Wednesday, December 16, 2009

Fat cat bankers

Brad DeLong notes that Obama must (more or less) necessarily come to the aid of "fat cat bankers": Absent a direct government stimulus, Obama must
persuade the private sector to boost its spending. ... But for indirect government policies to boost spending, they must boost asset prices — especially long-term, risky asset prices. And guess who owns the most long-term, risky assets? Guess who benefits most when those long-term, risky asset prices rise?

Yep. It's fat-cat bankers.
However, it's not necessarily the case that boosting long-term risky asset prices will actually cause the "fat cat bankers" to actually spend more. First of all, supporting long-term asset prices no longer makes them risky, which directly and explicitly increases moral hazard. More importantly, the "carrot" of supporting long-term asset prices must be accompanied by the "stick" of increased regulation and taxation:
The fact that the policies you undertake to avoid persistent mass unemployment also help fat-cat bankers doesn't mean that you can't implement other policies to place burdens on them. Progressive income and wealth taxes, tight capital and regulatory requirements, impositions of enormous risk on financiers in order to remove the possibility that they will retain their wealth even as their organizations go bankrupt these are all policies that make fat-cat bankers' lives less fat and less feline. And I am strongly in favor of enacting all of these long-term structural reforms.
The question, though, is who will bell the cat? It's important to understand the fundamentals of dialectical materialism here: Obama is not enriching the bankers directly because of some abstract principle, he's enriching the bankers because its in his own interest as a politician and would-be statesman to do so. It's obviously not in the fat cat bankers individual interest to submit to additional regulation; Is it in Obama's interest, or the interests of the Democratic party, to impose additional regulation? More precisely, Obama and the Democratic party represent some other interests: precisely whose interest are the (liberal and "centrist") Democrats representing, and is additional regulation in their interest?

They're clearly not representing the people's interest. The people themselves are not sufficiently organized or aroused to directly demand their own interests. Under current circumstances it's clear that all any Democrat must do to get enough votes to be "players" is to be slightly less evil than the Republicans. They're fine so long as they don't actually start producing Soylent Green, or if they at least ensure its production meets minimal health and safety standards. No matter how bad the Democrats get, liberals and progressives will hold their nose and vote for them (not entirely unjustly) because the Republicans are worse. Even if the nominal unemployment rate is still around 10% (and the real unemployment rate around 18-20%), even if people are living in miserable poverty, even if universal health care is little better than the current emergency-room based pseudo-treatment for the increasingly large poor masses, Paul Krugman and every other liberal and progressive will vote for the Democratic party because, hey! at least they're not actually eating the babies of the poor.

Like every other capitalist "democracy", the party and people holding official power represent a faction of the ruling capitalist class, throwing only enough bones to the population to prevent outright revolution. What faction of the capitalist class does Obama and the Democratic pseudo-left represent?

Again, it's clearly not the faction of the capitalist class that the Republicans represent: the faction that explicitly and directly wants to destroy consumer capitalism, that wants to smash the consumer capitalist state as radically, quickly, thoroughly and violently as Lenin and Mao smashed the feudal Russian and Chinese states. Therefore, Obama represents that faction that does not want to radically destroy consumer capitalism.

But that's a pretty broad group, and it necessarily includes those members of the ruling class that would benefit if consumer capitalism were more slowly dismantled, rather than preserved and expanded. Of course dismantling consumer capitalism more slowly is not all that far from the Republican/right-wing agenda; the Republicans can — so long as the Democrats pay along — win by losing.

(There's also the a personal political consideration: president Clinton was profoundly and deeply personally humiliated by the Republicans, and it's certainly the case that president Obama has skeletons in his own closet. So long as the right limits itself to rally-the-base small potatoes like ACORN and the "birther" bullshit, Obama will be hesitant to play his hand more strongly, fearing a deeper and more persistent investigation.)

There is undoubtedly a faction of the capitalist ruling class that would, at least in theory, like to see the preservation and expansion of consumer capitalism: most capitalists are rich precisely because they produce consumer goods. However, actually fighting for the preservation of consumer capitalism is not necessarily in their immediate individual self-interest. First of all, they're already rich — or in the case of higher (CEO/EVP) levels of the professional-managerial middle class beholden to the interests of the already rich. Consumer capitalism requires sacrificing some of the existing financial wealth of the ruling class, and there's no assurance that this sacrifice will be equally shared. Quite the contrary: it's almost certain that some part of the ruling class will take it in the neck and some will emerge relatively unscathed. Better to protect the class as a whole than risk being without a chair when the music stops.

Likewise, if the demand of the working class and the professional-managerial middle is increased, it's almost certain that this demand will not be spread out evenly; indeed it will be the capitalists who most vociferously and effectively demand an exemption to increased worker demand for their own holdings who will in fact receive such exemptions, placing them at a relative advantage over those who must submit to paying their own workers more.

It is probably the case that a majority of the capitalist class would prefer to preserve and expand consumer capitalism. However, it is not in any member's individual interest to preserve and expand consumer capitalism unless all members do so. Without any means to compel dissenters (except the enormously risky means of stirring up populist anger, which risks revolution and the destruction of the entire capitalist class), there's no way for even the majority to act in their mutual self-interest; they must act in their immediate individual self interest and help (or allow) the destruction of consumer capitalism out of sheer survival.

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