Submitted by Charles Sackrey
There’s some good economic news out there, believe it or not. Among the most promising is the recent discrediting of two powerful right-wing ideologues, Alan Greenspan, widely acclaimed head of the Federal Reserve System from 1987-2006, and Milton Friedman, a mere professor but a powerfully influential component of the view that government is essentially bad and unregulated corporations are essentially good. The unforgiving march of current history has revealed both as having been too dim-witted to realize that unregulated capitalism is no more stable than an unregulated day care center.
Greenspan, at whose knees fawning journalists and politicians bowed obediently, had a genuine religious commitment to “free markets”; a central tenet of this faith was his confidence that the pack of fiercely greedy and unregulated wolves running the world’s financial system had “honorable intentions.” Recently, he admitted that “I was wrong” about those fellows, proving the case that we all have crazy ideas at times, but never so much as when people worship at our feet. One result of the bootlicking, and not paying attention, is that during Greenspan’s two decades as head of the FRS, we experienced the greatest upward redistribution of income in our nation’s history. No need to ask this fellow, “Which side are you on?”
Friedman became famous because his simple-minded mantra about free markets fit like a glove with the needs of powerful corporations, the right-wing think tanks they fund, a legion of academic economists also in love with deregulation, and a mostly clueless media who lionized Friedman as they did Greenspan. Together, this crowd made Friedman a hero, but only by ignoring that “free markets” was code language for allowing global corporations to spread their control to every corner of the globe. For the grim truth about Friedman’s bag of tricks, one need only read Naomi Klein’s Shock Doctrine (2007). There, she provides ample examples of the moral compass that directed Friedman’s zeal. For instance, in 1975, he traveled to Chile to press his views in a private meeting with the fascist dictator and genuine barbarian, Augusto Pinochet, whose allies had overthrown the elected government (with CIA help). In fact, apparently beside the point to Friedman, this meeting occurred in the middle of a murderous purge by Pinochet of his political enemies that included the “disappearance” of 2,300 people and the torture of 30,000 more. Friedman told a reporter during this visit that, “I am against economic intervention by the government, in my own country, as well as in Chile.” Clearly implied here is, “no matter what.”
So, if you’re like me, and have all along thought that Freidman and Greenspan were wrong, and utterly so, about deregulated capitalism, it is certainly pleasant to know that Barack Obama has gone back to what is called “Keynesian” economics. This is a set of ideas most effectively spread by John Maynard Keynes, an Englishman, who published a book in 1936 that reshaped modern thinking about capitalism. He wrote in response to the Great Depression of the 1930s, about which most economists here and abroad had no useful advice, given their allegiance to the free market ideology that was also then the received truth.
Keynes carefully put to rest this doctrine by explaining, as Marx had done in the 1860s, why capitalism is inherently given to unending expansions and damaging contractions. He also argued persuasively that government intervention could help to keep these inherent ups and downs from becoming cataclysms such as the Great Depression. His policy prescription was simple enough: when, for whatever reasons, consumers and businesses stop spending — which will eventually create a recession, or worse — the government needs to encourage more private spending with tax cuts and add its own purchases to the total. Keynes noted that, in a downturn, it doesn’t make any difference whether the government builds pyramids, cathedrals, or goes to war, as long as the spending occurs. The prime example occurred during World War II when spending on guns, bullets, bombs, ships, tanks, and all the rest began an expansion that ended the Depression and lasted almost unabated until the 1970s.
Despite what seemed to be the proof of the Keynesian pudding, economic conservatives like Friedman and Greenspan would again have their day, especially after Ronald Reagan came into power in 1980 championing greed as good and government as bad. Fading memories about the Great Depression, and other factors, produced a waning influence of Keynesian ideas, and many foreign governments – Britain under Margaret Thatcher a prominent example — became converts to the religion of deregulated capitalism. Friedman, Greenspan, Thatcher, and their allies around the world had waged an effective war on Keynes’s idea that government intervention in capitalism was often useful and sometimes crucial to its longevity. Now, apparently, the pendulum has swung again, and the present collapse of global capitalism suggests that those who still worship at the free market church will need to wait a spell before catchy slogans about freedom and capitalism gather the attention of policy makers.
Keynes had another theory that had great influence, the idea that that we needed also to regulate the international system of markets. In 1944, he and representatives from the U.S. and its allies in Western Europe, designed a post-war international economy that was also carefully regulated, but not to the point of stifling trade. According to many economists and journalists, what followed was “the golden age of U.S. capitalism,” roughly from the late 1940s to the late 1970s. Then, along came Reagan and the pernicious spread of the free market church, capped by eight years under the guidance of G.W. Bush, who, wherever he could, dismantled economic regulations domestically and internationally. At the end of his inept and miserable presidency, capitalism was as unregulated as it had been for a over a century. This economic policy has produced the inevitable outcome, that we are bearing as he settles in Texas apparently as dazed and confused as ever. His presidency cannot help but confirm the view of the late journalist, Hunter Thompson, that Bush was our “Goofy Child President,” and his leaving can give us the comfort of knowing that adults are back in the White House.
All this is why Barack Obama is pushing for a $825 billion expansion package of a particular kind. About a third of it will be reduced taxes aimed at expanding private spending, and most of the rest will be used to rebuild the national “infrastructure.” This is a term that refers to such public services as schools, health care, bridges, roads, and hospitals, and others that are crucial to the lives of most people. Included also are billions of dollars for conservation and renewable energy, the reasons for which are obvious to all but those excited about global warming because it brings us closer to Armageddon and the Day of Judgment. The rest of us can hope that the spending on renewable energy and conservation will gradually produce economic production that is less and less an assault on our biosphere. Obama urges us to rebuild these elements of the public infrastructure so that people can be safer, healthier, more comfortable, and more confident, all of which will help them to think more clearly about how to remake a society that is going to seed.
We badly need for Barack Obama to continue to remind us that it is muscle, brains, dedicated work, and human imagination — rather than wildly overpaid financiers and corporate executives — that are the principal ingredients by which people build societies. His plan for economic expansion seeks to produce an atmosphere that encourages us to dream different dreams and to imagine a better world for everyone. My fondest hope is that the witness of this brand-new president, armed with reasonable ideas rather than right wing slogans, can help us to crawl over a vast mountain chain of consumer garbage and catch a glimpse of something more fully exemplifying the great powers of human imagination.