How Deregulation Resurrected American Economic Insecurity — Paul Craig Roberts

[JohnyCanuck]

Paul Craig Roberts, former Assistant Secretary of the Treasury in the Reagan Administration, acknowledges that unregulated free markets are not the answer to our economic and social woes, and writes, "Unregulated markets existed for awhile in Victorian England, and Clinton, Bush, Obama, Thatcher and politicians in Australia, and New Zealand have removed regulation from various economic activities from the 1980s through the present."

However, wasn't Ronald Reagan one of the biggest advocates of deregulation and government getting out of the way of business, so business could get the job done and supposedly create prosperity for all? So Mr. Roberts, why does Reagan not get his name added to your list of naive politicians swallowing the free market bait hook, line and sinker?

During the early years of Ronald Reagan's presidency, the demand for loans from banks was low and the banking industry worried about lost profits. In order to cater to the banking industry's perceived needs, the Reagan administration passed numerous deregulatory policies. These policies loosened up the rules for giving out loans. That means banks could now offer loans to people with less money, fewer assets and less ability to pay off the loans.

http://www.ehow.com/info_8106916_financial-deregulation.html

How Deregulation Resurrected American Economic Insecurity

By Paul Craig Roberts

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Free unregulated markets have existed only during short periods of history when state power and economic conditions were conducive to the imposition of unregulated markets. Unregulated markets existed for awhile in Victorian England, and Clinton, Bush, Obama, Thatcher and politicians in Australia, and New Zealand have removed regulation from various economic activities from the 1980s through the present.

The evidence is in and piles up daily. Instability is on the rise, and with it has come economic insecurity. Homelessness is increasing. In the last decade, New York City has experienced a 73 percent increase in homelessness, while the net worth of the city’s mayor has risen to $27 billion. http://www.salon.com/2013/03/05/new_york_homelessness_sees_unprecedented_rise/singleton/ Deregulation of the financial system produced such massive instability that the Federal Reserve had to lend the banks $16 trillion (a sum equal to US national debt). The Federal Reserve is in the fourth year of monetizing $1 trillion annually of US debt, raising the specter of dollar devaluation and inflation. Once great manufacturing cities, such as Detroit, are in steep decline. Real interest rates are negative, depriving retirees of interest income. The high unemployment rate of recent university graduates, despite an alleged economic recovery, proves that education is no longer the answer. Millions of jobs have disappeared. Unemployment is high. Poverty has increased as has the number of Americans on food stamps. The once vibrant American middle class is disappearing. The blue-collar working class is being proletarianized. Labor arbitrage across national borders has destroyed millions of US manufacturing and professional service jobs such as software engineering. What was formerly the incomes of millions of Americans was turned into incomes for Chinese, Indians, and into capital gains for shareholders and mega-million dollar bonuses for the corporate CEOs who offshored the Americans’ jobs and banked the lower labor costs as profits. One result has been a massive increase in US income and wealth inequality. The US now has the worst economic inequality of all developed countries and one of the worst in the entire world. This 6 minute video will give you a visual picture:

Another result has been the shrinking of the American consumer market and the reliance on debt instead of income gains to keep the economy going, an expedient now exhausted by the high debt levels of American households.

The lost tax revenues from offshoring now threaten social institutions put in place decades ago in order to reduce economic insecurity and improve social cohesion. Social Security and Medicare are under attack, but not the wars that are the vehicle for spreading US hegemony and “democratic capitalism.” Even the concept of a career is vanishing as the pace of economic instability forces people into ever different jobs if they can find replacements for the ones they lose. Free unregulated markets disconnect economic activity from human well-being. As Gray says, markets are supposed to serve man, not man the market.

The neoconservative belief that America possesses the only true way–”democratic capitalism”–is a delusion. Gray shows that “democracy and the free market are rivals, not allies.” Free markets are not sustainable in a democracy, because free markets erode stability, security, and social cohesion. Free markets existed for a short time in Victorian England, because “the franchise was small and the overwhelming majority of the population was excluded from political participation.” Gray concludes that the American project of constructing a worldwide free market in an age of democratic government requires the instabilities and insecurities that free markets create to be protected from democratic politics and insulated from correction and reform.

http://www.paulcraigroberts.org/2013/03/06/how-deregulation-resurrected-american-economic-insecurity-paul-craig-roberts/