Wednesday, September 24, 2008


Perhaps you know the Roman legend of Cincinnatus, the farmer-cum-dictator, who led his country in war and then returned, peaceably to the plow afterwards.

Our modern day Cincinnates (if you will) are Bernanke and Paulson who, though not dictators, are to be expected to control large amounts of capital with great financial consequence. The stark image of these two men crafting policy of great import, with limited outside involvement, reminds me of a section of Friedman's book: "China for a Day." In that section, Friedman daydreams about the potentialities of American creativity that would be unleashed if our government, fractured and unfocused as it is, could call for the bold changes in energy policy that China regularly has, at least, begun to do.

The scenario laid out by David Brooks (see below) could have been predicted by Aristotle, who diagnosed the weaknesses of democracy. Will our Cincinnatus, and their associated class of financial mandarins, go their way quietly when their work is done?

Two predictions:

1) Strong financial authority, provided to elites of that system, will supersede some of the authority of our populist leaders, caught up in the politics of fundraising and reelection. It will also lead to the responsible investing in America's energy, infrastructure, and human capital that is so vital right now.

2) Centralization inevitably leads to abuses of power. Expect, in say, ten years' time, a movement to arise to confront the smugness of a self-satisfied financial elite that, if all goes well, will have saved the country from a host of economic pitfalls.

Finally, the Brooks quote:

And lo and behold, a new center and a new establishment is emerging.

The Paulson rescue plan is one chapter. But there will be others. Over the next few years, the U.S. will have to climb out from under mountainous piles of debt. Many predict a long, gray recession. The country will not turn to free-market supply-siders. Nor will it turn to left-wing populists. It will turn to the safe heads from the investment banks. . . .

The government will be much more active in economic management (pleasing a certain sort of establishment Democrat). Government activism will provide support to corporations, banks and business and will be used to shore up the stable conditions they need to thrive (pleasing a certain sort of establishment Republican). Tax revenues from business activities will pay for progressive but business-friendly causes — investments in green technology, health care reform, infrastructure spending, education reform and scientific research.