Harry Binswanger’s 2013 praise of Goldman Sachs at Forbes.com ignores the context that the US does not have a free market economy. The US is a mixed economy, whose financial sector is monopolized by banking cartels. Counter to Binswanger’s argument that, “since profit is the market value of the product minus the market value of factors used, profit represents the value created,” the corporate profits of Goldman Sachs are the result of lobbying, government insider favors, the infamous 2008 bailout of AIG. and their membership in the central bank’s monetary monopoly. This misdirection is the primary characteristic of what Roderick Long called “right-conflationism.”
A mixed economy is not a free market. It is not even a free market with ‘a little statism’ thrown in, as some right-conflationists would have us believe. The market distortions caused by state interference in the economy ripple over everything and cause changes in countless, immutable ways. In 1967 Ayn Rand wrote in Capitalism: The Unknown Ideal;
“We are not a capitalist system any longer: we are a mixed economy, i.e., a mixture of capitalism and statism, of freedom and controls. A mixed economy is a country in the process of disintegration, a civil war of pressure-groups looting and devouring one another.”
Later in the same book Rand elaborates:
“While, politically, a mixed economy preserves the semblance of an organized society with a semblance of law and order, economically it is the equivalent of the chaos that had ruled China for centuries: a chaos of robber gangs looting—and draining—the productive elements of the country.”
In connection with this, Murray Rothbard identifies the monopolization of the banking industry, writing:
“Another crucial part of this process was the federal cartelization of the nation’s banks through the creation of the Federal Reserve System in 1913.“
It is in this context that Goldman Sachs must be judged, if that judgment is to be connected to reality. However, Binswanger claims that Goldman Sachs represents the productive elements of the country, writing:
“Imagine the effect on our culture, particularly on the young, if….the moral praise showered on Mother Teresa went to someone like Lloyd Blankfein, who, in guiding Goldman Sachs toward billions in profits, has done infinitely more for mankind. (Since profit is the market value of the product minus the market value of factors used, profit represents the value created.)”
Binswanger claims to “defend laissez-faire capitalism,” but in this article defends Goldman Sachs, a company whose cronyism is well documented. To hold up Goldman Sachs as a paragon of virtue by free market standards is so ridiculous that it would be funny, if Binswanger weren’t being serious.
In the past 15 years, Goldman Sachs has spent $33,879,000 on lobbying and has employed over 10,000 lobbyists per year during that period. Additionally, Goldman Sachs paid out $46,883,806 in campaign contributions to US politicians since 1990.
Revolving door with government agencies:
Opensecrets.org reports that “49 out of 52 Goldman Sachs lobbyists in 2012 have previously held government jobs.” In addition several former Goldman Sachs executives went on to hold political positions:
“Former Goldman executives who moved on to government positions include: Robert Rubin and Henry Paulson who served as United States Secretary of the Treasury under Presidents Bill Clinton and George W. Bush, respectively; Mario Draghi, President of the European Central Bank; Mark Carney, Governor of the Bank of Canada 2008–13 and Governor of the Bank of England from July 2013.”
“Goldman received $12.9bn of the bailout funds – a move that drew heavy criticism and allegations of cronyism. The then treasury secretary, Hank Paulson, had previously been Goldman’s chief executive.”
After receiving the taxpayer’s bailout money, millions of it went to company executives: “the top 200 at Goldman received $995 million.”
In response to Goldman Sachs executives profiting from money taken at the point of a gun from taxpayers in the bailout, Binswanger says “an end must be put to the inhuman practice of draining the productive to subsidize the unproductive.” When details of Goldman Sachs cronyism are brought up Binswanger continues to defend it, saying “the extent of Goldman Sachs’s cronyism (which is not a form of capitalism but of statism) has been greatly exaggerated by its enemies.”
Binswanger’s argument is completely divorced from reality. He writes:
“For their enormous contributions to our standard of living, the high-earners should be thanked and publicly honored. We are in their debt.”
“When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.“
The evidence shows that this is precisely the case, especially with a flagrant example of cronyism like Goldman Sachs. Far from “gore[ing] another collectivist sacred cow,” Binswanger provides a textbook example of what Roderick Long called “right-conflationism.” Kevin Carson, who calls the concept ‘vulgar libertarianism explains:
“Vulgar libertarian apologists for capitalism use the term “free market” in an equivocal sense: they seem to have trouble remembering, from one moment to the next, whether they’re defending actually existing capitalism or free market principles. So we get [a] standard boilerplate article… arguing that the rich can’t get rich at the expense of the poor, because ‘that’s not how the free market works’— implicitly assuming that this is a free market. When prodded, they’ll grudgingly admit that the present system is not a free market, and that it includes a lot of state intervention on behalf of the rich. But as soon as they think they can get away with it, they go right back to defending the wealth of existing corporations on the basis of ‘free market principles.’
Libertarians will often condemn the existing aspects of state power and interference in the market but then leap to the defense of those who benefit from the existing order in the same breath.”
On final analysis, Binswanger’s article is deeply disconnected from reality. To praise a looter corporation like Goldman Sachs as a paragon of profit and production ignores the fact that their “profits” are made through political pull and the actual looting of the productive class through tax profiteering. Instead of being a “radical for capitalism,” Binswanger here becomes a shill for actual looters and parasites. I do agree with him that “an end must be put to the inhuman practice of draining the productive to subsidize the unproductive,” —by abolishing state privilege that currently enriches the 1% at the expense of the 99%.