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Friday, November 9, 2012

U.S. Election 2012: Obama Vindicated?

The U.S. presidential election in November 2012 was the first in which neither of the major-party candidates participated in the campaign matching system that imposes campaign spending limits in return for federal financing. It was also the first presidential election since the Citizens United case in 2010. That U.S. Supreme Court ruling was a significant factor in the election because corporations and unions could dip into their respective treasuries directly, rather than only through employee or member contributions, to spend an unlimited amount on political ads by making donations to “social welfare” organizations. Without disclosing their donor lists, these non-profit organizations could create political ads that in turn could favor or criticize a particular candidate, albeit with no formal approval from the favored candidate. Faced with formidable superPACs pumping some $800 million or more in favor of Mitt Romney, Obama’s money-machine went into high-gear in a sort of “rich man’s” arms-race. Some rich donors had spent millions of dollars to push the massive ship of state a discernible distance in their direction. Hardly anyone expected that the contending high monies would virtually cancel each other out. Hardly anyone thought the Obama campaign’s scientifically-based “ground game” oriented to getting new voters registered would trump Romney’s financial support from Wall Street. Subtly missing in action among all the financial fire-power and, Obama’s empirical operation, and even all the presidential “debates” were ideas and a sustained societal discussion of a few basic principles of political economy and governance. The result, in spite of all the money, time and effort, was a continuance of the political status quo because few minds were changed in the process. That is to say, ideas and related rational argument are required for a basic shift in a body politic.
 
Referring to the federal election, the New York Times reported afterwards that “the overall cost of the campaign rose accordingly, with all candidates for federal office, their parties and their supportive ‘super PACs’ spending more than $6 billion combined.” The grand result for all that money was that the U.S. House remained in Republican hands, the U.S. Senate continued with a slim Democratic majority, and the Democrats held the White House. Even the deal-makers—the major players—notably John Boehner, Nancy Pelosi, Harry Reid, Mitch McConnell, and Barak Obama—remained in place. The difficulty they had had as a group in coming to agreement on major policy items before the election was essentially unchanged.
 
On Thursday, November 8tth the New York Times summed up the previous year and a half as follows: “After $6 billion, two dozen presidential primary election days, a pair of national conventions, four general election debates, hundreds of Congressional contests and more television advertisements than anyone would ever want to watch, the two major political parties in America essentially fought to a standstill. When all the shouting was done, the American people on Tuesday more or less ratified the status quo that existed at the start of the day: they returned President Obama to the White House for another four years, reaffirmed Republican control of the House and kept the Senate in Democratic hands. As of Wednesday, the margins in the House and the Senate had each changed by just two or three seats.” For all the money, time and effort spent kicking up dirt and picking fights, when the dust settled it was clear that the American electorate had not moved much at all.
 
It is not that the American electorate intentionally voted for continued divided government or gridlock. Rather, the American body politic contained voters of diametrically-opposed political, economic and social ideologies. In spite of the length of the campaign “season,” neither camp had budged by election-day. The resulting continuance of the status quo meant the continuance of the political constellation in Washington that had led to gridlock. Besides gridlock being more generally etched into the very design of the federal lawmaking apparatus in part to check power as well as unwelcome encroachments of the General Government on to the turf of the state governments, the various stalemates on the Hill in 2011 and 2012 were a manifestation, or symptom, of where the People as an aggregate stood then politically—that is, divided and even polarized ideologically. As a result of the stark ideological differences between citizens and the multiple points of access available in the U.S. Government, both major parties had sufficient electoral support and accessibility to the federal law-making machinery to grind policy-making and legislative activity to a halt on major problems desperately in need of solutions.
 
A story in the New York Times on the day after the election had as a headline, “Electorate Reverts to a Familiar Divide as Obama’s Support Narrows.” He “garnered just 50 percent of the popular vote, three percentage points lower than in 2008, in a sign of just how divided” the electorate was “over his leadership.” In spite of Obama having lost some of his base, the mere two-percentage-point difference in the popular vote between the two major candidates meant that among the electorate neither “side” had budged much. To find a “verdict” on the president’s first term beyond the vested opinions of the two bases, one must look to how the independents. Even there, the “verdict” was muted.
 
Referring to the independents, the New York Times reported that the vote was “very close.” In some swing states, including Ohio and Virginia, Romney received a slight majority of such voters (53 and 54 percent, respectively), while Obama received similar majorities in a few others (Iowa and New Hampshire). However, Obama received 45 percent of the independents over all (Romney got 50 percent), and in 2008 Obama had received 52 percent. This means that Obama lost some of the independents he had had in 2008. As a “verdict” of the relatively neutral “jury” segment within the electorate, the loss of 8 percent suggests something less than a vindication for the president.
 
Moreover, that Obama received 50% of the popular vote over all while Romney got 48% suggests that the contest ended unchanged as a virtual draw. Put another way, only about 3 million Americans out of 310 million residents in the U.S. separated the two candidates in the popular vote. About 1% of the entire population hardly constitutes a mandate, as if “the American people” has swung around en mass to support the incumbent after a long and hard-fought campaign.

                                                                                           President Barack Obama on Election Night 2012.     Source: The Atlantic
 
To be sure, some general movement can be discerned, as most counties had shifted in the Democratic direction in 2008 to vote for Obama only to shift back in a Republican direction in 2012. It could be said that the country had returned to its native center-right position. That Obama’s narrower base came out in sufficient force to counter the general shift in a Republican direction in most counties and a slight shift away by some independents accounts for his slight majority in the popular vote (and his wins in almost all of the swing states). Even so, such wan movement does not constitute the sort that is associated with an idea or mandate. Put another way, even the shift toward “Obamania” of 2008 was short-lived—the ideational shortfall rendering the “movement” as akin to a short-lived energy spirt from cotton-candy rather than new muscle from rich protein.
 
Accordingly, “(t)he bottom-line scorecard [from the 2012 federal election] left Washington as divided as ever,” according to the Times, “with no resolution of most of the fundamental issues at stake. The profound debate that has raged over the size and role of government, the balance between stimulus spending and austerity and the proper level of taxation has not been settled in the least.” The ideas had not changed because the hyperactive campaigns had been relatively bereft of new ones or even serious discussion of the central principles.
 
For all of the money, ads, and “debates,” one might say that talking points rather than novel arguments or ideas took center-stage during the long campaign “season.” In an interview on CBS’s Sixty Minutes broadcast shortly before the election, David McCullough, who had written several books on American political history (and who spoke at my doctoral graduation ceremony!), said he doubted that any words from the two major presidential candidates would stand the test of time. In fact, nothing said or written during even the “debates” was worthy of being retained past the news cycle of the day. The historian went on to contrast the contemporary talking-points with the authenticity in Truman’s “Give ‘em hell Harry!” campaign of 1942. In 2012, talking points backed up by fund-raising and the application of empirical political science to getting elected punctuated the candidates’ trajectories along paths of political-least resistance.
 
Considering the sheer duration of the primaries and general campaign, the opportunity-cost of shallow campaigning is in terms of foregone governance not only during the duration, but afterward as well. Moreover, the empty-form of a superficial campaign-mode exacerbates the fundamental flaw in having extended the campaign “season” further and further:  Taking a means—that of selecting office-holders to govern—as more important than its end, governance. The eclipse of governance at the federal level in the U.S. is from not only gridlock, but also the enabling ideational emptiness of the modern campaign elongated into a sustained void of sorts that the electorate allowed to take on a life of its own. 
 
For the body politic to shift as a body having a will from the status quo such that political leadership evincing a direction could replace gridlock and stasis, some ideational-ideological change would have to have occurred in enough voters that the contours of the body itself will have changed. Sadly, the experience of having gone through the financial crisis of 2008—rather than any new idea or exchange of ideas—led an unusually high 51% of the presidential voters in 2008 to favor more government intervention in the economy while only 43% wanted more things to be left to business. The unusually high percentage was a result of economic fear and perhaps even greater hardship due to the crisis, rather than from a national debate centered on a reconsideration of old ideas.
 
That even powerful people can reflect on the level of fundamental ideas and come to different conclusions genuinely rather than in a political calculation (e.g., Obama’s “change” on gay marriage during his re-election campaign) suggests that citizens too can allow themselves to be more open ideologically and thus shift. An empirical crisis, for instance, can jar loose even fundamental paradigms. For example, Alan Greenspan, a former chairman of the Federal Reserve, admitted in Congressional testimony after the financial crisis of 2008 that the freezing-up of the commercial paper market in September 2008 had shown him that his free-market, or laissez-faire economic paradigm had a fundamental flaw. He marveled before a panel of lawmakers that forty years of observing markets had done nothing to point to the flaw. Specifically, the market mechanism itself can freeze-up rather than make pricing adjustments under conditions of high volatility involving high uncertainty and risk. In September 2008 as banks lost trust in each other, they stopped lending rather than adjust their rates of interest upward to compensate for the additional risk. High risk, especially if occurring all of a sudden, can paralyze a market’s mechanism. Hence, the former central banker could suddenly discern a rationale for regulation by the government because of the “fatal flaw” in the “market-alone” paradigm.
 
Had the ideas behind Greenspan’s paradigmatic shift percolated through the electorate during the presidential election of 2008 or even 2010 in place of “Obama as the flavor of the month,” the percentages on the question would not have subsequently flipped back in 2012 back to “center-right” on the question of the role of government in regulating business. Rather, a fundamental shift similar to that which ushered in the New Deal in the 1930s would have been realized. That Greenspan’s “ideational moment” had not registered in the campaigns or the electorate itself at least by 2012 can be seen from the fact that Romney called for financial deregulation even though the lack of regulation of mortgage-based securities had played a significant role in the financial crisis. Absent a sustained paradigmatic reflection from a shared experience of the financial crisis, the electorate was vulnerable to the financial-political power of Wall Street as it continued as though legitimately along its familiar trajectory of profit and self-interest. It is significant that even though Obama came out slightly ahead in 2012, the electorate as a body evinced a shift back to its pre-2008 center-right position on government intervention in business.
 
Absent new ideas and a sustained reflection on the continued viability of extant paradigms, an electorate succumbs to the status quo. More money—much more money—and more time—much more time—does not necessarily mean that an election-cycle makes a dent in the judgment of the popular sovereign—the We the People—come election day. An election-campaign season should be a rather brief yet poignant opportunity for a genuine societal reflection that results in the body politic being in a new place—that is, changed in some way that will reflect on the ensuing governance. I contend that the way Americans elect the president of the Union was by 2012 not only flawed, but also rather ineffectual and even impotent. It is as though a runner were running in circles only to end up panting where he had begun. To use another analogy, it is as though the voters woke up the day after election day still hungry in spite of having eaten so much cotton-candy. The sacrifice of governance alone, not to mention the value in the popular sovereign (the We the People) making its judgment on general policy and candidates, suggests that elections should include new ideas and substantive arguments rather than each side hammering in more of the same through an eternally-repeated stump-speech and “debate” talking-points.
 
If there is one thing we can discern concerning the voters almost without exception on the morning after voting, according to the Times, “they were glad that the strident and polarizing contest between President Obama and Mitt Romney was ending.” Beyond the proliferation of negative ads, especially in the “swing states,” and the sheer length of the primary and general campaigns, the voter-frustration may reflect a still-unsatisfied hunger for ideas and authentic, substantive discussion of them and the paradigms we construct out of them and what can be termed, ideational values. I suspect that the want of ideas and genuine discourse had existed for so long that few if any Americans realized what was at the core of their discontent regarding the election cycle. The root may go far deeper than Citizens United and even the serial elongation of campaigning at the expense of governance. It may be asked whether a starving man will eat if he does not realize he is starving.

 

Sources:

Jackie Calmes and Megan Thee-Brenan, “Electorate Reverts to a Familiar Partisan Divide,” The New York Times, November 7, 2012.

Susan Saulny, “The Most Sought-After Voters Were No Longer Flattered by the Attention,” The New York Times, November 7, 2012.

Jeff Zeleny and Jim Rutenberg, “Focus Is On Economy As Voters Choose,” The New York Times, November 7, 2012.

Michael Shear, “As Electorate Changes, Fresh Worry for G.O.P.” The New York Times, November 8, 2012.

Peter Baker, “Obama Wins a Clear Victory, but Balance of Power Is Unchanged in Washington,” The New York Times, November 8, 2012.

Sara Murray and Patrick O’Connor, “How Race Slipped Away From Romney,” The Wall Street Journal, November 8, 2012.

 

 

Democracy and Over-Population in India: Foreign Direct Investment

How well can the democratic form of governance serve as a means by which a society is circumscribed, or restricted in some way? In other words, can self-government be used to enact self-discipline on the body politic itself? Adding another level to this question, can elected representatives be expected to go beyond fixes that are perceived societally as sufficient to redress the underlying causes of governmental, economic, or societal problems? Far from urging or implying the supremacy of non-democratic forms of government, such questions invite improvement in democracy itself. In this essay, I reflect on these questions using India’s industrial policy as a case study.
 
Faced with economic growth below 6 percent, a budget deficit expected to breach 6 percent of India’s GDP, a possible downgrade in the country’s credit rating to junk status, and the rupee hitting record lows, Sonia Gandhi, head of the Congress Party, spoke for the first time in late 2012 in support of allowing foreign companies such as Wal-Mart into India. Prime Minister Manmohan Singh and others had been urging her to embrace the reform. Appealing to Sonia Gandhi’s passion for social welfare programs, the prime minister told her that more foreign direct investment would be necessary to expand them. Most notably, the Congress Party boss was pushing a $5.6-billion food-security bill and a rural employment-guarantee program. According to the Wall Street Journal, there was already “high spending on subsidies” at the expense of “growth-generating capital projects.” In effect, the latter get “sub-contracted” in foreign direct investment.  Relatedly, the finance minister, P. Chidambaram, issued a plan to reduce the federal government’s deficit and sell stakes the government has in state-owned companies.
 
                                                    Singh and Gandhi at a rally. It is clear who's the boss.   AP

 
Lest Sonia Gandhi’s support be viewed as a panacea, other reforms, such as making it easier to acquire land, remained “stuck in the bureaucracy,” according to the Wall Street Journal. The government’s “mind-set is I will not fix the cause of the issue, I will put a Band-Aid on it,” Rahul Bahsin of Baring Private Equity Partners India said. Indeed, although Walmart would doubtless hire local labor both in the construction and retail-operations of the stores, that foreign-direct-investment alone would not be large enough to make a dent in the social welfare needs of India’s poor. Additionally, the company’s aversion to workers’ rights (not to mention unions) and the related low compensation and benefits for in-store employees could mean additional troubles for Sonia Gandhi as worker groups seek protection from the federal government.
 
Moreover, with over a billion people at the time the policy was being considered, the prospect of employing all able-bodied people of working-age in India was undoubtedly a daunting task in the midst of a global recession following the financial crisis of 2008. It was not as though the Indian government could simply invite hundreds of millions of Indians into computer-science and engineering classes and then into high-tech ready-made jobs. Over-population could have been the long-standing underlying problem, or cause of the unemployment and related subsidies.
 
The bureaucracy and coalition in-fighting, as well as the “Band-Aid” approach oriented to incremental additions in employment through FDI could be a reflection of India’s over-population—a more basic problem that eludes mere policy prescriptions increasing foreign-direct-investment. Especially if a given  over-populated area has a disproportionate number of unemployed people, tackling the underlying problem could be expected to relieve the pressure on policies such as foreign direct investment to make up the difference. Meanwhile, other symptoms, like global warming and food prices, would be redressed. The question may therefore be whether a democracy is a feasible venue for such “cause-oriented” legislation to be enacted.
 
Whereas government officials in China did not have to worry about a democratic backlash from the government’s one-child policy in the late twentieth century, the case of India raises the question of whether a self-governed people can regulate their own society by democratic means. A democracy may be hard-pressed in putting into effect painful legislation to curb excesses such as over-population—literally to restrict rather than promote a basic sort of growth. The value put on that value alone since the mercantile days could give legislators an implicit mandate to foster rather than retard population growth.  Furthermore, the “Band-Aid” approach might be more in line with the workings of a democracy if apparent measures are sufficient to get one re-elected. One could point to the perennial “fixes” in the U.S. regarding entitlement programs and deficit-cutting as other examples, and to the efforts of the E.U. to bail-out heavily indebted states as yet another example. Elected representatives seem to prefer to take little bites, incrementally, rather than enact fundamental laws that are oriented to causes rather than symptoms.
 
In contrast to these questions, an uncritical approach to the spread of democracy around the world, such as potentially in the “Arab Spring,” could actually exacerbate global problems. If the species continues “un-self-regulated,” meaning more and more over-populated, nature will undoubtedly step in at some point and impose restraint (e.g., famine, climate, war, disease). It may be an open question whether we as a species can stave off such a verdict from Mother Nature. Ironically, our consensus form of government may lessen the odds.
 

Source:

Romit Guha and Rajesh Roy, “India’s Gandhi Now Backs Overhauls,” The Wall Street Journal, November 9, 2012.

Thursday, November 8, 2012

Divergent Fiscal Policies in the E.U.

States on divergent fiscal paths can test the flexibility of an empire-scale union, particularly if it is relatively new and still developing. Simply having different industrial/agricultural make-ups can put states at odds with each other. That the richer states can use fiscal policy to become even richer, while the policies imposed on poorer states may aggravate their fiscal conditions, can mean that the economic distinctions between states can become an increasing problem in a federal system, even given the allowances enabled by federalism itself (e.g., by the principle of subsidiarity). 

The full essay is at "E.U. & U.S."

Tuesday, November 6, 2012

U.S. Deficits: Reflect Virtue or Vice?

Chronic government fiscal deficits, and thus debt, may suggest that a people is not up to self-governance. Moreover, the imbalance may be a drawback of democracy itself. That is to say, a people may not have sufficient will to constrain its own consumption to that which the people are willing to pay.
 
 
 
In the period from 1970 to 2012, that the vast majority of the years show a deficit indicates the difficulty involved in elected representatives voting to ensure that the people pay in taxes as much or more than the government spends. “It’s an extraordinarily dangerous situation,” former Federal Reserve Chairman Alan Greenspan said in 2012. “I believe we underestimate the size of current financial imbalances and how difficult it will be to resolve them. We’re trying to do this without pain. There’s just no credible scenario in which that happens.” The key phrase here is “without pain,” for it points to the underlying mentality that was pushing back a viable solution. To be sure, both the widening deficits and lack of desire to close the gaps from 2009 could draw on Keynes’ theory that governments should spend more and tax less during a recession in order to stimulate economic growth. However, the sheer number of years between 1970 and 2012 with significant deficits in terms of GDP suggests that the rationale has at best limited applicability. Even in the context of recession, the fact that the deficits were over $1 trillion in each of the four years after 2008 suggests that something else is in the mix. Nor could “wartime spending” be cited for those deficits, as significant domestic spending was also involved. Moreover, the U.S. was not at war during all the years of deficit spending from 1970 to 2012. In other words, something more systemic was going on throughout the period than recession or war.
 
According to the Wall Street Journal, the federal debt in the U.S. grew “through a combination of economic downturns, tax cuts and spending choices made by lawmakers and presidents from both parties.” It is not a partisan matter; rather, it involves choices made by elected representatives irrespective of party-affiliation. For this reason, we can begin to suspect democracy itself as the culprit, and below this the values and mentality (and indeed character) of the voters. In particular, too many are too fine with spending or consuming without feeling the need to pay for it in a timely manner. This is ultimately a question of values behind one’s character. At the political level, this manifests as societal or cultural in nature; even so, the imbalance is really in the individual psyche itself.
 
The vice is one of slothful selfishness at the expense of others—those in the future who will ultimately either have to pay the bill or see the government default. It is significant in this regard that Thomas Jefferson and John Adams agreed that a virtuous citizenry is necessary for a viable republic to endure. The question is perhaps what happens to it once a citizenry is no longer virtuous. Collapse even from a fundamental lack of fiscal balance can be stayed by the inertia of the status quo, as though a ship kept moving by its own momentum for a considerable time. In the soothing motion, the passengers can easily be lulled into the sensation that all is well.
 

Source: Damian Paletta, “Tough Calls on Deficit Await the Winner,” The Wall Street Journal, November 6, 2012.

Monday, November 5, 2012

Romania’s Monetary Policy in Federal Europe

Sometimes monetary policy and federalism can interact in interesting ways. To grasp a particular relation, such as that of Romania in the European Union, it is first necessary to keep in mind that monetary policy is not federalism and vice versa. An anti-federalist, for example, might have an incentive to conflate the two concepts out of a desire to deny the existence of a federal system already underway.

      Romanian currency.     Source: banknotes.com

The complete essay is at "Is the E.U. a Federal System?"

Sunday, November 4, 2012

Clearinghouses Profit as Too Big To Fail

According to Gretchen Morgenson of the New York Times, “failing to confront the too-big-to-fail question is a serious oversight.” Lest it be assumed that the financial reform law passed in 2010 after the financial crisis of 2008 makes it less probable that taxpayers would again be made to bail-out financial institutions without any strings attached, Morgenson argues that the legislation “actually widened the federal safety net for big institutions. Under the law, eight more giants were granted the right to tap the Federal Reserve for funding when the next crisis hits.” Those institutions, including the Chicago Mercantile Exchange, the Intercontinental Exchange, and the Options Clearing Corporation, were even able to avoid the penalties for failure specified in the Dodd-Frank Act of 2010.
 
The clearinghouses successfully argued that even though only banks had been allowed to borrow from the Fed’s discount window, the clearinghouses are not financial institutions (rather, they are “financial utilities”) so they should not have to be “wound down” by regulators according to Dodd-Frank should they fail. This is essentially having it both ways and getting away with it. To explain this nice arrangement, we would need to look under the hood, where I suspect we would find an exclusive world wherein vast private wealth is itself political power, even apart from any lobbying activity.
 
In 2011, the CME Group, the parent company of the Chicago Mercantile Exchange, made almost $3.3 billion in revenue. Craig Donohue, the CEO, received $3.9 million in compensation and held an additional $10 million worth of equity outstanding. With this kind of money comes inherent influence, politically speaking.
 
At the very least, great wealth has an intrinsic status, particularly in American culture. Even though some non-rich people might sympathize with the interest of riches in hopes of being rich someday, I suspect it is the power in the wealth itself that accounts for the “gravitational pull.” This subtle force operates on legislators and regulators too, and thus complements both the influence of lobbying and campaign contributions, and the ability or wherewithal of great wealth to “reward” and “punish.”
 
Abstractly speaking, great wealth has inherent political power by virtue of its status. In addition, the wealth can fund lobbyists and even political campaigns. Lastly, it can be used more generally to “help or harm” specific individuals. The systemic risk of such wealth to the viability of a republic thus goes beyond simply regulating lobbying and even campaign contributions. The sheer existence of the huge concentrations instantiates a risk to the system as a whole. If this thesis seems novel or different, it may because it is not in the interest of the subterranean power-brokers that it be made known. They would much prefer that secondary issues be debated or used as talking points.  
 
It should be no surprise that when the managers at the clearinghouses “were drooling at the prospect of having access to loans from the Fed,” according to Sheila Bair, the former head of the Federal Deposit Insurance Corporation, “top officials at the Treasury and the Fed, over the objections of the F.D.I.C.,” pushed Congress to allow the non-banks access to the Fed’s discount window as part of the Dodd-Frank Act even while saving the clearinghouses from being subject to the law’s “wind-down” requirements.  
 
According to Morgenson, the “clearinghouses have considerable clout in Washington. From the beginning of 2010 through [November 2012], the CME Group . . . spent $6 million on lobbying.” If I’m correct, the sheer wealth of the Group (and its executives!) and the related ability to “reward and punish” added to the efficacy of the lobbying. There are precious few Davids willing to sling-shot a giant; most people consider it entirely reasonable to simply step out of the way.
 
As though a rationale were needed, managers at CME argued that once their institution received Dodd-Frank’s designation of “systemically important,” the Fed “should provide access to emergency lending” and without strings. Not included in the Act’s penalties for failure, CME hardly deserved an “offsetting” benefit. The lack of symmetry here is the “smoke” indicative of “fire”—the conflagration here being the furtive, innate political power of huge amounts of concentrated (i.e., in one organization) private wealth.
 
As an alternative to Dodd-Frank, legislation could have mandated that clearinghouses too big to fail be broken up in terms of not only operation (i.e., product lines), but also management, physical location, and ownership (i.e., stockholders). Too big to fail means that the very existence of the institution represents too much systemic risk for the economy and financial system. In answer, the institution itself would have to be downsized or split apart until no such institution exists. Unfortunately, such reasoning must push off from the gravity of the tremendous mass that is hyper-concentrated capitalism—an economic system far indeed from that theorized by Adam Smith., wherein each producer is a price-taker, and thus by implication not off significant gravity even in the market, let alone Congress.
 
In short, the clearinghouses got it both ways when they should have been broken up. I contend that the culprit behind this feat or acrobatics is none other than the political power of large concentrations of private capital or wealth. Ultimately, it is the sheer mass itself that is too big to fail, both economically and in terms of representative democracy. It is as though mega-corporate kidney stones were passing uncomfortably through society’s innards with society itself heavily sedated. Everything is fine.


Systemic risk goes involves much beyond its financial or even economic dimension. When, according to Morgenson, “large and systemically important financial utilities that together trade and clear trillions of dollars in transactions appear to have won the daily double—access to federal money, without the accountability [in being wound down after failing as per Dodd-Frank’s process for systemically-important financial institutions],”—we can and should ask, at what cost to us as a people and even as a society to be passed on to posterity?
 
 

Source:

Gretchen Morgenson, “One Safety Net That Needs to Shrink,” The New York Times, November 3, 2012.