Bad Antennae

Today's Obama econ must-read is from Ed Harrison at Big Picture as he discusses this Marshall Auerback article on Obama favoring the bankers.

Why is Obama favoring big business? Neo-liberalism.

In the 1990s, the so-called Third Way, popularized by Bill Clinton and Tony Blair, changed the fortunes of liberals dramatically.  Traditionally, the Democratic and Labour Parties were controlled by unions and working class interests – the so-called left wing.  This is one reason Democrats controlled the South until the civil rights movement. But, stagflation seemed to discredit leftish policies. In the U.S., the 1980s ushered in 12 years of Republican Presidency.  Labour’s trip into exile was even longer, 18 years.

The Republican’s were stopped only as a result of an unusual combination of Ross Perot’s third-party candidacy and Bill Clinton’s co-opting of large parts of the right’s pro-business anti-regulation, pro-free market platform – so-called Neo-Liberalism.  The neo-liberals in America were so successful that Tony Blair adopted the same tactics in creating New Labour and overthrowing the Conservatives in 1997. Junchiro Koizumi copied Blair in moving the LDP away from its base toward neoliberalism, vaulting him into power in 2001. In fact, one could even see Gerhard Schroeder as a neo-liberal who moved Germany’s SPD into power in 1998 – one reason the SPD is now losing voters to Oskar Lafontaine and die Linke (The Left).

(More after the jump...)


So, Marshall is right. Obama has been more interested in sending out a pro-business signal to re-assure business interests and to court independent voters. I believe he has made a political calculation that he can hold his base of support even if he adopts a more center-left positioning because they have nowhere else to go.  It’s not like they are going to vote for the Republicans. This has been an effective way to power for left-leaning mainstream parties for at least 15 years.

However, I suspect that the Obama Administration was taken by surprise by how huge post-bailout profits in the banking sector were. He probably also never anticipated the lack of political antennae Wall Street executives showed in paying large bonuses. So, his pro-business emphasis has backfired and he finds himself in a position where he must ratchet up the populist rhetoric – not necessarily to be followed by any concrete actions.

The problem with this calculus is that, in the wake of this major financial crisis, there are lots of voters who want much more fundamental change than Barack Obama has been willing to make.  This is true on banker pay, on auditing the Federal Reserve and on protecting American jobs. Words alone are meaningless – one reason populism and protectionism escalate from rhetoric into action.

There's a lot to digest there, but the reality is pretty stark:  Obama's a classic Clintonian neo-liberal, always has been, and always will be.  The alternative would have been Angry Johnny and Moose Lady with their neo-Hoover policies.  A kick to the jimmy is still better than a sword through the neck, but not by much.