October 6, 2008

James Galbraith: Goodbye, Conservatives. Hello, Predators.

A very interesting article in Slate's The Big Money about the so-called "conservative" wing of the Republican party. Galbraith's thesis, in fact, is that the Republican party is beholden to a predatory class of politicians (who, IMO, aren't necessarily neocons) that practice crony capitalism. Galbraith's conclusion is that the presidential election really hinges on a single issue: Do Americans want a continuation of the predator state, or is it time to clean the government out?

Below is the meat of the article:

Real conservatives know that neither Bush nor McCain is one of them. Bush is a bread-and-circuses reactionary with a clientele of lobbies. McCain gets his economic ideas from Phil Gramm, the ultimate architect of the Enron culture, of libertine speculation and financial disaster. As for Sarah Palin, back in Alaska she took every dime of pork she could lay her hands on. This crowd deregulates and privatizes not because they think it might work out for the public but because they know it won't. What they care about is putting their friends in charge.

Under Bush, oil and gas, drug companies and defense contractors, insurers and usurers, banks and big media control the government of the United States. John McCain was a key member of the Keating Five and a lynchpin of the savings-and-loan debacle; then, as chair of the Senate commerce committee, he presided over Lobby Central; notoriously, his campaign is run by lobbyists to this day and until last week his policy could be summed up in slogans: he was a "free market" man, a "deregulator." Sarah Palin is an interesting case. What was she known for in Wasilla and Juneau? For trying to fire any public servant, from the town librarian to the state commissioner of public safety, who didn't toe her line. Bush and McCain are the predator state writ large, and she is the predator state writ small.

The predator state has no public purpose. Apart from a few empty slogans-smaller government, balance the budget, feel your pain-the connection between actual problems and actual policies has disappeared. It has become clear that, if the Republicans had their way, this election would not be about issues. It would be about anything else: personalities, associations, the politics of fear, and the life history of a long-ago prisoner of war.

But fate blew McCain's cover. On the morning that Lehman Bros. and Merrill Lynch fell, John McCain spoke the immortal words of Herbert Hoover: "The fundamentals of our economy are strong." He said it twice. It's a phrase with deep resonance in American politics. People understand it. No politician says "the fundamentals are strong" unless they know that they are not.

The Dow Jones average fell 504 points that day. As stocks crashed, suddenly people remembered that modern markets cannot exist without a cop on the beat. Every important market out there, from fresh food and safe drugs to autos and air travel to housing and health care, depends on government to maintain trust, and without it, none of them would survive. Without regulation, predators take over, and when they do, trust eventually collapses. Every important market is in peril now, precisely because of the predators in power these past eight years. And none more immediately than finance.

The Bush-Paulson bailout exposed the predator state in detail. Deregulation and desupervision were the origin of this crisis: the 1999 Gramm-Leach-Bliley Act repealing Glass-Steagall, and the Gramm-authored loophole legitimating credit default swaps in 2000. Bush's financial regulators brought chainsaws to press conferences, a clear signal to sub-prime hustlers that "anything goes." "Liar's loans," "neutron loans" and "toxic waste" became financial terms of art. When the crash came, Paulson and Bernanke were plainly not up to the job. The original three-page Treasury bill was less a power grab than a punt; it said to Congress: "there's nobody home over here."

The crisis forces McCain back to issues and exposed the emptiness of his campaign. He resorted to theatrics, "suspending" his campaign to fly to Washington to "work" on a bailout bill, only to demonstrate that his leadership charms were lost on Republican members of the House. At the White House summit he had nothing to say. Later he attacked the morals and ethics of Wall Street, but backed a bill that was aimed to protect the stock prices of the Wall Street firms, while imposing no new discipline and doing nothing to stop the foreclosures. And when it came time to actually cast his vote, he couldn't be bothered even to speak from the Senate floor.

It seems unlikely that John McCain, the regulation-wrecker, will become, overnight, the man who would turn vice to virtue on Wall Street. But even suppose he were serious. Who would trust him? No one with money on the line.

This is McCain's deeper problem. If he is elected, under his leadership, trust cannot be restored. No one with his philosophy or record can do that. Restoring trust requires a government of trustworthy people. Team McCain doesn't have any, and some, especially Gramm, inspire the opposite. It wouldn't matter what their policies were or pretended to be. Nothing they attempted would work.

The Democrats did not do well in the crisis; they were conflicted, divided, unsure of their ground, and they got rolled on many details. Yet they nevertheless broke through politically; Nancy Pelosi's stinging speech last Monday was a rare statement of plain truth. And so the choice in this election is well-defined. One party believes that the government serves no public purpose. The other believes that it must. One party has turned the government over to lobbies, to cronies and to big donors. The other is beginning to realize that a real government must be rebuilt. One party would keep the same crowd in office; the other would have to begin by clearing them out. No one can say there is no difference between the parties this year, and the basic issue in this election is really just as simple as that.

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