on August 9, 2010
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August 9, 2010
WHAT OFFICIALS CAN'T FACE, 1994 or 2010: A GREAT POWER IN DECLINE
So what does one of America's greatest "political" writers have to say about the "financialization" of the economy facilitated, celebrated and rationalized over the years under the Federal Reserve Chairmanships of Alan Greenspan and Ben Bernanke, spanning the years from 1987 right through to the present?
For the overall national economy, financialization has been a stage of decay, not triumph. An important yet small elite flourishes, but the average citizen is a loser. The odds are that the latest of theses stages in the United States will have a similar effect - and that the political and governmental failure in the late 1980s and early 1990s to deal with financialization and its abuses will leave a bad taste in the mouths of twenty-first century Americans. (Arrogant Capital, Page 112.)
This would be remarkable enough if it had been written in Kevin Phillips' last book, Bad Money, published in 2008; having actually been written in 1994-1995, in Arrogant Capital: Washington, Wall Street, and the Frustration of American Politics, it takes on even greater authority as "the early call" on what has unfolded, right down to that "bad taste" in our 21st century mouths.
We make no secret that we miss Kevin Phillips, and have admired his courage as an author who challenged conventional wisdom and national tradition by asking how and why the United States would be able to escape the fate of previous economic leading powers which could not stem their declines: Rome, Spain, Holland, Britain. We have Googled repeatedly to ask why Kevin Phillips has fallen silent since his last appearance on Bill Moyers on September 13, 2008, (here at [...]) and by his total absence from news commentary since the spring of 2009. We don't know whether he is working on another book (our hopes), has retired from the field (most likely) or is ill (our fears).
So let this be a tribute to him (but not a final one) and to what he left our nation back in 1994-1995. What he left us was so good that we told one young Maryland reformer that if we had only two books to recommend for guidance, then it would be Arrogant Capital and Hellfire Nation.
Even though Phillips acknowledged in the paperback edition, which carries a Preface date and address of May 1, 1995, Bethesda, Maryland, that the 1994 Republican "Revolution," with its "Contract with America," had already failed to change the Capital, he maintained that there was still "a case for optimism" to be made. That's not the way he sounded in September of 2008, talking with Bill Moyers, who noted the pessimism, and asked him about it. That foreboding can be found throughout much of the later works of Phillips, especially in American Theocracy (2006) and Bad Money, with their repeated references, if not focus upon, previous leading world powers that could not reform themselves after their peak empire years. It's there too in Arrogant Capital, but not yet the nearly dominant theme it would become, or the seeming final resting place with Moyers in 2008. We can give you a direct dose of the worry, from the still hopeful chapter in Arrogant Capital, "Renewing America," especially chosen to emphasize how far Phillips had traveled from the Republican conservative theoretician he was in The Emerging Republican Majority (1969):
In retrospect, the rich of eighteenth-century Holland and Edwardian England should have been taxed more heavily, so that the public sector would have had funds the private sector refused to allocate to rebuild each country's manufacturing economy and neglected infrastructure. (Arrogant Capital, Page 260.)
We highly recommend passing this quote along to the Tea Party supporters in your neighborhood, and sad to say, it probably would make your local Democratic Congressman fluster a bit too. But alas, Phillips qualifies this eye-opener in the very next sentence, stating "that is in theory, of course." In practice, on the grounds of the Capitol, the reigning political dynamics won't allow it to happen. Phillips looks outside the capital city for hope, knowing the history of such cities far too well to expect reforms to start there. Phillips deeply shares the American distrust of the place that Washington has become, starting in the 1940's, 1950's and 1960's ("when the Permanent Washington took shape") noting that his politics "has not been one of sympathy for the quiet collegiality of America's richest metropolitan area or empathy with its institutions and maneuvers, but one of commitment to the populist processes of American electoral realignment and renewal" which "surge up from the grass roots or they do not come at all." (Page xxvi, our emphasis.)
A Capital "no longer controlled by the general public"
He wrote these observations in 1994-5, but they ring as true today, fifteen years later, so that they could very well apply to the summer of our national disillusionment with yet another President. Phillips wrote of the "extreme volatility of America's disenchanted electorate," and observed that "politicians now have less and less time to fulfill public hopes and expectations." The city itself has become what "ordinary citizens of the 1780's and even some architects of the U.S. Constitution feared - a capital city so enlarged, so incestuous in its dealings, so caught up in its own privilege, that it no longer seems controllable by the general public." (Page xix.)
Yet the hope of Phillips back in 1995 was that the United States could once again display its remarkable ability, as it had over its first two centuries, to "stage political revolutions or watershed presidential elections every generation," sweeping out the "the old regime's exhausted interest groups and elites from Washington." Perhaps that's why we haven't heard much since from the somber Phillips of the Moyers interview: looking over the field of Larry Summers and Timothy Geithner and Ken Salazar, and many other very, very cautious key appointments, it doesn't look like Obama has changed brooms, much less conducted a "clean sweep" of the "old regime." Yes, it's true that President Obama has passed the most progressive legislation since the New Deal, but that statement skips the Conservative dominance between 1980-2008, when we would be measuring Obama's reforms against the Republican's inverted universe of legislative intent, and Bill Clinton's triangulating. That's like comparing the Newtonian laws of gravitational pull in our little solar system to the strange gravity bending behaviors of galaxy enveloping black holes. And to pass the legislation, Obama has not reformed the Washington inside game, the game Phillips devotes so much time to analyzing, but instead has made his compromises with the existing powers; compromises so extensive and complex, as shown by the extreme lengths of the health care and financial reform legislation, that the public isn't sure what he has obtained, and many decisions, and the future success of the work, has now been placed in the hands of regulators.
The End of "Watershed" Elections?
Phillips builds the case for American political genius, and his hopes, upon those sweeping, but nonviolent watershed elections of 1800 (Jefferson), 1828 (Jackson), 1860 (Lincoln), 1896 (a failed one, Bryant) and 1932 (Roosevelt). He was personally involved in making the case for one in 1968-1969, but knows the nation didn't achieve it. Yes, the Republicans controlled the Presidency for 20 out of the next 24 years, from 1968-1992, but they were unable to win control of Congress, and we now have that volatile and impatient public, so well characterized by the Presidential race of 1992 (of Bush I, Clinton and Perot), and the extreme mood swings which have followed.
As with all sweeping political generalizations, one can quibble with this scheme, especially the closer one looks at the scope of changes ushered in with the supposed peaceful "revolutions," and certainly with calling the election of Lincoln in 1860 a success. Yes, it was in the sense that he was still President four years later, and his party went on to be the dominant one of our Gilded Age, but any election that results in one of history's greatest secessions and civil wars can certainly be argued in the opposite direction: that America's political processes, built on incrementalism and compromise, failed to peacefully resolve the crisis of slavery.
However, from 1968 on, it has become clearer and clearer that the political genius of America is not working. And this is where Kevin Phillips has staked his claim, in our opinion, to being one of America's greatest writers on politics and the political economy. By taking on directly what the American political system refuses to - "The Crisis No one Can Discuss: U.S. Economic and Cultural Decline - And What It Means" (the title of Chapter Three) - Phillips has performed a courageous public service, and done so with a clarity and dogged determination that few others have matched. And that's why the silence over his absence is so disturbing.
We are impressed with many aspects about Phillips' writing on American decline. But two stand out from the others. First, it has historical depth, putting it into the framework of the downhill slide of not only the ancient powers, Greece and Rome, but more convincingly, of the more contemporary leading economic powers, especially Spain, Holland and Great Britain. We note, however, his nearly complete silence on the fate of France in the second half of the 18th century, a curious one, given the cross fertilizations between France and the U.S., the American and French Revolutions, and their cultural affinities with the great intellectual storehouse of the Enlightenment, something which, as we have already seen, John Gray insists the U.S. is still deeply involved with, with its Utopian Universal Free Market Project.
Roots of National Decline: Moral or Economic?
Second, perhaps because of his origins as a conservative Republican breathing the cultural air which produced Richard Nixon and Patrick Buchanan and elevated, even further, Billy Graham from his 1950's perch under Eisenhower, Phillips is sensitive to the cultural and moral aspects of national decline. That is something which conservatives and especially religious conservatives stress, while Democrats, and liberals, lean towards the emphasizing economic troubles. Phillips is fascinating with his illuminations on the way the two parties react to the notion of declension, deferring to their base constituencies: Republicans simply cannot accept the fact of American economic decline since their party has always been so heavily invested in our culture of business, and its main interest groups, and the religious Right is eager and urgent in advancing their ethical failings' explanations for moral and cultural declension. On the other hand,
Liberalism and the Democratic Party happen to represent most of the constituencies and interests that view the moral and cultural upheaval of the late twentieth century as a national achievement: blacks, gays and lesbians, feminists, civil liberties activists, and others. Many of these groups are just as enthusiastic about their periods of breakthrough as entrepreneurs and stockbrokers were about the economic opportunity of the 1980's - the notion of a `moral decline' is unacceptable. (Pages 80-81.)
One of the joys, and riches, of Phillips' book is its handling of the contemporary practices of our nation's capital, placing it in the company of others in history where neither of the two parties would like to find themselves, in "arrogant or atrophied capitals" which "have been front and center in most great-power declines." Phillips is never better than when expounding upon the ways of the capital's lawyers, lobbyists, the infamous revolving doors and their willing services on behalf of foreign governments. He reminds us of the populist instincts displayed in the early days of our republic, despite the stature of the founding fathers and their economic base in large land holdings. It's a time when New York placed its capital, far, far upstream in Albany (we can't say, based on how things have turned out there in 2010, that it was the "cure"), and Pennsylvania placed theirs in, of all out of the way places, Harrisburg, to keep it out of that famous den of iniquity and sophistication run by the Quakers in Philadelphia.
Blocking Change: Interest Group "Barnacles"
But for a nation now staring, once again, as in the 1990's, at political stalemate, gridlock or sheer obstructionism in the capital - pick your favorite noun - Phillips offers us, amidst much, much else, the perspective of a now deceased (1998) economics professor from the University of Maryland, Mancur Olson, and his 1983 work, The Rise and Decline of Nations. Olson gives us the idea that it's the relative absence of status-quo interest groups which help nations on the way up, as in 19th century America, and their tremendous drag on the way down, "with great nations heading into decline" impaired by "the interest-group barnacles collected during the long, fat years of their success, smugness and safety." It hurt Britain in the early twentieth century and is hurting America now, Phillips says, translating Olson into the Washington of the 1990's.
It's the sheer number and proximity of all the lobbyists and the physical fact that in a sense, they have Congress "captive," in isolation, away from the people who elected them that worries Phillips, along with the power of private money in elections. But does he overplay this hand of the "Inside the Beltway" special culture of the captive capital, echoing terrible historical precedents? Phillips doesn't see America's predicament as stemming from the Utopian, universal threats of the rise of the Right that more philosophical works do, such as Gray's False Dawn. After all, if Phillip's was leaning in that direction, it would have surfaced in his 2006 book, American Theocracy. By the time of the publication of Bad Money in 2008, he is certainly aware of Grey and gives one of the two epigraph quotes over to False Dawn, that "bad capitalism tends to drive out good."
Phillips & The Forgotten Man
Yet they seem to arrive at very much the same place, the economic hardships (without Gray's stress on the family disruptions) that the Right's policies have brought down upon the middle classes (Phillips doesn't say working class...even when talking directly about manufacturing wages...) It's tough stuff, so here it is directly, and does anyone else hear echoes of FDR's "Forgotten Man" in it?
The last thirty years have produced a national capital influence structure that represents the multinational corporations who move jobs from Wisconsin to Taiwan, not the anonymous Americans who suffer, that protects the financial giants who run the bond markets and mutual funds, not the ordinary folk who are at their mercy, and that favors the brokers, trade consultants, and communicators - who enjoy record incomes from the same globalization and polarization that has brought Middle America two decades of decline in real manufacturing wages. These trends would have happened anyway, but not to the same extent. It is foolish to expect the biases to change until the power structures of Washington are themselves transformed. (Page 223. Our Emphasis.)
Cures for the Arrogant Capital: where do we start?
And there it is, in that italicized last sentence, a sentence which hangs over the Obama administration and the choices it made in what reform measures to pursue first, and it also clouds the effectiveness of what it has in fact achieved. And there we have it: the reason we are recommending a book written in 1994-1995 is that the nation is still facing the crises Phillips delineates in Arrogant Capital, made even more urgent and painful by the scope of the economic crisis we are in.
Phillips didn't leave us hanging in mid-air, however. His last chapter, "Renewing America," contains ten broad "Proposals" for addressing the problems. The first five all are aimed at the imbalance of power between citizens and their unresponsive Capital and captive parties. Most of the rest are devoted to the economic inequalities stemming from globalization and financialization. As one might imagine from someone who has spent nearly his entire adult life writing at a highly skilled level about American politics and the political economy, the forty pages which cover his recommendations for reform are jammed with excellent proposals, most still not attempted. Here's just a sample from Proposal 8, Confronting "...the Power of Multinational Corporations and Minimizing the Effects of Globalization on the Average American." First, he notes again the historical pattern of declining powers' wealthy citizens shifting their investments overseas. So, "Economic patriotism, quite simply, requires making individual and corporate investments overseas less rewarding than domestic ones. Second...Washington should rewrite its corporate foreign tax credit and foreign tax deferral provisions to discourage U.S. multinationals from investments that move jobs overseas. These loopholes also cost the treasury too much revenue."
Because he covers so sweeping a policy universe in his Proposals, Phillips gives us the benefits of a "if I have to choose a half dozen," moment at the end, and these are the ones he settled on:
1) dispersing the capital and having Congress meet in another city for part of the year; 2) allowing congressmen and senators to vote from their home states and districts; 3) establishing a mechanism for national referendums; 4) concentrating a major attack on the hired-gun culture in Washington; 5) reining in abusive finance and its political influence by regulating electronic speculation, curtailing the nonaccountability of the Federal Reserve board and establishing a federal financial transactions tax; and 6) funding deficit-reduction largely by taxing its obvious beneficiaries. The impact of these six changes alone would be powerful. (Page 268.)
Phillips and "Entitlement Reform"
We think that's a pretty impressive insight from 1995 as to what's been placed on the table in 2009-2010, (with the glaring omission of health care reform) especially numbers five and six. And in number six, he is not advocating "entitlement reform" via attacks on Social Security. Phillips has one of the most foresighted and sophisticated analyses of the "twin crises of debt and savings" we've come across, and he clearly saw the financial elite's pending anti-egalitarian chess moves: "Reducing middle-class entitlements was the envisioned key to deficit reduction. But the consumption tax debate, as we shall see, offered the hoped-for avenue to further tax cuts for the rich." These quotes are from Pages 134-135, towards the end of Chapter Four, "The Financialization of America: Electronic Speculation and Washington's Loss of Control over the `Real Economy'" Don't look now, but isn't that the supposedly progressive think tank head, John Podesta, over at the Center for American Progress, pushing the value added tax, the VAT, a favorite form for a national "consumption tax?"
If there's a danger in Phillip's approach to our national problems, it's that his emphasis on Washington's arrogance and capture by vested interests can turn into momentum for political withdrawal as well as mobilization for change, especially as "stalemate" becomes the likeliest outcome of the current balance of forces. And would the nation's newly anointed "forgotten men" - the small entrepreneurs - favor the more egalitarian outcomes and proposals which both John Gray and Phillips seem to arrive at? After being fed a steady diet from the Republican Right for 30 years, of less government and lower taxes, would they be likely to go for Phillips' ten proposals - or rather instead a "doubling down" again on the Reagan-Bush tax transfers to the already well off? From the perspective of the summer of discontent, 2010, it seems more likely the nation is ready to try again the very formulas that put us in this situation, and it may take much greater economic suffering, post 2010 and 2012 elections, for the nation to finally change its course.
If indeed he has fallen silent for good, we will miss him and the legacy he has left of warnings and insights, works of depth and substance.
William R. Neil
7 of 8 people found the following review helpful
on May 29, 2007
The author Kevin Phillips is an exemplary example of a frequent Washington type: the former insider turned angry, prophetic outsider. Trained as an attorney, experienced as a a Republican Congressional aide at the modern lowpoint of Republican strength in Washington, acclaimed as a key strategist in Richard Nixon's 1968 Presidential comeback, the author has long been given to gathering masses of data and reaching bold new conclusions with a stunning certainty that is only partially vindicated by subsequent events.
The author's top six suggested governmental reforms are "(1) dispersing the capital and having Congress meet in another city for part of the year; (2) allowing congressmen and senators to vote from their home states and districts; (3) establishing a mechanism for national referendums; (4)concentrating a major attack on the hired-gun culture in Washington; (5) reining in abusive finance and its political influence by regulating electronic speculation, curtailing the nonaccountability of the Federal Reserve Board and establishing a federal financial transactions tax; and (6) fudning deficit-reduction largely by taxing its obvious beneficiaries."
The author's top ten broad proposals are "(1) Decentralizing or dispersing power away from Washington; (2) Modifying the U.S. Constitution's excessive separation of powers between the legislative and executive branches; (3) Shifting U.S. representative government more toward direct democracy and opening up the outdated two-party system; (4) Curbing the Washington role of lobbies, interest groups, and interest peddlers; (5) Diminishing the excessive role of lawyers, legalism, and litigation; (6) Remobilizing national, state, and local governments through updated boundaries and a new federal fiscal framwork; (7) Regulating speculative finance and reducing the poltical influence of Wall Street;(8) Confronting the power of multinational corporations and minimizing the effects of globalization on the average American; (9) Reversing the trend toward greater concentration of wealth and making the tax system fairer and more productive; (10) Bringing national and international debt under control."
To get to these and numerous other reforms and secondary goals, the author gives us a sweeping tour of what ails America, full of a unique collection of facts ( for instance, the decade by decade growth of governmental employment and population in the Washington metropolitan area), world historical parallels (comparing the broad trends of American economic history with that of Holland, Great Britain, Spain, and other countries), and American historical parallels (declaring frustration that as our country ages there is not the sweeping change with new administrations that there was with the administrations of Thomas Jefferson and Andrew Jackson.)
The author tends to see Washington interest groups as part of a kind of vast conspiracy, focusing on its own interests at the expense of the public interests. He gives short shrift to the reality that many of the interest groups are in constant competition with each other for scarce resources: governmental funds in an era of tax cuts, favorable regulations in an era suspicious of any regulations, and the time and favor of relevant governmental decision-makers.
The author focuses a disproportionate amount of attention of the U.S. House of Representatives, as the body most susceptible to governmental reform. Yet, in this, the author ignores the fact that the overwhelming majority of lawyers and lobbyists are focused on the executive branch, which his gneral collection of reforms tends to ignore or downplay.
The author believes that the U.S. is at a crisis point, and he advocates this with a mixture of public opinion poll data, quotes from angry, longshot Presidential candidates, Washington think tanks, and historical parallels with other countries, especially English-speaking countries. But this wide-ranging collection of information, impressions, and attitudes tends to dilute the case he is making as well as strengthen it. If hostility to government among the populace is, in fact, a worldwide democratic phenomenon, then it is somewhat contradictory to argue that the unique governmental system of the United States is responsible for it.
The author believes America is a country past its peak, a country entering a profound stage of economic decline. Internationalism is not a series of policies designed to benefit the average American, the author warns, but rather a series of policies aimed to benefit a small wealthy slice of the public at the expense of the rest of the public. Public policy's goal should not be to promote internationalism, but to curb its negative effects on the average American, the author says.
Reading the author is always an eye-opening, thought provoking experience. He does not generate his own research, but is a broad and creative user of an incredible array of secondary sources--from Karl Marx to Ross Perot to leaders of Washington think-tanks to newspapers to histories of the U.S. and other countries. He is a peerless summarizer and polemicist whose contstant search for broad themes gives life and purpose to what otherwise might be a quicksand of statistics and studies.