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As Long as We Remember...

March 20, 2008

A Model Failure

Tony Soltero

When the Bolsheviks overthrew Czar Nicholas II and, after a civil war, established the USSR, they launched the first large-scale practical application of Karl Marx's economic theories. His worldview had its share of appeal to many Russians on paper, especially after centuries of oppressive monarchic rule.


So, the new economic and political system enjoyed a good measure of popular support in the early days of the Soviet Union.


After a few years, though, the communist government bared claws and fangs just as sharp and deadly as those of the czars who preceded it. Joseph Stalin brutalized his (real and imagined) opposition with purge after purge, funneled most of his nation's wealth into a military/security apparatus, and built monuments to himself as millions of Soviet citizens went hungry.


Eventually it became obvious that communism was a major disaster, meeting no reasonable standard of political freedom or economic prosperity.


Undeterred by these grim realities, communist leaders kept chanting the mantra that the Soviet Union (along with, later on, its Eastern European satellites) was simply going through a "transitional" phase on its way to "full communism," when presumably all these problems would wither away and the long-awaited utopian dreamworld would finally emerge. These leaders would make claims that if communist states looked like they were failing, it was simply because they hadn't implemented the ideology with enough purity.


These kinds of rationalizations and self-delusions persisted for decades, until reality finally bit back and the USSR collapsed around the turn of the 1990's, along with its vassal states. Since then these countries have made lurching, uneven transitions to market economies, with varying degrees of success. But none of them seems too eager to go back to Marxism, with good reason.


It would be nice to report that only the Soviet communists could engage in such a sustained, long-term denial of the real world. But sadly, there are many here in America who have contracted the same capacity for self-delusion, and engage in the same ostrich act.


Except that instead of Marxism, their allegiance is to completely deregulated, supply-side economics – a mutant strain of capitalism that its adherents claim is "free-market," but was more accurately labeled "voodoo economics" by that flaming liberal, George H. W. Bush.


And the bitter fruits of voodoo economics have begin to sprout in recent months, as the American economy totters on the verge of a recession, if not something worse.


The dollar is dropping like the New Year's ball at Times Square. The federal budget deficit rises like yeast. Foreclosures are way up; loan defaults and bankruptcies are going through the roof. And the Treasury – with $2 billion of our money – has just stepped in and bailed out Bear Stearns, a firm noted for a slew of irresponsible investments, mostly subprime loans. There are indications that this won't be the last life preserver the feds throw to the private sector, especially since a frantic series of cuts in interest rates don't seem to be doing much to stanch the bleeding. (Where's Paul Volcker when we need him?)


Who's flying our plane?


(Side point: Has anyone noticed how these alleged "free-market" Republicans, who wring their hands so tightly at the prospect of tossing working people a few extra dollars in unemployment compensation and health benefits, don't blink an eye when taxpayer money is dumped to bail out failing corporations? Isn't this what we commonly refer to as "welfare?" Is it any wonder the GOP brand is down in Edsel and Betamax territory?)


But this economic meltdown shouldn't come as a surprise to anyone who can perform basic math. There's no way financial institutions can continually make unregulated high-risk loans and expect to collect on all, or even most, of them. There's no way the government can finance a trillion-dollar war on the other side of the world while at the same time slashing tax rates for economic elites. There's no way we can sustain the value of the dollar if we keep cutting interest rates simply for the purposes of keeping the supply-side fiesta going.


Enron wasn't an aberration, apparently. To the supply-side crowd, Enron was a dress rehearsal for what they intended to do to the whole American economy – bleed it dry. And now the chickens are coming home to roost.


The Reagan administration began dismantling many of the regulatory safeguards Franklin D. Roosevelt (and his successors) had put in to protect America from another Great Depression. The current Bush administration has taken that process to the extreme. And now – surprise! – we’re teetering on the precipice of another depression.


To hear the supply-siders tell it, though, the solution is more tax cuts and less regulation. Yeah, that'll work.


It is the height of ironies that supply-side adherents sound more and more like their communist counterparts in their capacity for self-delusion. It's time to shut these people off from the public debate before they cause America any more damage.

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