Let’s talk about the moral issue underlying our current economic crash, and, more broadly, America’s slide from the heights of its international economic and political power.
Here’s the simple thesis: It’s impossible to sustain for long a structure that rests on faulty foundations. Inevitably, that structure will collapse. The U.S. was resting on rotting foundations that Republican ideology had built (enabled too often by Democrats, sometimes because they’d been bought off and sometimes because they were too weak to do much about it). It was a matter of time until the inevitable catastrophe occurred.
Let’s fold in some history here. Both communism in the Soviet Union and fascism in Italy and Nazi Germany were so weakened by internal contradictions, based as they were on a warped view of reality, that they began imploding from within and thus were more vulnerable to pressure from without. As a result, they eventually, and relatively quickly, disappeared. Hitler’s "thousand-year Reich" was gone in 12 years. After several decades, the communist "wall," that metaphor for permanent communist rule, fell virtually overnight.
Both authoritarian systems were ruled from above with iron fists and an enormous propaganda infrastructure. There was little tolerance for dissent, oppositional parties were wiped out, and citizens were spied on constantly by their government. Democracies, despite their many flaws, are ruled by leaders dependent on the "consent of the governed," and dissent and alternative views are recognized as indispensable correctives on the universal tendency in politics for corruption and over-reaching.
When the neo-conservative extremists took over the Republican Party in this country and then the Executive Branch of government, in their arrogance they bragged about how they were now "history’s actors" who "create our own reality" that everyone else would have to adjust to.
Even before 9/11, the White House initiated massive, illegal spying on Americans; the supposedly free press to a large extent became a corporate propaganda arm of the ruling political ideology; and both the opposition Democratic Party and the Legislative Branch in general were marginalized, neutered, rendered largely irrelevant by the "unitary" Executive. White House Press Secretary Ari Fleischer warned those of us in the reality-based community to "watch what you say." Dissent could be dangerous to one’s health. Then-Attorney General Ashcroft equated opposition to Administration war/police policies as giving aid and comfort to America’s enemies, in essence charging "treason." (He told Congress: "To those who scare peace-loving people with phantoms of lost liberty, my message is this: Your tactics only aid terrorists — for they erode our national unity and diminish our resolve. They give ammunition to America’s enemies, and pause to America’s friends.")
WARS BASED ON IDEOLOGY
The war of choice begun by the CheneyBushRumsfeld ideologues against Iraq is an essential part of the moral and then political crash of the Republican Party. Wars of choice only work in the long run when they rest on clear support of the population back home, when the citizenry agree with the necessity for the conflict because there is a demonstrably-proven imminent, national-security threat. Neither of America’s two great wars in the past 40 years (Vietnam, Iraq) have rested on that foundation.
Given the effectiveness of modern-day propaganda techniques, it’s easy enough to take a country to war with a patriotic public behind it. But when the reasons for the war are faulty, based on lies and deception, devoid of a moral justification, not based on demonstrable proof of imminent threat, those wars cannot be conducted successfully and support for those misadventures begins to rot and creates a moral decay in the social fabric. Or, to switch metaphors, it’s as if a swarm of ravenous termites were to invade the moral system and begin chomping away at the wood in the floor and in the support posts.
Over time, this infection seeps throughout the entire body politic, weakening it. The population begins to notice the discrepancy between what the rulers are saying and the reality they know, and support for the war quickly begins to wain. Vietnam was lost not only on the battlefield but in the population at home, which altered its initial support to determined opposition within a half-dozen years. The American public developed its consensus on the now five-year-old Iraq war — that it was a mistake to invade and occupy and should be brought to a close as soon as practicable — at least two full years ago, and, for many, even earlier than that.)
THE ECONOMY AND GREED-ROT
As long as the economy and other major systems propping up the ruling elites work well, dissent remains at relatively low levels. Such was the case in the U.S. for a number of years in the CheneyBush presidency.
But the Administration, with an ideology that rested on a greed-is-good foundation, with no reason to consider "the public good" when making policy, disparaged and discouraged regulation of the financial system. The result, in effect, was state-sponsored looting of the treasury and citizenry by the titans of finance and industry (who, of course, just happened to be the biggest political and economic supporters of the Republican Party).
Most of this laissez-faire thievery was carefully concealed from the citizenry. But slowly the middle-class public came to understand how the financial system really worked. The scandals involving some of the largest corporations in America — the Enrons and WorldComs and Arthur Andersons and so on — reinforced ordinary Americans’ feeling that, per usual, they were getting the short end of the stick while they wound up paying for the resulting social damage caused by the greedy. Clearly, they reasoned, the CheneyBush government was in cahoots with the plutocracy against ordinary Americans’ interests. An even earlier example occurred when the taxpayers had to bail out a corrupt savings-and-loan system. This was the so-called "Keating Five" scandal, in which five U.S. Senators, among them John McCain, were publicly shamed for their roles. That scandal had prepared the citizenry for distrust of the financial and political systems, and maybe even of the way capitalism seems to work in the real world.
But it wasn’t just the more-profits-at-any-price elites that took the country over the economic precipice. There was almost a universal mindset among the citizenry, fueled by denial and an exceptionalist notion of America uniquely blessed by God, that refused to acknowledge that what goes up inevitably must come down. For nearly three decades, the U.S. economy (with a few relatively minor glitches) has been in a bubble of positive movement upwards. It was believed that the stock market would continue to surge in that direction, that the value of one’s home would continue to rise sharply as a matter of course, and that low credit-rates would remain in place. But the foundations for that prosperity were rotten at the core.
WHEN BUBBLES BURST
Reality has a way of bursting bubbles, of bringing us all back to earth. Cash was plentiful and the housing market was way overbuilt and needed buyers. Devoid of any serious oversight and regulation, private-sector banks and other institutional lenders began offering more and more attractive introductory mortgages to a segment of the public hungry to own their own homes as a symbol of the American Dream; contractors and the Bush Administration joined the hype. The contracts, often arranged through predatory lenders, were loaded with arcane, small-print caveats that many either could not understand or chose to ignore, such as how and when the sub-prime rates would rise.
New home-owners figured they’d be able to refinance when those low initial rates went up in a few years because the rising equity value in their home would more than match the new mortgage costs. When that pattern of rising home values stalled, the economic bubble popped, and foreclosures began en masse when families were unable to afford the new mortgage rates.
It’s possible that this economic downturn could have been absorbed by an overall healthy economy, but other things were happening to help create a perfect storm of financial disaster. For one, greedy Wall Street investment houses — again, virtually unregulated by government — began inventing all sorts of sketchy derivative instruments ("bundled mortgages," "credit default swaps"), based on the supposed value of these real-estate mortgages, and sold them widely both in the U.S. and, ominously, to banks and other major players abroad. Huge portfolios worth trillions of dollars based on these instruments were, and for all we know are still, held by these institutions and individuals and thus can cause even more damage to the world economy.
These instruments and derivatives were, so to speak, little more than Ponzi schemes for making quick money, and were hyped by investment firms and hedge funds to those investors and institutions looking to place their available money in a steady wealth-producer based on "real estate." But there was little that was "real" about the "estates" supposedly behind those financial instruments. And when the foreclosures and abandoned homes began to litter city after city, development after development, the whole economic house of cards, built on greed and denial, came tumbling down.
The above analysis comes to you from someone whose graduate training was not in economics or finance. (My degrees are in government & international relations.) However, I think the analysis provides at least a partial explanation for how we Americans, along with the rest of the world, wound up in the catastrophic mess we’re in today.
Veteran economists tell us that at some point in crash cycles, the bottom is reached and things start to turn around. I’m sure that’s the case, but that doesn’t take away the immediate pain most people are experiencing right now and will continue to experience for years in the U.S. and around the world. Despite what might happen on any day in the stock market, the value of personal assets for hundreds of millions of people worldwide might well be cut in half or more, governments will slash essential services, the poor will get more destitute, the middle class will be pushed further down the ladder with many winding up in bankruptcy and poverty, even many wealthy folks will take serious hits. And it will take many years for most societies to climb back out of this Great Depression pit.
In short, being at the locus of the disaster, we Americans are truly in for it, and the next few years ain’t gonna be pretty. Just ask the generation that went through the previous Great Depression in the 1920-’30s.
THE POLITICS OF DEPRESSION
Everything changes now, including the current presidential campaign. John McCain certainly knows that. The chances of his assuming the presidency have virtually disappeared, since he was a key pusher of the Republican ideology of deregulation of business that helped lead to the debacle we’re in today. Still, McCain fights on, claiming to rein in the worst aspects of the hate and fear his campaign has fomented, while continuing to circulate TV ads and comments, many from his running-mate, that rest on the fomenting principle that Barack Obama is someone voters should fear in the White House.
In short, McCain wants to have his cake and to eat it too — to call in his rallies for calm and respect while Palin and the other campaign surrogates and TV ads continue painting Obama as a scary, somehow foreign presence in the body politic ("palling around with terrorists," "not one of us," etc).
A President Obama would certainly know that his administration would be financially unable to carry out many of his promised projects and would be able to do little more than preside over a greatly injured economy and start to repair the damage. Of course, an Obama election victory assumes that Karl Rove and his dirty-tricks minions can’t successfully fiddle enough with the election totals in a Democratic landslide (and do you believe they won’t try? what would dissuade them since they’ve never been punished for stealing earlier elections?), and also assumes that Bush would not attempt to declare martial law and rule by "emergency" decree during this current financial crisis.
In short, America is now paying the price for decades of denial, greed as state policy, and an unwavering adherence to the now-discredited philosophy of governmental deregulation. How we begin to climb out of this pit of Depression will determine the viability of the continuing American experiment.