The surprising rebuke that Senate Democrats delivered to President Obama on Tuesday has been reversed. A bi-partisan agreement among supporters of the Trans Pacific Partnership (TPP) will enable debate to proceed on the president’s requested fast-track authority. Whatever its outcome, the controversy over the TPP has further highlighted differences within the Democratic Party that surfaced over the past couple of years with the rise of what is sometimes called the Warren wing, sometimes the populist wing, of the party.
Warren, of course, is Elizabeth Warren, the charismatic junior senator from Massachusetts who in short order has developed a mass following on the Democratic left, specifically for her scathing critiques of Wall Street, but more generally for her advocacy of policies aimed at changing the rules of our political economy that have seemed inexorably to redistribute wealth upward. TPP isn’t the first time Warren has clashed with the Obama administration. In her short tenure in the Senate, she has already been in the forefront of successful campaigns against two Obama nominees for high economic policy office (Larry Summers and Antonio Weiss) whom opponents regarded as too cozy with Wall Street.
Warren has given voice to the unease that many rank-and file Democrats feel about their party’s inability if not unwillingness to aggressively address the issues of inequality posed by our new Gilded Age. That unease has tended to be submerged by the differences that separate all Democrats, including the Obama administration, from the Republicans’ reactionary radicalism. The differences among Democrats are nevertheless significant, and they’re of long standing. I prefer to talk of “tendencies” within the Democratic Party rather than “wings”; the latter term implies a degree of consistency and coherence to the differing alignments within the party that is not warranted. But I think we can meaningfully talk about a populist tendency within the party that coexists in some tension with a usually stronger centrist tendency.
Democrats who tend toward populism are appalled at the growth of economic and political inequality in American life and seek to challenge and constrain the business interests that they see as the sources of those trends. Centrists are more comfortable with business power and actively seek support from among the politically more moderate sectors of the business community.
Writing in the Wall Street Journal, William Galston explains the Democratic divergence by contrasting Warren’s views with those of Delaware’s Democratic governor, Jack Markell. In Markell’s view, “…the economic system isn’t so much fundamentally rigged as the populists contend, as it is fundamentally, unalterably, never-to-be-the same again changed.” In other words, the world has changed, and it’s nobody’s fault—we just have to deal with that reality. Galston summarizes: “Ms. Warren believes that identifiable wrongdoers are principally responsible for our economic ills. Mr. Markell does not.”
I think Galston is roughly correct as far as he goes, but we need to go further. The centrists’ benign view of American business reflects a choice of political strategy, not just a particular economic diagnosis. You don’t cultivate big-money donors by bashing business. The American Prospect’s Harold Meyerson provides some important historical perspective. “Not so long ago,” Meyerson observes, “the Democrats generally agreed with one another on economics—hence the New Deal and Great Society.” But this has changed, a result of
“…a 50-year transformation that began when Lyndon Johnson signed the Civil Rights Act. As Southern whites fled the party, Democrats welcomed socially liberal financial elites who had rejected the GOP’s rightward turn on racial and gender issues. This mix of Wall Street bankers and high-tech entrepreneurs has become a major source of Democratic funding. Their perspectives have dominated the party’s economic policies, beginning with former Goldman Sachs CEO Robert Rubin’s tenure as Bill Clinton’s Treasury secretary and continuing through the Obama presidency with such protégés as Lawrence Summers and Timothy Geithner.
Meyerson may understate the influence business elites had with the Democrats even before the Great Society, but his broad point is valid. The famous “Eastern establishment,” once predominantly composed of moderate Republicans, is now heavily Democratic, leavened with Western silicon. It is an establishment whose preferences must perforce carry weight in the Obama administration, which helps explain why the administration is so fully committed to the business-friendly TPP. (For further explanation, see the closing paragraphs of my post of 4/1/15.)
Who’s right? Are the populists just choosing scapegoats to blame for implacable, impersonal market forces? You can plausibly make that argument, but only up to a point. For example, populists rail against “free trade agreements” that encourage the outsourcing of jobs by American firms. “Free trade” advocates point out that much of that outsourcing would take place in any case as a result of globalization. But just because something is inevitable isn’t a reason to promote it further. The broader impetus for populism lies in the undeniable major shift in American political power in recent decades to the advantage of business interests and wealthy individuals. (See, for example, my post of 4/16/14.) Think about it: It would be surprising, would it not, if those enjoying disproportionate political power didn’t use that power to promote public policies that advance their own interests? That is, if they didn’t do their best to shape the rules of economic life in their favor? And with considerable success? So, there is prima facie reason to assume that the populists are probably right at least in good part.
But there’s no need to rely on prima facie assumptions—the populists have abundant evidence to make their case. Inequality isn’t just a matter of happenstance. Capitalism may well tend naturally toward increasing inequality, as Thomas Piketty‘ s analysis suggests, but that tendency can be mitigated or amplified by the acts of government. As Robert Reich shows, inequality is protected and exacerbated by a wide range of policies promoted by powerful interests, policies affecting such diverse areas as labor relations, intellectual property rights, contract law, and financial and anti-trust regulation. Oh, and not least: international business regulation (AKA “free trade”). Economic power begets political power, which reinforces economic power, which….
Elizabeth Warren may not be running for president, but she has a lot to talk about. I’m glad she’s a good talker.