Steven Pearlstein is the smart WAPO economics columnist (Robert Samuelson is the dumb one. Fair and balanced reporting means hearing from both sides). Pearlstein is a defender of the traditional Keynesian line, for which LI has enormous sympathy. In that vision, two coordinate policy goals are set. On the one hand, free trade, that mainstay of economic orthodoxy since Adam Smith, retains its sacred place. The Keynesians call for its furthest extension, including overthrowing national barriers in the labor market as well as in commodities. On the other hand, Pearlstein supports heavy public investment in things like transportation, education, health and environmental protection. He believes that the latter is the necessary political concomitant to the former, since the market can be assumed to disadvantage, at any one time, some sector of the national economy – this is the iron logic of comparative advantage, which is never stable. Like a good Keynesian, he bemoans the blindness of the business community in not seeing the need for public investment:
“Globalization has been a big plus for the United States and many of its citizens. The gains from it,and the costs, however, have been distributed somewhat unevenly, and we have resisted mechanisms for making those more fair because of the ideological bias against government interference with the economy. So it comes down to this; as long as the Republican loving business community continues to push for more tax cuts and prevents improvement and expansion of necessary public services, like day care and good public schools and excellent public transportation and great parks and universal health care and better retirement programs -- until then, they won't get the next liberalization in trade and investment rules. Its really just that simple. Maybe that is a fine choice for them at this point -- after all, they are doing very well at the moment. But it IS the choice. They like to believe that if they can just get their message out, about how globalization benefit everyone, they can succeed. But they won't, because the facts and the feelings to support it just aren't there. People have plenty of experience with globalization in the United States, and they just aren't fully satisfied they want to go any further down that road without the kinds of things I just mentioned. So the business community is going to have to remember what it is like to operate from the political center and deal with Republicans and Democrats.”
It is at this point that one feels an ever so slight but still perceptible ‘skip’ in Pearlstein’s position, like a needle meeting a scratched groove. For the fact is that, from the rational choice perspective – the same perspective that legitimizes the expansion of free trade - the business community shouldn’t prefer to ‘operate’ from the center. To remain competitive and avoid what rational choice theory abhors – rent seeking – businesses should, on the contrary, pursue every short term advantage. Part of that pursuit is spending money that will bring a high return on investment. And that is where politics comes in – because it is relatively cheap to spend money spent to ‘buy’ politicians to create policies that produce huge advantages for businesses. Those advantages are often tax advantages. So that the public investment Pearlstein advocates cannot be funded, unless one funds them by massive government borrowing. The system we have now – tax cuts for the rich and massive borrowing for public investment – is the direct result of a uniformly rational choice economy. In such economy, the requirement that businesses make money in a competitive way – the selection pressure on ROI – inevitably tends towards exploiting any niche that lends itself to free riding, and to support of public disinvestments insofar as that removes a cost from businesses. This is why the business cycle is inevitable in capitalism – the more homogenous capitalism is, the more the real structural conflicts that it encodes will emerge in unpredictable intervals to create downturns of indeterminate depth.
There is no area within the economy that is exempt from the same economic laws that justify unlimited free trade – politics is as much of a market in the market economy as automobiles, or marriage.
All of which means that, from the neo-orthodox viewpoint, Pearlstein is simply being unacceptably finicky. However, from a more (oh, hateful term) post-Keynesian viewpoint, we can see that the terms themselves – the cards the economists are dealing each other – are marked. In actuality, and let me italicize this – "all institutional structures are rent seeking by definition.” By which I mean that institutions don't directly respond to human needs, like products or services. They require upkeep. In the course of that upkeep, they constitute themselves as attractors -- that is, they constitute themselves as independent entities with their own interests. To abolish all rent seeking is to abolish society. There’s no other way to put it. To allow rent seeking simply to flourish is to corrupt the base of society. To tow the middle line, one must not suffer from the conceptual delusion that strikes the neo-classical economist when he advises about public policy – that policymakers – unlike any other members of the genus homo oeconomicus – seek or even can seek a completely altruistic goal. Assimilation into an institution, which is how institution’s work, means identifying one’s interests, to a certain extent, with the institution.
We are living in the era of the revival of neo-classical models. These models see no good in rentseeking, and they see every good in efficiency – the golden calf the University of Chicago professors dance around. In response to the world wide collapse of labor’s bargaining power (both in the business world and in the political world), the default liberal position has become very like that outlined by Pearlstein: the state will, in essence, perform the function that unions used to perform, using taxation, education, and its other numerous instruments to put the worker on the social escalator. But one has to ask: in the absence of the power of organized labor, how do liberals expect the state to have the political credit to do this? Why should the state be expected to play this countervailing role? In a society dominated by businesses pursuing their rational choices, you get exactly the Bush culture we have now. It was a little alien embryo in the 90s, and then it burst out of its carrier body, Aliens fashion. The liberal assumption is that the part of the society with the most money will refrain from using it to exert political power – and if not, the liberal will create reforms in the process to restrain that power. However, there is nothing more porous than campaign finance regulation, for the simple reason that it is in nobody’s short term interest to obey the spirit of it.
Without abiding extra state and party pressures, liberalism becomes a matter of infinitely conferring about political processes, or it becomes a matter of trivialization. The politics of liberal trivialization, in which more attention is paid to violent teenage computer games than, say, the violence effected by a grossly unequal healthcare system on teenage health, is the current system we live under. I could complain about Hilary or complain about Senator X, and will probably do so in future posts as I’ve done in the past, but both are responding to the logic of the system – neither Hilary nor X deflated labor’s position in the modern system.
“I’m so bored. I hate my life.” - Britney Spears
Das Langweilige ist interessant geworden, weil das Interessante angefangen hat langweilig zu werden. – Thomas Mann
"Never for money/always for love" - The Talking Heads
"Never for money/always for love" - The Talking Heads