It's a sham

Back when I was an undergraduate at Yale I used to tell my friends that it was all a sham. Then I was usually talking about grades or the system. Today it’s just the system.

Via Dean Baker I read that America is abandoning the twenty-five year dream of the free market.

Through this uniquely American lens, saving businesses from collapse was the sort of thing that happened on other shores, where sentimental commitments to social welfare trumped sharp-edged competition. Weak-kneed European and Asian leaders were too frightened to endure the animal instincts of a real market, the story went. So they intervened time and again, using government largess to lift inefficient firms to safety, sparing jobs and limiting pain but keeping their economies from reaching full potential.

There have been recent interventions in America, of course — the taxpayer-backed bailout of Chrysler in 1979, and the savings and loan rescue of 1989. But the first happened under Jimmy Carter, a year before Americans embraced Ronald Reagan and his passion for unfettered markets. And the second was under George H. W. Bush, who did not share that passion.

So it made for a strange spectacle last weekend as the current Bush administration, which does cast itself in the Reagan mold, hastily prepared a bailout package to offer the government-sponsored mortgage companies, Fannie Mae and Freddie Mac. The reasoning behind this rescue effort — like the reasoning behind the government-induced takeover of Bear Stearns by J. P. Morgan Chase just a month before — sounded no different from that offered in defense of many a bailout in Japan and Europe:

The mortgage giants were too big to be allowed to fail.

I could go through all the nostrums - corporate welfare, class warfare, middle class aspirations - and I could go through all of the evidence - that markets fail as often as they succeed, that no one has ever lived in a completely free market society, that 20% of the population thinks it’s in the top 1% of the income distribution - but what’s the point.

The evidence I see is different from the evidence that others perceive. I read part of “True Enough” by Farhad Manjoo last week and it reaffirmed my bias that bias will never be overcome.

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Todd Suomela
Associate Director for Digital Pedagogy & Scholarship Department

My interests include digital scholarship, citizen science, leadership, and communications.

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