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COLUMNISTS
TODAY'S STORIES
01.10.2008
Alan Brinkley on How America Will Change

In an effort to start making sense of what is an indisputably confusing situation, we asked some of the most thoughtful people we know the question: How will America change as a result of the economic downturn? Here's Alan Brinkley, the provost and a professor of history at Columbia University, as well as a National Book Award-winning author.

Now that even the longshot bailout has self-destructed, it's hard to predict anything about the near-term future of the economy, and I will not attempt to do so. But at some point, after who knows how much damage, we will reach a point of stability, look over the wreckage, and decide collectively how to proceed.

It is hard for me to imagine that the view from that grim point would support a continuation of the anti-government, anti-regulation regime that has benefited so many wealthy and powerful people, while stagnating or impoverishing so many others--and leading us into the catastrophe that appears to be unfolding now.

I am a historian of, among other things, the New Deal, and in my lifetime I have seen nothing that resembles the 1930s more than the present moment. We have protections today that we did not have in 1929: federal insurance of bank deposits, which has prevented runs on consumer banks; a much more complex and international economy that will provide areas of resilience, even as many key areas of the economy decline; and the low likelihood of the Federal Reserve Bank's responding to this crisis as counter-productively as the Fed did in the early 1930s. But these seem frail defenses against the financial meltdown that could soon occur.

What is also striking is how much of the New Deal regime has been dismantled in the last 25 years, and how much of that dismantling has occurred in the last eight years. It seems clear to me that the next president, whoever it is, will have almost no choice but to rebuild some of the regulatory powers that have been scuttled along the way, and perhaps also to build some additional supports for ordinary citizens whose livelihoods may be gravely damaged by this crisis. The New Deal probably is not a model for recovery. Too much has changed to use it as a template. But the spirit of the New Deal--the rejection of ideology, the commitment to "persistent experimentation," and the belief that the government has a responsibility to help individuals in times of crisis--does have some relevance to our time.  

Is this the end of the "end of big government?" Will the right fade into obscurity to be replaced by the long-awaited revival of liberalism or progressivism? I doubt that we will see such a fundamental shift in the polity. But I think it is realistic to hope that the highly ideological politics that have driven our public life now for several decades will give way to a somewhat more pragmatic and realistic approach to our problems.

For now, though, we face the daunting prospect of trying to find a solution to this crisis in what could be the worst imaginable political circumstances: a repudiated president unable to influence his own party; a Secretary of the Treasury and a Fed Chief with relatively little experience or stature; a Congress with weak leadership of its own facing re-election while being asked to pass an unpopular bill; two presidential candidates jockeying for position without having any authority. No wonder the markets are in chaos.

--Alan Brinkley

Posted: Wednesday, October 01, 2008 6:22 PM with 27 comment(s)

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teplukhin2you said:

Neither party is against "big government." Neither Reagan nor Bush significantly scaled back the role of government in American life.

What New Deal historian Brinkley fails to mention is the 800-lb gorilla in the room: the inversion of the American demographic pyramid. In 1933 we were a young country and had many workers for each retiree; soon we will have as many retirees as young workers.

The implications of addressing this are

1) Americans will be forced, one way or another, to consume less and save more

2) because of #1, the American economy will no longer be so heavily weighted toward consumer companies focused on the domestic market

3) because of #2, investment capital in America will shift toward companies producing for foreign markets and companies serving either the elderly or basic infrastructural needs

4) much of the capital required by #3 will come from Asian and Arab investment funds

The social implications of hte above are that Americans will have less stuff, less access to credit, but much more stability in their lives: less house-flipping and moving around. As Americans put down roots and focus more on their long-term prospects, they will pay greater attention to local and state politics. In the states bordering Mexico, this will mean that our policy of importing half a million semi-literate, unskilled Mexicans each year will come under very great public scrutiny, and will likely come to an end.

This is progress.

Good things will come of this crashing end to the Great American Debt Culture.

October 1, 2008 7:13 PM

ChanRobt said:

Tep, superbly interesting analysis.  I see much truth in your predictions.

October 1, 2008 9:55 PM

ChanRobt said:

Tep, superbly interesting analysis.  I see much truth in your predictions.

October 1, 2008 9:55 PM

sullydog said:

I tried addressing this, much less eloquently, on my own blog. I think Alan is on the right track, but I believe the changes will be much more sweeping. Good or bad, I dunno. But huge, because the forces involved are so huge, and the stakes so are so high.

I do believe that the best possible outcome is a scenario in which government doesn't bully business and business doesn't corrupt government. Instead, government needs to put incentives in place to direct and empower economic forces to do what's best for the country, the international community, the species and the planet.

The four biggest priorities on this agenda, I believe, are closely linked. The first is the reindustrialization of America. Gone, hopefully, is this completely shitfucked idea, which I NEVER bought into, that a nation could retain its status as a great and stable eonomic power without, you know, MAKING STUFF. Lots of stuff. What we have seen since Reagan started the deregulatory snowball, an avalanche which threatens to smother us all, is an ever-growing expansion of this delusion that we could just make money by massaging other people's money--iow, by speculating. This is part of the 1930s parallel of which Alan speaks. It drives wealth inequality, inhibits innovation, promotes the wholesale exporting of entire industries, and perverts the incentives of the entire economy.

The second is a crash program to reinvent our energy infrastructure. This will go hand in hand with reindustrialization, create millions of new jobs, spur the creation of new technologies for export, and make a lot of people fabulously wealthy. But they'll get wealthy helping America and the planet, instead of cornholing Middle America.

The third is the rennovation of our decrepit infrastructure. Once more, this promotes reindustrializaiton, creates jobs, goes hand-in-hand with the establishment of a new energy infrastructure, and makes a lot of people fabulously rich. And, oh, by the way, it's an opportunity to harden critical domestic targets against acts of terrorism, making the country more secure. Again, creating wealth while making America stronger instead of weaker.

Finally, there's health care. You just can't have the best workforce on the planet unless you meet certain core criteria. They've got to be educated.  They've got to be insulated from unfair trade agreements that sacrifice their jobs to underpaid sweatshoppers toiling in environmentally fucked factories in Shanghai. They've got to secure in their retirement. They've got to be EMPLOYED, for goodness sake, in stable and robust new American industries, not baggins super nachos at Taco Bell. And they've got to have health coverage. This is a situation that's similar to the infrastructure issue--few Americans realize how bad our infrastructure has become. Fewer still--even those who are uninsured--can fully appreciate the complete disarray and inequity of our health care "system." Government can and should take on the heavy lifting for providing health coverage, and free industry of the burden a responsibility it is not designed to discharge.

None of this ever happened, nor could it have happened, under the conservative market regime that has prevailed over the last three decades. Because the only way to make these things happen is to have a system in which the government--the PEOPLE'S government--sets a national policy agenda for industrialization, infrastructure maintenance, healthcare, energy, education, etc--and then uses market incentives, tax policy and regulation to steer our corporate engines in the right direction. Conservatives reading this are busting a frippin' aneurysm. To them, these words are unholy, unclean. But does anyone really doubt, now, that our nation's economy has been rudderless, and that the twin engines of corporate America and the market have been without any sort of meaningful purpose other than just making as much money as possible this quarter? America's economic engines are huge, but they've been revving into the red zone without any engagement with the drive train, and now we've thrown a rod. Nasty metaphor, but you know what I mean. It's time to start steering again. It's time to remember that we have a brake and a clutch and safety belts and child safety seats and some headlights to look at the road ahead.

Is this scenario that I paint what will happen? I don't know. Things are so volatile, anything could happen. We could be on the verge of growing up out of a long and costly adolescence, or we could be on the verge of something far worse. But a man can hope.  

October 1, 2008 9:59 PM

sullydog said:

Tep, I see you're doing some speculating of your own. Less optimistic than mine, but intriguing. Great post.

October 1, 2008 10:16 PM

sullydog said:

In other news, I see that the Senate just passed their version of the bailout.

October 1, 2008 10:19 PM

deanpear said:

If you have obscenely easy money policies for 15 years you will get people searching for yield and they will buy any securitized medical waste they find.  Enough with the hyperbole about oversight and regulation, this thing is gonna happen no matter.  Short selling bans are worthless, foreclosure forbearance the same.  Easy money spawned this massive credit expansion and sent investors searching for ever riskier assets because money was loose and they could afford to take risk with borrowed funds.

Recessions can and will happen, stop managing the economy with more money.  The credit contraction will occur no matter what is done.  Assets need to be sold and balance sheets are gonna shrink.  We can turn this country into Hedge fund USA and keep the leverage in, but we'll just protract the collapse and probably exacerbate it.  If you try and inflate this economy again the dollar will burrow a whole through the center of the earth.  Encourage some healthy destruction, and quit subsiding the weakest banks with bailouts while forcing shot gun marriages on the healthiest institutions.  Protect the living and bury the dead or were gonna have some mendicant zombie banks roaming the economy that will bleed the treasury to death.

Preventing recessions for the last 20 years with ever lower interest rates is what allowed this mammoth credit expansion to occur and there's probably nothing we can do to stop it from contracting.

October 1, 2008 10:40 PM

lsernoff said:

Loved hearing Bill Clinton's sensible defense of the repeal of the Glass-Steagel (sp?)Act.  That statute worked when it was passed.  It's repeal drew nearly unanimous congressional support in 1999 because, sixty-five years later, it was severely hampering the ability of commercial banks to compete, not merely with investment banks--may they rest in whatever peace is due them--but also with private equity funds, hedge funds, etc., entities that Senator Glass could not have imagined.  It would be lovely to think that congress's imagination on what regulatory regime should apply to financial innovation could yield constant, perfect and instantaneous  course corrections.  It don't work that way.  Unhappily, we encounter periodic epic crises.  Let us pray 1) that congress can pass legislation that will ameliorate the current crisis, and 2) the current "cure(s)" hang in for another six decades.  We should be so lucky.

Dr. Brinkley is one of a number of historians who have illuminated our understanding of the Great Depression.  Dr. Bernanke is one of the leading economists whose career was built on research about the Depression.  Happy to have both of them, but I note that Dr. Bernanke shoulders responsibility in the current morass; Dr Brinkley is a kibbitzer.

October 1, 2008 11:14 PM

teplukhin2you said:

Sully  - reindustrialization and renewed emphasis on investment in infrastructure and in upgrading our people's skills: all for it.

But don't forget immigration reform. Essential to making the whole thing work (numbers, budgets, political support).

October 2, 2008 12:28 AM

teplukhin2you said:

Would that Americans started measuring their worth by the strength and beauty of their communities and not by the size of their houses or the quantity of Chinese-made expensive toys therein.

October 2, 2008 12:38 AM

teplukhin2you said:

One more hope for change: rather than this emerging and largely pointless rehash of the old regulation vs dergulation, libertarian vs interventionist debate, could we please leave aside these tropes from the last century and start focusing on the challenges facing us in this century. Namely entitlements, health care, entitlements, saving for entitlements, Mexico's meltdown, entitlements...

October 2, 2008 12:41 AM

wscothan said:

Having reviewed the comments above--and I found them informative--I hope that the present crisis leads to

teplukhin2you getting his own blog space, here or elsewhere.  Perhaps then tep wouldn't feel compelled to dominate the comments section of every TNR blog I follow.  Then again, perhaps not.  Tep is, I suspect,

remarkable in many ways.  But his compulsion to demonstrate them all, 24/7, week in and week out, marks

him a dreadful bore.

October 2, 2008 3:09 AM

teplukhin2you said:

Thanks for sharing, Scott. Appreciate the heads-up on the rattlesnakes at Anza-Borrego.

October 2, 2008 5:45 AM

sullydog said:

wscothan: Tep is garrulous, effusive, eloquent, and intelligent. He is always readable and always civil, and he has been one of the core members of this community for quite some time. He is often penetrating, insightful, and, well, correct. He is also, not infrequently, hyperbolic, wrongheaded, stubborn, perseverating and infuriating.

He is most certainly NOT a "dreadful bore."

I dunno who you are, but if you feel he's dominating the blogs, we'd thank you to try posting something substantive of your own instead of engaging in unfocused ad hominem poking at somebody else.

October 2, 2008 8:50 AM

satyendra said:

Teplukhin, what sort of immigration reform do you envision? It's an open secret that illegal immigrants take jobs no citizens do.  When we stop importing Mexicans, Guatemalans, etc., who will do the landscaping? Who will bake your bread, prep your restaurant meal and wash your dishes afterwards? Who will clean your office building and make the bed in your hotel room? I read recently that 25% of office building cleaners are illegal immigrants? Are you thinking these jobs will become more attractive as unemployment rises?

The master's house doesn't function so well when all the servants leave.  Or are you saying that the master will now have to tighten his belt anyway and do things on his own (cook his own meals, etc.) now that the economy is contracting?

October 2, 2008 8:53 AM

reganad said:

Tepluhkin, I think that was a great analysis. I have been trying figure out what is going to happen, because it is clearly going to be very different than it is now. I have never considered, or seen considered anywhere, the effect of the current demographic reality has or will have on our new economic reality.

I can understand that there might not be enough jobs for illegal immigrants, and that might be a problem that we need to take care of, but, on the other hand, aren't they mostly young?  

As for who will clean the hotel rooms, well, how about all the people we so gleefully jail for drug offenses, then support in extremely expensive prisons?  I wonder if this kind of moralistic posturing and togher-on-crime-than-thou policy isn't a luxury we will need to rethink, also.

October 2, 2008 10:59 AM

teplukhin2you said:

satyendra - regan - not true at all that "illegal immigrants take jobs no citizens do". Raise wages, crack down on sweatshops and other workplace abuses, halt illegal immigration, and you'll see those jobs filled OVERNIGHT, by millions of young and not-so-young native born Americans who lack access to higher-paying jobs for reasons of education or simply lifecycle status (students, in-between jobs etc).

October 2, 2008 12:32 PM

teplukhin2you said:

One more implication of less US consumer spend: the Chinese are f*cked, or will be if they can't find a way to stimulate domestic demand for all the crap they now sell to overleveraged American households.

Watch commodity prices crash in the next few years.

October 2, 2008 1:02 PM

satyendra said:

Teplukhin, yes, illegal immigrants do by and large take jobs most Americans won't touch, sometimes but not always due to sweatshop conditions.  A couple of anecdotes - the Journal had an article today about an illegal immigrant who's going back to Guatemala because he can no longer find those day labor jobs due to decreased building demand.  He had found steady work as someone's landscaper, and was the only one who would faithfully show up.  I could be wrong but I don't think the others failed to show up because the employer was mistreating them.

In Chicago there's a bakery called Red Hen that supplies about 1/2 of local restaurant bread, and has retail operations (at least when I read this story several years ago).  The owner wanted to go against type and hire a white guy, but ended up going through a couple of junkies and criminals before finally settling on, yes, reliable Hispanics.

On the other hand, Eric Schlosser's book Fast Food Nation describes how ever deteriorating work conditions in meat packing plants changed the worker demographic from native born to illegal immigrants.

Regan, you have a good point about what some people are doing in jails.  I don't see the point of sending someone away for a long time who's been caught three times for minor drug or shoplifting offsenses.  From an employer's persepctive, though, will that person reliably show up? Will they pick up hotel guests' loose change? Maybe it's easier to pretend not to notice when an illegal immigrant presents a fake social security number.

October 2, 2008 1:48 PM

moldndecay said:

The new patriotism -

Stay home and read.  

October 2, 2008 1:53 PM

singlespeed said:

It would be nice to see a resurgence of core manufacturing return to America but it will not be at the scale nor the breadth of dominance that it once had in America. Part of that is a result of conservative and business gutting of trade unions in business sectors that trade unions used to have some say in but also the changed nature of the American economy, and the modern cultural view of trades as "lesser" jobs/careers. One of the things many Americans have come to lack is a usable hard skill that extends beyond web surfing and swiping a credit card. It used to be that one who took pride in their craftsmanship was a mark of pride not just by those who practiced it but those who were beneficiaries of that skill set. I'm not calling for a return to yeoman manufacturing where every household has their own miniature manufacturing facilities but I think that an emphasis on skills that are broadly applicable as much as they are specialized.

Not everyone is destined to be a lawyer or (thankfully) a Wall Street banker. We've enough of them to last a life time. What we need is a resurgence in sectors that don't have that sex appeal or CBS drama story line attached to it. That it's a real art to learn, master and create not with just your mind but your hands as well. Instead of just striving to be a money lender. The resurgence of American manufacturing will start again but I think its focus will be on the local and regional economies with specialization, customization, craftsmanship and durability. We won't effectively compete with low-wage labor in Asia and soon to come Africa, but we can rebuild an American infrastructure from the ground up with green-technologies that can be designed, engineered, manufactured and installed here in the US as well as those skilled in the green technologies as an exportable skill. The US has the capacity to be a world leader of green technologies if we had a President that made the call to all Americans to work towards that goal by tying it to energy independence as well as security, and the exportation of green technologies like we export space sciences and weapons then I suspect we could see a rebirth of a strong American middle class in a generation or less.

It's possible and worth striving towards instead of the empty financial specialization and empty services economy we have now where everything has been repackaged as a "service." It's time we get our hands dirty and some sweat upon our brows again.

October 2, 2008 3:46 PM

tec619 said:

Teppy, don't you love the save the save Wall Street bill that passed the senate? Tax cuts without concomitant spending cuts.  Just how lopsided do both parties want the ratio of spending to tax reciepts?

October 2, 2008 5:08 PM

teplukhin2you said:

tec - it's a pretty amazing spectacle, agreed. My estimation of both parties has sunk (even) further in this past week. Heaven help us all

October 2, 2008 5:24 PM

AlanK said:

Agree or disagree, I think we all acknowledge that tep is courteous, witty, and interesting. The point being raised...one I've wondered about myself...is whether a "Letters to the Editor" column is the best place for his work. Surely a "Talk to the Tep" blog, in which he could choose his own topics and his own length of argument, would be more fun to read. He could keep on annoying/amusing/enlightening us here but give himself room for more detailed analysis elsewhere. Hey, if he put up a Paypal donation box I might even give him the odd nickel myself.

October 2, 2008 8:04 PM

teplukhin2you said:

Blogging's a loser's game.

Third party time.

October 3, 2008 8:50 AM

The Plank said:

In an effort to start making sense of what is an indisputably confusing situation, we asked some of the

October 5, 2008 5:41 PM

The Plank said:

In an effort to start making sense of what is an indisputably confusing situation, we asked some of the

October 13, 2008 12:11 AM