Keynes famously wrote that “Practical men, who believe themselves to be exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.” The Bush Administration today is in the awkward position of continuing to espouse the laissez-faire rhetoric of Milton Friedman and Friedrich Hayek while spending hundreds of billions of dollars of public money to bail out the financial sector.
Last week, President Bush gave a speech to the rightwing Manhattan Institute in which he asserted with a straight face that “free market principles offer the surest path to lasting prosperity.” He went on to insist “I’m a market-oriented guy, but not when I’m faced with the prospect of a global meltdown.” The idea that the market itself brought on this state of affairs was conveniently not emphasized.
Today, Treasury Secretary Henry Paulson delivered a speech of his own at the Ronald Reagan Presidential Library, a monument to the man who, in his first inaugural address, declared: “In this present crisis, government is not the solution to our problem; government is the problem.” While the current economic mess prevented Paulson from saying anything quite so categorical, he did try to salvage a bit of Reaganism by warning against “implement[ing] more rather than better regulations.”
While Bush and Paulson are trying to preserve some semblance of their failed ideology, corporate executives are doing what they do best: lining their pockets. Back in 2002, in the wake of the scandals involving companies such as Enron, Tom Toles published a cartoon headlined: “The preceding 22 years. A Synopsis.” It showed Regan in the foreground making his statement about government being the problem, while in the background CEOs are seen looting a safe filled with cash.
That image is even more appropriate today. The latest indication of corporate cupidity comes in today’s Wall Street Journal, which reports that in the run-up to the current crisis, top executives in the housing and financial sectors cashed out more than $21 billion in stock and thus avoided the subsequent collapse in the value of those holdings.
At the same time, automakers, who for years resisted significant fuel-economy regulation, are clamoring for a place at the public trough alongside the bankers who managed to abolish many of the rules that governed their industry. For all of them, government is now seen as the solution—to their financial woes.
It remains to be seen how long the likes of Paulson will go on clinging to some vestige of market fundamentalism. For the rest of us, the question is whether a decent economy can somehow be built amid the ruins of deregulated capitalism.