GREED!!!

Playwright Tony Kushner at a commencement speech to graduating college seniors had this to say:

"The people and not the oil plutocrats, the multivarious multicultural people and not the pale, pale, cranky, grim greedy people, the hard working people and not the people whose only real exertion ever in their parasite lives has been the effort it takes to get politicians to slash a trillion dollars in tax revenue and then stuff it in their already overfull pockets." 

Then there is Bill Moyers who stated:

"We must guard against true believers in the god of the market who would leave us to the ruthless forces of unfettered monopolistic capital where even the laws of the jungle break down....And these idolators wrap themselves in the flag and rely on your patriotism to distract you from their plunder.  While your standing at attention with your hand over your heart pledging allegiance to the flag, they're picking your pocket."

This attack on the free market system, while just a faint echo in the past, has been growing in volume in recent years.  But in spite of the protestations, free markets have resulted in mankind stepping out of abject poverty to a steady improvement in standards of living.  Before the Industrial Revolution which took hold around 1800, life was poor, brutish, and short for the masses.  It brought  about a new concept...economic growth, which  spawned a growing middle class, and ultimately many in the middle class becoming truly wealthy.  Alan Greenspan said, "It is precisely the 'greed' of the profit-seeker which is the unexcelled protection of the consumer."  Then John Maynard Keynes stated, "Avarice and usury must be our gods for a little longer still.  For only they can lead us out of the tunnel of economic necessity into daylight."

Author Ayn Rand had this insight:  "America's abundance was not created by public sacrifices to 'the common good', but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes.  They did not starve the people to pay for America's industrialization.  They gave the people better jobs, higher wages, and cheaper goods."

Then there is Henry Hazlitt who writes, "Contrary to the age-old prejudices, the wealth of the rich is not the cause of the poverty of the poor.  Almost anything that the rich can legally do tends to help the poor.  The spending of the rich gives employment to the poor.  But the savings of the rich, and their investment of these savings in the means of production , gives just as much employment, and in addition, makes that employment constantly more productive and more highly paid."

All of the above documents the wide gulf between two opinions.  Which opinion represents the truth?  The important thing is to question everything rather than blindly accept what is being handed to you.  If we objectively seek truth, eventually it will come gently to us.

Policy Errors Of The Great Depression

Imagine a policy maker whose policies don't work.  He resembles Euclidean Geometers in a non-Euclidean world who discovers that straight lines, apparently parallel often meet.  He then rebukes the lines for not keeping straight only to soon witness more collisions.  This is precisely what the government policy makers do when their solutions fail.  Faced with failure, government then tends to blame the market rather than itself, and intervenes more!  Feeling that they just haven't intervened enough, they try more...followed by more failure.  If this process is not interrupted, the price and profit system will break down and government control ensues. 

This is clearly demonstrated in the serious policy mistakes by government in attempting to bring an end to the Great Depression.  Here is a list:

1.  Wagner Act --  This basically kept wages from falling for union labor.  In fact it went up 24% during the depression.  But non-union workers were basically cast to the wolves.  Since wages are just one of many prices, this meant that unemployment is caused by an imbalance of prices.  Since the primary function of markets is to bring prices into balance, it makes no sense that markets cannot correct unemployment. 

2.  High Taxes On The Rich -- The rich are primarily the investors.  They risk their capital in new ventures.  If the risk pays off, it means jobs.  If you heavily tax the risk takers, they will not change their consumption, but they will reduce their investing.  We should be encouraging saving and investing, not discouraging it.

3.  Excise Taxes on Everyone -- This took money out of workers pockets.

4.  Social Security Tax -- This was implemented in 1935....right in the middle of the Great Depression!  Withholding funds from the workers during a crisis was a clear policy error.

5.  Corporate taxes raised --  To take money away from the very ones who could potentially hire workers was another policy blunder.

6.  Deficit spending went on too long.  John Maynard Keynes advocated deficit spending.  His view was that in periods of high unemployment, it would not be inflationary, and it would stimulate overall demand in the economy.  To some extent he was correct.  But he never implied that it should go on indefinitely.  He was a deflation hawk, and by 1937 deflation had been quelled, and he told policy makers to return to the classical economic model of budget balancing.  He was, of course, ignored, and the depression continued.

7.  Trade Protectionism -- The Smoot - Hawley Tariff  changed a recession into a depression. Today,  even left leaning economist Paul Krugman stated, "Opponents of global trade, whatever their intentions, are doing their best to make the poor even poorer."  -- NY Times; April 22, 2001