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Not So New A Problem

Great column by Ross Douthat today about the consolidation of power into the hands of an interlocking and not especially competent elite.  Douthat writes "From the Troubled Asset Relief  Program to the stimulus bill, from the auto bailout to health care reform, we've created a vast new array of public-private partnerships - empowering insiders at the expense of outsiders, large institutions at the expense of small ones, and Washington at the expense of state and local governments.  Eighteen months after the financial crisis, the interests of the financiers, CEOs bureaucrats and politicians are yoked together as never before."

The worst part is that even when these elites fail, they manage to turn it into an excuse for another power grab because "This is the perverse logic of meritocracy.  Once a system grows sufficiently complex, it doesn't matter how badly our best and brightest foul things up.  Every crisis increases their authority, because they seem to be the only ones who understand the system well enough to fix it."

This put me in mind of a statement from a certain wise man who said "From time to time, we have been tempted to believe that society has become too complex to be managed by self-rule, that government by an elite group is superior to government for, by, and of the people.  But if no one is capable of governing himself, then who among us has the capacity to govern someone else?"

I have only two points to add:

1.  I  hate the term meritocracy.  It concedes too much.  I see credentials and connections, but not nearly as much merit as the word implies.

2.  The job of governing isn't one for a power hungry technocracy, but the problems of governing under present conditions really are complicated and will involve sometimes painful choices.  Are there competent and thoughtful populists who are able to analyze our current predicament and explain to the general public, policies that will lead us to a less corporatist, less statist, less centralized and more market-oriented future? 

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This fits with Christopher Caldwell's recent discussion of Simon Johnson's new book, 13 Bankers, on how IMF interventions only fill the pockets of the "meritocracy" of recipient societies (http://www.weeklystandard.com/articles/american-oligarchy).

Being perfectly ordinary, referring to Henry Paulson and Timothy Geithner as 'not especially competent' would seem an act of effrontery. The thing is, folk who have reason to know what they are talking about have made comments which imply as much. In particular, the economist Charles Calomiris, who is a specialist in financial matters and I believe has worked for international agencies, has said he was stupefied by their behavior. Banking crises are not rare events and their have been scores of them over the last 35 years; yet (he said) these two rejected the accumulated experience of how to handle them in favor of innovation and improvisation. Nouriel Roubini, who was once an official of the IMF and is experienced in the containment and resolution of these crises, has said the initial design of the TARP program had almost no precedent and similar programs had been attempted in only two circumstances he could think of. The proposal of Luigi Zingales to recapitalize the banks through debt-for-equity swaps was rejected (apparently arbitrarily) and the proposal of another expert to recapitalize Fannie Mae and Freddie Mac in the same way was also rejected. Recall also the remarks of the former Prime Minister of Australia on the subject of Timothy Geithner's role in the Asian crisis of 1997-98. Our current president knows nothing of these matters and appears to care not; gotta have a health care bill to have a monument to himself and who cares about distressed banks or sovereign defaults.

Maybe Art, the thing is that you are likely to find disagreement among experts, which really means you can safely go with effrontery most of the time. I particularily think showing some effrontery to Roubini is fairly fun, if there was no precedent for what Paulson and Geithner did I am not sure how Roubini could have been so sure it was going to fail. His remarks at Dow 7000 that the Dow was going to 5000 didn't stop Jim Cramer from showing some effrontery. Cramer is still somewhat bullish and Roubini is still calling for DOW 5000.

The US gov sold out its stake in C and made a profit.

Of course Cramer works for CNBC and GE, and that is certainly a company that is part of the nexus pete decries.

While many would laugh I do think Jim Cramer is a competent and thoughtful populist who is able to analyze our current predicament and explain to the general public, policies that will lead us to a less corporatist, less statist, less centralized and more market-oriented future. Of course Jim is a democrat and a harvard law grad.

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