Over the past year, American politics has experienced something of a revolution. What else can explain the surprising success of Trump’s bombast and the remarkable tenacity of Sanders? Though to some their emergence may seem sudden, the causes of this populist revolt—mostly the fault of elite disregard for larger public opinion—stretch back at least a decade, before either of these men became serious contenders for political power. The collective arrogance of the financial sector, where I worked for many years, is responsible for much of the backlash.
The events surrounding the 2007-09 financial crisis in particular offer a vivid illustration of how the nation began to lose faith in the meritocracy that it once held in high esteem. In banking, industry, and government, all the presumed intelligence and superior education of this group seems to have conspired to bring the nation to a calamity. Legislation, without a thought to consequences, had for years pressured banks to issue mortgages to people who could not afford them. The elite in banking found ways to comply and still make money by packaging the questionable loans to sell off to small savers and less clever folk in pension funds, also without a thought to the consequences. The brilliant souls at the government-sponsored agencies, among them the Federal National Mortgage Association (Fannie Mae), facilitated the process by dealing heavily in these packages of bad debt, while the regulators found ways to look the other way. All the members of this elite got what they wanted as the nation’s financial structure become increasingly fragile.
When the crisis broke, this class’s self-seeking conspiracy became still more evident. All those in positions of power claimed that a remedy required extraordinary action, consisting largely of putting enormous amounts of money at their disposal. The federal government, under the guise of stimulating the economy, transferred billions in taxpayer funds to the special interests that had helped those in power secure their positions. The Federal Reserve bought still more packages of questionable assets from the negligent bankers, effectively socializing the risks the clever financial operators had taken. Taxpayer funds, too, found their way into the largest financial institutions. The best minds in academia, the nurturers of this ruling elite, praised these actions to a man and woman, as did the best and the brightest in the commentariat.
History will long remain uncertain whether circumstances required these unprecedented measures. What is painfully clear, however, is that these strenuous efforts helped those in the power elite keep their enviable incomes and their positions of influence, all while millions outside this ruling class lost their jobs and countless smaller firms, with weaker class connections, folded. No one in government suffered any blame or was forced to resign. Most CEOs of larger firms kept their jobs. Corporate boards of directors hardly changed. As if to underline the collusion, subsequent “reforms” have enshrined such protections into law. Look at the Dodd-Frank financial reform legislation. Its designation of a too-big-to-fail category of financial institution gives the elites running these firms security against bankruptcy and great competitive advantages over smaller financial institutions, where management comes from less privileged classes.
The abuse goes beyond finance. Assuming that people cannot even manage their own lives, those in power further justify their status by increasing their control of more and more aspects of life. They cannot brook the least resistance and will not even argue with opposition, for to do so would implicitly admit that someone else can think effectively for himself or herself. Their claims to superiority force them instead to dismiss any who resist as ignorant or racist or xenophobic or simply backward. Worse, the ruling class sees its position threatened by any practice or institution that in any way bolsters contrary thought. Traditional culture and religion get special attention, since they do the best job of supporting older norms.
President Obama has tipped his hand on this matter any number of times. A most egregious example arose during the 2008 campaign, when, as a candidate, he told a well-heeled San Francisco audience that many in the rest of the country are incapable of coping with the modern world and so “cling to guns or religion.” Other centers of elite power are even less careful than the president was. In the New York financial community, where your correspondent spent much of his career, a person can earn suspicion from one’s colleagues just by showing respect for members of the general public. The contempt has gone so far that bankers and money managers entirely forget whose money they are moving and act as if it is simply a vehicle through which they can make money for themselves.
On the issues of the day, these financial people, like other members of their class, simply and often derisively dismiss any opinion formed outside elite circles. When the Tea Party first gained prominence, for instance, one would have thought that financial people would have engaged with its primary issues, government spending and taxation. Instead, Wall Street glibly described the movement as full of racists and nativists, not because they necessarily believed it or had evidence, but because it gave them an excuse to ignore what these people were saying. Even today, any effort to inject a more nuanced view into this conversation evokes a personal attack, frequently with the suggestion that the questioner might be a racist, too, or, worse, unworthy of a place in the elite. The tendency to dismiss anything except received elite opinion on issues from transgender bathrooms to exemptions for religious liberty has driven Christians in New York financial circles to hide the fact rather than suffer a subtle ostracism and suspicions that they may not really belong.
If the success of Trump and Sanders is any indication, a significant portion of the American public wants to dislodge this failed and self-serving elite, whether they work on Wall Street or inside the Beltway. In both men these voters could not find a more awkward way of accomplishing their goal, but even with stronger champions, the displacement would be tough. With some intellectual support emerging from both the left and the right, however, it seems likely that the fight will go on. Even if not entirely successful, it might at least temper the elite’s arrogance and instill a measure of caution into its actions as well as its attitudes. That in itself would constitute a revolution.
Milton Ezrati is contributing editor to The National Interest, an affiliate of the Center for the Study of Human Capital at the University at Buffalo (SUNY), and recently retired as Lord, Abbett’s senior economist and market strategist. His latest book, Thirty Tomorrows, describing how the world can cope with the challenges of aging demographics and globalization, was released recently by Thomas Dunne Books of Saint Martin’s Press.