There's A Reason It's Called "Trickle Down" Economics
George Bush got it right.
Well, not the current version, but the original when in 1980, he referred to Ronald Reagan's economic policies as Voodoo Economics. You see, Mr. Reagan believed that if you removed regulations from businesses and amassed incredible amounts of wealth in the upper echelon of society, the upper echelon would in turn redistribute the wealth into the economy. It became known as "trickle down" economics. The name should have told us everything.
What Mr. Reagan was too stupid or too senile to realise, is that often the upper echelon accumulates wealth because it's greedy.
So, merrily America rolled through the 1980's deregulating industries. The results were felt in the banking, airline and communications industries as companies snapped up smaller rivals and got larger and larger. The Big 8 accounting firms, in place for most of the twentieth century, gave way to the Big 6, then the Big 5 and finally after the implosion of Arthur Anderson, the Big 4 of today. The trend happened in other industries as well.
Where are you Theodore Roosevelt?
How quickly a party can go off the rails in as little as one hundred years. No longer the party of that great trust-buster, Theodore Roosevelt (the maverick that John McCain wishes he were), Republican economic policies have replaced the concept of monopoly with that of oligopoly.
Oligopoly (def.) - a market situation in which each of a few producers affects but does not control the market.
Sound familiar? Like maybe a few investment banks that make shaky investments and then take the stock market down with them? Or how about two mortgage lenders that hold over 60% of the market. You know them, that fun loving couple, Fanny and Freddie.
So here were are on September 29, 2007 and Congress has failed to bail out the oligopical greedy and as a result the DOW plunged 777 points. Should they have done so? To be honest, I'm not sure. Perhaps America needs the pain of a major recession. Perhaps we need to understand the pain that our grandparents felt. Perhaps it's time to summon the ghost of Theodore Roosevelt and begin to bust trusts again.
What I do know for certain is that the results of Republican deregulation are these:
• Less independent media
• Fewer firms with greater ability to negatively impact the economy
• Higher barriers to innovation
Whether or not Congress ultimately bails out corporate greed is perhaps irrelevant. Because unless the root causes of the current crisis are addressed, it will eventually happen again. One only need to look at the Savings and Loan scandal of the late 1980's to see that history is indeed repeating itself.
Morning in America has ended folks and Reagan's failed economic theory is to blame. The critical question is this: Are we as citizens willing to let the pigs run amok any longer?
Well, not the current version, but the original when in 1980, he referred to Ronald Reagan's economic policies as Voodoo Economics. You see, Mr. Reagan believed that if you removed regulations from businesses and amassed incredible amounts of wealth in the upper echelon of society, the upper echelon would in turn redistribute the wealth into the economy. It became known as "trickle down" economics. The name should have told us everything.
What Mr. Reagan was too stupid or too senile to realise, is that often the upper echelon accumulates wealth because it's greedy.
So, merrily America rolled through the 1980's deregulating industries. The results were felt in the banking, airline and communications industries as companies snapped up smaller rivals and got larger and larger. The Big 8 accounting firms, in place for most of the twentieth century, gave way to the Big 6, then the Big 5 and finally after the implosion of Arthur Anderson, the Big 4 of today. The trend happened in other industries as well.
Where are you Theodore Roosevelt?
How quickly a party can go off the rails in as little as one hundred years. No longer the party of that great trust-buster, Theodore Roosevelt (the maverick that John McCain wishes he were), Republican economic policies have replaced the concept of monopoly with that of oligopoly.
Oligopoly (def.) - a market situation in which each of a few producers affects but does not control the market.
Sound familiar? Like maybe a few investment banks that make shaky investments and then take the stock market down with them? Or how about two mortgage lenders that hold over 60% of the market. You know them, that fun loving couple, Fanny and Freddie.
So here were are on September 29, 2007 and Congress has failed to bail out the oligopical greedy and as a result the DOW plunged 777 points. Should they have done so? To be honest, I'm not sure. Perhaps America needs the pain of a major recession. Perhaps we need to understand the pain that our grandparents felt. Perhaps it's time to summon the ghost of Theodore Roosevelt and begin to bust trusts again.
What I do know for certain is that the results of Republican deregulation are these:
• Less independent media
• Fewer firms with greater ability to negatively impact the economy
• Higher barriers to innovation
Whether or not Congress ultimately bails out corporate greed is perhaps irrelevant. Because unless the root causes of the current crisis are addressed, it will eventually happen again. One only need to look at the Savings and Loan scandal of the late 1980's to see that history is indeed repeating itself.
Morning in America has ended folks and Reagan's failed economic theory is to blame. The critical question is this: Are we as citizens willing to let the pigs run amok any longer?
posted by John Fracchia at 8:56 PM
3 Comments:
What an odd article.
"You see, Mr. Reagan believed that if you removed regulations from businesses and amassed incredible amounts of wealth in the upper echelon of society, the upper echelon would in turn redistribute the wealth into the economy. It became known as "trickle down" economics. The name should have told us everything."
This is caricature of supply-side economics. Supply-side economics is dumb, but no dumber than its leftist counterpart, the demand-side economics of the Keynesians.
"What Mr. Reagan was too stupid or too senile to realise, is that often the upper echelon accumulates wealth because it's greedy."
And the lower echelon fails to amass wealth because its self-sacrificing generosity?
"o, merrily America rolled through the 1980's deregulating industries. The results were felt in the banking, airline and communications industries as companies snapped up smaller rivals and got larger and larger."
Actually, the deregulations that Regan got credit for were began by Jimmy Carter:
"Rethinking Carter" by William Anderson
http://mises.org/story/535
How odd that anyone would opine for Teddy Roosevelt, the blood-thristy proto-fascist:
"American Mussolini" by John Denson
http://www.lewrockwell.com/denson/denson9.html
The idea that deregulation of banking has led to the current crisis is laughable. We've been living the "welfare state of credit" for years.
There's even a guy from Harvard who gets it:
http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html
For a complete guide to the bailout crisis:
"The Bailout Reader"
http://mises.org/story/3128
As far as longing for antitrust, think again. Antitrust trust law has always been special interest legislation where the efficient are punished and the inefficient rewarded.
See, Antitrust: The Case For Repeal by Dom Armentano
Read it free:
http://mises.org/books/antitrust.pdf
Greg Davis :)
As a former employee at one of the big4 firms I realized that my options are pretty hard to find, until I heard about: http://www.bigfour.com/. Now, I have a new great job and I’m looking ahead in the future with my head held up high.
The problem with the media is not lack of openness, it's lack of education. They all accept the Marxist critique of capitalism and the most naive form of Keynesianism--therefore they can't make sense of the news and the people, with the exception of a small remnant like Ron Paul supporters, are like dogs watching TV; they know something's going on, they just can't figure out what.
As for deregulation, if only. It's usually a form of reregulation or some public-private partnership that a more informed public would call fascism.
See a true laissez-faire critique of the Gramm-Leach-Bliley Act of 1999, that's been blamed for contributing to our current mess, by Ron Paul:
CONFERENCE REPORT ON S. 900, GRAMM-LEACH-BLILEY ACT
------------
HON. RON PAUL
OF TEXAS
[Page: E2297]
* Madam Speaker, today we are considering a bill aimed at modernizing the financial services industry through deregulation. It is a worthy goal which I support. However, this bill falls short of that goal. The negative aspects of this bill outweigh the benefits. Many have already argued for the need to update our financial laws. I would just add that I agree on the need for reform but oppose this approach.
* With the economy more fragile than is popularly recognized, we should move cautiously as we initiate reforms. Federal Reserve Board Chairman Alan Greenspan (in a 1997 speech in Frankfurt, Germany and other times), Kurt Richebacher, Frank Veneroso and others, have questioned the statistical accuracy of the economy's vaunted productivity gains.
* Federal Reserve Governor Edward Gramlich today joined many others who are concerned about the strength of the economy when he warned that the low U.S. savings rate was a cause for concern. Coupled with the likely decline in foreign investment in the United States, he said that the economy will require some potentially `painful' adjustments--some combination of higher exports, higher interest rates, lower investment, and/or lower dollar values.
* Such a scenario would put added pressure on the financial bubble. The growth in money and credit has outpaced both savings and economic growth. These inflationary pressures have been concentrated in asset prices, not consumer price inflation--keeping monetary policy too easy. This increase in asset prices has fueled domestic borrowing and spending.
* Government policy and the increase in securitization are largely responsible for this bubble. In addition to loose monetary policies by the Federal Reserve, government-sponsored enterprises Fannie Mae and Freddie Mac have contributed to the problem. The fourfold increases in their balance sheets from 1997 to 1998 boosted new home borrowings to more than $1.5 trillion in 1998, two-thirds of which were refinances which put an extra $15,000 in the pockets of consumers on average--and reduce risk for individual institutions while increasing risk for the system as a whole.
* The rapidity and severity of changes in economic conditions can affect prospects for individual institutions more greatly than that of the overall economy. The Long Term Capital Management hedge fund is a prime example. New companies start and others fail every day. What is troubling with the hedge fund bailout was the governmental response and the increase in moral hazard.
* This increased indication of the government's eagerness to bail out highly-leveraged, risky and largely unregulated financial institutions bodes ill for the post S. 900 future as far as limiting taxpayer liability is concerned. LTCM isn't even registered in the United States but the Cayman Islands!
* Government regulations present the greatest threat to privacy and consumers' loss of control over their own personal information. In the private sector, individuals protect their financial privacy as an integral part of the market process by providing information they regard as private only to entities they trust will maintain a degree of privacy of which they approve. Individuals avoid privacy violators by `opting out' and doing business only with such privacy-respecting companies.
* The better alternative is to repeal privacy busting government regulations. The same approach applies to Glass-Steagall and S. 900. Why not just repeal the offending regulation? In the banking committee, I offered an amendment to do just that. My main reasons for voting against this bill are the expansion of the taxpayer liability and the introduction of even more regulations. The entire multi-hundred page S. 900 that reregulates rather than deregulates the financial sector could be replaced with a simple one-page bill.
For a more complete critique of our clueless government and media see the great economist George Reisman:
http://www.lewrockwell.com/reisman/reisman45.htm
Greg :)
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