It was inevitable that the economic crisis would dominate Barack Obama’s first year – and probably first term – as President. This month, Obama is reaching a decisive moment in his struggle to restore faith in the US economy. After some shaky starts, he has seen the stock market rally in response to a policy of not nationalizing failing banks. The New Yorker’s recent editorial provides a fantastic analysis of why Obama may be correct to disappoint economists on his left, and how his focus – in the short-term – is less on regulation to stop irregularities recurring in the financial sector, and more on stimulating wider economic activity that has slowed as a result of the financial crisis.
It suggests that retribution against the banking sector and a focus on AIG executives’ bonuses (the American equivalent of Sir Fred’s pension) is less practical than what Gordon Brown calls “real help now” (even if he shows no signs of delivering it). Obama’s initial calmness may have been interpreted as indifference to the bankers’ errors… but is that just an inevitable downside to the rational, cerebral and calmer tone of political discourse that he offered in place of President Bush’s politics of passion and raw emotion? Was, as the editorial suggests, Obama right to be unstirred and wrong to feel obliged to jump on a bandwagon of outrage?
Here’s a snippet (but I do suggest checking it out for yourself, as it presents the question of popular rage, and how much politicians should reflect or redirect it, in a new and interesting light):
Those in Washington who say they represent, or even embody, the public’s anger at bankers should do their constituents a favor by focussing not on whom to demonize but on the hard work of building support for a program that would actually help people. Those who aren’t angry—like, maybe, President Obama—ought to stop pretending they are, and, instead, try to persuade the country that pure rage is not something to be honored and respected at this dangerous moment.
Do LDV readers agree? Is this idealism that distracts from the need for politicians to show sympathy with popular outrage? Was Nick Clegg right to focus on anger at bankers in his recent conference speech? To what extent are we falling into the trap of joining John Prescott in hating the financiers and letting the government off the hook?
My view? I think the impulses for sympathetic outrage and practical action both have strong arguments, and it will be a challenge for parties like the Lib Dems to get the balance right. I’m not sure I agree that AIG bonuses (and by extension Sir Fred’s pension) are a mere distraction, as I think they are moral outrages, but I like The New Yorker’s emphasis on practical action being our focus, rather than ineffectual rage. Yet if Drew Weston’s theory of The Political Brain is correct, then the public – and hence their endorsement for a political agenda – are decided by emotional sympathy rather than rational discourse. Does that make it right for politicians to respond in such a way, though, just because it’s advantageous for them?
I don’t think we have to choose between the two. Here’s my compromise: To maintain faith in an economic system that serves the interests of the community rather than a greedy few, it is important to rebuke the AIG bonuses and Sir Fred’s pension as inappropriate and a morally corrupt use of public money (even if they seem not to have been corrupt by the letter of the law). “Real help now” can only be effective if accompanied by a revival of faith in the virtue of political and economic system. But outrage at a form of capitalism that has not served the public interest should be funneled into debate on how that system is re-balanced and revived in a more virtuous form. Let’s be angry at the bankers but measure politicians success by their “real action now” rather than their empathy for our anger.
Update: Reading about the G20 protests in London, it seems as if many of the protesters are focused on practical action as much as wrath.
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14 Comments
Actually there is a far better commentry – albeit far less encouraging – in the New York Times;
http://www.nytimes.com/2009/04/01/opinion/01stiglitz.html?_r=2
Parties, like other entities, will work in their own self-interest. I would wonder, however, how much electoral advantage is to be gained from expressing anger.
There is the classic Dire Straits lyric
“When you point your finger because your plan fell through, you get three more fingers pointing back at you”
Anger at bankers may simply underline the fact that politicians in all three parties (for whatever reasons) were unable to stop the trainwreck.
Personally, I would want politics to learn from the past and see why economics failed. Was it due to politicians ignoring warnings from economists? Was it due to something else?
People are angry because they have been lied to.
They were told it was good that a fairly small number of people working in financial services were earning very large amounts of money and living lives of luxury because these people were very clever and were using their cleverness to create lots of wealth in which we all were sharing.
We can now see that was not the case. These supposedly clever people seem to not have seen the crash that was coming, even though many others saw it, and they built business plans based on the assumptions it never happened. The supposedly clever decisions they were supposed to have been making turn out to be not so clever, in many cases they hardly understood their own investment schemes, and there is at least one case where supposedly clever people being paid handsomely for their cleverness were actually throwing money into a pure Ponzi scheme.
It seems like much of the rest of the supposed wealth created had a very considerable Ponzi element to it. The encouragement of true enterprise was not what it was about, though the encouragement of unproductive paper enterprise sucked in many of the best brains diverting them from what could have been true enterprise.
To criticise this was to get oneself labelled as a pariah, or a stupid person unable to understand the sophisticated arguments of these clever types and wishing to return to the 1970s when …
This was true of all three major political parties, for though ours is trying hard to back-pedal and wheeling out Vince Cable at ever opportunity to say “look, we told you say”, well if we did, we didn’t say it loudly or with much conviction. Remember our leadership election less than two years ago? Did it centre around how we would deal with the forthcoming crisis? No, it did not. Rather it seemed to focus on pushing our party closer to the consensus that market-orientation and the belief that the man in the City knew best was the way to run everything.
I did say this at the time and expressed my disappointment that the choice of leader was between two right-wingers, with no-one on the more radical left who was able to give a strong critique of our financial system and the misery it was leading to.
When told there was no good news, fictional politician Jim Hacker said “Well, we must make the bad news sound good”.
Is there anyone in the current Lib Dem leadership who agrees that such an approach is not to be favoured?
It is not necessarily left vs right.
Someone on the right can realise that markets need regulation or we end up paying for it with higher taxes which is not something the right likes
Lets’ have the “credit” where it’s due.
These crusties should be standing yelling outside Downing St far more than in the City. That’s where the decision to start the unsustainable boom was started.
And they are still lying to us happy that Fred the Shred is taking the public opprobrium.
You can blame bankers for the hubris of thinking they can eradicate risk in celver and profitable ways. You can blame them for inventing undecipherable methods of spreading that risk and using those mechanisms to profit grossly. But you gotta go all the way back to the politicians for asking them to kick start ever increased and unsustainable lending that many of us have railed about since the early years of this decade to find the root cause of this.
Angry? You betcha. Angry at the people who started this from the corridors of power, agrny that they have manupulated people to pass the blame onto others, angry at those others for making all that hay, angry for them ignoring those of who did complain year in year out about how city bonsuses were skewing other parts of the economy, and angry for our so called representatives for not spotting things like Eddie George’s evidence two whole years ago now. And angry that they believe they can fix this, having cuased it in the first place. It’s like giving the arsonist a tanker full of fuel and a fire uniform and telling him to put it out with it.
Oops – the second link should be to one of mine.
Jock,
Who was cheering on rising house prices and the credit boom that was pushing them up? The people. It was very hard during this time to get across the idea that rising house prices were not necessarily a good thing. The mass abdication of those most directly badly affected by them – the young – from practical politics, did not help.
The arguments that should have been put to control the situation were not put because it would have been political suicide to have put them. What party would dared have stood against the unearned profits home-owners were making from this, and ultimately from the misery of the young forced either into cramped accommodation or to pay huge amounts for housing? The young themselves were made to feel this was a good thing, paying out huge amounts in interest, working like slaves to afford it, was “the first step on the housing ladder”. Er, since our party’s youth wing has been in the news recently, did it have anything to say about this during all those years of boom?
Unsustainable levels of lending were out forward as “helping people get onto the property ladder”. The notion that allowing people tomorrow more does not help them buy more, it just pushes up prices so helps the seller not the buyer, was hard to put across. Getting a big loan in this way was sold as an “investment” on the grounds the thing bought would rise in value.
It was better for those on the margins to have accommodation that does not rely on risky financial products, and where expenses are pooled so there’s long-term security. Allocating housing by cash market alone means those who have most need of it – families with children – are often those who can least afford it. But we sold off the council housing under “right to buy” and no-one could argue against that, could they? Not if they ever wanted to get re-elected, anyway.
Indeed – when house prices were rising by more than an average income a year, all anyone (with one) could think of is what car they were going to buy from the proceeds of borrowing against that, and all anyone (without one) could think of is how they were ever going to get one.
Nonetheless the house price boom was caused by the availability of money – land – that is “economic rent”, which is capitalized into the house price, absorbs everything that can be produced of it, which makes the political stoking of that process even more blameworthy and repugnant.
Then they go on and talk about “bubble mentality” – well bollock is it – when people are desperate to find a place to live it is perfectly rational to try to continue to get on that ladder in case it never comes back – I convered that back in October.
Are you saying, Matthew, that having cynically lit the blue touchpayer for political reasons (avoiding the early naughties recession which would have destroyed Labour for another generation) and created this beast, they could not then do anything about it until it burst naturally so that they would not have to take the responsibility themselves for telling people, again for political reasons (this time not upsetting the lucky home-owners they had created a boom for), that we needed to slow all this down?
You are getting there Matthew. The control of money should be taken out of the hand of governments and their agents, forever. Because governments in the last ten years have presided over, created and then not had the balls to call time on a system that has transferred vast amounts of rent and interest from poorer to richer and now is bound to do likewise on the way down.
They have been lying, cheating, conniving gutless, castrated, fools who tried to manipulate this for their own ends and have cost some of us not as fortunate as them to have someone paying for their second homes a fortune we will never ever recover.
blockquote>Matthew: Er, since our party’s youth wing has been in the news recently, did it have anything to say about this during all those years of boom?
Yes – they have co-hosted a number of conference events on “generational equity” and housing affordability over teh past four years at least and two years ago now adopted policy to demand the party move more quickly to LVT for residential property (instead of LIT for local tax).
Are you saying, Matthew, that having cynically lit the blue touchpayer for political reasons (avoiding the early naughties recession which would have destroyed Labour for another generation) and created this beast, they could not then do anything about it until it burst naturally so that they would not have to take the responsibility themselves for telling people, again for political reasons (this time not upsetting the lucky home-owners they had created a boom for), that we needed to slow all this down?
No. I am saying the situation should never have been created in the first place where the only way to get somewhere to live was to take on a dangerously large loan.
But the arguments for doing this was that it was “economic liberalism” and that any attempt to allocate housing with a needs rather than a cash-payment element on who gets it was unnacceptably paternalistic socialism. If X wants to buy a house, Y wants N pounds for it, and Z is willing to loan X N pounds, where’s the problem?
Well, actually X is forced to pay N pounds because there’s no alternative, but according to you economic liberals that’s not an issue.
I really don’t know what to say. I am gobsmacked. You may just have tipped me over into returning my membership card. If anyone agrees with you that forcing land values up by monopolistic lending practices, and that that is economic liberalism, there is no hope in this party. You have forgotten your history. I suspect you really don’t even approve of personal proeprty deep down. Or that personal property gives a buttress against arbitrary political interference.
You are just as incompliant with the Preamble as you could possibly accuse me of.
Gobsmacked. Fucking gobsmacked.
Anger is almost always counter productive.
Although I can vividly recall being labelled “abusive” for trying to mediate between two points of view that were being misinterpredted due to anger, and getting on the recieving end myself.
Jock,
There is a pretty well-known correlation between the amount available to bid for housing and the price of housing. Do you say there is not? Do you disagree with my contention that if people can borrow say 5 times their salary instead of 3, they will tend to do so, and as a result house prices will go up?
Why on earth, when I note this, do you accuse me of holding views incompatible with the aims and objectives of our party?
Removing restrictions on lending to enable that has been sold as “economic liberalism”. Do you say it hasn’t?
Why on earth do you think that because I am concerned people have been forced into taking on mortgages that they can’t safely support, and I feel that is a bad thing, that I am opposed to property ownership altogether?