Quiz for the day: Who said this?
The 85 richest people in the world, who could fit into a single London double-decker, control as much wealth as the poorest half of the global population– that is 3.5 billion people….
A greater concentration of wealth could—if unchecked—even undermine the principles of meritocracy and democracy. It could undermine the principle of equal rights proclaimed in the 1948 Universal Declaration of Human Rights.
Pope Francis recently put this in stark terms when he called increasing inequality “the root of social evil”.
Some of the greatest problems, still outstanding today, lay with the so-called too-big-to-fail firms. In the decade prior to the crisis, the balance sheets of the world’s largest banks increased by two to four-fold. With rising size came rising risk—in the form of lower capital, less stable funding, greater complexity, and more trading.
This kind of capitalism was more extractive than inclusive. The size and complexity of the megabanks meant that, in some ways, they could hold policymakers to ransom. The implicit subsidy they derived from being too-big-too-fail came from their ability to borrow more cheaply than smaller banks—magnifying risk and undercutting competition.
Answer: IMF Managing Director Christine Lagarde, in a speech to a conference on “inclusive capitalism” on May 27. See the transcript of her speech here. For more on changing spirits of the times, see here.
Robert Reich peels away the layers of an ideological onion:
One of the most deceptive ideas continuously sounded by the Right (and its fathomless think tanks and media outlets) is that the “free market” is natural and inevitable, existing outside and beyond government. So whatever inequality or insecurity it generates is beyond our control. And whatever ways we might seek to reduce inequality or insecurity — to make the economy work for us — are unwarranted constraints on the market’s freedom, and will inevitably go wrong.
By this view, if some people aren’t paid enough to live on, the market has determined they aren’t worth enough. If others rake in billions, they must be worth it.
Read more here.
“Econ 101 is killing America,” write Robert Atkinson and Michael Lind:
Even though most economists know better, they present to the public, the media and politicians a simplified, vulgar version of neoclassical economics — what can be called Econ 101 — that leads policymakers astray. Economists fear that if they really expose policymakers to all the contradictions, uncertainties and complications of “Advanced Econ,” the latter will go off track — embracing protectionism, heavy-handed “industrial policy” or even socialism.
Read their take on the myths of Econ 101 here.
Katrina van den Heuvel writes in The Washington Post:
True conservatives are — or should be — offended by corporate welfare as well. Conservative economists Raghuram Rajan and Luigi Zingales argue that it is time to “save capitalism from the capitalists,” urging conservatives to support strong measures to break up monopolies, cartels and the predatory use of political power to distort competition.
Here is where left and right meet, not in a bipartisan big-money fix, but in an odd bedfellows campaign to clean out Washington.
Read her piece here.
Capitalism Unmasked, a new eBook edited by Lynn Parramore, was produced in a partnership between AlterNet and Econ4 to expose the myths of unbridled capitalism and show the way to a better future. You can download the PDF here.
The Times reports free-market funnies from documents unearthed in a case now before the New York State Supreme Court:
On March 16, 2007, Morgan Stanley employees working on one of the toxic assets that helped blow up the world economy discussed what to name it. Among the team members’ suggestions: “Subprime Meltdown,” “Hitman,” “Nuclear Holocaust” and “Mike Tyson’s Punchout,” as well a simple yet direct reference to a bag of excrement.
Ha ha. Those hilarious investment bankers.
Then they gave it its real name and sold it to a Chinese bank.
Read here what they don’t teach about banking in B-school.
Echoing our recent Econ4 statement, Eduardo Porter explains in the New York Times why our healthcare-for-profit system means that Americans pay too much and get too little:
From the high administrative costs incurred by health insurers to screen out sick patients to the array of expensive treatments prescribed by doctors who earn more money for every treatment they provide, our private health care industry provides perhaps the clearest illustration of how the profit motive can send incentives astray.
By many objective measures, the mostly private American system delivers worse value for money than every other in the developed world. We spend nearly 18 percent of the nation’s economic output on health care and still manage to leave tens of millions of Americans without adequate access to care.
Read his piece here.
Does “Too Big To Fail” also mean Too Big To Regulate?
Gretchen Morgenson talks with Neil Barofsky, former special inspector general for TARP (the Troubled Asset Relief Program) about his new book, Bailout:
“So much of what’s wrong with Dodd-Frank is it trusts the regulators to be completely immune to the corrupting influences of the banks,” he said in the interview. “That’s so unrealistic. Congress has to take a meat cleaver to these banks and not trust regulators to do the job with a scalpel.”
Finally, Mr. Barofsky joins the ranks of those who believe that another crisis is likely because of the failed response to this one. “Incentives are baked into the system to take advantage of it for short-term profit,” he said. “The incentives are to cheat, and cheating is profitable because there are no consequences.”
Read her piece here.
Meanwhile Gar Alperovitz finds a surprising source of support for nationalization of banks that are TBTF and TBTR:
Most liberals in Washington — President Obama included — keep hoping the banks can be more tightly controlled but otherwise left as is. That’s the theory behind the two-year-old Dodd-Frank law, which Republicans and Wall Street are still working to eviscerate.
Some economists in and around the University of Chicago, who founded the modern conservative tradition, had a surprisingly different take: When it comes to the really big fish in the economic pond, some felt, the only way to preserve competition was to nationalize the largest ones, which defied regulation.
Read his column here.
In “Capitalism Unmasked,” Econ4′s joint project with AlterNet, Paul Davidson tours a fairytale world:
Conservative economists and their friends like to trot out a mythical being whenever they want to make arguments that favor an economy built for the wealthy at the expense of ordinary people. This imaginary being, known as the Confidence Fairy, is only happy when capitalists are given free rein to do whatever they want even if it brings us to the brink of a global economic meltdown.
Read his essay here.
In his ode to the “Free Market,” Dr. Doug Hendron sings:
Well, there’s something that makes me wanna jump and shout
It seems everybody’s always talking about
The free market, as if it’s just a fact
But you know it ain’t free if it destroys your habitat
Dr. Doug wields his musical scalpel here.