David Stockman, a former congressman and director of the OMB under President Reagan, is disgusted with his party. He’s a participant in what I refer to as the current civil war among Republicans — the fight on the part of traditional conservatives to get their party back from extremists. Stockman understands just how far it has ventured from its conservative moorings.
He obviously finds much to condemn in liberal approaches to the economy (he eschews Keynesian economics altogether and champions his own form of extremism in a return to the gold standard). What’s interesting, however, is his ire for today’s so-called conservatives who have created a monster — crony capitalism — the condemnation of which sounds more like Sen. Bernie Sanders or Elizabeth Warren.
Crony capitalism is the use of government power to achieve business success. It isn’t the reward and punishment of actors’ performance in a free market, but rather a corruption that depends on sweetheart deals in the corridors of Washington. Of course, those kinds of deals aren’t open to everyone, but only those with sufficient resources to fund campaigns, pay lobbyists and participate in the revolving door through which various actors move in and out of government and the industry they represent (which is why Stockman also argues for campaign finance reform). The small business man is still left to his own devices.
Crony capitalism means that profits are garnered through the manipulation of power and influence rather than through ingenuity and contributions to the real economy. On the first page of his tome, "The Great Deformation," Stockman calls it a “mutant regime,” in which the economy has become a “speculative casino” that “swindles the masses and enriches the few.” It isn’t the kind of capitalism that plays fair and lifts all boats, but rather depends on handouts to the rich and powerful at the expense of the rest of us.
In what Stockman calls “socialism for the rich,” government is used for private purposes, profits are privatized and losses are socialized (paid for by taxpayers). This became possible due to the elimination of the Glass-Steagall Act, the onset of easy money and guarantees of a bailout should things turn sour. Thus, actors stood to gain huge rewards while simultaneously being shielded from the consequences of failure.
What Stockman refers to as “Main Street” loses either way. While the financial side of the economy has grown to outrageous proportions, so has economic inequality. “The real net worth of the ‘bottom’ 90 percent has dropped by one-fourth,” and the growth of economic output is at its slowest since the Civil War. Real median family income has declined along with the creation of full-time middle-class jobs.
There are distant culprits in Stockman’s tale, such as FDR, but given the economic golden era under his hero, President Eisenhower, the real problem lies closer to our day. Despite Republicans' idealization of President Reagan, for example, Stockman reminds us that, under the erroneous influence of Milton Friedman and later Alan Greenspan, he was one of the first to argue that deficits didn’t matter. Much like his more profligate heir, President George W. Bush, he engaged in unnecessary defense spending while cutting taxes. The latter was no longer seen as dependent on a balanced budget, but became an end in its own right (in a “stunning denial of reality” that stood Republican fiscal orthodoxy “on its head”). Both contrast with President Eisenhower’s preference for balancing the budget over tax cuts, disdain of adventures abroad and slashing of defense budgets, warning us of a rising “military-industrial complex.”
Stockman further clarifies that “Rather than a permanent era of robust free market growth, the Reagan Revolution ushered in two spells of massive statist policy stimulation before it finally ran out of steam.” Both “fiscal profligacy” and “Wall Street-coddling” created a “temporary spree of phony prosperity.”
Stockman is thus disgusted by his party’s rhetoric of the free market (it’s not free); individual responsibility (the chord connecting actions to consequences has been severed for the rich and powerful); as well as its rants about the entitlement society versus the job creators. He thus turns the rhetoric around. The “entitlement expectation” is on the part of financiers and corporate leaders who expect the government to support them. As he told Bill Moyers, “there have been so many bailouts, there has been so much abuse and misuse of government power for private ends that now we have an entitled class in this country that is far worse than the welfare queens that Ronald Reagan used to talk about.” They own Congress, he argues, “lock, stock and barrel.”
Mary Barker teaches political science in Salt Lake City and Madrid, Spain.