Essay by Martha Quillen
Economy – January 2009 – Colorado Central Magazine
Although they are clearly human creations, something that we invented and that we presumably control, I tend toward the idea that no one really manages them, or even truly understands them. Human inventions or not, global monetary systems have grown and evolved beyond our control.
Of course, economic systems are not the only man-made things that have grown and mutated into unrecognizable, unmanageable, and barely understood forms. Given enough time, most complex systems — including governments, nations, cultures and civilizations — eventually mix, meld and morph into largely foreign creations. And right now we’re mixing , morphing, trading and exchanging goods, services, ideas and currency with unprecedented speed at unprecedented volumes.
Therefore it’s not too surprising that we’ve hit some snags, nor that the “experts” seldom agree on how to fix things. The only surprising thing is that so many economists, investment counselors, stock brokers, newsmen, senators, congressmen, and ordinary, everyday working-class Americans seem so positive about exactly what should be done.
America’s current financial crisis clearly ambushed our country’s best and brightest economic gurus. One month they were bragging as usual about how they’d conquered inflation, embraced globalization, and established the safest, soundest, and richest economy in history, and the next month America’s super-corporations were bankrupt and its banks were crashing.
But most of us who live out here in the real world — uncushioned by soaring CEO salaries, fat portfolios, and golden parachutes — realized long ago that things were not as fabulous as Alan Greenspan assumed.
Maybe you figured it out in the 1980s, when you lost your job at the mine or the family farm went belly up. Or in the 1990s when your health insurance rates spiraled from $300 a month for a family of four to $800 a month and rapidly rising for two empty nesters (and that was only if you had no pre-existing medical conditions). Or in the new millennium, when your neighbor’s home sold for six times more than he’d paid for it just a decade earlier.
Or perhaps — because you were still opening your own mail and email and answering your own phone — you noticed the epidemic of greed, fraud and corruption infecting our economy — the proliferation of phony charities, bogus investment schemes, counterfeit merchandise, copy-cat phone books, scam artists pumping you for information, and con men offering you riches for just a little cash upfront.
Yet the experts kept on bragging that the economy was great and they’d gotten inflation under control. And yes, all those goods produced in China, which you didn’t really need anyway, were cheap. But if you needed a doctor? A dentist? Shelter? Heat? You had better be making considerably more than you used to.
But you probably weren’t. Wages had stagnated. So Americans borrowed more and more money. And the powers that be and the press and the people grew more and more critical of our mounting debts, routinely deriding and ridiculing their fellow Americans for their waste, greed and profligacy.
And some people did charge things as if the bills would never come.
But despite all the uproar, I think most Americans are like me. Ed and I have never made enough money to drive a brand new car, or spring for a vacation condo, or update our home with hardwood floors and granite countertops. So we don’t have those things.
BUT SO WHAT. We eat well, and have a roof over our head, and can hike trails for free. Life is good — usually. But sometimes things get dicey. There was the time a four-thousand-dollar dental emergency coincided with the extinction of our furnace. And there was the $20,000 worth of damage at our rental home.
So we’ve borrowed money now and again, but never more than we could easily make payments on — thus far. We don’t kid ourselves, though. Like many (or perhaps most) Americans we remain a mere job loss or medical emergency away from financial catastrophe.
They say most Americans couldn’t make it for two months without a pay check. Ed and I try to keep more than that in savings, because free-lance writing and self-employment are variable. Although you can make good money writing, freelancers often spend their time laboring without recompense — working on proposals, queries, articles and even books on the mere chance that something might sell. Then there are the expenses: phone, Internet, word processor, travel, meetings, re-writes…. Sometimes unexpected expenses can make what looked to be a dream project a net loss.
But hey, “C’est la vie.” That’s just the way it is for most enterprises out here where the jets don’t land and the big wigs seldom convene. Expenses are higher, and potential customers are fewer. Wages are lower, but food and shelter costs are substantial.
Thus many (or maybe even most) people hereabouts live pretty frugally. But you sure wouldn’t think that saving and doing without were the norm if you listened to modern rhetoric. On the contrary, you would think that every person in America was out buying caviar and truffles whether they could afford to or not.
And of course there are insanely profligate people. They’re the ones you hear about on Oprah — people who have maxed out their credit cards and gone deeply into debt buying giant homes, luxury cars and designer clothes.
Gossip and television shows about the difficulties ordinary people are experiencing trying to pay for necessities (like rising utility bills, surgery, pharmaceuticals, and propane) rather than luxuries are rare — doubtlessly because they’re depressing. It’s more entertaining to hear about people who deserve to lose everything.
So we focus on those hapless folks addicted to shopping. But all of this emphasis on excessive buying, borrowing and spending is somewhat short-sighted now that recent events have proven that America’s high-flying economy was built on bad debt.
As it turns out, our country’s astounding riches weren’t due to free trade, or the new information economy, or globalization. Our recent boomtimes were fueled by excessive spending, and lending, and borrowing and investing by people (and businesses and banks and corporations) who really couldn’t afford it.
Now, our financial organizations are falling apart due to bad loans, bad mortgages, overextended borrowers, inflated stocks, and overpriced homes.
THE REAL TRUTH IN AMERICA? Our extraordinary wealth, those enormous gains in the GDP, the booming economy, the win-win philosophy, and exorbitant CEO salaries were all reliant on escalating debt.
Take a $25,000 house and lend someone $250,000 to buy it, and you’ve added plenty of value to the economy — on paper.
Keep wages low and people borrowing — and banks thrive (for awhile).
Put all of America’s pension payments in stocks — and corporations profit.
How much of our old, presumably splendid, superheated economy was based on interest payments and finance plans? And on encouraging ordinary folks who couldn’t afford losses to invest in risky pension plans?
How much of America’s recent construction boom was inspired by questionable mortgages? And how much furniture, and how many appliances, and how many man hours in fencing and landscaping and painting were sold to supply all of those homes bought with frivolous mortgages?
So whom do we blame? Some crazy woman who ran up $60,000 worth of credit card debt redecorating her house on a monthly basis? The family featured on Oprah that quit making their house payments in order to keep shopping for clothes every day? Or the young couples who were encouraged by so-called financial experts to believe that they could remortgage their precariously financed new homes before the higher payments came due?
Oh, sure, those are the people who brought down Lehman Brothers, Washington Mutual, Bear Stearns, AIG, Citigroup, and GM. It was those glassy eyed little guys bent on wild spending sprees who started all of this.
Or was it the lenders and mortgage brokers and investment counselors who encouraged ordinary people who didn’t have a clue about high finance to sink all of their savings into precarious investments?
Take your pick. But whichever you choose, it won’t change the fact that this house of cards has collapsed and tomorrow will bring a new reality.
Here’s hoping it’s a better one.
In recent decades, Americans had started evaluating too many things by their “net worth.” Money, money, money, money. We regarded it as the solution to everything.
You can’t have good schools unless you’re willing to pay for them, the activists told us. Yet excessive expense is probably what is wrong with American education. Kids do best with individually oriented, one-on-one instruction, yet we build schools on an industrial model, spending multi-millions on buildings, grounds, offices, and administrators while scrimping on instructors.
America’s obsession with money has eroded our democracy. People rage because our hospitals, schools, cities, and courts serve citizens who can’t “pay their fair share of taxes.” It’s gotten to where Americans proudly trumpet our nation’s superlative wealth while ludicrously denouncing the sick, poor, beleaguered, and immigrants for overburdening our grossly mismanaged systems
WITHOUT KINDNESS OR APOLOGY, American economists, industrialists, politicians, and newsmen routinely blame the poor and uninsured for driving up U.S. health care costs — after all, they are the ones who crowd our emergency wards but can’t pay the full cost. Instead of blaming our problems on the things we need to fix — expensive yet unreliable insurance coverage; inadequate health maintenance and prevention systems; excessive administrative expenses; stagnant wages; overtreatment of benign conditions; soaring education costs for medical professionals; a growing reliance on medical specialists and the coinciding loss of family physicians; waste; fraud; bureaucracy; and the increase of MRIs, cesarean sections, diabetes and other costly developments — we blame the patients.
In 2007, U.S. health care expenditures averaged $6,350 per capita. In comparison, Canada spent $3,430; France $3,819, and Japan $2,936, despite the fact that those countries provide universal health care and have systems comparable in quality to ours.
Which just goes to show that money isn’t everything.
Despite losses, crashes and downturns, America is still the world’s wealthiest nation. But it doesn’t have the best health care system, or schools, or literacy rate, or longest life expectancy. So what is the point of being wealthy, if it can’t reduce poverty? Or give us better health care and education? Or shelter our homeless? Or reduce our crime rates?
Now that banks and corporations are crashing all around us, it might be a good time to ask why our country isn’t doing better. But instead we keep pointing fingers. The Democrats blame the Republicans for the current recession and the Republicans blame the Democrats. And the citizens get bogged down in buzzwords which were developed to promote idealistic concepts — free trade, laissez faire, trickle-down….
Although such discussions are interesting, politically they get us nowhere. Solutions are seldom so simple. But more to the point, democracy can’t work if all 300 million U.S. residents are trying to micro-manage the economy, environment, courts, schools, armed forces, state department, and health care system.
WHEN YOU TAKE YOUR CAR to a mechanic, you don’t tell him how to fix it. When you pick a contractor, you don’t get to pick his construction crew. And when you consult a wedding planner you don’t tell her what you think her philosophy on marriage should be.
You tell them what you want.
We’ll have a new hired guy soon, and he is picking his crew. President-elect Obama seems smart and savvy and determined to pick the best and brightest, regardless of their “politics.”
At this point nobody is sure how bad the economy is, or how bad it will get, so Congress, the new administration, and state governments are bound to make mistakes. And what eventually happens may not be in our hands; we may be on the verge of profound international change, perhaps even the end of nation states as we know them.
But assuming that business continues pretty much as usual and America has some resources left next year, our job as citizens is not to determine how to fix the economy or get out of Iraq. Our job as citizens is to stay informed and figure out what we want, then to make it clear to our elected officials.
Obama talks about bringing Republicans and Democrats together, but it’s far more important for citizens to come together. Bankers, industrialists, and brokers know what they have in common and lobby for it. But you, me, the gay couple in California, the congregation in Georgia, and the hunter in Montana seem so riven by differences that we can’t seem to unite for something simple like affordable health care.
Perhaps if we focus our political discourse more on what we want, we can find some consensus. Do we want peace? Do we want universal health care? Do we want to see corrupt corporate leaders prosecuted? Or Bush staffers charged with war crimes? What is most important to us? To be the richest, most powerful nation in the world? Or the healthiest? Or the greenest?
Although we tend to assume that we control the money and markets and investments, all too often they control us. As we enter 2009, let us insist that even though America may have less money, we will make our money — and our elected officials — serve us better.
