"Cutthroat...Capitalism," "Tough Love of Laissez-Faire" No Longer Working in US?
The Sunday Week in Review story by economics reporter Peter Goodman, "Too Big to Fail?" His thesis: Just as the U.S. government bails out companies, the global economy will feel pressure to bail out the United States.
Goodman's long-view stories generally harbor severe misgivings about capitalism (a December 2007 headline: "The Free Market: A False Idol After All?"). His latest gloating is over a Republican administration that supposedly believes in "cutthroat...capitalism" but is now betraying its ideals and bailing companies out - although the main subject of the story are government-sponsored companies Fannie Mae and Freddie Mac, a different animal from the bailout of a private company like Chrysler.
In the narrative that has governed American commercial life for the last quarter-century, saving companies from their own mistakes was not supposed to be part of the government's job description. Economic policy makers in the United States took swaggering pride in the cutthroat but lucrative form of capitalism that was supposedly indigenous to their frontier nation.
Through this uniquely American lens, saving businesses from collapse was the sort of thing that happened on other shores, where sentimental commitments to social welfare trumped sharp-edged competition. Weak-kneed European and Asian leaders were too frightened to endure the animal instincts of a real market, the story went. So they intervened time and again, using government largess to lift inefficient firms to safety, sparing jobs and limiting pain but keeping their economies from reaching full potential.
There have been recent interventions in America, of course - the taxpayer-backed bailout of Chrysler in 1979, and the savings and loan rescue of 1989. But the first happened under Jimmy Carter, a year before Americans embraced Ronald Reagan and his passion for unfettered markets. And the second was under George H. W. Bush, who did not share that passion.
So it made for a strange spectacle last weekend as the current Bush administration, which does cast itself in the Reagan mold, hastily prepared a bailout package to offer the government-sponsored mortgage companies, Fannie Mae and Freddie Mac. The reasoning behind this rescue effort - like the reasoning behind the government-induced takeover of Bear Stearns by J. P. Morgan Chase just a month before - sounded no different from that offered in defense of many a bailout in Japan and Europe:
Of course, Fannie Mae and Freddie Mac are hardly examples of the untrammeled free market, they are "government-sponsored mortgage companies," as Goodman himself noticed. And can you imagine the Times' response if the administration had not bailed the companies out and a market meltdown happened?
Goodman had more strong, slanted descriptions of free market supporters:
The details were up in the air as the week ended, but some sort of bailout offer was on the table - one that could ultimately cost hundreds of billions of dollars. Whatever the dent to national bravado, or to the free-enterprise ideology, the phrase "too big to fail" suddenly carried an American accent....Still, there are ironies. Since World War II, the United States has been the center of global finance, and it has used that position to virtually dictate the conditions under which many other nations - particularly developing countries - can get access to capital. Letting weak companies fail has been high on the list.
Mr. Paulson, who announced the bailout, made his name as chief executive of Goldman Sachs, the Wall Street investment giant, where he pried open new markets to foreign investment. As treasury secretary, he has served as chief proselytizer for American-style capitalism, counseling the tough love of laissez-faire. In particular, he has leaned on China to let the value of its currency float freely, and has criticized its banks for shoveling money to companies favored by the Communist Party in order to limit joblessness and social instability.
Goodman (who graduated from left-wing UC-Berkeley) was even harder on capitalism in his "false idol" story from December 2007:
But now the invisible hand is being asked to account for what it has wrought. In this country, many economic complaints - from the widening gap between rich and poor to the expense of higher education - are being dusted for its fingerprints.