Stimulus, Ass-Backwards

I just published this essay on Arthur:

I’ve been trying to figure out exactly why President Obama’s approach to the economic crisis upsets me so much, so regularly, and I think I figured it out.

His impulse—perhaps as someone with more faith in the power of centralized, top-down decision-making than I have—is to fix our economic problems by supporting existing institutions. In the president’s view, the best approach now is to pump some necessary short-term assets into flagging institutions to help them make it through the rough patches in the economic road, and then get them to pay it back to the government once times are better. That’s the approach he’s taken to the banks, the automotive industry, and even the insurance industry.

What the Obama Administration doesn’t seem to understand is that the institutions they are attempting to prop up are the very ones whose solvency depends on the continuing extraction of wealth and value from the real people and places making up America.

more...

Comments

[Kika]

I keep thinking that the Obama administration has chosen his current financial course for two reasons:

1) The protection of the current megalithic financial structures that have been allowed to become too big and too integrated into the US/World financial structure to do anything but implode and make our lives miserable for decades+ until we're able to sort it out.

I think this long overdue implosion would be VERY unpopular for a president in his first term. So much for reelection!

AND

2) At least in the US people seem to me to be lazy and terrified of anything that might take away their cushy, SUV delivered, drive through pampered, McMansion nested lives.

The US mindset right now seems to be becoming: "Change is bad, the 1960's are good!." (This is a mindset that I suspect may have got us into trouble through the NeoCon mindset, but that's a whole other bag of worms.)

A great example of this mindset is the interview with Elizabeth Warren on April 15th's Daily Show.

Her speech about returning to the 1930's levels of regulations hits all the right nostalgia spots and she did a GREAT job of glossing over those occasional recessions and such.

At least, that's in my own uneducated, humble opinion. If I've got it all wrong I apologize for wasting your time and comment space! :)

[mason]

This would have been a great time to make the transition to bottom up Douglas. There are two problems, however. All those derivatives, as you have noted before, are in everyone's 401k. The debt had to go somewhere and it came back to our pockets a long time ago. We are left with much less than scorched earth now. The bottom up businesses not only have to deal with difficult regulations, but are scorched too. Had we seeded more earlier, there might be more small businesses and more people invested in them and somewhere, for the capital that is left, to go.

I would be interested in an evaluation of what small businesses were established and survived in the past eight years. Even more interesting would be an analysis of which ones are not only bottom up, but sustainable and integral to the new business landscape you and i would like to see.

This would go far in helping us *make the transition.* Until we have those transitional businesses, we are in no position to quarterback every monday morning. That said, one would expect that the administration would see the sense in identifying the sustainable & healthy assets and giving them a piece of the pie and the tax breaks etc.

BTW, have you seen my email to you from SSB? They are looking for you.

-mason

[Sean]

These days you and my favorite economist, Umair Haque, sound quite a lot alike. Do you read him? If not, you might find what he has to say quite interesting:

http://blogs.harvardbusiness.org/haque/

[Eassae]

I think he understands quite clearly whats going on. Did you really think it was going to be different?