Economics lesson of the day

[yesthattom]

If you read one link I post this week, please read this one.

The economics of how Enron was able to screw the world are the same as how Bush, Jr. was able to screw the country.

Why are we still in Iraq? Why does the Bush Administration insist on keeping our troops in Iraq even as we make no progress? It seems so irrational when viewed through political logic. But what if politics and military strategy simply are not sufficient explanation for the Bush Administration’s choices?

In recent years, America has seen the collapse of several major corporations in a seeming explosion of corruption and fraud. Worldcom, Global Crossing, Tyco, and, of course, Enron have become watchwords for corporate corruption, and capitalism as a white collar crime. Few people understand how these frauds were perpetrated and, more importantly, why

Comments

[arkham1010.livejournal.com]

Cliff notes version?

[xthread.livejournal.com]

Umm, that's a very nice article on control fraud, but he has his facts more than a little bit wrong.
Enron was massively successful at one specific, and unfortunately highly lucrative until it wasn't, thing: government relations. They repeatedly persuaded governments to change energy regulations in ways that enabled Enron to capture monopoly rent for energy sales. Once they became a sufficiently large player that they also had to actually make money at what they did, at essentially the same rate that they had appeared to make money up until then, they ran into a rather solid wall.
Similarly, in the S&L crisis, savings & loan institutions were encouraged (by state and federal regulation) to indulge in massively uneconomic behavior (much as many sub-prime mortgage lenders were until recently lending money in ways that were really, really dicey). In both the S&L crisis and the current sub-prime debacle, there were some real, legitimate cases of fraud as such. But most of the financial harm in both circumstances was the result of lenders making loans that were unlikely ever to be paid back, in sufficient volumes that it actually removed noticeable sums of money from the economy.
Similarly, while the Iraq war has involved an awful lot of money, much of which has flowed to cronies of the Administration, it's not that big a sum of money, in the context of the overall economy. Sure, few hundred million here, few hundred million there, pretty soon you're talking real money, but while the amount of money that has flowed to Halliburton et al may have been a significant amount of money for them, and an even more significant sum of money for you and me, it's cost $660 billion (give or take) over the course of four years, out of an $11 trillion (with a 't') annual economy. The way the article portrays it, it suggests that the wars has extracted tens of cents out of every dollar from the economy - which is simply not the case.

[barking-iguana.livejournal.com]

$T11per year at 4 years = $T44.
$B660 = $T0.66.
0.66 / 44 = .015.
That's one and a half cents of every dollar, four years running.

Sure, we could afford that and more, if it were truly a national emergency. But it's a very real, global-economy-effecting drain on our resources. I didn't realize it was that big until you presented the numbers and I did some mental arithmetic that I should have done a long time ago.

[xthread.livejournal.com]

You bet. If you want to put it further into incensing perspective, thing of that as roughly one third of the US economic growth during that time. It is a big number. It's just not the economy-breaking pillaging of the public purse that the article our esteemed host referred us to presents it as.

[drwex]

I think arguing over magnitudes misses the point. This column, like most of Daily Kos, falls into the "if only they understood how awful this administration is they'd agree with us" trap.

I also believed this until the whole "reality-based" fiasco of 2004. The people that support and voted for Bush did so KNOWING he's a simpleton, a drunk, a terrible public speaker, and most likely lied repeatedly about Iraq and pretty much everything else. You can't perform some kind of Wizard of Oz move and reveal the man behind the curtain (massive fraud!) and expect people to smack their foreheads and suddenly admit "oh, no, i've been WRONG for the last seven years!" Not going to happen.

You can go on about WHY people do this - I am personally fond of Lakoff's discussion of issue framing as an explanatory mechanism - but it's just silly and naive at this point to expect Americans suddenly to "wake up."

Finally, the article is purely post hoc ergo propter hoc reasoning. The effect is indeed massive transfers of cash and evisceration of the government. "Drown it in a bathtub" anyone? Did we forget that this administration openly declared its intentions to do just what they've done and roughly half the country applauded?

Wake up and smell the rot - it's 2007, not 2003. Daily Kos should spend some energy figuring out how we're going to get this mess FIXED when we can't even get Congress to increase CAFE or block a bill approving illegal wiretaps, and spend less energy on grandiose conspiracy theories.