Whew. I found myself in uncharted territory this afternoon. On my way to picking my son up from school, I heard Newt Gingrich interviewed on NPR about his opposition to the bailout, expressed in his recent post on the National Review blog. And I agreed with him. Ugh! The Newt Gingrich, the one of Contract On America fame. So then I began wondering: who the heck is actually for this harebrained bailout idea anyway? More after the break.
If I understand the bailout correctly, the Treasury proposes to back the purchase of lots of bad paper that nobody wants with possibly around $700 billion in taxpayer dollars. (This bad paper has been referred to by Sec. Paulson as “clogging up the system,” a metaphor that should make Timothy Mitchell and Fred Block alike proud.) So here’s the rub. This strikes me as at the same time very un-Democratic and un-Republican. It’s un-Democratic because it involves massive taxpayer dollars being spent on very wealthy people and large corporations. It’s un-Republican (as Gingrich says) because it involves enormous government intervention in the operation of the markets, and even more egregious, it opens the very real possibility that the U.S. state could end up owning the very backbone of global high finance!
Well, last I checked, the Congress is made up of 533 Republicans and Democrats, one independent Republican leaner who caucuses with the Democrats, and one independent Democratic Socialist who caucuses with the Democrats sometimes. So why is this bill even a possibility? One option is just that when Republicans and conservative Democrats notice that market fluctuations may have devastating consequences at the level of their constituents, they may be willing to sacrifice ideology for pragmatism, and it’s too late to do what would really have been good, i.e., maintain strict regulation, so they are backed into a corner.
That’s plausible, but let me suggest another idea as well: that this is the strange cousin of the phenomenon Fred Block introduced thirty years ago in “The Ruling Class Does Not Rule“. Essentially, the argument is that businesspeople need government to be the executive committee of the ruling class. But no individual businessperson is able to understand his/her true class interests; the ruling class as a whole has to do that. That’s how we solve the problem that businesses don’t like government even though government works in their interest.