On the Economy

The Economy:

Here is the way I see it. I am not an economist. I have never taken a business class. There are undoubtedly many things that I am not clear about. However, here goes.

The problems with Milton Friedman’s economics are the same as the problems with Marx’s economics – Both are fantasies of extreme proportions. It is impossible to conduct business in a massive society without governmental regulation and guidance of business just as it is impossible to conduct business in a massive society completely determined by governmental determinism. The current failures of Fannie Mae/Freddie Mac, Lehman Brothers, Bear’s Sterns, AIG, and whoever is next are ideal examples of these problems. Radical free market economists with contend that we have not had a truly free market so the failures should not be bailed out and the government’s intervention is inappropriate. What is interesting to me is that the current administration with the help of a compliant congress, has moved closer to the free market ideal than any in the past (at least since the early 20th century). It is when these ideals are reached for and deregulation of business/markets occurs, that businesses fail and threaten the economy. It seems to me that the same thing happened just before the great depression and the markets/business crashed.

When are we going to learn? The whole thing began with Reagan. I guess Carter began it at the end of his administration. But Reagan really pushed it and the Right is much more prone to these types of problems. The push was for deregulation. The results of obvious. Business needs regulation in order to function properly and in the best interest of the greater society.

The same process was in play at the interior department as recent revelations indicated.
No oversight leads to abuse.

This is a simple psychological process. Human beings do not do well without structure, boundaries, and restraints. Some of us develop enough internal regulation to exist independently, but the vast majority of people do not. Therein lies a serious problem with humanity. Human nature is not self-regulating, we are led by instinct, impulses, urges that cannot be totally overcome. This is why so many of us fall into hypocrisy – claiming to be anti-homosexual and seeking homosexual relationships in airport stalls, abusing power by having sexual relations with an intern in the oval office, etc… etc…Or claiming Miltonian free market economics and then bailing out your buds on Wall Street (Paulson and the Bush administration), claiming to want governmental reform but doing virtually nothing to enact legislation to make it happen (Pelosi/Reid). The list can go on and on. Your neighbors are just the same.

Children are in need of structure and restraints and boundaries to help them feel secure in the world and grow up internalizing their own self-imposed restraints and boundaries. If a child’s parent does not provide the child with sufficient boundaries and structure the child experiences fear, anxiety, anger. It becomes much more likely under those conditions that the child will act out, lack inhibition of urges/impulses, become aggressive, and unregulated. On the other hand, parents who are overly restrictive also create children who are more likely to act out, be frustrated, and lack initiative.

Don’t these scenarios sound familiar? The government’s main function is to act as the “parent” for the greater society. This is why there is a constant struggle between the two extremes of “parenting”: being overly permissive and being overly regulating. The reality is that because of the conflict we fall somewhere in between most of the time. It is unfair to say that one party is totally one way and the other is totally the other. Republicans tend to be overly permissive toward business interests and overly controlling in the social sphere (regulating abortion, religion, anti-constitutional/civil rights issues just to name a few. Democrats are have an opposite problem, mostly wanting to exert regulations on business but allow more freedom socially.

The battle between these two sides of the conflict is thoroughly natural and reflect the childhood conflict inherent in all of us. How we resolve these conflicts inside ourselves determines how we think politically.

This gets me into an entirely other issue which I hope to write about in the future – The idea that Republicans tend to be psychologically more in the paranoid range of personality and Democrats tend to be more of the depressive personality type. The implications for public policy in each of these types is quite clear.

Digression aside, the need for balance is obvious and our constitutional democracy helps us achieve some form of balance. The problem arises when those in power, especially executive power, try to undermine this balance. Now what administrations have done this? Republican – that is Nixon, Reagan, Bush (especially Bush). Dick Cheney is a paramount example of this (see the new book by Barton Gellman “Angler.”). Not surprisingly, Cheney was part of the Nixon Administration as was Rumsfeld.

Deregulation of any agency, business, etc.. will lead to the “child” becoming unwieldy and out of control. It is human nature. It is a fact that is seen repeatedly throughout the course of human history both societally and individually.
More about this another time.