Book Discussion: ECONNED: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism

[Welcome, Ms. Smith -- lambert]

As I mentioned to lambert and Ms. Smith, when I first proposed this discussion I knew two things: 1) that I wanted to encourage as many people as possible to read the book and 2) that I'd want to discuss the book with others. I had no idea the author herself might stop by. No pressure.

The book is definitely worth reading and should be as widely read as possible because, as Ms. Smith notes in the book, "[t]he economy is far too important to all of us to leave to experts" especially when those experts' opinions are built on faulty assumptions and twisted for ideological reasons. And I do have lots of things I'm interested in discussing and I'm sure I'm not alone.

I don't want to hijack the discussion or direct where it goes, but I will throw a few thoughts out there to try to get us started.

First, I'll start with where the book starts and where it ends because I think there are two incredibly key points that are the crux of everything else in the book. One of these CMike already noted and that's, from page 6,

We need to implement economic policies that treat finance as the handmaiden of commerce, not its master.

And from page 308,

Only when we, the public, are able to call the underlying realities by their proper names - extortion, capture, looting, propaganda - can we begin to root them out.

We're not going to get to the first unless and until we can see reality and speak about it truthfully. It's quite clear from the capture of all three branches of our government as well as our media, that the public is on its own to a large extent when it comes to efforts aimed at seeing our reality clearly. We're not going to get help from our elites.

Which brings me to another issue raised by the book, the great extent many of our elites behave as sociopaths (if not outright psychopaths). From busting Mexican banks like pinatas to screwing over every investor they can get away with, there never seems to be any thought or empathy for the effect their economic activity has on others, not even ostensible clients.

The underlying sickness probably has many causes and the book highlights one of the main ones - the underlying economic philosophy of "free markets" that focuses on individuals, when we are social creatures even in the markets we create, and the increasing use of economic models, which optimize output, as the framework for political and social policy. When, of course, people are more than their outputs and a healthy society recognizes that. When you only measure people by their economic output, you skew their own views of themselves, which is how the Masters of the Universe come to believe they are worth every penny of their eight or nine figure salaries and fail to recognize they are essentially nothing more than welfare recipients. And, of course, if you're really that special, there's no need to concern yourself with the fate of the "losers".

One of the added problems in terms of propaganda that the book identifies is how anyone who uses the phrase "free markets" to mean something more moderate is seen as endorsing the most radical version of libertarian ideology. I would argue that we've seen with Obama that the opposite is also true. Some neoliberals use people's willingness to assume that when they use the "free market" language they mean the more moderate view to hide the fact that they, instead, mean the more radical one.

So I think that's one of my first issues - how do we propagate reality and take back our country from sociopaths (especially with the economic knife to our throat, as they continually threaten to tank the economy) or, hell, even identify the sociopaths in the first place before we put them in positions of incredible power?

Reading the early part of the book with the takedown of neoclassical economic theory reminded me of the discussion of the gas tax during the 2008 campaign*. During the campaign, Clinton proposed suspending the gas tax on consumers and raising the revenue from oil companies. Obama countered with a signed statement from, IIRC, 200 economists that said the proposal wouldn't work. This latter narrative seemed to carry the day despite the fact that the same proposal had been done in Illinois and, in fact, had passed savings onto consumers.** That result led lambert to say "It works in practice, but does it work in theory."*** While originally taken from another context, this statement seems to nicely summarize modern economics, which is more interested in theory and reaching some fantasy perfect world of equilibrium than actually improving our real world. And theory is used to shut down policy ideas or objections to proposed policies that are much larger and of a lot more consequence than some gas tax holiday. Like free trade, for example. Never mind your little prosaic concerns about how you're going to earn a living once your company can pay someone in a developing country 1/10th what they pay you, our models show free trade is good for the economy (of course, that doesn't mean it's good for most people in the economy). To make matters worse, we're seeing the faulty ideas of economics now used to support other neoliberal policies such as Obama's education policy. There's no empirical evidence that "free markets" - using a mix of charter and public schools - actually improves public education, but that's what they're doing and selling it with the same buzz words "free market" that they use to sell every other neoliberal policy.

Again, I return to propaganda - how do we combat what's become an analytical pass, the use of the phrase "free market" as if that's always an inherent good (or even true, if there were really free markets, I would never be a customer of Verizon)?

Then there's the larger, systemic issue, which is cutting off our over-dependence on debt. When I read Ms. Smith's discussion of the need to increase the cost and lessen the availability of debt, I thought of Andrew Bacevich's interview with Bill Moyers where he tied our foreign policy problems to our need for access to credit. And that brought me back again to a post on naked capitalism about how tied in our policy makers are to the banks, in part, because wars require credit (I cannot seem to find the link this morning). So our foreign policy crisis is intimately tied to our domestic policy crisis.

I don't know how to reduce Americans' need for debt from the issue of stagnating wages. Debt essentially replaced wages to maintain an American middle class. Just as speculation via leverage on Wall Street replaced real economic activity and investment. We're basically debt slaves at this point and it's not just the "losers".

Which brings me back to "extortion, capture, looting, propaganda" and making finance the handmaiden of commerce, not its master. The book offers several excellent ideas on how to start moving in that direction in terms of Wall Street, but it seems to me that none of them are even seriously being considered by our elites or discussed in the media. How do we breakthrough the propaganda bubble and break the capture on our government to end the looting and extortion?

I don't know, but talking about it honestly is an important first step, which Ms. Smith has done in her excellent book.

So what parts of the book caught your attention (I've only scratched the surface) and how do we translate knowledge into a broader discussion within our society and, ultimately, action?

* This thread is NOT going to be used to re-litigate the primary or even this issue from the primary. I only used the example because it's how I got to the bigger issue - practice v. theory.

** Note the fascinating update where the author responds to readers, including apparently the criticism that he isn't an "economist".

*** lambert informs me that this quote is "from Adam Gopnik's Paris to the Moon. Gopnik puts it in the context of the (sadly, now useless) New Yorker's system of fact-checking -- the French simply didn't get the concept. But a theory checker, well... And so, Versailles is, duh, French! No wonder all the projection...."