A friend of mine from college was in town today and I got a chance to sit down for lunch with him. He works with international banks.
"Every central bank in the world dropped rates 50 basis points and the market's still dropping! This is free fall and nobody can do anything about it. We're watching the end of capitalism as we know it." Unfortunately, he may be right:
Central banks around the world have cut interest rates by 50 basis points in an unprecedented move to breathe new life into the ailing global economy.
The Bank of England, the European Central Bank and the Federal Reserve along with central banks in Switzerland, China, Canada and Sweden have collectively cut rates by half a percentage point.
Despite these astonishing and unprecedented actions by central banks worldwide, markets continue to slide, with no end in sight.
If this is the fall of the economic system created by the market fundamentalists, and it appears that it is, then we all have to begin to ask, what will arise to replace it? The most likely answer, is, unfortunately, quite terrifying.
For a long time the greatest rising power in the world has been the multinational corporation. As the existing banking structure collapses, we're looking at the end of the final constraint on the multinationals. What is increasingly likely, is that a core of powerful multinationals will emerge with ultimate control of the international banking system.
The ramifications of this are more than alarming. If the multinational supersedes the nation as the dominant power paradigm in the world, complete with banking control, then finally market fundamentalism may break free from the conventions of morality, humanity and the common good which governments are supposed to embody. Once the only value of a tree is its wood, the only value of water is its effect in industrial processing, and air the only value of air is its capacity to hold pollution, what becomes of the value of human life, dignity, freedom, or the other things Americans hold dear? What becomes of American values if the only value in the world is the bottom line?
In order to face the coming effort to rebuild the world economic system, Americans must enter this phase of rebuilding with some important concepts firmly in mind:
Monetization: Nothing in human experience has managed to stop the abuse of natural resources at the hands of industrial processing. We are reaching the end of the "tragedy of the commons", we're basically running out of resources to exploit. Take a few minutes to explore The Story of Stuff before you continue.
Until true costs become integrated into all legal enterprises, 90% of all stuff extracted from the earth will continue to find its way to landfill within 6 months as is currently the case. Human rights, worker rights, environmental concerns, human trafficking, disease and poverty relief worldwide will continue to fall by the wayside of the world economic order.
Business must pay for what it gets.
Like carbon credits or sky trust schemes, all natural resources will need to be monetized and included in the costs of goods. Some businesses will need to go away, but that's fine, some businesses are too destructive to be allowed to exist, which brings us to...
Regulation: The solution to our current financial crisis is actually quite simple. The bill that Phil Gramm blasted through congress in the dark of night as Bill Clinton was preparing to exit from the world stage, eliminated Glass-Steagll and directly precipitated our current economic disaster. In it, a completely unregulated section of finance was created which basically amounted to insurance bets on whether or not some assets would default. Here's a bundle of mortgages, I bet they'll fail, you bet they won't. This kind of junk is what is now called "toxic assets", and it creates what amounts to something on the order of $60 Trillion in liabilities to the world banking system. It's the cement galoshes, dragging the world economy to the bottom of the river. Eliminate those instruments and you eliminate the current disaster.
What that fix wouldn't address is the fact that nearly every area of financial dealing in America was left essentially unregulated by Milton Friedman cultists like Graham, Bush, and McCain. Trust in the system will require that when uninformed prospective home buyers go to a mortgage lender, that buyer can trust that the lender won't allow the purchase of a house the buyer can't afford. Trust in the system will require that those who regulate finances are not the ones who benefit from the financial transactions. Regulations are necessary, and they will be re-introduced, because this current disaster has done to Reaganomics what the fall of the Berlin Wall did to Socialism - discredited it utterly.
Education: When Brooks described Sarah Palin as emblematic of a terminal "cancer" on the body of the Republican party, he wasn't talking about her vicious partisanship, vendetta mindset, or even her profligate financial record. He was talking about her as the embodiment of a worldview that hates ideas. Much like President Bush, Palin violently despises education, knowledge, discourse, and educated informed decision making of all kinds. That vaunted war on reason has nihilisticly driven the value of knowledge toward zero. It's not what you know, it's what you are, and if you aren't like me, you're evil. That is the American Exceptionalism of Sarah Palin, a thinly veiled cover for racism, bigotry, hatred and every driving force of the death culture that is animating the Conservative zombie today.
Education is a human right. Solid education must be available to all children in America and in the world. It should begin as early as possible, in order to free parents to make a living, and begin a process of lifelong self-directed learning. There should be a strong grounding in mathematics and engineering, as well as arts and music education available to all, regardless of class, wealth, race, creed, or location. And education must include financial education so that we never again have a nation filled with so many ill-informed sheep, that they can accept a believe that unregulated markets can sustainably function.
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If the new world financial structure does not include monetization, regulation, and education, there is a looming distopia on the horizon. Anyone who's seen the movie Wall-E, will feel it instinctively, but here's a quick view of it from the Atlantic way back in 1992.
Jihad vs McWorld
Just beyond the horizon of current events lie two possible political futures—both bleak, neither democratic. The first is a retribalization of large swaths of humankind by war and bloodshed: a threatened Lebanonization of national states in which culture is pitted against culture, people against people, tribe against tribe—a Jihad in the name of a hundred narrowly conceived faiths against every kind of interdependence, every kind of artificial social cooperation and civic mutuality. The second is being borne in on us by the onrush of economic and ecological forces that demand integration and uniformity and that mesmerize the world with fast music, fast computers, and fast food—with MTV, Macintosh, and McDonald's, pressing nations into one commercially homogenous global network: one McWorld tied together by technology, ecology, communications, and commerce. The planet is falling precipitantly apart AND coming reluctantly together at the very same moment.
Nations have already ceded nearly unlimited power to multinational corporations, but they have largely remained constrained by the power and size of America's economy. What American market fundamentalists have universally failed to acknowledge is that the market doesn't give a care about America. Schumpeter's principle of creative destruction implies that only that which is viable is necessary. Once America becomes denuded of it's market power, if it does not have powerful value to provide to the world, there is nothing in economics to compel the continuation of the American experiment.
As Americans, it is critical for us to understand, that American values must be protected and compelled. Markets don't define values, they define value. Responsibility, empathy, and aspiration must be incorporated into the system. If America fails to employ its international competitive advantages in order to build value and it's regulatory power to control markets, nothing can protect America from the onslaught of a rising, megalithic, international corporate banking regime. America must bring its knowledge, experience, and power to bear lest the singular profit motive overthrow the people and governments, ultimately precipitating an even greater dustbowl economy than the one the world is currently forced to endure.
What will arise? Ultimately it's up to us. We'd better act wisely and soon.
Crosspost at Raising Kaine: the Voice of Progressive Virginia