Since the days of Ronald Reagan conservatives have been broadcasting this faith from radio and TV studios, pulpits, and lecturns across the country. In Oklahoma, despite what is now happening throughout the global economy, faith in the "invisible hand" is as prevalent as faith in God -- and some no doubt think that the two are one and the same. No state in the union has more faith in Reagan's mythology about the "magic of the markets."
I encourage my fellow Oklahomans, and anyone else who might be interested, to read Kevin Phillips' new book, Bad Money. Kevin Phillips was the GOP's principal electoral theoretician during the Nixon and Reagan eras. He provides some revealing insights about the "invisible hands" that have been guiding the American economy since the days of Ronald Reagan:
Part of what Bad Money deals with . . . is the financial sector's massive use of private debt and leverage during the 1990s and then again in the first decade of the twenty-first century to expand its size, global reach, and extraordinary profitability. This is less a market-based Adam Smith brand of triumph than a mercantilist joint venture with U.S. government authority, strategic direction, funding support, and periodic Federal Reserve or U.S. Treasury bailouts of overextended financial institutions. . . .Here's more:
Some have labeled these apparent policies the "socialization of risk" or "Wall Street socialism." I think the better explanation is that elements of the U.S. government decided, back in the late 1980s, that finance, not manufacturing or high technology, had to be the sector on which Washington would place its strategic chips -– would "pick as a winner" in the parlance of that era. Farms and factories were expendable, but certain banks and other financial institutions could not be allowed to fail. The coordinating body, handed its government franchise in 1988, following the October 1987 stock market crash, was the President's Working Group on Financial Markets, built around the secretary of the treasury and the chairman of the Federal Reserve Board. Its existence has never been secret, only the record of its discussions and the nature of its occasional interventions in the financial markets. [pp. xiii-xiv]
I wrote back in 1994 that “the investment community also buzzed with another rumor that the Federal Reserve, sheltered in the secrecy of its unsupervised, free from audit status, had gone even further by quietly buying S&P futures to prop up the stock market on critical days.” Actually, what would later be nicknamed the Plunge Protection Team may have been sheltering such activity behind something far more reassuring: stated but imprecise presidential authority, contained in a proclamation establishing the President’s Working Group on Financial Markets issued by Ronald Reagan on March 18, 1988, four months after the October 1987 crash. The secretary of the treasury and the chairman of the Federal Reserve Board were the designated big hitters, but others -– the several stock market chief executives, for example, and the president of the New York Federal Reserve Board -– could be added to the attendees as needed. . . .And more:
Just how much power the Working Group was allowed to exercise was never publicly made clear. . . . [p. 58]
After the financial markets' narrow escape in the stock market crash of 1987, some kind of high level decision seems to have been reached in Washington to loosely institutionalize a rescue mechanism for the stock market akin to that pursued on an ad hoc basis (by the Fed and the U.S. Treasury) to safeguard major U.S. banks from exposure to domestic and foreign loan and currency crises. Thus the coinage of the phrase "financial mercantilism." For Washington to have made such a tentative choice in 1988 was momentous. Finance became the chosen sector of the U.S. economy -– the one that would be protected and promoted because it would be too important to fail. Manufacturing would receive no such help, however excited members of Congress might get from time to time. [p. 60]Doesn't it make your heart feel good to know how Reagan entrusted our nation's entire economic well-being to the "invisible hands" of those "conservative" free-market financiers and Wall Street executives?