Tag: populism

Argentina’s Point of No Return

The most important development this week in Latin America is the decision of the Argentine government to seize control of Yacimientos Petrolíferos Fiscales (YPF), the country’s largest oil company. On Monday, President Cristina Fernández de Kirchner announced the expropriation of the controlling stake of YPF that is owned by the Spanish company Repsol. The Spanish government, backed by the European Union, has announced that it will take retaliatory measures against Argentina, noting that “all options are on the table.” The Economist Intelligence Unit has a very good analysis on the case and the implications for Argentina.

The big question after Fernandez’s overwhelming reelection last fall was whether she would deepen the economic model she and her late husband (and predecessor) implemented since arriving to power in 2003—marked by high government spending, tight economic controls on industries, and selective nationalizations of businesses—or instead change course given the growing signs of exhaustion: high inflation, growing fiscal deficit, increasing capital flight, fall in foreign direct investment, the weakening peso, etc.

Any doubt is now gone. With the nationalization of YPF, Argentina firmly joins Venezuela, Ecuador, and Bolivia in the club of Latin American nations that espouse high-octane economic populism. In the upcoming months, we can expect more protectionist measures, further controls on the economy and, once the government runs out of the money that it seized in the past three years from the private pension funds and the Central Bank’s reserves, we should not be surprised if it moves to take control of the banks.

Things will only get worse for Argentina.

‘Border Enforcement’ Bill Driven by Election-Year Politics

A $600-million bill to enhance border enforcement has hit a temporary snag in the Senate, but it is almost inevitable, with an election only a few months away, that Congress and the president will spend yet more money trying to enforce our unworkable immigration laws.

“Getting control of the border” is the buzz phrase of the day for politicians in both parties, from Sen. John McCain, R-Ariz., to Sen. Chuck Schumer, D-N.Y. Never mind that apprehensions are down sharply along our Southwest border with Mexico, mostly I suspect because of the lack of robust job creation in the unstimulated Obama economy.

Meanwhile, since the early 1990s, spending on border enforcement has increased more than 700 percent, and the number of agents along the border has increased five-fold, from 3,500 to more than 17.000. (See pages 3-4 of a January 2010 report from the Center for American Progress and the Immigration Policy Center.) Yet the population of illegal immigrants in America tripled during that period. If this were a federal education program, conservatives would rightly accuse the big spenders of merely throwing more money at a problem without result.

To pay for this politically driven expenditure, Congress plans to nearly double fees charged for H1-B and L visas used by foreign high-tech firms to staff their operations in the United States. The increased visa tax will fall especially hard on companies such as the Indian high-tech leaders Wipro, Infosys, and Tata.

This all has the ring of election-year populism. Congress pretends to move us closer to solving the problem of illegal immigrants entering from Latin America by raising barriers to skilled professionals coming to the United States from India and elsewhere to help us maintain our edge in competitive global technology markets.

DISCLOSE Near the End

The cloture vote on the DISCLOSE Act will soon be taken. It appears that its supporters lack the votes to close off debate.

Brad Smith explains some of the problems of DISCLOSE.

Roger Pilon notes other failings.

President Obama tried to rally the troops yesterday by taking a populist tone. I have never thought Obama was a very good demagogue, and his efforts at populism belie his strengths. President Obama and congressional Democrats are hoping a defeated DISCLOSE will be good for their fall campaigns. Historically, campaign finance issues have had little salience with the public. On these issues, more than others, hope does seem to spring eternal.

The Roots of the Tea Parties

The sight of middle-class Americans rallying to protest overtaxing, overspending, Wall Street bailouts, and government-directed health care scares the bejeezus out of a lot of people. The elite media are full of stories declaring the Tea Partiers to be racists, John Birchers, Glenn Beck zombies, and God knows what. So it’s a relief to read a sensible discussion (subscription required) by John Judis, the decidedly leftist but serious journalist-historian at the New Republic. Once the managing editor of the journal Socialist Revolution, Judis went on to write a biography of William F. Buckley Jr. and other books, so he knows something about ideological movements in the United States. Judis isn’t happy about the Tea Party movement, but he warns liberals not to dismiss it as fringe, AstroTurf, or a front group for the GOP:

But the Tea Party movement is not inauthentic, and—contrary to the impression its rallies give off—it isn’t a fringe faction either. It is a genuine popular movement, one that has managed to unite a number of ideological strains from U.S. history—some recent, some older. These strains can be described as many things, but they cannot be dismissed as passing phenomena. Much as liberals would like to believe otherwise, there is good reason to think the Tea Party movement could exercise considerable influence over our politics in the coming years.

Judis identifies three strains of American thinking that help to define the Tea Party movement:

The first is an obsession with decline. This idea, which traces back to the outlook of New England Puritans during the seventeenth century, consists of a belief that a golden age occurred some time ago; that we are now in a period of severe social, economic, or moral decay; that evil forces and individuals are the cause of this situation; that the goal of politics is to restore the earlier period; and that the key to doing so is heeding a special text that can serve as a guidebook for the journey backward.

I’ve offered a dissent from the common libertarian perception that we have declined from a golden age of liberty, but declinism is certainly a strong theme in conservative thought. (Not to mention in Club of Rome environmentalist thought.) Judis suggests that declinism often takes conspiratorial form and wonders “how could a movement that cultivates such crazy, conspiratorial views be regarded favorably by as much as 40 percent of the electorate?”

That is where the Tea Party movement’s second link to early U.S. history comes in. The Tea Partiers may share the Puritans’ fear of decline, but it is what they share with Thomas Jefferson that has far broader appeal: a staunch anti-statism.

And the final historical strain that Judis identifies:

They are part of a tradition of producerism that dates to Andrew Jackson. Jacksonian Democrats believed that workers should enjoy the fruits of what they produce and not have to share them with the merchants and bankers who didn’t actually create anything….

During the 1970s, conservatives began invoking producerism to justify their attacks on the welfare state, and it was at the core of the conservative tax revolt…. 

Like the attack against “big government,” this conservative producerism has most deeply resonated during economic downturns. And the Tea Parties have clearly built their movement around it.Producerism was at the heart of Santelli’s rant against government forcing the responsible middle class to subsidize those who bought homes they couldn’t afford…. Speaking to cheers at the April 15 rally in Washington, Armey denounced the progressive income tax in the same terms. “I can’t steal your money and give it to this guy,” he declared. “Therefore, I shouldn’t use the power of the state to steal your money and give it to this guy.”

Judis could have cited Ayn Rand’s analysis of “producers” and “looters” in influencing this strain of Tea Party thought. Not to mention a much older classical liberal version of class analysis, one that predated Marx’s theory, which focused on “conflict between producers, no matter their station, and the parasitic political classes, both inside and outside the formal state,” or “between the tax-payers and tax-eaters.”

Judis concludes on a note of despair:

their core appeal on government and spending will continue to resonate as long as the economy sputters. None of this is what liberals want to hear, but we might as well face reality: The Tea Party movement—firmly grounded in a number of durable U.S. political traditions and well-positioned for a time of economic uncertainty—could be around for a while.

There’s plenty for libertarians to argue with in Judis’s essay. But it’s an encouraging report for those who think it’s a good thing that millions of Americans are rallying to the cause of smaller government and lower spending. And certainly it’s the smartest, most historically grounded analysis of the Tea Party movement I’ve seen in the mainstream liberal media.

Libertarianism and Big Business: A Dissent

The March-April issue of Cato Policy Report featured a discussion among Timothy Carney, Uwe Reinhardt, and Ross Douthat of Carney’s book Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses. The tenor of the discussion was reflected in the title, ”Big Business, Big Government, and Libertarian Populism.” Richard L. Gordon, a distinguished economist emeritus at Pennsylvania State University and a Cato adjunct scholar, took strong issue with all three commenters and sent us the following rebuttal, which we’re pleased to publish here:

The March/April Cato Policy Report covered a January 2010 Cato Book Forum on Timothy P. Carney’s Obamanomics. Carney summarized his book and there were responses from Uwe Reinhardt, a Professor at Princeton noted for advocacy of strong government intervention in health care, and Ross Douthat, a (first-year) New York Times columnist, a self-styled conservative who (from scanning his columns) seems a weak one. The result was three tirades about how big business runs government. It is surprising in the twenty-first century to see outside of WhiteHouse.gov, movies, and television dramas such naïve attacks on the power of big business. This is not the libertarianism that I know. However, superficially plausible dominance theories are too convenient not to revive frequently, regardless of enormous refutations. Thus, some key, familiar points need recollection.

The charge of big-business dominance has at least three flaws. First, it is a myth. Politicians created the massive growth of government with more input from intellectuals than from business executives. Second, it reverses causation; government ensnares industry. Third, it is absurd since big business, however defined, consists of diverse, often conflicting companies.

Much, including the most problematic, expansion of government, has almost nothing to do with big business and is certainly not what any big (or small) firms would want. The entitlements explosion is in social security, government-employee pensions, Medicaid, and Medicare. The first is notoriously a shifting of savings from private firms to an entirely government-run program with a rigid reliance on treasury paper debt whose repayment is dubious. Other government pension plans do invest in the private sector so they rely somewhat on private firms. Again, this only displaces what individuals would have done for themselves, despite the fears of libertarian interventionists.

The messes that are Medicaid and Medicare do involve among many others big businesses in pharmacy and medical insurance. In the latter case, the non-profit Blue Cross and Blue Shield companies are major, often dominant factors. The other, more important participants are the large number of separate medical providers and hospitals. The final involved sector is much of American business. To lessen the impact of World-War II wage and price controls, the U.S. government extended to medical insurance the legal fiction used for Social Security that part of insurance costs could be called “employer contributions” and not considered income subject to personal income tax. Basic economic theory amply confirmed by empirical research shows that these payments are labor costs and lead to reduced direct compensation.

The result is a system in which payment is widely separated from decisions about medical procedures. Physicians err on the side of ordering additional tests because they know that neither they nor the patient directly incur the costs. (The fear of lawsuits may increase that bias, but it is unclear that tort reform without reform of insurance provision would make a big difference.) The prime fault of Obama care is that it reinforces, rather than lessens, the separation of patient from payee. This again is hardly an ideal for business.

Even more obviously, another great problem area, education, suffers from a government takeover so ancient and thorough that only specialists are aware of its existence. The federal government increasingly intervenes into pre-college education. Since World War II, all government has greatly expanded its role in higher education to the extent that the great private universities are heavily government dependent. Congress tacked on to the health-care bill the total government takeover of college loans. Only a lunatic would postulate that any of this is due to a big-business conspiracy to control minds, particularly given the massive leftward tilt of academia.

The largest non-entitlement component of the federal government, defense, does notoriously, in part, involve an excessively cozy relationship with suppliers. However, spending for equipment is dwarfed by direct and indirect personnel costs. The spending on equipment, like many government decisions, is distorted by Congressional obsession with bringing jobs to their districts. No big-business excuse applies to nondefense discretionary spending. In short, it is a mockery to assert big business is the primary source of excessive government spending.

Second, politicians, rather than business executives, generate the dependence on government. What was described as a craven sellout to big pharma was actually part of the ruthless blackmail through which the Obama administration silenced a wide range of the potential criticism of its health-care monstrosity. Aside from all the normal government tools of torture such as the Internal Revenue Service, the antitrust agencies, and the Environmental Protection Agency, drug companies are subject to special and critical government scrutiny. The companies must endure the cumbersome, slow, expensive, ineffective Food and Drug Administration approval process. The industry relies on patent protection and re-importation bans to secure profits sufficient to recover research costs bloated by regulation.

The “big” drug and insurance companies were far from the only frightened firms. Despite widespread physician concerns, the American Medical Association abandoned its long-time opposition. More strikingly, AARP, the relentlessly wrong-headed self-created representative of seniors, flooded its publications with distorted pro-legislation articles.

This is unfortunately typical of the pressures companies face. Anyone who argues that lobbying is improper fails to recognize the excessive power that government possesses. It becomes essential to resist in every legitimate way widespread unbridled pressure. As Obama and his admirers constantly demonstrate, response to outrageous interventionist claims is regularly defamed. Efforts are made to discredit and even ban critics. In such a situation, limiting lobbying and other forms of response is an outrageous threat to constitutional government.

Famously, Microsoft did not take lobbying seriously until hit by dubious antitrust suits. In the energy sector, clearly pressures to go green and not oppose global-warming policies caused enormous fawning by a distressingly wide range of companies. Many leading retailers have jumped on green initiatives such as the long-life-bulb bandwagon arising because legislators responded to three decades of public resistance by forcing use of these bulbs. Exxon, after slander over its support, far smaller than that of the U.S. government, of research skeptical of global-warming concerns, has added a green tinge to its advertising, albeit not as blatantly as BP and Chevron. General Electric became a sell-out due to its involvement in financing, medical equipment, and power generating devices. The major banks and brokers faced and suffered badly from the political pressures to lend heavily to potential homebuyers with questionable financial situations.

At best, we can admit that big business is no less, but not no more, likely than any interest group to seek to twist the web of government control in its favor. A prime example of the defects is that Obama regularly assumes away trade-union influence in his attacks on interest groups. One of my great teachers, M.A. Adelman, forcefully argued that it is the voting power of interest groups that matters. He reached that conclusion in studying the antitrust attack on A&P that was driven by the extensive anti-chain store outlook of the thirties. His student Peter Pashigian showed that similarly automobile dealers secured protection from automobile manufacturers. When Adelman turned to oil, he found that “small” oil producers were sheltered at great cost to consumers from competition, domestic as well as imported, by big oil. A long-time concern about banking was the legislation limiting bank consolidation. A well-known, but regularly neglected part of this is the unreality of the big versus small company distinction. In most of these cases, the protected were rich local notables. In contrast, through pension funds and mutual funds increasingly, big companies are ultimately owned by much less affluent people.

Finally, a pro-big-business or even a general pro-business outlook is a nonsense concept. Big businesses conflict, not just with small business, but with each other. Protection of the once-big business of steel production was at the expense of the manufacturers of automobiles and other durable goods and their customers. The oil industry disagreed with the automobile industry on the best policy, given the inevitability of action, to reduce gasoline consumption legislatively. Large retailers relentlessly turn to imports when domestic producers, big and small, become too expensive.

This last point is key to understanding what libertarian economics is about. Decades before tea parties, libertarians were for limited government that involves among other things free markets. We want the market to decide winners and losers. We feel that private monopoly is so rare and difficult to detect and reform or regulate that we oppose purportedly anti-monopoly policies.

The real danger is the unopposed monopoly power of government. The need is protection from politicians unaware of the limits of prudent, constitutional government. The heath-care debate provided many examples. The quintessence of the disgraceful process of passing Obamacare was Nancy Pelosi, yielding a grossly oversized gavel, leading an unnecessarily confrontational walk up the Capitol steps through a wall of peaceful protestors, instead of taking the underground access that is available. Less dramatic, but more chilling, was the consistent dismissal by the law’s proponents of constitutional flaws in the bill. It suggests a variant on what Jimmy Durante’s character in Jumbo said when caught with an elephant, “Constitution, what Constitution?” As Cato has validly argued, what we need is less, not more, restrictions on speech and stringent term limits.

Richard L. Gordon
Pennsylvania State University

For some other libertarian views on this topic, see Roy A. Childs, Jr., “Big Business and the Rise of American Statism” or this discussion at Cato Unbound.

Populism: Good and Bad

Today, Politico Arena asks:

What is it about the word “populist”? (these days)

My response:

“Populist” (or “populism”), in its American usage, invokes the “common man,” yet the idea’s origins – in ”the people” or “the polis” – can be traced to ancient Greek democracy and, in particular, to political demagoguery.  Both Plato and Aristotle had reservations about democracy as a system of government precisely because it was susceptible to corruption by populist appeals to superstition and error.  In America, populism has had a long and varied history, but it is most often associated with the Populist Party that was formed in 1891 and, in particular, with the fiery speeches of the Democratic Party candidate for president in 1896 and 1900, William Jennings Bryan, and his famous ”cross of gold” speech at the 1896 Democratic National Convention.

Thus, in a fundamental way, populism stands opposed to elitism, yet it’s more complicated than that.  On one hand, the populism of the late 19th and early 20th centuries contrasted with the Progressivism of the era, which held that society should be organized and run by “professionals” trained at the best schools.  (Thus, the emergence of political “science,” as distinct from the older tradition of political philosophy.)  But on the other hand, Progressives themselves purported to speak for “the people,” even if in practice they were often contemptuous of the people’s capacity to govern themselves, susceptible as the people were to the appeals of demagogues.

At the end of the day, therefore, populism is a double-edged sword.  Used pejoratively, it stands for the idea that politicians, to obtain or preserve political power, will appeal to base popular sentiments or mistaken (often economic or legal) ideas.  A good example is Obama’s reaction last week to the Supreme Court’s Citizens United decision, rooted in the First Amendment’s guarantee of political speech:  He called it “a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans.”  There is an element of truth to that sentiment, of course, because the system of government that has evolved in America under the influence of Progressive “professionals” has endowed those professionals (read: the governing class, in all its reaches) with unprecedented power over “the people,” who often feel powerless as a result.  But demagogic appeals like that or like others we’ve heard lately from Obama will only exacerbate that problem.  By contrast, a “populist” appeal that seeks to return power to people (N.B.: I did not say, as in the ’60s, “power to the people”) – power to run their own lives, free from unwarranted government regulation or dependency – is a side of the idea we hear too seldom.  Yet it’s what our founding documents are about.  They established not simply popular government but limited popular government – ensuring the right of the people to govern themselves, not mainly through government but individually or in voluntary association with others.  It is that liberty that Progressive elitists who “knew better” – the folks in Cambridge who voted 84 to 15 against Scott Brown – have gradually extinguished.

The Tea Party Comes Home

Today, Politico Arena asks:

The message from Massachusetts

What now for the Democratic agenda?

My response:

Listening to Scott Brown’s long, barely scripted acceptance speech last night, you had the refreshing sense that you were listening to an ordinary American, not to some political cut-out.  Here’s a guy who campaigned in a pick-up truck with over 200,000 miles on the odometer, who listened to the voters and understood that they wanted not simply to block tax hikes but to lower taxes (and the last thing they wanted was for their taxes to pay terrorists’ lawyers bills!), who understood that even worse than the health care bill now before Congress were the back-room deals that brought it about, who’s served proudly for 30 years in the National Guard – in short, here’s guy you’d be comfortable having a beer with because, as he said, “I know who I am and I know who I serve.”

Which brings to mind the famous Rose Garden beer the president and vice president shared with Prof. Gates and Sgt. Crowley – speaking of (dis)comfort.  And that brings to mind Cambridge, which stayed true blue, 84-15, Walter Russell Mead informs us this morning in his delightfully tongue-in-cheek Arena post.  (“First, some good news for Democrats: the base is secure.”)  As goes Harvard, so goes Berkeley.

But to today’s Arena question.  The Democratic left is predictably outraged that “the people” they so love in the abstract have so disappointed them in the concrete.  Exhibit A is last night’s Arena post by The Nation’s Katrina vanden Heuvel.  Railing against “the Tea Party’s inchoate right-wing populism” (if it’s infested Massachusetts, shudder to think of it in Idaho!), Katrina tells Obama to “get tough, get bold, kiss ‘post-partisanship’ goodbye,” and “put yourself squarely back on the side of working people” by “passing the strongest possible healthcare bill as quickly as is feasible.”  And there’s the cliff, Katrina.

Lanny Davis has more sober advice for Obama in this morning’s Wall Street Journal.  To those who are pointing fingers at Martha Coakley, Lanny says, “This was a defeat not of the messenger but of the message” – the unrelenting leftism that has come from this White House and this Congress.  And he points, by way of instruction, to Bill Clinton’s response to the disastrous elections of 1994, though he doesn’t mention Clinton’s ringing, albeit inaccurate, description of his course-change – “The era of big government is over.”  Is it in Obama’s DNA to make such a course correction?  Does he have a reset button?

On health care, Obama and his party are in an almost impossible situation.  If they press ahead, as Nancy Pelosi and others are urging, the cliff awaits them in November.  But if they abandon their project, what will they run on in November?  It’s a mess of their own making, of course, so completely did they misread the election of 2008.  What better evidence of the endurance of principles of sound, limited government that some two centuries later, The Tea Party has come home to Boston.