Michaell, I like this. But it seems like the opening of something much longer and I looked for the next page without finding it. Is there more to come?
Gene -----Original Message----- >From: Michael Perelman <[EMAIL PROTECTED]> >Sent: Oct 23, 2008 8:36 AM >To: [email protected] >Subject: [Pen-l] plea for comments > >I need to submit a proposal to a major publication tomorrow. I have had to >rush it >off. Any comments would be appreciated. > >How is it that the American dream suddenly morphed into like a nightmare? The >subprime crisis is a symptom of something larger and far more dangerous. Even >the >meltdown of Wall Street is a symptom of something larger and even more >threatening. >Without extreme care, the intended cure is likely to make matters worse. >Papering >over a crisis, even with a trillion dollar bailout, may temporarily eliminate >the >symptoms, perhaps even making the economy look healthy again, but the >underlying >problems are almost certain to break out again in a more virulent form. > >A rational response to the crisis requires recognizing the deeper, systemic >dimensions of the problem. On the most superficial level, the public face of >problem >was a group of people buying houses they could not afford. This perspective is >misleading, especially because many of the loans were to people who were >already >homeowners or small-time speculators who were looking to flip houses. > >Like a Russian nesting doll, another face is blow the surface: predatory >lenders, who >were pushing deceptive loans that could never be repaid. Pulling away these >predatory >lenders, exposes a more complex presence: the great banking institutions now >on the >public dole. These supposedly respectable businesses, protective of their >public >face, do not allow their corporate names to be used by the predatory lenders, >but >they represent a very profitable component of their businesses. At the next >levels, >first a dysfunctional financial system appears and, then, something more >abstract -- >a political movement fanatically committed to deregulation, which allowed the >whole >financial system to go haywire. > >Recent scrutiny has exposed most of these actors, but even deeper forces have >gone >unnoticed. To get a handle of these forces requires looking back at the >pattern of >crisis and response over many decades. Since comparisons of the current crisis >with >the Great Depression have become commonplace, that period may be a good place >to >start. > >The Depression of the 1930s had disastrous human consequences, but it made the >economy stronger in the long run. In effect, the depression drew much of the >poison >from the system. It swept away outdated, inefficient, and obsolete businesses, >plant, >and equipment. Under extraordinary market pressure, business found ways to >improve >efficiency. Finally, the Depression wiped out a great deal of debt, while New >Deal >legislation allowed unions to lift wages. World War II economy built up >considerable >wealth in the U.S. while the economies of international competitors were left >in >ruins. This constellation of forces left business and the public able to >purchase >goods and services once employment recovered. > >Shortly after the war ended, the U.S. enjoyed what economists call the Golden >Age, >because the extraordinary economic performance of the time. Business came to >expect >that the experience of the Depression had taught government how to make those >good >times last forever. Obviously, they did not. > >By the late 1960s, falling profits created enormous dissatisfaction for >business. >Both business and the public tended to hold the Democrats responsible for the >faltering economy. In the decades that followed, the Democrats managed to >elect only >two presidents, both of whom governed like traditional Republicans, while the >Republicans became increasingly ruthless about promoting business interests. >The >underlying obsession of both parties was to resurrect the profitability of the >Golden >Age. > >I will tell the story of the people and policies that set out to recreate the >economic performance of the Golden Age. The reader will see how, instead of a >Golden >Age, they gave the world a jerry-rigged Gilded Age -- one in which the gilding >covered up an increasingly dilapidated economy. Profits still rose, >approaching their >pre-Depression peak, but their recovery marked deeper problems. > >Normally, one would expect healthy profits to be a payoff from a productive >economic >structure, based on intelligent investments in plant, equipment, and a >well-trained >workforce. Instead, the improvement in profits reflected a combination of >cheap labor >(real hourly wages peaked in 1972), deregulation, low interest rates, and >financial >manipulation. The driving force of this new Gilded Age was credit rather than >income >for the majority of workers. Recurrent crises should have signaled the need >for >fundamental change. Instead, government and business chose to treat the >symptoms. > >-- Michael Perelman Economics Department California State University Chico, CA >95929 > >Tel. 530-898-5321 >E-Mail michael at ecst.csuchico.edu >michaelperelman.wordpress.com >_______________________________________________ >pen-l mailing list >[email protected] >https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
