Putting Out Fires, Starting New Ones

The failure of government regulators to anticipate the financial crisis and their continued failure to deal with its fall-out has been a noted flashpoint for partisans on both sides of the aisle. The dominant narrative assumes that most observers were content to stand idly by and reap the benefits of corporate largesse while the “getting was good”. It’s true, some saw the signs and did their best to sound the alarm, but in the great tradition of American politics, these Cassandras went unheeded. And if the developments of the last year and a half are any indication, we’re no closer to fixing the problem than we were at the start of the crisis, because as of yet our leaders have been unwilling to make the hard decisions required of them. In the meantime, we suffer from record levels of unemployment, saddled by mounting debt, and with little hope that the culprits will actually be held accountable. All this begs the question, what lessons if any have we learned from this crisis? Former Governor Eliot Spitzer does just that in this month’s issue of the Review, in his piece for the New Democracy Forum, “The Rules.” Read the rest of this entry »

Welcome to Pottersville

“Something is rotten in the state of banking.” Alright, that isn’t quite how the Bard put it, but you take my point. Our nation’s ongoing financial crisis – just shy of a year in the making – is far from over. Indeed, with unemployment and budget deficits at record highs (the ‘worst since the Great Depression’, as the official administration line goes) it seems like we’ve just skimmed the surface and Americans are madder than they’ve ever been – a point about which congressional Democrats, with eyes fixed on 2010, are rightfully nervous. But even as populist anger has surged in the months since the first bank bailouts, there is scarcely a consensus about how lawmakers ought to proceed – that is, to curtail the excesses of the banking industry and its ability to send shockwaves through the larger economy. Of course, there are some (particularly on the right) who would take issue with the problem, stated as such, but as the evidence mounts it’s becoming harder to ignore the implications – that, as Dean Baker concludes in his recent piece, “The Big Bank Theory”, the complicity of the banking industry is incontrovertible and regulation is not merely prudent, but necessary.

Read the rest of this entry »

Obama the Evil Genius?

In Unequal Democracy, Larry Bartels noted two interesting phenomena that, he says, partially account for Republican electoral success: first, voters are myopic in their assessment of economic performance, and tend to solely focus on how the economy fares during elections years, ignoring the performance in other years; and second, Republicans tend to preside over strong growth in election years, while Democrats preside over strong growth in off-years. Now, the flaws in Bartels’ study are pretty notable. First, and most obviously, it’s hard to discount the possibility of pure randomness when you can only consider 14 data sets (the number of elections Bartels surveys). Second, he provides no good explanation for how it might be that Democrats and Republicans systematically differ in the timing of economic growth. Bartels refers obliquely to the possibility that policy differences might explain it, but doesn’t even specify which policies he is thinking of.

I am reminded of all this by the conservative refrain (see, e.g., Robert Samuelson’s column) about how the stimulus package wasn’t really stimulating, but rather was a sop to liberal special interests. Many other commentators, not all of whom were hostile to the very notion of a stimulus, were concerned that the $787 billion would not be spent quickly enough.

What strikes me is that Obama and the Democrats, if they had read their Bartels, might have designed it this way. A stimulus that kicks in just in time for the midterms might well be preferable to one that kicks in during summer 2009, when nobody votes and which nobody remembers when it comes time to vote. And a recovery that begins next year will be at its strongest in 2012.

I don’t think Obama is an evil genius or that he values power for its own sake, so, no, I don’t think he planned it this way. And I think that the sooner the recovery starts, the better for his presidency. But the larger point is that the economy should be just as powerful a wind behind Obama’s back in 2012 as it was in 2008, which upsets Bartels’ theory and which no doubt upsets Mitt Romney.

Getting past the fact that it was Hugo Chavez …

At the Summit of the Americas last week, the smiling encounters between President Barack Obama and Venezuelan president Hugo Chavez had pundits speculating about the new administration’s approach to Latin America, in particular to the controversial, America-is-the-Devil President Hugo Chavez of Venezuela (and to his shunned political ally Raúl Castro of Cuba).

In a gesture caught on camera and analyzed ad infinitum , Hugo Chavez gave President Obama a book entitled Open Veins of Latin America, a critique of Imperialist American involvement in Latin America written in1970 (revised 1978)  by the Uruguayan journalist and writer Eduardo Galeano.  The book presents the history of Latin America from its initial colonization and exploitation by its Spanish and Portuguese colonizers in the 1500’s through the 20th century, in which it argues that the very structure of the world economic system (organizations such as the IMF and the World Bank) encourages the prosperity of the United States and the continued exploitation of Latin America.  The IMF, for instance, is said to have preferentially given loans to Latin America’s right-wing military dictatorships of the 1970’s and ‘80’s, whose economic policies were beneficial to U.S. and European corporations, despite these regimes’ flagrant abuse of human rights.

That Hugo Chavez is the giver of this well-reasoned and influential book certainly adds another layer to its interpretation, Chavez himself having positioned himself as something of a radical ideologue (albeit a radical ideologue of the left).  However, thinking of Chavez’s rise to power in light of the historical context laid out in Galeano’s book certainly should be a crucial aspect of the Obama administration’s consideration of diplomatic relations with Latin America, the majority of whose current governments have been deeply influenced by theories like Galeano’s.  Reading it certainly won’t hurt the thousands of people who have obtained a copy in the wake of Chavez’s gesture.