hydrarchist writes "

Talking bull

In the fallout from the current US stock market crash, plenty of people are taking a hammering, from corporate titans to Wall Street whizz kids. But one class stands aloof, untouched by blame: the media pundits and business gurus who have been so recklessly hyping the New Economy for a decade. Why, asks Thomas Frank, are they still riding high, seeking out scapegoats for the collapse instead of taking a long, critical look at the almighty market itself From
The Guardian

Two years of stock market collapse have done much to transform public opinion in America. The crash has rudely discredited the nation's chief executives, the heroes of the decade past. It has smashed the reputation of the accounting industry, and it has ruined the image of the superstar stock analysts, all those who worked so desperately a few years ago to invent new methods of valuing valueless companies. It has brought on one of the most severe - most well-deserved - corporate crises since the 1930s. But nothing touches the public intellectuals of the bull market. Most of the other 90s types have passed from the scene: the swashbuckling dotcom entrepreneurs have moved back in with mom, the rule-breaking CEOs are being hauled before Congress for a tongue-lashing, the day-trading pensioners who were supposed to "beat the pros" are thanking God that Social Security still exists. But many of the ones who wrote the Dow-worshipping books and who handed down all those daring pronunciamentos from the silicon heights are still cruising from one posh gig to the next.

Tune in to CNBC, the American stock market TV channel, at any point during the long, slow collapse of the last month or so and you would probably see the news reader turn to a representative of Forbes magazine, formerly one of the most enthusiastic pushers of bull market optimism in the world, now cast as an expert on a market in retreat. Keep watching for a few hours and you would enjoy the surreal sight of James Cramer, one of the late boom's most prolific publicists, trying to feign outrage at the same forces he once cheered. You would gape in disbelief when you recognised Cramer's co-host as Larry Kudlow, the hyper-exuberant economist who once proclaimed from the op/ed (comment) page of the Wall Street Journal that the free market policies of the Reagan/Clinton years were so profoundly correct, they would one day cause the Dow Jones Industrial Average to hit 50,000.

By the way, when Kudlow made that prediction in March 1999, the Dow was about to pass 10,000; the highest it ever reached was 11,723; as of this writing it's at 8,456. The other widely followed American index, always described as "the tech-heavy Nasdaq", has fallen by 74% from its highs of two years ago.

The Wall Street Journal itself - so often a platform for smug declarations about the democracy of markets, the history-erasing promise of the internet, the special relationship America enjoyed with the future, the saintliness of new-style CEOs, and the inevitable triumph of the free market way - shows little contrition for its excesses of a few years back. In fact it recently ran a defence of the nation's beleaguered stock analysts by none other than James Glassman, the co-author of the 1999 book Dow 36,000 (only a little more modest in his prediction than Kudlow). In his recent article, Glassman argues that analysts from the big Wall Street firms - people who were supposed to provide investors with objective research on companies but who often delivered blithe, buoyant buy recommendations simply because their firm was courting the business of those same companies - are being unfairly singled out for blame by killjoys like the local attorney general. "Every bear market requires a scapegoat," Glassman wrote, "and this time the chosen victims are stock analysts." I suspect Glassman was in the hot grip of financial delirium when he argued in Dow 36,000 that stocks were becoming so safe and the common investor so sensible that the Dow deserved to triple in value - after all, almost anything has become a better investment than stocks since that book was published: bonds, real estate, gold doubloons, muscle cars, hand-painted Hawaiian shirts. But Glassman is certainly right about the stock analysts. However guilty they are for puffing the bubble, analysts shouldn't be forced to bear the blame for the subsequent catastrophe alone. That burden should be shared - by, for example, Glassman himself, the editors of the Wall Street Journal op/ed page, Forbes magazine, Kudlow and Cramer.

Mssrs Cramer and Kudlow should, by all rights, have been sentenced to some kind of lengthy intellectual exile, required to spend the next decade in a defunded public library somewhere reading the complete works of Keynes. But a full year into the slow-motion crumbling of the Nasdaq, CNBC decided instead to reward these two great salesmen of the bull market with their own daily TV programme, where their thinkings, alternately frenzied and surly, can reach an even wider audience than before. Kudlow also continues to find takers for his newspaper column, a recent instalment of which advocated immediate war on Iraq - not because he has unearthed new evidence of Iraqi evildoing or anything, but because the American people are feeling a little blue and such a massive show of force "will elevate the stock market by a couple thousand".

So, too, with Glassman. Instead of being required to write, "I will not confuse libertarian hallucinations with practical investment advice" 36,000 times, he was indulged with a seat on President Bush's 21st Century Workforce Council. During the recent market downturn, he was tapped to furnish expert commentary for many of the nation's television, cable and radio networks, and he serves as the editor, or "host", of a popular internet magazine called Tech Central Station, where hard-right opinion collides with the latest news on technology and the environment.

Or consider George Gilder, the most celebrated tech writer and stock picker of the 1990s, the man who launched a thousand silicon shibboleths. Gilder's chosen list of stocks is now down more than 90% from its highs of March 2000. If you really believed Gilder's quasi-religious theories about computer chips, telecommunications and the virtue of the entrepreneur, you would be in trouble right now. Gilder himself is reported to have suffered some for his optimism. Unlike his fellow dealers in hot tips, he also makes a point of admitting his mistakes. This hasn't stopped him launching new publications extending his free market mysticism to such sectors as energy, biotech and something called "storewidth". In 2001, the great guru bought the American Spectator and proceeded to transform it into a platform for additional Gildervisions. "The New Economy," he wrote there in a May 2001 article called The Coming Boom, "far from being over-hyped, is still pitifully under-appreciated."

Then there is the 1998 book The Commanding Heights, by Pulitzer prize-winner Daniel Yergin and Joseph Stanislaw, which could have served as entry number one in the Vulgar Marxist Field Guide to Cultural Overdetermination. The stock market was at all-time highs then, and - lo and behold - here was a text paying reverence to markets as the culmination of human progress and depicting communists, socialists and Attlee-style labourites as the common enemies of the ultimately triumphant entrepreneur. In 1998, all this made some sense. But how to explain the Public Broadcasting System's choice to broadcast a documentary based on The Commanding Heights in April 2002, while the Nasdaq was crumbling and Enron was burning?

If the mythically liberal PBS feels it right to run a programme insisting, in the teeth of the worst free market catastrophe in 70 years, that free markets are the highest achievement of human history, it probably shouldn't surprise anyone that an American brokerage house is currently promoting its services with TV commercials that declare, "I believe in the market - I believe in me." Or that the nation's CEOs are still furnishing employees with copies of Who Moved My Cheese?, a toxic parable of the futility of resisting the forces of the market. Or that Suze Orman, the author of The Courage To Be Rich, now has a TV show on which she shares her thoughts on harmony through accumulation. Or that Robert Kiyosaki, the author of Rich Dad, Poor Dad (currently number two on the New York Times' paperback advice bestseller list), continues to peddle books, games, tapes and newsletters expounding fulfilment through ownership.

We are finally rid of the most egregious corporate swindles of the 1990s. Why aren't the intellectual snake-oil salesmen following the dotcons into oblivion? On the most elementary level, it's because the nation's newspapers, thinktanks, magazines and TV networks have a great deal to lose were we to turn on the New Economy theorists in the manner they deserve. If the intellectuals of the 90s boom are to sink like the stock analysts and CEOs into the depths of public scorn, those newspapers and thinktanks would bear the brunt, too. After all, any comprehensive list of those guilty for puffing the 90s bubble would read like a who's who of American media.

Cast your mind back to what it was like in those feverish days. Virtually everyone agreed: the market was a form of democracy. It was a juggernaut powered by the divine inevitabilities of Silicon Valley and the awesome assembly of the people of the globe. Privatisation, de-unionisation and deregulation were the only policy choices on the table. Those who worried about a downside were told that the business cycle was a thing of the past, as were imperfect information, predatory monopolies, tyrannical bosses and the eight-hour workday. The market would smile upon those people and those countries who praised it and obeyed its word; the market would rudely and rightly humiliate those who didn't "get it". The old ways were out, but for those societies willing to remake themselves along the lines suggested by the Republican Party, USA, there was no limit to how rich they would become.

This was not a set of ideas unique to Newt Gingrich or the op/ed page of the Wall Street Journal. This was well-nigh universal stuff: both Tony Blair and Bill Clinton were believers, as were Al Gore and George W Bush. Several times a week, the New York Times was printing the free market parables of Thomas Friedman, a supposed liberal and one of the most respected newspapermen in the land. The testifying of James Glassman appeared in the supposedly liberal Washington Post. Small-town papers across the country carried the stock-picking homilies of the lovable brothers who call themselves the Motley Fools. Bookstores everywhere allowed you to choose between reassuring investing tips penned by the Beardstown Ladies, a set of kindly Midwestern grandmas, or irony-drenched investing tips penned by the Capitalist Pig, a hip Chicago Gen-Xer. Mutual fund radio shows beamed the gospel to mom and pop out on the Kansas prairie. Your next-door neighbour had seen the light and was day-trading from his rec room, and you were thinking about doing it, too. The Third Wave was triumphant, we heard from every loudspeaker, and the nonbelievers were on the run.

Having collectively fallen for the grand delusion, the media class is now collectively inclined to let the soothsayers of a New Economy off the hook. This is why the dominant media narrative of the ensuing crash has been one of "crimeless victims", as my colleague Dave Mulcahey likes to put it. These days, we read dozens of expressions of sympathy for the small investors who've been wiped out. They're all victims of a terrible tragedy, the mainstream press tells us; one understands their outrage; one feels so sorry for them; and boo etcetera hoo - but surely we're not suggesting that the market or its cheerleaders are responsible for this calamity, are we?

Another reason that so many of the hyperventilating pundits of the 1990s have proven so impervious to the usual consequences of error is that generating an accurate depiction of economic life really wasn't their main function. Just as the now-discredited stock analysts of Merrill Lynch had a secondary, highly profitable motive when they exalted the shares of hollow dotcoms and telecoms, so the great public thinkers of the New Economy were interested in something else when they told the world about the miracles of the internet and the obsolescence of all previous economic knowledge.

That something else was politics. After all, the central tenet of the New Economy faith was that the free market was the highest and most rewarding form of human existence, a notion that would have seemed transparently ideological had it not always been couched in the language of technology and in lofty phrases about the juggernaut of history and the will of the common man. The great management theorists of the 90s didn't dissect the corporation so much as propagandise for it. And the stock market gurus of the age, with their fond dreams of a nation of small shareholders, openly looked forward to the destruction of the New Deal regulatory state, to a time when the little people would identify more with the corporation than with the government.

Again Glassman provides the apposite example. Marvelling at the great things that were to happen when we the people drove the Dow all the way to 36,000, he and his co-author wrote that "the first change we expect is political". Just as "the crash [of 1929] was the catalyst for the modern welfare state", so an eternally rising market will have "the opposite effect. As more and more Americans gain a larger and larger stake in stocks, their views undoubtedly will shift on such matters as business regulation, taxes, anti-trust policy, trade, and even foreign affairs." The stock market would thus do what Senator Barry Goldwater couldn't: even Social Security could be privatised if the Dow could keep on rising, luring more and more people into the mighty "investor class". And in this political revolution, books such as Dow 36,000 had an obvious role. The more people Glassman could encourage to get in the market, the more trustworthy and lovable American business would appear, and the closer the corporate dream would come to realisation. This was not so much stock-picking as it was politics by other means.

Another clue to the real nature of the New Economy should have been the rightwing pedigrees of so many of its most prominent gurus. Glassman himself is a fellow at the rightwing American Enterprise Institute. The banker Walter Wriston, who wrote an influential 1992 book about the wonders of the information age, was once one of that institute's trustees. Larry Kudlow worked for the Reagan administration, the Bush transition team and the rightwing Empower America foundation. Newt Gingrich was, obviously, the leader of the rightwing forces in the US House of Representatives. George Gilder achieved considerable fame as a far-right political theorist and a speechwriter for Reagan, before discovering that the microchip was calling the shots for human history. The dead giveaway came when none other than Dinesh D'Souza - a culture-warring hack who had spent the previous 10 years assailing political correctness on campus and blaming black America's problems on black culture - brought out his own New Economy book in the fall of 2000.

These people's prominence, in other words, was to a great degree unrelated to their skills as economic prognosticators. Their trade was politics, and they were wildly successful at it. Americans were indeed persuaded to roll back the regulatory state in the 1990s, to give the corporations whatever they wanted, to slash welfare, to smash the labour unions and even (sort of) to elect the most pro-corporate administration since Herbert Hoover's, headed by a man who promised to privatise Social Security.

Seen in this light, New Economy theory was less an objective assessment of our situation than a world-class hustle by a political movement that believed it was very close to winning the game. It was the flower of decades of libertarian thought and argument; of lavish irrigation by rightwing billionaires and corporate donors; of careful cultivation by a hundred thinktanks and kept magazines.

This is also why there will be no downside for the New Economy gang, even if the Dow should plummet all the way to 3,600. Workers, executives and ordinary stock analysts lose their jobs in such circumstances, but for those who fund and publish the great public thinkers of the 1990s, objective wrongness doesn't matter. Propaganda does. Money walks while bullshit just talks and talks and talks.

For most of last year's gurus, the battle has simply shifted. Now it is a matter of blame and they are on the defensive, fighting to rescue their beloved free market with even more zeal than when they were talking up the Nasdaq back in '98. The crash has brought the consequences that crashes always bring: a return of the regulatory state, demands for the end of excessive CEO pay, public anger at businessmen rather than liberal college professors, and - who knows? - maybe the resurgence of labour unions and the estate tax. For the business class, the stakes are huge, and the job that confronts their army of economic commentators is weightier than ever.

Nevertheless, they have risen to the challenge with impressive creativity, cranking out a thick smokescreen of blame-evasion where they once generated a fog of prosperity-without-limits. Whatever happens, they argue, it cannot possibly be the fault of the market. Never mind the fact that one of the very measures taken by corporations in the 90s to ensure that market rationality prevailed - the granting of stock options to top executives - is the single greatest culprit in the present fiasco: markets never fail. Other parties, namely government, must be responsible. For yesterday's bubble-blowers, this is true in the way the law of gravity is true; it is axiomatic. "This is Washington's recession," glowered Larry Kudlow a little over a year ago, "for which nothing is more to blame than the arrogance of policy-makers who refused in the first place to recognise the real sources of prosperity and then refused to acknowledge that slumping stock markets were a referendum on Washington's mistakes." The only trick is finding the exact bit of misguided government meddling that triggered this vast disaster.

Over the last year, dozens of candidates have been unearthed and pushed forward, then abandoned out of self-evident absurdity. Kudlow, for example, blamed the anti-trust lawsuit against Microsoft. Gilder blamed anti-trust restrictions placed on WorldCom. Others got indignant about taxes, which are always too high since by definition they are equivalent to theft, or about New York's lawsuit against Merrill Lynch. With my own eyes, I once watched a TV show in which business reporters blamed government policy for tripping up the good people of Enron. It pleases elements in the Wall Street Journal to pin the crash on the country's remaining telecom regulations, while others bemoan the government's failure to subsidise "broadband" aggressively enough. (Coincidentally, at the same time these arguments were being loudly made on the Journal's op/ed page, its news pages reported that telecom industry lobbyists were privately pushing hard for exactly such a deregulation/subsidy package.)

A more forthright school of thought blamed the public. In good times, corporate ideologues had claimed to see the majesty of the vox populi in every blip and surge of the Dow; why not simply invert that argument in these desperate days? After all, it was "the internet enthusiasm of small investors" that caused the bubble, the Wall Street Journal's Holman Jenkins wrote recently. It was mom and pop who "bear primary responsibility for driving up stock prices of speculative businesses and causing billions of dollars to flow into the creation of assets for which there is no demand now. Why not just say so?" This is the ugly downside of the idealistic market populism of the 1990s: a few years ago, guys like Kudlow and Glassman were celebrating the nobility and innate financial wisdom of the common man; today, though, we are a crazed mob on the rampage, dragging the righteous gentlemen of lower Manhattan down with us. Either way, of course, Wall Street wins.

My personal favourite evasive manoeuvre, though, is the denunciation of thought crime, of those who harbour doubt and negativity. Markets can't take criticism, apparently, especially when it comes from figures on the left. This is why liberals are being so widely blamed for the economic downturn: they have started to criticise corporate America, holding hearings and writing mocking books. This in turn suggests to Wall Street that our elected officials believe the economy is somehow their business, and that they will soon start regulating and taxing again. Next thing you know, the markets are plummeting. One would think that the gurus would keep their distance from this line of blame-assessment, given the obvious political motives of their own bubble-blowing back in the 90s. It also seems to suggest that the stock market is a fickle, pusillanimous institution, turning tail at the slightest sign of adversity - which can hardly be reassuring to the millions of investors being told that the market is a safe place for their savings. Yet again, the gurus seem only to see the immediate political objective: if people can be convinced that lefty critics are to blame for their depleted savings, maybe those critics can be turned out of office and replaced with clear-eyed Republicans who can continue to deregulate, privatise and kick union ass.

A few weeks ago, the Wall Street Journal ran no fewer than three editorials accusing congressional Democrats, as one of them put it, of trying to "produce a stock market crash, and perhaps a second-dip recession", and before long that old blame-the-critics melody was being sung from the tallest towers by the perpetually angry Republican congressman Tom DeLay.

When the optimists of yesteryear have to resort to dark theories of mass treason, epidemic lunacy and extreme government incompetence in order to keep the market blameless, you know the situation is pretty grave. In fact, the crisis is now so widespread that even certain business magazines are demanding reform - System Failure, screamed a recent cover of the business magazine Fortune - and so the Wall Street Journal has had to turn its guns on some former allies. "Well, everyone got so involved in talking about a crisis of confidence that we have finally produced one," an editorial chided on July 12.

Similarly, a newsletter by Brian Wesbury, a rightwing economist who has been highly visible of late - testifying to Congress, fulminating on the Journal's op/ed page, the usual - even extends the blame to Dubya himself, who spoke recently of an "economic binge" from which the nation now had to recover. Such language, Wesbury points out, sheds doubt on the "unbelievable progress" of the New Economy years, and also "undermines the free market policies that made it happen". Thinking in such a way is thus "a huge mistake and undermines potential stock returns in the future". Talking about lousy stock market performance, in other words, causes lousy stock market performance.

It is a difficult case to make, especially in current circumstances. "And to make matters worse," Wesbury writes, clearly frustrated with the fruitless new game of blame, "corporate malfeasance and law-breaking have given the DC power axis the cover they need to avoid any blame whatsoever."

Consider all of this for a moment in the light of recent history. America came as close to intellectual consensus in the 1990s as it ever has. Commentators such as Friedman and Yergin celebrated the death of economic dissent and argued that the destruction of left alternatives was what permitted the apparent prosperity of those years. Management theorists told us that we could have workplace democracy only once we gave up on labour unions and submitted ourselves utterly to the logic of the market. Merrill Lynch is known to have fired a stock analyst who wouldn't go along with the then-reigning hallucinations about Enron. The high priests of the New Economy are so entrenched that they continue to occupy prominent positions as commentators, despite their resounding wrongness. Now, though, we are told that none of this was enough; that even the most minuscule challenges to free market orthodoxy are capable of derailing the mighty locomotive of affluence. That we cannot recover until the last doubter shuts up.

Not only is this absurd on the face of it, but it puts the matter entirely upside down. America's current problems stem not from an excess of dissent, but from the utter unaccountability of corporate apologists such as Wesbury, Kudlow, Glassman and the Wall Street Journal. What was and is still needed in America is not the silencing of dissent, but a vibrant counterpoint to the chorus of promoters who virtually monopolised economic discussion in the 1990s. What will prevent bubbles and manias and mass delusions and maybe even bad government is a new set of public thinkers willing at least to entertain the notion that capitalism might not always allocate goods fairly or efficiently; that markets may not always be synonymous with democracy; that voting and collective bargaining are expressions of the popular will every bit as legitimate as are shopping and day-trading.

But as long as political speech is being held responsible for the catastrophic two-year collapse of American stock markets, and as long as Americans have no daily national newspapers or TV programmes or corporate thinktanks whose mandate is to make sure the free market system gets the blame for the free market's systemic breakdowns, I might as well take this opportunity to point out how much likelier it is that the error lies in the one-sidedness of our economic conversation, not in the occasional use of the term "binge" by public figures.

Maybe this is what happens to a country when commentary on matters economic becomes the exclusive province of business thinkers. When labour unions are systematically crushed. When dissent is divorced from matters economic or social and becomes instead a quality of middle-class taste preferences, of "extreme" cars and "radical" packaged goods. When management theorists take it as their duty to dazzle us with a crescendo of free market worship. When leaders of left parties cleanse their ranks of labourites, of New Dealers, of Keynesians, of socialists. When newspapers refuse to open their columns - on grounds of laughable, self-evident dinosaurdom - to doubters and second-wavers and old-school liberals.

Today we are paying for each of these, for all of the ways in which we expunged from our lives the common sense of our parents' America. With each month's nauseating returns, we are making good the intellectual folly of the last 10 years.

Thomas Frank is the editor of The Baffler magazine and the author of One Market Under God (Secker & Warburg).
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