Jon Stewart makes some excellent points here. Another point that deserves emphasis: The Wall Streeters received perverse compensation for benefiting from offering failed financial products. They were allowed to bet on the failure of loans, which is why they encouraged making loans to Subprime borrowers. They encouraged the sales of rotten, sure-to-fail financial instruments based on those loans. They found ways to make hundreds of millions of dollars from schemes designed to ruin their own companies, and the economy as a whole.
The average person simply cannot get his head around these facts, because Wall Street operates according to non-intuitive rules. The teabaggers can thus get away with framing banker compensation in terms of an honest day's pay for an honest day's work, when in fact there was nothing honest about anything they did. The system encouraged corruption.
I'm going to take the liberty of reprinting a good chunk of Bryan Gould's piece in the latest Lobster. (The entire publication is avaiable for free download
, but only for a short time.)
Contrary to the expectations of many of us that the global financial crisis would be seen as a conclusive judgement on the failures of neo-liberal doctrine, it is the Right that seems to have emerged, for the time being at least, unscathed and emboldened by the failure of their policies. It is worth reminding ourselves of the precise lessons that the global financial crisis should, and briefly appeared to, have taught us...
Markets are not self-correcting.
This simple and obvious proposition, so strongly confirmed by the failure of many of the world’s financial institutions, had been conveniently overlooked and even flatly denied by neoliberal theorists. They chose to believe that operators in a market are perfectly informed and enjoy a parity of bargaining power and that market outcomes are therefore the best available and should not be second-guessed. We now know that this is self-serving nonsense, and that the natural tendency of the unregulated market is to lead to excess, irresponsibility, inefficiency and eventually collapse.
The ‘trickle down’ theory was often used to support the proposition that, if the rich got proportionately richer, the rest of us would benefit in absolute even if not comparative terms from the lift in economic activity that the increased wealth of the rich would produce through increased investment and employment. This theory has been discredited in the absence of any credible evidence to support it, and in the face of evidence to the contrary that shows that in countries where inequality has widened the most, the living standards of the poor have actually declined.
Contrary to the constantly repeated mantra that the best thing that government can do is to ‘get off our backs’, the global crisis shows that in the end it is only governments that have the resources, will and legitimacy to underpin a failed banking system and therefore the currency and the economy more generally.