Thursday, May 7, 2009

How the left can save capitalism

Regulation. It's actually much simpler than we think. We were a country that thrived after the second world war in part due to the regulation that reined in the worst impulses that would exert themselves if left unchecked. Regulated capitalism is a tremendous engine for growth. Remember the fifties? No, of course not! You're too young. Well, you see, Dwight David Eisenhower was president back then. He was the great WWII hero we elected as president to usher in the American century. He was a Republican (nowadays a RINO). But he also believed in the basic premises of the New Deal, which said that Americans should not have to be subject to the vagaries of the economic cycles unprotected by a social contract overseen by a responsive government. Anyone espousing anything similar to what he took for granted (such as a much more graduated income tax up to 90%) would be called a socialist nowadays. And yet a certain segment of our population looks back to that era as the "good old days" to be restored. Even Richard Nixon would be called a borderline communist now for advocating a nation minimum income; a policy he publicly affirmed in the early seventies. As a conservative Republican! Oh, how times have changed.

If we look to the changes in credit card regulations in the late seventies under Jimmy Carter (sorry to say), we see the beginning of the end of our economic vitality. I use the term "vitality" carefully because we see it as a term that effuses growth and life in itself, and yet vitality is anything but what we've seen in the time since the birth of the modern credit card. We certainly saw an explosion of spending, and the growth that came from that. But to call that vitality is to confuse categories. What we saw were several 'bubbles" popping up over the course of three decades that gave us the appearance of economic growth predicated on money being made on money through an e-economy that would somehow bring magical profits (the 1990's) to an un-real estate economy that presupposed an always increasing property value (the 2008/2009 debacle) to a belief that collateralized debt obligations were a good idea up to the last few months.

In each of these areas, their very existence owes to the power of financial institutions being able to "contribute" to congressional members, and thus able to contribute to the writing of the laws related to financial affairs. And surprise of surprise, investment bankers and their congressional allies brought about sweeping changes from those that had been established during the Great Depression. And what were those regulations that had been established during the Great Depression? The regulations that Roosevelt enacted were established in direct response to the excesses that had brought the depression about. Insider dealing, officials being former bankers, and bankers being former officials. Sound familiar? It should. Lord Acton was right when he said that power tends to corrupt, and absolute power corrupts absolutely. It's true of government. But it's also true of the private interests which seek their own power.

Again, being an augustinian democrat helps me to see that every human institution is effected by our common corruption. Nothing is exempt.

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