The Financial Crisis – Part One
As a futurist, I view the financial crisis that exploded last week from a high level, long term perspective. The macro forces that are reshaping our world must be considered when such a crisis occurs. In addition this particular crisis will force us to reevaluate long held economic ideals that may no longer have validity in their purest forms.
It is important to state that there are many traceable causes to this crisis. It is these particulars that politicians and those that need to blame something or someone will focus on as a way to justify a point of view or to seek retribution. There will be much argument about who is to blame and what needs to be done to protect the U.S. and global financial system from further meltdown. This is an important discussion to have, as long as there is perspective and an honest desire to right the ship rather than to just be right.
There have been financial crises in the past that can be looked at for guidance and for reassurance. Guidance in how to handle what now confronts us, and reassurance that we can and will weather this crisis. The Great Depression has been mentioned a lot this past week, as it was the specter of such a calamity that provoked the actions made by the Fed and the Treasury Department . This was due in part to the fact that Ben Bernanke is regarded as an authority on this historical economic event. Perhaps a more pertinent crisis to view is the banking crisis of Sweden in the early 1990s. In that crisis there were a number of similar trend lines relative to housing and the investment portfolios of banks to the current crisis. The Swedes suffered economic pain, but did exit the crisis to once again become a vibrant economy.
The first high level view of this financial meltdown is to state that economic and political ideal philosophies cannot exist in their ideal state when submitted to actual human endeavor. In the last century, the lofty, egalitarian ideals of communism and socialism attracted many people. Unfortunately, whenever they were manifested in a governmental form, they failed. The Soviet Union and Communist China collapsed because they did not value the dynamics of market economics and because the theory of equality gave way to self interest. It was thought that a central planning committee could manage the economy, which proved to be woefully wrong. It was stated that all for one and one for all and that all citizens were comrades and equal, yet inevitably the members of the communist parties had privileges in life that non members did not have, and the higher up the party hierarchy the more favors and luxuries one had. So, the ideal of equality and centralized planning failed in its humanly manifested governmental forms.
The other dominant economic ideal is that the Market in unregulated form is the truest form of capitalism and is to be trusted to create the greatest good. Adam Smith instead of Karl Marx. However, whenever a government pushes toward this ideal, at least in recent times, there is failure and crisis. It is clear to all observers that the current financial crisis is due to a combination of greed at all levels and a total lack of checks and balances and regulation of new financial instruments and practices. The free market direction under Reagan led to the S&L crisis and the RTC. The current financial deregulation under Clinton and Bush led to whatever this crisis will end up being called. The Bush administration was so caught up in the “ownership society” that it didn’t want or try to put in checks and balances that might get in the way of everyone owning a home no matter what.
There obviously is a need for the hand of government in capitalism. This is particularly the case in this new global economy where everything is so interconnected. The question is finding the minimum amount of involvement and intervention that still allows capitalism to thrive but also avoids the greed generated melt downs we have experienced. I am sure there are many libertarians that are conflicted due to the fact that the government intervention might have saved them from losing all of their life savings.
The other, larger view point on the crisis is relative to the fact that we are entering a new age. This age, the Shift Age is the global stage of human evolution. We have moved passed national boundaries and now the only remaining boundary is planetary. At the beginning of a new age there is great disruption as new structures and new dynamics replace old ones. This was seen in the 1970s when the era of “stagflation” and extended recession occurred as the Information Age supplanted the Industrial Age. The filters through which we view the world become outdated and we need to find ones so that we can see more clearly. We need to find new metrics that provide a greater degree of accuracy in evaluating what is actually going on in the global marketplace. This will be the subject of the next column on the current financial crisis.