I have for some time now been dismayed as I watched a conservative movement I once respected, and considered myself a student and sometime sympathizer of, apparently become adrift in a haze of “free market” rhetoric that was more style than substance, more twitch than thought. I remember well one such “conservative” who went utterly ballistic on me not too long ago when I noted the rather unremarkable fact that in today’s world, the fastest way into the economic elite is often through conniving, backstabbing, cheating, and even outright thievery. This was supposedly me “showing my hand” as a mediocre unsuccessful joe unhappy with his lot in life. The bumper-sticker-substitute-for-thought with this part of the conservative crowd seems always the same: if you’re rich and you think the system is unjust and screwed up, it’s because you “feel guilty for succeeding,” whereas if you are not-rich and you think the system is unjust, it’s because you suffer from “envy.” Both of these cheap shots are substitutes for honest discussion, and alarmingly common. It had begun to appear as if you could not say the system was unjust and corrupt without being dismissed as either envious or a guilt-ridden elitist. Or at least stupid and uneducated. Anything other than you might have a valid point, anyway.
Having once been a longtime fan and subscriber to National Review (it was my favorite magazine for years, often educational even when I did not agree with it–I even once got a personal response from William F. Buckley Jr. to a letter, which I wish I hadn’t lost) it was with some relief that I recently read this piece on National Review Online:
Repo Men by Kevin D. Williamson. While Williamson shoots copious pixels at the Obama administration and the Democratic leadership in Congress, if you read it all the way through you find that he is not particularly sparing of Republicans (although you really do have to read it all the way through to see that). And it’s hard not to notice just what a bracing change from typical conservative “free market” boilerplate his opening paragraph is:
If you’re making money on the Wall Street scale — which is nothing like your boring, middle-management in the Fortune 500, Hamptons-and-Mercedes, barely–a–1 percenter type money — then you can buy basically anything. When real-estate investor Robert Rosania put part of his storied champagne collection up for sale in 2008, the auction was predicted to fetch $5 million — couch-cushion change to Rosania, who had not yet reached his 40th birthday, making him a good deal younger than many of the vintages in his cellar. (Known in the wine world as Big Boy, he brandishes a special saber designed for decapitating head-clutchingly expensive bottles of champagne. Bespoke vintage-champagne cutlery: That’s how you know you’re rich.) Not far from Zuccotti Park, where Occupy Wall Street was fragrantly encamped, I noticed a young man wandering into a store to buy a pack of cigarettes on a bright Saturday morning, wearing blue jeans, a T-shirt, and a $237,000 Vacheron-Constantin watch. In a world of $600,000 cars (consult your local Maybach dealer) and $4,300-a-night whores (consult Eliot Spitzer), it’s no big deal to buy a president, which is precisely what Wall Street did in 2008 when, led by investment giant Goldman Sachs, it closed the deal on Barack Obama.
If you changed a few of the names and dates, you could have easily put some Republican names on all that just a few years ago and called it a “lefty screed” that was all about “attacking the successful” or somesuch.
Williamson’s piece deserves to be read in its entirety. There is a lot there to digest and contemplate. The only fault I can find (other than its apparent obsession with attacking any wealthy person who thinks higher taxes on the wealthy just might be a good idea) is in this line:
Congress has effectively exempted itself from insider-trading rules, not that the SEC would have the guts to go after a Senator Schumer or a Speaker Pelosi for these exploits. And that — not campaign contributions, not lobbying — is the really stinky petri dish of festering corruption at the nexus of Washington and Wall Street. You want a case for limited government? That’s it.
So without really saying so, Williamson acknowledges that there is good reason to protest Wall Street after all. But this is a case for “limited government?” In what way? Big corporate interests and real fat cats have always bought government officials, including judges, or just managed to find gullible fools who are blinded by ideology and/or charisma to support whatever they want to do. This to me looks like a case for a great deal more government in setting rules, most especially in the area of the exchange of publicly traded stocks and bonds and congressional interest in same. It is an argument for greater government scrutiny and regulation, stricter rules for transparency and accountability.
As James Madison famously wrote in Federalist #51, “If men were angels, no government would be necessary.” Yet when we look at our government-created economic system, it seems obvious that the most distinctly un-angelic attitude found among modern-day conservatives is failure to acknowledge that money is indeed a form of power, and that such power is not generally given to angels–and as such it will inevitably be used against the common good, all the moreso if there is no policing. Governing is crucially necessary to the market–indeed, regulation of commerce is an explicitly-stated Constitutional duty and obligation of the Congress–and it appears that in all this corruption what we are seeing is not too much government, but altogether too little of it. Or in any case, a drastic need for more effective government, whether it be bigger or smaller, and the only debate we should be having is how it could better be governed. Congress is derelict in its duty.
For all of Williamson’s shots at targets that Republicans like to see targeted, he deserves credit for noting just how corrupt the whole system is, and for not being afraid to acknowledge that Republicans are hardly better when it comes to these shenanigans. And it would seem to me that perhaps Williamson might want to acknowledge that the biggest favor of all you could do for these crooks is to simply strip government of any power to scrutinize or interfere with anything these elites want to do with their billions. It would seem to me that what is needed is stricter rules on IPOs and securities exchanges, and greater scrutiny of those engaged in this level of business, not some hazy idea of “smaller government.” Corporate America and securities exchanges being ultimately a government-created marketplace, it necessarily falls to government to police that even more than other markets.
And alas, I think “throw all the bums out” is too easy an answer, and one we’ve heard before. Frankly, it doesn’t work. “Scare the bums and make them shape up” is more like it. Otherwise you’ll just exchange one set of bums for another set who tell you what you want to hear and then revert to form as soon as your back is turned.
In an equally-refreshing piece, the Weekly Standard (a Rupert Murdoch organ, no less!) has a remarkably astute, moderately-phrased call upon conservatives to stop with the auto-twitch of “capitalism is always good and criticizing it is always bad.” In How Many Cheers for Bain?, Jonathan V. Last says, amongst other things Republicans and conservatives should hear:
There’s a line of thinking you often hear from Republican-types about how markets are never wrong. You think a certain CEO’s lavish compensation is ridiculous? Nonsense, those types tell you. You think that a CEO’s VORP—that’s a baseball stat that translates, in this case, to the CEO’s marginal value versus the average replacement CEO—couldn’t possibly be so high? They simply counter that he’s worth the money because there’s someone willing to pay it. The results in a market triumph considerations of value.And there’s some truth to that. Free markets are, in the long run, wonderfully efficient and wise. The problem is, they aren’t, in the short or medium run, always wise (this is why we have bubbles); they aren’t perfectly free (every market is distorted by rent seekers and other externalities); and the efficiencies they produce are not always beneficial to society writ large (see the effects of the pornography and gaming industries).
To understand these limitations is not to attack or disdain the free market. It is merely to give, as a very wise man once wrote, a clear-eyed “two-cheers” for capitalism.
My God, it had begun to seem as if all common sense had completely fled most of the Right and that “Market Uber Alles” and “corporations are God’s gift to the world, alone bringing prosperity to a benighted world” were all you could expect anymore. (Yes I’m exaggerating a bit, and no that doesn’t describe everyone, but my God it’s seemed that way at times. Wal-Mart simply must be a great thing in all ways shapes and forms, didn’t the Founders and/or the Bible say that somewhere?)
I have always believed that conservatism is a vital and necessary voice. Without conservatism, I genuinely believe the wheels would likely fall off of society sooner or later as every single change was made willy-nilly simply because it seemed like a good idea at the time. William F. Buckley once famously described a conservative as one who stands athwart history yelling “stop!” and while he is still sometimes derided for that sentiment the truth is that if there’s never anyone filling that role then trains are going to collide sooner or later. There is huge need for the voice that looks at what we’ve done with our oversight of corporate America and the financial industry and yells “Stop! You’re plunging us over a cliff!” Big monied interests really do hold enormous power, and castrating government power to do anything about it isn’t wise; it is like saying that if you want less crime, have less police–it would certainly bring down the number of arrests and prosecutions, wouldn’t it?
I think it is high time that we acknowledge that we do not just have “rights” in this country, we also have duties to it. Whatever you have, then either visibly or invisibly it is this society, which includes this government, which has made it possible for you to obtain it. As a citizen you have not just rights under our Constitution, but duties under it, as do our elected representatives. Once again such sentiments would not have been controversial in conservative circles a generation ago, though they are often seen as high heresy now. So perhaps some rethinking is in order, and I am relieved to see stalwart conservative organs like NR and TWS edging back toward that. It’s needed.
Yes, yes, I have already said I’m not a conservative and I’m probably voting for Obama, so I suppose you could have two responses to what I say here if you’re a conservative: one would be to say “why should I listen to you, you’re not one of us!” But another might be, “The truth is the truth no matter whose mouth it comes out of, and perhaps some rethinking of priorities is in order here if we’re to persuade voters that we have good and useful ideas.”
It’s a thought. Anyway, three cheers for Last and Williamson.
(This item cross-posted to The Moderate Voice.)
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There may be something significant to what Dean has written here.
A few hours ago, I was having an email dialog with Alan Drake, a close friend of mine and a well-known researcher on both world peak oil and electrification of the USA’s freight railway network as a partial response to the coming peak in world oil recoverable reserves. Alan who holds academic credentials both in chemical engineering and accounting, is working on publishing a paper outlining how just a portion of US unrepatriated profits could easily finance the upgrading and modernization of all the major US freight railways system. I asked him what he meant by unrepatriated profits. He told me the term was well understood by everyone who works inside the DC beltway, but I’m not one of them. Here’s what we wrote to me in explanation:
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US corporations that earn profits abroad pay income taxes to foreign nations – if any.
The IRS gives a dollar for dollar tax credit for foreign taxes paid . But if US taxes are higher than foreign taxes, the US corporations must pay the difference when they bring the profits home. The profits have to be in the USA before they can be used to pay dividends, pay off US debt, etc.
To avoid this, most US corporations keep their foreign profits overseas – avoiding US taxes. The amount of unrepatriated profits has climbed to over $1.3 trillion. ($1,300 billion) and it is climbing by over a quarter trillion/year.
A special one time low tax year was given to unrepatriated profits during the George W. Bush administration, and there is intense lobbying for a second tax holiday.
Arnold, I can try and write a new version for tomorrow.
Best Hopes,
Alan
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Assuming the accuracy of the above, and I have no particular reason to doubt it, a gang of people have taken control of this entire country who are treating it as just another corporate property that they can loot, trade off and even dissolve at their will. They don’t give and damn about America any more than beer barons of the 1920s did. The more I think about this, the more I wouldn’t argue about treating these folks as public enemies, the same as they did with Capone.
Arnold Harris
Mount Horeb WI
Arnold, what Alan Drake wrote you is 100% correct.
Having said that, tho, so what? Why would anyone think any business should behave any differently?
It has always been this way. The only difference is that the US used to be the place where these kinds of profits went since it was the best place for the money to be. This is no longer true.
We’ve made it more expensive for the money to come here than to not come here. Shockingly, it isn’t coming here.
Attempt to ‘fix’ this problem (except by making this the best place for the money to be) will only exacerbate the problem and accelerate the rate at which money flows out of the US. For instance, by declaring these people traitors…
Dean,
I agree with much of what you wrote.
One thing I disagree with is:
The only fault I can find (other than its apparent obsession with attacking any wealthy person who thinks higher taxes on the wealthy just might be a good idea), it is in this line: …
I find no fault with that line. It’s not that it’s the only thing that stinks, it’s that it stinks incredibly badly.
If you’ve got a few corrupt cops, then adding cops can help cut down on crime. On the other hand, if the department itself is corrupt, then adding cops will only increase the number of people involved in the corruption.
The line you object to is actually a serious part of the problem.
Okay, FL.
Assuming we need to make the USA the best place in the world for investment funds, how do we go about doing just that, while, at the same time, feeding entitlements increasingly unfunded by taxation, to a population of some 300 millions with high expectations?
Arnold Harris
Mount Horeb WI
Arnold, we don’t.
This is why great countries fall. We had our turn. Unless the populace gets their expectations under control (which I don’t think will happen), we’ll go bankrupt and start building again.
Dishman: Well the fault I found was with the very last line of the quote and not the entire thing, just to be clear. And the fault I found was with his reasoning, not the very real problems he identifies.
As for our example of the cops: it would seem to me that if you aren’t in a position to fire all your cops (which we aren’t), then the solution is to fire the worst of them, slam the marginal ones against a wall and make them pee their pants, and hire some new ones, all while making it clear there’s a new sheriff in town.
Then when corruption sets in again–which, like rust, it simply will–you do the whole thing all over again. It’s grueling but so far it seems to be the only thing that works.
To change metaphors: Even stainless steel corrodes eventually, and is on the soft side and prone to warping at that. Ain’t no perfect material, ain’t no perfect design. There is only “better in this application” or “worse in this application,” and periodic maintenance and adjustment is still part of the cost structure one way or the other.
(Thanks for the link to the Williamson piece by the way, sorry I forgot to acknowledge you in the article.)
Fruity: My outlook is a bit more sanguine than yours. I don’t think collapse is inevitable. I think the system has proven itself highly adaptable and able to weather worse storms than this.
Just to pick one example, all those banking reforms of the Great Depresssion era? Well they may not have been universally good, but hardly anyone these days even knows what a “bank run” is, let alone what it looks like. That’s because they don’t happen. I don’t think one has happened to any significant degree in something like 70 years, anyway. We trust that our money’s going to be there when we hit the ATM, or that if it’s not there the reason isn’t going to be because the bank ran out of money–bless that old fossil FDIC’s heart, even if it does sometimes mean bank management gets away with crap that would destroy another business.
[Insert another of Dean's patented rants about how often the anti-government folks seem blind to how many government services they take for granted here. Also insert obligatory nod to Alexander Hamilton on the crucial need for sound banking policy and the usefulness of government debt.]
Unlike you I do not believe our entitlements are unsustainable. I think they’re entirely manageable with sound policy. I doubt collapse is inevitable, although we could force our way into one if we’re determined enough to put ideology over common sense, or give in to panic.
To get less into the realm of the hazy and more into the concrete: tax policies which make it more desirable to keep capital at home seem like a fine idea. Capital flight is a real problem and you aren’t likely to stop it simply by putting a gun to people’s heads. (Some sort of allusion to the Berlin Wall comes to mind but I can’t seem to formulate it.)
Nevertheless there are answers that go beyond “well just cut the marginal rates to be competitive” I think. In the long run, capital’s only going to have so many places to flee, and the number of desirable spots seems to be slowly diminishing; as the world becomes increasingly democratic and polluted by things like free speech and association and the internet, the populations of various nations start to make demands. People do naturally seek security and stability and comfort as much as they seek freedom; the two are in constant conflict, which appears to be part of the status of being human. Capital may flee to countries where everything seems friendlier, but then eventually the people in those countries start demanding more themselves and the climate doesn’t stay all that accommodating forever. You may have noticed, for example, that it’s not necessarily cheaper to run call centers in India anymore, and that’s not just because of factors internal to the United States; the Indians are demanding more and their pool of talented people willing to work a 12 hour day for a bowl of rice and a Coca-Cola is only so big anymore.
(Speaking of which, do you have any idea how much cheap business real estate is available these days just outside of Ann Arbor? Another discussion I suppose. ;-)
I think one of the things we’re likely to see in the next administration–whether it’s a second Obama administration or a Romney administration–is a slimming down of our defense spending, which seems to be increasingly politically acceptable to say as it becomes harder and harder to deny that huge armies and ginormous fleets of B-52s with nukes aren’t exactly what’s most needed in an early 21st century context. A shift in defense spending toward smaller, lighter, and (yes) cheaper is underway, and that is a *huge* part of the budget. And while it might cause some turbulence, a shift in policies that make it easier for smaller businesses to start up and sustain, and away from the “grow as quickly as you can and do an IPO” would probably do a world of long-term good for wealth creation–by which I mean, some capital might flee, but if people at home are busy making more capital, it might be desirable to go ahead and let it flee while the people at home start up new businesses and make new stuff. The next Steve Jobs isn’t likely to move from California to Kuala Lumpur at the age of 22 to start up the new Apple just because the tax environment is nicer there. I myself am in love with entrepreneurs, and by that I mean the “started it in a garage and got some seed money to grow” variety and not “put together a team and found angel investors to help us quickly turn this into an IPO and get out” variety. The former is the type to stay wherever the entrepreneur happens to be, and not where the big money men want them to be. If some wealth is fleeing, we might be better off to go ahead and let it flee and be nicer to the people actually creating new wealth here–which tends to come from small enterprise, not big corporate players. Or so I like to think, anyway.
I can agree with some of this disagree with some but overall I think we all see a need, and pretty much the same need. We cannot continue to spend without more money coming in.
We have too many who are third generation dependency on the government, we need to do something about that. That doesn’t just save money, it puts them into the stream who are feeding money into the government. The same is true with the unemployed and underemployed, they would no doubt prefer to be the givers rather than takers.
A huge way to cut spending is our huge and bloated bureaucracies. I find it strange that so many people want to cut military spending with all good intentions, who do not mention the many we could cut in all levels of civil government. How many times have you gone to a state or federal office and seen people who are doing nothing. This doesn’t just happen with the time honored jokes of the work crews on the street; one person shoveling and three watching. This happens in every city, county, state and federal office in the country.
Waste is everywhere. Fraud is not far behind. We have got ourselves into a pickle, we need to climb out of the pickle jar.
Dean,
Stipulating your views on what is right and good, I have to say, “Stop! Don’t shoot! You’re holding it backwards!”
Ruth: I’m not so certain our Federal bureaucracies are all that bloated anymore at the Federal level. Compared to the size of the general population, most of them are smaller now than they were, and most of them are shrinking not growing.
And while I don’t want to change the subject, I’ve seen as much farting around and doing nothing productive in corporate America as I’ve seen in any government office. Our beloved military is also filled with people who do the same damned thing; the people doing the fighting are now the tiniest part of the military. To pick one example: between active duty and reserve, we currently have about 3,000,0000 (three million) people in the US military, of which about 100,000 (a hundred thousand) are serving in Afghanistan–in other words, in our current largest military commitment, only three tenths of 1 percent of our forces are there.
This is not to say that all the rest of the military are useless. But it seems pretty obvious that there is room for slimming there, and the military brass has agreed since before Obama was even elected.
As with many things, the Obama administration has mostly followed what the Bush administration already put in place. Donald Rumsfeld started the move to slim down (you may recall his “faster and lighter” phrase) and the military brass itself has for years maintained that this is desirable. We’re maintaining infrastructure and forces that we don’t have any particular use for whereas we have greater needs in areas that are less expensive but are not getting filled anyway. If we’re going to talk about bloat, we should be able to say that the military itself admits to being bloated and wanting to slim down; they WANT their budgets cut and reprioritized. They’re maintaining bases and equipment they don’t need or use, and people they don’t need to do it.
We should expect to see, long-term, the military budget shrink, and we should expect to see that whether we have a Republican or a Democrat in the White House next year–which was my point for Fruitylips.
I expect the slimming down of our military forces to continue no matter who’s in the White House next year.
We are agreed by the way that welfare dependency is a significant issue, but I would remind you that these days if you are young and able-bodied there are time limits and work requirements. We got those under President Clinton and that hasn’t been done away with. Most of the long-term dependent are on things like Social Security Disability and retirement.
Dish: Heh. But where?
Dean, true that corporations are rife with bureaucracy but they are using their money not ours, and as Romney has shown occasionally someone comes in and cleans house. I just can’t believe that civil service jobs; townships to federal are not rife with waste. I’ve seen too much. I believe I saw the facts that the military has been drawing down since 2007. Are they also drawing down on the desk jobs? I hope so, meaning I know a lot of civilians are the work force for military establishments and contract workers.
All of the above need to do what we do when our income shrinks, shrink our spending. You have suffered from that a few times since I’ve been reading your blog many years.
Yeah it’s hard to believe how much I’ve managed to cut to survive.
Anyway Romney’s reputation for “coming in and cleaning house” may be a positive in some people’s eyes but it’s likely to be one of the biggest sticks he gets beaten with too. His fellow Republicans have already ripped into him for it and you can expect Democrats to be even more merciless. They’ll call him a corporate hatchetman who went in and put everyday people out of jobs just to make his multimillionare pals at Bain richer. Republicans already said it about him, why wouldn’t Democrats? I expect that to be the biggest thing he has to overcome if he’s going to win.
Given my own known antipathy for people in the upper echelons of high finance and corporate America, obviously my sympathies for Romney are limited here, although I still think he’s the Republicans’ best shot at beating Obama and probably wouldn’t be all that bad a President.
Dean,
Perhaps one simple rule everyone should keep in mind:
Whatever power you give government when your friends have control, you also give to those you most oppose when the wheel turns.
More specifically, anything you open for “reform”, you also open for lobbyists and rent-seekers. They have interest, awareness and persistence. They will almost always win, even if it seems otherwise.
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