Feb 13, 2009

Martin Wolf on "depressing timidity"; or Welcome to Laputa

For two days I have been rereading Martin Wolf's logical and jolting commentary in the Financial Times, "Why Obama's new Tarp will fail to rescue the banks." Wolf asks a hard question, "Has Barack Obama's presidency already failed?" His reasoning? Obama has not realized that these are not normal times, and that "Doing too little is now far riskier than doing too much."

His evaluation of the stimulus plan is, to my mind, spot on: the president hopes for the best rather than preparing for the worst, and what is even more telling, Wolf adds, is "that it is extraordinary that a popular new president, confronting a once-in-80 years' economic crisis, has let Congress shape the outcome."

So what exactly, is the worst that we are facing? In essence, it is that the "a sizeable portion of financial institutions are insolvent: their assets are, under plausible assumptions, worth less than their liabilities." Wolf is not the first to suggest this. Commentators from both edges of the marginalized political spectrum--Dennis Kucinich, Bernie Saunders, Ron Paul, Nouriel Roubini, James Galbraith, Paul Krugman, Kevin Philips, Joe Stiglitz, Paul Craig Roberts, Michael Hudson, just to name a few--have suggested as much for many weeks--no months--now. Wolf's point is that anything less than responding to this worst case scenario will bring utter failure.

And even deeper, Wolf thinks that "it also seems it has set itself the wrong question. It has not asked what needs to be done to be sure of a solution. It has asked itself, instead, what is the best it can do given three arbitrary, self-imposed constraints: no nationalisation; no losses for bondholders; and no more money from congress." If I had to add my own constraints to this list, they would have to be no relief for all mortgage holders, no failure of the "too-big to fail banks," no return of Glass-Steagall, no strings attached.

Obama has not only surrounded himself with conventional people who helped create or midwifed the current mess, he has unfortunately listened to them and been persuaded by them. His bi-partisanship is only one manifestation of his conventionality. And in this sense he has fallen victim to his own tendency to play to the center, to appease, not to break with convention and not even to bring into the mix the credible voices of critics who have been saying that the Emperor of Americanism has no clothes. It is said that an argument ensued in the inner sanctum of the royal chambers of Laputa, and Timothy Geithner and Larry Summers shouted down Rahm Emmanuel and David Axelrod and prevailed. Of course, what do the pols know, who are concerned already with re-election, compared to the poobahs of the predator state? Yet, one short look at Geithner's inadequate testimony before Congress yesterday shows that he has just not been able to think outside of his self-imposed box.

In one of the delicious ironies--and Naomi Klein (see The Shock Doctrine) would raise her fist in accord, Wolf points out that if Lawrence Summers or Tim Geithner were advising the US as if it were a foreign country, they would point out the dire situation "brutally."

Wolf's opinion piece is so accurate and devastating, that I have to think that the new President's bi-partisan approach is symptomatic of a much deeper issue, the inability of all politicians, no matter how well-meaning or intelligent, to deal with the economic facts as they appear, to expect the worst outcome, and to understand that we have in fact entered some extraordinary, almost revolutionary times.

The issue, I think, is this: can any politician even hope to escape the mental constraints imposed by 1) not being a member of the poor, the working poor, the working class, or the middle class; 2) of being an adherent to Americanism, the religion of capital (and Capitol!).

I use the words "adherent" and "Americanism" because I want to stress that the thinking over the past two weeks of every politician I have heard or whose words I have read, be they Republican or Democrat, assumes a concern for the American economy that leaves reality somewhere outside of the discourse. There are exceptions who prove the rule, but they are marginalized and perceived as "cranks" by the Capitol press corps. These politicians, men and women, walk around conversing with themselves over the subtleties or contradictions of their beliefs, like characters in a Swiftian satire, needing acolytes to bop them upside the head every so often with an air-filled bladder. The inhabitants of the flying island of Laputa talking not music and fine arts, but finance and economy and free markets and bonuses and pretending that they actually represent the inhabitants down below.

They still think they are live in an economy which has a bad case of the flu rather than congestive heart failure. And indeed, to them, it probably IS a bad case of the flu but they have plenty of time to stay in bed and drink plenty of liquids, a doctor who feels privileged to be their doctor, and spouses who don't have to work, or when they do, may make more as a lobbyist than they. It's not only politicians. It's the media as well, particularly the "molders of opinion" who tend to think they know what middle-America wants and needs. The David Brookses of the airwaves.

Their talk appears to me to be religious--in the root sense of the word: "religare" to "restrain," to "tie back." The bondage of religious belief. These men and women are so constrained in their thinking that they spout dogma, not think hard thoughts grounded in their constituents' reality.

They are unable to imagine a world without employment, without status, without influence, without savings, without investments, without assets, without solid education, without influential contacts, without a roof over their heads, without food on the table, without tolerance of their cheating on income tax, without bonuses, without good medical care, without a raise, without money to send their children to the best school they can, without security, without privilege, without health and safety protection on the job. In short, though they may have come from a working class or middle class background, they have so "escaped it" and so left it behind them, that they are incapable of imagining or remembering viscerally what it feels like to be an American who is destitute, poor, working class, or two-earner middle class, dependent upon begging or employment for their survival.

I almost want to say that because they are the 24-7 recipients of the benefits of "life, liberty, and the pursuit of happiness," they cannot begin to imagine what it is like not to exist within their bubble of warmth and safety. For them, the Declaration of Independence has been brought to fruition. For 90% of Americans, it is still an aspiration or a dream deferred.

Because the politicians and their minions exist in a world of more than adequate compensation, of full benefits, of excellent retirement pensions, full medical care and enough income not to worry about deductibles or co pays. They believe in capitalism and "free unregulated markets" so much that they incapable of seeing that the markets are not free except for those who create and run the markets. They still believe that the America of their dreams, like the ending of a Frank Capra movie where all comes round to peacefulness again, is still existing, humming along, and that their bliss is the bliss of all Americans. One might even say that they are "religiose." That is to say excessively or sentimentally religious but with a dash of "otiose," futile, functionless with no useful result.

As long as they float on their flying island--and by "they" I include the Charlie Gibsons and the Bill O'Reillys, the George Wills and the Tom Friedmans, the Katie Courics and the Rush Limbaughs, the political appointees and the lobbyists and consultants--they will never be able to formulate a plan than does anything but rescue and continue to reward the inhabitants of Laputa in their mag-lev island thrumming over all the cities and towns of distress and foreclosure, debt and hot dogs and beans, suicide and anger.

Perhaps its time not to bop them with the air-filled bladder but to wake them up with hard edged noise, to start banging pots and pans like the citizens of Iceland. There's an island for you!

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