Monday, March 09, 2009

Why Our Economy Has Collapsed

Maybe collapsed is not the right word - how about "fallen off a cliff"?

From where I am sitting, rational egoism/self-interest is the shadow wound of American culture, the one from which we are bleeding to death. A society built on me-first self-interest - the kind of crap espoused by Ayn Rand and her followers (who have an enormous and unexamined influence in American economics) - is doomed to fail. And so it has.

Alan Greenspan, once considered the "genius" of American economic policy, acknowledged Rand's influence on his thinking, according to this passage in his Wikipedia entry:

Greenspan was initially a logical positivist[22] but was converted to Objectivism by Nathaniel Branden. During the 1950s and 1960s Greenspan was a proponent of Ayn Rand's philosophy, writing articles for Objectivist newsletters and contributing several essays for Rand's 1966 book Capitalism: the Unknown Ideal including an essay supporting the gold standard.[23][24]

During the 1950s, Greenspan was one of the members of Ayn Rand's inner circle, the Ayn Rand Collective, who read Atlas Shrugged while it was being written. Rand nicknamed Greenspan "the undertaker" because of his penchant for dark clothing and reserved demeanor. Although Greenspan was once recognized as a proponent of laissez-faire capitalism, some Objectivists find his support for a gold standard somewhat incongruous or dubious,[citation needed] given the Federal Reserve's role in America's fiat money system and endogenous inflation. He has come under criticism from Harry Binswanger,[25] who believes his actions while at work for the Federal Reserve and his publicly expressed opinions on other issues show abandonment of Objectivist and free market principles. However, when questioned in relation to this, he has said that in a democratic society individuals have to make compromises with each other over conflicting ideas of how money should be handled. He said he himself had to make such compromises, because he believes that "we did extremely well" without a central bank and with a gold standard.[26] Greenspan and Rand maintained a close relationship until her death in 1982.[15]

In a congressional hearing on October 23, 2008 Greenspan admitted that his free-market ideology shunning certain regulations was flawed.[27] This has caused backlash from Objectivist intellectuals, blaming the economic crisis on Greenspan's pandering to the mixed economy and betraying his laissez-faire views.[28]

He shared her views on laissez-faire capitalism, and he was forced to admit their failure. Looking back, we can now see that Greenspan's politics shaped his economic policy as Fed Chairman, much to the country's detriment. Deregulation just allows rational self-interest - which only sees the bottom line - to run rampant.

In my view, the only solution is a cooperative mentality - not socialism or communism - but a society where we care about each other and take care of each other, at the individual level and in our national policy. We must work together for the common good, not for our own wealth and comfort.

We cannot allow corporations to be unfettered by regulation - we have tried that approach and this is what it has produced. But we must also encourage and teach personal responsibility. When consumer debt (on credit cards) is equal the GDP, both at $13 trillion as of February, we are doomed to economic collapse. We can no longer survive as a society built on consumer spending.

There is no simple answer to any of this - no political policy or legislation will change it. Only we can change things. In our homes, in our circles of friends and family, in our communities. We need to rebuild American culture from the bottom up - with a little help from those at the top - or we will never recover from the mess we have created.

But the first step, as in all recovery, is to admit we have a problem. Until we do that, nothing will change.


PeterAtLarge said...

Wisely written! I agree. The Libertarian fallacy has a lot to answer for, in view of the past three decades of "free markets." And we have many years of recovery ahead of us. So long, that is, as we don't get waylaid again by proponents of this false ideology.

Michael- said...

great comments Bill!

first step: admit that neo-liberalism failed, and time to begin anew...


Anonymous said...

Yes, these are heady times we are in. Plenty of blame to go around, both from the right and the left. I think we will need to create a new economic system, one that more explicitly acknowledges the impact on earth, environment and people, and also functions on a worldwide scale. I am sure there must be people beginning conversations about this somewhere. Are you aware of anyone?

Michael Clendenin Miller said...

Greenspan abandoned Rand's politics long ago when he took the job at the Fed she damned. Your knowledge of her politics is even shallower than his. Both of you merely flaunt your own ignorance by asserting that the collapse was caused by her radical laissez-faire capitalism, since it is not now and never has been practiced anywhere. How can something fail that does not exist?

Her brand of capitalism is defined by a single principle:

No person may initiate the use of physical force to gain, withhold, or destroy any tangible or intangible value created by or acquired in a voluntary exchange by any other person.

This is a restriction of corporations and individuals and government to a degree never before imposed. In that society, the greedy cannot coerce your participation. The government cannot take your money at gunpoint and use it to insure loans to those who could never pay it back or to insure the gambled debts of rogue investment firms. There would be no Fannie, Freddie, or Federal Reserve to distort the market system, and there would be no collapse.

The only relationship Rand has to this collapse is the fact that she understood it so well 50 years before it happened, that she predicted it in great detail and the succeeding consequences that are now unfolding.

And if you read Atlas Shrugged carefully, you will find a character just like yourself in there with the same lame arguments and excuses.