Leaning Left-3/31/2011

Leaning Left

Jim Fitzgerald

There are times when I wish more people took the time to read the conservative financial press rather than collect their opinions from television or internet blogs. They would find the actual issues on any given subject are far more sobering than the simplistic rants on television. What we need is an audience that is willing to be convinced of a particular position but yet skeptical enough not to take statements on faith. In other words, we need more people ready to use their brain power to weed through the hype and make a sound decision based on reasonable sources of information.

With that in mind, I love to read the conservative financial press because the views are more likely to be based on sound economic theory rather than politically divisive rhetoric. Last week, Barron’s published an interview with Dr. Joseph Stiglitz, a Columbia University professor and Nobel Prize winner in Economics.  As the author, Leslie Norton, pointed out, the professor is often controversial but always worth listening to as he was among the first to explain the consequences of integrating our economy with the world’s, wrote a solid, factual piece on the high costs of the Iraq war, and published an article on the forces behind our financial crisis.

As Stiglitz pointed out, the arguments that the market knows how to handle risk and self-regulates, that banks have incentives to manage risks, and that people making the decisions in those institutions reflect the interest of those they serve, are wrong, dead wrong. He went on to say: “The kinds of incentive schemes that were being employed by firms, banks, and financial institutions weren’t consistent with any model of rational behavior other than exploitation.”

Do we really need this economist to tell us that unfettered markets do not work? Do we need him to tell us that too-big-to-fail threatens our entire financial structure? And yet we barely survive our man-made financial crisis and not only bail the system out (which I supported and still do) but left the financial industry unchecked. Why Obama and the Democrats have allowed conservatives to continue the mantra about self-regulating markets is beyond me. Why we have attempted to strip away much of the checks and balances that any system needs to counter greed is, again, beyond me.

When we look at the national debt, we have been whipped into such a frenzy that it looks like we are preparing to shoot ourselves in the foot. The move afoot to slash and burn every program the conservatives do not like in the name of debt reduction is so short-sighted as to belie reason. As Stiglitz said, “I am surprised that so many European leaders and some Americans, having seen the disaster of Hoover economics, are still going ahead with austerity. The evidence is overwhelming that it will lead to an economic slowdown.” I pointed out last week that creating eight million new jobs could, single-handedly, take care of the national debt issue. Stiglitz reinforces this point in the article.

Politicians are driven by the passions of the people. If those passions are misguided because we have not taken the time to think them through, then we get the government we think we want but which can be self-defeating.