The evolution of the Obama Administration's health care plan confirmed, to me, that traditional liberalism of the kind that dominated mid-twentieth century America has been effectively marginalized. The obvious answer to our health care system was some kind of Medicare for everyone, a government-run system providing a genuine alternative to the private health care industry which, inevitably, tries to take as much money out of the economy as it can while providing a necessity. The original House bill--emerging from perhaps the most liberal House that I am ever going to see again in my lifetime--included such an option, but Joe Lieberman and Ben Nelson killed it in the Senate. Like liberal positions in foreign policy, genuine New Deal-type reforms in domestic policy get serious consideration only in Democratic primaries. After a Democrat is elected they become embarrassments that rarely if ever survive the legislative process--and so it was in this case.
The individual mandate was, of course, an attempt to provide universal coverage without creating a government system. It had the enormous political advantage of appealing to the insurance industry, led by its chief lobbyist, Karen Ignani, since it would provide that industry with millions of young, most healthy and employed customers and therefore, presumably, increase its profits still further. Yet the odds seem to be at least 50%, after last week's oral arguments, that a 5-4 Supreme Court majority will throw this approach out and take us back to square one. (I'll have more to say about the consequences of such a decision in a moment.) And reading those arguments, one sees the extent to which the Administration, by dropping the public option, lost its most effective debating points by adopting the "free-market" approach to a commodity that has no business trading in a free market. Let us take a moment to think how the argument might have been framed.
Health care is not an optional good which we may or may not choose to purchase. We all need some, and most of us, sooner or later, need a lot, the only exceptions being people who die young in accidents or homicides or those lucky folk who live healthy lives and die of their first heart attack or stroke in their 80s or 90s. (Even they, however, given the state of modern medicine, will undergo thousands of dollars of diagnostic procedures in the meantime.) And that, of course, is the difference between the threat of illness on the one hand, and other insurable threats like auto accidents or fires on the other. Insurance for those events is relatively inexpensive because they are so rare. Most of us will never have to pay large bills for car accidents or replace a burned-out home. But nearly all of us will eventually need large sums for medical care.
There is also a critical difference between health care and other "consumer products." We buy consumer products that we need, or simply want, and can afford. But because our society in general and the medical profession in particular still respects a few non-economic values, everyone who desperately needs health care gets it--or at least some of it--whether they can pay for it or not. We do not turn people away from emergency rooms because they have no insurance. In fact, as I learned from medical personnel at a town hall in 2009 which I described at length at the time (search under "town hall," "Whitehouse," and "Reed" if you are interested), for administrative reasons, those patients wind up costing a lot more.
We see, therefore, that health care is a very expensive service that everyone will need sooner or later and that everyone gets, in one way or another, regardless of ability to pay. I would suggest that such a service has nothing in common with your average consumer good and very little in common with exceptional life events for which we buy private insurance. What it really resembles are other public services that we all receive whether we have an immediate need for them or not, such as national defense, local police forces, infrastructure, and fire departments. And we pay for those through taxes, and traditionally compensate most of the people who provide them with secure, medium-income jobs. That model is obviously far more appropriate for health care and that's the model, of course, that most other advanced countries use. We alone allow various corporations, including drug companies and health insurance companies, to make billions of dollars in revenue providing a public necessity.
The problem with conceding the terms of the argument in advance emerged in striking fashion during the oral arguments, particularly with respect to the questions of Justice Scalia, whose vote is not in doubt, and Justice Kennedy, whose vote will surely decide the case. Scalia argued that a government that can pass a law requiring you to pay for health care can also pass a law requiring you to eat broccoli. I would suggest that my argument, above, shows how silly that claim is. What the mandate does is to force people to pay something for the health care which they are almost certain to receive sooner or later anyway, just as taxes force them to pay for various aspects of national defense whether they personally will ever need them or not. Kennedy, meanwhile, worried about the infringement upon liberty, but the whole health care industry is based upon the Hippocratic oath which takes away, properly, the liberty of the health care provider to refuse care. To make it possible for them to provide it, we have no choice but to make sure that everyone pays for it.
Scalia's argument reminded me of something else--an excerpt from a famous 19th-century book by Joseph Story, Commentaries on the Constitution of the United States, published 1832, to which I was fortunately exposed in connection with a conference on law in the early Republic. Story, like nearly all the Founding Fathers, was convinced that government was established for the public good and that the Constitution needed to be flexibly interpreted for it to carry out its functions. On p. 142 I found this paragraph, which Justice Scalia and some of his brethren clearly need to review:
"A power, given in general terms, is not to be restricted to particular cases, merely because it may be susceptible of abuse, and, if abused, may lead to mischievous consequences. This argument is often used in public deate; and in its common aspect addresses itself so much to popular fears and prejudices, that it insensibly acquires a weight in the public mind, to which it is in no wise entitled. The argument ab inconvenienti is sufficiently open to question, as well as of opinion, to which it leads. But the argument from a possible abuse of a power against its existence or use, is, in its nature, not only perilous, but, in respect to governments, would shake their very foundation. Every form of government unavoidably includes a grant of some discretionary powers. It would be wholly imbecile without them. . . .In short, if the whole society is not to be revolutionized at every critical period, and remodeled in every generation, there must be left to those, who administer the government, a very large mass of discretionary powers, capable of greater or less actual expansion according to circumstances, and sufficiently flexible not to involve the nation in utter destruction from the rigid limitations imposed upon it by an improvident jealousy. Every power, however limited, as well as broad, is in its own nature susceptible of abuse. No constitution can provide perfect guards against it. Confidence must be reposed somewhere; and in free governments, the ordinary securities against abuse are found in the responsibility of rulers to the people, and in the just exercise of their elective franchise; an ultimately in the sovereign power of change belonging to them, in cases requiring extraordinary remedies."
In short, the theoretical possibility that Congress could pass a law mandating the purchase or broccoli is not a valid argument against mandating the purchase of health insurance. If we have any faith in our democracy, we must be able to trust that a President and majorities of both houses (including, as things now stand, 3/5 of the Senate), will not pass a law mandating the purchase of broccoli. And a truly statesmanlike opinion on the health care law would uphold it, taking note that the Congress and the executive branch spent over a year designing, considering, and passing it in an effort to solve a genuinely pressing and very serious national problem, and adding for good measure that the American people in just a few months will have every opportunity to undo the law themselves by electing Republican majorities and a Republican President, should they choose to do so. I can see no excuse for depriving them of that right.
If however the court throws out the health care law in toto, or even throws out the mandate, I think the effect on Barack Obama will be devastating. I know Democratic pundits are suggesting that he could run "against the Supreme Court," but we are in a real crisis and the country is already lukewarm about the President because most of them have seen few results. To have his signature achievement thrown out will validate some of the more extreme accusations against him and make him look highly ineffective.
We are potentially at a turning point in our history. Justice Story believed the government was established to promote the public good. Franklin Roosevelt adapted that philosophy to the industrial era. For the last thirty years Republicans have engaged in an all-out assault on that concept, and they are not too far from a possible victory. In the last two great national crises the Supreme Court was on the losing side. This time, if they strike down the law, they could do nearly as much to assure victory for the right wing as they did in Bush v. Gore.
Friday, March 30, 2012
Saturday, March 24, 2012
The shape of the future
[Welcome to the many new visitors who have arrived courtesy of nakedcapitalism.com .I hope you will do some browsing through the archives here and I particularly recommend the July 4, 2010 post referenced below and the October 21, 2004 post on George W. Bush. You might also enjoy the review of Sebastian Mallaby's book on Hedge funds from October 20, 2011, and the review of Harry Markopolos's book on his hunt for Bernie Madoff on May 15, 2010. I hope you will return. Posts appear every weekend, and you can subscribe via the feedblitz link on this page.]
During the periodic crises that mark the death of an old order and the birth of a new one, the party that seizes power can take advantage of panic, uncertainty, and its own ideological fervor to impose long-lasting changes on government and society. Four years ago I thought Barack Obama and the Democrats might be the party that would do that. Two and a half years ago--on July 4, 2010--I concluded that I had probably been wrong, and that the job had already been done by the administration of George W. Bush. This past week, a story in the New York Times showed how that took place in a critical area of the American economy: energy.
For the last 40 years we've had huge, ongoing controversies and debates about energy in this country. President after President has called for energy independence. The Left has warned of global warming and argued for less dependence on fossil fuels. Meanwhile, the increasingly higher price of oil and environmental regulation led to a significant decline in energy production in the US. When the Bush Administration came into office they decided to do something about this, just as they decided to throw out half a century of bipartisan foreign policy. Dick Cheney formed a secret energy task force composed of energy executives like
the President and himself. In 2005, while our attention was focused on the deteriorating Iraq War, they passed a bill which, among other things, took a new drilling method called "fracking" out of the jurisdiction of the EPA. I do not know if that was reported in the press at all. Fracking, and a relaxed attitude towards offshore drilling, was going to be the answer to our problems and lead to a revival of energy production in the US. These steps would benefit from a long-term rise in energy costs.
As the story shows, this has all been coming to pass, thanks to fracking (for oil as well as gas) in the last ten years or so. An economic boom has hit much of the energy-rich west, including Bush's home town of Midland, Texas, and we now produce more than half the energy we consume at home, which is trumpeted as a move towards long-delayed energy independence. The environmental consequences of all this have become a matter of huge debate, thanks in part to the movie Gasland, from which I first learned about the key provision of the 1995 law.
Barack Obama, of course, campaigned on a platform of more green energy. He has now largely abandoned it and gone nearly whole hog for the Bush program. He is in the process of approving, in stages, the Keystone pipeline. His Administration will not reverse this trend even if it lasts another four years, as I suspect it will. It's campaign this year will focus mostly on social issues.
The Bush Administration also cut taxes, crippling the revenue base of the federal government while it led us into two very long wars. Barack Obama has continued this trend as well. He agreed to extend the Bush tax cuts and added a very expensive payroll tax cut which has, for the first time, but Social Security in the red. Banks, health insurance companies, and the food industry, as well as the energy industry, flourished under Bush, with disastrous consequences. It is not clear, as I have noted, whether the Dodd-Frank bill will effectively regulated banks or not, but it's clear that the health insurance reform, if the Supreme Court upholds it (I think they will) will make the insurance industry richer and stronger without doing much of anything about the real problems in American health care, which were too hot to touch. The organization, strength and effectiveness of the Republican campaign to transform America is also reflected in two op-ed pieces in Monday, March 26's New York Times: one by Paul Krugman on the influence of the conservative organization ALEC, which drafts legislation that has passed state legislatures all over the country, and one by Steven Rattner on the extraordinary extent to which the benefits of the current recovery have gone almost exclusively to the very richest Americans. There is no remotely comparable campaign on the left on any issue except gay rights.
All this is very reminiscent of the Civil War era. While they were fighting that war, the Republicans in Congress also implemented a sweeping economic agenda, including a national banking system, high protective tariffs, and generous legislation to make the transcontinental railroad possible. (The railroads, as a recent book by Richard White has made clear, were the big banks of their time; they fueled booms and busts, and frequently had to apply for government bailouts.)
There is however a paradox to our current crisis. Our current Republicans have not enjoyed the political advantages of their Civil War counterparts. Now as then, the country remained quite evenly balanced politically throughout the Crisis era. The earlier Republicans could do anything they wanted for more than eight years because the South had seceded and was originally re-admitted under Reconstruction governments. The Bush Administration originally got into office only thanks to a purge of Florida voters, Democratic ineptitude and a cooperative Supreme Court, and it relied upon a highly divisive base of religious conservatives that has turned into an electoral millstone around its neck. The shape of the coming campaign has become clear: the Democrats, to judge from the numerous fund-raising appeals I receive, will be focusing almost entirely upon social issues, counting on them to turn out the younger voters upon which they depend. (The Silent generation is solidly Republican and Boomers split evenly in the last election.) And Obama looks very likely to be re-elected, but without regaining a majority in the House of Representatives.
Thus we face an economic future in which we look more and more like a Third World country, with enormous economic inequality, fewer rights for workers, and declining public services, coupled with reinforced women's and gay rights--at least in the blue states. (The Republicans are working harder than ever at imposing their social agenda where they hold local power.) Had either party triumphed on both fronts, one might speculate, the country might actually break up again. (I do expect a burst of secession talk in the deep south if Obama is re-elected, but I don't expect it to go anywhere.) As it is, each side gets what it wants most. The Republicans get unrestrained economic freedom and the political power that goes with it; the Democrats get women's and gay rights, and their domination of university life will continue. No one will do much of anything to benefit the nation as a whole. That is the result of the great revolution that began 40 years ago, when the Boom generation started putting its own feelings above the accumulated rationalist legacy of the last two centuries. Their effect has indeed been profound.
During the periodic crises that mark the death of an old order and the birth of a new one, the party that seizes power can take advantage of panic, uncertainty, and its own ideological fervor to impose long-lasting changes on government and society. Four years ago I thought Barack Obama and the Democrats might be the party that would do that. Two and a half years ago--on July 4, 2010--I concluded that I had probably been wrong, and that the job had already been done by the administration of George W. Bush. This past week, a story in the New York Times showed how that took place in a critical area of the American economy: energy.
For the last 40 years we've had huge, ongoing controversies and debates about energy in this country. President after President has called for energy independence. The Left has warned of global warming and argued for less dependence on fossil fuels. Meanwhile, the increasingly higher price of oil and environmental regulation led to a significant decline in energy production in the US. When the Bush Administration came into office they decided to do something about this, just as they decided to throw out half a century of bipartisan foreign policy. Dick Cheney formed a secret energy task force composed of energy executives like
the President and himself. In 2005, while our attention was focused on the deteriorating Iraq War, they passed a bill which, among other things, took a new drilling method called "fracking" out of the jurisdiction of the EPA. I do not know if that was reported in the press at all. Fracking, and a relaxed attitude towards offshore drilling, was going to be the answer to our problems and lead to a revival of energy production in the US. These steps would benefit from a long-term rise in energy costs.
As the story shows, this has all been coming to pass, thanks to fracking (for oil as well as gas) in the last ten years or so. An economic boom has hit much of the energy-rich west, including Bush's home town of Midland, Texas, and we now produce more than half the energy we consume at home, which is trumpeted as a move towards long-delayed energy independence. The environmental consequences of all this have become a matter of huge debate, thanks in part to the movie Gasland, from which I first learned about the key provision of the 1995 law.
Barack Obama, of course, campaigned on a platform of more green energy. He has now largely abandoned it and gone nearly whole hog for the Bush program. He is in the process of approving, in stages, the Keystone pipeline. His Administration will not reverse this trend even if it lasts another four years, as I suspect it will. It's campaign this year will focus mostly on social issues.
The Bush Administration also cut taxes, crippling the revenue base of the federal government while it led us into two very long wars. Barack Obama has continued this trend as well. He agreed to extend the Bush tax cuts and added a very expensive payroll tax cut which has, for the first time, but Social Security in the red. Banks, health insurance companies, and the food industry, as well as the energy industry, flourished under Bush, with disastrous consequences. It is not clear, as I have noted, whether the Dodd-Frank bill will effectively regulated banks or not, but it's clear that the health insurance reform, if the Supreme Court upholds it (I think they will) will make the insurance industry richer and stronger without doing much of anything about the real problems in American health care, which were too hot to touch. The organization, strength and effectiveness of the Republican campaign to transform America is also reflected in two op-ed pieces in Monday, March 26's New York Times: one by Paul Krugman on the influence of the conservative organization ALEC, which drafts legislation that has passed state legislatures all over the country, and one by Steven Rattner on the extraordinary extent to which the benefits of the current recovery have gone almost exclusively to the very richest Americans. There is no remotely comparable campaign on the left on any issue except gay rights.
All this is very reminiscent of the Civil War era. While they were fighting that war, the Republicans in Congress also implemented a sweeping economic agenda, including a national banking system, high protective tariffs, and generous legislation to make the transcontinental railroad possible. (The railroads, as a recent book by Richard White has made clear, were the big banks of their time; they fueled booms and busts, and frequently had to apply for government bailouts.)
There is however a paradox to our current crisis. Our current Republicans have not enjoyed the political advantages of their Civil War counterparts. Now as then, the country remained quite evenly balanced politically throughout the Crisis era. The earlier Republicans could do anything they wanted for more than eight years because the South had seceded and was originally re-admitted under Reconstruction governments. The Bush Administration originally got into office only thanks to a purge of Florida voters, Democratic ineptitude and a cooperative Supreme Court, and it relied upon a highly divisive base of religious conservatives that has turned into an electoral millstone around its neck. The shape of the coming campaign has become clear: the Democrats, to judge from the numerous fund-raising appeals I receive, will be focusing almost entirely upon social issues, counting on them to turn out the younger voters upon which they depend. (The Silent generation is solidly Republican and Boomers split evenly in the last election.) And Obama looks very likely to be re-elected, but without regaining a majority in the House of Representatives.
Thus we face an economic future in which we look more and more like a Third World country, with enormous economic inequality, fewer rights for workers, and declining public services, coupled with reinforced women's and gay rights--at least in the blue states. (The Republicans are working harder than ever at imposing their social agenda where they hold local power.) Had either party triumphed on both fronts, one might speculate, the country might actually break up again. (I do expect a burst of secession talk in the deep south if Obama is re-elected, but I don't expect it to go anywhere.) As it is, each side gets what it wants most. The Republicans get unrestrained economic freedom and the political power that goes with it; the Democrats get women's and gay rights, and their domination of university life will continue. No one will do much of anything to benefit the nation as a whole. That is the result of the great revolution that began 40 years ago, when the Boom generation started putting its own feelings above the accumulated rationalist legacy of the last two centuries. Their effect has indeed been profound.
Friday, March 16, 2012
An honest man
Two days ago, the following op-ed appeared in The New York Times. You may well have seen it, but in case you haven't, I'm reproducing it for non-commercial use.
Why I Am Leaving Goldman Sachs
By GREG SMITH
TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.
It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.
But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.
I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.
When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.
Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.
How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.
What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.
It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.
These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.
When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.
My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore.
I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.
The author, Greg Smith, is evidently originally from South Africa and is in his early 30s. (We will return to this in a moment.) I was extremely moved by this piece, because so few people in any walk of life seem capable of writing this kind any more. (One who did was Peter Van Buren, the Foreign Service Officer whose book on Iraq I reviewed some weeks ago. He is now being reviewed for termination from the State Department, partly because of the blog he started to publish his book and partly for linking wikileaks, which I assume that he, like me, a fellow federal employee with a security clearance, was ordered not to visit.) I was not surprised that one very high-achieving young man who could have done just about anything with his life had become disgusted enough to do this, and I thought it was something everyone needed to hear. So I brought it to the attention of three different groups of people. (I won't be specific.)
I was in for something of a shock. Most of the Gen Xers who read it took an instinctive dislike to the author. They branded him as a hypocrite, and many speculated that he was already in trouble with the company, or was angry about his bonus, or hadn't gotten a promotion that he wanted. They simply couldn't even imagine--literally--that he was simply disgusted by the ethos of the institution he worked for. I had no trouble imagining that at all; I have felt that way about the universities I have worked for too, and I'm sorry that I was never more forthright about it when I could have made an impact. But I suppose I was afraid of sounding like a malcontent myself. (I don't feel that way about my current employer, the Naval War College. My department is supposed to teach officers to think strategically, and we work very hard to do just that.)
This is, I'm afraid, a portent of things to come. Gen X--now aged 31 to 51--is rapidly taking over much of the world, and I hear essentially the same thing about their management style from just about every walk of life. Most of them have no feeling for their institution as such at all, but only for what it can do for them. This is for instance how Gen X parents treat the schools their children go to: they want the best for their kids, and that's it. In the last ten years we desperately needed Boomers, who can think big, to set some goals for our institutions--not least the federal government--and enlist younger generations behind them. This we failed to do, and it will be a long time before anyone else will do it on a large scale again. I'm afraid that will make for a pretty cruel and unforgiving world. (Xers are sure that that is all it ever is anyway.)
So what made Mr. Smith so different? Generations may provide the answer. He was born, apparently, in about 1980 in South Africa--which was on the verge of the great crisis that destroyed apartheid and turned the country into a democracy. Since he is English-speaking and Jewish, he and his family were presumably very proud of what had happened. That would make him a member of an Artist generation, parallel to American Silents (born 1925-42) who as children lived through the Depression and/or the war. That generation produced a great many idealists and whistleblowers in the United States, including the original civil rights workers in the South, soldiers like David Hackworth and John Paul Vann who had the courage to tell us the Vietnam War was going badly, and CIA man Sam Adams who insisted on trying to estimate the Viet Cong accurately. They had been taught to revere American institutions and they could not remain silent when those institutions did not live up to their image.
I doubt Mr. Smith will have much of an impact upon Goldman Sachs. Their stock has fallen, but a good earnings report or two will take care of that. Next year, perhaps, I'll resurrect the column and try it on the Millennials I'll be teaching for one year again at Williams College. It will be a long time before they can change the world, but I hope it will help them think about their own lives. And if anyone else has a similar story to tell about the institution they work in, please let me know. Perhaps we can get ahold of Mr. Smith and put together a reader on the state of the modern world.
Why I Am Leaving Goldman Sachs
By GREG SMITH
TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.
It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.
But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.
I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.
When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.
Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.
How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.
What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.
It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.
These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.
When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.
My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore.
I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.
The author, Greg Smith, is evidently originally from South Africa and is in his early 30s. (We will return to this in a moment.) I was extremely moved by this piece, because so few people in any walk of life seem capable of writing this kind any more. (One who did was Peter Van Buren, the Foreign Service Officer whose book on Iraq I reviewed some weeks ago. He is now being reviewed for termination from the State Department, partly because of the blog he started to publish his book and partly for linking wikileaks, which I assume that he, like me, a fellow federal employee with a security clearance, was ordered not to visit.) I was not surprised that one very high-achieving young man who could have done just about anything with his life had become disgusted enough to do this, and I thought it was something everyone needed to hear. So I brought it to the attention of three different groups of people. (I won't be specific.)
I was in for something of a shock. Most of the Gen Xers who read it took an instinctive dislike to the author. They branded him as a hypocrite, and many speculated that he was already in trouble with the company, or was angry about his bonus, or hadn't gotten a promotion that he wanted. They simply couldn't even imagine--literally--that he was simply disgusted by the ethos of the institution he worked for. I had no trouble imagining that at all; I have felt that way about the universities I have worked for too, and I'm sorry that I was never more forthright about it when I could have made an impact. But I suppose I was afraid of sounding like a malcontent myself. (I don't feel that way about my current employer, the Naval War College. My department is supposed to teach officers to think strategically, and we work very hard to do just that.)
This is, I'm afraid, a portent of things to come. Gen X--now aged 31 to 51--is rapidly taking over much of the world, and I hear essentially the same thing about their management style from just about every walk of life. Most of them have no feeling for their institution as such at all, but only for what it can do for them. This is for instance how Gen X parents treat the schools their children go to: they want the best for their kids, and that's it. In the last ten years we desperately needed Boomers, who can think big, to set some goals for our institutions--not least the federal government--and enlist younger generations behind them. This we failed to do, and it will be a long time before anyone else will do it on a large scale again. I'm afraid that will make for a pretty cruel and unforgiving world. (Xers are sure that that is all it ever is anyway.)
So what made Mr. Smith so different? Generations may provide the answer. He was born, apparently, in about 1980 in South Africa--which was on the verge of the great crisis that destroyed apartheid and turned the country into a democracy. Since he is English-speaking and Jewish, he and his family were presumably very proud of what had happened. That would make him a member of an Artist generation, parallel to American Silents (born 1925-42) who as children lived through the Depression and/or the war. That generation produced a great many idealists and whistleblowers in the United States, including the original civil rights workers in the South, soldiers like David Hackworth and John Paul Vann who had the courage to tell us the Vietnam War was going badly, and CIA man Sam Adams who insisted on trying to estimate the Viet Cong accurately. They had been taught to revere American institutions and they could not remain silent when those institutions did not live up to their image.
I doubt Mr. Smith will have much of an impact upon Goldman Sachs. Their stock has fallen, but a good earnings report or two will take care of that. Next year, perhaps, I'll resurrect the column and try it on the Millennials I'll be teaching for one year again at Williams College. It will be a long time before they can change the world, but I hope it will help them think about their own lives. And if anyone else has a similar story to tell about the institution they work in, please let me know. Perhaps we can get ahold of Mr. Smith and put together a reader on the state of the modern world.
Saturday, March 10, 2012
Two and a half men from the 1960s
The second post I did on this blog, in the fall of 2004, was entitled "George W. Bush: Man of the sixties," and it got things off to a rollicking start. I pointed out, among other things, that the 1960s motto which Bush so often quoted disapprovingly--"if it feels good, do it"--described his own behavior in office perfectly. Indeed, he even admitted it--confronted with evidence, for instance, that Iraq might not be ready for democracy, he would appeal to "my instincts," which he trusted implicitly. Eight years have gone by, and three Republican candidates from the Boom generation are fighting to replace Gen Xer Barack Obama. Two of them, at least, are men of the 1960s--classic Boomers--as well.
Newt Gingrich was born on the cusp of the Boom generation in 1943. Strauss and Howe picked that date to begin it for logical reasons--no one born in 1943 would have real memories of the Second World War, and those born in that year were the first cohort who cold not simply use education to escape the Vietnam draft. In practice, however, I think everyone born in that year has to be looked at individually to determine their generation. If they were well launched into their life and career by 1965 or so--that is, by the time the Awakening began--they may well show more characteristics of the Silent generation. If they were not they are much more likely to have turned out as genuine Boomers. Gingrich--like Dick Cheney, who is several years older--falls into the latter category. He spent the 1960s in grad school. (He would have lost his grad school draft deferment in 1968, when such deferments were abolished, but by that time he had already been married for six years and may have had a child.) From the beginning of his political career in the 1970s he has shown the most noteworthy Boomer traits, an utter contempt for tradition and a certainty of his own righteousness. He did more than anyone else to turn Washington's relatively civil political climate into a struggle between good and evil, and he even described himself, in the wake of the Republicans' great Congressional victory in 1994, as "the real revolutionary" in contrast to Bill and Hillary Clinton, even though they were, according to him, "countercultural McGoverniks." He used everything he could to destroy his opponents--although he was frequently guilty of the same things himself. He still fancies himself a great intellectual who enjoys rewriting the past to suit his fantasies, but he really seems to be devoted to nothing but his own self-aggrandizement. It is extremely difficult to pick the most hypocritical of the three candidates, but Gingrich seems to have made more money out of the Washington power game that he so desperately attacks than anyone else.
Rick Santorum is a younger Boomer, born in 1958. A recent New York Times story revealed that he did not adopt the social views he holds today until his marriage, in 1990, and that they came in part from his father-in-law. In any case, he adopted militant conservative Catholicism with the same fervor that older Boomers embraced various forms of leftism 20 years earlier and he has never wavered from it since. Not only that, he has the Boomer belief that his ideas must be the best for everyone in spades, as his campaign is making clear. He, like Gingrich, is a hypocrite regarding the role of money in politics. He was a big part of the K Street Project in the 1990s, trying to force Washington lobbying firms to hire nothing but Republicans, and he was a zealous promoter of earmarks for Pennsylvania firms--a role which paid off after his defeat in 2006, since he went to work for some of the people he had helped. It is no accident that he has a particular hatred for John F. Kennedy, a fellow Catholic who, in the best GI fashion, put his civic duty ahead of his religion in 1960 and promised the country that he would not decide policy based upon religious belief. GIs understood that some decisions had to be made based upon consensus; Boomers tend to assume they must always be right.
Mitt Romney is exactly my age (b. 1947) and grew up in a distinguished, very high-achieving and somewhat religious household. His father was both an auto company president and a very successful politician, and there is no evidence that Mitt's own behavior was affected in the slightest by the emotional explosion of the 1960s or that he ever rebelled against authority in any way. Like the whole Silent generation, he grew up in the shadow of his GI parents, and he never really emerged from it. And thus his behavior seems far more typical of that older generation--he has never taken a particularly courageous stand about anything and has constantly modified his positions according to the constituency to which he has been trying to appeal. He was a genuine moderate Republican as governor of Massachusetts--how else could he have been elected? Faced with doubts about his religion in 2008, he specifically took issue with John F. Kennedy's approach as well in a futile effort to please conservative Republicans. Now, of course, he has repudiated his major legislative achievement, the Massachusetts health care reform. He had a great chance last week to re-establish his credentials as a moderate and a man of some integrity by blasting Rush Limbaugh's disgraceful comments about Sandra Fluke, but he did not dare take on his fellow Boomer Rush. While all this allows even Democrats like myself to hope that Romney, if elected, might show more sanity than either of his two main opponents, it ironically has made it impossible, it seems, for Romney to attract much truly enthusiastic support within his Boomer-dominated party.
Meanwhile, all three are showing the worst Boomer characteristic in public life: an inability to make any sacrifices for anything larger than themselves, including their political party. Neither Gingrich nor Santorum has a real chance of being nominated now, and their continued attacks upon Romney can only hurt Republican prospects at the polls, but they don't care. Modern campaign financing practices--which have now been enshrined into law by a Boomer-dominated Supreme Court--encourage this behavior: it only takes one or two billionaire angels like Sheldon Adelson to keep a campaign going for months. And I also find it highly significant that none of these three men has held elective office for quite a few years--a completely unprecedented situation in a major political party's presidential contest. Boomers have always been better at being than at doing, and they have shown much more talent for campaigning than governing. Holding office is a time-consuming distraction from the real business of self-promotion. In this respect, as in so many others, Boomers for 40 years have been living off their parents' legacy. It has now, sadly, run out.
Newt Gingrich was born on the cusp of the Boom generation in 1943. Strauss and Howe picked that date to begin it for logical reasons--no one born in 1943 would have real memories of the Second World War, and those born in that year were the first cohort who cold not simply use education to escape the Vietnam draft. In practice, however, I think everyone born in that year has to be looked at individually to determine their generation. If they were well launched into their life and career by 1965 or so--that is, by the time the Awakening began--they may well show more characteristics of the Silent generation. If they were not they are much more likely to have turned out as genuine Boomers. Gingrich--like Dick Cheney, who is several years older--falls into the latter category. He spent the 1960s in grad school. (He would have lost his grad school draft deferment in 1968, when such deferments were abolished, but by that time he had already been married for six years and may have had a child.) From the beginning of his political career in the 1970s he has shown the most noteworthy Boomer traits, an utter contempt for tradition and a certainty of his own righteousness. He did more than anyone else to turn Washington's relatively civil political climate into a struggle between good and evil, and he even described himself, in the wake of the Republicans' great Congressional victory in 1994, as "the real revolutionary" in contrast to Bill and Hillary Clinton, even though they were, according to him, "countercultural McGoverniks." He used everything he could to destroy his opponents--although he was frequently guilty of the same things himself. He still fancies himself a great intellectual who enjoys rewriting the past to suit his fantasies, but he really seems to be devoted to nothing but his own self-aggrandizement. It is extremely difficult to pick the most hypocritical of the three candidates, but Gingrich seems to have made more money out of the Washington power game that he so desperately attacks than anyone else.
Rick Santorum is a younger Boomer, born in 1958. A recent New York Times story revealed that he did not adopt the social views he holds today until his marriage, in 1990, and that they came in part from his father-in-law. In any case, he adopted militant conservative Catholicism with the same fervor that older Boomers embraced various forms of leftism 20 years earlier and he has never wavered from it since. Not only that, he has the Boomer belief that his ideas must be the best for everyone in spades, as his campaign is making clear. He, like Gingrich, is a hypocrite regarding the role of money in politics. He was a big part of the K Street Project in the 1990s, trying to force Washington lobbying firms to hire nothing but Republicans, and he was a zealous promoter of earmarks for Pennsylvania firms--a role which paid off after his defeat in 2006, since he went to work for some of the people he had helped. It is no accident that he has a particular hatred for John F. Kennedy, a fellow Catholic who, in the best GI fashion, put his civic duty ahead of his religion in 1960 and promised the country that he would not decide policy based upon religious belief. GIs understood that some decisions had to be made based upon consensus; Boomers tend to assume they must always be right.
Mitt Romney is exactly my age (b. 1947) and grew up in a distinguished, very high-achieving and somewhat religious household. His father was both an auto company president and a very successful politician, and there is no evidence that Mitt's own behavior was affected in the slightest by the emotional explosion of the 1960s or that he ever rebelled against authority in any way. Like the whole Silent generation, he grew up in the shadow of his GI parents, and he never really emerged from it. And thus his behavior seems far more typical of that older generation--he has never taken a particularly courageous stand about anything and has constantly modified his positions according to the constituency to which he has been trying to appeal. He was a genuine moderate Republican as governor of Massachusetts--how else could he have been elected? Faced with doubts about his religion in 2008, he specifically took issue with John F. Kennedy's approach as well in a futile effort to please conservative Republicans. Now, of course, he has repudiated his major legislative achievement, the Massachusetts health care reform. He had a great chance last week to re-establish his credentials as a moderate and a man of some integrity by blasting Rush Limbaugh's disgraceful comments about Sandra Fluke, but he did not dare take on his fellow Boomer Rush. While all this allows even Democrats like myself to hope that Romney, if elected, might show more sanity than either of his two main opponents, it ironically has made it impossible, it seems, for Romney to attract much truly enthusiastic support within his Boomer-dominated party.
Meanwhile, all three are showing the worst Boomer characteristic in public life: an inability to make any sacrifices for anything larger than themselves, including their political party. Neither Gingrich nor Santorum has a real chance of being nominated now, and their continued attacks upon Romney can only hurt Republican prospects at the polls, but they don't care. Modern campaign financing practices--which have now been enshrined into law by a Boomer-dominated Supreme Court--encourage this behavior: it only takes one or two billionaire angels like Sheldon Adelson to keep a campaign going for months. And I also find it highly significant that none of these three men has held elective office for quite a few years--a completely unprecedented situation in a major political party's presidential contest. Boomers have always been better at being than at doing, and they have shown much more talent for campaigning than governing. Holding office is a time-consuming distraction from the real business of self-promotion. In this respect, as in so many others, Boomers for 40 years have been living off their parents' legacy. It has now, sadly, run out.
Saturday, March 03, 2012
Reasonable Americans?
The chattering classes, represented on the op-ed pages of our major newspapers and the standard guest lists of mainstream talk shows, remain divided in theory at least into liberals and conservatives. E. J. Dionne and David Brooks, who appear together every Friday on All Things Considered, are typical examples. They are well-educated. The cataclysm of the late 1960s divided the highly educated, turning a fringe figure like William Buckley into a respected conservative, and gradually turning the left away from economic issues and even from foreign policy in favor of social issues such as affirmative action, women's rights and gay rights. But rational discourse still prevailed among a certain set of thinkers. They are suddenly awakening to find it more threatened than ever before. On the right, the monster they have tolerated and often encouraged seems ready to devour them at last.
Brooks himself, who has been extraordinarily tolerant of the right wing while insisting that President Obama's faith in centralized power has alienated the country, awakened last week to the impending demise of Republicans he agrees with. Even Orrin Hatch has had to move his voting record rightward to protect against the sort of challenge that toppled his colleague Robert Bennett. Brooks wants the Republican leadership--whoever they are--to show more courage--but the whole rise of the post-New Deal Republican party has been fueled by appeals to racism, crass nationalism, social conservatism, and religious fundamentalism. Such ideas have never been absent from American life, but they only get a real hearing when our political leadership--which never varies too much from our economic leadership--stoops to promote them. That's what Republicans have been doing since Nixon and Reagan, and now solid House and Senate majorities stand ready to overturn the customs of the last 40 years and encourage employers not to cover birth control in their health insurance policies. Nor is this political cynicism: no sane person can believe that this stance is going to hep the Republican Party in November. It is ideology that has fed on itself, in the echo chamber of Clear Channel, Fox News, and the Drudge Report, and it now exercises discipline as fearsome as Jacobins or Stalinists--even without the threat of a guillotine or a bullet in the back of the head. (As this post went to press, I heard that Rush Limbaugh has issued an apology for his outrageous comments last week. That is a sign that he had found the limits of contemporary discourse, but I doubt that it's going to affect him very much for very long.)
George Will has been increasingly hysterical about Obama of late, but he has just predicted that either Santorum or Romney will lose. He hopes however that the Republicans can gain control of both houses of Congress, and that that will prevent Obama from accomplishing anything for the next four years. More gridlock, he has concluded, is the answer. No wonder he, unlike Brooks, did not lament the retirement of Olympia Snowe, who like Rhode Island's Lincoln Chaffee really wanted to work across the aisle, but gave up.
The Democrats, however, are nearly as helpless, because they have either focused on social issues--the only ones about which they appear to care passionately--or trusted to rationalist assumptions to take care of our economic problems. Beginning with Clinton, they too have given into the invisible hand, symbolized by NAFTA, the ebbing of union power, and the steady erosion of the middle class. Even President Obama has adopted Republican policies on several key issues. His Race to the Top is similar in its philosophy to No Child Left Behind, relying on test scores and charter schools, as Diane Ravitch points out in an excellent two-part article in the New York Review of Books. As Ravitch points out, the "school reform movement" is driven in large measure by the idea that we can fix education without fixing poverty--a highly dubious assumption that also seems to assume that we have a shortage of highly skilled labor, something I do not see. In the same journal, the environmentalist Bill McKibben, writing on "fracking," mentions that President Obama has endorsed the practice, whose environmental hazards are carefully shielded from investigation by various political authorities. There is essentially no political response to our dreadful long-term political prospects. Why?
I think the answer is generational--and tragic. Every generation tends to take its parents' achievements for granted while looking for something new to contribute. Our parents' and grandparents' great achievement was the New Deal legacy: a well-regulated economy with high upper-bracket marginal tax rates and a deep commitment to high unemployment, good jobs, and readily available public services, including cheap, high-quality public education. Having grown up in this modern garden of Eden, elite Boomers wanted something different. On the right they wanted the unfettered freedom to make money; on the left, they wanted gender equality, more opportunity for minorities, and gay rights. The academic left in particular lost interest in how the modern world got to be what it was, focusing relentlessly on its imperfections. Both sides have gotten what they wanted. The loser is the broad mass of the American people, whose lives and prospects are suffering regardless of their race, creed, color or sexual orientation.
It seems more and more likely that this year's election will do some good, quite possibly by dealing Republican social extremism a final, fatal blow. The contraception controversy is exactly the kind of issue the President needed to energize the women and young people who made up so much of his base last time. Even if Mitt Romney is nominated--and I think his chances now are only about 50-50--he will have to put another extreme conservative on the ticket and adopt many conservative positions. The Republicans will probably lose some ground in Congress, too, but there's no way Obama can start his second term in a position comparable to his first. Even if he did, he seems bereft of any ideas that would get the country on a new path.
The chattering classes have lost their relevance largely because they insist that, despite ups and downs, all is basically well in America. That, too, is the legacy of their parents and grandparents, who left us such a remarkable, even if imperfect, legacy. But all is not well, not least because of the almost complete lack of commitment throughout our society to anything greater than the individual himself, or perhaps his nuclear family. With the advent of Gen X to power that is not likely to get much better. The nation that eventually conquered the Depression, won the Second World War, and spread its umbrella over the free world trusted authority. Now we do not--and authorities accept this and rarely even try to earn our trust. There is nothing new about any of this. History includes many such periods, the late nineteenth century among them. They lead in turn to great opportunities to those yet unborn, who can rediscover values worth uniting around and re-create a sense of common enterprise. That evidently was not our destiny.
Brooks himself, who has been extraordinarily tolerant of the right wing while insisting that President Obama's faith in centralized power has alienated the country, awakened last week to the impending demise of Republicans he agrees with. Even Orrin Hatch has had to move his voting record rightward to protect against the sort of challenge that toppled his colleague Robert Bennett. Brooks wants the Republican leadership--whoever they are--to show more courage--but the whole rise of the post-New Deal Republican party has been fueled by appeals to racism, crass nationalism, social conservatism, and religious fundamentalism. Such ideas have never been absent from American life, but they only get a real hearing when our political leadership--which never varies too much from our economic leadership--stoops to promote them. That's what Republicans have been doing since Nixon and Reagan, and now solid House and Senate majorities stand ready to overturn the customs of the last 40 years and encourage employers not to cover birth control in their health insurance policies. Nor is this political cynicism: no sane person can believe that this stance is going to hep the Republican Party in November. It is ideology that has fed on itself, in the echo chamber of Clear Channel, Fox News, and the Drudge Report, and it now exercises discipline as fearsome as Jacobins or Stalinists--even without the threat of a guillotine or a bullet in the back of the head. (As this post went to press, I heard that Rush Limbaugh has issued an apology for his outrageous comments last week. That is a sign that he had found the limits of contemporary discourse, but I doubt that it's going to affect him very much for very long.)
George Will has been increasingly hysterical about Obama of late, but he has just predicted that either Santorum or Romney will lose. He hopes however that the Republicans can gain control of both houses of Congress, and that that will prevent Obama from accomplishing anything for the next four years. More gridlock, he has concluded, is the answer. No wonder he, unlike Brooks, did not lament the retirement of Olympia Snowe, who like Rhode Island's Lincoln Chaffee really wanted to work across the aisle, but gave up.
The Democrats, however, are nearly as helpless, because they have either focused on social issues--the only ones about which they appear to care passionately--or trusted to rationalist assumptions to take care of our economic problems. Beginning with Clinton, they too have given into the invisible hand, symbolized by NAFTA, the ebbing of union power, and the steady erosion of the middle class. Even President Obama has adopted Republican policies on several key issues. His Race to the Top is similar in its philosophy to No Child Left Behind, relying on test scores and charter schools, as Diane Ravitch points out in an excellent two-part article in the New York Review of Books. As Ravitch points out, the "school reform movement" is driven in large measure by the idea that we can fix education without fixing poverty--a highly dubious assumption that also seems to assume that we have a shortage of highly skilled labor, something I do not see. In the same journal, the environmentalist Bill McKibben, writing on "fracking," mentions that President Obama has endorsed the practice, whose environmental hazards are carefully shielded from investigation by various political authorities. There is essentially no political response to our dreadful long-term political prospects. Why?
I think the answer is generational--and tragic. Every generation tends to take its parents' achievements for granted while looking for something new to contribute. Our parents' and grandparents' great achievement was the New Deal legacy: a well-regulated economy with high upper-bracket marginal tax rates and a deep commitment to high unemployment, good jobs, and readily available public services, including cheap, high-quality public education. Having grown up in this modern garden of Eden, elite Boomers wanted something different. On the right they wanted the unfettered freedom to make money; on the left, they wanted gender equality, more opportunity for minorities, and gay rights. The academic left in particular lost interest in how the modern world got to be what it was, focusing relentlessly on its imperfections. Both sides have gotten what they wanted. The loser is the broad mass of the American people, whose lives and prospects are suffering regardless of their race, creed, color or sexual orientation.
It seems more and more likely that this year's election will do some good, quite possibly by dealing Republican social extremism a final, fatal blow. The contraception controversy is exactly the kind of issue the President needed to energize the women and young people who made up so much of his base last time. Even if Mitt Romney is nominated--and I think his chances now are only about 50-50--he will have to put another extreme conservative on the ticket and adopt many conservative positions. The Republicans will probably lose some ground in Congress, too, but there's no way Obama can start his second term in a position comparable to his first. Even if he did, he seems bereft of any ideas that would get the country on a new path.
The chattering classes have lost their relevance largely because they insist that, despite ups and downs, all is basically well in America. That, too, is the legacy of their parents and grandparents, who left us such a remarkable, even if imperfect, legacy. But all is not well, not least because of the almost complete lack of commitment throughout our society to anything greater than the individual himself, or perhaps his nuclear family. With the advent of Gen X to power that is not likely to get much better. The nation that eventually conquered the Depression, won the Second World War, and spread its umbrella over the free world trusted authority. Now we do not--and authorities accept this and rarely even try to earn our trust. There is nothing new about any of this. History includes many such periods, the late nineteenth century among them. They lead in turn to great opportunities to those yet unborn, who can rediscover values worth uniting around and re-create a sense of common enterprise. That evidently was not our destiny.
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