One bubble burst, then another and another. Enron, Global Crossing, WorldCom. The rectitude of auditors–pop. Faith in corporate CEOs and stock market analysts–pop, pop. The self-righteous prestige of Citigroup and J.P. Morgan Chase–pop and pop again. The largest bubble is the stock market’s, and it may not yet be fully deflated. These dizzying events are not an occasion for champagne music because the bursting bubbles have cast millions of Americans into deep personal losses, destroyed trillions of dollars in capital, especially retirement savings, and littered the economic landscape with corporate wreckage. Ex-drinker George W. Bush explained that a “binge” is always followed by the inevitable “hangover.” What he did not say is that the “binge” that has just ended with so much pain for the country was the conservative binge.
Economic liberalism prevailed from the New Deal forward but broke down in the late 1960s when it was unable to resolve doctrinal failures including an inability to confront persistent inflation. Now market orthodoxy is coming apart as a result of its own distinctive failures. It can neither explain the economic disorders before us nor remedy them because, in fact, its doctrine of reckless laissez-faire produced them. The bursting bubbles are not accidents or the work of a few larceny-prone executives. They are the consequence of everything the conservative ascendancy sought to achieve–the savagery and injustice of unregulated markets, the blind willfulness of unaccountable corporations.
We will be a long time getting over the conservative “hangover.” It may even take some years before politicians and policy thinkers grasp that the old order is fallen. But this season marks a dramatic starting point for thinking anew. Left-liberal progressives have been pinned down in rearguard defensive actions for nearly thirty years, but now they have to learn how to play offense again. Though still marginalized and ignored, progressives will determine how fast the governing ethos can be changed, because the pace will be set largely by the strength of their ideas, their strategic shrewdness and, above all, the depth of their convictions. That may sound fanciful to perennial pessimists, but if you look back at the rise of the conservative orthodoxy, it was not driven by mainstream conservatives or the Republican Party but by those dedicated right-wingers who knew what they believed and believed, most improbably, that their ideas would prevail.
The new agenda falls roughly into three parts, and the first might be described as “restoring the New Deal.” That is, the first round of necessary reforms, like the Sarbanes bill already enacted, must basically restore principles and economic assurances that Americans used to enjoy–the protections inherited from the liberal era that were destroyed or severely damaged by right-wing deregulation and corporate corruption of government. Pension funds, for instance, lost horrendously in the stock market collapse and face a potentially explosive crisis because corporate managers gamed the pension savings to inflate company profits. Employees of all kinds deserve a supervisory voice in managing this wealth, but Congress should also ask why corporations are allowed such privileged control over other people’s money. Broader reform will confront the disgraceful fact that only half the work force has any pension at all beyond Social Security and set out to create tax incentives and penalties to change this.
Another major reconstruction is needed in antitrust law, to restore and modernize the legal doctrine systematically gutted by the Reagan era (and only marginally repaired under Clinton). The financial debacle includes scores of companies concocted by endless mergers that pumped up the stock price but added no real economic value. Others sought to build the dominance of oligopoly and have succeeded across many sectors. Spectacular failures include AOL Time Warner and the airline industry. Skepticism of unlimited bigness needs to be renewed and should start with the banking industry–reining in those conflicted conglomerates, like Citigroup and J.P. Morgan Chase, created with repeal of the New Deal’s wise separation of commercial and investment banking.