Mainstream media in 2008 were replete with diagnoses of the sickness of the US economy. Central bankers, politicians and their economic advisors sought to explain the economy’s swoon in medical terms. The economic patient was described as having a heart attack, a seizure, a collapse, a loss of animal spirits, loss of confidence. Our body economic was described as being in shock, needing liquidity injections, going to the emergency room, on life support, on the operating table, responding to the medicine and, hopefully, in the recovery room.
Let’s look at all this body imagery conjured up by the economic experts and see if there may be some more realistic medical appraisals. Since it seems self-evident that our economy needs restructuring, let’s look at how deformed and misshapen it became over the past quarter century. We know that our economic body suffers from cancerous growth of its financial sector which metastasized to over 20% of its GDP. A normally efficient financial sector, likened to the body’s blood supply and circulatory system, need be no larger than 10% of GDP.
So, let’s flesh out the diagnosis in broader medical terms: The body economic suffers from:
• An enlarged heart and circulatory system. Unlike the earlier medical remedies of blood-letting, today’s economic doctors seem intent on increasing the body’s blood supply, creating hematomas in the banking sector. Injecting liquidity has led to edemas with pools and clotting in various organs and sectors. Bypass surgery may be the answer to downsizing bloated, “too big to fail” Wall Street firms, banks and “insurance” companies while re-directing the transfusions to homeowners, Main Street businesses, students, state budgets, extending unemployment benefits, food stamps, schools, healthcare, human services and charitable foundations.
• Immune system malfunctions where the regulatory functions of their watchdog cells, liver, kidneys and other vital organs were compromised, causing growth of strange, toxic organisms such as CDOs, SIVs, CDSs and a menagerie of unrecognized foreign invaders. Here immunity-boosting antibodies, whistleblowers, investigative journalists and bloggers are the remedies needed. Other prescriptions must include flushing out toxic waste “assets” from banks, hedge funds and insurance companies by simply writing them off and permitting reckless companies to fail and go bankrupt.
• Skeletal and muscular atrophy as the productive sectors were dismantled and backbone manufacturing, infrastructure, plants, equipment and goods production went to cheaper labor in other, less-regulated countries. The economy’s spine suffered deterioration as levees, sewage treatment, water mains, bridges, dams, roads and railroads fell into disrepair. Remedies are obvious in bringing new blood transfusions into circulation to oxygenate and restore tissues, bones and sinews.
• Overweight and accumulation of fatty deposits in tissues due to over-investment in automobiles for transportation while starving mass transit and hampering cycling, walking and other fitness-maintaining parks in cities and infrastructure. Remedies are at hand for stimulating urban revitalization, retrofitting city infrastructure with pedestrian malls, mass transit and reversing sprawl.
• Overgrown dysfunctional medical-industrial complex gobbling 16% of GDP and military-industrial complex, a back-breaking “charley horse” of $500 billion per year. Healing these conditions calls for shifting to preventive, universal, single-payer holistic healthcare and wellness programs while shifting weapons budgets to diplomacy, better information and intelligence services.
• Brain and nervous system atrophy due to mind-numbing mainstream media. Advertising induces impulse buying, low self-esteem and consumerist waste while obfuscating public understanding of the need to shift from fossil fuels to clean, green renewable energy and efficient resource use. Remedies include expansion of public broadcasting, ethical standards for advertising, publicly funded political campaigns, restoring the fairness doctrine, equal time provision of the FCC while rebuilding crumbling schools, revising outdated curricula and paying teachers adequately. Re-training programs will be needed for re-deploying the oversupply of economists, lawyers, MBAs, options traders, quants and financial engineers to perform useful tasks, including real engineering, retrofitting buildings, restoring parks and playgrounds, volunteering at food banks, well-baby clinics and teaching reading skills to our 20% of illiterates.
• Constipation and accumulation of toxic wastes in bodily organs, colon, liver and kidneys, leading to an inability to flush toxic assets from balance sheets by the appropriate write-downs and bankruptcies. Build up of pollution due to lack of regulatory oversight, enforcement and elimination of toxics. Prescriptions include restricting lobbying and political contributions, vigorous law enforcement and re-regulation of higher environmental, public health and safety standards. The downsizing of the financial sector must include breaking up oversized banks, banning credit default swaps, and other murky derivatives, reinstating the Glass-Steagall Act to separate banking from brokerage, investment banking and insurance while banning naked short selling, bringing back the uptick rule and the small tax on all transactions.
• Psychosomatic disorders including narcissism, feelings of entitlement, unwarranted fears, addiction to oil, over-use of patent medicines and an inability to reality-test or recognize new global conditions. Remedies include tough love from some of the other economies in the human family that lend us some $3 billion per day to sustain our over-consumption habit, including China, Japan and the OPEC nations. Another key prescription is a small tax on daily currency trading of over $2 trillion, 90% of which is speculation. This would stabilize currency turbulence and provide billions to meet the UN Millennium Goals of providing health and education to all members of the human family and reducing poverty. Tax avoidance and money-laundering can be more closely monitored and prosecuted while transfers offshore to financial brothels can be cauterized and shut down.
Can the US body economic be healed? Yes! Rejuvenation and reforms are on the agenda of the new Obama administration, as well as plans to perform re-constructive surgery on the economy, toward a new base on solar, wind, geothermal and more efficient infrastructure. As the rest of the world relies less on the US dollar, US consumers will kick many old addictions and producers will grow more sustainable local economies. Bloated industries will downsize while inefficient firms will go bust. The old dreams of Wall Street “masters of the universe” and old boys’ military adventures and empire can quietly fade away.