When George W. Bush took office, his Administration loudly touted its corporate
credentials. In place of Clinton's policy wonks, the Bush economic team featured
real businessmen, who knew how the world worked, and who appreciated, in a visceral
and practical way, the value of free markets. Bush had more former C.E.O.s in
his Cabinet than any previous President. His Vice-President was a former C.E.O.,
and Bush himself had run an oil company. "No president, administration, and Cabinet
has been as marinated in capitalism," observed USA Today,
which also praised the Administration's "deep management pool" and its "all-star
Now, though, the consensus seems to be that Bush's boardroom is filled with
benchwarmers, not all-stars. The Administration has been lambasted, from the left
and the right, for its lack of political dexterity, as evidenced by the performance
it gave a few weeks ago at the Economic Forum, in Waco, Texas. But the more substantive
criticism is that it has a scattershot approach to economic policy, with little
regard for the nature of markets. The White House pushed an energy plan that was
not much more than a sop to big oil. It imposed high tariffs on foreign steel,
which, though a boon to the domestic steel industry, hurt domestic steel users,
alienated our trading partners, and compromised America's role as the leading
advocate of free trade. Then, last week, under political pressure, it scaled back
some of the steel tariffs. Bush signed a fat farm bill full of puzzling subsidies
to agribusiness. And he was slow to respond to the crisis of confidence on Wall
Street, offering lectures on individual responsibility instead of pressing for
systemic reform. Practically the only thing that the Administration has been principled
about is its tax cut.
The conventional explanation for such inconsistency and incoherence is that
Karl Rove, the President's chief political adviser, has been overruling the ex-C.E.O.s—that
political expediency has trumped ideology. Protectionism may be bad for the country
as a whole, but it's good for potential Bush voters in the steel states; farm
subsidies may hurt consumers, but they help representatives from the farm states.
Yet, while there's no doubt that Rove wields great power, there are reasons to
doubt whether the Bush Administration was ever really committed to a pro-market—as
opposed to a pro-business—agenda.
Almost none of the C.E.O.s on the Bush team headed competitive, entrepreneurial
businesses. The majority of them, in fact, made their bones in protected or regulated
industries, where success depends on personal lobbying and political maneuvering.
Bush himself, of course, built a small fortune on family connections, finagling
a spot on the board of Harken Energy, and securing a publicly financed stadium
for the Texas Rangers. Dick Cheney, meanwhile, got the top job at Halliburton
almost solely because of his political connections. His successor there, David
Lesar, has said, "What Dick brought was obviously a wealth of contacts." Wealth
of contacts, indeed: under Cheney, Halliburton expanded internationally, gained
$1.5 billion in subsidies from the U.S. government, and added a billion dollars
in government contracts.
What about Treasury Secretary Paul O'Neill? Yes, he did a fine job of reviving
the fortunes of the aluminum giant Alcoa. But he did so, in part, by helping to
orchestrate an international price-fixing cartel. In 1994, in Brussels, after
a fierce lobbying effort by O'Neill and his corporate peers, five countries and
the European Union agreed to slash aluminum production to drive up aluminum prices.
By the end of that year, prices had nearly doubled and political favoritism had
rescued Alcoa from the whims of the free market.
Secretary of Commerce Donald Evans ran an oil-and-gas company. Mitch Daniels,
the head of the Office of Management and Budget, was a vice-president at Eli Lilly.
Army Secretary Thomas White was the head of energy trading at Enron. Air Force
Secretary James Roche came from Northrup Grumman. And Navy Secretary Gordon England
put in time at General Dynamics. All these companies depend for success on regulatory
approval, government largesse, or cartel-like machinations. This is especially
true of the energy industry—the Bush Administration's finishing school—in
which the greatest determinant of a company's annual performance is a price more
or less fixed in Vienna by a cabal of sheikhs.
In fact, the Bush economic policy looks a lot like what the political scientist
Theodore Lowi called "interest-group liberalism." As Lowi saw it, the rise of
government regulation and independent bureaucracies had turned the process of
policymaking away from the pursuit of the common good—however imaginary
that might be—and toward a divvying up of the spoils by politicians and
interest groups. As long as the government is as big and as active as it is in
the United States, the incentive for interest groups—like big oil and big
steel—to seek succor from it will exist. And the Bush Administration seems
especially amenable to such blandishments (at least, when they come from business,
rather than, say, labor).
Mind you, there's nothing inherently corrupt here. Lobbying, fixing, finagling:
it's just business, of a kind. The point is that such ways of doing business have
very little to do with free-market capitalism. They have more in common with crony
capitalism, in which whom you know is more important than what you do and how
you do it. That's the world Bush's key policymakers come out of: they've made
their careers by circumventing the free market. Why expect them suddenly to embrace
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