March (Economic) Madness

Wednesday, March 11, 2009

Simon Johnson, former chief economist of the International Monetary Fund, professor at the MIT Sloan School of Management, senior fellow at the Peterson Institute for International Economics and co-founder of The Baseline Scenario blog, focuses on a different facet of the economic crisis each week in March. This week: 20 years after the fall of Eastern European communism, what are the lessons for US capitalism?


Simon Johnson

Comments [17]

Raphael BENABOU from Plandome

I comment on the repeated reference by Brian of "collapse of communism" as synonymous with "collapse of the Soviet Union".

I did wince when Brian "reflexively" used a double-speak equivalence usually mouthed off by the Right, typically followed by "thanks to our beloved R. Reagan".

Assumedly, he broke the Soviet Union. The country he definitely bankrupted is ours, with enormous deficits we have yet to recover from.

To be fair, even the USSR only claimed to be a Union of "Socialist" Republics.

40 years ago, in Europe, we predicted the URSS impending collapse from deep "internal" structural problems. We then used "state capitalism" to define their system. We did not call police states in Eastern Europe "communist".

Having lost my job in this upheaval, after years with Wall Street firms,I find little solace in anticipating the collapse of the Financial industry, though I admit the long-held conviction that US-style capitalism was going to implode.

In short, communism does not exist.
At best we have socialistic features where unbridled capitalism US-style is mitigated by a social net.

The lessons I draw from the collapses of the Soviet Union and the US economy are two-fold:

No nation endures without "humanism", a respect of basic human needs (food, shelter, medical care, education, safety) and higher aspirations: freedom, equality, creativity.

No society thrives if wealth is concentrated in a few, while the masses are "indentured servants" of capital.

Russia today, like its forerunner, is a failing society whihc lacks freedom.

We do not know where this country is going, but one can now dream of the US at a "socialist stage" ("free" health care, "free" education, 4 weeks vacation (?)), since rabid Conservatives are already screaming "USSA", United Socialist States of America.

With Yankee ingenuity, we might even succeed.

Mar. 11 2009 05:02 PM

Look forward to reviewing these titles! chrs

Mar. 11 2009 12:49 PM

No problem, there's another book that looks at just the American history of debt (with an intro that covers the global history), it's called:

One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe by Robert E. Wright
It's shorter and probably more relevant.

Wright is actually the more conservative writer. The first book I cited, "A Free Nation Deep In Debt" is by a former investment banker in London - I don't know if I should rightly label him conservative.

Mar. 11 2009 12:04 PM

That's interesting, eva, thanks.

Mar. 11 2009 11:43 AM
Vinny G from The Upper West Side NYC

I remember hearing on WNYC at the time 20 years ago an explanation that the fall of Communism a result of it being "too pure a form of Communism, not allowing for the growth of business capital resulting in corruption and the lack of incentive for growth" the same commentator suggested that Capitalism might be doomed to a similar fate for being "too pure a form of Capitalism, being always "on" constantly driving for greater profits and never allowing for a moderate level of a less pressured economy" and his description of the Scandanavian Socio-Economic model of allowing for all the Capital Growth desired while maintaining a vital committment to the social safety net "from Cradle To Grave" and how neither Capital nor Society would give up a single percentage of the taxation that made this social contract possible.

Mar. 11 2009 11:39 AM

The link is between government debt (not necessarily capitalism) and democracy, starting in ancient Greece. Provided, that is, that the government debt is sold to the citizens, and not in excess to foreign countries, as we have now.
"A Free Nation, Deep in Debt" is a good book by a conservative writer on this issue.

Mar. 11 2009 11:37 AM
Robert from NYC

But they're ignoring single payer option. We must have single payer option in healthcare. It's not even on the table as promised.

Mar. 11 2009 11:33 AM
Steve (the other one) from Manhattan

You should have Simon Johnson on every day - he's the sanest voice on this mess (other than Krugman and Roubini). On the other hand - why did you have that American Enterprise Insitute guy on at all (the cardcheck segement)? He was incoherent. As well, it was AEI that helped Bush lie us into the Iraq War. They have zero credibility.

Mar. 11 2009 11:28 AM

neglected to add in that parenthetical phrase, many cases...simple state-controlled economics.

Incidentally, Jeffrey Sachs was THE guru of tough economic love, which requires a nation to convert from command economics to free market capitalism quickly and completely. Presidents from Europe to Asia worshiped him for some years, at least until the 1998. That said, some of those countries have continued this path to enough of an extent that today they arguable remind us of the discipline required to be an ideologically capitalist country, for better and worse. In the good times, everyone is a capitalist of course.

Is there a link between capitalism and democracy?

Garten, IMF, Clinton all argued vigorously YES. This being the rationale for staying on track no matter how painful.

Mar. 11 2009 11:26 AM

Anybody who lived in a so called Communist country in the last 20 years has been shaking their heads since Bush was elected (kleptocracy and in many cases, such as agriculture, telecom standards and automaking) ... and now, under Obama, once again (job preservation at the expense of a healthy economy). Banking aside.

Mar. 11 2009 11:15 AM
Peter from Sunset Park

BL Moderator:

To be clear, I have been very civil. I have simply expressed my offense that my comments are routinely deleted for not being liberal enough. Just a few days ago I was admonished by WNYC censors for posting before a segment started, but such behavior is routinely tolerated by liberal posters. I simply am requesting that all view points and all posters be held to the same standards and rules.

As far as conversations getting derailed, that is a silly argument. On these boards (or on any internet boards) conversations are derailed at the drop of a hat. What you really mean is that my posts should be liberal enough so that your regular liberal posters don’t respond - this way, nothing gets “derailed.”

Mar. 11 2009 10:53 AM
BL Moderator from Varick St. Studios

[[BL Moderator Writes -
Okay, folks, this is precisely what we want to avoid - an uncivil conversation unrelated to the forthcoming on-air discussion. So, let's hit the reset button. Peter has his views on the WNYC moderation policy - so be it. No reason the segment with Simon Johnson should suffer as a result. Again, the best way - truly - to lodge these kinds of comments is to go through listener services.

So: reset button. Anything posted unrelated to the Simon Johnson interview will be removed.

Thank you.
-BL Show-]]

Mar. 11 2009 10:00 AM

Look Peter, they're so liberal they even posted those comments of yours! Rush on the other hand wouldn't even bother sneering as he picked his teeth with your bones.

Mar. 11 2009 09:54 AM
Peter from Sunset Park

The WNYC censors are hard at work today deleting any posts that are not liberal enough.

When you fund raise, you should point out this liberal bias and agenda.

Mar. 11 2009 09:31 AM
Peter from Sunset Park

[[Peter - No one ever said there was a "new policy" to automatically delete any post that is on the board before the segment airs. Our policy has always been the same - if a comment is uncivil or not relevant to the on-air discussion, then we remove it. Comments that go up before the segment actually airs often have the effect of derailing the comments section, so we often remove comments posted before the segment airs that we think will have that effect. But there is no hard and fast rule about comments that are posted before a segment airs.

You can always contact listener services - listenerservices at or 646.829.4000 if you have further questions or comments about programming or other station policy.

-BL Show-]]

I thought WNYC had a new policy that listeners are not allowed to post on these boards (even though the boards are open) until the segment airs? I disagree with this policy, but I disagree even more with selective WNYC enforcement.

I guess WNYC makes up policy to censor views, questions and opinions that are not sufficiently liberal. I never bought into the idea that public radio was tilted towards a liberal agenda until the Brian Lehrer Show censors confirmed it with their selective censoring agenda.

Will the Brian Lehrer Show censors delete this post? Probably. They don’t like facing the truth about their liberal agenda.

Mar. 11 2009 08:53 AM

If there is time, can you please ask Simon Johnson to address the following costly Paulson leftovers?

1) Paulson's unannounced, possibly illegal changes to Section 382 of the tax code on September 30, 2008 (in the midst of the bailout talks.) These changes let the banking sector (and only the banking sector) shelter their profits under the losses of newly acquired bankrupt financial companies.

This violation by Paulson of the 20-something Section 382 code is projected to cost the taxpayer an add'l $140 billion over the amount of the TARP funds.

Can we change it back? We need the cash.

2) Paulson's blatant lying about our returns on monies invested in troubled banks through TARP - he claimed that they were made at or near par - when apparently, per Elizabeth Warren:

a) we the loser taxpayers are only getting back 60 cents on every TARP dollar invested, while...

b) Warren Buffett and some foreign investors are getting back as much as 1.25 on every TARP dollar invested.

I'm fairly certain that you and I need the return more than Warren Buffett does.

Mar. 11 2009 02:23 AM
j from nyc

a lawyer friend of mine and i were discussing how the courts were going to handle financial lawsuits from the economic meltdown, and how it was going to be a battle of the consultants, the prosecution's highend math heads v.s. defense's highend math heads.
and that most lawyers and courts were not prepared to understand how complex the math was, so how could the court possibly tell the difference in an adversarial system of justice when they don't understand the evidence completely themselves.
He told me that in Ireland, the courts have their own impartial 'consultant' to crunch the numbers, basically.
My question is how would this affect outcomes for international companies/hedge funds/investors that are being sued or are suing - is it only going to be affected by where the lawsuit is registered, or where the company is based [Cayman Islands? seriously?] And what if there are lawsuits in multiple countries, and does the European Union follow the Irish court model?

Mar. 11 2009 01:54 AM

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