Sunday, January 8, 2012

Madoff and Mankiw and Inequality: The Corporatist Ideology At Work (Angry Bear)

I'm a little bit behind in posting this tidbit from The Angry Bear featuring the notorious black news hole (WaPo) and the  "newspaper of record," so I'll catch up today. It's an important commentary about what we lose when we "march forward" without precisely defining and punishing the wrongs that have been done previously, as the Obamaniacs so trustingly preach daily (13-dimension chess? HA!!!). And we do not make any friends under the Rethug tent by doing so. Trust me. (And, yes, many good people (who sincerely want another candidate) will vote for him again because they don't have any other candidate, do they?)

It also gives some needed perspective about the voters who continue to march eagerly to the polls (and caucuses) who have very little comprehension about the change in the statistics governing the movement in this country of real wealth during the last 30 years as one of my commenters so ably discussed about my last post on a satire, which may have been over a few heads. Sorry, but we're marching on here too.

Madoff and Mankiw and Inequality - The Corporatist Ideology At Work
There are two Letters to the Editor in the (New York) Times today that are worth noting - as usual, the 'real' analysis is hidden in the interior pages, positioned next to a huge ad (for an investment adviser, no less). Chris Cannon from San Francisco notes that treating Madoff as the iconic symbol of the financial disruption caused by the credit bubble is problematic.

"Everyone agrees that Mr. Madoff broke the rules. But the damage done by those acting as allowed by our ineffective rules cost the public much more. 'Our troubled financial times' are the product of a bubble economy fueled by cheap money, an abject failure by rating agencies, regulatory agencies that have been hamstrung by regulations written by financial lobbyists, and a laserlike focus by some bank leaders on yearly bonuses." New York Times, Dec. 18, 2011.)
Steven Conn, Yellow Springs, Ohio, notes that Greg Mankiw (economic adviser to Republicans, and specifically to Mitt Romney) misses the boat on understanding the way that economics is burdened with ideology.

"He seems not to understand that economists aren't really objective and dispassionate scientists.  Economics is merely a set of tools with which we build the kind of society we want to live in.  Defining what that means is, of course, an ideological proposition, and thus all economic 'theory' is freighted with ideological baggage."  (Letters, New York Times, Dec. 18, 2011.)
These two ideas are related. One of the reasons that someone like Madoff could get away with a long-term, enormous economic scam is that the reigning economic ideology from 1980 to 2010 has been the neoliberal belief in unfettered markets, taking power with 'reaganomics' and the acceptance of 'greed is good' corporatism that took hold in 1980, in which those that are sleazy, fraudulent or just intent on having things work out a certain way can take enormous means to achieve their petty ends - like hiring just-out-of-Congress people to panhandle for them in the halls of Congress and to hobnob with regulators, drafting the rules that govern the industry.  It is the enormous expansion of this corporatist perspective that permits money to buy the rules that caused the financial crisis and that continues to pervade the policy solutions that can get through a Congress that is beholden to lobbyists and Big Money in various industries.

As long as we leave tax policy fundamentally to the corporatist moneybags and ideological economists, we can expect regulations to fall short of what they ought to do to protect ordinary Americans; corporations to make money out of failing to do what they ought to do to protect their workers, their customers, and their communities; tax laws that fail to exact a reasonable share of the fiscal burden from the very wealthy (such as the current trend towards decimation of the estate tax, often the only way that some extraordinarily wealthy families pay much of anything, because most of their income is in the favored form of capital gains and income on capital); and the passage of stupid laws that take away our most precious Constitutional rights - like the legislation under consideration that will permit the MILITARY TO DETAIN US CITIZENS WITHOUT DUE PROCESS.

And the result of these tax and economic policies will be a continuation of the trend towards a two-class society of the very rich and the rest of us that has been aided and abetted by reaganomics.  See Allegretto, The Few, The Proud, and The Very Rich, Berkeley Blog, Dec. 2011.

The share of wealth held by the top fifth is about 87.2 percent while the bottom four-fifths share the remaining 12.8 percent of wealth — so the Occupiers are correct in their assessment. And, the riches of those in the top 1 percent are about 225 times greater than that held by the typical family — it was 125 times in 1962 — so, Grandma was correct too.

In 2007 (the most recent SCF) the cumulative wealth of the Forbes 400 was $1.54 trillion or roughly the same amount of wealth held by the entire bottom fifty percent of American families . . . . Upon closer inspection, the Forbes list reveals that six Waltons — all children (one daughter-in-law) of Sam or James “Bud” Walton the founders of Wal-Mart — were on the list. The combined worth of the Walton six was $69.7 billion in 2007 — which equated to the total wealth of the entire bottom thirty percent!  Id.
(Originally published at

Tim Worstall "Upon closer inspection, the Forbes list reveals that six Waltons — all children (one daughter-in-law) of Sam or James “Bud” Walton the founders of Wal-Mart — were on the list. The combined worth of the Walton six was $69.7 billion in 2007 — which equated to the total wealth of the entire bottom thirty percent!" As I have noted elsewhere. The fact is that the bottom 25% of Americans have no wealth at all, or even negative wealth. Meaning that you or I, with maybe $10 more assets than we have debts, have more wealth than the entire bottom 25% of Americans put together. That six billionaires have more than the bottom 30% is pretty much a "Meh" moment.

Batmensch Ah well, Tim, that's much better then.
coberly bat You said it better, but for the benefit of those who missed it... Tim Worstall doesn't think that the bottom 25% of the people having NO wealth is a big deal.   I could work up some theory of economics or sociology that would demonstrate that it is a very big deal indeed.  But I think I'll leave it at Worstall is a representative member of the class of people who don't think the poor are human.  And they don't treat their dogs too good either.

save_the_rustbelt "....that treating Madoff as the iconic symbol of the financial disruption caused by the credit bubble is problematic." I know of no such treatment, except perhaps from junior reporters. So what's the point? Linda Beale hates Republicans, the wealthy and business - ok, we already knew that. This rambles all over the place, undergrads write better essays.

run75441 Ahhh Rusty: Still muckraking for a fight?  Most notably, it is upon the Repubs the stigma of increasing wealth and income at the expense of the other 99% of the taxpaying households can be blamed. What Hoover could not or did not do with income, Bush did with the 2001/2003 tax breaks being funneled rowards 1% of the taxpaying households. Their income increased while everyone else's either fell or stagnated. Income increase does associate with the growth in wealth. Has today's political environment changed when it comes to income? No! Today, the Republicans have become more militant with regard to rolling back the income tax breaks for this very same group which has benefited the most, signing the Party of "No"rquist pledge, and under the guise of job creation. How noble to represent themselves as benefiting common labor. The essay is fine and the topic is conflated by those who choose to ignore the truth in order to continue to line their pockets. I suppose you still believe . . . 

tagyoureit  Ideological baggage, is that a code-word for crazy feelings like a desire for justice?

coberly Tag  A desire for justice could be many things. but it does not seem to fit the ideological baggage of the "economic theories" of the right. or maybe from your point of view, of the left. i think the point being made was that "economics" as a science is more like a religion.

Funny, when I studied Economics in grad school, it was a separate curriculum from Religion.

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