Leave it to the British, who know a thing or two about the state, socialism and modern capitalism, to explain to a still awe struck readership the nature of things going on in the heart of the global economy, the United States. This is one of several pieces in the FT’s weekend edition to point out that, in fact, the notion that we lived in a genuinely free market economy is posh, as the Brits say.
In fact, the power of the state always stood behind the great risks taken with “other people’s money” (Brandeis and, now, Palin) on Wall Street and in the City. Thus, the FT’s Christopher Caldwell aptly quotes the conservative German legal theorist Carl Schmitt on the power of the sovereign: “he who decides whether there is a state of emergency.” This week that power belonged to Hank Paulson and Ben (the era of the “great moderation”) Bernanke, without any serious input from the elected branches of government and, as proposed, no possibility of judicial review.
But it will not be long before there is a democratic backlash against the unilateral exercise of power by the federal government. Don’t look to the presidential candidates for leadership, of course, who are scrambling to comprehend and stay ahead of the news. That John McCain was part of the corrupt Savings and Loan debacle of the 80s and Obama is financed by young hedge fund and private equity fund managers limits their credibility.
Nonetheless, over the next few months and years, as the implications of this week’s events play themselves out it will become clear that a contest for state power remains at the heart of modern society. Markets and private ordering are chaotic and unreliable mechanisms prone to inequity, volatility and, ultimately, the generation of a political backlash. But that only means a shift to the terrain of the state for social conflict over social resources.
Thus, it is only logical to ask, if the government must step in to rationalize an irrationally organized financial system and housing industry, is not the same true of the health care industry and key manufacturing sectors? Or are we to allow those too to be torn apart by speculators?