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.

Contest
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 http://www.nakedcapitalism.com/2010/01/geithners-dubious-aig-cover-up.html

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.

Comments That Should Have Been Posts

Someone needs to make sure the masses stay in their place.

Anonymous @ 1:24 posted some good research in the post below.

I posted this over at Nando's blog awhile back, but received no response - let me know what you guys think:

"Just to show everyone how easy it was for our parents compared to our current plight, and just some food for thought in general:

The federal minimum wage from 1980-1981 was $3.10 and from 1981-1990 it was $3.35. If we assume that an average person could get a job paying minimum wage during the school years of 1980-81 to 1982-83 during a three year stint at the University of Michigan Law School, and assuming that person worked 20 hours per week during the 52 weeks of the three years in law school (certainly quite an easy task if you ask me), that person would have made $10,192.00 over the three year period.

Now, how much would tuition have been for those three school years? A grand total of $7,266.80!

In other words, you could work minimum wage jobs during your law school stay and actually come out ahead $2,925.20 when only taking into account tuition versus total minimum wage earnings! The extra money left over represents about $81.25 left over each month.

I realize you would have to take into account food, lodging, transportation, etc. However, average rent was $300.00 (which if you had roomates would be significantly cheaper - say ~$75.00), and everything else was much cheaper. Basically, you really could work minimum wage jobs back then and pretty much cover ALL of your costs for three years of law school. I really don't even know why people took out loans back then (if they did at all).

Now, comparing the numbers today:

Tuition - $129,030.00 for three years of tuition (assuming they don't raise tuition for the next three years...good luck with that).

Michigan minimum wage - $7.40. Working 20 hour weeks for the three years you would make $23,088.00.

Running the numbers, you would be left with a deficit of $105,942.00! And that's not even mentioned housing costs, food, transportation, etc."

With those numbers in mind, I then posed the following question:

"Maybe someone here can clarify this for me, but why did people really even need loans when all this federal student loan legislation was passed? Are you telling me that people really couldn't come up with the money to pay for their tuition back then? I really find that hard to believe. As I pointed out earlier, even as recent as 1985 (and a few years later even) you could completely finance a top notch law school education. Why were the loans needed?"

So does anyone have any thoughts? I really want to know why anyone from that day and age even needed loans to finish school. I realize that I only took numbers from the University of Michigan, but I have checked numbers from other schools and have found them to be quite comparable, and in many instances you could fund an education for much less than the numbers cited above. I'd especially be interested in hearing thoughts from those that graduated college from that time period.

In many ways our society was more equal three decades ago than it is today. We've made progress in dealing with racism, homophobia, and sexism but have gone backwards in terms of dealing with economic inequality. It amazes me that in this recession, colleges and universities still have the nerve to justify increases in tuition and room & board fees. As I commented in the post below, high tuition costs and the burden it has on American families is one of the reasons why the US lags behind many European and Asian countries when it comes to education and cutting edge research, especially in math and science. While other countries pay talented students (debt free!) to study overseas and receive the best education to become tomorrow's leaders in science, medicine, and technology, we seem fine with blaming young people who get in over their heads in student debt simply because they want an education to do something better with their lives.

Angel and Grumpy Young Man make valid points. A college degree shouldn't be a requirement for everyone nor is everyone meant to become an academic, a doctor, or a lawyer. I agree that the ABA needs to be reformed and all of TTT schools shut down. But let's be clear that a good education and making connections with important people at top universities and at Ivy Leagues is one of the few ways a person can move up the socio-economic ladder. Poor, working, and middle class students who are smart and determined enough to overcome the many obstacles to get into a Tier 1 school should not be prevented from attending because they don't have the money. I see the growing inaccessibility to an affordable education as another way the elite can keep anyone else from upsetting the golden applecart of wealth and privilege. Inaccessibility to a quality education whether we're talking about primary school or college is just another form of discrimination and segregation. If more people were as outraged we might actually have a fighting chance at changing the system.