Why populist outrage is in the outs
By Daniel M. Ryan
James Grant wrote an op-ed for the July 19th Wall Street Journal, in which he called attention to the lack of outrage about the growing derivative- and mortgage-related scandals in the financial-services industry. His piece openly wondered why that relative lack would exist, and seems to bemoan it.
Mr. Grant does have a populist streak, and a rather healthy one at that. He evidently thinks that a good burst of populist outrage will deter the movers and shakers in the financial-services industry from staying as reckless as they have been. A good smack from the people will bring back the old-style prudence and drain away the new-style bipolarity between enthusiasm and panic.
It's a nice scenario, and one that many here would find hard to be unsympathetic towards. But it does miss something about the darker side of said populist uprisings.
A quick answer can be found to Mr. Grant's puzzlement through a class analysis. One of the near-unique features of American culture, despite the standard complaints about U.S government tax policy, is that riches tend not to be envied by Americans. What does attract that kind of hostility, though, is differences in status. Back in the days when populists raged against "Wall Street" and its ways, Wall Streeters made for an easy target because they had formed the nucleus of a new upper class. It wasn't just money that made for that distinction, it was a class attitude. The old boys of the old Wall Street tended to carry themselves as if they were better than the rest of their countrymen. Many of them tried to justify said attitude through philanthropy and public service. In normal times, this kind of balancing act does tend to tie such class distinctions in with the merit system…but in tough times, it becomes galling. That's why members of any stable upper class tend to cultivate a Spartanesque attitude towards wealth; in modern times, it was inculcated through the private-school system. (The infamous Swiss boarding school for girls is a metonymy of this inculcation process.)
Nowadays, there's a bare trace of "Old Leadbottom" in the financial-services industry. The movers and shakers of today's Wall Street have roots in the plain old middle class, and it shows. It's hard to raise a sense of public outrage against a collection of regular folks whose grandparents were, say, white-collar workers. In America, unless an outright nest of vipers is uncovered, it's all but impossible. In addition, the last burst of outrage (at the close of the ‘80s) was directed against up-and-comers, such as Michael Milken, and was stage-managed by the old-money circuit. Why would any honest populist want to work as a mere hit-man for old money against new money?
There's another factor, too: the income-tax system. Back in the olden days, when there was little or no income tax, an economic argument had to be put forth to show why riches were not a threat. (In the much older days, quoting Tom Paine would have sufficed.) Making this argument is a bit of a chore, and assimilating it requires an unemotional audience. Once again, it suffices in normal times but loses its persuasive power when tempers get heated.
On the other hand, brandishing a large receipt for taxes paid gets a similar point across much more blatantly. A serious populist campaign against the "greedy rich who make X million a year" all-but-invites retorts about greedy governments who take Y million a year from those same rich. It may be too cynical to describe high tax payments as a kind of protection payoff, but they do serve that purpose. I suspect that any would-be populist with a well-working political radar senses it, and confines any anti-rich populist campaigns to keeping-the-base-motivated rhetoric. It's relatively easy to be let off the hook once the base is engaged; the lack of follow-through can be credibly blamed on "lobbyists," "Washington insiders" and the same "greedy (enviable) rich." Consequently, a new economic populist campaign contains embedded failure analyses of the last ones. This second reason, combined with the first, makes for a real glass ceiling that acts as an effective deterrent to any would-be stone throwers.
In addition, there's a third reason why economic populism, particularly against Wall Street, has waned. To put it simply, the dark side of this kind of populism has often encouraged anti-Semitism.
I'm aware that this linkage is typically unintentional, but consider how economic populism works. The usual targets of American economic populists are not the rich per se, because Americans tend not to harbor grudges against economic success. That's a consequence of the above-noted dearth of economic envy. Instead, American economic populists attack a certain kind of rich: the ones who are callous, uncaring, haven't set down roots in the community, too analytical for their own good. Rootless un-patriots who detach their humanity from their acquisitiveness.
Anyone who's thumbed through anti-Semitic propaganda can see the connection between populist portrayal of that kind of rich person and the anti-Semitic stereotype of the ‘bloodsucking Jew'. Despite the unintentionality, there is enough of an overlap to make any such populist seem to be an unconscious/unwitting encourager of real anti-Semitism.
This third reason adds a moral factor that's very difficult to overcome. All three reasons suggest, quite strongly, that any present populist movement in the United States will end with some kind of tax increase and little else. Unless future populists pick their spots a lot more carefully, the same can be said about the foreseeable future.
Get weekly updates about new issues of ESR!