Potterville Didn't Just Happen Overnight. We, the People, Helped.

Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard and current Chair of the Congressional Oversight Panel (and someone that Maxine thinks should be designated an honorary girl economist), provides a good overview in Huffington Post of how Bedford Falls has eroded into Potterville over time. It's pretty obvious that bankers didn't do this all by themselves. They had help from the guvmint and we the people who weren't paying attention. (After all, in a democracy, we ARE the government, at least in theory).

In Maxine's humble opinion, America is the middle class. If we lose it, we lose America and everything our forefathers fought and died and lost treasure for. And the world loses a shining beacon of (relative) equality of opportunity and freedom.

How did this happen in a democracy with near universal suffrage? Maxine thinks one of the ways it happened was that we allowed ourselves to become divided by race, religion, and reproductive and gay rights (the last two of which may be subsumed under religion).

The median voter doesn't exist anymore. She's been pried off the center by fear-baiting racism, sexism, religious bigotry, and myriad other emotionally-laden issues. Fear has been used to fracture an already diffuse electorate along stark lines of commitment to emotionally laden issues that while important in their own right, pale compared to the overall erosion in equality of economic opportunity and, ultimately, the erosion in personal freedom that must accompany it.

So the (run-on, convoluted) question Maxine raises today is: would the people of Bedford Falls have abandoned George Bailey for Mr. Potter if George, the good banker who treated them all well and helped them get ahead in the world, had been a supporter of gay or reproductive rights, if he had fairly and equally employed and served people of all religions and races, and if Mr. Potter had been the staunch opposition to those rights and equality of opportunity?

Maxine used to think that George Bailey would always win out in that hypothetical contest. First, because his business served people in ways that improved their lives. Second, because the people of Bedford Falls would understand that Potter would, over time with his business practices, erode not only the rights they would like to see eroded, but the rights they would like to see preserved.

She's not so sure any more.

And Maxine's final question of the day: Why do people fear government more than they fear concentrations of economic (and therefore political) power in large corporations and banks and health insurers (for instance)? After all, we're all shareholders in the government and can vote the entire "board" out at regular intervals...unless, of course, we've been manipulated into voting against our own economic well-being...

Just askin'.

Comments

[Ellen1910]

"Why do people fear government more than they fear . . . large corporations . . . ."

Not everyone does; however, those who do recognize that large corporations are dangerous principally insofar as they act (or by sponsoring legislation seek to act) as rent-seekers.

Government, no matter which party is in power, is, by definition, the rent-seeker's enabler. As government expands, it increases the ability of its principal beneficiaries (large corporations) to harm society.

The only possible remedy (we've tried others) which might succeed would be a reduction in the size and power of government (that is, the reduction of rent-seeking opportunities).

P.S. Hope you'll visit TPMCafe, frequently; we need more economists. Might try contacting Josh to see of you can get on the left side of the front page. Those entries stay active much longer than personal blog entries on the right side.

[Maxine Udall (girl economist)]

Maxine understands the rent-seeking-enabling function of government, but questions whether size is the causal determinant. It seems a convenient, possibly over-simplistic, and, therefore, highly appealing explanation. She would like to see evidence that it is size and only size and she would like to have a clear understanding of the likely other side effects of reducing its size before she agrees to "shrink it and drown it in a bathtub." We have, in fact, tried smaller sized government in the past. As far as I can tell it did little to eliminate rent-seeking and distorted capital markets. In addition, the lack of regulation caused much harm as did the absence of a coordinated safety net for displaced workers. Since the government is the people (at least in theory), I'm not sure how I feel about a general reduction in its powers, either. :-)

I would also be willing to be part of any reasoned discourse on shrinking the size of government that included a similarly grounded discussion of the optimal size of private firms where the optimand is social welfare (recognizing full-well that we are in the infancy of being able to do this intelligently. We have chosen a very narrow preference-based utilitarian framework. If we persist in being utilitarian, we need to revisit Mill and pay attention to Sen(at the least)).

Thanks, Ellen. I appreciate the kind words. I hope you'll continue to follow and comment.