The Finance Curse. Nicholas Shaxson

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СКАЧАТЬ was one of the truest of true believers who thought pretty much anything worthwhile could and should be shoehorned into the price mechanism in the interest of “efficiency.” His messianic zeal mesmerized many of his students. “I regarded my role as that of Saint Paul to Aaron Director’s Christ,” Coase said. “He got the doctrine going, and what I had to do was to bring it to the Gentiles.” Bork, another disciple, said Director “gradually destroyed my dreams of socialism with price theory,” adding that many of his colleagues “underwent what can only be called a religious conversion.”

      The guests that evening came to listen to Coase present a draft paper, “The Problem of Social Cost.” Stigler remembered wondering “how so fine an economist could make such an obvious mistake.” At the start of the evening Coase summarized his idea and a vote was taken. All twenty guests opposed him.⁴

      Coase deployed a novel argument. Corporations in those days were supposed to be subject to the law—or at least the law came first. If a corporation was pumping illegal pollutants into a river, you went out and found the pipe or some incriminating documents, then wielded the law to stop it. Pollution is an externality, a consequence that affects other parties who aren’t associated with the transactions or businesses involved. Markets can’t generally solve externalities; it had long been accepted that governments and laws needed to step in to stop such failures in the market. Coase wasn’t having this.

      Imagine, he said, that a farmer’s cattle ravaged his neighbor’s wheat crop. If the law held the cattle farmer liable, he’d have to pay for a fence or negotiate compensation with his neighbor. If the law didn’t hold him liable, the wheat farmer would pay for the fence. But from an overall efficiency perspective it didn’t matter which farmer paid for the fence, since the cost of the fence was the same. So the law itself didn’t really matter, he went on: laws should be subject to a sort of cost-benefit analysis where harm caused by the polluter or the careless farmer or the tax cheat should be weighed against the benefits derived by those actors who gained. It was enough to show that overall “welfare” was maximized to let this happen.

      You could extend this logic. If there was a large banking monopoly, for instance, any losses to consumers or workers could be balanced out by gains to the bank and its shareholders, and there might be no net loss overall. Bring in gains such as economies of scale reaped by larger corporations, and monopolies might turn out to be a good thing! Monopolies were the natural way markets wanted to go, and it wasn’t the job of judges to interfere. Once you took into account the apparent costs of regulation to the monopolizers, he said, it became hard to justify doing anything about them.

      The guests were stunned. Until then antitrust—the large body of established law and theory that said monopolies were harmful and that governments should regulate them—was supported both on the Left of the political spectrum, where people fretted about giant banks and industrialists oppressing workers and customers, and on the Right too, where people were keen to protect and promote competition and the integrity of markets. Coase had just lobbed a bomb into this whole edifice—and into a few other edifices too.

      The dinner progressed. The arguments mounted. “As usual, Milton [Friedman] did most of the talking,” Stigler remembered. “My recollection is that Ronald didn’t persuade us. But he refused to yield to all our erroneous arguments. Milton would hit him from one side, then from another, then from another.” But then, as in the plot of Twelve Angry Men, the mood began to change. “To our horror,” Stigler said, “Milton missed him and hit us.” By the end of the evening they took another vote: all were for Coase. “I have never really forgiven Aaron for not having brought a tape recorder,” Stigler said. “It was one of the most exciting intellectual events of my life.”⁵

      This violent attack on the foundations of legal authority—that laws should be subjected to economic cost-benefit calculations and rejected if they fail to pass muster—was a classic example of the Chicago School’s “economics imperialism”—a power grab by economics professors with ambitions to colonize and dominate as many areas of social and political life as they could lay their hands on. It was at the same time an example of red-blooded neoliberalism, which argued that lawyers and laws should bow down to economists and economics and that everything had a price. The scale and success of this insurrection was made clear later on, in 1983, when a group of Chicago School economists was reminiscing about—one might say gloating over—this power grab. This short exchange between Bork, influential jurist and economist Richard Posner, and Henry Manne, another influential economist, gives a flavor.

      BORK: As far as I know, the economists have not yet done any damage to constitutional law.

      POSNER: We are working on that.

      MANNE: We’ll chase you out of that too. [laughter]⁶

      It doesn’t take a genius to see how elevating easy-to-massage numbers above the rule of law was likely to boost lawbreaking everywhere, not least in the financial sector.

      These revolutionary ideas percolated slowly at first, but cheerleaders and corporate funders weren’t hard to find. One early enthusiast was a partner at a Wall Street consulting firm who was already a fanatical devotee of the antigovernment novelist and libertarian guru Ayn Rand. “The entire structure of antitrust statutes in this country is a jumble of economic irrationality and ignorance, … confusion, contradictions and legalistic hairsplitting,” he thundered in 1961. “The world of antitrust is reminiscent of Alice in Wonderland.” The problem wasn’t big business, he said; it was big antitrust and big government. This irate Wall Street partner, whose name was Alan Greenspan, would later become chairman of the US Federal Reserve.⁷

      The United States is the historical home of anti-monopoly, and trends around the world have been led by what happens there. Anti-monopoly has been hard-wired into the American psyche since the country’s founding. America’s rugged individualism emerged as a bulwark not only against oversized government but against overwhelming business and financial power too. The Boston Tea Party of 1773, which helped trigger the War of Independence from Britain, was in large part a protest against the monopolizing East India Company, “which, besides the trains of evil that attend them in the commercial view, are forever dangerous to public liberty,” wrote Samuel Adams and John Hancock.⁸ And this was always understood: monopoly wasn’t just an economic problem but a fundamental threat to liberty and democracy.

      Anti-monopoly zeal and monopoly power ebbed and flowed for centuries alongside shifting political tides. President Andrew Jackson launched a titanic struggle in the 1830s against what he called a “hydra of corruption”—a net of interlinked monopolies centered on the Second Bank of the United States—and his victory preceded a period of strong defenses against business predation and of tremendous economic dynamism. “The stranger is constantly amazed by the immense public works executed by a nation which contains, so to speak, no rich men,” wrote the French political scientist Alexis de Tocqueville in 1840. “What astonishes me is not so much the marvelous grandeur of some undertakings, as the innumerable multitude of small ones.”⁹

      The Civil War in the 1860s was a fight against slavery and monopoly: the abolitionist senator Thomas Morris of Ohio called “slave power” the “goliath of all monopolies,” and his fellow abolitionist Wendell Phillips railed against the “aristocracy of the skin” in the slave economies of the South. When the war ended, however, America drifted fitfully toward the “age of Caesarism,” the era of the Rockefellers, Carnegies, and J. P. Morgan, who justified their power as necessary to “rationalize” their industries in more “efficient” ways.¹⁰

      Democratic pushback emerged to confront these concentrations of economic and political power, often with geographical roots that are eerily similar to what we see today. Communities across rural and poor America saw large conglomerates sucking wealth and control away from their regions to benefit elites in mostly coastal cities like New York. СКАЧАТЬ