Like millions - maybe billions - of people around the world, I've been watching the news with a mix growing apprehension, disgust, anger, sadness, and concern for the past few weeks, wondering - in today's parlance - "WTF?" with each new 'emergency' that crops up in this context.
But, after watching the news this morning and listening not only to reporting on the economic issues, but also watching the stuff on the elections and other issues both national and international, a lot of things were mixing around in my head, and suddenly, I had an idea (possibly not a good one) followed immediately by another idea. I toss them out here for the hell of it; hardly anyone reads this blog, so it's likely more for posterity than anything else, but still, I may as well note them...
First Idea: $700b Bailuot..? Who should be bailed out?
When I lived in Finland during the 1990's, I was running a small, struggling company when an economic crisis shook the economy, similar in relative terms in many ways to the one hitting the US now, and it precipitated a government bailout of the banking system. Although the amount (as I recall) was 'only' around $10-$15 billion USD, for a country of 5 million people, it's pretty close to what we're looking at here in scale. Simplifying the situation, what basically happened was that the government 'gave' this money to the banks, which the banks readily accepted, however they did little with the money to help the individuals and companies which were struggling, and there were massive amounts of bankruptcies and defaults on loans. Althought the economy did manage recover after a number of years, the lives and livelihoods of many individuals were ruined, and I never felt that the end really justified the means; I always believed that more could have been done to help the "little people" and more should have, and that it would have not only speeded the recovery, it would have made it stronger.
It is, however, important to note a few things, too. The situation, while similar, has also significant differences. The economy of Finland is structured quite differently than that of the US (this was true more so then than it is now in many ways), with a strong state presence and control in many large enterprises and insitutions, and a largely socialized/subsidized welfare system (along with the expected union influence and tax burdens on individuals and corporations).
Still, an idea that occurred to me then still occurs to me now: Why not bail out the banks through bailing out the "little people"?
The idea is this: instead of giving the cash directly to the banks (in whatever form), why not give some sort of long-term loans in the form of vouchers that can ONLY be used for paying off home mortgages or business loans to the individuals and companies in trouble? This could be done on a monthly basis for as long as actually needed by the individuals and companies until they become self-sufficient or solvent again (let them make this decision voluntarily, so they choose to 'stop' recieving this support before the full amount is drawn, however - if they wish - allow them to draw as long as they decide to, but only up to the total amount of the approved debt).
If the vouchers are given in the form of long-term, low-interest, unsecured loans, the government will eventually get most or all of the money back. Yes, many will still likely default, but that is also still possible with the large entities being considered for bailout now, but the risk, and benefit, is spread out with this scheme, and I would think that many people recieving this help WOULD be more conscientious in paying it back than profit-minded corporate boards and institutionalized (pun intended) shareholders would be. It seems to make sense to me, at least on the surface. I'd be interested to know why it WOULDN'T work - if you're an expert in economics AND able to view the situation objectively (e.g. without coming at it from the point of view of some political-economic framework that you support dogmatically, I mean). Any thoughts, for or against?
Second Idea: The "System" is clearly broken. Broken things need repair - or replacement...
My reasoning goes somewhat like this: "Instead of fearing this crisis and trying to "fix" the institutions and companies that are crumbling, try "embracing" it as an opportunity to fix the systems!"
We have known for a long time that our system has serious problems. Medical and social security insurance are at or near the top of the list, but there are other issues as well, such as corporate and institutional irresponsibility and greed allowing these entities to run roughshod over both our own citizens and also around the world. This crisis is a sign that these things have been allowed to go to far for too long, and the scope and scale of the problem is more or less telling us that something needs to be done - not superficially for the short-term, but fundamentally for the long term.
For years we've been told that among the obstacles to addressing these problems seriously is that there are too many interests involved, too much money at stake, and that any tinkering could result in unexpected problems that could upset the 'balance' of things. (I wonder what 'balance' this is, but I suspect that means the profitability for the companies in trouble now, and the influence and position of the politicians that support them, but I could be wrong....right?) But now the applecart's been upended, and we're up to our ears in apples...and finding many of them rotten already. Since many of the entities involved here are behind many of the systems (and the problems) that have long needed fixing and are now more or less "broke" (in both senses), why not use the situation to begin addressing and reforming things like the insurance and medical industries and social insurance system? It seems to me that this is a unique opportunity to actually do this, and a situation where politicians - if their heart really IS in the place where they want us to believe they are - could sieze upon to do some real good for a change.
I don't have all the answers in detail, and I know it's not a 'simple' thing when you get to implementing it, but one thing IS simple and clear to me: it needs to be done, and this could be a window of opportunity to do it that may not be open again soon.
Another thing that is clear to me is that if we just patch things up by throwing money at it without really addressing the fundamental problems that cause them, we're really only mortaging our future - again - and I would like to think that our government can learn from the mistakes we've made these past 10-20 years, and that is that re-financing and multiple mortgages don't really fix problems; they just push them off to the future, where they wait for us...just bigger, fatter, and that much more tougher to deal with.
I don't know if either of these ideas are really good ones - they seem to make some sense to me though. I do wonder, however, assuming that they ARE, in fact, workable, would any politician have the political courage and personal integrity to adopt one or both?
In my view, by far the biggest problem our country faces is not the complexity of the problems or even the expense fixing them will take; those things can be dealt with. The real issue is do we, as a people, have the will to fix them, and can we force our elected representatives to DO it? Are we willing to begin DEMANDING more of our politicians in terms of competence and integrity instead of accepting less from them...'because they're only human'? It is time, I think, that we accepted the responsibility for the situation and decided to take control of it ourselves, and do it through the only means we have available to us. That also means we have to be honest with ourselves, too.
Have we the courage for that?
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I should also make clear one point: I do believe free enterprise/capitalism IS an economic system that is workable, and - so far - by far the most effective one in the world. But like with any kind of 'freedom', in order to REALLY work well for the benefit of all involved, everyone who participates in it needs to do so responsibly (preferably voluntarily) with the understanding that how one behaves has an effect on the welfare AND behaviour of all others. This principle, it seems, has been forgotten (or at least winked at), in both our economic and political processes. It's time we decided to do things a bit better.
Two well-known sayings come to mind here:
1. "A people who sacrifice a little liberty for security deserves neither" (paraphrasing B. Franklin).
2. "A thing should be no more, and no less, complicated than it needs to be." (paraphrasing A. Einstein's take on Occam's Razor (my favorite tool!))
I think the meaning and continued relevance today is clear in both, and if you think about it a bit, you can easily see how they apply to our present situation. And - importantly - they are relevant and important no matter which political pole you're oriented to...and correctly understanding these principles would go a long way towards removing the polarization that largely serves only to paralyze us now.
At least, that's what I think. You're mileage, of course, may vary.
