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Has Capitalism Failed?
The cartoon of a dollar note is seen sticked to computer screens at the stock exchange in Frankfurt, central Germany, on Friday, Oct. 10, 2008. European stock markets slumped further on Friday following massive losses on Wall Street and Asia on mounting fears that this week's efforts by central banks and governments to break the logjam in credit markets have failed to ease lending rates between banks. (AP)

The cartoon of a dollar note is seen stuck to computer screens at the stock exchange in Frankfurt, Germany, on Oct. 10, 2008. (AP)

Judge Richard Posner is one of the nation’s most prolific legal defenders of free-market economics. Appointed by Ronald Reagan, he’s a “Chicago school” laissez-faire man from way back — a creator and defender of the free-market theory that has guided American thinking and deregulation for thirty years.

And now, Judge Posner is talking about a “failure of capitalism.” About “re-regulating.” This isn’t a recession, he says. It’s a depression. And we have to change.

This hour, On Point: Richard Posner, and former Labor Secretary Robert Reich, on capitalism and the U.S. economy now.

Tell us what you think — here on this page, on Twitter, and on Facebook.


Richard Posner joins us from Chicago. He has been one of the leading lights in the conservative “Chicago School” of economics and of the so-called “Law and Economics” school of thought. He is a prolific author of the law and the marketplace, and his most recent book is called “A Failure of Capitalism: The Crisis of ’08 and the Descent into Depression.”

Judge Posner is posting updates on the economic situation and policy responses on a new blog at TheAtlantic.com.

Robert Reich joins us from Berkeley, Calif. He was Secretary of Labor under President Bill Clinton and is now a professor of public policy at the University of California at Berkeley. His most recent book is “Supercapitalism: The Transformation of Business, Democracy, and Everyday Life.”

More links:

Nobel economist Robert Solow reviews “A Failure of Capitalism” in The New York Review of Books. He says the book is “an event,” and notes that if he had made these arguments it wouldn’t be news. But “from Richard Posner, it is.”

Robert Kuttner reviews Posner’s book, along with several others, in The American Prospect. He writes: “conversions would be a little easier to take if the convert had the decency to concede that his earlier mistaken theories had collided with reality. Posner, however, doesn’t look back.” Still, “one should welcome Posner’s book even if it is a reversal without a recantation.”

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  • Mike

    Does he mean financial capitalism or industrial i understand that we sold the industrial capitalism off in the last quarter century and gutted it as much as possible and pushed hard to the financial/service side where one charges a small fee and passes it along mutiple steps from producer to the consumer all taking there lets say “value added fee” both from the consumer and the producer.

    I assumed financial capitalism freed on itself creating vast virtual wealth off of debt and spent that virtual money before any of the debt was partly paid off. Feeding and leveraging off itself until finally like in spaceballs the character pizza the hut was trapped and nowhere to go ate himself”

    and since it was virtual money and “intellectual added fees” when it finally stopped there was nothing tangible there only cheapen and worthless papers and debt still accruing and waiting to be paid off..

    There was a cbs show called i think “in pursuit of money” really good that talks about finical capitalism and the folly that accrued when some became to greedy.

  • JP

    In a model where resources are unlimited, regulated capitalism works nicely and may even be the most desirable system.
    The problem is that resources ARE limited while there is a desire to maintain quality of life for present and future generations.
    The nature of capitalism is that it requires crisis in order to function properly.
    For instance, people want a resource, oil:
    Supply and demand dictate that supply will ramp up to meet demand, eventually exceeding it; then oversupply reduces price, and people can even better afford oil; Supply ramps up further to meet the increased demand; the cycle repeats.
    This system ensures that the resource, oil, will be used up as quickly as possible, and the cycle is not curbed until supply can no longer meet demand due to forced scarcity.
    This model is the same for all resources, including: wood, water, extracted resources, food, etc…
    Despite millennia of human history, only a few recent generations of man has managed to consume as much as 70% of the world’s easily recoverable resources, resources being defined as all that which is recovered for use by man.
    Too much pollution? Eventually Capitalism will ensure that excessive pollution is addressed… but not until it is fully acknowledged as already a severe problem.
    Global climate change? Sure, Capitalism force a change to better behavior, but not until the problem reaches crisis level.
    Enron? Bad toys from China? Bad pet food? Mortgage-backed securities? Tech bubbles? Capitalism has self-regulating mechanisms which will see to it that all of these problems are addressed… but not until each demonstrates that it has reached a crisis level.
    This incredibly selfish wastefulness by a few generations of humanity is the direct result of the success of capitalist economies.
    Success, yes… but only a few generations reap the rewards of success at the expense of all future generations.
    Capitalism has many virtues, not the least of which is a drive towards progress and innovation, but the instinct for preservation of the species will soon have to be weighed against certain types of human “progress.”
    Unless man’s intention is that there be no regard for the future of humanity and much of creation, then Capitalism, regulated or not, is a system unsuited to the goal of maintaining quality of life for present and future generations.

    It is a race towards (and thus always ensures) scarcity and crisis.
    Capitalism may be a detrimental system, but let me be clear: I’ve certainly enjoyed it! I’ve lived my 45 years in perhaps Capitalism’s great golden era, in one of the wealthiest countries on earth in the ultimate consumer society… WE USED IT ALL, MAN… WITHOUT A CARE!!!
    Not a bad time and place to live… I’ve partied my ass off, I’ve traveled, and I burned green like there was no tomorrow. If Capitalism had to exist, I’m certainly glad I got to be in the right place at the peak.
    If not Capitalism, then what?
    I cannot offer an alternative for Capitalism; I’ve only ever stated my case as to the failings of the system.
    I can only offer the obvious: the alternative system would somehow have to manage resource use for sustainability of both the resource and the environment… short of that we lose an ultimate goal.
    I hate to say it and I don’t condone it, but a workable system would likely have to be somewhat totalitarian. Resources would have to be rationed, population controlled, population centers carefully managed to optimize density and efficiency, land use allocated by plan, etc.
    China has some answers as to how some of this might work, and so far as my knowledge goes, it’s not that pretty.
    A system with such restrictions would make it tough for even limited Capitalism to work to much effect… the best one could hope might be to have some degree of guaranteed egalitarianism.
    I’m definitely not Marxist, but Marxism sounds like it comes closest to something that might succeed at the goals of sustainability… a depressing thought, as I can’t see how humanity can evade such a system in the long run.

  • david

    Government failed and will continue to fail.

  • Mark

    I doubt that capitalism has failed. All that’s happened is people were given tremendous freedom to create wealth, and abused the hell out of it.

    Happens every time.

    Completely unregulated markets are, in theory, a wonderful practice. The problem is that hundreds of thousands of completely innocent folks get mangled while the “invisible hand” is correcting things.

  • Howard

    See the recent article “How to Understand the Disaster”, by Robert M. Solow, in the New York Review of Books, Volume 56, Number 8, May 14, 2009, which includes a discussion Judge Posners new book.

  • JP

    Yes, government failed to regulate as necessary and will probably continue failing to regulate as necessary.

  • http://www.GrewDesign.com Milton Gregory Grew

    Well, once again Tom Ashbrook uses hyperbole to make this story into something it’s not. He keeps trying to get Judge Posner to jump in with him but Posner has to keep taming Ashbrook’s comments. I love public radio but Ashbrook almost always annoys me with his cliche and hyperbolic comments trying to make stories bigger than what they are. I think he belongs on CNN, MSNBC or Fox where his style would fit better.

  • Lilya

    The problem is that private sector has always been one step ahead of criminal system and regulation.

    Private system has been increasingly more creative in sprinkling other people’s along the way money in order align their own pockets in the short term in a big way.

    We should find a way of imposing mandatory fines or sentencing in order to protect the system. Otherwise, cheating and getting away with it will replace honest hard work which is the pillar of the capitalist system.

  • E. Taylor

    We don’t need radical new regulation, just some adjustments. We should monitor the total debt-to-equity ratio of the American consumer. Don’t let it get above 20 percent.

  • mr.independant

    Milton I hate to say it but I was just thinking the same thing. He was doing this yesterday on the show on Pakistan and it was very, very annoying.

    How about Tavis Smiley doing a stint.

  • http://www.richardsnotes.org Richard

    Robert Reich is fantastic. He’s one of the best commentators on the scene today. Consider me a fan Dr. Reich.

  • R.M.

    all systems eventually degenerate because slime rises to the top which leads to changes of regimes, that’s called revolution and human nature.

  • Manaz

    I first want to appreciate the courage of calling the problem what it is “failure of capitalism’, so we can fix it. Unlike “crash of comonism” there seem to be a reulctant to do so in this country. There seem to be to associate President Regan to this, because he was popular. But the reason for my email is some questions for your guest:
    - Hasn’t the Board of Director system failed, and become a way for buch of reach collect more money?
    - Where did ani-trust laws go? How can we make companies get so big that we can not let them faile? I do not think it is just banking, we have that with Insurance too!
    - The Insurance companies do not seem to be in business of pretecting people first, and then make money. It seems they are in business to just make money.
    Thank you.
    (Sorry for spelling mistakes, I am running out of time to fix them).

  • EIO Boston

    Judge Posner just talkesd about regulation and our banks being taken over. The truth my friends is that most of our Banks have alredy been taken over. our major banks are partly owned by sovreign wealth funds and othe foreign baks(UBS, Royal bank of scotland) etc.

    We should try to be honest when we talk about these issues.

  • http://www.MandalanQuest.com Roger Marshall

    A point missed is that capitalism is one element of a polarity that makes up a way of managing an economy. The other element of the polarity is (the bad word) socialism. We need to retrench from either/or thinking on the economy. The greater need is to balance capitalism and socialism in a both/and world.

    Thank you, Roger Marshall

  • http://profitandentropy.com richard goldwater

    As far as I know, no economic theories since Marx have addressed the nature of profit. In neo-classical econ, profit is just a deviation from supply and demand that naturally works itself out. My colleagues from the world of physics and math and I are advancing a new theory of profit that compares profit to increasing entropy, and our current failure to thermodynamic equilibrium. We can prove that maximizing profit is scientifically wrong to permit. Please visit profitandentropy.com.

  • Nicholas Bodley

    Have we yet come to the end of The Era of Exalted Greed?

    I don’t know. Perhaps “Wall St.” still exalts greed, but the rest of us don’t, to over-simplify.

  • Scott Durocher

    Capitalism hasn’t failed. Chicago school economics has failed. Miserably, and in every country it has been tried. It’s finally time to bury Milton Friedman and declare his policies to be failures for anyone who isn’t a multi-national for-profit corporation.
    It is beyond me how smart people can still look at this model and believe it works.
    And I’m glad you have callers who will call Judge Posner out on it.

    Want to see a pure model of deregulation and free-market capitalism? Go to Mogadishu.

  • Mari

    Super-capitalism is Feudalism re-branded.
    The small group of lords at the top squeeze the massive population of serfs,vassals and peasants at the bottom.

    Look at history. The trick is to NOT repeat the bloody
    revolutions that sweep through these unjust- but very human- market structures when the fat-cats get way too confident of their own power.

    We can do so much better than this, now. Right?

  • Scott Durocher

    The greater need is to balance capitalism and socialism in a both/and world.

    Exactly, instead of either/or.

  • Ken Swiatek

    I have written “The 2009 Social Security Modernization Plan” which will help in the long run to stabilize the U.S. economy, well as strengthen Social Security.
    Here is a link to a published version:
    Here are 2 links to a two-segment You Tube which I have produced on this topic:

    Please read and watch, and send me comments.

  • Robert Evans

    An interesting aspect, which Judge Posner briefly touched on, is that in the early 2000′s the global investment market was awash in capital due to the depression of interest rate on US government securities by the Fed. In its desperation for a more profitable use of capital, the market looked more favorably on the profit/risk considerations of subprime mortgages. Whence the collapse.

    This puts to rest the argument that low marginal tax rates are necessary to generate the capital investment that drives the economy, aka “trickle-down”.

  • http://neilblanchard.vox.com/ Neil Blanchard


    It seems to me that the main problem with the way we have been doing things is the emphasis on SHORT TERM profits, that ruin the stability of the economy. If the company has to continue to exist in the long term, then risks for short term gain would be taken very often.

    The other main problem is that MONEY IS NOT SPEECH! Voting is speech, and money is action. In other words, political contributions are NOT SPEECH, and should not be protected as free speech. Period.

    Related to this, is corporations are not people, and as such, they should not have the same rights as people do.

    Sincerely, Neil

  • mr.independant

    This show should have been both hours, these two were just getting started. The good thing, Richard A. Posner and Robert Reich demonstrated how to debate using rational and critical thinking. Something that is very few and far between these days on the radio.

    I agree 100% with Richard A. Posner’s assessment on government and how lobbyist and money control the outcome.

    Excellent show.

  • Mary R.

    I’m stunned by Judge Posner’s arrogance. Despite admitting that he got it wrong before, he’s still absolutely convinced that his every current opinion is unassailably correct. I applaud Tom for calling Posner on some of his high-handed statements, which to my ears betray a person out of touch with the severe damage to the lives of ordinary people caused by the policies that he so confidently advocated in the past.

  • Bryan Van Dussen

    I agree Ashrbooke talks too much and uses hyperbole (his lead ins to questions border on self aggrandizement).

    BUT, isn’t Ponser’s title guilty of this too? The FAILURE of Capitalism…Has it really failed? I don’t think so.

    I like Roger’s comment: its one end of a continuum.

    Let’s avoid condemning Capitalism’s productive force of creativity and seek ways to make it fair (er)

  • John Totter

    All was pretty with the conversation with Judge Posner, despite his snipes at Robert Reich until Tom Ashbrook expressed his opinion that the voters will have a role in determining future regulatory policy. Posner then attempted to shut that opinion down with a whining “oh that’s just naive, that’s just naive” leaving me with the impression that he was the uber-authority on the subject and anyone less knowledgeable knew nothing. Why was it just naive? Because it was irrelevant? Because he hadn’t considered it? Or does he just think the voters are sheep and should have no role? Or that politics should have no part? Once again, what had been a respectful, considerate conversation was denegrated to slapping down an opposing opinion.

  • John Totter

    Correction: Please amend my first sentence to: All was going pretty well with the conversation…

  • D K Young

    Usury Laws DO NOT limit lending to those of high risk. As a bank examiner in the 1980′s if someone was of high risk, instead of charging 8% interest they charged 10% interest and required collateral or a co-signer. The usury limit was 16%. Usury limits assures that the bank does not abuse consumers in the area of credit. Today banks will arbitrarily under universal default rates take a good credit risk and run them up to 35% or more. This abuse must stop.

    D K Young

  • mr.independant

    Judge Posner while he comes across as smug and all that is kind of typical of a certain kind of academic.
    However he is right about our naivety in light of how lobbyist now call a lot of the shots. Even thought we the people e-mailed and flooded our representatives in regards to the recent vote on for bankruptcy reform and the credit card industry, which failed due to guess what; the banks lobbying. So much that Senator Durbin commented that “they own the place”. Posner does have a point.

    Dr.Robert Reich is right on with all of comments and analogy, I recommend his blog.

  • http://none Dana Franchitto

    I have alot of respect for Judge Posner and I really admire Robert Reich. However, “Has Captialism Failed?”featured two guests who are,well… captialists.ONe would think that “public” radio would feature at least one socialist on the program to adress that question. Why is discussing socialism on “public” radio as taboo as discussing feces at a cocktail party?

  • Scott Durocher

    Despite admitting that he got it wrong before, he’s still absolutely convinced that his every current opinion is unassailably correct.

    That’s pretty standard for Chicago School boys, though, isn’t it?
    “Well, we f*cked that up. This time it’ll work for sure!

  • mr.independant

    With all due respect, are we not all capitalist in the country? We are all part of a system that is driven by money and the bottom line. I can’t think of any socialist system in the world that would even work here. Name one country that is socialist that is doing well. All of the Western European countries are social democracies and are still very much part of a capitalist system. China is now a capitalist country run by a communist party. Now there is an interesting mix, but the do not have any social welfare programs. Try surviving being a laid off factory worker in China.

    Socialism in it’s pure form is not any better than unbridled capitalism.

  • R.M.

    What we need is a good social safety net . One that doesn’t separate families but strengthen them . Housing should not be deregulated to go up as much as it wants. Ever since Ronald Reagan homelessness has gone out of control . its a disgrace to our society …….

  • RM1111

    Well, Posner must be a good capitalist, since he didn’t seem to give out too many answers (for free) on how capitalism failed; I guess we need to buy the book to get those answers.

    But of the few pearls of wisdom he did offer, he blamed middle management having too much leeway (so then why do CEOs make so much money if they don’t know what their underlings are doing?) and the lack of usury laws. Oh, and that we need more studies. Really, that’s it? Those are the cures for capitalism? I won’t be rushing to buy his book.

    To me, one of the big problems is that the average ordinary common (long-term) shareholder has almost no ability to influence corporate governance. Institutional shareholders simply do not do what’s necessary to reign in bad corporate behavior.

  • Fred W. Bracy

    Judge Posner STILL doesn’t get it. His snivelly comments over the European model are so off base as to suggest anesthesia of the mind. We could easily afford a gross economic growth rate of 4-1/2 percent instead of crying in our beer when the growth rate is less than 6 or 7 percent. This would allow America and ordinary Americans to SAVE … that’s right, SAVE THE DIFFERENCE the way Europeans do, and the result would be that America could start thinking about becoming a CREDITOR nation again instead of the world’s largest DEBTOR nation as we have been ever since the idiotic Reagan era. Europe has been eating our lunch ever since Reagan, and will continue to do so as long as we continue to allow it.

  • Gerald Fnord

    The salient question is, ‘Capitalism has failed to do _what_?’ It’s a socio-economic technology, and like any technology the question is what one does with it. I think it’s great in some ways (no strict limitations based on birth or Party membership) and terrible in others (the monetisation of anything, and the attendant deprecation of all other ways of valuing people and things, the socialisation of problems implicit in primates’ using technology so primitive that it actually throws away useful chemicals as pollution).

    That being said, I think we should judge Capitalism not as an unknown ideal, but as it is. I’d say it’s doing really well in Europe, with a few problems (I don’t worry about the aging population because labour is better done by robots anyway, and that increases productivity), generally decently here, but with big problems, most of them cultural (our tendency to deprecate ‘losers’ as if they were a different class or race of people, and not us, just as many of us support torturing Bad Guys oblivious to their being a stroke of the pen away from being a Bad Guy).

  • aled owen

    Capitalism is imperfect (like democracy) but it is the best system we have and in order to protect it we have have to modify it to protect the poor, the weak. and the gullible. Yes, I am a liberal democrat.

  • Putney Swope

    “Ever since Ronald Reagan homelessness has gone out of control . its a disgrace to our society …….”

    This is true but there are a lot of complex issues.
    First off as a nation we closed down almost all the mental health institutions. They were horrible places, but that was the huge factor in the late 70′s and 80′s for the rise in homelessness. Reagan made it worse by cutting social programs but one has to remember that in the 70′s states almost went bankrupt. We had a very bad rescission then, which was mentioned on today’s show. The nation had a tsunami of factors leading to the rise in homelessness.

    Mental health institutions closed, more people were put out of work by the demise of large industries, such as steel and manufacturing, and social programs such as welfare became targets for politicians. Add to that huge amounts of cheap cocaine (crack) that flooded poor and working class neighborhoods, the net result will be homelessness.

    As time has moved on into the 90′s we get the rise of the working poor and the middle classes who’s incomes have remained stagnant. Which brings to today, now we have people who have are pretty well off who are now joining the ranks of the homeless for the first time since the great depression. Yeah it’s a fun ride living in this country.

  • millard-fillmore

    It would’ve been worth-while to have either Amory Lovins or Paul Hawken – co-authors of the book and the concept “Natural Capitalism” – be present at the table to discuss their views and ideas. I think they have identified the problem, actually, Paul Hawken identified it way back with his book “Ecology of Commerce” – all that’s needed is to discuss their ideas and make changes to the current system to take into account the simple fact, the reality – which the current capitalist system either ignores or conveniently dubs as “external costs” – that we do not have infinite resources available to us. Here’s a link to their website: http://www.natcap.org/

  • Rachel

    To JP—-

    Very well articulated. Hopefully the lesson that mankind learn from past centuries will balance the extremity of Capitalism and Marxism, or will it?

    For some reason, just when we human think we have evolved and progressed, we are back to square one again. Are we (referring to human nature) still running around in the same circle when we started thousands of years ago?

  • http://none dana Franchitto

    TO mr. independent;
    Sure, you can argue the nuts and bolts of socialism and capitalism but my point was not to offer socialism as the “word of God’ but to give it a place at the table as would be fitting on “public” radio.

  • Rachel

    And the balance for Capitalism and Marxism is Socialism, and if you are so afraid of this terminology, get over it, cause it is coming and it really ain’t so bad IF you are born with, let’s see– Sympathy, Empathy, Compassion, or just a little less GREEDY? Oh, is that a lot to ask?

  • millard-fillmore

    “And the balance for Capitalism and Marxism is Socialism, ..”

    Rachel, but neither Socialism nor Marxism take into account the faulty premise of unlimited resources. Doesn’t matter which -ism is used, all of them need to change the underlying assumption and address the basic issue that currently, there is a limit to resources on planet earth.

    Till we figure out systems of production that are not linear and are closed-loop (“waste” from one is used as a “raw material” for another), we’ll continue facing the same problem.

  • Putney Swope

    Again name one Socialist country that is successful in terms of GPD standard of living and so on.

    Marxism you mean the kind of government they had in Cambodia in the 80′s? Or the kind that they have now in Myanmar? Marxism is theory that has never really worked due to the nature of humans.

    I’m not a big fan of the capitalist system but I think it work if it is tweaked to be more socially responsible, affordable health care, decent housing, better workers rights, which go both ways. Some unions are just way to selfish for their own good. Witness the Boston Globe negotiations.

    If Socialism worked then why did it fall apart in the late 80′s in Eastern Europe and the former USSR?

  • GMG

    I agree with Mary R’s comment – this man is insufferable and I finally had to turn him off. Robert Reich makes perfect sense, his arguments are clear and persuasive. Posner pontificates as to what is and is not permissible as if it were all for him to decide, dismissing counter arguments with a snide tone that drips with condescension and certitude, leaving no room for debate. Horrible – this kind of arrogance has hurt us badly over the last few years, and we need to start calling it out.

  • Robin

    Regarding Judge Posner:

    Sarcastically telling people not be so “dramatic” (uh, it’s a depression) and “naive” when he, himself failed to recognize the incredible dangers of deregulating an economy and then basing a large portion of future economic growth on largely non-productive activity: financial “innovation”, insurance and real-estate. Whoops. It’s a depression. My bad.

    His lack of humility proves he has gained no wisdom from his previous mistakes. Insufferable, smug and arrogant. I lost all interest in the book before the hour was over.

    As for the cynical remarks about democracy: yeah, we all know there’s mass corruption. Throwing up your hands and giving up on improving the situation is one solution, but it’s a pretty pathetic one. It’s very “Chicago”, though. Why not just stage some more coups. It worked out so well in Chile.

  • Robin

    Regarding Ashbrook

    “I think he belongs on CNN, MSNBC or Fox where his style would fit better.”

    I don’t understand where these comments are coming from at all. Ashbrook couldn’t be more mild-mannered, and I find it refreshing when he pushes a guest to properly address a question on actually listen to what is being asked. To suggest he is like the weirdos on Fox who continually yell over their guests and make personal attacks is completely ridiculous.

    Judge Posner, like many guests, often preferred to make points he had already decided on rather than *listen* and respond. He thought he was above the person interviewing him and deserved some push-back for his rudeness.

  • Robin

    “I’m not a big fan of the capitalist system but I think it work if it is tweaked to be more socially responsible, affordable health care, decent housing, better workers rights, which go both ways.”

    Um, you do realize those are largely socialist ideal, right?

    “If Socialism worked then why did it fall apart in the late 80’s in Eastern Europe and the former USSR?”

    There is a big difference between Finland and the Soviet Union and Canada and Cambodia under Pol Pot. Lumping them altogether proves that you are very confused.

    I seriously recommend that you get a good, impartial dictionary of political terminology. Oxford has a good one.

  • PW

    Even so, Robin@3:44pm — and I’m a real admirer of the show — I think we need a new Tom. Fewer interruptions and bluster, more focus and steadiness. Less Tom, more guest.

  • millard-fillmore

    At its heart, capitalism is nothing but trade between people, countries, cultures – and that has been going on since the dawn of civilization, and no one can stop it. Think globalization is a recent phenomenon? Think again. Archaeologists often find artifacts and coins issued in one country, in another country far far away, and traders in the past have introduced food indigenous to their country, to visiting countries. Look up the history of Silk Route/Silk Roads.

    What can be done is change/modify the models we use. So, I have no problem with capitalism per se and am definitely not an anti-capitalist, but I do think the current models have glitches which need to be corrected.

  • Joe Miller

    Listening to Posner makes me think of Elmer Fudd. He is so deep into the system he can’t see the forest for the trees.

    I for one will not feel confident in our financial institutions until I see a few thousand convictions of financial executives and managers, and in related enterprises.

    I will not feel confident in my government until we see a major, possibly revolutionary reform of our campaign finance and lobbying laws.

    Anything less than this is just window dressing.

    Posner is I think shilling for the banking industry and this book is his door to ‘credibility’ to essentially push for mild (e.g. meaningless) reforms and reregulation.

    He says up front he is for regulation now, but all of his arguments are for stunting that regulation, minimizing it, delaying it.

    Its time for some serious change, including replacing the banking system and convicting the bankers. A recent newpaper article asked “Is BOFA CEO’s Job at Risk”? We should be asking how many years will he get and why is he still walking free.

  • LinP

    I read the comments first before listening to the show, and was waiting to hear Tom be bombastic. Where was it? I think he firmly challenged that smug Judge Posner. I think Tom hit the right tone, and did a good job with this topic today. I think we need another few hours on it.

    Also, Posner had a point at the end about the power of the lobbying groups, but it was lost in his rude, I-am-so-superior tone.

  • Mari


    Interesting look at today’s super-capitalist flaws through the lens of historical comparisons.

  • Leme

    Posner’s silly, disingenuous doublespeak (“Oh, I had no idea the banking industry would collapse”) is laughable. It’s called corruption. Surely someone as ancient as he can acknowledge the amoral corruption that drove the bankers to gamble away our country’s wealth (e.g. domestic labor).

    Good riddance savage market capitalism – a thoughtful capitalism is here.

    And Tom Ashbrook – more concerned with getting a major, breakthrough statement on his show than asking serious journalistic questions. NPR is full of sensational journalists who skate in the shallow end of the pool. Up with alternative news outlets online and on truly independent radio. ugh.

  • Susan Franz

    I find it interesting that any bank would insist on supervision and a number signoffs to empty an ATM, but would take insane risks at the board and CEO levels.

    Perhaps, derivities created the problem by masking the actual risk of the moves the banks, insurers, and hedge funds took instead of making clear that what was being done was dangerous for everyone involved.

    It seems odd that Judge Posner can identify the inherent risk of the banking industry, see those exact risks in insurance and hedge funds, but not see an equal need for regulation, clarity, and transparency in regulation for anyone taking risks for a money, and always someone else’s money, for a living.

  • Susan Franz

    Also, I find it troubling that 19 CEOs have control 2/3 of the wealth of the country through their operations. That is not a healthy market under any view of capitalism. A company which can make mistakes substantial enough to threaten its existance and then relies of the taxpayer to keep it on life support is not a real player in anything approaching a healthy market economy. A healthy market can heal a lot of woes, but we can’t have a healthy market
    with only 19 companies calling the shots.

  • Cliff Travis

    “Clean capitalism” needs (1) a solid regulatory framework/structure in place in order to function properly. It also needs (2) transparency in order for all of us to understand where the money’s going and how much – which ultimately affects how we’ll change and adapt the framework over time.

    Every decision in this regard should consider greed as the most basic, fundamental, and relentless problem. Stories go back 2000 years that remind us of this. It has been and will always be there, and therefore needs to be accounted for in ever single decision we make here. The banking industry is no exception. They didn’t have their investor’s best interests in mind when they went crazy packaging, selling, and investing in the riskiest overleveraged assets on Earth – they’re fallible like everything and everyone else. It’s time to sober up and realize that greed can overwhelm even the most well-informed, intelligent individuals.

  • Chuck

    Robin: Regarding your objection to the comment that “I think he belongs on CNN, MSNBC or Fox where his style would fit better.” Your comment that you “don’t understand where these comments are coming from at all. Ashbrook couldn’t be more mild-mannered.”

    I’m mystified that you don’t hear his continual efforts to hyperbolize even the most minor thing. But even more problematic is his insistence on spending a lot of time restating what he believes the guests just said. I find them rarely helpful and, worse, often misleading because he obviously doesn’t understand what was said or understands and wishes to distort it for his own purposes (which include cheap exaggeration of a minor point).

    One recent example was the show on the dispute within the ACLU where he characterized the opposition to the present leadership as “purist” – a euphamism for dreamy altruists. It was clear very early, though, that this characterization was a disservice. The opposition was objecting to a gradual shift away from the founding ACLU principles. This shift has made it easier to raise money, but it is at the expense of a vital ACLU function. I don’t think Assbrook had the slightest notion of how important the issue is – and that’s why he chose to call it “purist”.

  • http://www.synapse9.com Phil Henshaw

    There actually has been a sound theory that addresses this whole problem, been around for 30 years, but it’s physics addressing complex systems and clearly draws the physical limits of learning and choices. As a result it requires it allows clear thinking about our most highly political choices, and no one has had the courage to discuss it.

    Judge Posner makes a good point, that the 250 PhD economists of the Fed should get about the business of finding some indicators of economic fragility, and we can see these things coming.

    The one indicator that does that best is watching the divergence of credit and real product, or unearned and earned income, which have been diverging exponentially since the 70′s. The coming trouble to those who watched those indicators grow apart was obvious. The real conflict, though, is that it amounts to being the central purpose of regulation to stabilize what causes that. What is really missing from our plan is what to do other than stabalize the divergences to collapse or to let them collapse. Big “silver lining” and all, though, sorting through the choices is a kind of discussion people are still in denial about needing to have. http://www.synapse9.com/issues/concept$.htm

  • Fred Magyar

    Comment from millard-fillmore is the only one that comes closest to the truth!

    “Doesn’t matter which -ism is used, all of them need to change the underlying assumption and address the basic issue that currently, there is a limit to resources on planet earth.”

    Bingo! The fact that so few people seem to get this concept and that we are facing a profound paradigm shift because of it, is what I find most troubling.

    The dogma of economic growth being our salvation is false. That our leaders in government and finance with all their doctorates do not seem to be able to grasp the basics of the exponential function is sad.

  • Robin

    “I’m mystified that you don’t hear his continual efforts to hyperbolize even the most minor thing.”

    I guess we just don’t agree about this. (Also, I took you more seriously before I got the the “Assbrook” thing. Come on.)

    I am not an avid Tom Ashbrook fan (I only listen to shows which have a topic of specific interest to me) but I find him likeable and pretty calm. Generally, this show included, guests go on at length without interruption. If they try to slide by a point, or ignore a fair question, it is Tom’s job to push them. I don’t see anything wrong with that.

    I avoid American news these days because I frankly can’t stand listening to people screaming talking points over one another in lieu of a real debate. I simply don’t see that happening here. I maintain that a comparison with CNN or, especially, Fox is completely ridiculous.

  • ilan ba

    How can you say that only the banking deregulation is a problem? The arrogance there is unfortunate, “We were only wrong about deregulation of banking, not everything else.” Who says we won’t find out that there are plenty of other industries that should be regulated?

  • Brett Greisen

    I hope the Congressional Commission is smart enough to look into why the CANADIAN banking system has avoided the worst of the banking crisis. While it has been hit by the real economic crash we’re in, their banks, in their domestic market are now in a position to suggest some changes to our regulators.

    I found Judge Posner’s overly broad statements and his failure to limit them during cthe discussion rather alarming. He has chosen an advocation writing about Chicago economic theory & on air he denies his previous writings and first impressions in his current tome. He fears “over”-regulation, but is cavalier about the twin robberies of the Public Purse – the S&L scandals & this meltdown which used basically the same mechanism. They wrote as many mortgages as they could in both instances. Then they bundled them regardless of risk and sold them upstream. In the S&L instance the damage was limited somewhat to the domestic US market. In the present instance they could make larger bundles and sell them worldwide & get their commissions on larger leverage (30+ X).

    Let’s look to Canada for some help on this mess.

  • Susan Franz

    I agree with DK Young’s comment regarding usury. We have a system where banks make more money the worse off their customer’s financial situation becomes. If a credit card balance can be blown up from $1,000 to $5,000 through wild interest rate changes and hefty fees, the individual’s debt-to-income ratio suffers and every financial entity can begin charging crazy rates from mortgages to cars to business lending, putting the individual further in debt.

    A usury cap would limit the profit a bank could make by damaging the credit rating and adding to the debt load of an individual or business.

    This is such a complete waste of the wages that would otherwise go to buying things people need or want – items which require jobs to make, distribute, and sell.

    It wasn’t Alan Greenspan’s fault the investment banks were awash in cash. It was the fault of the regulators who saw no reason to protect the little guys while the big guys drove the economy off a cliff.

    I think it is important that the mortgage market didn’t fail with the introductory rates that were given to homeowners. Homeowners were always able to make those payments. It failed when the banks raised those rates, sometimes doubling or tripling payments. The wild contracts started more than five years before the ultimate implosion.

    If the introductory rates – still often much higher than a prime rate – had been a real rate, the housing market would have been sustainable.

    Again, the idiots to blame are those who should have been regulating the banks, instead of golfing with them.

  • Stephen

    I agree with some other comments it would have been good if this show could have went another hour. I don’t really feel like Posner got to make his point at the end. Unfortunately I kind of have to agree with Posner that this won’t be decided at the polls because unfortunately most people aren’t really paying that much attention. I’m not saying people aren’t paying attention to the economy more so just these theories on how an economy should work.

  • Greg

    Two comments, you had a caller that stated that we are a nation built solely on capitalism. You left that unchallenged. It is difficult to imagine how the US would look without transcontinental railroads, a federal highway system and, most ironically, agricultural subsidies. I say ironic because it is hard to fine any farmers in this neck of the woods that aren’t rabidly anti-tax and anti-government until you talk about cutting parity payments.

    The most rabidly anti-tax and anti-collectivist among us (WalMart for instance) are often the most dependent upon these collectively acquired societal assets.

    Second point, isn’t it possible that upper management pay that is not tied to performance had a little something to do with risky decision making? Your guests seemed to gloss over that aspect and jump right on trader compensation practices.

  • Chuck Palson

    Reply to Susan Franz:

    Your point about the effect of an interest cap to prevent usury, and, more important, the broader negative effects of it, are excellent. I have wrestled for many years with what constitutes usurious rates and why there are frequently laws against usury. I finally found an explanation only this year, and it’s consistent with your point.

    Basically, high interest rates divert investment away from productive and socially useful production of goods and services; it is a sign of a deteriorating economy when the usury sphere greatly increases as it has since dereg got rolling. It’s even worse than it looks because the various expensive fees no charged by banks are not included, even though the account for very large portions of bank profits.

    So the fact that financial “service” biz has increased from about 15% to 30% of GDP and 40% of profits should be alarming to everyone because it’s a sign of an economy in deep trouble.

    And, by the way, to those who think a lot of credit card usage is for frilly stuff, Elizabeth Warren in the Two Income Trap has thoroughly debunked this notion. She has recently called attention to the fact that the median family income has been DECLINING (NOT merely “stagnant” as claimed by just about every journalist. A lot of consumer credit has been used instead to make up for the shortfall caused by endlessly declining real wages (the CPI is ridiculously rigged to hide the true rate of inflation – like not including health insurance, college tuition, and the cost of housing!!).

  • Putney Swope

    Robin Canada is not a socialist country. Having a single payer health care system does not mean your a socialist country.

    Um, you do realize those are largely socialist ideal, right?

    While these ideals might be part of a socialist governments makeup they do not mean that it is what defines such a government. Canada seems to me to be a pretty well entrenched in the capitalist world. It has a capitalist system of trade, and so on. Cuba is a socialist country, or I should say a communist. All the institutions are run by the state.

    I would say that your confused about the difference between social democratic countries, such as Canada, Sweden, Holland, and so on.

    These countries do not have state owned industries, which is one of the things that define a socialist country.

    For instance Switzerland has a national health care system, a socialist idea one could say, but the people still buy health insurance through private companies.
    The companies are regulated by the state, but one could hardly call Switzerland a socialist country, far from it.

  • Rachel

    to millard-fillmore—

    Fully agreed. I always have problem with whatever the **ism is, we constantly label ourselves that traps ourselves into these **ism box. Really, it’s time to practice “practicality”. It is so true that we need to evolve ourselves around the resources and renewable resources of this planet (even the renewable resources takes energy to produce, so we have to be careful of how to generate these energy), instead the planet evolve around us, and the fact and the lesson we learn is, there’s no such a thing that the planet evolves around us, human have been very arrogant for too long.

  • rachel


    Very true, trading globally began since the dawn of human civilization. But what really changed the dramatic scale of it is the “industrialization”. Industrialization is like a gigantic turning wheel and black hole thats sucks everything out of this planet and in return putting the toxin back in it.

    After all, at the end of the day, this planet is still standing and existing, and will not miss a thing about human being.

  • Seth Mason

    Posner said that this economic collapse is much worse in europe. I’m currently living in Stockholm and would like to note that no one here is losing their house and more importantly, no one is losing their retirement. The average person is feeling this way less in europe

  • Rob

    What failure of prediction would it take to get someone like Richard Posner off the air and out of the public eye? Obviously completely failing to predict the biggest financial crisis of our time isn’t enough. Even though all the signs were there for anyone who cared to look – e.g. something over 50% of mortgages issued in CA in 2005 were negative amortization.

    Tom makes a great program, day in, and day out. But he would do his listeners a great service to do away with these aging “sages” and interview some of the bloggers that predicted this crisis from the start. They’re not hard to find – Ben Jones at the Housing Bubble blog, Mike Shedlock, the Calculated Risk blog. These are fairly ordinary people who presented strong evidence for the coming financial meltdown, years before it happened. Come on Tom, we’ve seen how badly the Ivy League-approved Ideologues have hurt our country – lets hear from some up-and-commers who present facts.

  • justanother

    I used to think the society of America are generally open minded. But after I moved to this country for over 20 years, and realize a huge part of this country are not.

    Even though there are versatile informations available out there, but if we are not so interested in balance and check our views, most likely our views are formed by being exposed to the major TV networks and other major medias, especially when it comes to the opinions of other countries in the world.

    I came from another culture, at times I am just standing there speechless by listening to how so called “experts” here talk about systems and cultures of other countries. Those experts can be so clueless. It is almost scary to think they are the ones out there spreading false informations and views, and most of the people kind of just take it like it is without delving into the facts.

  • http://none Aled Owen

    Robert Reich is fantastic. He’s one of the best commentators on the scene today. Consider me a fan Dr. Reich.

    Posted by Richard, on May 7th, 2009 at 9:25 am EDT

    I like Reich and think his suggestion in his latest book that we not tax corporations has merit. However his idea in curing the US employment problem by exporting unemployment to other countries by rsising tariffs is old fashioned and a recipe for world economic disasters. I was amazed that he should say such a thing on PBS
    Aled Owen

  • Cynthia

    I just listened to this podcast with Richard Posner and Reich. Posner’s arrogance and belittling comments took my breath away. He seemed to be backpedaling on the fundamental thesis of his book – I’ll have to depend on Tom’s show for its entirety since I most certainly won’t want to further line this guy’s pockets.

    One post said that he admired the civility of the debate. Actually Tom Ashbrook’s guests are usually quite civil. Posner was the least civil guest I’ve heard in a while. Tom – good on you for taking him to task.

    I very much agree with the post who said that Tom should invite some of the up and coming crowd. People like Posner already have gotten too much air time. Just because he got a book published that seems to do little more than try to capitalize off the current debacle is no reason to give him air time.

  • Tom Cantlon

    Yea! Intelligent, well-spoken, informed, reasonable people having an informative disagreement. I feel like the man in the desert who found a bit of water and it makes him realize just how parched he’s been.

  • http://www.gwi.net/~pstewart/lcdproj.html Phil Stewart

    Mari’s point is most on target: “Super-Capitalism is Feudalism re-branded.”

    Yes. She is also right to warn of bloody revolutions arising as a direct result of fat cats taking too much, feeling too confident of their power.

    Remember that the American Revolution was pitched, at a theoretical level, against the divine right of kings to rule. We have busily re-invented kings in our present society, by different names (CEOs). This rose, by another name, smells just about as sweet.

    Capitalism is archetypally American; but our present Super-Capitalism is *anti*-American, *un*-American–contrary to the principles this nation was founded on.

    Now we get to see the concept’s material consequence. It threatens solvency and sovereignty, in equal measure. How will we unlearn the habits that have created it?

    Phil Stewart

Aug 20, 2014
A man holds his hands up in the street after a standoff with police Monday, Aug. 18, 2014, during a protest for Michael Brown, who was killed by a police officer Aug. 9 in Ferguson, Mo. (AP)

A deep read on Ferguson, Missouri and what we’re seeing about race, class, hope and fear in America.

Aug 20, 2014
In this Oct. 21, 2013 file photo, a monarch butterfly lands on a confetti lantana plant in San Antonio. A half-century ago Monarch butterflies, tired, hungry and bursting to lay eggs, found plenty of nourishment flying across Texas. Native white-flowering balls of antelope milkweed covered grasslands, growing alongside nectar-filled wildflowers. But now, these orange-and-black winged butterflies find mostly buildings, manicured lawns and toxic, pesticide-filled plants. (AP)

This year’s monarch butterfly migration is the smallest ever recorded. We’ll ask why. It’s a big story. Plus: how climate change is creating new hybridized species.

Aug 19, 2014
Lara Russo, left, Cally Guasti, center, and Reese Werkhoven sit on a couch in their apartment in New Paltz, N.Y. on Thursday, May 15, 2014.  While their roommate story of $40,800 found in a couch made the news, other, weirder stories of unusual roommates are far more common. (AP)

From college dorms and summer camps to RVs and retirement hotels, what it’s like to share a room. True stories of roommates.

Aug 19, 2014
Police wait to advance after tear gas was used to disperse a crowd Sunday, Aug. 17, 2014, during a protest for Michael Brown, who was killed by a police officer last Saturday in Ferguson, Mo. (AP)

“War zones” in America. Local police departments with military grade equipment – how much is too much, and what it would take to de-militarize America’s police force.

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