Matt Taibbi (Taibblog) provides an example illustrating why there is no reform that can fix capitalism. It complements my previous post magnificently.
It shows that it's not a matter of creating better models, explaining and convincing some misguided academics and technocrats. Patching up a few things here and there will not do either.
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I suppose people could say many things about Glenn Hubbard. His Wikipedia profile, for instance, says he is the dean of the Columbia University Graduate School of Business, and Russell L. Carson Professor of Finance and Economics. So, the man has more than enough academic credentials and I am sure he has an intellect to match.
Until a few months ago, Taibbi adds, he "was a leading economic advisor to Mitt Romney and a rumored (perhaps even consensus) candidate for the Treasury Secretary job". Therefore, he is also successful in policy and political circles.
From reading the fragments of Hubbard's deposition in the lawsuit against Bank of America and Countrywide Financial (currently, Bank of America Home Loans), fragments which Taibbi presents, one can confirm that Hubbard is highly intelligent, plus being good with the words, and able to keep his cool under pressure.
Furthermore, one can see that Hubbard is a man who is paid handsomely for his services (but no more than high-end escorts, who charge for their services around the same):
"He took $1200 an hour specifically to not learn how subprime loans were created. Moreover, he did this non-learning for Countrywide years after the financial collapse, long after the truth about that company had already become common knowledge pretty much everywhere in the world outside Hubbard's office (...)"
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Smarter people than me can theorize and create new models; they can teach and preach until they are blue in the face, but they will not convince Hubbard and others like him. Neither will they convince think-tankers, shock-jocks or politicians (of both "liberal" and "conservative" persuasions) of their mistake, because it is not a matter of lack of brains, as Hubbard's example demonstrates. "It is difficult to get a man to understand something, when his salary depends upon his not understanding it", as Upton Sinclair once said.
It is not a matter of patching up the financial services alone, either. For one, Taibbi mentioned the connection between the financial services, universities and parties. Reform the financial services, without severing its links to universities and parties, and you'll have gained little, if anything.
But Taibbi didn't mention the notorious bureaucracy-private enterprise revolving door. He wasn't, either, speaking of climate change, or taxation and public services, industrial relations or a range of things where the same things happen.
Paraphrasing Cathy O'Neil, no "financial services reform" band aid will fix this boo-boo.
So, dear smart people, by all means, theorize, create new models, teach and preach. Technocrats, propose better regulations. But don't fool yourselves, with luck, if you are persistent, right, and communicate your ideas really well, you may convince people like me.
Don't get me wrong, this may help, but it is not enough.
Moreover, forget about convincing people like Hubbard, let alone those paying his fees. Upton Sinclair learned this without spending years studying; you should be able to do the same.
And whatever you achieve will last exactly until these people tolerate it.
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Perhaps it's time to think about a more enduring solution.
Your argument is worth taking seriously. However, I wonder if the situation isn't even more problematic. History shows that even ending capitalism doesn't end the potential for corruption among the brightest and most skillful. While the structure of the economic system is surely important, there is also always the question of whether existing institutions are credible and taken seriously. If the US were a country where there was a general perception of good governance and regulators had good standing in society, Hubbard's sense of shame would keep him from pimping himself out like this.
ReplyDeleteI wonder, too.
ReplyDeleteBottom line, no one can promise any solution will be enough. I believe more comprehensive solutions have a better chance of success, but better chances don't mean absolute certainty.
What I am absolutely certain of is that the clock keeps ticking. And we may eventually run out of time for any solution.