Interregnum Revisited

Ken Ballweg was kind enough to point me back to a post I wrote for Talking Points Memo two years ago on my continuing obsession: The Interregnum. It is one of those periods that come along perhaps once a century, where “the old is dying and the new cannot be born”.And then Alex Bowles sent me a wonderful essay by Marc Chandler called Crisis and Instability–Searching for Terra Firma which makes much of the same argument.

 This is similar to where we are now, in-between. What is at stake is not the capitalist system as such, but how it is organized; not just economics, but political economy. How will productivity gains be distributed? What is the relation between employee and employer? What is their relation to the state? What is the relation between industrial and finance capital?

And then I woke yesterday to this stunning analysis of the global political unrest that has shaken India, Israel, Great Britain, Egypt, Syria, Greece, Spain and now the U.S.

But from South Asia to the heartland of Europe and now even to Wall Street, these protesters share something else: wariness, even contempt, toward traditional politicians and the democratic political process they preside over. They are taking to the streets, in part, because they have little faith in the ballot box.

Alex calls it a crisis of legitimacy and I have to believe that is the heart of the issue. Writing about the rise of the Progressive Movement more than a century ago, Richard Hofstadter said it was an “effort to restore a type of economic individualism and political democracy that was widely believed to have existed earlier in America and to have been destroyed by the great corporation and the corrupt political machine.” This seems just as true today. If todays politicians in all parties are seen to have sold out to the highest bidder then a new generation begins to shun representative democracy and take to street protest. The Times quotes my friend Yochai Benkler.

“You’re looking at a generation of 20- and 30-year-olds who are used to self-organizing,” said Yochai Benkler, a director of the Berkman Center for Internet and Society at Harvard University. “They believe life can be more participatory, more decentralized, less dependent on the traditional models of organization, either in the state or the big company. Those were the dominant ways of doing things in the industrial economy, and they aren’t anymore.”

In 1991 when Francis Fukuyama published his book The End of History, he was confident that the combination of liberal democracy and free market economics was the final solution to man’s quest for a just and free political economy. Twenty years later we are not so sure. I have never suggested I knew how we get out of this Interregnum. I do believe that the role of money in politics has fatally corrupted our democracy and from reading the Times piece it is obvious that the citizens of Tel Aviv and Mumbai feel the same way. And because the democracy is corrupted, whatever fantasies the libertarians have about free markets are totally destroyed by crony capitalism. Marc Chandler suggests some things will need to change.

Capital markets will become more regulated and transparent. Whether directly with a financial transaction tax or indirectly through regulation, the cost is likely to increase and this will serve to slow the rate of growth. This applies to financial innovation as well. It is, like James Tobin once suggested, putting some sand in the too-efficient wheels of the capital markets.

The distribution of productivity gains has never been more lopsided in the United States, and the disparity has grown to extreme levels in other major industrialized countries. The cash register has to redraw the balance for economic as well as political reasons. The top 5% of America’s income earners account for almost 40% of all consumer purchases. If the new cash register is going to boost aggregate demand it must boost the base for consumption.

These are perhaps important ideas to fix the financial system, but ultimately as long the expenditures of $19 million on a single Senate campaign are characterized as “relatively modest”,  we are in trouble. The fatal linking of money and free speech could kill this amazing 235 year experiment in government “of the people, by the people and for the people”.  That would be the real end of history.

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16 Responses to Interregnum Revisited

  1. Morgan Warstler says:

    Perhaps if we print some more money, we can cause even greater Food Riot Democracies!

    That’s all these are… people are being priced out of food by commodity price responses to US / Euro politicians trying to rob peter to pay paul.

    Hard money is tough love, it does the deed without moral hazard.

    If you want to run the “Dollar” to the exclusive benefit of unemployed Americans, we’re going to topple lots more foreign dictators.

    Win-win, right?

  2. Morgan Warstler says:

    “The point of Meredith Whitney’s investigation, in her mind, was not to predict defaults in the municipal-bond market. It was to compare the states with one another so that they might be ranked. She wanted to get a sense of who in America was likely to play the role of the Greeks, and who the Germans. Of who was strong, and who weak. In the process she had, in effect, unearthed America’s scariest financial places.

    “So what’s the scariest state?” I asked her.

    She had to think for only about two seconds.


    I hate to have you read this, because I’m afraid you will run from and not double down on New Fed:

  3. JTMcPhee says:

    len, which part was Henry right about? The machine guns on the factory roof? Benevolent dictatorship? “The International Jew,” , which might have given Rupert Murdoch some ideas about how to do propaganda and which buttons to push on the old lizard brain dash panel to get it into overdrive?

    Ford is kind of what happens, more often than not, when the entrepreneurial spirit does a succubus bone-jumping on Saint Innovation. How do humans survive the end result of DARPAgeddon?

  4. len says:

    @jtmc: That to have a prosperous economy you need workers to have jobs that provide enough income to buy the products they build. Choking the chicken to push money to the top defeats that cycle. If the middle class fails, the rest of the economy follows. Wall Street believes it can simply send money around the planet and they themselves will remain prosperous and in a strict sense they are right, that is at least until those kids in the park get tired of being cold and ignored and start throttling bankers on the street for the thrill of it.

    This is where the A-school kiddies and the rest of the warped globalists fail: they have a recipe for maximizing greed a la Rand, not for ensuring the local cycles support the viability of the local processes. In programming terms, they only see the outer control loop and fail to understand that a function that does not receive a call never returns a value.

  5. JTMcPhee says:

    Is our clockwork turning orange yet? Maybe it’s just the colors of the fall…

  6. len says:

    Cycle scope is another way to describe legitimacy if not authority, JTMc. Authority can be wrong and if the cycles are correct, the authority will be ignored. It is when authorities attempt to regulate cycles without regard to scope and affect that things go south. This is where Tap is correct to say what works for California may not work best for Alabama. He’s right.

    On the other hand, the Walled City of Apple and the chain link and barbed wire I’m looking at have a lot in common and for the same reasons: secrets to protect. That is not the same as isolation from inspection. The trouble is telling the difference when all you get is a report from a guy in a lab coat who’s test subject has charmed him. “Hello Mary Lou, Goodbye heart.”

    Almost Orange.

  7. Morgan Warstler says:

    Ah yes, because by and large FORD has been bad for America.

    Stop the presses! The name FORD has been weighed, judged, and sentence has been passed by an ex-EPA lawyer hiding out on a boat on the gulf coast.

    What color is the sky in your world JTM?

    BTW, there is a blog I think you would really enjoy… he’s a great writer:

  8. Jon Taplin says:

    Morgon-Don’t be such a dickhead.

  9. Ken Ballweg says:

    Jon, Jon, Jon…. after all these years you still are optimistic enough to thing Morgan can/will change? Silly boy. The one thing a Narcissist can be counted on is to fail to see any reason to change their perfection.

  10. Ken Ballweg says:

    Damn iPhone spell check. “think Morgan” not “thing Morgan”; though in that isolated context, “thing” does go together with Morgan more easily than “think”, so perhaps it wasn’t quite totally inaccurate a slip.

  11. Morgan Warstler says:


    you too should read:

    He’s a great writer and no one knows who he is.

    He does quite a bit on narcissists. Good stuff.

  12. Ken Ballweg says:

    There is some interesting speculation that TLP is a female with an inner city practice. Her/His endless fascination with narcissism, and his/her endless rambling leaving me with a few too many “What’s your point here?” moments make TLP a real difficult read for me.

    I’ve also worked with so many Psychiatrist over the years and know that a few too many of them are wondrous strange beasts to trust them to individually do good science.

  13. Morgan Warstler says:

    Oh I like that.

    TLP as a woman is even better.

    There’s very very little I ever disagree with, and I find it laden with points.

    Her / His disregard for so much of the “science” hits all the right notes to me.

  14. Alex Bowles says:

    Sorry to see that our friend Morgan managed to scare off the more conversational crowd. It was a good topic.

    In any case, here’s an addendum I came across in Granta. It suggests that the prevailing order (of which wheels are now coming off) was the Reagan/Thatcher model of economic globalization – something with extraordinary power that went unaccompanied by any commensurate expansion of democratic governance, which is more than a little ironic, given it’s ostensible justifications in the name of ‘freedom’ (for who, exactly?)

    None of this is new, controversial, or even particularly original. But the piece does end with a real gem.

    And so we come to the present, to the moment before the next transformation and the shift to another age of the world. Daylight floods the mysteries of both finance and the War on Terror. Yet America’s wars continue and the bankers tell us they must have yet more public money if disaster is to be averted. Aside from the talk of austerity we are without an organizing story. Though shrewd careerists will not say so out loud, both money and war have lost their power to entrance. Nothing now stops us seeing things as they are. In downtown Manhattan, the crowds of protesters that vanished after September 2001 are back, again asserting the primacy of people over finance-as-theft, again risking arrest, again unnerving the powers and signalling to the rest of us that there is an alternative.

    This moment, of being outside enchantment, will not, I think, last. Another articulation of time is coming, and coming soon. It will determine how our children and grandchildren judge these last two decades. It will determine whether history will vindicate the maniacs and hucksters who brought us globalization and the War on Terror. In the Middle East something has already changed. In Europe and the United States our future, our hopes for effectual freedom, our survival even, depend on our being the authors of the next inaugurating event.

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