Free Markets, Free People

Hacking Away At The Last Pillar

The siege against capitalism continues unabated. Yesterday, leaders of the 20 largest national economies reached a consensus that they needed to reel in unfettered free markets, which they all agreed was the cause of the world’s economic crisis. The medicine consists of further funding of the IMF (to the tune of an addition $1 Trillion) and an increased regulatory state.
crumbling-column

Setting aside differences in philosophy and national character, at least for now, the leaders agreed to make available more than $1 trillion in new lending to spur international growth. While leaving it to individual nations to enact, they promised tough new regulations aimed at banks and other financial institutions whose freewheeling activities sparked the crisis. And they vowed renewed support for trade and more help for the globe’s poorest countries.

“The world’s leaders have responded today with an unprecedented set of comprehensive and coordinated actions,” Obama said, in the spotlight on his first overseas trip as president. “Faced with similar global economic challenges in the past, the world was slow to act, and people paid an enormous price. . . . Today, we have learned the lessons of history.”

For some reason, the bulk of the reporting on the G-20 conference outcome is limited to describing how wonderful everyone feels about the loose agreements, and how industrious they all were to come to terms with one another. Very little press has been devoted to the actual agreements. The media seem to be under the collective impression that the most important aspect of these meetings is the conduct of the diplomacy. They could not be more wrong:

FINANCIAL market “cowboys” who wreaked havoc on the world economy will be brought undone by the G20 agreement, Prime Minister Kevin Rudd says.

Mr Rudd says the $US1 trillion ($A1.4 trillion) deal agreed on at the G20 summit in London, will benefit “tradies”, young people and small business with real commitments against real timelines.

“Today’s agreement begins to crack down on the sort of cowboys in global financial markets that have brought global markets undone with real impacts for jobs everywhere,” Mr Rudd told reporters at the conclusion of the summit overnight.

The summit has agreed to a restructure of the financial regulatory system, reform of and a trebling of funding for the International Monetary Fund (IMF) to $US750 billion ($A1.08 trillion), an extension until the end of next year of a ban on nations introducing trade protection measures, a curb of excessive executive payouts and agreement to co-ordinate further economic stimulus.

Make no mistake. What the G-20 leaders (as stated by PM Rudd above) are saying to world is that none of this would have happened if they had been in charge. “Financial market cowboys” (meaning US and UK bankers), the faces of capitalism, are entirely to blame for the woes of the world. If only there had been more government involvement, according to this theory, then the financial crisis would have been averted or severely curtailed. Accordingly, the G-20 have decided that the way to fix this mass is to assert greater control over the world economy. The immediate targets of this new world order? Tax havens of course:

Switzerland, Singapore, the Cayman Islands, Monaco, Luxembourg and Hong Kong are among 45 territories blacklisted on Thursday by the Organisation for Economic Co-operation and Development and now threatened with punitive financial retaliation for their banking secrecy.

Among the sanctions being considered by the G20 are the scrapping of tax treaty arrangements, imposing additional taxes on companies that operate in non-compliant countries, and tougher disclosure requirements for individuals and businesses that use shelters.

[…]

Illegal tax evasion through offshore shelters has been a long-standing irritation for Gordon Brown, President Barack Obama and French President Nicolas Sarkozy. An estimated $7 trillion of assets are held offshore and, according to pressure group Tax Justice Network, developed countries lose $180bn a year in evaded taxes.

Under the OECD definition, countries will be considered non-compliant if they have less than 12 bi-lateral agreements to exchange tax information with foreign governments on request. “Authorities should have access to the information to effectively crack down on tax evasion,” Andrew Watt, director at law firm Alvarez & Marsal Taxand, said.

Jeffrey Owens, director of the OECD’s centre for tax policy said: “This is the major breakthrough we have been trying to get for 13 years. If you intend to evade tax through offshore bases, you will think hard about it now you know tax authorities can trace you.”

[…]

Mr Sarkozy added: “Sixty percent of hedge funds are registered in tax havens. Putting hedge funds under supervision isn’t going to generate jobs in the textile industry. But we have to put behind us the madness of this time of total deregulation.”

The reactions of Owens and Sarkozy are like being annoyingly puzzled at why the whipping boy continues to move, seeking to avoid the lash.

Clearly the aim here is not at fixing anything other than the ability of wealthy nations to collect taxes. Small countries typically designated as “tax havens” tend to have one thing in common: they have no other means of competing in the world market place other than in the area of business taxation. If the economies of these countries were all dependent upon growing and selling corn, then the G-20 actions would be met with a much different response. Instead, companies that wish to minimize their tax burden, so that they may instead fund R&D, expand (create jobs), or re-invest, are treated as outlaws, unworthy of little more than scorn. And the small countries that have been willing to host these companies as a means of boosting their own economies, are labeled pariahs to be sanctioned by the wealthiest nations in the world. The message: “Don’t muscle in on our territory. That’s our tax money and we’re here to collect.”

In addition to punishing tax havens, the G-20 decided that the favorite whipping boys of statists needed to be better restrained so as to prevent their squirming:

Leaders agreed to craft tighter controls over hedge funds and establish more rigorous regulations to prevent the buildup of toxic assets that poisoned the U.S. financial system in and spread overseas.

[…]

The leaders agreed to set benchmarks for executive pay and make accounting standards more uniform across borders. Most would be drafted by a new Financial Stability Board, where central bankers, regulators and finance ministers from the more than 20 nations represented at the summit will eventually hash out the details.

Credit agencies — whose top-notch ratings of instruments linked to bad U.S. subprime mortgages gave false indications of their relatively safety — would be subjected to new oversight and regulations. But there was no call for a global regulator that could overrule decisions made by individual countries.

While I’m glad to see the ratings agencies (whom have inexplicably been absent from public criticism and ire) taking their turn at the post, everyone should be dismayed at what these sorts of agreements portend. The collective effort to rein in “cowboy capitalism” is little more than a barely disguised effort to place the European bit in the mouth of American (and, to a lesser extent, British) mouth. Business decisions are no longer to be made in the interests of the shareholders, but in favor of “public good.” What constitutes the “public good” will be determined by the special interests who exact the most influence upon, and best line the pockets of, the political forces in charge. In short, consumers no longer rule the market place; bureaucrats do.

Fallen pillar

Fallen pillar


As with all movements based on collective will, such as that which the G-20 has furthered, an unfettered free market is featured as the main culprit. America is widely considered to be an economic jungle where the capitalist beast roams freely, devouring the innocent and maiming cautious outsiders. Ironically, Leviathan himself has identified capitalism as an unrestrained beast in need of controlling. Yet, we have nothing like an uncontrolled free market here. It only appears that way because the remainder of the world has cloaked their industries in thick blankets of protectionism and shackled their businesses with an alarming array of bureaucratic chains. Comparatively, America does look like a free market jungle.

But therein lies the problem. As the Washington Post stated it:

Along with declarations of optimism came the recognition of at least a temporary shift in attitude away from two decades of intense reliance on free trade, deregulation and market-knows-best policies that fueled stunning growth across the planet.

Brown — the leader of a country closely associated with that philosophy — declared “the Washington Consensus” over, using a term that recognizes the American roots of an economic system seen by many in the world as unfair and unhealthy.

As far from a pure free market as we are, it is our relative distance from the nanny-statism of Europe and beyond that props up the economies of the world. That stunning growth was made possible precisely because of what the rest of the world refers to as “cowboy capitalism” and they were all happy to join in the ride. But now that woe times betide us, thanks primarily to government meddling (e.g. CRA, Fannie Mae, Freddie Mac, Fed policy, etc.), the world is ready to chop down the last pillar of capitalism, and assert government control over everything. With that final support gone, the capitalist beast will be brought to heel, confined to the zoo where it will live its remaining days as little more than a novelty. Unfortunately, it will take its wealth producing powers with it.

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21 Responses to Hacking Away At The Last Pillar

  • For decades the tide has steadily moved away from everything you believe in, yet still you stand fast commanding it to halt.
    I shall dub thee all: neo-Canutes!

    • For decades the tide has steadily moved away from everything you believe in …

      Not according to the pro-regulation view of the world.  Didn’t you read any of the post or linked articles?  It’s because of unfettered capitalism over the past two to three decades that we are in this mess.  You really need to brush up on your talking points.  Or come up with an original idea, but I understand that may be beyond your capabilities.  Better to just let others do your thinking for you, eh?

      • Well, in all fairness to TomD, the tide IS moving away from things we believe in.  You know: things like the free market, individuality, personal responsibility, rationality, and liberty.  The herd has decided that all these things, which used to be hallmarks of free men and were considered worth defending to the death, are bad for the collective.

        The problem, of course, is that the herd assumes that all the good things it has enjoyed that have resulted from capitalism and “cowboys”, such as abundant food, cheap fuel, inexpensive consumer goods, and near-miraculous medical care, will continue to exist after we’re all regulated and regimented and curbed and coordinated in to a compliant mass of sheep.  They won’t.  There is little room for innovation in a society that fears the work of “cowboys” and is so risk-averse that it cannot tolerate ANY behavior that MIGHT threaten the safety of the herd, even if this aversion actually harms the herd in the long run.  It is not, for example, in the best interest of a state-run medical system to provide drugs and therapies that will prolong the lives of its subjects; indeed, the best outcome is that its subjects die as soon as their useful lives (i.e. their ability to work and pay taxes to the state) are over.

        Even the horses and the dogs have no better fate. You, Boxer, the very day that those great muscles of  yours lose their power, Jones will sell you to the knacker, who will cut your throat and boil you down for the foxhounds. As for the dogs, when they grow old and toothless, Jones ties a brick round their necks and drowns them in the nearest pond.

        George Orwell
        Animal Farm

        Such a society also has no need for much (if any) innovation at all.  Indeed, technology is really quite undesirable, as it tends to upset the existing order and often results in classes of subjects being made obsolete.  Take, for example, one possible origin of the word “sabotage” (French textile workers destroying man-replacing machines with their wooden shoes), or indeed the Luddite movement of the early 19th century.  One can only imagine what results would have obtained had the Luddites had the backing of powerful unions, politicians and the media of their day and been able to brand machinery inventors and users as “cowboys”.

        In Oceania at the present day, Science, in the old sense, has almost ceased to exist. In Newspeak there is no word for ‘Science’. The empirical method of thought, on which all the scientific achievements of the past were founded, is opposed to the most fundamental principles of Ingsoc. And even technological progress only happens when its products can in some way be used for the diminution of human liberty. In all the useful arts the world is either standing still or going backwards. The fields are cultivated with horse-ploughs while books are written by machinery.

        George Orwell
        1984

         Possibly some would argue that the left’s current fascination with the vaporware of “green energy” somehow demonstrates how they embrace innovation.  Actually, the opposite is true: they use “green energy” merely for propaganda purposes to cover their destruction of existing institutions and technologies and to choke off competing innovation.  Consider: green energy is supposed to replace our present technology.  Yet, various means are already being put in place to eliminate current technologies (or, at least, make them prohibitively expensive) before the new technology is ready.  It’s like taxing railways out of existence to encourage people to use the new technology of air transportation… in 1890.  Further, the “greenies” are relying on certain types of “green energy”, such as ethanol, even though producing ethanol from corn is massively inefficient.

        And while I’m on the subject of Orwell and his works, I think it worth mentioning in closing that TomD and people like him are a subject of Orwell’s:

        Even the humblest Party member is expected to be competent, industrious, and even intelligent within narrow limits, but it is also necessary that he should be a credulous and ignorant fanatic whose prevailing moods are fear, hatred, adulation, and orgiastic triumph. In other words it is necessary that he should have the mentality appropriate to a state of war. It does not matter whether the war is actually happening, and, since no decisive victory is possible, it does not matter whether the war is going well or badly. All that is needed is that a state of war should exist. The splitting of the intelligence which the Party requires of its members, and which is more easily achieved in an atmosphere of war, is now almost universal, but the higher up the ranks one goes, the more marked it becomes. It is precisely in the Inner Party that war hysteria and hatred of the enemy are strongest.

        In the case of TomD and other libs like him, the “war” isn’t fought with guns and rocketbombs, but it is a war nevertheless.  Merely substitute “George Bush” for “Emmanual Goldstein” and “capitalism” for “Eastasia”, and “thought-criminal” for anybody who doesn’t share his loopy beliefs, and I believe the point is made. 

    • I, in turn shall dub thee –

      Know-nothings.

      Been used, I know, but it seems terribly appropriate and there’s no sense in letting a perfectly good and clearly applicable name go to waste. 

      Besides, it’s Green to recycle and you should be in tune with that.

  • Business decisions are no longer to be made in the interests of the shareholders, but in favor of “public good.” What constitutes the “public good” will be determined by the special interests who exact the most influence upon, and best line the pockets of, the political forces in charge. In short, consumers no longer rule the market place; bureaucrats do.

    So it’s official then.  We are all Economic Fascists in this, our glorious New World Order:

    Where socialism sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. Where socialism nationalized property explicitly, fascism did so implicitly, by requiring owners to use their property in the “national interest”—that is, as the autocratic authority conceived it. (Nevertheless, a few industries were operated by the state.) Where socialism abolished all market relations outright, fascism left the appearance of market relations while planning all economic activities. Where socialism abolished money and prices, fascism controlled the monetary system and set all prices and wages politically. In doing all this, fascism denatured the marketplace. Entrepreneurship was abolished. State ministries, rather than consumers, determined what was produced and under what conditions.

  • The media seem to be under the collective impression that the most important aspect of these meetings is the conduct of the diplomacy

    They’ve been under that impression for the past 8 years. “Diplomacy” has become a fetish, not a means to an end but an end in itself. Results…..don’t matter, as long as it’s not the result of “unilateralism” and reeks of “consensus”

  • As usual, you dense righties offer a vague and abstract case for capitalism. Well, your ideas are being brushed aside. We wise leftists get to define how best to harness capitalism for greater social good. And that’s not a thing like fascism, and you thick righties that lack advanced degrees in social sciences ought not to be making such comparisons. Trust my godlike powers of political science on this: unfettered capitalism has failed, and regulation and investment decisions by wise leftists is the only answer.

    Obama, with his Christlike visage, is just the person to do it. He thinks like me, and I’m so happy that the Bush regime is over (finally!), so that Obama can proceed to fix all the problems left behind by the odious Bush. Starting with how Bush let the free market run rampant, and we’ve certainly had enough of that!

    Of course, I’ve gone back and forth on the stimulus, first being against it, and then for it, and then against it again, and that has nothing to do with being completely unprincipled and blown by the winds of whatever I read last, so stop saying that! Anyway, I’m sure Obama is going to stimulate our economy, rein in rampant capitalism, cut spending, make all foreign leaders love us, and cure cancer.

    But I worry about inflation. And that’s not because Obama is just like Carter, who brought us ten percent inflation, so stop saying that! All you guys know how to do is insult me, but I’m rubber and you’re glue, so all you say bounces off me and sticks on you.

    Of course, I’ve tried in some recent posts to moderate my zeal about Obama and sound like I actually might be willing to respect some of the commenters here. And that’s not either because I’ve been shredded and exposed as a lightweight blowhard, so stop saying that! I have advanced degrees and a godlike power of political science, so I have a laserlike ability to immediately come to the correct conclusion, but I’m coming to understand that I can’t just come right out and dictate to you dense righties what you ought to think. I have to pretend to listen to you first.

    That means that I want discussion and debate with all of you. Well, except for those ex-military basket cases like McQ and Hollis, of course. For all the rest, I’d love to engage in a content-laden exchange, in which I supply all the content, and you question my assumptions and reasoning, and I explain to you why you have it all wrong and I’m completely right, and repeat that a few dozen times in every thread here.

    And I don’t either do that because of some narcissistic need for self-validation, so you really, really ought to stop saying that! I can stop coming here any time I want! Really, I can! Whenever I feel like it. I just never feel like it, that’s all.

  • Most would be drafted by a new Financial Stability Board, where central bankers, regulators and finance ministers from the more than 20 nations represented at the summit will eventually hash out the details.

    Is that not right out of Atlas Shrugged?

    Credit agencies — whose top-notch ratings of instruments linked to bad U.S. subprime mortgages gave false indications of their relatively safety — would be subjected to new oversight and regulations.

    Hmm. I wonder if there was any political pressure to avoid placing bad ratings?  I wonder if government could have had anything to do with this.  Congress is very lucky the complexities of all this are beyond the comprehension of the mob, or I daresay they would already be dead.

  • Well the wheel has gone completely around and now we will be facing another twenty years or so of managed economies, austerity programs and runaway inflation.  It is depressing, but inevitable.

    We will await a new generation of freedom lovers to slay the dragon all over again.

  • As we enter this time of the New Fascism one must always remember that a brighter day awaits.

    Goes with the territory…
    http://cidc.library.cornell.edu/DOF/italy/captioned/hanging.htm

  • Don’t worry, what can not go on will not go on.  Over half the people I work with are from other countries because the US had the best environment, if the US is no longer offers the best environment, we will go where the environment is better and make that country more sucessful.  Marx can rejoice, the captial of labor is no longer bound to the land.

  • Let’s see….regulators who failed are rewarded with more power and with new international jobs involving conferences in banking centers like Bahamas, Zurich, Paris, Bali, etc. (Maybe it works if Geithner can be promoted up and out?)

    Seriously, did Basel I or II help in this crisis? Did the world’s central banks do a good job (USA, China, we’re looking at you?) Did SOX stop Maddof? or Citi?

    The pain of failure is the best medicine, not the pain of future regulations that can be gamed.

  • You guys are feeling about the country the way the left felt about the country under George W. Bush and the militarization and wars (which felt like fascism).  Can you empathize with the “left” of 2003-04 now?   And guess what, political pendulums swing back and forth.   You’ll find folk you agree with back in power in at some point.  America will continue just fine.

    • You. Freakin’. Dolt.  Are you so arrogant as to think you (of all people) are pointing out angles we haven’t thought about or addressed?  Do you actually believe that you are so much better informed about the facts of the matter than I am?  Than we are?  Are you possibly that arrogant?  I think you are.

      If you actually understood what fascism was (is) then you’d realize how fundamentally ill-informed your comment is.  Here, I’ll help. After  you’ve digested that, it would do you well to never, ever, comment on something here that you are so ignorant about.  You had better think twice about how you respond to this comment (if at all).  I am more than a little tired of your nonsense.

    • You guys are feeling about the country the way the left felt about the country under George W. Bush and the militarization and wars (which felt like fascism). That’s right, removing a dictator who was explicitly fascist in his outlook and who routinely violated a cease fire and routinely committed acts of war is also fascist. I just feel it.

      Because war is just icky. You ex-military basket cases at QandO just don’t get that, do you? War is unhealthy for children and other living things. Here in the faculty lounge, we have a finely tuned moral sense that understands just how icky war is, and that lets us intuitively recognize fascism as anything that’s associated with war, and that fascism has nothing to do with anything done by wise leftists such as Obama. That’s just the way it is, righties. Suck on it.

      Can you empathize with the “left” of 2003-04 now? I mean, sure, Bush was implementing leftist-inspired programs such as Medicare Rx and campaign finance reform, but still. He was just so chimplike and inarticulate, you know? Plus the whole war thing, of course, and given how icky war is, no amount of socialistic stuff from Bush was going to keep us from hating him over that. But that’s completely understandable, and you righties ought to be completely understanding of our Bush hatred, because it was inspired by the very best of moral impulses.

      And guess what, political pendulums swing back and forth. And that’s not just a stupid trite statement, it’s very meaningful! And you guys probably didn’t realize it! Because you’re dense and all. And the fact that the pendulum never seems to go back as far right as it went left is just fine, and part of the natural way the world is supposed to work, and you libertarian types just need to realize your ideas are being pushed aside and get over it.

      You’ll find folk you agree with back in power in at some point. Uh, that does mean people like Bush, doesn’t it? I mean, I know you guys slammed him sometimes, but you really agreed with him deep down, didn’t you? You libertarian types put up a good act that you have not had anybody in power you agreed with in decades, but I can’t take that seriously. I just intuitively feel that you really, really liked Bush, because you ex-military basket cases like war so much. And because there are really only two political philosophies: wise leftism and everything else.

    • “You guys are feeling about the country the way the left felt about the country under George W. Bush and the militarization and wars (which felt like fascism). Can you empathize with the “left” of 2003-04 now?”

      No. They were almost always wrong about everything and based their feelings on nothing but a ridiculous vision of humanity that does not and will never exist.

      • I know I’m late, but what happened to ‘Erb the centrist’, now all of a sudden you’re the left – oh, and Goober Scott, don’t EVEN try and tell us you’re not who you were talking about:

        “You guys are feeling about the country the way the left felt about the country under George W. Bush and the militarization and wars (which felt like fascism).”

        Your addition of ‘which felt like fascism’ is not a statement of how ‘they’, the ‘left’ felt, it’s a statement of how ‘you,  Scott Erb’ felt about the last 8 years.   Not that it comes as a surprise, okay?, we could tell you were selling manure all along, even if the sign on your store said “wholesome natural foods”.

  • Here is an interesting set of articles about the AIG mess.  I’ve listed them in the order that they were originally posted, because it’s more complete that way.  Any one of them points up the fact that much of this mess isn’t due to lack of regulation so much as the network of regulations being unenforced, or being enforced in a manner that benefitted “certain” people.  In other words,  the heart and soul of corruption.  It doesn’t matter how many rules and laws you make if they’re only enforced on those who those in power _want_ to enforce them on.  That’s why the US system of ” all men are equal under the law” was a novel concept.  That’s one of the primary principles that allowed the US to prosper.  We’re “progressing” to a banana republic – where the head honcho can’t break any laws.

    http://market-ticker.denninger.net/archives/916-Yoo-Hoo!-Yes,-Mr.-Cop-Over-THERE!-AIG.html

    http://market-ticker.denninger.net/archives/929-Eric-Holder-LIAR.html

    http://market-ticker.denninger.net/archives/932-Wheres-My-Pitchfork.html