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Economics Financial Crisis Politics The Opinionsphere

The Reagan Revolution (cont.)

There’s been quite a strong response to Paul Krugman’s column last week blaming the financial crisis on Ronald Reagan. William Greider from the left and Richard Posner from the right both made the case that it was actually Jimmy Carter who’s to blame. But I think Andrew Leonard in Salon has the best take on the whole meta-debate over the debate:

The continuing influence of the banking industry on Congress, on which point we witness new revelations nearly every day, should be enough to underline how both parties succumb all too willingly to the financial blandishments lavished by Wall Street. I’m sure Krugman would acknowledge that. Despite Posner’s dismissal of Krugman as a Democratic partisan, it is well worth noting that Krugman has been far harder on the Obama administration’s economic policy moves than your typical Republican partisan was on George Bush until late in his second term.

But there’s a different, perhaps more profound sense in which Reagan really did do it. Momentum for deregulation may have gotten started during the Carter administration, but the ideological case for it didn’t crystallize until the election of Reagan in 1980. From that point on, the predisposition to loosen the reins on the financial industry became explicit. Both parties helped get us where we are today, but one party in particular identified itself with the all-knowing wisdom of the markets. And that party is paying the price.

I still like the formulation I used – that does not lay the blame directly on Reagan or his advisors – but indirectly:

To some degree, these changes had positive effects – as the market was freer, as the economy grew, as corporations thrived, as the overall wealth of America grew.

But they spelled trouble down the road. The stimulus spending and tax cutting, the informal Bretton Woods II agreement, and concentration of wealth created an unstable system. Internally, the society was imbalanced as extremes of wealth and power were accumulated by a small minority. This eventually undermined the very free market and democratic discourse that is essential to the American tradition. A course correction later might have saved the Reagan vision – and for a time it seemed as if Bill Clinton’s moderate presidency had, as middle class wages finally began to grow again – but Bush doubled down on Reaganism when he should have pared back, and we are left with this mess.

Is this collapse Reagan’s fault? I wouldn’t say so. But he set the initial course towards this iceberg, even if the iceberg was out of sight at the time he set the course. He – and the 1980s revolutions in finance, economics, and government that his administration supported and enabled – are the true authors of this economic collapse, even if they cannot be blamed for not forseeing it.

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Barack Obama Conservativism Criticism Economics Financial Crisis Liberalism Political Philosophy The Opinionsphere

The intellectual deterioration of the conservative movement

Richard Posner has written one of those posts that gets talked about despite it’s lack of hyperventilation – it’s a thoughtful, reflective piece on what he calls the “intellectual deterioration of the once-vital conservative movement in the United States.” Posner summarizes the deteriotion:

[T]he policies of the new conservatism are powered largely by emotion and religion and have for the most part weak intellectual groundings [such that]the face of the Republican Party [has] become Sarah Palin and Joe the Plumber. Conservative intellectuals [have] no party.

Posner sees this decline as a symptom of the movement’s success. I think he’s half right.

Philip Bobbitt posited some time ago his theory of the evolution of the state – from princely city-states to kingly states to imperial states to the modern nation-state. The next step – according to Bobbitt – the one to which we are already evolving – is the market-state. And while a nation-state was legitimized in the eyes of it’s people by ensuring people were provided for (thus setting up the economic battle of the Cold War, as capitalism and Communism competed on this front), the market-state is legitimized by offering the maximum amount of opportunity for it’s citizens. Bobbitt’s theory is interesting – and if not entirely perfect, it is certainly useful. 

Given this structure, you can easily understand how the nation-state liberalism of Lyndon Johnson gave way over time to the market-state liberalism of Bill Clinton and Barack Obama. By this reading, conservatism did not so much win any more than nation-state liberalism “won.” Both were appropriate responses to their times.

Unfortunately for it’s proponents, conservatism (like nation-state liberalism in the 1970s) did not evolve with the times, but remained staticly committed to the principles that worked so well three decades earlier. The innovative ideas of the 1980s have become the brittle orthodoxies of the present. As conservative historian Niall Ferguson explained – “only the left” has a credible response to the issues of our day. The Right is still fighting the battles they won decades ago.