So I caught the last ten minutes of the Diane Rehm show this morning while driving into the office. It was the standard end-of-the-week news roundup with a few pundits, one of whom was David Ignatius from The Washington Post.
On its ten-year anniversary, Diane was asking her guests whether there was any connection between the 9/11 attacks and the country’s current financial crisis. (I love the Diane Rehm show, but here is a simple answer to a stupid question: No.) David Ignatius took it upon himself to answer, and he said something like this (I am paraphrasing from memory):
I think what September 11th showed us is that our systems are not self-correcting. We had this sense that our political and economic systems could take care of themselves. That is what they are supposed to do; a disturbance comes along and they self-correct back into a stable state, back to equilibrium. It took us a long time to get past September 11th and now our financial system doesn’t seem to be doing what it is supposed to be doing, we’re not seeing that self-correction taking place.
Oh, fer gawd’s sake! Where to begin?
Nobody has ever proposed that any complex, dynamic system – be it an ecosystem, an economy, or a political system – automatically and necessarily self-corrects to its original state after a disturbance. What happens is that a new state of equilibrium eventually asserts itself. That new state may be identical to the original stable state, but there is never any guarantee of that.
This is what drives me batty about people who blithely talk about the “self-correcting” nature of the market, or politics, or the economy: a new equilibrium will be reached, sure, but it might not be an equilibrium we want. For example, overgrazing, or the destruction of an aquifer, or the over logging of a forest such that runoff eliminates all the arable topsoil might so destroy farmland that it can no longer support its original population and eventually turns into a sterile desert; that’s a state of equilibrium too – it’s just one that involves mass starvation and death for all the people who live there.
The bottom line is that when the underlying factors that give rise to any particular system are eliminated or fundamentally changed, the system may in fact continue to run for a while on its own sheer momentum. But when that system is disturbed you can bet that it will not automatically go back to its original state, but seek out some other equilibrium that can be supported by the new factors on which it depends.
And if that new equilibrium involves mass death, widespread poverty, or other calamitous events . . . well, the fact the system eventually stabilizes is pretty much beside the point, isn’t it? Seriously, who really takes comfort in the fact that a new and stable ecosystem will eventually arise after we’ve all wiped ourselves out in a nuclear war?
* * *
The financial regulations enacted in the wake of the Great Depression, the social engineering and safety net set up by the New Deal, and the GI Bill created after WWII all helped to build a new social equilibrium never before seen in the United States: one marked by a vibrant middle-class, a great equalization in income, and a placidly profitable financial industry. And this proved remarkably stable . . . for a while.
Eventually we forgot that our vibrant middle-class and placidly profitable financial industry were not inherent to the United States, but were instead something we had consciously created for ourselves by adopting prudent social policies. And because we forgot all that, we began methodically dismantling all the regulations and other underpinnings that had allowed this state of affairs to flourish in the first place, all in the name of “unleashing the power of the market.” But – still – for about 30 years the system remained more or less intact, at least on the surface. I think that is a testament to how strong that system used to be.
But now we’ve got banks “too big to fail” that have a strangle-hold on our economy and our national government like “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” We’ve got almost a complete elimination of the most important regulations that served to keep the big banks from overreaching and bringing down our economy. We’ve got a rogue political party nihilistically willing to wreak havoc on America itself if that is what it takes for it to seize political power again, and a media too concerned that they present themselves as “savvy political innocents” to call them on it.
And after all these fundamental, structural changes have been made in the way America works David Ignatius professes surprise that things aren’t just “snapping back” to the way they used to be?
Lord, Lord . . . save me from the slow and the feeble-minded.