How do we build a good economy?

Michael Lind of the New America Foundation provides a short course on the history of American capitalism. Very interesting and potentially useful. My question: How do we build a good economy -- one that not only provides value to shareholders but also gives value to its other citizens?

I was struck by this quote. (The emphasis is mine.)

If American Capitalism 5.0 had a single fundamental flaw, it is this: it treated industries and banks as mere commodities, like apples or oranges. Outside of the English-speaking world, nobody thinks of industries and banks as commodities. In other societies, flourishing industries are considered to be essential to national military security and communal prosperity.

These days American capitalists appear to care only for themselves and for their shareholders. No one and nothing else matters, not even the security and future of the company or their industry. If this truly is their attitude, and Lind argues that it is, then American capitalists may well destroy themselves. First, though, they will have destroyed everyone else.

Must Read: How the U.S. became a banana republic, & how we're all gonna pay & pay

Simon Johnson, the former chief economist of the IMF, calmly and clearly explains how the so-called greatest nation in the world (i.e. us) turned into a banana republic, and how all of us a paying the price for the misdeeds and misthoughts of those at the top. The villain? A culture and political philosophy that worshiped Wall Street. Mental Health Warning: His prognosis for the future of our economy is chilling.

New Column: The sad truth about gays & the economy

My new Political IQ column is out.

I'm not feeling particularly rich these days. Every time the Dow Jones average plunges and new unemployment figures are released, my stomach churns. I go into terror mode as I contemplate my economic future. Read more.

It's Official: New report drives stake through the myth of the rich gay

Just about anyone who is lesbian or gay knows that the stereotype of the wealthy queer is a ridiculous myth. Today, though, we got confirmation of that fact from a new study by UCLA's Williams Institute.

The heart of the matter: “The myth of gay and lesbian affluence is just that — a myth,” the report says. “Lesbian, gay and bisexual individuals are as likely to be poor as are heterosexuals.”

In some cases, queer folk are much more likely to be poor than straights. Leading the way in the poverty sweepstakes are -- ta dah! -- lesbian couples and our families, who are "much more likely to be poor than heterosexual couples and their families."

Once again, this isn't news to those of us who live in the real world, but it is good to see the evidence presented. By the way, this is the first scientific analysis of the poor and low-income lesbian, gay and bisexual population. Every other "study" of LGBT wealth has either been a marketing ploy or a pipe dream.

Jon Stewart to Jim Cramer: You're selling snake oil

You owe it to yourself to watch Jon Stewart take Jim Cramer, CNBC and the business media apart. The full interview can be seen at www.dailyshow.com. Here's the key part.

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Pt. 2

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

Today's Unsettling Read: Dr. Doom predicts more pain

Dr. Doom -- AKA Nouriel Roubini, a New York University business professor -- now says we probably won't see the end of the recession until 2010, and that's if we keep our fingers crossed and do all the right things. The good news, and this is good news, is that it could have been much worse.

... the risk of a total meltdown has been reversed for now but that the economy is going through "a death by a thousand cuts." He also said that "most of the U.S. financial institutions are entirely insolvent."

Obama & company may be barreling toward more financial disaster

Today's Paul Krugman on why Obama's apparent plan to "save" the banks is a stupid idea:

We can’t afford to squander money giving huge windfalls to banks and their executives, merely to preserve the illusion of private ownership.

Meanwhile, why is anyone giving any credence to free market fundamentalism -- a philosophy that, well, Katrina-ed the entire world's economy?

Pre-stimulus, bipartisan terrors strike the blogosphere

Paul Krugman's column is getting a lot of comment in the lefty blogosphere this morning, largely from folks who agree with Krugman that Obama may be declaring stimulus surrender before the real fight over the plan starts. Like other bloggers, I worry that Obama is emphasizing bipartisanism to the point of self destruction. (Translation: Placating Republicans matters more than finding real solutions.)

On the other hand, I still want to see how this all plays out and what the Obamites actually do. On the other other hand, I applaud my fellow bloggers for bellowing about their concern. If we don't speak up early and often, we won't be able to affect the outcome.

And so life in the Age of Obama begins, 15 days before inauguration.*

Here are some of the more interesting posts I've seen.

Kevin Drum:

Obama's team is so focused on getting a big bipartisan majority for their stimulus legislation that they're negotiating their goals down even before they actually start negotiating

Josh Marshall:

Obama seems to be telegraphing that to a significant degree the fundamental structure of the legislation is being built around accommodating the concerns of Republicans -- members of a political party that are about as unpopular and weak as you can get at the moment

John Aravois:

But don't worry, if we just appease the Republicans this once, they'll stop being mean to us.

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*Obviously, the transition to our new prez has been barreling down the tracks for weeks now. With the holidays behind us, though, we've finally gotten beyond questions of who's going to do what in the new administration and into substance. That's why I'm marking today, Jan. 5, as the real start of the Age of Obama. (Remember, you heard it here first.)

Today's Must Listen: Paul Krugman explains how incompetence & ideology sunk the economy

One of the things I love about economist and columnist Paul Krugman is that he can explain the economic crisis in ways that actually make sense. On Monday he talked about how the "crazy influence of ideology" and the complete and utter incompetence of business executives and the Bush Administration have torpedoed the world economy.

Krugman was interviewed by Newsweek senior editor and Moneybox columnist Daniel Gross. By the way, Krugman thinks unemployment may go to 10 percent. The current unemployment rate is 6.5 percent. Yikes!

The Economy: I'm so glad they cleared that up

The National Bureau of Economic Research has made it official: We're in a recession. I suspect this may matter in some important, technical sense; maybe it even matters practically to put a label on the state of the economy. But am I the only person on the planet who wants to shout: Tell me something I don't know!

The Train Wreck

This and this are like watching a train wreck in slow motion. O.M.G. The problem is that we're on the train. Salon sums up the situation clearly.

The debate is back on

The New York Times and others are reporting the news. Shall we recap the events?

• John McCain "suspends" his campaign and declares that he won't debate until the financial crisis is solved.
• Republicans and Democrats in Congress announce that they have a deal to pass a modified bailout plan.
• "Suspended" McCain campaign continues running ads and attacking Barack Obama via surrogates, while the news media report that McCain is putting "country first."
  
• McCain flies to Washington, DC, and arrives with much fanfare.
• Announced bailout plan crashes and burns.
  
• McCain declares victory and announces that he will (tah dah!) debate Obama as planned.
• Congressional leaders and Bush Administration go back to what they were doing before McCain intervened. A grateful nation holds its breath and prays for a real solution.
  

What was accomplished? McCain got a ton of news coverage.

The Big Bailout: David Cay Johnston pleads with journalists

Back at the dawn of time when the Internet was barely a glimmer in anyone's eye, I worked for the Detroit Free Press under Pulitzer Prize winner David Cay Johnston. He not only taught me how to write, but also which questions to ask. I have never seen a reporter who worked harder than Johnston.

Today, a letter from Johnston has been posted at Romenesko, an insiders blog for journalists. In it, Johnston pleads with his fellow reporters to do much, much more than they are now in reporting the proposed bailout.

The Administration has scared the markets and some key legislative leaders, but it has not laid out a coherent, specific and compelling need for this enormous proposal, which is the equivalent of a one-time 55 percent income tax surcharge. (Instead the money will be borrowed, so ask from whom and how this much can be raised so quickly if the credit markets are nearly seized up with fear.)...

As of now we are, as a group, behaving just as we did the last two times the administration sought to rush through a hastily thought out, ill-conceived plan. Why in the world are we being so gullible and naive? whatever happened to the core value of journalism -- check it out?

We may need this bailout, and we may need it soon. But if we don't understand exactly the why, how, who and what, then the United States may be in very deep trouble.

Republicans, deregulation, and the current financial mess

By Nancy Jane Moore

Has anybody else noticed that three major financial crises -- ones brought on by excess, greed, and, most importantly, insufficient oversight -- came during Republican administrations?

I'm speaking of the Great Depression, the savings and loan crash of the 1980s, and the current mess, which, according to what Kevin Phillips said on Bill Moyers Journal last night, might be worse than the Depression. (I'm paraphrasing from vague memory -- Phillips' pessimism scared me so much that I couldn't stand to watch and switched to a DVD of Battlestar Gallactica instead of listening to him as I should have.)

These three crises happened after years of administrations that opposed regulation, took steps to deregulate institutions that cry out for regulation, and appointed people as regulators who oppose the whole idea of oversight.

I know there have been other crises in recent times, but most of the others strike me more as the usual ups and downs of a market-based economy. These three, though, came about because the administrations did what they could to block regulation, allowing as so-called unfettered market.

As near as I can tell, all an unfettered market does is allow people to make money doing things that provide nothing to the economy as a whole -- such as creating hedge funds and other financial instruments most ordinary people can't comprehend -- and to get insanely rich, until the whole thing crashes, at which point we the taxpayers bail them out so that our economy doesn't go down with them.

The Depression came about after the corrupt years of Harding following by Silent Cal Coolidge and Herbert Hoover, neither of whom did anything to get in the way of their money-making pals. It took a long time to rebuild after that, but rebuild we did, with increased regulation and protection for ordinary citizens. There were ups and downs after that, but on the whole, the economy did pretty well.

And then Reagan came along with his deregulation ideas, which were followed by the crash of the high-flying, over-extended, deregulated savings and loans. As crashes go, this one may seem like a blip, except that it so exactly presaged what we're seeing now.

At least I understood what happened with the savings and loans. I don't really comprehend the financial side of how the investment banks got into all this trouble -- and I actually do know something about real estate financing. The most obvious thing to me -- especially given that the ratings organizations continued to rate investments in and by these firms at the highest levels -- is that everybody took care of everybody else and nobody paid attention to the fact that housing prices couldn't go up forever.

I'm currently reading Naomi Klein's The Shock Doctrine, in which she explains Milton Friedman and his argument for completely free markets, and points out how "shocks" -- both economic and political -- paved the way for other countries to try his methods. By rights, here in the land of Friedman, we shouldn't bail these companies out, but just let them fail and our economy with them. Supposedly our society would end up better off, never mind how many of us might suffer.

Of course, even Republicans don't do that. With luck, along with this massive bailout we'll get some revived and even improved regulation.

Though as Klein warns us, don't think you've seen the death knell of the "free market uber alles" argument. It'll be back as soon as we get things put back together and it could screw up the other things we need to deal with, like climate change for example.

Given the depth of the crisis, many of us may not live to see the next round.

Here's another suggestion for something we can do -- besides voting Democratic this time and making sure Congress actually passes some meaty regulatory schemes: Lobby the high schools to teach economics. Make it a required course, just like civics and history. Given the complexities of modern finance, everyone needs at least a basic grounding in how economic systems work.

Used to be everyone needed to know how to raise food, build houses, cook, and sew. These days, what everyone really needs to know is how to manage their own money -- and how to control those who manage vast amounts of it.

A sinking ship?

Princeton economist and New York Times columnist Paul Krugman is now comparing the news from Wall Street to the Titanic. This is not making me feel better.

John McCain meet Herbert Hoover

As anyone who reads this blog knows, I'm a confirmed Paul Krugman fan. I value his knowledge, his political perspective and, most of all, his ability to explain the economy in terms that make sense. Today Krugman brings a couple of interesting facts to our attention in his blog. He reminds us of how John McCain is sounding eerily like Herbert Hoover on the eve of the Great Depression, and then points us toward the "postmodern bank run(s)" happening now.

Update
Updated with image of Hoover.

The economy does better under Democrats

Michael Kinsley isn't the first writer to argue that the economy does better under Democrats than Republicans, but he does have the latest statistics.