I’ve had the misfortune of checking various internet sites dedicated to politics – Politico, Daily Caller, Huffpo, etc. – and one thing I keep finding are opinion articles, written by some no-name pundit/hack, offering advice to the faltering Mitt Romney campaign. In one breath, they declare Obama’s triumph to be inevitable, and then in the other, they freely proffer advice for Mitt Romney to seize upon and reinvigorate his dying campaign. Not to be outdone, I humbly offer a policy that I believe would lead Mitt to an easy victory, if only he were to take my sagacious advice.
A brief comment, first, on the state of the race. Obama leads, but by two to three points. I’m sure you can find some polls to back me up on that, and some polls that sharply disagree, but that’s where my gut tells me the race is right now. The Romney campaign is not doomed, quite the opposite really, and Obama is not leading ten points in Ohio and Virginia. I think the race is very close, with Obama possessing a slight edge. However, and this is another judgement call, I think Obama’s support is a mile wide and an inch deep. The volatile nature of this race, and indeed of the global economy and political situation, leads me convinced that a single event could sap some of Obama’s support. The undecideds are supporting him, by default, but are very willing to jump ship.
Now, onto my recommendations.
Romney’s greatest weakness is that he is a rich man, a stereotypical data-driven C.E.O. running for president a mere four years after a horde of white collar Mongolians wrecked havoc on the global economy. The middle voter, still experiencing pain from the recession and lukewarm on Obama’s accomplishments, instinctively hesitates when they see a man embodying all of the worst attributes of upper management. This, to an extent, is not Mitt Romney’s fault. He is a victim of circumstance. Yet he hasn’t done much, or rather, what he’s done has not been successful in dispelling this image.
So how does he overcome this? He can’t fight against this perception by remaking or recasting himself as a blue collar, hard working labourer. Instead, he can, and should, fight this perception on the policy front. That is, he should endorse some token policies that go against his corporate image. And I have an idea on such a policy: breaking up the banks.
Within certain markets, there is sometimes an inherent pressure on firms to consolidate and grow bigger. It makes little sense for there to be hundred of internet providers, for example. In banking, which used to be heavily fragmented on a regional basis, the market has now become highly consolidated. It’s easier than ever before to run a national banking system from a central office somewhere. Within the US, six banks account for two thirds of the entire nation’s assets. SIX BANKS! JUST SIX! Let that fact sit and jostle around in your brain for a bit. $2.4 trillion dollars are controlled by just four banks.
A highly integrated and consolidated banking system does yield some advantages, but it also carries with it some potential system-breaking risks.
First, the firms in any highly consolidated industry start to resemble and behave like monopolists. Through political manipulation and cartel like practices, they limit new entries into the market, lobby for regulation that gives them special advantages, and in extreme circumstances engage in price fixing. The LIBOR scandal in Britain is a perfect example of what happens within an industry that has become too cosy, and thus too corrupt.
Additionally, there is the risk of a systemic collapse when one bank fails. Bank failures happen all of the time. If the bank is isolated, then the government can quickly act to ensure deposits and bring stability to the banking system. If a major national bank with linkages across the entire industry fails, then even the government’s near limitless resources can be overwhelmed. Is this likely? Any understand of the basics of the 2008 financial crisis will prove that not only is this likely, it happened and will probably happen again.
It then makes sense to break these banks up. As someone very sympathetic to capitalism, I recognize that there are times whereby the government can and should intervene to ensure the proper functioning of the market or its continued existence. You would have to be a hardcore anarchist to argue against the government’s power to break up monopolies (as an aside, I think governments tend, on the whole, to produce monopolies, but that’s another post). You can still be a rather strident libertarian and agree that sometimes, the government should step in not to manage companies or even, really, regulate them but to break them up into manageable pieces. We should do that with the banks. If we don’t, look what happens. Government bails them out, and in some cases, directly manages them. Actual socialism. I’ll take a dash of interventionism now if it prevents the flu of socialism later.
Romney, then, should propose to break up the banks. He could portray himself as a populist, a saviour of capitalism, coming from the belly of the beast to slay the beast. A Nixon to China moment, if you will. I don’t think that many on the right would disapprove the idea. You may hear some grumbling, but framed in the right way and it’s a rather right wing policy. The vast majority of people, still hungry for some revenge against the banks, would relish this. Most voters couldn’t be damned to know the in and outs of banking policy. But they would immediately recognize and approve anything that was perceivably a blow against the banks. Ohio voters, a particularly populist bunch, would love it. Independents, still searching for some inkling of reform, would love it. Left wing voters, reluctantly voting for Obama because of the lack of alternatives, would love it. Sure, they wouldn’t vote for Romney, but they might just sit this one out, for the chance to see the big banks getting their comeuppance. Small businesses, a core part of the Republican coalition, would love it. I even think Wall Street would like it. It would be sure to alienate a few of them, but they are smart enough to know the beneficial economic effects it would bring.
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