Left and Right

In 1971, after announcing wage and price caps to curb inflation, Richard Nixon famously declared, "We are all Keynesians now." But moments after the phrase escaped his lips, it was no longer true. Indeed, the thirty-seven years since then have seen a nearly full-scale repudiation of Keynes at home and abroad, as neoliberalism remade our political economy and ushered in the new Gilded Age.

In the past few weeks, however, it has seemed quite clear that this chapter is over or at least on its last few pages. But as Nixon showed, old ideological habits die hard. Which is why, when faced with the prospect of imminent financial collapse, the Treasury initially designed a bizarre, jerry-rigged, quasi-free-market solution that would have involved setting up a government-run reverse auction to buy troubled assets. From the beginning, people on the left pointed to a far more efficient, fair and tested approach: direct injection of capital into banks. Or, to use a word that still retains a frisson of the taboo, nationalization.

Of course, anyone calling for a major part of the economy to be nationalized just six months ago would have been swiftly relegated to the margins of American political discourse. And yet here we are in 2008, with old Wall Street hand Hank Paulson, of all people, suddenly seeming to embrace the idea. On Monday, October 13, he called a meeting with the heads of the nation's nine largest banks and announced that the government would be purchasing $250 billion in their preferred stock. The devil, of course, is in the details (see William Greider, "Dr. Paulson's Magic Potion," page 4), and if the banks' alacrity in accepting the deal is any indication, taxpayers ought not to let down their guard anytime soon. Still, this departure from neoliberal orthodoxy was a shift worth savoring.

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