BOOK REVIEW: ‘The Great Deformation: Assessing the Blame for Who Busted the Economy: Everybody’s Guilty, Says David Stockman

  •  Reviewed by David M. Kinchen
BOOK REVIEW: 'The Great Deformation: Assessing the Blame for Who Busted the Economy: Everybody's Guilty, Says David Stockman

 Today, May 1, is Labor Day in much of the world, especially the socialist inclined world. I wouldn’t even want to guess what it would be like today in Greece or Spain, two of the EuroZone countries that have suffered the most. I don’t love the smell of tear gas in the morning!

David Stockman, the author of “The Great Deformation: The Corruption of Capitalism in America” (PublicAffairs Books, 768 pages,  $35.00)  was the architect of the Reagan Revolution meant to restore sound money principles to the U.S. government. It failed, derailed by politics, special interests, welfare, and warfare.

 In “The Great Deformation” Stockman describes how the working of free markets and democracy has long been under threat in America, and provides a nonpartisan, surprising catalog of the corrupters and defenders. His analysis overturns the assumptions of Keynesians and monetarists alike, showing how both “liberal” and “neo-conservative” interference in markets has proved damaging and often dangerous.

Over time, crony capitalism has made fools of us all, transforming Republican treasury secretaries into big government interventionists, and populist Democrat presidents into industry wrecking internationalists. Today’s national debt stands at nearly $16 trillion. Divided equally among taxpayers, each of us is $52,000 in debt. This book explains how we got here—and why this warped crony capitalism has betrayed so many of our hopes and dreams.

My position on reviewing is to read the book completely, with no exceptions. I’m making an exception: I’ve read 90 pages of this tome and skimmed much of the rest, but this review is based on the pages I’ve read. I’ll review the book in segments, but I wanted to get out a review of a vitally important book that was published April 2 before the reading public ASAP.

Stockman starts in the late summer and early fall of 2008, when Treasury Secretary Henry Paulson panicked, convincing President George W. Bush, Congress and just about everybody that AIG was too big to fail. In Stockman’s view, nobody is too big to fail, as he details in Chapter 1, “Paulson’s Folly: The Needless Rescue of AIG and Wall Street.” Failure is a good way of clearing out companies that don’t deserve to live — or to convince survivors that they have to downsize. It’s that way for the 95 percent and it should be that way for the 5 percent.

 

Let’s take a break and watch Jon Stewart of “The Daily Show” interview Stockman:

 http://www.thedailyshow.com/watch/mon-april-8-2013/david-stockman
 

Here’s a brief biography of David Stockman

 

David Alan Stockman, born Nov. 10, 1946,  is a former U.S. politician and businessman, serving as a Republican U.S. Representative from the state of Michigan and as the Director of the Office of Management and Budget. He’s a Republican, although he blames members of his party as much or  more for the collapse of the American economy.

Previous office: Director, United States Office of Management and Budget (1981–1985) BooksThe Great Deformation: The Corruption of Capitalism in America EducationMichigan State UniversityHarvard UniversityLakeshore High SchoolHarvard Divinity School

 Stockman was  elected as a Michigan congressman in 1976 and joined the Reagan White House in 1981. Serving as budget director, he was one of the key architects of the Reagan Revolution plan to reduce taxes, cut spending, and shrink the role of government. He joined Salomon Brothers in 1985 and later became one of the early partners of the Blackstone Group. During nearly two decades at Blackstone and at a firm he founded, Heartland Industrial Partners, Stockman was a private equity investor. Born in Fort Hood, Texas, Stockman attended Michigan State University and Harvard Divinity School and then went to Washington as a congressional aide in 1970. He is the author of The Triumph of Politics

 

I’ve reviewed dozens of books about the Crash of 2008 and I wanted to get the opinion of a man whose book, “The Death of Corporate Reputation”(link: http://www.huntingtonnews.net/60248) I recently reviewed, Jonathan Macey, a Yale University law professor and expert on corporations:

“David Stockman is right: the economy in this country is being ruined by inept, turf-grabbing bureaucrats.  He’s also correct that steps need to be taken immediately to deal with the massive federal deficit. The good news is that these two problems can be solved simultaneously by shrinking drastically the size of the government.  The bad news is that there are no statesmen or patriots in power in Washington, only small-time pork barrel politicians who cater to special interest groups on the right as well as on the left.”

Stockman prefers the designation “5 percent” for the people who’ve hogged most of the money in the world and “95 percent” for the rest of us.  On page 68 he tells us the 5 percent hold about $40 trillion  in net worth — a $32 trillion gain over the $8 trillion they held in 1985. By contrast, the net worth 95 percent of householders at year end 2011 was just $8 trillion higher than a quarter century before. The top 5 percent have gained four times more than the bottom 95 percent in the land of the free and the home of the brave. 

I came across an interesting AlterNet story about some of the folks in the 95 percent bracket, a story about 9   jobs that pay surprisingly small, including airline pilots and adjunct professors:

 

http://www.alternet.org/economy/pilots-and-professors-barely-scraping-9-surprising-jobs-pay-pittance?akid=10378.107278.6ze7r7&rd=1&src=newsletter832576&t=4&paging=off

 

Surely, Stockman, Reagan’s boy wonder, would concede that we defeated the Communist peril, in part by outspending the Evil Empire. On Pages 79-86, he goes into gruesome detail about Reagan buying into Caspar Weinberger’s policy of spending whatever money he could raise for whatever department he helmed. “During his time at the Federal Trade Commission he was an enthusiastic regulator,” Stockman tells us on Page 80. “At Nixon’s White House Budget Office he became ‘Cap the Knife.’ “During his stint as Secretary of HEW in 1973-1975 its budget grew by 45 percent — the greatest two-year surge in social spending recorded at any time before or since.”

Do I or Stockman have to tell you what happened when Cap Weinberger took over the Pentagon in the Reagan Administration? Yes!  You can imagine that free-spending Weinberger ignored President Eisenhower’s warning about the “military-industrial complex” in Ike’s January 17, 1961 farewell address and you’ll be right.  On pages 72-74, Stockman details the spending of Weinberger when Stockman was the director of the Office of Management and Budget in the White House:

“When the dust finally settled,” Stockman writes on page 73 about Cap Weinberger and his warfare spending, the fiscal 1982 defense budget stood at $222 billion — a figure nearly nearly 60 percent larger than the $142 billion piñata that had been so roundly attacked during the campaign. Yet it was from this vastly  elevated prospective budget for 1982, not the allegedly deficient actual 1980 spending level, that the annual growth rate calculation was applied.”

 

OK, so much for my first take on Stockman’s Magnum Opus. I’ll return with a few more columns for a book that deserves a multi-part review.

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