The Opinionator

Economics 101

Economics 101

Let's see if I get it.  We live in a free and capitalistic society where individual initiative and risk taking, coupled with an amount of luck, is how you become successful and get rich.  It's called free enterprise and its patron saint is the late Milton Friedman, and one vehicle through which his nostrums are promulgated is the Wall Street Journal. It's the American way, we know it and love it and the opposite is something like socialism or Communism.  If you doubt our way being the best, consider the fate of the former Soviet Union.

 I understand very little about economics. My eyes blur when I contemplate notions such as supply and demand. I never took an economics course in high school or college, but I  think I have an intuitive understanding of why some scholars refer to economics as "the dismal science." For me, unemployment is a word which precedes compensation.  If you lose your job the government will take care of you, or at least there is a chance it will. There is so much I don't get. I hear talk of  the Federal Reserve setting an interest rate approaching 0.  What's that all about?  You loan money to others whom you don't charge?  No wonder we are in trouble.

 My eyes glaze over contemplating the fraud of the financier Bernard Madoff who has stolen about 50 billion. A giant Ponzi scheme? What does that mean? One helpful quote about Ponzi schemes I picked up in the New York Times recently:

 "In a Ponzi scheme, not all investors lose.  The first investors gain much. Those who manage to get out in time retain their investments and some of their gains." - TAMAR FRANKEL, a law professor at Boston University on the Madoff scandal.

I heard a guy on TV the other day say that the banks have borrowed too much and are choking on their own debt.  Therefore they can't loan any more. Enter Uncle Sam who makes it easier for banks to loan money.  That's how it is supposed to work.

 With the recent melt down of the stock market along with the automobile industry, my sense is that we are staring down the barrel of an enormous gun which will blow at any minute. The basic question is whether the government should help out failing business enterprises. We can't help everyone; there is not enough money to go around.  So whom do we help?  The ones with the most lobbying influence?  The ones who could cause the most loss of jobs? The institutions which are most central to our culture?  No one at all? 

 It forces the nation to define its priorities.  Is the automotive industry as vital to our futures as the newspaper industry?  Is home foreclosure a bigger disaster than corporate bankruptcy?  Where do you draw the line about who to bail out and who to let fail?  I've read where the auto industry years ago resisted such innovations as rear view mirrors and seat belts.  That doesn't endear them to me, not does corporate charter flights of millionaire managers in a world where teachers and cops are earning about $50,000 a year.  How much does greed have to do with all the business problems today?  Are we going to support a situation where greed is rewarded?

 With no idea whatsoever about what to do, I will posit the following opinion: We can't do it all, but we probably need to do something.

 Perhaps we can help failing enterprises by suspending some of government's regulatory activities.  Yes, we can loan tax money to bail some of them out, but it should be offered with many strings attached and the emphasis must be on taking care of ordinary people who don't know greed, who work hard, and love our country.  That's my plan.  Help out a few, but understand that the breadline will be infinitely longer than we can afford. We need to face when to stop the handout.  I can trust elected officials to make the decisions about this, but I will watch their decisions closely and will use my vote and letter writing ability to try to smash the self enhancers and the greedy. I may even arrive at the point where the politician who can buy a second home or own a high performance automobile or boat may qualify as a greedy self-enhancer.