Financial Meltdown -- Many Theories, Many Futures
There's a small upside to the big downside of the global financial implosion. We get to be amused by theories about why it is happening.
Scandals in Washington. Allen Greenspan. Panic about the turn of the millennium and the Y2K computer bug. The too-tight relationship between Japanese banks and the Japanese government. The Russian mafia, the coming launch of the Euro, the indisputable evidence of global climate change. I've heard these postulated causes and more from reputable businesspeople.
What's striking is that the theories all point to causes outside the financial system. They don't challenge the model, now dominant everywhere, of capitalism as a nearly flawless machine, turning out ever-increasing wealth, requiring only that we act according to our self-interest. The machine is slightly finicky, the theories imply, subject to breakdown if we stop acting as economic theory requires us to -- desiring ever more, working hard, choosing strong leaders, taking risks, being inventive, privatizing just about everything, competing vigorously but not cheating, and never, never losing confidence.
Given that model, when the machine is down, we have to find some human failure to account for it. Human failure is easy enough to find, so we end up with a rich assortment of causes for any crash.
I suspect we all actually know better. The people who most frantically recite the dogma of the free market probably know best of all. The fault is not in some outside glitch. The fault is in the machine itself, which has a morbid sensitivity to glitches.
We have only to look at history to see that booms and busts are endemic to market systems. We have only to look at very recent history to see one reason why. Nothing in the real economy has been getting more valuable at 30-40 percent per year. But financial securities have, round the world. The accounts of the small minority of people who own securities have swollen wonderfully, but those are just numbers on paper. Everyone knew that there was insufficient worth standing behind those numbers and that, when the music stopped, there would not be enough chairs for everyone to sit on something solid. Everyone knew, but no one dared say it, because saying it would make the music stop.
So now it has stopped. Numbers on paper are still coursing around the world, trying to find some real value to sit upon. The scramble is knocking down real chairs, making the situation worse. Folks who do the actual work of the economy are getting hurt more than those who were sucked into the speculative frenzy of dreams and greed but that's what always happens in capitalistic busts.
Peter Schwartz, a great strategic planner, formerly of Royal Dutch Shell, now of the Global Business Network, wrote a memo last August, putting forth three scenarios about where things might go from here. He calls them:
I'm rooting for a fourth scenario: "Shocked into a New Economics," in which the creative destruction is directed at the obvious weaknesses of both socialism and capitalism.
The new economics would worship something far more satisfying than mere growth, especially since growth is ever more costly on this over-full planet. Actual human needs would be a fine focus. It would admit the novel idea of "enough." It would not have to whip up demand for stuff that no one needs (and that the planet cannot afford) just to keep satisfying bets on growth placed by people who have too much money but think they should keep getting more. Ensuring "enough" for both the poor and the rich would take away the insecurity, desperation, envy, greed and howling fear that drive the booms and busts of the market.
A new economics would still have a market, but it would put the market in its place, as the servant, not the master of society. It would reward work and investment, not speculation. It would keep its books straight, counting up environmental and family and community costs as well as money costs. It would find more truthful indicators of success than the GDP, which is a measure of frantic activity, not of actual welfare. It would redefine "jobs" so that people can be supported for real social contributions -- raising children, learning, teaching, caring, cleaning up, restoring the environment, making joy for others.
This new economics sounds nutty to those who are still mesmerized by the old economics, but it is alive and well-thought-through. (See anything written by economist Herman Daly; see the society and journal of ecological economics founded by him and others.) It's available any time we want it. To find it we just have to let go of our illusions about the clunky old machine that is failing us one more time, as it has before, as it always will, until we invent a better one.