To some degree the current financial crisis seems to have resulted from a world of Warner Brothers cartoon coyotes suddenly looking down and noticing they’d run themselves off a cliff. Things didn’t get bad until we started noticing they were bad.
But I’m not sure everyone noticed at the same time. Almost a year ago I noted that the English newspapers I was reading were full of doom and gloom about the economy. But in the US, there remained a pervasive optimism. Naturally some of that could be due to the kind of naive obtuseness our foreign friends often accuse us of. And the election helped too, energizing us in a way we hadn’t been in years. But I think a lot of that optimism was rooted in something real, something that needs to cultivated and nurtured in order to nurse us back to economic health.
Even after bank insolvencies, market turmoil, and worldwide government scrambles to right the global economy, there remained a sense of normalcy in ordinary society. People who had jobs went to them. People who had friends still saw them. People who had families still loved them. There’s an obstinate inertia in normalcy, and it’s not going to be given up by normal people lightly. Especially when the problems around them seem so far from their own making. Most people are not bankers or finance experts. While many may have stocks in retirement accounts, the markets exist in a world apart from most people’s daily lives.
And yet they will be affected if they fail, even though that failure would be through no fault of their own. As the financiers panic and blanche and pull capital, even the healthiest companies will struggle as they lose either their capitalization or their customers, or both. If enough of these dominoes fall, everyone falls.
It is this very dynamic in fact which is at the root of the current crisis. For too long too much of the financial health of the world has been in the hands of too few people. To recover from the crisis, and to ensure that it never happens again, we must ensure that this schism is erased.
For too long the rules governing the creation of wealth have been weighted in the favor of people who already had it. Take, for example, taxes, where the impetus has been away from progressive taxes like income taxes and more towards consumption taxes that inequitably affect poorer people. Or bankruptcy laws, which have changed in such a way to make it nearly impossible for people to crawl out of usurious consumer debt. Or even mortgages, where poorer borrowers were saddled with unworkable loans in order to afford properties with over-inflated speculator-driven values.
And that’s not all. There’s corporate law, where the mandate to deliver shareholder value often comes at the expense of sustaining a workforce. There’s healthcare, which becomes more and more a profit-driven enterprise that fewer and fewer can afford. And there’s privatization compounded with a lack of public investment, leaving poorer people to bear proportionally greater costs of the little infrastructure there is through use charges and tolls than their wealthier neighbors.
And all this needs to change.
It needs to change if for no other reason than it’s unsustainable. Under the current regime, those with assets try to maneuver in such a way that they can either keep them (at minimum) or grow them (ideally). But all this maneuvering contains an element of risk, and assets can be lost along the way. Our current predicament bears witness to what happens when there are a lot of such losses, which then leaves fewer investors to value others’ assets. Over time the pool of investors gets smaller and smaller because there’s no real way for new people to acquire sufficient assets in order to join them. Thus the pool of investment capital also gets smaller and smaller, until there’s no longer a sufficient market to sustain even substantive assets’ value.
What must happen is that there needs to be fewer structures preventing the flow of wealth through all strata of society. Only by doing so will the pool of investors and investment capital — and the economy — grow. We saw the benefit of this flow with the minimum wage. While businesses at first feared that the higher labor costs would lessen their profitability, paying higher wages meant that there were now more potential customers.
We therefore need more policies that level the playing field. Investing in public infrastructure, for instance, by funding this investment through a progressive tax that spreads the tax burden around proportionally with whom can best afford it. Ensuring that jobs are more stable. Ensuring that health care is no longer a perverse reverse lottery, where luck is an operative factor in whether you can afford to get sick.
We need to make sure that mortgages are structured in a way so that people can build stable homes, families, and communities. That consumer debt is structured in a way so that it’s affordable for consumers and therefore profitable to lenders and vendors.
We need to take steps to build sustainability into our markets and provide the right ingredients for growth. That means enabling no more boom-or-bust cycles based on exploiting resources, natural and human. Instead we must provide education and opportunity to spawn the innovation upon which lasting economic success can depend.
All that lingering normalcy that remained after the markets started to crash is both a clue and a tool for how to proceed. There are millions, if not billions, of people who stand to be affected by economic decline, through no fault of their own. All these people did what they were supposed to do, and will do what they are supposed to do, if given the chance: go to work, produce and consume. Millions of people stand as ready as ever to provide their economic energies to the global market. The trick is to make it all count, because all markets will inevitably fail if it doesn’t.