Blind Spots

As I wrote in an early post, many conservatives have a blind spot when it comes to “Wall Street.” In the heat of battle it is understandable why this happens.  When defending a position against attacks, there is a reluctance to accept any criticism of one’s position. To do so might be seen as a sign of overall weakness. But while understandable, such blind spots can lead one to defend what to others are clear errors, and thus undercut one’s credibility.

The conservative blind spot came up recently with Occupy Wall Street, and now Newt’s attacks on Romney and can be seen in Dennis Prager’s comments on Hugh Hewitt’s show attacking Newt Gingrich with comments such as “Free is Free… Freedom allows for inequality… sorry gang time to grow up.”

One huge problem in all of this is that not every criticism of Wall Street, or big business is a call for less freedom, at least in terms of Government regulation or new laws.   This is what was particularly troubling about Prager’s comments given that he has often made the point in the pass that sometimes there is a difference between what is immoral and what should be illegal.  I would argue that this is particularly true when it comes to picking the next President of the United States.  One could easily argue that a particular type of behavior is, and should remain, legal; yet is not something we want in a President.

Frankly I do not see a whole lot of difference between Romney’s attacks on Gingrich and Gingrich’s attacks on Romney.  It is what happens in a campaign. After all, these attacks, and a lot worse, will certainly be made by Obama and the Democrats later this year, so I would rather have them raised now to see how the candidates and the pubic respond. Next September is not the time to find out that a candidate cannot defend themselves. Those attacking Newt however, claim that his attacks on Romney are different in character, for they attack capitalism.  Maybe they do, but maybe they don’t.  This brings us to the blind spot of so many conservatives.

Capitalism, as an economic system, is driven by self-interest checked by two things: competition among the suppliers of goods and services, and real choice among the consumers of those goods and services. While capitalism does require a great deal of freedom, that freedom is not absolute, and while some of my conservative friends will cry heresy, capitalism can benefit from regulation, at least certain types of regulation. 

Often the liberal-conservative divide is seen as those who want more regulation (liberals) and those who want less (conservatives). Yet while often portrayed as such, that is really not correct. The problem is not how much regulation, so much as the focus of the regulation. The key question should really be does the regulation promote competition and choice or does it limit it.  Ask this question and most regulation would go away. 

But the failure to make this distinction is troublesome, for combined with the conservative’s blind spot it means that conservatives cannot see what many voters see, and this allows liberals to falsely claim that conservatives only care about the rich.  So let me risk an excursion into the land of heresy and point out a problem I see with “big business.”

 A key charge by the left is that the rich get richer, while the poor get poorer, and they cite as evidence for this the “huge amounts of money” corporate executives get paid. While I reject almost all of this argument, I don’t completely reject it as there is a grain of truth here to which many conservatives are just blind.  Real wages, wages adjusted for inflation, have declined over 16% since the 1970s, during the same period that executive salaries have exploded. 

Now here I make a big distinction between those who own their own businesses, and management such as CEOs who ultimately are hired employees. When you own your own business you take the risks and should reap the lion’s share of the reward.  But those in upper management are often not owners, they are employees, and I see no capitalistic reason they should get lavish and ever increasing compensation packages with golden parachutes, while other employees’ real wages decline.

Some of my conservative friends will claim that it is just capitalism, but is it?  To me the comparison of executive pay is closer to union pay than pure capitalism.  Many conservatives are right to see that there is a problem with unions, as they distort the market place, allowing unions to demand wages and benefits higher than the marketplace would otherwise support.  I would suggest that the same thing is true with corporate pay.  When it comes right down to it, executive pay is not set by the marketplace; it is set by the other executives. Given the intermingling of boards of directors, there is very little to incentive to hold the line on executive completion, certainly not the same incentive as there is for the compensation of average workers.    In short there is in effect a sort of an executive union driving up executive compensation pretty much the same way workers unions have.

The knee-jerk reaction of many conservative immediately jumps to a condemnation of any government solution.  There is probably a lot to condemn here, and in fact I would argue that previous government attempt to “fix this” have only made it worse.  But condemning a solution and acknowledging a problem are two different things.  To get a real solution, a problem has to be acknowledged and then analyzed. Unfortunately many conservatives will not even acknowledge that there is a problem, leaving it to the left to propose any solutions.

More importantly, this is a problem that resonates with many people.  Despite the praise of how much more productive worker are today, they see their incomes not keeping up with inflation, and they see the gap growing between workers and management. When conservatives refuse to acknowledge that a problem even exists, it rings hollow, and that only makes it all that much easier for Democrats to falsely portray them as the party of the wealthy.