Not everything is going well for Wall Street these days. The NASDAQ is off 67 per cent from its highs of last March and it seems that every day some once-beloved booster of the new economy is subjected to a humiliating public recitation of his or her madly exuberant remarks of just a year ago.
But even though the bull market has died, its greatest legacy, the proposal to partially privatize Social Security, is still very much alive. A nostrum of America's radical right many decades ago, the idea of investing public pension funds in the stock market finally achieved mainstream credibility during the free-money days of the late 1990s. And not even a 1929-style meltdown could cool the enthusiasm of George W. Bush, MBA, for the idea that markets always work best.
The path to the free-market utopia envisioned by Mr Bush and his crowd of corporate courtiers, however, is not a straight and simple one. Those who are most fervent about Social Security privatization also warn that the job has to be done exactly right. Unless elected officials are stripped of any power over how funds are invested, admonish knowledgeable sources everywhere, we run the risk of "politicizing the market" - of turning investment decisions over to people whose values are not those of the bottom line.
Were Congress permitted to invest the funds however it saw fit, they warn, who knows what mischief might arise. Some future Congress, guided by fickle public sentiment rather than the timeless laws of corporate management, might decide to punish a company for, say, polluting, or union-busting, or shipping its manufacturing overseas.
Haunted by this specter, the proponents of privatization caution us thus: nothing can be permitted to dilute the vigor of our outsourcing; nothing can be allowed to distract chief executives from their sacred work of re-engineering.
Like the glories of privatization, the pitfalls of politicizing the markets has been a favorite conservative refrain for many years. The fear that labor unions might use their pension funds to encourage some less mercenary style of corporate management, for example, is the reason that Republican legislators from the time of the 1947 Taft-Hartley Act to our own day have persistently sought to strip unions of control over the pensions earned by their members.
But the deadliest danger lurking in Social Security privatization comes from precisely the opposite possibility: that the US will marketize its politics, that by handing Social Security funds over to Wall Street the country will give Wall Street undue authority over matters of public policy.
Contrary to the faiths of the reigning American economic consensus, markets are not politically neutral forces of nature. As America learned during the past decade, stock markets thrive vampirically on the weakness of labor, organized and otherwise; they reward companies that downsize ruthlessly; they rally on news of stagnant wages; they romp joyously when white-collar work is casualized; they insist petulantly that the gains of productivity be turned over to shareholders rather than wage earners. Wall Street's idea of the good society is one in which workers are powerless, chief executives and leading Wall Street figures enjoy ever-heightening levels of opulence, taxes are paid disproportionately by the poor, and the need to build shareholder value trumps every other social concern.
That is hardly the sort of arrangement that Americans would choose to welcome, but with Social Security privatised we would no longer have a choice. Turning Social Security funds over to Wall Street would not simply open a shortcut to a better percentage return; it would also change dramatically the way Washington makes decisions and enshrine the worker-hostile faiths of Wall Street permanently as our national economic policy. After all, who is going to legislate for higher minimum wages, say, or stricter pollution controls, or better safety standards in the workplace, when any such legislation would damage shareholder value and hence erode the well-being of the nation's retirees?
The dangers of marketizing our politics are as catastrophic as they are obvious. One of the reasons we hear so little about them, one suspects, is that marketization is precisely what Bush and Co have in mind. By privatizing Social Security, by locking in the way of Wall Street as the guarantor of the social safety net, they would accomplish a staggering inversion of the New Deal social policies Americans have relied on for 60 years. marketization would instantly switch the political valence of the famously inviolate third rail of US politics, transforming Social Security from the bane of the business community into its most powerful weapon. Touch Wall Street and you're dead.
The writer is the author of One Market Under God (Doubleday, 2000)
© Copyright The Financial Times Limited 2001