Complacency and The Will To Radical Reform (February 12, 2009)
Despite the current gloom, the U.S. is firmly entrenched in a complacent faith that traditional methods like Keynsian borrowing/spending will "repair" the U.S. economy. For an explication of just how destructive such deep complacency can be, I turn to the excellent account of the causes of the Roman Empire's collapse by Michael Grant, The Fall of the Roman Empire .
Enmeshed in classical history, all he can do is lapse into vague sermonizing, telling the Romans, as many a moralist had told them throughout the centuries, that they must undergo an ethical regeneration and return to the simplicities and self-sacrifices of their ancestors.When does supreme confidence turn into supremely dangerous complacency? When you read fawning accounts of U.S. innovation saving the day. The mainstream media is chockful of predictably mealy-mouthed mea culpas: OK, we missed the subprime meltdown, the housing bubble, the derivatives insanity, the inevitable collapse of over-leveraged lenders and insurers, the corruption and lax oversight--but really, some of our reporters did cover these things--on page B-11...occasionally....
And when the MSM isn't pronouncing its innocence, it's running over-confident, hubris-choked paens to American innovation and entrepreneural drive, blah blah blah. In other words, we don't need to do anything about the current Depression except stand back and watch that good old American "can-do" attitude and spirit of innovation run right through this "temporary downturn."
Nice--but too bad they're not reporting the decline of the engine of innovation: small business. As described here numerous times, what few are willing to look at squarely is the crushing of small business by high junk fees and taxes, high rents and a general disdain for business by government at all levels.
If you look at BusinessWeek and other "standard-bearers" of the status quo, bookending their now-rabid attacks on zombie banks (where were you guys 2 years ago, huh?) and lax regulation are happy-happy stories about some new tech innovation or new start-up which is just about to bust out and repeat the meteoric rise of Apple or Google.
Maybe, but what if the situation is no longer favorable for start-ups? What if the regulatory and other cost barriers are now so high that the garage tinkerers are doomed to be stuck in the garage?
Meanwhile, back in the bankrupt state of California, the state's political "leaders" are proposing a mere $10 billion in new borrowing to bridge the deficit--along with $15 billion in new taxes and $10 billion in cuts. Hmm, how exactly is adding yet another $10 billion in borrowed money a solution to a deficit which grows larger by the day? Isn't that the very acme of irresponsibility and complacency?
The basic complacency is this: "Everything will bounce back in a quarter or two; all we need to do is patch things over until 2010, when everything will return to endless prosperity." But what if the $40 billion deficit facing the state widens even further in 2010? What's the "leaders'" plan then? Borrow $20 billion more?
Would someone on Wall Street please become an adult long enough to tell the state of California, "No, we're not rating your new bond A, or B or even C. They're rated junk, and nobody will buy them." That is expecting too much, of course; Wall Street will palm off the guaranteed-to-default California bonds as "safe" and collect the fat fees: business as usual.
There can be no will to radical reform as long as a deep, untouchable complacency is the status quo. The MSM consensus is that this "recession" will be like every other recession of the post-war era--two or three quarters of declining consumer spending and then it's back to rising assets, lending and spending.
Just like the Romans of the fast-crumbling Empire circa 450 A.D., our "leaders" are pontificating about illusory strengths and making pious appeals to past glories (we beat the last Great Depression, and by golly, we're not making those mistakes again! We're going to lick this thing right now, etc.)
Yet as we examine the "solutions" being offered--borrow and spend, borrow and spend, brawk!--we see the same old tired script being played out. New ideas? Basically zero, at least to date. Where is the recognition that any economy fundamentally dependent on cheap, abundant oil and ever-rising debt, tax revenues and consumer spending is mortally wounded?
The Barbarians of Depression are metaphorically already across the Rhine and Gaul and heading straight for Rome. Will our leaders continue wrapping themselves in the false confidence of complacency until our latter-day Rome is surrounded and the Empire totters? The will to radical reform is presently non-existent in the halls of power and influence, and that does not inspire confidence that our leaders recognize their own complacency is perhaps our greatest enemy.
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