For a number of reasons, blogging has been infrequent here lately. I offer my humble apologies for depriving the world of my reactions to such events as the Cochran victory. Amazingly, the world appears to be getting on, but I know how much I've been missed.
In those snatches of time I've had available to me, I have managed to read James K. Galbraith's The Predator State. It's not a new book, but it's well worth reading. The subtitle tells much about the basic theme:
How Conservatives Abandoned the Free Market and Why Liberals Should Too
The last book I reviewed on this illustrious blog was Piketty's Capital in the 21st Century. The contrast between the two books puts me in mind of an aphorism that I first heard applied to Jefferson and Hamilton back in my college days:
The fox knows many things, but the hedgehog knows one big thing., first uttered, apparently by a Greek philosopher named Archilochus. Jefferson was the hedgehog by the way.
The “but” in the quote implies that the hedgehog's knowledge is somehow superior, but one must question that. There's something to be said for knowing a lot of little things, since if you know but one big thing, you tend to be led astray if you run into a situation where you come up against something new. And again, if I had to bet, I'd guess that the fox is more able to think his way out of a fix than a hedgehog.
Anyway, back to my book report. The one big thing that Piketty knows, at least for purposes of his book, is that inequality is growing and it's inherited wealth that we most must fear. That is a very big thing, and it is well worth documenting, even though most of us foxes knew it instinctively, though we might not have had the data on hand to prove it.
But Galbraith's book is about many little things, though there is an overarching theme, and it should be required reading for every Democratic politician, and every Democrat for that matter. The overarching theme is that Republicans have propagated a meme to the effect that “free markets” are the answer to all questions. The corollary to this is the equally evidence free assertion that governments are always and everywhere incompetent to do anything that a private actor with his snout to the trough offers to do in its stead. They have created an environment in which any deviation from “free market” ideology in our public discourse is easily squelched. Liberal politicians (if not liberals themselves) have, after years of being beaten with this stick, largely bought into the premise that the role of government is to enable markets to do their magic. They are afraid to utter the obvious truth that “free markets” don't always work, and, in many areas, don't even exist. Meanwhile, while conservatives pay lip service to free markets they have abandoned the idea in practice. The system they have created consists of rent seeking and diversion of money from the general populace to the corporations. An example: Free market ideology suggests that a purchaser in bulk (think Walmart) can negotiate for lower prices. And, that's precisely what Walmart does (See also, Amazon). But the government has, at the behest of conservatives, tied its own hands when it comes to the Medicare prescription drug benefit. The drug companies get retail prices for their goods, thus transferring our money to the drug companies in a way that should shock free market ideologues. But, surprisingly, it doesn't. And, of course, there's the implied government guaranty of “too big to fail” banks, that Republicans are so eager to protect.
Fox that he is, Galbraith gives multiple examples of the ways in which the “free market” is anything but, and goes on to give examples of instances in which modern Democrats feel compelled to find solutions to social problems that are “market based”. The book was written before Obamacare, but it makes an obvious point that, despite the “success” of that program, cannot be denied: that any market based (i.e., insurance company subsidizing) approach to the provision of health care will be more expensive and less efficient than one simply provided by the government. In the case of health care he makes the same point that I've made on occasion: that the basic math of insurance is well known, that there are no efficiencies that can be introduced into the system by “competition”, and that the only innovations that today's insurance companies can possibly come up with would involve new ways of rejecting claims, and that a “market based” health care system amounts merely to a government subsidy to insurance companies and their overpaid CEOs..
Altogether he makes a powerful case for looking at issues from a new perspective, which is really an old liberal perspective of believing that there are some things government can do better than the private sector; indeed there are some things the private sector can't do at all without sinking into the type of corruption we see in our big banks and other entities such as the nascent charter school industry and for-profit colleges, which leads me, as a coda, to take note of this story in today's Times:
A decade ago, Corinthian Colleges was a Wall Street darling — a company that seemed to be able to coin money from the federal government and from desperate students. Now it is on the brink of collapse.
You may have never heard of Corinthian, but it is a principal beneficiary of federal student loans, taking in $1.4 billion a year from the government. It operates schools under the names Heald, Everest and WyoTech. A week ago it said it would be unable to finance its operations past the end of this month and disclosed that the Education Department had slowed the flow of federal money, pointing to what it said was admitted fraud at Corinthian in reporting both grades and job placements. But Corinthian persuaded the department to keep pumping in federal money, at least temporarily.
The department initially said it would hold up funding of student loans for as long as 21 days to give it time to check on whether the students were eligible for the loans. Corinthian responded that such a delay would be fatal and damage its 72,000 students on 107 campuses. It said its finances were so perilous that it could not operate for more than a few days without an inflow of cash.
Even before the government action, Corinthian had violated covenants on loans from Bank of America, leading the bank to reduce the amount it could borrow and to demand faster repayment. While the company’s financial statements showed it had a sizable net worth, a chief asset was the money it would save on taxes on future profits because of past losses, and it has been forced to write off much of that asset. Other assets included money owed by students who had already defaulted on their loans.
Confronted with warnings it would be responsible for hurting so many students, the department blinked. In negotiations over the last weekend, it agreed to pump in an immediate $16 million, with more expected to follow, even though Corinthian has not provided many of the documents the department demanded months ago.
Those 72,000 students would be better off if the Department stuck to its guns. In any event, Corinthian College is yet another example of “market based” businesses whose true business plan involves diverting taxpayer money into its coffers while providing a “service” that could never survive in a real free market and which is far better delivered by non-profits or public institutions. To date, no one has ever accused a for-profit school of providing a quality education.
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