Thursday, February 11, 2010

Well, Well, Reich and Krugman Understand the Difference Between Interventionism and Free Markets, Afterall

It's been standard operating procedure for interventionists to blame the Great Recession on free markets, as though what is going on in America even now has anything to do with free markets.

It has taken President Obama's statement, that he does not begrudge the "free market" earnings of Jamie Dimon, Lloyd Blankfein, and the like, to set the interventionsits into such a fury that they are now willing to admit that what is going on has little to do with free markets. Indeed, it seems like top interventionists Robert Reich and Paul Krugman can write about little else.

Robert Reich writes today:
...the President was asked about the giant pay packages of Jamie Dimon, CEO of JP Morgan Chase & Co. ($17 mullion for 2009) and Lloyd Blankfein, CEO of Goldman Sachs ($9 million). “First of all, I know both those guys,” Obama said. “They’re very savvy businessmen. And I, like most of the American people, don’t begrudge people success or wealth. That’s part of the free market system.”

Free market system? As I remember it, American taxpayers forked out hundreds of billions to keep JPMorgan, Goldman, and other big Wall Street banks afloat through most of 2009. Had we not done so, Dimon, Blankfein, and most other top executives on Wall Street would not have earned a dime last year. In fact, some would be out on the street, reather than sitting pretty on the Street.
Here's Krugman's full take from his blog, today:


I’m with Simon Johnson here: how is it possible, at this late date, for Obama to be this clueless?

The lead story on Bloomberg right now contains excerpts from an interview with Business Week which tells us:

President Barack Obama said he doesn’t “begrudge” the $17 million bonus awarded to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon or the $9 million issued to Goldman Sachs Group Inc. CEO Lloyd Blankfein, noting that some athletes take home more pay.

The president, speaking in an interview, said in response to a question that while $17 million is “an extraordinary amount of money” for Main Street, “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.”

“I know both those guys; they are very savvy businessmen,” Obama said in the interview yesterday in the Oval Office with Bloomberg BusinessWeek, which will appear on newsstands Friday. “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free- market system.”

Obama sought to combat perceptions that his administration is anti-business and trumpeted the influence corporate leaders have had on his economic policies. He plans to reiterate that message when he speaks to the Business Roundtable, which represents the heads of many of the biggest U.S. companies, on Feb. 24 in Washington.

Oh. My. God.

First of all, to my knowledge, irresponsible behavior by baseball players hasn’t brought the world economy to the brink of collapse and cost millions of innocent Americans their jobs and/or houses.

And more specifically, not only has the financial industry has been bailed out with taxpayer commitments; it continues to rely on a taxpayer backstop for its stability. Don’t take it from me, take it from the rating agencies:

The planned overhaul of US financial rules prompted Standard & Poor’s to warn on Tuesday it might downgrade the credit ratings of Citigroup and Bank of America on concerns that the shake-up would make it less likely that the banks would be bailed out by US taxpayers if they ran into trouble again.

The point is that these bank executives are not free agents who are earning big bucks in fair competition; they run companies that are essentially wards of the state. There’s good reason to feel outraged at the growing appearance that we’re running a system of lemon socialism, in which losses are public but gains are private. And at the very least, you would think that Obama would understand the importance of acknowledging public anger over what’s happening.

But no. If the Bloomberg story is to be believed, Obama thinks his key to electoral success is to trumpet “the influence corporate leaders have had on his economic policies.”

We’re doomed.
Of course, they can still say that the GR was started by free market policies (It wasn't), but they sure as hell can't claim, anymore, that what Bush and Obama have done since GR hit is simply free market policy. They have boxed themselves in.

This doesn't mean, though, that they are in favor of free markets, it's simply that they want more intervention and more government money spent, just in their chosen directions, i.e. into the hands of their interventionist friends, and not into the hands of the Wall Street oligarchs.

But mark this day down. At some point in the future, some interventionist, in a history of this time, perhaps even Reich or Krugman, will write that Bush and Obamm did nothing except allow free market forces to act and that's what prolonged the GR, but we will have the real time scribblings of Reich and Krugman to prove that this wasn't the case.


  1. I'd like to share your optimism, Wenzel, but Krugman explicitly admitted in 2006 that it was Greenspan who had caused the housing bubble--and that it may have been a good idea!

    In fairness to Krugman, if you read very carefully he is saying simple words from Greenspan could have diverted disaster, but still, you would think this type of statement would have gotten more attention.

    The same will be true of Reich and Krugman now saying we haven't had a free market in the banks for a few years.

  2. The same will be true of Reich and Krugman now saying we haven't had a free market in the banks for a few years.

    My point is thatthey did day, and if anyone tries to say otherwise, it gives you the opportunity to write, "The Politically Incorrect Guide to the Financial Crisis"

  3. I agree with Wenzel, Reich and Krugman are sowing the seeds of a new book on the Politically Incorrect GR.

    These guys are usually so inconsistent that it is difficult to reveal. They offer no base-line of rational consistancy for comparison. But in this case they are so frustrated by Obama's inability to use the populist anger to consolidate govt intervention that they reveal a certain consistancy in their thought. They quite clearly understand that the banks are "wards of the state" due to govt. intervention.

    But as night follows day they will contradict this statement and then the Politically Incorrect hero can strike. Although this may not be enough to save the republik, it will probably sell a few books.