Tuesday, December 16, 2008

I wish I were more shocked about the Madoff scandal

But what's really all that shocking about the Ponzi scheme? Is it the greed? No, Madoff's greed isn't shocking. In fact, greed like his is what our economy needs to grow (I hate to be the one to say that, but I don't make the rules...). Is it the idea that he was paying investor A with the money of Investors B and C rather than through any real production? I can't see how that in itself is all that shocking. It's unsustainable, obviously. It only works if there's constant growth, and there's no such thing as constant growth. But unproductive tricks like this are not only common, they're the back bone of our economy. We spin gold from hay while 90% of the world starves. That's not a dirty secret. That's Wall Street. That's the financial sector.

The only thing I can even think should be deplorable in the Madoff scandal is the deceit involved...that the people who gave him the money didn't know what he was actually doing with it, and believed he was doing something else with it. It's fraud, sure. But done in more subtle ways, it's pretty common and pretty legal. Unsavvy consumers end up getting hosed all the time. And what's the free market's answer? Make it illegal? Give them their money back? No. It's 'buck up and make better decisions next time.' Free market for the poor, regulation and even subsidy for the rich.


Clumpy said...

The role of greed in a free market society is worth exploring. Is "greed" truly necessary? Greed seems the twisted brother of ambition, the desire to make a daily living without that same satisfied feeling of demonstrably doing something that you get from shoveling the driveway or helping a friend move.

Raw "greed" combined with the loopholes and shortcuts available in a society ruled by imaginary transactions definitely undermines the system - the fact that there are so many ways for those with resources to pull strings to increase their wealth in formless sorts of ways can't be a good thing.

And the contrivances and shroud of tricky secrets, tortuously complicated law and self-supporting organizations seem to buck at the foundation of anything approaching the free market system. It's not really capitalism, it's not socialism and it's not even objectivism but the worst bits of all of the above. It's casino-minded meta-moneymaking and it can't last.

t said...

I fail to see how the Madoff scandal is the embodiment of the 'worst bits of socialism'. What would socialism have to mean for that to be true?

Moreover, greed isn't a bad 'side-effect' of the market system; it is constitutive of contemporary market capitalism. Without the desire of economic elites to pursue the logic of profit maximization to its limits, you do not have capitalism. This is capitalist-apologists either 1) try to show that unmitigated avarice is somehow ethical, or 2) try to claim that wide-scale greed-driven behavior yields optimal society-wide outcomes. The trouble is that both of these are false, and that avarice and fear are terrible ways to view our fellow human beings (but are, nonetheless, the defining social/economic relations under market conditions).

The 'free-market' is not an actually-existing set of institutions, this is true; but it is a real thing. It is real insofar as it is a legitimizing fantasy that functions by explaining away the most destructive elements of the existing order. E.g. "privatized, corporate health insurance is only bad in the U.S. because the markets are free enough, thus if only there were more deregulation then for-profit health insurance would be swell..."

The words "capitalism" and "socialism" have meant a great deal to world history for hundreds of years. I'm not sure 'objectivism' has the same relevance.

t said...

part of that should read:

"This is why capitalist apologists usually say 1)... 2)... etc."

t said...

sloppy typing... another part of the main post should read:

"E.g. ... is only bad in the US because markets aren't free enough..."

Clumpy said...
This comment has been removed by the author.
Clumpy said...

Firstly, I was referring to "objectivism" for its emphasis on hedonistic personal consumption and rejection of an overriding ethical code, instead gearing toward one's own happiness.

I wasn't comparing the proliferation of tricky moneymaking secrets in a free society to socialism, but merely pointing out that it didn't fit any viable philosophy (and things like the "free market" are very much a philosophy). It merely supports the existing class structure and widens disparities, something that doesn't seem to fit into any of the major philosophies.