This past week, Naomi Klein bravely stepped into the lion’s den this week and addressed the University of Chicago, protesting their bid to name an economic research center after Milton Friedman.  It was a bravura speech where she made the argument that the current financial crisis is the final repudiation of Friedman’s twisted theories of unregulated capitalism.

More than that, what we are seeing with the crash on Wall Street, I believe, should be for Friedmanism what the fall of the Berlin Wall was for authoritarian communism: an indictment of ideology. It cannot simply be written off as corruption or greed, because what we have been living, since Reagan, is a policy of liberating the forces of greed to discard the idea of the government as regulator, of protecting citizens and consumers from the detrimental impact of greed, ideas that, of course, gained great currency after the market crash of 1929, but that really what we have been living is a liberation movement, indeed the most successful liberation movement of our time, which is the movement by capital to liberate itself from all constraints on its accumulation.

So, as we say that this ideology is failing, I beg to differ. I actually believe it has been enormously successful, enormously successful, just not on the terms that we learn about in University of Chicago textbooks, that I don’t think the project actually has been the development of the world and the elimination of poverty. I think this has been a class war waged by the rich against the poor, and I think that they won. And I think the poor are fighting back. This should be an indictment of an ideology. Ideas have consequences.

Now, people are enormously loyal to Milton Friedman, for a variety of reasons and from a variety of sectors. You know, in my cynical moments, I say Milton Friedman had a knack for thinking profitable thoughts. He did. His thoughts were enormously profitable. And he was rewarded. His work was rewarded. I don’t mean personally greedy. I mean that his work was supported at the university, at think tanks, in the production of a ten-part documentary series called Freedom to Choose, sponsored by FedEx and Pepsi; that the corporate world has been good to Milton Friedman, because his ideas were good for them.

But he also was clearly a tremendously inspiring teacher, and he had a gift, like all great teachers do, to help his students fall in love with the material. But he also had a gift that many ideologues have, many staunch ideologues have-and I would even use the word “fundamentalists” have-which is the ability to help people fall in love with a perfect imagined system, a system that seems perfect, utopian, in the classroom, in the basement workshop, when all the numbers work out. And he was, of course, a brilliant mathematician, which made that all the more seductive, which made those models all the more seductive, this perfect, elegant, all-encompassing system, the dream of the perfect utopian market.

Klein mentions the Free To Choose series, and later on she highlights something I forgot – the man who introduced one of those series on PBS:

“Being free to choose means being free to make your own decisions.  Free to live your own life, pursue your own goals, chase your own rainbow without the government breathing down your neck or standing on your shoes.  For me it meant coming to America, because I came from a socialistic country where the government controls the economy.”

That was Arnold Schwarzenegger in 1990, spouting free market fundamentalism in a corporate-sponsored documentary which mainstreamed ideas that today have brought us to the brink of economic failure.  It’s important to know what altar at which Schwarzenegger worships.  It’s important to know how he was, for a long time, the glitzy front man for Friedmanism, the showy snake oil salesman that got Joe Six-Pack to think that corporate behemoths eliminating rules for themselves was in the best interests of the common man.  If Friedman was P.T. Barnum, then Arnold was the star attraction in the center ring of the circus.  And he clearly believes, or at least is willing to front, that these ideas, about “free enterprise and free people,” are immutable, hard science, incapable of being wrong.  

Except we are now at a moment when, as governor, Schwarzenegger is bearing the brunt of the worst effects of unbridled capitalism.  His state is caught up in the credit market freeze, with no money to pay the bills.  He is begging the state’s citizens to buy bonds and bail the government out, an approach taken so clumsily that he got Wall Street shaken at the precise time when he has to go into the market to borrow money.  The state’s public infrastructure is crumbling on his watch and even that won’t be enough to make up the revenue shortfall.

A lot of people would let Schwarzenegger off the hook for this.  The national economy went bad, and the financial markets failed as a result of the housing bubble bursting, and surely the governor of California can’t be held responsible for that.  Except he is such a devotee of Friedmanism, and in fact one of its key pitchmen, that of course he is guilty.  Guilty of the same faith in capitalists not to be driven by greed.  Guilty of stripping regulation and empowering corporate America to live in a tax-free and restraint-free bubble.  And as the current cesspool of deregulation, where market forces run wild and greed becomes virtue, gets a reckoning due to the carnage it has caused, so too must the man who introduced Free To Choose all those years ago.  He was wrong then, and he’s doubly wrong now.  To quote Naomi Klein:

Ideas have consequences. And when you leave the safety of academia and start actually issuing policy prescriptions, which was Milton Friedman’s other life-he wasn’t just an academic. He was a popular writer. He met with world leaders around the world-China, Chile, everywhere, the United States. His memoirs are a “who’s who.” So, when you leave that safety and you start issuing policy prescriptions, when you start advising heads of state, you no longer have the luxury of only being judged on how you think your ideas will affect the world. You begin having to contend with how they actually affect the world, even when that reality contradicts all of your utopian theories. So, to quote Friedman’s great intellectual nemesis, John Kenneth Galbraith, “Milton Friedman’s misfortune is that his policies have been tried.”

It’s the ideological blinders that caused this crisis that must be taken off if we’re ever going to get out.  Schwarzenegger is somehow seen as the “good cop” Republican in the mix of California, wanting ever so to do the right thing.  But the one area of jurisdiction, the one part of this crisis where the California governor could have had a hand in stopping the bleeding, when he could have imposed regulations to help stop predatory lending and rein in the runaway mortgage market in one of the biggest bubble states in the country, Arnold not only decided to do nothing then, but has continued to do so.  Laissez-faire remains his core philosophy, the failed philosophy of conservative economics.

I guess the banks and the lenders need to be free to choose.

It would be irresponsible for state Democrats not to remind the public that the pain and anxiety they are seeing today is a cause of the insane embrace of Friedmanism, and that the man at least in large part responsible is the muscle-bound Governator who was willing to put a smiley face on the shock doctrine.

Last week, we got some good news regarding the pension fund for our state’s teachers. In 2004, the long-term deficit was projected to be $24.2 billion. Today, the long-term deficit is projected to be $19.6 billion. It’s not quite as good as we want it, but it’s getting better.

So how did our favorite right-wing commentator who always misses the point respond? Oh, Chris Reed just looks for a way to tie this to “the public employee unions’ master-puppet relationship with Democratic lawmakers“. Huh?

Follow me after the flip for more…

So what exactly is Chris Reed angry about? I guess this:

Last June, three state Senate Democrats — Don Perata, Debra Bowen and Gil Cedillo — killed the governor’s nomination of David Crane, a smart, well-regarded San Francisco financier, to the California State Teachers Retirement System board. Crane’s sin? “The three Democrats on the five-member Senate (Rules Committee) agreed that Crane seemed too concerned about the burden of pension shortfalls on taxpayers,” according to a published report.

Perata, Bowen and Cedillo’s open declaration of allegiance to the California Teachers Association over Californians in general showed anew that public employee unions have a master-puppet relationship with Democratic lawmakers — and that taxpayers are being and will continue to be brutalized as a result.

Wait, so how exactly did the Democratic lawmakers act as “puppets” to the “masters” at the public employee unions? And what’s so horrifying about the state teachers’ pension fund? Take a look at this article from The Sacramento Bee last week, and try to explain the “crisis”.

Surging stock markets and three straight years of strong investment returns have pared billions from a long-term pension shortfall plaguing the California State Teachers’ Retirement System in recent years, but it’s not enough.

The state, school districts and teachers still will be forced to dig deeper into their pocketbooks to erase a projected $19.6 billion gap over the next three decades, according to a new report for the nation’s second-largest public fund. […]

The CalSTRS analysis, prepared by the actuarial consulting firm Milliman, shows the giant fund’s financial outlook improved slightly at the end of fiscal year 2006 as the nation’s second-largest public fund continued to rack up double-digit percentage annual investment gains, including a 13.2 percent return in ’06.

The results have cut the long-term deficit to $19.6 billion, compared with $20.6 billion in 2005. That’s an improvement from a $24.2 billion funding gap in 2004.

Milliman said CalSTRS, with nearly 800,000 members, has enough assets to cover 87 percent of its pension obligations decades from now — up from an 82 percent rate in 2003. By comparison, the average for 125 state retirement systems is 88 percent, according to a 2007 report by Wilshire Consulting.

OK, so now the pension fund has enough assets to cover 87% of our teachers’ pension needs for the next few decades. We’re not quite fully funded yet, but we’re getting better. And apparently, there’s already a proposal to fill this gap. Again, from Sac Bee:

The consultant’s report said CalSTRS needs a 3.3 percent boost in annual pension contributions to wipe out the deficit. Currently, school districts pay 8.25 percent of payroll toward teacher pensions, while the state puts in 2 percent and teachers contribute 8 percent of their pay.

In December, trustees backed a legislative measure to increase contribution rates in 2009 while leaving benefits intact. The proposal calls for raising the teachers’ rate to 8.5 percent while gradually increasing the state’s portion to a maximum of 3.25 percent. The school district contribution would slowly rise and be capped at 13 percent.

OK, so what’s the big deal? The teachers pay a little more. The school districts pay a little more. The state pays a little more. And in the end, the pension fund is fully funded. Under the current proposal by the pension fund trustees, everyone chips in a little more (including the teachers themselves) to ensure that our teachers can afford to stay alive after they retire.

So how did Chris Reed respond?

The story noted that CalSTRS still had a projected long-term $20 billion shortfall in paying for the pension benefits of retired teachers. How did the CalSTRS board propose to deal with this huge unfunded liability? Not by trimming benefits, an approach it flatly rejected. By waterboarding taxpayers.

And what does he want to do about this? Go back to whining about one of Arnold’s good buddies from SF not making the pension trustee board. Oh yes, and if one really wants to talk about “master-puppet relationships”, look at this. David Crane is a venture capitalist who served on Arnold’s transition team in 2003. And Arnold placed him on his “Commission for Jobs and Economic Growth“. And he’s part of Arnold’s inner circle as an economic adviser. And even though David Crane calls himself a “Democrat”, he boasts of his admiration of Milton Friedman.

And Chris Reed is really surprised that Senate Democrats won’t nominate someone adamantly opposes “non-market deals” and who calls public pension benefits for workers who serve the public “special privileges”? Give me a break!

So once again, Chris Reed misses the point. The teachers’ pension fund isn’t quite doing as well as we’d like it to, but it’s doing better than it had been just five years ago. And now, the pension trustee board has proposed a solution to the remaining problem. However, Chris Reed doesn’t like a solution. So now, he’s criticizing the State Senate Democrats for rejecting a radical Friedmanite (who despite being a “Democrat”, is VERY CLOSE to Arnold) to serve on the pension board. Can someone please explain Chris Reed’s distorted “logic” to me?