The Dull Compulsion of the Economic
A series of posts by D&S collective member Larry Peterson
Obama’s Mixed Up Metaphor
I suppose it’s a luxury, of sorts, these days, to look at a presidential address as something more than an opportunity for a good laugh, but President Obama’s first attempt to articulate his vision of economic recovery to the suffering nation was, if more sincere and confident, all the more incoherent. And it wasn’t just me: markets clearly didn’t buy Obama’s line, falling on the morning after the speech. They recovered later, but much of this was on the back of a rising oil price (which boosted oil stocks), while losing the momentum that saw Tuesday’s rally bring the indices away from dangerous lows.
The main problem with the speech was crystallized in one particular statement of the president: “You see, the flow of credit is the lifeblood of our economy.” I suppose we’ve all become so inured, in the wake of the fall of Lehman Brothers, to economists and economic commentators using the metaphor of the circulatory system, so that we are conditioned to accept such references to the financial system, tacitly assuming money in the place of blood. But to use the metaphor in relation to credit is another thing altogether. And the fact that this statement made it past the president’s handlers, and attracted no comment, so far as I have seen, concerns me.
As anyone who read my post of last week knows, I’m hardly a stickler on the issue of the definition of money; and I’m certainly not going to push some rigid definition that neglects the central role of credit creation in any modern economy. But the economic crisis has featured not only a credit system that was a little oversized: as we all know now, credit creation, under the sleepy eyes of the ideologues and crooks who “regulated” the financial industry for decades, reached altogether ruinous heights in the run-up to the crisis. So, far from being like blood, the credit injected into the economy for much of the time leading up to the crisis resembled the tainted blood samples we’ve read about in China, only watered down by a factor involving several digits.
This is important because Obama appealed earlier in the speech to the capacities that would allow the nation to fend off the crisis: the work being done in the laboratories, the imaginations of entrepreneurs, and so on. And, in this vein, Obama said his entire agenda “begins with jobs.” Some of us would say that this is more like the true lifeblood of the nation’s economy. But Obama, after making his circulatory analogy, and even adding a few boilerplate denunciations of bankers, tries to steer us in the following rhetorical direction: we have to accept that rescuing the banking system, in much the same form as we have come to know it, is absolutely essential to reviving the economy. Why? Because only bank lending will create the means of reproducing, and even enhancing the American lifestyle: “That’s what this is about. It’s not about helping banks; it’s about helping people. Because when that credit is available again, that family can finally buy a new home. And then some company will hire workers to build it. And then those workers will have money to spend, and if they get a loan, too, maybe they’ll finally buy that car, or open their own business.” Failure to do this, on the other hand, will lead to years of stagnation, and more remedial government spending down the line. This doesn’t exactly sound like a jobs-led recovery to me: it sounds more like the type of trickle-down thinking that brought us the subprime mess in the first place. And the fact that Obama failed to mention our abysmal, if rapidly rising savings rate, reveals clearly the level of duplicity being at least tacitly employed in the speech, especially insofar as President Obama did mention the looming Medicare crisis.
This is all the more the case if one looks at some of the appeals to patriotism Obama made. No doubt, many of them could not but have been looked at by attentive foreign creditors as hints of a possible protectionism to come: “Well I do not accept a future where the jobs and industries of tomorrow take root beyond our borders and I know you don’t either. Its’ time for America to lead again.”
So it seems Obama is trying to force the peons into signing onto his program: one that has, as one of its main goals, no less, a re-uptake of highly leveraged players looking for big yields, who have been sitting on top of big, if declining cash piles on the sidelines as the crisis has progressed, into the financial system, with the huge loans they depend on being backed somehow by taxpayers and foreign bondholders. And these people have hardly shown themselves to be big job-creators. This is what the so-called P-PIF (Public-Private Investment Fund) seems to be about. So Obama must find something to connect, rhetorically, the former with the indispensable banking system, while downplaying the fact that the latter still, somehow–and they continue to borrow US bonds as fast as the Treasury can print them, even as their economies decline–hold an important veto power over the plan.
And then, Obama added insult to injury by saying “three-quarters of the fastest growing occupations require more than a high-school diploma” when he discussed his education proposals. As Doug Henwood noted in his fine book, After the New Economy in 2003, “Of the top 30 occupations [projected by the Bureau of Labor Statistics], about 40% of job growth will be among those in the lowest quarter of the income distribution. Another 28% will be in the top-paying quartile, with only 31% in the middle two. Less than a quarter of the top 30 jobs will require a bachelor’s degree or higher; 54% will require short on-the-job training.” The upshot? “It’s hard to see from this how “the problem is that many people don’t have the right skills,”” and that “[i]t is, however, easy to see the polarizing tendencies in today’s labor market…It produces a fair number of high-end jobs, a lot of low end jobs, but not much in the middle (New Press, pages 72-73).” Though his emphasis on education is laudable, the structure of the American economy remains less than favorable for most job seekers, educated or not, and will remain so, whether or not their taxes subsidize the “indispensable” recapitalization of the banks, and the re-integration of leveraged players into the financial system. This is all the more the case, of course, as the economy continues its unavoidable (given all that bad debt) decline.
And it is the rhetorical device of a circulatory system which is the focal point which is employed to illustrate a totally disingenuous connection between the debt-based financial system and working people (especially inasmuch as it airbrushes the connection of foreign creditors in propping up this arrangement to the latter, even as it attempts to appease them with appeals to their patriotism, while tacitly threatening the foreigners who pay a big part of the bill). And as long as working people accept this ruse, he’s right: the financial system will have to be revived in much the way it was, even if that serves no economic purpose for the workers. But if we can look beyond Obama’s flawed metaphors–as well as those of economic commentators and the financial press–maybe we can move in a better direction.