Perez also has a respectable ancestor in her call for financial regulation that would "change the incentive structure that has been clearly biased towards the casino (with capital gains paying less tax than profits or salaries)." Apparently even Adam Smith supported usury laws in order to tilt finance toward productivity rather than speculation. But there's something alarming in Perez' statement that "The whole idea of 'don't work for money, let money work for you' should be left behind." Letting money work for you is the entire reason you would lend at interest in the first place.
Utilitarian free marketers have a habit of phrasing moral issues in terms of numbers and numerical problems in terms of morality. Thus Perez states that, "The legitimacy of capitalism rests on the capacity to reap social benefits out of the individual pursuit of profit," rather than on the idea that the pursuit of happiness is the right of all people everywhere. On the other hand, her ideas on reformation during the global recession contain references to "innocent victims" and ensuring dividends and interest make up "a "fair share of real profits"—determinations that seem better left to judges, or even to the people making the deals, than to politicians.
Something of this appears in Perez' vision of rebalancing the world of finance—which is especially disappointing given her very valuable work on financial innovation. Mortgage-backed securities of varying degrees of risk, credit default swaps, and the securitized debt of even credit-worthless people are not inherently flawed. They are tools far less lethal than airplanes, cars, nuclear power, and other unnecessary innovations we have nevertheless decided to live with. They will be used again, by sadder and wiser investors, and the world will be richer as a result.
But if Perez' ideas offer little for libertarians to like, they contain fascinating insights on economic history and a window on contemporary international liberal thinking. (For a free sample, try this essay on "respecialization.") We live in a blessed age, in which governments from Sacramento to Paris to Moscow to Beijing would love to assert themselves, but—having participated in the multi-trillion-dollar inflation of assets with more abandon than most of their subjects—they are too broke and depleted to do much. Everybody's in search of intelligently designed solutions that will produce fair outcomes, make money appear in its proper place, and help the environment, too. Perez does not claim to have solved all these problems, but some people think she's pretty close.
Contributing Editor Tim Cavanaugh writes from Los Angeles.
Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time.
|4.9.09 @ 4:45PM|#
But there's more here than just the irony that every premise eventually gets used to support every position.
Looks like I'm going to have to get all Miss Crabtree on your ass.
That isn't irony, that's begging the question. Both are commonly misused. You missed the opportunity to correctly invoke the latter in favor of further abusing the former. Now that's funny.
*|4.9.09 @ 4:49PM|#
"Kaldor, professor of global governance at the London School of Economics, believes Perez's economics contain the seed of a new Keynesianism that will "eradicate poverty and tackle climate change world-wide" while spreading a "new techno-economic paradigm.""
Oh, and the increase in size? well, that was kind of fun too.
|4.9.09 @ 5:28PM|#
WTF? I'm having a hard time coming up with any examples of genocidal horror causes by any form of liberal capitalism. National socialism yes, international socialism yes, but capitalism no.
¢|4.9.09 @ 5:39PM|#
I'm having a hard time coming up with any examples of genocidal horror causes by any form of liberal capitalism.
Kristallpepsi.
NEVER FORGET
|4.9.09 @ 5:54PM|#
Europeans are more familiar with genocide than we, it's true.
|4.9.09 @ 5:55PM|#
er hello
If anyone gets the chance please use the term
neo-mercantilist
as much as possible
cheers!
|4.9.09 @ 6:03PM|#
"professor of global governance"
Not able to get past just that.
|4.9.09 @ 6:04PM|#
Kristallpepsi.
NEVER FORGET
It's such a rare joy when the thread winner appears in the first five posts. :)
|4.9.09 @ 6:17PM|#
If anyone gets the chance please use the term
neo-mercantilist
as much as possible
Runner up.
Yeah, that pretty much describes Perez's position, and is probably a better description of what we're in for than "socialism", "facism" or "progressive corporatism".
We're talking state-sanctioned oligopolies, where corporations are going to be leashed to the political goals of the state. Kinda how the East-India Company was effectively a branch of the British Empire.
If the left thought that neo-liberal capitalism was a form of "economic imperialism", just wait until they get a load of the new and improved General Motors.
That is assuming GM can actually sell any cars outside the US. Chances are the next stage will be attempts to manipulate trade to try to force US products on the world though.
engineer|4.9.09 @ 6:25PM|#
"Looks like I'm going to have to get all Miss Crabtree on your ass."
I thought Miss Crabtree just told people to sit down and shut up.
Paul|4.9.09 @ 6:30PM|#
If the left thought that neo-liberal capitalism was a form of "economic imperialism", just wait until they get a load of the new and improved General Motors.
Why would the left be concerned with "The New GM" as long as GM is, as you astutely say "leashed to the political goals of the state.
Who cares if the New GM makes a profit, by God, they'll be producing an entire line of hybrids, electrics and various 'green' Trabants, erh, automobiles. Then, and only then will GM be "successful" and a model for the rest of the automotive world.
Come along, auto industry, get on board, or have the Auto Czar revoke your license...
fyodor|4.9.09 @ 6:44PM|#
Perez notes that she is seeking smarter rules, not just more regulation.
Laugh? Cry?
engineer|4.9.09 @ 6:51PM|#
It depends on what she means by smarter rules. For example, while my preference with respect to Fannie Mae and Freddie Mac would have been to remove their special government privileges, a second-best solution, to me, would have to at least subject them to the same regulations as truly private entities.
|4.9.09 @ 7:10PM|#
From "A Vision for Latin America: a resource-based strategy for technological dynamism and social inclusion" (by Perez)
How many generations have to live in poverty before Import Substitution Industrialization is discredited? People do not rise out of poverty by having that which they would buy forcibly made more expensive!
This would-be do-over of that failed policy apparently relies on differentiation via technological development, as opposed to complete reliance on the old fetish on the "commanding heights" of heavy industry. But all the blueprints for technology in the world won't bring technology to the poor if no one has anything saved to procure them. Technology, tangible and intangible, far too divorced today from what it should by rights be considered: fancy capital.
engineer|4.9.09 @ 7:27PM|#
"To set the stage for this strategy proposal we begin with an interpretation of Raul Prebisch's Import Substitution model"
Shorter version: We're going to dredge up the old protectionist model again, because protectionism has historically been such a great boon to the poor.
Paul|4.9.09 @ 7:28PM|#
Import Substitution Industrialization:
Well, that about wraps it up for Import Substitution Industrialization.
perilisk|4.9.09 @ 7:32PM|#
"WTF? I'm having a hard time coming up with any examples of genocidal horror causes by any form of liberal capitalism. National socialism yes, international socialism yes, but capitalism no."
Which form of socialism motivated the dispossession and eradication of the native Americans?
Joel|4.9.09 @ 7:51PM|#
Uh, yeah. Ask any Cherokee you happen to meet if a "capitalist" state can't indulge in genocide. Don't mention Andrew Jackson during the conversation.
Paul|4.9.09 @ 8:01PM|#
Uh, yeah. Ask any Cherokee you happen to meet if a "capitalist" state can't indulge in genocide.
By "Capitalist state" you mean the complicit state that figured Indian lands could be eminent domained for a "public purpose"? That capitalist state?
Right, public private partnership state.
Tim Cavanaugh|4.9.09 @ 9:37PM|#
Sorry for the confusion. "Genocidal horror" is straw man by proxy: Making cartoon shorthand of lefty rhetoric about the commoditization by alienation of the value dialectic, and so on. (I'm a buff of anti-market vocabulary, and I guess I just got carried away...)
Warren, not sure I follow you on the question begging issue.
|4.9.09 @ 9:49PM|#
By "Capitalist state" you mean the complicit state that figured Indian lands could be eminent domained for a "public purpose"?
No kidding. The indian tribes in Canada STILL have this problem, but their lefty defenders continue going around saying "Private property rights? But Native Americans don't believe in land ownership! It would be wrong to give them property rights, just wrong. How could they live in harmony with the land if they are contaminated by the sin of owning it!!! "
Seward|4.9.09 @ 11:25PM|#
My one comment is this: for those who have not read Schumpeter's most celebrated work, get a copy and read it.
Naga Sadow, Economics Major|4.9.09 @ 11:52PM|#
Ah. I meet so few people that when given the chance aren't in favor of subsidy's, regulation, tarriffs, etc. Especially economists.
|4.10.09 @ 11:13AM|#
"Mortgage-backed securities of varying degrees of risk, credit default swaps, and the securitized debt of even credit-worthless people are not inherently flawed. we have nevertheless decided to live with. They will be used again, by sadder and wiser investors, and the world will be richer as a result. "
Where's your proof of this? I'm curious how much value these products have actually generated. Although it's quite clear how much damage they have caused. All this mortgage securiziation etc seems like off balance sheet financing writ large to me. It's a way to try and hide the risks involved, and leverage to the hilt. It's trying to get rich without really creating anything of value.
Sure capital allocation is necessary, and yes we need capital markets. But if a bank needs to raise more money for loans, let them issue bonds, and keep the risk on their books. Investors would then be free to buy those bonds.
We've become WAY to focused on finance, and forgotten that it's the goods and services that are produced (from the capital provided by finance) that is actually important.
Justen|4.10.09 @ 4:13PM|#
Neo-mercantilism, I like the sound of that. Does it come with guilds and all the other neat stuff I get to read about in Victorian fantasy fiction and MMOs?
No really though, exactly how many cycles of "down with the state! down with government control!"-"ah the government is dangerous, but we can keep a handle on it"-"ah the government isn't too bad if we use it as a tool to help ourselves"-"ah the government is the solution to everything if we just give it all the power it needs to operate"-"down with the state!" do we really need to figure this central planning thing out? Are we really so addicted to authority that we can't imagine a world where people, who already show they're competent and responsible whenever given the opportunity in the realm of minutia, can also be trusted with the larger problems?
There is a real problem with cavities, you know; possibly the issue is that there is no law to regulate how one must brush one's teeth! There is a real problem with inefficiency in carrying out the garbage, too. Thousands of steps and thus hundreds of calories could be saved every month by adopting a uniform system, which could be better directed into state-approved activities! (oh yes, I can keep this up a long time)
|4.10.09 @ 7:12PM|#
There is a real problem with cavities, you know; possibly the issue is that there is no law to regulate how one must brush one's teeth! There is a real problem with inefficiency in carrying out the garbage, too. Thousands of steps and thus hundreds of calories could be saved every month by adopting a uniform system, which could be better directed into state-approved activities!
Your dental problems cost the state (and hence me) money. Therefore I'm justified in forcing you to brush your teeth the proper up-and-down way instead of the inferior back-and-forth way.
The New Guy|4.17.09 @ 5:28AM|#
I've already used neo-mercantilism™ in a conversation, and I just love it!
nike shox|8.9.11 @ 1:41AM|#
is good