Sunday, September 28, 2008

Conservatism, Economic Crisis, and American Power

I'm seeing an interesting reaction to last night's post, "Conservatism, Neoconservatism, and Economic Crisis."

Uncle Sam

It's not often that one gets attacked and ridiculed for having honesty and integrity, but that seems to be the case here.

Most vocal is the initial comment from an arch paleoconservative, "HarrisonBergeron2," of the
Conservative Heritage Times. He's joined by a fellow who calls himself "The Angry Republican" in the comment thread. They're both followers of Ron Paul, and his tinfoil hat-style of extreme right-wing ideology (see "Ron Paul and the Fringe of American Politics"). Paleocons harbor a well-known hatred for neoconservatives, which in many respects puts them in bed with the antiwar left on questions of war and peace, and apparently on the economy as well.

So what's the beef?

The issue surrounds what might be called "the neocon approach" to the current economic crisis. Recall
Jacob Heilbrunn's essay this weekend, which takes a look at variations of conservative thought. Heilbrunn argues that George W. Bush is hardly conservative when it comes to economic management and the expansion of the state sector. Not only does Bush's big goverment neoconservatism rile paleocons, but some of the top conservatives on the mainstream contemporary right as well, like Newt Gingrich and Michelle Malkin.

As I suggested at
the post:

Americans expect an activist role for a substantial state sector, even conservatives. Until we are willing to peel back the entitlement culture and the regime of unchecked non-discretionary spending, much of the talk about fiscal conservativism is a ruse. The federal government is society's safety net, in most aspects of life. When things get rough, no other agent in American life has the legitimate power and resources to act to preserve basic functions and institutions, and hence to guarantee the survival of the republic.
Some may have read into this passage more than my meaning. The simple fact is that all modern industrialized democracies are advanced technocracies with large social welfare states. The notion of small-g conservative is fine in principle, but the U.S. has never really enjoyed a truly libertarian economic structure, the kind Hayekian libertarians advocate.

As the economist Robert Shiller points out today at the Washington Post, a strong role for government intervention in the economy is as old as the republic:

Americans may assume that the basics of capitalism have been firmly established here since time immemorial, but historical cataclysms such as the Great Depression strongly suggest otherwise. Simply put, capitalism evolves. And we need to understand its trajectory if we are to bring our economic system into greater accord with the other great source of American strength: the best principles of our democracy.

No, our economy is not a shining example of pure unfettered market forces. It never has been. In his farewell address back in 1796, 20 years after the publication of Adam Smith's "The Wealth of Nations," George Washington defined the new republic's own distinctive national economic sensibility: "Our commercial policy should hold an equal and impartial hand; neither seeking nor granting exclusive favors or preferences; consulting the natural course of things; diffusing and diversifying by gentle means the streams of commerce, but forcing nothing." From the outset, Washington envisioned some government involvement in the commercial system, even as he recognized that commerce should belong to the people.

Capitalism is not really the best word to describe this arrangement. (The term was coined in the late 19th century as a way to describe the ideological opposite of communism.) Some decades later, people began to use a better term, "the American system," in which the government involved itself in the economy primarily to develop what we would now call infrastructure - highways, canals, railroads -- but otherwise let economic liberty prevail. I prefer to call this spectacularly successful arrangement "financial democracy" - a largely free system in which the U.S. government's role is to help citizens achieve their best potential, using all the economic weapons that our financial arsenal can provide.

So is the government's bailout a major departure? Hardly. Today's federal involvement offers bailouts as a strictly temporary measure to prevent a system-wide financial calamity. This is entirely in keeping with our basic principles - as long as the bailout promotes, rather than hinders, financial democracy.
Like myself, Shiller sees federal intervention as guaranteeing the survival of our economic institutions, and this is a temporary intervention that may well serve as the catalyst to a new wave of dynamism that transforms the American marketplace.

From a neoconservative perspective, which sees a role for government regulation of the economy and the military-industrial sector, the administration's policies are reminiscent of the response we saw to the attacks of September 11, 2001. The nation faces a fundamental crisis, and an expansion of the state in response is both necessary and proper.

Anne Applebaum notes that the collapse of Lehman Brothers on September 15 was "an economic 9/11":

The September 11 metaphor is a weary one: too many events, in recent years, have been described as "a new September 11", or "England's September 11", or even "football's September 11". Still, it might be worth rescuing the phrase one last time.

For if September 11, 2001 was the day that we had to reassess our ideas about America's role in world politics, September 15, 2008, the day
Lehman Brothers went bankrupt, may well be remembered as the day we had to reassess our ideas about America's role in the world economy. It's that cataclysmic, that decisive, that irreversible.
Beyond this comparison, Applebaum's thesis is that instead of uniting the country (as we say in 2001, the Wall Street's financial mess has sent the country into a partisan funk, upending "our national psyche."

Applebaum's conclusion offers some speculation on whether the current economic crisis marks the end of America's international economic preponderance. She doubts it, but amazingly,
some anti-Americans on the left are hoping that this month's collapse will weaken the United States and foment the rise of a true multipolar world order that effectively rein-in U.S. power and ambition.

I wouldn't bet on it,

As the world grapples with the fallout from Wall Street's shenanigans, there's no shortage of consternation, and even anger. But so far the international image of the U.S. economic model has shown amazing resilience. Lehman Brothers may be in the morgue and AIG on government-funded life support, but most businesspeople think the U.S. is more about Silicon Valley and Hollywood than the erstwhile dynamos of Wall Street. Even in China—where broadcaster CCTV-2 has been running two hours of special programming every night about the financial crisis—the U.S. is still a land to be emulated.
It's more than perception, however. Every major international crisis or domestic setback the U.S. has faced has been met with cries on both left and right that America's in relative economic decline. Yet, the more likely scenario, as Applebaum notes, is that if the U.S. ecoonomy goes down, the rest of the world will go down with it. Not only that, there's no ready alternative to American world economic leadership. The dollar still finances more than 90 percent international trade in goods and services, and the U.S. market is the destination for both people and products from every shore abroad.

This is not to say the way out of our crisis is guaranteed, or that it will be easy. It does suggest that simplistic notions calling for some pastoral states-centered economic system in the U.S. is silly. On top of that, expectations that the Wall Street crash heralds the end of the American global protectorate is wishful thinking at best, and implacable America-bashing at worst.

Folks need to step back a bit, and think things through. We are facing a grave crisis, and in times of trauma often Americans turn to Washington for help as well as their own perserverance. Our traditions and our republic will endure, and they'll continue to adapt and evolve, as they always have.