A Tottering Technocracy

Here and in Europe, the financial meltdown exposes the hollowness of our elites.

by Victor Davis Hanson
National Review
August 9, 2011

We are witnessing a widespread crisis of faith in our progressive guardians of the last 30 years. These are the blue-chip, university-certified elite, employed by universities, government, and big-money private foundations and financial-services companies. The best recent examples are sorts like Barack Obama, Eric Holder, Larry Summers, Peter Orszag, Robert Rubin, Steven Chu, and Timothy Geithner. Politicians like John Kerry, John Edwards, and Al Gore all share certain common characteristics of this Western technocracy: proper legal or academic credentials, ample service in elected or appointed government office, unabashed progressive politics, and a free pass to enjoy ample personal wealth without any perceived contradiction with their loud share-the-wealth egalitarian politics.

The house of a John Kerry, the plane of an Al Gore, or, in the European case, the suits of a Dominique Strauss-Kahn are no different from those of the CEOs and entrepreneurs who were as privately courted as they were publicly chastised. These elites were mostly immune from charges of hypocrisy or character flaws, by virtue of their background and their well-meaning liberalism.

The financial meltdown here and in Europe revealed symptoms of the technocracy’s waning. On this side of the Atlantic, Geithner, Orszag, Summers, Austan Goolsbee, Paul Krugman, and Christina Romer apparently assumed that some academic cachet, an award bestowed by like kind, or a long-ago-granted degree should give them credibility to advocate what the tire-store owner, family dentist, or apple farmer knew from hard experience simply could not be done — borrow or print money on the theory that insular experts, without much experience in the world beyond the academy or the New York–Washington financial and government corridor, could best direct it to productive purposes.

But now they have either left government or are no longer much listened to — and some less-well-certified accountant will be left with the task of finding ways to pay back $16 trillion. Abroad, at some point, German clerks and mechanics are going to have to work a year or two past retirement age to pay for those in Greece or Italy who chose to stop working a decade before retirement age — despite all the sophisticated technocratic babble that such arithmetic is reductive and simplistic.

In the devolution from global warming to climate change to climate chaos — and who knows what comes next? — a small group of self-assured professors, politicians, and well-compensated lobbyists hawked unproven theories as fact — as if they were clerics from the Dark Ages who felt their robes exempted them from needing to read or think about their religious texts. Finally, even Ivy League and Oxbridge degrees and peer-reviewed journal articles could not mask the cooked research, the fraudulent grants, and the Elmer Gantry–like proselytizing about everything from tree rings and polar-bear populations to glaciers and the Sierra snowpack. A minor though iconic figure was the truther and community activist Van Jones, the president’s “green czar,” who lacked a record of academic excellence, scientific expertise, or sober and judicious study, assuming instead that a prestigious diploma and government title, a certain edgy and glib disdain for the masses, and media acclaim could permit him to gain lucre and influence by promoting as fact the still unproven.

Higher education is no longer affordable for many families, and does not guarantee well-rounded, well-educated graduates. A university debt bubble, in Fannie and Freddie fashion — together with the rise of no-frills private online certificate-granting institutions — is undermining traditional higher education. The symptoms are unmistakable: tuition spiraling far ahead of inflation; elite faculty excused from teaching to publish esoteric articles in little-read journals; legions of poorly compensated part-time instructors and graduate-student assistants subsidizing the privileged class; political orthodoxy as an unspoken requisite for membership in the club. An administrator is deemed successful largely for promoting “diversity” — rarely on the basis of whether costs stabilized, graduation rates increased, the need for remediation declined, or post-graduation jobs were assured on his watch. This warped system, which grew out of the bountiful 1960s, is now a vestigial organ, an odd-looking thing without an easily definable purpose. When will the bubble burst? If the four-year university cannot ensure its graduates that they will necessarily have a better-paying job and know more than the products of an upfront credentialing factory, why incur the $200,000 cost and put up with the political indoctrination?

Kindred media elites in Europe and the United States lauded supposed technocratic expertise without much calibration of achievement. Indeed, to examine the elite media is to unravel the incestuous nature of power marriages and past loyal service to heads of state. Those who praised Obama as a god or attributed their own nervous tics to his omnipresence or reported on his brilliant policies often either had been speechwriters to past liberal presidents, enjoyed family connections, or were married to other New York or Washington journalists or powerbrokers. Their preferences about where to send a kid to school, where to vacation, and what to think were as similar to those they reported on as they were foreign to those who were supposed to listen to them. Like wealthy people in the Middle Ages who bought indulgences instead of truly repenting their sins, the more our elites preached about egalitarian politics for the fly-over upper middle classes, the less badly they felt about their own mannered conniving for privilege and status.

A generation ago, we were supposed to be grateful that a few gifted and disinterested minds were digesting our news for us each day on cash-rich ABC, CBS, NBC, NPR, and PBS, and in the New York Times, Washington Post, and Los Angeles Times, summarized periodically on weekend network discussion groups and in newsweeklies like Time and Newsweek. Now the market share of all these enterprises is shrinking. Some exist only because of government subsidy, rich parent companies, or like-minded wealthy benefactors.

The technocratic pronouncements from on high — that Barack Obama was “sort of GOD,” or at least “the smartest president in history”; that a Harvard-trained public-policy wonk alone knew how to save us from a roasting planet — are now seen by most as laughable. An education-age Reformation is brewing every bit as earth-shattering as its 16th-century religious counterpart.

There are also generic signs of the technocracy’s morbidity. It deeply distrusts democracy, most recently evidenced by John Kerry’s rant that the media should not even cover the Tea Party, and by the European Union’s terror of allowing the public to vote on its intricate financial bandaging. It is no accident that technocratic journalists love autocratic China — with its ability to promote mass transit or solar panels at the veritable barrel of a gun — while hating the Tea Party, which came to legislative power through the ballot box.

So the elites’ furor grows at those who seek and obtain power, exposure, and influence without the proper background, credentials, or attitude. How else to explain why a Michele Bachmann or Sarah Palin earns outright hatred, whereas a Mitt Romney or John McCain received only partisan disdain?

There is an embarrassing lack of talent and imagination in the last generation of the technocrats. One banal memo about a “tea-party downgrade” or a “jihadist” takeover of the Republican party is mimicked by dozens of politicians and journalists who cannot think of any more creative phraseology. Calls for civility are the natural accompaniment to unimaginative slurring of those outside the accustomed circle. When Steven Chu exhorts us that gas prices should match European levels or assures us that California farms will blow away, should we laugh or cry? Do learned attorneys general call the nation “cowards,” refer to fellow minority members as “my people,” or really believe that they can try the self-confessed terrorist architect of 9/11 in a civilian court a few yards from the scene of his mass murder? Was Timothy Geithner really indispensable in 2009 because other technocrats swore he was?

We are living in one of the most unstable — and exciting — periods in recent memory, as much of the received wisdom of the last 30 years is being turned upside down. In large part the present reset age arises because our political and cultural leaders exercised influence that by any rational standard they had never earned.

Goldman Sachs Defrauded Investors, sent bailout outside U.S.A

by Karen Mracek and Thomas Beaumont

Goldman Sachs sent $4.3 billion in federal tax money to 32 entities, including many overseas banks, hedge funds and pensions, according to information made public Friday night.Goldman Sachs disclosed the list of companies to the Senate Finance Committee after a threat of subpoena from Sen. Chuck Grassley, R-Ia.

 Asked the significance of the list, Grassley said, “I hope it’s as simple as taxpayers deserve to know what happened to their money.”

 He added, “We thought originally we were bailing out AIG. Then later on … we learned that the money flowed through AIG to a few big banks, and now we know that the money went from these few big banks to dozens of financial institutions all around the world.”

 Grassley said he was reserving judgment on the appropriateness of U.S. taxpayer money ending up overseas until he learns more about the 32 entities.

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 Goldman Sachs (GS) received $5.55 billion from the government in fall of 2008 as payment for then-worthless securities it held in AIG. Goldman had already hedged its risk that the securities would go bad. It had entered into agreements to spread the risk with the 32 entities named in Friday’s report.

 Overall, Goldman Sachs received a $12.9 billion payout from the government’s bailout of AIG, which was at one time the world’s largest insurance company.

 Goldman Sachs also revealed to the Senate Finance Committee that it would have received $2.3 billion if AIG had gone under. Other large financial institutions, such as Citibank, JPMorgan Chase and Morgan Stanley, sold Goldman Sachs protection in the case of AIG’s collapse. Those institutions did not have to pay Goldman Sachs after the government stepped in with tax money.

 Shouldn’t Goldman Sachs be expected to collect from those institutions “before they collect the taxpayers’ dollars?” Grassley asked. “It’s a little bit like a farmer, if you got crop insurance, you shouldn’t be getting disaster aid.”

 Goldman had not disclosed the names of the counterparties it paid in late 2008 until Friday, despite repeated requests from Elizabeth Warren, chairwoman of the Congressional Oversight Panel.

 “I think we didn’t get the information because they consider it very embarrassing,” Grassley said, “and they ought to consider it very embarrassing.”

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 The initial $85 billion to bail out AIG was supplemented by an additional $49.1 billion from the Troubled Asset Relief Program, known as TARP, as well as additional funds from the Federal Reserve. AIG’s debt to U.S. taxpayers totals $133.3 billion outstanding.

 “The only thing I can tell you is that people have the right to know, and the Fed and the public’s business ought to be more public,” Grassley said.

 The list of companies receiving money includes a few familiar foreign banks, such as the Royal Bank of Scotland and Barclays.

 DZ AG Deutsche Zantrake Genossenschaftz Bank, a German cooperative banking group, received $1.2 billion, more than a quarter of the money Goldman paid out.

 Warren, in testimony Wednesday, said that the rescue of AIG “distorted the marketplace by turning AIG’s risky bets into fully guaranteed transactions. Instead of forcing AIG and its counterparties to bear the costs of the company’s failure, the government shifted those costs in full onto taxpayers.”

 Grassley stressed the importance of transparency in the marketplace, as well as in the government’s actions.

 “Just like the government, markets need more transparency, and consequently this is some of that transparency because we’ve got to rebuild confidence to make the markets work properly,” Grassley said.

 AIG received the bailout of $85 billion at the discretion of the Federal Reserve Bank of New York, which was led at the time by Timothy Geithner. He now is U.S. treasury secretary.

 “I think it proves that he knew a lot more at the time than he told,” Grassley said. “And he surely knew where this money was going to go. If he didn’t, he should have known before they let the money out of their bank up there.”

 An attempt to reach Geithner Friday night through the White House public information office was unsuccessful.

 Grassley has for years pushed to give the Government Accountability Office more oversight of the Federal Reserve.

 U.S. Rep. Bruce Braley, a Waterloo Democrat, said he would propose that the House subcommittee on oversight and investigations convene hearings on the need for more Federal Reserve oversight. Braley is a member of the subcommittee.

 Braley said of Geithner, “I would assume he would be someone we would want to hear from because he would have firsthand knowledge.”

 Braley also noted that the AIG bailout was negotiated under President George W. Bush, a Republican.

 He said he was confident that the financial regulatory reform bill signed by President Obama this week would help provide better oversight than the AIG bailout included.

 “There was no regulatory framework in place,” Braley said. “We had to put something in place to begin reining them in. I’m confident they will begin to be able to do that.”