Congress bales out

The bailout debacle exposes indirection, immaturity and indiscipline in the heart of DC.

Brendan O'Neill
chief political writer

30th September 2008

Was the rejection of the bailout a victory for unbridled capitalism or for small-s socialism? Both, apparently. The House of Representatives’ ‘Nay’ to the Treasury and Federal Reserve’s $700billion package to bail out struggling banks has been celebrated by right and left alike. The vote had barely been declared before the Competitive Enterprise Institute was chirping: ‘Oh, happy day! It certainly is for all those who value freedom, responsibility and the true free market…’ Yet The Nation, too – the favoured magazine of the cat-owning, fat-cat-bashing Democratic classes in the US – hailed the rejection as ‘an invigorating moment for democracy’, a victory for ‘the people’ against the ‘odious’ bankers (1).

So: a win for the market or for the masses? Neither, actually. For all the efforts to drape the bailout debate in the zombified garb of free market vs socialism, unethical capitalism vs democratic control, the collapse of the bailout really shows that that old political divide counts for little today. And it demonstrates, decisively, that one of the key factors in the current financial crisis – perhaps the key factor – is the crisis of political leadership. Washington’s political elite is now so disengaged, so parochialised, that it lacks the imagination or the will to deal with new experiences in our changed world.

The bailout debate is being stalked by the zombies of politics past. The free marketeers – a dwindling band – who opposed the plan claim that its rejection in the House of Representatives has ‘literally saved’ American capitalism: ‘This means that America is much less likely to turn into France, Venezuela, or the old Soviet Union, as this bailout/nationalisation package would have set us on the road to becoming.’ (2) This is self-delusion on stilts. The arguments put forward by even the numerous Republicans who defied President George W Bush to reject the bailout were based on disdain for (or at least discomfort with) unbridled capitalism. Many said they voted against the bailout because their voters are sick of thieving bankers (3). As should have been confirmed by the American mortgage bailouts in recent months, and by numerous other events in the past few years, the neo-liberalism fantasised about by free marketeers and fearfully obsessed over by liberal commentators is a myth: even the Financial Times, a week before the bailout debate, announced ‘The end of American capitalism as we knew it’ (4).

More deluded still is the idea that the bailout rejection is a ‘people’s victory’ against Bushite backing for reckless capitalist bankers. The Nation fantasises that, ‘after 25 years of deferring impotently to the wise men of Wall Street and retreating tactically from conservative initiatives’, in the current crisis, and with the rejection of the bailout, the Democrats are taking a ‘hesitant first step toward rediscovering their nerve and abandoned convictions’ (5). This conveniently, one might even say bizarrely, overlooks the fact that more Democrats – 140 – said yes to the bailout than did Republicans – 65. Other liberal commentators backed the bailout on the basis that increased state control would put the bankers in their place, meaning they found themselves on the same side as the person they’ve hated with an unusual passion for the past eight years: Bush. Nothing better captures the strangeness of contemporary politics than the sight of both the Satan Bush and blue-state, bespectacled worriers backing the same plan in order to save/re-educate American financiers (6).

Left-wing sections of society that claimed to represent ‘public outrage’, as The Nation now describes the American people’s reaction against the bailout, once had higher aspirations than to rap the knuckles of bank bosses and increase state control of the capitalist system. If recent events have woken even the Financial Times to ‘the end of American capitalism as we knew it’, then they should also wake the rest of us to the end of radicalism as it once existed.

The imposition of the zombie categories of ‘free market’ and ‘socialism’ on to the bailout debate has obfuscated the real problems underlying the financial and political crisis, and made it more difficult for society to have a proper debate. First, it has obscured the fact that, for all their warlike chanting, both the small band of free marketeers and the unconvincing ‘anti-capitalists’ in the press and on the floor of the House of Representatives share much in common. Both see no alternative whatsoever to the capitalist system and agree that the best way forward is to have state-controlled capitalism; they only disagree over how much control there should be. Even the CEI called for new legislation to address financial problems, while The Nation declared: ‘The essential political failure… is that Congress did not step up and assert the full emergency powers of government in this epic crisis [and] take temporary control of the entire financial and banking system.’ (7) This isn’t free market vs something else, something different; it is lightly state-controlled capitalism vs heavily state-controlled capitalism. I cannot envisage people going to the barricades over that choice.

Second, the description of the bailout rejection as a great victory – whether for the market or the people or the Democrats – profoundly misses, or misunderestimates as Bush might put it, the politics of paralysis that caused the bailout to fail. It was not Republican passion for the free market, or the Democrats’ sudden discovery of a backbone, that led to rejection; it was political indirection, immaturity and indiscipline at the heart of the most powerful capital in the world. The bailout debate revealed a political elite that is now so narrow and parochial in its thinking, so consumed by the humdrum of everyday life, that matters of importance, especially of a new and unpredictable variety, can provoke disarray. The House of Representatives was more like a sixth-form debating society than a Jacobean hotbed of debate and intrigue. From Nancy Pelosi’s tantrum about Republican apologists for the free market to Republicans’ tantrum-like defiance of their leader (and their lack of an alternative to the bailout), the lasting impression was of a political class utterly out of control – unable to debate, to take a lead, to be decisive.

The historian Simon Schama recently argued that the financial crisis would have one tangible benefit: it would replace the ‘politics of pettiness’ in the US, and the world more broadly, with something that ‘Small Politics had all but made us forget could ever happen again: a true debate’ (8). If only. Instead we have dishonest debate, where conformity towards capitalism is disguised as an epoch-defining clash between a free market of sorts and socialism-lite, or we have politicians and commentators arguing that the economy is too important to be made into a political football. The end result is that debate is sidelined, and the highest aim of representatives of the left, right and centre ground of politics is to keep capitalist society chugging along in an acceptable fashion. We really do need a ‘true debate’ about the future of society, and we should start by stripping away the mystification of the financial crisis, the bailout debacle, and the crisis of political will.

Brendan O’Neill is editor of spiked. Visit his website here. His satire on the green movement – Can I Recycle My Granny and 39 Other Eco-Dilemmas – is published by Hodder & Stoughton in October. (Buy this book from Amazon(UK).)