PREDICTABLY HIS Republican opponents have accused him of fomenting “class war” and “the politics of envy”. But President Barack Obama’s bid in his State of the Union address on Tuesday evening, to make the “fairness” agenda the cornerstone issue of his re-election campaign puts him in international company that extends far beyond the “usual suspects”, wavers of the red flag or Occupy Wall Streeters.
In Britain, prime minister David Cameron has been vying with Labour’s Ed Miliband to champion the cause of “responsible capitalism”, specifically over tackling the toxic issue of top executives’ pay. Only yesterday the Financial Times reported that, as part of the drive, he has capped the annual bonus of Royal Bank of Scotland head at a not-ungenerous £1 million, though half of last year’s award.
At Davos the opening meeting this year will ask the assembled capitalists and world leaders “Is 20th century capitalism failing 21st century society”, while in France Socialist leader François Hollande has argued that his “true adversary” in the presidential election is not Nicolas Sarkozy, but the world of finance. The pay of top executives will be a central issue, as indeed it has become in Ireland, although here we appear more preoccupied with State employees than the private sector.
The argument is not that capitalism has failed, or that it is not seen as indispensable – but rather that it, particularly the world of finance, needs to be saved from itself. As Adam Smith warned of the untrammelled market, “the interest of the dealers in any particular branch of trade or manufacturers is always in some respects different from, and even opposite to, that of the public.”
Obama in his speech promised no return to “the days when Wall Street was allowed to play by its own set of rules.” “Washington should stop subsiding millionaires,” he declared on the day Mitt Romney released tax returns that show he paid an effective tax rate of 13.9 per cent on his 2010 income of $21.6 million. And, citing billionaire Warren Buffett, the president proposed a minimum 30 per cent effective tax rate on those who earn a million dollars or more. Buffett has complained it is unfair that he pays a lower tax rate than his secretary.
“We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by,” Obama said. “Or we can restore an economy where everyone gets a fair shot, everyone does his fair share, and everyone plays by the same set of rules.”
In what will clearly be his central anti-Republican theme Obama, rising in the polls, is accurately reflecting growing middle-class concern that the essential compact at the heart of US politics for generations – secure and rising living standards for all – is no more, eroded by both the economic crisis and growing disparities between the rich and everyone else. And not least the pay practices that grew up on Wall Street and in the City of London following deregulation in the 1970s and 1980s – by their excess, delegitimising capitalism and killing both Lehman and the goose that laid the golden egg. Not ground that the Republicans will easily defend.