Voice of the Mid-Columbia | Kennewick, Pasco and Richland, Wash. |
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closeAccording to many prominent economists, America is now in a once in a century financial debacle.
Political pundits, with some merit, might conveniently point fingers at either Democratic or Republican politicians who did not adequately regulate the housing market, but our mortgage mess is just the smoldering fuss of the problem.
In a nutshell, what has driven us to the edge of the abyss is known as "over financialization." There are many components to this phenomenon, including debt, greed, corporate consolidation and deregulation.
It began in the 1980s, when Ronald Reagan embraced deficit spending and deregulation. That was the decade in which greed became good.
What resulted was a massive increase in national debt, from scant $1 trillion then to $10.7 trillion today. And public debt is less menacing than private debt, which according to Kevin Phillips, is now at approximately $40 trillion!
Moreover, in the early 1980s, CEO pay was about 42 times the average worker; now it is 400 times. In Europe and Japan, by comparison, CEOs are only paid between 10 and 30 times their workers' salaries.
Not only has our financial sector grown to surpass the industrial, but too many people directing the process are akin to opulent riverboat gamblers.
Capitalism is like a professional football game. It needs abundant rules to function properly. The economic ideology guiding America over the last 28 years has finally run us to the edge of disaster.
We already had comparatively low taxes and nonintrusive government. Tax cuts and deregulation, the mantra of the cause, did not make the economy grow better, debt disappear or people any happier.
What we have attained instead is a system with problems that go somewhat beyond comprehension. In addition to the abovementioned debt, tens of trillions of additional dollars will be needed to pay future Social Security and Medicare costs.
We are so far in debt and our industrial base so degraded, it will be somewhat miraculous if we are able to dig ourselves out. Ironically, one of the few things now standing between us and depression is the federal government - the entity Reagan identified as the problem.
Our economy needs not to be tinkered with, but instead restructured. The people and practices that have led us into our current situation must be purged.
Recent comments by some of our best financial analysts have been illuminating. The CEO of the Bank of America states that our economic crisis is the result of greed and over leverage (risk).
Jim Cramer from Mad Money says "the free market has reeked." Alan Greenspan, former chairman of the Federal Reserve, states the amount of irresponsibility among the nation's top bankers and investors has been so great he will now have to change his economic model.
The federal government has been complicit with business interests and must now independently step forward. Oversight has not only been too lax on specific policies, such as in lending, but way too much business consolidation also has been permitted.
One of the main reasons why the taxpayers must bail out AIG, Citigroup, etc., is because these companies are too large to fail without disastrous consequences.
A solution is to prevent companies from becoming so huge. Somehow the pay of CEOs must also be brought under control.
The current system is not only an insult against social equity, but it also corrupts our economic leadership.
As revealed by John Gray of the London School of Economics, an unfortunate characteristic of global free markets is that bad capitalism tends to drive out good capitalism.
We need a new FDR to once again save capitalism from the capitalists.
w Mark Mansperger is an assistant professor of anthropology and world civilizations at Washington State University Tri-Cities. His research includes cultural ecology and change as well as international economics.
Editorials are the consensus of the Tri-City Herald editorial board.
Editorial board members are Rufus Friday, publisher; Chris Sivula, editorial page editor; Ken Robertson, executive editor; Matt Taylor, contributing editor; Lori Lancaster, editorial writer; Shelly Norman, editorial writer and Jack Briggs, retired publisher
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