There is an old child’s joke that goes like this. "Rabbi David, Rabbi David, why does the dog wag his tail?" "Because, my child, the dog is bigger than his tail. If the tail was bigger, perhaps the tail would wag the dog."
The tail-wagging-the-dog inversion is an ancient staple of comedy. It is an equally ancient staple of political theory, starting with Aristotle’s warning that wealth-seeking in the service of the household is a positive good, but where the household is devoted to wealth-seeking it has become corrupt. Aristotle was pointing to one of the biggest, most important questions about tail-dog relations in the West: what is the relationship between our politics and our economics? The different answers to this basic question are the real differences between McCain and Obama.
Marx argued that the answer was simple: our political values are merely temporary expressions of economic imperatives, and will give way as economic interests evolve. Marx also saw capitalism as inherently unstable. Capitalist markets, he said, would lead to an endless and amplifying series of boom-and-bust cycles, and at the same time the working class would be ever-more exploited by a dominant class. The combination of instability and resentment would lead to the proletarian revolution, most likely in Germany, later in the United States.
Marx was wrong, of course. The western democracies defied Marx’s logic by a decidedly unMarxian choice of priorities: politics over economics. We intervened in our respective economies with government regulation, and social welfare programs, and publicly funded higher education, and the political empowerment of labor — in ways ranging from American trade unions to the Scandinavian Fordist model – and created something new, a working middle class. We modified political arrangements to ensure representation for economically disempowered groups. And we intervened in the system of corporate capitalism to stabilize markets and tame, if not end, the boom-and-bust cycle of bubbles and depressions that had marked the century leading up to 1929. For a while, in other words, the world was not divided between working poor and capitalist rich.
One of the reasons Marx got his story wrong is the he did not sufficiently recognize that capitalism was evolving. New forms of corporate capitalism led to new forms of government-economy relations. That’s the genius of capitalism, what Joseph Schumpeter called its capacity for "creative destruction"; old forms are pushed out as new ones come in.
But capitalism can also lead to a less creative form of destruction, when social relations are sacrificed to pure economic interests. Both state socialism and unfettered capitalism share this weakness: giving economic systems priority over political values creates terrible cognitive dissonance. In their personal lives we tell people – especially young people – to value loyalty and stability, kindness and empathy, respect and cooperation. Then we tell them exactly the opposite about their economic lives: that they should expect to have ten different jobs in their career, to always be negotiating, to be perpetually on the job market, to rely on nothing, commit to nothing, and expect no more than the market demands in return for their efforts. The interventions in western economies in the 20th century did more than tame the excesses of the markets, they opened the space for civil society and communality to flourish. Richard Sennett, among others, has recorded the decline in our understanding of the profoundly important relationship between political values, economic intervention, and social capital.
The current crisis involves confronting another new form of capitalism, finance capitalism. It is remarkable how little McCain and Palin seem to understand this basic point. Palin gave a speech recently in which she spoke about small towns as the "real" America. The speech got some attention for its negative implication – what parts of America are anti-American? – but there was another line in that speech that was actually more interesting. Speaking of small town America, Palin spoke of "those who are running our factories and teaching our kids and growing our food…" Factory workers, teachers, and farmers sounds like a description of the American workforce circa 1930.
Finance capitalism is a new, emergent form that supplements and, in places, supplants market and corporate capitalism. As a new form, finance capitalism has not yet matured. Specifically, we have not yet worked out an approach to the Marxian equation of economy and politics in this new context. When McCain bellows that Obama’s plans are "socialism," and when Palin (probably unknowingly) quotes Reagan’s declaration that the adoption of Medicare will be the end of American freedom, they are not just engaging in the classic pastime of Red-baiting. They are also reflecting a near-total lack of appreciation for the fact that new economic forms require new political approaches, not to create new value commitments but in order to preserve the old ones.
Doing the same thing in the face of changed conditions is one form of radicalism; adjusting measures to suit new conditions is essential to intelligent conservatism. The "freedom" of individual workers to negotiate the terms of their employment may have made sense in the context of cottage industries of the 17th century; it took on an entirely different, more sinister meaning in the context of early 20th century industrial capitalism. The "freedom" of patients and doctors to negotiate their relationship takes on a whole different cast in the face of HMOs and a giant health insurance industry bent on maximizing profits by minimizing costs. And the "freedom" to keep what you earn has to be reconsidered when "earning" means something unrelated to old ideas of productive work and "keeping" your money means being left to the mercy of economic predators. (Government, remember, was invented in the first instance to protect us from one another.)
So the basic question is both profoundly simple and hugely complex. The hugely complex dimension is, "Once we decide what we are after, here, how do we achieve it?" There won’t be a single, magic wand-style solution. Like the relation between labor and industrial capital, or the relationships in international trade, or the systems of international finance, new arrangements will emerge piecemeal and take different forms in different places. But the profoundly simple question comes first. Confronted by the recognition of a new, explosively creative form of capitalism, do we declare once again that our economics serves our political ideals, or do we embrace the idea that concepts like "freedom" and "democracy" are only worthwhile because they create profits? Between our economic and our political values, which is the tail and which is the dog?
[Cross-posted from The Huffington Post]