In Princeton, New Jersey, last week, I gave two lectures on the legacy of Margaret Thatcher. I was told that the last outsider to have spoken at the university on this subject was Edward Heath. He had informed Princetonians that Lady Thatcher posed a greater threat to world peace than Saddam Hussein. My second lecture’s audience was not disposed to agree. They were members of the James Madison Program in American Ideals and Institutions, a movement set up to counter the politically correct culture of academia. Afterwards I read Frank Rich in the New York Times complaining that the Madison Program is the semi-covert backer of an organisation which has the — to him — dastardly project of promoting heterosexual marriage.
But on my day, that particular topic did not arise. We were discussing whether it was true that, in the events that led up to the credit crunch, Adam Smith’s ‘invisible hand’ had put its fingers in the till. I argued differently: it was rather that capitalism and big government had made a devil’s bargain in the last 15 years in which each agreed to cover up for the faults of the other. There is a powerful article about this in the latest issue of the Atlantic Monthly by Simon Johnson, the former chief economist of the IMF. He explains that when the IMF is invited in to help a country in financial difficulty, it always encounters the same obstacle — a political-financial oligarchy which has much to lose by putting its house in order. The problem, he says, is that the United States has just such an oligarchy. Twenty-five years ago, the financial sector earned 16 per cent of the nation’s corporate profits. In this decade, the figure is 41 per cent. With those profits has come power which is entrenched in ‘the interweaving of the two career tracks’ (of government and finance), and in ‘a kind of cultural capital — a belief system’.
The case of Goldman Sachs illustrates. Just as I reached Washington, Goldmans proudly announced that they now wanted to pay back early the $10 billion that they had taken from the government’s Troubled Asset Relief Program (TARP). Public joy was confined by the fact that they were not proposing to surrender the other forms of government protection they enjoy. They were keen to cast off what the head of JPMorgan Chase, which is in a similar situation, called the ‘scarlet letter’ of TARP aid, so that they could return to their more traditional vice of paying one another as much as they wanted. Robert Rubin, who was Clinton’s Treasury secretary, was once co-chairman of Goldmans. Henry Paulson, who did the same job for George W. Bush, had been its CEO. The largest single financial backer of Barack Obama’s election campaign — through the agreed individual contributions of the top tier of the company — was Goldman Sachs. The banks have become like heavy, often nationalised industry was 40 years ago — the ‘commanding heights’ which grabbed more political power at the expense of their true economic efficiency. Political leadership has to confront them, while preserving their necessary functions. Mr Obama, though clean of responsibility for the mess, is in a curiously weak position to do this, because his government, like the banks, is ‘too big to fail’.
The Republicans, however, seem not to understand that President Obama still has the benefit of the doubt. Last week’s Tax Day, when Americans have to file their tax returns, was marked by hundreds of ‘tea parties’ held, in imitation of the Boston Tea Party, by natural Republicans all over the country who were ‘mad as hell’ about taxes. Some of them wore tea bags on their heads. The parties were quite well-attended, but essentially directionless. They were also the subject of ribaldry, because ‘teabagging’, apparently, is some revolting sexual practice. My old friend David Frum, who is trying to get the Republicans to confront reality (see his website NewMajority), fears they are like the Tories after 1997: they fail to realise what they look like to everyone else. Perhaps partly for this reason, David wants them to confront the rise of American obesity. He wishes literally to shrink the Republican base.
One of the things to admire in America is its Victorian quality. American Ideals and Institutions (see above) are celebrated without embarrassment. And people still build in a style intended to reflect the importance of institutions. Whitman College, within Princeton, looks late-Victorian, with its court of grey stone and mullioned windows, but it was commissioned in 2002, from the architect Demetri Porphyrios. The best bit of Whitman is the hall. It is mediaeval in style, including an imposing fireplace, but strong and simple and grand — not a silly pastiche, but an expression of confidence.
A similar spirit imbues the Metropolitan Club in Washington, at which I stayed. Founded in 1863, it is as old as many of the famous English clubs, and resembles them. But American clubs are subtly different. They snap to attention more. Just after arriving, I was sitting in the coffee-room, and my mobile rang. I guessed that it was not allowed, but answered it quickly to ask to ring back later. As if from nowhere, a smartly dressed oriental porter emerged and smilingly placed into my hand an elegantly printed card which explained that ‘The use of electronic devices is prohibited in dining and public areas of the Clubhouse’, and urged me to retire to the Correspondence Lounge. So much politer than the disorganised shushing that would happen in London.
In my bedroom, the maid had left the radio playing, as maids often do. But the channel she had chosen was C-Span, the station devoted to verbatim recordings of testimony before congressional committees etc. In this case, a speech to a pro-life dinner by the chairman of the Republican National Committee was burbling into the room. For this politics-crazed capital, it is like airport-lounge music, designed to make no demands and create a relaxed mood.
I had asked Alan Greenspan, the former chairman of the Fed, if he would see me. He refused, explaining that he had to do jury service. There must be something right with a nation in which the 83-year-old former head of the most powerful central bank in the world has to join 11 fellow citizens to do his civic duty.
The Washington Post reported a speech by the extremist Pakistani cleric Maulana Abdul Aziz at the Red Mosque in Islamabad: ‘…he called on a crowd of chanting followers to spread the crusade for Islamic law across the country’. I don’t think so.