The Collapse of Bush's Market Fundamentalism

George W. Bush’s reputation is sinking deeper than the Dow Jones, which says a lot considering the fact that stock market wealth is vanishing faster today than John McCain’s chances of winning a third Bush term.

Eight years of Republican misrule are coming to an end, big time. The causes of the current economic collapse are myriad, but they were predictable consequences of unwise, unsustainable, and unjust GOP policies. To begin with, the myth of the all-wise marketplace is now deader than Karl Marx’s corpse. Secondly, laissez-faire economics, deregulation, and the simplistic notion than “government is part of the problem” stand revealed as an axis-of-idiotic ideological assumptions. And thirdly, the massive financial bailout plan aimed at preventing a complete economic meltdown proves that capitalism, left to its own devices, entails socialism for the rich.

Years ago, Warren Buffet warned that the United States was well on its way to becoming a nation of sharecroppers. As the billionaire noted, a nation cannot continue to consume more than it produces indefinitely. Dick Cheney, who insisted that Ronald Reagan had proved that “deficits don’t matter,” contradicted Buffet’s common sense. As far as the VP was concerned, America could borrow money from the Chinese to purchase Arab oil without diminishing America’s economic position.

The Bush administration also financed the war in Iraq and its massive tax cuts with borrowed money. Supply-side economics is supposed to pay for itself – just as the Iraq War was supposed to be self-financing – but all taxpayers have for their “investments” so far is a sea of red ink, and blood.

Deficit spending is not bad per se. Borrowing money to invest in public education, universal healthcare, and infrastructure improvements will pay dividends in terms of restoring America’s competitiveness. As historian Arnold Toynbee observed, civilizations that reform themselves are more likely to prosper. On the other hand, those that seek to reform the rest of the world invariably exhaust themselves in the process.

The architects of America’s “shock and awe” campaign have transformed the U.S. model into an object of fear and loathing. The Iraq War, Katrina, and now the implosion of America’s financial institutions have decimated our image in the eyes of world opinion. Eight years ago the Neoconservatives that hijacked the Bush administration proclaimed that the American system of democratic capitalism was the end point of history for all humankind. Today, neither our global adversaries nor our allies view the American model as capable of delivering social justice, economic stability, or the good life.

We have reached this stage of national senescence due to a mixture of imperial hubris, intellectual sloth, moral turpitude, economic shortsightedness, and political cowardice. President Bush has laid the blame for the current financial calamity on the financial sector –“Wall Street got drunk” – and on subprime mortgages that went bad. But these factors are only part of the story. The truth is that for the past thirty years United States has followed a pattern eerily similar to the Spanish Empire’s downfall under Phillip II. In a nutshell, the financialization of Spain’s economy, expensive imperial/military expeditions that failed to pay for themselves, and the erosion of the manufacturing sector bankrupted the empire.

America’s free market fundamentalists insisted that the invisible hand of the market place would cure all national and economic ills. Deregulation was their mantra. In particular, the market fundamentalists argued that government shouldn’t be in the business of picking winners and losers. The problem with this, of course, is now obvious. As economist James K. Galbraith observes, markets are incapable of long-term planning. Deregulation unleashed predatory practices that privatized profits and socialized risk. And a dysfunctional relationship between politicians clamoring for campaign donations and corporate executives pushing for even less regulation created a vicious cycle that reinforced the self-interest of the few at the expense of the public good.

Renewing America – and the American idea – will necessitate rejecting the reigning Republican ideology in favor of a new social compact that rejuvenates the liberal ideals that proved so effective in rescuing America from the excesses of the Gilded Age that brought on the Great Depression. Tailoring liberal values to meet the challenges of the 21st century will be a tall order, but the principles are easy enough to articulate. First, as F.D.R. noted more than sixty years ago, “we are all in this together.” This is self-evident, and the current crisis illustrates this only too well; if Wall Street doesn’t get its bailout, then Main Street will sink too. We would do far better, of course, recognizing this up front by investing taxpayer dollars in universal healthcare, public works, and far-sighted economic initiatives (as opposed to funding bailouts for wealthy speculators).

To begin with, universal coverage is inherently more efficient because it eliminates vast bureaucratic layers that do not provide patient care. To put it bluntly, private health insurers spend at least a third of their revenue on overhead designed specifically to deny health coverage. Additionally, universal coverage will allow U.S. businesses to shed the substantial cost of insuring employees, which will make them far more competitive in a global environment.

Treating healthcare as a commodity is inimical to human dignity. Likewise, CEOs making 350 times what their employees earn is inimical to democracy, sound business practices, and ultimately the dignity of work. Put simply, lionizing CEOs who garner huge bonuses by sending jobs overseas and slashing workers is perverse, especially when ponders how often such executives end up running their companies into the ground.

Vast income inequality invariably leads to what Plato once called the worst catastrophe of all, a society divided against itself. Bolstering the minimum wage and setting limits on executive compensation can help restore a dignity of work climate (as opposed to the vanity of wealth climate we have now). Further, contrary to free market fundamentalism, government should and must partner with the private sector to map out strategic economic goals for the nation. The Internet, for instance, began as a government initiative. Only government has the long-term vision and resources to shape the marketplace in ways conducive to achieving national goals. Market fundamentalists have contented that government should not be in the business of picking winners and loser, but their simpleminded ideology has led to the perverse outcome where the government is bailing out losers after the fact, rather than grooming industries and technologies that fit with our national objectives.

Clearly, the United States needs to develop the alternative fuels and energy savings technologies of the future, both to lessen our dependence on foreign sources of oil and also to reduce greenhouse gases that contribute to climate change. If the U.S. government doesn’t take the lead in this endeavor, then American consumers will continue to transfer vast sums of our dwindling national wealth to adversarial regimes. Meanwhile, the challenges associated with global warming will mount.

The Bush administration has decimated America’s fortunes because it clung to a bankrupt ideology. When disaster struck, Bush didn’t ask Americans to sacrifice. Instead, he told them to shop. Market fundamentalism is not just economically unsound; it is morally bankrupt. A liberal political philosophy helped America rise following the Great Depression. It can do so again because it recognizes markets are imperfect institutions meant to serve individual and communities, as opposed to gods who demand our blind faith.

Sphere: Related Content