whyroots

Congratulations to "bailout," 2008's word of the year. Probably the most deserved award handed out this year, despite my joy in watching the right squirm when Paul Krugman received the Nobel.

Unfortunately, the actual bailout seems to be just about the most hated thing on the planet. Conservatives hate it because it's the government doing something useful and expensive. Liberals hate it because bankers benefit, and bankers are evil.

The conservative hatred I can understand. We're nationalizing the banking sector because the conservatives are so incredibly wrong about how to run an economy. The liberal hatred, however, is like some perverse rewriting of the rule of double effect. The rule of double effect has also gotten a lot of attention lately, mostly in the justification for Israel's shelling of Gaza; it's that rule that allows Israel to claim that the deaths of Palestinian civilian's are Hamas's fault, not Israel's (count me highly dubious). You see, if a great harm comes to someone because you do something good, that's okay, because the good outcome came concomitant with the bad one. Well, in the case of the bailout, it's more like, if a good outcome comes to investment bankers, then all the good you do is nullified because you helped the banker.

Take David Sirota's column in the Sun Journal. Generally, I find it difficult to type while hyperventilating, but I'm not a professional, so I'm impressed by the craftsmanship. (My ability to ply in snark is coming along, however.) I want to focus here on two claims Sirota makes because they're common complaints.

1. He cites the second report filed by the bailout's Congressional oversite committee and repeats its claim that the bailout has had no demonstrable effect on lending. The Treasury does not dispute that claim. Rather, the Treasury points to the fact that the economy has taken a huge turn for the worse and that people don't have many good lending opportunities. In turn, the oversite committee agrees that the economy is bad. Their gripe is not that the program hasn't improved lending, but that it hasn't saved the economy from a tailspin. There is not a single economist I have heard defend the bailout by claiming it would prevent a recession; the shock to the financial system that occurred pre-bailout, that necessitated the bailout, was enough to cause the recession we see. Economists have argued that the bailout was needed to prevent a systemic collapse of the financial system. It worked. The TED spread, the go-to metric for the level of counterparty risk, is well off its historic highs, and there is money out there to be had. Unfortunately, there are not many peoople asking for or receiving loans. If and when the stimulus package is enacted, we will have the financial system and the bailout to thank for any economic stimulus that actually arrives because it will be banks saved by the bailout that will provide working capital for paychecks, inventories, and leases as the nation undertakes infrastructure projects galore.

2. Sirota asks, "Is the bank bailout the best way to stimulate the economy." No. No. No. And it wasn't sold that way. The bank bailout was the best way to save the economy. So why does Obama want a stimulus and the bailout? Doesn't the stimulus make the bailout obsolete? Again, no -- take a look at recent reports that Bank of America and Citigroup are still having big balance sheet problems. The stimulus and bailout are two halves of the same coin. The bailout is necessary to keep banks solvent and healthy enough to lend; the stimulus is necessary to start the economic engine started again. Credit is often described as the oil that allows the country's economy to function; Sirota is complaining that adding oil to a dry engine isn't starting it. No kidding. But try starting the engine sans oil and ... kerplunk.

I'm all for calling Obama out when he's straying (see my last post). But asking for bailout  money so it can be used when necessary is simply good policy, not the maintenance of a kleptocracy, as Sirota writes. Problems at Bank of America and Citigroup suggest that the financial sector still needs a government crutch -- probably a more significant one. I agree with Sirota and other critics that there needs to be more transparency, and that the government should push for untenable mortgages to be renegotiated, not foreclosed. But I remain a fan of a bailout because it has so far delivered, despite a lack of transparency and a frustrating absence of strategic coherence. I want to stand with those on the left that call for greater transparency and good governance. But I want allies who are intellectually honest, not as bankrupt as our banks.

Last spring, one of the consultants at my management consulting firm won an election for part-time office in a south western state. He was elected on a progressive platform. During one of his first post-election meetings back at the firm, a senior executive and one of our clients joked with him that he wasn't sure how he felt about having someone so liberal and "pro-union" consulting for him. Meanwhile, over the course of the election, which included a primary contest, this consultant was criticized for his corporate ties by an opponent on the left. Seems as though no one is comfortable with a progressive in the corporate world.

Naturally so, you might say, given the amount of time prominent progressives spend railing against corporate power, and the huge sums of money corporations have spent lobbying against progressive government reforms. But many self-described progressives have collected a corporate paycheck, or had a parent's corporate paycheck pay their way through school, or at the very least spent money on corporate products. (Your outfit might be head-to-toe American Apparel, but your Converse kicks are as corporate as it gets.) So many progressive Dr. Jekyls with a lurking, corporate Mr. Hyde, eh?

I don't think it can really be any other way. There are bills to be paid, and there are only so many plum non-profit jobs to go around. Besides, someone has to donate something to make those NGOs run. Like it or not, corporations are extremely efficient engines of economic growth (financial meltdown or no meltdown, this point stands). Progressives have every reason to be wary of corporate ambitions to twist public servants to serve their self-interest at the expense of the public good. But corporate self-interest is very often aligned with the public good, not opposed. 

Progressives need to avoid dogmatic opposition to corporations and businesses more generally. Society has too much to gain from efficient, well-run firms of all sizes, small and big alike. Progress demands pragmatism, not tribalism. So when considering the meaning of progressivism, let us define it by its successes, not its conflicts, by its ideals, and not by its caricatured enemies.