Obama the Hamiltonian

When former President Barack Obama decided to take $400,000 from a Wall Street investment bank for the first paid speech of his post-presidential career, he accelerated an important debate within the political establishment.

As a policy leader, Obama’s Presidency was largely defined by the financial crisis. The government’s response, organized first by Bush and then Obama, had a moral core. This moral core framed concentrations of financial power not as threats to liberty and democracy, but as vehicles to deliver efficiency and social justice. You don’t, for instance, want random protesters setting nuclear policy, you want generals and experts doing that. You don’t want anyone to be able to organize a search engine, you want the best technologists in the business doing that, doing it well, and doing it for everyone. That’s not just power, it’s the right way to run a society.

In this framework, taking money from an investment bank in the form of a speaking fee is not immoral, it is eminently reasonable. Investment bankers are smart. They allocate resources. That’s why they have power. That’s who elites should be associating with. Obama, like Bush, is a Hamiltonian. He believed that those at the top of large concentrated financial institutions are experts, with top-tier credentials, and, therefore, rightful rulers. As Mr. Obama put it, Jamie Dimon, the chief executive of JP Morgan Chase, and Lloyd Blankfein, the chief executive of Goldman Sachs, were just “smart businessmen.”

Behind this is a deep moral debate that goes back hundreds of years, to the days of Hamilton and Nicholas Biddle. Since the Boston Tea Party revolt against the British East Indies Company’s attempted monopolization of the tea trade in 1773, Americans understood local commercial institutions as enabling key decisions to be made closer to the people who bore the costs of those decisions. Advocates of centralization, like Hamilton, believed that this was an unstable and weak model for how to craft a nation-state, and that a quasi-aristocratic class should rule.

This debate was alive and well in its own form during the financial crisis. Larry Summers, for instance, lauded the Canadian banking system, which has just few giant, heavily regulated banks. This kind of system, he argued, was more stable and more easily regulated than the American one in which many small banks and credit unions compete over credit allocation.

The policy path of the Obama administration, like the Bush and Clinton administrations before it, and in some ways like Hamilton’s Treasury Department, was largely construed around aiding the big, and hurting the small. Local banks lost out during the crisis, as did community-oriented banks. Black-owned banks, for example, were ten times less likely to receive bailout money than non-black-owned banks. This hit at the individual level as well. People in foreclosure were treated with one set of rules, while large Wall Street firms with significant debt were treated with another.

What most critics of the Obama administration missed was that these policies were an assertion of a Hamiltonian moral vision. Obama, in 2005 as a young Senator, helped launch the Hamilton project at the Brookings Institute. His Treasury Secretary, Tim Geithner, believed that strong public action to constrain big banks, prosecute bankers, or restrict bonuses represented ‘Old Testament’ justice, a pander to the ignorance of the rabble. Obama even called Franklin Delano Roosevelt ‘irresponsible’ for refusing to pledge to Herbert Hoover’s during the 1932 transition that he would adhere to Hoover’s policy framework.

This Hamiltonian process of concentrating power was most obvious in the banking sector, but it is also part of an overall trend towards the monopolization of our commercial society and increasing control over our lives, our liberties, and our democracy by private financiers. Some within the Obama administration noticed problems towards the end of the administration. His administration challenged the Comcast-Time Warner merger and issued an executive order on monopoly. Antitrust chief Renata Hesse made a speech explicitly rejecting the modern pro-concentration treatment of antitrust. But this was far too little, loo late.

The open markets in which entrepreneurs thrive, in which workers have bargaining power, in which business is conducted honestly and effectively for the benefit of society, was fundamentally weakened during the eight years of the Obama administration, just as they had been during the Bush administration before it. The result is a bipartisan corrosive cynicism towards democracy,

Americans have been saying no to this for ten years. In 2006 and 2008, Americans threw the governing Republican Party out of power. In 2010 and 2014, they did the same to the Democrats, installing Obama in power. Then, in 2016, Donald J. Trump beat both 16 Republican candidates, and then Hillary Clinton. It’s hard to see these electoral tremors as anything other than a rejection of the moral framework of both party establishments.

For virtually his whole Presidency, President Obama operated according to a Hamiltonian worldview in which social justice and concentrated capital went hand-in-hand, where technocracy was seen as superior to democracy. It is that same moral vision that animated Obama in accepting nearly half a million dollars in speaking fee money. Obama was the damn President — he’s a smart guy, and yeah, this is who he should be spending time with and naturally this transfer of wealth is a just reward for him to live the lifestyle to which the virtuous class is entitled.

The endorsement of this worldview by Obama, and the disappointment it provoked in his supporters, is useful. It strips away the polish and PR sheen of the last eight years. Democrats are now uncomfortable, not with Trump, but with themselves. And they need to be, or they won’t learn to love democracy. Taking this money makes it clear what Obama believes, and what Democrats bought into when they invested so heavily into his administration and its policies. It draws a consistent line from the unsatisfying policy framework of Obama’s administration to what actually animated it. Not 13 dimensional chess, not GOP obstruction, but a philosophy that Democrats find distasteful on its own merits.

Obama’s good society was one in which a few actors in this class organize our culture using their power over our lives and liberties, because their virtue has enabled them to have the capital or credentials to do so. It’s why his policy agenda on the challenges of today’s political economy was education, early childhood education, and a higher minimum wage, rather than any means to liberate us from the concentrated financiers that organize our markets and our communities. They are doing this for our own good, for one day, maybe not you or me, but perhaps our children might be able to scratch and claw into this rarefied class. If, of course, they have the virtue and intelligence to do so.

Many people believe in this system. Many don’t. But now we can actually have the argument in an honest way.