The Pros Lose to the Cons

Future historians will spend careers arguing over when this new era began. They’ll have plenty of options. But they ought to take a good look at September 29, 2008. That’s the day when two-thirds of House Republicans voted to kill the Bush administration’s $700 billion “financial rescue plan.” The plan eventually passed Congress, but the vote on September 29 was the one that mattered. It was the day when two-thirds of House conservatives made a huge mistake. The day when Lou Dobbs replaced Milton Friedman as the face of economic conservatism.

We’re used to seeing certain types of arguments among Republicans. There are fights between moderates and conservatives, neocons and paleocons, small- and big-government types, populists and elitists, insurgents and the establishment. The internal fight over the bailout bill was different. It pitted the conservatives who want to promote the international system we call “globalization“-for simplicity let’s call them Pros-against those who do not. Let’s call the latter Cons. This is their moment.

Globalization depends on the free worldwide flow of capital, labor, and goods. Pros want to help this flow, while Cons want to shut it off. Hence the Cons’ position on free trade (against), immigration (against), and international finance (who needs it?). The leaders of the Pros are President Bush and John McCain. The leaders of the Cons are Representatives Duncan Hunter of California, Tom Tancredo of Colorado, and Ron Paul of Texas.

These are not cut and dried labels. Conservatives can be anti-immigration and pro-bailout, or pro-trade and anti-immigration. But when you look carefully enough, it’s fascinating how the same folks tend to line up together on global issues again and again. You also notice how passionately they argue their point of view. There were times during the bailout debate last week when National Review Online‘s group blog, “The Corner,” resembled a rumble between the Crips and the Bloods.

The battle between the Pros and the Cons has been pronounced since 2006. Early that year the Bush administration sought to approve a deal that would have had a Dubai-owned company take over operations at major U.S. ports. This was exactly the sort of deal that you’d expect in a globalized world. Capital is supposed to cross borders with ease.

But the Dubai deal provoked a remarkable public outcry. Suddenly the federal government was “selling our ports” to foreigners. Who knew what could happen as a result? Hunter led the opposition, but the Democrats pitched in, too. A few brave souls tried to defend the global market. They cautioned that nobody was in any danger. They argued that America ought to be open to outside investment. They were totally ignored. Hunter and his allies scuttled the deal.

President Bush has continued to underestimate the power of the Cons. Soon after the Dubai ports controversy, Bush asked Congress to approve his immigration reform. America’s remarkable economic performance over the last 25 years has attracted millions of immigrants. Plenty of them have entered the country illegally. Bush’s reform was classic pro-globalization legislation and would have helped the American economy. It sought to stabilize the labor flow by instituting a guest-worker program and regularize the status of those immigrants who already were here.

But this was too much for plenty of House Republicans. They opposed the reform vociferously. They argued instead that the Bush administration should build a wall along America’s southern border. Once again, Hunter led the opposition, and, once again, Hunter won. Bush’s reform went nowhere. He failed with it again in 2007.

Two weeks ago, when Bush asked Congress to spend $700 billion buying up Wall Street’s bad debts, the Cons blanched. Many of them railed against the bill as “socialism.” But, contrary to popular myth, America has always had a mixed economy with elements of both the free market and interventionist government. The $700 billion, moreover, isn’t going to be spent digging ditches in Nevada or bringing electricity to Appalachia. It’s going to be spent buying securities that will later be sold-perhaps even at a profit.

One can argue that the administration’s plan won’t work, or that it won’t do enough to fix the financial crisis, or that the plan that failed in the House on September 29 didn’t contain enough oversight or tax breaks. One cannot argue, however, that there is no reason to support the plan. There is a big reason: the possibility that the alternative-doing nothing-may be far worse. Doing nothing could lead to a global financial meltdown. Doing nothing could mean an enduring economic recession, even depression.

That’s because the real global economy of people making, selling, and buying things relies on access to credit. In a systemic banking crisis, credit can disappear. The Cons who voted against Bush’s plan were willing to take that risk. They were ready to jettison the financial superstructure of globalization. They figured the costs of maintaining the system were too high. Better to let it collapse and start over again. That, after all, is what “creative destruction” is all about.

The problem with the Cons is that they underestimate the role confidence plays in the global economy. Markets rely on trust and the perception of strength. The markets need to see America taking decisive action. Otherwise they will freeze up, and investment will stop. It may start again eventually, as some of the Cons point out. But the cost in the meantime would be a poorer, and hence more dangerous, world.

The new politics of globalization also affects the Democrats. But their response to globalization has been far more unified. They tend to focus on the things globalization destroys (jobs, wages, economic security), while Republicans tend to be stymied by the things globalization creates (international finance, migrations, supranational and subnational identities).

During these uncertain times, Democrats have become more protectionist, more reliant on organized labor, and more willing to use state power to address inequity. They oppose further economic integration with allies like South Korea and Colombia. They are more willing to pool America’s sovereignty in collective security arrangements and other diplomatic compacts. And they are less convinced that our “hard power” protects global markets and therefore undergirds global stability. The Democrats may not have the right answers to the questions that globalization brings up, but they do present a unified front.

There are still a few Pros in the Democratic party, but these days they aren’t too vocal. It’s a party of Cons. And that is why the fight between the Pros and the Cons in the GOP is so important. During the last quarter century the GOP has been, more often than not, the party arguing for open markets at home and abroad protected by a powerful and assertive America. It’s been, in other words, a pro-globalization party.

And the consequences have been dramatic. Americans under the age of 30 wouldn’t recognize a recession if it punched them in the face. The political commentator Michael Barone likes to point out that since 1983 “Americans have lived in a country that has enjoyed noninflationary economic growth 95 percent of the time.” The global economy has also experienced an unprecedented prosperity during this period. About a billion people have been lifted out of poverty.

Normally, politicians would love to run on a record like this. But neither party has found a language in which they are able to describe globalization’s successes. Neither party has leaders who can discuss macro-economics and geopolitics with equal felicity, and explain to voters how the two things are related. Each party is far more likely to rely on old nostrums. Each party is tempted by inward-looking public policies. Each is ready to exploit the spectre of the “foreign.”

Our allies cast a wary eye on American politics. They see that the Pros are losing to the Cons.

Matthew Continetti is the associate editor of THE WEEKLY STANDARD.