One Retread Too Many

The incoming admin- istration had already been putting too many old Clinton tires on the Obama Express - Larry Summers, Tim Geithner, etc. Now Obama has found a pre-Clintonian retread - the 81-year-old former Federal Reserve chairman Paul A. Volcker - who is going to chair a new group called the Economic Recovery Advisory Board.

The board sounds very New Deal, but Volcker is not a New Deal guy. His main accomplishment as Fed chair was shock therapy - the brutal elevation of that took the prime rate - the rate at which banks lend to each other overnight - to 20%. The idea was to "break the back of inflation" by, in reality, breaking the back of the economy. He helped send unemployment to 11%. Crude and destructive. Volcker also helped Nixon unravel the Bretton Woods conventions on currency exchange, which has been a gold mine for speculators and destabilizing for everyone else, particularly developing nations. Volcker has never shown any interest in social development or social reconstruction. He is on the face of things a terrible, misguided choice for a board focused on economic recovery.

It looks like the only Clintonian big wheel not to get a new White House job will be Robert Reich, former labor secretary who was in fact the only committed progressive in Clinton's economic inner circle. He also has a blog, and I read this to mean blogs are very bad for political careers.

Reich's deeper liability is that he has always advocated the development and the protection of new-wave labor, by which he mostly has meant white-collar brainwork, the work of what he called "symbolic analysts" in his classic book "The Work of Nations" (1991). Reich was a Clintonian darwinist about the inevitable decline of manufacturing in the face of allegedly higher value-added activities like architecture and radiology - both of which are being offshored as well. But Reich was honest about the stratification and inequality and evil social fallout of this system - the last long dystopian section of WN makes the book still worth reading.

Reich also thought democratic governments could choose policies that would maintain - or at least valorize - social solidarity. The good thing about solidarity is that it sustains a capacity to renew the workforce rather than simply dumping into low-wage dead-end jobs. If Obama doesn't agree with his we are really screwed.

Obama obviously wants to assemble a team of well-connected insiders so that Washington doesn't freeze up on him when he tries to do something. I see the point here. But there is a wider range of insiders than the ones he is picking from. The Business Roundtable is a little too content.

These appointments are also scary because of the sheer multiplication of economists and economic perspectives. The White House has both a Council of Economic Advisors (to be headed by a UC Berkeley economicst Christina D. Romer), and a National Economic Council (Summers). There is a White House Office of Management and Budget (to be headed by Congressional Budget Office director Peter Orszag). There is a chief economic advisor, who will be U of Chicago professor Austan Goolsbee. There is also a Domestic Policy Council, and multiple other economics jobs.

One problem with this redundancy is that economics has a profound bias in favor of market-like mechanisms and against political institutions. The profession has been instrumental in creating the mess we're in. It's hard to see that any of these people have the ability to put society back in the mix.

Pressure for any kind of New Deal is clearly going to have to come from outside. But be ready to dodge shredded retreads.