The Persistence of Dumb Narrative

As we enter this election year, and countless political slogans and buzzwords prepare to bombard our psyches, it’s important to examine the power of narrative in framing our national political conversation. Narrative is what makes “wealth re-distribution” a political virtue in some political cultures and a cardinal sin in others; it is what determines whether the top 1% of wealth holders are seen as “job producers” or greedy “fat-cats”; it is what imbues meaning to phrases like “Climate change,” “social justice,” and “entitlements.”

As an opening salvo in this year’s political verbiage battle, US News & World Report issued a doctrinaire reassertion of the free market, limited government narrative. Responding to President Obama’s income-inequality-centric Osawatomie speech, author Stephanie Slade concedes that wealth and political power is unfairly concentrated in the hands of the few, but argues that Big Government is the culprit.

“What people often fail to recognize is that the state is itself the tool by which the haves keep the have-nots without…It is only by intervening to choose winners and losers—by trying to substitute the judgment of the few in positions of power for the judgment of the many in an open marketplace—that a government cedes influence to those with the most to spend.”

This is the rallying cry of the Free Marketeer narrative; well intentioned yet naive progressives want to reduce inequality through forced redistribution, but  aggravate the problem by creating more opportunities for the powerful to exert their influence. For the sake of argument, let’s assume this narrative is correct about the naiveté and quixotism of liberal socioeconomic philosophy, but do Free Marketeers offer a more pragmatic story, one based on fact instead of fancy, highfalutin’ theories?

In the Free Marketeer narrative, productivity and wealth go together like bagels and lox.

“Within a free market, inequality comes almost exclusively from one place: unique individuals’ differing levels of productive ability…The more productive you are, the more wealth you can accrue, and the less productive you are, the less wealthy you’re likely to be.”

But can one honestly argue that investment bankers are so much more productive than teachers or firefighters as to justify their vastly different incomes? Free Marketeers seem to forget that the market often works whimsically, rewarding great wealth to some and a piddling to others based not on their productivity, but on mere happenstance.

John Cassidy of the New Yorker offers a stark rebuttal to the Free Marketeer narrative, arguing that Wall Street is essentially the story of obscenely wealthy institutions engaging in activities with no productive value:

“In effect, many of the big banks have turned themselves from businesses whose profits rose and fell with the capital-raising needs of their clients into immense trading houses whose fortunes depend on their ability to exploit day-to-day movements in the markets…Some recent innovations, such as tradable pollution rights and catastrophe bonds, have provided a public benefit. But it’s easy to point to other innovations that serve little purpose or that blew up and caused a lot of collateral damage, such as auction-rate securities and collateralized debt obligations. Testifying earlier this year before the Financial Crisis Inquiry Commission, Ben Bernanke, the chairman of the Federal Reserve, said that financial innovation “isn’t always a good thing,” adding that some innovations amplify risk and others are used primarily “to take unfair advantage rather than create a more efficient market.”

The persistence of this narrative lies not only in its conception of productivity as an infallible mechanism of resource allocation, but also in the allure of its holy grail­–the perfectly competitive market.

“If the economy were allowed to function organically, there would be little reason for people to waste resources on ‘high-priced lobbyists and unlimited campaign contributions…wealth would cease to give an unfair political advantage to those who possess it, and inequality would once again be a function of work ethic and ability alone.”

In our political discourse, there are very few utter illusions masquerading as facts more preposterous than this. Even introductory economics textbooks allow that a perfectly competitive market exists only in theory. And as for the assertion that without any regulatory interference “wealth would cease to give an unfair political advantage to those who possess it, and inequality would once again be a function of work ethic and ability alone?” I can think if no more quixotic or highfalutin’ theory.

The reality is that holders of wealth and capital have virtually unlimited power to design the rules of the game. The regulatory authority of the state is the only effective counterbalance to the confluence of wealth and power. Factors like imperfect information, monopoly, barriers to entry, collusion and fraud are intractable parasites in the body economic, allowing wealth to perpetuate itself, and divesting the average citizen of equal leverage.

The reason the Free Marketeer narrative maintains its persuasive power is due to our proclivity for historical amnesia. Never having lived in such a reality, people are free to romanticize and aggrandize, elevating an ideology untested in their lifetime to an almost divinely ordained status.  But as we enter a politically divisive year, fraught with challenges to the progressive vision of America, let us not forget the historical reasons behind the creation of the social safety net and the poverty of blind narrative.

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A thought on Capitalism and consistency

 

Liberalism—a term that has taken quite a winding path in its usage and definition. I would define classical liberalism as closely aligned with modern day libertarianism. Classical liberalism, in its advocacy of individual rights, the free market, and a more egalitarian political order puts itself at odds with classic conservatism, an ideology wary of radical social change and distrustful of an unchecked economic order, and suspect systems of government that devalue political arête. Classic conservatism is at best a reticent bedfellow of democracy; government is best left in the hands of excellent individuals—those who have devoted their energies towards studying the art of politics(the liberal arts, funnily enough). On the other hand, the average person, has had neither the relevant education, nor any exposure to the classics, nor the guiding experience of august, elder statesmen. Hoi Polloi are simply not fit to steer the ship of state; best leave that to those who can do the finest job. 

Let’s face it, whether you’re a democrat or a republican, a liberal or a conservative; if you’re American, you’re for government for the people, by the people. Both political parties are engaged in an endless tussle to assert their democraticness—that they are for the people; real, everyday Americans, not the good ol’ boy, business as usual, inside the beltway, and all other overused and asinine euphemisms for the powers that be. Modern day liberals show their populism by advocating for social programs, such as healthcare reform, poverty initiatives, etc. as well as human rights, exemplified by left-leaning organizations like the ACLU. Modern day conservatives do so in both similar and different ways; for those in the libertarian camp, individual civil liberties are also a high priority, but libertarians are certainly not the dominant sector of influential conservatives today. Mostly, conservative populism is found in its rhetoric—politicians like George W. Bush assert their “everyman” status by continually reminding us that they were C students. Sarah Palin is highly adept at painting conservative ideology as the heart of “real” America—hard working, small town people, guided by religious values and wary of big city intellectuals and big government bureaucrats. Both political camps today have this similar thread in common; whether or not they practice what they preach in smoky backroom dealings, both profess that government is ultimately the provenance of the people. Both thus reject the classical idea of political arête—that those who should lead are only those elite ones who can, by virtue of their excellence do the best job. 

Given this context, I find the modern conservative position on laissez-faire capitalism somewhat contradictory, for what does the advocate of unfettered capitalism profess but that the financial system should be left to those with the talent, the experience, the excellence—the arête; that the economy should be left to those who can do the best job. How does this shed a contradictory light on conservatism specifically? In some ways, modern day liberals adhere to this ideology and in some ways they renounce it. Liberals are advocates of the free market, but to a much larger extent than conservatives, government regulation. Why is it, they ask, that every other arena in society should have laws and regulations governing its power and scope except for the economy? What if powerful economic forces come into conflict with the environment? What if globalizing forces outsource American jobs and dodge American taxes? What if corporate forces lower the living standards of their workers? What if gargantuan financial institutions play no-holds-barred Texas hold ‘em with our 401ks? To some extent, liberals embody the democratic ideal by demanding that government by the people have ultimate authority over powerful social actors—that the body politic reign in the economy if it grows too unwieldy. Thus, our elected officials and their appointees have the mandate to regulate the economy in the public interest. Hopefully they do so. This model of governance seems to embody an understanding that unfettered capitalism in its modern day form is not naturally democratic, for how can the people exercise power over the multi-national corporation with all its financial power and political influence? In the absence of government regulation—an institution which is, though convolutedly, ultimately accountable to the populace—powerful economic forces with no national ties or accountability to the communities of its clientele operate with impunity. If we the populace doesn’t have control of these economic forces, these economic forces will determine the direction of important parts of our lives, without our consent, ability to protest, and even awareness. Thus the modern day liberal value of government regulation of corporations and the financial system represents a democratization of the economy, for if the government is ultimately accountable to the people, and not just some of the people, namely the elite, excellent individuals, but all the people, and if our government exercises control over the economy, then we will have a social order that is true to its egalitarian principles. 

In some ways, modern day conservatives embody this ideal as well. When the Sarah Palins and George W. Bushes of the world shout their rallying cry to take government hands off the economy and instead leave it in the hands of those that are best fit to lead it, they are talking about the people—the entrepreneur, the small businessperson, the individual innovator. In this sense, the ideal of leaving the economy to only those excellent individuals rings true to democratic principle, for this arête which is not a fancy education or access to elite outlets of power, but rather nothing else than individual self interest—and who is a better judge of one’s self interest than every man himself? 

But this in nothing new. Then how is it that modern day conservative ideology is inconsistent regarding the economy and its actors? When conservatives oppose regulations such as those Obama recently proposed mandating that Banks cannot invest in anything not expressly in the interest of their clients, or demanding stricter rules on risky investments, they are essentially wresting control of powerful social forces out of the hands of the people, and into the hands of a few privileged individuals vested with an obscene amount of power. Funny, a conservative would probably see in my last sentence “the people” as the CEO and the “individuals vested with obscene amounts of power” as the Fed and Obama’s economic team. But in response I ask these questions—to whom are the CEOs accountable? Are they elected? Can we choose not to elect them if we disagree with their politics/ideologies/motivations/actions, etc? Can we impeach them? What if they cause harm to our communities? What authority can chastise them for such actions except the government? Given that the powers of a corporation represent such a monumental externality—that is, their decisions affect many not directly involved in their decisions/transactions (think of what would happen to the country if Nokia left Finland)—and given that conservatives continually oppose reforms that grant the government (a.k.a. the people) power over these forces, is it not safe to ask whether conservatives of this ilk have forgotten their egalitarian beginnings? Have they crowned a new class of elite, excellent individuals above the common fray?