The Western world embarked on an experiment about thirty years ago, during the era of Reagan and Thatcher. After eighty years of a movement to mitigate the excesses of nineteenth century capitalism by putting in place a Guarantor state – which Karl Polanyi called the second movement in the history of capitalism, the first one being the installation of an industrial system linked to a market driven economy – the third movement began. The third movement consisted, frankly, of a politics that, while keeping in place the Guarantor system, deregulated industries – notably, the financial services industry – and lowered taxes for the wealthy in an effort to, as it were synthesize the Gilded Age with the Great Society.
Although privatisation and the crushing of labor movements were the surface phenomena of this third movement, it did not simply reprise the nineteenth century. Far from it. For one thing, the social movements of the sixties were transfigured, not erased, by churning ever more people – notably, women – into the labor market. This represented an advance in one way - the unpaid labor performed by women was translated into paid labor int he public sphere. On the strength of this new revenue stream, wealth accumulation and day to day living expenses were also transformed by being strongly attached to the credit market, which, in turn, being deregulated, found more and more creative ways to charge for debt and trade debt. The war state apparatus, which had been a prime driver of the social welfare programs of the 1900-1980 period, were sustained.
And gradually the orientation of the political elite was also altered. In 1980, that elite still legitimized itself by adverting to the well being of the majority of the population in some way. The old images of the past eighty years had still not lost their cultic force.
But over the years, as changes were wrought on the fabric of national economies, this reflex adherence to the principle of the well being of the majority sickened and died.
Among the political elite, for the most part, this sickness unto death dare not speak its name. But the latent conventional wisdom of the 2010s is that the economy exists not for the well being of the majority, but rather for the well being of the small majority of those who have benefited most over the last thirty years.
And it is this way that political issues are now ‘manufactured’ in the media and among the chattering class in D.C., London, Paris and Berlin. Behind the issue of the deficit looms the idea that we must not hurt the ‘savers” – that is, the small minority who have hoarded immense fortunes. Of course, when the question was one of loaning nine trillion dollars at rates close to zero percent to the representatives of the wealthy – banks, hedgefunders, mutual funds, etc. – the question wasn’t even posed. There was no headline about the politics of this form of redistributing wealth upwards in a slump. There was no discussion of it. There was complete agreement that it should be done. The release of documents from the Fed naming names and outlining the mechanism of this fantastically generous welfare program never took up the newspaper space devoted to Charlie Sheen.
How does the conventional wisdom become conventional? Of course, ultimately the ruling class, as Marx has written, exercises dominance over the discourse – but in a sense this is just saying that the ruling class rules. It is the mechanisms of dominance that are interesting.
Thus, I was fascinated by this bit in a post on Matt Yglesias’s blog. MY is a well known ‘progressive’ blogger who is extraordinarily good at absorbing conventional wisdom and extruding it as though it were contrarian. He adheres to the neo-liberal line of the last thirty years, garnished with Obama-esque policy nudges.
This was the beginning of one of his posts yesterday : “I met Brookings’ Isabel Sawhill one time at a conference and she chided me for being insufficiently interested in cutting Social Security and Medicare spending. So I thought she might be into Paul Ryan’s budget ideas, at least perhaps in a Jacob Weisberg contrarian kind of way.”
The “chided” is the part in this that fascinates. To chide implies a certain responsibility one is not living up to. That responsibility is not to the well being of the majority, but instead, to actually doubting that diminishing their lifestyles is a policy we should embrace. It is notable that the chiding isn’t that MY is insufficiently interested in cutting down the average household spending on medicine, or insufficiently interested in making sure that the wealth of the wealthiest country in the world is used to make retirement pleasant and easy.
If one is still caught up in the past, or even in the compromises of the past thirty years, Sawhill’s morality seems upside down. Surely the one thing the Clinton years taught is that deficits are pretty easy to handle if one raises taxes that are paid by the wealthiest – from the capital gains tax to marginal tax rates on those making above 250,000 per year. In fact, it would be quite easy to break out new tax categories that would not weld together the millionaire and the upper middle class in the category, 250000 to infinity. There has never been a problem so simple. But the key here is that the solution is the problem. Because the solution is to discomfort the minority, the wealthiest top ten percent, by taking away from them money that has an extremely low marginal utility for them. Edgeworth, a radical free marketer rather than a Marxist, showed, over a century ago, that the entire running of the state could easily be achieved by taxing the wealthy at a rate proportionate to the lower marginal utility of their fortunes. If, in the same state, there is a family making 50 thousand per year and a family making 50 million per year, true confiscatory taxes would consist of taxing the former family at a minimal rate – five percent – when the same revenue could be painlessly extracted from the later family, who would, in every sense of the word, remain rich before and after taxes.
With the rise of universal education and the technostructure of the contemporary economy, there is, in truth, less need for the wealthy than ever before. This was demonstrated by the collapse of the credit markets, which was entirely due to the rentseeking system by which the wealthy used their fortunes – not in order to gain marginal utility in their persons, but purely in order to gain power.
But this is not a chideable issue. The political elites have benefited enormously from the economic changes of the past thirty years, and, by their lifestyle and their nudges, are committed to the proposition that the state and the economy exists to benefit the top 10 percent. It is in that light that all law and all issues should be tailored. The republican representative who recently opined that the Banking committee in the House of Representatives was there to serve the banks told a particular truth that has a general application: this is the ruling class. Only by holding this truth firmly in one’s mind can we understand the Democratic Party’s “weakness”, or the ‘bi-partisanship” of Obama, or the “Big Society” of Osborne and Cameron, or the odd emotional phenomenon of the leader of the Liberal Democrats, Clegg, who feels evidently that the electorate should understand that the rhetoric of the election has nothing to do with the real issue at hand, to wit, how to run a nation so as to produce maximum benefit for its richest citizens. To think otherwise is to fall on the side of the chidden.
“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