As per Rod's command, here I am. I've been working on, and then deleting, incomplete posts for a week or two now, never quite able to catch up with events and say the things I think I'd like to say before my whole reason for saying them becomes either irrelevant or exhausted. The same will probably go for this post, but hey, at least I'm getting it up.
As I write this, the $700 billion (we think!) bail-out of Wall Street appears to be heading towards Bush's desk for his signature; meanwhile, Senators Obama and McCain are on their way to Washington where, no doubt, they will say exactly as little or exactly as much as necessary to placate their bases and get back to the campaigns they want to run: ones in which, like most presidential campaigns in my lifetime, the prospect of substantive, challenging, serious, transformative, and/or participatory debates are exchanged for elite, media-centered (and media-manipulating) arguments about this comment or that insult or this mistake, because that kind of culture-and-appearance obsessed mud fight over which candidate can make themselves into a better synecdoche for some arbitrary slice of the American populace seems to be, unfortunately, a moderately effective way to woo and/or alienate enough random voters so as to pull off a 51-49 win in the end. Can you tell I'm a little frustrated with the process right now? And the thing is, I'm not your usual burn-both-their-houses-down!-style contrarian; while I'm more than happy to treat my vote expressively, and support whichever minor party candidates I think best represent (or at least approximate) whatever mix of issues which I believe deserve greater attention, I'm not opposed to trying to make the existing system work as best as it may, and that includes hoping for the best when the presidential show comes to town. So what's the problem? The problem is that the present crisis is so obviosuly one with roots that dig down into some of this country's most basic assumptions and behaviors, that to hear a discussion of saving investor confidence and stopping the bleeding and all the rest without so much as a gesture at the unreality and irresponsibility of a national economy built upon, and whole corporate cultures practically premised upon, consumption and speculation and debt is simply maddening.
In particular, what's most maddening about it--to me, anyway--is the fact that this enormously expensive bail-out will involve the embrace of a host of economic particulars that one can speak sensibly about, if we were willing to call them for what they are, and open ourselves up to what they entail. What am I talking about? I'm talking about what Irwin Seltzer called, with great reluctance and through gritted teeth, the "New Capitalism."
Henceforth, government will undertake previously unheard-of intrusions into the paneled boardrooms of corporate America, controlling the methods by which executive salaries are set. Board members, especially those serving on compensation committees, should no longer be friends of, or dependent on the good will of, the executives whose salaries they determine: They must be independent. And independent as judged by regulators. Auditors cannot build lifelong, cozy relationships with the executives and directors whose bookkeeping they are charged with reviewing; they must make way for other independent auditors after a number of years. Executive compensation must be transparent and somehow related to performance....[W]e are about to see equity given greater weight relative to efficiency as New Capitalists recast the tax structure erected in the last days of the Old Capitalism. Old Capitalists worry that if the marginal tax rate on the highest earners is raised from 35 to 40 percent, the wealthy will be less inclined to invest and take risks. New Capitalists, who would distribute those funds to the middle class, think it is worth sacrificing a small bit of efficiency to gain a great deal of fairness. This is the one area in which the Old Capitalists have not capitulated, and are mounting a last-ditch effort to preserve the Bush tax cuts. They will lose, whether to a President Obama or to a Democratic Congress that will drive an only apparently reluctant President McCain back to the position that he took when first confronted with the Bush cuts: They just don't seem fair.
As someone with egalitarian preferences like myself, that's all well and good...except, in fact, I hope that Irwin is, at best, just half-right. Because, of course, he isn't actually talking about a new capitalist regime at all; he's talking about social democracy, about the recognition that social accountability and ownership and equality--in other words, the basic elements of democratic fairness--are a necessary component of maintaining justice and legitimacy along with human flourishing in the complicated, interdependent world we have--for good and for ill--built for ourselves. And if one is going to recognize that some form of socialism is what is being called for here, then one at least ought to use the terminology appropriate to it, rather than grumpily insisting upon the capitalist jargon of growth and efficiency. (That's part of what got us into this mess, remember?) At the very least, continuing along with an unreconstructed globalist free-market mindset--from which I really do not expect either the Democratic or Republican parties to deviate anytime soon--will set us up for failing to appreciate how the socialism we are traipsing into could be much improved. (Which it certainly could be...E.J. Dionne is absolutely correct in calling the original bail-out proposals "socialism for the rich only.")
Those who assume, as an article of faith, that the U.S. is and must remain a fundamentally liberal and individualistic society will, of course, mount their usual libertarian complaint about this kind of transformation. But there are other cautionary voices which are not so grounded in a warped (though unfortunately common) misreading and metastasizing of Locke's defense of property rights; Daniel Larison reminds us that a hostility to a "collusion between financial interests and the government" was a central part of the old Country tradition, parts of which shaped Jefferson's own democratic-republican/communitarian-agrarianism. More relevantly, James Ledbetter in the piece I linked to above makes the obvious point that "state socialism is intrinsically unstable" and that "the Soviet Union collapsed for a reason"; he also pointedly observes, however, that "you don't see the Spanish [a nice Western European social democratic country, if you haven't heard] having to take over their own banking sector." So obviously, the question that ought to be asked--if we could be politically honest with ourselves--is not merely how to keep the "moneyed interest" from either taking over or becoming tools of the state, but more importantly, how to have a state for which the socialism that our present-day global economy seems to make unavoidable (at least for much of the world) will not pose either a threat or a temptation to democratic politics.
Noah Millman wants to make a distinction between this massive bail-out and the slightly less (or slightly more--it depends on who does your accounting) expensive, and more upfront in its implication, government intervention into Freddie Mac and Fannie Mae two weeks back: "I mind it less if Uncle Sam is my landlord than I do if he’s my banker." Either way, however, is going to mean the government buying up assets and absorbing losses that otherwise would have brought private financial institutions--and the retirement funds and investments and mortgages that they'd tossed back and forth in the meantime--down with a crash. So let's talk about the buyer. As it happens, Sweden found itself, about 15 years ago, in the position of having to become such a one.
Sweden's financial crisis in the early 1990s stemmed from a 1985 deregulation of credit markets, which set the stage for overexpansion and bubbles in the real estate and finance markets. When those bubbles burst in the early 1990s, Sweden's currency crumbled and interest rates spiked to 500% overnight. Of the country's seven biggest banks, five needed either government bailouts or big injections of money from shareholders. The value of the country's real estate market plunged 50-60% in 18 months....The government tried several stop-gap measures to no effect and in late 1992 opted for a complete re-booting of Sweden's financial system....The government issued blanket insurance for a period of four years to creditors in all the country's 114 banks. It established an agency to oversee all banks that needed recapitalization and told them to immediately write down their losses. Most importantly, the government stipulated that in order to become eligible for government funding, banks would have to give up something--namely equity--in return. In the case of one leading bank, the mere prospect of the government taking a stake was enough to persuade shareholders to dig deeper and raise money on their own. For the rest, the government was able, once the markets rebounded, to sell off the stakes it had acquired, making a profit that was effectively returned to taxpayers' coffers. At one point the government controlled more than 20% of the entire banking system.
Sounds simple, doesn't it? The key point, though, was the one which, thanks to Congressional insistence, the administration appears to have come around on: an "equity position" for taxpayers in the bailout. (Interestingly, it may be exactly that vague and unspecified promise of equity that will make the bailout plan even more unappealing to House Republicans.) I'll be curious to see exactly how much government negotiators come through with in their discussions over the taxpayers becoming, through the federal government, the owners and controllers of many of these assets; as much as the Bush administration has spoken about the "ownership society," it has reliably resisted the kind of redistribution of resources and opportunities that would make it possible for citizens to truly participate in--to exercise some authority over--that which is their own (as opposed to, say, being "enabled" to buy at or buy into this or that Major Corporate Institution, as if the range of crap for sale on the shelves and stocks in the portfolio to invest in were really the sum total of liberty and ownership). Maybe the enormous cost of this bailout will be enough to wake them up to the imperative of real, significant ownership...but I'm doubtful.
The other key point is, of course, a matter of culture and connection; as the same article above put it, "Swedish experts caution that the Swedish financial system is relatively small compared to the U.S....in 1992 most leading government officials knew the bank chiefs on a first name basis." That's the sort of intimacy and involvement which breeds both trust and an awareness of the limited resources (and all resources are limited) one must share if one is going to be committed to the sort of social priorities which the economics of today expose as in desperate need of recognition and protection. Such small-scale connections and cultural assumptions are, I think, for the most part a deeply admirable thing...though for those trying to get America's financial system into a defensible, coherent, more secure shape, that realization may be a rather tragic thing. Because the truth is that the United States is probably too large, too powerful, too globalized, too involved in the structures of our consumption-and-liberation-driven world, for this kind of trust and sense of limits to be operative, or at least operative enough to make the socialism that our own financial practices have made incumbent upon us work as well as it ought. But let's not ignore what it means to see real, small-scale, sensibly conceived, social democratic practices to work.
I've talked about Sweden's social democracy a couple of times before. I don't want to use that country as an example of exactly the sort of social democratic model which we all ought to or could follow; rather I just want us to keep the "possibility" of Sweden in mind:
Sweden is not a place for mad, brilliant, disruptive entrepreneurs--but it is a place for working citizens and families, most of whom would (as, I think, most every human being would, if the options were put plainly before them) prefer to exercise a little control over the vicissitudes of existence, and preserve a place for a reliable and secure everyday world. Few people would describe Sweden as a conservative country, and it's possible (perhaps even likely) that their particular approach to choosing what to put into a socio-economic enclosure has had political and cultural consequences that make different types of conservation impossible. Yet there is a sense that, compared with the U.S., they "conserve" far better than we. In their analysis of their own situation (and in the analysis of many other social democratic countries) you can see, if you look for it, the evidence that socialists and egalitarians of many (if not all) different stripes share an intellectual pre-occupation with agrarians and others: the conservative concern with tending to what one has, and a willingness to structure life so that one's tending isn't made moot by realities that ought to be subject to the will of the people.
Patrick Deneen recently highlighted the prediction which Matt Simmons (banker, oilman, and Republican) has recently made about our nation's needs for the long-term economic future: "We should basically be going back to creating a village economy, so that we really reduce the energy intensity of how we live....We need bigtime conservation, not feel-good conservation. Make things where they're used. You'll end long-distance commuting, and we have the tools to do that now with webcams. Grow food locally. Grow food in your backyard. If they're not commuting, people will have time to do that." I couldn't agree more. And moreover, as Patrick himself has acknowledged, I would note the example of social democratic countries in Western Europe (like Sweden!) suggests that this kind of localism is achievable...so long as one acknowledges--rather than rebelling against--the sort of environmental and civic and economic regulations which allow ordinary people to sitaute themselves against the runaway forces of corporate speculation and capital accumulation and consumer consumption, and truly take ownership of their social and economic worlds (which, nowadays, unfortunately includes an awful lot of credit and debt). This isn't to say that all our fears and worries and complaints about this massive socialist--but don't say it out loud!--bailout of Wall Street would disappear if, say, it was all being run by a homegrown Christian Democratic Union party rather than by the Bush administration's Treasury Department. The problems--and the habits which support them--run deeper than mere questions of administration, running all the way down to the uncomfortable reality of America's size and strength and position in the world. But, for the moment anyway, if either McCain or Obama would suggest that they could at least acknowledge some of that, I'd certainly feel much better about it all.
