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"I baptise you in the name of the Rand, the Fama and the Holy Friedman."
Republican concept of “small government” is a fake and 100% pure hypocrisy as they don't count the military and police as part of “the government”. It’s hard to believe that conservatism in this country was once identified with an opposition to foreign entanglements and large military establishments. The Reagan's agenda of fake “deregulation” and “privatization” was in essence the same kind of kleptocratic insider dealing that characterized Yeltsin’s Russia.
The hypocrisy that underlays the GOP's 'big government'-bashing has been noted before, but seldom so well explained, as by Dr. Julian E. Zelizer, a professor of history and public affairs at Princeton University's Woodrow Wilson School. Zelizer, author of forthcoming "Arsenal of Democracy: The Politics of National Security -- From World War II to the War on Terrorism" and other political science texts, puts it this way in his commentary "GOP's 'small government' talk is hollow" at CNN Politics.com:After the past eight years in American politics, it is impossible to reconcile current promises by conservatives for small government with the historical record of President Bush's administration. Most experts on the left and right can find one issue upon which to agree: The federal government expanded significantly after 2001 when George W. Bush was in the White House.The growth did not just take place with national security spending but with domestic programs as well. Even as the administration fought to reduce the cost of certain programs by preventing cost-of-living increases in benefits, in many other areas of policy -- such as Medicare prescription drug benefits, federal education standards and agricultural subsidies -- the federal government expanded by leaps and bounds. And then there are the costs of Afghanistan and Iraq.
The conservative Cato Institute reported in 2005 that total government spending increased by a third during Bush's first term -- "the largest overall increase in inflation-adjusted federal spending since Lyndon B. Johnson."
Zelizer's article also notes the expansion of executive power under Republican rule, hardly commensurate with their advocacy of smaller government.
Fifty years of American history have shown that even the party that traditionally advocates small government on the campaign trail opts for big government when it gets into power. The rhetoric of small government has helped Republicans attract some support in the past, but it is hard to take such rhetoric seriously given the historical record -- and it is a now a question whether this rhetoric is even appealing since many Americans want government to help them cope with the current crisis.
Government-bashing is an ever-present staple of GOP propaganda.
Friedman's argument against social democracy was that it would not do the job -- that you would lose a lot of economic efficiency and some political liberty and in return get no equalization of economic power because the government would redistribute income and wealth the wrong way, and the beneficiaries would be the strong political claimants to governmental largess who would not be those with strong claims to more opportunity.
By the time you have resorted to arguing that "human existence in the shadow of a nanny state doesn't conduce to 'Aristotelian happiness'... because it strips human beings of the deeper sorts of agency and responsibility that ought to be involved in a life well lived..." you have lost the argument completely. And I have not even raised the point that Aristotle thought that Aristotelian happiness was possible only if you yourself owned lots of slaves:
Andrew Sullivan is vulnerable to this slide into apriorism too: "The intervention of a government is like that of a loud telephone ringing in the middle of an engrossing dinner conversation. It is inherently offensive. It commands our attention, when we would much rather be doing something else," (Conservative Soul ch.6). More faithful legators of Burke or Adam Smith would understand the false lure of easy utopias -- this is the "man of system" in his libertarian shape.Aristotle: There is in some cases a marked distinction between the two classes, rendering it expedient and right for the one to be slaves and the others to be masters.... The master is not called a master because he has science, but because he is of a certain character.... [T]here may be a science for the master and science for the slave. The science of the slave would be such as the man of Syracuse taught who made money by instructing slaves in their ordinary duties.... But all such branches of knowledge are servile. There is likewise a science of the master... not anything great or wonderful; for the master need only know how to order that which the slave must know how to execute. Hence those who are in a position which places them above toil have stewars who attend to their households while they occupy themselves with philosophy or with politics...
The "grounded in greed" counterargument you see in the comment above is every bit as aprioristic. When you get to that point we're just yelling slogans at each other.
There was time when Republicans were a welcomed change from Democratic overuse of government . As DAVID LEONHARDT noted in NYT on Oct 6, 2009 (Bruce Bartlett’s Argument to Improve His Republican Party)
Successful economic ideas usually end up being taken too far.
Democrats dominated the middle part of the 20th century, thanks in part to their vigorous response to the Great Depression. They used the government to soften the effects of the Depression and to build the modern safety net. But they failed to see the limits of the government’s ability to manage the economy and helped usher in the stagflation of the 1970s.
Ronald Reagan then came to power promising to cut taxes and unleash the forces of the market. And the Democrats spent the next dozen years struggling to absorb the lessons of their failures.
More than a few people believe the Republican Party is in a similar place today.
But, like most poisons, libertarian doctrine is useful only in very small doses and during a limited period of time. The Christian theologian Reinhold Niebuhr in Moral Man & Immoral Society pointed out the blatant hypocrisy inherent in the fiction peddled by the Libertarian-Austrian-Neoliberal axis:
Thus, for instance, a laissez faire economic theory is maintained in an industrial era through the ignorant belief that the general welfare is best served by placing the least possible political restraints upon economic activity. The history of the past hundred years is a refutation of the theory; but it is still maintained, or is dying a too lingering death, particularly in nations as politically incompetent as our own. Its survival is due to the ignorance of those who suffer injustice from the application of this theory to modern industrial life but fail to attribute their difficulties to the social anarchy and political irresponsibility which the theory sanctions. Their ignorance permits the beneficiaries of the present anarchic industrial system to make dishonest use of the waning prestige of laissez faire economics….
When economic power desires to be left alone it uses the philosophy of laissez faire to discourage political restraint upon economic freedom. When it wants to make use of the police power of the state to subdue rebellions and discontent in the ranks of its helots, it justifies the use of political coercion and the resulting suppression of liberties by insisting that peace is more precious than freedom and that its only desire is social peace.
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From the event at the Philadelphia Fed on April 17th, 2013 (04/17/2013) conference segment "Fixing the Banking System for Good" .
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17 July 09 | C4SS
People who vote Republican in the belief that the GOP is the party of small government need to get out of their codependent relationship.
Republicans claim to be the party of the head rather than the heart, the party that never lets wishful thinking trump the law of unintended consequences — unless, of course, proper reverence for the Flag or Fatherland is involved. And recognizing that actions have consequences, in the realm of foreign policy, is just a fancy way of saying "defeatism."
Come to think of it, there really seems to be a lot of messy Freudian stuff lurking beneath that Republican facade of stern common sense, doesn't there? Just consider how prominently accusations of being "soft" on this or that, or "getting tough" on something or other, or "showing them" or "teaching them a lesson", figure in their rhetoric. The Republicans: party of penis envy?
Republican claims to be the party of small government are equally nonsensical.
First of all, it's a rather odd conception of "small government" that doesn't count the military and police as part of "the government". It's hard to believe that conservatism in this country was once identified with an opposition to foreign entanglements and large military establishments, or that the perpetual warfare state was originally created by liberals. In fact, the legal precedents and constitutional arguments that the neocons appeal to in order to justify their wet dream National Security State all come from paragons of conservatism like Lincoln, Wilson and FDR.
Today, we're constantly reminded by self-described "conservatives" that loyal Americans rally around their "Commander-in-Chief" in wartime, and "politics stops at the water's edge." Sean Hannity got his knickers in a twist because some Democratic senator accused "our Commander-in-Chief" of lying–in (gasp) WARTIME! Not only does "politics stop at the water's edge" for Republicans, but apparently Acton's Law stops there as well. Seems to me that if patriotic Americans are required to suspend their normal distrust of government in wartime "for the duration," that's a mighty powerful incentive for the "Commander-in-Chief" to STAY at war as much as possible. As Dubya said some time or other, 'it's a lot easier when you're a dictator'.
(Ever notice, by the way, that the same people so outraged that Pelosi would accuse the "heroes" in the C.I.A. of lying were themselves making the same accusation back when it involved Valerie Plame and Doug Feith?)
It's also an odd conception of "small government" that tasks it with making sure no two people with the same kinds of pee-pee get married, that nobody sees Janet Jackson's tit or hears one of George Carlin's "seven words", and that everybody "Just Says No" to drugs (other than Ritalin and Gardasil).
But even stipulating that "small government" principles only refer to domestic economic and regulatory policies that don't involve drugs or genitalia, the Republicans' "free market" rhetoric is a bunch of buncombe. The Reaganite agenda of fake "deregulation" and "privatization" usually involves, in actual practice, the same kind of kleptocratic insider dealing that characterized Yeltsin's Russia. The GOP's "small government" economic policy, when you get right down to it, is even more corporatist than that of the Democrats–and you've got to go a ways to beat them.
What about the Republicans as the party of "strict constitutionalism" and "original understanding"? What that translates into in plain English, Jeffrey Toobin says, is "a view that the Court should almost always defer to the existing power relationships in society". Chief Justice Roberts, in every major case, "has sided with the prosecution over the defendant, the state over the condemned, the executive branch over the legislative, and the corporate defendant over the individual plaintiff". And come to think of it, I don't recall Madison and Jefferson advocating a set of Executive "national security" prerogatives as unbounded as those of Charles I.
(Did you notice, by the way, that these enemies of "judicial activism" were pressuring Sotomayor to discover a new fundamental right–the right to keep and bear arms–among those incorporated in the Fourteenth Amendment?)
You folks out there with "Democrats Care" bumper stickers shouldn't be enjoying this overmuch. Behind all the crap about "America's working families", the Democrats are really just the other corporatist party. Democrats need to get over their own codependent relationship. But that's another column.
C4SS Research Associate Kevin Carson is a contemporary mutualist author and individualist anarchist whose written work includes Studies in Mutualist Political Economy and Organization Theory: An Individualist Anarchist Perspective, both of which are freely available online. Carson has also written for a variety of internet-based journals and blogs, including Just Things, The Art of the Possible, the P2P Foundation and his own Mutualist Blog.
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Ross Douthat:
The Case For Small Government: I think the argument suffers from a problem that's common to both sides in the debates over the desirability of European-style social democracy - namely, the hope that what's ultimately a philosophical and moral controversy can have a tidy empirical resolution.... [T]he philosophical case for limited government - that human existence in the shadow of a nanny state doesn't conduce to "Aristotelian happiness"... because it strips human beings of the deeper sorts of agency and responsibility that ought to be involved in a life well lived - he's on firm (if obviously arguable) ground. But when he segues into the possibility that the emerging science of human nature will "prove" the limits of welfare-statism, and force liberals to give ground... there's an unwarranted hope that the right facts and figures can settle a debate that ultimately depends on the philosophical assumptions that you bring to it...
Matthew Yglesias calls bullshit:
Matthew Yglesias: Crippling Poverty is Not Service to Family: Left out of here is what the right always loves to leave out of discussions of economic policy choices: interest. If you're poor in the United States and you live in a neighborhood where poor people can afford to live, you will almost certainly be living in a neighborhood that's much more dangerous than the neighborhoods in which poor Dutch people live. You'll also find yourself living in a country that's much less friendly to the interests of people who can't afford a car than is the Netherlands.
Conversely, if a European executive meets an American executive and feels a twinge of jealousy, it's not for the American's greater level of "entrepreneurship" it's for the fact that the U.S. social model leaves top executives much richer than European executives....
[I]ncome level is fairly predictive of voting behavior and this is neither a coincidence nor the reflection of an abstract disagreement about the value of "voluntarism." It reflects the fact that politics is, among other things, a concrete contest over concrete economic interests.... I don't think, for example, that America's high child poverty rate reflects American preference for "service to one's family" over "ease of life"...
As Milton Friedman put it back in 1953:
The basic objectives, shared, I am sure, by most economics, are political freedom, economic efficiency, and substantial equality of economic power. These objectives are not, of course, entirely consistent.... I believe -- and at this stage agreement will be far less widespread -- that all three objectives can best be realized by relying, as far as possible, on a market mechanism within a "competitive order" to organize the utilization of economic resources...
" [T]he philosophical case for limited government - that human existence in the shadow of a nanny state doesn't conduce to "Aristotelian happiness"... because it strips human beings of the deeper sorts of agency and responsibility that ought to be involved in a life well lived "He is having a bit of trouble staying oriented as between the philosophical and the empirical here. I claim that this is a piece of (bad) armchair psychologizing.
But his philosophical position is clear: each man for himself and the Devil take the hindmost. But he does say it in such a flowery way that it is almost possible to overlook what it comes to.
His (absurdly false) dichotomy between health-care access and health-care innovation is more concrete, but no less revolting.
"that Aristotelian happiness was possible only if you yourself owned lots of slaves"I have no doubt in my mind that true libertarians/economic liberalists are entirely in favor of legalizing slavery...
"Hence those who are in a position which places them above toil have stewars who attend to their households while they occupy themselves with philosophy or with politics..."or derivatives trading.
Ed quotes this definition of libertarian:
Libertarianism is a term adopted by a broad spectrum[1] of political philosophies which advocate the maximization of individual liberty[2] and the minimization or even abolition of the state.[3][4] Libertarians embrace viewpoints across that spectrum, ranging from pro-property to anti-property, from minarchist to openly anarchist
http://en.wikipedia.org/wiki/Libertarian
1. Since the effective liberty of most people would be diminished if not completely destroyed as the "state" is diminished (not that many are capable of liberty either way), even in pure liberty terms this is already really might makes right, right of the stronger, and "libertarian" is simply a fancy, dishonest word to dress up that fact.
Still, beyond the terminological dishonesty, might-makes-right in itself can be an internally consistent view.
2. But where they bring "property" into it is where we know the whole thing is a scam. Property and wealth accumulation (let alone all the bells and whistles of banks and stock markets and so on) of course cannot exist at all without a strong, aggressive government aggressively dedicated to those things.
It's absurd on its face to say "get rid of government" and yet say "I have property rights!"
"Property" and "rights" - one has to be doubly an aggressive statist.
So there's where we KNOW "libertarian" is just a stalking horse for the brutal, direct dictatorship of big corporations and the rich.
Law is the order of the land and its inception was to protect *property* from the mob (see the poor) by landed army's aka the Authoritarian system. We have evolved socially from feudal to monarchy to peoples forms of governance.
Democracy is an attempt to equalize societal pressures with regards to concentration of wealth and power by the few over the many (see Rome).
Now sorry for the 101, but what are we really debating here libertarian vs socialist vs free market vs ??????. I thought the Constitution said WE the people not some fence in the mind that has so many gray areas multiplied by the number individuals present in the republic at one time. Hence we all have different interpretations of definitions regardless of what wiped says.
I fear Democracy is under the knife by forces which would concentrate power for their benefit and not that of the people as a hole. Call that what you may, but remember the club of I over US has ramifications and one should consider fully their impact.
Hell lets all just get big stamps on our foreheads and call a spade, a spade and respond accordingly to their ideology with out interference.
Every system of governance I have studied evolves and then devolves to a basic state of community if not over whelmed by another budding system of youthful expansionist exuberance.
We are some where on that historical trajectory and need to sort out who we really are ie: a group of citizens ready to learn from our mistakes or a rowdy group of individuals ready to cut each others throats for our individualistic/ idealogical needs, especially when none can lay claim to fact, but merely see truth in own minds.
Skippy...sorry just so sick of the crap: see extremism.
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depresso said... Nakedcapitalism and Stephen Roach are spreading LIES!
Bernanke is NOT and never was "an ultra-free market Libertarian".
Libertarians and proponents of free-markets believe in sound money, gold standard and want the Federal Reserve to be abolished.I am tired of all the libertarian-bashing and free-market-bashing. Bernanke is no more a Libertarian and free-market believer than Roach/Yves is a radical communist.
August 25, 2009 8:56 PM 
Edward Harrison said... depresso, I happen to be a Libertarian myself albeit not as much a believer in the unadulterated form of the free markets espoused by some.
How would you describe Bernanke?
And do think we are spreading lies or giving opinion because it seems that it is obviously the latter?
Edward (the writer of the post)
August 25, 2009 9:01 PM roger said... It is strange to me to look at Japan's lost decade, when we have our own staring at us in the face. The 00s were characterized by the worst employment figures, month by month, of any decade since the forties, the worst income figures for the medium household since the thirties, and an amazingly flabby technology sector - that is, in terms of innovation. What is really different about 2009 from 2001 or 2000? Youtube? From 2000, 1990 looked positively primitive. One could go decade by decade looking at major techno changes - but not the "lets spend money on the Mcmansion" decade. Although I'm forgetting the innovation in the "financial industry" - so excellent! of such social benefit! Like, oh, the invention of three card monte. The Japanese slough is already here, and its been here since 2001.
August 25, 2009 9:08 PM moslof said... A good article but I disagree with labeling Bernanke a Libertarian. Most Libertarians are for "sound money" in my view. Bernanke may well be our last Fed Chairman. The greatest cycle of real economic growth in history occurred in Hong Kong with no central bank.
We need to try it here because the short sighted knee jerk policies of the Fed have needlessly distorted the natural swings of the business cycle since day one.August 25, 2009 9:19 PM Edward Harrison said... Here's a definition of Libertarianism that I agree with: Libertarianism is a term adopted by a broad spectrum[1] of political philosophies which advocate the maximization of individual liberty[2] and the minimization or even abolition of the state.[3][4] Libertarians embrace viewpoints across that spectrum, ranging from pro-property to anti-property, from minarchist to openly anarchist
http://en.wikipedia.org/wiki/Libertarian
The key thing that binds us Libertarians is a desire for individual liberty over power of the state. Otherwise, there are many different flavors.
August 25, 2009 9:23 PM depresso said... If you use the proper definitions of terms, then you could call Bernanke a fascist (fascism is the merger of state and private interests).
The vast majority of libertarians I know were highly critical of Greenspan, Bernanke and Fed's policies and predicted the inevitable crisis that would result form their activities. So, calling Bernanke a libertarian is an insult to them. A very high number of libertarians are proponents of sound money and gold standard or at least favor very strong restrictions on fiat money creation. That would be the opposite of what Bernanke and Greenspan did and are doing.I am not interested in what Bernanke supposedly or really says. I am interested in his actions. And his actions have nothing to do with libertarian principles, unless you happen to be a libertarian basher, liar or a simple ignorant.
August 25, 2009 9:28 PM Edward Harrison said... Depresso, that's absolute rubbish. The seminal moment in Bernanke's tenure was his decision to let Lehman Brothers fail, a decision which was driven by free market thinking. Use silly terms like basher, liar and ignorant all you want, they are not in any way adding strength to your argument.
Clearly Bernanke had 'libertarian sympathies' until the moment of truth post-Lehman.
August 25, 2009 9:59 PM Edward Harrison said... This from Alan Blinder two years BEFORE the crisis: http://money.cnn.com/magazines/fortune/fortune_archive/2005/05/02/8258489/
He's very driven on the inside, but comes across as a very calm personality--strong-minded, but not argumentative. Like Greenspan, he never raises his voice," said Princeton economist and former Clinton-appointed Fed vice chairman Alan Blinder. "I worked with him for years before I even knew he was a libertarian-leaning Republican."
Again, I certainly don't agree with much of what Bernanke did as Fed chairman, but in policy circles he is considered to be a Libertarian.
August 25, 2009 10:06 PM depresso said... I don't give a damn about the "policy circles". Bernanke is not and never was a libertarian and anyone who says otherwise is a liar or ignorant. Considering the ongoing statist campaign against libertarians, I believe that the former is more true than the latter. A person who is responsible for manipulating the interest rates and money supply, creating and popping bubbles, creating an alphabet soup of funny facilities, etc. can not be a libertarian by definition.
It does not matter how much the liars and libertarian-bashers say that black is white, they will not change this simple fact. They can however influence the public perceptions and that is their real agenda, the real reason why they falsely blame the libertarians and free markets for this crisis.And, by the way, I also don't give a damn about you getting offended by "silly terms" like basher, liar, etc. The statist campaign is reaching gigantic proportions and I don't see a reason why I should restrain myself in the face of all this obnoxiousness coming from the "circles".
August 25, 2009 10:26 PM Edward Harrison said... depresso, yours is not a well-reasoned argument. It's an entirely emotional response. And whether Bernanke is a Libertarian is irrelevant as it has nothing to do with whether he will be a good Fed chairman. You have your view. I have mine. Let's just leave it at that.
August 25, 2009 10:31 PM Yves Smith said... depresso. Ad hominem attacks are against this blog's comment policy. If you want to disagree, that's fine, but abuse and name calling is not.
August 25, 2009 10:37 PM bob said... "A person who is responsible for manipulating the interest rates and money supply, creating and popping bubbles, creating an alphabet soup of funny facilities, etc. can not be a libertarian by definition" Nonsense. If its yours why can't you manipulate it? That is the heart of libertarianism.
Is it your assertion that I could not sell my gold for more (or less) than what it was going for in another market?
Who enforces libertarianism? By your definition, they would not be libertarian.
Its a word. An adjective. Hitler was libertarian compared to Stalin.
What you seem to be advocating is anarchy.
Where does this free market exist? Point to one example of it anywhere in the history of the world.
August 25, 2009 10:38 PM Edward Harrison said... When it comes to Bernanke (and Greenspan), I think moslof has it right about the subversion of Libertarian ideas and makes criticism I can accept: "...I disagree with labeling Bernanke a Libertarian. Most Libertarians are for "sound money" in my view. ...short sighted knee jerk policies of the Fed have needlessly distorted the natural swings of the business cycle since day one."
August 25, 2009 10:47 PM depresso said... Yves, I consider calling Bernanke a Libertarian an ad hominem attack on all Libertarians. Bob said: Nonsense. If its yours why can't you manipulate it? That is the heart of libertarianism.
Bob, that would be true if fed wasn't a state enforced monopoly. However, the Fed is a state enforced monopoly and thus is anti-libertarian.
Yves, feel free to block my access and/or delete my comments. It is your blog and you have a right to do as you wish here (unless a "libertarian" makes it illegal). I admit that my comments are partially emotional. I am simply sick and tired of all the nonsense that is nowadays coming out from the mainstream and from blogs like nakedcapitalism (which I used to like...).
Edward Harrison said: ...I think moslof has it right...
Interesting that you say this because before moslof said what you claim to agree with, I said: Libertarians and proponents of free-markets believe in sound money, gold standard and want the Federal Reserve to be abolished.
Bernanke is NOT libertarian, never was, never will be.
August 25, 2009 10:54 PM bob said... You seem to have a monopoly on the word libertarian, who can use it and how they can use it. That is anti-libertarian.
August 25, 2009 11:15 PM depresso said... Very funny bob. Feel free to believe that a government monopoly is libertarian, up is down and black is white. As you can see on this blog, you will not be alone in your beliefs... August 25, 2009 11:22 PM attempter said... Ed quotes this definition of libertarian: Libertarianism is a term adopted by a broad spectrum[1] of political philosophies which advocate the maximization of individual liberty[2] and the minimization or even abolition of the state.[3][4] Libertarians embrace viewpoints across that spectrum, ranging from pro-property to anti-property, from minarchist to openly anarchist
http://en.wikipedia.org/wiki/Libertarian
1. Since the effective liberty of most people would be diminished if not completely destroyed as the "state" is diminished (not that many are capable of liberty either way), even in pure liberty terms this is already really might makes right, right of the stronger, and "libertarian" is simply a fancy, dishonest word to dress up that fact.
Still, beyond the terminological dishonesty, might-makes-right in itself can be an internally consistent view.
2. But where they bring "property" into it is where we know the whole thing is a scam. Property and wealth accumulation (let alone all the bells and whistles of banks and stock markets and so on) of course cannot exist at all without a strong, aggressive government aggressively dedicated to those things.
It's absurd on its face to say "get rid of government" and yet say "I have property rights!"
"Property" and "rights" - one has to be doubly an aggressive statist.
So there's where we KNOW "libertarian" is just a stalking horse for the brutal, direct dictatorship of big corporations and the rich.
August 26, 2009 1:11 AM Prashant said... I don't know about the definitions, but Bernanke, Greenspan and Co. are definitely no believers in Free markets.
All said and done, it is just another variant of Crony Capitalism that is practised in the United States despite what it preaches to the rest of the world.August 26, 2009 1:20 AM skippy said... Law is the order of the land and its inception was to protect *property* from the mob (see the poor) by landed army's aka the Authoritarian system. We have evolved socially from feudal to monarchy to peoples forms of governance. Democracy is an attempt to equalize societal pressures with regards to concentration of wealth and power by the few over the many (see Rome).
Now sorry for the 101, but what are we really debating here libertarian vs socialist vs free market vs ??????. I thought the Constitution said WE the people not some fence in the mind that has so many gray areas multiplied by the number individuals present in the republic at one time. Hence we all have different interpretations of definitions regardless of what wiped says.
I fear Democracy is under the knife by forces which would concentrate power for their benefit and not that of the people as a hole. Call that what you may, but remember the club of I over US has ramifications and one should consider fully their impact.
Hell lets all just get big stamps on our foreheads and call a spade, a spade and respond accordingly to their ideology with out interference.
Communists can have one small room like all the others and rationing of all worldly goods.
Socialists can have an egalitarian world, little bits of everything the good and the bad ie: nobody really happy or completely fulfilled ideologically.
Free Marketeers can get screwed and screw over each other till one person owns it all, the hole planet.
Every system of governance I have studied evolves and then devolves to a basic state of community if not over whelmed by another budding system of youthful expansionist exuberance.
We are some where on that historical trajectory and need to sort out who we really are ie: a group of citizens ready to learn from our mistakes or a rowdy group of individuals ready to cut each others throats for our individualistic/ idealogical needs, especially when none can lay claim to fact, but merely see truth in own minds.
Skippy...sorry just so sick of the crap: see extremism.
PS. Have a good trip Ted K. you tried to do good things.
August 26, 2009 4:28 AM skippy said... @above shez....wiped should read...wikipedia. amends
August 26, 2009 4:31 AM stylerspeakslife said... i guess you can never please everyone in Washington, and this Bernanke mess is no different. Obama and his supporters are confident that he can come in and save the day, but others think he helped cause the mess in the first place! http://www.newsy.com/videos/ben_bernanke_is_here_to_stay August 26, 2009 10:40 AM Siggy said... Roach wrote a very good piece. Bit of a realty check. A hugge amount of pointless parsing of libertarian/socialist/fascist here. Why the reliance on democracy? We are a Constutionally Empowered Federal Republic! When we consistently mis-identify our political system as being a democracy, we erode the contract that was the great gift of our nations founders.
What Roach has clearly pointed out is that the extension of Bernanke's term was a choice of lessor evils, the devil we know.
August 26, 2009 11:23 AM Dave Raithel said... Ed Harrison and all re "Libertarian" and "Libertarianism" etc.: So how come John Rawls wouldn't be called "Libertarian", since his first principle of justice is (paraphrased): Each person is to have the broadest degree of liberty consistent with a like degree of liberty for each other person... Because he had no gold fetish, and was for redistribution (as needed to improve the circumstances of the representative least well-off person ...)
But all that is a mostly a digression from the main point of the argument: "The world needs central bankers who avoid problems...", which returns us to the whole foreknowledge problem I've lately been tasking myself about. Sure, but how much are you going to pay them? Has to be more than they can make in the private sector (with proper utility considerations for power and prestige.)
Granted, there's some limiting point at which past choices preclude one from future participation. (Imagine Goerring or Borman genuinely confessing that the whole kill the Jews thing was a terrible policy - doesn't seem to work.) On the other hand, for all I know - since I don't live and work in Financelandia - Bernanke is rational, and he's gotten past the errors of his previous ways. Reality has been the experiment, and it just didn't work out as predicted.
Or not. Here's an aspect of reality that persists as much as my extraordinary disappointment in Obamaman - somebody, somewhere, made money (and somebody lost some) because of how they speculated on who'd be running the Fed a year from now.
Bernanke is, at worst, a symptom.
August 27, 2009 3:35 AM attempter said... Dave says: Ed Harrison and all re "Libertarian" and "Libertarianism" etc.: So how come John Rawls wouldn't be called "Libertarian", since his first principle of justice is (paraphrased): Each person is to have the broadest degree of liberty consistent with a like degree of liberty for each other person...
Because he had no gold fetish, and was for redistribution (as needed to improve the circumstances of the representative least well-off person ...)
Just yesterday I was flipping through an Ayn Rand tome and chuckled to see her referring to the rather innocuous (a word I'm not using as a compliment) Rawls as "evil" and "malevolent".
Now I wonder what would inspire her to such a seemingly disproportionate response? Could it be that Rawls really does represent a kind of capitalistic liberty philosophy, exactly what she lyingly claimed to represent?
August 27, 2009 4:55 AM Edward Harrison said... I have added this paragraph to the end of the post: Update: I wouldn't characterize Ben Bernanke as "cut from the same market libertarian cloth," as Roach does. I would suggest he has Libertarian leanings, but was probably the least inclined between himself, Paulson and Geithner to let Lehman fail. Another thought: as to whether Bernanke would be the best choice, I think this is largely a political calculation (do we go with an unknown and roil markets/do we change horses mid-stream). Obama plays it safe when it comes to these kinds of decisions. His Biden pick reflects this. It was unlikely he was going to select anyone other than Bernamke, Summers, or Yellen, Although one or two other names have come up.
August 27, 2009 9:01 AM VangelV said... "Bernanke, like Greenspan, is an ultra-free market Libertarian who believes markets always are better informed than regulators..." So much for Roach's credibility. How can anyone who has the job of being a central planner and is arrogant enough to believe that the economy can be managed by pulling strings and pushing buttons be considered a 'libertarian?' It seems to me that those that favour meddling, as Roach seems to, do not blame the system of regulations that created the mess in the first place but the regulators for not doing enough meddling.
If Bernanke were a true libertarian he would resign his position.
August 27, 2009 9:56 AM Edward Harrison said... Vangel, I am pretty much sick and tired of people acting as if there is some absolute to being a Libertarian. It's utter rubbish.
I think you have a fairly narrow view of what it means to be Libertarian. In an ideal world, many believe the central bank shouldn't even exist. But Roach is NOT talking solely about monetary policy when he uses the word Libertarian, he's referring to Bernanke's belief in market forces in the financial sector a.k.a. de-regulation.
When I refer to the word Libertarian I mean to invoke the concept of liberty in a general sense. This would a believe in individual freedom, free markets, civil liberties, and so forth.
For instance, the Libertarian Party platform mentions all of these things but nowhere does it explicity state that it wishes to abolish the Federal Reserve, though it does call for the repeal of income taxes. The party does abhor "inflationary monetary policies" and calls for a repeal of legal tender laws.
Being a Libertarian or having Libertarian leanings is not just about monetary policy.
One final word: anyone who is foolish enough to believe that self-regulation in finance works - that allowing an economic ecosystem to flourish without the government enforcing law and acceptable codes of behavior - is either an anarchist or not particularly realistic.
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By Henry Kaufman
Published: April 27 2009 19:16 | Last updated: April 27 2009 19:16
The Federal Reserve has been hobbled by at least two major shortcomings that were primarily responsible for the current and several previous credit crises. Its failure to spot the importance of changing financial markets and its commitment to laisser faire economics were big mistakes and justify a fundamental overhaul of the Fed.
The first of these shortcomings was its failure to recognize the significance for monetary policy of structural changes in the markets, changes that surfaced early in the postwar era. The Fed failed to grasp early on the significance of financial innovations that eased the creation of new credit. Perhaps the most far-reaching of these was the securitisation of hard-to-trade assets. This created the illusion that credit risk could be reduced if instruments became marketable.
Moreover, elaborate new techniques employed in securitisation (such as credit guarantees and insurance) blurred credit risks and raised – from my perspective, many years ago – the vexing question, "Who is the real guardian of credit?" Instead of addressing these issues, the Fed was highly supportive of securitisation.
One of the Fed's biggest blind spots has been its failure to recognise the problems that huge financial conglomerates would pose for financial stability – including their key role in the current debt overload. The Fed allowed the Glass-Steagall Act to succumb without appreciating the negative consequences of allowing investment and commercial banks to be put together. Within two decades or so, financial conglomerates have come to utterly dominate financial markets and financial behaviour. But monetary policymakers failed to recognise that these behemoths were honeycombed with conflicts of interest that interfered with effective credit allocation.
Nor did the Fed recognise the crucial role that the large financial conglomerates have played in changing the public's perception of liquidity. Traditionally, liquidity was an asset-based concept. But this shifted to the liability side, as liquidity came to be virtually synonymous with easy borrowing. That would not have happened without the marketing efforts of large institutions.
My second major concern about the conduct of monetary policy is the Fed's prevailing economic libertarianism. At the heart of this economic dogma is the belief that markets know best and that those who compete well will prosper, while those who do not will fail.
How did this affect the Fed's actions and behaviour?
- First, it explains to a large extent why the Fed did not strongly oppose the removal of Glass-Steagall restrictions.
- Second, it also helps explain why the Fed failed to recognise that abandoning Glass-Steagall created more institutions that were "too big to fail".
- Third, it diminished the supervisory role of the Fed, especially its direct responsibility to regulate bank holding companies. To be sure, the Fed's supervisory responsibilities have never been very visible in the monetary policy decision-making process. But its tilt toward an economic libertarian approach pushed supervision a notch down just at a time when financial market complexity was on the rise.
- Fourth, as hands-on supervision slackened, quantitative risk modelling became increasingly acceptable. This approach, especially quantitative modelling to assess the safety of a financial institution, was far from adequate. But it worked hand in glove with a philosophy that markets knew best.
- Fifth, adherence to economic libertarianism inhibited the Fed from using the bully pulpit or moral suasion to constrain market excesses. It is difficult to believe that recourse to moral suasion by a Fed chairman would be ineffective. Such public pronouncements about financial excesses are hard to ignore, reaching the broad public as well as market participants.
- Sixth, the Fed's increasingly libertarian philosophy underpinned its view that it could not know how to recognise a credit bubble but knew what to do once a bubble burst. This is a philosophy plagued with fallacies. Credit bubbles can be detected in a number of ways, such as rapid growth of credit, very high price/earnings ratios and very narrow yield spreads between high- and low-quality debt.
By guiding monetary policy in a libertarian direction, the Fed played a central role in creating a financial environment defined by excessive credit growth and unrestrained profit seeking. Major participants came to fear that if they failed to embrace the new world of securitised debt, proxy debt instruments, and quantitative risk analysis, they stood a very good chance of seeing their market shares shrink, top staff defect, and profits dwindle.
Ironically, the problem was made worse by the fact that the Fed was inconsistently libertarian. The central bank stuck to its hands-off approach during monetary expansion but abandoned it when constraint was necessary. And that, in turn, projected an unpredictable and inconsistent set of rules of the game.
We should, therefore, fundamentally re-examine the role of the Fed and the supervision of our financial institutions. Are the current arrangements within the Fed structure adequate – from its regional representation to its compensation for chairman and governors to its terms of office for governors? How can the Fed's decision-making process be improved? If we were to create a new central bank from the ground up, how would it differ? At a minimum, the Fed's sensitivity to financial excesses must be improved.
The writer is president, Henry Kaufman & Company
"Libertarian Dogma and the Fed"
hari says...
Old Henry is the master bond dealer of his time.
What he is saying is further confirmation of Waldman/MT on another link today. He's explaining the mindset of Fed when it comes to (ideological) policy orientation under Greenspan/Bernanke.
I don't think you can re-educate them...It's too late!
If you take Henry/Waldman links together, Geithner/Summers policy prescription is a very costly affair for taxpayers - and directly benefits WS Barons who inflicted the serious catastrophe.
It would be next to impossible framework of policy in Germany/France and rest of ECB-16. And for good political-economic reasons to boot.
bakho says...
Blaming "Libertarian tendencies" is a polite way of saying they took a chainsaw to regulations.
ken melvin says...
Part of reform should include driving a stake throught the heart of libertarianism. Generally, I believe in freedom of religion, but the worship of such false gods must henceforth be forbidden, and straight to the gallows with anyone who claims that the markets know best.
8 says...
Libertarianism in the Fed and deregulation was a response to the failed socialism/progressivism of 1910-1978. If we want to get rid of the false gods, we'll have to rip out everything since Teddy Roosevelt.
Patrick says...
"Libertarianism in the Fed and deregulation was a response to the failed socialism/progressivism of 1910-1978"
Not even wrong.
Brooks says...
Just a side note: Funny thing is, many (perhaps most) of the capital "L" Libertarians are the biggest Fed-haters in the nation, and many would like to see the Fed abolished. So when I saw the title of this post "Libertarian Dogma and the Fed" I thought it would be about those "Ban the Fed" types who constantly rail against "fiat currency".
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Posted by: anonymous | March 15, 2009 at 01:14 AM
Less easy is responding to Douthat's point (Murray's point, actually) that part of what makes humans happy is a sense of personal responsibility and accomplishment and that to the extent that government starts to infringe on aspects of life that used to be an individual's responsibility - people will experience less of a sense of achievement - hence less happiness.
I hope that 100 years from now religion will be viewed as slavery is today. I further hope that people will not be so obtuse as to claim that everything religious people have said in the history of man should be discounted... because they were religious.
Posted by: Michael | March 15, 2009 at 03:42 AM
I suspect Iceland is no longer number 1. The US is #13, lucky us. Everyone above us is more socially democratic. With the possible exception of Iceland. And maybe Australia, though I bet they have universal health care.
Posted by: Doctor Jay | March 15, 2009 at 08:05 AM
Posted by: Colin Danby | March 15, 2009 at 11:52 AM
Hmm. I take it that Ross Douthat has not read Malcolm Gladwell's _Outliers_? But, for christs sake, do you need Gladwell to tell you that, if you are struck with a childhood disease because of a crappy health system, or are given a lousy childhood education, or can't get a job at a certain company because you have the wrong color skin, then you DON'T HAVE MUCH of that precious agency that Douthat thinks is so important.
How about it Ross? Willing to come out squarely on the side of more government involvement in child healthcare, in education, in undoing the damage of past and current discrimination? Don't tell me, let me guess: Mr "screw agency for Asians and women" doesn't really give a damn about Aristotle except insofar as he can be used to extend the arguments of the plutocracy.