The Great Deformation: The Corruption of Capitalism in America
David A Stockman, PublicAffairs: New York, NY, 2013
“I invest in anything that Bernanke can’t destroy, including gold, canned beans, bottled water and flashlight batteries.” –David A. Stockman on CNBC in 2010
The American economy is in a bad place decades in the making. Deeply messed up macroeconomic approaches are to blame. This, the tightly coupled interplay of specific public policy and deliberate elite behaviour also helped build suburbia, the single most visible monument to the American way of doing business since the 1930s.
America’s macroeconomic policy raised up this spectacular suburban edifice and then promptly whacked it in the face with a folding chair, among other things. David A. Stockman brings us the story in one battleship of a book.
Polemical? Yes. Righteous? Yes. Objective, well, not really, but the author’s take on the whole concussed, black-eyed, nosebleeding mess that is America makes this an alarming, unputdownable blockbuster.
Apparently, the Eisenhower era was the last time there was any shred of sound fiscal policy in Washington, D.C. Since then it’s been mainly a horrifying tale of crony capitalism based on flawed, destructive Keynesian mythologies made popular in the Great Depression. Too much borrowing, too much money-printing, too little gold standard.
Stockman starts with a survey of the smoking hole that remains of America’s finances. Oh, the “wonder and plunder” he sees, this financialized End Times of red hot printing presses and liquidity injections, TARP and auto bailouts, prosperity management via rock bottom interest rates, jacked up stock markets, lobotomized stimulus spending, vast sums for welfare and warfare, green energy boondoggles, fractional reserve banking, fiat currencies, outright corruption and fraud, lawlessness in an overgrown financial sector, deindustrialization, bubble-crazed markets for commodities and real estate, leveraged buyouts and plutocratic elites.
Nixon did this, mostly. He took the US dollar off the gold standard, hoping to make recovery from the disastrous Vietnam war faster and easier. Nothing has been the same since. This was when the idea that money and prosperity are just artefacts of policies and postures at the Federal Reserve, the Treasury Department, Freddie Mac, Fannie Mae, the White House and on Wall Street exploded. Just as the little bungalows of the 1950s were replaced by long ranch houses in the 1960s and then the crazed monster homes of the 1980s the sound money policy of the Eisenhower era was abandoned in stages for something ever more fake and elaborate.
The result is permanent ruin. This could not have happened, argues Stockman, if the US dollar had remained attached to something real, namely gold. Carter made some efforts to cope with inflation but Reagan was very comfortable with the new regime, adding vast and unnecessary military spending to a reactionary hatred of taxation. Before anybody knew where they were a long, yet totally ersatz, boom was underway thanks to casual miracles of financial engineering. Sprawl replaced mere suburbia. Clinton took credit for the manufacturing of prosperity in turn. More tax cuts came under George W Bush, a massively idiotic president in terms of economic policy.
In 2008, it all blew its guts out. What lies ahead? A $20 trillion “tower of deficits” is what. A “fiscal doomsday machine” which has so trashed free enterprise’s best qualities that nothing can really save America now, it is, apparently, sundown over the state-wreck. Welcome to permanent fiscal cliff and permanent sequester, America.
Sure, there’s a prescriptive appendix of policies that need to be adopted yesterday which could turn things around. They are interesting, worthless and lame all at the same time. After the demolition job done on America by crony capitalism, far too little and not exactly on time. Stuff like means testing social benefit programs is weak and Tory, and won’t bring back this patient.
The wild tale of how America got where it is right now is about as big as it gets. Such as it can be held by one story teller Stockman is probably custom made to do the job. He was one of Reagan’s budget directors, a Congressman and worked for Wall Street for many years. Combine that insider perspective with his study of the Great Depression and you get a privileged viewpoint.
The reader will find a high level of detail and much colour in The Great Deformation. The vast arc of economics, mind boggling statistics and casual meetings between a handful of decision makers are handled with equal deftness. Even though the overall package is huge we never felt lost in it.
Of particular interest to suburban-poverty.com readers will be chapters 19 and 20. This is where we see the racy folly of casino capitalism finally putting American hope in the sepulchre. Fiscal policy drew everyday Americans into Wall Street’s gambling addiction and fostered the long, long boom in real estate prices. Both of which have worked out not very well for America’s working people and middle class, and most of the main institutions affecting their lives.
Wow! Suburban-poverty.com says, “read this book.”
“…a welcome thrashing of the ruling classes in both parties.” That was said of The Great Deformation by a Wall Street Journal reviewer: Bow to Our Malefactors