I’m guilty. Way back in the day when I was young and thought I knew it all, I was the biggest proponent of ‘free market capitalism’ and the ‘deregulation’ orthodoxy. To boot, in my mind ‘Big Government’ was an evil purveyor of the ‘welfare state’ and it was anathema to innovation, job growth, free enterprise, property rights and human industriousness. I was sold and though many tried, you could not convince me otherwise. That is until I joined the financial industry, learned the business from the inside, out and later gained additional insight from graduate business and finance courses and professors such as Joseph Stiglitz, Jagdish Bhagwati and Charles Calomiris at Columbia. And then more and more, I began to realize the foxes were guarding the hen house when I noted the huge competitive advantage Big Business has over ordinary citizens when they leverage billions of dollars and armies of lobbyist to fight against the will of the American people and the public interest. For instance, in the way food companies have peddled money & influence to minimize FDA protections resulting in legalizing unhealthy, carcinogenic ingredients in the nation’s food supply; or the way Wall Street’s Oligarchs – with the help of their crony, Treasury Secretary Tim Geithner – snookered taxpayers out of trillions in bail-out funds; or how the financial industry lobby and credit card companies are undermining the will of American voters by watering down the proposed Consumer Financial Protection Agency, allowing banks to continue charging loan shark rates on credit cards and bank ATM fees. With all due respect, the so-called “best and brightest minds” from the Lords of Finance to Auto Industry execs, to the Titans of Wall Street told us they knew best how to run business & industry with as little regulations as possible. Thing is…
…they ran their companies – along with the global economy – into the ground, and then stuck taxpayers with the bill for their greedy, risk-laden foibles. What we’ve learned from this crisis (if you’ve been paying attention to Enron, Tyco, AIG, commodity price-fixing, Wall Street risk, and purveyors of faulty mortgages, etc) is that the “best & brightest” in American corporations really aren’t. And I have more news for you: The only sector in the economy that has worked effectively throughout this financial crisis is what many pejoratively call “Big Government.” That’s right, Government does work – they bailed-out your banks, saved millions of jobs from falling over the cliff, kept you in your foreclosed homes, provides unemployment checks and food stamps to help put food on your table and stay afloat weekly, rescued the auto industry ensuring its future viability and gave you a great deal on that new car in the driveway – while it protects and defends the right, in far-away places, of the lunatic fringe to gratuitously condemn President Obama as a “fascist” or rally for “less government” and “less regulation” – the very things that got us into this mess. Yes, I trust the government when our recent experience patently reveals that “BIG BUSINESS” when left unchecked by “BIG GOVERNMENT” screw consumers, taxpayers and becomes consumed by greed and harmful, irrational risk-taking that undermines the public good. In the aftermath, it is ‘Big Government’ — led by the president – that is expected to ride in to the rescue, clean-up the mess left by the previous administration, stabilize the economy and reset the conditions for job growth and economic prosperity. Left to ‘Big Business’ there would still be pigs at the trough. It is time we hold ‘Big Business’ accountable to be be good corporate citizens and to demand their social responsibility to uphold the public good above greed and profits.
Two final points. ‘Big Government’ is no longer a pejorative term; it does have an important role to play in society. And second, Ayn Rand is over-rated. That’s why I think you’ll appreciate the piece below from today’s Washington Post.
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By Steven Pearlstein, Washington Post
Dec 30, 2009 — If you step back and look at the big economic policy issues– health care, financial regulation, immigration, education reform, the budget deficit — they appear to boil down to one fundamental question: What is the best trade-off between fairness, stability and social cohesion on the one hand and disruptive and growth-inducing free market capitalism and innovation on the other?
At its most simplistic level, this debate plays itself out as the choice between big government and small government, between regulation and deregulation, between European-style socialism and Anglo-American free-market capitalism … Over the years, the center of political gravity has swung toward one camp or the other in response to economic crises brought on by overdoing things in one direction. The pendulum has now begun to swing back from Reagan Republicanism to some still-evolving form of Obama Democracy…
What good is competition if it drives corporate executives to knowingly engage in increasingly risky behavior simply to boost short-term profits and stock prices even at the expense of long-term value creation? And what good is innovation that is used to snooker consumers, mislead investors or subvert sensible regulation?
…Americans understand that free markets are the best vehicle for generating innovative products and ever more efficient ways of producing them. But recent experience also reminds that innovation and the competitive dynamic are not always what they are cracked up to be. When investors engage in herd behavior and deploy scarce capital merely to bid up the price of real estate or financial assets, that does nothing to improve economic output or efficiency … What good is competition if it drives corporate executives to knowingly engage in increasingly risky behavior simply to boost short-term profits and stock prices even at the expense of long-term value creation? And what good is innovation that is used to snooker consumers, mislead investors and subvert sensible regulation?
The question is not simply whether innovation will be “stifled,” as the business community likes to suggest, but whether those innovations serve a larger social purpose. Read more here…
