"The dictionary defines 'populism' as a political philosophy that supports the rights and power of the people, usually in opposition to a privileged elite. I see economic populism as a response by an impoverished populace to a failing society, one characterized by an economic elite who are perceived as oppressors. Under economic populism, the government accedes to the demands of the people, with little regard for either individual rights or the economic realities of how the wealth of a nation is increased or even sustained."So in Greenspan's view as a self-described Libertarian Republican, economic populism comes to life in "failing societies" that have significant income inequality and are dominated by an economic elite. And in Greenspan's mind, it is not the government that can make the required changes to address the failures of the society; it is the markets that are the key to reducing failure.
Our own economy is a mixed economy, market-driven, but with government policy and regulation developed to counterbalance the very real excesses of the markets. Though it is mixed, the US economy is not driven by the visible hand of a government acting as an economic populist, but is instead an economy that predominantly looks to the invisible hand of the markets to address and resolve economic failure.
Or at least, so I thought.
The Age of Turbulence was published in 2007, prior to the very turbulent collapse of our own economy. What we saw when our economy catastrophically crashed in 2008, was the US government acting to bail out and prop up the numerous failed businesses within our banking sector.
What we learned in 2008 was that in certain sectors - like our financial sector - the markets are not allowed to work their invisible magic. Banks that failed in 2008 were not allowed to fail. They were instead fed a steady stream of income from the federal government that propped them up, kept them going and allowed astronomical bonuses to be paid to the banking executives involved in their failure.
Under the very conservative, pro-business regime of GW Bush/Cheney/Paulson, the invisible hand was quite visibly shoved aside. We were told this had to be done because the consequences of the failure of these many banks would be too much for our economy to bear. Thus we needed to bail out the banks in order to see unemployment only push above 10%, underemployment that added to the burden of the populace, a housing market crippled by overvaluation and over-saturation of product, employees unable to move to better opportunities because of housing lock, banks showing profits as the debt of the US government reached astronomical levels.
Despite these significant problems our economy faces today, little has been done since the crash to wean the financial sector of their impractical and senseless dependence on the federal government. Dodd Frank is exploring the issue, but we do not have a resolution authority in place as of yet that will allow banks to fail in an orderly way. Our banks are as vulnerable to the domino-theory of collapse (if one goes, they all go) as they were back in 2008.
Today in America, rather than having an economy driven by the market, or economic populism, or the invisible hand, we have an economy reliant on a welfare program for bankers that is without question a failure. It is a failure of our banking sector, a failure of political philosophy, a failure of public policy, and most of all, a catastrophic failure of vision from both our business and political leaders.
And it is a failure that has cost our nation far too much.