The Wisdom of Crowds

By Hirsh, Michael; Gross, Daniel | Newsweek, February 8, 2010 | Go to article overview

The Wisdom of Crowds


Hirsh, Michael, Gross, Daniel, Newsweek


Byline: Michael Hirsh and Daniel Gross

When populist rage leads to smart policy.

John Dingell is one of the few people in Washington who remembers the last time so much populist anger gripped the country. It was early 1933, the worst year of the Great Depression. The Michigan congressman, now 83, was a wide-eyed kid listening to his father--also a congressman--speak at the family dinner table about losing his entire net worth of $7,500. "Americans all hated the damn bankers, they hated Wall Street," Dingell tells NEWSWEEK. "We had more communists in this country than there were in the Soviet Union because" of rage against the so-called banksters. No one knew this better than the incoming president, Franklin D. Roosevelt. The story is told that a supporter warned FDR that if he failed now, with the nation in chaos, he'd be known as "our worst president," and Roosevelt supposedly replied: "If I fail, I'll be your last president." FDR exhorted his New Dealers, "Above all, try something!" While it took time to get going, the hodgepodge of recovery programs he came up with--some successful, others not--managed to appease most of the populist outrage.

Barack Obama isn't saddled with the same degree of economic disaster as Franklin Roosevelt; the nation suffers 10 percent unemployment, which is bad, but it's not 25 percent. Yet the 44th president may face a political problem almost as sticky. Obama, like FDR, must appease populist anger rising from both left and right. Obama's giant stimulus, his health-care plan, and his continuation of the Bush administration's various bailout programs have ignited a prairie-fire backlash from the right (fueled in part by cynical Beltway Republicans). They call themselves tea partiers. The left's outrage is less organized (it's the left, after all), but reflects a visceral sense that the president has coddled Wall Street and given short shrift to Main Street. "The Democratic base is out of patience here," says a senior labor leader. "We're at a breaking point." There's something deeper at work beyond politics. We've witnessed an epic failure of the establishment--political, financial, business, even cultural.

All of which adds up to a very unhappy moment for Obama. The president and the Ivy Leaguers he has surrounded himself with are not natural populists. Since its appearance on the scene in the late 19th century, the language of populism has been one of opposition and incitement, clashes and fights--the Eastern bankers vs. the Midwestern farmers, rich white urban elites vs. poorer rural whites. That's not the language Obama traffics in. When the cerebral Obama inveighs against "fat-cat bankers," the phrase doesn't trip off his tongue. He's a community organizer, not a rabble-rouser. And he must know that populism, generally speaking, has been the refuge for losers in the American political process. No populist candidate has even come close to the presidency, though Teddy Roosevelt hit the 27 percent mark with his Bull Moose run in 1912 (he'd already been president, after all) and Ross Perot amassed an impressive 19 percent in 1992. William Jennings Bryan, the original Populist candidate, was the Democratic nominee in 1896, 1900, and 1908, but received fewer votes in each successive campaign.

Above all, populist uprisings usually careen out of control, driven by mindless anger. To some extent that's what is happening now. By the time of his confirmation vote last week, Federal Reserve chairman Ben Bernanke had been blamed for everything from Alan Greenspan's deregulatory policies to the flawed oversight of Wall Street, even though most of the worst-hit financial institutions were outside the Fed's supervisory reach. Yes, Bernanke made mistakes--serious ones--in the run-up to the financial crisis. But he also arguably did more than anyone to pull the global economy back from the brink of a Great Depression. Bernanke survived, but his populist penance was to suffer the largest "no" vote ever in the history of the Fed chairmanship, 70 to 30, with damage to the Fed's reputation that could be permanent.

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