Saturday, April 3, 2010

Book Giveaway: ECONned

ECONned was a fascinating read. The book clearly laid out critical concepts involved with the current financial disaster, the shift in economic theory to conservative “free markets” ideology, and the “deterioration of conduct in the financial arena”. For someone like myself with zero background in economic theory to actually enjoy a book like this is a testimony to Yves Smith’s ability to break down complex economic analysis in layman’s term. It's also another reason why her blog is a must read for everyone who wants to learn more about financial markets and its enablers in government and finance.

I chose ECONned for our first book giveaway because I saw the appeal for our readers interested in how young people are scammed into taking out massive private loans in an economy with stagnating wages and debt slaves holding onto the last vestiges of the middle class lifestyle. But that is just one part of a much larger scam being run on not just us but also our friends, family, and neighbors. It is obligatory for everyone regardless of your educational background to understand how hardworking Americans were conned by financial firms and their enablers before we begin to see the big picture and how that is tied to much of the free market education propaganda that has led to the education, economic inequality, and insane tuition rates we've discussed at this blog. So that when you see a cartoon like this, all of your knowledge will make that little light bulb go off in your head and you can quickly file it under partisan propaganda: comparing 2010 health insurance windfall reform to social security and medicare is an insult to FDR and LBJ.

As Smith states in her book, it is necessary to call the resulting extortion, capture, looting, and propaganda from libertarian idealism/Mussolini-style corporatism by its proper name in order to root out the problem. If we won’t educate ourselves to separate truth from propaganda, the ruling class will continue to con and loot for as long as possible until there is nothing left to take. Smith makes that clear in her many examples from the Mexico banking crisis in 1994, a microcosm of our current situation – deregulation unleashing predatory behavior – to the growing scandals on Wall Street in the 1990s and 2000s including the Salomon Brothers Treasury bond fraud and the current financial crisis that began in 2007 with policy makers such as Ben Bernanke and Timothy Geither still in power despite helping create the meltdown in their past positions.

I read BDBlue’s book review of ECONned at Corrente and thought s/he was spot on in pointing out how free markets and libertarian ideology has dangerously made its way into the neoliberal lexicon. We see it in Obama’s education policy as BDBlue points out and as I had noted in one of Angel’s posts on Secretary of the Department of Education Arne Duncan in February. The discussion also noted a passage which caught my attention and is something that Ian Welsh brought up in his radio interview at 00:28:00-00:30:15 about how even rich people who live in a unequal society suffer consequences with their health and overall lifestyle as opposed to rich people in more equal societies. It's an amazing fact that gets little attention in our country from the media or economists, but has a huge impact on our health and daily lives. Living in a free market society where people feel devalued literally makes all of us sick:

But income inequality is not just of concern to economists. A study by public health experts in the United States and abroad that was, predictably, not well publicized in the United States itself, found that inhabitants of countries with greater income inequality show lower life expectancy on average even after adjusting for differences in income levels and diet.

...Findings like this are stark reminders that framing policy choices solely in economic terms may miss vitally important considerations. After all, many people would trade off a longer healthier life against more income, but economics refuses to consider this preference. (From chapter 1 The Sorcerers Apprentices)
Some of our readers more interested in the legal aspects of economic theory and the rise of the free market system will appreciate chapter 5, How “Free Markets” Was Sold, which discusses how inculcating judges was a major avenue in promoting the free market ideology beginning in the 1980s:

While conservative scholars like Richard Poser and Richard Epstein at the University of Chicago trained some of the initial right-leaning jurists, attorney Henry Manne gave the effort far greater reach. Manne established his “law and economics” courses for judges, which grew into the Law and Economics Center, which in 1980 moved from the University of Miami to Emory in Atlanta and eventually to George Mason University.
Smith states that by the mid-1980s, top law schools developed solid law and economics programs. Oddly enough I can’t remember a single law and economics class offered in law school. Maybe it was offered as a seminar but it definitely wasn’t a major part of the law school curriculum unless you count interdisciplinary courses offered at the business school. Did anyone attend a law school that had a strong law and economics program and was it considered more liberal or conservative? I’d be interested in learning more about anyone’s experience if they attended schools like George Mason or UChicago.

…The law and economics promoters sought to colonize legal minds. And, to a large extent they succeeded. For centuries (literally), jurisprudence had been a multifaced subject aimed at ordering human affairs. The law and economics advocates wanted none of that. They wanted their narrow construct to play as prominent a role as possible.

For instance, a notion that predates the legal practice is equity, that is, fairness. 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, the “free markets” ideology focuses on efficiency and seeks aggressively to minimize the role of government. The two sets of assumptions are diametrically opposed.
There is so much more to discuss but I doubt my elementary understanding of economic concepts would do the book justice. The Angry Future Expat should most definitely be reviewing ECONned instead of me because he is a hundred times more knowledgeable in the area of economics. I dropped my one attempt to learn economics in college because I couldn’t understand the foreign graduate student instructors and numbers and graphs scared me. Only in the last several years have I tried to educate myself by reading blogs like Yves Smith’s Naked Capitalism, Calculated Risk, Corrente, and The Big Picture. I highly recommend these blogs which have educated me so much more about current events, economics, and politics than any law school classroom ever did.

We have Yves Smith’s ECONned to give away to one lucky But I Did Everything Right reader. Comment or email me at hardknockslaw(at)gmail(dot)com by Thursday April 8th at 11:59pm with an answer to the following question:

What did the current Secretary of Treasury Timothy Geithner tell American International Group Inc. (AIG) to do while he was president of the Federal Reserve Bank of New York?

You can find the answer here

And/Or do any of the following to receive an entry:

Follow our blog publicly and receive one additional entry. Please let me know in the comments section or email that you’ve followed our blog.

Comment on a topic discussed at Naked Capitalism or in ECONned in the comments section and receive one additional entry.

The winner’s initials or pseudonym will be announced on our blog next Friday. I will contact the winner by email and they will have 24 hours to respond with their mailing address. Contest only open to US and Canada residents.


  1. "The discussion also noted a passage which caught my attention and is something that Ian Welsh brought up in his radio interview at 00:28:00-00:30:15 about how even rich people who live in a unequal society suffer consequences with their health and overall lifestyle as opposed to rich people in more equal societies."

    That is a good point. The rich have more physical safety and security in a nation where wealth is more evenly distributed because there is less crime and fewer desperate people. Who really wants to live behind fences and guards and have to travel around in a helicopter (to keep from being accosted by the impoverished masses below)?

    For example, in South America, people have been kidnapped and held for ransom, such as the mothers of wealthy soccer players. Frontline aired a documentary film about kidnappings in Brazil called Ransom City, but it's unavailable online. (There is a good article about it somewhere, but I can't seem to dig it up now.)

  2. Something is up with this blog post. It disappeared for a while and went back to editing mode in blogger. Don't know why. Hopefully the problem has been solved.

  3. Oh oh sign me up for the book giveaway, I'm too broke to even pay my library fines so I could check the book out for free (urgh to my rotten teenage child who can't seem to return books in a timely fashion).

    So Geithener told AIG to hide the fact that they were still paying full price for toxic credit swaps. F*cker.

    And Frank- the only time we've had redistribution to more fair levels in this country is when the rich are flat out threatened with something "worse". Socialism in the 30s was a real possibility, we got the New Deal in it's place. Unfortunately, the teabaggers are concentrating their anger and violence on the people who are really screwing them over, if they did, we might have an effective threat to the status quo. Instead they work for the elites by terrifying people at the bottom.

  4. Government is firmly in the hands of private industry. This has been the case since the inception of this nation. The wealthy got the poor to do the bulk of the fighting against the British (and every subsequent war, police action or conflict). How did our "enlightened Founders" reward the masses? They allowed only white male property owners to vote! Hell, U.S. Senators were appointed by their (respective?) state legislature prior to 1913.

    There have been times in this nation's history when the elites have thrown us a few crumbs here and there - to get us to calm down and shut up about the situation. This has been in times when the elites have been threatened with something worse, i.e. Red Scare in the 1930s and massive social unrest in the 1960s. In the latter period, the government reacted by giving us more "temporary privileges" - to steal from the late George Carlin - sold to us as civil rights.

    I like that some of the scam-bloggers are branching out and discussing macroeconomic/political realities. (I am also glad you were able to fix this site.) In the end, the higher education scam is only part of a much larger financial cartel.

  5. I don't know any schools with economic programs, but my guess is that many of them masquerade as something else.

    Like South Texas College of Law is known for having an "environmental law" program.

    Who enrolls in that program? Why, it's members of the elite in Oil and Gas corporations!

    They just happen to be a fourth-tier school. Not that it really matters for many of those people who are admitted. If your title is "V.P. at Exxon," I don't think that you're ever going really care if Career Services is shaking down all of the local employers for 15 hour a week legal secretary jobs to keep you off the street.

  6. your latest blog post, called where in the world is Angel, shows on your blog preview in my blog list, but it will not load when clicked.

  7. I think Angel took down her post to edit it some more. It should be back up later.

  8. Timmeh!

    Nice post HK. Inequality is inherent in a competitive economy, and that's not a bad thing - you want people to strive to succeed, and do better than their cohorts. But what happens when you get these huge disparities in income - and more importantly in wealth - is that the wealthy start pulling the levers of governmental power to exempt themselves from the process of creative destruction. I would say that's where the U.S. is headed, but I think we're already there.

    So what you end up with is this huge and incredibly effective safety net for the richest, at the same time you have a fraying, borderline useless safety net for the poor and middle class.

    The irony is that the wealthy have been fetishizing and pushing this fee-market ideal, at the same time they've been working mightily to exempt themselves from its effects. ECONned indeed.

  9. Unregulated capitalism and free markets should scare the shit out of anyone with more than 2 functioning brain cells. The idea the such systems can function with human integrity devoid of human greed and human ego structures is naivete to an infinate degree. It ain't the money sweetheart its the power.

  10. Thanks, Emmy Coffee and everyone who has entered the contest. I wish I could give a book to you all.

  11. Sign me up for the free book! Answer: Timothy Geithner told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis.

  12. Timothy Geithner urged AIG to withhold crucial information about the deterioration of its financial condition in the lead up to its demise. Thanks for the giveaway.


  13. Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis.

  14. Geithner told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis

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  17. He told them to withhold details from the public about the bailed-out insurer's payments to banks during the depths of the financial crisis.



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