Archive for September, 2008
One phenomenon of this election is the impact of Alaska Governor Sarah Palin on the campaign. Thursday night’s debate should make it a bit more clear, as we finally get to see and hear the candidate unscripted. At first, it appeared Palin was a brilliant choice, igniting the base and providing an attractive, young, fresh face to the GOP ticket. Now some wonder if McCain didn’t commit a horrible blunder, chosing someone not up to the kind of challenges facing a national campaign. My own thinking on this has changed within a week or so, from it being a smart pick, to a dumb pick, to a kind of GOP anti-Obama. Perhaps by the weekend we’ll know.
Within the GOP, rumors persist that Palin is “clueless,” has bombed debate trials, and some hope they can postpone the debate or maybe cancel it. In fact, McCain’s bungled attempt to suspend his campaign might have been an effort to find a way to scrub the VP debate, since he suggested that be the venue for the first Presidential campaign. Palin’s favorability ratings have plummetted. After all, if she is such a game changer, such a superstar, why is she kept hidden from the press, unavailable to the public, and treated as if she was a fragile flower rather than a pit bull with lipstick? If she does a quality job in Thursday night’s debate, she could put a lot of the worst fears behind her, but right now, the pick is looking more and more dubious.
The New York Times, hardly John McCain’s favorite paper, has reported about his ties to the gambling industry, as well as his own history of gambling. Given that the Palin pick was done on a gut instinct out of a need to do something big, it could well be one of those high stakes rolls of the dice. Apparently he had talked to her only once, and there are still questions about how well she was vetted. There is no evidence that they had in depth policy discussions, or really investigated her capacity to handle media on the national stage. Clearly, she brought early political benefits. She electrified the GOP convention in St. Paul, and helped the McCain campaign turn around major gains Obama received from the Democratic convention in Denver.
But if she’s such a weapon, why have more people seen Tina Fey as Sarah Palin than Sarah Palin herself? Why isn’t she out doing what Joe Biden is doing, chatting with the press, talking to CNN after the debate? Instead, she was the brunt of a joke. After Biden talked one CNN analyst said, “we’d like to have the Republican Vice Presidential Candidate Sarah Palin on too.” Another, laughing, “well, I don’t think that’s going to happen.” The others chuckled. It’s well known that she is being kept away from the press on a very tight leash.
When she does talk, she makes gaffes. Now, given all the gaffes Joe Biden has made, famously saying that Roosevelt came on TV after the stock market crash (Hoover was President and there was no TV), why do hers matter more? The answer is obvious. Nobody doubts Biden’s expertise, and every top Republican has expressed respect for Biden, and note that he is well versed in foreign affairs and qualified for the job. He doesn’t have to prove himself to the public, he is known to be competent. His gaffes are thus attributed to his locquaciousness, his tendency to speak before thinking.
Palin, on the other hand, is an untested quantity. After she was chosen, Alaskan newspapers questioned if she was even competent to run Alaska, let alone the US. She has to prove herself to the American public, and so far she’s not even tried to do that. She made a great speech in St. Paul using the teleprompter, but anyone can do that.
To be sure, people vote for the top of the ticket, and Dan Quayle, similarly criticized (though not hidden and shielded the way Palin has been) did not pull Bush the elder away from an easy victory over Michael Dukakis in 1988. But while Bush was seen as clearly more qualified and better than Dukakis by most voters, McCain is playing catch up with Obama. If he is to win enough of the undecideds, or turn around the decideds, he has run a campaign that is extremely effective through November. If Palin’s qualifications become an issue, that will hold him back and stymie any momentum he might gain.
On the other hand, dumping Palin, as conservative columnist Kathleen Parker suggested, would be poison to the McCain campaign. Choosing a running mate is the “first Presidential decision,” and admitting he flubbed it would be a bitter pill to swallow. To be sure, they could manufacture an excuse for a change in running mates, but if that comes on the heels of a bad debate performance, it would be transparent. It would be a strong argument that McCain is erratic as the Obama camp contends: gambles on a VP choice, suspends his campaign but does nothing in bailout talks, and then debates anyway after vowing not to debate if no deal had been made. That completely undercuts McCains claims at experience, and in a year where change is desired, experience is a loser.
Of course, Sarah Palin could pull off a brilliant performance on Thursday, and Biden could muff some questions, making all this moot. Reports of Palin’s incompetence are based on rumor and snap judgments about a few interviews and speeches. She can still bounce back.
With the US economy in crisis and the public in the mood for change, it’s ultimately still up to Obama to prove he is up to the job, that people can take a chance on this young, black man with a funny name. So far, he seems to be making progress to close the deal, and if you believe the Obama camp’s claims about their organization and “ground game” in swing states, this could be a landslide.
So right now it’s crunch time. The ball is on the 15 and it’s fourth and goal. There is still time after this drive, but if they give up the ball here, it’ll be difficult to come back. The coach sends in the play. The untested rookie running back is called on to try to make the score. The players are shocked, surely they should pass, or try a more conventional play on 4th and 15! But the play has been called, and on Thursday we’ll see if she scores.
I’ve written extensively about the economic crisis we’re facing in blogs for a long time. Since I started this blog, in May, I’ve written about (in chronological order): Oil Denial, America in Decline, America and the Troglodytes, Future Uncertain, Decade of Illusions, The Economic Storm, What Me Worry?, China’s Century, Economic Collapse, Financial Crisis Worse Than Terrorism, Ideology and Economics, and Schadenfreude in Europe. To me, the most pressing and important issue of the day is not Iraq, Iran, health care, or any of the things politicians talk about the most. I’m worried that our economy may be in for a severe and deep crisis, one that will affect all of us, perhaps profoundly.
The current plan to bail out mortgage backers is creating a lot of controversy. On the one hand, it’s probably true that if the bailout plan fails stocks could plummet below 8000. That would decimate retirement accounts, personal investments, educational investments, and tighten credit to the point that it could unleash another Great Depression. Given how weak our economy is in terms of our current accounts deficit, this could also see a decline in value of the dollar, causing the crisis to spiral in on itself. The result is frightening, and explains why so many politicians are in a tizzy over this, and why intense popular opposition to the bailout plan isn’t pushing the politicians to line up strongly against it. Perhaps those in really unsafe districts will vote against it, but otherwise, it’s almost certain to pass in some form.
Looked at that way, the bailout is a no-brainer to the extent that it is better than doing nothing. However, not only are there other possible paths to take, but there are other perspectives on this. I’ll leave the exploration of alternative paths to other pundits or bloggers — and there is a lot being written out there, especially in economics blogs. What interests me is the other perspective, that this is less a practical economic issue, but an ethical one.
This view has proponents on both the left and the right. On the left it’s noted that common folk and mortgage holders themselves aren’t getting bailed out — people are losing health care, homes, and the capacity to pay for their childrens’ education because of the crisis. The people who will benefit from this massive socialization of a huge sector of the economy are the cream of the capitalist crop. They are big Wall Street investors, those who run the financial engine of the country. So while the Democrats try some things to benefit community action groups or others besides the wheelers and dealers, much of the country takes a cynical eye to a government that takes care of the elite, while ignoring the middle class.
On the right there is a more basic ethical argument: people should pay for the consequences of the decisions they made. This is true for individual home buyers who should have realized that a massive continuous boom in housing values could not last, and for big banks who should have understood the immense risk they were undertaking. Indeed, since 2003 a drumbeat of warnings have been made about the economy and the housing boom. They were brushed aside as “so much doom and gloom,” the kind of prophecies made often in the past, but which never actually came true.
The pro-bailout group responds with a utilitarian ethical argument: just measure the societal harm done by letting the economy collapse with the cost of a bailout which ultimately, as Senator Obama noted in the debate Friday, could earn the government a profit. This is not just a handout but actual government taking over huge chunks of the financial sector, meaning that if things bounce back, it might not be costly. Calculate the probable utility and compare the likelihood of different scenarios, and you get a pretty strong utilitarian argument for swift governmental action.
Of course, both the left and right argue that this is a limited calculation. First, it’s based on assumptions about the future by the same government bureaucrats and legislators whose miscalculations allowed this crisis to happen. Second, what about the signal this sends — government will step in if need be, so why not do the same thing again if there are short term profits? This isn’t as strong an argument as it sounds, since despite the bailout most of the ‘winners’ of the last decade’s financial boom will still be hurt tremendously by all this, but it’s worth considering. Finally, shouldn’t the wishes of the American people be taken into account, and a broader based response that isn’t focused on Wall Street be considered? The Federal Government says we don’t have time for that, we need direct action. But no one knows for sure what will happen.
For me there is a deeper concern. This crisis was caused by our materialist excess and our consumerism (oh, and I’ve been posting on that too: Consumerism and Fascism, Carnival Consumerism, Consumer Cathedral, The Core/Void, and The Selling of the President). We are addicted to stuff, and we are addicted to debt. Our material wants have overcome everything, we have morphed into an excessive consumer society where values and social concerns are second to individual interest and a desire for more. To the extent that a bailout addresses the symptoms of this problem, but not the underlying cause, the problem is likely to continue. Addressing the cause and changing the culture might be better served by allowing the markets to run their course — but that could also set up authoritarian and Bonapartist reactions, as Americans could be shocked and angered by the sudden and deep collapse — just a couple years ago we considered ourselves top of the heap, the “winner” of the Cold War, the invincible and necessary power. The fall would be so hard and so fast that people might react with anger and irrationality.
Luckily, I’m in no position to impact whether or not the bailout is chosen, so I’ll not get upset either way. These decisions are being made by others based on their experience and beliefs. All I can do is observe and comment. But unless we as a society figure out a way to address our excessive consumerism/materialism, our dependence on oil, and rethink what our society is all about, this problem will linger, regardless of the decisions made on the bailout.
Last night’s debate between Barack Obama and John McCain has convinced me that this is likely to be a lopsided victory for the Democrat. Political science theories would all look at conditions and conclude that this is clearly going to be a Democratic victory. The fact Obama is black, and McCain is running as a maverick might muddy the waters. But Obama’s debate victory (at least according to early post-debate polling) against John McCain suggests that as long as Obama doesn’t take a major stumble, he will be inaugurated President in January 2009.
First, while on the ‘expectations game’ Obama was expected to do better, the real issue is whether Obama has the stature to be President. Last night, McCain tried all he could to minimize Obama. He repeated the mantra “Senator Obama does not understand…” so many times that it became comical. It was clear he was instructed to say that as often as he could to try to create the impression Obama wasn’t ready. Yet Obama was clearly in command of his facts and confident; it ended up sounding more condescending than real.
To be sure, there was no knock out punch. But while McCain sounded themes which will no doubt sound good to partisan Republicans, Obama’s task was not to defeat McCain but to show the country he’s ready to lead. He had to avoid looking unsteady or unsure. There are two more debates, but Obama showed tonight — when the topic was foreign policy, supposedly McCain’s strength — that he can handle the pressure.
McCain, in trying to stress his experience, often lingered too much in the past. That is a risky strategy for him. The election is about the future, and both candidates claim to be about change. While it is legitimate for McCain to make the argument he’s been around longer and has dealt with more issues than Obama, stories from the Cold War or the 80s — as well as name dropping — detracts from that notion of focusing on change or the future.
So debate one is over. McCain headed into it weakened, having tried to “suspend” his campaign to focus on the economic crisis, only to have his efforts seem irrelevant. Then, despite no deal having been reached, he had to change his mind on his pledge “no deal, no debate” and show up to avoid giving Obama the stage alone. All this puts Barack a step closer to the Presidency. There still is time to change the game for McCain, but right now the race seems to be moving towards an Obama victory, perhaps a big one.
Thought experiment: Let’s say I told you (and this is true) that my wife and I both work, we have two young children, and we try to take care of the house work and child care as complete equals. We share tasks, and since she (being a CPA) handles all the family finances, I tend to do the baths and put the kids to bed to give her time to do that. My base salary is a bit less than hers, which is great — the more she makes the better! I certainly am not bothered by that. OK. You might say, gee, I’m a good husband, having a modern appreciation of the challenges women face in the workplace. You might pat me on the back, or say that she’s lucky to have me and not someone more stuck in the past. NOW…what if I reversed what I wrote above. What if she was saying that about herself, what if the roles were reversed?
If that were to happen, she’d get none of the praise I’d get. Even though she’d be doing the exact same things I’m doing now, people would respond by saying she’s lucky to have a husband that shares the housework and childcare. For doing the same thing I do she’d get no extra praise or credit, and some people would consider her benefiting from the way the relationship is structured. See the inequality? For doing what would bring a man considerable praise, the woman gets no credit, that’s expected of her. That’s a deeply engrained societal prejudice, and one that is especially unfair to women.
Yesterday I saw an interesting presentation from psychologist Dr. Alison Terry on the difficulties mothers have breaking through the glass ceiling, getting top level positions at major corporations or in government. The information she gave touches on a cultural bias that has bugged me since the birth of my first son over five years ago: the tendency to assume that mothers are supposed to do more with the children and the home.
I discussed this in my blog entry Fatherhood and Parenthood last June. Dr. Terry’s talk, however, demonstrated to me the perniciousness of that bias, and the fact that while it may annoy me that magazines like Parenting seem to think mothers are the ones to take care of children and the house (‘time saver for moms,’ etc.), the real victims are mothers in the workplace.
Mothers are harmed much more than average women. Although women still tend to earn less in the work force, in a study where people were given basically the same resume, men with children were suggested for the job 70%, women with children (and the same qualifications) only 30%. Whereas the salary recommendation for men and women was very close (I believe around $148,000 or so, with women slightly less than men), women with children saw the rate go down to $139,000, while children benefited men, raising it to $154,000. That wasn’t the only study cited in a presentation full of information and examples, but it is an example that demonstrates the nature of this cultural prejudice.
Men having children benefit in their career because it is assumed they will be more stable and conservative. They won’t try to job hop, they’ll be diligent, and there will be pressure to work hard to earn more for the family. Women are hurt by having children because it is assumed they’ll miss more days due to child illnesses or other child care issues, and be more devoted to family than work. This is exacerbated by our societal tendency to overwork. Most people who earn over $100,000 a year work well over 40 hours a week, many even over 60. They expect similar work ethics from their underlings, and see it as a lack of devotion to work to want to balance work and family. This is unhealthy on a variety of levels, but at base it demonstrates a bias of material concerns over family — especially at the upper levels of society. It becomes impossible to truly balance family and work because so much work is expected for anyone trying to move to the top.
There is no clear solution to this problem. Our tendency to overwork increases stress and decreases quality family time. Add that to our bias against mothers, and women again bear the heaviest burden. Overt sexism remains as well. It is common for people to say that sexism is a thing of the past, and indeed, we have made progress. Yet here at Farmington business majors are predominately male, and it’s rare to find males in education — especially areas like Elementary and Early Childhood Education. Which of those careers will earn the most money?
Since the problem is cultural, the solution rests with our culture, and it will take time to remedy. I think we’re on that path. Hillary Clinton, Sarah Palin and other women are starting to rise towards the top. Nancy Pelosi not only became the first female Speaker of the House, but she’s being recognized increasingly as a very competent and tough leader. And while only 2% of top leaders in Fortune 1000 firms are women, there is an increase in women in middle management. Perhaps its only a matter of time before the culture shifts enough to create more balance. At the same time, it’s important that today’s young boys grow up to NOT expect a wife to cook and keep house, but instead to see raising a family as a partnership.
While some families choose to have a parent stay home, it can be either the father or mother, and increasingly men are making that choice. Also, I think we’re overcoming the false guilt given to parents who use day care. The traditional way to raise children was to have the villages children together in one place, watched over while men and women did the work to survive. Isolating kids with a parent and siblings doesn’t strike me as healthy, unless there are a lot of play dates and opportunities to interact with others.
Still, it’s infuriating that mothers still bear the highest cost. The expectations of them are greater. The man isn’t questioned and doesn’t feel guilty if the family hires a nanny or a maid, should both have high stress, high pay jobs. Inlaws, parents and others pressure women to play roles that are obsolete. The good news is that taking a birds eye view, things are changing slowly but surely, and such change can be nothing but slow — that’s how cultures work. Our culture is shifting dramatically vast in many ways, the world is so much different in this regard than 20 or 30 years ago. Mothers in the work world do have it far better here than in China or much of the world. The only place with real equality seems to be Scandinavia.
But that doesn’t do much mitigate the discrimination that does exist now against mothers. So all I can suggest is that we men try extra hard to do what we can to minimize the burdens, and put our egos aside if a women makes more money. More money to the household is a good thing, no matter who brings it in! More importantly, we should raise our daughters to believe they can do anything, and they expect a man who will be a supportive partner, and our sons to see girls as true equals. June Cleaver, the stereotypical mom of the 50s, will hopefully be looked at in a few decades as reflecting a backwards and bizarre notion of womanhood. Until then, Mother’s Day and International Women’s Day should be seen as reflecting a continuing cultural struggle for real equality.
John McCain, with polls showing a shift to Obama, and with blame for the current financial crisis being placed on the GOP, decided to suspend his campaign, and ask for a delay for the debate scheduled for Friday. As Sarah Palin bombed an interview with Katie Couric, the McCain camp argued that the Presidential debate scheduled for Friday should replace the scheduled Vice Presidential debate, which would be rescheduled for “sometime.” That would give Palin, who except for limited exceptions is being kept under lock and key from the press in a way that shows an almost insane paranoia about what she’ll say, more time to prep for a debate. All of this suggests McCain knows he’s in trouble, and is trying to find some magic bullet to change the momentum.
Obama, of course, is having none of it. If he were to agree to suspend his campaign, it would be a victory for McCain. McCain would be seen to have been the leader — he had the idea, and Obama followed — and it would be a major change in conversation at a time when Obama is moving forward. At this stage in the campaign, when strategies are set, only a candidate who perceives he’s in trouble wants to shake things up this way. The most bizarre request was for a cessation in advertising. It’s as if McCain wanted to say that because of the mistakes made by government and big money over thirty years we should stop having a discussion about the best way to move forward. Instead, let’s hunker down in the Capital and talk with other politicians and focus on simply passing a bill.
The truth, of course, is that John McCain can’t really do any more good in Washington than on the campaign trail. He can talk with Senators, advisers, and staff from anywhere in the country. Moreover, the last time such a strategy was used was when President Carter at first didn’t want to campaign until all the hostages were released from Iran during the I980 campaign. That didn’t work and he had to go on the campaign trail, politics doesn’t allow candidates to call “time out” at their whim. If McCain were serious, he’d have suggested when Obama and McCain were talking that they do this together, to really put it above politics. To make the first move and “challenge” Obama makes it blatantly and undeniably a political ploy — Obama has to aggressively point that out.
Yet, as with the gamble in picking Sarah Palin, McCain is going for something dramatic to alter the dynamics of the race. His campaign probably figured that in a best case scenario Obama would follow suit and they’d be able to declare they led, and change the tone of the conversation completely. In a worst case scenario they may figure they can fight to a draw by claiming McCain is putting country over campaign, and thus is the kind of person Americans need.
McCain does not get to script this for the opposition and pundits, however. The Democrats, recognizing that this is a ploy, are not about to roll over. Obama has the mostly positive message: Now is the time for a debate, now is the time to have the leaders discuss the future, talk to the American people, and not escape to the comfort of the Capital. He’s probably been as negative as he will be in noting that the President cannot drop everything for one problem.
Biden should be sharper. He should hint that McCain has “panicked” and note that the timing of when this suddenly became a crisis for McCain coincided with dropping poll numbers. In DC Democrats should follow the lead of Harry Ried: McCain can’t do any good simply being here, that’s not how the Senate works, etc. Moreover, since the Democrats are the majority party, they can assure that McCain does not get credit for any sort of solution to this, and won’t be able to trumpet himself as the savoir of the deal. That would even be tough if the GOP had the majority!
The pundits should point out that as bad as this is, it’s a financial mess that has been a long time in building, and which will take awhile to correct. It’s not something a quick bit of legislation will fix, it’s in the corporate culture, the consumer culture that defines our society, and embedded in our financial regulations and institutions. One can do more to address the entire problem by remaining engaged with the American people than by sitting in smoke filled rooms in the Capital, talking with other politicians.
To be sure, he could pull it off. He’ll coordinate with President Bush to have the latter call for both candidates to return to Washington. Obama has to respond aggressively. That’s the “old politics” — a problem comes up, then stop talking to the American people and retreat into the marble buildings to work out deals to cover up past mistakes. Talking about it and debating it in front of the American people would require having to take responsibility and show accountability. How could this happen in the eigth year of President Bush’s Administration without the President having to be held to the fire for not being prepared? How could people like John McCain, no stranger to scandal at financial institutions, talk about the “fundamentals being strong” and “free market solutions” for so long without having to tell the American people why. To hide behind vague promises of “working on the economy” and “creating legislation” is only a method to distract from the tough questions and evade responsibility. That’s the same old politics.
Obama will have to focus on the economy, show he is taking it seriously, and get a lot of support from colleagues in Washington. But if he does that, McCain will start to look a bit ridiculous. If it takes a long time to work out a compromise and McCain seemingly plays no major role, he will look like he panicked. If the public discourse looks at this less like ‘putting American first’ and more like ‘grandstanding’ or ‘reacting to polls,’ he’ll squander anything he gained at the GOP convention.
Of course, this could be an effort to nix the VP debate, as it appears Palin is not quite as ready for prime time as many Republicans thought. As time passes and she is kept in a kind of cone of silence most of the time, it becomes obvious she’s more image than substance. She has a compelling story, is attractive, and something fresh. But that does not a Vice President make.
To be sure this is a major crisis, on that McCain is correct. Anyone reading my blogs over the past summer know I have long believed we’re facing a severe crisis in the US. But it isn’t a crisis that can be fixed with one bailout, it’s not a crisis that requires just legislation. It is a crisis with structural, spiritual, and societal dimensions. It’s how our economy is built, what our values are, and the way consumerism and easy credit has eroded the social fabric and our capacity to keep capitalism on an even keel. No legislation is going to address this, this bailout, as huge as it sounds, is only the first step. McCain is treating it like it is a one time crisis that if he pass something, will make things alright. In that he is fundamentally wrong, and sending the wrong message by heading back to Washington.
I think he knows that. This is politics, it’s a campaign in trouble, trying a hail Mary pass to change the conversation from one that threatens not only McCain but vast numbers of Republicans on the ballot in November, to something else. It won’t work. In the past I’ve compared the 2008 election to that of 1980, with Obama the Democratic Reagan. I’m starting to think this may be more like the 1932 election, with Obama in the role of Roosevelt.
The title of my blog comes from a Jackson Browne released in 1989. Here are the lyrics:
“Sun going down in the usa
Down on main there’s a family sleeping in a doorway
Around the corner you can hear the sound
People dancing around the golden calf
Those who have not, those who have
On the billboards and the t.v. screens
They got food and cars and toys and trucks and jeans
Like a homeless child’s fitfull dreams
Smiling faces free from wanting
Life’s abundances beyond counting
World in motion — speed your changes
Close your distances, find your angels
Lose your fears and meet your dangers
World in motion
Once we were running through smoke and fire
Running into the sun
In the rush of youth, for love and truth
Our deeds were done
Now we awake with a world at stake
And a race we run
Sun going down on the usa
Sun coming up a hundred years away
On another world and another time
Things like hunger, greed and hatred
One way or another, gonna be eradicated
World in motion — speed your changes
Close your distances, drive your angels
Lose your fears and meet your dangers
World in motion
’till the world I look out at this world and see
Is the world I know this world can be
You have a volunteer in me
Now come on”
I bought the CD “World in Motion” in Munich, Germany in the summer of 1989. I had a pre-dissertation research grant to start to explore my topic of East-West German relations. I went to the Hertie store in Munich and paid 300 DM for a Sony Discman and bought three CDs — Jackson Browne’s, Billy Joel live in Moscow, and Udo Lindenberg’s greatest hits (he’s a German artist — one of my favorites). In 1989 the world was in motion, especially in Germany. That August I went to East Berlin for the first time, and in retrospect was there literally days before everything started to unravel. After I left an exodus of East Germans through Hungary to Austria would spark protests and ultimately the collapse of the East German government. The Cold War ended not because of the super powers and their policies (though Gorbachev could have continued it if he had supported the Stalinist East German government), but because of people taking power into their own hands. In the next few years the Soviet Union would collapse, apartheid would end in South Africa, and economic globalization would take off. The world was, indeed, in motion!
On the way home yesterday the song came on the radio, and it reminded how it had inspired my blog “title.” And we still have a world in motion. On the TV news this morning dour stories spoke of how the US intelligence services are now assuming a stark downturn in American power and influence in the world for the future. Moreover, to get out of this financial crisis we have to raise $700 billion (we can’t just print it up without risking severe inflation), most of which will come from foreign sources. While this can be seen as bad in that it will make us more vulnerable to countries like China and Saudi Arabia, the upside is that they become more invested in the American economy and don’t want to see us fail. The result is an internationalization of the US economy. This will weaken our sovereignty and make it much less likely we’ll be aggressors on the world stage (the bitter lessons of Iraq and Afghanistan also push us in that direction), but it might — at least for the optimists — lead to new international cooperation. The pessimists, however, fear depression and war.
Simply, we need a fundamentally new vision of America and its role in the world. The old patriotic slogans and bombastic claims that we don’t care what the rest of the world thinks or does need to be replaced by acceptance of interdependence, a stark, realistic recognition of our own vulnerabilities, and acceptance of the fact that the US does not determine what constitutes right and wrong in the world. Our arrogance in rejecting treaties and agreements that don’t suit us — ranging from the UN Convention on the Rights of the Child to the Landmine Treaty and the International Criminal Court — needs to be tamed. We don’t have the power to be arrogant any more. That doesn’t mean we sacrifice our values or go along with whatever the international community wants, but we need to compromise and avoid seeing ourselves as somehow a superior, invincible and virtually infallible power. That hubris is, in fact, what brought us down.
We also need to recognize this isn’t just about greed on Wall Street, government de-regulation or as some claim government over-regulation (that’s a tougher case to make). It’s about our essential approach to politics and the world — we need to change our way of conceptualizing who we are, and what kind of world we find ourselves in. It’s about our materialism, our inability to save, our refusal to learn more about the world — to focus on sensationalism and celebraties rather than issues and events. We’ve been partying it up as a society, running up debts, building and bursting bubbles, enabled by a financial system that threw easy credit our way and said “don’t worry about the debt, no big deal, no need to save, just keep partying.”
The party’s over. And it’s the generation coming up that is saddled with the debt, the price of our past arrogance, our abandonment of principle. I don’t know if a bail out is a good idea — I know a lot of people who are opposed to it in principle, both on the left and the right. At best it’s only a bandaid, at worst it might dissuade people from confronting the reality of this crisis.
As the American economy reels from what could become the most dangerous crisis since the Great Depression, the view in Europe is a bit more cheery — especially on the continent, where the banking sector there does not face the same kind of dangers as here. In Germany where banks make mortgages the old fashioned way — using depositor money to underwrite a mortgage, rather than going out on the credit market — there is a sense that the ‘cowboy capitalism’ of the United States is finally being outed for what it is: dangerous and wreckless. The Europeans, often accused by the US of having too much regulation and government oversight are a bit gleeful of the fact that it is the lack of regulation and oversight which has led to the current problem in the US.
And, though one can forgive a little Schadenfreude, I was a bit taken aback by this (in the LA Times “Europeans Left and Right Ridicule US Money Meltdown”):
“The finance minister of Italy’s conservative and pro-U.S. government warned of nothing less than a systemic breakdown. Giulio Tremonti excoriated the “voracious selfishness” of speculators and “stupid sluggishness” of regulators. And he singled out Alan Greenspan, the former chairman of the U.S. Federal Reserve, with startling scorn.
“Greenspan was considered a master,” Tremonti declared. “Now we must ask ourselves whether he is not, after [Osama] bin Laden, the man who hurt America the most. . . . It is clear that what is happening is a disease. It is not the failure of a bank, but the failure of a system. Until a few days ago, very few were willing to realize the intensity and the dramatic nature of the crisis.”
In an interview Thursday in the Italian newspaper Corriere della Sera, Tremonti drew a comparison to corruption-ridden Albania in 1997, when a nationwide pyramid scheme cost hundreds of thousands of people their savings and ignited anarchic civil conflict.
“The system is collapsing, exactly like the Albanian pyramids collapsed,” Tremonti said. “The idea is gaining ground that the way out of the crisis is mainly with large public investments. . . . The return of rules is accompanied by a return of the public sector.””
For those of don’t know Italy’s history, corruption has been a major problem in Italian politics for years, and the Tangentopoli (bribe city) scandals of the 90s, which saw the destruction of major Italian political parties, and judicial prosecutions destroy careers of some of the most esteemed Italian leaders, led to a crisis that brought down the Italian system. Even though they have restructured their institutions, Silvio Berlusconi’s troubles still evoke the idea that Italian politicians are prone to corruption. To be lectured then by an Italian about corruption…well, that just doesn’t seem right! Yet it does show how far the US has fallen.
The problems that we face are not just about American de-regulation, however. Part of it is cultural. Our society is built on debt, Americans are more willing than anyone to go without savings in order not only to spend now, but to borrow from the future. That is unique in the western world, and thus mortgages and other loans are not financed through deposits from investors, but from credit markets, and more often than not foreign investors looking to profit. Freddie Mac and Fannie Mae were especially lucrative to foreign investment because they seemed to be generating continuing profit, especially during a housing boom, and were seen to be as safe as treasury bonds.
However, when the underwriting of such a vast amount of mortgages — almost half of the mortgages in the US — is done by two firms, the lack of diversification sets up the catastrophe we’re witnessing. By bundling up mortgages into mortgage-backed securities, this also allows investment and trading to affect banks world wide. The result is that the impact of a failure of these two giants would have been world wide, and could have led to a global crisis.
Back in July I wrote about our “carnvial consumerism,” noting how culturally we’ve become a hypermaterialist society, vulnerable to an “Economic Storm.” The roots of this problem are not simply deregulation, or government connections with big business and lobbyists. Rather, our problem is that we have become not only addicted to consumerism, but our economy is built on the myth that consumerism is good, beneficial, and natural. Our real crisis is, in a sense, spiritual. By that I don’t mean religious, I mean it is a crisis of meaning. We have created a world where material wealth is the goal, and pursued it in such a way that we constructed a house of cards which now tetters on the brink of collapse.
The Schadenfreude in Europe is misplaced. While we may be culturally more materialist and consumer oriented than the Europeans, they share many of the cultural attributes that made this crisis possible. The desire to have fun and gain possessions means many Europeans do not have children — thus helping create a potential demographic disaster as society ages. Moreover, the environmental problems caused by this consumer pursuit of more stuff affects everyone, and could be more consequential than the current crisis. Finally, our political parties (except, to some extent, Green parties) are focused on material/economic concerns. Socialist or free market, the concern is about economics first. Somehow, to really deal with the issues facing us going forward, we need to find a way to think differently about our values. This crisis might force the issue — here and abroad.