Inauguration Commentary – January 2001

The new president is greeted with glee by comedians, but his presidency may be a watershed event. Bush Jr, to a greater extent than any predecessor, is the man of business. Reagan was all for the free market, but he was an idealist able to believe wacky ideas like voodoo economics and star wars. He never followed through on reducing the size of government. Father Bush, we forget so soon, was seen as an empty man lacking idealism. He was a competent administrator who saw the need for reducing the deficit and lost Republican support by raising taxes. Unfortunately, he had harped on no tax increases to get elected and going back on his word created the impression that Bush senior did not stand for anything. Not so Dubya, he stands for something - unqualified support for business. Bush has sought to identify himself with education, a nice comfortable political issue, but education is a sideline. The central theme of Bush’s rule in Texas was support for business and that support is what got him elected. Business leaders picked him out as their man and provided the largest pot of money in the history of elections. He was not bought, he is a true believer that businessmen should run the country. Bush will pay absolutely no attention to McCain’s election reform effort. He is the big business candidate McCain’s program is specifically aimed at. The cabinet appointments prove the point. Start with treasury, a businessman. Look at defense. Rumsfeld is a known supporter of increased defense spending, a powerful business issue. Bush talks about raising soldier pay, but the real support will be for new weapons. Our defense contractors sold so many advanced weapons overseas that we apparently need new ones to counter all those now in the possession of foreign powers. The appointment of a general as secretary of state (if he weren’t black we would all be shaking our heads at a general in this position) would seem to further the point. The lesser appointments are more revealing. The original labor nominee, Chavez, is a union basher and critic of the minimum wage. Could corporations wish for anyone better. Energy: the qualification here is that the new secretary has championed closing the department. Interior: the lady’s only known position is opening up government lands to business. The most subtle is Christy Whitman as head of the Environmental Protective Agency. This may seem like a reward to a fellow member of the eastern establishment, but not so. Whitman’s predecessor introduced one of the most comprehensive environmental programs of any state and she simply disbanded it. Who better to run the EPA in the interests of business. As for Justice, look for a dismantling of the anti-trust effort of recent years. Ashcroft’s own views are less interesting than the fact Bush would pick someone so far to the right (he did owe them a big one for repulsing the McCain bandwagon in South Carolina). The SEC - look for it to be turned over to Wall Street (an established Bush trick is turning a regulatory agency over to those being regulated) and some of the activist Levitt initiatives reversed. The takeover of government by corporations goes beyond cabinet appointments. Business representatives, CEOs, lobbyists have swarmed the transition office seeing that sub-cabinet and other positions fall into friendly hands. As to Prime Minister Cheney, we are so relieved to have a solid experienced man to shield us from an in-over-his-head Bush that we forget his far right views and the fact that he picked these people. Bush endlessly talked of being a healer, but the cabinet appointments reveal the emptiness of his views on bipartisanship. Disguised by ethnic and gender diversity, the Bush appointments are blunt in-your-face moves from a man supposedly placed in a conciliatory position by the questionable nature of his win. His actions demonstrate the extend to which he is unalterably allied with big business, not the most popular interest of the common man. The important question, will the alliance of business and the administration be good for the country? A few years ago the judgment would unquestionably have been no. Twenty years ago Bush would have been laughed at as a presidential candidate, now as the business president he is a product of changed times. Business has greatly increased its influence in government and prosperity has never been greater. Starting off with a recession, or a severe slump, means that his timing is good. Over the short run, business probably needs a helping hand and Bush is going to provide it. For the stock market over the next year, we could not ask for a better choice. Longer term, the issue breaks down to the relative view of capitalism. The free market is seen by some as solving all economic problems and producing the greatest benefit to the greatest number. The rich may get an apparently unfair slice of the pie, but the poor end up much better off than under any other system. Certainly capitalism has proven itself in modern times. While the returns are mixed overseas because of centuries old cultural barriers, capitalism works in this country. So the issue isn’t capitalism, it is the degree to which capitalism compromises democratic principles. Communism did not come out of the old feudal serfdom, it came out of the industrial revolution and the exploitation of labor. Free market capitalism does give rise to unfairness. The rich become greedy, they never have enough. They use money power to accumulate more and lose their sense of justice. Monopoly is an inevitable corporate goal and monopoly slows progress and leads to higher prices, defeating the free market. Enthusiasts point out that the free market ultimately destroys monopolies, but it takes time and in a democracy we are unwilling to wait. The monopoly problem may be moot, for in the fast moving high technology international economy, establishing a monopoly is almost impossible, so the anti-trust laws may have become superfluous. The government beat Microsoft, but with the peaking of the PC, Microsoft is back in a fight for its life. But the problem remains - business means big corporations and big corporations exercise great power in an undemocratic manner. The point is that the completely free market is not utopia, it almost instinctively goes astray. I think we face a serious problem at the moment because of the crazy, greedy, indiscriminate new issuance market brought to us by Wall Street. We are seeing the downside of overselling the market and driving stocks to ridiculous levels. More significant than the immense waste of capital is the false sense of wealth that may have put the consumer behind the eight ball. Greenspan’s efforts to control stock market speculation were directed at preventing just this situation, but he failed. On the subject of Greenspan, apparently he is close to Cheney, so he may be protected, but look for the Bush people to go after him, specifically with blame for the slowdown. Business does not like Greenspan’s powerful and moderating influence on the economy, it wants a free hand. In America we developed a government restrained capitalism to control the nastier, undemocratic practices that inevitably develop in a free market. The government is also an important partner in providing services that assist the free market to grow. The idea that government is always a hindrance is ridiculous. On the other hand, coming out of the New Deal, the need to counter the Russian threat, fears about a shortage of energy, the need for a central bank of last resort, and many other examples, government undoubtedly became too active in our lives. The environment needs protection, but the original cleanup laws of twenty-five years ago went too far. The influence of government in our lives has gradually diminished and that probably helped sustain the long prosperity of the 1990s. Although business recognizes the contribution of government, it can’t resist fighting to reduce that role. Business wants the roads, but it does not want to pay for them. Business has captured the keys to the regulatory safe and this administration will do whatever it can to eliminate regulation. Will they overdo it? Corporations are not noted for restraint when it comes to their self-interest. The cabinet nominations are evidence of a must-have-it-our-way attitude that gets corporations in trouble. A corporation can be run as an autocracy, the country can’t. The question is, will the business takeover be good or bad? I am a firm believer that government restraint is an important cog in the success of our form of capitalism and that given the chance business will go astray. But what do I know, maybe the unfettered market will provide new stimulus. That decision will not be made in the next four years, this is a long term contest. The pendulum of relative strength between government control and the free market has moved in favor of the free market. The result is big business flexing its muscles as never before, but that swing may be reaching a peak. You can’t help but admire Bush’s don’t give a damn attitude, but in a democracy a business president probably holds a bad hand. I am disturbed by the constant talk show spinmeisting that this is the greatest cabinet ever, when it clearly lacks in distinction. This may reflect a defensive foreboding among Republicans about the cabinet, or an effort to obscure what this group actually stands for. The majority of voters believe in government and anyone letting the big corporations run wild may be placing himself in an unelectable position. But maybe not. Business is on top and the majority of Americans are stockholders with a more benign view of big corporations. Business will never have a better chance to prove it can lead. The next four years will be fascinating for students of capitalism.

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