David Brooks is right about three things. First, the current economic fiasco is leading, at least in the short term, to a situation where people are tossing aside their ideological preconceptions in the interest of achieving confidence in the markets. Pragmatism is coming to the fore on both the left and the right. Brooks is also correct that the mechanism for achieving (or attempting to achieve) stability is the faith people have in an elite of financial powerhouses.
What Paulson, et al. have tried to do is reassert authority — the sort that used to be wielded by the Mellons and Rockefellers and other rich men in private clubs.
Inspired in part by Paul Volcker, Nicholas Brady and Eugene Ludwig, and announced last week, the Paulson plan is a pure establishment play. It would assign nearly unlimited authority to a small coterie of policy makers. It does not rely on any system of checks and balances, but on the wisdom and public spiritedness of those in charge. It offers succor to the investment banks that contributed to this mess and will burn through large piles of taxpayer money. But in exchange, it promises to restore confidence. Somebody, amid all the turmoil, will occupy the commanding heights.
But, of course, the original Paulson plan would not fly. It will be changed to include federal oversight, to provide help for homeowners, and to deny golden parachutes to failed CEOs. The inertia of Washington is such that we are headed, at least initially, in exactly the direction Brooks suggests.
Beyond that, they will embrace a certain sort of governing approach.
The government will be much more active in economic management (pleasing a certain sort of establishment Democrat). Government activism will provide support to corporations, banks and business and will be used to shore up the stable conditions they need to thrive (pleasing a certain sort of establishment Republican). Tax revenues from business activities will pay for progressive but business-friendly causes — investments in green technology, health care reform, infrastructure spending, education reform and scientific research.
If you wanted to devise a name for this approach, you might pick the phrase economist Arnold Kling has used: Progressive Corporatism. We’re not entering a phase in which government stands back and lets the chips fall. We’re not entering an era when the government pounds the powerful on behalf of the people. We’re entering an era of the educated establishment, in which government acts to create a stable — and often oligarchic — framework for capitalist endeavor.
After a liberal era and then a conservative era, we’re getting a glimpse of what comes next.
Of course, all of this is premised on Barack Obama winning the presidency. But, if he does, the initial direction of his presidency and of the swollen Democratic congress, will be precisely as Brooks describes. From the left there will be much to praise and support. But the Democrats will be badly divided between the progressives and corporatists. And this will lead to a contant tug and pull on the Obama administration. The more successful Obama is early on in restoring the economy, the less traction progressives will have for systemic change. But, if incremental steps do not work, progressives will gain the upper hand.
The new Congress will be fascinating. It could easily be swollen with as many as forty new Democratic congresspeople. But all but a handful of those new members will be coming from districts that voted for Bush twice. New Senators from places like Alaska, Colorado, Mississippi, North Carolina, and Virginia are not going to lead to some massive shift to the left.
Unless, that is, conditions demand it. Who, after all, foresaw a month ago that the government would own the world’s biggest insurer? In some ways, I expect Obama to follow FDR’s blueprint. Be flexible, try different things, and keep going until it works. Since we don’t know what will work, we can’t be sure what the result will be.
We do know that the election of Obama will be a victory, first and foremost, for the creative class. We will see policies change to emphasize science and research, technical education, infrastructure investment (for commuters), new green technologies and industry, and health care reform. The government will be more attuned to the libertarian-bent of the Obama coalition. That means a restoration of privacy rights, but also more consideration to barriers to entry and opposition to corporate welfare. Even immigration policy is likely to change to bring in more skilled workers.
The poorest among us will fare better than they have in memory, especially if health care is passed. Yet, I see progressive advocates and traditional liberals feeling some of the same frustrations they felt under Bill Clinton. A lot will depend on whether Obama really pushes his Urban Policies. His Urban Policies aren’t all that expensive to implement, but we are going to be facing budget restraints. So, we’ll see.
