Hang The Banksters... Or Jail Them If You're A Wimp

Friday the editors of the NY Times asked a simple, straightforward question. They want to know who's to blame for the jobless rate... and how the problem can be fixed and their answer-- though it doesn't go far enough (more on that in a moment) is simple and straightforward as well:

The question then is why the recovery under Mr. Obama has not been stronger. Part of the answer lies beyond the control of any American politician, including the euro zone crisis and, more recently, the slowdown in China. But part is the result of obstructionist Republican politics, including the fiasco in 2011 over raising the debt ceiling, which dented confidence in Congress’s ability to steer the economy.

Mr. Obama’s big mistake was to turn prematurely from the need for stimulus to a focus on cutting the budget. He may have hoped to co-opt the Republican emphasis on deficits. He would have done better to slam them on their cynicism in lamenting the deficit after enabling the tax cuts, wars and financial crisis-- all Bush-era creations-- that have deepened the debt.

What he is not responsible for is the continued Republican obstructionism, even in the face of a weakening economy. Last fall, Mr. Obama returned to job creation, with a proposed package that would have created up to 1.9 million jobs, including aid to states to hire teachers and other public employees, investments in infrastructure and tax breaks for new hiring.

Republicans in Congress blocked the package and have balked at other plans from the administration ever since. Wed as they are to the notion that the weak economy is their best shot at victory in November, there is virtually no chance for change in the months ahead. And that means more jobs reports like the one for June.

Defeating every single Republican from Mitt Romney, Eric Cantor, Scott Brown and Paul Ryan down to the bottom of the garbage pile-- your Joe Walshs, Virginia Foxxs, Louie Gohmerts, and Buck McKeons would seem like the logical answer. And it's certainly a logical and necessary start. But Nobel Prize winning economist Joseph Stigliz has a much better and more long-lasting solution: going after their financiers. He wants us to jail the banksters. (Miss McConnell is also worrying that other shady GOP financiers besides just banksters may be in for rough times if anything-- whether his sexuality or their contributions-- are forced out of the closet. Miss McConnell is a clown, though, so read his silliness at the link and let's go right to Mr. Stiglitz:

[Joseph Stiglitz is] convinced that jailing bankers is the best way to curb market abuses.

A towering genius of economics, Stiglitz wrote a series of papers in the 1970s and 1980s explaining how when some individuals have access to privileged knowledge that others don't, free markets yield bad outcomes for wider society. That insight (known as the theory of "asymmetric information") won Stiglitz the Nobel Prize for economics in 2001.

And he has leveraged those credentials relentlessly ever since to batter at the walls of "free market fundamentalism."

...When traders working for Barclays rigged the Libor interest rate and flogged toxic financial derivatives-- using their privileged position in the financial system to make profits at the expense of their customers-- they were unwittingly proving Stiglitz right.

"It's a textbook illustration," Stiglitz said. "Where there are these asymmetries a lot of these activities are directed at rent seeking [appropriating resources from someone else rather than creating new wealth]. That was one of my original points. It wasn't about productivity, it was taking advantage."

Yet Stiglitz's interest in the abuses of banks extends beyond the academic. He argues that breaking the economic and political power that has been amassed by the financial sector in recent decades, especially in the US and the UK, is essential if we are to build a more just and prosperous society. The first step, he says, is sending some bankers to jail. "That ought to change. That means legislation. Banks and others have engaged in rent seeking, creating inequality, ripping off other people, and none of them have gone to jail."

Next, politicians need to stop spending so much time listening to the financial lobby, which, according to Stiglitz, demonstrates its spectacular economic ignorance whenever it claims that curbs on banks' activities will damage the broader economy.

...The central argument of his latest oeuvre is that the huge inequalities of income and wealth that have developed in the US and elsewhere in the West over recent decades are not only unjust in themselves but are retarding growth.

"Every economy needs lots of public investments-- roads, technology, education," he says. "In a democracy you're going to get more of those investments if you have more equity. Because as societies get divided, the rich worry that you will use the power of the state to redistribute. They therefore want to restrict the power of the state so you wind up with weaker states, weaker public investments and weaker growth."

It's an elegantly simple proposition. And one that logically points to a radical manifesto of redistribution and higher taxation in the name of the general public good. Time will tell whether this comes to be regarded as another manifestation of towering economic genius. But, for now, crusading Stiglitz has one more weapon in his hands with which to batter down those walls of folly.

See, it's not just about revenge. In fact, it isn't about revenge-- or even punishment-- at all. It's about what the Times editors asked Friday-- how the country's staggering economic problems can be solved. Personally I've been advocating a more historically just tax systems to get rid of billionaires and other social predators and parasites-- perhaps the Eisenhower rate of 91% will work-- but I'd be happy to see the banksters all carted off to prison too. Very happy in fact.