Kudlow's Flawed Ideas on Unbridled Free Enterprise

Like sports, the economy needs referees and rules.
Otherwise, the result is chaos.

Example: U.S. (and world) economy in 2008.

(2008 Feb blog post)

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Larry Kudlow repeatedly drills into the audience of his CNBC show on the U.S. economy (circa 2007-2008, and beyond) the following quote.

    "Free market capitalism is the best path to prosperity."

Kudlow repeatedly drowns out any of his guests who would suggest that there needs to be some umpires and referees in the U.S. business scene.

It is well recognized in every sport --- baseball, football, basketball, soccer, rugby, tennis, lacrosse, field hockey, boxing, jiu jitsu, karate, sumo wrestling, ultimate fighting, etc. etc. --- that there need to be referees/umpires/line-callers and the like to make sure that the games/competitions do not degenerate into an ugly mess.

Apparently Kudlow thinks the same does not apply to the business world. Somehow he thinks that business persons can police themselves and have impeccable ethics. I actually heard him say once on one of his shows that he believes in business ethics. BUT ... he apparently believes that the business world will observe ethical behavior with no oversight.

BUZZZZZZ ... WRONG! We have only to look in the newpapers each day to see repeated examples that demonstrate that business people are going 'out of bounds' all the time. Examples:

  • The 2007 subprime mortgage crisis, which was precipitated largely by lenders encouraging people to buy homes that they knew they could not afford --- especially when adjustable-rates of the mortagages they were selling took a quantum leap upward. AND, on top to that, these lenders packaging up these extremely risky mortgages in bundles, and foisting them on government mortgage bodies, essentially dumping these risky mortgages on U.S. taxpayers, while they enjoyed their gains in the Caribbean or their new 10,000 square foot houses.

  • CEO's, in cahoots with their CIO's and boards of directors, devising ridiculously excessive and/or undeserved compensation plans and severence/retirement plans --- including the back-dating of stock options. Grasso, ex-head of the SEC, is a particularly outstanding example.

  • more examples (and cartoons) to be added.

BOTTOM LINE: The business community needs oversight by line-callers, umpires, and referees --- just like all the sports do.

    'Competition with ethics (which requires oversight,
    because of the nature of many persons)'

    ... now there's a concept worth fighting for.

A more truthful Kudlow's creed would be

    "Free market capitalism is the best path to CEO prosperity."
    "Competition, with responsibility shown to the general citizenry,
    is the best path to a strong and civil country."

The latter is more like what our founding fathers (and mothers?) had in mind.

Without competition and oversight, 'free market capitalism' results in a race to the bottom, achieving the opposite of a strong-across-the-board society and a civil-to-each-other society.

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Posted 2008 Feb.
Changed to allow for better printing 2009 Aug 23.
Changed format slightly 2013 Apr 23.