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

Top Ten Reasons Bush is NOT to Blame for America’s Economic Meltdown

10). “It was that major league a-hole, Dick Cheney, who absolutely, positively assured me “Deficits don’t matter.”” – G.W.B

9). “Wall Street got drunk, drove into a ditch, and totaled America’s economic engine. And for that, you blame the bartender? I don’t think so.” – Barbara Bush

8). “I think it’s fair to say that George Jr. is not responsible for anything.” -- George H.W. Bush on truth serum

7). “Bush is already responsible for the debacle in Iraq, Katrina, global warming, Abu Ghraib, and Guantanamo. Blaming him for the worst financial crisis since the Great Depression as well would seem to me to be too much for any one individual to bear.” – Dr. Phil

6). “We are in a crisis mode here, but it would be a mistake . . . and we can’t blink on this . . . because we couldn’t see Russia from our backyard if we did . . . but it would a mistake to blame the current economic meltdown on either global warming or the Bush Doctrine.” -- Governor Sarah Palin

5). “Taxpayers will come out ahead on this fifty or sixty years from now on account of the fact that my administration led the way in burying the Death Tax.” -- Dubya

4). “Capitalism is nothing more than socialism for the rich. The current crisis is simply the inevitability of historical forces engaged in a dialectical process that seeks to reconcile opposing ideologies on a higher plane. President Bush is merely a cog in a predestined historical process through which tragedy and farce are synthesized” -- Groucho Marx

3). Bush has super-duper secret plan to wager $700 billion of bailout money in on-line poker competition against China, North Korea, and Iran. The president is absolutely 100% certain that he’ll win enough money to save the economy.

2). “Where there is crisis, there is opportunity.” – Chinese fortune cookie Bush got at the Beijing Olympics.

1). 53 million Americans voted for a bozo like Bush, a candidate who peddled his economic snake oil with slogans like, “It’s your money, you paid for it.” If you voted for our nincompoop-in chief, then I think it’s fair to say this joke is at your expense.

Sphere: Related Content

It's Your Money, You Paid for It: How the Bush Administration Bankrupted America

Once upon a time -- eight years ago to be precise -- the Bush administration rudely proclaimed that the American economic and political model was the universal blueprint for all humankind. Today, the Bush administration is standing in the rubble of its own hubris.

The meltdown of America’s financial system is a seminal event. The era of America’s financial and geopolitical hegemony is coming to an end. The debacle in Iraq, the bungled federal response to Katrina, and now the virtual collapse of America’s economic order has exposed the moral emptiness that was at the core of the Republican Party’s governing philosophy.

The Bush administration has accomplished the impossible; it has turned a Superpower into Banana Republic. It has managed to reverse and undermine the nation’s economic fortunes by burying America under a mountain of debt. Trillions of dollars have been committed to Iraq -- and the now the looming Wall Street bailout – but the dividends from these “investments” are dubious indeed.

Imagine, for instance, if the United States has spent the trillions it is now spending to buy off Sunni insurgents, and buy out predatory financiers, had been invested in providing universal healthcare, shoring up our infrastructure, and developing alternative sources of energy. We might be well on the road to greater economic competitiveness and energy independence. Instead, we are stuck in a ditch of the Bush administration’s making.

We are mortgaging America’s future to pay for policies that at best simply mitigate the failures and misjudgments of the Bush administration. The Surge has succeeded in lowering violence in Iraq, but growing anarchy in Pakistan, where al-Qaeda has regrouped, is canceling out the increasing stability in Iraq. Put simply, Bush’s simplistic assumption that defeating al-Qaeda in Iraq would deflate the jihadists is nothing more than wishful thinking. Likewise, Bush’s certainty that changing the regime in Iraq would necessarily serve as a catalyst for transforming the Middle East for the better appears more quixotic than ever. In other words, Don Quixote seems like a realist in comparison to Bush.

Invading Iraq has not enhanced America’s strategic position anymore than Bush’s tax cuts enhanced America’s financial health. Indeed, in some sense U.S. troops are hostages in Iraq, and U.S. taxpayers are financing a $10 billion ransom every month to keep the country from exploding. After all, just think what will happen if we stop doling out $300 a month to each member of the Sons of Iraq. The former Sunni insurgents will once again be shooting at U.S troops, but this time with American supplied weaponry.

Bush’s free market fundamentalism has led to a dead end too. Supply side economics, deregulation, and faith that markets are all wise and self-correcting are ideas that now belong in the ash heap of history.

The United States is in the process of finding out what it means to be hostage to foreign lenders. Dick Cheney, who once said we’d be greeted as liberators in Iraq, also insisted that deficits don’t matter. They matter now, however, big time. After all, the federal government either has to borrow the money to finance the roughly trillion-dollar Wall Street bailout or it will have to raise taxes. Needless to say, given America’s already over extended state of indebtedness foreign creditors are certain to insist on higher rates of interest, which will certainly crimp economic growth. The declining strength of the dollar too, will increase the cost commodities like gas and food, thus we are likely facing a period of stagflation – slower economic growth and rising inflation.

Until now, the U.S. has had the luxury of denominating debt in dollars, which is another way of saying that so long as the dollar was the world’s reserve currency the costs of indebtedness were in some sense borne by creditors. With the dollar falling to a nine year low against the euro, however, the U.S. can no longer devalue its debt by simply printing more money.

All this means that average Americans are entering a period of wealth destruction where the value of their assets are eroded by inflation, the declining dollar, negative income growth, higher interest rates, higher state and municipal taxes, and cuts in government services. I can think of no better slogan to sum up this mess than the one Bush used to justify borrowing trillions to finance his tax cut scheme: “It’s your money, you paid for it.”

Sphere: Related Content