If Friedman’s Economic Model Is a Complete FAILURE! Why Is Obama Ignoring That Fact?

[leftchick]

This guy is way too optimistic. Sure they have been exposed and for quite while now. Yet no politician seems to want to end this model. The Chicago boys' theory will live until our economy is destroyed and we, the slaves are penniless. The USA is soon to suffer like Latin America. I just hope we can avoid the death squads.

:scared:


RIP Chicago School of Economics: 1976-2008

Posted By Barry Ritholtz On December 23, 2008 @ 7:03 am In Markets | 101 Comments


Some time ago, I asked if “Milton Friedman was the next economist whose once lauded reputation may soon slide ?”

Turns out it happened much quicker than expected. A long Bloomberg piece, Friedman Would Be Roiled as Chicago Disciples Rue Repudiation, discusses the tarnishment of the Chicago school of thought.

Its long overdue. From the efficient-market theories, to the concept of man as rational profit maximizers, much of the edifice that is was the Chicago school of economics is based on a foundation that is false, disproven or otherwise questionable.

I first encountered the Chicago theory in law school. The Chicagoists somehow read into law a market efficiency component that was never there. I recoiled against it — not because of the libertarianism, which I embraced. Rather, it seemed a backdoor way to circumvent democracy, and force into the legal system rules that were never debated, voted on, or agreed to by a representative government. I found the extremist legal theories of Judges like Richard Posner and Frank Easterbrook intellectually repulsive. They were undemocratic, anti-representative government. When I told a professor that the law and economics movement was an attempt at a political coup, he laughed and said, try to stop it.

I disliked the neoclassical price theory. It was authoritarian, a worship of a form of mob rule outside of the usual legal channels. The view that regulation and other government intervention is always inefficient compared to a free market has now been made laughable. Its always the extremists that seem to control a discipline or school of thought. If I have any dogma, its extremism in all forms is undesirable (I know, radical, huh)

If there is one silver lining in the entire collapse, its that this group of intellectual charlatans have been revealed as utterly wanting. Oh, there will be some pushback by the Chicagoans. (Watch the comments for the cute little protests from law students who never practiced a day in their lives, and the biz school kiddies who never executed a single trade).




Here is the piece from Bloomberg. The problem is, Obama is not taking their advice...

<snip>

When Friedman’s Platonic ideas of free-market virtues are put into practice, they have too often generated a systemic orgy of competitive greed — whose remedies, ironically, entail countermeasures of nationalization,” Marshall Sahlins, an emeritus professor of anthropology, said during the debate, speaking in a room adorned with murals of female students parading through the campus in medieval gowns. Sahlins, 77, noted a few weeks later socialist and capitalist countries alike are regulating or nationalizing financial institutions in a rebuff to Friedman.

Off campus, the global meltdown is stirring anti-Chicago economists, who were voices in the wilderness during decades of lax government oversight of markets. Joseph Stiglitz, who won one of Columbia’s economics Nobels, says the approach of Friedman and his followers helped cause today’s turmoil.

‘Bears the Blame’ “The Chicago School bears the blame for providing a seeming intellectual foundation for the idea that markets are self- adjusting and the best role for government is to do nothing,” says Stiglitz, 65, who received his Nobel in 2001.

University of Texas economist James Galbraith says Friedman’s ideology has run its course. He says hands-off policies were convenient for American capitalists after World War II as they vied with government-favored labor unions at home and Soviet expansion overseas.

“The inability of Friedman’s successors to say anything useful about what’s happening in financial markets today means their influence is finished,” he says.

http://www.bloomberg.com/apps/news?pid=20601109&sid=a3GVhIHGyWRM&#

[leftchick]

1. this is a first

I have kicked my own thread. I want an explanation for Obama's horrible economic decisions so far. We are drowning out here.

[chimpymustgo]

3. Leftchick, a lot of people are in denial. They don't want to KNOW, they want to BELIEVE.

But I honestly think more people are starting to ask some of the questions many of us have asked since this ridiculous bailout was proposed. Obama and his team truly did not get it at first. Matt Taibbi's article...Arianna Huffington on MSNBC this morning...Paul Krugman as well - some people are starting to call for a new direction for the economic crisis - you know, CHANGE.

[leftchick]

8. I have seen the denial

and it is ridiculous. I wish I could be optimistic but after reading this and seeing him on tv laughing I am disgusted. The economists have been screaming for weeks we are running out of time. My husband is extremely fearful he is going to lose his job and I am disabled, my son has Diabetes, what happens if we lose our health insurance? I mean LIFE SUCKS right now and obama is fiddling with the wall street boys while the people get burned!

:argh:

[truedelphi]

50. But -- but if they don't get their bonuses they will

Run Wall Street from some other country.

CNBC guy Haines just spelled this out.

After all, what does the average person in this country know about running a huge company.
Or the economy for that matter.

Well, I'd answer, now that Taibbi's piece exposes the fact that AIG didn't even have a risk assessment manager for 18 months - I guess most of us know more than that. Most of us do our risk management in the form of balancing our checkbooks and not spending more than we make.

[leftchick]

51. and by not stealing from others

and making up false numbers. The bottom line is we have to nationalize or we are DONE!

[truedelphi]

53. I think you are right about nationalizing, but who in the world would we have in the

nationalized banks? I no longer trust any one from that sphere of the Universe.

[leftchick]

54. I would completely rely on economists

for choosing people with ethics and we also need to prosecute, which means Elliot Spitzer should be called upon.

[originalpckelly]

15. Obama and his team get it, they just don't want to overturn the system that made them.

It's really easy to think America's a nice country and the like when life works out for you, but when you've had tons of shitty things happen, and you don't end up the President, you tend to view America in a different light.

[HughBeaumont]

7. I kick my own threads quite often.

I don't know what it is. Our bad disaster capitalist economic system should make gobs of people mad.

[mix]

2. He's a Chicago product

Obama taught at the U of C's Law School...he's been influenced by people like Cass Sunstein and Astan Goolsby...free-market, neo-liberal, Milton Friedman inspired capitalism has been one of the most dominant and seductive ideologies of the last 30 years...Obama caught the bug, let's hope he can shake it. When his regulatory reform package becomes clearer, we'll know the answer, but with Geithner and Summers still in the mix, hard to say if he'll get the cure.

A return to more progressive taxation is a good sign however.

[tonysam]

62. You Absolutely Nailed It.

He's a product of neoliberalism and has surrounded himself with neoliberals. It isn't too late for him to reverse course, but he'd better do it soon.

[JCMach1]

4. One of my big problems with Obama... so far it has haunted his approach to the crisis

as his Chicago economists have no freakin' clue what to do as that line of thinking is completely outside of 'their' view of reality.

I have been reading Eric Reinert's book "How Rich Countries Got Rich . . . and Why Poor Countries Stay Poor"


In this refreshingly revisionist history, Erik S. Reinert shows how rich countries developed through a combination of government intervention, protectionism, and strategic investment—rather than through free trade. Yet when our leaders lecture poor countries on the right path to riches they do so in almost perfect ignorance of the fact that our economies were founded on protectionism long before they could afford the luxury of free trade. How Rich Countries Got Rich… will challenge economic orthodoxy and open up the debate on why self-regulating markets are not the best answer to our hopes of worldwide prosperity... http://www.target.com/gp/detail.html/185-8690891-8549952?asin=1586486683&afid=yahoosspplp_bmvd&lnm=1586486683|How_Rich_Countries_Got_Rich_._._._and_Why_Poor_Countries_Stay_Poor_:_Books&ref=tgt_adv_XSNG1060

There are economists out there, it's just that Obama isn't listening to them.

Fuck Friedman and the whole damn Chicago School... time to break out the tar and feathers...

And no, Obama has not realized the fact that their ideology is completely bankrupt.

[DCKit]

5. With effective regulation and investigation to reign in their excesses...

the crash never would have come. Greed got the better of the "Masters of the Universe" and they bought enough compliant politicians - and at least two elections - to pull off this massive heist we'll never be able to pay for.

But that's just my opinion and, like assholes....

[malaise]

6. Politicians always lag behind reality

Ours are still spewing neo-liberal bullshit while the bauxite companies closed down today and lay off hundreds of people. Meanwhile Standard and Poor lowered is island's rating yet again.

We are all collectively fucked until we abandon this Friedman/Hayek crap.
The only good news is that the criminals who have been running this planet are so broke that they can't afford more wars.

[Marie26]

9. I think he just doesn't get it.

At least, that's what I prefer to think. Obama might have good intentions, but he's been surrounded by Chicago School intellectuals for pretty much his entire political life. Heck, he IS a Univ. of Chicago professor. So he's been swimming in that pool & isn't aware that there are other alternative schools of thought, or that Friedmanism isn't the only way of doing things. I would pay big bucks to anyone who can slip Obama a copy of a Naomi Klein book.

[leftchick]

10. here is an update on James Galbraiths feeling about lack of action...

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=5294210&mesg_id=5294210

http://www.washingtonmonthly.com/features/2009/0903.galbraith.html



Barack Obama’s presidency began in hope and goodwill, but its test will be its success or failure on the economics. Did the president and his team correctly diagnose the problem? Did they act with sufficient imagination and force? And did they prevail against the political obstacles—and not only that, but also against the procedures and the habits of thought to which official Washington is addicted?

The president has an economic program. But there is, so far, no clear statement of the thinking behind that program, and there may not be one, until the first report of the new Council of Economic Advisers appears next year. We therefore resort to what we know about the economists: the chair of the National Economic Council, Lawrence Summers; the CEA chair, Christina Romer; the budget director, Peter Orszag; and their titular head, Treasury Secretary Timothy Geithner. This is plainly a capable, close-knit group, acting with energy and commitment. Deficiencies of their program cannot, therefore, be blamed on incompetence. Rather, if deficiencies exist, they probably result from their shared background and creed—in short, from the limitations of their ideas.

The deepest belief of the modern economist is that the economy is a self-stabilizing system. This means that, even if nothing is done, normal rates of employment and production will someday return. Practically all modern economists believe this, often without thinking much about it. (Federal Reserve Chairman Ben Bernanke said it reflexively in a major speech in London in January: "The global economy will recover." He did not say how he knew.) The difference between conservatives and liberals is over whether policy can usefully speed things up. Conservatives say no, liberals say yes, and on this point Obama’s economists lean left. Hence the priority they gave, in their first days, to the stimulus package.

But did they get the scale right? Was the plan big enough? Policies are based on models; in a slump, plans for spending depend on a forecast of how deep and long the slump would otherwise be. The program will only be correctly sized if the forecast is accurate. And the forecast depends on the underlying belief. If recovery is not built into the genes of the system, then the forecast will be too optimistic, and the stimulus based on it will be too small.

[originalpckelly]

11. A free market is a system that follows the laws of physics.

What's interesting about this system, is that it can be proved beyond a reasonable doubt that much of it is NOT a free market.

It is not a natural thing that benefits of one's labor should be redistributed to the top, every system in the universe is attempting to achieve equilibrium, and most importantly the equilibrium state is the most probable one.

That means that what's going on in this economy is NOT a free market game, because the rules of that game simply forbid the amassing of wealth over the long term, without undertaking productive work.

If tomorrow, we prevented investors and management from stealing the fruits of the workers, then eventually they would have to spend away their wealth to people with less wealth, and from there those people would have to spend it away, and so on and so forth. By this method the system would achieve an equal distribution of wealth.

But because of management and the investor class, wealth is kept from evenly distributing itself, they continually steal it through corporations and their control of property.

Productive work includes work that's physical and intellectual, that provides both physical and intellectual goods. It stands to reason that productivity as a result of thought would be compensated far greater than traditional productivity because it can impact positively so many people. That's the only way people should be making millions, and one can only imagine how fast our society would progress if this was the case.

THIS is what the people at the top don't want us to know, that we DO NOT LIVE IN A FREE MARKET CAPITALIST SYSTEM!

We need to have a revolution, a free market workers revolution, and during that we must throw off all forms of the upper classes control, while retaining private property for everyone.

[mix]

12. nice line and true:

"It is not a natural thing that benefits of one's labor should be redistributed to the top..."

[originalpckelly]

14. If you were living like an Amish dude...

but all by yourself, the fruits of your labor would be your own. It is this deviation from the natural state of affairs that has caused so many problems.

This is the basis of the right to private property. This right is self-limiting usually, because no one person could work so much as to own everything.

On it's face, the claim by the rich that what they have is their private property is laughable, because they gained it through coercion of everyone else into working for them, or paying rent to them, or paying property taxes to the government, in lieu of them paying the taxes.

[alcibiades_mystery]

16. This is the Robinson Crusoe mythology of all modern capitalist economics

(as Marx demonstrated).

But there is no Robinson Crusoe, and the Amish are a deeply communal people. Those separated early from community structures do not even have language, much less an understanding of value, both of which are required for any identification of property, or the private, or the individual as such. Humans are pack animals defined above all else by their social existence, and any hypothetical scenarios that avoid this basic and indisputable historical fact are rubbish and ideology, pure and simple.

[originalpckelly]

17. Packs often contain family members right?

That implies emotional connection?

Emotional connection acts as a method of self-regulation keeping people from screwing over their friends and family members. It's not perfect either, as so many will attest, but it greatly increases the probability of egalitarian action.

One cannot have an emotional investment in the random people of daily life, and therefore basing a society around this non-existent/bullshit relationship is naive at best, and horribly ignorant at worst.

The only thing one can count on in life is the shitty way people treat each other, we know that will happen, and if we create a system that checks and balances this greed, which normal capitalism is, then it will serve us all the best. If people still want to be egalitarian, there's nothing keeping them from donating their money to someone else.

[alcibiades_mystery]

19. I have jno idea how that connects to my post

:shrug:

[originalpckelly]

20. Explain better the intent of your post.

My post was a reaction to a perceived challenge to the idea of private ownership, rather than collective ownership.

And to imply there are primates that don't from time to time find themselves without a pack is wrong. They may desperately seek to find a pack, but in the meantime they will work their asses off to find a new one.

[depakid]

21. If you're interested in an economic system that works with the laws of physics

you'll want to look to the transdiscipline of http://en.wikipedia.org/wiki/Ecological_economics">Ecological Economics.

That's where- as Galbraith alludes- the useful contributions are going to be in the long term- by which I mean, over the next two decades.

With regard to the immediate problem of the world's financial system, he's right. Right that Friedman's fools have nothing to offer- their schemes (ideology?) have proven to have failed (in many more ways than one). Thankfully that bit's been bared. Yet in the meantime, you might find some solace in Dean Baker and Joseph Stiglizt's approaches. It beats pounding on the table for revolution.

And I say that with all due respect and sincerity.

[originalpckelly]

22. There is too much specialization and too little synthesis going on in most of modern science.

We are all missing the really big picture. I'm someone interested in finding a single understanding of everything, one formula, one explanation, one set of laws that govern the universe. I think the specialization that's gone on is missing the forest for the trees. Everyone needs to step back and take a look at the whole picture.

The whole picture includes using ideas from one discipline in another, in this case taking something from physics and using it in the analysis of an economy (though another person, who was an ecological economist did the same before.) Not to create yet another school of economic theory, but to synthesize all points of view into one greater understanding, in the hope of finding a general relationship that governs the behavior of everything.

*Pardon the Anglage...fixed it.

[depakid]

23. Finding grand unified theories- so to speak, is both a goal of science and religion

Synthesis of various deals doesn't require that much.

[readmoreoften]

47. Why would a "free-market game" forbid the rules of amassing wealth over the long term

without undertaking productive work? The value of "productive work" has always been an ideological cover for free-market capitalism. The wealthy "deserve" more because they at some anterior point, theoretically, someone in their family lineage engaged in "productive work". The free market just means that governments should not check the flow of capital. Government would only have two reasons to check the flow of capital: (1) Kleptocrats might attempt to steal wealth for their own families (2) Common workers, having no other advocates, would use government to stop the private sector from stealing all the value from the objects they produce. US conservatives like to imagine that progressives elect "kleptocrats" whose goal is to help common workers "steal" from corporations.

Or maybe I'm just misunderstanding your point. That's possible. :shrug:

<"this economy is NOT a free market game, because the rules of that game simply forbid the amassing of wealth over the long term, without undertaking productive work.">

[originalpckelly]

52. The problem is that they don't engage in productive work...

they engage in PLANNING of productive work, and by the structure of the system they have planned, there is much economic hereditary rule.

Capitalism means there is private capital in the economy, meaning people can own things.

Corporate capitalism, is a system in which the profits of one's labor are coercively re-distributed to the top. In the presence of this system, it's common sense that the rich would be able to continue their dominance of everyone.

The real debate between American's politicians is as follows:
1. Fuck them, we have ours. That's what Republicans represent.
2. Bribe them so we can keep ours. Unfortunately, since the Democrats at the top, don't want to overturn corporatism, they are representing this side.

None of it is really about the people, it's just about how best to use the people to achieve one's goals.

[readmoreoften]

56. Capitalism didn't invent personal property.

There was personal property before capitalism was invented in the feudal era and the classical era. There is personal property under even the strictist communist system (i.e.: this is my shirt, my shoes, my books, my mom's photo album, my car, my iPod etc.)

Capitalism is the privatization of the means of production for the purpose of generating profit. The wealthy (corporations, individuals--no matter) hoard fresh water systems, oil resources, airspace, factories, land, etc. and obtain these resources through surplus value a.k.a suppressing the value of the only commodity they have power over: labor.

If a person works their ass off and gets rich making clay pottery, that person is not a capitalist. A capitalist is someone whose money "works" in their place.

[SammyWinstonJack]

13. K&R

[alcibiades_mystery]

18. Everything I've read from Obama on economics seeks to find a third way

Selecting the workable parts of Keynesianism and the workable parts of Friedmanism, and applying those to the global transformations in production and circulation. This is what his books say, it's what his campaign always said, it's what the close observers of his economic philosophy say. The notion that he is a straight Friedman follower strikes me as simply false, and you provided no evidence for it.

Now, Obama may be wrong in this approach, and I'm even inclined to think he is, but the premise of your post is unsupported. You speak as if Obama is deploying Chicago School principles uncritically. This is nonsense. What he appears to be doing is selecting the tools from a range of economic theories that seem most suited to the occasion. It is an utterly pragmatic operation. Now, he could be critiqued for MIS-selecting the appropriate tools (too much free market tools here, too much Keynesian stimulus there), but if the charge is that he is being ideological in any one area, that charge seems to be simply wrong on its face. At the very least, you'd have to prove it, and you don't even come close here.

[depakid]

24. Blair and Clinton thought about "third ways" too

[alcibiades_mystery]

25. Is that your evidence?

Ok, then.

[Political Heretic]

26. Talk is cheap. Nothing about his economic decisions to date represents any sort of third way.

So we have a right to be skeptical.

[alcibiades_mystery]

29. Third way, in this context

means a pragmatic mix of Keynesian and Friedmanite tools. The OP seems to claim thaty it is some kind of pure Friedmanite ideology running the economic policy. That is pure nonsense based on the structure and content of the stimulus package alone. If anyone can show me how the Recovery Act represents Chicago School philosophy, I'd love to hear it.

[depakid]

28. How much evidence do you need?

What would suffice?

[alcibiades_mystery]

30. Um, anything?

:shrug:

Why don't you actually start presenting some, and we'll determine sufficiency as we go.

[Marie26]

31. OK, name one progressive economic advisor

on Obama's team. I'm not aware of any. Then name the neoliberal free-market members of Obama's team: Summers, Geithner, Goolsbee, Furman, etc. It's a free-market team. Obama says stuff like "I'm a free-market guy, I love the market". Can anyone imagine, say, Jimmie Carter saying that? I've never heard Obama talk about a "third way" between Keynesianism & Friedmanism, instead he uses buzzwords like "pragmatic", "free market", "economic efficiency", "merit pay" - all neoliberal code words. I'm not sure he even thinks of things that way; instead he seems to be operating out of the neoliberal framework he knows, w/o considering alternatives. Economically, Obama supports Friedmanite, free-market ideology & his appointments reflect that. The writing has been on the wall for a long time for anyone who's looked at who Obama chooses for his economic team.

Obama Embraces Neoliberal Economists as Advisors - http://www.mediamouse.org/griid/electionwatch/2008/06/obama-embraces-neoliberal-econ/

[alcibiades_mystery]

32. Explain to me how the stimulus package is a free market, Friedmanite operation

I don't tend to think in terms of names (little characters for people who like soap operas and whatnot), but in terms of policies. I have no doubt that Obama is using free market logic for some policies, and Keynesian logic for others. To say you've never heard Obama speak of finding a middle ground between these approaches is simply ignorant: that's been his whole schtick for years.

The fact is that the stimulus package is the most explicit deployment of Keynesian economic thought in forty years. I acknowledge that some policies are Chicago School based. So I don't have to deny that. To deny that the stimulus package is anything but Keynesianism seems, to me, ridiculous.

[Marie26]

36. You're avoiding the question

You can't name a progressive economic advisor because there isn't one. Obama depends on the advice of his economic advisors when it comes to crafting economic policies - so if you've got neoliberal advisors, you're going to end up w/a neoliberal economic policy. Garbage in, garbage out. And if someone decides to appoint Freidmanite free-market advisors, it's most likely because that is the economic approach that he himself supports. Your attempt to disregard this evidence as "little characters" for people who like "soap operas" is ridiculous. Those "little characters" are the ones who form & shape the entire economic policy of the Administration. I guess we should've just ignored Bush's neocons, too - they were just "little characters" who had no influence on shaping Bush's foreign policy, right? LOL. A President's advisors are a *far better* indication of his intentions & eventual policy decisions than the speeches & spin dished out to the public.

There's also nothing about this alleged "third way" between Keynsianism & Friedmanism, instead there's a whole lot of free-market, neoliberal buzzwords. If Obama is all about "building coalitions", or finding a "third way," where's the Keynsian, progessive advisors to balance out his neoliberal crew? There's no one. There's one way - neoliberalism. And if Obama's been speaking about a "middle ground" between these economic schools of thought for years, it'd be great if you could show even one quote to support that. Obama doesn't talk like that; I'm not even sure he thinks like that. My contention is that Obama is using Freidmanite philosophy almost as a default, because it's the only way he knows.

I think the stimulus package is a mess, created by free-market ideologues who have no idea how to proceed now that their ideology has failed them. They know rabid capitalism hasn't worked, & know that government must do *something* due to public pressue, but don't know how to proceed. So they throw money at the problem. The plan throws together a ton of lukewarm free-market principles - tax cuts, tax credits, stimulus checks, & random pork. They're also throwing billions of dollars in bailouts at these private banks w/o using any gov. intervention to change the way Wall St. business is done. Thereby never correcting the original problem. Friedmanism lives in terror of any government regulation of the market, which IMO is why we're not seeing any. Keynesanism supports a "mixed economy," w/strong government controls on the economy. Where's the gov. control & regulation of Wall Street?

What's most telling is what they're *not* doing - there's no nationalization of banks, no new regulation of Wall Street, no real punishments of corporate wrongdoers, no bold new projects for government akin to the New Deal. The plan spends almost $800 billion dollars; w/that amount of money they could create something truly great, even bigger than the New Deal or the Great Society. But instead of creating a real vision for the role of gov., they settle for just throwing money at the problem & hoping that helps. If Obama got some *real* Keynesian or progressive economists, we could actually create something of lasting value.

[alcibiades_mystery]

39. I don't think so

The policies are what they are, and can be evaluated in principle separately from the characters who shaped them. The stimulus package is Keynesianism, and it's ridiculous to deny that. That you don't like the way the money is being spent doesn't change the basic principle of direct government spending. As for regulation, the jury is out on that. The Securities Act of 1933 wasn't passed until May of that year. The real teeth of the New Deal regulatory regime came with the Securities and Exchange Act of 1934. It takes time to craft and pass regulation. Let's agree to evaluate it when it appears, rather than decry its absence two months into the term.

I'm the last person to defend Friedmanite economic policies. Cards on the table, I am a Marxist, and don't particularly care for the reformism or state apparatus of the Keynesian vision either. I'm making a limited claim: the OP is wrong to say that Obama is something like an unreconstructed Friedmanite. It's a laughable claim, however you cut it.

[Marie26]

55. OK

First of all, you're setting up a straw-man & ignoring the real claim. The OP never said that Obama is an unreconstructed Friedmanite. She said 1.) Friedmanism is a failed ideology & 2.) Obama seems to be ignoring that fact. No one at DU would dispute the first part. Free-market ideology led directly to the current economic mess. And, Obama does seem to be ignoring that fact, given that he is employing & selecting free-market ideologues for his economic team & often employing free-market policies. You haven't disputed that he's using only neoliberal advisors (no progressive ones), or that he often uses free-market policies (even a hundred times). This should be a cause for concern for *any* progressive, Marxist or no. Because it means that Wall St. & neoliberalism have a unacceptable degree of sway in this Administration.

Yeah, they've only been in there two months, but the signs right now are not encouraging. For example, instead of placing gov. limits on executive pay, Obama's Treasury Sec. was actually working behind the scenes to secretly *remove* any government regulation of executive bonuses. Or kinda like his economic advisor was reassuring Canada behind the scenes that Obama had no intention of changing free-trade policies, no matter what he told poor Ohioans. Or creating a "stimulus" plan that uses 1/3 of the money on tax cuts. Friedman would approve of all these measures. Bush spent a ton of federal money, too - just because a gov. spends money doesn't make it Keyensian, or progressive. What's missing is the federal regulations, control & policies for real social change. Legislation takes time, but the President can act *immediately* to outline his vision, sign executive orders & urge Congress to pass a bill. Within the first hundred days of taking office, FDR had created sweeping banking reforms, union protections, farming programs, worker wage increases, etc. That's what I'm looking for from Obama, and not seeing. Instead I'm seeing the same warmed-over free-market faces & policies that created this mess in the first place.

In *principle*, it's possible to seperate the advisors from the policy, but in reality it's not. Free-market advisors will tend to recommend free-market approaches to a problem, & any Keynesian approach they might try will probably be done badly, because they don't really believe in it. It'd be like asking a Republican to create a universal health care plan & being surprised that it ends up a disjointed mess. If Obama was really interested in a "third way," as you claim, you'd think he'd have at least one voice to represent the alternate POV. As is, he's getting economic advice exclusively from free-market Wall St. insiders & it's damaging both his public support & any chance to create real systemic change.

In short: Dump the neoliberals, Obama!

[leftchick]

57. Wow! Very well stated marie!

:applause:

I really do not know what to add except thank you for such a rational explanation of the shit we are in. :)

[scarletwoman]

59. Damn, you're good! What an excellent post! Brava! Brava!

:applause:

[mix]

48. +1

If one assumes that the present crisis is neo-liberalism's death knell, which it might be, then Obama's choices so far have been mistakes and could possibly sink his presidency, much in the way that many specialists like Juan Cole think that the Afghan escalation could do.

On the economic front the problem is continuity, or too many ties to Paulson and Wall Street. Geithner and Summers are other examples of worrisome continuity. Truth be told, both parties since 1980 have been complicit in creating this teetering neo-liberal edifice. Clinton and Rubin dismantled Glass-Steagall and pushed for deregulation in the financial markets. There is plenty of blame to go around for everyone.

If then there is no going back as economists like Krugman, Stiglitz and Galbraith believe, or in other words our economic future will inevitably involve more regulation, government spending and protectionism, Obama risks being a transitional president only...one that may be followed by a more radical government of the left or right.

Obama's ties to the failed policies of the past are too evident not to worry. I hope he takes us in the right direction and I hope he listens.

[leftchick]

42. the poster can not

because he does not have any. That is why it is so infuriating to see respected economists publicly expressing what should be done, and Obama does the exact fucking opposite. He is doing exactly what bush would have done only under the cover of a clintonism, "I hear you!" Even Krugman, who used to sing his praises, is getting pissed off.

[depakid]

33. Okey dokey.

How about we start looking back here:

(This from 4/04/2008- as to the origins- errr... dysfuntion of the so called "third way" -we have to look back a bit further below). Bear with it.

"Prescient is too mild a word to describe Stephen Pizzo's testimony.

<snip>

As we autopsied dead savings and loans, we were absolutely amazed by the number of ways thrift rogues were able to circumvent, neuter, and defeat firewalls designed to safeguard the system against self-dealing and abuse. ...

... billions of federally insured dollars will disappear ...

That will happen, not might happen but will happen, and when it does these too-big-to-fail banks will have to be propped up with Federal money. In the smoking aftermath, Congress can stand around and wring its hands and give speeches about how awful it is that these bankers violated the spirit of the law, but once again, the money will be gone, the bill will have come due, and taxpayers will again be required to cough it up."

http://www.calculatedriskblog.com/2008/04/some-prescient-testimony-from-s-crisis.html

September 13, 1991

Hearing: Subcommittee on Telecommunications and Finance
Committee on Energy and Commerce
102nd Congress

A bill to Amend the Federal Securities Laws to Equalize the Regulatory Treatment of Participants in the Securities Industry

* * *

Rep. MARKEY. Thank you, Mr. Mayer, very much. Mr. Pizzo.

STATEMENT OF STEPHEN P. PIZZO

Mr. PIZZO. Thank you, Mr. Chairman, for an opportunity to address this committee. To get right to the point, this so-called bank reform legislation is nonsense. It is dangerous nonsense.

The premises on which it is being peddled to Congress are contrived, cynical, and transparent. They are the same arguments, the very same arguments, recycled from a decade ago, only then it was the U.S. League of Savings Institutions that was peddling them, rather than the ABA and the Association of Banking Holding Companies.

What is amazing to those of us who remember those days and witnesses the aftermath of Garn-St Germain is that so many in Congress appear eager to follow this demented pied piper a second time.

Members of the committee, we already have a healthy, vital, and dynamic community banking system out there. Of our 12,500-odd banks, the vast majority are community banks that are not in trouble and are not asking for this unwise legislation. But in the Lewis Carroll environment that surrounds this legislation, the success of America's community banking is being totally ignored.

Instead, the administration and many in Congress have chosen to listen to the failed portion of the banking industry, America's big and super-big banks. It is these colossal failures that many in Congress and the administration now want to accommodate with even broader banking powers. If only you would let them stay out later and associate with new friends, they promise they will straighten up and fly right.

Much more: http://www.smirkingchimp.com/thread/13858

[alcibiades_mystery]

34. Do you understand what you're supposed to be providing evidence for?

:shrug:

[depakid]

35. How about you tell us what you're looking for?

The so called third way has its origins right about there as I see it.

Maybe you see something different?

[alcibiades_mystery]

37. My claim was fairly simple

Obama mixes Friedmanite and Keynesian principles, applying them as he thinks the situation warrants.

In that sense, he can't said to be a Friedmanite, as the OP implies. If he feels that Friedmanite principles are sometimes in error, then he obviously questions free market ideology at least some of the time. Again, this goes directly against the OP.

Simple enough, right?

Now, you can show me a hundred times that Obama has deployed some Friedmanite principle. It doesn't dispute my claim, since I acknowledge that he does. Moreover, I only have to really show you ONE use of Keynesian principles, and I have: the stimulus package.

You might disagree with how he applies these principles (indeed, I disagree), or in what proportion, or with what effectiveness, or whatever. But I think it's indisputable that he aims to apply sometimes one, and sometimes the other, seemingly as he thinks the situation warrants. And I haven't seen one bit of evidence to the contrary.

[depakid]

38. "I haven't seen one bit of evidence to the contrary. "

This entire controvesy is evidence that Friedmanite principles (as you call them)- in theory and in application -and in dumb ass fail to foressee poitical effect, still hold sway in this administration.

Hate to ask, but are you really that thick?

[alcibiades_mystery]

40. Whether they will "hold sway" (whatever that means)

Is another question. My claim is limited, and I've made it consistently: Obama seems to deploy one and then the other based on the situation, rather than deploying either as an ideological necessity. I'm pretty sure I haven't insulted you here, so I'm not clear why you're degrading this conversation.

[depakid]

41. I guess that's where we disagree

Looks to me like there have been various decisons in this administration based on ideology- My preferred amalgamated term is center right- though there are various other labels.

The President (nice to be able to say that again) admitted as much himself when he spoke to the nation (us) about how to deal with the large insolvent banks:

http://tpmmuckraker.talkingpointsmemo.com/2009/02/obama_nationalization_wouldnt_make_sense.php

An objective observer would look at the polices as they've been wrought and think:

Is that the best way to deal with the issues at hand? What do other really smart (and prescient) economomists think?

How would this policy or another (as an American, I've thought about this so so much it's made my head spin round) play politically?

Like many of us, informed citizens- I ask ask questions. Share 'em with my parter and friends and colleagues. The conclusions I've drawn thus far are that the administration is reluctant to -how would one say? pull the trigger on what needs to be done.

Whether that heralds from time at The University of Chicago or not is tabloid stuff.

The bottom line here is effective policy- and my bet would be that it's going to take a bit of a purge to acheive it.

[leftchick]

27. fucking fuck fuck fuck

:cry:

3 more people laid off at my hubby's work. We are so scared.


:cry:

[EmilyAnne]

43. What do you think of European style mixed economies? n/t

[leftchick]

44. Paul Krugman erupts

for him anyway....

AIG

Preliminary thoughts on the tax bill:

1. It’s not the way you should make policy — it’s clumsy, and it will punish some innocent parties while letting the most guilty off scot-free

2. But — there wasn’t much alternative at this point. And for that I blame the Obama people.

I’ll leave to others the question of who knew or should have known that the bonus firestorm was coming; but it’s part of a pattern. At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis — that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that “governments do a bad job of running banks” (as opposed, presumably, to the wonderful job the private bankers have done), that financial bailouts and guarantees should come with no strings attached.

This was bad analysis, bad policy, and terrible politics. This administration, elected on the promise of change, has already managed, in an astonishingly short time, to create the impression that it’s owned by the wheeler-dealers. And that leaves it with no ability to counter crude populism.

http://krugman.blogs.nytimes.com/2009/03/20/aig/

[readmoreoften]

45. Petty criticism: how on earth is Friedman's theory "Platonic"?

That's pretty much a nonsense statement. The Republic argues for a tiered class system where slaves produce wealth for the state, citizen-commoners profit from their work as farmers or blacksmiths, and intellectual elites live in austerity, supported by the common people, divorcing themselves completely from concerns about family or profit. Plato argued that the most corrupt system was plutocracy, which was nothing more than a degraded timocracy. That doesn't really have a damn thing to do with Friedman.

"When Friedman’s Platonic ideas of free-market virtues are put into practice..."

:shrug:

[mix]

46. platonic, as in ideal

or purely theoretical...a nice way of saying dogma, not science, drove Friedman's work

[readmoreoften]

49. It's an inappropriate colloquialism in this case and a misunderstanding of philosophical idealism.

Idealism and dogma aren't synonymous... Mathematics, not to mention the whole of 20th century structuralist social science, floats around in that much-maligned realm of 'ideality'. I would argue that Friedman didn't fail to take material reality into account, but that he put an ethical patina on a violent economic theory with words like "freedom" and so on...

It's just inappropriate, because Plato did have specific economic policies and every vague piece of dishonest, right-wing, academic propaganda is not "platonic" or anti-materialist--it's just obscurantist crap meant to keep the rich rich and the public confused.

Plato, were he alive, would rip Friedman to pieces. Like I said, it's just a petty personal beef. (I teach Plato, so this kind of colloquial use makes my life more difficult.)

[cadmium]

58. I doubt he is ignoring the failure of supply-side

economics. He is trying to build the demand side --- against a pretty tough opposition. Even Russ Feingold is pushing him to not spend on anything that can be considered an "earmark". 2 months he has been in office -- trying to undo the wreckage of the past 27 yrs. I expect it to be messy. If Geitner doesnt work out at least the administration can say that he gave the establishment a try to make things better and Obama can make changes. If he does work out -- that's fine.

[Trekologer]

60. I majored in economics at Rutgers University

Milton Friedman's alma mater. You would think that the Economics department would brag about an alum who won the Nobel Prize. Instead he was persona non grata. Literally none of the professors thought that his theories were correct. Looking back at the 80s and the last 8 years, it certainly looks like he wasn't right.

[KoKo]

61. He's very young...filled with hope...like many of us were at his age...

what else is he to do? Obviously some agreement was made with the Bushies to allow the voting machines to "switch" and for him to be President..agreements with Bushies and Clintons.

He will do what he can do ...which is not much given that our own party fights against us along with Repugs...but he will do what he can do.

It's up to the REST OF US..to MAKE THE DIFFERENCE. If we don't use this chance we've been given we are truly lost as a force for CHANGE for many years longer than most of us will still have left to productively live.

Sorry to be a "Debbie Downer" here...but it's what I think so, I threw it out there amongst the rest of the stuff we throw out.