By James Kwak
Arnold Kling wins the prize for the most erudite post of the past week, a review of The Symbolic Uses of Politics, by Murray Edelman. Kling cites not only Sigmund Freud and J.D. Salinger, but Theodor Adorno and Seymour Lipset (with specific books, not just names), among others.
In Kling’s summary, Edelman divided the political sphere into insiders and outsiders (Kling’s terms). Insiders are basically special interests: small in number but well organized and with specific goals. Outsiders, or the “unorganized masses,” are the rest of us: we have some interests, but we are poorly organized to pursue them and therefore are generally unsuccessful. In particular, Outsiders suffer from poor and limited information, and therefore are especially susceptible to political symbols. In Kling’s words:
“Given these differences, the Insiders use overt political dramas as symbols that placate the masses while using covert political activity to plunder them. What we would now call rent-seeking succeeds because Outsiders are dazzled by the symbols while Insiders grab the substance.”
This seems like a pretty straightforward description of why interest groups are politically powerful. I think Edelman’s additional contribution is the emphasis on the use of symbols by the Insiders to distract the Outsiders: “For Edelman, symbolic reassurance and political quiescence were somewhat troubling phenomena. The masses were being lulled by symbolic gestures into accepting adverse political outcomes.”
In any case, Kling thinks that Simon and I are too positive about Elizabeth Warren — not because Warren is a bad person, but because, in his words, “expect the banks to be able to do a more efficient job of rent extraction with Elizabeth Warren in place than before.”
One the one hand, this is a valid point. I’m pretty sure that Kling and I agree that a major problem with our financial system has been the ability of entrenched incumbents to use government policy as a rent-extraction device; think, for example, of the banks lobbying the OCC and the OTS to preempt anti-predatory lending laws in the early 2000s. Since we live in a democracy, the ability of elites to use the government to their advantage requires our political institutions to have some minimum level of credibility. If everyone believed that government was simply a tool for the rich and powerful, the entire system would break down and would have to be maintained by force, if at all. (This is like my argument that a facially progressive yet riddled-with-regressive-exceptions tax code is just what rich people want — were it not facially progressive, it would have legitimacy problems.)
Seen from this angle, then, the Insiders want to lose some battles. If they were to win all of them, the Outsiders would get suspicious. So what the Insiders really want is to lose the symbolic battles and to win the substantive battles. And I guess Kling is arguing that the appointment of Elizabeth Warren is a symbolic battle, not a substantive one.
On the other hand, though, does that mean that I should be opposing the appointment of Elizabeth Warren? I don’t think Kling would go that far. Probably he would simply say that I am overestimating her potential impact in the grand battle with the Insiders of the financial sector. I agree that one should not overestimate the impact of one person or one agency, and I also suspect that some people in the administration were happy to go along with the Consumer Financial Protection Bureau because it gave them disproportionate political cover for a bill that, in many ways, and perhaps more important ways, is too soft on Wall Street.
But I don’t think I’m naive on this point. My big worry is what will happen to the CFPB when the next Republican president comes into office, and I don’t have a good answer for that — because I don’t think we’ve yet come up with a great answer to the problem of regulatory incentives. And in any case, Warren does have some power, and she will use it, and that will make some difference. An agency with the words “consumer protection” in its name will have a harder time screwing ordinary people than an agency with the words “comptroller of the currency” or “federal reserve” in it, although future directors will no doubt try. And an agency is a big, complicated organization, which means it will have a culture, and it will have inertia. So who starts up an agency can matter.
On balance, I still think the CFPB and Elizabeth Warren are good for the middle class, for poor people, and for America. I don’t think we can just call it a clever chess move by our Insider overlords. That leads to a view of the world that can too easily always explain everything.
And besides, isn’t all this “symbolic reassurance and political quiescence” stuff more applicable to the Tea Party, which is itself a big-budget re-run of What’s the Matter with Kansas? Or “is this time different”?