Friday, November 14, 2008

Kashkari and the Cash and Carry Economy

There are lots of fairly sophisticated theories out there about how we got ourselves into our present national financial dilemma. There are people who write terrific stuff about how the incentives of lenders and investors were not aligned. There are folks who blame the greed of Wall St. There are those who think the whole thing started with the miscalculation of a once proud technocrat who found a flaw in his equations. There are even those who think that the whole thing can be chalked up to simple government incompetence.

Of course these things are all true. They have all had an impact and are all (partially) to blame. But to me, none of them gets at the fundamental problem we are facing, not just in the US but globally. Fundamentally we no longer trust this economic and political system.

I don't mean this in an ideological sense, as if we might somehow come to trust socialism or authoritarianism more. The question is not which ideology you think best optimizes the parameters of freedom, development, and justice. No, I mean to say that we no longer trust that any of these political systems is actually working for us. Everywhere you look in the world you see the same basic pattern -- huge, highly centralized political units run by tiny enclaves of the well connected. Once upon a time we (foolishly, certainly) trusted that these people actually ran their countries with at least one eye towards the benefit of 'the people', whoever that is. Our problem, fundamentally, comes from the fact that these political units have an enormous influence over our lives, and yet we no longer feel that we have any control over them, we no longer trust that those in charge of them have our collective benefit in mind.

In short, the cause of the sub-prime crisis in neither economic nor technical. It was not the result of too little or too much regulation. It is the result of something at once much simpler and much deeper. It is the result of a basic breakdown in our trust in government, the result of a lost decade of crony capitalism, the result of the US sliding incessantly towards the fate that has ever hovered at the edge of our country, and which has engulfed so many other colonies in our hemisphere -- the sub-prime crisis happened because we have become a banana republic.

And we have taken the rest of the world with us.

Once you believe that your government only exists to enrich itself and those connected with it, there is simply no way back from the abyss. If no one capable of even contemplating our mutual benefit is in charge, then it is every man for himself. Trust and cooperation are the foundations of all societies and all economies, whether they are organized along socialist or free market principles. Without that trust, it doesn't matter what you call your crumbling sham of a system.

So no, I don't think that Bush and Paulson and Kashkari are chumps, as Rep. Elijah Cummings so delicately puts it. I just think they are more rational than the rest of us -- they are first in the race to fuck everybody before they get fucked.

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