Check out Will Wilkinson’s post on Peter Orszag’s disappointing decision to cash in at Citigroup.
First Wilkinson suggests that this sort of co-optation of government officials by market forces is a fatal flaw in progressivism. “[M]arket institutions find ways to use the government’s regulatory and insurer-of-last-resort functions as countervailing forces against their competitors and, in the end, against the very public these functions were meant to protect.”
I think this is empirically wrong, which must be why Wilkinson doesn’t talk about empirics. For the 50 years after the New Deal, we didn’t really have major financial crises, and we had broad-based, stable income growth. I don’t doubt there was some co-optation, but it seems like the basic regulatory system worked. You just didn’t get that rich by working on Wall Street, and Wall Street didn’t do anything too risky. Then the system was dismantled, and now you can get mega-rich by working on Wall Street and Wall Street nearly brought down the global economy. That’s just to say: there’s nothing inherent in “progressivism” about what just happened with Peter Orszag.
But, Wilkinson says, people like Orszag have all this power (thanks to progressivism) and “wonks can get rich on Wall Street only because Washington power is now so unconstrained.” Really? Only because Washington power is now so unconstrained? Or rather perhaps because Washington power has been too constrained—too constrained in its regulation of, say, Wall Street? Look, I realize this is just to say: I’m a progressive and Wilkinson is a libertarian. But really, he thinks you get rich on Wall Street only because Washington is powerful?
I think what Wilkinson may be missing is the possibility that some people prefer to work for government and will resist being co-opted. Apparently plenty of people did so for the half-century during which New Deal regulations put a cap on Wall Street’s excesses.
Wilkinson starts to change tune towards the end of his post, admitting that if unfettered markets would be really bad, maybe we need to accept co-optation and hope for the best. Maybe we just need to “muddle through” and rely on “complementary cultural currents” to strike a balance between state and market. Which I guess is to say, we need people who believe in public service and won’t sell out.
In terms of structural things we could do to improve matters, I might suggest more serious civics education in public schools—this curriculum and its prominence in public education have notably declined over the last half-century. I might suggest mandatory community service and expanded national service programs. And I might suggest paying public employees more, not less, as seems to be our common inclination.
And finally, let’s get some journalists who don’t say things like, “Who can blame a fella for throwing open the door when extravagent opportunity knocks?!” Maybe Wilkinson was being facetious, but let’s blame the fella! If we believe unfettered markets are unrealistic or undesirable, and that co-optation can be fought through “cultural currents,” we better get comfortable speaking in moral terms about prominent public decision-makers who decide to sell their expertise and, more importantly, their insider knowledge.
Update (12/16)
Now James Fallows has followed up, pointing out that Peter Orszag’s decision has been a total non-story in the mainstream media. To elite editors and writers, it’s just unremarkable. Of course he did that. Wouldn’t you?
That seems to be the gist of an indignant retort Fallows has also posted. “If someone can make five times more money, especially in our uncertain economic climate, how can you fault them?” Well, pretty easily. If Orszag is going to be worth anything close to $2 or $3 million to Citigroup, it’s going to be because he provides them with inside information about how decision-makers in the White House think. I’m not saying he’s going to betray some personal pledge he made to President Obama. I’m just saying, if he’s going to be worth his pay, it’s because he was an insider.
So I agree with another Fallows interlocutor: “[T]his move just reinforces all of the cynicism that many Americans feel.” I’m not sure that’s good enough to make it illegal to do something like this, but we can definitely start by doing some of the things I recommended last night. And maybe the Washington Post can run a story about Orszag? That’d be nice.
Update (12/16 — later that same day)
Now Ezra Klein, picking up the slack for the Post, has written a long post on this subject, making the following points.
1. Orszag probably isn’t doing this just for the money, so I regret saying above that he is cashing in at Citigroup. I think Ezra is right: This probably has more to do with the power and excitement of a new career than with the money per se. Academia, think tank wonkery, and column-writing sound good to me, but I can’t say they’re for everyone.
2. The problem isn’t so much with Orszag’s motives, but Citigroup’s. This is what I was talking about when I said, “if he’s going to be worth his pay, it’s because he was an insider.” As Ezra points out, Citigroup is “much more reliant than other banks are on connections with the American government, and other governments.”
3. On some level, motives aren’t even that important, because perception is what really counts. This revolving door can only weaken Americans’ faith in government. For the individuals involved, I’m sure that seems really unfair. As Ezra puts it, federal employees can ask, why should I have any duty to the “very idea of serving in government”? But then, is it fair to ask the American people to have faith in a government that doesn’t demonstrate fidelity to that idea?