Back to Clive Crook's blog homepage
More on ‘the end of capitalism’
October 22, 2008
Apologies: I jotted this down a few days ago and then forgot to post it. I’m blaming jet lag (see next post). Anyway, for the record…
What form will the backlash against lightly regulated capitalism take in the US? I ponder the question in this piece for the FT’s Analysis page:
Even before the worst financial crisis since the 1930s bore down on the US this summer, the country seemed poised for an ideological shift. The administration of President George W. Bush was immensely unpopular. Anti-trade and anti-business sentiment was on the rise and both main political parties, in different ways, were responding.
The technocratic market-friendly liberalism espoused by Bill Clinton and the New Democrats was already much less prominent in Barack Obama’s presidential campaign. As the country’s economic difficulties have worsened, the pro-market theme has not so much subsided as disappeared. Mr Obama now is far more likely to talk about the bankruptcy of “trickle-down economics” than the need for competition and incentives.
John McCain, the Republican candidate, has yielded nothing to his opponent in the stridency of his recent denunciations of “Wall Street greed”. The administration, meanwhile, has been forced to swallow what remained of its rhetorical commitment to market forces and deregulation with a $250bn bank recapitalisation – a plan that Hank Paulson, Treasury secretary, described as “objectionable” but necessary.
Where might this lead? Does the present upheaval, as some have speculated, point to the end of a distinctively American capitalism? On the whole, this seems unlikely – though the pressures on “American exceptionalism” have rarely looked so strong.
Read on here.
Clive, what a splendid piece.
I’ll read it again whenever I start to think that the world is full of idiots and we are all doomed.
Posted by: Rodchenko | October 22nd, 2008 at 6:20 pm | Report this commentWhen Capitalism needs taxpayer’s cash to cover their mistakes, it’s just for the good of the system, but when the middle- and working- class asks for fairness and a good return on their little taxes ,it’s evil socialism…
On top of the 700+ billion dollars “Bail-Out”, this week the Federal Reserve is buying ” at least 540 billion dollars ” in money market-mutual funds assets to avoid a fire sale , and these assets are good stuff , so who will watch who gets what at what price ? who will decide what sells and to whom for how much and when ? Bernanke or Kashkari at Treasury ? if its Bernanke and friends at the Fed, i smell a rat in the air….and why do they keep on calling it “Federal Reserve” ? it’s just a private enterprise run by political appointees using taxpayers money, i wish we had just one elected official with enough …wisdom …to re-set the Federal Reserve inside the Treasury and with adult supervision,no more calling in advance to friends overseas, but we don’t have anyone, what a shame ! so the “hide and seek” will go on , and next in the menu….credit card and predatory lending for fools and in trillion dollar portions …
One solution , let some bankruptcy Judges re-set the principal and rate of residential mortgages is not even on the table, to keep people in their homes and avoid the whole mess, but again, its not even on the agenda.
and all the while, the rating agencies, the ones who give the AAA seal of manure to the mortgages is still out there, selling their…what ever it is they are selling…
so more incompetence,ignorance, lack of action and a total lack of real “Energy Independence and Broadband ” is still all we get for our taxes in this obsolete so-called capitalistic system, isn’t wonderful ?
Posted by: financialtools1@gmail.com | October 22nd, 2008 at 6:47 pm | Report this comment“financialtools1″ is absolutely right about the bankruptcy judges. Denying them the power to modify mortgages in order to give homeowners relief from excessively high interest rate “resets” and related charges that were, in most cases, not fully explained to them is a national scandal. Obama and the Democrats were wrong to cave into the fat cat Republican lobbyists on this one.
It makes a mockery of any pretense that the bailout was designed to help Main Street, instead of only Wall Street.
Posted by: algasema | October 22nd, 2008 at 8:07 pm | Report this commentClive,
Somehow with a rather sensible pre-amble you come up with the solution of the WPA to build our way out of what could very well be a 1 quarter economic downturn.
Seems a bit rash to me, as the Bridge to Nowhere is hanging around Obama, Biden, and Palin (but not McCain) as testament to the foolish spending of governements.
How many of the WPA schemes would turn out to be additional bridges to nowhere? Here in Chicago we have the same highways torn up year after year with no discernible effect on employment rates or economic growth (or traffic volume for that matter), only delayed motorists, big pollution, and ever-richer Democratic insiders.
JBP
Posted by: John Powers | October 23rd, 2008 at 2:21 am | Report this commentIt makes a mockery of any pretense that the bailout was designed to help Main Street, instead of only Wall Street.
Am I seeing things? Can it be? Mr. Algasema and I actually agree on something.
Rats! I knew it was too good to be true! Re-reading it, Algasema blames Republicans. I’m sure the perpetrators were on both sides of the aisle and fat cat lobbyists were working both sides.
Posted by: James Dean | October 23rd, 2008 at 2:26 am | Report this commentIs the bailout freezing credit markets?
I have a different take on the current crises. I believe that it was excessive government interference that was the cause (and not the result) of the current financial meltdown. Starting with Bear Stearn, where the government showed its inclination to intervene in an extraordinarily heavy handed manner, investors got spooked and started fleeing the financial markets. As a result, bank stocks tumbled, making previously healthy banks in need of help. A tragic self-fulfilling prophesy if there ever was. Ironically, the bailout made the situation worse as it gave the government additional power to create so much more (mostly unintended) mischief. Thus, banks have started hoarding cash simply to survive the potential excesses of the government, and credit markets remain stubbornly frozen in spite of the enormous liquidity injection. You can access this article and pod cast at www.bus.msu.edu. I will be happy to elaborate on this further if you believe this has merit. Thanks.
Prof. Naveen Khanna
Posted by: Naveen Khanna | October 23rd, 2008 at 10:53 pm | Report this commentMichigan State University.
“Here in Chicago we have the same highways torn up year after year with no discernible effect on employment rates or economic growth (or traffic volume for that matter), only delayed motorists, big pollution, and ever-richer Democratic insiders.”
Hey John I am in Logan Square. I wonder if the rest of the country has any idea what they are signing themselves up for by putting a Cook County Democrat in charge. It will be funny when these San Francisco liberals get to know Chicago style government contracting up close and personal on January 20.
Posted by: Ted | October 24th, 2008 at 4:49 am | Report this commentTed,
I am backing Todd Stroger for Senate if Obama wins. Gets him out of the county more. Perhaps Mayor Daley for UN Ambassador, as he is so diplomatic. Obama mentor, Emil Jones for Secretary of State.. there are plenty of doozies to go around.
JBP
Posted by: John Powers | October 24th, 2008 at 6:58 pm | Report this commentprof khanna,
Posted by: gym-bob | October 25th, 2008 at 2:36 am | Report this commentyou bring a topic to the table that will be the focus of sharp debate. did the shotgun response of the treasury sec, fed chair and the presedent contribute to market turmoil and precipitate the credit crunch? my suspicion is that the house of cards was comming down of its own volition. the actions of the administration did little to instill confidence in markets or citizens. the shock and awe approach used in passing the bailout bill was reprehensible considering the importance of maintaing confidence. when the administration must resort to yelling fire in a crowded theater to stampede support for a bailout it unvails it own weakness and bankrupt leadership. the financial condition around the globe is fragile because too little capital is supporting too much debt. too much of the debt is junk. too much of the junk is leveraged. deleveraging pushes distressed assets into the market and the spiral becomes self reinforcing.the economies will shrink and capital to debt ratios will revert to historic means.
prof, i will listen to your podcast to learn more about your ideas. you are one of the first to begin evaluating the quality of the federal response to the credit crisis and the role it has likely played in exacerbating the problems.
The vast majority of Americans have paid and will continue to pay their mortgages - sub-prime, ALT-A, or whatever. The vast majority will weather the coming recession without losing either their jobs or their minds. 67% might disapprove of George Bush, but that doesn’t mean that they throw up at the sight of him. They might well pull the Obama lever in November, but that also doesn’t mean that they hang off his every word.
Will the chattering classes take advantage of the current political-economic mess to implement their most cherished woolly ideas? Of course. But the American people will eventually shrug them off, as they always have.
The media love to quote the generic party polls that show Democrats in the ascendant, but has anyone noticed the latest results? We don’t even have an election, and already the Republican numbers are beginning to stir. If Republicans should be heartened by anything this fall, it is the coming ascendancy of the Nancy Pelosi and Harry Reid cliques. Tin ears and political blunders all around.
I give Senator Obama one Congressional term before the media wake up to the Emperor’s new clothes, and the Republicans come roaring back. It happened to the Clintons, and they were and are the smartest political operators in town.
Posted by: Ben Shipley | October 25th, 2008 at 10:36 pm | Report this comment“the Republicans come roaring back”
The Republican Party as it is currently constituted has no chance of coming back, much less “roaring back”.
If it were to return to its roots as a fiscally responsible party with moderate views on social issues it would survive and most likely thrive, but as it is now, as I repeatedly note, it is for all intents and purposes the American Fascist Party.
It continues to astonish me that anyone who is not in the 20-30% of the population who would support Hitler if he were re-incarnated as an American politician can support the McCain-Palin ticket.
What also astonishes me is that Senator Obama’s policy proposals - as well as his history - are marginally different in most ways from the current conventional wisdom in virtually every policy area. In his taxation proposal virtually the only material difference from current tax law is to accelerate by two years the reversion of the top marginal individual tax rates to 36% and 39.6% and have those apply only to the richest of the richest of USA tax-payers.
The furor over “Joe the Plumber” is utterly laughable. As I have noted elsewhere in this weblog, “Joe”’s personal tax situation benefits substantial more from Senator Obama’s proposal than Senator McCain’s! His desired acquisition of his employer’s business has nothing to do whatsoever with taxation! He would also benefit tax-wise if he bought the business then resold it for a gain in the future more under Senator Obama’s plan than Senator McCain’s!
Need I exclaim any more on the topic?
Your comment in the other post regarding Senator Obama’s associations with the people repeatedly mentioned versus Senator McCain’s is simply right-wing, paranoid nonsense. Senator McCain’s association with right-wing criminals such as Gordon Liddy has barely been noted in the press - no need in fact - although I do not doubt that there is much there worth investigation.
Senator McCain’s self-aggrandizement and self-mythologizing largely at the expense of his fellow veterans in many cases, not to mention his frighteningly erratic performance in all ways on the stump, are sufficient to drive anyone with moderate political and social views away from him.
Not mention needed of his running mate.
Personally I could care less about the threesome with whom Senator Obama has had whatever contact he has had. I have zero interest in them or in whatever the relationship has been, close or not. That is completely irrelevant to Senator Obama’s running for President.
Posted by: Wendell Murray | October 26th, 2008 at 11:06 pm | Report this commentI agree totally with all of Wendell Murray’s thoughtful comments except for the following:
“The Republican Party as it is currently constituted has no chance of coming back, much less “roaring back”.
I believe you are much too optimistic in this respect.
Posted by: Walter H. King | October 29th, 2008 at 12:17 pm | Report this comment