Iceland

The incomprehensible audacity of using bailout money for bonus payments to employees of failing companies only exceeds the incomprehensible audacity of bonus payments to employees of failing companies in the first place. The rationale for retaining valuable employees in this crisis environment is equally absurd. Where are they going to defect to? Lehman Brothers? AIG? Fannie Mae?

How long can the government hope to keep this parking lot bailout carnival going? In the 1930s, public works programs made a difference in the economy. World War II has sometimes been claimed as the real solution to the Great Depression, which may or may not be true, but either way, George Bush already made our war, which only distracted us from what should have been the real issues and contributed to the economic crisis instead of alleviating it, so war as an economic solution doesn’t look hopeful this time around, leaving us with the more benevolent domestic approach.

The argument that we still aren’t socialist is nuts. Banks that aren’t “troubled,” are of course whining that they are being discriminated against for their prudent management, which is true in principle, but as they know well enough, and the reason they aren’t whining louder, is that failure of the lunatic fringe would create an economic vacuum eventually threatening to suffocate even the most conservative financial operations. Perhaps the result would only be the equivalent of the 1930’s, in which a small portion of the population continued to possess great wealth while a much larger portion struggled desperately, but why the general population tolerated that condition at the time is sort of a mystery in itself except that the thirties may have been more hopeful, because there is a crucial difference. In the thirties, the government was not yet saddled with trillions of dollars of debt from decades of cold war competition and general bad management.

The savings and loan failures of Reagan era deregulation precipitated a financial crisis at the time, but it was headed off by another crucial difference, the advent of the information technology revolution, equivalent to or exceeding the economic effects of steam power, railroads, chemistry, electricity, and wireless communication. The IT industrial revolution produced a huge new global economic enterprise that didn’t begin to deflate until the dotcom collapse at the advent of the new millenium, while the economic momentum continued to sustain the Iraq war and residential construction until the saturated market at home and the lack of encouragement for opportunities in developing economic markets left the financial community without any realistic alternatives except reality, and Reagan’s other shoe finally dropped on us.

The U.S. has not used up its capital resources, either financial or psychological, and to a larger extent the entire world still has a vested interest in US economic viability, but we’re running out of options, and without some kind of general economic production on the scale of IT development, there will be no revival. Where’s that going to come from? Space exploration? Environmetnal restoration? Maybe, but where are you going to get that kind of consensus?

In the meantime, here’s what we need to do. The laws and services that make Accumulation of wealth possible depend on cooperation and participation of the entire society, not just on individual enterprise. We’re all in this together. The government should create a general fund. Any individual net worth of more than a billion dollars should be collected and contributed to the fund. To paraphrase Muhammed Ali, if you can’t live on a billion dollars, you can’t live on nothin’. We’ll allow a half a billion per individual for wiggle room. Income tax will be increased, not decreased. Everybody with jobs and/or money is going to contribute something. If this is not to your liking, then just go live somewhere with an economy and laws that suit you better. Go to Iceland.

In the long run, Iraq and the Middle East may achieve stability, although it’s hard to see how the alternative of not invading Iraq could have been much worse. As a matter of both capability and vision, George Bush has been a disaster. The government can intervene effectively as long as the global investment community on which we depend continues to consider the U.S. a good and necessary risk, but without the reassurance of either intense national commitment or revived economic activity, or both, how long can we keep that perception going? How long can you hold your breath?