Sat Nov 6th, 2010 at 06:02:31 AM EST
Efficiency enjoys a nearly spotless reputation. Business leaders invoke it to justify activities that would otherwise be frowned upon, while politicians use it to explain why policy must follow their pet theories. Its limitations are once again being laid bare for anyone who cares to see, however.
Cross posted from Pruning Shears.
No Associated Press content was harmed in the writing of this post
In the wake of the Republican victories Tuesday there will probably be a renewed emphasis on neoliberal economics - at least as imagined by conservatives. Of course, "pure" neoliberal economics is one of those wonderful belief systems, like communism, that postulates an ideal end state. The world it sketches out never seems to come to pass though, so it is destined to remain, like communism, a system that cannot fail but only be failed. Look for it to be failed repeatedly for the next couple of years.
The mania for tax cuts will be back with a vengeance, and at some point liberals will have to figure out how to properly communicate to the citizenry that taxes pay for things that people like, and that when implemented by competent politicians (i.e. people who are not on principle hostile to government) are perhaps the most effective tool available to promote the general welfare.
The very idea that there are collective things worth having, and that cost money, seems curiously downplayed by neoliberal economics. Instead it is built on extrapolation from the most atomized level: imaginary individual transactions. (I have money, you have a loaf of bread. I pay you money for the bread. Now: scale to the whole country!) It tends to disparage anything that interferes with or slows down this fantasy capitalism, even if it provides a sensible, broad and basic level of protection. Yves Smith describes the dynamic on pp. 125-6 of her book ECONned:
The law in its various forms including legislative, constitutional, private (i.e., contract), judicial, and administrative, is supposed to operate within broad, inherited concepts of equity. Another fundamental premise is the importance of "due process," meaning adherence to procedures set by the state. By contrast, "free markets" ideology focuses on efficiency and seeks to aggressively minimize the role of government. The two sets of assumptions are diametrically opposed.
The presumed virtue of efficiency is insidious. For example, it is currently playing a central role in the foreclosure crisis. Stories and analysis of it is littered with references to it. MERS
- the Mortgage Electronic Registration System - used to process mortgage documents was created specifically for that purpose. Tom Deutsch of the industry-backed American Securitization Forum claimed
) MERS "makes the process more efficient, which helps keeps mortgage rates lower." Who could be against lower interest rates?
The implication here, per usual, is that efficiency is the result of gee-whiz computer technology automating drudgery - allowing the same work to be done cheaper. And of course gains in productivity are sold as the fruits of greater efficiency, when at least some of the time it simply means the same workforce is just putting in longer hours. But these supposed gains can be, like MERS, just new ways to cut corners and engage in questionable practices.
As Smith notes, the two positions cannot be reconciled. Wall Street's groupies claim (via) the problem is "antiquated, cumbersome property registration and foreclosure procedures," but as one judge who actually dealt with the issue noted, "Vague references to efficiency cannot be allowed to supplant the law: the basic requirements, rules and responsibilities for how we organize ourselves."
MERS is just the latest example. A couple years ago one of the remedies floated for checking stock speculation was a transaction tax. It would be a drag on large, quick movements of capital - and this is a good thing. Traders would be slower to empty holdings in one area to plunge into the latest bubble. It would reduce the tendency of vast sums of money to go sloshing around from one emerging market to the next in search of the latest quick hit. It would, in short, be better for the economy - and incidentally, help fund government. Instead we hear that high frequency traders (HFTs, or speculators) "play an important role in improving market efficiency" and must not have any friction in their games.
(Incidentally, HFTs are also credited with supplying "liquidity" to markets. This is a superb bit of doublespeak, because all you can really say about liquidity is that it is something that exists until it doesn't. When the earthquake hits, ain't no one looking to catch a falling body. The HFTs are scrambling for safety just like everyone else.)
Efficiency is neither good nor bad. Yet more often than not Washington embraces the kind of efficiencies that are at best a mixed blessing and at worst help set the table for crises. That no one dares question it is a sign of just how narrow the range of discourse is in the capitol. Until such claims start getting flagged and examined, conservatives will be calling all the shots in DC - no matter who has the majority.