In his new book, Power, Inc., David Rothkopf offers a provocative analysis of the push-pull between big business and big government. He says the rift has gone far past simplistic political rhetoric to a larger battle: pitting American capitalism against other forms of capitalism that have emerged on the world’s stage in the past decade or so. “Something is clearly broken within our economy,” he says.
“We’ve pulled too far away from the government playing the role that it should in empowering and enabling citizens to succeed in the marketplace, whether it’s investing in schools or in highways or in research and development and health care,” Rothkopf says.
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A former member of the Clinton administration in the Commerce Department and today CEO of Garten Rothkopf, an advisory firm, Rothkopf says fiscal policy has become too politicized. “Republicans call for cutting back government services, like Medicaid and Medicare, which may be based on a sound economic notion of not spending more than you’ve got, but it also serves a political objective. Similarly, some Democratic arguments about providing social programs and social stimuli have the effect of arguing for a bigger role for government. I actually feel that the Democratic argument doesn’t go far enough.”
The Fiscal Times (TFT): Let’s talk about what’s “broken.” Why do you say there’s a reckoning ahead for this country, and who or what are the forces behind it?
David Rothkopf (DR): We’re coming out of a decade in which for the first time in modern U.S. history we actually lost net jobs. GDP went up, but income inequality also grew and median incomes went down. Social mobility went down; job creation went down. Something’s clearly broken. And I think the frustration with this is seen in the rise of the Occupy Wall Street movement but also in the rise of the Tea Party movement. Which I think in some respects are two sides of a similar coin and might be characterized as the politics of alienation.
TFT: You’re talking about the 1 percent vs. the 99 percent, essentially.
DR: It’s what happens in a country when people start to feel the system is not working for the majority. We’ve had a year of recovery in which the benefits have accrued to the top 1 percent, while the rest – essentially table scraps – are left for the remaining 99 percent. This has caused doubting within the U.S. that our system works, a debate about the nature of American capitalism, and concerns that American capitalism has grown unbalanced.
TFT: Why is there another part to this “reckoning” ahead, connected to the U.S.’s position on the global stage?
DR: As we’ve struggled, our economy and our system, which was seen as an example for the world, is now seen in a different light, while other economies and models of capitalism are seen as more viable alternatives, particularly because those other economies are doing well, in many cases, whether it’s the Asian version of American capitalism – the Chinese, the Singaporian – or the emerging markets like Brazil and India, or small states that are very entrepreneurial, like Israel or even the northern European capitals. So the capitalism of the future may take a form that’s very different from what we know in the balance between public and private power.
Yet the international system is not constructed to provide the kind of public-private balance of power the way the national systems are. There are now 150 semi-states that can’t control their borders, can’t print currency that can be traded, can’t enforce laws because big corporations can menu shop. We’ve got another couple of thousand big private actors who aren’t really accounted for in any of our big models. There aren’t strong agreements between these entities to regulate financial markets, or deal with climate, or health, or other important issues. So there’s a serious institutional gap at the global level.
TFT: If you had ten minutes with President Obama right now, what would you tell him about the economic state of this country?
DR: I haven’t had that phone call yet. (laughs) Assuming it came in, the message would be, You’re on the verge of entering a second term as president. And in your second term, there’s a chance for you to be less politically cautious about addressing some of the imbalances that have been caused over the past 30 years both by both Republican and Democratic administrations – such as the one in which I served, which went too far in the direction of deregulation, and too far away from addressing the kinds of fairness and competitiveness issues that I think are critically important. One role the government can play is in social safety net, education, and social issues. But another role is helping U.S. workers compete more effectively for global capital or new jobs. We’ve been remiss on both sides.
TFT: How does this country position itself better globally?
DK: First, we have to fix fundamental problems in our political system. It’s been corrupted by money. It give disproportionate power to economic mega-actors, and I think that’s a particularly dangerous distortion of the idea of democracy – giving those with more money effectively more frequent speech, if you will.
TFT: What about the Super PACs?
DK: That’s another dangerous development. But frankly the system of lobbying – the fact that we have campaigns of unlimited duration, and when we don’t have federally funded campaigns, we don’t have campaign spending limits – that needs to be changed. Otherwise, monied interests will always have an unfair advantage.
TFT: What about local issues?
DK: The gridlock in our political districts is hard to deal with sometimes. Gerrymandering effectively ensures a Congress that’s full of intransigent incumbents. The primaries tend to be won by wingnuts. The extreme wings of the party make the debate less civil, and that’s another area we have to focus on. We need public policies that make more sense – not bigger government but more effective government.
TFT: How do you propose we do that?
DK: We need true financial reform that we haven’t had yet, whether it’s competitiveness policies that focus on getting the best brains to America, or changing our immigration laws, giving out more visas, ensuring that other countries play fair, doing what we can to attract more capital here, and focusing more on economic benefits for the U.S. rather than serving the agenda of global actors. That’s part of the role of a national government. A national government’s job is to look after its people.
TFT: Yet too few people have a say in decisions at all levels of government – federal, state and local, you say. What’s the answer?
DK: The notion of representative government is to give everybody in society the ability to choose representatives to look after their interests in a constructive way. But if you tilt the system so that people with more money have more of a chance to pick their reps, then the center and the compromise candidates don’t get elected. We need to change if our objective is, as I think it is, to guide markets and to guide this country politically and economically – and lead to a higher quality of life for our society at large.