Thursday, December 16, 2010

Revolving Doors

There's a lot of justified anger and cynicism regarding Peter Orzag's move from the White House to Citigroup. A move like this tends to reinforce what people see as a cosy relationship between government and the banking sector, and it seems like we would be well-served by limits on how quickly a person could move from one to the other. But this analysis by Will Wilkinson struck me as wrong-headed:
Progressives laudably seek to oppose injustice by deploying government power as a countervailing force against the imagined opressive and exploitative tendencies of market institutions. Yet it seems that time and again market institutions find ways to use the government's regulatory and insurer-of-last-resort functions as countervailing forces against their competitors and, in the end, against the very public these functions were meant to protect.

We are constantly exploited by the tools meant to foil our exploitation. For a progressive to acknowledge as much is tantamount to abandoning progressivism. So it's no surprise that progressives would rather worry over trivialities such as campaign finance reform than dwell on the paradoxes of political power.
I think the first paragraph is basically correct, and it's the second that I take issue with. Acknowledging that market institutions exploit public institutions and their regulatory functions is not "tantamount to abandoning progressivism" any more than acknowledging that pure unchecked market capitalism can be destabilizing and destructive requires a free market advocate to completely abandon the idea. It's like saying that because the system can be gamed, then the entire system should be scrapped. Chait offers several rebuttals, including this one:
As Wilkinson semi-concedes later on in his item, it's not really true that "Well-connected wonks can get rich on Wall Street only because Washington power is now so unconstrained." It's impossible to create a government weak enough that having deep knowledge of government will not be a marketable commodity. Given that fact, the only answer is to create social norms and regulatory barriers to minimize excessive special interest as best as possible.

Wilkinson's post is interesting and much more than a bash on progressivism; he even walks back that original statement. He's asking the right questions:
Maybe it's true that markets hum along smoothly only with relatively active government intervention and it's also true that relatively active government intervention is eventually inevitably co-opted, exacerbating rather than mitigating capitalism's injustices. Perhaps the best we can hope ever to achieve is a fleeting state of grace when fundamentally unstable forces are temporarily held in balance by an evanescent combination of complementary cultural currents. This is increasingly my fear: that there is no principled alternative to muddling through; that every ideologue's op-ed is wrong, except the ones serendipitously right. But muddle we must.

So what is to be done about the structural injustice spotlighted by Peter Orszag's passage through the revolving golden door? How exactly do we tweak the unjust structure? If the system is rigged, how exactly do we unrig it? In which direction can we muddle without making matters worse?

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