There was an interesting Washington Post story last week about Molly Katchpole, a mostly unemployed 22-year-old progressive activist who started a petition to pressure Bank of America to back off its $5 debit card fee. In one sense, Ms. Katchpole might sound like the typical entitled progressive looking for a handout from the state. Regarding her student loans she said, “Why should I be expected to pay them off now? Why are colleges charging us interest on this stuff?”
While it may be tempting to dismiss what Ms. Katchpole has to say as just more typical progressive nonsense, don’t do it just yet. The issues she raises are much more complex than you might think at first glance and underscore the challenge of trying to shove today’s thorny political and economic problems into a neat Republican vs. Democrat or conservative vs. liberal box.
First, most believe Bank of America deserves everything it has coming to it. Remember, these are the guys that moved $75 trillion worth of notional CDS risk from Merrill Lynch to their FDIC guaranteed sub so that U.S. taxpayers will now be on the hook when the whole thing goes kaboom — and it will go kaboom. I don’t care how you slice it, that is simply unconscionable and the worst sort of progressive corporatism you can imagine.
Second, while majoring in art history and architecture wasn’t the smartest move, the fact that Ms. Katchpole has $40K in student loan debt is absurd… Why does she have that much debt? Because the federal government guarantees the loans. Truth be told, no bank in its right mind would ever even loan money to students unless they were backstopped by the feds to begin with. Flaky college kids are simply a terrible credit risk.
Were the Feds not backstopping student loans though, college would be a hell-of-a-lot more affordable for everyone. Colleges can jack up their costs by 10% a year precisely because taxpayers guarantee the loans. Colleges are simply taking advantage of inefficiencies in the marketplace created by the government. It’s progressive corporatism (there’s that phrase again).
Third, how is it equitable that student borrowers who make stupid bets (e.g. taking on $40K in debt to major in art history) aren’t even allowed to discharge those loans in bankruptcy anymore, yet bondholders (banks) who have made monumentally stupid bets over and over and over again by leveraging themselves to the hilt on garbage like European sovereign debt refuse to even take a haircut while demanding that taxpayers bail them out? It’s not equitable… It’s progressive corporatism.
So, what is progressive corporatism?
In the mid-1800’s progressivism began as a two-pronged movement towards direct democracy and efficiency made possible through the elimination of conflict and competition. An article in Blackwood-Edinburgh’s Magazine in 1864 described it best:
“[Competition] is a system of beggar-thy-neighbor, most useful in the earlier stages of civilization, but one most unworthy of civilization at its maturity. It is costly, for it requires many companies and establishments to do the work which would be more economically performed by one.”
Early progressives didn’t care about trust-busting, they wanted competing businesses to combine or merge to create more efficient monopolies. Check out how JP Morgan himself was described by his biographer in 1911:
“Mr. Morgan has stood in a unique way for the principle that capital must always organize and do away with internal friction, war, waste, among its factors and segments. He has been the great Progressive among capitalists.”
Progressive corporatism isn’t about free markets, it’s about organizing the world into dominant interest groups or business monopolies in order to reduce conflict. The vast regulatory state that we live with today was campaigned for and supported by big business to reduce conflict by keeping out pesky upstart competitors.
The result is a completely regulated marketplace that benefits monopolies. If you doubt me, ask yourself whether you could start an automobile company today, or whether you could bring a new drug to market as an independent company. It would be impossible of course because the regulatory costs are too high.
This is complex stuff and its not self-evident to most, but the “little progressives” – the students like Katchpole, some of the OWS protestors — they aren’t the problem. It’s the big progressives – the progressive corporatists, the billionaires like Warren Buffet, the crooks like Jon Corzine and Lloyd Blankfein, the phony’s like Al Gore who we should be running out of town on a rail.
They have been feathering their own nests at our expense for a long, long time. They push for the expansion of the central state into every sphere of our lives, not because they care about you and I or even about making the world a better place, but rather because progressive corporatism is profitable… for them.
And unfortunately, they do it with the full acquiescence and support of folks like Ms. Katchpole… for now. The bottom line is she’s being used. She know’s she’s being screwed. But she doesn’t know by whom. She has the wrong culprit.