The Tale of Two Romneys

We don't know which is running: the moderate from Massachusetts, or the conservative philosophically

The question going into the general election is: who is the real Mitt Romney? We don't really know which of them is running, the moderate from Massachusetts, as Newt Gingrich never tired of saying, or the conservative mantle bearer who is philosophically to the right of Ayn Rand.

Now that Rick Santorum, the social conservative, has suspended his presidential bid, Romney can rejigger his campaign for the general election. That usually means a candidate turns his attention to the wide middle ground where the coveted independents are awaiting his charms.

Romney isn't doing that. In fact, as a recent appearance at a conference of the National Rifle Association suggests, he is banking to the right even more on issues like immigration, abortion and gun rights. He even endorsed US Rep. Paul Ryan's draconian federal budget, which calls, in effect, for gutting Medicare.

Bob Moser of the American Prospect calls this the Santorum Effect:

 ... [Santorum] helped push Romney to the right of the average general-election voter ... Romney cannot "course-correct" back to the centre — except in completely symbolic ways — with hardcore conservatives warily watching for any hints of apostasy.

This of course depends on the sound memory of the media. As it did with President Obama's hope to implement a new tax on millionaires, the media is beginning to forget all those arch-conservative things Romney had to say to get arch-conservatives to believe he was just as arch a conservative as Santorum. You know, like bombing Iran, repealing health care reform laws and eliminating the Education Department.

Now that the GOP nomination process is essentially over (though former House Speaker Gingrich and US Rep. Ron Paul are still in the running), pundits are now reverting to calling Romney a moderate, mostly because that's what he was during the time of his governorship of Massachusetts and because that's what his genuinely conservative rivals kept calling him.

But is it true? Yeah, probably. Romney works too hard to sound conservative but appears at ease when talking about things like the safety net and the embattled middle class (conservatives never say "safety net" or "class"). Romney also seems to think of himself as a competent manager more than a fire-breathing ideologue. He was, after all, the head of a private-equity firm that made money by cleaning up other people's messes.

Such an attitude toward government has roots in American liberalism and neoconservatism (which is like liberalism sans hope). Such theories generally call for the solving of social problems by identifying and applying the right fix. Politics is more puzzle than worldview. Take away the idea that society is perfectible, and you might have the moderate that Mitt might be.

That, of course, assumes he's not going to enact all those conservative things he says he's going to enact as president. But saying isn't being -- and conservatives know this better than most. Noam Scheiber of the New Republic argues that Mitt is too moderate to beat Obama, only because the GOP's base is going to be second-guessing him from now till November, just as it did with Bob Dole in 1996 and John McCain in 2008. Romney isn't like George W Bush, whose conservative bona fide were unquestioned that he could talk about the poor and without sounding like a candy-ass liberal.

I buy it. You sell conservatives on gays, guns and God, not on rational public policy. If you do, you can't rely on their vote. Romney doesn't have to worry about appealing to independents. He has to worry about his base.
 

Mitt Romney and his wife Ann Romney talk to members of the media aboard his campaign plane on March 6, 2012. Photograph: Getty Images

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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