The Republicansâ€™ loss of Wall Street magnifies an ancient fissure in the party, a conservative contradiction: the misalignment of incentives between the partyâ€™s free-enterprise wing and its entrenched business interests.
â€œThe problem with socialism is socialism,â€ Willi Schlamm famously observed. â€œThe problem with capitalism is capitalists.â€ From Wall Street to Detroit, businessmen have had at best a marriage of convenience with free-market principles, a fact that often puts the Republican party in the impossible position of mediating between philosophical purists and parochial business interests that profit from expansive government, protectionism, and regulations that smother competition. Republicans have long thought of themselves as the party of Big Business and free enterprise but, as Wall Street sends its money and votes to Democrats and snuggles up in an ever-cozier relationship with the government, Republicans face the choice of being the party of Big Business or the party of free enterprise â€” the party of capitalists or the party of capitalism.The Democrats have already decided which party they are. Which is to say, the Democrats have figured out that they can keep Wall Street in their coalition by offering them easygoing social liberalism, a few sweet tax breaks, and good access to government revenue streams. Republicans are not above the same deal-cutting and back-scratching, obviously, but they have a knottier coalitional contradiction to resolve: The capitalists donâ€™t want capitalism, and neither do a lot of mid-American social conservatives. Even as Reagan talked about the miracle of the invisible hand, the blue-collar social conservatives who put him in office indulged in a near-paranoid loathing of Japan â€” an economic phobia that is still very much alive in Republican heartland attitudes toward trade with China and India. George W. Bush talked up free trade â€” except on steel, sugar, and most agricultural commodities. The Republicansâ€™ philosophy is informed by free-market idealists who celebrate the wonders of Schumpeterian â€œcreative destruction,â€ but the guys flying business class would much rather sink into a nice warm bailout and let capitalism creatively destroy somebody elseâ€™s money â€” the taxpayersâ€™ money, for instance. The bankers are the last guys who want free markets right now, and so itâ€™s no surprise to find them writing big checks to the Democrats. But against all evidence, Republicans remain the party of Wall Street in the public imagination.
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