Robina Chair in Law, Science and Technology, U. Minn. Law School
August 10, 2016 Bloomington, MN
I like Hillary. Would I like to have a mimosa with her? Wrong question. I suspect that that neither she nor I have much interest in partying during the mimosa part of the day. Indeed, I suspect that no woman who meets the mimosa test would run for President or be elected if she did. Instead, for me, a detail oriented policy wonk, the more relevant question is whether I would find a discussion of political strategy to be exhilarating. And in spite of the fact that I have supported Hillary for the last thirty years (since I was thrilled to discover that someone who had worked for the Children’s Defense Fund was running for Yale Alumni Trustee) and went out of my way to stick up for her over Bernie Sanders in the Minnesota caucuses, I still have no idea whether she sees the issues – the defining issues of our day – in the same terms that I do.
My doubts come from the way we are alike – the very reasons why I identify with her. She’s a few years older than I am, but we went to the same law school and were shaped by the same movements that opened to the door to professional women. Coming of age in that world and striving as a lawyer meant becoming a realist. The exciting ideas of the eighties and nineties proposed to “reinvent government,” free corporate decision-making from hidebound bureaucratic committees, and seize the center – which ushered in an era of technological change and globalization. In that age, it was hard not to resent the left – the self-destructive left that still seems stuck in the sixties, cheered Ralph Nader in 2000 (allowing the election of George W. Bush), and more recently shouted down Leon Panetta’s anti-Trump message at the Democratic National Convention. It was also hard not to admire (even without being First Lady) Bill Clinton’s political success at triangulation as he outflanked Republicans from the right, Obama’s success in advancing universal health care through the adoption of Romneycare (even while the experts recognized that Hillary’s proposals were better), and the embrace of free market oriented cap and trade policies as a principal approach of those who would fight climate change. Hard-headed realists of the eighties and nineties became admirers of neo-liberal policies such as free trade even as they remained loyal to the causes of racial and gender justice.
But this is a different era. For hard-headed realists, the central issue of the day is whether Hillary can translate progressive policies, which she appears to support, into a narrative that creates a new political identity. Creating that narrative requires tying together three pieces.
The first is the dysfunction of today’s business elite. With the rise of industrialization in the nineteenth century, a new capitalist class, freed from the restraints of a well-ordered society, took the world to the brink of destruction through two world wars and the Great Depression. Industrial capitalism was finally made to work for society as a whole with the New Deal in the United States and post-war European reconstruction. Today, the rise of a new economic order, which has ushered in globalization and the information age, has destabilized the institutions of mature capitalism and, yet, no new order has arisen to manage the changes. Instead, a resurgent capitalist class appears to be locked into a series of destructive practices.
These practices, which brought us the financial crisis, combine free market ideology that blocks meaningful reforms with a corporate elite mired in short-termism. Corporate executives today earn their billions by focusing on quarterly earnings (threatened by activities shareholder who will dislodge them if they do not.). As a result, they cook the books. The same type of economists who celebrated the efficiencies of corporate takeovers in the eighties now write doctoral dissertations on how the emphasis on stock options encourages dishonesty in the executive suites. These same executives, who like Mitt Romney squirrel away their earning in the Cayman Islands, shortchange the future. While corporate earnings are up, corporate investments in research, machinery, and human capital are down. Workers, once considered the backbone of industry, have become liabilities; the easier way to boost immediate earnings is to reduce workforces, training programs, and pension plans. CEOs who once, like Mitt Romney’s father, thought that the health of their companies constituted the mark of their executive success now like Donald Trump view the size of their individual bank accounts as the more important measure. These changes do not just create greater inequality, although they do exactly that. And they do not just rig the system against those outside of the elite, although they also do that. These changes also imperil the global economy and the American place within it. They are guaranteed to produce:
- Recurrent, intensifying financial crises. New Deal regulations eliminated for fifty years what Herbert Hoover viewed as inevitable bubbles and busts. Financial crises – the Savings and Loan debacle of the eighties, the turn of the century dot.com bust, and the much more severe Great Recession – are back. And Dodd-Frank reforms notwithstanding, nothing has been done to prevent the next crisis.
- The dismantling of the feedback loops that reinvest profits in mechanisms that improve Both public and private investment in basic research have been scaled back. The most recent financial forecasts have been revised downward because companies are continuing to sit on boatloads of cash that should be invested in new plants and machinery. And public and private investments in human capital are down, as states cut funding for public universities and companies fail to invest in workers. Free market publications like The Economist routinely decry the plateauing of productivity increases, which are likely to further slow growth, yet it is hard to imagine further increases in productivity without greater investment.
- The destruction of the link between corporate profits and consumer spending. Companies that share prosperity with their workers create the conditions that spur consumer confidence, increasing demand. Henry Ford got that if his employees could afford to buy his cars, his company was likely to be more prosperous. Today, executive insistence on using companies to extract profits means that workers do not share in capitalist successes, weakening demand for the next generation of products. Globalization has forestalled the day of reckoning, as companies move their products to the hot markets of the day, but a global stall is on the horizon.
Elizabeth Warren – and Donald Trump – capture the sense that something is wrong with this picture when they say that the “system is rigged.” Hillary has endorsed a progressive agenda – taxing the rich, investing in infrastructure, raising the minimum wage, making college more affordable, profit sharing with employees – that is mostly right. Yet, it’s not clear whether she can construct a narrative that links the problems that threaten the American working class to issues that threaten the American economy as a whole. That narrative requires tying together today’s information economy with the need to recreate public solutions that rechannel the benefits of that economy into sustainable progress for everyone.
The second issue is the terms of America’s global engagement. A central reason for the problems with today’s business class is the fact that the elite can evade national norms and regulations through the creation of a global race to the bottom. The Trans-Pacific Partnership becomes a problem not because foreign trade is inappropriate in itself, but because it is a symbol of a stacked system that allows corporate interests to evade accountability to anyone, undermining confidence in global institutions. Trump would respond by “making America first,” at a time when the crying need is the creation of reinvigorated international institutions. With the fall of the Soviet Union, the United States emerged as the world’s only superpower. The predictable response would be to expect rest of the world to unite against us. The smart move in that context would be for the United States to lower its profile and to try to create international institutions that promote our values. George W. Bush squandered that opportunity in Iraq, wasting American resources and good will on an ill-conceived war while allowing a power vacuum to develop elsewhere. In that vacuum three long term threats to U.S. interests and to global stability have increased: the rise of China, which if it remains strong will continue to expand its economic influence on ill-liberal terms and if it falters could depress the global economy, the creation of failed states such as Somalia and Syria that create terrorist safe havens, and the weakening of international institutions such as the EU that were once thought to promote shared prosperity. In this this rapidly changing international environment, economic issues may be as important as security concerns and a bi-partisan foreign policy establishment with a clear-eyed view of American global interests no longer exists. In its place are the neo-cons who see American dominance displays as ends in themselves and activists who understandably cheer any way to dislodge tyrants like Saddam, Qaddafi and Assad. Obama, whose clearest objective was to avoid “doing stupid stuff,” understood the need to avoid being sucked into foreign conflicts, but his most promising initiatives involved efforts to bring regimes like those in Iran and Cuba back into a moderating system of international exchange. Only a global response offers hope of a long term solution. Where in the midst of this chaos is Hillary’s vision?
I have more optimism that Hillary fully gets the third piece – the need for a political realignment in the United States and the defeat of what she termed the “vast right wing conspiracy” that has plagued her for her entire public career. I have less confidence that she understands how to create the narrative necessary to do so. The Reagan coalition took hold in part by making the very idea of “tax and spend” delegitimizing words, and associating government spending with resentment against minorities. The GOP’s most sacred ideological commitment remains to preventing governments generally and Democratic governments, in particular, from doing much of anything and certainly from not getting credit for what they do effectively. Yet, Democrats, while railing against attacks on the middle class, have never effectively made the case stick that conservative opposition to government is responsible for the economic misfortunes of Trump supporters. Countering Republican ideology requires inoculating the public. The Democratic response needs to be that when you hear a politician promise to cut taxes, what he is trying to do is to make it easier for CEOs to bank the proceeds from their companies in the Cayman Islands. When conservatives talk about cutting spending, they want to insulate fat cats from paying their fair share for roads and schools. When they stoke resentments of disfavored groups, they are announcing that they have no moral principles and will sell out their own voters the moment they take power. The voters do get this when they are given the chance. After all, the very conservative voters from rural Kansas just voted out their tea party Congressman in large part because of his failure to promote the farm subsidies that benefit them. Yet, Obama has never effectively made the case to the public that his stimulus program rescued the country from another Great Depression and the recovery did not filter down to the rank and file in large part because the Republicans blocked the measures most likely to help the working class (as opposed to bailouts for the banks) and when they regained the House in 2010 the first thing they did was to end programs that were succeeding. While Hillary gets most of this right, she still pays lip service to the importance of balancing the federal budget. In fact, as Paul Krugman points out at least once a weak that conviction is in the same league with denying the reality that humans are causing climate change. Democrats once embraced the notion that a principal purpose of monetary and fiscal policy ought to be a full employment economy and that infrastructure spending and, yes, deficits, are necessary to that end.
Donald Trump has gotten as far as he had because he has tapped into the widespread conviction that things are not working well for many people, and that mainstream politicians have helped rig the system against the little guy. The amazing thing about his success is that he done so without recognition that many of the policies he advocates would make things worse. He is able to get away with this because of the lack of a coherent counter narrative. To create a new political realignment requires distilling complex, long term shifts into explanations that average people can understand and a political identity that corresponds to determination to bring about real change. Hillary, after all, has been attacked for her entire career by the forces that also imperil the working class. Democrats need to be able to explain how a progressive agenda is common sense one and that the Republican opposition to government is opposition to policies that work. The agenda for the next generation is the construction of a new political agenda that genuinely reinvents government as the agent of a more flexible citizenry able to share in the profits of a global information economy