Obama economic adviser Larry Summers is sounding like Gordon Gekko these days, arguing that we need more "greed" to revive the economy (HT: Instapundit):
“In the past few years, we’ve seen too much greed and too little fear; too much spending and not enough saving; too much borrowing and not enough worrying,” Summers said Friday in a speech to the Brookings Institution. “Today, however, our problem is exactly the opposite.”
In remarks to a private dinner at the U.S. Chamber of Commerce on Wednesday, Summers was even blunter, according to an attendee: “Before, we had too much greed and too little fear. Now, we have too much fear and too little greed.”
It definitely reminds me of Gordon Gekko's famous "greed is good" speech from Wall Street, where he said that "greed — you mark my words — will not only save Teldar Paper, but that other malfunctioning corporation called the USA." However, Summers is wrong to suggest that American investors and corporations have lost too much of their greed. To the contrary, the constant lobbying of every interest group under the sun for more and more government bailout money suggests that they are just as greedy as ever. Even firms that have already received a hefty dose of handouts are lobbying for more. The problem, of course, is that their greedy impulses are being channeled into the unproductive activity of lobbying Congress for subsidies rather than into the development of more and better products for consumers.
In and of itself, greed is neither bad nor good. The key question is whether it is channeled towards socially beneficial activity that increases wealth and promotes economic growth or whether it is directed towards lobbying the government to take away money from one set of interest groups and direct it to another. At this point, it is often easier for corporations to satisfy their greed by lobbying for government funds than by engaging in productive activity. As Gordon Gekko put it in his speech, "[t]he new law of evolution in corporate America seems to be survival of the unfittest." Failing firms are using their very failures as justification for seeking bailouts.
It is also ironic that Summers cites an excess of "fear" as one of the main dangers facing the American economy. Ironic because the administration he serves has itself been stoking that fear in order to undercut opposition to its programs. As White House Chief of Staff Rahm Emanuel puts it, the crisis is "an opportunity to do things you could not do before . . . You never want a serious crisis to go to waste." An obvious corollary to this notion is that the "opportunity" will be even bigger the more "serious" people believe the crisis to be.
Related Posts (on one page):
- The Coming Explosion of Federal Spending:
- Larry Summers Channels Gordon Gekko:
- Obama Chief of Staff Hopes to Exploit the Economic Crisis to Expand the Growth of Government:
- Richard Epstein on Obama:
- Fear Itself, Con't:
- Exploiting Crises to Expand Government and Curtail Civil and Economic Liberties:
- Fear Itself.
- Why I'm Concerned About an Obama Victory:
Try telling that to St. Augustine.
I took Summers as making an unremarkable point in a colorful manner--i.e., the problem with the economy is demand (or, the lack thereof). I do not think he means that, literally, those on Wall Street are no longer greedy.
If 2 short paragraphs is an extended set up by your standards, you've definitely been influenced by the age of sound bites a bit too much. You could also have noticed that the post makes two points, not just one (one about greed and the crisis, one about stoking fear).
I took Summers as making an unremarkable point in a colorful manner--i.e., the problem with the economy is demand (or, the lack thereof). I do not think he means that, literally, those on Wall Street are no longer greedy.
He doesn't say that they aren't greedy at all, but he does clearly say that we need them to be more greedy and less fearful than they currently are. Moreover, his statement refers not only to a shortage of demand but also to insufficient investment and profit-seeking.
And, that explains why BHO is spending billions on road construction, something that's about as low-tech as you can get. Not only that, but some of the raw materials will have to be bought from China and other countries, and potentially hundreds of thousands of those who get construction stimulus jobs will be illegal aliens. Somehow I don't think the same libertarian types who'd say things like the post would have any issues with the latter two points.
One can be seriously wrong about economic issues without being an ignoramus. I never suggested that Summers was either ignorant or politically correct.
I do not need to read two paragraphs about whether greed is good to understand that you felt like making a cliched republican talking point about Obama a-scaring us into social-mal-ism.
"Isn't it ironic, don't you think?"
No. And there is nothing sneaky, or necessarily socialist (your characterization), about it.
I'm not the one claiming that our problems are due to an excess of fear. I also don't think you have to be a libertarian to be concerned about the truly gargantuan expansion of government (which, BTW, I don't think amounts to "socialism") we are witnessing. Even more to the point, I'm not the president of the United States or in any other comparable position of authority, so any fear I "stoke" won't increase my power or my political prospects.
Near as I can figure, which isn't much, it seems that everyone knows that some banks are toast, the bullet has to be bitten, and until that happens, everyone's on pins and needles.
Inflation? Deflation? GM/Chrysler failure? Oil back to $100 this summer? High interest rates? States running out of money? Bankrupt pensions? Capital gains tax hike?
Not all of those are going to happen. But the fact there's a good chance that one or more of them will happen doesn't make me want to do anything with my money other than stockpile it.
Need a few more metaphors for that mix?
Tom Friedman, call your office.
I'll do penance by reading "Politics and the English Language" again ... aloud ... at least, until the priest in the confessional makes me leave.
You seem to be confusing greed, the motivation to go out and acquire goods, services, status or other items/stores of value, with avarice, the motivation to go out and seek to take by trickery, fraud or force (whether force of violence or force of law) those goods, services, status or other items/stores of value acquired lawfully by others.
So, the president's top economic advisor has now said, in a prominent public statement, that there are signs that the crisis may be easing. Does that mean the Obama administration is now trying ally fears in order to bolster opposition to its programs? Or could it be that perhaps both before and now they were just stating facts and calling it as they saw it?
I think it's about kleptocracy, and I don't mean to apply that to just the party currently in power.
The economic crisis is the WMD of this administration.
Indeed Boesky was the source of "greed is good."I have never understood the fuss about "greed is good." Greed runs the world, and there is nothing greedier than universities.
Welcome to the hedge-fund racket, America.
Of course every people can tell is opinion, but not always you are right. But any way thanks for it!
The two are not mutually exclusive. People have a strong tendency to sincerely believe that which is in their political and economic self-interest. I have never suggested that the administration is consciously lying about the crisis and indeed suggested the opposite in one of the earlier posts in this chain.
As for why the administration is now saying the crisis is easing, it could be because they have already enacted a large proportion of their program and thus have less need of alarmism to promote its passage. However, Summers' statement is very equivocal about how much easing there has actually been, thereby leaving room for future alarmism should the administration consider such to be necessary.
Greed is no solution: Maxie Waters, Bernie Madoff and other Democrats (and Reps) have and are proving that.
Nobody at the helm is doing much if anything to get the ship back on course. Obama is listening to neo-Marxist French economists, quoted in his books, when it comes to economics, and hard leftists for everything else. Geithner is way over his head...after all, he ran the NY Fed supvervising Citibank during its race to the bottom. Didn't act then, can't act now, and a liar to boot.
The same boobs in Congress at the heart of the credit crisis are still there and have done nothing to fix their mistakes. Indeed, they pose as saviors.
No reason for confidence I can see.
The usefulness of alarmism is waning. Alarmism was necessary to pass the stimulus. But alarmism about the economy works against other administration goals. Take, for example, Obama's environmental and energy objectives. Reducing carbon emissions is a good idea, but it's expensive. The last thing the economy needs right now is a carbon tax. When we're all doing better we can afford to pay more for gasoline.
Other of the administration's goals, like universal health care, universal preschool, and universal college, may ultimately return profits on the money spent on them, but each has large upfront costs and deferred benefits. Again, we need to be doing pretty well before we can start pouring money into programs that won't pay off for many years.
In that vein, Above the Law can be the "Curveball" of the administration by spreading false rumors of massive layoffs.
. . . if only that were the case . . .
Where's the run-on sentence? Evidently MCM works as staff at Duke; what other possible association could he have?
Didn't he get sh*tcanned from Harvard for being un-PC?
(He didn't get shitcanned just for being un-PC; he also alienated a good chunk of the faculty by picking fights with popular deans and professors, and Harvard's legal defense of his buddy economist cost the school $25 million.)
Whoops. It's my density :-).
I think Mr. Summers was commenting on the investment climate, not on greed as a human emotion or vice.
People often describe the prevailing mood in the capital market as "greed" or "fear"--i.e., as expecting boom or doom. Summers is saying that the market was too optimistic during the late bubble and is too pessimistic now. No judgments about human nature, or morality, implied.
He may be a heck of economist, but his advice to Harvard's endowment has them hurting more than most.
So, what relevant skill has he demonstrated?
Then go read or listen to Volker and learn something. The separation of commercial and investment banking was done for a good reasons.
It does illustrate how we can understand the situation. It's all about what businesses do to differentiate themselves. Right now, government policy has given them incentives to differentiate themselves via value chain support activities like lobbying. Those are activities Michael Porter described in his writings about value chains that are indirect to the actual production of goods and services.
Porter also described value chain primary activities as those used to actually produce goods and services. Fields like quality management and marketing come to mind. When firms try to differentiate themselves by optimizing those activities, they produce better and cheaper products for buyers. If we continue to use the word "greed," this is where we might actually say "greed is good." In sum, this is the better activity to incentivize if government is going to influence the business environment with policy.
We can probably make a similar argument about consumer spending (especially via debt) and saving.
Sincerely,
Leroy Hurt
Calling Obama a Marxist: insightful. Accurate. A sign of clear thinking.
Speaking of the Fed, anyone got an opinion on Greenspan's claim that the Fed didn't cause the current crisis? The (ahem) money quote:
Greenspan says that his federal-funds policy is irrelevant to the unusually low mortgage rates. Is this really true? And what about the other side of the bubble? The crisis is about more than just risky mortgages - it's about risky mortgage-backed securities. Does the federal-funds rate have any relevance to the latter?
In the article, Greenspan makes the federal-funds rate the issue. But what about other Fed policies? Foes the Fed share any culpability elsewhere?
He did call Obama a Marxist-- at least not in that statement. He said "Obama is listening to neo-Marxist French economists." There's a difference between taking guidance and being one yourself.
I think Hyman Minsky has offered us valuable insights into the working of our banking system, yet he leaned towards socialism. Marx himself was right about some things too.
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