19 October 2008

Smashmouth Economics

by Thomas Gangale
California Progress Report
12 October 2008

George W. Bush pushes a $700 billion "rescue package" of government money to shore up the markets. Henry Paulson announces that the government will use some of the money to acquire stock in banks. John McCain proposes that the government buy up the bad paper on your home. And any number of deregulationist Republicans are now tripping over each other to step up to the pulpit and preach the need to replace our outdated, 20th century regulatory structure with a newfangled system for the 21st century. All of which leaves the Republican Party with about as much philosophical underpinning as the Communist Party in China, where capitalism is cleaning our clock. Perhaps the Communist Party and the Republican Party ought to swap names, for the GOP is now espousing the sort of capitalism that Karl Marx would have loved.


Contrary to popular belief, Marx was not an enemy of capitalism. His magnum opus, "Capital," fills a library shelf, the product of a lifetime of studying capitalism. If he was a critic of capitalism's excesses, given what has occurred in the past few weeks, is criticism such a bad thing? But Marx also gave capitalism its due as the most efficient mode of production ever devised. The problem, as Marx saw it, was that an economic system based on competition necessarily produces winners and losers. It creates wealth, but it creates it unevenly. What about the losers? Aiding society's small-time losers is called "welfare;" aiding its major league losers is called "rescue." By any name, both are socialism.

That's such a scary word! Worse than visions of doling out Cadillacs to the underclass, it conjures up your having to give half of your paycheck to everyone else, and if that were the case, no one would want to work very hard. I mean, just suppose that the 49ers have another disastrous season and end up at the bottom of the heap? Do they deserve to get the top draft picks in the college draft? When they go on the road to get creamed by the Dallas Cowboys, do they deserve to get 40% of the gate receipts at Texas Stadium?

That's right, the National Football League, one of the most successful capitalist enterprises in history, is socialist in its structure. Long ago, the team owners agreed that although competition was a good thing and the American way, driving each other out of business was bad business. What they wanted was "parity," to keep all of the franchises stable, to punish winners and reward losers, to limit the lifespan of team dynasties, to increase competition by constraining competition, to increase the creation of wealth by redistributing wealth. Without revenue sharing, the Green Bay Packers would be only a fond memory from the days of leather helmets. NFLism's merger of capitalism and socialism is as American as soccer-style place kickers, and it's the best of both worlds. Its socialist net makes the league safe for smashmouth capitalism. And everyone in it works very hard, because Americans always want to win.

Forget about the self-regulating "free market." It doesn't exist, it never has, it never will. The free market religion has a number of central tenets, a couple of which are demonstrably false. First of all, it assumes that everyone participating in the marketplace is rational; writing subprime loans was rational? Secondly, it assumes that rational actors have perfect information; how good was Lehman Brothers' information?

What has emerged in the American economic system over the decades is a sort of disaster socialism: government intervention to pull the economy back from the precipice. And it's a form of socialism that historically turns a profit. Bailing out Mexico, the savings and loans, Chrysler, and Lockheed, the American government made money every time. We're smarter socialists than the Soviets ever were. Recognizing that there is no free market that some preach, and being honest about the disaster socialism that we practice, we need to take the next step toward NFLism. Our current crisis of capitalism wouldn't be as dire if socialist intervention had been more timely, and had it been more timely, the intervention would have been so tiny as to be unremarkable. The free market coaches knew they had lousy field position, but they keep wanting to run up the middle on fourth down and long yardage anyway. We can do better, and we already know how to do better. NFLism runs capitalist and socialist plays like a smart coach uses the ground game and the air game, knowing when and how to use each. If salary caps for football players is a good idea, why not for CEOs as well?

So, let's go, America. We're getting blitzed, but we can get back in the game. Maybe John Madden will draw some yellow circles and lines on the NASDAQ board for us.