The government's backstopping of Fannie and Freddie, along with the federal agenda of promoting homeownership, was yet another cause of the bust. Yet for all of Washington's miscues, the direct agents of the bubble were private ones. It was the market that financed unsound mortgages and collateralized debt obligations (CDOs) that spread their contagion globally; the Fed permitted, but the market acted. The banks that failed were private; the investors who financed them were doing the glorious work of Adam Smith.
There is a basic point about capitalism which I like to reiterate. If something is designed to work a certain way, you can't get upset when it works that way.
Just as the abuse of disproportionate, unchecked power always "comes as no surprise," so too will profit maximization by a possessing minority inevitably end in tears for the society at large.
Capital's political religion teaches that if the profit impulse of the self-interested does not yield its public good, then, by definition, this noble impulse has not been realized correctly.
Those of the conservative denomination swear that whatever has gone wrong, the government has done it; meanwhile, our liberal men of the cloth proclaim that the government has not done it well enough!
The truth is that what the government does, or does not do well enough, reflects a balance of power within the society. Capitalism has never existed without its state, and the state has never acted "in the public interest" wholly independent of capital.
Yet, as with so many religious beliefs, our politics stay relevant just so long as they reflect on those problems yet to be resolved.
1 comment:
What is this "market" Lowenstein is talking about?
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