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!
