By: Patricia Wilkie
The debt ceiling debate continues in Washington. As the saga unfolds, bargaining, compromising (or lack there of) and arguing continues. The clock ticks, and political posturing continues with unprecedented displays of partisanship. On August 3rd, around 70 million people may not receive checks from the federal government, and the financial implications of this are incredible. The gravity of this situation is such that it tempts one to zoom out and take a look at the bigger picture. Why are we here? How can we forge a responsible path forward that would make sure we are never here again?
Our leaders have made suggestions of where to go from here. The Republicans are calling for austerity, demanding painful cuts in government social/welfare programs on a truly revolutionary scale. While, the Democrats are simply trying to compromise under an umbrella of neo-liberalism. We are all attempting to adjust and respond accordingly to intense economic changes in the last four years. Our politicians are essentially arguing over the symptoms we are experiencing and how best to alleviate the pain. This is no doubt an important part of recovery, but so is the examination of the disease. Without an uncompromising analysis of the myths that dominate our lives, we are collectively doomed to repeat cycles of suffering.
While Congress dances around these issues, let’s explore the reasons why we are here. A macroeconomist named Hyman Minsky who died over a decade ago, could be an important part of the puzzle. When he was alive, he received little recognition. However, in the last few years, he has emerged as a prophetic, big picture thinker about what we are experiencing. Nobel Prize winning economists such as Paul Krugman have talked of incorporating his insights. He’s gone from being a nearly forgotten figure to a key player in the debate over how to fix the financial system, and copies of his books are back in print and selling well.
Minsky predicted, decades ago, almost exactly the kind of meltdown that recently hammered the global economy. Unlike most economists of his time, he spent more time thinking about the destruction capitalism brings rather than the creation. He believed that not only was capitalism prone to collapse, it was precisely its periods of economic stability that would set the stage for monumental crisis. He believed in capitalism, but also believed it had almost a genetic weakness. If it happened once, it surely can happen again.
The good news? Minsky believed that it was possible to take the inherent, cyclical “boom and bust” that capitalism created, to economic stability. Like his theory that is just now gaining creditability, his solution to the problem was radical and not very palatable politically. Minsky argued for a “bubble-up” approach. He believed that by sending money to the poor and unskilled first, offering a job to anyone who wanted one at a set minimum wage, it could improve a stagnant economy. This set wage would be paid to workers who would supply childcare, clean streets, and provide services that would give taxpayers a visible return on their dollars. Such a program would not only help the poor and unskilled, he believed, but would put a floor beneath everyone else’s wages too; preventing salaries of more skilled workers from falling too precipitously and sending benefits up the socioeconomic ladder. A trickle up theory, if you will.
As a nation we are facing tough quandaries, and one of them may be whether or not our systems are working for the people, or only working for a select few. We are not just experiencing an economic crisis, but a crisis of legitimacy. Are our systems legitimate, or inherently exploitative and unsustainable? An economic crisis paired with a crisis of cognitive dissonance. This is but one aspect of the crisis of legitimacy that confronts almost all of the political and economic institutions that comprise the capitalist world system today. In her book Forces of Labor, Beverly Silver notes the “fundamental contradiction of historical capitalism.” That is, the tension between the system’s drive to attain maximum profitability and its need to maintain legitimacy in the eyes of those it oppresses and exploits.
Perhaps a post-meltdown mentality is precisely what we need. It could lead us to look beyond pure free-market capitalism towards a new social order that would allow us to live within a system that is responsible, just and humane. I’m no economist, and I don’t have the how’s, but I think I’m beginning to understand the why’s. It has become increasingly clear we can’t afford to continue to rely on false securities and market fundamentalism. We cannot continue to believe that we don’t need good policy with regulation and oversight if necessary. We cannot continue to legitimize the myth that there is a miraculous force, a benevolent deity: the hand of the market, and it will iron everything out. What the world needs now is more modern Minskys, people who are just as innovative and freewheeling as the subject of economics. We desperately need individuals with dissident stances promoting forward thinking when it comes to such a dogmatic and politically charged matter.
