Of course they are. Should we have let them collapse? Debatable. The leftist in me says ‘let them burn!’, to which my common-sensical guy says ‘and then what?’ and argues ‘if they collapse, we fall along with them and society at large suffers’. Now, the social democrat in me says ‘the regulatory state is still relevant’ and chides the market-is-the-panacea way of thinking along with the conservative right for damaging the essential elements – however imperfect – of the social contract. This guy, the social democrat, is also very dissapointed at how some center-left movements in Western Europe, the French Socialist Party (out of ideas), the British new Labour Party (out of steam), and the Spanish Socialist Worker’s Party (out of everything else), are losing ground and in clear retreat when this political juncture should be a time for the center-left to reorganize, get in touch with their grassroots and the electorate and offer policy proposals of their own.
The political scientist in me says a lot of things, mainly how preliminary observations and data-rich sources all over will make for an extraordinary array of research articles re-testing theories and validating hypotheses. The debate ensues within social science and I hope there will be consensus around the validation of the State (capital S) as an imperfect, multilevel entity that, though arbitrary and inefficient, exists to protect citizens against negative and detrimental market fluctuations and/or outcomes as well as natural and human-made disasters. That is, and this is an attempt t normative philosophy , if we accept Capitalism and its invisible hand as the best possible system we must also accept that this hand suffers periodically from rheumatoid arthritis and, like now, that our present form of Capitalism is quadriplegic. Thus, the very visible hand of government must be tendered at such times, not only as a way out, but as a way to reconstitute essential elements of the political economy.
This is a very opportune juncture for the State to redefine its position, but especially its relation with the economy and society. The state, in all its conceptions, needs to address those with whom it suscribed a social contract and convince them, first, that government is (should be) there to help, and second that civil society should hold it accountable when it fails to fulfill its side of that contract. As much as some of us don’t appreciate State intrusion in our lives, we sure are grateful to have it on our side when the worst arrives, like it didn’t happen with Katrina, or like it did happen in the Fall of 2008 when the debacle of financial markets was confirmed.
Concerning the question in the title I’d like to direct you to the following written pieces. The first one, in French, by Frédéric Lordon appeared in Le Monde Diplomatique. Titled ‘Le jour où Wall Street est devenu socialiste’, Lordon comments on the ambiguous morals behind the Wall Street bailout. On the one hand, says Lordon, US Treasury Department and The Federal Reserve Bank System’s room for maneuver is significantly curtailed when crises of this type appear or, like now, are a reaction to the unethical behavior of finance firms. Of course, the consequence for government is to act without a choice if it wants to avert disaster, a politico-economic cul-de-sac if you will. The mere consideration of it enrages commonsensical people from the left and right, a sentiment reflected in Thomas Friedman’s article ‘All Fall Down‘ in The New York Times.
Apart from Lordon’s and and Friedman’s articles there’s another piece that you might find interesting. Sociologist and cultural critic Slavoj Zizek wrote an exceptional essay titled ‘Don’t just do something, talk‘ in the London Review of Books in which he summarizes the contradictions brought forth by the fundamental flaws in the current massively-deregulated system. One of his first arguments deals with implementing action without reflecting on its outcomes,
Faced with a disaster over which we have no real influence, people will often say, stupidly, ‘Don’t just talk, do something!’ Perhaps, lately, we have been doing too much. Maybe it is time to step back, think and say the right thing. True, we often talk about doing something instead of actually doing it – but sometimes we do things in order to avoid talking and thinking about them. Like quickly throwing $700 billion at a problem instead of reflecting on how it came about.
One of Zizek’s reflections is precisely the weakness of the Wall Street-Main Street dichotomy that populist conservatives are so fond of. The system that they’ve allowed to put into place doesn’t permit to make that distinction because, like it or not, they are intertwined, now more than ever. Here’s Zizek’s reply to the claims of ‘financial socialism’,
If the bailout plan really is a ‘socialist’ measure, it is a very peculiar one: a ‘socialist’ measure whose aim is to help not the poor but the rich, not those who borrow but those who lend. ‘Socialism’ is OK, it seems, when it serves to save capitalism. But what if ‘moral hazard’ is inscribed in the fundamental structure of capitalism? The problem is that there is no way to separate the welfare of Main Street from that of Wall Street. Their relationship is non-transitive: what is good for Wall Street isn’t necessarily good for Main Street, but Main Street can’t thrive if Wall Street isn’t doing well – and this asymmetry gives an a priori advantage to Wall Street.
The contradictions are piling up and as you might have surmised the stubbornness of the crisis is just recently budging. But it is far from over. Judge for yourself, see this GDP data From the US Bureau of Economic Analysis. Also check the data from the Bureau of Labor Statistics and the US Census Bureau (in Census, pay special attention to ‘People & Household‘ and ‘Business & Industry‘ links). US States are faring no better, see this feature from Pew Research nor are individuals who look to online resources for coping with recession, and though there are some signs of consumer confidence according to Gallup the overall picture shows lack of improvement.
We are still, following the analysis of Paul Krugman, on the Edge of the Abyss, and bond trader John Jansen deems this crisis “the financial equivalent of the Reign of Terror during the French Revolution” . But don’t take my word – or Jansen’s, for that matter – for it, New York Times’ Eric Dash and Julie Creswell wrote an extraordinary journalistic piece titled ‘Citigroup pays for a rush to risk’ about how Citigroup engaged in unethical and excessively risky trading practices with little or no oversight. Now there’s a horror story for you, although you’d never guess it if you look at Citi’s website; it is as if billions of dollars were never lost in the type of questionable banking that Citigroup engaged in. I guess, as far as oversight was concerned, the Citi did sleep.
So there you have it, a lot of reasons to be angry. But if you’re still looking for someone to share the blame, all we have to do – as V said – is look into the mirror
Tell me what you think.
Some references if you are interested in knowing more
Center for Public Integrity (2009, may 6), Who’s Behind the Financial Meltdown? The Top 25 Subprime Lenders and Their Wall Street Backers, Retrieved from the World Wide Web on August 4, 2009, URL: http://www.publicintegrity.org/investigations/economic_meltdown/
Dash, E., Creswell, J. (2008, November 23), ‘Citigroup Saw No red Flags Even as It Made Bolder Bets‘, The New York Times (The Reckoning: NYT articles exploring the causes of the financial crisis). Retrieved from the World Wide Web on July 29, 2009, URL: http://www.nytimes.com/2008/11/23/business/23citi.html
Hillyer, Q. (2008, October 2), ‘Maddening for Madisonians‘, The American Spectator, Retrieved from the World Wide Web on August 3, 2009, URL: http://spectator.org/archives/2008/10/02/maddening-for-madisonians