Blogging my thoughts: Averting a Depression by Priming the Pump
I woke up in the night worried about our economy and all the people losing their jobs and houses. Remember, if we learn new ways of public and private sharing, they could still have homes where they are welcome. I also worried about the fact that I have lost three fifths of my pension, meaning that any hope of retirement is unrealistic. But how do you retire from underemployment? I have a quarter time call in which you cover for a full time pastor, preach for a mid-week Lenten service, teach a bible study, help with a funeral, meet with a worship committee, and get a sermon ready for Sunday? Sorry, I love to complain.
I realize that I don’t work only for others, but basically for God. I am a servant of my Lord Jesus Christ. That is my faith statement. There you have it.
Back to the economy: Ben Bernanke answered those who asked why they should help someone who made bad decisions in buying a house and now were in foreclosure. He said “If your neighbor smokes in bed and sets his house afire and you live in a neighborhood of closely packed wooden houses, you could punish him very severely by refusing to send the fire department. And then he would probably learn his lesson about smoking in bed. But unfortunately, in the process you would have the entire neighborhood burning down.”
Rugged individualism does not see that social part of reality. That naked homeless man, trying to cover himself with an old raincoat and wracked with all kinds of diseases will infect everyone on the New York subway. His smell filled half of the subway car. The bacteria from his infections will not avoid the rich, the middle class, or whatever a person might be. His diseases will spread to all.
The economist, D’Anghel Rugina, used to chant, “Freedom, Freedom, Freedom!” in the classroom at Northeastern University, and said it depended on the free enterprise and market system, but he nuanced his analysis of society carefully, because socialism was appropriate for some sectors of the economy and not for others. Who wants to see doctors multiply unnecessary exams, procedures, and operations because of the profit motive? It happened with open heart surgery and examination procedures here in Redding, California. Deregulation of the utilities was used to pilfer the people of California. The private inspectors auditing the peanut factory in Georgia, assessed the food level safety of the plant to be “superior.” Judges get kickbacks from a privatized juvenile detention center and get paid for every teenager they sentence and send to it. Privatized military stand ready to introduce all kinds of new conflicts of interest. Private Auditing companies work in a complete conflict of interest relationship with the companies they audit.
We have to advance beyond the slogans of big government versus little government. We need government representing public interests as a check and balance for unethical practices that can metastasize in the private economy. Rugina said that the market needed to be like the cockpit of an airliner with all the controls and gauges to keep it flying freely. Free enterprise is related to freedom. The private needed to be checked for fairness by public institutions and the common wealth dare not be drained by one segment of the private sector.
That article of his from the International Journal of Social Economics bears rereading. (See my Blog on his important essay.) But that is reformation of our economy for the long term. What to do in the short term, in this crisis?
Prime the pump. When we put in a pump to pump the water from our well, we had to pour some in at the top, until the suction increased enough to get the water flowing from the real source below the ground. The government is priming the pump to get the market working again. Why are people saying, that’s big government, earmarks, and irrational spending? Has our problem been market fundamentalism? We need to understand the proper limits of the market, that is, in what sectors it is appropriate and where it will not function. What good are tax cuts to the unemployed? What help were Bushes giant tax cuts in the last administration? They might have been a factor in the melt-down. Isn’t big government a necessity when the markets have collapsed? What other source of capital is there to prime the pump of the economy?
Look at it. There could well be a dead $63 trillion market of deregulated derivatives that have changed our Banks into zombies, but we could suspend those derivatives in a bad bank and slowly bring that bank around once again, when the markets recover and rationality has been introduced into the financial industry. But the priming of the pump means that millions of private investors should let their capital flow into the market once again to let that important source of value, the markets start working again.
What about letting Warren Buffet recruit 20 million investors to prop up the banks and AIG while Geithner and Bernanke prime the pumps? That is what their insurance program for the banks needs to stress. They are priming the pump. Insulate the toxic assets until they can be dismantled and revalued in a recovering market. When it recovers, what is too big to fail either has to be decentralized, broken down, or given global oversight and regulation.
GM should be taken over by the government and they should produce green cars, similar to the Volkswagen, even if I despise the originator of it. Insure that every car produced will be bought, with government vouchers, if necessary. Prime the pump and do so for the Asian cars as well. Chart out the market share in the global economy where these cars will be sold. Help pay for them until the companies and their markets revive.
But conservatives should not prevent the administration from priming the pump until the markets function again. Then an analysis is necessary to determine what went wrong. It is a failure of the relationship of the public and private sectors, of the markets and their government. Did we get the bubble because of cheap Chinese capital and their powerful productivity? Can we figure out a way to regulate global debt, savings, and production to allow the markets to function without these bubbles bursting and causing such havoc?
There should not be a blame game, except in that we went into debt way over our heads without the manufacturing and production supporting the increasing standard of living we desire. The global economic forces are very real and corporations outsourcing labor are not beholden to the needs of a country. Economics should not be another form of warfare but a form of mutual help and support. Somehow the market has to be guided and regulated to the extent that it not destroy the standard of living in a country but enhance it, if ever so slightly; or decrease it gradually to a realistic level. We have to understand that we all live in wooden houses and after we have put out the fire, we have to forbid the smoking in bed or Adam Smith’s invisible hand will come out and smack us right in the face.