The Rise of A New Nobilty

I rarely find myself in agreement with Martin Wolf, but in his FT column today he examines the long-term effects the bank rescues will have on our political economy. 

http://www.ft.com/cms/s/0/5e7dd89c-3f1c-11de-ae4f-00144feabdc0,dwp_uuid=653c5c4a-0ca3-11de-a555-0000779fd2ac.html?nclick_check=1

The "perverse incentives" that Wolf identifies have become the central issue because it will not take long for them to become normal. The political insurance against failure enjoyed by major financial institutions will turn them into extractors of rent with menaces. Once the market recovers too many individuals will identify their well-being with the benefit of those institutions and the constituency for real reform will be lost. Sadly I think that Wolf's perception that Obama has no stomach for a restructuring of the financial system is probably right. This is the price we pay for a man who was trained in constitutional law rather than institutional economics. The flaw in the thinking of otherwise interesting figures like Unger and Mandel is that they really take for granted that the old problems of scarcity and wealth are largely irrelevant in mature capitalist societies and I think Obama has acquired this position. He attention is given tot he failures of social democracy and the conservative liberalism that succeeded it as the dominant ideology of the American centre left. His project of democratisation does address those problems, but even those projects will fall apart if the power, interests and ideas of th new capitalist class are simply folded into the polity he is trying to build.