What we've been witnessing in Washington isn't just political positioning by one party looking to deny the other a victory, although it's certainly that. We're also seeing the death struggle of a dying ideology. This ideology provided intellectual cover to business and political elites for decades, but events have proved conclusively that it doesn't work. What's more, people are beginning to see that it's inconsistent with the country's traditional values of competition and free enterprise.
The ideology was cooked up in think tanks and boardrooms, then packaged and sold under a variety of conservative and libertarian guises. While the theories and rationalizations varied wildly, the conclusions were always the same: Deregulation was always the right approach, even (especially) for the most concentrated and rapacious businesses. Consumer regulations should be avoided because they hurt everybody, especially (somehow) consumers. And cutting taxes for the rich magically made things better for everybody else.
The arguments changed but the results were consistent: greater upward distribution of wealth, and more concentration of power, delivered by those the special interests funded and placed into positions of influence.
While the ideology was traditionally a Republican one, it had willing enablers in the Democratic Party who pushed for the same goals: Less regulation. More "unfettered" innovation in financial products, with "unfettered" a code word for "untested." Less transparency. More centralization of financial products through growth and acquisition, as if the world had never seen oligopolies before.
Now the ideology lies in ruins. The world has seen its fruits in a worldwide economic collapse, massive structural unemployment, and revelations of dirty dealings by our largest and most respected financial institutions. The two most prominent architects of the New Economic Order, Alan Greenspan and Robert Rubin, are publicly discredited by the collapse of the edifice they built. And, as we've discussed before, Greenspan's philosophy was particularly colored by his extreme ideological leanings and Ayn Rand worship (the money quote for Greenspan: "Parasites who persistently avoid either purpose or reason perish as they should.")
And yet privilege rewards its own. The same elites are being drafted into service, this time to recommend slashing benefits for older Americans in service of the wealthy. The Economic Night of the Living Dead that is Pete Peterson's "deficit summit" is the perfect example of this. (See Dean Baker's reaction here.)
But old warhorses like Greenspan and Rubin don't have the mojo they used to. Public anger at banks and financial institutions is staggeringly high, and nobody but the die-hard ideologues believes that deregulation has been a good idea. Not that this has been an upsurge in socialism, mind you -- as much as some might hope and others might fear. If anything, it's a return to what might be called "traditional American economic beliefs." Here are a few of them:
Free markets should be free. Ideologues can no longer use the phrase "free markets" to describe a system where wealth and political influence are amassed by a few. The public recognizes that this encourages cheating, politician-buying, and the stifling of competition. And competition is the engine of a free market. What they call a "free market" is one where opportunity and growth have been crushed by the power of a few.
Transparency is vital. The Greenspans and Rubins of the world have long resisted rules that would require public disclosure of financial transactions. Yet disclosing deals, whether through exchanges or other mechanisms, is completely in line with the concept of "perfect competition." That's a market model that requires, first and foremost, "perfect information." Transparency's not just vital - it's fair. And what's a more American concept than fair competition?
Everybody gets to play. How effective is a marketplace where some people get to buy at one price, others have to buy at another price, and still others never get to buy at all? Whether it's through so-called clearing houses or other mechanisms, reform can ensure a more effective market with more participants on a level playing field. It's hard for those who label themselves free-marketers to oppose reform of this kind.
People should be rewarded for doing things, building things, inventing things ... not moving money. America's financial heroes have always been inventors, leaders, creators. Instead these ideologues have built an economy where an ever-increasing percentage of the nation's profits are captured by the people who move money around. That leaves less for the people who create wealth and more for the people who drain wealth from the system.
With ideas like this emerging, and the old theoretical double-speak disproved by events, what's an ideologue to do? Judging by recent events, the answer is to flail around a lot. First Republicans (and one Democrat) began filibustering to prevent debate on financial reform. But they're politicians, and keenly aware that their ideology's been discredited, so they had to articulate the very principles they were opposing. Yesterday they released an alternative proposal that oscillates between vagueness and repetition of ideas in the bipartisan-negotiated Dodd bill. (If they're really this close on the shape of reform, it undercuts their position even more: Surely they're close enough to be able to debate the bill's contents.)
Now Sen. Shelby has apparently reiterated the two parties' inability to strike a deal, while at the same time seemingly releasing Republican Senators to vote in favor of bringing the bill to the floor. If that's really what has happened, debate may begin shortly. But the zig-zag arguments of the past several days underscore the deeper narrative: The ideology that served Wall Street special interests for the last 40 years has broken down, and there is nothing to replace it.
You can't argue for free markets and still fight for the giant companies. Those positions are mutually exclusive. You can't paint the picture of an agrarian past and then serve the giant corporations. The fact is, the American dream can't survive without regulation. Without it, the powerful will always crush a free market where the little guy has a chance to make it. It's like the old Western movies and dime store novels, but this time with an unhappy ending: The giant ranchers will always drive out the independent cowboys. The combines will always throttle Main Street business. The frontier will always be fenced. The railroad will always destroy the town.
And those who speak up for giant, faceless, unethical forces will always be what they've been in Western movies and dime store novels from time immemorial:
The bad guys.
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Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project. Richard blogs at:
No Middle Class Health Tax
A Night Light
Website: Eskow and Associates
He can be reached at "rjeskow@ourfuture.org."
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow
(cont. below)
This is the fatal flaw of libertarianism. The ideology obviates any major shared investments, the benefits of which individuals could never leverage, obviates any societal and long-term memory applied for the benefit of the marketplace (because that often has to come through government); it assumes people learn from poor consequences without taking into account how many poor consequences are too severe to recover from for many individuals. And it assumes people have infinite time to think about avoiding all the pitfalls and schemes that could be present in a free-for-all environment in all aspects of their lives. First-world countries are first-world because ordinary people have a floor of services and protections they can count on: their lives are not absorbed with the (competitive) hunt for clean water, food, and basic protection and survival.
Where do we go from here? The term "free market" has been so besmirched by Republicans. Do we help people understand what has happened and what free markets should be, or do we come up with better terminology and move on?
Fiscal conservatism has failed because in a free market, corporations privatize lawmaking and destroy the economy for profit.
Social conservatism has failed because it is nothing more than candy-coated theocracy.
Both twitch and thrash, but they are the death throes of otherwise inert concepts.
The big problem is that Americas disgustingly wealthy are doing their damndest to ressurect conservatism, like some kind of shambling corporation-loving zombie.
Rightwingers have destroyed "fiscal conservatism". What is a supposed conservative these days but someone who doggedly pushes policies resulting in the least fiscally sound outcomes, so long as it concentrates wealth for a few?
Eisenhower was my kind of fiscal conservative, when being fiscally conservative meant being wise with money. Getting the most for it. Making wise investments. Doing the best for the most number of people rather than serving the wealthy at the expense of everyone else.
Rightwingers don't practice fiscal conservancy. They have given it a bad name, just as they've trashed the use of "free market".
Fiscal conservatism is about government minimalism in the economy (and regressive taxation), and _that_ is a failed doctrine.
In an unregulated market, the party with the greater amount of leverage is allowed to employ it, regardless of how great that leverage is. Think, selling water to people dying of thirst.
And in America's unregulated market, the government is used as leverage against us.
Greed is not new. The need for the buyer to beware is not new. But this whole "shake-down" ethos was never such a way of life for mainstream business. When a telecommunications company might slam you for thousands of dollars one month, or a utility company might claim you didn't close your account at a previous address and are now on the hook for someone else's power, or the insurance company tells you the anethesiologist isn't part of the hospital bill and wasn't a preferred provider so you're on the hook for thousands you didn't expect from your surgery -- It's really tough for ordinary people not to be financially derailed by any of the business interactions they have in a middle class life.
The one point I would add to your list, Mr. Eskow, is that ordinary people need to be given back the power to make the right things happen at the level of every interaction in our economy, to be secure in their property. Not after years of fighting, not after time-consuming steps or litigation. For example, rules that allow people to simply keep unsolicited merchandise stopped cold abusive mail order practices (and redeemed the mail order industry which is now healthy and far more prosperous). Free healthy markets mean people can't be shaken down through abuse of their time or through unrestricted tricky fees and charges.
There is value in efficient capital allocation ... moving limited money into the most productive sectors .. and people should be rewarded for participating in that process. But, at the top, finance has become about speculation rather than efficient capital allocation.
Remember how the Great Depression was orchestrated by a greedy few bankers who knew that an economic crisis would benefit only themselves. We are now seeing the Great Depression: Redux, led by the likes of Bernanke and Greenspan. In the end, it is their greed that will be their undoing.
The ideology tied, in people's minds, the fortunes of the poor to the success of the ultrarich. The trickle-down theory. Anyone attacking the ideology, in anyway touching the advantages of the ultrarich, takes away the engine of the economy, takes all jobs away from the poor and hurts all of us -- which is not true of course, but it's a powerful narrative that lives still.
The narrative needs to be rewritten for us to reclaim our prosperity. An educated and free middle class is the engine of our economy. Some public expenditures, like education, infrastructure, and healthcare, are investments that reap rewards for our everyone (even the rich).
Eisenhower taxed the wealthy in the extreme compared to today's standards, which gave us the interstate highway system. Our economy (including the rich) benefited in the extreme from that public investment, rather than it destroying jobs because of taxes on the wealthy, as the ideology goes.
The end result of persistent siphoning off of middle-class prosperity (sponging BY the ultrarich) and making no new investments was predictable and a one-way street if we don't change. Unfortunately, we're still paralyzed by the old narrative.
Freedom now means crony capitalism because Stalin took advantage in Russia. There is no alternative (TINA).
J. Edgar Hoover spent many years going after organized labor, especially the CIO while there was organized crime that got a free pass. Those same gangsters realized thatt more could be stolen on Wall Street. Why rob a bank when you can own onbe and rob it?
The educational system has become an appendage of the fight against socialism so that the world can be free for financial criminals to operate in the City and on the Street.
He who runs the monetary system runs the world. None of this is the least bit democratic. Trickle down does not happen, just trickle up with the use of derivatives. Fractional reserve banking is the underlying problem. We fought a revolution against the Bank of England and the British East India Company.
The Redcoats were allowed in the back door. Remember that the White House was burned down in 1814. The Civil War was supported by the financial Oligarchy from across the pond. They got us into WW I and WW II. Fiat money, fractional reserve lending, unregulated derivatives, free trade hype.
Globalization is all about imposing a monetary system world wide. That benefits them, not us.