When the 2-and-20 crowd drives economic research
Elizabeth Warren sent a letter to the CEOs of America’s biggest banks today, telling them to reveal how much money they give to Washington think tanks — policymakers and the public, she says, should know when they’re being fed a corporate-lobbying line, and when they’re getting valuable information from a genuinely independent think tank.
Matt Yglesias says that Warren’s letter is little more than “legislative subtweeting”, but she does have a point: the more that think tanks become beholden to vested interests, the less useful they become. If a think tank is working from an ideology and everything that it concludes is in line with that ideology, it’s really little more than a derp tank. On the other hand, if a think tank has a reputation for intellectual independence but is in fact secretly being controlled by ideologues or other people with a certain agenda, then more transparency is definitely in order.
But if you’re worried about Washington think tanks falling under the influence of the finance crowd, it’s not the bank CEOs you should really be concentrating on. Instead, it’s the 2-and-20 crowd, who are giving quite astonishing amounts of money to fund economic research in such places. Last year, for instance, Bill Janeway gave $25 million and George Soros gave another $50 million to The Institute for New Economic Thinking, which gifts spurred INET to announce that it was going to try to raise another $75 million on top of that.
Janeway and Soros were in their own way just following the lead of Pete Peterson, who contributed $1 billion to the Peter G. Peterson foundation, and has pledged to spend the vast majority of it on fiscal and economic issues. And today, Glenn Hutchins announced that he was spending $10 million to create the Hutchins Center on Fiscal and Monetary Policy within the Brookings Institution. The WSJ adds that as vice chairman of the Brookings board, he has also given himself the job of raising another $600 million for the think tank — the kind of money which will pay for an almost unlimited number of distinguished economics commentators. (WSJ columnist David Wessel is leaving the paper to head the new center.)
All of this rich-people money is making a real difference in policymaking circles. Wessel, in the WSJ, is quoted as saying that “there are few forums outside Fed-sponsored events” for questions about monetary policy to be discussed, and that he wants the new Hutchins Center to be the main such forum. This is great for Hutchins, who clearly wants to get his fingerprints on any institution where monetary policy is studied or practiced — he is, after all, already on the board of directors of the NY Fed.
The result is that the people who study monetary policy — academics and technocrats and career central bankers — are increasingly being funded not by the state, or by the academy, but rather by a small number of very rich individuals, most of whom made their fortune in finance. And while it can’t necessarily be identified with either the Democratic or the Republican party, there is a rich-people consensus on economic issues. Tax hikes are bad, first of all, while cuts to programs which serve the poor are much more acceptable. As Hutchins himself puts it, “the big problem is the political failure in this town associated with the inability to solve our government debt problems.”
It’s not news that people spend their money in a self-serving manner, of course, or that rich people in particular tend to be very sure that their own way of looking at the world is the true and right way of looking at the world. It’s not even news that rich people have a disproportionate amount of influence in public life. And different donors require very different degrees of fealty to their own economic vision. INET is a highly heterodox institution: it has no particular point of view, except to broaden the debate, and it has a natural economic curiosity which is in line with Soros himself, without necessarily mirroring Soros’s own opinions. If anything, I should imagine that Soros values INET not as a vehicle for his own ideas, but rather as a source for them. The Peterson Foundation, meanwhile, is at the other extreme: Peterson knows exactly what he thinks, and wants to propagate his ideas as effectively as possible. Hutchins is probably somewhere in the middle.
In many ways I’m glad that his center will now exist. The connection between fiscal and monetary policy is not well understood, but is absolutely central to the way the global economy currently works; if Wessel and Hutchins can help central bankers now, when they need all the smart analysis they can get, that is probably a good thing. (Academics are also studying these things, of course, but they tend to work at a much slower pace and be less policy-focused.)
Still, this is just another step in the Davos-ization of the world — just another way in which rich financiers are managing to institutionalize an astonishing degree of access to central bankers and other key economic policymakers. Hutchins chose Brookings for his millions because it is very good at influencing government, and driving the terms of wonkish debate. Influence is at heart a zero-sum game: if the financial sector has a lot of it, that means the rest of us have less. And given what the financial sector wrought in the 2000s, I don’t particularly trust it to get things right this time around.