A Critique of the System, or: A Fool and his Money….

I think what many mainstream defenders of Geithner or the rescue plan don’t realize is that critics of the plan are not always merely partisan hacks out with a political agenda.  Some of us are actually out to critique the system itself, rather than the President (whom I admire a great deal) and aren’t in it simply to pile on the easy target that is the Treasury Secretary.  Likewise, when Matt Ygelesias offers up this sort of argument in defense of consumption over sacrifice, he misses the point that many of us are trying to make which is essentially that our levels and means of consumption are simply unsustainable.  Writes Yglesias:

But if Americans were to collectively sacrifice—everyone agree to eat only potatoes on Wednesdays or something—that wouldn’t help anyone except the potato farmers. Consumption in a market economically is almost always a positive-sum exchange; economic growth, and therefore prosperity, requires more economic activity, not more sacrifice. If the big national problem were a giant war, things might be different—we could all conserve gasoline and save it to fuel the tanks. But it’s hard to see how sacrifice could solve the problem of rapidly rising unemployment.

Now, the essence of this argument is very true – indeed, in a market economy spending is the fuel that keeps everything moving.  The problem is that we’ve equated spending with credit, and so people have moved slowly further and further into a cycle of spending money that they don’t actually have.  I’ve certainly fallen prey to this many times over the years.  It’s such a pervasive thing nowadays to buy with credit that we hardly think twice about it.  So perhaps asking Americans to “sacrifice” is the wrong approach; perhaps asking American to stop going into so much debt would be better.  Same goes for the government, which leads by example if nothing else, and has shown time and again that massive debt is okay, that spending what we don’t have is good, and that going out and buying stuff is the answer to the problem.  Well, it may be on some level: the purchasing of goods and services naturally creates jobs and so forth.  But again, doing this to the detriment of personal savings only leads to more trouble.

This is a critique of the system – not of the concept of buying and selling goods, or of capitalism – but of doing so without the proper financial means, and of our national leaders encouraging our doing so.  Obama’s predecessor pushed Americans after 9/11 to “go shopping” and now, in this current crisis, that’s exactly what Yglesias is saying, and what the Obama administration is saying.  I suppose in a market economy, going shopping is the answer.  The question then is whether or not that should be the answer, or perhaps more saliently, if this is the way things are, then how can we as a nation change so that markets work without people going into boatloads of debt.  Spending is good only within the boundaries of our capacity to also save and to invest in our futures.

US Personal Savings Rate

This is what I find so unsettling about the general philosophy behind the bank rescue, behind the push to get “credit flowing” and “banks lending again.”  Though I certainly understand the need for credit to move, especially in order for businesses small and large to do business, I also think that we are witnessing a national denial of what got us into this mess to begin with.  We can’t simply go back to old bad habits.  We can’t be told to just “go shopping” even though yes, it is good for the economy or at least for jobs, because it’s short-sighted and part of the boom/bust cycle that has been going on for decades now.  Economic stability is also important, and it relies heavily on personal savings as well as stable businesses and a government with a balanced check book.  Growth for its own sake, or spending to revive employment rates simply won’t secure us for the long run.  And it’s high time we began thinking about our economy and our general welfare in terms of the long run, not merely in terms of what’s good for the here-and-now.

On a deeper level we need to begin asking questions about the distribution of wealth and property and the centralization of power in Washington and Wall Street, but this post is not the one for that.

And also, it’s important to note that there are many, many sane critics of “the system” out there.  Many of us believe that underpinning all of this is a moral question, not a political one, and certainly nothing calling for some sort of violent revolution.  In a certain sense, it’s all really just a matter of pragmatics – don’t spend what you don’t have.  The villain isn’t the US government or the evil capitalists – and as often as not lies “not in our stars but in ourselves.”

Not everyone can be as crazy as Glenn Beck or Chuck Norris, after all.