Ecomonics, Finance, & Business Feed

Conservatives misread Friedman

Philosopher Gary Gutting argues that current conservatives are mis-reading conservative economist Milton Friedman.  

It follows that, on Friedman’s own account, capitalism is not an economic system that operates independently of the political system in which it is embedded. It is a creature of that system, which has goals (of morality and social responsibility, for example) that go beyond the profitable exchange of goods. Therefore, the owners of businesses must accept governmental restrictions on their profit-making for the sake of overriding social values.

It might seem that this activist role for government flies in the face of Friedman’s libertarian insistence on the magic of Adam Smith’s “invisible hand” to produce “public goods from private vices,” without political control. In fact, however, Friedman makes it clear that the invisible hand is attached to the body politic. Here is how he introduces Smith’s famous phrase: “It is the responsibility of the rest of us to establish a framework of law such that an individual in pursuing his own interest is, to quote Adam Smith again, ‘led by an invisible hand to promote an end which was no part of his intention.’”The “invisible hand,” therefore, operates for the public good only because it is directed by the social values that our political system enacts by its laws. These values shape the function of the capitalist economic system.

Whereas Friedman believed that capitalism served other social ends, current conservatives seem to promote the means as the ends:

Our current political impasse over economic issues has arisen because so many conservatives have moved well beyond Friedman’s position. They object to almost all regulation of business, reject the need for any governmental solutions to social problems, and often seem to insist on judging corporate success in terms of short-term profits.

I have long objected that many conservatives of the last decade or so have misunderstood Ronald Reagan and his legacy.  Reagan promoted tax cuts as necessary means to larger ends.  They would spur economic development, lift America out of its late-70's malaise, inspire entrepeneurial efforts which could lift all boats (and help in the defeat of the Soviet Union).  They were part of his optimism about the future of American life.  I am convinced that he did not believe in continual tax cuts at all costs.  I don't believe a true Reaganite could support the Bush tax cuts of 2001, as the properly prudent thing to do in 2001, that which would have moved us closer to achieving the larger goals of American life, would have been to keep running surpluses so that we could have paid off the national debt (which projections said could have been accomplished in a decade).

I believe this analysis of Friedman argues similar points.


Joint filing!

Strange to be excited about a tax ruling, but I am.  The Treasury Department has announced that married same-sex couples can now file jointly, even if they reside in a state that does not recognize their marriage.  Read about it here.  

While I'm excited, I'm also nervous.  I so used to doing my taxes the same way every year, and now they will change.  Plus, I get mine done like two months before Michael usually does.  So, this will be a new source of anxiety.

And, we'll still have to file separately on the state level, so I guess we'll have to prepare individual federal returns that we'll have to use for the state filing?  What a pain in the ass.


More on Good Work

Further Wendell Berry quotes on good work:

by our work we reveal what we think of the works of God.  How we take our lives from this world, how we work, what work we do, how well we use the materials we use, and what we do with them after we have used them--all these are questions of the highest and gravest religious significance.  In answering them, we practice, or do not practice, our religion.

The significance--and ultimately the quality--of the work we do is determined by our understanding of the story in which we are taking part.


Good Work

This from Wendell Berry:

Good human work honors God's work.  Good work uses no thing without respect, both for what it is in itself and for its origin.  It uses neither tool nor material that it does not respect and that it does not love.  It honors nature as a great mystery and power, as an indispensable teacher, and as the inescapable judge of all work of human hands.  It does not dissociate life and work, or pleasure and work, or love and work, or usefulness and beauty.  To work without pleasure or affection, to make a product that is not both useful and beautiful, is to dishonor God, nature, the thing that is made, and whomever it is made for.  This is blasphemy: to make shoddy work of the work of God.  But such blasphemy is not possible when the entire Creation is understood as holy and when the works of God are understood as embodying and thus revealing His spirit.


Divestment

Last week during General Synod, the United Church of Christ voted to begin a process of divesting from fossil fuels.  The Washington Post covers the story here.  

The original resolution called for immediate divestment, and I did not support it.  My reservations were

  • Many members of the United Church of Christ, including friends, family, and church members of mine, work for fossil fuel companies or receive royalties for oil and gas.  
  • A place like Oklahoma would be even poorer and more backward without the profits from fossil fuel companies, jeopardizing other of our social justice aims.
  • The best fossil fuel companies view themselves as energy companies and are the institutions with the resources and position to invest in sustainable and alternative energy.
  • I also thought we need to start a conversation, not make a final judgement.
The compromise resoultion, which passed, I could support.  It was worked out with United Church Funds and the Pension Board and called for aggressive action by UCC investors, including requiring us to bring resolutions to shareholder meetings.  It does begin a conversation, takes gradual steps, and allows for investments to remain in energy companies that are "best in class."  It was also a great example of democratic compromise (Congress, take note).

Low state income tax rates do not correlate to economic development

Despite politicians who argue that lower state income tax rates (usually in states with already low income tax rates) will spur economic development, the facts demonstrate that economic development generally correlates (though causation is not demonstrated) with higher income tax rates.  Read Richard Florida's article about this, with maps, here.

Thatcher myths

WaPo lists five myths about Margaret Thatcher.  It is a older piece, from when The Iron Lady was about to premier.  I particularly like what it says about Thatcher's views of economic regulation: 

But the deregulation she pursued had nothing to do with the lack of oversight that contributed to the meltdown on Wall Street. Before Thatcher, commissions of civil servants decided, for example, what sorts of cars Britons should drive. That was the kind of regulation she ended. She was a passionate proponent of regulation that makes free markets function properly — otherwise known as the rule of law.

Thatcher supported stringent bank regulation. Consider the 1986 Financial Services Act which, contrary to its reputation, closed loopholes in investor protection laws, boosted the enforcement power of regulators, and applied the same investor protection standards to a broad range of securities and investment activities.

Thatcher stood for thrift, sound money and balanced budgets, powered by private enterprise. The uncontrolled explosion of debt in Western economies that followed her time in power would have appalled her.

 


Resilience

Arianna Huffington, writing from Davos, discusses "resilience," the new value necessary for surviving and thriving in the 21st century.  

I first heard resilience discussed in an NPR story as a value that some cities were embracing in their architecture and design.  No longer is sustainability enough, we have now moved into the era when we must cope with globe climate change and defend ourselves against it.

Huffington takes the value to the broader level of global systems.

I'm curious how it will apply in the smaller systems in which I work, church, non-profits, household, etc.


"Eunuchs of the Universe"

The cover article of the first digital-only Newsweek is novelist Tom Wolfe writing about Wall Street.  His lively satire The Bonfire of the Vanities was such a huge hit in the 1980's and here he writes about the decline of those "Masters of the Universe" as trading has radically transformed.  After this essay, I understand things about Wall Street and the financial crash that I had not before understood.  And it is written with Wolfe verve and wit, not like some boring financial piece.  I highly recommend.