There are two somewhat related columns this morning by two important voices. Paul Krugman offers Egos and Immorality in which he deconstructs the incredible sensitivity of those in the financial sector to any kind of criticism, and their false assertion that they have created economic good times for the nation. Eugene Robinson hones in with Why Bain Questions Matter, in which his only criticism of the President is that he wishses the questions about Bain had been raised during the debate on financial reform, since the President is now "posing the kind of fundamental questions that needed to be asked" - which may be why Romney does not want to address them.
Both columns are absolute must reads.
Below the fold I will offer just a few snips from each as well as my probably far less informed personal observations - after all, I have neither a Nobel in Economics nor a Pulitzer in commentary.
Many Americans seem ignorant or at best forgetful of American economic history. That is where the Krugman column is particularly useful. He takes time
to debunk a fairy tale that we’ve been hearing a lot from Wall Street and its reliable defenders — a tale in which the incredible damage runaway finance inflicted on the U.S. economy gets flushed down the memory hole, and financiers instead become the heroes who saved America.
About the idea that it was the financiers who forced businesses to become lean and therefore created more productivity, Krugman writes
overall business productivity in America grew faster in the postwar generation, an era in which banks were tightly regulated and private equity barely existed, than it has since our political system decided that greed was good.
Given our seemingly endless trade deficits with the rest of the world, he reminds us
From the 1950s through the 1970s, we generally had more or less balanced trade, exporting about as much as we imported. The big trade deficits only started in the Reagan years, that is, during the era of runaway finance.
As for the idea that allowing the top to get rich benefits everyone, the idea of "trickle down?"
It never took place. There have been significant productivity gains these past three decades, although not on the scale that Wall Street’s self-serving legend would have you believe. However, only a small part of those gains got passed on to American workers.
Robinson reminds use why we should be so grateful for the Republican primary season, because it was Romney's opponents who offered the harshest criticism of the model of Bain Capital that made Romney rich and therefore important in his own eyes. Allow me to quote his 2nd and 3rd paragraphs:
Listen to what Newt Gingrich said in January: “The Bain model is to go in at a very low price, borrow an immense amount of money, pay Bain an immense amount of money and leave. I’ll let you decide if that’s really good capitalism. I think that’s exploitation.”
Or what Rick Perry said that same month: “There is something inherently wrong when getting rich off failure and sticking it to someone else is how you do your business. I happen to think that that is indefensible.”
Of course, IOKIYAR, because if Democrats raise such points they are, as Robinson notes, quickly accused of being Bolsheviks or worse - anyone note Romney of accusing the President of attacking capitalism?
There are issues of the legitimate scope of regulation, but Robinson asks rather bluntly whethere certain aspects of what companies like Bain do should be treated as equally bad as insider trading. He asks what higher economic purpose is served when a failing company seems beyond rescue and a firm like Bain steps in and
buys the company with borrowed money, burdens it with more debt, and then spends the next few years firing workers, selling assets, eliminating pension plans — all while collecting handsome “management fees.” Then the company fails anyway, as it was fated to do.
Robinson could add to that scenario that some companies that were targeted by Bain were NOT doomed to failure, were in fact fairly healthy, but either cash rich or had a lot of money in their defined benefit pension funds. Bain loaded them up with debt, paid the Bain figures generously with the funds either from the debt or from taking out "excess" pension funds (which became allowable under Reagan), and then when the company failed walking away with huge profits while sticking the government (and thus the taxpayers) with the financial responsibility for the now insolvent pension fund.
Yet Romney does not think examining this is fair. His buddies on Wall Street, including some who are Democrats, agree with Romney, and they also don't want to be criticized. And yet even their supposed shining lights, such as Jamie Dimon as J. P. Morgan Chase, are now demonstrating why criticism is not only warranted but necessary, as it is quite conceivable that the losses to that firm will be several multiples of the $2 billion that Dimon and the firm have so far acknowledged.
There is a real question about elevating "productivity" as an economic goal in isolation. The more workers can produce the fewer workers are necessary. On the level of an individual corporation in the short term increasing productivity can increase profits by lowering employment costs. On the macroeconomic level of a national economy one must remember that the "cost" of employment to one company is actually a source of revenue to those companies which produce the goods and services purchased by the income of the workers. Unless gains in productivity are shared with the workers, it is against their economic interest in the long term to become more productive.
This should raise another issue. How much profit is enough? How much income for an individual is enough? If we allow no limits, and we do not put back into the economy for the benefit of the nation as a whole, several things will happen
1. long-term the profits and income will not be sustainable. There was a reason Henry Ford paid his workers well enough to be able to purchase the cars they built. Ford understood that you had to have customers able to purchase your product in order to have profits over the long term
2. Society will cease to function well, and that includes those services that realistically can only be provided by the public sector that enable the development of wealth and income. Yes, those who are very wealthy may be able to coopt parts of the public sector for their personal gain. But there can be a real cost to allowing that to happen. Perhaps some of our current generation of robber barons aka vulture capitalists should go reread the cost to Britain of the British East Indies Company, to cite but one example. Anyone remember the results of using the British military in Boston to protect the property interest (aka tea profits) of said company?
Let me offer the conclusions of both columns. First from Robinson:
This is what Rick Santorum said in March: “I heard Governor Romney here called me an economic lightweight because I wasn’t a Wall Street financier like he was. Do you really believe this country wants to elect a Wall Street financier as the president of the United States? Do you think that’s the kind of experience we need? Someone who’s going to take and look after, as he did, his friends on Wall Street and bail them out at the expense of Main Street America?”
Good question. I’d like to hear Romney’s answer.
Of course we could also remind America that Romney offered the same claims he now makes about his business experience when he ran for Governor of MA. His track record there demonstrates the vapidity of his assertions, given that his state during his tenure was 47th in job creation. Perhaps that is why he does not want to talk about the only experience he has in running a government - it was a failure.
And then there are the blunt words of Krugman, who reminds us that the self-absorbed nature of Wall Street's behavior may have been funny, but is now immoral:
Think about where we are right now, in the fifth year of a slump brought on by irresponsible bankers. The bankers themselves have been bailed out, but the rest of the nation continues to suffer terribly, with long-term unemployment still at levels not seen since the Great Depression, with a whole cohort of young Americans graduating into an abysmal job market.
And in the midst of this national nightmare, all too many members of the economic elite seem mainly concerned with the way the president apparently hurt their feelings. That isn’t funny. It’s shameful.
Shameful.
Deeply Immoral.
That sounds about right.
It is why that for all the criticisms some of us may have about policies of this administration, as I have had on its educational policy and its abuse of the Espionage Act and other areas, the choice this fall good not be more stark. I think of the words spoken by Lyndon Johnson in the famous Daisy Ad in 1984, that we must either love each other, or we must die.
Johnson's campaign ran the ad once. It made clear to the American people the possible catastrophic effect of electing Goldwater.
One might well consider that the economic stakes are just as high now. Given some of Romney's rhetoric on foreign and military matters, he may be more dangerous to this country's future than Goldwater would have been.
So here is how I propose to end this, with Daisy, asking you to think how we can in a short but powerful ad ensure that the American people understand the stakes this time.