Sunday, August 15, 2010

Is this Doubletalk or Tripletalk? A Critique of Pathocrookis

I cite one James Pathocrookis: “… Goldman Sachs is today’s scapegoat ...”

Later in the same article Pathocrookis allows as how:

“All of that makes the recommendation that you and I share — strong government support of basic free market principles — one that looks increasingly vulnerable to populist politics within free market democracies. The problem is even larger in Europe and Japan than in America.”

May 11, 2010 14:42 EDT
State capitalism, crony capitalism | New Normal

My bemused comment:

Fascinating! So Goldman Sachs is just a scapegoat! I see.

And furthermore “you and” I “share” a “recommendation”, to wit “strong government support of basic free market principles”, no less!

If you were really desirous of free-market policies -- and not just using them as a cheap rhetorical device, as you do in your rant -- you would at least mention in passing that if Goldman Sachs -- like the rest of the Wall Street mob – managed to achieve notoriety through its reckless speculation, it was only because Goldman Sachs (and the rest of the Wall Street mob) had previously persuaded the US congress and the SEC to remove all curbs on speculation.

When a participant in the market, in this case Goldman Sachs (plus the rest of the Wall Street mob), has the power to change the rules, then it is grossly inaccurate to speak of a free market. To back up this statement I cite the great German free-market economist Walter Eucken (1891-1950).

Eucken recommended a policy of strict division of labor between government and private business. The government regulates the economy, i.e. it makes rules about how private parties should behave on the market, but is not itself a market player. On the other hand market players are barred from trying to change the rules, unless it be through the ballot-box. Eucken’s thinking formed the basis of West Germany’s “socially aware market system”, which was the propitious framework in which the German economic miracle (1948-1973) took place.

Cite by Walter Eucken:

This [i.e. the strict division of labor explained above] is the only way in which we can accomplish the goal of enabling all citizens to control the economy through the price mechanism, instead of allowing a small minority to control it. The only economic system in which this is possible is that of complete[ly free] competition. IT CAN ONLY BE ACCOMPLISHED IF ALL MARKET PARTICIPANTS ARE PREVENTED FROM CHANGING THE RULES OF THE MARKET. [1] (my stress)

Walter Eucken (1891-1950)

To her credit, Margaret Thatcher observed Eucken’s rule and forbade members of her government to have any contract with lobbyists of any sort. To expect such a policy of an US Republican would be an act of madness.

[1] From Walter Eucken’s preface to the first issue of Ordo (an annual publication reflecting free-market views) in 1948. This is my translation of the cite found in the article Walter Eucken in the German-language Wikipedia.

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