About Rationally Speaking
Rationally Speaking is a blog maintained by Prof. Massimo Pigliucci, a philosopher at the City University of New York. The blog reflects the Enlightenment figure Marquis de Condorcet's idea of what a public intellectual (yes, we know, that's such a bad word) ought to be: someone who devotes himself to "the tracking down of prejudices in the hiding places where priests, the schools, the government, and all long-established institutions had gathered and protected them." You're welcome. Please notice that the contents of this blog can be reprinted under the standard Creative Commons license.
Monday, March 17, 2008
Once again, unbridled capitalism doesn’t work (pace the libertarians)
It has happened this past weekend, when the Federal Reserve bailed out (they are not using the term, but that’s what it is) the failing investment bank Bear Stearns, ironically one of the most aggressive on Wall Street. An article in the New York Times by Paul Krugman gives an idea of the cost to the public of this sort of move: $450 billion for the savings and loan bailout of the ‘80s, $3 trillion (yup, with a “t”) for Japan’s post-bubble implosion, and who knows how much this time around (while our economy is not helped, of course, by the tens of billions regularly spent in Iraq).
According to Krugman, however, the prophets of the free market economy are still at it, completely impervious to the facts (most prophets are). Take Alan Greenspan, former chairman of the Federal Reserve and devout follower of Ayn I’m-absolutely-right Rand, the founder of so-called “objectivism.” Despite the financial disaster unfolding in real time, due in large part to predatory (and unregulated) lending practices by unscrupulous operators on Wall Street, Greenspan insists: “market flexibility and open competition [are the] most reliable safeguards against cumulative economic failure.” Really? If those are the most reliable safeguards, I don’t want to find out what the worst ones are!
The bottom line is that free markets work much like natural selection (as was clear to Darwin, and even to Adam Smith, the originator of the idea of the “invisible hand”): they maximize only one quantity (profit in the case of economies, fitness in the case of evolution), and they do so by mercilessly eliminating the competition (“nature red in tooth and claw”). The problem is that we do not want a society where profit is the only criterion: we want stability, quality of life, protection from faulty products, job security, housing. We also don’t want the ruin of countless lives just so that a few robber barons (such as the current CEO of Bear Sterns, who was playing bridge while his company went down the drain) can thrive on our backs.
It is disingenuous, while not downright immoral, to yell to the government to stay out of one’s business when things are good, only to come begging on one’s knees for government help when things turn sour. Wall Street cannot and should not have it both ways. Unbridled capitalism doesn’t work, and we know it. It’s time to stop paying attention to people who claim otherwise because of ideological commitment or because they profit shamelessly on others’ misfortune.