the ruling class and the bailout

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.

Author: andrewperrin

University of North Carolina, Chapel Hill

11 thoughts on “the ruling class and the bailout”

  1. I have no idea if it’s both those things, or one over the other. Wish I felt smarter about this, esp. as I go teach Class & Power tomorrow.

    When you say “no individual businessperson is able to understand his/her true class interests,” do you mean that they’re unable, without govt oversight, to moderate their exploitation enough to keep the working classes stable? That the govt keeps them from going too far, or is supposed to?

    And one more question, teacher. Have you seen a good “soc of the bailout” post/article (beyond this one) you’d recommend?
    Thanks.

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  2. Hmm, well, this post at Daily Kos is hardly nonpartisan but I thought was helpful in figuring the mess out. And believe it or not the Gingrich one isn’t bad either.

    I think your restatement of Block’s argument is good. The idea, basically, is that the ruling class as a whole has an interest in the maintenance of capitalism; each individual capitalist has an interest in the growth of his/her business. The latter can, at times, be opposed to the former, and it’s the job of the state to tend to the interests of the class as a whole.

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  3. Mark Mizruchi is working on a similar issue with regard to changes in corporate control and some results from the late 90s about the declining role of commercial banks as sites where inter-corporate conflict was resolved (e.g. Mizruchi 2004). His work in progress argues that as individual corporations have become more powerful, the corporate elite have become less able to act collectively. In some sense, this bill would be a counterexample – something done on behalf of big business, because of collective pressure by big business, in spite of the interests (as you lay them out) of the government sans corporate action.
    Hm.

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  4. anotherjess, it seems to me that most people, even the supposed experts, are not feeling too smart about this and even admitting to it on the news.

    Oh no, the big financial institutions are closing. You know what would really help them out? A big fat load of public money! I know there are ripple effects throughout the economy, but I’d like to see a cost-benefit analysis before saving these guys. I’d rather see them just drop the internal debt. Institutions fall because they made overly ambitious arrangements to put an underpaid middle class with stagnant wage increases in as much debt to them as possible? Good. The institution said underpaid middle class worker owes money to disappears, and their new unmortgaged ownership of their property bolsters the economy and preserves what’s left of the dying middle class.
    That $700 billion would be better used to help the people who lose their jobs because of this, rather than bailing out the institutions which caused the problem to begin with. Now that everyone knows the economy is going down the drain, when these same institutions and other big businesses start downsizing, outsourcing, and deunionizing, nobody’s going to say a word, and things are just going to get worse. This is what’s going to happen anyway, so why pay them to do it?

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  5. “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.”

    I don’t understand this explanation. Who is doing what to whom? How does this explain Congress voting in favor of the bailout? The explanation is so vague that it seems meaningless.

    “No individual businessperson is able to understand his/her true class interest.” I don’t understand what is meant by “class interest.” ? It would depend on how much someone stands to lose from bets that have gone bad. Or if the person hasn’t lost money directly from the crisis, and does not stand to gain directly from the bailout, then they might be thinking of the long-term effects of the government doing nothing.

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  6. I thought you would say that! I really did, and I debated asking “please don’t tell me to (re)read Marx.” It is a bit analogous to a religious person who is arguing that something was foretold in the Book of Revelations saying “Read your bible.” I am fairly familiar with some of these ideas, but I was looking for a concrete, falsifiable story from you!

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  7. The problem is that the question itself emerges from Marx. The question is: why would the government act against the stated preferences of the ruling class if Marx is right that the government is the “executive committee of the ruling class”? The answer is: because no individual member of the ruling class understands his/her true interests. This doesn’t explain the behavior per se, it just resolves an apparent contradiction in the theory.

    Oh, and by the way: falsifiability is way overrated, as is concreteness.

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  8. Well I’ve always been tone deaf to Marx in part due the relative relative lack of concreteness and relative lack of falsifiability. (Although I think those are not the real reasons why I was tone deaf to Marx, only post hoc (yet nonetheless reasonable) explanations. It is presumptuous of me to say this, but I think most of us (at least me, sample of 1) make our intellectual commitments due to emotional reactions rather than rational thought. But that doesn’t necessarily mean the post hoc rationalizations are less tenable in their own right.

    Your final comment about falsifiability and concreteness piqued my interest. Assuming you aren’t being facetious ( I do tend to be gullible), that might be an interesting topic to blog about in its own right. Please forgive me if this topic has already been discussed; I am a new but excited reader of this blog.

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