Commenting on the Real Economy

NBBooks wrote this comment in a recent dkos diary. It deserves a little more attention than just that of a throw-away comment.

I was covering and writing about deregulation and financial derivatives back when one of the very few Congressmen to oppose the deregulation of the savings and loans, Texas Democrat Henry Gonzales was chairman of the House Banking Committee (read Molly Ivins' November 2000 obituary of Gonzalez here) and Richard Breeden was chairman of the SEC. Many of you probably know the general outline of the history of these issues the past 30 years. But in the late 80s to mid-90s, I was in some of the hearings where these ideas were debated in the Congress, in the SEC and CFTC and in some of the think tanks back in the late 1980s and early 1990s. I saw how Wall Street got its way over and over and over again.

For me, opposing Wall Street came down to one central idea - it's the real economy that's important, and the banking and financial system should always be kept in a position of subservience to it. It's the real economy that produces and distributes the food we eat, the clothes we wear, the houses we live in, the cars and buses and trains and planes we ride in. The real economy provides what people need to survive; by contrast, you can't eat a debenture or a bond. And in the 1980s, the real economy, as I saw it, was being sacrificed to and looted by the banking and financial system.

Does anyone remember "It doesn't matter whether we produce potato chips or computer chips" ? I was among the Cassandras that were shouted down when we tried to warn such foolishness would bankrupt our country. Yeah, too damn bad we had to wait twenty years to show you the proof.

The financial catastrophe that has occurred under George W. Bush is only the logical result of the "post industrial" policy trends of the past three decades, but some people still don't get it. I find it hard to believe there are people, so called "progessives," here - here of all places! - that are in favor of allowing the auto industry and at least one million working class jobs to disappear.

No one I have seen yet has challenged the estimates that a million jobs would be lost to begin with. Some estimates go as high as three million jobs lost. It will take years, and millions of lives lost to despair, hopelessness, misery, and the amplified affects of deteriorating mental and physical health, before we would climb out of this disaster.

Yet, many people appear anxious to pay this extravagant price. To punish auto's management for making bad decisions. To punish industrial workers for abandoning the Democrats and supporting Reagan and both Bushes. To punish organized labor for making more money than they do.

To punish mankind for having the arrogance to tame and harness nature so that ninety percent of kids no longer die before they're five years old.

What stupidity. What short-sighted, unthinking, vengeful moronbasity.

Well, people who have had their heads up their ass for the past twenty years, are about to have their asses handed to them. Too bad the innocent are going to get the same treatment.

I left my journalistic position in 1996, feeling very tired, belittled, jaded, cynical, and completely marginalized.  Meanwhile Wall Street led the country on a tear of false prosperity that my fellow Americans can now see was nothing but debt, debt, debt, piled on more debt. This is my "I told you so," moment, but what effing good does it do?

What I can do that might do some good is to tell you what I think is coming next.  

The Obama administration will spend around 12 to 24 months try to find a solution to the new world depression within the confines of neo-liberal economic thought.

Meanwhile the suffering and misery is going to get worse, and worse, and worse. The Rethugs will be grinning from ear to ear.

I'm hoping the street organizer in Obama will come to the fore at that point, and we can begin to crack down on the financial markets and their addiction to hot money. In other words, saving the real economy is going to require destroying all the offshore tax havens and imposing a tax on financial transactions that chases out short-term speculation.

Basically, we are either going to force the financial system to eat the losses of its deflated bubbles, or the financial system is going to force us to cut wages, pensions, Social Security, national healthcare and the standard of living.

Most people, including Obama I fear, don't understand this yet. We are going to waste a year or two floundering about trying to avoid both massive economic pain and panicking the markets, before we finally figure out it is impossible to do both.

I hope that his conclusion about Obama's team is not true but his point about the auto-makers and the real economy is very important. As he put it, there is a huge difference between potato chips and computer chips, and the loss of potentially 3 million jobs related to the auto industry is not an acceptable option. Once people understand that, this should no longer be a discussion about the foolishness of auto-industry CEOs but a focus on rebuilding the real economy in the US.