Wednesday’s Democratic debate was far more informative than previous debates. What we learned, in particular, was that as a presidential candidate, Michael Bloomberg is a great businessman — and that Elizabeth Warren remains a force to be reckoned with.
Both lessons ran very much counter to the narrative that the news media has been telling in recent weeks. On one side, there has been a palpable eagerness on the part of some news organizations and many pundits to elevate Bloomberg; on the other side, complaints by Warren supporters about her “erasure” from news coverage and polling aren’t wrong.
What does all this mean for the nomination? I have no idea. But maybe the Warren-Bloomberg confrontation will help refocus discussion away from so-called Medicare for All — which isn’t going to be enacted, no matter who wins — to an issue where it matters a lot which Democrat prevails. Namely, are we going to do anything to rein in the financialization of the U.S. economy?
During the U.S. economy’s greatest generation — the era of rapid, broadly shared growth that followed World War II — Wall Street was a fairly peripheral part of the picture. When people thought about business leaders, they thought about people running companies that actually made things, not people who got rich through wheeling and dealing.
But that all changed in the 1980s, largely thanks to financial deregulation. Suddenly the big bucks came from buying and selling companies as opposed to running them.
In many cases, these financial deals saddled companies with crippling levels of debt, often ending in bankruptcy and job destruction — a process that continues to this day. There was also an epidemic of financial fraud and racketeering, exemplified by the career of Michael Milken, the junk-bond king Donald Trump just pardoned.
And the financial sector itself doubled as a share of the economy, which meant that it was pulling lots of capital and many smart people away from productive activities.
For there is no evidence that Wall Street’s mega-expansion made the rest of the economy more efficient. On the contrary, growth in family incomes slowed down as finance rose — although a few people became immensely rich. And the runaway growth of finance set the stage for the worst economic crisis since the Great Depression.
It also made Michael Bloomberg a billionaire.
Now, I wasn’t being sarcastic in calling Bloomberg a great businessman. He is. And to his credit, he himself hasn’t, as far as I know, engaged in destructive financial wheeling and dealing. Instead, he got rich by selling equipment to destructive wheeler-dealers.
For those who don’t know what I’m talking about, I’m referring to the famous Bloomberg Terminal, a proprietary computer system that gives subscribers real-time access to large quantities of financial data. This access is incredibly expensive — a subscription costs around $24,000 a year. But it’s a must-have in the financial industry, because traders with Bloomberg Terminals can react to market events a few minutes faster than those without.
It’s an extremely profitable business. But is it good for the economy? No.
After all, does getting financial information a few minutes earlier do anything significant to improve real-world business decisions that affect jobs and productivity? Surely not. Bloomberg has, in effect, made his billions off a financial arms race that costs vast sums but leaves everyone pretty much back where they started.
Which brings me to Elizabeth Warren.
Warren stumbled badly, making herself a long shot for the nomination, by trying to appease supporters of Bernie Sanders. She endorsed proposals for radical health care reform that have almost no chance of becoming reality, and she was raked over the coals about paying for those proposals even though Sanders himself has offered few clues about his own plans.
But before all that, Warren had made a name for herself as a crusader against financial industry fraud and excess.
It wasn’t just talk. One key piece of the reforms instituted after the 2008 financial crisis, the creation of the Consumer Financial Protection Bureau, was Warren’s brainchild. Furthermore, by all accounts the bureau was wildly successful, saving ordinary families billions, until the Trump administration set about eviscerating it.
And here’s the thing: Financial reform, unlike health care, is an area in which it might make a big difference which Democrat becomes president. It’s true that other candidates — including Bloomberg! — have endorsed Warren-type reforms. But it is, I think, fair to ask how committed they would be in practice, and also whether they would squander their political capital on unwinnable fights, which is my big concern about Sanders.
Again, aside from the clear damage to Bloomberg, I have no idea how or if Wednesday’s debate will affect the Democratic race. But it may have helped remind Democrats that corruption, fraud and the excesses of Wall Street in particular can be potent political issues — especially against a president who is both personally corrupt and so obviously a friend to fraudsters.
Paul Krugman, Ph.D., winner of the Nobel Memorial Prize in Economics, is an Op-Ed columnist for The New York Times.