In Defense of the Cassandras: “Bogeyman Economics” & the Threat of Investor Confidence

In times of economic turmoil, it is often useful to examine the role the media plays in reporting on the everyday struggles of ordinary people as this usually provides much-needed insight into the moral culture of a nation. Sadly, a brief examination of the American media, and their treatment of the social decay borne out of the 2008 economic crisis shows that the most privileged sectors of our economy would much rather trivialize authentic suffering than reflect on its causes. This is no more apparent than in an article authored by Scott Winship of the Brookings Institute titled Bogeyman Economics. In this article Winship ridicules analysts, activists, and politicians—those who he calls “purveyors of economic gloom”—for their “overstatements” and “exaggerations” in describing the depth of the deprivation brought about by the economic crisis.
In the first section of this article Winship states that “Even as we slog through what are likely to be years of lower-than-normal growth and higher-than-normal unemployment, most Americans will be only marginally worse off than they were in past downturns.” He then proceeds to justify this statement by providing data pertaining to employment, health security, income, retirement security, and the “politics of horror” that are responsible for perceived misconceptions in these varying arenas.
In reference to employment Winship writes, “relatively few of today’s non-workers indicate that they actually want jobs.” He attempts to support this statement by referencing an anonymous 2007 study. This unverifiable statement reinforces a common argument among privileged sectors that the jobless are just undeserving parasites who would prefer nothing more than to be sustained by the revenues of the state. He goes on to state that “it is possible to be concerned for the plight of the catastrophically unemployed without having to advance the fictional notion that every American faces catastrophic unemployment risks.” While catastrophic unemployment risks are dismissed as “fictional” I doubt Winship could dismiss the far greater risks associated with unemployment itself; in particular, the brutal costs inflicted on this nation’s children.
Take for example the fact published by the Annie E. Casey Foundation that 5.3 million children were affected by foreclosures between 2007 and 2009 or 2011 Census Bureau figures that showed that 10% of children lived in “deep poverty or…below half of the poverty line.” The figure pertaining to home foreclosures is of special importance due to the insight it gives about the connection between American legal norms and the fraudulent behavior it encourages. This institutionalized theft is described in great detail in an interagency investigation headed by the Federal Reserve, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision in which they highlight “industry wide” foreclosure “processing weaknesses” that led to what they termed “violations of state foreclosure laws designed to protect consumers.” To be exact these banks violated the Bank Service Company Act (Sec. 7d) and the Federal Deposit Insurance Act (Sec. 8b). Another “marginal loss” worth mentioning is the fact that “the child poverty rate increased 18% since the year 2000.” Additionally, ” the number of U.S. households deemed ‘food insecure’ exceeded 50 million last year, amounting to a record 14.7 percent.”  These facts were given extensive analysis by EPI labor economist Heidi Shierholz on Democracy Now! .

It should be added that none of this gangsterism receives mention in Winship’s article. Instead he decides to criticize the “Cassandras” who expose these crimes, writing that they “may do more to harm the truly disadvantaged than to help them.” So it isn’t the banks or their millionaire clients in Congress that are responsible for the sluggish recovery, rather it’s those who, for some inexplicable reason, express indignation at the fact that “the five largest mortgage servicers by activity volume account for 60% of the industry’s total servicing volume” or the fact that in 2008 27% of US children lived in families where no parent had full-time year round employment. Apart from giving us a picture of America’s servile intellectual culture, these facts provide a graphic illustration of the corrupt criminal justice system and its grossly unequal application of the law. An unemployed worker robs a liquor store and he is thrown behind bars but when a gang of corporate executives robs an entire nation they are made to pay meaningless fines or accept toothless recommendations for “reform” or “restructuring.” Prison abolitionists across the country have spearheaded  campaigns with the objective of moving the criminal justice system from a paradigm based on punishment to one based on rehabilitation.  It should be noted that such a model already exists. The rehabilitation model of criminal justice has existed for decades it just so happens that this model is exclusively for world-class criminals and not small time, run-of-the-mill criminals. By this logic one can make the argument that the US prison system is overpopulated with the nation’s poor not because they are robbing people but because they aren’t robbing enough people.  

But of all the notions in this article arguably the most revealing is the idea that “scaring workers (as well as consumers, investors, and entrepreneurs) only delays recovery,” and that “digging out of our current hole will require businesses to create jobs, which will happen only when consumers start feeling comfortable enough to spend money again and when investors start feeling comfortable enough to take risks again.” Indeed, it takes a great deal of effort to sustain such a paradoxical mode of reasoning without sacrificing economic analysis to the category of theological dogma. Investors “feeling comfortable enough to take risks” was one of the chief causes of the economic collapse. This is even affirmed by the Federal Reserve who wrote that the banking industry was marked by “inadequate identification of financial, reputational, and legal risks, and [an] absence of internal communication about those risks among boards of directors and senior management.” If these banks can’t even manage risk internal to their institutions what possibly could give one the idea that they could manage systemic risk that extends to nearly every sector of the economy? Perhaps, questions like these are irrelevant. After all the effects of systemic risk would only affect the general population, many of whom would only be “marginally worse off.”

“Bogeyman Economics”, while vast in its scope, is by no means exhaustive in getting at the core of what’s behind the current economic crisis. It, in accordance with long-held doctrines of class domination, shifts the responsibility for grievous crimes from the actual participants to the most defenseless in our society. Winship ends his article by stating that ” If we are to effectively confront the fiscal and economic challenges of the 21st century, we will need to begin by seeing things as they really are.” On this point he was refreshingly correct. But he forgets to recognize that “seeing things as they really are” includes seeing people as they really are and this includes seeing those 10% of children in “deep poverty”, those millions of unhoused workers in unemployment lines, and even the indignant “Cassandras” objecting to such imbalances of power. A careful study of the available data shows that America is in the grip of a deeply rooted social problem, one that considers the denial of justice to working people and the poor as a negotiable price to secure “investor confidence.” When the people have lost confidence in investors and the investors only have confidence in capital then the only defense against the complete evisceration of democracy is the concerted force of the people who have confidence in each other. We see this around the world from the ongoing rebellions in the Gulf region, to the nascent economic formations in Latin America (CELAC for example), and the current mass mobilizations unfolding in oil-rich Nigeria. I’m sure there’s a circle of multinational investors somewhere objecting to these trends under the pretext that it’s undermining their “confidence.” Isn’t it fascinating how men with such power can have such low self-esteem?



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