Nationalization on the Sly
Yesterday I saw Andrew Sullivan on the Chris Matthews Show hypothesizing that at the end of the day Barack Obama is going to nationalize some large banks after all, and that the point of the complicated-and-somewhat-hazy Geithner plan is to try to convince people that he’s doing this because it’s genuinely necessary and not just a fit of left-wing ideology. An email correspondent suggested the same thing, also yesterday. And it seems that last night Josh Marshall rounded up a bunch of speculation along these lines.
I’ve been calling attention to the possibility of a backdoor path to nationalization since this plan was announced, so I’m definitely open to that possibility. That said, I’ve noticed an odd tendency in some quarters to, whenever Obama makes a move to the right and therefore attracts some criticism from the left, turn around and criticize those critics on the left for failing to recognize the brilliance of Obama’s secret left-wing plan. From where I sit, whether or not such a plan exists, its execution actually depends on moves to the right attracting criticism from the left. So rather than speculate as to whether or not this is “really” what the administration is planning to do, I’ll just say I think that would be the right thing to do.
The audience that needs convincing, however, isn’t really the public. Ultimately, this kind of bank system bailout is an elite-driven phenomenon. The constituency that matters is, broadly speaking, the executive class of the non-financial sectors of the economy. US business leaders have typically shown a very high degree of class solidarity such that back in 1993 businessmen from throughout the economy stood shoulder-to-shoulder with the particularist interests of insurance company executives to beat a health care plan that would have benefited many of their firms. Similarly, here in 2009 most firms would benefit from a maximally effective financial rescue program rather than from one that’s maximally deferential to the managers and owners of major financial services firms. If the managers of those firms choose the best interests of their own companies, then the political space for nationalization gets quite big. But if the managers of those firms choose to stand by the interests of their economy-wrecking colleagues at the banks then things get tough.
32 Responses to “Nationalization on the Sly”
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February 16th, 2009 at 10:32 am
This post synthesizes and sublates all previous discussion on the topic. Kick ass.
February 16th, 2009 at 10:44 am
Critics of the left like Petey confidently assured us that Obama would never even consider nationalization because the President is a triangulating centrist. I think if it were up to Geithner and Summers it wouldn’t happen and we’ll see, it might not.
During the Cold War when some tiny, decolonizing country was moving to nationalize some key industry of its economy, this was cause for a CIA coup or invasion. And here we are discussing the nationaliztion of our banking system.
Matt:
“From where I sit, whether or not such a plan exists, its execution actually depends on moves to the right attracting criticism from the left.”
Accurate criticism is fine. What I saw happen over the stimulus bill was the Washington media elite try to take Obama and his advisors down a peg. It had little basis in reality. Leftwing critics jumped on this as proof that Obama’s bipartisanship didn’t work and was naive, but they had an axe to grind too. At the end of the day, Obama got a decent stimulus bill through and all of the drama queens were wrong. Their analysis was proven to be inaccurate, not that this will change future behavior.
February 16th, 2009 at 11:10 am
Note that similar strategies aren’t exclusive to nationalization. Obama’s benefitted from cover-by-criticism-from-the-left on several issues:
1. Healthcare. Criticized during the campaign for recycling Harry and Louise against Clinton. He was later criticized during the general (on this blog maybe?) for positioning his plan in the center against left and right extremes. He can point to this history of criticism when he’s blasted from the right for socializing healthcare.
2. Taxes. Criticized from the left for focusing on tax cuts and including cuts in the stimulus. In reality this will lead, after the expiration of the Bush cuts for the top brackets, to a fairly drastic and progressive shift in the tax burden.
Could go on to talk about the stimulus, etc. My guess is that with trade he’ll talk about free trade and then end up passing agreements that obligate American environmental regulations. On medicare/social security/medicaid he’ll talk a good game but then figure out how to fund social security at or above current levels. It’s not so much about a secret plan as it is about making the best possible outcome within the administration’s power appear to be a compromise and a rebuke to the left.
February 16th, 2009 at 11:12 am
This is an excellent post. What I would highlight here is that this is not really an indication of Obama’s leftism so much as an indication that he’s not a Broderite. Broderism would never allow for bank nationalization because it doesn’t feel centrist enough. But when the entire economic system is at risk, suddenly the interests of the wealthy and the middle class are aligned and the extreme resistance to dramatic action coming from the right disappears. I think what you’re going to see is some kind of pressure to nationalize banks or force them to liquidize assets. There are tons of dollars out there waiting for decent investments. Until the financial sector is on sound footing again, the business sector doesn’t qualify. But the market would love to be able to buy banking assets at their actual value, which after getting rid of various negative value assets through default, would be good opportunities. What the left needs to fear is the public soaking up most of those negative value assets and private financial capital getting all the deals with upside. And Obama won’t do much to prevent that without a lot of pressure.
February 16th, 2009 at 11:19 am
US business leaders have typically shown a very high degree of class solidarity..
Very smart post, MY. Whether DTM’s point, that the audience which needs to be convinced is the private capital markets, is right or not, your point is a good one. It’s easy to forget that a disaster like this is very much a socio-psychological phenom. It’s all about deciding, quickly and under pressure, which luxuries you must do without – redefining what a luxury is, in fact. Let’s just see how this class solidarity holds up now. What’s true today might not be true in a week, or tomorrow.
I would also note that people (regular people) HATE banks right now. I’ll bet Lindsay G. has heard about it from constituents.
February 16th, 2009 at 11:25 am
I think, most of the time, it’s ridiculous to think Obama’s feinting right when he means to go left in the long run. I also think it’s ridiculous to think he really WISHES he could go left, but goes right to give Republicans want they want. When he comes out with a moderate or conservative plan, let’s start with the assumption that that’s what he really wants, at least until we get some other evidence.
That doesn’t mean we shouldn’t criticize him- in fact, if the plans he introduces are what he really wants, it’s probably MORE IMPORTANT to criticize him- but let’s recognize it for what it is.
Ironically, I think Geithner’s “plan” might be one of the few circumstances where my above hypothesis doesn’t apply though, if only because Gaithner’s statement was such a nothingburger. It wasn’t a feint to the right, it wasn’t a feint at all. And there is evidence (the reports of internal debates, the words Geithner himself used) that the “plan” (Scare quotes used purposely) is very much a work in progress. So I can see this being a case where Obama’s initial plan isn’t what he wants in the long run, ’cause he might not yet know what he wants in the long run.
Which isn’t to say that he’s going to end up nationalizing the banks, for all I know his ultimate plan could be to let Ron Paul figure it all out. I do feel like a nationalization consensus is slowly developing, but Obama’s defied conventional wisdom plenty of times before- so as a leftist who thinks we probably need to nationalize, I’m not yet comfortable.
February 16th, 2009 at 11:51 am
I do feel like a nationalization consensus is slowly developing, but Obama’s defied conventional wisdom plenty of times before- so as a leftist who thinks we probably need to nationalize, I’m not yet comfortable.
I’m not comfortable either, but thinking of Obama as The Inscrutable, a sphynx, is really just as silly as over analyzing supposed feints. The guy has a conservative streak, no doubt about it (and I don’t, and have never, liked it). But he’s a practical pol above all. As has become CW, whether it’s called ‘nationalization’ or not is not very important. Things are moving very fast, and I don’t think anyone’s ‘banking’ on anything yet.
February 16th, 2009 at 12:25 pm
Actually, the 1993 health care reform prompted huge division between (1) the tip-top major insurers and HMO’s who would have controlled all of U.S. health care in the ‘managed competition model’ and (2) all the ’small’ to ‘medium’ (in comparison) sized insurers & HMO’s who would lose out.
The Republican ‘revolution’ in Congress reflected in part a huge diversification in funding, turning to smaller corporations and a lot of smaller insurers, partly because the Democratic Congress and more established Republican leadership had been very effective in locking up the biggest corporate donors.
February 16th, 2009 at 12:29 pm
I don’t think the term “nationalization” is accurate. The government has no intention of seizing the “means of production” and operating them for the national or common good. They’re just putting them into receivership.
When a decolonizing country in the 20th century nationalized some industry or property, they didn’t take bankrupt businesses and assets, but profitable ones; that was the point! And they certainly didn’t sell them back to private owners at the first opportunity.
February 16th, 2009 at 2:12 pm
“Since the founding, the American political tradition has been reformist, not revolutionary. What that means is that for a political leader to get things done, he or she ideally should be ahead of the curve, but not too far ahead. I want to push the envelope but make sure I have enough folks with me that I’m not rendered politically impotent.”
http://www.harpers.org/archive/2006/11/0081275
February 16th, 2009 at 2:33 pm
“I’m not comfortable either, but thinking of Obama as The Inscrutable, a sphynx, is really just as silly as over analyzing supposed feints.”
I don’t think of him that way, and I’m not sure I indicated that I do. But we agree on our discomfort, so that’s something.
February 16th, 2009 at 3:59 pm
I don’t think the term “nationalization” is accurate. The government has no intention of seizing the “means of production” and operating them for the national or common good. They’re just putting them into receivership.
I think it’s an open question. Obama described very directly how the Japanese failed to cope with their banking crisis and how Sweden succeeded in dealing with its banking crisis.
He said he didn’t think the Swedish model applied because of a couple different factors (number of banks and political culture) but if TARP II, son of TARP doesn’t work, they may have no alternative. Was what Sweden resorted to merely receivership? They did manage to save their taxpayers a lot of money.
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February 16th, 2009 at 6:53 pm
Nationalization doesn’t have to be forever. A bank can be nationalized, and when it hopefully returns to “normal functioning”, de-nationalized. It never occurred to be that it might be a good idea to nationalize a bank, but for reasons I don’t understand, it seems painfully obvious right now that many U.S. banks are simply not going to be providing much credit in the forseeable future. In such a situation, why not nationalize that bank? It’s not like the “private” bank is doing much good to people. Is it “socialism” to nationalize a bank, but “not socialism” to shovel oodles of money into it?
February 16th, 2009 at 7:28 pm
How about de-nationalizing after they’ve paid us back with the same interest they’ve been charging us for the past 8 years.
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