Public debate is now a little richer, less like a comic strip

In her interview on CSPAN’s Q&A on April 19, Janet Tavakoli made the comment that in the past, before the explosive growth of the financial services sector, investment bankers used to police themselves. She illustrated the point with this story:

People knew each other. People that I started out with in the business - we all still pretty much know each other, and people would not pick up the phone of people who behaved badly. I remember reading the biography on Andre Meyer, one of the financiers at Lazard Freres, and somebody called him about somebody who had not behaved well in the financial business and they said, "What do you think about him?" and he said, "I don’t know him," and they said, "Of course you know him, you worked with him." And he said, "I don't know him!" And that was the way that the bad actors were dealt with, you just shunned them.

Maybe Alan Greenspan wasn’t just clueless when he confessed during his October 2008 testimony to the government oversight and reform committee that he and others who “looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief. Such counterparty surveillance is a central pillar of our financial markets’ state of balance.” Maybe that’s how things worked when he was coming up.

It seems that the economic crisis has caused a sort of break in our polarized public debate about what the economy is for, what government is for, and why people behave the way they do, a public debate which for a long time has been impoverished almost to the point of cartoonishness. The 1990s were probably the worst time for simple-minded public discussion, epitomized by Newt Gingrich’s absurd history of the United States, To Renew America, in which he postulated two distinct eras, the 358-year period from 1607 to 1965, when we knew what America was about, and the sharply contrasting 30-year period from 1965 through the 1990s in which “cultural elites” discredited American civilization and promoted irresponsibility.

Such categorical hype was echoed in Lynn Cheney’s book Telling the Truth, in which she, like Newt and other culture warriors, divided up the world into two kinds of things—according to her, an absurd and cartoonish Truth versus Postmodernism— in order to pit one against the other in a false either/or contest between unreal choices. The culture war seems old fashioned now, but when George W. Bush became president in 2000, the impoverished polarizing debate that was the culture war morphed from the realm of talk to the realm of action when Lynn’s husband Dick Cheney put that comic strip “us versus them,” “good versus evil” framework into practice, with horrible consequences.

While no one would wish for millions to lose their jobs or for any of the other awful things that have happened lately, the richer public debate that has resulted from this crisis is exciting. Some basic things have become clearer. It’s clearer that the government and the market are not categorical opposites; the market could not exist without government. Corruption is a human failing, not just a republican or democratic one. It is human nature to try to minimize risk and maximize reward.

The economy exists within a constructed legal and technological framework. For example, without laws that limit financial liability for investors, capital would have to be raised “locally;” that is, all companies would be private, dependent on investment from family members or others willing to take on full liability for their operation. Laws in place centuries ago when Britain began to industrialize made it difficult to create joint-stock companies, severely restricting wider capital investment. Limited liability is now, of course, integral to our economy.

Many economic outcomes are the result of policy decisions, not supply and demand. There is no automatic process in the economy to appeal to in order to avoid having to make policy decisions all along the way, as “free market” advocates seem to believe. The argument that raising the minimum wage would cost jobs is an argument about policy—about trade-offs. The opposite trade-off is made when companies down-size to increase profits. Non-emergency down-sizing is a matter of policy, not a matter of an automatic, neutral process, like supply and demand. Whether or not companies make decisions based on their short-term or long-term interests is a policy decision.

A self-regulating market is indifferent to many common interests and moral imperatives, including the plight of the unemployable, the working poor, and those who are discriminated against. A self-regulating market, under the right labor market conditions, can employ people as near slaves if government—human decision making— does not intervene.

Alan Greenspan was right to see human decision making as a major part of how the economic world works. Policy-making requires that we make value judgments about which trade-offs we want. A richer public debate could define some common ground on which we could make these political decisions.

Self-delusion

Years ago, before the Enron scam came to light, I heard Jeffrey Skilling in an interview say about Enron’s business activities that “we are on the side of the angels.” The moment I heard him say it I knew something was wrong, even without knowing anything about the business or what was going on behind the scenes. It was the language of the strenuously self-deluded.

Tuesday on CSPAN I heard the same language of strenuous self-delusion from Marc Thiessen. Whether or not Thiessen’s other claims are true (that torture worked), much less relevant to the argument of whether we should torture, his statement on CSPAN and in his Washington Post op-ed, that our torturing detainees “helped” them “do their duty to Allah”—indeed “liberated [them] to speak freely”—, is so far outside of what he might need to support a reasoned argument that he really believes is true, that it makes me wonder if deep down he knows he’s full of it. The same could be said about Liz Cheney’s claim on Thursday on MSNBC to the effect that because we use these same techniques on our own people for training, they’re not torture. Abuse of language like this doesn’t call for direct refutation, but it might be a clue that the people speaking don’t quite believe their own line.