The trap Obama has created for his presidency

For a while I figured that this decade of Americans used the word ["elites"] to describe a group of hateful people, a group to which they don't belong.  Now it looks as though the word means a group of hateful people in which they would like to be members.

I wrote that a couple or days ago in an effort to pin down the loose usage of the word "elites."  The words "elites" and "populist" seem to have picked up a hundred different meanings, depending where you're coming from.  I didn't get the distinctions right.  Simon Johnson does. 

The economist manages to clarify the nature of the "war" between "elites" and "populists."  He concludes, with good reason, that Obama is dooming his own presidency with a complete misunderstanding of what's really happening to the relationship between Wall Street and the rest of us.

Amidst otherwise strong coverage of the growing debate around the nature of finance and the power of big banks, a surprisingly high number of journalists continue to misuse the word “populism”.

For example, in an article on criticism of bankers at Davos, the Wall Street on Saturday morning reported that President Sarkozy of France delivered a “populist broadside” when he said,

    “That those who create jobs and wealth may earn a lot of money is not shocking.  But that those who contribute to destroying jobs and wealth also earn a lot of money is morally indefensible.”

The implication, of course, is that some politicians are pandering to “the people” vs. “the elites” – part of a long-standing theme in some interpretations of democratic political conflict.  While elites invest and engage in productive activities, the argument goes, plebians from time to time demand excessive income redistribution or punitive taxation or other measures that would undermine productivity and prosperity.

Or, as President Obama said in March 2009, “My administration is the only thing between you and the pitchforks.”

Such language reveals a complete misunderstanding of our current situation....

Johnson's understanding of how the word "populist" is being misused reveals what could prove to be a fatal flaw within the Obama administration.

... The fact that dramatic banking reforms would be popular does not make them populist.  It merely means that a broad cross-section of our population has woken up to part of our appalling reality.  Sure, they are angry – but with good reason, and the remedies they seek are entirely appropriate.  Most of our elites are on the side of the broader population on this issue; only the diseased heart of Wall Street holds out.

Unfortunately, for whatever reason, the Obama administration remains convinced that merely tweaking our existing regulations is the only responsible way forward.  Even their new “Volcker Rule” increasingly looks like superficial rebranding without new substance.

This will go nowhere – except to sad, unnecessary, and complete defeat in the November midterm elections.

For the full story from Simon Johnson along with valuable links and comments, go straight to his blog.