THE DYING MARKET GOD

Marketolatry has been the reigning religion of glo-
bal capitalism. It has exhibited blind faith in Adam
Smith's "invisible hand" (I. H.), which Smith be-
lieved governs the allocation of resources, capital
and labor in the most efficient possible way.

While Smith's confidence in the market to self-regu-
late was conditional, later apostles like Milton Fried-
man and Alan Greespan turned that principle into
dogma. And dogmas have a way of becoming un-
conditional. That's too bad, because it can produce
chaos, and now has.

The effectiveness of Smith's I. H. depends on open,
honest, and full information on all aspects of any and
all business transactions. Without this, the hand is
operating blind. Picture a surgeon operating blind,
and you'll understand the disaster afoot now in the
world economy. When the I. H. confronts a series
of Ponzi schemes, all it has left of the hand to give
is a finger!

Thomas Friedman, in today's NYT, notes the Ber-
nard Madoff scandal, and then comments: "I have
no sympathy for Madoff. But the fact is, his alled-
ged Ponzi scheme was only slightly more outra-
geous than the 'legal' scheme that Wall Street was
running, fueled by cheap credit, low standards and
high greed. What do you call giving a worker who
makes $14,000 a year a nothing-down and nothing-
to-pay-for-two-years mortgage to buy a $750,000
home, and then bundling that mortgage with 100
others into bonds -- which Moody's or Standard &
Poors rate AAA -- and then selling them to banks
and pension funds the world over? That's what our
financial industry was doing. If that isn't a pyramid
scheme, what is it?"

George Soros wrote about the dangers of these
kinds of shenanigans, ten years ago in The Crisis of
Global Capitalism. Soros, for anyone not familiar
with him, is a multi-millionaire philanthropist who
graduated broke from the London School of Eco-
nomics and made a fortune in speculating on cur-
rency futures, and other commodities. He runs a
very successful investing firm.

In the book just mentioned, he wrote: "What I pre-
dict is the imminent disintegration of the global
capitalistic system. . . . The 19th century was punc-
tuated by devastating panics followed by economic
depressions. We are currently in the process of re-
living that experience. . . . in the current global cri-
sis, both theory and practice are proving inadequate."

Soros holds that our present financial situation is the
result of market fundamentalism (M. F.) run amok.
He is not alone in that view. It is one shared by Paul
Krugman and James K. Galbraith, among others.
Soros again: "I believe that the revival of market
fundamentalism can be explained only by faith in a
magic quality ("the invisible hand") that is even
more important than the scientific base. Not in vain
did President Reagan speak of the 'magic of the mar-
ketplace.' A key feature of fundamentalist beliefs is
that they rely on either/or judgments. If a proposi-
tion is wrong, its opposite is claimed to be right. This
logical incoherence lies at the heart of market fun-
damentalism. State intervention in the economy
has always produced some negative results. This
has been true not only of central planning but also of
the welfare state and of Keynesian demand manage-
ment. From this banal observation, market funda-
mentalists jump to a totally illogical conclusion: If
state intervention is faulty, free markets must be
perfect."

Soros expains further: ". . . fundamentalism implies
a certain kind of belief that is easily carried to ex-
tremes. It is a belief in perfection, a belief in abso-
lutes, a belief that every problem must have a solu-
tion. It posits an authority that is endowed with
perfect knowledg even if that knowledge is not readi-
ly accessible to ordinary mortals."

Pres. Bush recently remarked: "I've abandoned
free-market principles to save the free-market
system." Doesn't that tell you the principles don't
work? The system is trashed, and has been for
some time. Deal with it.