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The Economy in a Mess - It Doesn’t Have to Be
By BrianHull | December 10, 2008
There are several issues that I have wanted to write about for a while now, but never took time to do, until now. There’s a lot of discussion about the economy: the financial crisis, home foreclosures, the auto industry bailout, growing unemployment, a shrinking economy, etc. To be honest with you, it seems like the world is falling apart.
What is generally pissing me off is that almost every response coming from the federal government involves giving enormous sums of taxpayer money to businesses and CEOs that were directly responsible for the mess that we’re in, without any sort of oversight or regulations to temper the speculative behavior of unscrupulous individuals. And we see the results, don’t we? There’s still a financial crisis, exemplified by the Republic Windows and Doors debacle. Home foreclosures are on the rise and more people owe more on their homes than they are worth. The country lost another 533,000 jobs in November. And there is no relief in sight.
I suppose all of this was bound to happen when you give lots of money to a bunch of greedy self-interested bastards who have no concern at all for people who actually have to work for a living. I remember, not too long ago, when the financial crisis started percolating up to the public’s collective consciousness. Editorials were plentiful claiming an end to American capitalism. The free market failed us, profoundly, and continues to fail us on a daily basis. What more people need to understand is that capitalism is a wonderful system if the sole purpose of economic transactions is to generate wealth as quickly as possible (which I suppose it is). All the proponents of free-market capitalism can bloviate incessantly about the glorious benefits of a capitalist system, however, a serious societal problem arises when the vast majority of the wealth is concentrated into the hands of the very few. If you’re rich, everything is great, but if you’re not, you’re screwed. Unregulated capitalism has some serious problems, and is not always socially desirous or beneficial in the long-run, as is all too obvious by the current economic situation that we are finding ourselves in.
There needs to be a government response to get the economy back on track, that seems to be undisputed. My view is quite different than the conventional wisdom we have been seeing in Washington. The solution, to me, is pretty obvious. To remedy the financial crisis, the U.S. Government should make low interest loans directly to businesses. It would have been much less expensive than giving $700 billion dollars to the largest banks in the country, essentially rewarding them for their horrible lending practices. And it would have been much more effective since loans would have actually been distributed to borrowers rather than banks using the money to buy up other banks or shore up their books.
To solve the home foreclosure crisis, the U.S. Government should buy homes at their current market value and renegotiate the mortgages directly with the home owners. The overvaluation can be eaten by the banks that got $700 billion of free taxpayer money. The major problem with foreclosures isn’t that home owners owe more on their mortgages than their homes are worth. Instead it’s because the previously low introductory adjustable mortgages rates are now starting to climb and the homeowners are no longer able to refinance (again). Alternatively, freezing interest rates would remedy a large part of the problem because absent a few extreme instances of new unemployment, medical expenses, or divorces, people were able to happily pay their mortgages at a lower interest rate. For instance, if someone bought a house for $250,000 and they were capable of paying their mortgage when the interest rate was at 6%, the U.S. Government can buy the house for the current mortgage value and lower the interest rate back down to 6%. I’m not sure why the government has decided that only those people who purchased a home between January 1 and July 31, 2005 deserve this accommodation.
To rectify growing unemployment, the U.S. Government should create a vast public spending program to put people back to work doing things that need to get done. For starters we can fix the bridges that are constantly falling down. Additionally, since the three largest U.S. auto manufacturers can’t figure out how to make cars that people want to buy, the U.S. Government should either tell them how or let them fail and retrain the workers for the jobs of the future: building wind turbines, tidal energy generators, solar cell panels, solar radiation collectors, etc. so we can move away from importing $700 billion of oil every year into the U.S. All the vague phrases like “requirements for restructuring and cost-cutting” that are being attached to any aid package for the auto industry is merely code for more layoffs anyway. Do we want to give the Big 3 billions of dollars to layoff more workers, or would that money be better spent elsewhere?
The government should stop looking for solutions in the private sector in today’s economy because it has failed us so miserably. Rather, it should focus on getting more actively involved in providing goods and services directly to those who desperately need them. The government should stop worrying about trying to save the largest employers on Wall Street or in Detroit and just save the employees instead. If a few top level executives and managers lose their jobs because of their own bad decisions, so be it. Point being, there are options other than the morally hazardous decisions which the government is currently making. There are options that would be beneficial for workers rather than business. There are options that would turn the economy around rather than have it sink further into a crisis.
Topics: Alternative Energy, Education |
December 10th, 2008 at 10:13 am
Well said, Brian.
December 10th, 2008 at 11:54 am
Whenever anyone says that they believe in the free market all I can think about is WC Fields famous quote - there’s a sucker born every minute. Freedom is an abstraction of will and spirit and has no place in the market. Markets are leveraged -those with the most power attempt th influence them by controlling the supply and conditions - i.e. war increases the demand for war products. If the government, as an agent for the people, does not excercise popular control of the economy, one that represents the greater social needs, it fails to leverage the market for the greater good. Capitalism, rather than being dead, will reappear in a new disguise until we recognize this simple truth - either we allow the wealth to accumulate in the hands of a few individuals or intervene through the instrument of government to insure an equatible relationship on behalf of the majority. It really is that simple. Once we get over the war of labels we can get to the real business of the modern orginizational model - be it public or private - dealing with bureaucracy.