By Judd Gregg - 05/13/13 09:00 AM EDT
One of the most defining aspects of populism is that it promotes ideas that in the end involve cutting off your nose to spite your face.
With the financial meltdown of 2008 and the recession that hit as a result of it, populism as a political tool has gotten a great deal of momentum.
It delivered us Dodd-Frank, tax increases of historic levels on the wealthy (and small business, which got swept up as a side event) and an activist government that in the name of fixing the ills of society instituted a massive push in the arena to dispense what its adherents call social justice.
The energy for this populism comes not only from the hard left but also the hard right. It is ironic that one of the places where the ideologist who subscribes to a collectivist view of the world and an ideologist who subscribes to essentially anti-anything-big, such as business and government agencies, meet, is on the field of populism.
It is a hardened belief on the extremities of both the left and right that the Federal Reserve is at the center of many of our economic ills. In their view, the Fed is part of a grand conspiracy; an alien force. If Congress would just “end the Fed” both libertarian former Rep. Ron Paul (R-Texas) and socialist Sen. Bernie Sanders (I-Vt.) would be happy.
This philosophy is easy to hyperbolize into a series of one-liners that resonate well at political rallies. But the problem is that actually executing it — actually turning the responsibility of printing money over to either the elected politicians of the left or the right — would have a massively negative impact on all the folks who go to those rallies and cheer the one-liners.
Except for the fact that everyone would suffer, it might be entertaining to watch those who march in these cadres of populism live with an economy where either the politicians of the left controlled the money printing presses, or the politicians of the right turned off the ability to print money. Either way you would be assured of economic chaos and tremendous hardship for people just trying to get by on Main Street.
The concept that big business, especially big financial houses and insurance companies, is bad has become another tenet where the populist left and right meet. The thought process is that there should not be any banks or insurance companies that are so big that they may be a threat to the economic well-being of the people if they fail.
This seems to make sense. It is why excellent populist rhetoric develops around the idea. It leads quickly into the language that calls on voters to “vote for me, as I will stand up to the big banks, to big business and to big everything, even Wal-Mart.”
How could anyone oppose such attractive rhetoric?
Substantively, though, the position is a hard sell. With what are these populist reformers going to replace these market-generating entities?
In the case of financial houses, they are the source of the capital and loans that create the liquidity in a market economy. They are an integral part of what makes up the American advantage, which is that a person on Main Street who has a good idea and invests sweat equity in it can get reasonably priced capital and credit that will allow him or her to pursue his or her dream, in the process creating jobs and prosperity for others. And, all these big financial entities are owned by whom? In large part, they are owned by the folks on Main Street through their pension funds and stock holdings. This is, after all, a capitalist society, built on markets and profits. This is an economy that requires all sorts of different institutions to make it work. None of them should be protected from failure nor should they be arbitrarily limited in a way that will impede our nation’s growth. We do not need to cut our nose here to make a populist point.
It is interesting that one thing the populist left and right are willing to engage in and use is government. Populists on the left constantly return to the refrain that a large government is needed to dispense social justice, as the governing class defines it. On the right, the populist movement turns to government as force to be used to vanquish private entities that they deem cannot be trusted as they are part of the conspiracy of the “big.”
For the most part conservative populism is a commitment to the “small” — except when it comes to using big government.
Populist ideas have a nice ring to them but they do not work in a nation that has the largest, most affluent and most complex economic structure in the history of the world.
They are in the end “small” ideas driven by unworkable ideologies. They do not suit a country that thrives on large thoughts and needs large growth to keep it prosperous.
Judd Gregg is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee and as ranking member of the Senate Appropriations subcommittee on Foreign Operations. He also is an international adviser to Goldman Sachs.