From the November 3, 2008 New York Post
November 4, 2008
by Irwin Stelzer
WE learned something important in the past year or so. There is more to a political campaign than "It's the economy, stupid."
That is not to say that the economy doesn't affect elections. Of course it does, especially when a severe recession or financial dislocation such as the one we're now experiencing has voters worrying about their jobs, their mortgages, their health care and their kids' kindergarten and college-tuition bills.
But something deeper is at work now. Voters want some sense of each candidate's view of how the economy works.
Barack Obama knows how, or says he does: Big bad bankers and oil companies take advantage of average families. Free markets can't produce affordable health care or higher education. That's a job for governments. Free trade causes the loss of millions of jobs. Government has to protect workers from those low-paid Chinese.
There's more. But you get the idea. Even if you don't agree, even if you know that governments are wasteful and inefficient, and at times corrupt, you can see where the man is coming from. And that he knows where he is going.
Until recently, defenders of free-market capitalism had an equally coherent tale to tell: Competitive markets will set fair prices and produce a flow of mortgage money at reason- able rates and on sensible terms; bankers and oil companies will be led as if by an invisible hand to do the right thing; everyone willing to work will find a job. Government has to make rules and referee the competitive fight for consumer favor - but it shouldn't be a player in the game.
It was John McCain's misfortune that his lack of interest in or understanding of economics - he might have gotten by in ordinary times - was magnified by the fact that President Bush and Treasury Secretary Hank Paulson decided to fight the current crisis by pulling the rug out from under believers in the Old Capitalism.
It is impossible to defend the free market when the government - a Republican president and the former boss of Goldman Sachs - decides to bail out Bear Stearns and pump capital into the biggest banks. It is hard to defend a belief in individual responsibility when the government bails out homeowners who bought more house than they can afford. It is hard to defend free markets when executives who have wrecked their companies waltz off onto the nation's best golf courses with multimillion-dollar bonuses.
It is hard to defend free markets when their leading defender, former Fed Chairman Alan Greenspan, confesses that he was wrong when he believed that private-sector bankers and brokers would behave responsibly.
In short, there is a need for a new capitalism.
Not Obama's model of a government that redistributes income, that taxes and taxes so that it can spend and spend on its favored constituents and projects. But one that tames the excesses that have been revealed in the Old Capitalism and then lets Americans go on about their work, their inventing, their money-making, their lives.
McCain didn't get it. Neither did his campaign, too busy hiring fashion consultants for Sarah Palin to provide voters with a coherent view of how the economic world works, or should work, or would work under a President McCain.
Sure, McCain followed his good instincts and attacked the undeserving rich. But then he launched attacks on those he deemed to be what Theodore Roosevelt called "malefactors of great wealth." But that's not the same as articulating a governing philosophy to compete with Obama's "I'm from the government, and I'm here to help you."
We don't know whether voters will in the end prefer Obama's big-government capitalism to McCain's swings from defending free enterprise to attacking its key players. But one thing is certain: From now on, "It's the economy, stupid" will mean a lot more than the latest employment and GDP figures.
It will mean having a plan to make mortgage brokers retain some of the risk of default so that they stop writing NINJA (no income, no job) mortgages. It will mean figuring out how to prevent banks from sneaking stuff off of their balance sheets so they can borrow more than is prudent. It will mean deciding how big a role government should play in the housing market. In short, it will mean developing a New Capitalism that retains the virtues of the old, minus most of its flaws. Otherwise, the big government types will control the White House and the Congress for more years than would be good for the country.
Irwin Stelzer is a Senior Fellow and Director of Economic Policy Studies for the Hudson Institute. He is also the U.S. economist and political columnist for The Sunday Times (London) and The Courier Mail (Australia), a columnist for The New York Post, and an honorary fellow of the Centre for Socio-Legal Studies for Wolfson College at Oxford University. He is the founder and former president of National Economic Research Associates and a consultant to several U.S. and United Kingdom industries on a variety of commercial and policy issues. He has a doctorate in economics from Cornell University and has taught at institutions such as Cornell, the University of Connecticut, New York University, and Nuffield College, Oxford.
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