From One Market Under God by Thomas Frank (2000)

From Deadheads in Davos to Nobel-laureate economists, from paleoconservatives to New Democrats, American leaders in the nineties came to believe that markets were a popular system, a far more democratic system than (democratically elected) governments….in addition to being mediums of exchange, markets were mediums of consent.  Markets expressed expressed the popular will more articulately more articulately and more meaningfully than did mere elections.  Markets conferred democratic legitimacy; markets were a friend of the little guy; markets brought down the pompous and the snooty; markets gave us what we wanted; markets looked out for our interests.

Except when they didn’t, especially starting in 2008.  A different Nobel-laureate economist, Joseph Stiglitz, said of the economic crisis, “In this sense, the fall of Wall Street is for market fundamentalism what the fall of the Berlin Wall was for communism….This moment is a marker that the claims of financial market liberalization were bogus.”  This is not the first time the ideology has been discredited either.  In 1926, three years before the onset of the Great Depression, John Maynard Keynes wrote about a “disposition towards public affairs, which we conveniently sum up as individualism and laissez-faire,” that sounds all too familiar, right down to its origins:

Nevertheless, that age would have been hard put to it to achieve this harmony of opposites if it had not been for the economists, who sprang into prominence just at the right moment. The idea of a divine harmony between private advantage and the public good is already apparent in Paley. But it was the economists who gave the notion a good scientific basis. Suppose that by the working of natural laws individuals pursuing their own interests with enlightenment in condition of freedom always tend to promote the general interest at the same time! Our philosophical difficulties are resolved-at least for the practical man, who can then concentrate his efforts on securing the necessary conditions of freedom. To the philosophical doctrine that the government has no right to interfere, and the divine that it has no need to interfere, there is added a scientific proof that its interference is inexpedient. This is the third current of thought, just discoverable in Adam Smith, who was ready in the main to allow the public good to rest on ‘the natural effort of every individual to better his own condition’, but not fully and self-consciously developed until the nineteenth century begins. The principle of laissez-faire had arrived to harmonise individualism and socialism, and to make at one Hume’s egoism with the greatest good of the greatest number. The political philosopher could retire in favour of the business man – for the latter could attain the philosopher’s summum bonum by just pursuing his own private profit.

Ten years later, he published his greatest work, The General Theory of Employment, Interest and Money, which revolutionized economics until the 1970’s when our leaders decided to try the magic markets thing again.

What I’m getting at is how strange it is that this remarkably stupid doctrine keeps managing to come back with disastrous consequences. Concerning the market–the one that’s rebounded to bring us a “jobless recovery” despite increasing unemployment and underemployment–public relations legend Edward Bernays noted in 1928:

…[I]t would be rash and unreasonable to take it for granted that because public opinion has come over to the side of big business, it will always remain there. Only recently, Prof. W. Z. Ripley of Harvard University, one of the foremost national authorities on business organization and practice, exposed certain aspects of big business which tended to undermine public confidence in large corporations. He pointed out that the stockholders’ supposed voting power is often illusory; that annual financial statements are sometimes so brief and summary that to the man in the street they are downright misleading; that the extension of the system of non-voting shares often places the effective control of corporations and their finances in the hands of a small clique of stockholders; and that some corporations refuse to give out sufficient information to permit the public to know the true condition of the concern.

Yet people continue to invest in it despite being more or less told to piss off when they complain about the absurd pay going to executives that should theoretically be going to them:

Group Inc.’s board of directors has received several demand letters from shareholders relating to compensation matters, including demands that Group Inc.’s board of directors investigates compensation awards over recent years, take steps to recoup alleged excessive compensation, and adopt certain reforms. After considering the demand letters, Group Inc.’s board of directors rejected the demands.

Still, they never learn.  In a recent column about the prospects of shareholder activism, the “executive director of the Millstein Center for Corporate Governance and Performance at the Yale School of Management” was quoted as saying, “Up until now, it’s been sort of a Soviet system…We have been operating in the United States under the myth that boards have been accountable to shareholders.”  What does this have to do with the Soviet Union? Its collapse didn’t bring about any magic change according to the population.

Update:

It would also be nice to see something new on this front:

You may recall the Kabul embassy guard scandal [1] that broke last fall—the photos documenting drunken, lewd behavior by embassy guards—all to the embarrassment of the U.S. State Department. Shortly thereafter, the Department fired [2] eight guards and announced it would not renew [3] the contract of ArmorGroup North America after it expires in July, but that it would grant the contractor a six-month extension “to allow for an orderly transition between contractors.”In the meantime, since ArmorGroup is still on the job until the end of this year, the State Department wants to toughen its oversight of the private security contractor, and it intends to do that by hiring another contractor [4] to oversee this one.