Well, I hope we have been rescued from economic meltdown; I hope I won’t be out in the street selling pencils next month.
I remember the election campaign of 1980; The father of our current president was seeking the nomination of the Republican party. He called Ronald Reagan’s economic plan “voodoo economics.” Regan of course, prevailed, and his philosophy is now sometimes called Reaganomics. Reaganomics is the economic theory and practice that has prevailed for the past 28 years. The key elements of Reaganomics have been deregulation, deficit spending, and income redistribution.
First, a disclaimer: economics is messy and complicated. In fact the current economic crisis is based on economic instruments so complicated even the banks that own them don’t understand them. So what follows are the memories and reflections of a marginal participant in the U.S. economy, not those of an expert.
One of the basic principles of American democracy is the balance of power. Our political creed is based on a fear and loathing of tyranny, a belief that the concentration of power in any one source or segment is dangerous. Reaganomics is based on a fear of government–which is genuinely part of our heritage: That government is best which governs least. But with Regan this became absolute: Jefferson with a vengeance. President Bush can still recite the words, “I’m from the government, I’m here to help” as a self-evident joke (and verified by hurricane Katrina).
Anyone who has ever dealt with a bureaucracy can understand this side of Reaganomics. But the other side is an unbounded confidence in the good will and ability to do good of the free market. There is no attempt to balance the evils of big government vs. the evils of big business. Reaganomic diehards would see no irony in the words, “I’m from the global oil company” or “I’m from your HMO, and I’m here to help.”
Regulations were designed primarily to protect the public against three dangers: reckless gambling with other people’s money in the financial markets, the loss of genuinely free markets through concentration of power in monopolies, and damage to the air, water and other natural resources we all depend on. Reagan and his disciples saw environmental protection as a threat to the free markets. They managed to portray those who wanted to conserve nontoxic air and water for their children as a crazy bunch of deranged tree hugging Luddites who wanted to stop progress.
In response to the energy crisis of the 1970s, President Carter initiated a series of energy-saving programs that actually worked. By the 1980s and 90s the price of oil had plummeted–to the point that we got fat and lazy and started driving gas-guzzlers again. But that’s another story.
One of Carter’s projects was to install solar panels on the White House. One of Ronald Reagan’s first acts as president was to remove them. They were a reminder of the need to conserve, of the fact that resources are finite–and as such they did not convey the kind of optimism he wanted to mark his presidency.
So, for nearly the past thirty years, regulations have been rolled back or swept under the rug–and it worked. It produced a booming economic bubble.
But now the bubble has burst and some of the financial gambling turned out to be losing bets. Now Congress has to provide a security net for the Wall Street high rollers.