Newt Gingrich's new tactic is a gift to Barack Obama

The candidate has taken a break from dog whistles to stir up class resentment with his latest attack

Progressives are once again gnashing their teeth over the dog-whistle politics of Republican Newt Gingrich. In Iowa, the former House Speaker hammered away on poor kids, food-stamp recipients and other red-meat issues, and the Tea Party faithful, ever attuned to the misery of the undeserving, appeared to respond. He did it again in South Carolina on Martin Luther King Jr. Day when he told Juan Williams, black journalist, that Barack Obama was a terrific "food stamp president."

Cue the delight of the audience. Yet Newt's apparent race-baiting hasn't much improved his standing in the polls. According to the latest Rasmussen survey (which leans rightward), Mitt Romney remains the runaway favorite among primary voters at 35 per cent. Gingrich is second at 21 per cent. Rick Santorum and Ron Paul each have 16 per cent for third.

With so many Americans jobless, debt-ridden or out of their minds with worry over the health insurance companies fighting over every nickel, it's stunning that voters are reacting to Newt's brand of plantation politics. Gingrich had no practical solutions. He thinks he can jumpstart the economy by changing the Federal Reserve's monetary policy from being partly focused on inflation to being entirely focused on it. Forget about full employment. Let the market decide that.

What's striking about Gingrich's strategy in South Carolina hasn't been the race-baiting. Pot-shots like those come cheap. What's striking is that an astonishing $5m is being used to portray the quarter-billionaire Romney as a capitalist robber-baron straight out of the Gilded Age.

Gingrich's well-heeled supporters could have used that $5m, which goes a long, long way in South Carolina, to assail Romney's Mormonism, his record as governor of a blue state, "Romneycare," his Yankee pedigree or his bionic mien. There's so much material here that it could make even Romney regret a corporation's cash-flush right to freedom of speech.

Instead, his supporters chose to depict Romney, the former head of Bain Capital, as a Wall Street tycoon responsible for sending jobs overseas, closing down factories and destroying lives. The short film focusing on Bain echoes charges made by the Occupy Movement: that market fundamentalism, which pledges allegiance to low taxes and deregulation, is not the solution but the very source of everyone's problems.

With this attack on "vulture capitalism," Gingrich is still aiming to stir up resentment among white middle-class voters over 50. But it's not just resentment steeped in racism (and as Gingrich's attack of poor blacks illustrates, racial resentments are obviously a part of his larger mode of politicking). It's a resentment that the political left has been trying to build a coalition around since forever -- the resentment of class.

It seems that Gingrich is obliquely conceding that the American class system isn't a figment of a liberal's imagination. His attacks also suggest that Republicans are aware of the fallacy of their own worn-out ideology.

I don't mean the ideology of low taxes and deregulation, though these are never far from their minds. I mean that the GOP uniformly believes that one's world view determines one's material conditions. A good outlook, they would say, equals a good paycheck. Failure, then, is a discrete and personal problem. Individuals need reforming, not social systems.

Anyone who has traded his labour for money knows this is false. A superlative attitude isn't going to magically generate upward mobility. Failure, then, is structural. Social systems need reforming, not individuals.

Progressives have long dreamed of building a coalition that cuts across racial divides to unite workers in common cause. Republicans typically don't. Yet they have no answers to pressing economic issues. The only way they can win is to divide and conquer using the deep entrenchments of race, and they have been doing that successfully for 30 years.

Gingrich parlayed racial resentment into a Republican takeover of the House in 1994. But it should come as no surprise that he was able to do that at the dawn of the most rapid expansion of the economy in US history. When the economy was good, voters could afford racism.

But that might not work now, no matter how hard he tries to invoke Nixon's Silent Majority. The economy has languished too long. The Cold War has faded; civil rights are integrated, if not fully honoured. "Socialism" now isn't even a bad word for a majority of young Americans.

Progressives, including Democrats, have called Gingrich's suicide-bombing of Romney's campaign a sign of the GOP's ideological end times. That may be true. More importantly, it may signal a shift in our national social conscious. The culture war was always illusory. It is supremely ironic that an old culture warrior like Gingrich may end up removing the veil from voters' eyes to see what truly oppresses them: those, like Mitt Romney and Wall Street firms like Bain Capital, who control the means of production.

Thanks to Gingrich, NBC's Matt Lauer asked Romney if envy fueled the debate over income inequality -- and Romney said yes! President Obama got a great gift that day. Let's hope he makes the best of it.

John Stoehr is a lecturer in English at Yale University.

John Stoehr teaches writing at Yale. His essays and journalism have appeared in The American Prospect, Reuters Opinion, the Guardian, and Dissent, among other publications. He is a political blogger for The Washington Spectator and a frequent contributor to Al Jazeera English.

 

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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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