The bailout as epiphenomenon; or, how globalization kicked my puppy
So I was planning to write a long, witty song-and-dance about a theme to which I've occasionally alluded lately: the importance of globalization in this bailout crisis. But then I decided I'd spare the words and write it out as a few easy and very approximate steps.
1. American wages rise with unionization. Capital is captive and cannot go on strike, must actually innovate.
2. Bad theories (==total liberal economic consensus, to this day) and self-interested political behaviour ratchets down trade barriers (but not in an intelligent way---there's a case for lowering them selectively).
3. Capital flight to cheaper jurisdictions.
4. Wages fall. (Unions weakened, but they can't stop this anyway, because they can't hold capital captive.) Rust belt rusts.
5. Exporting markets still need buyers and US politicians need to paper over the fact that workers are getting poorer: EASY CREDIT!!!
6. Easy credit creates moral hazard---on the part of banksters!
7. Feedback loop creates enormous bubble.
9. For economy to recover, consumers need to start spending again.
10. MORE EASY CREDIT!!!
We are stuck on 10. The entire debate is framed around how to induce banksters to extend more easy credit. Punish and replace them, bribe them, hold them accountable, Zero Interest Rate regimes, it's really all the same in the big picture. Seriously, there's no fundamental difference between any of these solutions.
Because the problem is that the American consumer is maxed out, has no money, and won't because they are still too expensive.
Now there are two ways to solve this problem. Perpetuate their (American workers') impoverishment so that they are on the same level as Chinese workers (with Chinese workers being a bit better off than they are now). This is the solution that is being contemplated. This is why you will not see single payer health care ever seriously discussed. Because the intention is not only to have a cheaper health care system, but one that actually delivers much less.
If it were not the intention, then the other alternative is to pay American workers higher wages. That means trade barriers, because there's little but """services""" (ie, being a servant) that Americans can do that can't be done elsewhere for cheaper.
Trade barriers are not being discussed and will not be discussed any time soon. That's why I find it hard to get worked up over how foolish the netroots were or how progressive Obama feels on Thursdays. Because everything else is just tweaking, on the economic front, until globalization is dealt with. Everyone of note used to know this back in 1999. But the program started failing in 2000, and it broke completely in 2001 for obvious reasons. We are not going back to 1999 anytime soon, and when we do it will be Gotterdämmerung.
ADDED NOTE: I'd really like to emphasize one point. Whatever the administration does regarding the banksters, no matter how much moral hazard they eliminate, no matter who they punish, how they scrutinize it really makes no actual difference to the outcome. It does perhaps change the speed of the apocalypse, but it certain doesn't stop it. Of course, slowing it down is worth something, and something big: a few lives spared. That is, of course, why it remains worth doing.