Romney Financialism Rampant: The Envy Club and the Big Lie

Former Massachusetts Governor Willard M. Romney will be bringing his troops to Nevada for the upcoming Republican caucuses, and his intellectual baggage with him.  The Washington Post transcribed this illuminating exchange with the former Governor who has made a couple of attempts to secure the GOP nomination for the presidency:

QUESTIONER: When you said that we already have a leader who divides us with the bitter politics of envy, I’m curious about the word envy. Did you suggest that anyone who questions the policies and practices of Wall Street and financial institutions, anyone who has questions about the distribution of wealth and power in this country, is envious? Is it about jealousy, or fairness?

ROMNEY: You know, I think it’s about envy. I think it’s about class warfare. When you have a president encouraging the idea of dividing America based on 99 percent versus one percent, and those people who have been most successful will be in the one percent, you have opened up a wave of approach in this country which is entirely inconsistent with the concept of one nation under God. The American people, I believe in the final analysis, will reject it.

QUESTIONER: Are there no fair questions about the distribution of wealth without it being seen as envy, though?

ROMNEY: I think it’s fine to talk about those things in quiet rooms and discussions about tax policy and the like. But the president has made it part of his campaign rally. Everywhere he goes we hear him talking about millionaires and billionaires and executives and Wall Street. It’s a very envy-oriented, attack-oriented approach and I think it will fail. [emphasis in original]

Governor Romney may have said much more than he intended.  There are two reasons to parse this exchange carefully.  (1) It reveals Romney’s mindset about middle America, and (2) It demonstrates the pernicious quality of the Big Lie of  2011.

First, it’s not the income inequality statistics that are the problem. It’s the trending income inequality statistics that are problematic.  There has been and forever will be income inequality.  Some people have talent and skills for which we will pay more than for the talent and skills of others.   Thus, it’s not the fact of income inequality that is causing contention, it’s the trend that indicates the American middle class is in serious trouble.

The Federal Reserve has taken note of the trend as shown in the following chart:

What Governor Romney brushes off as “envy,” is concern over the widening gap between the purchasing power of disparate income groups.  If we assume that the U.S. economy is at least 67% driven by consumer spending then the reduction of middle income earners buying power is obviously of great interest.  This isn’t about envy, it’s about generating DEMAND for consumer goods and services in the United States of America.

Governor Romney’s misplaced conclusion infers that the operation of the financial markets is somehow of greater importance (hence an object of envy) among those who believe that the financial markets are only one part of the total economy — which includes, of course, other markets:  The housing market; the retail clothing markets; the wholesale and retail grocery markets; the health care market; and the automobile market — to name just a few of our economic components.  Romney’s embrace of  Financialism could not be more glaring.

Secondly, the adoption of the Financialist perspective isn’t helpful:

“…financial instruments become progressively further removed from their role in supporting commerce in the real world and develop a life of their own, a weird shadow dimension, a hall of mirrors, a distorted alternate reality that intersects and reacts with the real economy in unpredictable and destructive ways.”  [Seeking Alpha]

And there are perils in this Hall of Mirrors:

“A system which exalts the most capable financial predator as its highest member will suffer periodic booms and busts – the prey, honest people who work and save and try to invest, become too few and too weak to sustain the predators above them on the feeding chain.” [Seeking Alpha]

This situation isn’t about ENVY, it’s about whether or not we can sustain a capitalist free market economy when the “predators” have drained the capacity of the working people to save and invest.  Financialism makes it all too tempting to replicate Nora Desmond’s reference to consumers in Sunset Boulevard:

“You see, this is my life! It always will be! Nothing else! Just us, the cameras, and those wonderful people out there in the dark!… All right, Mr. DeMille, I’m ready for my close-up.”

By the end of the picture no one in the audience could be envious of Miss Desmond’s estate, wardrobe, or swimming pool.  The Financialists face a similar danger — when they’re ready for their close-ups there may be no underlying economy of “wonderful people out there in the dark” to sustain their feats of  financial engineering.  There’s another line from Sunset Boulevard that seems to fit this situation: “The poor dope – he always wanted a pool. Well, in the end, he got himself a pool. ”

This is the point at which the Big Lie of 2011 is relevant.   Governor Romney represents the bankers who are fighting any restrictions on their financial engineering projects:

“The banking lobby is fighting the implementation of the Dodd Frank Act with every tactic available.  They are fighting the funding for the Consumer Financial Protection Bureau, the appointment of a director for the CFPB, indeed the entire rationale for the CFPB.  They are fighting the efforts of the Commodity Futures Trading Commission to oversee the credit default swap transactions.  They are fighting efforts to monitor the over the counter trading of derivatives.  They are fighting against having oversight of their capacity to create systemic risk.  They are fighting any proposal for an “Orderly Liquidation Authority,” i.e. a plan to wind down bankrupt banks.”

In order to make the argument that we do not need financial regulation reform, that we do not need to protect financial product consumers, that we do not need to oversee the derivatives markets, that we do not need to implement an orderly liquidation process for large bankrupt banks — the bankers need to make it seem as though the financial crisis of 2008 was Our Fault.

Our government was at fault! Our participation in the housing market was at fault! Our over-spending was at fault! And, now it’s Our Envy that must be at the heart of the complaints concerning the machinations of the Financialists and their Hall of Mirrors, and its distortion of our economy.

Governor Romney may not have intended to tip his hand so visibly, but having done so we can be certain of his Financialist perspective, and convinced that he neither understands the nature of the long slog toward economic recovery, nor the essential need to maintain a viable middle class in the process.  Again, “The poor dope – he always wanted a pool. Well, in the end, he got himself a pool. “

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