I have nothing to say about the financial crisis, because I discover that as a heavy news reader who has scraped through classes on law, economics and complex systems, and even read some Galbraith on a bus once, I don’t have even first principles to judge what has just happened in the US financial system. The subject–the impenetrable interplay of financial “instruments”–is so inscrutable that any comprehensible narrative one tries to tease out of it by watching the shadows it casts on the wall seems to have more to do with what goes on in one’s own head than what goes on in the stock markets or boardrooms or policy lairs of the world. I just have no idea about where it came from, or what it means, or what should be done, or where it will go. All I’ve learned is that the people who presumably do have the expertise to deal with this, possibly don’t.
But everyone is telling one story or another about it all the same. And they usually boil down to public versus private, government versus market. Here’s a somehow rather heartening thought from commenter HH at Crooked Timber:
The left-right polarization over and private enterprise is overshadowed by the larger conflict between truth and lies. Both free market and planned economic systems can function with reasonable efficiency when operated with competence and integrity. Neither can function when overrun by thieves and liars.
America’s moon landing program and nuclear submarine projects were masterpieces of centrally planned, government sponsored endeavors. France’s nationally controlled nuclear power program achieved great success, while America’s privately managed nuclear power efforts stumbled. It is the animating vigor and functional integrity of a program that is the best predictor of success, not its ideological grounding.
To which I think I would add that we get a somewhat better chance at choosing thoughtful criteria for what ‘success’ means for public enterprises than for private.
Here’s an old-hand financial technician interviewed by Reason magazine people:
(Just incidentally, I’m tickled to note that the Reason blog linked to this little old website a few days back).
I don’t understand how he gets from some of his premises to some of his conclusions. But his central premise feels about right: nobody knows how to value these derivatives, which seem to have absorbed so much of the nations wealth and now may or may not even particularly exist as real entities in the real universe. The old bosses didn’t know how to value them, and the new bosses won’t either, once they’ve sunk so much more of the country’s treasure into getting a chance to try.
But we won’t admit to ourselves that we’re dealing with an uncertainty, will we? Instead we’ll talk ourselves into believing one thing or the other, and forge ahead on that basis.
A separate but related question: how does a country that can’t afford equitable education or health care keep finding hundreds of billions of dollars lying around when there’s a country to be invaded or a bank to be bought out? Where does all this money come from? And why wasn’t it there before?