Week In Politics: Capitalism Versus Democracy
ROBERT SIEGEL, HOST:
Well, now, politics with our regular Friday crew, columnists E.J. Dionne of The Washington Post and the Brookings Institution and David Brooks of the New York Times. Good to see you both.
E.J. DIONNE: Good to see you.
DAVID BROOKS: Good to see you.
SIEGEL: Everywhere you turn this week there seems to be some point of tension between capitalism and democracy. There are questions about the balance between bankers on Wall Street and regulators in Washington and the balance between rich and poor countries in Europe. Or as we'll hear in this clip from Vice President Biden this week, the balance between manufacturing jobs, which he says the president wants to create, and more growth in the financial sector, where Mitt Romney made his millions.
VICE PRESIDENT JOE BIDEN: You know - you know the difference between an economy, as I said, that's built, built on making things, rather than on collateralized debt, creative credit default swaps, financial instruments like subprime mortgages. That's not how you build an economy. You build an economy by building things, ladies and gentlemen.
(SOUNDBITE OF APPLAUSE)
SIEGEL: E.J. Dionne, in that speech in Youngstown, Ohio, Vice President Biden went after Mitt Romney as someone who's not on your side. What's noteworthy about this speech?
DIONNE: Well, I think the debate on Mitt Romney and Bain Capital will give us the debate we might have had after the crash in 2008 and 2009. And that is, have we radically shifted the rewards in our economy toward the masters of the financial world and away from all other parts of the economy, including manufacturing? How much, for example, did all of this financial innovation help the broader economy and how much did it just help a very, very narrow group of people?
And we're also looking at what these takeovers mean when companies get sort of saddled with lots of debt. And so I think this is a very fundamental argument about what kind of capitalism do we want in the United States and I think that's a good argument to have and it's one we have often had through our history.
SIEGEL: David Brooks, a good argument or just an attempt to vilify Mitt Romney?
BROOKS: Well, it's a good argument, but I think Obama and Biden, I think, are going to have to do a little better. The Biden comment was illiterate, economically illiterate on multiple levels. If he thinks American manufacturing is divorced from American capital markets, he's got another think coming. It's not just a blacksmith in a garage. It's companies using capital markets in very sophisticated ways.
The second thing is manufacturing output is high. Our manufacturing output is actually doing extremely well, including exports. The problem is employment is low because they've become so productive. And I think Romney should be happy to have a debate about Bain because the Obama campaign ran an ad which also, I thought, was a bit illiterate about a company called GST Steel that closed.
And this was a company that was in dire straits, had lost most of its workforce. Bain put in some money. They invested $100 million. They hung onto it for eight years. It ended up failing anyway. But that's part of the creative-destructive process of capitalism. And I suspect, like E.J., we're going to have a big debate about creative destruction and how it's done.
DIONNE: Could I just quickly say on the matter of literacy, the issue here is not do companies need capital markets. Of course they need capital markets. The issue here is whether all of these new financial inventions have actually benefited the real economy or have they benefited a very small number of people. And on manufacturing, yes, we have finally turned again toward rebuilding American manufacturing. I think that's a good thing and I think, I hope that's something that is also talked about a lot in the campaign.
SIEGEL: Speaking of the financial sector, David, do you think that the problems at JPMorgan Chase, where The Wall Street Journal now estimates the bank's losses could rise to $5 billion, does it change the debate about financial regulation and the banks?
BROOKS: I think only maybe a fifth of the way. First of all, being stupid is not illegal. Failing and losing money is part of capitalism. And what happened is Morgan has taken this huge hit. A lot of people or some people have lost their jobs, the people who supervised that operation. And so they've taken a hit. And we should not care about that. We should not try to regulate failure out of existence. That's part of the capitalist process.
The thing we have to do is make sure banks of that size do not spread. And so to this degree, I do agree with the Obama administration and with most Republicans.
SIEGEL: You mean do not spread, do not get any bigger or...
BROOKS: Do not become contagious toward other firms. And therefore, asking them to raise capital requirements so that they can survive hits like this, that seems to me a legitimate job, especially when you have firms that are too big to fail.
DIONNE: There are different kinds of being stupid. If David and I are stupid, our listeners or readers can yell back at us. If a bank is stupid with large sums of money, they can destroy or bring down the American economy. And it was stupid bets and stupid things that happened before the crash that had something to do with the economic mess we're in, which is why we - I prefer boring banks to interesting banks. And that's what economic regulation is for.
So I do think that this event will help the argument for stronger regulation.
SIEGEL: We don't want you guys to be boring. That's not...
DIONNE: Or stupid.
SIEGEL: Speaking of a lot of money, by the way, $100 billion has been spent on buying stock in Facebook, although that defies any ratio of value to earnings. David...
BROOKS: Mark Zuckerberg is now worth almost as much as Harvard's endowment. So that's not so bad.
DIONNE: He got a lot out of that education up there.
BROOKS: Yes, dropping out. You know, to me, the big question - is Facebook good or bad for America, good or bad for the world? People logging on and having half their social life. And my quick rule is it's not Facebook, it's what you bring to Facebook. Most young people use Facebook as a way to augment pretty healthy friendships. About 10 or 20 percent use Facebook - they're lonely and they use Facebook to mask that loneliness.
So to me, one of the interesting questions, are we being ruined by Facebook? And I'm sort of an optimist. I think, in general, Facebook is making our friendships better and if Mark Zuckerberg wants all that money, fine.
SIEGEL: I want to hear from both of you on some of what Scott Horsley was talking about, the European crisis. Right now, Greece is - has both a debt crisis and a political crisis. And it raises a question that, David, you addressed in a column today, which is can any government that's subject to election and that reads the polls every day tell its people here's the plan, guys, we've got to get poorer for the next 10 years?
BROOKS: Yeah, both the U.S. and Europe have been living beyond our means. So how do you rebalance? The Europeans have a very concentrated technocratic system. The problem is it's entirely cut off from the people. We have a very fragmented system where a lot of people have veto. And so right now, to me the answer is neither government system looks particularly promising for getting us out of this long mess. It's going to be a bad decade on both sides of the Atlantic.
DIONNE: I had - I never disagreed with David more fundamentally than I did today, but I can't go into all of that. I think no kind of government, democratic or not, is good at allocating scarcity, which is why it is so urgent to create growth again in Europe. And I don't think this is a crisis of the welfare state. It's a crisis of the - a failure of capitalism, which has created the problem these European governments face.
SIEGEL: E.J. Dionne, David Brooks, good to see you once again. Take care.
DIONNE: Good to see you.