What are markets? Markets are nothing more than individuals engaged in exchange. Nothing more, nothing less. Now, sometimes in the process of trading, there is fraud. One party can lie or cloud the terms of an agreement to his or her benefit. We can all agree that it’s the government’s responsibility to protect people from said fraud. Otherwise, markets are just people engaged in free activity — mutual benefit, mutual gain–with risks sometimes involved. If such a relationship didn’t exist, there would be no trade and therefore no market.
But some of our favorite Mercedes Marxists think of markets as some abstract enemy — a Darth-Vaderish force that inhabits the greedy and puts Vampire eyeteeth in the necks of the poor. Perhaps this mien – common among progressives – is fueled by guilt. Perhaps by ignorance. Who can say? But of course, anything that happens that’s perceived as a social bad is the market’s fault and the market’s alone. Markets aren’t perfect (whatever perfect means — I guess by their lights that no one should ever have to take risks or fail at anything.) And the government is the almighty, allgood, fix-er-up-er of justice–an objective Board of Control that with the smartest, morally upright people will set straight all the little people who clearly can’t make economic decisions for themselves. (What could be more condescending, except perhaps putting a Wikipedia link to the word Schadenfreude as if people have never heard of it?)
Most recently, for example, Progressives have a post that lays blaim for the mortgage crises squarely at the feet of "Republicans" and of course those they derisively refer to as free-market fundamentalists — despite the fact that the former and the latter don’t always occupy the same area of the Venn diagram. Evil capitalists, the story goes, are drinking the blood of the homeowner (forgetting that some of these companies, and their employees, are teetering at the edge of bankruptcy themselves due to poor decisions). For support of their view, they throw in the Left’s favorite neo-Keynesian hack Paul Krugman as evidence that they’re right, as if this polemicist has said anything sane since 1999 — or whenever it was Krugman started getting paid more to think less.
Instead of looking for villains in any other places besides his favored place — that horrible market he (and all of us) have benefitted from — he sticks to his master-narrative. And if any consideration falls outside of that haves- and have-nots story he jealously guards, he will ignore it, wish it away, or search frantically through Paul Krugman archives for witty retorts. Because rectitude courses through his veins. To consider other ideas ruins that good feeling righteousness brings. In the case of the subprime "crisis", he ignores the fact that HUD regulations have pressured and even forced lenders – either politically or by law – to "serve" populations that would otherwise fall out of the risk calculations lenders use to remain solvent businesses. But no, the government can do no wrong. So this couldn’t be a factor.
And while in the wake of the dotcom bubble there was certainly an excessive migration of capital to real estate fueled by Fed policy, our Robin Hoods of home ownership write as if they a) knew all along, suggesting some crystal ball living where the sun don’t shine (hindsite being 20/20 and all), b) that Alan Greenspan is any better at planning an complex economy than their favorite progressive politicians are of fixing it, and c) ordinary people are simply not capable of making risk calculations for themselves and to live with the consequences of their choices.
And if we, as our champagne socialist bloggers might hope, had regulated away the kinds of loans they finds so abhorrent, how many of the 97+ percent of those subprimers who still own and are paying for their mortgages would very likely still be renting? So which is the "crisis"? Never having the opportunity to begin with? Or freely accepting the risk? Our gentle paladins for social justice know better than YOU what risks you should take. And so do the government nannies they serve with such utter faith and obsequiousness. (I’ll pass over the irony in that this author simultaneously derides "market fundamentalism" [yes, again] while taking shots at the former Chairman of the FEDERAL Reserve — you know, that august government body.) When the government monkeys come around to over-regulate the mortgage industry so no one in the lower quartiles EVER gets a lone, what will they say? ‘Screw ’em’ I suppose. Or perhaps they’ll hand out 3% fixed-rate loans like candy to everyone and bail them out whenever they default–all at everyone else’s expense. Either way, they’ll know what’s best.
To our progressives blogger’s false dichotomy I’ll say this: the lending industry has already corrected itself. Bailouts will only skew the risk assessment of lenders and buyers more than the government and Fed have already done. Over-regulation a la SARBOX will result in unintended consequences that will be with us well beyond the healing of this burst bubble. We’re now paying for a confluence of factors not even a majority of which were products of the market. But more importantly, the cure will be much worse than the disease if you, Bush and Congress get your way.
Despite all the sarcasm they can muster, our Mercades Marxists won’t be able to explain away (much less acknowledge) myriad other factors in the subprime issue. They will be content instead to throw out non sequiturs about war or wiretapping. They will offer no substantive solutions. They will be content to hide behind rhetorical devices their readers will happily lap up without reflection. But they will not get into the actual critical thinking. (That’s Krugman’s job, apparently). No, they are, and will remain, second-hand dealers in bad ideas.