The Great Deformation: The Corruption of Capitalism in America By David Stockman

I am posting this book review now because David Stockman has an article on Antiwar. com that is one of the best I have recently read. You should read Trump’s Iran Fiasco’s Silver Lining – The End of NATO.

If you want to learn something about the man, you can read on.

Are we on the precipice of the end of the world as we know it or is the economy humming along at an acceptable pace, if not staggering growth? One man believes we are the Titanic headed for the iceberg, and he has marshaled the facts and figures to defend the claim.

David Stockman has been, as the song has it, a “witness at the scene of the crime.” Born in 1946, he was in or close to the governing elite from 1970 through the Reagan administration. He was Reagan’s director of the Office of Management and Budget. Stockman was famously “taken to the woodshed” by the Gipper after giving interviews to a writer for the Atlantic, William Greider. He had expressed some doubts about the program he was selling.

After leaving OMB he wrote a book, The Triumph of Politics: Why the Reagan Revolution Failed. It blamed Congressional Republicans for not supporting spending reductions to offset tax cuts.

From there, it was to Wall Street. Where else would a young veteran of high rank in the executive branch go? Stockman had a career in private equity that played to mixed reviews with some successes and some problems.

With a long tenure in government and business, he could have easily written an entertaining memoir. The Great Deformation: The Corruption of Capitalism in America is not that. Rather, it is 768 pages of thoroughly researched jeremiad.

The Great Deformation starts with recent history, that is the Paulson bailout of Wall Street in the late days of the Bush administration. It ends with where we are now and then his suggestions for reform.

Stockman is a rare thing. He may be the nation’s lone true fiscal conservative of the old school. Most so-called conservatives have signed on to supply side theory. Almost all liberals are Keynesians. The author is okay with lowering tax rates if there are sufficient spending cuts to compensate. Want to expand government programs, such as maybe another war? Raise taxes to pay for it.

In a book with the word deformation in the title, there is bound to be a plethora of villains. Surprisingly, Stockman finds a number of heroes as well. As a fiscal conservative, he would be expected to find Roosevelt wanting. A revelation on Page 162 seems to expose the man as a primitive. On one occasion, “FDR had chosen to raise the (gold) price by $0.21 per ounce, explaining, “It’s a lucky number, because it’s three times seven.””

He is as hard on Richard Nixon, if not harder. Nixon had the Fed stoke the printing presses to help his 1972 election campaign. However, there is one place where it would be expected Stockman would wish Dante could describe an awful circle in Hell just for Nixon. That would be when he abandoned the Gold Standard.

During World War II, delegates from 44 Allied Nations met at Bretton Woods and came up with a system to set postwar monetary policy. The nations would have fixed exchange rates for their money and The US dollar would be the reserve currency. The system worked well enough, but was probably fated to break down eventually.

Johnson’s Guns and Butter policies for the Great Society and Vietnam War meant the demise was coming sooner or later.

History was going to stare Nixon in the eye and he would blink. Rather than follow difficult policies of fiscal discipline, he closed the Gold Window and told the world we would no longer meet our obligations in anything but paper. No longer could anyone remotely call the dollar “good as gold”

After that, on money printing, it was off to the races. Anyone who remembers the inflation of the 70s remembers the constantly rising price index. Could it end or would we become Argentina? Fortunately, when it looked like all was lost, one of Stockman’s heroes appeared.

Jimmy Carter appointed Paul Volcker Fed chairman in what was probably the best move of his administration. Volcker enforced discipline at the Fed and wrung inflation out of the system. Sadly, we have not seen his like since.

Instead, we have had two more of Stockman’s villains, Greenspan and Bernanke. They have allowed the Fed to become a wholly owned subsidiary of Wall Street.

Stockman seems to miss how inevitable this is. After all, in an overly bureaucratized country such as we are, this happens. The regulatee captures the regulator. Monsanto et al have their way with the Ag Department as Big Pharma does with the FDA. Do we need mention Eisenhower’s Military-Industrial Complex and control of DOD? Capture seems to be unstoppable.

When we get to today, he makes the case that there is no recovery and the unemployment rate is not honestly reported and we are up the creek.

Stockman gives a number of recommendations at the end. Some are excellent, such as a revived Glass-Steagall. Most have no chance unless circumstances were so dire even the bankers knew it had to be done.

If there is one takeaway from this book, it is that any system that depends on leadership is doomed. Stockman says it all, “monetary arrangements must last for the ages if they are to be credible.” Unfortunately, for every Volcker, you get a Greenspan, and probably a Bernanke as a bonus. Doom is inevitable. Of course the only effective automatic system the world has had has been the Gold Standard. Even that, governments have always tried to game.

It is a book that, for all its length and detail is not a difficult read and is accessible to anyone who wants to get into it. That said, it is a lot.