Economic Populism Is a Virtue
Conservatives have argued for decades that the sins most dangerous to our society were rooted in lust when in fact they were rooted in greed.
We are at the beginning of a great popular rebellion against those who showed no self-restraint when it came to lining their own pockets. Their entitlement mentality arose from an inflated sense of their own value and of how much smarter they were than everyone else.
The sound you are hearing in response to the AIG payoffs -- excuse me, bonuses -- is the rancorous noise of their arrogance crashing to earth.
Yet there is much hand-wringing that this populist fury is terribly perilous, that the highfliers who could not control their avaricious urges have skills essential to repairing the damage they caused in the first place.
Beware populism, we are told. Honor those AIG contracts. Forget about any moral reckoning and just fix the economy.
This view is wrong on almost every level, especially about populism. Of course not all forms of populism are attractive. But as historian Michael Kazin argued in "The Populist Persuasion," the "language of populism in the United States expressed a kind of idealistic discontent" and "a profound outrage with elites who ignored, corrupted and/or betrayed the core ideal of American democracy."
Is this not an entirely appropriate reaction to elite decisions dating to the 1980s that ultimately ran our economy into the ground?
The Obama administration has sent thoroughly ambivalent signals on this question. Its initial response to the $165 million in AIG bonuses (the president's lieutenants said there was little to be done about them) suggested that it did not want to join in the populist anger and maybe didn't even realize that it was there. On Monday, President Obama made clear that he got it, denouncing the bonuses.
It was the right first step. He should build on this by showing that he shares in the public's morally justified intuition that our society's rewards to the very wealthy are totally out of line with their contributions to the common good.
A study of compensation levels in 2007 found that average CEO pay at S&P 500 companies was 344 times higher than the average worker's wage, and that the top 50 investment fund managers took home 19,000 times -- yes, that's with three zeroes -- as much as typical workers earned.
Now, I am not against people getting rich or entrepreneurs reaping profit from their investments of time and energy. But there is no moral or practical justification for such levels of inequality. Capitalism worked extremely well in the three decades after World War II without such radical inequities. It's when inequalities soar that the system runs into trouble -- precisely what happened at the end of the 1920s, when inequality reached levels similar to today's.
With the populist furies unleashed, the Obama administration has two choices. It can try to fight the public. Or it can use the public's outrage to move the country in a better direction.
Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, points to the irony that populism threatens to work against Obama even though the president has proposed "a populist budget." It's a budget that raises taxes on the wealthy, cuts them on almost everyone else and spends money on programs -- notably health care -- that are of benefit to the poor and the middle class. Obama needs to show that his budget is itself a direct response to the injustices aggravating the country.
The president needs to do two things at once. The administration has no choice but to spend piles of money to unwind the financial mess. A share of the largess, as Frank acknowledges, may indirectly benefit some of the malefactors in this saga. But Obama has to be unambiguous in asserting that the purpose of this spending is not to reward those who got us into this fix but to solve a problem that affects us all.
To make this case, the administration should be unafraid to use its proposals on health care, taxes, education, energy and financial regulation to argue that it is building a new economy on the ashes of the old -- an economy based on fair rewards to capital and labor alike, not on an ethic of greed and excess.
Obama can work with the populist wave or he can be overwhelmed by it. As Kazin notes, American progressives have succeeded in improving the "common welfare" only when they "talked in populist ways -- hopeful, expansive, even romantic."
Kazin cites the line popularized by Ralph Waldo Emerson, "March without the people, and you march into the night," and then adds: "Cursing the darkness only delays the dawn."