Robert Kuttner: Only a Roosevelt-Scale Counterrevolution Can Prevent Great Depression II

[marmar]

via AlterNet:



Only a Roosevelt-Scale Counterrevolution Can Prevent Great Depression II

By Robert Kuttner, The American Prospect. Posted September 18, 2008.

Free-market extremists brought us this needless economic collapse. Here's a rundown of the mistakes we've made and the reforms we need now.



The current carnage on Wall Street, with dire spillover effects on Main Street, is the result of a failed ideology -- the idea that financial markets could regulate themselves. Serial deregulation fed on itself. Deliberate repeal of regulations became entangled with failure to carry out laws still on the books. Corruption mingled with simple incompetence. And though the ideology was largely Republican, it was abetted by Wall Street Democrats.

Why regulate?

As we have seen ever since the sub-prime market blew up in the summer of 2007, government cannot stand by when a financial crash threatens to turn into a general depression -- even a government like the Bush administration that fervently believes in free markets. But if government must act to contain wider damage when large banks fail, then it is obliged to act to prevent damage from occurring in the first place. Otherwise, the result is what economists term "moral hazard"-- an invitation to take excessive risks.

Government, under Franklin Roosevelt, got serious about regulating financial markets after the first cycle of financial bubble and economic ruin in the 1920s. Then, as now, the abuses were complex in their detail but very simple in their essence. They included the sale of complex securities packaged in deceptive and misleading ways; far too much borrowing to finance speculative investments; and gross conflicts of interest on the part of insiders who stood to profit from flim-flams. When the speculative bubble burst in 1929, sellers overwhelmed buyers, many investors were wiped out, and the system of credit contracted, choking the rest of the economy.

In the 1930s, the Roosevelt administration acted to prevent a repetition of the ruinous 1920s. Commercial banks were separated from investment banks, so that bankers could not prosper by underwriting bogus securities and foisting them on retail customers. Leverage was limited in order to rein in speculation with borrowed money. Investment banks, stock exchanges, and companies that publicly traded stocks were required to disclose more information to investors. Pyramid schemes and conflicts of interest were limited. The system worked very nicely until the 1970s -- when financial innovators devised end-runs around the regulated system, and regulators stopped keeping up with them. .......(more)

The complete piece is at: http://www.alternet.org/workplace/99241/only_a_roosevelt-scale_counterrevolution_can_prevent_great_depression_ii/

[glitch]

1. K & R to keep this one on top. nt

[tom_paine]

2. Unfortunately, the bushies have neutralized just about every avenue for nonviolent change within the

system. The System which itself has been parasitized and neutralized for 28 o more years. the System which only really exists in people's imaginations as it was post-WWII, and less and less as time goes on.

And I deperately ferverantly hope I am wrong about this, but I think in a mere one and a half months, we are going to be schooled in how utterly true that is. I don't think even the tiniest of changes to the status quo will be tolerated. Plus the Bushies need to retaiun full control of law enforcement to be safe from prosecution from their eight-year Nazi-level crime spree (minus the overt racism & violence/bloodshed and ONLY those two things...which are the only real difference between Bushie Actions and Nazi Actions).

And evn though the chances that Obama and the Democratic :eadership will actually DO anything along those lines is remote, one wonders even even that small possibility is too much to risk.

In any case, I hope I am wrong about the upcoming "election".

[glitch]

5. Wish I didn't agree :( nt

[Joe Chi Minh]

3. K&R. I expect he means a labour-intensive economy and a form of

Communism to protect the poorer folk (kind of quasi pre-industrial, actually post-industrial), until a mixed economy becomes possible again. Though this time with the common good, not endless growth as the supreme good. If we face an economic apocalypse, it's no good thinking small, tinkering.

Computers banned from the workplace, only for private use. The fullest employment possible. No more disembodied voices answering the blasted phone. Phone operators. No more bus drivers collecting the fares. Bus conductors, etc, etc.

[glitch]

4. This needs more attention. nt

[OneBlueSky]

6. I've been thinking along the same lines recently . . .

and posted a couple of comments yesterday that sort of reflect where Kuttner is heading . . . not as eloquent, as technical, or as detailed to be sure, but we're in the same ballpark . . .

like it or not, the only way out of this mess will be for the government . . .

to exercise a fair measure of control over the economy . . . the "free market" is no more, having proven that it works only for the very rich, and then only through trickery, chicanery, and outright theft . . . the notion of corporations as persons will have to be abolished, as will the sanctity of property rights over human rights . . . a whole new system based on a whole new set of principles will have to be implemented if this country is ever going to regain its preeminent economic position in the world . . .

conservation will have to be valued over new energy production; the rights of people to shelter will have to be valued over the rights of banks to foreclose and eject; the notion of conducting foreign policy as an equal among nations will have to take the place imposing our will through pre-emptive wars; teachers and social workers will have to be valued more than entertainers and athletes; and healthcare will have to become a human right rather than a deep-pocket ATM for insurance companies and HMOs . . . getting out of our current mess and building a steady state economy (rather than one based on unlimited growth) will take the kind of innovative thinking that this country hasn't seen in a long, long time -- if ever . . .

whether Obama and Biden are up to such a gargantuan task, I do not know . . . but I DO know that McCain sure as hell is not . . .

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=103&topic_id=385118&mesg_id=385166

and . . .

should Obama be elected, he's going to have to be something of a miracle worker . . .

to clean up the heaping mounds of horseshit left all over the nation and the economy by BushCo . . . he's going to have to sever long-standing lines of control between industry and the government and essentially start from scratch, constructing a new economic paradigm in which capitalism is not the be-all and end-all and property rights are no longer more sacred than human rights . . . he'll have to do the kind of job FDR did, except more extensively, more comprehensively, and better . . .

does he have it in him? . . . we can only hope and pray . . .

and this all presupposes that the Republicans will not succeed in stealing yet another election . . . I think Obama will win the popular vote in a landslide, but I'm not at all convinced that will put him in the White House . . . there extremely powerful forces working against such a scenario . . .

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4026222&mesg_id=4027296

[DCKit]

7. Teh Final Kick?

[PA Democrat]

8. Great article that puts together pieces of the puzzle in layman's terms.

Thanks for posting!