Yes, makes an interesting comparison. But discussing Chile is pointless without discussing copper. Copper is to Chile as beef is to chili. I kid, copper is to Chile as oil is to Venezuela.
I notice you left out the fact that while Pinochet was moving towards free markets, he kept the copper industry nationalized. Not very capitalist if you ask me.
Chile is now one of the few countries with a massive budget surplus because the price of copper skyrocketed. And as a result Chile can enjoy socialist policies like universal health care. Kind of like Alberta.
I wonder is we need to distinguish between a coup and a revolution. For most recent history, revolution has been “left”, it is an uprising by the oppressed proletariat, etc. Whereas a coup might just be two different ruling class factions in competition, if CitiGroup ousts BankAmerica, so to speak. Outside of the highly questionable Nazi “revolution”, I’m hard pressed to recall any example of an actual “capitalist” revolution.
Niggling point for Sam re the “popularity” of the Bolsheviks: in actual fact, the Bolshevik faction was not all that popular with the average Russian, the designation “Bolshevik” (meaning “majority”) was pure fabrication of Lenin’s part, as well as connoting his opponent socialists as being “menshevik” (minority).
It is a fundamental principle of Leninism that the revolutionary cadres lead and instruct the proletariat, they are inherently superior due to their “correct” political indoctrination. Whether or not Leninist principles were popular or not was largely incidental, the popular opinion and will was not something to be considered. Lenin expected his principles to be unpopular, and couldn’t have cared less. The population would need to be controlled and instructed by their political superiors until such time as the Communist revolution could work its magic.
He further held that it was perfectly legitimate to lie through his teeth in the service of History and dialectical materialism. So far as he was concerned, any ethical consideration that did not derive exclusively from such a basis was metaphysical “woo”.
America was no different than these fledgling capitalistic nations until union organization forced corporations to take safety, working conditions and to pay a reasonable wage into consideration. I have read that unions are starting to appear in China. That is the only way to get the rich to share some of the wealth the workers produce. It will be bloody and ugly when it occurs. But the country will be better off when it does. We have crushed unions here and the wealth of the people is diminishing. that should be no surprise. The wealthy are amassing huge fortunes. that too should not surprise.
Wouldn’t it have be a capitalist revolution any time communism was overthrown? I picture Eastern European countries or former Soviet states that eventually demanded capitalism (and democracy).
I also picture capitalist revolutions happening slowly: people in China demanding more things to buy. Or people in Canada demanding to have a private health insurance company fuck them over. Eventually the flood gates open and capitalism takes hold, the oil-spill covered slippery slope leads to freedom.
Countries that have too much socialism (all too often combined with communism) eventually crack, and allow capitalism.
Countries that have too much capitalism eventually drift towards more and more socialism.
Which is precisely why I challenged the quote from the OP, and why I dared question the effects capitalism may have had on Venezuela.
It all comes back to: would you rather all the money in the world, but no food to buy. Or a choice of any food item imaginable any time of year, but no money to buy it.
In my view both suck equally, making those clamoring for one or the other equally misguided.
Capitalism has a lot of sharp edges, it means a lot of people die. And they die long, slow, painful deaths. I view socialism and a means to round off some of those edges.
And yes, US history has been punctuated with socialist revolutions. The great depression was capitalism at work, greed begets greed until there is a correction. The recent housing crisis was another. Like natural selection a heard size (and a stock market and a housing market) will grown exponentially if unconstrained until it crashes, and when it crashes it crashes hard.
And each of those crashes result in an injection of socialism, meant to slow down the growth, and minimize the crashes. More social services, more government programs: Medicare, social security, and yes more military.
As a compare and contrast, Canada has a much more heavily regulated banking industry–what many Americans would chastise as socialism. So while the US housing market was booming, the Canadian market was growing considerably slower, a point that often frustrated Canadians.
But when the bottom fell out of the American housing market, and hundreds of banks failed, Canada soldiered on, our unemployment rate popped up a bit, but is now lower than the US. The housing market continues to track upwards, and we haven’t had a bank fail since 1923 (there might have been two small ones in the mid 80s, trying to verify that).
First of all, Canada’s housing boom was not as strong as the American housing boom for many reasons. One big one is that we do not allow home interest deductions, so owning a home in Canada is significantly more expensive than renting. You can get a home mortgage in Canada with a 5% down payment, which is really not much of a hurdle.
Another reason why we didn’t have quite the real-estate boom you had is because you have a lot of cities that are heavily zoned or geographically constrained in size so they can’t expand. San Francisco and New York are good examples. Vancouver’s housing boomed as well, for the same reason.
And while you can blame financial markets for a lot of what went wrong, the housing boom and subprime mortage program was fully supported by Democrats. Paul Krugman was a big booster. Fannie Mae and Freddie Mac were instrumental in helping establish mortgage-backed securities, which allowed banks to offload their risk. You complain that the banks weren’t regulated well enough, but the Democrats didn’t have a problem with what was going on, and in fact were pushing for more. So were some Republicans. So bemoaning the lack of regulation and blaming it on the free market is ridiculous. When the regulators are just as enthusiastic as the market, just where is this regulation supposed to come from? And why can’t this be seen as a failure of government as much as a failure of the market?
I’d go even further. Fannie and Freddie at one point held 48% of the entire market in subprime mortgages. That declined to about 24% by the time of the crash, but you can’t underestimate the impact of having government-sponsored agencies happily playing in that market, buying up mortgage securities from banks, and in general putting the good government stamp of approval on the whole works.
Then you have the Community Reinvestment Act, which also acted as a signal to markets that subprime mortgages were A-OK. Far from government regulating the packaging of subprime mortgages into securities, the government was not only right in there with everyone else, but it was pushing laws that actually forced banks to re-evaluate mortgage denials for minorities with bad credit scores.
Or maybe the best way to put it is this: If the entire mortgage market had been nationalized and fully under the control of the government from 1990 until 2008, do you honestly believe that this crisis wouldn’t have happened? What evidence do you have that government was any more prudent or cautious than the market? And if you can’t, why are you dropping all the blame on the market?
Canada soldiered on because we don’t have the kind of fetish for home ownership that Americans in both political parties have, and don’t have the kind of financial incentives for home ownership, and because our homes were more affordable in the first place, and because our banks are very large and traditionally very conservative. It’s not so much a regulatory thing as it is a cultural thing. Sorry if that doesn’t fit your narrative of “government good, markets bad”
More importantly, government regulations don’t equate to socialism. Adam Smith as much said that government needs to be there to stop monopolies, to protect patents and copyrights. I have no reason to think that he wouldn’t have also agreed to requirements of truth-in-advertising, nor to condemning activity which was harmful to the general public (in effect, transferring their costs onto the general public), both of which are really what all (meaningful) government regulations come down to.
Capitalism is the simple realization that if you give people the freedom to profit by providing benefits to others, then the world becomes a better place (the invisible hand). But, where someone is trying to circumvent the invisible hand, there is no rule against preventing them from doing so, just like Smith foresaw a monopoly as being able to circumvent it. Getting the invisible hand to work properly is entirely acceptable within capitalism. The difference between it and socialism (Marxist, Anarchist, and Utopianist Socialism – not the faux “big government” capitalist stuff that has been mislabeled socialism) is that in a capitalist market all you have to do is split up monopolies, pass a few truth-in-advertising laws, and keep businesses from trying to cut costs on the taxpayers dime. To get a socialist economy to continue running, you either have to accept that your economy is going to be stuck in the middle ages, or that you’ll have to send goons around beating on people to make them do what needs to get done.
We’re all talking about a balance between socialism and capitalism, and you managed to bring in the Democrats? Why not blame Michael Moore while you’re at it. Sadly you will no doubt succeed in side tracking this into a mess of what roll the Democrats played, bravo lil’Bricker.
And I’m sorry that my narrative wasn’t actually “government good, markets bad.” Criticism of capitalism isn’t anti-capitalism. Advocating for some socialist policies is not advocating for capitalism. It wasn’t when McCarthy tried it, and it isn’t now. But do carry on building up and knocking down strawmen where ever you can.
The only thing you did get right was that it is a *cultural *thing. In all my experience, Canadians are much more tolerant of mild socialist ideas being applied to capitalist problems. It’s generally viewed as one of many tools available.
The chorus of people shooting “markets good, government bad,” so prevalent in the US culture, is quite often drowned out by the vuvuzelas of people willing to be open minded.
That was meant to read communism. Missed the edit window.
And “things the Democrats do” does not equal socialism or socialist policies. So trying to equate perceived failed of the Dems with failures of socialism is both weak and sad.
Sorry but while Freddie and Fannie were players in a sense greenlighting mortgages, they did not write them. The mortgages were originated by companies with absolutely no intention of collecting and servicing them. That is why loan standards were an impediment to be ignored. They were immediately sold off. They got paid for writing them, whether they were good or not.That is the root of the housing failure. The political pressure of the times was to allow financial companies to do whatever they wanted because it was a self correcting system that would work for the public good. How stupid was that? But the financial companies exerted a lot of political influence with campaign contributions and lobbying. Yes they coerced the Repubs and Dems. Money works that way. Financial companies are giving the dems a lot of money now. that is because they are in charge since they have the house, senate and presidency in their hands. It would be poor business to short them now. But we know what party works for them. Just look at how the repubs are shooting holes in the financial regulation bill.
A reality check from the board represenative from the Heritage Foundation. The funking irony.
Canada’s banks have actual leverage restrictions, actual restrictions on mortgages (which they have to hold onto), sensible capital requirements, regulators who actually regulate, a consumer protection agency…
Then we have a huge list of dissembling and outright bs, as per.
Paul Krugman did not encourage an eight trillino dollar housing bubble and the writing of trillions of dollars of bad debt/toxic securities.
During the bubble years Fannie and Freddie lost a hugew chunk of their market share of mbs, Fannie lost 56% in 2006 alone. The reason was that the deregulated mortgage industry didn’t have to hang onto their mortgages anymore and could sell them all immediately, which they did to a Wall Street desperate for mortgages they could turn into AAA unregulated toxic securities that blew the financial system up. That’s the dynamic that created all the crap mortgages – unregulated mortgage originators wiriting treillions of dollars of crap and selling it immediately to unregulated securities firms who used unregulated ratings agencies to give it a AAA rating. If F and F hadn’t ever existed the exact same thing would have happened, they were irrelevant bit part players in the meltdown.
Banks operating under the CRA wrote exactly six percent of total subprime debt, and don’t forget subprime was a small fraction of total bad mortgage debt. So about 99% of the total bad debt in mortgages was written by unregulated firms like Countrywide who then sold their crap direct to Wall Street.
Basically you’re just repeating the same bs Heritage talking points which have been endlessly debunked here already. And why? Because you’re a true believer who can’t face the fact that the ideology you believe got blown to bits in 2008.
Yes, but he successfully Brickerized the debate away from something meaningful and back into 2008. Soon, someone will come along, vaguely familiar with the various talking points from back in the day, and decide to regurgitate them for our amusement.
Long story short, the mortgage melt down of 2008 was capitalism working at its best. The tech bubble before that was capitalism working at it’s almost best. And every couple of years we’re going to get another bubble.
If we can’t be openly critical of capitalism and it’s flaws, we are doomed to an ever repeating series of bubbles.
So I’ll say it again: criticism of capitalism is NOT anti-capitalist.
I think if you look at this quote again:
"I’d rather a coup by a capitalist than a socialist for whatever country I lived in. "
So much of it depends on where you view your personal status in life. I find as a Canadian, growing up in an upper middle class home, I tend to under represent myself.
For me, a capitalist coup would give power to the rich (those with capital) at the expense of those without. A socialist coup is just the opposite, the state re-acquiring the wealth, and distributing it to the poor.
I figure I’m more likely to benefit from socialism since I associate myself with the working class, being the lower 98% of society. It’s only the top 2% of the wealthy that will benefit from the capitalist distribution of resources.
If it helps, consider the game Monopoly, and imagine the four railroads are initially not for sale. So the game progresses and a couple players dominate while the rest slowly approach bankruptcy.
To me, a capitalist coup represents those railroads being put up for auction. So naturally the richest player gets the four properties, and with that dominates the game.
A socialist coup would work in reverse. It would recognize that one player is dominating the game through control of the four railroads. Those properties would then be nationalized, with the revenue being distributed to the poorest of the players.
I think it says a lot about how an individual views him/herself when deciding what sort of coup to route for.
If it helps, I think a capitalist coup in the US would involve canceling the public education system (from primary right up through state universities). If that happened, are you prepared to shell out $30k a year for each of your kids? Or do you think you’d do better if suddenly all the private schools became publicly accessible?
This pernicious libel took hold after some irate critic with an axe to grind took a quote of his out of context. He was not suggesting that we should inflate a housing bubble–he was attempting to interpret the enigmatic Greenspan as suggesting that we should inflate a housing bubble. Even Arnold Kling, a member of GMU’s army of libertarian economist bloggers, and thus no ideological friend to Krugman, has admitted as much.
It would be helpful if you got the full story from the source instead of spreading unfounded rumors. It is time to bury this accusation.
This is a rather large distortion of what actually happened. I’m not going to say that F&F were angels–far from it–but they did not start the subprime problem. They made an already bad problem worse, but they did so because they were pulled in by market forces after the private sector went crazy. You’ve spread this distortion before, and you’ve been corrected on it before.
In this post, I specifically pointed out to you the factual problems with your superficial argument about F&F. You apparently ignored it.
In this post, I made the exact same point to another poster. Although that was not addressed to you, you were a participant in that thread. You apparently missed it again.
The Community Reinvestment Act was originally from seventies. It could not have possibly signaled to markets in the naughties that subprime mortgages were suddenly A-OK, especially because the worst offenders of the subprime debacle weren’t CRA banks. The CRA banks were, by and large, doing safe loans. They were innocent of this particular problem. Another one of the army of GMU libertarian economist bloggers, Tyler Cowen, has admitted as much. Cowen, of course, believes that the CRA is a bad idea for other reasons. I might even agree with him. But you just can’t attribute the bubble to the CRA. And this has also been pointed out before, too, although perhaps after you had already left those threads.
Here is wmfellows noting that the CRA was not responsible for the housing bubble. And here is MOIDALIZEmaking the same point. Those posts are, however, from later pages of those threads.
Still, these debunkings have been out there in the news, and in the blogs, and on this board, for a long time. Anyone interested in untangling the real causes of the housing bubble should already know them. And again, this is not to say that the US government doesn’t over-encourage mortgages. It does. American Dream, having your own home and all that. But there was much more to the situation than what you let on.
Considering the fact that F&F were pressured into subprime by private-sector competition, it is indeed possible that we wouldn’t have had this particular financial crisis if the housing derivatives market had been funneled fully through the GSEs, or even officially nationalized.
I’m not advocating that. Not at all. I’m very seldom a fan of nationalization, for obvious reasons of efficiency. But the problems with markets are why responsible people stand for good regulation. Not necessarily more or less regulation, but just plain old good regulation.
This just isn’t right.
The US regulatory system is a complete mess. Canada’s system is much better by practically any standard. Canadian banks have no opportunity to pick and choose their favorite regulators, the system is more streamlined, risk is better controlled, consumer protections are already built in. You are attributing these things to “culture” only because you don’t understand the regulation. I’m not saying I know a lot about it myself, but I know enough to not be under the bizarre impression that Fannie and Freddie are themselves regulators, which is so strange a mistake that I can’t even fathom how you got that notion.
Financial markets fail. They have failed for the entire history of modern banking, and probably even longer than that. They will always need to be regulated. The problem, then, isn’t big government or small government. There is only good government and bad government, and people have to choose what they want to have. And refusing to make a choice is an automatic choice for “bad”.
It might interest you to investigate the psychological concept of “projection”.
I love it when your posts start out like this.
You point out some things that may have aggravated the boom but the mortgage interest deduction has been around for decades, as have FNMA and FHLMC. What changed was the development of securitization of non-GSE backed mortgages, then the development of securitization of subprime non-GSE backed mortgages and eventually liar loans.
In one respect you are correct, the failure to regulate the mortgage market sis represent a failure of government but it was a deliberate failure. There had been calls to regulate the mortgage and credit default swap market for years but Republicans thought the free market knew better.
WTF are you talking about? Are you saying that having GSEs was anh implicit government endorsement of the entire mortgage securitization market? How do you figure?
Thats right, bad credit scores, the mortgages were otherwise conforming.
Once again the CRA has been around for decades. Its pretty hard to blame what happened in 2003-2008 on something that happened in the 1970’s isn’t it?
Yes.
The GSEs had much stricter underwriting criteria than Countrywide or Ameriquest or most of the other lenders that blew up whether it was for conforming mortgages or for subprime mortgages to minorities, the GSE criteria were much more stringent. There is a reason why the GSE lost so much market share when they had effectively been the market makers in mortgages.
So yeah, I guess I blame a failure of the free market. Its not like perfect, it was our fault to assume that it was.
Do you even understand the differences between the way Canada regulates its banks and mortgage lenders and how the US regulated its banks and mortgage lenders? I’ll give you a running start. America didn’t regulate its mortgage lenders at all while Canada did. The US had far looser capital requirements for its banks than Canada did. Your Canadian conservatism may be cultural but its also legally required.
The move to deregulate financial services was largely bipartisan. The final repeal of Glass-Steagal was in part ceremonial, because it had already been shot so full of holes, but the death blow passed with overwhelming majorities in both House and Senate, and was signed by President Clinton. The general push toward deregulation was favored by both parties. W and his followers deserve special blame not for the financial crisis itself, which had many parents, but for their fiscally irresponsible spending in a time of economic expansion which has limited our ability to respond to the aftermath of the crisis. That by itself is plenty guilt enough that they carry.
It wasn’t Republicans, or Democrats, it was Alan Fucking Greenspan and all the morons that believed the free market would regulate itself; believed that a situation like this could NEVER happen because banks would never let it; that banks would act in their own self interest; that regulating the banking industry would be bad for the economy. They were wrong.
Government didn’t cause the mortgage melt down, socialism didn’t cause the mortgage melt down. It was pure capitalist greed. It was capitalism acting exactly the way capitalism is supposed to act. **Sam Stone **has no problem attributing inflation in Chile to socialist policies, but can’t see past his own blind ideology to the failures of capitalism. Housing bubble, tech bubble, hell even the BP oil spill is capitalism at work. It always seems great when it means cheaper and more available products. But then some how **Sam Stone **is able to look the other way when it kills people.
The US housing market ran out of customers. Capitalism can’t accept that all the people who wanted to own houses, and all the people that could own houses, already owned houses. Capitalism doesn’t allow a company to stop growing. So the standards were lowered, credit scores were ignored, down payments were ignored, appraised values were ignored–all this was necessary because capitalism needed the housing market to grow.
But that wasn’t enough, because eventually banks run out of capital. Without capital they can’t create more mortgages, without selling more mortgages they won’t be seen as “growing.” But who the fuck would buy one of those shitty mortgages, no one. So capitalism did what capitalism does: cheated people. The shitty mortgages were bundled with slightly less shitty mortgages, and passed off as moderately okay mortgages.
The housing bubble was exactly what capitalism does. Capitalism behaved perfectly. The markets went up as high as they could go, then crashed as low as they could go. A lot of people made a lot of money, and a lot of people lost a lot of money.
As I said before, socialist policies are about rounding off those sharp edges. The US didn’t need to nationalize the mortgage market. It just needed to set up some protections, and some regulations, and enforce them. It needed to set up some safety nets. And it needed to make sure it wasn’t creating or encouraging a culture of greed.