Who's to Blame?

Why capitalists are capitalism's most dangerous enemy.

By Robert J. Samuelson | Newsweek Web Exclusive

Jan 23, 2008 | Updated: 11:17 a.m. ET Jan 23, 2008

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Discuss

Posted By: sharkman @ 04/21/2008 10:37:24 PM

Comment: Every American needs to learn to live without money.Learn to hunt,fish,and plant your own food we will see how rich these thieves are when nobody needs or wants their money.If people reject the system they think we have to live in. If our money system fails the rich theives will have the most to loose.It will be a better world when this occurs.It's not if it is going to happen but when?When will the working class Americans lay down the shovel and climb out of the hole?Soon I hope.
Posted By: sharkman @ 04/21/2008 10:35:39 PM

Comment: Every American needs to learn to live without money.Learn to hunt,fish,and plant your own food we will see how rich these thieves are when nobody needs or wants their money.If people reject the system they think we have to live in. If our money system fails the rich theives will have the most to loose.It will be a better world when this occurs.It's not if it is going to happen but when?When will the working class Americans lay down the shovel and climb out of the hole?Soon I hope.
Posted By: vznuri @ 01/25/2008 8:44:25 PM

Comment: its not "who" to blame, its "what". that "what" is our banking system.
the only candidate who has any idea about this is ron paul.

see a paper I wrote called "fractional reserve banking as economic
parasitism"

http://econpapers.repec.org/paper/wpawuwpma/0203005.htm

endorsed by two phd economists. printed in nexus
magazine, 60k world circulation. #1 top downloaded
economics paper. used by economics
teacher in australia as standard classroom material.

more info on request.

recent supporting material:

The Shock Doctrine: Naomi Klein on the Rise of Disaster Capitalism
http://www.democracynow.org/article.pl?sid=07/09/17/1411235

Confessions of an Economic Hit Man: How the U.S. Uses Globalization to Cheat Poor Countries Out of Trillions
http://www.democracynow.org/article.pl?sid=04/11/09/1526251

John Perkins on "The Secret History of the American Empire: Economic Hit Men, Jackals, and the Truth about Global Corruption"
http://www.democracynow.org/article.pl?sid=07/06/05/149254

Video, senator/pres candidate Dennis Kucinich
at last years 2005 Monetary Reform Conference
http://www.monetary.org/video/kucinich/win_broadband.wmv

Money as Debt, video by Grignon
http://video.google.com/videoplay?docid=-9050474362583451279
Posted By: Mwalimu @ 01/25/2008 11:32:37 AM

Comment: Fimally, Robert L Samuelson has gotten it right. The real reason for our economic woes is the obscene gap between the very rich and the rest of us. Furthermore, all of the policies of our current Administration, aided and abetted by the corrupt Roberts Supreme Court, are geared to put more money into the pockets of the rich and take away money from the poor. Enron and the dot-com bubble could have been avoided had everyone one Wall Street been forced to abide by the accounting practices outlined by the AIA. The current mortgage crisis could have been averted had the governmnet outlawed APR's and forced every to abide by the traditional fixed-payment 15 and 30 year mortgages. That regulation would have kept housing prices within reason and would have prevented house flipping. In my hometown Los Angeles, even now, housing prices are ridiculous, even in grungy neighborhoods like mine, people expect $ 300,000 to $ 500,000 for a condo in an aging building with plumbing promblems. Before I retired, I taught in a dangerous inner city neighborhood, yet I would not afford to buy a house in the neighborhood where I worked. Los Angeles, like many other cities, offers housing at prices that only the rich can afford, and the rich can't live everywhere at once.
Posted By: poldark @ 01/24/2008 3:55:23 PM

Comment: THe problem we have is that these people are practicing "corportism" not capitalism , they are in it for the money and their personal careers. A good (smart) capitalist thinks about the viability of the company and its good in the long run. They make sure the people who are there assest are providing the same ROI on their compensation as any other asset would be required would be analyized. The problem is that these people get caught up in "the oz effect" in that these stupid board of directors actually believe the press these blow-hard CEO''s create about themselves and think they have to have them at any price. If only someone would dig under the covers and realize the "emperor DOESN"T HAVE ANY CLOTHES" and the CEO HAS NO BRAIN!!! Most have gotten to where they are through through other boneheads who "mentored" them and took care of them.. A friend of mine who used to be a high level executive at one of these firms explained to it to and I have met most and always walked away thinking " who do they have pictures of". This is the same person who hired a famous CEO to take over the presidency of a high profile company he aquired. The whole time during the hiring process and subsequent fall out he kept saying over and over what a PIG this guy was. When asked the obvious "why did you hire him when you felt that way?" The immediate response was " well cause I knew him". Enough said.
Posted By: tdn0024 @ 01/24/2008 9:41:51 AM

Comment: Big problem with a pretty simple solution.

The root of the problem: Financial executives have one-way pay packages. They make a lot of money for selling deals. They lose (basically) nothing if the deals they sell are horrid.

Pension funds need to get serious and force a change.

I-bankers (and other execs) hold on their big rewards need to have contractual clawbacks. If the team you are working on creates losses, you personally cede your prior pay.

And indeed, one may look at fee generating businesses having a substantial portion of their fees generated subject to future clawback in the case of failure.

Thus, the problem is not capitalism.

The problem is faulty contracts as a pay norm with capitalism, that incent the fee businesses and annual bonus people to milk it like mad until their sector goes broke, then retire rich or skate on as big successes to use their rainmaking abilities in some new sector.

Clawback provisions will elevate the value of strong analysis and risk management within firms. And that is what steady capitalism requires.
Posted By: adirondack_1 @ 01/24/2008 9:35:08 AM

Comment: There is one word, accountability, there is none. White collar crime is largely legalized through campaign contributions and kickback schemes. Legal schemes. After all, who writes the laws won't put themselves in harms way. The sole reason there isn't a line item veto in this country, scams.
Posted By: case42tlc @ 01/24/2008 9:21:09 AM

Comment: Why does Newsweek perpetuate the childish myth that new money is created with printing presses? Cash makes up a tiny percentage of the money in our economy, and running the printing presses at the treasury department could never inject a significant amount of money into the economy. Just for the record, new money enters the economy when banks make loans, not when hundred dollar bills are printed. Econ 101.
Posted By: case42tlc @ 01/24/2008 9:14:37 AM

Comment: This might seem like nit-picking, but it's been driving me nuts for years. Just for the record, the fed does not create new money by printing hundred dollar bills. Money in the form of cash makes up a minuscule portion of the money supply. Most people, not to mention businesses, do most of their transactions without cash being involved. New money enters the economy through banks making loans, not by bills being printed.
Posted By: eddiewhere @ 01/24/2008 8:04:14 AM

Comment: What goes up must come down. Recessions are part of the economic cycle. It is natural and enevitable. The question is who is to blame if a recession last too long. That is why it is very dangerous for government to try and control prices.
Sometimes we have to let PRICES RISE it is a healthy thing. A Person who never gets sick can never build up an immune system to fight future more devestating viruses. It is not good to get sick all the time but it part of our biological developmet. PRICE CONTROLS ARE BAD WHY? Any price control below market rates and/or the expenditure of national savings (financial reserves) to hold down monetary devaluation are inflationary. Price controls and the expenditure of financial reserves subsidize inflationary levels of demand and prevent increases in supply. They make it much more difficult - much more painful - to bring inflation to a halt and restore healthy and sustainable economic growth.
Monetary inflation is a TAX used by governments to expand the money supply and transfers wealth from its people to itself.
Even when there is little "price" inflation, stable prices just mean that governments, by printing more money or otherwise expanding the money supply ("monetary inflation"), has appropriated for itself all the benefits of each year's increase in productive efficiency.Therefore the measures used to hold down price increases are actually additional forces or causes behind inflation, that will cause even further price increases in the future.
"Our country is too large to have all its affairs directed by a single government. Public servants at such a distance, and from under the eye of their constituents, must, from the circumstance of distance, be unable to administer and overlook all the details necessary for the good government of the citizens; and the same circumstance, by rendering detection impossible to their constituents, will invite public agents to corruption, plunder and waste." --Thomas Jefferson to Gideon Granger, 1800. ME 10:167
"I consider the foundation of the Constitution as laid on this ground: That "all powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people." [X Amendment] To take a single step beyond the boundaries thus specifically drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition." --Thomas Jefferson: National Bank Opinion, 1791. ME 3:146
Posted By: lovnov4 @ 01/24/2008 3:18:55 AM

Comment: Blame no one. A long deep worldwide recession might just solve our problem of global warming. Anybody noticed there might not be a technological solution to it?
Posted By: dongiovanni @ 01/23/2008 9:01:44 PM

Comment: Sir,

The problem is not capitalism, the problem IS MBAs. The tenet of capitalism is simple, invest in a manner that creates wealth and profit, not for a week, two months or 5 years, but forever. This country, over the last 30 years has been overun by 20-something so-called experts coming out of a business schools (with MBAs) spewing trite without ever having been faced with having to make their way in life. They have been brought up with silver spoons in their mouth and now that they have jobs, their bosses, who are of the same elk promote them to spew and promulgate the same idiocy.

Until this country rids itself of MBAs, these cycles of perceived boom and certain bust will not stop, more and more people will get into trouble, and this country will be relegated to be a second rate empire. I do not believe that Mssrs Gates, Buffet or Slim will agree with you that the problem is capitalism, but I am sure that they will agree with me that the problem is with short term profiteering that Wall Street imposes and compensates.
Posted By: GustoMaybe @ 01/23/2008 8:54:13 PM

Comment: > Lest a libertarian rear its ugly head here, I would ask if they'd like to do without OUR public roads, public education, public security (police and fire and military), public subsidized higher education.....

I'm a libertarian; hopefully my head is not too ugly , but here's my response:

Public roads: I could do without public freeways; they encourage sprawl and are bad for the environment. Make every freeway a toll road and watch sprawl slow down and automobile traffic decrease.

Public education: Every child in America deserves a quality education; it turns out, however, that the government sucks at providing it. Allocate a certain amount of money to each child and let their parents decide.

Public security: Government should provide this.

Public subsidized higher education: While it may increase accessibility, subsidized college also is responsible for continual double digit increases in tuition. Supply and demand...
Posted By: pbriggsiam @ 01/23/2008 7:52:59 PM

Comment: Finally a mainstream publication that asks the question of whether capitalism needs reigning in. We are a society that can choose who to best meet the needs of its inhabitants. The "free market" is every bit a human invention as any other economic system. It is faulty therefore.

Finding a way to create a just society (not a utopian one) - always having the goal of justice in mind - is where our economic system should be focused. Harness the creativity of freedom while reigning in the excess that invariably arises via government regulation is the fine line we have yet to find a balance on.

Lest a libertarian rear its ugly head here, I would ask if they'd like to do without OUR public roads, public education, public security (police and fire and military), public subsidized higher education..... I would suggest libertarians miss an important part of life in that we really are in this together. Life at its most meaningful is often found in our involvement in the community and looking beyond ourselves (Ann Raynd - what an immature human being).
Posted By: sevakandi @ 01/23/2008 7:46:04 PM

Comment: The moment a company goes public, it becomes subject to demons known as investors, chasing the Holy Grail called "growth". Endless growth at any cost, whether or not the company is ready to grow or not. CEOs with fat pay packages tied to company stocks and incentives have an inherent conflict of interest. Yes, it is in their interest to help the company prosper. It is also in their interest to fudge books, take unnecessary risks, and drive change to satisfy the clamoring of investors wanting instant gratification. It's not longer good enough for a company to be profitable year over year; it must "grow! grow! grow!" or be deemed a failure on Wall Street. Even this ignorant no-economics-degree observer could see that the housing bubble had to burst sometime, and that it would be as ugly as the dot.com bust when it came. How come this overpaid twits couldn't see it? Because they were incentived to drive the bubble bigger and bigger, regardless of the coming crash. They chose to gamble on getting in, getting rich and getting out instead of moving their companies wisely on a steadier course. They had no incentive to do that, you see.
Posted By: Archguy68 @ 01/23/2008 7:44:18 PM

Comment: Corrupt financial markets are capitalism's worst Enemy. It's time for regulation/oversight/inspection similar to what is found in the Construction/Engineering/Architecture industries, not whatever is done in the SEC currently.
Posted By: gnathan @ 01/23/2008 6:18:14 PM

Comment: First, capitalism as such is neutral. It is neither good nor bad. It works fine when there is a level playing field because, when both parties are equal in power and make an exchange, both must benefit. The problem is that most often there is not a level playing field. In fact, the whole idea of capitalism as it is now practiced is to ensure that there is no level playing field. The idea is to get an advantage over the other party by collusion, coercion, misinformation, concealing information, favorable legislation, etc. One role of government (and government is largely to blame for the present situation because there was an absence of oversight and regulation) is to ensure that the playing field stays level. However, when corporations and other special interests own the government, guess who will be favored in legislation? Let me tell you how things work in Canada, which the US would do very well to emulate in many regards, including health care. No candidate is allowed to accept more than $1000 from any contributor, including from the candidate him/herself. Spending in a campaign is determined by a formula based on demographics such as population and population distribution in an area. No one can exceed the spending limit or outspend other candidates. This system prevents corporations or other special interests from getting a stranglehold on government.

Second, it makes no sense to ask what someone is worth. The question: Is a doctor worth more than a banker? cannot have an answer since there are ever so many ways by which we determine worth. A doctor is worth more if you???re injured; a banker is worth more if you need to borrow money. There is no such thing as worth in general. Just as a house is worth what people are willing to pay for it (given a level playing field, which almost never exists) so an executive or doctor is worth what people are willing to pay them. This is a gross oversimplification as there are so many factors that determine price, which is what you???re talking about. Is a baseball player worth a price of $60 million? Yes, if people are willing to pay that. However, this is to ignore the extent to which the populace subsidizes baseball salaries by building stadiums, etc.

In my opinion, the US is very nearly dysfunctional and unless serious action is taken soon, it is headed for disaster.