On a run this past weekend in Mississippi, I ran over the levee and past some dilapidated farming homes that had been abandoned after this springs’ floods. I was struck by the nobility of the structures and the spirit of farming, and I caught myself thinking nostalgic thoughts about farm life and all that it represents.
But these were not quaint relics, they’re not there to remind anyone of our past – they are, or were, someone’s livelihood that had, again, let them down thanks to climate change, increasing farm productivity and a changing global economy. What was once a thriving rural community on the banks of the Mississippi River has seen agricultural incomes decline, the Air Force base go away, and a downtown that’s been hollowed out into a living ghost town. It may be that there’s a brighter future in sight, but it’s hard to see the path that lead from here to there.
This isn’t a new story. Nor did I think it was a particularly instructive story for our current economic woes…at least I didn’t until I read a new piece by Nobel Prize-winning Economist Joseph Stiglitz in this month’s Vanity Fair titled “The Book of Jobs.” In it Stiglitz argues that while everyone notices the banking system parallels between the current economic downturn and the Great Depression, Stiglitz’s own analysis, together with Bruce Greenwald, tells a different story.
While the financial sector, specifically poor monetary policy (a monetary tightening by the Fed just when there should have been a loosening) pushed the American economy from recession to full-blown depression in 1929, this analysis masks what was really going on: the fundamental shift from an agricultural to a manufacturing economy, one in which the rising productivity of the agricultural sector caused supplies to balloon, prices to plummet, and real incomes (and towns) to decline beyond repair. So too today, Stiglitz argues, during our Long Slump: while it looks like we are having a financial crisis, what we really are experiencing is a tectonic shift in our economy from manufacturing to services. Huge increases in productivity, coupled with globalization, are causing a decline in income and jobs in the US.
If Stiglitz is right, then the medicine we’ve applied (tons of free money to the banks, with no strings attached) is all wrong. No amount of monetary tinkering will get you out of this kind of crisis; instead, like in the wake of the Great Depression, one needs a huge fiscal stimulus (read: huge government spending) to get out of this sort of mess. Back then it was, ironically, World War II. What will it be this time around?
Whether this is precisely the right analysis isn’t what’s on my mind. Rather, what worries me is that the chance that we’re going to find and execute the right policy seems preposterously low. Whereas in the 1930s we simply didn’t know enough in terms of monetary policy to respond appropriately, today each and every issue is so politicized that it feels almost naïve to think that we’ll turn to apolitical experts who just plain know more (about the economy, the environment) than everyone else. No one is seen as smart enough or neutral enough to be fully above the fray (remember when the chair of the Fed was someone everyone liked?).
How do we get to a point where certain issues are important enough that they become nonpartisan? It happens when we weave them into the fabric of our identities rather than leave them at the periphery in the realm of ideological debate. It happens when we create new narratives that transcend ideologies or, worse, when issues become so dire that we have no choice but to act together. I hope we get our act together before then.