After Me, The Flood

Last summer, on her final day as the Chairman of the FDIC, Shelia Bair decried the short-termism that has overtaken both Wall Street and Washington, where “[o]ur financial markets remain too focused on quick profits, and our political process is driven by a two-year election cycle and its relentless demands for fundraising.” This short-termism has taken hold of the reins of our larger political system and increasingly characterizes policy initiatives at every level of government. Since the 2008 bailout, banks have fought tooth-and-nail against financial regulations, including many that would serve their long-term self-interest by making the overall banking system more stable. In country after country, public services, from education to healthcare to prisons, have been privatized, and austerity measures have been forced onto unconsenting populations by deficit hawks, technocrats, and institutional creditors. And in a hugely symbolic fight last summer, U.S. Republicans proved they were willing to default on the national debt and jeopardize the country’s ability to borrow in order to shield the country’s wealthiest individuals from higher marginal tax rates. It’s a sign of how far we’ve fallen that our best hope lies in convincing our political and financial elites to “be long-term greedy, not short-term greedy.”

Economists have long recognized that individuals overvalue their present interests over future concerns. But it’s another matter entirely when we can no longer rely on our political institutions to pursue our longer-term and higher-order preferences. To borrow Robert Monks’ line about the corporate form, a state aimed at nothing beyond short-term private wealth generation is little more than an externalizing machine. Unfortunately, this is increasingly the trajectory of our politics. Wealth concentrates among a small financial elite and gets pumped back into government, not as tax dollars to facilitate collective decision-making, but as lobbying and campaign money intended to deflect regulation and further entrench the self-serving policies that helped generate these unprecedented levels of concentrated private wealth. There is a cancer-like logic to this feedback loop, where localized economic growth comes more and more at the expense of the larger body politic.