The Manicures Don’t Matter; the Campaign Contributions Do
posted by Frank Pasquale
There are going to be more shocking revelations of Wall Street decadence in coming weeks; AIG’s managers’ manicures are just the beginning. While not yet demagogic, this focus obscures the real story of our ongoing economic collapse: the self-reinforcing cycle of money and favors that led to disastrous policy choices not to regulate the finance industry more. Ellen Miller of the Sunlight Foundation has summarized the process: “the finance, insurance and real estate (FIRE) industries that collectively are at the center of the current crisis are the single largest sector–by far–of all the major economic and interest groupings that give campaign contributions to federal politicians.” Here is Larry Makinson’s visualization (if you like Edward Tufte, you’ll love this):
In media prone to parrot compartmentalized “experts,” these relationships between economics and politics are rarely in the foreground. It was refreshing to hear Danny Schechter make the connection on the Tom Ashbrook show when an apologist for laissez-faire started talking about how important a government policy of increasing homeownership was to the current crisis. Schechter simply asked: who lobbied for that policy? or for no regulation of derivatives? or for the SEC’s oxymoronic “self-regulation?”
Anyone with a nodding acquaintance with Charles Lindblom’s Politics and Markets (or Owen Fiss’s Why the State) understands the problem of circularity–the intimate interconnection of political and economic elites. Real campaign finance reform would help break down those ties. As it stands, Wall Street titans can use the tens of millions of dollars they earned in the “boom” to influence policy during the bust–and can count on the Supreme Court to slap down any “millionaire’s amendments” that could retard that process.
As we reap the whirlwind of years of conspicuous consumption and positional competition, we may want to consult the thought of Thorstein Veblen, who never cordoned off economic thought from the types of political and psychological analyses necessary to understand flows of money and power:
[A] prime theme (or principle) of Veblen’s is that of institutional holism, which is advanced in various ways in all his works, but . . . especially in The Theory of the Leisure Class (1899). Central to holism is the need to study the interplay of social, political, and psychological factors in the determination of economic processes. Economics is part of an open system, with determination including values, beliefs, individuals, institutions, social behaviours and human-centred aspects of the provisioning process. Every aspect of economics, in this view, needs to be situated within a broad framework of reference in order to comprehend adequately the nature of the processes in motion and to recognise the element of novelty and creativity that are prime factors in change (along with blind drift).
At least we can now recognize where the “blind drift” of a politics mastered by market forces has led us.
October 9, 2008 at 6:00 pm
Posted in: Corporate Law, Economic Analysis of Law, Securities
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Responses (2)
JP - October 10, 2008 at 11:45 am
See also: Financial industry contributions and the (first) House vote on the bailout bill.
$231,877 to each legislator voting Yes
$150,982 to each legislator voting No
Maryland Conservatarian - October 10, 2008 at 3:32 pm
C’mon Professor, cheer up – look how much the wealth gap has narrowed in just the last week.
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