The approaching abyss had been held at bay by the now defunct mortgage-securitization bubble. Homeowners were encouraged to treat their houses like a piggy bank, refinancing at ever higher valuations and lower interest rates to maintain life styles that they could no longer afford on their receding incomes. Much of that liquid equity was transferred to China and other third world countries to buy the goods that free trade produced at bargain prices and that a hollowed out U.S. manufacturing sector could no longer produce. More than one economist declared the U.S. bankrupt in all but name.
As households and the nation slid ever deeper into debt the pundits blamed the free-spending U.S. consumer for problems that government policies had caused.
Armageddon, no longer invisible in the distant fog, was held back, at least temporarily, by sheer terror in the rest of the world at the dimensions of the U.S. fiscal mess.
The regulatory safety net, created during FDR’s New Deal, for decades provided the underpinning for sane capitalism and general prosperity. The dismantling of financial sector regulation was bought and paid for by the same rootless, multinational corporations that lusted after cheap foreign labor and the elimination of import penalties.
The stock market briefly climbed to over 14,000 before the house of cards crumbled, right on schedule, as the irresponsibility of Wall Street and Congress settled in. All those no-documentation, no down payment, adjustable rate home mortgages imploded in slow motion, one foreclosed home, one “high grade” investment, at a time.
As foreclosures annihilated neighborhoods and cities, Bear Stearns went on life support; hedge funds and airlines struggled, with mixed results, to avert collapse; 232,000 U.S. workers lost their jobs in the first 3 months of 2008, and CEOs, true to form, walked away with millions.
And then, playing their accustomed role in the repeating drama of corporate financial malfeasance, the U.S. government stepped in to bail out – ok. You know who, and it wasn’t the taxpayer. Corporations that had spent millions in tax sheltered lobbying expenses to effectively destroy the regulatory safety net couldn’t make their way to the taxpayer trough fast enough. For the good of the country, of course.
While corporate titans saw the American worker as their opponent in a zero sum game, our government acted as their enablers. The collusion of our elected representatives with their corporate financiers in the hollowing out, selling off and mismanagement of a once vibrant economy has been a sad, and possibly final, chapter in the American success story.
As Jim Lehrer’s guest implied, what comes next may be a standard of living that none of us could have imagined – except those who have spent time in a third world country.
Take Ecuador, for example.
I visited Ecuador not long ago when my daughter was in the Peace Corps. I knew before I went that it was a poor country and that the water was undrinkable. But nothing, not the guide books, not the internet, not descriptions from previous visitors, prepared me for the shock of living, even temporarily, in a culture where government services are virtually nonexistent, and where 80% of the population is officially classified as poor (WHO/UNICEF.)
In real terms, here’s what that means:
--Even in urban areas, where the majority of homes have water connections, it is available only 50% of the time and the quality is always iffy. Ditto for electricity. In many areas, the day ends when the sun goes down.
--The lack of water treatment facilities means, among other things, that toilet paper cannot be flushed away. It is kept in the home for later disposal.
--Women in much of the country wash clothes by hand in a concrete tub. I actually saw a woman using a rock to clean clothes.
--Trash is everywhere. One of the first things visitors notice is the ubiquitous filth.