Archive for November, 2010
Secrecy has always been a hallmark of diplomacy. So has spying. In the game of high stakes power politics, the public face you show is often much different than the one you expose behind closed doors. The one thing that governments friend and foe have in common is that they know this is the case. They have no illusions that the public statements made by President Obama or Prime Minister Putin are somehow definitive or even true. Insiders know secrets about world leaders which never get mentioned, and details about the inner workings of governments here and abroad.
That’s why I am not in the camp of the outraged in response to the latest Wikileak dump. To hear US officials tell it, the leakers and those in charge of Wikileaks are anti-American, irresponsible amoral publicity hounds who, as Senator Lindsay Graham said “may have blood on their hands.” Some have even branded Wikileaks an enemy of the state, and have called for non-judicial retaliation against Wikileaks founder Jullian Assange and others.
The truth, they believe, is for insiders to know. The public is to get a sanitized and often false story, with the knowledge that in thirty years or so historians will get access to documents currently too sensitive to release. The truth needs to be hidden for the sake of national security: the public just can’t handle the truth.
Yet this secrecy also enables powerful states and leaders to pursue policies and actions that shape our world and can lead to immense harm. It prevents citizens from understanding and knowing what is being done in their name, and protects corrupt leaders from being held accountable. Secrecy is the best friend of “big government,” allowing political leaders to say one thing while they’re doing another. More than anything else, secrecy aids the ability of governments to control populations and deny liberty. Without secrecy, government power is eviscerated.
That is why inside the halls of the State Department, Pentagon, Congress and White House there is outrage over the Wikileaks dump. It threatens the power of the elite establishment to run their own game while giving the public only as much as they “need to know.” This creates an “empowered class” – elites who know that they are on the inside and have a sense of both importance and power. They possess knowledge others do not have, and ultimately see themselves as superior to average folk. They rationalize their power by asserting they are protecting the citizens and allowing them to live their lives without having to think about the true nature of a complex and dangerous world.
The “empowered class” fancies themselves the protectors of democracy and the national interest. They see themselves as having a clearer perspective about the world than most, and a more sophisticated sense of moral responsibility. Yes, water boarding may seem wrong, but put in the context of the dangers we face and threats to the western way of life, at times it may be necessary. Those who criticize are naive, uninformed, or lost in a cloud of idealistic wishful thinking. The self-serving delusions of the empowered class hide everything from power orgies to quid pro quo deals and policy choices involving torture, war, and espionage. Theirs is a high stakes, high risk game which must be kept as opaque as possible.
Wikileaks threatens that. There is nothing inherently dangerous in the leak that came out, at least according to initial reports. It does show a United States less able to manage world events than in the past, even if the Obama Administration has improved the US reputation abroad. The United States clearly finds itself more isolated and easy to ignore than ever. The leaks errode US prestige and power at a time when it is already being sorely taxed.
And yes, that’s embarrassing and makes it harder for US diplomats to operate. Yes, foreign leaders may be less willing to secretly cooperate with the US if they fear news of that cooperation might be leaked. Yet there was nothing surprising in the documents. Most new information verified existing suspicions – the fact that Arab states are more worried than Israel about Iran getting a nuclear weapon should surprise no one. Even “embarrassing” portrayals of foreign leaders fit what most people think – Angela Merkel is “rarely creative,” Libya’s Gadhafi is “erratic” and has a voluptuous blond Ukrainian nurse, Putin dominates Medvedev, and Afghanistan’s Karzai is weak and corrupt. Well, all that is pretty obvious (though the Ukrainian nurse is a new).
That the US and South Korea are gaming out North Korea’s collapse may seem big news, but the shocking news would be if they were NOT doing that. And who is surprised that China engaged in a kind of cyber attack on Google? No, the documents were neither shocking, surprising, nor especially harmful. Yet Secretary of State Clinton has a point when she said:
“Let’s be clear. This disclosure is not just an attack on America — it’s an attack on the international community. “Such leaks…tear at the fabric” of responsible government. There is nothing laudable about endangering innocent people, and there is nothing brave about sabotaging the peaceful relations between nations.”
It is an attack on the international community, but it does not tear at the fabric of responsible government. It tears at the fabric of the power politics games enjoyed by governments for centuries. It does not endanger innocent people, it informs innocent people and endangers government elites by showing how they operate. It doesn’t sabotage the peaceful relations between nations, it exposes the secret deals and actions undertaken by and between national governments.
I’m sure Secretary Clinton believes her words; the empowered class has come to believe their own story: secretive games are necessary, and they are protecting the public. This self-serving rationalization of secrecy is as prevalent on the left as on the right. Yet there is reason to believe it to be misguided. While some information would be dangerous or harmful if made public, in general it’s better to shine light on the actions of governments, even if creates embarrassment. If world leaders feared that their statements and actions might become public knowledge, they’d have to behave more responsibly.
Yes, I know. Those in the empowered class would say I don’t understand the sensitivity of the issues at hand, and lack appreciation for the delicate balance diplomacy requires. I understand that argument, and in many instances it’s valid. But overall, the moaning and groaning from the empowered class is less about the public good than the fact wikileaks threatens their power and insulation. That’s a good thing. So Wikileaks, thank you!
On Thursday Americans travel to be with family and/or friends to celebrate the most traditional of American holidays. Most people will roast a turkey, have potatoes, veggies, pies, and various family delights. The stores are closed, and even the most secular of families will talk about giving thanks for what they have. Most families will take out the Christmas decorations, ready to celebrate “the holiday season,” where the Christmas values of peace, love, and goodwill overcome greed and selfishness.
One need not be Christian to appreciate the Christmas spirit, expressed in everything from Ebenezer Scrooge’s visit of the spirits of past, present and future to, George Bailey’s journey in It’s a Wonderful Life and even the Grinch’s heart expanding as he hears the Whos celebrate joyfully even after he stole their Christmas loot. The Christmas spirit reflects a belief there is something more important than material possessions and the daily grind. Love, connection to others, and a sense of the spiritual combine to point to a more joyful and meaningful mode of living. The eternal trumps the temporal, ethical values trump self-interest.
Yet the day after Thanksgiving the stores open early — in major cities sometimes at Midnight, but even in moderate size towns often 4:00 AM or so — so that shoppers can get the best bargains of the year, so called Black Friday. There are usually stories of violence — shoppers being trampled as they rush to get bargains, people fighting over the last of a specially priced item.
Then for the next month malls will be full, kids will be adding to Christmas wish lists, and likely feel deprived if they don’t get most of what they wanted. Stress will grow as people try to churn out Christmas cards as an obligation, juggle Christmas party schedules, deal with the shows and activities planned for the kids, and try to get that shopping done. The music, lights and smells of the season will distract from the stress, and provide moments of relaxation, but for too many people the next month will be devoted to chores associated with the holiday.
Peace on earth, good will to men. “Yeah, yeah, but I have to shop, get this package to the post office, and damn, we got a Christmas card from them? Sigh. I think I have one more I can send out.” Kids will be talking about, counting, and focusing on their presents. “Why does he have five more presents than me, it’s not fair!” It’s the most wonderful time of the year. Yeah, for the retailers! For the small shops in the mall!
A savior is born in Bethlehem. Jews, Muslims, agnostics, atheists, Wiccans and others might smile and nod, but don’t get meaning from that. Christians might, but many will simply nod, “hey, that’s the true meaning of Christmas, but I have to go get supplies for our party…why’d we invite so many people…”
Yet one does not have to be Christian do celebrate and appreciate the joy inherent in the Christmas spirit: Love for others, good deeds, giving without needing to receive, forgiveness, family, friends, and connections. The Christmas spirit appeals to the part of ourselves that rises above self-interest, and sees meaning in core human values rather than the daily routine or material possessions. What irony! The Holiday most focused on our better selves has become the most stressful and materialistic time of the year. Instead of learning the value of sacrifice and sharing, children shout “me, me, me” and fantasize about the stuff they’ll get. The first day of this season, the day after Thanksgiving, we embrace raw consumerism in the extreme — “you are what you own, and today you can get great deals!”
What if people decided to reject that and grab the Christmas spirit instead? For Christians the answer is right there — the teachings and traditions provide a guide of how to steer clear of crass consumerism and materialism. For those of other faiths similar core principles apply — religions around the world grasp the core values underlying ethical human existence (even if extremists sometimes subvert that message). And for the rest of us, the spirit applies too — peace, love, good will, and a faith that there is something more to existence than just electro-magnetic “weak” field energy, quarks, leptons, bosons, and gravity. If not a God, that “something more” can be love, can be spirit, can be values. If one cannot bring oneself to believe in something, then imagine — imagine the best each of us can be, and the best for humanity. The boundary between faith and imagination is blurry, and perhaps non-existent.
The Christmas spirit is truth, even if one can doubt the story it is built around or the religion that gave us this holiday. That spirit can be tapped to defy the stresses, material excesses and greed that too often subverts this time of the year. And it’s here. Inside of us, in the songs, movies, and ideals expressed this time of year. Grab the Christmas spirit! Share it. Make this a season of joy rather than greed. Let love and human connections trump selfishness and consumerism. A family snowball fight always beats a day roaming the malls. And maybe, just maybe, we can enter 2011 renewed rather than spent, focused on values rather than stuff, and thankful for our family, friends, and the life we’ve chosen to lead.
Yeah, we still have to shop, send out cards, and endure children demanding “add this to my Christmas list.” At our weakest moments stress will be ready to pounce. I nonetheless believe that a focus on the true spirit of Christmas can make this a season of joy rather than anxiety. Happy Holidays!
Now a days its trendy to be skeptical of the long term future of the EU or the Euro. A crisis in Greece followed by a crisis in Ireland, whispers about possible financial contagion to Spain, Portugal and possibly Italy, and it appears the Euro is wobbling. Alarmist (and wrong headed) squeals about “Eurarabia” and the spread of Islam, demographic trends that show an aging European society, and soon gloom and doomsayers are pronouncing Europe all be done for. Nothing could be further from the truth.
Some of these doomsayers are the usual suspects wanting Europe to fail. British Euroskeptics have been seeing conspiracies and catastrophes for decades, and many on the American right have been predicting that the “welfare state” mentality in Europe will doom it. During the heady real estate bubble, Americans gloated that we had found the secret to long term economic growth — deregulation and limited government — and that the rapidly growing low unemployment economy of the 00’s was proof.
In fact, Eurocritics have gotten so used to assuming that Europe was in decline and America remained the indispensable power that despite the recent financial collapse and US debacle in Iraq, many cling to that illusion. The reality is that not only is Europe not only still viable, but it may be on the verge of returning to the role as the leading world region. The 21st century may be Europe’s century.
There are two primary reasons why Europe has positioned itself well for the next century: 1) a realistic understanding of the problems they face; and 2) a principled approach to globalization at moves away from myopic self-interest.
The issue of global climate change is one where these two come together and have already yielded substantial benefits for EU states. First, unlike in the US, the discussion about climate change has not been hijacked by a well funded propaganda machine designed to denigrate, belittle and attack those wanting to take action. Rather, the climate change scientists are being listened to, the evidence assessed, and they recognize that while there is always uncertainty, the risks are so great and the evidence so substantial that it would be irrational to do nothing, or wish the problem away.
In the US, unfortunately, the issue has become ideological, with many people equating support for action on global warming as a “left wing socialist agenda.” Scientists are accused of graft, supposedly cooking data in exchange for government grants. Emotive attacks and derision, repeated on a variety of media fronts, have moved the US public away from an honest consideration of the science to emotion over the politics of the issue.
In 1992 at the Rio Summit, the Climate Change Convention was signed, pledging that developed states would reduce their carbon emissions to 1990 levels. The process was further refined by the 1997 Kyoto Protocol to that agreement, which went into force in 2005. The US refused to participate. The result: The EU achieved the desired result, reducing emissions to below 1990 levels. To be sure, the fact that the year after the fall of the Berlin Wall was chosen helped, but nonetheless the rise in technology and the effectiveness of the effort to reduce emissions is astounding. It also provides proof that this can be done without hurting the economy.
In fact, by sticking to realism (and principle) the EU has positioned itself for a major economic advantage in the fields of alternate energy and anti-pollution technology. These are the fields most likely to radically increase in demand in the coming decades, especially as China tries to switch towards alternative fuels and cleaner burning of coal. EU companies are at the forefront of this new technology, and will likely profit handsomely from the Chinese market alone.
Meanwhile in the US, not only have carbon emissions increased by 20% since 1990, but we’re only now starting to pick up the pace again on alternative energy. With the EU pushing for a decrease of 30% of carbon emissions by 2020 (regardless of what others do), and governments very involved in supporting R&D, the chances are very good that the EU will maintain and even expand its lead in this important market.
That’s another point of realism: not letting ideology guide policy. Many Americans are still enamored with the idea of “the free market does things right,” a now rather discredited ideology given the costs of not regulating the financial sector (see Greenspan’s confession). Still, it’s a seductive and simple ideology, and speaks to traditional American dislike of government rules and bureaucracy. The problem, of course, is that markets respond to demand now, based on current conditions. Humans have the capacity to study and understand trends for the future, including the likelihood of increased oil prices and the danger of another energy crisis.
The Europeans recognize that, and work with markets (not against them) to prepare for a different kind of future. The market won’t do this on its own, at least not at a pace that will give the EU a comparative advantage when the change comes. A pragmatic embrace of a government efforts to adjust the market now will likely pay large dividends.
On issues of human rights and efforts to support development, the EU has a mixed, but generally solid record. On environmental issues, the EU is a clear leader. The core principle, inherent in the EU shift away from myopic sovereign self-interest, is that working together we can solve problems and create a more just, safe and sustainable world. This embraces a role for global governance, as states and regions can reach agreement and cooperate to solve problems.
The problem in the US is delusional thinking combined with heavily funded political propaganda which manipulates public opinion to serve the interests of a moneyed elite. They use very seductive ideas (the market can do it, government is bad, there is no need to worry about global warming, if you cut taxes problems will be solved, it’s all the government’s fault, etc.) to sell a “something for nothing” solution to our difficulties. Cut taxes, cut government regulations, and everything will fix itself! OK, that oversimplifies, but we have a public increasingly out of touch with reality, driven either by ideology or apathy. Americans generally don’t realize how far and fast we’re falling behind.
The result is that slowly the US is fading as a world power. China is rising, but given the intense problems China faces, including political instability (800 million still live in poverty) and oil price increases, the EU is in a unique position to be a bridge between civilizations, reflecting a core value in cross border cooperation and putting sovereignty aside for the greater good. Muslims in Europe are modernizing, and can play a role in helping defeat extremist thinking in the Arab world. The EU also has a generally good reputation internationally, while the US is seen as being militaristic, nationalist and arrogant. This will also work in Europe’s failure.
The US can turn around this trend, but we first need to move away from myopic self-interest, we have to recognize that sovereignty in the age of globalization means we have to cooperate and be willing to build and participate in international law, and we have to reject simplistic ideology and emotive politicization of issues. We can do this, but will we?
(Note, this is part 6 of a series called “Quantum Life,” in which I post the contents of a strange ‘guide book’ I found for a game called “Quantum Life.” It is in English, which it calls a “Quantum Life language,” unable to capture all the complexities of the world as it really is. I’m not sure where this book came from.):
Birth and Pre-Birth
The most traumatic aspect of playing Quantum Life is entering (being born) or leaving (dying) a round of the game (a life). The reason is because between rounds players realize they are playing, even if full knowledge of their “real” selves is not retrieved (unless they choose to leave the game completely).
Before each life, a player goes over some key aspects of the planned life ahead, usually with a game counselor who can help recommend certain life choices. While the purpose of any life is to improve game skills and move forward, over time groups of players form partnerships, whereby they help each other during play. In pre-birth they will plan how their lives might intersect in a given round of play. They may choose to be parent and child, meet and become friends, or become spouses.
It should be noted that all they can plan in advance is probabilities. Once in the game players can make choices that disrupt those plans. A woman might have an abortion, not realizing the child she was to have was to be a prominent aspect of that life. A man might be tempted by leave a woman who was meant to be his spouse. Players have back up plans. If it is recognized that the planned pregnancy may lead to early termination, they may plan to try again with a pregnancy later in life. If (usually guided by a game counselor) a couple recognizes one of them has a relatively high probability of rejecting the plan once in the game, they may plot later encounters, sometimes much later in life.
Game counselors are very good at measuring probability and looking at past lives to determine likely choices and build in back ups and fail safes to make it likely that most life plans will be realized in some way. What appears during the game as coincidence, a chance encounter, or a lucky break may be the result of intense and complex planning between rounds.
Players also choose the time and place of their next life. While time appears linear in the game, the fact that it is simply a complex program means people do not have to progress chronologically. A life lived in 20th Century Asia may be followed by one in the early days of human existence. Sometimes people choose that to take a break — early human life is exuberant and extremely sensual. Others having lived a life of tragedy due to a lack of personal discipline may choose to go to an era of very strict social norms and rules in order to try to reintegrate discipline into the personality. Others may try to hone traits. A person lacking empathy for the poor may choose to have a life of abject poverty. Groups of friends playing rounds together may also choose very difficult lives in order to play a role in helping a friend progress.
More advanced players often undertake very difficult lives both to meet the challenge of succeeding (overcoming fear and being content) in horrible conditions, or to act to motivate others. A player may be born as a child with a terminal disease in order to help the parents learn life lessons, for example. In the game it’s impossible to know the exact background of a person simply due to their conditions. Not only might the same conditions be chosen for very different motives, but the choices made during the game might alter the kind of life expected. All birth points have a myriad of possible directions for that life, with each decision point widening the possibilities of life-experience. Even well planned lives can end up going in a much different direction, sometimes helping the player develop, sometimes setting the player back.
Once the purposes and plans for a life have been made, the process of “forgetting” begins. The player enters an hypnotic state wherein the connection with the greater Whole is hidden. How this is done is impossible to explain using a Quantum Life language like English, and can only be done with the willingness of the player. Once the connection is hidden, the player enters the game as a small, helpless baby, requiring attention and love from other players to survive. This puts the player into a mode of pure instinct and information gathering, helping enhance the hidden nature of the connection with the greater Whole, and making the new game environment intriguing and overwhelming.
Yet in those early days the nature of thought/mind development allows communication between players setting up that person’s plan and experience. This communication continues at sub-conscious levels throughout life, though rarely does any player notice or suspect they are in such contact with other players. Also, some novice players enter the game with the goal of only spending days, months or a few years in a given life, not feeling ready for the whole experience. Indeed, the first time out as a human is almost always for less than a couple weeks, most players don’t venture into aware childhood until at least their fifth or sixth “life.”
As vocal and cognitive skills in the Quantum Life world develop, the connection to others becomes further buried in consciousness. Often this comes out as imaginary friends or images for the children (which some cultures take very seriously, often recognizing that it is a kind of communication), but usually the weight of the Quantum Life reality presses hard on the player, who becomes so immersed in and curious about the new environment that by age three the game world is simply reality. At that point a player has fully entered the game, and play becomes more complex.
The process of “being born” is feared by many new players, though within the game players ironically tend to fear death! It is traumatic, but the overwhelming sensations overtaking a new born make it generally painless. It is not remembered during a life, and afterwards players recall it as a fog combined with a mix of sensations and emotions they could not identify or fully control. Players early on form bonds with parents, and the sense of love and caring (or despair and rejection) dominant early life experiences, and have an impact on later life experience. Perhaps the most important lesson for players to learn is that part of the game is to help new players enter life, and that requires connection and bonding. Otherwise, it’s harder for players to stay focused.
By age 2 or 3, most players are fully in the game and ready to start engaging certain skills and capabilities to make the most out of the game.
(I’ll stop copying the manual for today — I’ll try to find time to post more of it in the near future, between my normal blog posts).
What is the stuff that makes up reality? Is our reality constructed primarily by ideas, with thoughts being actualized as physical experience? Or is reality made up of matter, stuff that combines to form the world we experience?
As anyone who has had a dream where you have become aware that you’re dreaming can tell you, dream reality seems real and “external” to the self while one is in it. It operates under different rules, of course, but that simply means its a different reality. It is possible that our reality is a kind of dream too. Moreover, quantum physics gets so weird at the subatomic particle level that nothing in science gives any particular reason to favor a materialist explanation of reality over an idealist one.
Of course, in our daily lives the world appears to be material. It seems external to us, imposing its form on our minds, meaning that ideas follow matter rather than vice-versa. Yet this could be illusory. From Plato’s “Allegory of the Cave” to films like The Matrix and lucid dreams, there are many ways to imagine that what seems to be an external material world is really something else.
A pragmatist would look at this question and likely say “what does it matter?” If you can’t tell whether or not it’s a world of ideas or a world composed of matter, then why even worry about the question? Whether its your ideas or the nature of reality that causes a body to fall to its death if it jumps off a cliff, they key conclusion is the same: don’t jump off a cliff.
However, the two different approaches open up very different causal mechanisms. If ideas are the stuff of reality, then changing how we think affects what happens in the material world. At an extreme, an idealist version of reality would see ones’ experience in the world as reflecting one’s subjective state — you externalize the internal. Or it may not be so subjective, we could be experiencing something reflecting group consciousness. For British cleric Bishop Berkeley, reality was simply God’s dream. We make the rules in our dreamscapes, God makes the rules in his.
To a materialist, what one thinks matters only insofar as it affects action. A more optimistic person may take a risk or be more resilient, and that might make a difference. Yet at base we are victims of fate, with fate being the material cause and effect which could bring unforeseen disease, disaster, or despair. Ideas and positive thinking might help us bear the burden of a material world where we control only a small portion of our destiny, but they can’t halt the forces and substances in motion in the world.
If one decides to view the world from a materialist perspective, one sees the self as an entity — and if one is honest to oneself, an insignificant entity — in a world of forces and elements that act without regard to the human. Moreover, other humans are in similar conditions, evolved forms of life designed to compete for scarce resources and try to survive as a species. Such a world is filled with pain and danger, and most obnoxious of all — death is inevitable. In the grand course of time we have a small bit to fill, and what we do will be forgotten, perhaps far more quickly than we imagine. To find joy and meaning in this sort of existence is difficult. It is far more likely that the flames of envy, greed and despair will engulf us, or that we’ll become depressed by how hard it is to be appreciated and recognized.
From the materialist perspective, the current age is bizarrely contradictory. We have material opulence, but we’ve jettisoned the traditions, customs, and religious beliefs that protected us from the meaninglessness of existence. Myth, dogma, and custom could unite a community and create an illusion of meaning, enough to make this existence tolerable. We embraced the power of reason and it has given us material opulence alongside tremendous psychological obstacles to happiness.
The idealist perspective makes possible a very different outlook, but one with its own problems. First, if ideas create reality, then the “stuff” of the world isn’t important, and it’s not all that clear if death is a permanent state. After all, we awaken from our dreams but dream again the next night. What if this life is like that? If we’re in Plato’s cave, we have only the shadows to go by, we do not truly understand the greater reality, except perhaps by looking inside ourselves.
If ideas are the stuff of the universe, then we may actually be masters of our own existence. Reality may be unfolding in a manner that our minds shape, even if subconsciously. The positive side of that perspective is that it liberates us from death and gives us rather than the force of nature control over our fate. Of course, the negative side is that if we’re responsible for our successes, we’re also responsible for failures — is the rape victim, the genocide victim, or a person who suddenly loses his or her job in a recession to blame for what happened to them? To be sure, that’s the same issue that often trumps religious thought — would a loving God really allow all this?
If we view the world through a materialist lens, we have little control over our destinies and they may have no meaning, but at least we aren’t to blame when we’re victimized. If we use an idealist lens there is a chance at meaning and control — and even eternal life — but we might end up “blaming the victim.”
I’ve convinced myself that the stuff of reality is ideas, with matter being a symbolic representation of the ideal. Is it a “dream of God,” are we part of some pantheistic ideal, grasped by Plato, Plotinus and Berkeley? Do Eastern religions and their notions of karma get closer, with desire being the source of all human pain? I don’t know. I don’t think a radical subjective notion that each reality is wholly self-created makes sense — as entities we share a world, so I suspect ‘blaming the victim’ is also misguided.
Of course, I may be grabbing onto this for the same reason someone might refuse to entertain the idea his or her religion might be fantasy: it gives me a sense of control, contentment and hope. A materialist might smile and say, “you have your fantasy, your myth, I hope you feel better with it. I prefer to deal with the reality that life is insignificant and my time here slight.” Yet, of course, neither materialism nor idealism can be proven accurate, it’s simply a call each of us can make if we choose to think about such things. Perhaps wishful thinking motivates my perspective, but the level of uncertainty is such that we can’t say one perspective is more probable than another.
What I find odd — and maybe telling — is how our culture privileges a materialist world view and denigrates an idealist perspective. The former is associated with reason and reality, the latter with new age mysticism and fantasy. Ultimately, though, each is an interpretation of a reality which operates by rules and laws whose source remains unknown.
And I do think there is one very logical reason to reject radical materialism. The question “why is there something and not nothing” contradicts the possibility of the world being simply a material “accident” with no deeper meaning. The only way that there should be something rather than nothing, is if there is something meaningful beyond the world of appearances. That logic seems inescapable, the existence of a world means there must be something more, something not purely material. God? Spirit? Ideas? Something like Plotinus’s “The One?” No one knows, perhaps we can’t know in this world. But we can believe.
Do a google search on “Irish economic success” and you’ll find a lot of articles and stories about Ireland as the success story of Europe, turning around an economy that was one of the most troubled in Europe back in 1970 to one with stellar growth rates and low unemployment as the new century began. Those stories end about 2007, when the Irish economy started to slow. Even then, the attitude was that thirty years of growth had catapulted Ireland into one of Europe’s elite economies; a few tough years are normal given the business cycle. Now, however, Ireland stands at the brink of economic disaster. Bond yields have soared to nearly 8% and Ireland is literally running out of money.
Since they are part of the Eurozone, they can’t simply “print money” (so-called quantitative easing), so they’re in a bind. Ireland’s unemployment rate is now 14%. They economy is in a downward spiral, the foreign investment that helped their boom is now fleeing. Ireland stands at the brink of default, hoping for a bailout from the EU. The EU did bail out Greece, but in relative terms Greece is a small economy. Moreover, though that bailout seems to have worked, the political backlash, especially in Germany, was immense.
The problem for the EU is that while it remains inconceivable that the Euro will fail or the EU will break up, the union is not popular with its citizens. For the first time youth satisfaction with the EU is low, historically the young have been the most supportive. Overall only about half of EU citizens feel the organization is benefiting their country. Now, that doesn’t mean they want to dismantle it — that is the stuff of fantasy for Euroskeptics and conspiracy theorists — but new initiatives to spend taxpayer money to “save Ireland” will harm any government that supports such a move. So what next for Ireland and the EU?
The EU could decide to bail Ireland out despite the political risks. This could even lead to governments supporting a bail out being voted out of office, and reward Ireland’s economic mismanagement. To be sure, at the time it appeared Ireland was doing the right thing, mimicking the kind of economic boom the US was having. The real estate market was soaring, and investment income increased rapidly. Ireland was leveled by the same tsunami that hit the US 2008, with considerable contagion from the US. Still a bail out would be an acknowledgment of the difficulties of having a common monetary policy with diverse fiscal policies and internal regulations.
So what would happen if the EU let Ireland fail? What if Ireland went bankrupt? The cost would not borne by the taxpayers, but rather by the bond holders. Unfortunately, these bond holders are primarily European and especially British banks, which themselves would be put into crisis by such a move. This could ignite a financial catastrophe throughout Europe. Moreover, what about Portugal and Spain, two other problem countries? Russia already has announced its not buying any more Spanish debt, and many analysts say its only a matter of time before those countries go into crisis.
If the EU let Ireland fail, the message would be loud and clear: the EU is not going to bail out economies in a financial crisis. That would immediately initiate a sell off of Spanish and Portugese bonds, whose yield rates would rise as investors would see them as far more risky then they currently do. At that point, Spain and especially a small country like Portugal might need to consider leaving the Eurozone — they’d want the monetary tools to handle their crisis that the ECB (European Central Bank) is not extending.
In other words, despite the political unpopularity of bailing out Ireland, not doing so has greater systemic risk — a potential banking crisis and new crises in Spain and Portugal — and perhaps even Italy. Bailing out Ireland will be hard to stomach, especially for the Germans, but might send a signal to holders of Spanish and Portugese bonds that the EU and the ECB is not about to let member states fail or go become bankrupt. Germany’s finance minister did suggest bond holders had to share the cost, one of the reasons bond yields have increased so rapidly. But that’s better as part of a long term reform, not an ad hoc response to crisis.
Euroskeptics often get giddy about the idea that the Euro will fail. That’s not going to happen, at least not unless things get much, much worse. The costs and complexity of undoing the Euro are immense, and the risks are huge. Moreover, it’s not like the dollar is in an essentially strong position. High US debt (public and private) and the large growth of the money supply due to quantitative easing and low interest rates should be producing an extremely weak dollar. Yet the Euro still costs $1.35, historically a good exchange rate. This gives the ECB room to pump liquidity into the system to try to ease the economic burden. With inflation low, the ECB still do a lot, even if it can’t do what Ireland’s central bank would do if there were no Euro.
So expect a bailout of Ireland — and of Spain and/or Portugal if necessary. But also expect this to lead to a complete overhaul of the European financial system in 2013, when major reforms are planned. This crisis has shown a weakness in the Euro-model, and the dangers inherent in unifying economies of such diversity. But it’s less a deadly blow than an important learning opportunity, both for the EU, and the states in trouble. Moreover, this should halt a rapid expansion of the Euro eastward, as bankers and politicians in both East and West need to be sure that when the Euro expands dangers of crises like these one are minimized.
Just as the EU turned out to be far more exposed to the US financial crisis in 2008, any financial meltdown in Europe would cross to our side of the Atlantic. That means the US has an interest in making sure the IMF helps the EU deal with this. In a globalized economy, myopia is deadly.
President Obama’s commission, chaired by Erskine Bowles (D) and Alan Simpson (R) has come forth with a dramatic call for cutting debt by $4 trillion over ten years, starting in 2012. Most of the savings come from spending cuts, while about a quarter come from tax revenue increases. The ultimately goal would be to target both taxes and spending at 21% of GDP, a very low figure compared to the rest of the industrialized world.
So far, Democrats have sounded more negative towards the report, but its not clear how Republicans will react to tax revenue increases. Moreover, cuts include defense spending cuts and other politically tricky targets. The retirement age for social security would increase, and there is bound to be considerable debate over the various provisions. The bottom line is that meaningful cuts won’t happen without controversy, and with power being shared, no political party will get to ram through their own version of what should be done.
President Obama can seize this report and call to enact it, grabbing the fiscal high ground for the 2012 election. The challenge to the Republicans will be if they mean it when they say they want to cut the deficit and debt. But given that we’re in a recession, is it good to undertake ambitious spending cuts?
First, the cuts start in 2012. There’s a possibility we’ll be working out of the recession by then (if my bearish predictions are wrong) and if that’s the case it’s the perfect time to cut spending. In fact, if the economy is improving, the cuts may be easier to stomach than it now seems.
More importantly, I’ve been mulling over the arguments in favor of stimulus. Everything is different in a globalized economy. Stimulating the economy used to be a relatively simple affair: you increase demand, which leads suppliers to put people back to work to satisfy this new demand. That starts a chain reaction of growth, as these workers then increase demand for other goods.
But now the world is a global market, and economic stimulus might not benefit ones’ own economy (just as tax cuts might end up being used to purchase foreign goods). What we really need is direct infrastructure improvement with an eye on keeping the country productive in the 21st century, but the stimulus that we had didn’t really do that job. Moreover, stimulating the economy when demand is low may also be counter productive when debt is high and credit remains cheap. I’m not just talking government debt here, but private and corporate debt as well. The problem has been inflated demand (consumerism) for the twenty to thirty years before this crisis hit. This crisis emerged from an overstimulated economy.
So decreasing debt seems a smart thing to do, especially if we land at a sustainable balance of taxing and spending. I don’t think too many people would consider 21% of GDP a high level of government spending, after all. This also comes as President Obama meets with world leaders at the G-20 conference, trying to argue that China, Germany and Japan can’t expect to maintain such large trade surpluses with the US. The debt reduction plan may produce a jolt of strength in the dollar, which goes against what I was arguing in the last post. Yet that could help pressure China to allow the Renminbi (or Yuan) to revalue against the dollar. There are reasons a stronger currency may be in China’s interest as the global economic system rebalances.
I feel a bit of schizophrenia in my posts, bordering from talking about this as a global depression and a civilizational crisis for the West, to seeing some positive signs and thinking maybe the rebalancing can be done successfully. This blog not only records my predictions, but also shifting moods. When I think a lot about energy/oil, as well as the dangers of global warming, I veer into a more pessimistic view towards the future. If I try to contemplate how the world can deal with such massive debt — heavy debt in the entire west, from Japan to the EU to the US — it becomes easy to imagine a deep and lingering recession.
Yet if oil really doesn’t peak until 2030, and if the worst predictions of global warming are exaggerated, then signs of gradual debt reduction (private and public) and economic restructuring seem to indicate the landing could be softer. Don’t get me wrong — we won’t see the consumerist orgy of the 00’s return, nor will the US remain the dominant world economy. There will be a shift in economic and political power away from the US towards a multi-polar world. That is something Americans will have to learn to accept.
We also need to come to grips with the fact that the financial crisis represented really a giant fraud, as big investment bankers siphoned billions of money from innocent investors by packaging up mortgages into bonds (and then those bonds into other bonds, etc.) Even the investors who failed ultimately still pocketed millions during the boom years, and those who lost had been told they were in secure investments. They choose AAA bonds for security, not out of greed. We have to have a regulatory structure so investment is honest and does what investment is supposed to do, and not simply be legalized gambling.
Proposing cuts and passing them are two different things, and we’ll see where this plan goes. But it does appear that there is a serious effort in the US to restructure government taxing and spending to cut debt and develop a sustainable blueprint for the future. That to me is a good thing.
I’ve been particularly bearish on the economy in my last couple posts, calling this the equivalent of a depression and a crisis that risks civilizational failure. However, there are signs that we can avoid the worst. The news came out today that Consumer debt fell by 7.4%, or nearly $1 trillion dollars in the last two years. Though the pace of repaying that debt is declining, it means that our total consumer debt now stands at $11.6 trillion. There are also fewer credit cards, and in general it appears that at least the American public has come to grips with the fact that the wild consumerism of the 00’s cannot continue.
So, a piece of good news hits, and my first reaction is to rethink my position about this crisis. Is it possible that I’m far too bearish and concerned, under estimating the capacity of a country as large and rich as ours to bounce back and recover from the long debt-driven party of the last thirty years?
Some signs of sanity are real: people are paying down mortgage debt, delinquencies in consumer loans are down, as are home foreclosures. Families across the country are starting to put their household finances back in order, adapting to the uncertainties of the recession. Home lending practices have been tightened, as has credit access to the sub-prime market. In fact, this is how a recession should look — the economy is slow as we recover from a credit binge.
A best case scenario would involve a gradual increase in economic growth, and a tightening in what to me is still the most important statistic: the current account. In the second quarter of 2009 the current account deficit hit a ten year low, at $84.4 billion. However, the latest figure (released in September, Q2) is $123.3 billion, the fourth quarterly increase in a row. The current annual GDP is $14.73 trillion. The current account deficit now is at about 3.4% of GDP, up from 2009, but still a sustainable number compared to the 7% of GDP hit back in 2006. We’re still consuming more than we produce, but not to the extremes of a few years ago.
Ultimately I think the US needs to see this number stabilize closer to 0. Treasury Secretary Timothy Geithner recently proposed that the G-20 set targets capping current account surpluses at 4%. The argument the US is making is that China bears some fault for the current global crisis by how it has kept its currency under valued while running constant trade surpluses. One could even accuse China of engineering a mass transfer of wealth from the US to China, using our belief in free trade to flood the market with cheap consumables we’d go into debt to keep acquiring. They were, however, simply playing by our rules (and we’ve been willing consumers).
Yet the US can’t play hardball with China because we do still need them to buy our bonds, and if they got really made and started dumping bonds, stocks, and US currency, they could do severe damage to the US economy. Arguably they could weather such a storm better than we could. So what does the US do? Quantitative easing.
To do this the Federal Reserve board created $600 billion out of thin air, put them on their accounting sheet, and then used that money to purchase US bonds. That, of course, has the impact of driving down the interest rates on those bonds, which negatively impacts countries like China who holds them. China originally complained about this, but apparently in exchange for Geithner to quiet down on current account surplus targets, they’ve also muted their criticism. This also isn’t the first time the Fed did this; since the crisis began nearly $2 trillion have been “created” in that manner.
Colloquially “quantitative easing” is simply “printing money.” The risk, of course, is inflation and even hyperinflation. It is a form of stimulating the economy that is often used when lower interest rates fail to generate more economic activity. In the US that and a fiscal stimulus have so far failed to generate growth. That’s seen as bad, though given the rate in which consumers have been paying down debt, one wonders what would be happening to the economy without the stimulus! Quantitative easing was used by Japan a decade ago, but didn’t work to stop Japanese deflation. Indeed, Japan’s high government debt, low interest rates and then quantitative easing should have risked inflation. It hasn’t because low unemployment means there is not a reserve of new workers ready to go into the system and generate income.
Japan has maintained its industrial base (unlike the US), has vast foreign capital reserves, and has had a current account in surplus (meaning it invests in the rest of the world). The relative “comfort” of Japanese deflation — it remains a wealthy low unemployment country — isn’t cause for comfort here. The key for us remains to increase production. Without increasing production the only way out of the recession is through consumption of foreign goods, and that would require more debt. In other words, the problem would intensify and set up another crisis.
Paying down the debt is an important step — and private debt is perhaps even more important than worrying about government debt at this point. My fear would be that quantitative easing could induce more consumption of foreign goods, thereby increasing the risk to the dollar moving forward. My hope would be that somehow we find ways to increase production at home so that ‘new’ money is spent improving America’s productive capacity rather than just causing more consumption.
Ultimately, I don’t see any way that can happen without a decline in the value of the dollar.
A falling dollar would mean foreign goods would get more expensive, and we’d consume less of them. American goods would get relatively cheaper, and there would be incentives to produce more of them. More Americans and even people abroad might find it cheap to “buy American.” This would produce problems in emerging markets, many of which rely on the US to buy their goods. This also would wreck havoc with the bond markets and the US ability to sustain debt and deficits. The result could be such global uncertainty that a call for a “new Bretton Woods” would be quite persuasive.
The Bretton Woods system is the monetary and institutional system of free trade and fixed exchange rates created after WWII, named for the location in New Hampshire of a July 1944 meeting setting the framework for the post-war system. Bretton Woods II is often used to discuss the changed nature of the system after the end of the fixed exchange rate system in 1973. Robert Zoellick of the world bank has talked opaquely about an internationalization of capital accounts, perhaps a “Bretton Woods III,” that could even reintroduce gold as a benchmark against which currencies are measured. Though this is not necessarily a call for a new ‘gold standard,’ it does reflect growing concern about the ability of humans to successfully handle fiat currencies. To me this signals recognition that currency instability is likely in our future; a dollar crisis may be the next phase of this global slowdown.
So yes, Americans paying down the debt is a good thing. But we also have to increase production and stop growing the current account deficit. I doubt that can happen without a weaker dollar — perhaps substantially weaker. Now that it’s clear that the Euro is not in existential crisis, I would not be surprised to see the dollar start to decline in value. How hard and how far the fall is uncertain. Whether or not the global system can handle all this in a stable manner may determine how deep this global economic crisis ultimately becomes.
“Each time we bathe our reactions in artificial light
Each time we alter the focus to make the wrong move seem right”
– from “Stick it Out” by RUSH (lyrics Neil Peart), Counterparts LP, 1992
For all my posts on the economy, I’ve not spent a lot of time on the underlying cause of this crisis. The true nature of the current crisis is far deeper in our culture than most people realize, and although it sounds alarmist, the US and perhaps western civilization in general may be on the verge of something akin to civilizational failure.
This is not due to outsiders. Many point to China, Arab Muslims, India, or even Russia as doing things globally to undercut the US. No, we can’t blame others. This also is not due to nefarious insiders. When Hitler rose to power he blamed socialists, internationalists and liberals, saying that these folk were betraying German values, internal traitors against a “real” Germany. Jews were also a convenient scapegoat. Some extremists on the far right use similar rhetoric against the left, with Hispanics replacing Jews as the “parasite” destroying the country from within. No group inside the country is bringing us down. This is also not due to Republicans or greedy corporations either. Many on the left want to dismantle corporate America, and blame banks and business for greed and taking a far greater portion of the pie. Yet blaming big money is wrong too.
The reality is that this crisis comes from how we think. It is a cultural crisis, with its roots in the enlightenment. It is also not a new flaw. We can look back and see colonialism, bureaucratic socialism, fascism, world wars, and a Cold War where in which the world hung under threat of nuclear annihilation.
The enlightenment gave us a world view that allows us to interpret reality in whatever way suits our interest. By positing reason and rational thought as the ideal, it gives us a tool to twist reality and construct meanings that justify what we do. Colonialism is spreading civilization to the benefit of the “primitives.” Bringing war and chaos to Iraq is ‘removing Saddam’ and “spreading democracy.” Destroying indigenous cultures is “bringing them Christianity,” and living off cheap resources and labor from the third world is “using free trade to help them develop.”
We are very good at rationalizing things; we do it in politics and in every day life. Should we cut taxes to the wealthiest when the gap between the rich and poor is at its greatest in 100 years? Sure, some will say, it will help the economy and the poor will benefit. And if there is a real danger, such as global warming — well, we’ll find a couple naysaying scientists and then use media and propaganda to make it seem like the deniers are brave critics against “big science.” We are to believe that the vast majority of climate scientists are simply lying to ‘try to get grants.’ And on the left people rationalize increasing the scope and size of government programs, even though the economy is in recession and we have an unsustainable level of debt.
Yes, we are always able to rationalize what we want to believe. There are enablers built into our society — bankers who sold and often pressured people to take subprime loans they really couldn’t afford, advertisers telling people “you deserve” this — go a little more in debt, this product is worth it. Credit card companies pushed cheap easy credit on us, and the cultural insanity was defended by simply blaming those who lost out. When the subprime mortgage goes bad or credit card debt buries someone, “well, they should have known better.” Shifting blame allows us to keep alive arguments, beliefs and ideas that justify convenient cultural delusions.
We do this to ourselves all the time. That is why we gain weight, rationalize mistreating or cheating on friends and family, purchase goods we don’t need, and produce massive amounts of trash even as we say something has to be done about pollution. We also create cultural narratives to rationalize and make seem “normal” something which is anything but. The narratives hypnotize, they are with us from birth, they speak to our basic desire to pursue our interests while avoiding cognitive dissonance in justifying the cost. They are narcissistic and myopic, and our culture reflects that.
The enlightenment gave us the ability to create rational arguments by use of reason. In science this, of course, allowed the development of new technologies and knowledge about the world. But in culture and politics it is a dangerous capacity. The problem is that reason needs to be grounded — there need to be core values and principles underlying the use of reason, otherwise it is literally sophistry — building arguments to justify whatever we want to justify. And our sophists are more sophisticated than was the case in Socrate’s time!
Although colonialism was rationalized through a variety of discursive strategies (persuasively argued by David Spurr in Rhetoric of Empire), tradition, religion and custom were strong enough to keep the most negative forces in check. Starting in the 20th century and aided by the rise of propaganda and mass media, our ability to create narratives to rationalize anything became unhinged. Be it Communism, Nazism, Consumerism, Libertarianism, class warfare, interventionist foreign policies, or the recent rise in debt due to easy credit, we’ve learned to use reason like a drug — it can cause us to see as good and rational anything we feel like we want to believe or do. Moreover, we don’t even know we’re doing it, we really think our arguments are correct! It’s emotion that gives us that certainty, but we believe it is our rational thought.
That’s why we’re in such deep trouble. It’s not primarily the economy, or militarism, culture wars, or anything else. Unless we can find a way to ground reason and use it wisely, we’ll rationalize and see as good and necessary the very things which will bring down our civilization. The key for individuals is to recognize and understand the danger, and try to resist the tempting self-serving justifications. We can do that, though it takes practice. For our culture, though, there needs to be a shift in values. We won’t bring back traditional society, nor will religion play the same role it did in the past. But somehow we have to find a way to humble the use of pure reason and rediscover values, principles, and ethics outside of using reason as a tool. Reason can be used to rationalize any ethical belief, after all.
In his book The End of Wallstreet, Roger Lowenstein writes:
“Rates were guided in their downward path by the person of Alan Greenspan, the economic consultant and Ayn Rand disciple turned interest-rate guru who served as Federal Reserve chairman from 1987 to February 2006…It would be an oversimplification to credit (or blame) Greenspan for everything that happened to interest rates over that period, but it was his unmistakable legacy to stretch the boundaries of tolerance, to permit a greater easing of credit than any central banker had before…It was a central tenet of the Greenspan worldview that market excesses — ‘bubbles’ — could not be detected while they were occurring. This stemmed from his faith in the seductive doctrine of the new finance, a core element of which was that financial markets articulated economic values more perfectly than any mere mortal could. People might be flawed, but markets were pure — thus ‘bubbles’ could be ascertained only after the markets had corrected them. Greenspan’s was a Rousseauean vision of markets as untainted social organisms — evolved, as it were from a state of nature. (It overlooked the obvious point that markets were also human constructs — made by men.)”
– pages 3-4
In my first year seminar “The Future of the US,” we’re now talking about the economic crisis we’re facing, one that started with policies in the early eighties when the US started amassing massive government and private debt, setting up a series of bubbles that persisted until the financial meltdown of 2008. Fundamental to the errors that caused the problem was a flawed view of markets as being the best regulator of economic activity, and superior in all ways to government bureaucracy.
Greenspan was appointed by Ronald Reagan, who first broke with the old orthodoxy by instituting a massive wave of tax cuts, while at the same time stimulating the economy with an unprecedented increase in government debt. The “borrow and spend” mentality spread to the public. Naysayers like David Stockman, Reagan’s first budget director who later harshly criticized the total disregard of the Reagan Administration for fiscal constraint, were brushed off. The economy is growing (how could it not, if you deficit spend during a boom!) and inflation was absent.
The dirty secret behind this apparent capacity to borrow, spend and avoid inflation (thus keeping interest rates low and igniting the hyper-consumerist era of the 90s and 00s) is that there was a massive shift in who produced the goods Americans consumed. Instead of being produced by well paid union workers in the US, production shifted to third world states and by the 90s, China. Inflation didn’t increase because the cost of goods went down. The quality went down as well — compare, say a toaster made in 1975 to one made in 2005 — but quality wasn’t really considered in the consumer price index.
Lowenstein’s book, of course, focuses primarily on the bizarre world of credit default swaps, collateralized debt obligations (explained very well here) and the financial collapse of 2008. While “mere mortals” were warning of high debt and the de-industrialization of America, high profits on Wall Street and a faith in the wisdom of markets guided policy makers. Policy makers, especially at the highest levels, get disconnected from average folk. They are connected to the movers and shakers on Wall Street and in big business, and that’s who they take advice from. Bill Clinton — while at least not deficit spending during a boom (under Reagan debt increased from 30% of GDP to 60% of GDP, it held steady under Clinton who ultimately balanced the budget for a couple years) — seemed to worship the advice of ‘big money.’
China and other sellers of consumables to the US rode the credit wave for all it was worth, even buying bonds to help finance its continuation. It was a good deal for China — they got the power to totally subvert the US economy if they wanted to, became America’s top creditor, and the money flowed back to them when consumers bought stuff at Walmart.
An example of the shortsightedness of this market faith is the fate of the effort of Brooksley Born (detailed in this Frontline video) to start regulating a vast market called “over the counter dervivatives.” This involved markets for bonds, swaps, and other financial instruments which had absolutely no transparency. Massive amounts of money were moving into derivatives, with no one knowing exactly what was happening. Derivatives are transfers of risk (the most common form being a futures market), and the new trading was unprecedented, exotic — and ultimately toxic. Greenspan, Summers and Rubin got Congress to shut her down. Markets get it right, Greenspan extolled.
Just as mere mortals were ignored when they warned about high debt and lack of production, they were also warned when they wanted to regulate the fastest growing part of the bond market. They were ignored when they warned about the housing bubble. “Just let the market handle it.”
Well, at one level Greenspan was right — the market will ultimately adjust. And now we’re seeing how it adjusts, with a major recession and a fundamental weakening of the US economy and US position in the world. If humans had intervened, we’d maybe still be producing, we’d not have got caught up in the housing bubble, and the derivatives market would not have threatened to take down the entire global financial system in 2008. If we had not run up debt and unleashed cheap credit, we’d have not become addicted to cheap foreign goods, and the hyperconsumerism which has damaged society on so many levels (detailed in Benjamin Barber’s aply titled book “Consumed: How Markets Corrupt Children, Infantalize Adults and Swallow Citizens Whole“), might have been avoided.
Rather than the roller coaster bubbles followed by a deep recession, we might have more mills and factories still open in Maine, and we’d not be facing the risks we face in this global economy. It’s not so much that markets are bad, only that without regulation and control they get manipulated by the powerful whose interests are usually not those of average folk. Their interests are myopic and short term — profit in any way possible. The faith that how the wealthy structure the game to profit themselves will work out “best” for society is irrational. The idealization of markets has been thoroughly disproven many times in history.
The theory is seductive and yields a very simple, objective world view, one in which many people find comfort. A lot of people don’t like the complexity and nuance of how a very diverse world of imperfect humans with flawed judgment functions. Many prefer to cling to Hayek, Rand, and Greenspan who offer a clear vision of the morality and superiority of markets. Seductive theories, be they communism or market libertarianism are dangerous.
So let markets operate — they do a good job of communicating demand through price, and stimulating innovation. Markets create incentives and allow people to make choices and adapt. But especially in the world of high finance, big business and global trade, they need strict oversight and regulation. Without that regulation markets fail, and instead a rigged game that benefits the elites take over, ironically defended by many who are their victims, but yet believe the system is market driven. Markets cannot function properly without such regulation. Unfortunately, even with some significant reforms, the Obama Administration has not yet made the changes we need to try to really get on the right path. Tim Geithner is smart, but he’s also a Wall Street insider. True, Wall Street is not the enemy, but it’s driven by a conventional wisdom that distrusts needed regulation. Perhaps Obama should tap Brooksley Born to come back to government and help design a new regulative scheme.
With the GOP taking control of the House, it’s unlikely the lessons we should have learned in 2008 will be turned into policy. That bodes for more economic bad news down the line for a country far deeper in crisis than most Americans realize.