Die Vorlage

Im Laufe des Interviews fragte ich Mr. Galbraith,Lloyd M. Bentsen, Jr. Chair of Government/Business Relations at the Lyndon B. Johnson Schoolof Public Affairs an der  University ofTexas in Austin, dieses:

In a recent interviewfor MMNews, Hans-Olaf Henkel, who was once the head of the Federation of GermanIndustries as well as IBM Europe, said two things that I would like to confrontyou with because Mr. Henkel is an influential opinion-maker here in Germany.[i] The first thing hesaid was that basically no one saw this crisis coming and that he laughshimself to death whenever someone says that this crisis was foreseen. Can yougive Mr. Henkel some names in this respect? How about Dean Baker for example?

James K. Galbraith: I’ve written a long articleon not just the individual economists, but groups of economists who saw thecrisis coming very clearly.[ii] Dean is one certainly with a strongclaim. Dean follows a very simple method. He looks at critical ratios, such asthe ratio of house prices to rental rates. When these deviated very far fromtheir historical norms, that generates an expectation that they would revert. Peopleshould have been looking at that evidence and taking Dean’s predictions farmore seriously than they did. But on the other hand,  what Dean is pursuing is a very simple methodand couldn’t be described as a school of economic analysis.

There are at least three traditions ineconomics that were warning about what was coming in ways which were verycoherently related to a formal analytical program.

There is a group associated with the Levy EconomicsInstitute and led by Wynne Godley, former senior advisor to the British Treasury. This group was workingwith national balance sheets -- with the national income accounts -- andwarning very emphatically that the debt-burden of the household sector wasunsustainable..

There are people working in the tradition ofHyman Minsky, who of course were  trainedto expect financial instability. They were making similar points from asubstantially different conceptual basis.

And then there are people working broadly inthe tradition of my father, who look at the structures of economic power, andwho were warning that the supervision of the banking system was going to causean epidemic of fraud. There was a group of what we call “white-collarcriminologists”, who were examining these issues, and they are developing a newpolitical economy of crime.

This group had the experience of what happenedin the Savings and Loan crisis of the 1980’s, when certain patterns ofbehaviour, which are relatively standard in criminal financial activity, werevery clearly present. These patterns re-emerged in the early 2000’s in the Enron,Worldcom, and Tyco scandals, and they were re-emerging again in the housingsector. To these people it was entirely obvious that a massive problem wasdeveloping.

So, Mr. Henkel needs to read a little bit more,he needs to broaden his definition of what constitutes economic analysis, andneeds to recognize that the problem is precisely a group of people who insistthat nobody outside of their very narrow circle has any insight worth payingattention to. That’s a preposterous position. It’s a completely indefensibleposition. It reflects fundamental narrowed-mindedness and, as I may say,incompetence which is really on display for anybody to see. So I do not need tohammer the point too hard.

The otherthing that I want to know with regard to Mr. Henkel’s statements is this: Hesaid that this crisis was caused by a certain type of “do-goodism” amongAmerican politicians who wanted to make sure that every American citizen wouldhave a home of her/his own. What do you think when you hear such a thing?

James K. Galbraith: It is an amusinginterpretation of the motives of someone like George W. Bush, who representedone of the most aggressively predatory tendencies in American politics ever toreach the White House. This was a president who turned over regulation -- notjust in finance but in everything he got his hands on -- to the mostreactionary elements of the business community, to the most anti-regulationelements, so that regulatory structures were run down everywhere. They were rundown in consumer protection, they were run down in worker protection, they wererun down in trade, they were run down in ways which have significantly degradedthe quality of life in the UnitedStates.

So, to suggest that this was some naïvealtruism on the part of that extraordinarily reactionary Republicanadministration is, I must say, a view that no one who has actually livedthrough this period in the UnitedStates would recognize.

Now, Mr. Henkel is probably thinking aboutinstitutions like Fannie Mae and Freddie Mac which were, in fact, privatefirms. Fannie Mae had been privatized for forty years, and it had, indeed,become a bastion of Washingtoncronyism. I think that’s fair to say. Those institutions were drasticallymismanaged by the overpaid appointees who were running them, no doubt aboutthat. Ginnie Mae, the Government National Mortgage Association, which was notprivatized, did not have the same problems.

But the truth is: this crisis emerged largelyfirst of all in the private-label mortgage sector, that is to say in purelyprivate entities like Countrywide, Washington Mutual, or IndyMac. The loanswere securitized through private banks, vetted by private ratings agencies. Thepoint here was not to put people in homes. It was clear to the lenders that thepeople that they were putting in homes would not be able to stay there.

The point was obviously to do two things. Onewas to create an enormous stream of revenue for these financial firms -- whowere in many cases friends and political supporters of the administration.Second, it was to create a temporary burst of economic activity  that would be to the political benefit of theBush administration. So, to the extent that you had political forces that wereexplicitly driving the process, those were the motivations. It was certainlynot some broad altruism toward a part of the population in which the politicalleadership of the country at the time never had any interest whatever.

Is there such a thinglike “do-goodism” in Washington?

James K. Galbraith: There is “do-wellism.”

What is this?

James K. Galbraith: Large parts of the processare driven by a very strong desire to increase one’s income and wealth. I’m notsaying that everybody in Washingtonis a crook. I’m not saying that there aren’t principled public servants evennow. But to say that they were dominating housing policy in the last decade isa very silly view.

Die Antwort

Herr Henkel wandte sich nun anMMNews und wünschte um folgende Klarstellung, der wir ausdrücklich nachkommenmöchten.

Statement of  Hans-Olaf Henkel,former leader of the Federation of German Industries:

Dear Sirs,

I take strong objection to themisleading answers Mr. Galbraith gave in the interview ("There Is NoReturn To Self-Sustaining Growth") when you confronted him with some of myviews on the  causes of the financial crisis.

Instead of arguing with facts he deflected from the issue with anincredible degree of arrogance ("Mr. Henkel needs to read a little(!)bitmore").

He chose to ridicule my assertion that "a certain type of do-goodismamong American politicians caused the remarkeable increase of home ownership inthe U.S. and contributed significantly to the real-estate bubble in hiscountry", by stating that it was "an amusing interpretation of themotives of someone like (!) George W. Bush".

Mr.Galbraith should read a little bit more himself. For instance George W.Bush's "American Dream Downpayment Act" of 2003, in which he targeted5.5 Million additional homes for the underprivileged by the year 2010 (by 2007he achieved 3.1 Million). Even better, Mr. Galbraith should read Bill Clinton'sown biography in which he boasted (of course before the crisis)the introductionof his "National Home Owner's Stragtegy" with the objective toconvert "two thirds of the Americans to home owners". Or better, Mr.Galbraith should familiarize himself Jimmy Carter's "Housing and CommunityDevelopment Act" where in Section VIII Banks were prohibited the practiceof "red lining" which until then enabled them to distinguish"better living quarters" and "slums".

If a so called "leading economist" refuses to recognize thecauses of an economic problem for obvious ideological reasons, how can he betaken serious in his analysis?
Hans-Olaf Henkel

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