Late Saturday (10/18,) in a blog post entitled “Danish Doldrums,” Paul Krugman wrote this:
“Bernie Sanders said he wants America to become like Denmark; Hillary Clinton was a bit skeptical, but agreed that Denmark is a good role model.”
Hillary Clinton actually said:
“I think what Senator Sanders is saying certainly makes sense in the terms of the inequality that we have. But we are not Denmark. I love Denmark. We are the United States of America and it’s our job to rein in the excess of the capitalism so that it doesn’t run amok and doesn’t cause the kinds of inequities we are seeing in our economic system but we would be making a grave mistake to turn our backs on what built the greatest middle class in the history of the world.”
Hillary wasn’t skeptical at all. She was downright negative on changing anything. In fact, she told us, right before Sanders was asked his question, that capitalism only needs a reset every so often. That doesn’t square with adopting a different model:
“We are the United States of America and it’s our job to rein in the excess of the capitalism so that it doesn’t run amok and doesn’t cause the kinds of inequities we are seeing in our economic system but we would be making a grave mistake to turn our backs on what built the greatest middle class in the history of the world.” Hillary Clinton
The translation from Clintonese is not a political revolution. It is not the capitalism reset called for by Joseph Stiglitz in his economic plan. It is not a reform of Wall Street that bears any resemblance to what either Bernie Sanders or Martin O’Malley propose. Whatever it is, however, bears very close resemblance to what Ben Bernanke has been saying and wrote in his book about the Fed having enough in place to step in and break up the banks if there is a need. But as Martin O’Malley pointed out during the debate:
The big banks, once we repealed Glass-Steagall back in the late 1999’s [sic], the big banks went from control of, what, 15% of our GDP to now 65% of our GDP
Mrs. Clinton’s position on regulating the banks is basically to, again, trust the instincts of those watching to seize the banks before another disaster and, in the meantime, not focus on the banks themselves, but the other financial institutions as, in her view, they’re the ones most likely to be the cause of a future failure:
“But we have to worry about some of the other players. AIG, a big insurance company. Lehman Brothers, an investment bank – there’s this whole area called shadow banking. That’s where the experts tell me the next potential problem could come from. So, I’m with both Senator Sanders and Governor O’Malley in putting a lot of attention onto the banks and the plan that I have put forward would actually empower regulators to break up big banks if we thought they posed a risk, but I want to make sure we’re gonna cover everybody – not what caused a problem last time, but what could cause it next time.”
“…But I’m telling you, I will say it tonight, if only you look at the big banks, you may be missing the forest for the trees. We want to look at all the other financial institutions.”
I will remind everyone reading this that Lehman Brothers has been dead, kilt dead, deader than a door nail since 2008. AIG, of course, is still around.
Clinton’s answers on banking sounded an awful lot like Ben Bernanke testifying to Senator Elizabeth Warren in 2013. That goes to show how far apart from a newly former Republican the presumptive (self-styled progressive) nominee is on economic doctrine. The distance between his moderate conservatism and her neoliberalism can be measured in inches.
In an earlier piece, I wrote about the basis for Hillary Clinton’s economic policy. It was supposed to be based on the work of Joseph Stiglitz and his “Rewriting the Rules” at the Roosevelt Institute. “Based on” is the operative term here. Clinton is advised by Lawrence Summers. In an interview of Joseph Stiglitz in the UK’s conservative paper the Spectator, ‘The problem isn’t that we’ve been slaves to free markets,’ Liam Halligan writes:
“Unlike Thomas Piketty, whose recent bestseller Capital in the 21st Century argues that capitalism makes rising inequality inevitable, Stiglitz insists the system can be fixed. ‘Widening and deepening inequality isn’t driven by immutable economic laws,’ he says. ‘A well-functioning market economy doesn’t only create jobs, but should also generate increases in income that are shared.’
So Stiglitz is no anti-capitalist. He stresses that ‘getting markets to work like markets’ is the core message of his book. The problem ‘isn’t that we’ve been slaves to free markets, but that we’ve usurped them… Too-big-to-fail banks that extort government bailouts and big monopoly corporations that use their power to restrict competition are anathema to the free-market model — and are a lot of the reason inequality has risen so fast.’”
“Accepting that some inequality is ‘necessary to maintain economic incentives’, Stiglitz argues that wide income disparities eventually lead to a slowdown. ‘The US economy is in bad shape, with negative growth in the first quarter of this year and possibly the second quarter — so we may be in technical recession,’ he says.
‘One reason,’ he argues, ‘is that there’s so much inequality and people at the top spend a much lower share of their income than those at the bottom — so that kills aggregate demand.’ It’s a new twist on the traditional Keynesian case for government spending. ‘Inequality is both a symptom and a cause of a slowing economy.’”
Making mention of banksters who went unpunished makes for a great soundbite. What Stiglitz envisions is a reinvention of capitalism of FDR proportions to right the terrible wrongs that have accumulated since his tenure. At the basis of this reinvention is getting the proportion of GDP generated by Wall Street back down, closer to where it used to be. Clinton threw some red meat when she criticized the lack of prosecutions of Wall Street bankers. Why red meat? Making mention of banksters who went unpunished makes for a great soundbite. The boat for prosecuting individuals passed with the administration’s decision to fine firms rather than prosecute individuals. Secretary Clinton’s statement about reining in excess, breaking up banks only as deemed necessary by regulators and not reinstating Glass-Steagall, should signal a reluctance to diverge any further than she must from her husband’s economic philosophy.
Senator Sanders refuted that Clinton’s plan is tougher, and the back and forth related to that line of questioning ended up with Sanders’ best line of the night in response to Clinton’s recounting of a visit to Wall Street in which she admonished bankers to stop their behaviors:
Secretary Clinton, you do not – Congress does not regulate Wall Street. Wall Street regulates Congress, and we’ve got to break up these banks. Going to them and saying please do the right thing is kind of naive.” Bernie Sanders
Clinton, tries to build a progressive image by repeating a mantra filled with progressive buzzwords and crowd-pleasing expressions of regret that an administration she was a part of did not prosecute Wall Street robber barons, all the while making proposals that she characterizes as tougher than Bernie Sanders. But, upon examination, her platform really amounts to nothing more than the measures that are already in place and were deemed inadequate or just plain wrong by Sanders.
It is very disappointing to see a serious economics writer mis-characterize clearly divergent views on a topic that is easily fact-checked. Hillary Clinton did not in any way, shape, or form come even close to criticizing the current US economic model, much less concede that anyone else’s – Denmark, Sweden, or Iceland’s for that matter – would be a good model. Clinton will only go as far as reining in excesses while leaving current structures as they are, with little more, if any, additional regulations. That is a far cry from what a group of liberal economists have been calling for over the last seven years, including Paul Krugman, at times.
My advice to all is not only to re-watch the relevant portions of the debate, but read the transcript. Often times, the eye catches what the ear misses. Surely, that’s what happened to Paul Krugman today.
Sources and additional materials:
My essay on Ben Bernanke‘s interview on ABC
Click here for videos and a transcript of select portions of the Democratic debate
Robert Reich Explains Why Bernie Sanders’ Policies Would Cost America Nothing (VIDEO) http://fb.me/21x5KOyy2
Bernie Sanders Tells the Truth: Former Clinton Labor Secretary Robert Reich on His Surging Campaign
Matthew Yglesias | Vox | 9 questions about Denmark, Bernie Sanders’s favorite socialist utopia