One of the best pieces of reporting to emerge from the bailout insanity is this gem from Joe Nocera of the New York Times. You must read it: doctor’s orders. It makes it crystal clear that Paulson has a plan for his friends in the financial world, but there is no plan for the economy. You can lead a bank to liquidity but you can’t make it loan. For his chutzpah in listening in on a conference call intended only for JP Morgan staff, Nocera deserves a Pulitzer, a Nobel or something.
My first thought on reading this exposé was that we just need to hang on for three more months, when the real cavalry will come to push aside this bunch of imposters. But then I realized that there is no guarantee that Rubin, Summers et al. will have the courage or freshness of vision to do what needs to be done. They too have been shouting “Capitalization, Capitalization”, which may rescue them but falls far short of rescuing us.
I reiterate: we need to put a public financial alternative on the table. Bailing out the financial institutions (a) may not succeed on its own terms and (b) does not deal with the fact that the real economy is plunging. A public entity can step up and provide the credit we need to avoid a suffocating slump, so we are not held hostage to the Jamie Dimons of this world.
And where is the left? They rail against the bailout and the evils of finance capital, but when it comes time for them to put forward a constructive, functional alternative they change the subject. As far as I can see, it comes down to this: either we bail out the existing institutions and somehow browbeat them into countercyclical lending behavior, which they will resist with all their fiber, or we let them go to their fate and put our marbles into a public institution that can do the job. The first is an ethical swamp, reeking of moral hazard, and may well fail. The second is the straightest, fairest, most reliable route to recovery. Please raise your voice for a public alternative. If the bailout fails to prevent a full-bore economic collapse, by the time we find out it will be too late.
"Treasury is using the bailout bill to turn the banking system into the oligopoly of giant national institutions, it is hard to see how that will help anybody. Except, of course, the giant banks that are declared the winners by Treasury."
ReplyDeleteThe failure of Treasury is to differentiate itself from the large financial interests. Any interested observer of these institutions would have similar trouble doing so.
Here is a broad statement from the Canadian Labor Congress that might get the mental gears turning.
ReplyDeletehttp://canadianlabour.ca/en/clc-response-economic-crisis-summary
Are you proposing to set down an alternative right here at Econospeak?
Martin,
ReplyDeleteI'm sympathetic to much of what the CLC says, and it's also nice that at least one North American country has a strong, independent labor movement in a position to have a voice.
Nevertheless, if you look closely, there isn't really an alternative proposed to bailing out the system. We should fill up the gaps in the regulatory system -- yes. We should have a fiscal stimulus, centered on the needs of those at the bottom -- yes. We should get an equity stake for any injections into the private financial sector -- yes. But if (a) a successful bailout, one that restores most of the financial sector to health, is not a sure thing, and (b) such a bailout, even with the safeguards CLC (and Gordon Brown) proposes, may well not be enough to forestall an open-ended plunge in the real economy exacerbated by the self-reinforcing pessimism of investors, we have to go further.
EconoSpeak is just a blog, not the best place to hash out the specifics. On a practical level, those who think the way I do need two things we don't have: an outlet in general circulation publications to lay out the case to a wider audience and foundation/think tank support to flesh out our proposals, backed by research. I should also add that there is a need for foundation support to enable community-based organizations to coordinate their thinking and programs in order to shift the national debate.
Speaking personally, I have tried for about two years to get something happening on all these fronts, but without the least bit of success. This may account for my public disappointment with the (US) left.
"either we bail out the existing institutions and somehow browbeat them into countercyclical lending behavior, which they will resist with all their fiber, or we let them go to their fate and put our marbles into a public institution that can do the job."
ReplyDeleteIsn't this a significant part of Nader's platform? I know he's been marginalized by the political system and the media, but which of the other candidates from the establishment parties has given any indication of taking the high road to economic solvency? Obama is once again, and only, a better alternative than is McCain, but after eight years of extreme welfare capitalism we're still looking at a choice between a henchman and a sycophant. Either way we end up with little more than a status quo fir the economy.
Jack, has Ralph Nader proposed a non-bailout alternative? In his Counterpunch piece he said we need to have an accountable bailout, combined with more effective regulation. If he has moved beyond this position, I haven't seen it.
ReplyDeleteBut we should also remember that RN is just one person. With the best arguments in the world he would still need media, money and organization to get his word out. In a sense, the point is not, what is Ralph saying, but, why am I not hearing anyone saying something fundamentally different -- and more responsible -- in the media?
The "left" in this country is generally placated and filled with middle class, petty bourgeoisie liberals who engage with the ideas of social justice and change in a self-masturbatory manner. It's Utopian to expect the kind of outcry you seem to be requesting given these conditions. To me, the United States is an ideological wasteland and the changes that "the left" wants to institute will come from a global vantage point, not a nationalist one. So what can we do? This is essentially a valley in the capitalist business cycle, so we should start building the groundworks. If there is any chance that the remnants of what we call the "U.S. left" influences policy, it will be at the local level and therefore ideas for domestic economic alternatives should remain within that realm instead of wasting time and effort asking for "public" national financial institutions that fall on deaf ears.
ReplyDeleteThe "left" is a bunch of fluttering moonbats that believe in The Easter Bunny. The Liberals on the other hand recognize that the so called "left" can get 90% of what they are constantly whining about through the pursuit of simple justice and _real_ political economy.
ReplyDeleteJust last Friday I attended a session conducted by Peter Dorman in which he talked about the dovetail of Climate Change and peak oil. More importantly he proposed (in very loose form) a proper solution/salvation concerning both of these matters. I followed along and did not really think about it much more than to realize that the basic concept was beautiful and that NOW is the time to do it. NOW when the economy is in the tank. And NOW when the common people on the bottom really need the help, and NOW when we need bottom side stimulus.
Concept = tax carbon production at the source and redistribute the proceeds in an egalitarian manner. Let the market decide about the development of alternatives, and let the rest of the tax system and government funding be addressed as a separate issue.
I did this as http://GreaterVoice.org/gas , and had a less egalitarian distribution. My own offering was flawed because it attacked only the oil companies (it was done when they were raking in huge profits and oil was trading at $145/brl).
Peter Dorman says government sells permits to puke out carbon. All the proceeds of the sale go to the voters equally with no political messing around. That is the right stuff.
But who is the permitting "authority"? Is it a group of affiliated moonbats or is it an actual government deal? And can it work in a worldwide commons called the environment. If we increase the price of carbon here then the Chinese will kick our teeth in using cheap oil and coal. It matters not how we do it, by making energy more expensive here, then the other guys will be more productive and we get to choke on the fumes. I suppose its "turn about fair play", but I don't have to like it.
What a marvelous idea anyway, and just in time for talking about stimulus and how to fund it.
--
"I know no safe depository of the ultimate powers of society
but the people themselves; and if we think them not enlightened
enough to exercise their control with a wholesome discretion,
the remedy is not to take it from them, but to inform their
discretion by education." - Thomas Jefferson ------
http://GreaterVoice.org