A farewell to 2008, and an offer of hope

In the last few hours of December 31st it seems appropriate to bid good-bye to the concluding year, and to recognize at least some of the changes that 2008 has brought us. This year it is neither a happy nor an optimistic exercise.

To begin with, 2008 brought us once again to the climax of the recurring fantasy that deregulation, politically-motivated tax cuts and a general attitude of denial lead to sustained prosperity. It seems that every generation or two, depending on the depth of the harm inflicted by the most recent relearning, has to repeat this silly experiment. We went through it in the late 1920s, with memorable consequences. We went through it in the Reagan years—which conservative myth-makers have spent the intervening two decades trying to paper over—and inherited for our foolishness the collapse of the century-old network of locally-owned, locally-acting  savings and loan institutions, the construction of an unstable and fundamentally corrupt system of national commercial banks, and an economic collapse.

That worked so well that we tried again, this time with nearly the entire global financial system. And we achieved the same result again, but on a far grander scale. This will not be the last experiment of this nature, of course, as the fiction behind the story is too compelling, the advantages for the thieves who walk away with the winnings while the roof is falling in on everyone else are too great, and our cultural memory is too vulnerable to the machinations of our mass media.

Every time we have seen a period of rapid growth turn out to be a Ponzi scheme, but every time we conclude that there must have been some error in the design of the experiment. The cycle will end, one presumes, when the rest of the world is no longer willing to loan us the money necessary to fund such adventures.

Perhaps 2008 has also brought us to the end of, or at least an interruption in, the delusion that a country can prosper by spending a great deal more than it earns and borrowing the difference at attractive rates. This also should be so obvious as to not require further experimentation. But the will to deal with the problem in the US is so lacking that not only are we not renouncing the concept of living beyond our means, we are actually out on the world market borrowing unprecedented sums in the hope of using the proceeds to restore just the profligate nonsense that made a reckoning inevitable. Borrow much more and give it to people so that they will feel secure enough to go even further into debt? Are we listening to ourselves?

But perhaps—just perhaps—the completion of 2008 has also brought us to a beginning. Were we to forge from the now-abundant scrap lying around us a new economic policy, based not on a fiction that serves to cover the obsessive greed of a well connected few but on a realistic and systematically sound vision of a sustainable economic system for the US, 2008 could be not the first great slip down the road to humiliation, but the first step up toward a new era of world leadership.

We can see from here an ideal in which the US is once again a major exporter—not of financial "services" or of entertainment, but of sustainably-produced agricultural commodities, of pharmaceuticals and medical equipment, of highly-efficient capital equipment for industry, and of durable goods that lighten the carbon footprint of everyday living for ordinary people throughout the world.

We certainly have the knowledge and the research facilities to learn to do this. We have the home market to support the early phases of such a revolution. Perhaps the one positive of the shameful disregard for our own infrastructure that began in the Reagan years is that we are now in nearly the same situation as were Europe and Japan in 1946—nearly every bit of our infrastructure needs replacing.

Such an effort would require a huge investment of both intelligence and financial capital. The money we are likely to spend anyway. My fear is that in our current state of panic, we will not invest the intellectual capital first. Instead of visualizing, architecting, and analyzing a system that we wish to build, we will simply throw more and more borrowed money at trying to recreate 2007.

But this need not be. We don’t have to throw our remaining ability to borrow into the same black hole into which we have pitched the last few thousand billion dollars. (I don’t exaggerate, by the way. According to a New York Times story this evening, Wall Street has destroyed about $7,000 billion dollars in paper wealth this year.) Instead, we can invest what is left of our borrowing power in making the US a world leader in design and manufacturing, and a leader in demonstrating and facilitating the way humanity must live to have a world at the same time urban, industrial, and survivable.

So where do we begin? The way any design begins. What should be our goals? What are our resources: intellectual capital, organizations capable of acting on the scale required, labor and materials, financial capital? And then we architect an endpoint, and craft objectives, measures, and feedback loops that will take us there.

Such an effort would restore wealth to individuals in the US, and to our trading partners. It would restore as well some sense of the legitimacy of leadership that we have so pathetically squandered. And in the end, it would move us toward a world in which we would all want our grandchildren to thrive. That would be a legacy positive enough for such a sobering year.