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Developing the New "Capitalists'
Man"
By Dean
Baker
Monday 28 April 2008
In the wake of revolutions in Russia, China, Cuba,
and elsewhere, there was talk of creating a new type of person with a socialist
mindset. The idea was that people in the prerevolutionary capitalist societies
had been educated to be individualistic and greedy. The post-revolutionary
societies would instead educate people to be socially minded and to consider the
collective good in their actions.
I'll leave it to others to debate the merits of these
efforts. The reason that they are suddenly relevant is that our political
leaders now seem concerned that people have not been adequately educated for
their vision of a capitalist society.
This came to light recently when Treasury Secretary
Henry Paulson insisted that people who are underwater in their mortgages still
had an obligation to pay off their loans. Mr. Paulson is concerned that, because
of the collapse of the housing bubble, many people now find themselves owing
more than the value of their house and are simply walking away from their
debts.
For example, in some of the rapidly deflating bubble
markets, many homeowners are in situations where they owe $400,000 or $500,000
on a home that today is worth $100,000 less than the amount of their mortgage.
In this situation, homeowners can effectively save $100,000 if they stop paying
the mortgage and let the bank foreclose on the house.
Tens of thousands of homeowners are opting do exactly
this. They calculate that it makes more sense for them to let the bank take the
house than to repay the mortgage. Businesses have even opened that show people
exactly how to "walk away" from their mortgage and
explain the potential consequences.
As a committed capitalist, we might expect Mr.
Paulson to applaud people taking initiative and acting to improve their plight.
Instead, he is insisting that these homeowners should ignore their self-interest
and act in the interest of the banks. In other words, he wants homeowners to
keep making payments on their mortgages even if it is a bad deal for them.
Apparently, individualistic behavior can go too far when it affects bank
profits.
Mr. Paulson isn't the only capitalist who wants
people to put aside self-interest. The entertainment industry is also struggling
with the fact that people acting in their self-interest are unlikely to pay
copyright protected prices for music, movies and video games when they can get
the material for free over the web. To try to discourage people from acting in
their self-interest, the Recording Industry Association
of America (the trade association for the music industry) has developed
curriculum for grade school, high school and university level courses that are
supposed to instill in children the proper respect for copyright. Instead of
debating the most efficient mechanism for financing creative work in the Internet Age, we are getting propaganda courses on
copyright protecti
on.
Of course, no industry has a more urgent need for
people to act selflessly in support of their profits than the pharmaceutical
industry. Their profits depend on being able to sell drugs at prices that can be
hundreds or even thousands of times the actual production cost.
With few exceptions, drugs are cheap to produce, but
the industry can charge very high prices because it has a government-granted
patent monopoly. The absolute highest prices are associated with drugs for
diseases like cancer that can literally mean life or death for patients. The
cost for a year's prescription of these drugs can run into the hundreds of
thousands of dollars.
If people act in their own self-interest, they will
seek out unauthorized copies of high-priced drugs, either from foreign countries
or from gray market producers in the United States who will step in the fill the
need. (There are more efficient ways to pay for pharmaceutical research than the patent system.) Unless the
government becomes ever more repressive in enforcing patent protection, the
pharmaceutical companies will not be able to sustain its current business model,
since people will not pay tens of thousands of dollars for drugs that cost a few
dollars to produce.
But the problems of the pharmaceutical industry, the
entertainment industry and the mortgage industry can all be solved if we can
just perfect the new capitalists' man - a person who willingly subordinates his
own needs to the greater need for corporate profit. There is an obvious name for
this new man: "sucker."
Dean Baker is the co-director of the
Center for Economic and Policy Research (CEPR). He
is the author of The Conservative Nanny State: How the Wealthy Use the
Government to Stay Rich and Get Richer (www.conservativenannystate.org). He also has a blog, "Beat the
Press," where he discusses the media's coverage of economic issues. You can find
it at the American Prospect's web site.
-------
Man"
By Dean
Baker
Monday 28 April 2008
In the wake of revolutions in Russia, China, Cuba,
and elsewhere, there was talk of creating a new type of person with a socialist
mindset. The idea was that people in the prerevolutionary capitalist societies
had been educated to be individualistic and greedy. The post-revolutionary
societies would instead educate people to be socially minded and to consider the
collective good in their actions.
I'll leave it to others to debate the merits of these
efforts. The reason that they are suddenly relevant is that our political
leaders now seem concerned that people have not been adequately educated for
their vision of a capitalist society.
This came to light recently when Treasury Secretary
Henry Paulson insisted that people who are underwater in their mortgages still
had an obligation to pay off their loans. Mr. Paulson is concerned that, because
of the collapse of the housing bubble, many people now find themselves owing
more than the value of their house and are simply walking away from their
debts.
For example, in some of the rapidly deflating bubble
markets, many homeowners are in situations where they owe $400,000 or $500,000
on a home that today is worth $100,000 less than the amount of their mortgage.
In this situation, homeowners can effectively save $100,000 if they stop paying
the mortgage and let the bank foreclose on the house.
Tens of thousands of homeowners are opting do exactly
this. They calculate that it makes more sense for them to let the bank take the
house than to repay the mortgage. Businesses have even opened that show people
exactly how to "walk away" from their mortgage and
explain the potential consequences.
As a committed capitalist, we might expect Mr.
Paulson to applaud people taking initiative and acting to improve their plight.
Instead, he is insisting that these homeowners should ignore their self-interest
and act in the interest of the banks. In other words, he wants homeowners to
keep making payments on their mortgages even if it is a bad deal for them.
Apparently, individualistic behavior can go too far when it affects bank
profits.
Mr. Paulson isn't the only capitalist who wants
people to put aside self-interest. The entertainment industry is also struggling
with the fact that people acting in their self-interest are unlikely to pay
copyright protected prices for music, movies and video games when they can get
the material for free over the web. To try to discourage people from acting in
their self-interest, the Recording Industry Association
of America (the trade association for the music industry) has developed
curriculum for grade school, high school and university level courses that are
supposed to instill in children the proper respect for copyright. Instead of
debating the most efficient mechanism for financing creative work in the Internet Age, we are getting propaganda courses on
copyright protecti
on.
Of course, no industry has a more urgent need for
people to act selflessly in support of their profits than the pharmaceutical
industry. Their profits depend on being able to sell drugs at prices that can be
hundreds or even thousands of times the actual production cost.
With few exceptions, drugs are cheap to produce, but
the industry can charge very high prices because it has a government-granted
patent monopoly. The absolute highest prices are associated with drugs for
diseases like cancer that can literally mean life or death for patients. The
cost for a year's prescription of these drugs can run into the hundreds of
thousands of dollars.
If people act in their own self-interest, they will
seek out unauthorized copies of high-priced drugs, either from foreign countries
or from gray market producers in the United States who will step in the fill the
need. (There are more efficient ways to pay for pharmaceutical research than the patent system.) Unless the
government becomes ever more repressive in enforcing patent protection, the
pharmaceutical companies will not be able to sustain its current business model,
since people will not pay tens of thousands of dollars for drugs that cost a few
dollars to produce.
But the problems of the pharmaceutical industry, the
entertainment industry and the mortgage industry can all be solved if we can
just perfect the new capitalists' man - a person who willingly subordinates his
own needs to the greater need for corporate profit. There is an obvious name for
this new man: "sucker."
Dean Baker is the co-director of the
Center for Economic and Policy Research (CEPR). He
is the author of The Conservative Nanny State: How the Wealthy Use the
Government to Stay Rich and Get Richer (www.conservativenannystate.org). He also has a blog, "Beat the
Press," where he discusses the media's coverage of economic issues. You can find
it at the American Prospect's web site.
-------