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Tuesday, March 31, 2009

Economy The Quiet Coup

Posted by Eli Sanders on Tue, Mar 31, 2009 at 11:05 AM

Yesterday, Charles linked this great essay in The Atlantic about the economic crisis and some things that could be done to fix the mess. I read it last night on his recommendation and just wanted to link it again. And again. And again.

There is currently no shortage of writing about the economy, but clear-eyed pieces like this one (which analyzes the current situation in the U.S. from the perspective of a former chief economist for the International Monetary Fund) are rare and worth reading whenever they come along. It was a doubly-interesting read for me because I'm currently working on a short piece for this week's Stranger about an upcoming nation-wide bank protest on April 11—with a local protest planned here in Seattle—that is using the theme: Nationalize. Reorganize. Decentralize.

If you read the Atlantic piece, by Simon Johnson, you will find that his advice is essentially just that.

Nationalize:

The government must force the banks to acknowledge the scale of their problems. As the IMF understands (and as the U.S. government itself has insisted to multiple emerging-market countries in the past), the most direct way to do this is nationalization.

Reorganize:

Of course, some people will complain about the “efficiency costs” of a more fragmented banking system, and these costs are real. But so are the costs when a bank that is too big to fail—a financial weapon of mass self-destruction—explodes. Anything that is too big to fail is too big to exist.

Decentralize:

Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business. Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole, but with the requirement of being broken up within a short time. Banks that remain in private hands should also be subject to size limitations.

It's not the most catchy of rallying cries, this "Nationalize, Reorganize, Decentralize" business, but the fact that the current economic mess has been boiled down to a solutions-oriented rallying cry at all is another telling marker of this crazy financial moment. And it's a rallying cry that's getting some notice. Here's the planned nation-wide protests being discussed recently on PBS:

Comments (15) RSS

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None of this will happen unless there is an insurgent movement to either take over or replace the Democratic Party. It is too controlled by corporate interests to be an effective vehicle for economic populism right now. It will give us a few token reforms, but this kind of economic restructuring is beyond what its current leadership is willing to contemplate.

Posted by Trevor on March 31, 2009 at 11:24 AM

Can we talk about the IMF's track record doing this?

Posted by Greg on March 31, 2009 at 11:24 AM

Greg has a point.

In general, when the IMF wants you to do something, your best advice is to do the opposite.

For example, nationalizing banks might be a good idea (Sweden did it) but a better idea is to trust bust them into their constituent lines of business and force the firewalls and regulations back in place that the neocons removed.

Posted by Will in Seattle on March 31, 2009 at 11:36 AM

@ 2: the IMF has historically opposed nationalization. This writer isn't proposing neoliberal privatization.

Posted by Trevor on March 31, 2009 at 11:38 AM

@3 Will, that's sort of what Johnson is suggesting (the trust busting aspect). He's just saying that he thinks the way to do that is to temporarily nationalize, clean things up, and then re-privatize (breaking them up in the process).

Posted by Julie in Eugene on March 31, 2009 at 11:49 AM

A protest movement to "reform" capitalism? How fucking lame.

Posted by someone nationalize the stranger under the CDC on March 31, 2009 at 11:56 AM

@6 Your witty posts and witty bylines always add so much to the discussion. Please, keep on, keepin' on. Everything you post helps me remember why I hated middle school.

Posted by windupbird on March 31, 2009 at 12:17 PM

#7: you're still thinking about middle school? Get over it.

Posted by well, we're here protestin' now what? on March 31, 2009 at 12:31 PM

@1--With all due respect, no. We need to work on removing the power of moneyed lobbyists from the campaign loop, not just reform the Democrats.

If you ignore the Republicans (who would, I assume, simply reap all that money and influence the NeoDems would be rejecting) you have a recipe for failure.

We have an empire (yes, empire) here in the United States of Amnesia, a National Security State (thanks Truman!) controlled by corporate money and ruled by two wings of a single party. I choose the wing that proposes a much more humanistic approach (the Democrats), but I recognize the corrupting influence of lobbyist money can ruin any politician regardless of party.

The system, not a single party, needs reform.

Posted by Gore Vidalatry on March 31, 2009 at 12:37 PM

Wow. Where do you get those drugs, @9?

Posted by Mr. Obvious on March 31, 2009 at 12:53 PM

Hey, Hey! Ho, Ho! Unregulated selling of unsecured collateralized debt obligations has got to go!

Posted by NapoleonXIV on March 31, 2009 at 1:21 PM

@11 is awesome.

Posted by Julie in Eugene on March 31, 2009 at 1:29 PM

It doesn't seem like too many have read the article. The author makes clear that two things have to happen: Nationalize/Reorg/Decentralize, AND the oligarchic culture in finance MUST be broken. Please do read the article if you haven't.

Posted by JoeG on March 31, 2009 at 5:06 PM

@11- That's why moderate with a nuanced and realistic approach to fixing problems always have trouble motivating people.

Posted by dwight moody on March 31, 2009 at 6:14 PM

After having read Mr. Johnson's article I must say that his solution is very simple and eloquent. The "too big to fail" institutions political influence over the last decade has increased to reckless heights so much so that government regulation has become a joke. Its like the loonies are running the asylum but what should we do about it.

His solution proposes that the government should nationalize the banks and break them up but how? If the government is truly unduly influenced by the financial sector how is this to be achieved? What should we do?

Though a great article I would like to see more articles like this in the popular press urging solutions to this mess such as the proposed bank protests and the proposed united withdrawals from certain institutions resisting regulation.

It is all fine and dandy to propose a solution but how do we achieve it?

Posted by Just An Accountant on April 8, 2009 at 4:38 PM