The Crisis of the “Gentry Presidency”
The Obama administration’s belated attempt to address the looming employment crisis — after three years focused largely on reviving Wall Street, redoing health care and creating a “green” economy — reflects not only ineptitude but a deeper crisis of what is best understood as the “gentry presidency.”
Unlike previous Democratic presidents, including John F. Kennedy and Bill Clinton, President Barack Obama’s base primarily lies not with the working and middle classes, who would have demanded effective job action, but with the rising power of the post-industrial castes, who have largely continued to flourish even through the current economic maelstrom.
From the beginning, Obama has been nurtured and supported by an array of influential leaders in finance, technology and real estate who supported his rise. In the run-up to his nomination, he attracted more money from Wall Street than Hillary Clinton, New York’s senator. Later, he pummeled the Republican nominee, Sen. John McCain (R-Ariz.), by a wide margin among financiers.
To be sure, Obama’s ground game relied on organized labor, particularly public-sector unions, African-Americans, Latinos and progressive activists. But these groups have not emerged stronger from his three years in office.
Instead, the major winners of the Obama years have been the big nonprofits, venture capitalists and, most obviously, the financial aristocracy. These have all benefited from the Ben Bernanke-Timothy Geithner — previously the Bernanke-Henry Paulson — policy of cheap money and near zero-interest rates, which have depressed the savings of the middle classes but served as a major boon to Wall Street. This has benefited mostly the wealthiest 1 percent, which owns some 40 percent of equities and 60 percent of financial securities.
This Wall Street-first approach makes Reaganite “trickle down” look like a populist torrent. Glimmers of reality are beginning to dawn on more perceptive progressive analysts, like Kevin Drum of Mother Jones, who accuses the Democrats under Obama of abandoning “the middle class in favor of the rich.” The Democrats, grouses the reliably partisan but perceptive Harold Meyerson, should be known as “Bankers R Us.”
To be sure, some parts of the old progressive coalition, such as African-Americans, whose prospects have declined markedly under Obama, will most likely remain loyal to the president. Many other working- and middle-class voters, including Latinos and young people, groups particularly hard hit, may not be ready to bolt en masse for the GOP. But their lessened enthusiasm to participate in either the campaign or to vote could threaten the White House next year.
These developments, as Marxists might put it, reflect the fundamental contradictions of gentry liberalism. Essentially, gentry liberalism reflects the coalescing interests among the financial, technological and academic upper strata. For these people, the Great Recession was brief and ended long ago. All depend heavily on high stock prices to maintain their wealth. Their interest in the overall U.S. economy — particularly the Main Street grass roots — has become ever more tenuous with their increasing ability to shift assets to East Asia and other developing country hot spots.
These prerogatives have been neatly protected under Obama. In the past, administrations let corporate scofflaws, like the savings and loan companies, collapse. Some were sent to jail.
But this time, the Wall Street elites have been allowed to skate through their own self-created crisis with astounding agility. Not only have they stayed out of the slammer, but they have been enjoying the best of times.
This may have also been good news for Manhattan and San Francisco real estate and luxury retail — Tiffany profits were up 25 percent in the past quarter. Silicon Valley venture capitalists, in particular, have been lavished with access to cheap government loans and incentives — as demonstrated by the recent revelations about solar manufacturer Solyndra — to promote their attempted expansion into the ballyhooed “green economy.”
The essential problem of gentryism, however, is that it fails to address the fundamental economic needs of the vast majority. It is also tied to policy prescriptions that either fail to spur broad-based growth or, in some cases, hinder it.
For one thing, by concentrating wealth at the top, the gentry approach has depressed entrepreneurialism among the vast middle and working classes. In contrast to past “recoveries,” the rate of new start-ups has slowed considerably. The health of existing small business remains feeble, notes the National Federation of Independent Business.
Other initiatives have slowed potential growth, particularly the threat of new draconian environmental regulations. Fossil-fuel development, for example, represents one of the best opportunities for new, high-wage employment for blue- and white-collar workers. In contrast, the massive expenditures of public money on “green jobs” has turned out to be less than effective in creating blue-collar employment.
Equally revealing has been the pathetic performance of states that most fully embraced gentryism. California, an epicenter of the gentry economy, suffers the second-worst unemployment and lowest new business formation rates among all the states. Illinois lost more jobs in August than any other state. The bluest places — New York City and California — also tend to be the most unequal — and places where the middle class is fleeing.
Whatever the failings of ungentrified Texas — ranging from a too-tattered social safety net and too many low-paying jobs — the rate of employment growth, including the high-tech sector, dwarfs that of key blue states, including California. Denizens of California, New York and other Obama bastions are voting for the Lone Star state with their feet.
You don’t have to be a fan of Gov. Rick Perry to acknowledge Texas’s relative success compared with the gentry bastions.
Overall, gentry rule has fostered a sense throughout the American public of national decline and diminishing personal expectations. Small property ownership, the key to a democratic capitalist society, is fraying. Wall Street’s Morgan Stanley, for example, having helped create the housing crisis, now talks boldly of a “rentership” society.
This would extend the dominion of Wall Street and large landowners, like feudal lords, over the last redoubts of small property owners.
Clearly, as even many on the left now acknowledge, we need a bold and radical break with gentry politics. Bernanke-ism is absurd — given that, under today’s conditions, a federally sponsored Wall Street boom does not assure prosperity for most. Perhaps it is time to focus instead on how to shift capital and incentives to the grass-roots economy.
One possible reform would be a flat, or flatter, income tax that eliminates the patently unjust lower rates for capital gains and eliminates dodges for the ultra-rich, while creating greater incentives to individual grass-roots wealth creation. The Obama payroll tax cut represents a small, grudging step in this direction, but may well be too little, too late.
Such a radical break would most likely cause mass consternation in Washington — as both parties rally to save their friends on Wall Street and a host of special tax breaks that enrich their campaign coffers. Many big money conservatives would shoot back with capitalist indignation while Democrats like Wall Street’s consigliere Sen. Chuck Schumer (D-N.Y.) would come up with more elegant reasons to protect their Wall Street backers.
But such a suggestion from Obama might show his willingness to end a vassalage to the patrician class that is sinking both the economy and his own reelection chances.