Did Obama Save Capitalism?

One of the most outlandish defenses of Obama's first two years has become one of the most emailed articles on the New York Times.

President Barack Obama
President Barack Obama

In the Opinionater section on the website of the New York Times, Timothy Egan tells big corporate donors to be worried "about what you just bought."

He's talking, of course, about the Republican victory in the midterms, which has delivered the GOP control of the House of Representatives. But it's far from clear that big corporate donors "bought" anything in this election. Certainly, it's a canard to say they bought the Republican victory.

As Tim Carney explains, the top 12 corporate political action committees gave far more to Democrats than Republicans. More campaign cash from HMOs went to Democrats. Wall Street donated more to Democrats than Republicans. Lobbyists sent more money into Democratic campaigns than Republican campaigns. Politico showed that even when you include independent political expenditures, the Democratic-aligned political machinery had far more cash to spend than the Republicans.

In short, if corporate donors were trying to buy anything, it would be accurate to say they were trying to buy a Democratic victory. As it turns out, money is nowhere near as effective in politics as Egan thinks.

But if Egan starts with a canard, he goes on to an absurdity: "For no matter your view of President Obama, he effectively saved capitalism."

What is the evidence that Obama "saved capitalism?" It's that Obama continued the Bush policy of bailing out banks. No, really. That's Egan's main argument.

The banking system was resuscitated by $700 billion in bailouts started by Bush (a fact unknown by a majority of Americans), and finished by Obama, with help from the Federal Reserve. It worked. The government is expected to break even on a risky bet to stabilize the global free market system. Had Obama followed the populist instincts of many in his party, the underpinnings of big capitalism could have collapsed. He did this without nationalizing banks, as other Democrats had urged.

Saving the American auto industry, which has been a huge drag on Obama’s political capital, is a monumental achievement that few appreciate, unless you live in Michigan. After getting their taxpayer lifeline from Obama, both General Motors and Chrysler are now making money by making cars. New plants are even scheduled to open. More than 1 million jobs would have disappeared had the domestic auto sector been liquidated....

Interest rates are at record lows. Corporate profits are lighting up boardrooms; it is one of the best years for earnings in a decade.

All of the above is good for capitalism, and should end any serious-minded discussion about Obama the socialist.

While I'm not especially interested in the question of whether Obama is a socialist (my instinct is to reply that Obama is not a socialist, he's a golfer), I think it's important to clear up this question of whether saving failed banks and failed automakers while holding interest rates artificially low is good for capitalism. Of course it isn't.

The word capitalism is usually used to refer to a system of free enterprise in which market processes are permitted to operate with relatively little intervention by the government. All of the things Egan describes as "good for capitalism" are, of course, the opposite of capitalism. They undermine market processes.

Low interest rates are not necessarily the sign of something being good for capitalism. Indeed, when those interests rates are engineered by central bankers, they have nothing at all to do with capitalism. They are the product of central planning of the economy and manipulation of the money supply. They certainly aren't the sign of the healthy economy: the Fed is explicitly lowering interest rates because the economy is so unhealthy.

Corporate profits are not a proxy of something being good for capitalism, especially in the short term. Government subsidies and easy money can easily make for a great earnings year.

Egan is looking at the world through a very strange lens. Everything is the opposite of reality. Far from the "manipulators of great wealth" being ungrateful to Obama, they were very grateful. But this time around, they lost the election.


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