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.