(The views expressed are the author’s own and not those of Reuters.)
As the presidential campaign finally takes off with the party conventions, there seems to be only one point Republicans and Democrats agree on. This election will be about job creation and the role of government. But having defined this battlefield so clearly, neither side seems to have any credible ideas for dealing either of these supposedly decisive issues.
Let’s start with government. The Republicans claim to want smaller and less intrusive government. Yet they vehemently demand tighter government controls over abortion, immigration, marital arrangements and sexual behavior. On other politically less salient issues such as drugs, prison reform, alcohol use by young adults and doctor-patient privacy, Republicans consistently support government intervention, sometimes to a bizarre degree. For example, a law signed in 2011 by Florida’s Republican governor (though struck down promptly by federal courts) made it a crime for pediatricians to tell parents that they could endanger their children by keeping a loaded gun in their home.
The Democrats’ vision of government is equally paradoxical, but in the opposite direction. The Democrats, like left-wing parties in Europe, laud the economic role of government, and especially its importance in supporting public goods and regulating business abuses. But they deny the right of government to regulate, or even try to influence, private behavior, even when it impinges on community life in such areas, for example, as marriage, child-rearing or trade union activity, especially in the public sector.
In short, the left’s faith in government suddenly evaporates when it comes to social and lifestyle issues, while the conservative passion for smaller and less intrusive government only applies when money and economics are at stake.
Which raises the second, even more important, electoral issue — jobs. Mitt Romney has promised “a singular focus on job creation” and has accused Barack Obama of wasting his presidency on healthcare instead of creating jobs. The paradox is that when they are not attacking Obama for failing to create employment, conservative politicians insist that government has no positive role whatsoever in creating jobs — whether by hiring public-sector workers, supporting failing banks or auto businesses, or expanding fiscal and monetary policies to stimulate demand. Such is the conservative aversion to any government involvement in job creation that Senator Bob Corker, a leading Republican economic thinker, has even proposed legislation to remove employment from the legal objectives of the Federal Reserve.
The only job-creating role that conservatives now regard as legitimate for government is reducing business regulations and taxes. But given that the deepest and longest recession in postwar history followed decades of radical deregulation, it is hard to see the logic whereby further deregulation would, on its own, restore the jobs that were lost in 2008-09.
But if conservative political positions on employment are riddled with contradictions, the same is true on the other side. If anything, the Democrats have been even less successful in arguing their economic case for active government or pinning the blame for the recession on the laissez-faire economic policies of the Bush decade. President Obama, for all his eloquence, has never presented a coherent narrative of what went wrong in 2008 or how his policies could put it right. He has never challenged the laissez-faire assumption that a market economy will automatically return itself to full employment without any government macroeconomic intervention. He has not tried to explain the Keynesian argument that depression becomes inevitable if households, businesses and government all try to reduce their debt at the same time. And he has never even mentioned the role of monetary policy in easing the long-term burden of government borrowing.
Because President Obama has failed to justify or even explain his economic policies, while the Republicans have no coherent alternative, it seems unlikely that either side will have anything interesting to say in the U.S. election about the supposedly defining issues of government and jobs. This is a shame, because a genuine debate about the new relationship of governments and markets was desperately needed after the 2008 crisis.
The crisis tested and destroyed the Thatcher-Reagan view that “the market is always right” and that government is not the solution but the problem. Running another experiment with an even purer version of the free-market model, as many conservatives now demand, seems politically implausible, to put it mildly. But returning to the faith in a benign and omniscient government that preceded the Reagan-Thatcher revolution is not an option either, because that New Deal-Keynesian model was comprehensively discredited in the great inflation of the 1970s.
What is needed instead is a reappraisal of politics and economics that recognizes that governments and markets can both make big mistakes, that macroeconomic management is needed but must not impede private enterprise, that complex new systems of checks and balances may be needed to protect and promote both public and private interests. Two years ago, I wrote a book on this subject, suggesting that a new model of capitalism was starting to evolve from the 2008 crisis, in the same way that Thatcherism and Reaganomics emerged from the 1970s crisis and New Deal Keynesianism emerged from the 1930s. I was right that new thinking was needed about the balance between governments and markets, but totally wrong about the timescale on which any new model might evolve. Four years after the trauma of 2008, a serious new consideration of government’s role in the economy has not even started. The U.S. election is making that very clear.
Anatole Kaletsky is a journalist and economist based in the United Kingdom. He has written since 1976 for The Economist, The Financial Times and The Times of London before joining Reuters and The International Herald Tribune in 2012.