Posts Tagged 'the great depression'

A Succinct Explication

There seems to be a concerted effort on the part of many of those complicit in the current economic debacle, they and their political running dogs, to shift the blame off and onto the impersonal forces of market dynamics, or to the government’s “irresponsible” encouragement of home-ownership or to the well-documented sleaze of Bill Clinton. Forget about it. 

The following is the final paragraph in a lengthy piece that appears in the February 12, 2009, edition of The New York Review of Books titled, “How We Were Ruined & What We Can Do,” by Jeff Madrick, editor of Challenge Magazine, Visiting Professor at Cooper Union, and Senior Fellow at the Schwartz Center for Economic Policy Analysis at The New School. 

“This is, as many economists now concur, the worst economic crisis since the Great Depression. Financial market participants created a financial bubble of tragic proportions in pursuit of personal gain. But the deeper cause was a determination among people with political and economic power to minimize the use of government to oversee the financial markets and to guard against natural excess. If solutions are to be found, the nation requires robust and pragmatic use of government, free of laissez-faire cant and undue influence from the vested interests that have irresponsibly controlled the economy for too long.” 

Couldn’t say it better myself. I did try; See The Compost Heap, “Whadda I Know About Economics?”  Posted July 28, 2008. Apparently just enough.

Another Crisis For Another Old Order

images-1In the 1920s, President Calvin Coolidge proclaimed “the business of America is business.” The stock market crash of 1929 and the ensuing Great Depression took some of the wind out of that one.

With the so-called Reagan Revolution, the aggressive business agendas of pre-Depression America once again asserted their hold on the country. Over the past three decades business ceased to be a subset, if even a major subset of the national purpose, but became the underlying if unstated rationale for the existence of America. We were no longer a community, no longer a commonwealth or even a polity. We were a nation of consumers, market-targets and sheep to be fleeced. And, it was everyone for themselves.

The stock market boom of the 1990s, the housing bubble and the introduction of 401K retirement accounts turned ordinary working people into the equivalent of financial groupies. Tens of millions of Americans with any money at all to invest feared being left behind when the great Wall Street gravy train began to roll. But in the national frenzy for gain, a few fundamental economic principles somehow got lost:

Index-based mutual funds were only as stable as the market itself.

The gospel that “in the long-run,” the market ultimately rights itself ignores Keynes’ sharp observation that “in the long run we are all dead.”

And finally, the absolute touchstone of investment prudence; never put any money into equities you can’t afford to lose.

The national economy went through the looking glass into credit and investment   instruments of near-infinite complexity while an instantaneous process of globalization led to overnight, overseas  outsourcings of most of the nation’s industrial production. Inside a speculative bubble, and a gluttonous consumption of third-world goods (China), the economic health of the supposedly mightiest nation on earth became so jittery that trivial things like the level of Holiday shopping or a slowdown in the surreal values of housing could cause panics. This year, the shoe finally dropped.

Arthur M. Schelsinger, Jr, titled the first volume of his “The Age of Roosevelt,” “The Crisis of the Old Order, 1919-1933.” The Obama election and the economic collapse that contributed to that victory will, I hope, lead to a new crisis of the old order, the now old order that ran things from 1980 – 2008. The sanguine, irresponsibility of the Reagan/Bush ideological approach to government oversight of the economy (an utterly un-conservative philosophy holding that the beast of human economic self interest could be kept tame without serious regulation), and let’s not forget the two Clinton terms where the only ideology was (no pun) “naked” opportunism, led to the mad dance of greed that preceded the current debacle.

The  “old order,” the plutocracy of our own time; the sharpies, the MBAs, the piggish CEOs, lobbyists, the system-gamers have had their day at the trough. My hopes for an Obama administration go beyond the GOP’s much-feared spectres of “Socialism.” I think something even stronger is on order. My own modest proposals would include a bracing dose of class warfare with the application of near-confiscatory tax rates at the country’s stratospheric levels of wealth. Think of it as a way of a rebalancing of the national equity, a way of repealing the outrageous upward transfers of money to the rich during the obscene national barbeque of past twenty-five years.

During the campaign, Obama himself said something like, “Lets’ spread some of the wealth around.” That sounds like a great idea, whose time, I hope has finally come.