A Fool and His Money

Last October, Bush proposed, and Congress approved $750 billion in bailout money under the TARP program. Some of this money was used for bonuses for already-high-paid Wall Street executives, and much of the rest is unaccounted for. Also untraceable are billions in Federal Reserve funds used to prop up various banks deemed “too big to fail.” All together, several trillion dollars have been dedicated to restarting the economy, and the engine hasn't even turned over yet.

In October, I was running for Congress here in Mississippi’s 1st District. I said that any bank that was too big to fail was too big to exist. It needs to be broken up under anti-trust statutes. I also said that the bailout would not work and would probably make things worse. I wish I had been wrong.

Now, the corporations have come calling hat in hand for another helping of taxpayer money. This time, it is even more important that we examine our situation with the help of a diverse group of economists and thinkers…not just Wall Street bankers. In short, we need a panel of experts (i.e., not politicians) to quickly but comprehensively analyze our economic difficulties and design a plan that addresses short-term needs, but not by neglecting long-term realities. As I said repeatedly during my campaign, we need solutions that work on multiple problems at once.

Short-term needs

Short-term thinking is what got us to the point of economic collapse. The faux conservative belief in the infallibility of markets and the evils of regulation are to blame. Plenty of blame belongs to the Democrats too. For now, Greens are completely innocent of the mess in Washington. In fact, we predicted the outcome of Reagan’s policies in the 1980s and the failure of economic globalization.

The only short-term thinking we need now is how to protect Americans from the results of the Reagan-Bush-Clinton economic policies. In the near term, millions of Americans stand to lose their homes. They must have shelter. Food shortages are probable in the next year. The people must be protected from starvation. With oil production in Mexico and Russia now in decline, oil prices are set for another spike. Memories are short, and nothing much was done last year to prevent future price rises. People need public transit so that they can show up for work if they are lucky enough to find a job.

Long-term causes

The fundamental causes of our economic collapse are the following:
1. Ecosystem collapse
2. Oil depletion (Peak Oil)
3. The wars in Iraq and Afghanistan
4. The housing bubble
5. Deregulation of the financial sector

A decade from now, historians will have figured out the relative contribution of each of these factors. For now, I do not know which is most significant. The proximal cause is the housing bubble, made much worse by foolish investments in risky derivatives and other financial instruments that were enabled by deregulation. As for the rest, I do not know whether ecosystem destruction, oil prices, or the tremendous cost of the wars in Iraq and Afghanistan (indeed of the whole military-industrial complex) is most to blame.

Ecosystems are particularly underappreciated as a source of our economic woes. Yet, we’ve known since 1972 that there are limits to growth. Even if there had never been a scientific study of the feasibility of infinite economic growth, common sense should have warned us that a finite planet cannot support unending growth. A few prescient economists and systems thinkers like EF Schumacher and Kenneth Boulding saw the train wreck ahead: "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist." (Boulding) And, the poets warned us too---Abbey likened belief in economic growth as the source of human progress as “the ideology of the cancer cell.” No doubt Ed Abbey would think recession therapy an appropriate treatment for the suburban strip-mall tumors spreading across the landscape, sapping the vitality of wilderness (needed for our soul) as well as farmland (needed for our body). Yet, come October 2008, the US government was more willing to threaten martial law than to even consider a steady-state economy or ponder how to design an economy that satisfies human needs rather than the vanity of the rich.

A recovery plan that fails to take all these factors into account runs the risk of making things worse. And, unless the plan is designed to end the folly of growth as it’s currently defined, it’s doomed to failure. Whether that final failure is now, or at the end of the next business cycle or the one after that, is not something anyone knows for sure. Such massive uncertainty, carrying with it the potential for human suffering on a scale never before experienced, should make us cautious. What we're doing is too important to get in a hurry.

That’s why it’s just as essential today as it was five months ago to study the problem carefully. So far, that hasn’t been done. Until then, not one more dime for the banks.