Rational Philosophy

The Invisible Hand

Ah, the invisible hand, what a fine, dark metaphor to match these dark times. Adam Smith in The Wealth of Nations: The individual who “intends only his own gain is led by an invisible hand to promote an end which was no part of his intention.”

Wednesday’s New York Times editorial “Mr. McCain and the Economy” criticizes McCain on several fronts. 1. His claim that the economy is fundamentally sound, despite the latest cataclysms. 2. His clarification that what he meant by “fundamentally sound” was that he “believed in American workers.” and 3. His broadside that any blame that could fall fell surely on Wall Street’s “unbridled corruption and greed.”

“The crisis on Wall Street is fundamentally a failure to do the things that temper, detect and punish corruption and greed. It was a failure to police the markets, to enforce rules, to heed and sound warnings and expose questionable products and practices,” says the editorial, and with a flick of the wrist ends with a call to McCain to proffer new solutions or approaches that might correct the problems.

McCain, we’ve heard and he admits, suffers from a fundamental lack of interest in things financial (he doesn’t recall how many properties he and his wife own — eight). This is an unfortunate quality in the prospective leader of a country, especially during economic upheavals.

Record Profits in 2007 $1,300 per second

The invisible hand has another meaning here, too. McCain, intent on gaining the presidency is led by the invisible hand of greed in the Republican power-makers. It is no part of McCain’s intention to lead the country into financial disarray, to risk further dismantling of what was, prior to Bush’s presidency, a remarkably strong economy.

Economics is a complex subject. Even the experts don’t understand how economies really work. They are too vast, multi-faceted and irrational.

This last is an incredibly important point. Emotion, fear, mania, addiction, overoptimism all play significant roles in the way the economy heaves and rolls. The concept and model of a completely free market fails in the real world on this basis alone.

Subprime mortgage rescue plan (Simplified Diagram)

Subprime mortgages and the resulting current woes illustrate the second point about the illusion of the completely free market. A free market, a market without restraint, is free to collapse. If we want to prevent this (and who would argue that it’s not in the nation’s best interests to prevent occasional collapse of the economy) someone outside the market needs to be monitoring, reviewing and, if necessary, regulating such things as new financial instruments.

The last problem with the notion of a completely free market is the dangerous relationship with the seat of government. Large, wealthy corporations have deep pockets with which to influence government policy. And, worse yet, if agents of those corporations influence government thinking, policy and strategy (think Rove and Cheney) the power of government will exert an ultimately skewed and even destabilizing influence on the market.

This is exactly what has been happening, as the Times editorial points out: “The disconnect between work and reward has been especially acute during the Bush years, as workers’ incomes fell while corporate profits, which flow to investors and company executives, ballooned. For workers, that is a fundamental flaw in today’s economy. It is grounded in policies like a chronically inadequate minimum wage and an increasingly unprogressive tax system, for which Mr. McCain offers no alternatives.”

The free market is a nice idea, a useful model to illustrate one of the forces at work in an economy. But we should not forget that the invisible hand bends and shapes the market according to the will that wields it.

Related posts from around the Web:

Senate Democrats Discuss Bush-McCain Economic Policies - Senators Boxer, Stabenow, and Menendez discuss how the turmoil on Wall Street is a direct legacy of Bush-McCain economic policies that have failed this nation for eight years. Refusing to police lenders and neglecting to protect …

McCain’s Economic Solution: Hemorrhage More Money - … GOP nominee for his statement this morning — which they asserted was an announcement of support for $25 billion in government loans to the auto industry. So there we have it. McCain’s solution to our terrifyingly failing economy? …

McCain Follows Obama With Direct Economic Ad (VIDEO) - “You, the American workers, are the best in the world,” says McCain. “But your economic security has been put at risk by the greed of Wall Street. That’s unacceptable. My opponent’s only solutions are talk and taxes. …

On Hillary Clinton’s unerring sense of footinmouthity.

Capitalizing on the tragedy of her inability to be sensitive, Hillary Clinton has once again demonstrated her supreme political aptitude for footinmouthity. Stricken with a malignant brain tumor she is not, but Hillary needs no excuse to usurp Teddy Kennedy’s tragedy and achieve her outrageous best. Is it her fault that Robert Kennedy was assassinated in June of the year of his foreshortened primary bid? Of course it isn’t. Then why are people so bent out of shape that she would attempt to make political capital out of it…?

Jeez. Anyone would think you’d never seen a man shot before.

And now, with rumors that her fellow liability, Bill, is agitating for her to be Obama’s VP, one wonders how she’ll outdo Dick Cheney (remember him?) who managed to shoot his old friend in the head with a shotgun…

Early news of the destruction of the CIA interrogation tapes had the distinct whiff of smoke about it; the kind of smoke that hints at the existence of fire. The sad story had all the hallmarks of a not-so-wily White House cover up. The protestations of ignorance from all corners; the silent finger pointed at the lone and lowly scapegoats, I mean maverick lawyers at the CIA… I’m sure that many of us had the same question: could this really have happened without the knowledge and endorsement of the White House?

Today we have a glimpse of the smoldering coals of that fire. At least four lawyers close to the administration weighed in on the question of destruction, apparently, among them Alberto Gonzalez, the long arm of the war. And a former senior intelligence official speaks of the “vigorous sentiment” of some White House big wigs in favor of destroying the tapes. Why? Because at the time the Abu Ghraib detention scandals were making the administration and the country look bad, as if we lacked principles and decency. So came, we may presume, the principled and decent voice of power: Let’s burn those incriminating tapes.

I’ll go out on a short and sturdy limb and predict that the US administration also had a hand in Pakistan’s quiet release of about 100 detainees who had been held on suspicion of terrorist involvement in secrecy and with dubious legal grounds or outright lack of same. One of whom was so sick and malnourished that he died about twenty days after being left on a garbage dump.

What philosophical lesson can we take away from the miserable conduct of the present administration? An odd aspect of the Bush presidency seems to be that the man himself hasn’t garnered more ill will. And therein perhaps lies the seed to the lesson.

Bush is the president by title but not by function. He’s the front man. Bush has been more truly and firmly manipulated than the American public. Cheney, Rumsfeld, Rove, Fieth, Wolfowitz, and the rest of the hawkish bunch, all with their overlapping and dangerously ulterior motives have molded the clay of the hapless Bush. The plan, but for one fatal flaw, would have been perfect. Bush is so clearly incapable of complex subversive maneuvering that the country was duped into thinking he mostly meant what he said. He probably mostly did mean what he said having been fed the uncomplicated black-and-white surface ideology of his puppeteers.

Here is the point: The American public has been manipulated. Bush’s wranglers used a political system short on insight and long on hype to get an unqualified stooge into the highest office of the government. When that can happen, the system needs revision. The public needs to use the lessons of the last few years to allow itself to yield to wisdom and to carefully evaluate the policies, strengths and weaknesses of the current batch of candidates. The beauty pageant is a distraction. We owe it to ourselves to get wiser, to dig deeper, to understand the motives and motivations of the hopefuls so that we pick the one who is the least corruptible, the best intentioned, and the most effective. Sound bites be damned; America needs a real president again.