Showing posts with label Financial Crisis. Show all posts
Showing posts with label Financial Crisis. Show all posts

Saturday, July 23, 2011

Hard Times in the Capitalist Kingdom


In a lazy summer moment of stasis between ending work at the New York State Attorney General’s office and starting toward my PhD in political science at Johns Hopkins University, it seems like a good time to put some thoughts about the current state of capitalism (the organizing principle/axiomatic of our society) down on paper. The hand-wringing panic and plummeting stock market of the summer of 2008 have passed us by, along with the government bailout of large financial institutions and the collective sigh of relief as markets stabilized and started gaining ground. However, a sinister and sickening malaise has set in across the developed world; all is not well in the kingdom.
            Notably in the United States, high unemployment continues to be the stick in the eye of the Obama administration, and of course the enormous number of Americans who still find themselves out of work. While many companies, including many of the bailed out banks, have returned to profitability, none of this wealth has trickled down to the average worker. Even G.M. and Chrysler, which were teetering on the edge of bankruptcy, have returned to profitability after slashing their workforces, cutting pensions and benefits, and installing new management. Companies are sitting on record piles of cash, using it to insulate them from potential risks, pad their stock prices, and pay large bonuses to their executives, many of whom had a hand in the corporate behavior that led our economy to the brink of collapse.
            What these companies are not doing is hiring new employees, investing in new ventures that could lead to sustainable growth, or moving out-sourced jobs back to America in order to take advantage of the surplus labor. The private sector, left to its own “free-market” devices, is proving that what is good for big business is resoundingly not good for society at large, at least the vast majority of it.
            The other major engine of the economy, indeed, its integral component, the State, is sitting in neutral. After enacting a rescue of investment banks and insurance companies (and their stock and bond holders), and a half-hearted stimulus plan, which consisted mainly of tax cuts, those in the U.S. government seems to have lost the will and the urgency to improve the economy. Over the past three years, the government has been long on rhetoric, excuses, political infighting, and half-measures, and short on effective policies that actually produce results. Keynesians like Paul Krugman have continued to argue that the proposed stimulus was always too small, and that the Obama administration must confront Republican opposition, in spite of the potential for filibuster or gridlock. This did not happen. Instead, Democrats, with Obama taking the lead as conciliator in chief, have capitulated to Republican blackmail on a host of issues, from the healthcare bill to Bush-era tax cuts for the wealthy to new financial regulation of derivatives to cutting the deficit and now raising the debt ceiling.

Monday, May 17, 2010

Solution to the Economic Crisis: Build New Ghost Towns!

This story from today's New York Times gave me the sick feeling in my stomach that everything that I've been writing and thinking about our nation's economy and culture is sadly correct. Here we are a year or so after our country's biggest financial crisis and near depression, just barely getting on track and with unemployment still in double-digits and we have developers building NEW housing developments on top of all the empty ones! They have literally stuck their heads so far deep in the sand that they've popped out the other side and damned if things don't look rosy. There are 9,517 new houses sitting empty in Las Vegas and two million vacant homes for sale in the US. But the rub is that the economy only works through limitless expansion and consumption. New products must always be created, no matter their utility, in order to fuel GDP growth. This necessity also inheres in the American psyche. As the article makes clear: "many Americans will always believe the latest model of something is their only option, an attitude builders are doing their utmost to reinforce." Capitalist ideology hard at work! Just like we've seen after crises past, Americans are now hard at work forgetting everything and busy setting the stage for a new crisis; inflating a brand new bubble. As Brent Anderson, a marketing executive for Meritage Homes puts it in the article,“Our customers wouldn’t care if there were 50 homes in an established neighborhood of 1980 or 1990 vintage, all foreclosed, empty and for sale at $10,000 less. They want new. And what are we going to do, let someone else build it?”Of course not Brent! But, maybe you can get ghosts to start paying up for their mortgages?

Check out the story here:

Building Is Booming in a City of Empty Houses