The Fixer is In

The Washington punditocracy is in something of a rapture over Obama’s appointment of Bill Daley–of the Chicago Daleys, natch–to be his chief of staff.  This stream of hosannas is a perfect illustration of the fact that said punditocracy is as a rule clueless.

Argument I in the Obama+Daley paean is that Daley is a pragmatist that will help an Obama pivot to the center. But it should be noted that Daley’s predecessor, Rahm Emanuel thought that Obama’s 2010 political course was dangerously unbalanced.  Emanuel was apparently leaking furiously in the summer and fall of last year about his attempts to push the administration towards the center.  Fat lot of good that did, proving that a more politically astute, less ideological chief of staff is not a sufficient condition to keep this administration from veering too hard left.  It also shows that the signaling value of the chief of staff is limited at best.

Argument II is that Daley’s long experience in business, including stints as an executive or director at J.P. Morgan, Bank One,SBC, Fannie Mae, Boeing and Merck will help the administration repair its damaged and dysfunctional relationship with business.  This argument is even more clueless than the first.

All of the businesses that Daley is or was involved in are heavily, heavily politicized.  Those kind of companies are willing to pay big to have political heavyweights like Daley around because of their connections.  Such individuals are, to put it impolitely but accurately, fixers.  Daley was in business not because he is an entrepreneur or an innovator, or because he has a preference for the private sector; he was in business because he was a politician with valuable political connections who could help these firms negotiate their relationship with the government, and make some rain for himself and his political cronies.

Even to the extent that Daley has some understanding of, and empathy for, the operations of the private sector (instead of being someone who is merely trading on his political connections), his experience has been  exclusively with corporate behemoths, and again, all corporate behemoths in highly regulated and politicized industries.  He may well be able to negotiate accommodations with such firms, but that’s hardly good news to the larger economy–and especially to the vast array of smaller businesses that are vital to economic growth.

The Daley types, and the corporations and corporate executives that they deal with, are agents of corporatism.  And as Adam Smith pointed out long ago, and as Milton Friedman argued repeatedly, the interests of individual corporations are not well aligned with those of consumers, workers, or suppliers of capital.   Corporatism is not your friend, or mine.

In particular, someone with Daley’s experience and connections is ill-suited to understand or represent the interests of smaller businesses and entrepreneurs that are the biggest potential casualties of the legislative and regulatory onslaught that Obama has unleashed.  Those are the individuals and firms that, for instance, are most likely to be devastated by Obamacare.  The Daleys of the world will be great at negotiating deals that mitigate the impact of mandates for big corporation, but the smaller fish will not merit their/his attention.  Jamie Dimon may be quite pleased with the results, but that’s not going to help the economy grow.

All pretty ironic coming from a president that rages regularly at the Citizens United decision for giving undue influence to large corporations.

It’s not really surprising that political pundits confuse corporations with the broader economy and corporatism with free market policies.  Immersed in the political waters, their understanding of markets and wealth creation is extremely limited.  So it is par for the course for them to confuse a pol that helps businesses fix their problems with someone who actually understands how economies work and wealth is created.

And it is also imperative to remind ourselves of what the commentariat has almost uniformly ignored: the miasmatic political swamp that gave birth to Daley, and which nourishes him and his family and his political allies to this day.  You can see the results of Daleyism in Illinois, and they aren’t pretty.  Why would anybody expect the results at the national level to be any better?

Too bad Mike Royko isn’t around to teach the commentariat some Chicago home truths.

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About Craig Pirrong 238 Articles

Affiliation: University of Houston

Dr Pirrong is Professor of Finance, and Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business of the University of Houston. He was previously Watson Family Professor of Commodity and Financial Risk Management at Oklahoma State University, and a faculty member at the University of Michigan, the University of Chicago, and Washington University.

Professor Pirrong's research focuses on the organization of financial exchanges, derivatives clearing, competition between exchanges, commodity markets, derivatives market manipulation, the relation between market fundamentals and commodity price dynamics, and the implications of this relation for the pricing of commodity derivatives. He has published 30 articles in professional publications, is the author of three books, and has consulted widely, primarily on commodity and market manipulation-related issues.

He holds a Ph.D. in business economics from the University of Chicago.

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