12 August 2009

Dani Rodrik Tilting at Windmills

There is a provocative - one might say wildly Utopian - Op-Ed by Dani Rodrik here in The Business Standard. The piece is prompted by the fact that the the Chairman of the Federal Reserve here in the U.S. needs to be re-appointed or replaced. He is basically arguing that Central Bankers have for too long been drawn exclusively from the ranks of those too busy genuflecting to the financial markets to actually regulate them in a meaningful manner. He claims (persuasively, I think) that such obeisance never was warranted but surely is not warranted now. Rodrik is (as usual) refreshingly frank about "the lies that the finance industry tells itself and others" and the dire consequences that follow When the Federal Reserve not only allows the bankers to lie shamelessly, but tends to actually believe their lies. And he suggests that Obama appoint someone to head the Federal Reserve who has solid credentials as being skeptical of dissembling and rationalization (otherwise known as lies).

As policy analysis and advice this all makes good sense to me. Unfortunately, two things stand in the way to Obama heeding Rodrik's proposal. At least here in the U.S., appointing someone skeptical about - let alone critical of - financial markets likely would induce some sort of preemptive capital strike as investors took their money elsewhere. The second thing is that Obama - despite being pilloried as a "socialist" or a "Marxist" by right wing nutters - basically lies prostrate before Wall Street, not just out of prudential concern, but because market worship is central to his ideological make-up. For Obama, Rodrik's proposal cannot gain entry to the category of 'change you can believe in,' because it is not change he is capable of imagining in the first place.

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