A Failure of Capitalism: The Crisis of ’08 and the Descent into Depression
By Richard Posner
(Harvard, $23.95, 346 pages)
IS RICHARD POSNER TOO BIG TO FAIL? That term of art usually refers to companies that are too politically paid up to go down without a few congressional hearings and whispers of bailouts from our disinterested representatives on Capitol Hill. But it can apply to political prognosticators as well. Certain people manage to build up reputations so formidable that they can withstand almost anything. And unlike in the financial services sector, the bottom line often doesn't bite them. A Bernie Madoff-like day of reckoning need never arrive in their lifetimes.
With that in mind, it will be interesting to see what happens to Posner after the publication of his simply awful A Failure of Capitalism (Failure, hereafter). Posner is a judge on the U.S. Court of Appeals for the Seventh Circuit, a lecturer at the University of Chicago, and author of about 40 books, some of them good, on subjects ranging from sex to scandal to plagiarism. His Wikipedia entry sums up the pre-Failure consensus on his life's work thus: "One journal has identified Posner as the most cited legal scholar of all time. He is one of the most respected judges in the United States."
The journal that attested to Posner's influence was Chicago's Journal of Legal Studies, from an article published back in 2000. Now that citation seems beyond dated. High-ranking jurists establish their reputations through their legal reasoning. Posner, a Reagan appointee, was once thought one of the finest minds associated with the "law and economics" movement that tried to make the legal profession more sensitive to market forces. But for reasoning to be effective it must convince, and Posner has lately found himself staring down the twin barrels of incredulous public opinion and judicial incomprehension.
In spite of his earlier opposition to a right to privacy, Posner ruled that the grotesque and medically unnecessary procedure known as partial-birth abortion is a constitutionally protected right. Last year, when the Supreme Court ruled that the District of Columbia's near-total gun ban was unconstitutional, Posner parried in the New Republic that the decision, which simply acknowledged, in the plain meaning of the Second Amendment, that law-abiding citizens have a "right to keep and bear arms," was "questionable in both method and result." Serious scholars of the Second Amendment had a good chuckle over that one.
And nearly everybody laughed when, on the Becker-Posner blog (a collaboration with Chicago economist and Nobelist Gary Becker), Posner toyed with the idea of "expanding copyright law to bar online access to copyrighted materials without the copyright holder's consent, or to bar linking to or paraphrasing copyrighted materials" without same. Posner wasn't talking about illegally reposting content, just linking to it, or, really, talking about it in any meaningful sense. In his ideal world, this review might be illegal.
Many conservatives have said that they felt betrayed by Posner over this last decade, as he endorsed every liberal trendy cause-from catastrophism to judicial activism-but in reading Failure, it's hard to see why they should want him. The book is a badly written jumble, a prose train wreck, a mishmash of half-thoughts, and irritable mental gestures.
Posner's once good sense fails him from the get-go, when he insists that what America is suffering through right now is not a recession but rather (cue eerie music) a depression. Rather than moving on to the next point, he lingers there too long and defeats himself. He concedes that maybe this won't be as bad as the Great Depression, but "there is semantic space between a ‘Great Depression' and a mere recession," so this could still go down as a Pretty Great Depression.
The world-famous jurist downplays many of the causes that responsible economists have fingered for the buildup of the housing bubble-chiefly, relentless pressure on banks to make risky loans backed by ever-increasing federal quasi-guarantees through Fannie Mae and Freddie Mac, and a burgeoning investment market built on that house of houses- and instead focuses on the red herring of "deregulation."
Posner dances around most of the worst actors in this Greek tragedy-the affordable-housing shakedown artists, the clueless regulators, the politically connected Fannie and Freddie execs, the congressmen who ridiculed the Cassandras-and instead blames capitalism itself. The problem is "systemic," so what the U.S. needs is a different system. Going forward, he advises massive deficit spending, much more highly regulated financial markets, higher taxes, and even the return of usury laws to prevent future "depressions" from occurring. He calls these reforms "small beer," which only invites the sophomoric reply: Party at Posner's house!
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