I’ll do my best….
I hope you can unpack a couple of concepts for us:
- “Fundamentalism, by its very nature is not grounded in reality because it depends upon the purity of belief, intent, and action on the part of all players.”
- “The whole of human society and the rule of law is based on the understanding the people cannot be relied upon to behave honorably, and thus we have laws and regulations prohibiting and punishing some dishonorable behavior, because it has negative consequences for the rest of us.”
Specifically, in the first, define “all players” and explain your concept of “purity” used there. And in the second, define “the whole of human society” and “behave honorably” as used there. I don’t know of any source that definitively establishes either of your contentions, although they both “feel” truthy … and so I was hoping you could develop those concepts a bit so the rest of us can understand better your points here. Thanks!
Well, the sources are really my own observations. But I’ll try to unpack my thinking on these statements.
1. The constant refrain of conservatives in the financial crisis has been that the lack of regulation isn’t the problem. In fact, there’s too much regulation, in their view.
When finally called before a congressional committee to explain, the great champion of deregulation — Alan Greenspan — admitted that he “made a mistake” and that he “found a flaw” in his philosophy. But when pressed to point out what went wrong, he stated that the problem was that bankers and Wall Street executives failed to behave “honorably.”
The problem, then, is that they behaved dishonorably. Not the lack of regulations to guard against the inevitability of some dishonorable behavior dishonorable behavior among some players that’s likely to happen are huge sums of money are changing hands and a chance to build great wealth in the short term, at the long term expense of many others. Regulation might prevent some of that behavior, check some of it, and at least mitigate the damage of that it doesn’t stop, but that is beyond the ken of free market fundamentalists.
What’s free market fundamentalism? Here’s how we define it at the day job.
Conservatives disdain government and worship the private sector. They think that all government regulation of private enterprise is bad, and that everything done for profit will be done well. Conservatives seem to forget that the purpose of profit is profit, not public service. Business interests might line up with the interests of government and taxpayers, but they might not — especially when it comes to providing public goods and services ranging from military operations to rebuilding levees.
Government is supposed to be on the side of the people. But conservative government is on the side of business. The result is a culture of waste and corruption that demeans everybody and serves only the privileged few.
Of course, that’s not the only definition. There’s Wikipedia, which is pretty straightforward.
Market fundamentalism (also known as free market fundamentalism) is an expression used by critics  of laissez-faire capitalism to denote an unjustified and exaggerated belief that free markets provide the greatest possible equity and prosperity , and that any interference with the market process decreases social well being. Users of the term include adherents of interventionist and protectionist positions , as well as capitalists such as George Soros, and economists such as Joseph Stiglitz . Critics cite as fundamentalist   the unshakable belief that free markets maximize individual freedom, that they are the only means to economic growth and that society should adhere to their specific ideas of progress. Ideas ascribed to fundamentalists include the belief that markets tend towards a natural equilibrium, and that the best interests in a given society are achieved by allowing its participants to pursue their own self-interest. The expression is usually rejected as a pejorative term by the persons and organizations to whom it is applied.
…The expression “market fundamentalism” was popularized by George Soros in his book The Crisis of Global Capitalism (1998), in which he writes “This idea was called laissez faire in the nineteenth century… I have found a better name for it: market fundamentalism.”. Palagummi Sainath believes Jeremy Seabrooke, a journalist and campaigner, first used the term.
…The expression is now used by various authors writing on economic topics to signify an allegedly unjustified belief in the ability of markets to solve all problems in a society. The term has been used, pejoratively, to criticize some groups which are mainly viewed as advocating strongly against “any” state regulation and defend a “totally” free market. It is also used to disparage the arguments of the proponents of “the virtues of radical free-market economics” or, in Soros’ own words, against the “ideology” which “has put financial capital into the driver’s seat.”
Here’s Soros himself.
Every time the credit expansion ran into trouble the financial authorities intervened, injecting liquidity and finding other ways to stimulate the economy. That created a system of asymmetric incentives also known as moral hazard, which encouraged ever greater credit expansion. The system was so successful that people came to believe in what former US president Ronald Reagan called the magic of the marketplace and I call market fundamentalism. Fundamentalists believe that markets tend towards equilibrium and the common interest is best served by allowing participants to pursue their self-interest. It is an obvious misconception, because it was the intervention of the authorities that prevented financial markets from breaking down, not the markets themselves. Nevertheless, market fundamentalism emerged as the dominant ideology in the 1980s, when financial markets started to become globalised and the US started to run a current account deficit.
And here’s Soros talking about it at length, and another video on the collapse of free market fundamentalism.
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And just for good measure, Robert Reich.
There were many flaws that Greenspan failed to see, and that other free market fundamentalists must avoid seeing if they want to continue to believe. A major one, as pointed out by Soros, Reich and other above is that the government has constantly intervened in the “free market” in order to save the market from itself and its own “innovations.” But there’s another that has is basis in nothing more than human nature.
All the time I’m sitting in the audience thinking that these models are far too simplistic and based on countless unrealistic assumptions. I tell people that these instruments are dangerous, that no one understands the risks. But no one cares.
As long as people are compensated hugely for taking risks with other people’s money, and do not suffer equally on the downside, then those risks will inevitably become outrageous. Whether markets are efficient or not, I don’t know for sure. But I do know that, if there’s a way for someone to make money at another’s expense, he will.
Simply put, it only works if everyone (in Greenspan’s terminology) behaves honorably. Put even more simply, in order for it to work, everyone has to behave themselves. Taken a step further, everyone will behave themselves, because it is in their “rational self interest” to do so. Thus Greenspan can say with a straight face that he believed self-interest would regulate Wall Street.
For years, a Congressional hearing with Alan Greenspan was a marquee event. Lawmakers doted on him as an economic sage. Markets jumped up or down depending on what he said. Politicians in both parties wanted the maestro on their side.
But on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.
“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.
Who can blame him for being “in a state of shocked disbelief”? After all, it would be irrational for an organism to destroy the very environment that sustains it. Wouldn’t it? And rational organisms like human beings wouldn’t do that. They’d stop themselves before things went too far. Right?
Of course, to believe that you’d have to ignore not only thousands of years of human history but also the simple truth of what the columnist I quoted earlier said. If people get big payoffs for taking big risks with other people’s money and suffer no consequences, some of them will do it. Or, if some people can beat you out of a buck and get away with it, they won’t think twice about doing it.
But even worse than that, Greenspan (and a host of other free market fundies) would have to ignore his own interventions on behalf of the wealthiest players. In that sense, he is a bit like the “Great and Powerful Oz” — the man behind the curtain, pulling levers and flipping switches — except that he has come to believe in the facade of fire and smoke.
The flaw that Greenspan failed to find makes the second item I’ve been asked to “unpack” even more important. The notion that the system will work fine if everyone behaves honorably, is strangely at odds with what Naomi Klein identifies as the ideology behind conservative economic policy: that unrestrained pursuit of self-interest is the ultimate good.
When hard-right political leaders and their advisers apply brutal economic shock therapy, do they honestly believe the trickle-down effects will build equitable societies–or are they just deliberately creating the conditions for yet another corporate feeding frenzy? Put bluntly, Has the world been transformed over the past three decades by lofty ideology or by lowly greed?
A definitive answer would require reading the minds of men like Dick Cheney and Paul Bremer, so I tend to dodge. The ideology in question holds that self-interest is the engine that drives society to its greatest heights. Isn’t pursuing their own self-interest (and that of their campaign donors) compatible with that philosophy? That’s the beauty: They don’t have to choose. Unfortunately, this rarely satisfies graduate students looking for deeper meaning. Thankfully I now have a new escape hatch: quoting Alan Greenspan.
The deregulated utopia conservatism aims to create bears a strong resemblance to Hobbes’ “state of nature” — in which “any person has a natural right to do anything to preserve his own liberty or safety, and life is ‘solitary, poor, nasty, brutish, and short,'” and in which there is no injustice because there’s no law. It’s telling, but not surprising, that they don’t then take the next step from there, to the social contract, and the idea that it’s actually in one’s “rational self-interest” to surrender the right or freedom to do whatever your personal power and conscience allow, in order to gain the benefit of society. That, however, is in keeping with the contempt for the weak (in this case economically) and those in need of economic help.
It’s evident in the President’s steadfast refusal (along with his party) to do much of anything in the way of relieving the economic pain of everyday American during this crisis, even while shoveling money at Wall Street firms. It was stated outright by FDIC chair Sheila Bair, “There are some people in the Republican Party who resent the idea of helping others,” and in just about any right wing rant about the people left behind in Katrina’s aftermath. And, Klein points out, it’s there in the early writings of Alan Greenspan.
Then he discovered Ayn Rand. “What she did…was to make me think why capitalism is not only efficient and practical, but also moral,” he said in 1974.
Rand’s ideas about the “utopia of greed” allowed Greenspan to keep doing what he was doing but infused his corporate service with a powerful new sense of mission: Making money wasn’t just good for him; it was good for society as a whole. Of course, the flip side of this is the cruel disregard for those left behind. “Undeviating purpose and rationality achieve joy and fulfillment,” Greenspan wrote as a zealous new convert. “Parasites who persistently avoid either purpose or reason perish as they should.” Was it this mindset that served him well as he supported shock therapy in Russia (72 million impoverished) and in East Asia after the 1997 economic crisis (24 million pushed into unemployment)?
Rand has played this role of greed-enabler for countless disciples. According to the New York Times, Atlas Shrugged, her novel that ends with the hero tracing a dollar sign in the air like a benediction, stands as “one of the most influential business books ever written.” Since Rand is simply pulped-up Adam Smith, her influence on men like Greenspan suggests an interesting possibility. Perhaps the true purpose of the entire literature of trickle-down theory is to liberate entrepreneurs to pursue their narrowest advantage while claiming global altruistic motives–not so much an economic philosophy as an elaborate, retroactive rationale.
What Greenspan teaches us is that trickle-down isn’t really an ideology after all. It’s more like the friend we call after some embarrassing excess so that they will tell us, “Don’t beat yourself up: You deserve it.”
Take a big serving of that,add a dash of Calvinisim, and a cup of George Lakoff’s take on the conservative world view — the kernel of which is that “Worldly success is an indicator of sufficient moral strength; lack of success suggests lack of sufficient discipline.” — and you have at least part of the recipe for “Drop Dead” conservatism and a morality most recently embodied by the titans of finance.
It would be consoling to believe that these individuals know in their hearts they are at fault, but are advised not to admit it. If you are in a road accident, every decent human instinct is to say “sorry” but the small print of your insurance policy dictates otherwise. However, mostly these titans of finance do not experience regret because they do not feel it. They truly believe they were victims not villains, that if the world does not allow them to make large profits the fault lies with the world, and that government agencies should protect them from the consequences of their own actions. They prattle about free markets and the evils of government but deny personal responsibility.
But it’s a reality with deep roots in the “American Dream.”
The American Dream is a form of worship–if more than just metaphorically so–in certain branches of evangelical and charismatic Protestantism. From Daddy Grace to Pat Robertson, from tents to televangelism, a strong line of American sectarianism converts monetary remuneration into a form of God’s grace. Even for those of us to whom this configuration is not a matter of divine will but rather the outcome of applied economic ideologies and sociopolitical narratives, its immense symbolism is worthy of serious consideration. If this recession/depression is not the work of a deity hungry for sacrifice, it might be good to take a look at the stories we tell ourselves, the ones that bind, and blind, us to the stupidity, arrogance and corruption of those who rule from the heavenly pinnacle of top-down corporate, as well as Congressional, governance.
But it’s actually Cornell West who marries one form of fundamentalism to the other more explicitly than I did.
The problems plaguing our democracy are not only ones of disaffection and disillusionment. The greatest threats come in the form of the rise of three dominating, antidemocratic dogmas. These three dogmas, promoted by the most powerful forces in our world, are rendering American democracy vacuous. The first dogma of free-market fundamentalism posits the unregulated and unfettered market as idol and fetish. This glorification of the market has led to a callous corporate-dominated political economy in which business leaders (their wealth and power) are to be worshipped-even despite the recent scandals-and the most powerful corporations are delegated magical powers of salvation rather than relegated to democratic scrutiny concerning both the ethics of their business practices and their treatment of workers. This largely unexamined and unquestioned dogma that supports the policies of both Democrats and Republicans in the United States – and those of most political parties in other parts of the world – is a major threat to the quality of democratic life and the well-being of most peoples across the globe. It yields an obscene level of wealth inequality, along with its corollary of intensified class hostility and hatred. It also redefines the terms of what we should be striving for in life, glamorizing materialistic gain, narcissistic pleasure, and the pursuit of narrow individualistic preoccupations-especially for young people here and abroad.
Free-market fundamentalism-just as dangerous as the religious fundamentalisms of our day-trivializes the concern for public interest. The overwhelming power and influence of plutocrats and oligarchs in the economy put fear and insecurity in the hearts of anxiety-ridden workers and render money-driven, poll-obsessed elected officials deferential to corporate goals of profit, often at the cost of the common good. This illicit marriage of corporate and political elites – so blatant and flagrant in our time – not only undermines the trust of informed citizens in those who rule over them. It also promotes the pervasive sleepwalking of the populace, who see that the false prophets are handsomely rewarded with money, status, and access to more power. This profit-driven vision is sucking the democratic life out of American society.
In short, the dangerous dogma of free-market fundamentalism turns our attention away from schools to prisons, from workers’ conditions to profit margins, from health clinics to high-tech facial surgeries, from civic associations to pornographic Internet sites, and from children’s care to strip clubs. The fundamentalism of the market puts a premium on the activities of buying and selling, consuming and taking, promoting and advertising, and devalues community, compassionate charity, and improvement of the general quality of life. How ironic that in America we’ve moved so quickly from Martin Luther King Jr.’s “Let Freedom Ring!” to “Bling! Bling!”-as if freedom were reducible to simply having material toys, as dictated by free-market fundamentalism.
That brings me, after a rather long trip, back to the second point.
“The whole of human society and the rule of law is based on the understanding the people cannot be relied upon to behave honorable, and thus we have laws and regulations prohibiting and punishing some dishonorable behavior, because it has negative consequences for the rest of us.”
This really isn’t anything more complicated than my understanding of the social contract, that by nature of living together in a society we have agreed to leave behind the “state of nature” that conservatives want to make of the market — where the state or government is virtually non-existent, and where there is “no justice or injustice, because there is no law” — in order to live in a society that provides both order and protection.
That particularly protection for the weak (the young, the elderly, the poor, the infirm, etc.), because one part of that contract means accepting that might — whether granted by god or the market — no longer includes the freedom to do harm to another simply because we can.
It reclaims moral authority from capitalism by creating obligation to something besides profit. Perhaps to all those things West mentions — schools and education, child care, workers’ conditions, health clinics, civic association, community, compassionate charity — and all those things that have been neglected, including the common good or general welfare. It means perhaps we become more responsible to and for one another, and less focused on the unrestrained pursuit of self-interest.
Most of all, perhaps it means that we stop worshiping and rewarding the false prophets of profit.
Then we can begin changing what needs changing.