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World Economy: That Sinking Feeling

Three top US economists say nothing's really been fixed. But where's the political will to do what's needed?

By Stan Persky, 14 Jul 2010, TheTyee.ca

Globe, earth, underwater, sinking

We're going under. Will no one save us?

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  • Freefall: America, Free Markets, and the Sinking of the World Economy
  • Joseph Stiglitz
  • Norton (2010)

One of the many disquieting things about the Great Recession that began in 2008 is how much the theory and practice of "business as usual" survived intact, not only in the world of business, but in politics, and the public forum as well. "One might have thought," says Joseph Stiglitz, near the beginning of Freefall, "that with the crisis of 2008, the debate over market fundamentalism -- the notion that unfettered markets by themselves can ensure economic prosperity and growth -- would be over. One might have thought that no one ever again -- or at least until memories of this crisis have receded into the distant past -- would argue that markets are self-correcting and that we can rely on the self-interested behaviour of market participants to ensure that everything works well."

But that's not what happened. Wall Street and the other global centres of finance didn't appreciably change their way of doing business, and in the U.S., the financial sector, while happy to accept taxpayer bailouts, stubbornly resisted even minimal forms of government regulation, investing substantial sums of money in lobbying efforts to prevent constraints on its methods of transacting business.

Not until mid-2010 was a moderate fiscal regulation law levered into place.

Earlier, President Barack Obama and the Democratic Party representatives in the American Congress passed modest but significant health care reform legislation as well as a stimulus package in an effort to refurbish infrastructure, maintain public services, especially schools, and ultimately reduce a 10 per cent official unemployment rate (the "real" numbers, it's claimed, may be half again as high). Every initiative of the new president was almost unanimously opposed by the Republican Party opposition. Moreover, conservative political forces in the U.S. moved further to the populist right under the banner of a "Tea Party" movement, accompanied by a ratcheting up of the decibel level in the public forum, thanks to a rabid right wing media.

Nothing learned?

If the recession and near collapse of the economy might have been expected to instill a new respect for the role of government in public affairs, given that government action is what averted catastrophe, there has been little evidence of it.

Nor has there been much of a swing away from the libertarian ideas and rhetoric that have had free play ever since the era of President Ronald Reagan in the 1980s. Even though the effects of the recession are visible everywhere, the debate in the U.S., Europe and elsewhere some two years after the "freefall" focused not on further measures to alleviate joblessness, home foreclosure and diminishing public services, but instead concentrated on fears about government deficits.

The resulting proposals to "tame" those deficits would further reduce services, government revenues and consumption exactly at the moment when, according to many economic thinkers, further stimulus is precisely what is called for.

Joseph Stiglitz is one of those economists. Stiglitz is the 2001 winner of the Nobel Prize in economics, former chief economist of the World Bank, an advisor to the Clinton administration, a Columbia University professor, and one of the thinkers who predicted and warned against the impending recession well in advance of its advent.

In Freefall, Stiglitz attempts to explain some of what went wrong. His book is both an interim report on the causes of the crisis and a running assessment of the remedial measures taken by the Obama administration in its first year in office.

A library of economic prescriptions

Stiglitz's book joins a growing (and perhaps groaning) shelf of works that try to explain the extraordinary economic events of the first decade of the new century, events that proved contagious in a "globalized" world where, as we're frequently reminded, national economies are interconnected.

The profusion of books inspired by the economic crisis that deserve at least mention here present both detailed narrative accounts of the capitalist meltdown, such as William Cohan's House of Cards: How Wall Street Gamblers Broke Capitalism (2009), New York Times financial reporter Andrew Ross Sorkin's thriller-paced Too Big To Fail (2009), and Michael Lewis's The Big Short: Inside the Doomsday Machine (2010), as well as more analytical forays. The fiscal investigations and autopsies range from those that probe historical precedents, such as Liaquat Ahamed's Lords of Finance: The Bankers Who Broke the World (2009), a re-telling of the run-up to the 1930s Great Depression, to works attempting a broader overview of the present.

Among the more readable volumes about the market: English novelist John Lanchester's populist Whoops!: Why Everyone Owes Everyone and No One Can Pay (2010; the American edition is titled, I.O.U.), and various lively but more scholarly studies, including Paul Krugman's The Return of Depression Economics (2009), Jeff Madrick's The Case for Big Government (2009), Nouriel Roubini and Stephen Mihm's Crisis Economics: A Crash Course in the Future of Finance (2010), and Stiglitz's own Freefall. I'm focusing on the latter as something of a stand-in for an impressive array of analyses that necessarily cover similar and overlapping ground.

Stiglitz's book "is about a battle of ideas, about the ideas that led to the failed policies that precipitated the crisis and about the lessons that we take away from it." It's a critique of shattered illusions and, in terms of what might be learned, an argument for what can be called "social democratic" economics and politics.

"Economics need a balance between the role of markets and the role of government -- with important contributions by nonmarket and nongovernmental institutions. In the last twenty-five years, America lost that balance, and it pushed its unbalanced perspective on countries around the world," says Stiglitz.

Not just a failure of character

In looking at "the making of a crisis," Stiglitz warns against "too facile explanations" that begin and end "with the excessive greed of the bankers." Yes, the bankers were greedy, but in part that's because they had "incentives and opportunities" to be greedy.

Stiglitz emphasizes the interconnectedness of the elements that produced the crisis: a phantasmal housing bubble generated by worthless "sub-prime" mortgages; the bundling or "securitization" of those mortgages through instruments of fiscal "innovation" invented by very clever operators; the sale of those packages by both mainstream and "shadow bank" sectors to large investors, including mutual funds, pensions and other banks around the world; the absence of regulation of both institutions and innovations, or the collusion of regulators who gave their imprimatur to Ponzi-scheme-like speculation; and the inevitable, even predictable, bust that followed the artificial boom.

It was mortgage securitization, the bundling and sale of "toxic" mortgages, "that proved lethal," says Stiglitz, who likens the whole process to the attempts of medieval alchemists to turn base metals into gold. Here, "modern alchemy entailed the transformation of risky sub-prime mortgages into AAA-rated products safe enough to be held by pension funds. And the ratings agencies blessed what the banks had done.

Finally, the banks got directly involved in gambling -- including not just acting as middlemen for the risky assets that they were creating, but actually holding the assets." When the day of reckoning came, it was not just investor institutions and individuals who were stuck with worthless assets; it turned out that the banks, both mainstream and shadow, had also been caught off guard.

Markets manufactured risk

Summing it up, Stiglitz charges that "America's financial markets had failed to perform their essential societal functions of managing risk, allocating capital and mobilizing savings, while keeping transaction costs low. Instead, they had created risk, misallocated capital and encouraged excessive indebtedness while imposing high transaction costs."

The high transaction costs made for ballooning profits and instant multi-million-dollar bonus compensation for the money managers.

"At their peak in 2007," notes Stiglitz, "the bloated financial markets absorbed 41 per cent of profits in the corporate sector." That's a number worth thinking about. It's a reminder that in the midst of all the razmatazz, the economic system wasn't making money from making things, but making profit by moving money around (often, imaginary money).

While the details of the story are fascinating, the fiscal innovations downright exotic, and Stiglitz's telling of the tale engrossing, there's something more going on here, and the shrewder observers, like Stiglitz, Paul Krugman, and Nouriel Roubini are quick to see it.

"The current crisis," says Stiglitz, "has uncovered fundamental flaws in the capitalist system, or at least the peculiar version of capitalism that emerged in the latter part of the twentieth century in the United States.

It is not just a matter of flawed individuals or specific mistakes, nor is it a matter of fixing a few minor problems or tweaking a few policies." Rather, there's something wrong with capitalism.

'Dr. Doom' weighs in

However, none of the major analysts at hand is proposing anything more than a social democratic reform of capitalism. This is not Karl Marx and The Communist Manifesto of 1848.

In arguing that the "problems are more deep-seated," Stiglitz notes that even in the last quarter-century, "this supposedly self-regulating apparatus, our financial system" has repeatedly required government rescue from crisis. As for the world outside of the U.S., Stiglitz, who once worked for the World Bank and is something of a "crisis veteran," reports that "crises in developing countries have occurred with an alarming regularity -- by one count, 124 between 1970 and 2007."

Stiglitz also has the virtue of not treating the numbers as abstractions; repeatedly, he points to the toll caused by these crises on actual human beings.

Nouriel Roubini, an economics professor at New York University, where his gloomy but accurate predictions of the collapse earned him the sobriquet of "Dr. Doom," goes further in underscoring the point that crisis is inherent in capitalism. He describes the idea that markets are stable, solid, dependable, self-regulating entities as a "simple, quaint belief."

Roubini's book Crisis Economics, as he and his co-author Stephen Mihm explain, "returns crises to the front and center of economic inquiry... It shows that far from being the exception, crises are the norm, not only in emerging but in advanced industrial economies. Crises -- unsustainable booms followed by calamitous busts -- have always been with us... Though they arguably predate the rise of capitalism, they have a particular relationship to it. Indeed, in many important ways, crises are hardwired into the capitalist genome."

A chorus of reformers

In his focus on the nature of "crisis economics," Roubini indirectly echoes some of the ideas in Canadian analyst Naomi Klein's The Shock Doctrine (2007). In her book on the rise of "disaster capitalism," Klein argues that laissez-faire capitalist thinkers systematically seize on economic crises and other catastrophes to impose their version of American-style "cowboy" capitalism (or "neo-liberalism," as it's sometimes called) on the world.

Roubini, relatedly, says that beyond the exploitation of crises by a particular school of capitalists, economic instability is part of what capitalism is all about. The amelioration of capitalist crises, insofar as it is available, is state regulation of capitalism to prevent "bubbles," and the use of government as an instrument of economic stimulus in hard times.

Stiglitz, Krugman and Roubini represent themselves as proponents of capitalist markets, but insist on the reform of such markets in the name of democracy, justice and a morality that is seldom heard about outside of certain church pews and select university classrooms.

Stiglitz's Freefall provides a running assessment of the Obama administration's measures in response to the present recession as well as to the systemic flaws of capitalism. Stiglitz says that his experience as an analyst of Obama's policies has been "painful." The "spirit of hope" that marked the arrival of a new, more liberal president has substantially diminished.

Neither Stiglitz, Krugman or Roubini, three of the most prestigious economists working in the U.S., is satisfied that the American or global response to the crisis amounts to more than half-measures and muddling through. Although they call for policies that are much stronger than the programs and rules established to date, there's a political problem.

Where is the will?

It is not clear that the Obama administration, even if wanted to implement stronger measures, has the political clout to do so. What is most evident about American politics in the first years of the new century is how deeply divided the world's most powerful empire is, riven by seemingly irreconcilable economic, cultural and political values.

No doubt, it's too much to demand that economists like Stiglitz and his intellectual peers offer not only economic remedies but political formulas that will permit their implementation.

Roubini cites a line from John Maynard Keynes, one of the mentors of the age. Keynes criticised economists who, "in tempestuous seasons... can only tell us that when the storm is long past, the ocean is flat again."

So far, the ocean is not yet flat again, and even the best economists, as the subtitle of Stiglitz's book suggests, tend to leave us with a familiar sinking feeling. [Tyee]

Stan Persky teaches philosophy at Capilano University in North Vancouver. He's the recipient of the 2010 B.C. Lieutenant-Governor's Award for Literary Excellence. His most recent publication, co-authored with Brian Fawcett, is Robin Blaser (New Star, 2010), a memorial book about the Vancouver poet.

34 Comments:

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  • freebear

    1 year ago

    The Earth needs an economic collapse

    in order to 'reset' 'our' vision for a sustainable future; because 'we' are not there yet despite all the 'sustainable' rhetoric!

  • Van Isle

    1 year ago

    Of course our governments

    Of course our governments aren't doing anything; they're just too damn close and cozy with big business to begin with. Before there is going to be any economic reform, we have to have political reform first and I'm not holding my breath on when that's going to happen. What I read and feel is that our whole global ponsi economic system is unraveling.

  • KWD

    1 year ago

    nothing learned

    “Stiglitz, Krugman and Roubini represent themselves as proponents of capitalist markets, but insist on the reform of such markets in the name of democracy, justice and a morality that is seldom heard about outside of certain church pews and select university classrooms.”

    Yes, “a library of economic prescriptions” and unheard of reforms, but not a word about absolute scarcities of renewable and non-renewable resources, or how those scarcities are accelerating as levels of affluence accelerate, or the impossibility of infinite growth. But what’s worse; not even a hint at examining the human element.

    Capitalism isn’t flawed, it’s the thinking that wants to avoid reality that needs an overhall.

    The ocean is flat? Sadly, this is the mindset that contiues to prevail even though we’ve long known otherwise.

  • Luck

    1 year ago

    DO YOU HAVE A SINKING FEELING

    WELL YOU SHOULD.

    GOVERNMENT HAS HAD IT TOO GOOD FOR TOO LONG.

    EXPERIENCE ONE LITTLE PROBLEM THAT THEY CAN NOT FIX AND LOOK WHAT HAPPENS.

    GOV JUST CREATES MORE PROBLEMS TO HELP YOU COMPLAIN WITH NO CLEAR SOLUTIONS.

    WE NEED TO FIRE THE PROVINCIAL GOV IN BC IMMEDIATELY.

    YOU ASK WHAT IS THE ALTERNATIVE???

    PLACE A RECRUITING AD ON CRAIGSLIST AND HIRE PEOPLE INTO THESE JOBS WITH SKILL, KNOWLEDGE, ABILITY, JOB FIT AND SENSE OF UNDERSTANDING HOW TO BE A STATESMAN AND REPRESENT THE PEOPLE AS THE JOB DESCRIPTION WILL STATE.

    THEN, AND ONLY THEN IF THEY CAN NOT PERFORM IN THE JOB LIKE NOW, THEY ARE FIRED WITH NO SEVERANCE PACKAGE. BIG BUSINESS DOES IT EVERY DAY QUIETLY AND YOU WON'T SEE IT IN THE PAPER.

    WE THE PEOPLE ARE IN CHARGE AND SHOULD COME OUT OF OUR COMPLACENCY.

    IF IT TAKES GETTING AN EQUAL MIX OF MALE AND FEMALE TO GET THE JOB DONE THEN LETS DO IT.

    SITTING BACK HOPING SOMEONE ELSE WILL DO IT (LIKE NDP,UNIONS AND GOV)IS LIVING IN A DREAM KNOWN AS A NIGHTMARE.

    IF NOT YOU, THEN WHO.

  • rangergord

    1 year ago

    The three stooges

    One thing you should know about nobel prize winning economists is they don't represent the interests of the public. Economics is a highjacked discipline, infested with the ideology of the financial and political elite behind the scenes. The author is seemingly taken with the same disease, not recognizing the corrupt monetary and financial system that indebts and enslaves every nation on earth. Government deficits are nothing to worry about. Full steam ahead, I don't see any ice burgs. The public has no real understanding of economics, how our monetary system works and why there is a credit crisis. Why is that? First they are fed disinformation by people like the three afore mentioned stooges. The public is not educated in economics unless they attend college or university where economics is a course filled with deception. These are the people who occupy positions of power and influence. Interested in learning about economics? Don't waste your time with writings of these fools.

  • Noggy

    1 year ago

    Its an old story, a very old story.

    Deceit is the weapon of choice in the Capitalist armory. Deceit and propaganda goes along way in defeating your enemies.

  • Noggy

    1 year ago

    Thats not all

    I suppose I should have mentioned apathy on the part of society, we as citizens carry a resposibility as well.

  • Jerry Munro

    1 year ago

    Divine Origin and Materiality....

    Well clearly, my view is that capitalism and the kind of thinking/morality it represents, how e're useful it has been historically in creating "advanced economies" technologically, and in more limited ways socially, has come to the End Time of its usefulness. (See the lengthy discussion under the thread re Harper and the G20.) Further "reform" attempts available are only the ones that the Social Democratic State of capitalism has already attempted over the immediate postwar, and which have already been proven inadequate to the task, and from which capitalism, its ruling class has itself chosen, for reasons of its own, to move "backward" in time and development from.

    In short, it is time for deep "revolutionary" structural and social changes to societies and economies of capitalism, such as will transform it "qualitatively" into something else structurally and content-wise. It is only this approach which can begin to get at the deep resource availability and environmental problems being exhibited along with the social inequality issues of capitalism.

    It is materiality, the social and economic conditions of existence, that forms, shapes and directs our thinking largely, not simplistic appeals to get to know one's inner self better, or one's "thinking" alone. That is more tail chasing, frankly... picking at the fluff in one's navel.

    Thinking arises out of materiality, not the reverse. (Which is not to say that there is no "interaction", for there clearly is.) But in this chicken and egg scenario, materiality is clearly the egg, and the stuff of the egg. And when it comes to "large groups" and "whole societies" at least, it is first the material conditions of one's life, primarily the way in which you secure your daily bread, that is the foundation for your thinking and all that flows therefrom. Your ideas don't drop down out of the sky fully formed, unless perhaps you believe in "divine origins". They arise in the workings of the brain from the material conditions of ones existence... one's experience of it.

    Change the material foundations of one's existence, especially but not exclusively within the economy, and one begins at least to change the way one sees the world and thinks about it. And that is what is being called for again, in these times, out of material necessities arising within the economy... the material conditions of our lives.

  • djsw

    1 year ago

    The Economy

    Governments have bailed out their big banking buddies and it will keep happening. You want change? Stop paying your taxes and funding these scum bags, what else do you expect? A government that actually cares to get into power? Hahahahaha!

    "The government," is not the problem, the problem is "government," using force, using the government to hold a gun to your neighbours head so that your idea or your government program can get funded, because that's what it's all about, using government to get what you want instead of entering voluntary relationships with others, that is sick and disgusting.

    And to all the welfare hippies who post about capitalism being evil, go buy a brain. We've never had true capitalism, true capitalism means no government interference, try opening a diner or even a food cart without kissing the butt of the government. We've had Keynesian economics at work the past 100 plus years and that ain't capitalism, try looking at Austrian economics and you'll have some idea of what true capitalism should look like. For a real good look at what true capitalism can bring us check out "Savannah LastBiscuit," on Facebook and MySpace then tell me where in the lower mainland can I get that kind of service for that kind of price. If their food kills someone then they will be out of business so they have a very large incentive to not have that happen.

    Stop asking the government to protect you from the evils in this world, the government has caused most of them anyways.

  • Glen Murtz

    1 year ago

    Two words for Stan...

    Doug Henwood.

  • Fiat lux

    1 year ago

    How can we have an "economy"

    How can we have an "economy" with fraudulent values based on the garbage of the GDP, and figures of imaginary money, "created" from the air by some bank for the collectivization and colonization of the Eart with so called "wealth creating free trade and competitive globalization", competing for the faster destruction of the ecology and humanity? .

    If we had an economic system based on realities, it would show that products imported from long distances, are not "cheaper", but far more expensive, because we're paying the higher prices with incompetence, helplessness, enslavement, climate change and a long list of illnesses we didn't have before, caused by the poisoning of people with the resulting pollution.

    Ed Deak.
    .

  • KWD

    1 year ago

    the ultimate excuse

    “Your ideas don't drop down out of the sky fully formed, unless perhaps you believe in "divine origins". They arise in the workings of the brain from the material conditions of ones existence... one's experience of it.”

    Finally, an excuse for all of my past, present and future misbehaviours … that darn material Devil made me do it!

    Reductio absurdum and non sequitor, the most commonly used tools of those that believe ‘something’ or ‘someone’ is responsible for their behaviour.

  • Fiat lux

    1 year ago

    Years ago I've picked up a

    Years ago I've picked up a small wooden sign at a garage sale:

    "A man must believe in something. I believe I'll have another bottle of beer."

    I'm practically a non drinker, but I thought it expresses the world's and history's belief system appropriately, so I bought it for a buck.

    So much for history's economic theories, the biggest heap of criminal idiocies exceeded only by the baloney from religious prophets.

    Ed Deak.

  • Luck

    1 year ago

    THIS IS NOT ECONOMICS BUT A SHEER RIP OFF AND

    RANGER GORD THIS IS NOT ECONOMICS BUT A SHEER RIP OFF AND THE PEOPLE OF BC ARE ALLOWING IT HOOK LINE AND SINKER.

    THE HELL WITH ECONOMIC THEORIES OF THE PAST. DO NOT USE THE PAST MISTAKES TO GO FORWARD,

    WE NEED SMART LEADERS WHO UNDERSTAND HOW TO MAKE A BUCK AND HOW TO STRETCH A BUCK FOR THE PEOPLE.

    WE NEED LEADERS WHO KNOW HOW TO PARTNER WITH OTHER MUNICIPALITIES, PROVINCES AND COUNTRIES TO EXPAND TRADE AND COMMERCE.

    WE ARE REALLY STARTING OVER, THE LEADERS WE HAVE ARE FLAWED, THE TECHNOLOGY WE HAVE IS FLAWED,OUR COMMUNICATION IS BASE MENTALITY AND WE HAVE ALL FORGOT HOW TO NETWORK.

    UNLESS THE PEOPLE START SOME ACTION IN THE STREETS, WITH HOLD TAXES TO GOV. AND JUST GET PLAIN EVEN AND MAD WE WILL SIT IN NEUTRAL FOREVER
    AND COMPLAIN.

    THE TYEE IS A GREAT AVENUE TO EXPRESS YOURSELF BUT IF WE CAN NOT RALLY AND GET OUR SHIT TOGETHER WE WILL STAY DIVIDED FOREVER.

    HAY ZALM AND DELANEY LETS GET THAT THIRD PARTY GOING. CREATE SOME EXCITEMENT, FEAR, CHALLENGE AND DIRECTION FOR A LOST BC CIVILIZATION.

    AS CHRIS ANGEL THE MAGICIAN AND EXTRORDINAIRE ALWAYS SAYS "ARE YOU READY".

    " YOU ALL BETTER BE ".

  • Illahie

    1 year ago

    The economists are right and wrong

    Krugman etal is absolutely right that what the US needs now is massive public stimulus, to make up for the massive shortfall in personal and corporate spending. That is by far the best thing for the US economy when it is in a liquidity trap.

    However, a lot of the last stimulus money was pissed away by politicians on idiotic programs such as Cash for Clunkers, and home buyer incentives. The political will to do further stimulus has been lost because a lot of the previous effort was wasted.

    However the US economy is not just Governments but is made up of Corporations, and Citizens, whose best interests are to cut back expenditures and to save money when times are tough, or to invest money elsewhere.

    When the Government artificially broke the sacred bond between savers and lenders by lowering interest rates too low for far too long, they destroyed savers and encouraged reckless borrowing.

    We will pay for this debacle for at least a decade or two.

  • doggone

    1 year ago

    the part of the article I got

    he resulting proposals to "tame" those deficits would further reduce services, government revenues and consumption exactly at the moment when, according to many economic thinkers, further stimulus is precisely what is called for."
    Then I read most of the comments.
    Looks to me as if the folks in positions have absolutely no idea what is happening: business as usual
    My sweet lord! what will inspire them to pay attention?
    Locomotive Breath

  • Jerry Munro

    1 year ago

    On getting off the hook...

    No KWD, EDITED FOR PERSONAL INSULTS. PLEASE REVIEW THE TYEE'S COMMENTING GUIDELINES http://thetyee.ca/Comments/FAQ/#7 -- MODERATOR

    For despite how ideas in general arise from our material experience with the world, and come to constitute the way we think, at least in main outline, there is an interaction back and forth. The material world is merely primary in the relationship. Hence, you still have to be held responsible for your own immoral/violent/ sexist/classist interactions with the material world, how ever they arose. Certainly by the time you are an adult. (Which may still let you off, I know. :-) Afterall, you are just a man. :-)

    Metaphysical absurdities certainly don't get you off the hook EDITED

  • rangergord

    1 year ago

    Reform is doomed

    If these economists are talking reform then we are still doomed. I have to say that I do not believe the system can be successfully reformed. It must completely collapse before something better can be built in its place. Call me a collapsarian as James Howard Kunstler likes to say. No one wants to abandon the status quo because no one wants to take the losses that will result. They will be forced to take the loss down the road or they will try to pass it off on someone else.

  • Bailey

    1 year ago

    Looting

    The reason these smart people keep failing to learn from the disasters they cause is most likely that the disaster is the point of the exercise.

    This is about concentration, not about the strength of currencies.

    While all these debt production schemes and these bailout/deficit producing schemes seem to be given the benefit of the doubt in the propaganda machines,as if they were good faith mistakes or incompetencies, they remain consistent in their results:

    First they place huge amounts of currencies into very few hands. The same set of hands each time, whichever mechanism is examined.

    The Enron scam, the ponzi schemes, and the mortgage frauds on the one side, the massive corporate bailouts on the other.

    It was no coincidence that the bailout money was passed out among the same people who looted the companies in the first place.

    Second, when all this enormous concentration proceeds, nothing of value is produced, so inflation causes a huge reduction in real wages and in value of smallholdings, people lose what savings they have tied up in their homes and small businesses, all of which revert to the mortgage holders.

    Meanwhile the concentrated currency is converted, even as it devalues, into ownership. The real estate and the means of production, companies and factories and so forth are bought up as they fall away from those who actually built them through real work and through good faith transactions.

    Followed through to it's logical consequence, we wind up with a rigid class system, like Mexico, Central and South American systems where 90+% of everything is owned by 1 or 2% of the people, and the serfs and slaves can just howl for land reform and be machine gunned down for it.

    How long exactly have the Zapatistas been fighting for reform? Have they had any visible success, do you think?

  • RickW

    1 year ago

    Proponents of "The Rapture".....

    ....must be thrilled.

    And don't forget the Gulf Blowout that BP cannot stop:
    http://en.wikipedia.org/wiki/List_of_oil_spills

    As well. we can add this wee tidbit:
    http://en.wikipedia.org/wiki/Coal_seam_fire

  • Jerry Munro

    1 year ago

    The Coffin...

    "Call me a collapsarian as James Howard Kunstler likes to say. No one wants to abandon the status quo because no one wants to take the losses that will result. They will be forced to take the loss down the road..." rangergord

    It is preferable to me that this should not happen, but that there should be a "Great Awakening" amongst the masses in time to avert the coming total collapse. It is even possible, if the reformist dreams of putting yet another "human face" attempt on capitalism, of which camp are many "greens", not only New Democrats, can be sufficiently debunked and discredited. For on the road map of reformism, all roads lead again back to here, sooner or later. And the proof of that pudding is the entire history of the postwar Social Democratic State of capitalism. (Read Bailey above here, for some very good insights into why that is; these periodic and recurring cyclical "collapse crises" of capitalism arise out of and fit within the dynamics, logic and ruling class interests of "the system". These crises have a "usefulness" to them, even though there are other objective forces having to do with class and market forces which set the stage regardless.)

    Still rangergord, you may very well be correct. It is my greatest fear. Success nor the survival of the species is guaranteed. It would be such a waste though. (Even a successful return to the stone age cave of some of us, would but begin again the long torturous evolutionary path back to here, or somewhere nearby.) The only real way forward is up and out of this box, which is really a coffin, and forward out of here altogether. There is no going back, that is at least desirable, in my view.

    A collapse of the system even, and the mass starvation and fratricidal warfare that would result for resource share etc., would really only reset the clock for capitalism. Which is how some of them, the really big boys, tend to view these recurring crises. They are "reset and revitalized growth" opportunities.

  • boondoggle

    1 year ago

    and climate change is a distant memory

    As we blithely carry on pontificating on the virtues of this or that economic policy we tend to forget the elephant in the room. There is no such thing as a healthy economy without a healthy environment and we all know how the environment is doing these days. "Nature bats last".

  • Bailey

    1 year ago

    It's not Capitalism, in any definition

    Capitalism requires owners to take risks, so that incompetents lose their ability to do any further damage as they lose their capital, These Bozos are all playing with other people's money.

    They take no risks and produce nothing that can be called capital, unless you count large pools of melting currencies.

    Just observe the Dollar areas first, and the Euro areas more recently. It's nothing but a bank robbery.

    It resembles the Medici one that resulted in the Renaissance in Europe except that one weakened the Feudal system, while this one seems more likely to re-establish feudalism as the dominant pattern.

    I would like to point out that Feudalism is a very stagnant, and therefore a very stable political system. It tends to last a thousand years, once it gets established.

  • Dr Alexander

    1 year ago

    Things would improve if....

    Governments printed their own money instead of private banks.

    It is probably not unrelated that the reason Canada seems to be faring better than most is due to the fact that our central bank is a crown corporation and thus is still serving the public interest, as opposed to the central banks of most other Western countries, which are private banks.

  • Cynic

    1 year ago

    Stan, the array may be

    Stan, the array may be impressive but the analyses aren't. The only analysis worth considering answers the questions: where does money come from? and how is it injected into the economy? The answers reveal the truth, the awesome and pathetic con job that controls the human condition.

    Where does money come from? Money is loaned into existence by the private banks. So? They only print the principal of the loan and no provision is made for the payment of interest. This is the truth and it explains everything. Any analysis that ignores these basic facts is worthless and worse, a cover-up. I don't trust Stiglitz et al.

  • Yeoman

    1 year ago

    Socialize loss and privatize debt

    The crash and "bail-out" has been the largest white collar crime ever committed. The economy is, at its root, a confidence game literally and figuratively.

  • samuidave (not verified)

    1 year ago

    Giving credence to government is our first HUGE problem

    "Wall Street and the other global centres of finance didn't appreciably change their way of doing business.."

    Why would they? The government rewarded them with unworldly riches for their past conduct. If we call this by its true name, it's theft.

    "If the recession and near collapse of the economy might have been expected to instill a new respect for the role of government in public affairs..."

    Respect for government in public affairs? The government does nothing which public opinion does not force it to do. It is always moving away from our common interests. There can be no respect for the man who robs you, loots you village, and knocks your children about. How patently absurd.

    "...given that government action is what averted catastrophe..."

    Catastrophe, huh? Well, thems fightin' words! The big question is, for whom is this a catastrophe? It surely isn't the common man because "when you ain't got nothing, you got nothing to lose" (Dylan).

    This 'catastrophe' was simply the 'fear alarm' going off, once again, to allow the government, on directions from it financiers, to take extreme measures in relieving the workers from their labour for years to come.

    Capitalism isn't broken. It is working like a well-oiled machine. The wealth is increasing shifting upwards, and the common folk are increasingly sliding downwards, down to a position where desperation allows them to check their dignity at the door. This is the machine we saved by averting the catastrophe.

    Wrong is wrong. We all know that. Our fear of the unknown prevents us from doing what is right. And right means taking back control of the government, disbanding the army for all military purposes, and directing our natural ambitions on making a quality life for ourselves and our community, as we have more than enough to go around.

    Civil disobedience. . . is not our problem. Our problem is civil obedience. Our problem is that numbers of people all over the world have obeyed the dictates of the leaders of their government and have gone to war, and millions have been killed because of this obedience. . Our problem is that people are obedient all over the world in the face of poverty and starvation and stupidity and war and cruelty. Our problem is that people are obedient while the jails are full of petty thieves, and all the while the grand thieves are running the country. That's our problem. ~ Howard Zinn

  • siamdave

    1 year ago

    the titanic is sinking

    - and rearranging the deck chairs is not a solution - but that is all that Stiglitz et al can do, because they are stuck in the paradigm of 'classical economics'. A couple of the earlier posters have mentioned the central problem - that we allow private banks to create and control our money. All else follows, and until people start to realise that he who controls the money controls everything else - and thus very obviously we do not live in a 'democracy' but a bankocracy, nothing is going to change. It matters not that our ancestors put up enough of a protest to get some concessions from the rulers, they still rule because they control the money, and that is the source of all of our problems. A bit of a longer explanation of what this means from a Cdn perspective here - What Happened? http://www.rudemacedon.ca/what-happened.html . I'm working on a longer essay when I have time, but for now think about this - the great 'austerity' drive going around the world today is the final step in a great looting - and if a lot of people don't stand up and put a stop to it, there's soon going to be nothing left but ashes. It's a lot easier to put a fire out in the early stages than to rebuild afterwards.

  • KWD

    1 year ago

    siamdave

    You’ve identified a number of problems and concerns faced by societies around the globe … lack of control, support and faith in government; too much power in the hands of the financiers; and economic systems (private control over money supply) that are designed to keep power in the hands of a few … which are recurrent and common themes in many discussions on Tyee and elsewhere. And most informed readers would agree with your views.

    Where I run into difficulty is understanding the cause of this malaise; because what you’ve identified are really symptoms. And the claim that we fail to do what’s “right” because we fear the unknown really doesn’t make it any clearer. Even if we “start to realise that he who controls the money controls everything else”, that realization isn’t a remedy. If you really look closely at what drives folks to fall back on default positions … like, we’re driven by fear or it’s a function of human greed … you enter into analyses that try to understand WHY we chose these positions.

    Why are we obedient? Why do we obey our leaders? Why do we let private interests control the money supply? The simple answer is because we are trained to. We learn very early in life that a failure to comply … deviant behaviour … has a cost, and that cost is often painful.

    In order to change outcomes … produce preferable symptoms … we have to expose the causes, and deal with them, otherwise they will simply mutate and produce something equally, if not more, harmful.

  • dorothy

    1 year ago

    KWD

    Yes, you are certainly onto the crux here. As a newcomer to this community (I'm Scandinavian), the first thing that struck me,especially when my kids started school, is that people don't want to do anything communal here. They don't want to exchange babysitting and save money, but will rather pay a stranger from a bureau, whom they can pay and never see again. They don't want to work on getting educational means of better quality into their children's classrooms as a unified effort, but will rather buy their own stuff and not have to share, even if that is screamingly less efficient for all, and some cannot afford it. I believe the worst manifestation I have ever seen of this Teflon syndrome was back when my boys were in scouts. The troop had been doing fundraisers all year to send them together to a big jamboree. When about two-thirds of the funding was in the bag, through shared efforts, some of the well-heeled parents lost their patience with the bean salads and wrote a cheque for the rest, whereas those whose parents could not do so were left as 'having opted out'. No money back either, because 'it couldn't be separated out'. Rip-off lessons start early. So yes, you are right. We are trained to. When I came here, I realized with absolute horror that there were ten times the number of litigation lawyers per capita of that in my old country. Now I almost see that as the only little bit hopeful sign, that people actually will stand up for some of their rights, if it is within their means to do so. But the rip-off artists who divide and conquer, that school of thought, should never even get to first base as often as it does. Enron and such outfits only get in position to rip off, because the little people still think it is their right and within possibility to get a little bit better deal out of life by, in turn, rip someone else off. I have a hard time feeling sorry for the victims, as they did not think who would have to pay for their extra special return on their investments. The next generation? They will.

    I thank you for realizing, and expressing so clearly what I have always felt: That the problem starts with every one of us, what is in our heads, programmed into our thinking. We need to work on learning better priorities and better methodologies, and be less afraid to get together on things, less afraid of 'involvement'.

  • KWD

    1 year ago

    Thanks Dorothy

    It’s reassuring to have someone agree with my take on things. I often wonder if posting that view

    … that before we can embrace cooperative communal living, we have to confront societal problems at the individual level. And in order to understand those problems we must take a close look at the process that shapes individual thinking …

    is a worthwhile venture or if I’m making any sense at all. But when I find find others that share similar insights it gives me hope and encouragement.

  • samuidave (not verified)

    1 year ago

    well worth the read if excess a concern...

    http://www.alternet.org/economy/147501/joe_bageant%3A_our_plunder_of_nature_will_end_up_killing_capitalism_and_our_obscene_lifestyles/?page=entire

  • Mal

    1 year ago

    "However, none of the major

    "However, none of the major analysts at hand is proposing anything more than a social democratic reform of capitalism. This is not Karl Marx and The Communist Manifesto of 1848."

    And that is exactly the problem. People here talk about control over the money supply, but that cannot be achieved without "Centralization of Credit in the hands of the State, by means of a National Bank with State Capital and exclusive Monopoly." Nothing short of a State Bank of Canada, of the US, or even of the EU can realize public control over the money supply.

    The bonus is that the suggested measure above was a logical conclusion to left-wing developments in Ricardian classical economics before Marx and Engels arrived on the scene. [In fact, the first five allegedly "transitional" measures outlined in the 10-point CM program can be derived from left-wing variations of Ricardian classical economics.]

  • Mal

    1 year ago

    I forgot to add that,

    I forgot to add that, however, well-intentioned, replacing traditional private banking with credit unions or some other form of coop finance does squat to increase public control over the money supply.

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