In order to maintain it…

“Strictly speaking, economic liberalism is the organizing principle of a society in which industry is based on the institution of the self-regulating market…For as long as such a system is not established economic liberals will call for the intervention of the state in order to establish it, and once established, in order to maintain it.”

–Karl Polanyi, The Great Transformation

And here is the greatest intervention ever proposed in order to maintain this self-regulating market.  (It is also the largest and most brazen criminal act in history.)

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY

TO PURCHASE MORTGAGE-RELATED ASSETS

Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.–The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.–The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for–

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.–The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets.–The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets.–The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.–The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets.–The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary.–The term “Secretary” means the Secretary of the Treasury.

(3) United States.–The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.

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In order to maintain it…

The Self-Regulating Market requires state intervention

Tim Lee makes a couple of points about what he sees as the puzzling connections between free trade and protectionism, and he stumbles across the point I’d made earlier to one of Jerry Brito’s comments, (yes, the comment that Jerry can’t respond to, and therefore must censor) It’s a simple point that Karl Polanyi made in his excellent book The Great Transformation: that the self-regulating market requires state intervention, both for it’s creation and for its maintenance . So the creation of a self regulating market in copyrighted goods requires state intervention to create and maintain that market. But Tim, being a libertarian, can’t read or understand Polanyi, so he’s confused about why those who support free trade also support certain market interventions:

This is a fascinating question. One of the things I find really interesting about the 19th century political debate is that the opposing political coalitions were more sensibly aligned, perhaps because people had a slightly clearer sense of what was at stake. My impression (which may be wrong in its details) is that the free traders tended to be liberals and economic populists. They clearly understood that protectionism brought about a transfer of wealth from relatively poor consumers to relatively wealthy business interests. In the opposing coalition were a coalition of business interests and xenophobes making fundamentally mercantilist arguments about economic nationalism.

 

Karl Polanyi covers this period in his book The Great Transformation. His perspective is a little different.

First, Polanyi notes that those opposing the liberal agenda there were the defenders of the old order, ultimately derived from the feudal social structure, as well the working urban proletariat. Their interests never coincided and their visions of an alternative to the dominant liberal creed were so very different, it is not surprising that they never formed a united opposition. It is true that once the middle class realized that free trade meant cheaper food they were temporarily won over to its cause. But there were a few others who realized how disastrous free trade would be in the long run.

Second, Tim Lee, as all libertarians do, makes a whole series of informational exclusions about what comes along with liberalism. For example, it cannot be an accident that Great Britain, during the time of the ascendancy of liberal ideals, also maintained a very large colonial empire. Ultimately, adherence to the dogma of the self-regulating market requires state intervention to ensure that the prices of labor, land, and money are all controlled only by economic factors internal to that self-regulating market. When social, environmental, religious or national policies interfere with the operating of that self regulating market, state intervention is required. Case in point: US invasion of Iraq. When political ideals interfere with the functioning of the self-regulating market, state intervention is also called for by supporters of the market. Case in point: the DMCA. From this view, the fact that those who support the self-regulating market also support strong imposed patent, copyright and trademark laws is entirely consistent and unsurprising.

 

The bottom line is: you cannot separate the economic functioning of society from its broader social, political, environmental, national and social contexts, as liberals are wont to do. Human society just cannot be distilled into neatly separate fungible categories. They are all connected. Failure to come to grips with this reality is why libertarianism can only be maintained by making excluding whole categories of information.

Thus the following confusion on Tim’s part:

Today’s free trade debate is much weirder, because there are enough businesses who want to export things that significant parts of the business community are for freer trade. On the other hand, the liberals who fancy themselves defenders of relatively poor consumers find themselves in bed with predatory industries like sugar and stell that have been using trade barriers to gouge consumers. And the “trade” debate has increasingly come to be focused on issues that don’t actually have much to do with trade, whether it’s labor and environmental “standards,” copyright and patent requirements, working retraining programs, cross-border subsidies, etc.

Continue reading “The Self-Regulating Market requires state intervention”

The Self-Regulating Market requires state intervention

The Great Transformation

Reading The Great Transformation by Karl Polanyi. It is certainly one of the great cross-disciplinary conceptual efforts of our time, and is the best book about economics I’ve read since Amartya Sen‘s Development as Freedom. Essential to Polanyi’s views is that our economic structures are embedded in a wider social and political context, and he makes the great point that men can not be reduced to economic automatons, as so many economists were (and still are) apt to do.

One of the insights he has is that there are some inherent conflicts within the dominant neo-classical liberal creed, specifically between the idea of laissez-faire policies and the institution of the self-regulating market:

“Strictly economic liberalism is the organizing principle of a society in which industry is based on the institution of the self-regulating market…For as long as such a system is not established economic liberals will call for the intervention of the state in order to establish it, and once established, in order to maintain it.” (page 149)

And I found a great example of this contradiction right over at that libertarian website, TLF:
Continue reading “The Great Transformation”

The Great Transformation