Barney Frank, Democratic chairman of the House financial services committee, has a fascinating article in the Financial Times of London yesterday. Just like its very explicit title (Why America needs a little less laissez-faire), its publication in the main European business paper is significant, and should be taken as a (hopeful) harbinger of things to come both on domestic policies and on their international side effects. As laissez-faire economic policies of recent years have tended to favor muiltinational corporations's rights to do as they please over any kind of regulation, whether national or global, this is a noticeable warning shot to Europe's gang of neolib parroting pundicracy and elites.
As we prepare for this autumn’s election, the results are in on America’s 30-year experiment with radical economic deregulation. Income inequality has risen to levels not seen since the 1920s and the collapse of the unregulated portion of the mortgage and secondary markets threatens the health of the overall economy.
An unambiguous message: today's economic and financial crisis is a direct result of Republican policies - in effect, the bill for Reagan's grand adventure is now coming due. Frank has some more favorable words about the Clinton period in his article, but he is right that we have seen a long term trend towards deregulation and weakening of government (by way of demonization, defunding and incompetence promotion) and that this is at the heart of today's crisis.
but here comes the optimistic news:
These two economic failures will be major issues in the forthcoming presidential election, and, importantly, there is an emerging Democratic consensus standing in sharp contrast to the laisser faire Republican approach.
There are two central elements of this consensus. Democrats believe that government’s role as regulator is essential in maintaining confidence in the integrity and fairness of markets, and we believe that economic growth alone is not enough to reverse unacceptable levels of income inequality.
I can only clap loudly at all this:
- making this a major issue in the presidential election is the only way to strengthen in voters' minds the link between the obvious prevailing economic malaise and Republican policies. The crisis is not caused by Bush's incompetence, it's an inevitable result of Republican ideology, and that's one of the big things the election needs to be about;
- The solution is more government, and better government, because government is the only institution that can make markets actually work;
- inequality is such that its mitigation becomes more important than growth; indeed, the single minded focus on growth (beyond its deleterious effects on our polluted environment and our stressed-out quality of life) is the very cause of inequality as growth is easier to achieve if it's about concentrating resources in a few hands in the short term by way of looting the commons rather than about building the economy for the future;
- Democrats all agree on this, which means that real steps to change the situation will take place irrespective of who is elected - and thus have a good chance of happening.
As a result, we are likely to have a healthy debate about the role of government in supporting a robust capitalist economy in the 21st century. It is important to note that this debate is not about policy details but represents fundamentally different views about the nature of our modern economy.
I believe the American people will decide that we should enact policies that seek to curb growing inequality and provide some check on market excesses.
Yes. Finally.