On Joseph Stiglitz’s “Wall Street’s Toxic Message” – Vanity Fair June 2009

JS once again offers his view on the social and political consequences of the latest economic crisis.

If it weren’t abundantly clear already, it by now should be. Economics and finance are the playground of a “learned” few where the fun and inevitable consequences (you drink, you get drunk, you have a hangover) are respectively enabled and borne by society.

Grand.

Once again though, it appears to me that JS omits to points out some critical issues.

For example JS writes:

” So, too, is [over] the debate over “market fundamentalism,” the notion that unfettered markets, all by themselves, can ensure economic prosperity and growth. Today only the deluded would argue that markets are self-correcting or that we can rely on the self-interested behavior of market participants to guarantee that everything works honestly and properly.”

The above implies that we’ve had unfettered markets at some point somewhere at least in the West. Of course, a cursory look at Western politics and economics will debunk the idea that we’ve ever had any such thing ever. For starters, right at the top of the tree, thus precluding any other form of free market activity, we have interest rates i.e. the cost of money. When interest rates are set by decree rather than by negotiation amongst interested parties, markets are not free. This one single piece of control whether exercised by government or by a presumably independent institution precludes in and of itself any pretense of free markets. That by itself is evidence that “unfettered” markets have never been tried anywhere in the world ever.

But, if the concept of interest rates seems too arcane, then here is something more mundane that is also not characteristic of a free market.  Subsidies to special interest groups like farmers are not compatible with free markets. Bailing out struggling companies on the rationale that they are too big to fail, is not compatible with free markets. No-bid government contracts are not compatible with free markets. Quantitative Easing or monetizing debt is most certainly not compatible with free markets.

The truth is that nowhere in modern history has anyone ever tried free markets to any significant degree anywhere on planet earth. We’ve tried Marxism, Communism, Monetarism, Keynesianism, Neo Conservatism but never, ever have we tried true free markets.

Other than that, it is a mildly interesting article.

http://www.vanityfair.com/politics/features/2009/07/third-world-debt200907

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