Thursday, April 06, 2017

It's Not Populists that Working Class People Need. What They Need Are Progressives.

The populist rabble regularly spout terms such as "bankster" or "deep state" to attack dark forces they blame for all society's ills. Rarely do they exhibit much understanding of what a contradictory and flawed concept they're embraced. Trump seduced them with visions of prairie populism but what he's dishing up is Wall Street Populism.

Even Noah Millman, writing in The American Conservative, has the measure of Trump's "Pro-Wall Street Populism."

On the campaign trail, Trump did regularly attack Wall Street — and hedge funds in particular. But he also attacked the Dodd-Frank regulatory structure, and blamed it for the fact that “so many people … who have nice businesses” can’t borrow money. And indeed, it’s quite true that after the financial crisis banks got far more cautious in their lending — which led to the growth of non-traditional lenders who typically demand more aggressive financial terms than banks historically had.

Dodd-Frank regulates especially large financial institutions more heavily precisely because they pose a systemic threat that creates a moral hazard: Confident that the government couldn’t afford not to bail them out, these institutions have an incentive to run more risk than would otherwise be sensible, because if the risks pay off they keep the profits but if they don’t the government is left holding the bag. Moreover, the legislation also gives the FDIC Orderly Liquidation Authority (OLA) to unwind failed firms in a controlled manner.

But from a populist perspective, giving special treatment to some firms because they are “too big to fail” looks like a way of institutionalizing the problem rather than solving it. Even if that special treatment is described as greater oversight, the mere fact that such a status exists implies that finance and government are formally enmeshed in a way that a populist is bound to see as leading to favoritism — which is precisely what the Tea Party types argued when they said that OLA was a kind of “permanent bailout” and that banks that take big risks that go bad should simply be allowed to fail.


Populists don’t like bureaucrats any more than they like bankers. So if the problem of Wall Street malfeasance is framed as “give the government more power to restrain the evil banksters” — which is the standard progressive framing — it’s not completely surprising that the government will lose about as often as the banksters. You saw a somewhat similar dynamic with health care, where Obamacare was vilified as a big-government sell-out to insurers. I have little doubt that, in the fulness of time, taking Wall Street off the leash will prove exceedingly unpopular, just as taking away people’s health insurance has proven to be. But in the short term, I understand why plenty of people may be more inclined to say a plague on both your houses, and financial interests know perfectly well how to take advantage of that attitude.

The populist alternative to growing government power to counterbalance big finance is to structurally reduce the power of big finance and enable individuals and communities to have more control over their economic circumstances. The question genuine populists need to answer is how they propose to do that without impoverishing the country. “Break up the banks” may or may not be a necessary part of the answer, but it is surely not sufficient.


Anonymous said...

American Conservatives have not been progressive since Ike. Democrats haven't been progressive since LBJ.

Long story short: Grand Generation populists knew how to get shit done. We went off the rails 50 years ago. Have to go back to where we went off the rails before making any progress -- and that includes undoing 50 years of regress.

Populism works. Democracy works. A democratic economy worked wonders in the New Deal era. Looking the other way on establishment excesses and corruption in government, however, is a good way to blow up this makeshift barbarian civilization of ours. (Almost there.)

The Mound of Sound said...

I understand your position, Anon, but I can't see how Americans will undo "50 years or regress." Populism can be a productive force but in the wrong hands it can also be very destructive to a society at large. It has an appeal that is seductive but very easily exploited.

Look at Trump's cabinet. You have three main groups - the generals, Team Goldman Sachs, and the Billionaire Boys' Club. If you were to search for progressive instincts you would be drawn to the generals and them alone.

In undergrad I did several courses on Latin American history and politics. Contrary to the narrative that was peddled by our politicians and media, it was the military caste who staged coups and formed juntas who were, in the main, the reformers. Unlike the landed gentry, the latifundia, the officer corps was rooted in the peasantry. The military was the main vehicle for social advancement out of the lower castes. The officer corps often broke the anti-democratic grip of the landed aristocracy.

I'm certainly not advocating for nor do I see as realistic any form of military coup in the US. I'm merely using the generals as a contrast with the civilian elements within Trump's inner circle.