Looks like we might be in for another economic downturn. We’re inching ever closer to ecological disaster. Instead of looking at the possibilities with some humility, there are people, with real power, raring to push their long-beloved ideologies harder than ever.I want to make a humble plea: stop being so certain about everything.
About fifteen years ago I read a book that is now almost thirty years old, from which I gleaned (apart from very cool bits of information about dynamic systems and other macrophysical phenomena) a very simple lesson.
The book was James Gleick’s Chaos: The Making of New A Science. The lesson was that certainty and clarity are not synonymous. Not even close.
I think this is true not only of trajectories and attractors, but also of knowledge itself. In fact, when it comes to knowledge (and the epistemic processes we have to use to know or to make any sense at all of the undifferentiated mass that is our life and our universe), you might go so far as to say that certainty and clarity seem to have an inversely proportional relationship. I made some marginal notes in my copy of Chaos. On page 41, I wrote: “theory makes you see things. Theory makes you miss things.” All abstractions – theory, language, measurement, description – are necessarily approximations and reductions. When you think about that, the expectation that our theories would infallibly fit reality – or worse, that reality would “fit” our theories – is simply ridiculous.
Far greater intellects than mine have acknowledged this conundrum. Albert Einstein said of mathematics (one of our most powerful epistemological tools) “as far as laws of mathematics refer to reality, they are uncertain and as far as they are certain, they do not refer to reality.” Werner Heisenberg pointed out that our observations are not so much “nature itself, but nature exposed to our method of inquiry.”
Yet, although analysis, abstraction, and theoretical filters destroy the gestaltic reality of things, without those methods we would understand very little about anything. In fact, speaking of Chaos Theory, let’s not forget it was mathematical analysis that revealed the vast descriptive validity of nonlinear patterns, which prior mathematical/theoretical filters had treated as “error.”
It’s scary how many people insist on sticking to their ideological guns in the face of real disaster. Those who want to continue extracting and burning fuels pretend they can do it for ever. Those who want to take “bold action” will bulldoze ahead without actually considering whether their “solutions” will end up making things much worse and whether it’s wise to ram policies through on a global scale, endowing governments and tech industry giants with limitless power over all of us with no guarantee we can ever back out if/when we realize they got something very wrong or lied to us (both of which governments and corporations do so well). Maybe there are newer more creative ways to solve problems. Maybe we can get people who disagree to brainstorm together. Whatever the cognitive devices we use to learn about our world, all of our learning stops being useful and may even become dangerous when we forget that our theories are just tools that point to reality, with varying degrees of success, but they are not reality themselves.
Alfred Korzybski said it better: “the map is not the territory.”
Twenty years ago tomorrow, Hungary began taking down the barbed wire partition between itself and Austria. It wasn’t attended by all the fanfare of the fall of the Berlin Wall a few months later. But it was a quietly heroic start of that gloriously literal, physical dismantling of the Iron Curtain.
We in America like to celebrate it as a matter of national triumph. That feeling is warranted only in the sense that our ideals of democracy and open societies had prevailed. But when we do the revisionist victory dance and buy into the popular cowboy narrative of how we strong-armed the Soviets to surrender, we do a great disservice to history and the truth and ourselves.
First of all, that attitude diminishes the role of the people living inside the countries behind the curtain, who essentially rose up to overthrow their own oppressive governments (many of these, like Solidarity in Poland were labor activists, a fact that gloating neocons like to sweep under the rug). The truth is, communism failed as an economic structure and authoritarianism failed as a governing principle. They were no longer tenable propositions and historical forces brewing for many years imploded the system from within, in some cases violently (Rumania). As Karl Marx might have recognized if he had actually lived through the era of communism, it was a historical inevitability.
Secondly, keeping alive the fantasy that we defeated the communists through force, denigrates the role of our values – democracy, freedom, and equality – that formed the real impetus for the fall of communism. We were the shining example of a life they wanted. As George Shultz said (criticizing the Jackson-Bannick Act), “telling our friends. . . we are forcing you to do [something] doesn’t work.” What does work, according to him, is to let them see that what we are asking for works to their own benefit.
Most ironically, believing the cowboy myth does a grave disservice to the Cowboy himself. When I emphasize that our values and our example helped end the Cold War, I don’t mean to suggest our foreign policy didn’t. But it wasn’t our tough-talking, deficit-exploding-defense-spending policy that did the trick. It was our diplomacy.
Ronald Reagan’s contribution in this was significant, though not singular. But the key to his foreign policy success (contrary to every self-styled Reaganite who gives The Gipper practically the entire credit for “ending communism”), was not his unrelenting “show of strength.” It was the opposite of that. (Remember that Eisenhower, Kennedy, and Johnson had all been as hawkish and as much the anti-communist crusaders that Reagan was, but they all failed. Remember also that the Cold War was not so much “won” as thawed.)
The reason Reagan was able to make any headway was, along with the historical realities I mentioned earlier (and the good fortune to be dealing with Gorbachev, instead of the likes of Khrushchev and Brezhnev) was really his flexibility. He was willing to engage in “constructive dialog,” as Gorbachev explained.
Last week, Mikhail Gorbachev and George Shultz were on Charlie Rose. They talked about the truly successful aspect of Reagan’s legacy, one that his most vocal disciples NEVER mention, which is one of peacemaking. He came to realize that cooperation works better than bullying. Gorbachev said he witnessed Reagan evolve from a hardliner to a peacemaker. Shultz noted the same evolution of Gorbachev.
Reagan and his foreign policy team took a lot of heat from their hawkish domestic constituency (and some allies) for promoting a ballistic missile ban, and a general, progressive, nuclear weapons reduction plan with the goal of eventual disarmament. Shultz said Margaret Thatcher hit him with her purse over the disarmament proposal at Reykjavík (although I think that may well have been because she wasn’t invited to the Summit).
What Thatcher didn’t get – and her neocon fans in America still don’t get– is that Reagan got somewhere becausehe met his adversary halfway. Gorbachev recalled a meeting early in their relationship, when he essentially told the president “I’m not your student; if you don’t stop lecturing me, this conversation is over.” Reagan realized being conciliatory (a dirty word to today’s conservatives) might be a better strategy. Unlike our last Republican president, who never liked to admit errors, Reagan actually rescinded the “evil empire” statement. He told a Soviet journalist “I believed it at the time I said it, but I don’t anymore.” How refreshing!
We don’t generally think of Reagan in those terms (because conservatives like to pretend his success validates a diehard conservatism that it really doesn’t and liberals like to disregard his redeeming qualities because they dislike so much else about him). But Reagan, at his best, did listen to people, and correct himself, and compromise. In fact, his compromises on weapons discussions helped him to negotiate his human rights agenda. There’s something else people don’t seem to remember about Reagan: he cared about human rights! Certainly I (as a shameless liberal) care about a whole of host of human rights issues that Reagan was indifferent to, but one has to respect the fact that the rights that he did care about – like religious freedom – seemed to be important to him in substance, and not merely as lip service to win elections and to justify invasions. Gorbachev remembered that Reagan tried to coax him to talk about the Jewish emigration issue, at EVERY meeting! Shultz recalled a quiet deal worked out between the two leaders whereby the USSR would permit a Pentecostal community to emigrate if the US promised not to “crow” about it.
In America, we take a lot of pleasure in thinking of President Reagan’s “tear down this wall” speech as pivotal in communism’s decline. In reality, of course, it was just a great sound bite, like “audacity of hope” – inspirational, to be sure, and I never fail to feel a certain spine-tingling whenever I see archive footage of it. But was it really “pivotal”… in a concrete, history-altering sense? Come on! It wasn’t like he was sending us off to battle in Gettysburg.
Gorbachev, who remembers Reagan with great admiration and affection, chuckled at the suggestion that changes in the Soviet foreign policy posture was at all influenced by that speech. “This did not really impress us, as it did you,” he admitted. But he gave Reagan a great deal of credit for the actual work of diplomacy that did influence changes.
There was one more factor to which we do more than a little injustice by claiming Reagan as a latter-day Lincoln, single-handedly liberating the bulk of Eurasia from totalitarian serfdom. I speak, of course, of Mikhail Gorbachev.
First, the warming of international relations was led jointly by the Reagan-Gorbachev team. More importantly, international relations played a small part of the actual fall of the Soviet empire as compared to the internal pressures, as I mentioned before. And Gorbachev must get much of the credit for the way he dealt with that. Although I give the people of Eastern Europe more credit for their own liberation than any politician, it’s obvious that in the Soviet Union itself, Gorbachev’s Perestroika and Glasnost programs definitely catalyzed the process by liberalizing Soviet society from within. (Ironically, he was trying to save communism by rescuing it from totalitarianism, but it turned out totalitarianism was pretty much the only thing holding it in place!)
Gorbachev says that he was “defeated” in his political career, but, in the final analysis, the liberalization policies he put in place proved successful in principle. I’d say!
I’d also say that the end of the Cold War, Communism, and the Iron Curtain are all related, but they are not the same thing. The Cold War was an arms-race between us and the Soviets. Communism was the economic system of the Easter Bloc. The Iron Curtain was the opaque and tyrannical political conditions within the Bloc. If you look at our interactions in the world today, and indeed our other interactions during the late Cold War years, all these factors aren’t always necessarily related.
Watching Gorby and Shultz chew the fat with Charlie made for one riveting hour. Twenty plus years later, all their nerve-trying diplomatic calculations, all the guarded communications through a political minefield that could prove, at any moment, to become an actual minefield on a planetary scale. . . transmuted into reminiscences of the kind that you might have with an old college debating rival over a decent Beaujolais.
There is a scene in Ken Burns’s “The Civil War” in which a couple of old soldiers – one Union, one Confederate – are talking about the “old days” like brothers in arms. It was like that: surreal and yet exactly right.
I was talking yesterday to a friend about my concerns regarding assertions of absolute private “property rights” over stuff taken out of the public domain. My friend, an architect by training, is vehemently opposed to anything that remotely resembles a restraint on commerce and wealth accumulation. She describes herself as “nearly objectivist.” She says she was “a typical liberal intellectual” when she first started studying architecture some twenty years ago. Then, in the Autumn of 1991, she read a little book about a brilliant fictional architect, that turned her around. (That book, if you haven’t guessed, was Ayn Rand’s “The Fountainhead”).
Anyway, she was irritated by my suggestion that any such thing as a “public domain” existed. I tried to press her to consider whether perhaps some things could be considered “commons” (the rivers, the airwaves, the last of the old growth forests, some designated public spaces. . .).“There is no such thing as ‘commons,’” she snapped. “Things don’t exist just because you say they do.”It’s not the first time I have heard statements in this vein. And she’s right to assert that “commons” is purely a construct. It’s nothing more than a proposition I am considering. It was made up by humans who think it might be a useful way to organize our relationship to the world.
But what struck me about my friend’s reaction is her utter failure – or refusal – to recognize that there is also no such thing as “private property” EXCEPT THAT WE SAY THERE IS! It’s fine to argue that “private property” is a more useful or desirable construct than “commons” but to pretend that one is a fabrication and the other is something “natural” is absolutely baseless.
Ultimately, what’s more important in property theory (a) that we all – really and substantively – have the ability to prosper as best as our talents and efforts will allow us without hindering someone else’s ability to do the same or (b) that we have a philosophically pure fantasy of limitless acquisition, even as in reality wealth becomes concentrated in fewer and fewer hands?
Keep in mind, that it is modern capitalism, with all its built in public oversight and limits, that has made more people prosperous than any economic system in the history of civilization. In fact, the longest period of sustained economic robustness characterized by wealth proliferation (rather than concentration) was in postwar, post-New Deal United States. By contrast, the objectivist dream was lived out in the 19th Century, when staggering amounts of wealth was concentrated in the hands of a few Robber Barons.
Just to clarify:
*I’m not arguing against private property. For the record, I do think private property and many aspects of capitalism are useful. I just think that, like most human-made systems, they are flawed, and should be evaluated pragmatically, and modified as necessary.
* To the extent that I would entertain the idea of limiting private property rights it would only be with respect to the world’s finite natural resources, air, water, land. . . . frequencies of the electromagnetic spectrum. . . NOT property rights in stuff you create yourself (although, most things you create require some natural resources; but that’s beyond the scope of this post).
* Even though I like the idea of “commons” – I like it only in a limited sense, and even then, I don’t claim to know where the lines should be drawn. I am just interested in exploring the idea.
* I understand that even if we figure out the perfect balance between private property and the public commons, there will always be a question as to who gets to administer “public” resources. Governments theoretically represent the public interest, but I think we all know better.
Before you dismiss the entire line of inquiry as either “basic” or “radical” I urge you to consider this: no one has ever made great – or even particularly interesting – leaps in knowledge without going back to first principles. I’m not saying generally accepted first principles have to be abandoned before you can have any insight. I’m saying there has to be a willingness to question them. No matter how good a theory has been in describing the world, as evidence of its weakness starts to pile up, you have to be willing to revisit it. Even Newtonian physics had to make way when Einstein came along with a theory that explained things better at a more complex level. And Newtonian physics gave a much, much better description of real-world phenomena than does classical free-market economic theories.
One or other economic system is not a “natural” order just because it makes use of some recognizable facts about human behavior (any more than basketball is a natural order just because the athletes’ movements and the trajectory of the ball follow certain laws of physics). It’s a game we made up to serve our own purposes. It’s inane to place the rules of a game we invented beyond our own ability to revise and correct when it no longer serves our purpose as well as it could.
There are significant gaps in our understanding of human nature and how best to order our economic relationships. We routinely treat our theories (private property, money, present-value-discounting, etc.) as gospel truth, and we sometimes treat the world’s refusal to comply with our models as an irrational failing on the part of world, instead of as a failing on the part of our economic theologies! As I said in another recent post, our conceptions of reality should always be recognized as such and never taken for reality itself. Reality will always be complex beyond our full comprehension. Our approach toward it will always be asymptotic.
What we can do, as Jacob Bronowski suggested many years ago, is to get at incrementally better and better approximations of some aspect of reality and with each step, open up vast new frontiers of reality about which we know absolutely nothing.
Yesterday, I posted an entry questioning whether a bridge loan/ rescue package from the federal taxpayers to the auto industry giants was warranted. Grace from Michigan commented that ordinary people in Michigan, who work for these companies and have essentially been struggling through a recession for several years, really could use a hand. Moreover, she pointed out, what they are asking for is a loan, not a handout. I promised to consider the “pro-loan” side of the issue today. It’s going to be a pretty sparse examination. Because honestly, the “need” appeal that Grace was making, is the ONLY point I can see that has any merit at all. It’s the crucial point, of course, and I wouldn’t be a liberal worthy of the label if I didn’t believe in citizens seeing each other through tough times. But my questions still stand as to whether this strategy will work. I just don’t see any evidence that it will. On the other hand, I do keep hearing that apparently we eventually made a “profit” on the 1979 Chrysler deal, so who knows?I turn now, to the real focus of this post: the “wage” issue. In the Senate bill, there was a tolerably fair provision limiting executive compensation, including a freeze on bonuses for those making over $250k and a moratorium on golden parachutes (although it did include an “incentive” exception that raised a bit of a red flag for me).
But the biggest controversy seems to be over the issue of workers earning union wages. That’s the problem? Really? Those guys making working class wages with their hands and sweat and didn’t mismanage their companies into a 5-year loss-cycle, THEY are the ones whose ass we’re going to get “tough” on? They are the ones who have to “give something” so that the guys who did run the companies into the ground can keep more of the $14 Billion that they get from taxes we all have to pay? Bob Corker of Tennessee has outdone himself in forthrightly “demanding” the auto exes trim the fat by slashing their workers’ wages and benefits. Yeah, that’s been their big indulgence, overpaying their factory workers! You GET ‘em Corker! You get ’em good!
Beyond lip service, there has been little in the way of substantive objection (addressing the kinds of questions I raised yesterday). All the sticky “free market” convictions seem to have been easily surmountable when it came to agreeing to give away taxpayer money to big corporations. “It’s not the time for ideology” as President Bush said a few months ago. [One wonders what use “ideology” is, if it must be abandoned to solve real-life problems, but that’s a different post]. However, when it comes to working stiffs, suddenly all the righteous wrath of fiscal responsibility is unleashed. The way Bob Corker is practically frothing at the mouth with indignation at the hourly wages negotiated by union laborers, it’s almost hard to believe that he’s not a cartoon or an archetype in a morality play. This is where I am simpatico with that “why didn’t you ask this of Wall Street” chorus that I criticized on the broader issues.
You know, I keep hoping that there really aren’t people like Corker, who fit those horrible caricatures of Republicans that are dreamed up by extreme partisan leftists. I keep thinking, it’s just not possible that there are people whose agenda really is just straightforward patronage for the wealthier classes at the expense of working people. It’s like they were looking for an excuse to pull off one more reverse-Robin Hood act and this was it.
I know I’m not really making a cool-headed argument at this point and that my rage is showing; but this is so ass-backwards it makes you almost apoplectic.
This whole strategy probably won’t do much good in the long run, but if we are going to do it, for whatever short-term benefit the powers that be are persuaded we will see, then requiring a gratuitous punishment clause against workers just adds insult to injury. I have no great love for socialists (because everything they fear from corporations, they end up letting governments do), but happening upon the World Socialist website, I saw an interesting comparison of the current bailout proposals to the Chrysler deal in 1979. A bit of unusual insight regarding the windfalls made by Chrysler and Lee Iacocca while workers were asked to “sacrifice.”
It doesn’t matter, ultimately, that the bridge loan failed in the Senate. Looks like the White House will come through for the car makers. But is it a good idea?
I know it’s hard to swallow that the finance industry, which caused the economy to crumble while paying its top execs handsomely in the process and creating nothing of value at all (more on that next week) gets a 700+ billion dollar bailout with hardly any strings attached, even as the auto industry, which actually makes a product and didn’t cause the economy to blow up) is denied a $14 billion loan. It offends an innate sense of fairness. Especially stinging was the government’s demand, ultimately leading to the plan’s failure, for compensation limits for autoworkers of the kind never required of the finance industry employees, whose incomes are incomparably higher and who, as it turns out, got bonuses from the bailout money. This is making some people fume with appropriate righteous rage. Although I have many questions and doubts about bailing out the auto industry, I share the sentiment regarding the double standard (captured most poignantly by Jon Stewart, as usual).
However, I think it’s important to parse this into (at least) three pieces and assess them separately.
First: the bailout itself should be evaluated independently of the compensation cap question.
Second: the compensation question should be considered, not in light of Detroit vs. Wall Street, but in terms of Executive vs. Regular Worker compensation.
Third, Detroit vs. Wall Street, a double standard, yes. But whether and to what extent that double standard is warranted, is extremely, extremely gray. There are arguments (for and against) bailing out each industry that simply don’t apply to the other. Let’s be honest, this is really not about “fairness.” We don’t “owe” it to the auto industry to help it survive, any more than we owed the finance industry. When did corporate welfare become a moral imperative? The finance industry bailout was, in its terms, simply obscene (more on that next week). But as your grandmother used to say, two wrongs don’t make a right. My point is not to excuse the Wall Street bailout or sweep it under the rug. On the contrary, I would’ve filibustered it if I were in the Senate; it was a travesty that we should be investigating, discrediting, and hopefully fixing, rather than relying on it as precedent for future measures.
Here are some doubts I have about the pro-bridge-loan arguments (framed in admittedly simple terms) considered without irrelevant references to the finance industry bailout (some references are, of course, relevant).
• Bankruptcy doesn’t necessarily drive a company out of business. If the car makers actually are turning the corner in terms of product improvements (as they are claiming in support of their creditworthiness), then shouldn’t they be able to survive a reorganization? Better yet, shouldn’t they be able to get a loan in the market (“relevant reference” alert: isn’t this why we gave money to the banks)?
• An “industry” doesn’t die just because some inefficient monoliths go down (if they do). Small, trim, innovative companies are much more likely to form, thrive, etc. in an environment where established companies don’t effectively become cartels by growing “too big to fail” – that’s a dangerous philosophy (as I’ve discussed here). Furthermore, precisely because a car is a real product with a real function and value, someone will move in to fill the void, if free to do so and if capital is available (again, what the hell happened to our $700 billion, I wonder). Truth is, the Big-3 are failing because they’ve been making cars that consumers don’t like. It’s been happening for a long time, well before the general economic downturn. Propping them up might just mask the problem and allow bad business models to fester instead of dying. That’s just not smart.
• Isn’t it a little inaccurate to equate the “industry” with the largest American companies? Profitable “foreign” companies operating in the US (employing and doing business with American assembly workers, mechanics, dealerships etc. as well as supplying American consumers with desirable products) are very much part of our domestic economy. They pay corporate taxes. They generate and support the same kind of satellite businesses that the Big-3 do (which they are pointing to as further evidence of the far-reaching consequences of letting them fail). These “foreign” companies may not be union shops, but they comply with our wage, hour, and benefits laws. I hear Toyota offers pretty good compensation (including profit sharing) to its workers. Does it really even make sense to talk about multinational corporations as if they were really tied to their countries of origin, when they (including the American ones) operate wherever the rules are favorable and are essentially free to go domicile-shopping? If Congress wants to address any inequities in that regard (and I’m not necessarily suggesting they should), then that’s a whole other legislative package that should not be confused with this bridge-loan deal.
• The idea that our economy would collapse if the Big-3 went into bankruptcy is highly questionable. Ron Gettelfinger of the UAW said that the “auto industry” (by which he means the Big-3), must not be allowed to fail because “it’s the backbone of our economy; we need this industry to survive.” By “we” he means the entire American economy. That’s just – and there’s no kind way to say this – drivel. It’s not 1950.
• Also true: domestic car production accounts for a small portion of the GDP (it’s been hovering around 4% for some time now, even the Chicken Littles – or is it Chickens Little? – generally agree with that figure). That might be bigger than many industries (not as big as others, e.g., the information technology industry) but in any event, not a large enough chunk of the economy to warrant some kind of mortal fear.
• As for satellite businesses that would also suffer along with the Big-3. I don’t really accept that as an argument for why we “can’t afford” their demise – at least not as being uniquely relevant to this industry. EVERY industry, indeed every thriving company, touches off some peripheral economic activities that “depend” on that industry or company. In this economy a multitude of companies are threatened with hard times or even failure, which will all have indirect impacts on other businesses (vendors and suppliers, communication service providers, transportation, utilities, service industries catering to an employed workforce). We can’t prop up all of them. We simply can’t. I’m not even going to argue that point. And if we prop up only the big guys, then what we do is subsidize those who are failing despite having had huge advantages. In other words, we shore up the worst elements in the economy and effectively preclude the rise of anything more vibrant or efficient. We let the “Too Big To Fail” become a parasitic, government supported aristocracy, living by the wealth generated through our work, and for what? For the opportunity to barely eke out an existence in “their” businesses? As I said yesterday, that’s feudalism.
Tomorrow, I’ll consider some pro-bridge-loan points but mainly discuss the autoworker compensation question.
I know that the failure of the auto-industry bailout will hurt a lot of people. More precisely, it will fail to mitigate (in the short term) the hurt a lot of people will experience as a result of other factors.
But can we really save ourselves by simply propping up every company or industry that’s doing poorly in this less than stellar market? Not to be too academic, but that would suck. Although I am critical of the most purist forms of free-market dogma and I favor the idea of some public watch-dogging, I think we should review closely and critically any attempt by government to become too much more than a watch-dog for the people, when it comes to interference in the market. [Amity Shlaes’s The Forgotten Man: A New History of the Great Depression is pretty instructive on this point. While I don’t buy her entire argument, I think she raises important questions about the assumptions historians frequently make about the government’s role in economic recovery in the past.]
Ok, so what if we prop up only those that are “too big to fail”? See my comment above regarding government interference? Let me add: we should be especially horrified by government interference on behalf of tremendously wealthy and powerful segments of society attempting to maintain their positions. This is what the Bush Administration has been doing (despite shameless pretenses to “free-market” and “small government” ideologies). [Check out Naomi Klein’s The Shock Doctrine — I am not endorsing all aspects of Klein’s perspective either, but I think she does a great job of pointing out the fallacy of the big/small distinction (or, more to the point for me, the primacy of that distinction) and she asks the right question: on whose behalf and to what end should government act?]
Although over the last century, “small government” has become (I think cynically) the battle-cry of the privileged, historically, the call for limited government had grown as much out of opposition to the entrenchment of privilege. Read Thomas Paine’s The Rights of Man, if you don’t believe me. I realize that English constitutionalism (from which most modern “limited government” philosophies are at least partially derived) was a way to manage aristocratic property rights against a sovereign monarchy. But the success of the idea of limited government in democracy movements is based on the recognition that through most of history, intrusive government was almost universally a tool of aristocracy, the class whence “government” hailed. Government had been practically synonymous with aristocracy and its exercise of social control.
Any political order that requires us, the middle and working class tax payers, to toil to bail out the auto industry and the financial industry (who are today’s aristocracy) — and makes us accept punishing pay cuts, as the Republicans were demanding in the auto-industry case — all ostensibly in order to preserve the privilege of continuing to toil, is nothing short of a new feudalism.
Note that I’m not commenting specifically on the merits of the auto-industry loan package. More on that tomorrow. But before we get to evaluating any particular proposal, we have to disabuse ourselves of this “too big to fail” premise that is silently turning into conventional wisdom with little examination beyond essentially marginal arguments about what to demand in return for rescue packages. This is frighteningly reminiscent of the early Iraq war bandwagon.
My view on the “Too Big to Fail” doctrine can be summed up this way:
If something can get so big that it requires us to collectively absorb its losses (either by bailing it out, or by letting its demise infect the entire economy), then it should have been prevented from getting so big in the first place, or at the very least, it should have been prohibited from accruing to itself all the benefits of an endeavor for which it would ultimately not have to bear the costs. This is privatization of profit and socialization of loss. As we know from the history of the finance industry, repeatedly bailing out institutions in hard times, without requiring anything in return during flush times, is the surest way to guarantee it will happen again. And again. And again.
Lest I sound glib, let me clarify: just because I’m questioning the wisdom of corporate welfare packages that give lip service to working-class anxieties, it doesn’t mean I don’t understand or sympathize with those anxieties or that I wouldn’t support effective government intervention on behalf of working people.