Alright– in the spirit of just picking up the thread, I want to talk about the financial crisis for a minute. I’ve read a lot about the crisis, and talked about it, and thought about it. I was listening to the radio the other day and somebody who was explaining what’s going on in the markets right now made a comparison to the apocalypse of 2008 , and I thought, it didn’t seem like the end of the world to me. I remember 2007 (sort of), and it is now 2016. 2008 came and went and most of us are still here. My parents live in the house I grew up in. My friends are, by and large, doing fine, living the lives they had more or less planned on. I mean, I thought the crisis was supposed to be some kind of event.
Obviously, I know about all the loss of money and credit and the recession and all that, and those things are not good, but nevertheless I cannot quite shake the feeling that what the crisis is really about is something that doesn’t happen.
And this is where things get weird for me. It has occurred to me often that what a lot of Americans want is a return to the 1950s- they imagine an idealized version of the Eisenhower administration, peace and prosperity, but without the racism and the sexism and the fear of nuclear war. Remember the Jetsons and the Flintstones? The first a cartoon about a typical family in the future, and the second the same idea except in the past. In both, the typical family is white. They live in a single story ranch house. The man drives a large automobile to his job everyday while the woman attends to the household. They have two children. The man aspires to be a manager (but management is usually inept), he belongs to a club of other men who get together and wear funny hats. The woman aspires to have high quality material goods, especially the kind that you can display in public.
I think a lot of people want life to look something like a sitcom, where they are able to just go along and kind of ignore the world around them. The economy is expected to just hum along indefinitely and never change.
In the Middle Ages, it seems to me, although life was generally very hard, it was, at the very least, more predictable. It was at least possible, back then, to be born into a small village, live a long life, and die there, having only ever known the other people in the village, and the occasional visitor, and having never seen any other place. The years would come and go, and the world would be much as you found it throughout.
The world my father was born into was very different from the one we are in now. The world since 1815 is a radically different place from the world before 1776. The world we are living in now basically begins in the 1930s, and emerges fully after 1945. And think of how tumultuous that world has been! The human population of the world has increased by over 4 billion since 1950. The Green Revolution, led by Midwesterners like Henry Wallace and Geneticist Norman Borlaug, have changed the realities of food production, making it possible to sustain the enormous population, and allow it to grow. On the other hand, we’re using resources at an unsustainable rate.
And what I think Americans want is to not have to think about all this stuff. What’s the point of being the most powerful country in the world if you can’t get a decent night’s sleep anyways?
The role of banking is to facilitate the ordinary processes of a market economy. Now, in some sense, the market is thought to be an impartial mechanism. Businesses compete not for customers but rather for investment, and their competitiveness is measured by the return on investment. Banks are responsible for making all that happen, for separating profitable business from waste. In theory, consumers are the beneficiaries of this competition, although I think that’s debatable. Nevertheless, bankers are responsible for assessing the creditworthiness of firms as well as consumers; they are judges, arbiters of access to the financial system. A system that makes our way of life possible.
People who lost their job in the recession that followed the crisis lost their job because of the crisis, but it is impossible to hold any person or group of people entirely responsible for what happened. It is accepted that those people lost their jobs, and they have to find other jobs. Now the thing about living in a capitalist society is that it is, in some sense, a society of laborers. People who do not labor do not contribute to society. The people who lost their jobs and did not find new ones, some of those people lost their place in the world, and became homeless. It’s nobody’s fault. The homeless serve as a rejoinder to discipline for labor. However, in order for that rejoinder to be effective, labor must be made to think that those jobless and homeless deserve their condition in some way, so that existing reality can seem reasonable as well.
Let’s say, let’s imagine, that people feel like the economy is too big. Not enormously too big, just a little too big. If it were just a little smaller, it would be fine. How would you do that? You take a little bit of money out of the economy. Which is sort of what we’re doing right now. The thing is that all the money in the economy is also all the income in the economy, so when that gets smaller, incomes get smaller. And as incomes get smaller, the relative size of debts gets bigger.
Now its tempting to say at this point in the story, aha! This is a negative feedback loop! By enabling companies to store profits offshore, banks are slowly starving the American people. But I don’t really think that’s what would happen. Bankers are not stupid, not even a little. There are guys on Wall Street who are total Bros, but even some of those guys are pretty bright. At some point, in theory, its possible for banks to put the kibosh on a deflation and start lending and get an expansionary cycle going. That eventually turns into a bubble, and then there’s a crisis, and – in theory – the suckers get liquidated. The crisis is not a symptom of instability, but a cause of stability.
Look. After the Soviets detonated an atomic bomb in 1948, fear of nuclear war rationalized the sustained investment and output levels in the US and Western Europe that led to the greatest economic expansion of all time. Full employment led to population growth with social stability. But now the cold war is over. The prosperity of the 20th century brought with it a cascade of consequence. Here in the early 21st, America is tired.
We close our eyes and we dream of a time when we had hopes and dreams. The steady rise and fall of the economy rocks us like ocean swells felt from the deck of cruise ship, assuring us that nothing will change, not really.
If you think that banks are crooked, that politics is corrupt and America is an oligarchy, then why bother fighting? You have already ceded victory to the enemy. Go home.
Banks are institutions like any other. If we want them to do something different, we ought to tell them what that is, instead of trying to put them in chains. Democracy is quite capable of regulating banking and finance if it wants to – but that’s the thing. You can’t reform banking, or the monetary system, without engaging the people working in it, and without taking into account how it will effect demographics or social arrangements. Saying that the economy should work for the people and not just a small group of billionaires means nothing, because “the people” is an empty term. Everybody has a different idea of who “the people” includes. A serious politician has to engage with bankers, just as they must engage with the military, just as much as they must engage with the people who elect them.