The problem is that capitalism has become more aberrant, improvisatory, and self-destructive than ever. We are in the age of the predator and gamblers, people who want to get very rich very quickly and are wholly oblivious to the larger consequences. Power exists but the theory to describe the economy which was inherited from the 19th century bears no relationship whatsoever to the way it operates in practice, a fact more and more recognized by those who favor a system of privilege and inequality. Even some senior IMF executives now acknowledge that the theory that powerful organization cherish is based on outmoded 19th century illusions. "Reconstructing economic theory virtually from scratch" and purging economics of "neoclassical idiocies," or that its "demonstrably false conceptual core is sustained by inertia alone," is now the subject of very acute articles in none other than the Financial Times, the most influential and widely-read daily in the capitalist world....

On September 12, 2006, the International Monetary Fund released its report on "Global Financial Stability," and it was unprecedented in its concern that "new and complex financial instruments, such as structured credit products," might wreak untold havoc. "Liberalization," which the "Washington consensus" and IMF had preached and helped realize, now threatens the US dollar and much else. "The rapid growth of hedge funds and credit derivative mechanisms in recent years adds to uncertainty," and might aggravate the "market turbulence and systemic impact" of once-benign events. Hedge funds, it warned, have already "suffered noticeable losses."

At the end of October, again the Financial Times, Jean-Claude Trichet, head of the European Central Bank, deplored these new financial products, which have been increasing and growing into the trillions. He wrote that he could not comprehend them; that there is scant oversight over them; that many are pure hype; that nothing prevents them from creating immense domino effects on the entire financial system were they to collapse, thereby also dragging the well-regulated parts of the system down....

...one of the best kept secrets of economics is that there are lots of systems that work provided, that is, you don't care who they work for. Feudalism, for example, was great if you were a lord, not so efficient a marketplace is you were merely a serf. And each system works differently depending on the culture in which it operates, which is why communism in the Soviet Union, China and Italy meant such different things. In the end, the real test of an economy is not its math but its social, financial and moral effect on its culture and those who live there.

This is why the commentaries on Friedman were so consistently wrong. They treated economics as though it was a cold science when, in a mind as distorted as Friedman's, it was really just a sort of creationism myth applied to money.

Mr. Friedman of course abhorred regulation, going so far as to insist that competition alone can be relied upon to protect the public. In a January 1973 Newsweek column, for example, he cited serious flaws in federal regulation of food and drugs as a basis for arguing that it should be abolished and replaced by "consumer sovereignty." It does not detract from Mr. Friedman's many brilliant insights and achievements to call this advice foolish and dangerous. A quick example: If all fast-food chains compete by using trans-fats to improve flavor, is competition protecting consumers ignorant of their terrible effects?

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That abandoning regulation of food and drugs could needlessly threaten human safety, health and life on a massive scale was common knowledge long before Friedman invented “consumer sovereignty.” A dramatic example involves thalidomide, a sedative/tranquilizer that a conscientious Food and Drug Administration medical officer declined to approve for sale. In 1962—11 years before the Newsweek column—the world learned that thousands of babies had been born armless, legless or limbless to women who had taken the drug during the first trimester of pregnancy. The mothers lived in countries where there was no drug regulation or where regulation was weak or had failed. Neither they nor the prescribing physicians on whom they had relied had the faintest inkling of thalidomide’s dangers. “Consumer sovereignty”?

Unlike thalidomide, carcinogens are a continuing and ever-present threat. They occur in pesticides, foods, drugs, and the air we breathe. Importantly, the cancers they cause may not become apparent for 20 or 30 years. If the Environmental Protection Agency and the FDA did not exist, or if they did not devise and enforce regulations intended to keep carcinogens out of our foods, medicines, and air, or if the EPA and FDA are, in the professor’s words, “taken over by vested economic interests and exploited for the preservation and enhancement of their own wealth,” then what use to cancer victims would be the words “consumer sovereignty”? Even the right to try to hold a manufacturer or a polluter liable after the fact is under constant relentless attack in Washington and state capitols by the politicians those vested interests bought and buy.

The myth of Milton's genius is not surprisingly maintained by the folks at the WSJ whom display severe cognitive dissonance regarding the natural role of government to curtail corporate abuses to protect its citizens. The author says Milton viewed "Any effort to use corporate resources for purely altruistic purposes" as equal to socialism and jumps through a few hoops in the course of the article to conclude that Milton was right.

When you are trying to convince someone that corporations should not have to be responsible as do individuals, then it's important to focus your points away from the obvious reality that bad actions are bad actions and incorporation should not grant one immunity. Better yet, don't even bring up the fact that the idea of "responsibility" rests in the fact that our actions have impact beyond ourselves and therefore a large corporation tends to leave a larger impact that can naturally become a more public problem. This simple point is a mysterious transformation to our Friedmanite.

The knee-jerk and exaggerated anti-socialism comes off in the way that assigning any "public interest" in corporate actions as making them "inferentially a part of the state." Rather than the government through regulation prevent companies from unfairly unloading their cost on the public, the Friedmanite view is that "Any large enterprise, no matter how competitive its industry and no matter how successfully it is fulfilling the publics' desires, has a social responsibility--a term that makes mockery of the idea of individual responsibility--to use part of its resources for "public" endeavors." I have to wonder how environmental protection, employee health, and community development as some of the "favorite causes" listed factor into the author later giving the examples of Wal-Mart, Coca-Cola, and BP being "highly vulnerable to organized public criticism." Whose responsibility is it to maintain BP's oil pipelines in Alaska? Does the WJS writer think it's socialism to punish BP for the environmental destruction caused by dumping thousands of gallons of oil and then profitting because the shutdown raised prices? Does the WJS writer think it's socialism to punish Coca-Cola for marketing such an unhealthy product to children (not that it's healthy for adults, women especially, either) or that India and the EU were wrong to fight the Cola companies from allowing pesticides in their drinks? Does the WJS writer think it's socialism that towns are passing laws to prevent Wal-Mart from opening business in their communities because it has been proven to increase poverty when they do?

Why do such supposidly smart people at the WSJ invest so much time in myth-making and deception?

It turns out human beings aren't so unique after all. Conventional wisdom once held that humans were the only animals that could make and use tools. Then, researchers discovered that some of our closest relatives, such as chimpanzees and some monkeys, made and used tools too.

Now it turns out that chimps and humans have something else in common: the capacity to kill, and not just for food. In the 1970s, primate researchers shocked many people with the news that chimpanzees hunted and killed colobus monkeys. Then came even more stunning news: Chimps killed, and sometimes ate, their own kind too.

Today, many scientists believe the hunts are a form of organized violence that plays an important role in chimp culture. One of the researchers studying these seemingly ritualized hunts is David Watts, a primatologist and anthropologist at Yale University in New Haven, Connecticut...

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David Watts on why chimps display violence

It appears to be a regular part of chimp behavior, although it can vary from population to population and habitat to habitat. And like other forms of aggression, they use it tactically. For instance, we might be following a group of males, and they will switch into what we call patrol mode. They'll go silent, which is unusual for chimps, and just look and listen. When they hear neighboring chimps, they respond in a pretty predictable way. If there are just a few chimps in the group, for instance, they'll quietly move back toward the center of their own territory. If it's a big group, they'll respond vocally and listen to the responses. If they decide they are evenly matched, that can lead to major aggression. They'll chase down, surround, and attack rivals. Sometimes they kill them.

Rubin seems to have difficulty in forming arguments without some egregious error of ommission, over-generalization, or false dilemma. His contention that failures in trade and "chardonnay diplomacy" with "Axis of Evil" types are examples of Realists denying reality. The reality as he sees it is that diplomacy itself is an ideology that thinks "talk is productive and governments are sincere." This is why John Bolton is their man! It's the Grover Norquist strategy of government applied to diplomacy. Want to show that government is not the way to solve problems? Elect George! His incompetence is sure to drive that point home. Think diplomacy is a waste of time when bombs could be clearing away real estate for Halliburton to rebuild? Get John Bolton to the UN, pronto!

Rubin's final sentence asks about the lessons of history, which I can offer from a great little book I read a couple of weeks ago called The Ugly American (published in 1958). If we ever learned anything from that book, we've abandoned those lessons for our relations with the Middle-East and embraced all the notions that had clearly worked against us. Rubin suffers from the same exceptionism that has doomed our diplomacy for decades, if not longer.

Trade with Tehran has likewise backfired. Between 2000 and 2005, European Union trade with Iran almost tripled. During this same period, Iranian authorities used their hard currency windfall not to invest in schools and hospitals, but rather in uranium processing plants and anti-aircraft batteries. Mohammad Khatami, Mr. Ahmadinejad's predecessor and a man often labeled reformist by U.S. and European realists, showed the Islamic Republic's priorities when he spent two-thirds of his oil-boom windfall on the military. Said Mr. Khatami on April 18, 2002: "Today our army is one of the most powerful in the world. . . . It has become self-sufficient, and is on the road to further development." Subsequent discovery of Iran's covert nuclear facilities later that year clarified his boast. The Assad regime has shown its willingness to spend its discretionary income on a wide-range of weaponry and terror groups.

-Michael Rubin