Arnold Kling  

Banana Republic Watch

Cities, Suburbs, Country: Who'... Henderson Speech at Hillsdale ...

Who wrote this? Answer below the fold. The mystery author writes,

The finance sector's increasing concentration and growing political muscle have undermined the traditional American understanding of the difference between free markets and big business. This means not only that the interests of finance now dominate the economic understanding of policymakers, but also -- and perhaps more important -- that the public's perception of the economic system's legitimacy is at risk.

You might guess James Kwak or Simon Johnson. It seems very Baseline Scenario-ish.

However, in this case, it does not come from the left of center. Instead the words are those of Luigi Zingales, writing in a new journal called National Affairs, which is modeled after an earlier journal called The Public Interest.

Zingales goes on to say,

We thus stand at a crossroads for American capitalism. One path would channel popular rage into political support for some genuinely pro-market reforms, even if they do not serve the interests of large financial firms.

The alternative path is to soothe the popular rage with measures like limits on executive bonuses while shoring up the position of the largest financial players, making them dependent on government and making the larger economy dependent on them...This is the path to big-business capitalism: a path that blurs the distinction between pro-market and pro-business policies, and so imperils the unique faith the American people have long displayed in the legitimacy of democratic capitalism.

Zingales says, and I agree, that the Obama Administration is inclined to go down this path (as was the Bush Administration under Bernanke, Geithner, and Paulson).

In another article in the same journal, James Capretta describes the role of middle-class entitlements in fiscal policy. This is another aspect of the Banana Republic trajectory.

In still another article, Steven M.Teles offers a sympathetic account of compassionate conservatism. He writes,

Compassionate conservatives could rebuild their linkages with reformist Democrats, changing policy slowly by reshaping the conventional wisdom in both parties.

If we're headed toward Banana Republicanism, I think compassionate conservatism is part of the problem, not part of the solution.

Finally, W. Bradford Wilcox documents the trends in marriage and social class.

now that the institutional model has lost its hold over the lives of American adults, sex, children, and intimacy can be had outside of ­marriage. All that remains unique to marriage today is the prospect of that high-quality emotional bond -- the soul-mate model. As a result, marriage is now disproportionately appealing to wealthier, better-­educated couples, because less-educated, less-wealthy couples often do not have the emotional, social, and financial resources to enjoy a high-quality soul-mate marriage.

Have a nice day.

Comments and Sharing

COMMENTS (7 to date)
Dale Simpson writes:

The Wilcox piece on marriage/class is fascinating.

Though it should be noted that many of his points have been made for quite a while by bloggers like 'Roissy in DC' and others.

JSIS writes:

What exactly are these pro-market reforms Luigi talks of. I don't see an example of any in that verbose article

shecky writes:

Banana Republic, coming to you from the Right.

The tone of National Affairs seems to be boilerplate conservative thinking for, oh, at least the last twenty years. Yup, looking at the list of editors and associates, that's about what you'd expect.

Don the libertarian Democrat writes:

I have to agree with JSIS. Zingales was long on sentiment, but short on proposals. I disagreed with some of his historical points as well, but I'd like to focus on another point.

I happen to be a follower of Burke, Hayek, and Oakeshott. Civil society evolves in an organic way, often achieving a stable form that is hard to change or changes slowly. Such is our Welfare State, and the other ones as well. It is a very stable system that involves a number of compromises that are proving very hard to unwind. In this world crisis, I feared Nationalism, but the Welfare State is here for the foreseeable future.

Given that fact, in the short run, following Burke, I believe in choosing a party and trying to make things incrementally better. In the long run, the only hope that I see for a smaller govt is for building a very strong safety net, and hopefully growing the economy in such a way as to have fewer and fewer people needing it. In that spirit, I support Milton Friedman's NIT and his Universal Health Plan. I also support his measures in "A Monetary and Fiscal Framework for Economic Stability". In my view, it's an attempt to do just what I'm advocating: Have govt fill some basic functions, and then set up a system that reacts to the changes in the economy in such a way as to pragmatically fill those needs. In other words, we should agree on some goals, and then propose plans to fulfill those goals that are economically efficient and fair and tend to reduce the size of govt, much of which is like the financial world, moving things around without getting much done. Our system is so full of competing incentives and disincentives, Raymond Smullyan couldn't explain it.

But the idea that, in any crisis, the govt should stand back and watch, is going nowhere fast. That's when a large number of people most want govt to intervene. Also, the SEC and other such agencies don't exist for James Grant or other savvy investors, but in order to satisfy the need to have the govt insuring that the system isn't entirely rigged against the little guy. We might well laugh at that, given the SECs behavior, but the answer will not be for a large number of our citizens getting rid of any third party oversight by the govt. That's just not on. Many people will always want better govt, not less. The solution is to set up better govt that leads to less govt in the long run.

Finally, in fairness to Zingales, he has given a number of proposals in other essays and posts.

John Samples writes:

Don the libertarian Democrat writes:

"we should agree on some goals, and then propose plans to fulfill those goals that are economically efficient and fair and tend to reduce the size of govt"

This recalls to me Michael Oakeshott's remark that even those who oppose rationalism in politics must have a plan, thereby becoming rationalists.

RPB writes:

Break the lobbyist grip and reform campaign financing. That is the true path to reform.

Bill R writes:

I've been meaning to pick up his book, "Saving Capitalism from the Capitalists" but never got around to it. I'd imagine it includes "proposals".

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