Stiglitz on NO--quoting Sen

Stiglitz has a piece in Tom Paine today (could have appeared elsewhere) which is just one of many that I could be reading around the situation in New Orleans. It has definitely blown up into a national crisis and has created a lot of questions that seem to have answers that become political quite quickly. His basic argument--and one that will be repeatedly made, with good reason, is that, "Markets, for all their virtues, often do not work well in a crisis." This is an important point since it seems that it defines the Bush administration's approach to government, which is to say, that for all their propaganda about the importance of markets, they have also created one of the largest government bureaucracies in American history. That they were completely inept at it probably says more about how crippling their worldview is--i.e. they have no idea how to run something that isn't for a profit.

Along these lines (I'll get there in a second), Stiglitz brings up Amartya Sen:

The Nobel Prize-winning economist Amartya Sen has emphasized that most famines are associated not with a shortage of food, but the failure to get food to the people who need it, largely because they lack purchasing power

He is right about the failure Sen speaks of but the lack of purchasing power, at least in Development as Freedom, isn't nearly as important in these situations than the lack of democratic accountability. He points to the famine in Ethiopia in the 1980s (and others) and says that things like this wouldn't happen if the leaders of these countries were more beholden to their people, if their power relied on a democratic mandate. I don't know enough about the history of famines to judge how correct his argument is, but it does seem to follow that political power is as important in these situations as economic power.

On the other hand, NO and the gulf coast are an important area in the economic and social life of the country so it seems like even the economic motive for saving the gulf or NO wasn't enough. And the powerful people in that city--and powerful oil and chemical companies in that part of the country weren't able--or maybe willing?--to stop the flood. Certainly the slow response is indicative of a lack of concern for a poor and, probably self-disenfranchised, minority. I say self-disenfranchised to indicate that, while the poor and black have been able to vote, it is often noted that many abstain because there is no one who speaks to their interests. The time is, therefore, ripe for someone like Hughy Long to take over in some populist revival. Likewise, the current Republican fascism, gaining its power from fear of a military (or at least physical) threat, could likely be replaced by a more "democrat" fascism like we saw during the New Deal.
As I write that, I notice the nuances of what Polanyi means by fascism. I am not going to attempt to define it, but the important thing is that for him--and for the early twentieth century elites afraid of it--the idea of fascism is related to democracy run amok. Lippmann was afraid, long before Hayek, of the problems of the government intervening in the functioning of society. But he also recognized the alternative as being one less favorable to people who didn't already have opportunity and success on their side and who had little ability to contest monopoly corporate power except through the government. At first, in books like Mastery and Drift, he basically tells the big industries they should just get over it, but by the late 20s, when things start looking more dire and pressing, he begins to think that there could be danger. This danger is at least two fold: on the one hand there is the fear that the masses will rise up and ask for things that are detrimental to the functioning of society; on the other hand, there is the danger that once this request has been made (or even before) someone will arise that will claim they can give it to them.

Polanyi talks about this as fascism, but his object is the functioning of the free market. Certainly there will be an effect on the efficiency of the market--as libertarians say--if this fascism is focused on some form of wealth distribution or increasing corporate oversight, but even this is only interfering with the market as it functioned before the intervention. It is only in relative terms not in absolute. If the market was already a stratified oligopoly, if most of the economic descisions were made not by people in elected office but in corporate boardrooms, if there was no real functioning mechanism of supply and demand, then the market was already ineffecient in absolute terms, right? We might be able to assume or hope or have some sort of blind faith that, someday, down the line, things would change to fix the inefficient aspects: companies would be bought and sold, get started or go broke; new innovations would give an advantage to people who didn't have to retrofit already existing equipment or re-train workers. This is the idea of Schumpeter's creative destruction and it assumes a role in clearing the blockages to this ineffecient market in the same way that we could discuss the possibility that silt would have replaced the disappearing wetlands around New Orleans if we hadn't built levees and that this silt would have helped to absorb some of the flooding waters.

We have perfect vision in hindsight and can try to predict what would or would not have happened in retrospect, but the problem is when we assume extreme positions beforehand and say that there is only one absolute way of doing things. In this way, the earlier understanding of the market, before the new deal, was equally fascist if we define this as being in relation to the unilateral intervention in the relationship of market to society on the part of the government.

...student advisee incoming, will have to pick up later...

...no time today...but wrote a longer discussion of this question of political vs. economic fascism as well as a consideration of the similarities in Freidman and Marcuse, at least in a sketchy way, in the GPE I field notebook...sorry if someone is reading this. It's mostly for me at this point. I don't think I make enough sense to have any regular readers. Someday, perhaps.