Blue Wall Street

Dr. Mead has a post that I'm sure you've seen elsewhere, on the clash between factions within what he calls the Blue Model. I'd like to discuss one particular element of his piece.
For Blue Wall Street the conflict between the interests of the private sector and the power of the government does not really exist. The symbiosis between Blue Wall Street and the state is strong and deep. The pension funds, bond issues and other financial transactions that blue city and state governments need helps nourish Blue Wall Street; Blue Wall Street helps integrate the policy agenda of other government focused interest groups with larger national priorities and movements. Fannie Mae and Freddie Mac are the archetypes of this symbiosis....

Blue Wall Street benefits much more from the blue social model than the other elements in the coalition. Five figure cop salaries and low six figure salaries for goo-goo social engineers pale before the seven, eight, nine and ten figure paydays on the Street.
There is a direct connection between those big paydays and the connection between big finance, big government and Democratic (as well as Republican) interest group politics. Good relations with politicians help make money: ask the leadership of Goldman Sachs, which has provided much of the leadership and policy advice for administrations of both parties for some time. It’s a sensible trade-off for well connected i-bankers to accept higher general tax rates in exchange for significant influence over government policy. You can not only use that influence to carve out nice loopholes that insulate you from the high tax rates blue policies entail; you can get enough business from good government relations to offset the cost of the taxes the model requires. If Al Gore’s environmental businesses make enough money as a result of emission laws and price controls, he doesn’t have to worry too much about his tax rate. And in any case, carbon taxes favor the financial economy (which uses very little carbon though its PR firms emit a lot of hot air) over the manufacturing economy.
This is what Ms. Palin was calling crony capitalism, and it is a much larger problem than the Blue Model.  The Red Model, so to speak, has its own version of this as well:  a version that uses government to favor corporate interests.  In conflicts between citizens and other citizens, the government may come down this way or that way; but in conflicts between citizens and big (not small!) business, well....

The Red Model is on display in Texas, where Gov. Perry has favored corporate interests.  Consider tax rates:  Texas has no corporate income tax rate, but only a 'franchise' tax on net profits over a million dollars, at no more than one percent, with the profits to be calculated according to the most favorable of four methods.

Education is another area in which Texas favors the interest of corporations, with its curricula designed around developing a workforce rather than a citizenry.  A free republic needs a citizenry educated in history, some of the great works of literature, certain works of ancient philosophy, as well as math and science; a workforce can dispense with everything except the math and science.  Gov. Perry has pushed to find ways to generate more focus on those workforce-developing methods.

I don't say this to attack Gov. Perry, who may be the best of the remaining candidates in spite of his participation in crony capitalism.  I say it to point out that we've already reached a Presidential field that is going to endorse some form of crony capitalism.  Mr. Cain is a Red Model capitalist, who just last week was boasting of his ties to the Koch brothers; Gov. Perry is a well-known one, who took some heat from Rep. Bachmann in the debates over it (she was probably the last chance to avoid a crony capitalist of some flavor, but alas).  President Obama is a Blue Model exemplar.  Mitt Romney is also from the Blue Model, as demonstrated by his policies and positions as a governor up north.

What is really at stake in this election is whether the Presidency will be occupied by a Red Model crony or a Blue Model crony.

The Red Model offers two things to the people that the Blue Model does not.  Employment, and a model that is sustainable.  The Blue Model is permanently broken, as Dr. Mead has pointed out repeatedly and excellently in recent months.

The Red Model is compatible with some good things for the people (as was the Blue Model at its height); for example, Gov. Perry's attempt to construct a $10,000 Bachelor's Degree.  Let's say that this follows corporate interests, and is made available only for fields in science, mathematics, engineering, and the like.  Those fields produce good jobs for the person obtaining the degree!  Let's say that corporate interests lead to zero-percent corporate income tax rates like in Texas or South Dakota.  Those lead to more jobs:
Despite being oil-free, South Dakota’s unemployment rate is around one-half the national rate. Its economy is booming. Why? When I talk with business leaders around the country who have facilities in South Dakota or who deal with businesses there, they invariably emphasize the quality of South Dakota’s labor force. The phrase “work ethic” comes up again and again. And, of course, South Dakota has a friendly business climate. It hasn’t elected a Democratic governor since 1974. And there isn’t a union in sight.
"Work ethic" isn't something the government can train the citizenry to have, but it is something that the government can break via perverse incentives.

What the Blue Model advocates may have to accept is that a Red Model is the last means for producing enough wealth to transfer to other, preferred outcomes -- things like social services.  Even then these will have to be cut, because even if you entirely eliminated the Defense Department, we are facing massive shortfalls.  Of course, an improved economy will increase the amount of revenue available, so the Red Model can help; but the Blues are going to have to face up to the internal fractures that Dr. Mead describes, and decide between police unions and welfare as the trolly winds down.

None of this is finally satisfying, but as a practical matter it's where we are.  We shall face the next four years with some sort of crony capitalist in office; we must decide which kind.  Those of us who would prefer to build a citizenry rather than a workforce, or an economy built around small businesses and farms -- that  Jeffersonian model favoring the private ownership of individual means of production -- we will not see any joy out of the next President.  Still, there is bad and there is worse, and it may be that the bad is not entirely without its silver lining.


Dad29 said...

Ugly dichotomy from which to choose, eh?

Eric said...

I really don't see this as particularly different from any other time in US history, (or world history for that matter), although, as you point out, one probably gets more mileage out of the red model these days.

SDN said...

I find it fascinating that getting the government out of the business of overregulating is referred to as a form of crony capitalism. What happened to restricting the government to its' proper sphere?

Dad29 said...

SDN, GE did not pay income taxes last year for a reason: they have a $zillion-dollar tax AND lobbying operation which makes certain that GE's tax liabilities will be minimal. Yes, they lost money on their financial unit, too....

Your solution, of course, is absolutely correct. When the Government(s) are put back on their chain, in their yards, where they belong, they can no longer dispense goodies to the best-connected.

That may take more than a couple of weeks, though.

Grim said...


I'm not sure what you mean by "is referred to," above. Who referred to deregulation in that way?

In general deregulation is in the interest of small business more than big business. Big business in the Red Model benefits mostly from relief of regulations pertaining to unions, etc.; but in the Blue Model regulations favor big business by raising the costs of entry for competitors, and indeed are especially targeted at maintaining favored monopolies or oligarchies.

After all, as Joseph Schumpeter pointed out, there is a scale at which even a successful business ossifies and becomes vulnerable to small-business competitors. This is because smaller operations can move more quickly to achieve opportunities or revise outdated systems. If regulations raise the cost of entry into the business to the degree that no small businesses can compete, you can protect a large business artificially through regulation (while allegedly 'not interfering in the market' but only 'ensuring safety').

In the contemporary era, of course, international competition means that you can't regulate evenly; you end up hurting American businesses in favor of Chinese ones. That's one reason the Blue Model is broken.

douglas said...

"A free republic needs a citizenry educated in history, some of the great works of literature, certain works of ancient philosophy, as well as math and science; a workforce can dispense with everything except the math and science."

Well, first I disagree with the idea that only math and science matter to production. English skills for the sake of communication certainly matter, although I'd argue they matter far more than simply that. I think a reasonable argument could be made that a producer is better with at least some exposure to those other subjects you leave to the 'blue' column.

My bigger issue is with your idea of a Free Republic needing a citizenry that has a classical liberal education. That may be so, but are you proposing that the government mandated education should serve this function as well as that of providing a basis for a functional workforce? Invariably, what happens when is that the ideologues pirate the whole education system and use it as their tool of indoctrination (witness the OWS crybabies). So, again- is the place for that education the government schools, or is the reach of government in that sphere better limited to the functional purposes, leaving us individuals teach our children to drink from the fountain of wisdom set out for us, if only we'll come to it?

It seems to me that wishing for more may be a utopian vision.

Grim said...

Before mandatory public education, Douglas, there was still some concern about the question of education. This is because of the natural law concern we have talked about, whereby the perfection of procreation isn't just in the having of offspring, but their correct education to be useful members of society.

Now it is a great harm to a Republic that its membership be educated in a way that leads them to dependence; and it is a great good for the Republic, and also for those educated, if they are led instead to independence. This independence is of two kinds: independence of practical capacity, and independence of thought.

The first kind means that you must have some capability of production, whether intellectual or physical. You should, in other words, learn physical sciences, mathematics, or at least a trade.

The second comes from the ability to think things through in a disciplined manner. This requires the skill of logic and, again, mathematics: but it also requires a context. Logic and math are machines, or tools, which generate correct results only if they are given correct material. History and the classics of philosophy and literature are the most reliable source for this context.

When I say that logic is a machine, I mean what the logician Dodgson meant (although he is better known by his pen name Lewis Carroll, author of Alice in Wonderland). He points out that the following is logically valid: "All cats understand French; some chickens are cats; therefore, some chickens understand French."

That syllogism is valid but not sound -- however, you cannot detect soundness through logic or math alone. Having great skill at math will let you believe Congress' budget numbers; but it is context that lets you know that, even though the numbers add up on paper, they are a complete fantasy. Once you realize that, you can do the math correctly (say, recognizing that they are not accounting for Federal pensions), and come to a sound answer.

As to your bigger question of whether this is a family or a government concern, of course it is naturally a matter for the family. However, unless the government is gotten entirely of the business of education, they will either be directly educating the mass of children, or at least setting standards for their education. If we leave them to train people only for submissive roles, we will find that we have a dependent majority -- and you can see where that leads, because we have one today!

No, I think we must move to demand proper standards. There is no alternative to contesting them, and forcing a government that adheres to them. Otherwise we will find that the potential for a free people has been washed out from under us, and what might have been a citizenry has become a dependent mob.

Eric said...

Grim, you're going to end up in a big argument over what the 'standards' exactly are. Yes, History and philosphy are important; but just who are you talking about? Howard Zinn or Herodotus? Aristotle or Michel Foucault? The devil is in the details.

Doug has a very valid point about utopianism--and I see that from both left and right.

Grim said...

I understand that the argument arises necessarily out of the proposal. It's just that I don't see a way to avoid the argument.

There is a sense in which you can divide education into questions of fact and questions of meaning. You may say that math and logic are about facts, sort of; some of the hard sciences are about facts. If you say, "Government schools shall only teach math, logic, and hard science," then you're going to get a dispute over which science -- indeed, we have that dispute already, and not only with creationism. You certainly see it with the so-called "social sciences," but if you ban teaching those you can't teach history -- and as you well know, an education without history is no education at all.

If you can think of a way to get government entirely out of the education business, then you can avoid the problem of engaging a contentious political debate (or, as you correctly put it, 'a big argument'). How, though, would you do that? Is it really possible to do it while sustaining an advanced economy?

Anonymous said...

Re. Education: At the moment I would settle for an education system where students graduate and are literate and numerate enough to read and understand warning signs and instructions, and to be able to balance a check book and estimate the cost of a cart of groceries. Not everyone needs to go to college, but everyone should be able to read, write and cypher!


Cass said...

Doug has a very valid point about utopianism--and I see that from both left and right.

There's a lot of that going around lately.

It would be funny if it weren't so pathetic.

douglas said...

You know Grim, I'm actually very sympathetic to your proposal- I agree with your goals and desires completely. I'm just not sure if the system we're using now (mandatory free public education or in government approved institutions but at additional expense) is the best way to go after all. The question to my mind isn't 'do we need to promote classical liberal education?', but 'how best do we promote classical liberal education?'

Once one becomes versed in the basics of reading, writing and mathematics, one of the best instructors for discipline of thought is life experience. Yes, history, logic and philosophy are excellent instructors as well, but many a man without formal training in these things has learned the most important of these lessons from astute and considered living itself. I think perhaps that is what is missing more than the formal education. Too many of these kids don't have any real experience of having to cut it themselves in the real world. How many parents do you see at OWS? Very few indeed, and why is that? Because having children can be a very functional way to disabuse one of many a whimsical notion developed in some ivory tower somewhere using some sort of logic and philosophy, which as you pointed out, are tools which if garbage is put in, garbage comes out.

Perhaps we should analyze the discussion in terms of stages of education- elementary (K-3) level being different from primary (4-6), Junior High (7-9) and High School (10-12) for the primary education, and then Bachelors, Masters etc. in higher ed, and/or technical/vocational training (which to me should still include some aspects of liberal education, but perhaps in a more narrow scope closely pertaining to the chosen field of study). I'd really like to have more discussion in that direction.

The funny thing is, the older and further from school I get, the more I feel compelled to continue my 'studies' and find things to read, and people to talk to who will continue to expand my understanding of the world I live in and who I am in it. Without such a desire, even the best of learning institutions are nothing. With it, even a humble blog can be the equal of any university.

Dad29 said...

Indirectly related under "education":