Since the start of the recession, Americans have lost 4.4 million jobs and 18 percent of household wealth, or 11 trillion dollars. The lost wealth alone amounts to the combined annual output of Japan, Germany, and the UK. Yet apparently, some of our political elites, along with their friends in the media, believe the average American has not sacrificed enough.
Most famously, Chuck Todd, NBC’s political director, raised the issue during President Obama’s March 24 news conference. He asked the President, “Why, given this new era of responsibility that you’re asking for, why haven’t you asked for something specific that the public should be sacrificing to participate in this economic recovery?”
Although Todd’s question seems inane, he is by no means alone in pushing it. When Jonah Goldberg commented on the exchange between Todd and President Obama, he seemed to imply it is unfair to former President Bush not to criticize President Obama for his “failure” to call for further sacrifices:
Obama’s round-robin with Chuck Todd over the issue of sacrifice is actually pretty interesting. Maybe I missed something, but it sure sounded like Obama is simply unwilling to really call for sacrifice from the American people. George Bush was denounced for not calling for sacrifice after 9/11….
But the extraordinary notion that a people who have lost well over 4 million jobs are not sacrificing enough does not stop with Todd and Goldberg. Howard Fineman of Newsweek noted even before the March 24 news conference that the establishment — which he defines as the elites in Washington, in the mainstream media, and in corporate America — is dissatisfied with President Obama in part because of his “failure to call for genuine sacrifice on the part of all Americans, despite the rhetorical claim that everyone would have to ‘give up’ something”.
It seems strange to me our elites think middle class and poorer Americans should sacrifice more than they already have. Additional sacrifice seems pointless, even though it is perhaps inevitable: Unemployment is likely to rise through the remainder of the year, and the housing bubble has not yet completely deflated. So why are we hearing these calls for greater sacrifice?
Recently, two sources — Simon Johnson and Desmond Lachman — provided an unexpected answer to that question. Both men have worked with the International Monetary Fund (IMF) and have drawn on their intimate familiarity with the problems of emerging economies and markets to analyze the current economic crisis. On March 29th, Desmond Lachman wrote in The Washington Post:
Back in the spring of 1998, when Boris Yeltsin was still at Russia’s helm, I led a group of global investors to Moscow to find out firsthand where the Russian economy was headed. My long career with the International Monetary Fund and on Wall Street had taken me to “emerging markets” throughout Asia, Eastern Europe and Latin America, and I thought I’d seen it all. Yet I still recall the shock I felt at a meeting in Russia’s dingy Ministry of Finance, where I finally realized how a handful of young oligarchs were bringing Russia’s economy to ruin in the pursuit of their own selfish interests, despite the supposed brilliance of Anatoly Chubais, Russia’s economic czar at the time.
At the time, I could not imagine that anything remotely similar could happen in the United States. Indeed, I shared the American conceit that most emerging-market nations had poorly developed institutions and would do well to emulate Washington and Wall Street. These days, though, I’m hardly so confident. Many economists and analysts are worrying that the United States might go the way of Japan, which suffered a “lost decade” after its own real estate market fell apart in the early 1990s. But I’m more concerned that the United States is coming to resemble Argentina, Russia and other so-called emerging markets, both in what led us to the crisis, and in how we’re trying to fix it.
Over the past year, I’ve been getting Russia flashbacks as I witness the AIG debacle as well as the collapse of Bear Sterns and a host of other financial institutions. Much like the oligarchs did in Russia, a small group of traders and executives at onetime venerable institutions have brought the U.S. and global financial systems to their knees with their reckless risk-taking — with other people’s money — for their personal gain.
Simon Johnson, who was once the chief economist for the IMF, has arrived at almost identical conclusions. Writing in the May edition of The Atlantic, he says:
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.
But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.
If Lachman and Johnson are correct, then, the United States — and most of the world — has to some large degree been victimized in timeless fashion by an oligarchy.
It is now in the interest of those very rich oligarchs to shift the burden of paying for their mistakes from themselves to middle class and poorer Americans. And that seems to reveal the real reason we are now hearing calls for greater sacrifice from the establishment elites. In other words, we are in the early stages of being propagandized to accept the notion we must cut back or give up social programs that benefit the middle class and poorer taxpayers in order to bail out the very people who did more than anyone else to create the economic crisis.
It seems to me public opinion is quite manipulable by folks who can pump out the money to do it. So, I expect the oligarchs will win some victories if they continue long enough their attack on the American people. On the other hand, Johnson gives some useful advice on what to do about the situation in his Atlantic article. If you are interested in this issue, it will not be a waste of your time to read it.