NoisetteandtheDude’s Blog

October 29, 2008

Making the “Dismal Science” less dismal

Filed under: Election 2008 — noisetteandthedude @ 12:13 pm

First, thanks to Barry and Adam L, for continuing the discussion. Both of you obviously put some thought into your comments, and I appreciate hearing from you.

When I posted “Economics: the Dismal Science,” my focus had been sharpened by reading Naomi Kline’s “The Shock Doctrine: Disaster Economics.”  I’ve still not finished the book, because – like electro-shock – it’s best taken in small doses; too painful if you don’t.  If you don’t believe me, buy Ms Kline’s book, read the first couple chapters (which document the uses of electro-shock as a tool for re-education), then try to get a good night’s sleep.

That said, time is moving right along, and the economy remains THE issue in the 2008 presidential race, even more so as we approach election day (six days from now). So I’m trying to shift my focus to what the next four or eight years will look like, under president Barack Obama.

He’ll be inheriting a mess, and while he’s in no way responsible for it, we will all expect him to solve it for us.  It’s going to be a huge job, and one has to wonder what he’ll do (or even, what he CAN do) on our behalf.

In some ways, the economic downturn Obama faces as he takes office is much like that confronting FDR in the 1930’s.  Most everyone (except John McCain) agrees there is something wrong with the “fundamentals” of how our economy has been operating – and there are fingers pointing in all directions at the culprits.  Variously, the culprits are defined as “trickle down” economics, unchecked corporate greed, rampant consumerism, too little regulation, too much regulation.  Take your pick: you’ll find supporters – and detractors, all equally ardent.

Here’s how I see it: so many fingers point so many different ways because too many people base their analysis on unexamined ideological biases.  That was true of Milton Friedman and his “Chicago School” nation-leading disciples (including Thatcher, Pinochet,  Reagan, both Bushes, McCain, and Clinton).  And it’s equally true of critics of unadulterated laissez-faire economics like John Maynard Keynes and Naomi Kline.

It seems incredibly apparent to me that no one has all the answers.  To be sure, the strengths of market-driven capitalism are well-documented – and few question the central tenet that unregulated, laissez-faire economics can produce an efficient distribution of resources that can benefit all who participate.  It’s also certain that having people in the equation complicates things, because we don’t always behave rationally, even when our own welfare is at stake.

My hope for the next four or eight years is that president Obama will move decisively in solving the dilemma – but NOT by adopting the extremes of Keynesianism or Friedmanism.  As is most always true, a middle road is the most direct road, and a form of Friedman’s Chicago School of economics, carefully leavened by consistent regulation of banks, investment firms and our monetary system, will be sufficient.  We already have a form of socialism (i.e., public ownership) in place now – with congress’s enactment of the rescue package.  And that dismays many traditionalists.

But the rescue package also provides a venue for developing a more rational approach for government management of our economy.  Notice that I refer to “management,” not “regulation.” Because that’s what we’re talking about: government management of our economy, for the public good.

Because we’ve seen that non-management doesn’t work very well; an unmanaged economy does not “raise all boats” and it does not benefit anyone, except those who best navigate the tax codes for their own benefit: i.e., the very rich and the very powerful, who can afford high-priced experts to light their path.

I believe that Barack Obama will draw from the best of both worlds: the “Chicago School” and the Keynesians – and follow the middle path.  It won’t be easy and it won’t be without pain, and it will take awhile.  The great depression didn’t end because of a speech about not fearing fear.  It took action – deliberate government intervention – to turn things around.

But it can be done.  And I’m encouraged to see that, as a “Chicago School Democrat,” Barack Obama understands this:

Let’s hope so.


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