[24 April 2009]
When an industry gains disproportionate social power, as the finance and real-estate industries had in the pat decade, there must be an associated ideology that legitimates that ascendancy. It surprises me that this notion sometimes seems a shocking discovery to those who cover business, as though it never occurred to them that they were dealing in ideology in their coverage of CEOs and on earnings calls and in shareholders letters and the rest of the official communications from corporate America, not to mention the efforts of their lobbying arms to plant their preferred soundbites into the speeches of politicians. Of course, those in the business press often function as ideologists themselves, suffering from the “cognitive regulatory capture” that Willem Buiter claimed happened to the Federal Reserve under Greenspan. Business journalists often seem more enamored than critical of the titans of industry who deign to speak to them, and they typically accept in its entirely ethics derived from a faith in deregulated markets. Workers are depersonalized into “labor” or “wages”—an unfortunate cost of doing business and an obstacle that the heroes of capitalism must overcome.
They are used to economists playing by the same rules, so they seem a bit flummoxed when someone like MIT economist Simon Johnson (interviewed here by Salon) rises to prominence by declaring the obvious point that the finance industry exercised political power for its own good and not the good of the country. But that is how the system plainly works; I don’t think one is being unduly cynical to recognize that in the US, money is openly and obviously used to gain political power (via campaign contributions and marketing efforts), which is then used to further an industry’s agenda. The “good of the country” is an afterthought, a premise cooked up in the ex post facto spin.
In the interview Johnson suggests that economic realities will be sufficient to dispel the effects of that spin. In response to whether greater regulation and a mandated bank breakup would end the oligarchy, he replies:
The breaking of the belief system is an outcome of the crash. The belief system is kind of a perpetuating mechanism but when the economic realities change, people stop believing the same things. I think one advantage of a society like the United States, a democracy, is that we can change our minds pretty quickly on some things, even some firmly held beliefs. I am not saying throw capitalism out with the bath water. I’m saying big finance has just become too powerful and it needs to be reined in. There are some relatively straightforward technocratic steps that can be taken that will move us in the right direction. But I’m not a starry-eyed idealist—I don’t think this is going to change massively overnight.
Throughout the interview he is at great pains to avoid being marginalized as a “radical,” to shift the sense of the center toward his position through a kind of rhetorical calm. That’s certainly a prudent course, though the country may be more in the mood for scapegoats and show trials than incremental change. The banking business would like us to believe that it was just a few bad apples who can be tossed out while keeping the ideology in tact, whereas the rabble-rousing, tea-bagging set seems to want vengeance. The danger is that the fervor for scapegoats could prove a distraction, leaving the underlying system unaffected. In this you can see how the right-wing may hope to steer the populist uproar.
Addendum: Matt Yglesias makes a related point here, where he wonders why Americans seem to think CEOs have more credible opinions on policy than other citizens.
Zack McMillan of the Memphis Commercial Appeal recounts for us a great moment in ideology in America, as FedEx CEO Fred Smith deigns to speak to the Memphis City Council. Note that the very premise of the event, that a wealthy CEO should be considered a source of public policy insights, is, though very common in today’s America, a highly ideological notion. Relative to a person selected at random, Smith is no more likely to have substantive insights into the issues facing the Memphis City Council, but much more likely to be deliberately lying in order to personally enrich himself.
But in the United States, when a wealthy and powerful person wants to opine on public affairs, this is viewed not with suspicion (”what’s this rich guy trying to pull?”) but with delight. The mere fact that someone is rich is held to demonstrate that he’s entitled to massively disproportionate political influence even beyond what he’s able to directly purchase.
Needless to say, Smith’s ideas were entirely self-serving.