Thomas Palley: Fraternity of Failure – The Alternative, as in Hillary Clinton, Version

Posted on by

Yves here. The one reason I preferred Obama to Hillary in 2008 was that Hillary would bring back the old Clinton economics team. Then as soon as he was elected, Obama did his bait and switch and swapped out Paul Volcker, who’d been his most visible economics advisor during his campaign, for Rubin gang member Timothy Geithner. I’d also have a slightly different litmus test list, but it is good to throw down concrete demands.

By Thomas Palley, a United States-based economist who has served as the chief economist for the US–China Economic and Security Review Commission. His latest book is Financialization: The Economics of Finance Capital Domination. Originally published at his website

Hillary Clinton does not want to talk about past economic controversies. And it is easy to understand why. There is much that is troubling. But let’s not go along with her wishes. You can learn a lot by studying recent history and even more by watching how politicians react to that history.

The big “let’s move on” story of the Clinton campaign is the refusal to answer journalists. According to the Washington Post in the first 29 days after she announced her campaign she took just eight questions. The campaign’s response to all this? Blah. Reporters whining as usual.

Now, I’m not going to be impolite and focus on questions about the Iraq War which have been getting Jeb Bush in deep trouble with some liberals. Instead, I’m going to focus on economic policy which is my area of expertise. It also seems to be the focus of Mrs. Clinton’s campaign.

If you take a look at the list of big name economists who have significant influence on Mrs. Clinton, you will find that nearly all of them agreed, back during “Bill’s boom”, that NAFTA was good for the economy. So too was giving China access to the US market without effective labor standards, environmental standards and protections against currency manipulation. They also thought financial deregulation was a must and financial concentration was cool.

Mrs. Clinton’s economics team includes Robert Rubin, Larry Summers and Peter Orszag. In the 1990s, Rubin and Summers put in place the trade, deregulation and competition policies that have gotten us in so much trouble. The housing bubble that ended so badly also began on their watch. Above all, they argued persistently for fiscal austerity and even toyed with privatizing Social Security.

Following in the footsteps of Messrs. Rubin and Summers, for the last several years Mr. Orszag has been collecting booty on Wall Street. Before that, his starting job in Washington was to write papers showing that budget deficits increase interest rates, thereby preparing the political table for a menu of fiscal austerity and entitlement cuts.

In Clintonworld, it seems that playing a central role in catastrophic policy failure or peddling bad economics doesn’t disqualify you from future influence. If anything, a record of being disastrously wrong on economic policy seems to be a required credential.

Mrs. Clinton wants us to think things have changed and that she’s become a real deal populist. Well, talk is cheap. It’s costless to mouth bromides about supporting full employment and reduced income inequality.

That means the challenge for the rest of us is to make presidential candidates commit to policies that are ‘big” enough to determine an administration’s character and specific enough to tie a candidate down.

Here’s my list of three policies that Mrs. Clinton must adopt to show she’s the real thing:

1. Expand Social Security.
2. Add a public option to Obamacare.
3. Reject all trade agreements that lack currency manipulation protections or include investor – state dispute settlement provisions.

Argentine President General Peron once said “A country is like a guitar. You pick it up with the left hand and play it with the right”. Team Clinton have been masters at this. Until Mrs. Clinton answers these three questions affirmatively, I’m not buying her new populist song and dance.

N.B. This article borrows shamelessly from Paul Krugman’s original version of “Fraternity of Failure”, New York Times, May 15, 2015.

Print Friendly, PDF & Email


  1. Sandwichman

    One’s perspective on “catastrophic policy failure” depends on whether one has benefited or suffered from it. Some folks have made out like bandits.

    1. James Levy

      On the one hand, I understand your point. On the other, you can go to the well one too many times, or kill the goose that lays those golden eggs. What some of us around here expect is that the need for systems maintenance, even if it is a crappy, unfair, system, will have to kick in as the top priority over systemic looting. You can only beat that plow horse so mercilessly until it up and dies and then you’ve got to somehow get in that crop with your bare hands. My guess is that the elite would rather fleece the provincials, as Tiberius said, not flay them. But our elites are so greedy and near-sighted that they seem to be running the planet the way Mr. Magoo drove a car (but I fear without his cartoon luck).

      1. RUKidding

        You make good points, and I like the Mr. Magoo analogy (heh). One would like to *think* that these greedy sociopaths would somehow realize that one can only flog a horse for so long, and then it’s dead… and then what? Especially if you’ve flogged ALL of the horses ’till they’re dead.

        In my life (the tiny microcosm), I’m sad to say that most people don’t appear to exhibit what I’ve come call uncommon sense – mainly bc most people do not exhibit “common sense.” Either we’ve lost the capacity for that, or it was never there to begin with.

        Given my experience in the microcosm of my life, I hold few expectations that these rapacious, greedy, out of control, fully nuts criminals will somehow wake up, smell the coffee, and figure out that they simply cannot continue on this present course, which IS, in fact, totally self-destructive for themselves and our planet.

        As you indicate, Mr Magoo was somehow always saved at the last minute by some unforeseen but lucky-for-him circumstance. I don’t think we will all be similarly lucky.

    1. lakewoebegoner

      lol, as if paying HR Clinton (or Bill or a retired Barack) $100,000 would have been ‘reasonable.’

      HRC clearly doesn’t need the money. And for HR Clinton to accept money that’s presumably funded solely (or largely) by the local student activities fee is unconscionable.

      pathetically, 2016 will be the battle of Conservative Republican who’s mildly pro-choice and pro-bombing countries v. Conservative Republican who’s rabidly anti-abortion and pro-invading countries.

    2. Katniss Everdeen

      What in the world could these people have to say that’s worth this kind of money? And even in a nation of 316 million people, I can’t imagine being able to find 1000 individuals who are willing to sit through an hour of their fingernails-on-a-chalkboard vocalizing and demented, self-absorbed histrionics.

      I honestly don’t get it.

      1. ambrit

        I suspect that it’s all about status, for both the speaker and the ‘sponsor;’ the audience be d—-d.

        1. DanB

          Here’s my guess. The committee that controls this money is a few people who want access -and some status rub off- to Hillary. Maybe they are angling for a job with her campaign or administration, etc. But even they are taken aback my Hillary’s avarice and temerity to say she’s giving them a discount. No one on earth is worth a $300,000 speaking fee; but if it’s about status, corruption, and access, and it’s other people’s money being spent, then it suddenly is worth $300,000.

          1. Carolinian

            Indeed. Perhaps the real question is who at UCLA invited HIllary–or anyone–to talk for such an astronomical fee. In the old days these decisions were made by a student committee. If it was the administrators looking to gladhand Madame Secretary using the student/taxpayer dime then that’s an even bigger scandal. Not that Clinton’s fees aren’t a scandal in themselves. That she would try to so shake down a public institution is unconscionable. I believe there was a similar case in Nevada and she backed down somewhat.

            BTW Dean Baker writes today about the bloat of university administration and wonders what will happen to all those overcompensated university execs should free college proposals come to pass.


      2. rusti

        An additional irony in this is that I imagine the speakers, as a rule, just give an hour of reassuring platitudes about how great the audience is and the system that enabled them to pay more than the lifetime income of a huge percentage of the world population for an hour with a celebrity.

        If they wanted an actual hour of enlightenment and a challenge to their world views, they could go to a library and get it for free.

      3. Joe Reeves

        Around 2002 I was working at Schwab and Bill Clinton was the keynote speaker at their IMPACT conference for financial advisors. Schwab had just recently laid off many, many people (I don’t remember the number). I had a chance to listen to Clinton’s profound wisdom for which they paid him $200,000 for about 35 minutes of reasonably articulate blather. Included in that he took one or two softball deferential questions. In my asking around why the company would do such a thing it boiled down to name, status, celebrity and that for these conferences they need a big name.

  2. Marko

    No Clinton or Bush will ever represent me in Washington again , and that includes Chelsea , Barbs , and Jenna -even if they were to spend the next decade cleaning the latrines of poor Ethiopians with their bare hands. The same for anyone named Obama. I’m already terminally ashamed knowing the atrocities those Presidents signed off on while I sat around with my thumb up my ass. No more. I’m not a party to anything these creeps do going forward , though I’ll do what little I can to stop everything they try , because none of it will be good.

    1. Crazy Horse

      So you hate the family Bush, the clan Clinton, and the order Obama? About as relevant as cheering for the Cowboys or hating the Patriots and Tom Brady.

      Elections in a kleptocracy are simply circuses held to keep the rabble occupied by activating genetically embedded tribal urges while the sociopaths on top ride the planet down the path to the Sixth Extinction.

      As George Carlin pointed out, if elections mattered they would make them illegal.

      1. Steve Bruns

        Actually the source text is Emma Goldman’s wonderful, “If voting changed anything, they’d make it illegal.”

  3. Carla

    It doesn’t matter who is president. It’s possible that it hasn’t mattered for a good long time, but in any case, it doesn’t matter now. The system is too far gone.

    So if we’re not working on systemic change, we’re not doing anything.

    How about replacing Mr. Palley’s three policy proposals with these systemic changes?

    1. Go BIG (provide a Basic Income Guarantee to every American)
    2. Replace Obamacare with comprehensive single-payer: expanded and improved Medicare for All
    3. Bury Fast Track and any Investor-State Dispute Settlement provisions of trade agreements. They are blatantly unconstitutional.

    Speaking of the constitution, there seems to be an almost universally held religious conviction that it has served us well. Considering the Roberts court, does that item deserve another look-see?

    1. ambrit

      A case can be made for declaring a vote, and or sponsorship, for either of the trade ‘treaties’ as an act of treason against the State. The Constitution has been, and can be again, a force for good in our society. As any regulator can tell you; the enforcement provisions are paramount.

    2. Marko

      ” Speaking of the constitution, there seems to be an almost universally held religious conviction that it has served us well. Considering the Roberts court, does that item deserve another look-see?”

      There’s a great Realnews series about the surveillance state , etc. ( Chris Hedges and Robert Scheer ) in which the founding fathers and their documents are a topic of debate :

  4. Chris

    Here’s my list of three policies that Mrs. Clinton must adopt to show she’s the real thing:

    Ain’t gonna happen :(

    1. AlanSmithee

      It doesn’t have to happen. All Palley wants is for his candidate to say nice things so, when Hillary does the exact opposite, he can say: ‘I wuz fooled agin!’

  5. Code Name D

    Two words, “Projected Cabinet”. Lets see her do it. But we know why she won’t.

    1. NotTimothyGeithner

      Clinton’s Iraq War vote makes any promise worthless. She is simply unfit for any government job.

  6. mk

    “The one reason I preferred Obama to Hillary in 2008 was that Hillary would bring back the old Clinton economics team. Then as soon as he was elected, Obama did his bait and switch and swapped out Paul Volcker, who’d been his most visible economics advisor during his campaign, for Rubin gang member Timothy Geithner. ”
    Volcker hanging out with Obama during the 2008 presidential campaign is what gave me hope that corrupt bankers would go to jail, but I wasn’t sure and when I pointed out at an Organizing For America meeting that Goldman Sacks-The-USA gave Obama almost $1 million for his campaign, I was shouted down and shunned by the organizers. EFF HILARY, I’m working for Bernie Sanders this campaign, I don’t care if it’s a throwaway vote, it’s a throwaway government at this point, not representative of the 99% of people living in this country.

  7. LHV

    Carla’s point about the constitution is crucial. The constitution’s obsolete shit. Every mediocre African statelet has a vastly better one. Supreme Court justice Ginsberg told you so. Anyway, the constitution’s gone. It’s not coming back.

    The world has left the US in the dust. So if you as a candidate don’t understand the duties and obligations now required of any sovereign state, you don’t deserve to run for dogcatcher. If you don’t even know what we as human beings have got coming, then stick your piecemeal programs up your ass, you’re a clown.

    Not gonna lift a finger till I know, Do you meet the minimal standards of the civilized world? Specifically, The International Bill of Human Rights. The UN Charter. The Rome Statute. Chapter and verse. What protective pacts will you ratify, how? What reservations will you withdraw? What institutions need to adapt to comply?

    The state wants you to beg for pathetic little scraps of rights. Fuck that. We get them all.

    1. Carla

      “The state wants you to beg for pathetic little scraps of rights. Fuck that. We get them all.”

      Well, we sure as hell aren’t acting like it.

  8. Chibboleth

    “Here’s my list of three policies that Mrs. Clinton must adopt to show she’s the real thing:”

    Here’s the problem – in the Obama era it has become clear that major national politicians are under no compulsion to even pretend to govern the way they campaigned. All you have to do is toss your base some pleasing rhetoric every once in a while and then actually do whatever the hell your sponsors want, serene in the knowledge that hardly anyone will even notice.

    Which means there is nothing Clinton can do or say during the campaign that will convince me she’s turned populist all of a sudden. I really see no reason to pay attention to the campaign at all, or vote when the time comes. In fact ignoring it will probably be a lot better for my mental well-being.

  9. Dan Kervick

    This piece seemed to be leading up to something fairly big, but the concluding litmus test seems fairly limited – though good as far as it goes.

    1. Carla

      Yes, we need systemic change, not tweaks. So I’ll reiterate my demands, as stated in a comment above:

      1. Go BIG (provide a Basic Income Guarantee to every American)
      2. Replace Obamacare with comprehensive single-payer: expanded and improved Medicare for All
      3. Bury Fast Track and any Investor-State Dispute Settlement provisions of trade agreements. They are blatantly unconstitutional.

      And I threw in a freebie: that article of faith we call our constitution? Maybe we need to reconsider it altogether.

  10. impermanence

    Clinton will do what’s best for Clinton [just like pretty much everybody else].

  11. Bernard

    “The Old Clinton economics team” is mainly responsible for lots of bad things, the list is endless. to hear you, Yves, or anyone say that surprises and saddens me. Unless i have been misreading US economic/political history since Clinton was elected, the Big Dog, that is, i can’t even imagine anything “positive” about the Clintons, other than their capacity to screw others for their own benefit. wow, what a statement. i obviously don’t know or haven’t learned much in this blog about economics if “Clinton’s economic team” is “good for America.”

    Wow, i must be dreaming what i read or misinterpreting this.

  12. TG

    Sorry, I must disagree. If Hilary Clinton publicly agrees to your points, so what? Words are wind.

    By now we must assume that EVERYTHING that Hilary Clinton promises is a focus-group refined lie, to be discarded as soon as she is elected.

    The traditional three laws for evaluating political candidates are:
    1. Look at the record
    2. Look at the record
    3. Look at the record.

    Hilary Clinton is beyond the pale and nobody with any decency should fool themselves into voting for her because of her latest spin. No, that doesn’t mean there are going to be any better candidate out there – Jeb and Rubio are IMHO equally vile. But there is a level of toxicity beyond which it should be impossible to vote for someone under any conditions, and Hilary Clinton is the Fukushima of Democratic politics – no amount of scrubbing can ever clean her up.

  13. Oregoncharles

    Doesn’t this belong in the category of “lessons not learned”?

    I’m tempted to just leave it there, but I’ll elaborate a little:

    What do you do when she isn’t signing on to any sodding “litmus test,” and why should she?

    This was precisely Hillary’s big problem in 2008: we already know who she is. That’s why people went for Obama – he was at least a little cryptic, intentionally.

    I still wonder what it’s going to take. I’m not looking forward to finding out.

    1. MyLessThanPrimeBeef

      In 1992, I did not believe in fiat miracles like, say, Camelot II, that could be created out of thin air.

      In 2008, I still did not believe a new Messiah could be created out of thin air.

      Both cases, I was looking for a slightly worse choice of an old, and not particularly suave candidate who could inspire trust.

      Trust is the only thing we can go by these days…when a person opens a can of cat food, he/she trusts it’s not poisonous. The usual deterrent that, after being poisoned to death, the public or the state will get the canning corporation is of little comfort to the victim. And so, trust is paramount in any non-hunting/gathering society, or a non-self-generating food world.

      I can’t say I was smart, but rather, I was lucky. I did not, to borrow an analogy, dare to fall in love, and so, I was not disappointed. They say, in life, one must not fear in order to live a full life. I went against that advice and held back from believing in either guys.

  14. Pelham

    Given the presence of Summers and Rubin, Clinton is now definitively a lost cause. What she says or which questions she dodges are of utterly no interest.

    That leaves Bernie Sanders, a decent man who deserves a serious hearing and a serious chance at the Democratic nomination. But I’ve lost count of the number of sympathetic articles I’ve read that say he has no chance although it’s a good thing he’s running because he can change the conversation, nudge Clinton to the left, etc., etc.

    Well, if we concede from the start that he has no chance, how much influence can he exert? He might shift the conversation a bit, but it won’t matter once Clinton or Bush take office. That would be the worst of all outcomes because it would give the illusion that we’ve had a bit of debate when we actually haven’t.

    Let’s categorically and irreversibly reject Clinton and REALLY get behind Sanders and drive as hard as we can to secure the nomination for him. And then let’s make the best case we can for Bernie not just with the left but with genuine outreach to people in the middle of the spectrum and even on the right.

    In other words, in this election cycle, let’s for a change do something that’s actually different. It’s long overdue. The worst that can happen is that we’ll fail. But if the alternative is Clinton, that’s a failure, too.

Comments are closed.