Wrestling with Chicken Little

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U.S. Automakers currently sent home to re-think their requests for a bailout package from Congress have run into two major problems bode poorly for the U.S. and the global economy.

First, the policy drift in Washington that's taking place as we all hold our breath for the Bush Administration to pack its bags couldn't have come at a worse time: the speed at which the economic fallout is now coming back to depress the stock markets has been a matter of weeks, not months, and I really shudder to think how much worse it can get between now and January 20, 2009. And, frankly, our Congress just doesn't seem up to making a decision, whether for pure fright at the enormity of the consequences, or because we're just in the political doldrums until Obama's inauguration.

The second problem is a kind of "Chicken Little" problem. Our American automobile manufacturers have been back to Washington over and again for help to "stay competitive", "to retool" or otherwise to stay in business. Patience among taxpayers and their reps in Washington is wearing understandably thin, but all signs actually point to the sky falling this time. At a time when we have shudders at hearing of over 200,00 layoffs on Wall Street alone, imagine the tsunami effect if Detroit, the poster child for supply chain economics, fails: best estimates are millions of 2.5 million to 3 million jobs lost -- in the heart of the country.

In the broader contest of the debate between conservatives and liberals over how much intervention, how much regulation, how much government should be involved -- and over the fundamental soundness of our financial system, the reality of an entire industry sector poised for failure is sobering for its fear factor alone: witness yesterday's stock market plunge. The ripple effect that will be quickly seen spreading out among Detroit's supply chain will have a corollary effect among all industries. Will others follow Detroit? The last thing we need is for Washington to go numb in the brain at a time when action alone has a psychological calming effect. The less of Chicken Little is that his call is so disturbing that people just shut down and tune out, and while no one is tuning out, fear of action in the face of the enormity of the consequences is the equivalent.

January 20th can't come soon enough, but I really worry about what's in store for us over the next 8 weeks.

Taxes, the Election and the National Self Interest

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I have to credit the McCain campaign for making lemonade out of lemons. At a time when the economy is tanking and Americans are truly and justifiably fearful for the economic future, when it becomes commonplace for our government to speak of figures in excess of many hundreds of millions of dollars being committed to this bailout and that rescue, and the national debt be damned, they have managed yet again and at just the right time to twist the minds of lower and middle-class Americans away from anger at those in power who have brought us to economic disaster, and flipped it into a powerful fear that the Obama administration would preside over a massive and universal tax increase. Can you see the total disconnect in thinking?



Clever. And ironic, given that so much of our country's financial problems are the direct result of a mindset among our current corporate and government elite is that government must cede its fiduciary responsibility to Americans to the gods of profit and growth. Where would we be if the SEC hadn't handed over to the five largest Wall Street investment banks control over their own risk? Where would we be if we weren't in Iraq and Afghanistan, where it now looks like we will go down as the Russians and the Brits before us? At a time when government spending is skyrocketing as fast as the stock market tanked in October, the McCain camp would like us to overlook a basic question. Where will all the money come from?



Obvious answer, of course: us. There's not much debate that we cannot leave our economy to its own travails, although there is considerable debate about the impact of us digging our hole quite so deep. James Kenneth Galbraith spoke about this in a recent Bill Moyers interview which makes fascinating and enlightening reading. He says, rightly, that the failure of government regulation of the banking system has created a crisis of trust and confidence, and goes on to say that it is appropriate and necesary that the US Government borrow whatever funds necessary to provide the capital to provide a bailout on the national, state and local levels. http://www.pbs.org/moyers/journal/10242008/transcript4.html I'm not sure I agree with Galbraith that the US dollar is and will remain the one solid go-to currency in the global economy. And he ignores the ultimate question: what are the long term consequences for our nation to have effectively mortgaged an entire generation's wealth. Remember that the Chinese government is the single largest holder of U.S. debt, and for now, it remains in their interest not to call that in. But back to taxes and the election.



Are we so averse to individual pain in the face of national crisis that we cannot see the plain necessity of taxes being raised to pay the costs of our mistakes -- our individual mistakes in arriving at a national economy that relies on soft goods and credit card debt, as well as the mistakes of policy and leadership that have put us in this place? Again, the Republicans play the fear card, only this time they've managed to twist our gaze away from reality and layer it on our own deep national unease at our individual and collective economic futures. The Democrats, in the interest of winning this election, don't do much better in truth-telling grounded in real economic reality. Maybe it's just too much to deal with now. Our problems are much deeper than our leaders will let on, and politics will prevail.

I only hope the only saying holds true for Americans: you can fool some of the people some of the time, but not all of the people all of the time.

Watching America Vote

Image via WikipediaFor a quick snapshot at what the rest of the world is thinking about our upcoming presidential election, you'll find a fascinating array of articles on msnbc.com's "World Blog" that reflect the hopes, fears, frustrations, selfish wishes, and altruistic dreams for a better world that make me pause to reflect. http://www.msnbc.msn.com/id/26716509 The headlines themselves are telling, surprising, even eye-popping: "Germans Hoping to Get Past 'Bush-fatigue'," "Vietnamese Back McCain," "Neither Candidate Will Be Good for Pakistan," "For China, US Election is Entertaining" (entertaining??!), "Iraqis Say Vote Smells of 'Honey-Promises'" (one of those weird translations, no doubt), "Egyptians Looking for 'Good Side' of America."

We can be certain this will be, as it is among Americans themselves, the most closely-watched of elections. I've been in Washington, DC this week on meetings and it is as fascinating to hear the array of views inside and outside the beltway, as it is to see the America's reflection both inside and outside the country. We've seen very little substantive discussion among Obama and McCain of a broader concept of "the national interest." We get snippets here and there: their views of our national interest in the global financial crisis, Israel, Iraq, Iran, energy policy, mostly talking points and poorly articulated boilerplate designed to enable them to skate over the tough questions. I wonder if, as we as Americans become more embattled economically, socially, politically, a greater sense of the national interest will emerge that can provide us some kind of beacon in troubled times.

But the outcome of the elections in two weeks is only part of what the world is watching. Today's papers note that in Florida, almost a third of the electorate will have voted early in this new kind of in-person absentee voting. And yet there are same problems with our faulty physical voting structure. I hope these problems won't blow up into a new national electoral crisis a la Bush/Gore. My friend in DC -- a high level technology policy expert -- had a clipping of a letter to the editor to a national magazine taped to the back of her kitchen cabinet expressing her view of what happened: two or three highly technologically savvy people monitored the computerized election returns in Ohio. When it became clear Bush would not win a key county, one of these techno-burglars quickly, anonymously, and remotely hacked into the computerized voting system and switched the vote to favor Bush. Of course, my friend the writer went on to point out, this could never be proved, but concluded with optimism that our newly computerized voting systems would be changed to restore our faith in democracy.

I wonder. The problem, of course, is not the computerization, but the lack of a means to double-check results. Basically, the lack of a paper trail. http://www.securityfocus.com/news/6530. Just last week, the U.S. Supreme Court ruled with Ohio Secretary of State Jennifer Brunner on Friday, October 17, granting her a stay to a temporary restraining order from a federal appeals court that ordered her to provide a system for implementing voter fraud prevention methods. It's a striking case of the Republicans manipulating the issue for their gain, with the Ohio Republican Party filing the initial suit challenging the state's compliance with the Help America Vote Act, alleging that the state has no system to deal with mismatched voter records.

I suppose we might get through Obama v. McCain without the system blowing up in our faces and into the arms of the Supremes again. But as we watch, and the world watches how American votes, and how America votes, I can only hope that our newly re-engaged electorate will care passionately enough about both results to move forward to a fuller expression of what really works for America.

Leadership and Critical Thinking in the Global Financial Crisis.

Many will already have seen or read Bill Moyers's October 10 interview with George Soros on his "Journal" program/blog. http://www.pbs.org/moyers/journal/10102008/watch.html What's striking about Soros is how he observes the groupthink grounded in basic human nature that has driven this crisis to the brink. "[O]ur ability to govern ourselves doesn't keep pace with our ability to exercise power over nature, control over nature."

This is especially striking when looking at the role of the SEC in permitting the five major investment banks to self-regulate. As Soros put it so well in his interview, the major flaw in Wall Street thinking as developed since the demise of Glass-Steagall is the belief that by distributing the risk, you reduce the risk. The real question is: at what point does blindness to reality set in?

What happened at the SEC in 2004 is succinctly put together by the New York Times's Stephen Labaton in his multi-media presentation on the subject. http://www.nytimes.com/interactive/2008/09/28/business/20080928-SEC-multimedia/index.html http://www.blogrunner.com/snapshot/D/0/9/stephen_labaton/

It's a powerful example of how quickly the belief in the all-powerful, self-correcting, invisible hand of the market always making things right became arrogance combined with pure greed. Who was worse? The SEC, for essentially rubberstamping a fundamental change in how risk is accounted for, or the firms and their lobbyists for squeezing out the last major run up this super bubble of a market these past 25 years? These human blindspots are curious. I'm struck by how stupid and mute we've become today, numbed by the "good" times to the point of some weird lethargy that's both blind hope and apathy. Which brings us to the psychology of leadership of the governments we now look to for "bailout" and "rescue".

How caught up are the world's finance ministers in clinging to their belief in the Market as the ultimate expression of Mammon? The Brits have, again, shown a capacity for both critical thinking and leadership that gives cause for hope. I wonder if, as Labaton suggests, it isn't strange that we have Henry Paulson leading the way in this crisis, and if we can't possibly crack the mold of our group think about what's possible and what's right to move out of this mess.

Greed, Greed, and more Greed

I can't help but consider the root causes of our current economic state of affairs, and it comes down to unbridled greed. The necessity felt by all in business to do better, to do more, to make more money - quarter after quarter, year after year. The insatiable NEED for profits has created a house of cards that we've seen flattened in very short order.

In looking through my collection of news sources this morning, I was struck by the comment in one piece that banks and investments banks, collapsed together by the now discredited abandonment of Glass-Steagall, were driven to find new sources of profit at the time of the collapses of the dot.coms in 2000 and 2001. We'd heard of derivatives long before this, of course, but the "sophistication" of these instruments -- such a malapropism -- has now gone way beyond what even my most "sophisticated" friends on Wall Street could easily describe in lay terms.

I can't but wonder now what this human drive for ever-higher standards of living by our wealthiest citizens will create out of the chaos of a global financial meltdown. Much is being said now about a return to a slow growth economy -- a weird nostalgia for the values that came out of the depression that for a short time made America the wealthiest and most powerful nation known in history. See Jim Cramer's September 29 piece in New York magazine and his comparisons with today's situation with that in the movie, It's a Wonderful Life. (http://nymag.com/news/businessfinance/50520/) Are we craving for a break from the pressures of quarterly earnings reports, workaholism, and total lack of balance between a healthy standard of living and the basic demands of capitalism, even as we are in utter terror about a global financial meltdown the likes of which no one has ever seen?