[Re-posted from earlier today.]
One reason I find the Romney-Ryan proposals for the economy somewhat alarming is that, in an era of hyper-social-inequality, they will almost certainly increase it still further. The Republicans are radical Randians in that sense, not Tories, as I have tried to argue. When you see an unexpected and sharply upward trend in inequality and want to accelerate it some more, you have ceased to be a conservative.
But why should conservatives worry in any way about inequality? For much of my adult life, that was my position. In principle, growing up in the 1970s, in a failing socialist country, I yearned for a polity where talent and hard work could be rewarded, where the state could be ratcheted back to allow for a more dynamic and meritocratic creation of wealth. Thatcher provided it, and Major and Blair entrenched it. One of its lynchpins was what they called the “Big Bang” in the City of London, when finance was deregulated, just as Glass-Steagall was repealed in the US.
Suddenly, I saw so many of the brightest minds of my generation go into finance and make a fortune. Suddenly, it seemed, growth was possible again, and inequality could actually fuel it. It seemed win-win through the 1990s, and entrenched in my mind at least, the wisdom of the Thatcher-Reagan analysis of the core problem of economic growth in the 1970s. For striving individualists like me, this was a golden era. To see the Eastern bloc collapse reinforced our complacency.
But we should have seen the danger signs that our complacency blinded us to. Enoch Powell, a very high Tory, once said that every political career ends in failure, because the problems that they have solved will have inevitably ceded by then to new ones, and new exigencies and new times. And so it remains true that Reaganism, enormously successful in its moment, can be seen as irrelevant to the new challenges its success spawned. Yes, growth soared for a while, but it soared far, far more for those at the top than those in the middle and the bottom. I saw no problem with that as such. I remember even mocking Al Gore’s in retrospect prophetic denunciation of the “top one percent” in 2000. But over time, the extremity of this inequality began to trouble me, because of its impact on the legitimacy of capitalism and liberal democracy. And when I first saw Barack Obama speak, his argument made me prick up my ears. I wasn’t buying it yet, but he was onto something. The good thing about having a blog is that I can go back and read my first impression from more than five years ago now:
I went to see Obama last night. He had a fundraiser at H20, a yuppie disco/restaurant in Southwest DC. I was curious about how he is in person. I’m still absorbing the many impressions I got. But one thing stays in my head. This guy is a liberal. Make no mistake about that. He may, in fact, be the most effective liberal advocate I’ve heard in my lifetime. As a conservative, I think he could be absolutely lethal to what’s left of the tradition of individualism, self-reliance, and small government that I find myself quixotically attached to.
Not as lethal as the Bush administration was, but you get the point. And you’ll notice the early twitches of my political/intellectual migration. It was clear by then that three decades after Reagan’s great reduction in taxes, the middle class was struggling hard, moving upward largely on credit, while the top were in a new stratosphere. I didn’t buy any crude redistribution solution from the left, but I also saw how the right was coming up empty with proposals, apart from rationalizations. Hence my support for Clinton in 1992, and for Bush’s allegedly humbler, but ultimately catastrophic betrayal of conservatism from 2001 on. More to the point, as income growth stalled, and middle and working class Americans saw their richer peers leave them further and further behind, there were greater incentives for government to rush in to placate the middle, to ease the pain, to give them something to retain the illusion that the American dream was still alive. Jon Rauch, in a four-star must-read, explores what the economic profession has now discovered about the linkages involved:
Marianne Bertrand and Adair Morse, of Chicago’s business school, have found that legislators who represent constituencies with higher inequality are more likely to support the easing of credit. Several papers by International Monetary Fund economists comparing countries likewise find support for the “let them eat credit” approach. And credit splurges, they find, bring on instability and current-account deficits.
So you have most of the wealth going to a tiny few, and the rest trying to keep up in a credit bubble, while the federal government keeps on borrowing to pay for a growing entitlement state (even in its best non-dependency form, like the EITC) that its poorer citizens increasingly needed. Then .. well back to Jonathan:
For decades, more than half of the increase in the country’s GDP poured into the bank accounts of the richest Americans, who needed liquid investments in which to put their additional wealth. Their appetite for new investment vehicles fueled a surge in what Arkansas State’s Brown calls “financial engineering”—the concoction of exotic financial instruments, which acted on the financial sector like steroids.
And we all know what happened when those instruments unraveled, leaving us where we are. And where we are is not 1979. This is not an ideological shift; it’s an empirical deduction. To quote Rob Shapiro of the post-Reagan consensus:
The debate for many years looked settled. Changes in the economy and changes in the data have reopened the debate.
No surprise that Rob studied Oakeshott. An open mind can be a dangerous thing in today’s politics. And the point, of course, is that conservatives who care about the tradition of free enterprise and a thriving middle class should be among the first to worry about our return to the 1920s. It is that kind of instability that leads to expansions of the entitlement state. It is that kind of inequality and abuse of freedom (on Wall Street) that forces the state to intervene.
Conservatives, from Aristotle on, have always understood the central importance of the “middle way” and the “middle class” in sustaining a liberal democracy. Disraeli and Bismarck were the European pioneers of this conservatism. I think of Eisenhower in the last century as its great conservative defender in the US. Reagan was a necessary, even vital, correction, after liberal over-reach, but when that correction became dogma, and the right became fundamentalist about it, and the political fundamentalism was fused with a religious one, you saw the GOP degenerate into its Cheneyite and then Tea Party form: intellectually incoherent, angry beyond reason, and defined by cultural fear.
In an email Jon wrote discussing this subject, he expanded:
Conservatives should be MORE worried about inequality than liberals, at least the kind of inequality we’re seeing now. It will wreck the legitimacy of the values they hold dear and discredit them for two generations (a narrative Romney is doing his formidable best to set up).
Exactly. Romney personifies the kind of person who profited fantastically from the post-Reagan era and Ryan the small, tight brain that is still intellectually arrested in 1979. I know their abstract arguments and want to agree with them. But they are not in tune with these times – and are not responding to them. They have dogmas but no solutions. Obama, at least, is steering the ship a little further away from the rocks. That will have to do for now – it may be all anyone can do for now. And it’s what a real conservative would support.