How Federalism Saved Us From Wall Street
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How Federalism Saved Us From Wall Street

Our federal system sometimes gets bad press from the Electoral College to the way healthcare functions there are frequent calls to revise and even
scrap the system’s that divide power between the national government and the individual state governments
Washington DC is always ready take on new powers. We
often hear about positive developments new national powers led to. What we don’t often hear about is all the trouble that our federalized
system has saved us from today would like to tell one of those stories.
You all know about the evils of our current financial system of too big to
fail banks. The roots of that system go much further
back to Bush or even Clinton. The current model of unleashed financial
capitalism goes back to the 1970s and 1980s Adam Curtis, sort of a British Michael Moore has told the story in The Mayfair Set a
documentary series for the BBC you can find on YouTube.
Curtis’s relation to the facts is often as problematic as Moore’s but he tells interesting story. From World War II until the nineteen seventies the British
and American economies were dominated by corporate managers the post-war economic boom allowed these
managers to set up friendly relationships between capital, labor, and
government. Economists like John Kenneth Galbraith
claimed that capitalism had changed from a battle to a carefully
organized and planned system. There was no longer any need for
the entrepreneurs and self-made man who had built the
international economy. The 1970s proved how wrong they were. As post-war growth petered out, the planned
system proved unable to deal with the challenges of new competition and emerging market
players who had little respect for the comforts of the developed world. A solution was
developed but as always happens it presented
its own problems. The power the shareholders, the actual
owners of the great industrial companies was unleashed.
Corporate raiders and takeover specialists began to liquidate
the old companies freeing up value but also ending
millions of economically efficient jobs. On balance I believe that this process was necessary and
has yielded some valuable results. The costs, of course, are indisputable. But Anglo-
American capitalism, as it is sometimes described, has had very
different careers in Britain and the United States. Some of this is due to size of course. But much of it has to do with our
different systems. Britain is occasionally described as an “elective dictatorship”. Due to stronger party loyalty and less
constitutional restraint on the central power, in the nineteen eighties financial
capital was able to capture the British government to an extent that we are only now
reaching the United States. In the US, Wall Street had to deal with
a whole class of senators, representatives, and state and local
attorneys with real power bases outside of the
national system. When a corporate raider wanted to liquidate a US company the process was more difficult. These other
power centers couldn’t stop the process, but they changed it, slowed it down, and may actually have improved it for all
involved. It is important to remember that
pioneering corporate raiders, michael milken and ivan boesky, ended their
careers in jail, while their British equivalents ended up
with knighthoods. This is why the United States still has a car industry, and a manufacturing industry, and possibly why the US has such a
robust technology industry. The differing centers of
political power have managed to preserve multiple
centers economic power. The story is not this simple but it is a
part of the story worth paying attention to.
Financial capitalism brought great rewards to both countries in the years leading up
to 2008. The rewards, however, hid a disturbing
fact. The UK was becoming a one-horse economy. There is London’s financial industry, and
a bunch of northern cities competing desperately for the annual title of a European
Capital of Culture and the few tourist dollars that that brings
in. The crisis started in 2008 me this
difference very clear. Both countries experienced economic
devastation. In the US however, the unemployed could
moved to Texas or benefit from years of unemployment
insurance paid for by the government debt. The British government did not have that luxury. They had to react to a massive recession
with massive cuts in the social safety net. London’s continued
resurgence seems to have saved them for now, but it’s a tentative recovery at best. The US
economy is in much better shape, and we owe that, in part, to our federal
system. thanks for watching , please Subcribe.

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