Check-Up or Autopsy? Diagnosing the US Economic Body
By Hazel Henderson (*)
ST. AUGUSTINE, FLORIDA, (IPS) .- The mainstream media in 2008 ran myriad diagnoses of the sickness of the US economy. Central bankers, politicians, and their economic advisors sought to explain the economy’s swoon in medical terms. The economic patient was described as having suffered a heart attack, a seizure, a collapse, a loss of animal spirits or confidence. Our body economic was described as being in shock, needing liquidity injections, on life support, on the operating table, responding to the medicine and, hopefully, in the recovery room.
But there may be some more realistic medical appraisals than those spun off by the economic experts. Since it seems self-evident that our economy needs restructuring, let’s look at how deformed and misshapen it became over the past quarter century. We know that the US economic body suffers from the cancerous growth of its financial sector which metastasised to over 20 percent of its Gross Domestic Product (GDP). A normally efficient financial sector, likened to the body’s blood supply and circulatory system, need be no larger than 10 percent of GDP.
So, let’s flesh out the diagnosis in broader medical terms. The body economic suffers from:
An enlarged heart and circulatory system. Unlike the earlier medical remedies of blood-letting, today’s economic doctors seem intent on increasing the body’s blood supply, creating haematomas in the banking sector. Injecting liquidity has led to edemas with pools and clotting in various organs and sectors. Bypass surgery may be the answer to downsizing bloated, "too big to fail" Wall Street firms, banks, and "insurance" companies while re-directing the transfusions to homeowners, Main Street businesses, students, state budgets, extending unemployment benefits, food stamps, schools, healthcare, human services, and charitable foundations.
Immune system malfunctions where the regulatory functions of their watchdog cells, liver, kidneys and other vital organs were compromised, causing growth of strange, toxic organisms such as CDOs, SIVs, CDSs and a menagerie of unrecognised foreign invaders. Here immunity-boosting antibodies, whistleblowers, investigative journalists and bloggers are the remedies needed. Other prescriptions must include flushing out toxic waste "assets" from banks, hedge funds and insurance companies by simply writing them off and permitting reckless companies to fail and go bankrupt.
Skeletal and muscular atrophy as the productive sectors were dismantled and backbone manufacturing, infrastructure, plants, equipment and goods production went to cheaper labour in other, less-regulated countries. The economy’s spine suffered deterioration as levees, sewage treatment, water mains, bridges, dams, roads and railroads fell into disrepair. Remedies are obvious in bringing new blood transfusions into circulation to oxygenate and restore tissues, bones and sinews.
Obesity and the accumulation of fatty deposits in tissues due to over-investment in automobiles for transportation while starving parks and mass transit and hampering cycling and walking in cities and infrastructure. Remedies are at hand for stimulating urban revitalisation, retrofitting city infrastructure with pedestrian malls and mass transit, and reversing sprawl.
The overgrown, dysfunctional medical-industrial complex gobbles up 16 percent of GDP while the 50 billion dollar-a- year military-industrial complex is the cause of crippling muscle cramps. Healing these conditions requires shifting to preventive, universal, single-payer holistic healthcare and wellness programmes while shifting weapons budgets to diplomacy and better information and intelligence services.
Brain and nervous system atrophy due to mind-numbing mainstream media is another problem. Advertising induces impulse-buying, low self-esteem, and consumerist waste while obfuscating public understanding of the need to shift from fossil fuels to clean, green renewable energy, and efficient resource use. Remedies include expansion of public broadcasting, ethical standards for advertising, publicly-funded political campaigns, restoring the fairness doctrine while rebuilding crumbling schools, revising outdated curricula, and paying teachers adequately.
Constipation and accumulation of toxic wastes in bodily organs, colon, liver and kidneys is leading to an inability to flush toxic assets from balance sheets by the appropriate write-downs and bankruptcies. There is a build-up of pollution due to the lack of regulatory oversight, enforcement, and elimination of toxics. Prescriptions include restricting lobbying and political contributions, vigorous law enforcement, and re-regulation of higher environmental, public health, and safety standards.
The downsizing of the financial sector must include breaking up oversized banks, banning credit default swaps and other murky derivatives, reinstating the Glass-Steagall Act to separate banking from brokerage, investment banking, and insurance while banning naked short selling and bringing back the uptick rule and the small tax on all transactions.
Psychosomatic disorders including narcissism, feelings of entitlement, unwarranted fears, addiction to oil, over-use of patent medicines and an inability to reality-test or recognise new global conditions. Remedies include tough love from some of the other economies in the human family that lend us some USD 3 billion per day to sustain our over-consumption habit, including China, Japan, and the OPEC nations. Another key prescription is a small tax on daily currency trading of over USD 2 trillion, 90 percent of which is speculation. This tax would stabilise currency turbulence and provide billions to meet the UN Millennium Goals of providing health and education to all members of the human family and reducing poverty. Tax avoidance and money-laundering can be more closely monitored and prosecuted while transfers offshore to financial brothels can be cauterised and shut down.
Can the US body economic be healed? Yes! Rejuvenation and reforms are on the agenda of the new Obama administration, as well as plans to perform re-constructive surgery on the economy, towards a new base of solar, wind, and geothermal energy, and a more efficient infrastructure. As the rest of the world relies less on the US dollar, US consumers will kick many old addictions, and producers will grow more sustainable local economies. Bloated industries will downsize while inefficient firms will go bust. The old dreams of Wall Street "masters of the universe" and old boys’ military adventures and empire can quietly fade away.
(*) Hazel Henderson is author of Ethical Markets: Growing The Green Economy, president of the independent Ethical Markets Media and co-creator of the Calvert-Henderson Quality of Life Indicators ( www.calvert-henderson.com).