The tension in the party was highlighted in a clash between Senator John McCain, the Republican contender in the 2008 White House race and a veteran who has done deals all his political life with colleagues from the Democratic party. He described as “bizarro” the newer members and dismissed them as naive, seeing the world as a Lord of the Rings battle between good and evil. One Tea Party senator elected for the first time in November, Rand Paul, in one of the stranger exchanges of the week, responded that he was happy to regard himself as a hobbit.

The dynamic of the crisis has pivoted on the intransigence of a small number of Tea Party aligned Republican House members. Hence, as Paul Krugman points out, the usual process of compromise has seen Barack Obama offer up cuts to social spending which “are far to the right of what the average American voter prefers”.

If the Tea Party legislators are in fact obsessed with ideological purity to the exclusion of most everything else, then we are observing something very interesting indeed. Slogans about “small government” have morphed from vague statements of orientation and political differentiation into a threat to the continuance of governance as usual. Fantasies about 18th century Republics threaten to have their effect on reality in 2011.

While neo-liberal rhetoric has enveloped American politics in the last few decades, the reality has been “big government conservatism”. Now that reality awaits its showdown with an ideology sundered from any real concern with consequences.

Ideology is always part fantasy. But, usually, the fantastic element is contained within political structures and routines. If it prevails to the exclusion of a relation to reality, then the result will indeed reshape reality, but not in the way that the ideologists might want.

You can follow the trainwreck here. Some impetus to a resolution comes from the spectre of a meltdown when Wall Street opens on Monday morning. But the forces working against a compromise may yet prevail.

NB: Previous discussion of the debt crisis on LP is here.

Andrew Bartlett:

For the last few months, I’ve found it hard to shake the idea that the Liberal Party’s overriding approach to politics and policy has deteriorated to a level little better than where the US Republican Party now finds itself. I think the reason why things have sunk this low has a lot to do with the perverted nature of the so-called culture and history wars which were embraced with such fervour by the Howard government.

The Liberal’s incoherent, self-contradicting approach on a whole range of policy issues – most worryingly even on economic and tax policy – might be sufficiently obscured by their continuing inchoate war on everything as to provide electoral benefits for them. But once rational thinking is no longer required – in fact becomes an impediment to launching the latest barrage – then there is no guarantee it will ever be returned to at some stage down the track.

Charles Richardson: [paywalled]

Fraser’s generation, having lived through the Second World War, could never forget the importance of liberalism; even down to John Howard?—?whose similarities with Fraser are often overlooked?—?it was understood that there were potential enemies to the right as well as to the left.

With the current generation, that realisation has been lost.

The Liberal Party of Fraser’s time, whatever its faults (and there were many), would never have flirted with torture, with creationism, and with the repudiation of international law over Tampa and later Iraq. There are still liberals in the party today, but they are outnumbered and outgunned by the acolytes of an American-style “movement” conservatism?—?militant, intolerant and anti-intellectual.

I’m not sure the Libs are the Tea Party equivalent; that movement has spun out of the Republicans’ control, as the victory of Rand Paul in the Kentucky Senate primary, Governor Charlie Crist’s defection from the GOP in Florida, and the results of the Utah convention show. Mark Lillia, writing in the New York Review of Books has a rather interesting take on the Tea Party – libertarian anti-politics, he suggests. But the Liberals have certainly taken over a huge slice of the Republican/Fox News/Noise Machine playbook. The soil for constructing an electoral majority on these lines may be more fallow in the US than many think – I’m not at all sure the expected Democratic wipeout in the mid terms will eventuate. But I do strongly suspect it’s even more fallow here in Australia. Rudd may be in trouble; but Abbott’s probably still unelectable. In the mean time, we have nothing like a sensible political debate on the issues confronting our country.

While some of the discussion has focused on some of the more extreme scenarios about the misuse of people’s information, there’s no question that the routine use of Facebook has now become much more problematic for many. Jason Calacanis, as part of an impassioned post, provides some useful links to enable readers to understand the scope of the problem. Few might leave Facebook, but, conversely, the company’s approach to “radical transparency” has undoubtedly flayed a trust already fraying because of resistance to constant shifts in functionality.

Within the techie community, the response has been to call for “an open alternative”. Yet, here, problems of scale arise. Despite increasing attention to privacy issues from regulators, legislators and the media, Facebook’s trump card is its pervasiveness. As danah boyd comments, it’s become a “social utility”. As I’ve commented previously, Facebook is now just part of the communications landscape. While it’s certainly possible to envisage a mass of users migrating to another site, the precondition for such a ‘network effect’ in reverse would be a competing commercial entity able to raise enough capital to compete.

An open source alternative is unlikely to generate the scale necessary.

The claim from Facebook, and its founder, Mark Zuckerberg, that the site is just reflecting shifts in contemporary understandings of privacy can be dismissed easily. Social norms against oversharing still exist, users modulate (or try to modulate) what content and information they want seen by various groups of others, and it’s simplistic and arrogant to claim that all would be just peachy if only dumb users could understand sophisticated privacy settings. The point, precisely, is that the company now affords users only limited choices about how open they wish to be. And Jeff Jarvis is right that Zuckerberg and co. confuse “public” with making a plurality of micro-publics.

Arguments about “a single identity” being a demonstration of “integrity” have been well skewered by Henry Farrell and Kieran Healy.

So what has gone wrong, and what can be done?

danah boyd is, again, spot on:

What pisses me off the most are the numbers of people who feel trapped. Not because they don’t have another choice. (Technically, they do.) But because they feel like they don’t. They have invested time, energy, resources, into building Facebook what it is. They don’t trust the service, are concerned about it, and are just hoping the problems will go away. It pains me how many people are living like ostriches. If we don’t look, it doesn’t exist, right?? This isn’t good for society. Forcing people into being exposed isn’t good for society. Outing people isn’t good for society, turning people into mini-celebrities isn’t good for society. It isn’t good for individuals either. The psychological harm can be great. Just think of how many “heros” have killed themselves following the high levels of publicity they received.

Zuckerberg and gang may think that they know what’s best for society, for individuals, but I violently disagree. I think that they know what’s best for the privileged class.

While she is absolutely on the money in contending that the desire to be “public”, in a certain sense, is one that isn’t open or chosen by all, and a desire that is differentially shaped by class, cultural capital and gender, she doesn’t quite put her finger on the basic issue. What we are seeing now is a result of the commodification of personality which, in late capitalism, creates value for corporates. We are all unpaid labourers in the social media industry, whose lives are fodder for the accumulation of capital. Facebook profits from our sociality.

The politics of this issue is, to large degree, shaped by the dialectical conflict between libertarian urges and their commercial capture, which is one way of reading the story of the web. But, because the root cause is that Facebook wants to monetise its ‘content’ (ie – us), a better lens with which to view the problem is a socialist or social democratic one. Facebook is a social utility, as boyd says; a communications medium, but also a public commons.

As such, we’re not in the realm of “good” and “evil” but in the realm of Capital – Zuckerberg has far less agency than he thinks he does, because his duty is to monetise endlessly. It’s not that Facebook is evil, but that it’s a private company providing a public purpose. So the inescapable conclusion is that it should either be heavily regulated, or a public entity should occupy its position. Just imagine the cries from the press if the ABC were to offer social networking as a public service, and you’ll know I’m right.

SABRA LANE: And on the eve of the Productivity Commission handing down a report on water recovery in the Murray-Darling basin, he had this to say about the commission’s reports, saying he met a group of farmers yesterday who admitted they read the reports.

BARNABY JOYCE: These people actually do read the Productivity Commission reports. I don’t know, I use them when I run out of toilet paper but, you know, they actually, they actually use them.

Of course, today, it’s a quip, and he’s very concerned to reiterate that as Shadow Minister for Water, he will actually read the report.

But another remark he made hasn’t garnered the same media attention:

SABRA LANE: On a day when his leader was denouncing the Government for wasting taxpayers’ money, Senator Joyce said the education money would have been better spent building a north-south pipeline, even if that project was worthless.

BARNABY JOYCE: With the money we have wasted on the Building the Education revenue, revolution, the, the blatant economic rip-off, we could have built, definitely built a pipeline from the north to the south, most definitely, we could have done that.

We, we, and even, even if that pipeline had never moved a drop of water, even if it had rusted in the paddock, I would have believed that you would have a greater economic stimulus to our nation than what we’re going to get out of what is a glorified, eclectic of rubbish that is now parked around the back of every school.

I think that’s the clue to Joyce. The instinct of every National Party politician is that any government nation building spending must be a boondoggle. But he wants it spent on his boondoggle. You know, turning back the rivers, fast railway links from nowhere to nowhere, and so on. It’s pure projection.

But the agrarian socialist Senator is very popular around at what remains of Libertarian Central these days. Go figure.

The ALP under Rudd is in fact far more moralistic and authoritarian than the Liberals ever were.

I think that’s far too broad a statement, and could be contradicted with evidence from other policy domains. And needless to say, there were enough Howard Ministers – Tony Abbott being one who immediately comes to mind – who could trump almost anyone when it comes to sanctimonious authoritarianism. It’s more accurate to say, in my view, that the arguments of “communitarians” provide useful cover for left ALP ministers (for instance, Gillard, Tanner and Macklin) to sign on to an agenda which actually derives straight from the Catholic right, and which has more than a little political calculation behind it – both in terms of Senate numbers (and the cohesiveness of the ALP Senate caucus itself) and also in terms of skimming some votes from churchgoing socially conservative Catholics and Evangelicals.

A very similar dynamic is observable with regard to the arguments of the Noel Pearsons and Warren Mundines of this world – in that they provide cover for authoritarian interventions in Indigenous affairs (and increasingly in social policy more generally). The basic mindset is the same – worrying about the breakdown of norms and the absence of community. The communitarian stream of political philosophy – which largely developed in the 1990s and has strong affinities with “Third Way” politics – generally bemoans the alleged fracturing of moral values and shared ethics and places the duty on the state of recreating community in its absence. Very often, the practical and political application of such views has more than a tinge of racism about it. The goals set can never be achieved (which is useful politically for the more canny operators), and a lot of the concern is misplaced and wrongly framed, but a lot of damage can be done along the way by state intervention. Also writing in Spiked, Guy Rundle is much more sensitive to the real political dynamics of moralistic social democracy than Miller.

Probably the best way of understanding what’s going on is in terms of the clash between post-materialist and materialist politics. Labor governments need their own discourse to recapture those who “should” vote for the centre-left on economic grounds, and moralism and campaigning about the dire effects of pr0n and binge drinking or whatever provides the missing piece of the puzzle. But it is very much the case that such attitudes – or at any rate similar attitudes – cross the political spectrum, and that’s why it’s far too simple to judge one government as more authoritarian than another. There is a reason why Miller is partially right in suggesting that the left’s response has been “anemic” but again I think she’s too predisposed by her political dispositions to be an objective analyst in this instance. That reason has to do with – yep, you guessed it – the same legacy of 60s libertarianism Hamilton rails against, but it’s a big issue, and one I’ll return to shortly in another post.

Meanwhile, the man himself is running out of places to hide. The US no longer offers such a congenial political climate for John Howard, although there’s still Fox News for him to appear on.

It’s interesting how times change. The “big government conservative” is now gettin’ some lovin’ from the Catallaxy crew:

Also, former PM Howard weighs into the financial crisis debate and takes the side of the Austrian libertarian interepretation. [sic]

That would be the claim that the subprime mess, and therefore presumably the global financial crisis, is all the fault of those poor people who wanted to own homes. How this squares with Howard’s own role in promoting aspirationalism and the housing bubble is anyone’s guess. But then truth-telling, and indeed consistency, were never his strong suits. It’s a rather horrendous thing to contemplate as to what sort of approach he’d have taken if he’d been re-elected and the current economic conniptions were occurring on his watch.

Elsewhere: Guy Beres, Public Opinion.

Since September, I’ve been wading through far more reading matter than I’d ever imagined possible on economics and finance. Much of it has been, by necessity, somewhat ephemeral. However, it’s good to see some commentators coming out with something of a longer view.

Immanuel Wallerstein’s conclusion won’t be any surprise to anyone who’s been following his work:

We can assert with confidence that the present system cannot survive. What we cannot predict is which new order will be chosen to replace it, because it will be the result of an infinity of individual pressures. But sooner or later, a new system will be installed. This will not be a capitalist system but it may be far worse (even more polarizing and hierarchical) or much better (relatively democratic and relatively egalitarian) than such a system. The choice of a new system is the major worldwide political struggle of our times.

As for our immediate short-run ad interim prospects, it is clear what is happening everywhere. We have been moving into a protectionist world (forget about so-called globalization). We have been moving into a much larger direct role of government in production. Even the United States and Great Britain are partially nationalizing the banks and the dying big industries. We are moving into populist government-led redistribution, which can take left-of-center social-democratic forms or far right authoritarian forms. And we are moving into acute social conflict within states, as everyone competes over the smaller pie. In the short-run, it is not, by and large, a pretty picture.

As I’ve previously commented, I’m not at all sure that he’s right that what we’re seeing is the final death throws of capitalism. But I do think he makes another very important point in his commentary:

The characteristics of a Kondratieff B-phase are well-known and match what the world-economy has been experiencing since the 1970s. Profit rates from productive activities go down, especially in those types of production that have been most profitable. Consequently, capitalists who wish to make really high levels of profit turn to the financial arena, engaging in what is basically speculation. Productive activities, in order not to become too unprofitable, tend to move from core zones to other parts of the world-system, trading lower transactions costs for lower personnel costs. This is why jobs have been disappearing from Detroit, Essen, and Nagoya and factories have been expanding in China, India, and Brazil.

As for the speculative bubbles, some people always make a lot of money in them. But speculative bubbles always burst, sooner or later. If one asks why this Kondratieff B-phase has lasted so long, it is because the powers that be – the U.S. Treasury and Federal Reserve Bank, the International Monetary Fund, and their collaborators in western Europe and Japan – have intervened in the market regularly and importantly – 1987 (stock market plunge), 1989 (savings-and-loan collapse), 1997 (East Asian financial fall), 1998 (Long Term Capital Management mismanagement), 2001-2002 (Enron) – to shore up the world-economy. They learned the lessons of previous Kondratieff B-phases, and the powers that be thought they could beat the system. But there are intrinsic limits to doing this. And we have now reached them, as Henry Paulson and Ben Bernanke are learning to their chagrin and probably amazement. This time, it will not be so easy, probably impossible, to avert the worst.

I think it’s incredibly important to underline the point made in the second paragraph of that extract. I feel like I’m sounding the same note over and over again when I’m arguing that what we’ve seen during the global financial crisis reveals the incapacity of ideology for understanding events. Dichotomies about states v. markets are nonsense. There are no “free markets”, except in the fervid imaginings of Hayek’s disciples. The bubbles which are now bursting simultaneously are to large degrees artefactual creations of state power – the self same mob – the Bernankes and the Paulsons of the world – who have now totally lost control of what’s occurring. It is just foolhardy to believe otherwise, and it also should signal that “state action” doesn’t necessarily equate to action in the public interest, another theme I believe has gone missing in action as folks on the left have rushed to claim some sort of revenge of socialism moment with strategies such as the TARP bailout.

It’s understandable that ideology continues to operate as a frame through which to view events which appear unprecedented and frightening, even when the events themselves show up its inability to provide understanding. In this context, LSE political economist Robert Wade’s analysis in the latest New Left Review is very instructive indeed:

Since the 1930s the non-communist world has experienced two shifts in international economic norms and rules substantial enough to be called ‘regime changes’. They were separated by an interval of roughly thirty years: the first regime, characterized by Keynesianism and governed by the international Bretton Woods arrangements, lasted from about 1945 to 1975; the second began after the breakdown of Bretton Woods, and prevailed until the First World debt crisis of 2007–08. This latter regime, known variously as neoliberalism, the Washington Consensus [1] or the globalization consensus, centred on the notion that all governments should liberalize, privatize, deregulate—prescriptions that have been so dominant at the level of global economic policy as to constitute, in John Stuart Mill’s phrase, ‘the deep slumber of a decided opinion’.

Neoliberal economics has powerful antibodies against evidence contrary to its way of seeing things. However, the current crisis may be severe enough to awaken economists from the ‘deep slumber of a decided opinion’, and render them more receptive to proof that the post-Cold War globalization consensus has strikingly weak empirical foundations.

[My emphasis.]

Wade’s article is well worth reading in full. Written on 7 October, it’s a relatively up to date analysis incorporating a historical view with a sound understanding of the current conjuncture. He’s less apocalyptic than Wallerstein, but I think well captures the actual significance of the global financial crisis as a turning point:

The shocks of the past year—another thirty years on from the last major shift—support the conjecture that we are witnessing a third regime change, propelled by a wholesale loss of confidence in the Anglo-American model of transactions-oriented capitalism and the neoliberal economics that legitimized it (and by the us’s loss of moral authority, now at rock bottom in much of the world). Governmental responses to the crisis further suggest that we have entered the second leg of Polanyi’s ‘double movement’, the recurrent pattern in capitalism whereby (to oversimplify) a regime of free markets and increasing commodification generates such suffering and displacement as to prompt attempts to impose closer regulation of markets and de-commodification (hence ‘embedded liberalism’). [3] The first leg of the current double movement was the long reign of neoliberalism and its globalization consensus. The second as yet has no name, and may turn out to be a period marked more by a lack of agreement than any new consensus.

Wade also emphasises something I wrote about in comments on a recent post:

The uk’s role in the crisis deserves emphasis, because contrary to conventional wisdom, the dynamics at its heart started there. The Thatcher government set out to attract financial business from New York by advertising London as a place where us firms could escape onerous domestic regulation. The government of Tony Blair and Chancellor Gordon Brown continued the strategy, leading Brown to boast that the uk had ‘not only light but limited regulation’. In response, political momentum grew in the us over the course of the 1990s to repeal the Depression-era Glass–Steagall act, which separated commercial from investment banking. Its repeal in 1999 produced a de facto financial liberalization, by facilitating an unrestrained growth of the unregulated shadow-banking system of hedge funds, private equity funds, mortgage brokers and the like. This shadow system then undertook financial operations which tied in the banks, and it was these that eventually brought the banks’ downfall.

Wade’s final suggestions about a reform of economic thought and global policy are also measured, stimulating and worth reading and discussing.

After this crisis, the Keynes-Minsky view of financial markets as inherently destabilising looks a lot more appealing than the opposing view, argued most prominently by Milton Friedman.

Once the EMH is abandoned, it seems likely that markets will do better than governments in planning investments in some cases (those where a good judgement of consumer demand is important, for example) and worse in others (those requiring long-term planning, for example). The logical implication is that a mixed economy will outperform both central planning and laissez faire, as was indeed the experience of the 20th century.

Alan Greenspan and other disciples of Ayn Rand have been getting somewhat of a worse press, interestingly, than the rather mild questioning he came under at a Congressional committee. Jacob Weisberg in Slate:

The worst thing you can say about libertarians is that they are intellectually immature, frozen in the worldview many of them absorbed from reading Ayn Rand novels in high school. Like other ideologues, libertarians react to the world’s failing to conform to their model by asking where the world went wrong. Their heroic view of capitalism makes it difficult for them to accept that markets can be irrational, misunderstand risk, and misallocate resources or that financial systems without vigorous government oversight and the capacity for pragmatic intervention constitute a recipe for disaster. They are bankrupt, and this time, there will be no bailout.

David Corn, writing in Mother Jones, pointing out that Greenspan scuttled attempts to regulate derivatives and swaps:

But not everyone got it wrong. In the late 1990s, regulators at the CFTC wanted to regulate swaps. Gramm, Greenspan and others—including senior members of the Clinton administration—did not. Following the Enron debacle, Feinstein took a run at this. But Greenspan and Bush administration officials said no. And it was not an issue of smarts; it was a matter of ideology.

In fact, it was always a matter of ideology for Greenspan, a libertarian champion. In 1963, writing in Rand’s “Objectivist” newsletter, he noted, “It is in the self-interest of every businessman to have a reputation for honest dealings and a quality product.” Regulation, he maintained, undermines this “superlatively moral system.” Self-governance by choice, he said, would be more effective than governance through government. Regulation, Greenspan maintained, was the enemy of freedom: “At the bottom of the endless pile of paper work which characterizes all regulation lies a gun.”

Well, it turns out that at the bottom of the system that Greenspan oversaw for years, there was nothing but a pile of bad paper. And testifying to the House oversight committee, Greenspan, one of the more ideological Washington players of the past few decades, essentially said that Ayn Randism had let him—and the entire world—down. It was truly a God that failed.