Free Markets, Free People

Brooks On Capitalism

David Brooks had started down the road to Damascus when he was called back into the fold by Dear Leader. His Op-Ed in today’s NYT is the result.

Most of Brooks’ offering is a rather transparent attempt to shame congressional Republicans into supporting Pres. Obama’s agenda:

The Democratic response to the economic crisis has its problems, but let’s face it, the current Republican response is totally misguided. The House minority leader, John Boehner, has called for a federal spending freeze for the rest of the year. In other words, after a decade of profligacy, the Republicans have decided to demand a rigid fiscal straitjacket at the one moment in the past 70 years when it is completely inappropriate.

The G.O.P. leaders have adopted a posture that allows the Democrats to make all the proposals while all the Republicans can say is “no.” They’ve apparently decided that it’s easier to repeat the familiar talking points than actually think through a response to the extraordinary crisis at hand.

There are myriad problems with Brooks’ line of reasoning, including many in just to two foregoing paragraphs (e.g. How much input did Republicans have into the recent legislation? By “adopted a posture” is he referring to “not having control of either the House or the Senate”?), but I wanted to focus in on a couple of points in particular.

After some platitudinous admonitions, Brooks launches into his prescription for Republicans to save capitalism:

Third, Republicans could offer the public a realistic appraisal of the health of capitalism. Global capitalism is an innovative force, they could argue, but we have been reminded of its shortcomings. When exogenous forces like the rise of China and a flood of easy money hit the global marketplace, they can throw the entire system of out of whack, leading to a cascade of imbalances: higher debt, a grossly enlarged financial sector and unsustainable bubbles.

I really don’t know what point Brooks thought he was making, but he failed miserably on any score. First of all, “exogenous forces” cannot be “weaknesses” and/or “shortcomings” with capitalism since, by definition, they come from outside that system. At best, examining such forces can be used to understand better ways of protecting capitalism from them. In the context of the entire Op-Ed piece, however, it appears that Brooks is pitching the tired line that capitalism must be reigned in so that people don’t get hurt. That’s like diagnosing the problem with house, finding termites, and then thinking of ways to protect the termites from the house.

Furthermore, Brooks cites a “flood of easy money” (which, of course, is caused by government) as an example of an exogenous force, and then lists the following “shortcomings” of capitalism: “higher debt, a grossly enlarged financial sector and unsustainable bubbles.” What do any of those things have to do with capitalism? If anything, these are once again a failure of government skewing incentives.

In fact, when the government does its darnedest to make the cost of borrowing money historically low, people would be really stupid not to take advantage of that. We all know that rates fluctuate, and that the cost of money will be more expensive when they go back up. Logically therefore, it only makes sense to borrow when the Fed turns the money spigot on and then to find some sort of an asset to grow that money in. That, of course, is what leads to bubbles as everyone has barrels of money but not as many clear ideas of what makes a good investment. Instead of taking the time to really investigate what opportunities are available, and which ones fit a particular person’s portfolio, the herd mentality takes over and we all tend to keep up with the Jones and Smiths whether that means buying tulip bulbs or a run-down house we intend to flip.

The bottom line, however, is that these sorts of scenarios start with government intervention into the market place. In addition to turning on the money spigot, the federal government was also encouraging lenders to make high-risk loans, and for the Freddie Mac and Fannie Mae to buy them up, securitize them and sell them into the derivatives market. Again, that’s all fine and dandy (until it it all goes to hell), but it has nothing to do with “weaknesses” and “shortcomings” of capitalism, and everything to do with government sticking its big fat honker where it doesn’t belong.

More Brooks:

If the free market party doesn’t offer the public an honest appraisal of capitalism’s weaknesses, the public will never trust it to address them.

The “free market party”? Who does he think he’s kidding here? The Republicans haven’t acted like a free market party since … well … it’s been so long I can’t remember.

Moreover, I simply can’t fathom how Brooks thinks a “free market party” would ever be able to reconcile itself to joining hands with Obama on his completely anti-capitalist agenda.

Power will inevitably slide over to those who believe this crisis is a repudiation of global capitalism as a whole.

Earth to Brooks: that’s already happened. Look who the president is for crying out loud, or take the time to read your own newspaper. Each and every day we hear about how the excesses of capitalism caused this crisis, and how the “libertarian” policies of Bush (HA!) have landed us in this awful spot. Capitalism didn’t get a trial, Mr. Brooks, it was rounded up, convicted and summarily shot as soon as the latest grand experiment in government do-goodism failed (again).

Tweet about this on TwitterShare on FacebookShare on Google+Share on TumblrShare on StumbleUponShare on RedditPin on PinterestEmail this to someone

21 Responses to Brooks On Capitalism

  • I’m not an economist (though I have stayed in a Holiday Inn Express; nice continental breakfast), so I’m curious:

    Would the current financial crisis have happened in a purely capitalist system, free from government regulation, pressure, and intervention?  If not, then doesn’t that really indicate that capitalism is NOT the problem?  Wouldn’t that require searching for the real source of the problem?

    As for Brooks… We’re getting a good look lately at the central divide in the GOP: the elitists on one side, the rest of us on the other.  Writers like Brooks, Buckley, and Frum, along with politicos like Graham, Specter, Collins, Snowe, etc, are the elitists.  They DESPISE the hoi-poloi of their own party, don’t actually trust capitalism or personal liberty very much, instinctively favor big government solutions (i.e. control of the hoi-poloi), and naturally tend to side with even more elitist democrats (spit), though they from time to time think that the dems (spit) tend to try to do too much, too fast.  This is why they support TAO and attack Limbaugh, for example: TAO really shares much more of their philosophy that Limbaugh.  They get lots of coverage and ballyhoo from their pals in MiniTru because they fulfill the role of Useful Fool, the “tame Republican” who can be trotted out from time to time both to show how “unbiased” MiniTru is (as my wife sometimes tries to remind me, “There are Republicans on CNN, too!  I’ve seen them!”) and to provide the gratifying spectacle of a “Republican” s***ting all over other Republicans (McCain was useful to MiniTru for this back when he was The Maverick but before he was the nominee; I still wonder if he realizes just how he was used by MiniTru).

    As a related aside, if you haven’t read Iowahawk’s latest missive by T. Coddington Van Voorhees VII, it’s a very amusing and trenchant satire of elitist RINO’s:

    … in order to survive, conservativism simply must start appealing to a better class of people. The sad fact of the matter, as we noted, is that one no longer finds admitted conservatives in any of America’s prestige zip codes nor the faculty redoubts of her selective academies. During our Bahamian summit many gambits were proposed to win back America’s elite electoral precincts from the left; sponsoring various hip hop colloquia at the better Ivies, supporting integration of gays into Nascar, endorsing state ownership of the means of production. Rod Dreher, whose sensational exegesis “Crunchy Cons” sold well over 200 copies last year, recommended a full embrace of the environmental movement, which as I understand is quite the rage among youthful voters and the trendsetting thespians of Hollywood. Good and bold ideas all, and necessary steps to get the movement started again. But there remains a daunting obstacle – namely, the benighted rubes who constitute so much of our so-called “base,” and whose existence make it nigh on impossible to recruit their social betters.

    • Would the current financial crisis have happened in a purely capitalist system, free from government regulation, pressure, and intervention?

      Not necessarily the current one, but certainly crises would happen.  Having a free market does not mean being free from economic problems, it just means being free from distortions (what Brooks called “exogenous forces”).  The difference would be that there would be no massive force (i.e. government) tweaking here and there trying to effect a certain outcome thus introducing unintended consequences.  Business cycles would still churn, money would be made and money would be lost, and sometimes recessions (possibly even depressions) would occur.   People would still react to incentives just like they do now, but they would also have a lot more incentive to avoid pain since there would be no implicit guarantee that the 800 lbs. gorilla would come in and “correct” any problems that investors run into.  Consequently, when problems did occur, they would have a much better chance of correcting themselves in orderly fashion, and the market would grow stronger as a result. 

      I could go on about this for quite awhile, but I think you get the point.

      • Thank you.  That’s about what I thought.  Critics of captitalism (like that fool Brooks) like to point to the busts and recessions and depressions that are the result of the normal business cycle, as if they are the default position of a market economy.  It never seems to occur to them that all the government interference they seem to crave doesn’t stop them happening.  In the present case, I don’t think the crisis would have happened at all: absent government intervention, banks would almost certainly NEVER have made the risky subprime loans, and certainly not in the kind of numbers that they did.

        • In the present case, I don’t think the crisis would have happened at all: absent government intervention, banks would almost certainly NEVER have made the risky subprime loans, and certainly not in the kind of numbers that they did.

          I think that’s probably right.  By the same token, the Tech Bubble would have happened just like before since AFAIK there were no government distortions incentivizing people to invest in (and overvalue) tech companies the way that they did.  But notice too how shallow the recession was from the first while people are talking about depression from the current bubble bursting.

  • Just because Brooks says he is a conservative doesn’t keep him from being a fatuous twit.

  • You know, you see such  lines of “reasoning” from stalwart “conservatives” like Brooks, or Frum or whoever……and then people wonder why a guy like Limbaugh and his supporters have such influence in the party.

  • What a great bit of analysis!

    “Capitalism,” “libertarian” and “free market” have become name tags affixed to straw men.  It’s quite telling:  Folks like Brooks have no basic concept of what these terms mean, and are conflating them with the Republican party.

    Not to sound like a nut, but do you suppose it’s third party time?

    • Ronnie GipperNot to sound like a nut, but do you suppose it’s third party time?

      Yep.

      The problem is establishing a basic party platform.  The original Republicans had it easy: abolition.  Single issue, easy to understand, appealed both to reason and emotion.

      But what would a twenty-first century third party stand for?  “Conservatism”?  “Libertarianism”?  Would it not founder on hot-button issues like abortion, drugs, gay marriage, or even tax policy?

      Rush used to crow about how fractured the dems were.  I think he had the wrong party in mind: the GOP is far more fractured.  There are social conservatives whose primary issue is gay marriage or abortion and don’t really worry too much about how much money the government spends.  There are 2A folks who couldn’t care less about abortion, but just don’t want to lose their guns.  Then there are the fiscal conservatives who just want lower taxes, less regulation, and a generally more friendly attitude toward business.  And let’s not even try to deal with the elitist RINO’s who basically agree with democrat (spit) positions, but either don’t want so much, so fast and / or want to be the ones calling the shots.

      There will be a surge of unity in the GOP due to the idiot, destructive policies of TAO and the rest of the filthy democrats (spit), but it won’t last long unless the GOP can give us somebody and something that’s worth following beyond, “We hate that idiot in the White House and what he’s doing.”

  • Power will inevitably slide over to those who believe this crisis is a repudiation of global capitalism as a whole.

    **

    You know, this is a real sore spot for me…..when I see this comment (or variations on it) I have to suppress a rant of epic proportions.

    Because it is SO. F**king. Stupid.

    The very fact that we can have this debate in this medium- on the internet, which is used by our home computers or laptops in our heated homes with  our electric lights while we maybe download some music to our Ipods as we sip on a nice warm cup of coffee or maybe an adult beverage while in the meantime outside all manner of cars and trucks rumble along bringing people and products to all sorts of places…..well, if you think this crisis is somehow a repudiation of capitalism, please take a shotgun, put it in your goddamn mouth and pull the trigger and make the world better and smarter by your blessed absence.
    You want to know what a repudiation of capitalism looks like? Google the nighttime satellite image of the Korean peninsula. You see that huge black spot next to the sea of light? There’s what repudiating capitalisn looks like you stupid f**kwits.  You want to know what repudiating capitalism feels like? Go out in your backyard or local park and eat some f**king grass for your daily meals.
    You want to repudiate capitalism? Get the f**k out. Kim Jong or Hugo or Raul or Sensei Putin can use you. Not so much the ChiComs though- when they’re embracing capitalism more than some elements of our society- more than our goddamn President for gods sake- you know something is seriously wrong.
    I hate these faux socialist b*tches. They want to destroy capitalism but keep all the fruits of the system. UH UH! It doesn’t roll like that no matter what textbooks you read, or what smooth talkers fills your head with.  Repudiate capitalism? Then go dark, go cold, go hungry. Then I’ll respect you.
    Cretins.

    /end mini-rant.  Thank you for your time.

  • The “free market party”?


    By implication, what does that make the other party?
  • Here’s a little something on Buckley from J. Goldberg.  I think Goldberg gets it with Buckley. Can you say Buckley was an “elitist”? Sure he used big words, but “elitist”?

    On Conservative Intellectuals, Snobbery and Populism [Jonah Goldberg]
    I should have linked to this yesterday, but life conspired against it. Bill Voegeli on the Roots of Liberal Condescension.
    I liked this bit:

    Buckley’s position, then, is not really populist. The ism of populism is the idea that the people are inherently more sound and virtuous than the elites. Buckley is saying, less categorically, that we live in an age when the people happen to possess better judgment than the professors. If the reverse were true, if the professors had more respect than the people for God’s laws and tradition’s wisdom, Buckley’s argument would have favored entrusting government pari passu (as he would have said) to scholars instead of citizens.

    What sets the people in the phonebook apart from the professors, according to this argument, is that they believe in and defer to profound truths existing outside of history. They are willing, furthermore, to accept that the “democracy of the dead,” incorporating the cumulative judgment of people long gone and forgotten, might well have grasped those truths better than people, even very smart people, who happen to be alive at this moment.

    The professors, by contrast, expect to be deferred to, not to be the ones deferring. Their “intellectual arrogance” is a consequence of the assumptions of progressivism, an ism that treats progress as the fundamental reality. The belief in progress is the belief that the present is better and wiser than the past, and the future will be better and wiser than the present. Truths outside of history, such as the laws of nature and nature’s God, either don’t exist, can’t be known, or don’t matter. Unlike the Marxist, the progressive does not believe history is following a defined path to a specific, inevitable conclusion. Rather, the evolution of human society is constant and eternal. Its entirety is unknowable, the idea that it has an ultimate destination a complete misconception, but history’s next phase can be discerned by some better than others.

    Meawhile, Barton Swaim had an interesting piece on the site the other day about conservative intellectuals. I found it particularly interesting because I always thought we needed a new word, since “intellectual” is freighted with more baggage than it can carry.
    “Scholar” and “academic” both have very professional connotations these days (which is particularly sad for the former term). “Historian” is too narrow. “Expert” is even narrower. “Author” is too unimpressive and vague. “Man of letters” is probably too sexist and certainly too literary sounding (at the very least “woman of letters” sounds stupid).
    And so we are left with “intellectual” which must be a statement about ones learning and IQ, but also an adjective with several sociological connotations. In one usage, as Voegeli suggests,  “intellectuals” are a specific bunch of progressive or otherwise left-leaning eggheads who have a bottomless confidence in their own intelligence and the ability of people like themselves to redesign society from scratch or at the very least guide it to the sunny uplands of history. In the 1930s, such would-be meddlers were frequently called “planners,” a term I’m still fond of. Philosophes is an even older term for this crowd.
    Again, as Bart notes, the fact that Burke hated “intellectuals” demonstrates the tension. Burke himself was certainly an intellectual in the sense that he was really, really, smart and learned. But he wasn’t an intellectual in the sense that he thought he was smarter than tradition, convention and markets combined. Bill Buckley played a similar role. He had the appearance, mannerisms and qualities of mind most of us associate with intellectuals, but he rejected the ambitions most closely associated with intellectuals.
    This confusion creates a huge opportunity for mischief, in that it allows many critics of conservatism to claim that conservatism is anti-intellectual when it’s often merely opposed to a certain kind of intellectual.

  • This crisis is going a long way to bring back the wisdom of J.M. Keynes.  The fact is that capitalism works, but it only works if there is regulation and rule of law to prevent excesses.   Moreover, Marxian analysis correctly predicts many of the factors which led to this crisis (a crisis which hit de-regulated states like Ireland, Iceland and the UK the hardest, though contagion from the US — esp. AIG — meant that all of Europe was affected).  Keynes’ brilliance was to note that while some Marxian critiques of capitalism are accurate, markets can work, and there is something between pure free markets (which nobody who understands politics and economics can possibly believe work) and planned economies (which nobody who understands psychology and organizational behavior can possibly believe work).

    Capitalism and markets work.  But they are not magic.   They can’t work without regulation, rule of law, and government action to assure relatively equal opportunity and a playing field that’s relatively fair.  Ideological fantasies of pure free markets are as misguided as fantasies of pure planned economies.  It’s time to ram the ideological extremists into the gutter of history.  They are wrong on all fronts!   And I’m going to do my part to repudiate both sides of the extremist spectrum.

    • I’m going to do my part to repudiate both sides of the extremist spectrum.

      Then how about once, JUST ONCE, tell us what deregulation policy helped lead us to this point. Quit posting the same mealy-mouthed crap over and over again and provide a piece of evidence. No one around here is impressed with your ability to simply declare something true like you do with your gullible 18 year olds.

  • Pingback: Kah Zoohl List
  • Leave it to an American President to have a crisis and go off on a preemptive unilateral course of action

    Disagreements between the European Union and the US over how to combat the global recession widened on Tuesday as EU governments made clear they had little appetite for piling up more debt to fight the collapse in output and jobs.
    Finance ministers from the 27-nation bloc insisted in Brussels that it was doing enough to support world demand and did not need at present to adopt another fiscal stimulus plan, as Washington is urging.

    • .. or is this another “stimulus” ? 
      You mean that Team Obama passed a “stimulus” so ill-targeted that they need another ?
      I’m sure all those Senators and Congressones that voted “NO” are pleased with themselves about now.

  • Some bankers say the conditions have become so onerous that they want to return the bailout money. The list includes small banks like the TCF Financial Corporation of Wayzata, Minn., and Iberia Bank of Lafayette, La., as well as giants like Goldman Sachs and Wells Fargo. They say they plan to return the money as quickly as possible or as soon as regulators set up a process to accept the refunds. On Tuesday, Signature Bank of New York announced that because of new executive pay restrictions in the economic stimulus package, it notified the Treasury that it intended to return the $120 million it had received from the government only three months ago.

    Now (tiny) Tim Geithner has even more to do. LOL

  • The only demonstrated failure of free markets is a failure to exist.