A Failure of Capitalism: The Crisis of ’08 and the Descent into Depression
Richard A. Posner
Judge. The word suggests a lot of things. A sense of right and wrong. Belief in truth as a non-relative concept. A willingness to face facts. And all those great synonyms: probity, rectitude, morality, virtue, honesty and on and on. There’s even a book in the Bible entitled Judges just in case you missed their importance. (I promise it’s there, right between Joshua and Ruth.)
Not all judges are up to that standard. Luckily for the profession, there’s Richard A. Posner, although he might make other jurists a bit uncomfortable. A member of the US Court of Appeals for the 7th Circuit (that’s based in Chicago for the more geographically inclined), Posner has at least two other careers, maybe three.
When he’s not adjudicating he’s lecturing at the University of Chicago Law School. That’s the perch from which he plies yet another trade as legal scholar and theorist. You might be tempted to dismiss that as a part-time job for a workaholic whose job gives him summers off. But Posner is the most-cited legal scholar of the 20th century by one count. He’s also sometimes labeled an economist but I think that has more to do with how he approaches legal issues than it does with hanging out with Stiglitz, Krugman and Rogoff.
That combines what are actually two or three jobs into one. because there’s also Richard Posner the public intellectual. A lot of ink and pixels get spilled over what exactly that expression means and nearly all of them leave me dissatisfied. So let me propose a definition that you don’t need to agree with for longer than it takes to read this post.
(n., also, a term of art),
an individual who engages in reasoned,well- informed discourse on a wide range of matters affecting society in general in a manner, and through channels, accessible to the interested public
You will note certain things are missing. There is no requirement that ‘intellectual’ be demonstrated by an advanced degree, tenure or any other form of academic credential. In fact, an academic credential may be the single biggest disqualifying factor. Notice, also, that reason precedes knowledge and that the requisite level of knowledge is to be well-informed. And finally, you need to have some editorial credibility behind you. I know that’s old school, but otherwise you’re just someone like me with a wi-fi connection and a keyboard.
Also, please consider what a public intellectual is not: not necessarily an expert; not a pundit; and most assuredly, not a thought leader (whatever that empty phrase means). Each of those seeks a different end; the public intellectual holds the ratiocination as the end in itself. You can’t draw a proper conclusion from sloppy thinking.
Have I bored you yet? Some quick 20th century examples and we’ll get back to the judge. Lionel Trilling, despite the academic paraphernalia and the focus on high culture, was one. As were Gertrude Himmelfarb and William F. Buckley. For those of you who detect a right-wing bias, I think Daniel Patrick Moynihan also qualifies.
Non-contenders currently at work include well-known pundits David Brooks, Thomas Friedman and , though he desperately wants the title, Robert Reich. I don’t believe anyone writing from the perspective of the business community can ever fill such a role. They have a different job.
So what’s a judge got to say about the mess that erupted six Septembers ago? Plenty, it turns out, and much of it not kind to the major parties involved. At this point in time most people have settled into their opinions on just who misbehaved, how and why. But in 2009, when this book was published, the need to frame the situation and understand roles and responsibilities was much greater. Doing that is the task Posner sets out for himself.
And what he does, in good lawyer-like fashion, is to lay out an indictment. From the outset he refers to the economic consequences of the housing bubble and the subsequent financial crisis as a depression. He notes a long-standing, unspoken agreement to not use that particular word, ascribing the practice to what he calls “….magical thinking; if we don’t call the economic crisis a “depression,” it can’t be one.”
Posner has a reputation as a libertarian, which is often seen as conservative by folks who favor intervention. How does the conservative view fare with the judge? See for yourself: “Some conservatives believe that the depression is the result of unwise government policies. I believe it is a market failure.”
Lots of folks would agree with that. But isn’t that why we should strengthen government regulation and oversight? Well gentle readers, deregulation has two parents and the Carter and Clinton administrations bear as much responsibility as any of the GOP ones. Here’s the judge:
“The economists and eventually the politicians who pressed for deregulation were not sensitive to the fact that deregulating banking has a macroeconomic significance that deregulating railroads or trucking or airlines or telecommunications or oil pipelines does not. (p. 317)
I used to think I needed to understand the 60s to understand the social situation. But that’s now a half century ago and the events of 2008 will loom large for the rest of my life and probably my kids’ as well. We can understand what happened, maybe even how it happened. But I fear that’s a far as it will ever go.
Because in the end the judge got it right. Capitalism is a moral system. And from this book’s title through to the conclusion the only word to describe everything that’s happened is failure, judgment intended.