“Old-fashioned voodoo economics--the belief in tax-cut magic--has been banished from civilized discourse. The supply-side cult has shrunk to the point that it contains only cranks, charlatans, and Republicans.”
Take a guess. Who wrote this?
If you said "one of those anonymous twerps posting on Daily Kos," you are forgiven. Had I not cut and pasted this crazed quote myself, I might have guessed it came from a reedy tenor in the Huffington Greek Chorus.
It was actually Paul Krugman, writing in today’s New York Times.
In this rotten economy, many will accept Krugman’s premise that supply-side capitalism is rotten to its core, “a cult filled with cranks and charlatans.”
But supply-side capitalism is just a simple and benign idea. It posits: Only suppliers can supply us with goods and services. The demand side can’t will a product or service into existence. Society therefore advances economically when it reduces tax and regulatory barriers to the creation of goods and services.
Hardly a cultish idea. One can unpack this simple idea into entire books, and many of Krugman’s betters have. The reputations of Smith, Say, Schumpeter and Hayek surpass that of the dyspeptic economist writing for The New York Times.
In fairness, Krugman is not alone. Many people do blame capitalism for bringing us to this low moment in the economy. Do they have a point?
They do if capitalism, as they define it, is devoid of any underlying morality. True enough, it is hard to see any underlying morality when one surveys the present carnage caused by liar loans, shady banks, duplicitous politicians, Ponzi schemers and regulators angling for Wall Street jobs.
This weekend, I caught a BBC radio program on the meltdown in “The City”--London’s financial district. The program quoted many young Brit bankers who said morality was a barrier to personal success in The City. Better to have the sociopath gene if one wants to become a billionaire.
What we are hearing and seeing, in other words, is a failure of morality, not of capitalism.
How do we get back to the old Adam Smith/Benjamin Franklin idea of free enterprise based on a moral foundation? It won’t be easy, but I think we need to start with these:
--Throw the scoundrels in jail and lock the key. Since America is a land where “all men are created equal,” let’s include scoundrels high and low. Find that woman who bought a $750,000 house with a $14,000 income and make an example of her, along with every liar up the pyramid to the investment bank CEOs who bought and sold and overleveraged these toxic loans.
--Deny Tim Geithner the Treasury Secretary position. He cheated on his taxes. The IRS would report to him. This won’t do.
--Radically simplify the tax code. Pick a number--I say 15%--and have that apply as a rate for every federal tax: income, payroll, corporate, cap gains, dividends, inheritance. In other words, remove the temptation to manipulate and cheat.
--Don’t ban political fundraising and lobbying, but make its influence transparent and immediate. If, say, the chairman of the House Financial Services committee has a lover at Fannie Mae trying to relax lending standards, let's know about it.
America’s Founding Fathers came of age at a time when the secular values of the Enlightenment were in ascendance against a backdrop of religious tradition. The founders themselves ranged from Christians to agnostics, but their center of gravity was a deism that accepted the duality of human nature. Men are devine. Men are animals. The best government is one that encourages man’s divine side and mitigates the damage from the animal side.
We have to get back to that. Every alternative you can imagine is much worse.
Post your thoughts below. Is the current crisis a failure of capitalism or of morality? How do we fix a culture where so many young people think sociopathic amorality is required for economic success?
Fire away.
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