Monday, August 23, 2010


I have nothing to add to what Atrios, Felix Salmon, my friend Mike Konczal, and others have to say. I just need to register my disgust with the Obama administration.

Steve Randy Waldman (via):
On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that ... even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. ... I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”.
I want to write something longer, soon along the lines of that last sentence. It's a good heuristic that when seemingly intelligent people keep doing things that fail to achieve their stated goals, their actual goals might be different from their stated ones.

In economic-policy debates, we tend to operate with the convention that maximizing economic growth -- with perhaps some consideration of distribution -- is the only objective, and we're only disagreeing about means. But whose objective is that really? Ok, it's society's, insofar as society is embodied in the state; which is to say, in conditions of total war. (Another future post: All Keynesianism is military Keynesianism.) But outside of the case of a broadly-supported government fighting for national survival, the interest of "society" is seldom operational. Especially in a hyper-pluralistic polity like the US, what you have are broader and narrower particular interests. And when it comes to economic policy, the interest that matters is the interest of owners of financial assets.

You know the old joke of adding "in bed" to the end of fortune-cookie fortunes? I've increasingly felt the same kind of thing works for economic writing, especially financial journalism: Anytime you see a word implying a value judgment (good, bad, disaster, opportunity, frightening, promising), you just need to add "for bondholders" for it to make sense.

This is all more or less abstract and theoretical. But not with HAMP. There, the government of hope and change is willing to say right out that they don't care about people losing their homes, as long as the banks don't lose money. That it's true is bad enough, that they're willing to say it is worse.

As I said, at some point soon I want to write something more substantial about how things look when we take the bond's eye view. But I can't right now. Right now I'm so angry I can hardly breathe.


  1. "Especially in a hyper-pluralistic polity like the US, what you have are broader and narrower particular interests. And when it comes to economic policy, the interest that matters is the interest of owners of financial assets."

    I'm wondering whether this statement (and your blanket statement about "all kinds of" Keynesianism) is applicable to other countries' political systems. For example I had a discussion with one of my friends about race and he makes a similar comment concerning the need to always please the center-right in any policy proposals.

    Basically I'm wondering whether this "state in capitalist society" model you're adopting here is relevant outside of the U.S. and in so, how you explain the variations -- say, Germany's Keynesianism vs. ours.

  2. It's interesting you picked up on that line, because I rewrote it several times. And the reason for that is, that the answer to your question is, I don't know.

    In principle one could say that in a society with a genuinely mass-based party of government, the interest of society as a whole could be operational even under capitalism. In most of the world, for sure, the only way the interests of the majority of the population can be expressed is agonistically, with strikes, riots, uprisings, etc. But what about in Gemrany, in Scnadinavia? Again, I just don't know.

    What do you think?

  3. I've read several critiques of the role of the state in capitalist or market society which draw on the point made in federalist paper no. 10 concerning the need for a "larger republic" to prevent factions from harming the [property] interests of a "minority". I'm sure you've seen this argument, too -- there is an interesting book on the history of American foreign policy (can't find the citation now) that integrates this argument, and Tom Ferguson's /Investment Theory of Politics/ also quotes this Federalist paper.

    Color me convinced -- I think it's a compelling justification for modern liberal democracy. it integrates the propertied foundations of capitalist society with the political institutions necessary to sustain such foundations, using the language of bourgeois freedom in the process.

    so, let's say i adopt this model in what i'm about to say.

    still, with this framework it is difficult to explain the differences btwn say scandinavia and the u.s.

    but it does suggest that they are small differences -- that's not an argument i like to make (especially in light of your polemic against *'s in statistics :) but then again, it was the argument i thouhgt you were making.

    the main reason for my first comment was to try to get at why you are "so angry" over these issues. are you angry at the general idea of the strong influence of bondholders, or at how much more of an influence they seem to have in u.s. politics than elsewhere?

    and, finally, if the latter-- i was hoping for an explanation of your position, because it seems at odds with the view of politics which I (and which I thought you also) tend to agree with.

  4. You're right, Dan, my position seems a little incoherent. On the one hand, I say that the political dominance of bondholders is exactly what we should expect. But then, why get angry about it? I guess that's part of what it means to be a Marxists, no? -- you have to combine a clear-headed analysis of why the world is the way it is, with a sense that the way the world is, is morally intolerable.

    On the specific question of US-European differences -- which I agree are real, and important -- the best treatment I know is Moschonas' In The Name of Social Democracy. Have you read it?

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