The End of America?

America ain’t collapsing but…

From The Statesman

ND Batra

'For the want of a nail, the shoe was lost; for the want of a shoe the horse was lost; and for the want of a horse the rider was lost, being overtaken and slain by the enemy, all for the want of care about a horseshoe nail.'
--Benjamin Franklin

Today we are much more connected with each other than in the good old times of Benjamin Franklin, one of the founding fathers of the United States, a man of immense genius who invented the lightening rod and the bifocals and published Poor Richard’s Almanack, among his other great deeds of innovations and inventiveness. In fact the whole world, like a massive web, has become so interconnected that a slight tremor ripples through the entire global eco-system. The collapse of a bank in New York might dry up credit flow in South Korea, sink stocks in Russia, or trigger a financial stampede in India, prompting the governments to take extra-ordinary protective measures.

Last week, in the first attempt, when the US House of Representative defeated the $700 billion proposal to bailout the financial system, it was clearly perceived as a stunning rebuke to the Bush administration, Congress leadership and other smarty-pant dealmakers that they had not explained themselves to the American people, most of who now regard Wall Street as a nest of thugs worse than 9/11 terrorists. It’s a terrible failure in communication at a time when the American people need to understand how their daily lives are connected with what happens in Wall Street and how its collapse would spin the global economy out of control and plunge it into an irreversible downward spiral. Whether you like it or not, global economy is anchored in Wall Street. Grasping quickly the anger and frustration of the American people and what might happen to the already weakened economy that has been rapidly shedding jobs (159,000 in September alone) if the credit pipelines remained frozen, the Senate revised the bailout proposal to incorporate some of the most popular demands including tax breaks of more than $150 billion for families as well as businesses. The new proposal also included increased Federal protection for bank deposits from $100,000 to $250,000, among other popular though economically less sensible provisions. In other times this kind of wheeling-dealing would have been called pork-barrel politics but this is how American democracy works sometime. The House members, confused and flabbergasted, followed the Senate lead and passed the bailout package with grim faces and muffled protests, as if a heifer were being led to the slaughter house.

It is doubtful nonetheless that these measures would quench the rage of those who are convinced that Wall Street investment bankers and tycoons, those who count their working hours in millions of dollars and have fail-proof golden parachutes, those whose greed and incompetence plunged the country into an unprecedented financial crisis, apart from triggering a global chain reaction that left no country untouched. To calm the mood of vindictiveness that has gripped the entire nation, Senator Christopher Dodd (D-Con) said, “We can take a cut at Wall Street, but Wall Street won’t feel the brunt of the pain.” The pain is not only being felt by the common man on the Main Street who has become a victim of the opaque financial system over which he has no control. The pain is also being felt by cities, counties, school districts and even states, because due to their limited cash reserves and the non-availability of credit, some of them cannot meet their payroll obligations. Car dealers can’t sell their cars unless customers can get credit, thus, locking up millions of dollars on unsold car lots. Perhaps the most desperate plea to unfreeze credit pipelines came from Governor Arnold Schwarzenegger of California who asked the Federal government last week for an immediate loan of $7 billion to maintain the government operations. He was quoted in the New York Times for having written to the Treasury Department that “The federal rescue package is not a bailout of Wall Street tycoons — it is a lifeboat for millions of Americans whose life savings, businesses, retirement plans and jobs are at stake.” But how do you explain this to Joe Sixpack or a hockey mom whose son might not get a college loan?

A similar sentiment was expressed by Bill Novelti, president of American Association of Retired People (AARP), one of the biggest and most powerful lobbying groups in the United States, who said, “It is no secret that people are angry about bailing out Wall Street. But Wall Street is us. These are our stocks, our retirement funds and our futures.” Millions of retirees depend upon a healthy functioning Wall Street for a steady flow of income. When a chill wind blows through Wall Street, some retirees wonder what they might have to give up; a prescription medicine, perhaps?
Wall Street cannot die, though you see some Asian investors salivating over the prospects of pecking over the carcass. Fan Dizhao, an investment manager at Guotai Asset Management in Shanghai, was quoted by Ariana Eunjing Cha of the Washington Post saying, “The United States may be grappling with its worst economic crisis since the Great Depression, but these are the go-go days for China.” And because of the “mountains of cash,” which China has built up through export, he said, “It is inevitable that we will take the US’s place as the world leader.” If you believe that China’s “mountains of cash” and America’s “mountains of debts” are not interconnected, pay heed to Ben Franklin, “For the want of a nail…”

ND Batra is professor of communications at Norwich University)