Anger is a natural reaction. Heck - I'm angry about it. I have particular people in mind when I think of attitudes that "led" to this - and when I think of them, I get angry. Unfortunately, I think my own anger gets mixed into my blog post - but in a weird way - I'm angry at my own anger.
Intellectually, I think the search for causes and villains is in at least some sense unfounded. What happened in the markets is like an earthquake, or avalanche, or like a panic in a crowded room. It is a natural byproduct of the physical and social structure which developed so successfully over the last 40 years. As we drove our economy to more efficiency, less redundancy, and fired anyone who didn't produce immediate results, we created a very successful economy, but also one that was reaching criticality. Was it inevitable that it would happen when it did and in that particular way - no. But it was inevitable it would happen sometime and in some way and when it did - it was inevitable that we would all be angry.
There was a massive inflow of liquidity/financing made available over the last 30 years and it was this liquidity flow which ultimately stopped. But it was also this massive liquidity flow which led to the stock market and real estate rally over the same time. [And at least in part, these financial innovations were a response to the establishment of ERISA and pension plans in the 80's. Pension plans needed something new to invest in, and our capitalist system created it.] The same phenomenon that led to the economic success of which we are so proud as a nation was both the cause of and result of the processes and practices that blew up.
I am proposing that this crash - and all such crashes - are natural and inevitable byproducts of dynamic "living" systems. If you look hard enough, you may be able to find a triggering event of such a crash, but most likely, every major event was itself caused by a series of smaller and smaller inconspicuous triggering events. Pareto theorized that diverse systems of society and economies can result in a particular and relatively stable pattern of wealth distributions. I'm saying the same thing about how such systems behave over time.
I also believe that a good paradigm for thinking of such a living system is that of a dynamic network.
We see networks everywhere - in a wide range of natural and man made phenomenon. Networks occur naturally - simply as a response to things interacting with with their environment. We see these networks when look out the window at our ecosystem, when we have peaceful relationships with our neighbors, when we see our stocks rally and fall, when we turn on the power to our home. They can lead to amazingly successful growth (Google for example) and equally devastating failures. When things go our way - we think of them as natural and normal. When capitalism "worked" it was because of its inherent superiority and the work ethic of the American people. When it fails - lets find the culprit and string him up.
I also believe that networks display a signature - or fingerprint in their behavior. This signature is the power law distribution, such as the Pareto distribution.
So it is in this context I find the crisis so absolutely fascinating - so cool! But at the same time - Yes - those b____s on Wall Street are getting huge bonuses because We bailed them out. I just wish I weren't so angry about it.
[Note that the 80/20 rule is an example of a Pareto distribution - there can be any number of actual parameters - and the Pareto Distribution is just an example of a power law distribution - so when I say networks exhibit power law distributions - I don't mean they all have 80/20 Pareto distributions. Its just that the 80/20 rule is known and hopefully illustrates the point]
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I will grant that crashes are natural and inevitable byproduct of dynamic systems. But so is the backlash. And a backlash denied causes Anger, and that anger has to have somewhere to go or it will fester in the populace for years and perhaps even generations.
ReplyDeleteIt should be natural and normal for leaders to expect to be punished when something goes wrong on their watch. Leaders are rewarded when things go right and they are punished when things go wrong -- and they are not entirely responsible for either situation. That is part of the job description for a leader and the responsibility they accept when they take the job.
But, I wonder, how many times would a specific banker have to preside over their bank going under and being bailed out by the taxpayers before they could be fired? One time is apparently not the answer. Two times? Three? Ten times? Or do bankers have jobs and bonuses for life? Are they NEVER the villain? Apparently Wall Street bankers are a protected class of worker. Very interesting -- and disturbing.
[ As an aside, I was in North Carolina over Christmas and heard two different groups of people in restaurants saying that the bankers responsible "should be taken out and shot." I quote because they seemed to be serious about this ultimate penalty (maybe it is a southern thing). They went on to say that that type of consequence is the only way to keep them and the next group of bankers from keeping their eye on their annual bonuses rather than the on the long-term benefit of the business. ]
It seems to me we should not be concerned for the welfare and jobs of the individual bankers who presided over this mess. I certainly don’t advocate shooting the bankers, or stringing them up, but I do think they should have been fired and removed from their positions of power – preferably with security guards escorting them out of the building and the footage shown on the nightly news and YouTube. Symbolism counts. A few hundred firings would have gone a long way to mitigating the Anger people feel. The healing could begin. As it is now, the Anger festers and mutates in ways that we have not seen the results of yet.