ARROYO GRANDE, Calif. -- America is in a historic transition, watching the passing of the Reagan-Bush era. Only a few weeks to go. Yet pain is everywhere -- the economy, housing, jobs, prices, markets, terror -- and we grow more anxious, impatient and uncertain each day. Elections were a temporary distraction.
All this was foretold: "The Gods have two ways of dealing harshly with us. The first is to deny us our dreams," wrote Irish playwright Oscar Wilde. "The second is to grant them." Elections gave us both. McCain's 47%, denied, angry. Obama's 52%, prayers answered. But were they? Remember, the Gods "deal harshly" with all dreamers. Another great old saying: "Want to make God laugh? Tell him your plans."
Dreams? Plans? Unfortunately, till late January we're all trapped in a nightmare. A new president has no power till sworn in. The outgoing not-so-lame-duck chief executive continues sinking taxpayers deeper into debt with a lethal cocktail of new long-term bailout debt, Reaganomics and disaster capitalism.
Yes, it will be a historic transition, Obama replacing Bush. But an even more monumental transition is the coming paradigm shift from a "Capitalism 2.0" that "devours nature, widens inequality and makes us unhappy" to a saner "Capitalism 3.0," as Peter Barnes calls it.
Saying goodbye to Reaganomics and 'Capitalism 2.0'
More accurately, the new Obamanomics is a rejection of the Reaganomics thinking that began with Nobel economist Milton Friedman's 1962 classic, "Capitalism & Freedom," then moved into high gear under Reagan and the Bushes. That reign brought us the best and the worse of deregulation, globalization, major warfare, massive deficits, privatization and big plutocratic government, culminating in a disastrous credit meltdown, a deepening recession and a bear market that's already lost $9 trillion, the worst-case scenario since the Crash of 1929 and the Great Depression.
You'd think such a miserable track record would be enough for the old guard to stand down. Unfortunately good old 20th century Reaganomics ideology is still being defended, even as it lives in disarray, confusion and pain amid wild contradictions. Listen to Steve Forbes recent post-election defense "How Capitalism Will Save Us:"
First off, Forbes blames "a chain of major economic policy errors, which, to use a current clich�, created the perfect storm. These government blunders temporarily paralyzed the global credit system and are now sending the U.S. and Europe into recession." How Reaganesque: The sole cause of the mess is always government. Yet, while his idol Reagan believed "government is not the solution, it is the problem," Forbes contradicts that dogma by welcoming over a trillion in government bailouts to a greedy and totally incompetent Wall Street, calling the bailouts "sensible rescue efforts." Sensible? Yes, if you make the bizarre assumption that Goldman Sachs, Morgan Stanley, Citigroup and others were guiltless victims of "economic policy errors" requiring taxpayers to make "restitution." Forbes adds "never before have so many people advanced so far economically in so short a period of time as they have during the last 25 years." Apparently he's referring only to the richest Americans on his Forbes 400, because he's ignoring the fact that the average inflation-adjusted income of most Americans has declined during the same 25 years as the inequality gap skyrocketed. Who's to blame for the toxic meltdown? Not Wall Street. Oh no. Certainly not the Forbes 400. And never Reaganomics ideology. They take no responsibility. Zero. Who then? He goes back to Reagan's tired old mantra, "government is the problem," ignoring the fact that big government and deficits grew more the past eight years than in the entire two centuries since the Declaration of Independence! Throughout, Forbes puts all blame on government, blindly ignoring the fact that Washington is controlled and manipulated by 42,000 special interest lobbyists bankrolled by the wealthy few controlling America's plutocratic government.
In fact, the real issue is not "how capitalism will save us." Capitalism 2.0 just failed miserably, creating a huge mess.
"How to Save Capitalism," a special Harper's magazine feature, seems like a rebuttal to Forbes. The article says "capitalists have done a remarkably poor job at safeguarding the future of capitalism," suggesting that Wall Street not only cannot be trusted to fix itself, evidence is now emerging that Treasury Secretary Henry Paulson's flip-flopping delays have made matters worse.
Worse yet, Nobel Economist Joseph Stiglitz notes that unless Wall Street's incentive system is drastically reformed, "the financial sector will only try to circumvent whatever new regulations we put in place. We will simply have a short respite before the next crisis."
No doubt Forbes honestly believes that "free-market capitalism will save us, if we just let it." Endure another disastrous eight years? That's absurd. He denies Wall Street's biggest blunders, like creating a global shadow banking system of $523 trillion derivatives unregulated by any government.
Sorry, but by totally refusing to put one ounce of responsibility on Wall Street, Reaganomics and free market capitalism, Forbes' defense loses all credibility. Rather, the real question should be: "Do we still have enough time to prevent 'Capitalism 2.0' from totally destroying America?"
Forbes should step back for a moment from a no-holds-barred defense of free-market Reaganomics and "Capitalism 2.0." He should look ahead with the same vision he gave America so eloquently after the 9/11 crisis:
"The Forbes 400 demonstrates that the real wealth of our nation is not physical -- jewelry, gold, large cash accounts, lots of land -- but metaphysical, what stems from the human mind -- creativity, innovation, inventiveness. It is character -- stick-to-itiveness and a willingness to take risks, to leap into the unknown. The freedom to turn thoughts, hunches, insights and dreams into realities not only makes America rich but also keeps it perpetually on the move, open to new things and to new ways of doing things ... Free enterprise -- grounded in strong moral values, as it must be to survive -- allows the most unlikely people to burst the bounds of the present with breathtaking breakthroughs and advances, thereby enriching us all."
Obama is "the most unlikely."
Valuing a greener Obamanomics and 'Capitalism 3.0'
Moral leadership, character, ideals, values, principles -- that's what America needs as we look to the future, not an uncompromising defense of an ideology whose time has passed. And for openers, you may see the principles of this emerging "Capitalism 3.0" in a paper by economics Prof. Herman Daly before the U.K.'s Sustainable Development Commission earlier this year.
In "A Steady-State Economy" Daly offered 10 principles which may well slowly filter into America's domestic economic policies in the years to come. We've edited them here, but clearly a new greener economy would be a paradigm shift in America's public policy in all these areas:
Use cap-auction-trade systems for basic resources with the goal of controlling carbon emissions Amend tax policies to reinforce the pricing of resource depletion. Limiting income inequities at the margins Flexible employment options that support national and personal growth Re-regulation of commerce and finance New missions for the IMF, WB and WTO going beyond the old Capitalism 2.0 lending and trading policies that primarily favor developed nations Control global money supplies by maximizing bank reserve requirements Put scarce natural resources in public trusts Stabilize global population growth Reform national accounting by separating costs from benefits. Today's GDP adds the two and that's absurd, Daly says. "Compare them at the margin, stop growing when marginal costs equal marginal benefits."
Yes, we are in a historic transition. The pendulum's swinging rapidly, creating something new, volatile and murky. The old guard can't surrender its ideology without a fight.
But the opportunity is there for a new reality, a better future. Reaganomics will fade into history, very slowly. Obamanomics and a greener "Capitalism 3.0" will grow beyond our dreams. Maybe the Gods will even stop "dealing harshly" with us.