(Started on 6/27. Update added below on 6/28)
As I was writing Systems out of Balance I tried to keep abreast of the misinformation being used to persuade us to continue with laissez faire policies. The enhancement of liberty and wealth were the most dominant types of misinformation when I started. Laissez faire economists twisted the meaning of free in virtually all its uses, while also providing constant reminders that a “rising tide lifts all boats.”
While I did my research and writing a new type of misinformation surfaced, or at least started to dominate the media enough to finally reach my attention. The writing was on the wall that the economy was heading south. I wish I could claim that my Essays 3 and 7, first written in 2006, were unique in forecasting the destabilization to come, but in truth many already were warning of the looming problems. To the extent that laissez faire economists and puppet libertarians knew that trouble was on the horizon they started to generate misinformation about how we were turning socialist. Sometimes you could hear the same news talk host or pundit declare that 96% of economic indicators were positive, while complaining about all the naysayers, then just a few weeks later start complaining about how socialist we have become. This scampering by the laissez faire camp as they started to realize what would happen next was part comedy, part tragedy.
We have not trended towards socialism since the seventies, as plenty of empirical evidence already provided on here confirms. The government has been commanding the economy for sure, but we have trended towards command capitalism rather than socialism, something quite easy to empirically demonstrate at this point.
Only recently have I become aware of a new misinformation focus by our favorite Puppet Libertarians and the Powell Cabal (metaphorically speaking). It’s hard for even these folks to ignore the escalation of essential and expensive items in the middle class budget at this point, so of course they have been working out what self-serving misinformation will be their response. Don’t you know that escalating costs have been due primarily to the escalating costs of goods and services only, inflated by government subsidy and other intrusions into markets? It’s all the fault of socialist government mucking things up for business corporations. I won’t deny the problems of government subsidies and intrusions, but this laissez faire misinformation claim warrants a closer look in the near future.
(Updated 6/28/09)
Actually, if laissez faire economists now acknowledge the escalating costs of goods they are reversing one of their misinformation campaigns from the nineties. The Boskin Commission was formed in the nineties to explain why the Consumer Price Index might be overestimating inflation. Mind you, the CPI lagged behind things such as housing and health costs, but the Boskin Commission came up with a bunch of reasons why the CPI might be preventing us from realizing just how well our economy worked at keeping costs down. To have laissez faire sympathizers now acknowledge the opposite problem almost warms a middle class heart.
The point of their sudden conversion is to lay the blame at socialist government. Yet government intervention and subsidy is at best a partner in crime, not the major reason that the most essential but expensive items are escalating in relation to median incomes. The only time the laissez faire camp brings the financial sector into their finger pointing is with the synergy between government and lending institutions, with Fannie Mae and Freddie Mac the prime whipping boys.
The financial sector extends way beyond these lending institutions; insurance, realty, and Wall Street have contributed to the fast growth of the financial sector in relation to our overall productivity since the seventies. Health costs and net dividends both track well with the growth in the financial sector during this same time span, yet the laissez faire camp wants us to believe the root cause for escalating health costs lies in the escalation of health care. I guess they forgot all those reasons their own Boskin Commission once provided, when poverty was our main economic issue, for why goods and services don’t inflate as much as we might think from progress and new technologies.
Laissez faire apologists also seem not to understand that escalating health care costs, without the insurance component, contribute to both the numerator and denominator in a ratio of health costs to productivity of goods and services. The fact that health costs track more closely with the financial sector than with GDP, plus the fact that private health insurance corporations exist to make a profit tacked on to health care, would seem to indict private health insurance over health care as the main culprit in escalating the ratio of health costs to income.
Similar arguments can be made about realty. Yes, people build bigger and better homes, but most people buy already existing homes. Until the recent crash a house could be flipped for a tidy profit with little productivity having been added. Land can be subdivided to “earn” lots more capital with virtually no productivity. What is going on in the financial sector is precisely the root cause for the inflation and destabilization. Fannie Mae and Freddie Mac are a part of this problem for sure; but they are not the only lending institutions that form the problem, nor are lending institutions the only part of the financial sector that is the problem.
That’s not what you will be hearing from puppet libertarians and think tank blogs, though, so brace yourself for the new wave of misinformation that is coming.
Tags: Economic Misinformation, Interest Groups, Middle Class Economics, Unbalanced Trends
