WASHINGTON — Conservatives have argued for decades that the sins most dangerous to our society were rooted in lust, when in fact the most damaging transgressions involved greed.
We are at the beginning of a great popular rebellion against those who showed no self-restraint when it came to lining their own pockets. Their entitlement mentality arose from an inflated sense of their own value, of how much smarter they were than everyone else.
The sound you are hearing in response to the AIG payoffs — excuse me, bonuses — is the rancorous noise of their arrogance crashing to earth.
Yet there is much hand-wringing that this populist fury is perilous, that the high flyers who could not control their avaricious urges have skills essential to repairing the very damage they caused in the first place.
Beware populism, we are told. Honor those AIG contracts. Forget about any moral reckoning and just fix the economy.
This view is wrong on almost every level, especially about populism. Of course not all forms of populism are attractive. But as the historian Michael Kazin argued in The Populist Persuasion, the "language of populism in the United States expressed a kind of idealistic discontent" and "a profound outrage with elites who ignored, corrupted and/or betrayed the core ideal of American democracy."
Is this not an entirely appropriate reaction to elite decisions going back to the 1980s that ultimately ran our economy into the ground?
President Obama seems thoroughly ambivalent about this strain of American politics. Yes, the president tried to jump out in front of the populist parade on Monday by denouncing the $165 million in AIG bonuses. But his administration seems to see the public's outrage primarily as a distraction.
In fact, the reaction to AIG reflects a morally justified public intuition that the rewards in our society to the very wealthy are totally out of line with their contributions to the common good.
A study of compensation levels in 2007 found that average CEO pay at S&P 500 companies was 344 times higher than the average worker's wage, and that the top 50 investment fund managers took home 19,000 times — yes, that's with three zeroes — as much as typical workers earned.
Now I am not against people getting rich or entrepreneurs reaping profit from their investments of time and energy. But there is no moral or practical justification for such levels of inequality. Capitalism worked extremely well in the three decades after World War II without such radical inequities. It's when inequalities soar that the system runs into trouble — precisely what happened at the end of the 1920s, when inequality reached levels similar to today's.
With the populist furies unleashed, the Obama administration has two choices. It can try to fight the public. Or it can use the public's legitimate outrage to move the country in a better direction.
Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, points to the irony that populism threatens to work against Obama even though the president has proposed "a populist budget" that asks the wealthy to commit more money to the common good.
Frank also ridicules the idea that AIG can't find smart people to replace those who might walk away if they are denied their extravagant bonuses. With unemployment among investment bankers at a rather high level, "it's not like you're going to have trouble hiring good people," he said dryly.
Obama needs to do two things at the same time. The administration will have to spend piles of money to unwind the financial mess. A share of the largesse, as Frank acknowledges, may indirectly benefit some of the malefactors in this saga. Yet if the public sees this spending primarily as a reward to those who got us into this fix, and not as necessary to solving a problem that affects us all, it will revolt.
So the administration also needs to argue that the new economy it will create on the ashes of the old will be more equitable, based on fair reward for capital and labor alike, not on an ethic of greed and excess.
Obama can work with the populist wave or he can be overwhelmed by it. As Kazin notes, American progressives have succeeded in improving the "common welfare" only when they "talked in populist ways — hopeful, expansive, even romantic."
Kazin cites the line popularized by Ralph Waldo Emerson, "March without the people, and you march into the night," and then adds: "Cursing the darkness only delays the dawn."
E.J. Dionne's e-mail address is email@example.com.
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