It's not as though no one saw it coming. Here's the economist Michael Hudson, writing in the May 2006 issue of Harper's Magazine: "The reality is that, although home ownership may be a wise choice for many people, this particular real-estate bubble has been carefully engineered to lure home buyers into circumstances detrimental to their own best interests. . . . The bubble will burst, and when it does, the people who thought they would be living the easy life of a landlord will soon find that what they really signed up for was the hard servitude of debt serfdom."
Other commentators, including this paper's editorial writers and Warren Buffet, said similar things about the derivatives market. It was prescient stuff for anybody who cared to listen, but hardly anybody did. Americans, perhaps even more than other people, have difficulty embracing the concept of "reality."
In part, this is religious. America remains the land of infinite redemption where any crook can suddenly go straight. In part, it stems from our turbo-charged ethos of capitalism. America has always been the land of get-rich-quick and damn the consequences. We are a nation of fantasists, and things have to get really bad before a politician has the right to trade in hard truth.
So far, I don't think they've gotten bad enough. Even with all the frenzied commentary about the credit crisis now choking the media (while the financial geniuses assembled at the corner of Wall and K Streets scramble to save their hides), I'm struck more by what's not being said than what is.
Every day I add to a list of critical omissions from the debate. Where, for example, is the voice of organized labor? In previous generations, we could have expected to see the president of the AFL-CIO or the United Auto Workers on the sets of the major talk shows. Apart from David Brancaccio's NOW on PBS, I couldn't find a single TV program that featured what might be called a "labor leader."
Where are the alternative candidates for president like Ralph Nader and Bob Barr? I was pleased to hear that Nader, a long-time critic of the deregulated economy, was permitted to appear on CNN and The O'Reilly Factor after the second McCain-Obama debate, but the time for that was before the House passed the bailout bill.
Why is the heavy financial support for Barack Obama and John McCain from Wall Street off limits for discussion? It's unlikely they will be asked about it in tonight's debate - the two parties write the rules to discourage tough questions - but some impertinent journalist might. If you can't get the media-trained Obama to give a straight answer, why not simply present a graphic contrasting Obama's Reno speech supporting the bailout and Nader's argument against it?
For that matter, in its recent take-down of Alan Greenspan and Clinton administration deregulation (including the refusal to regulate derivatives trading), why didn't The New York Times mention that former Clinton Treasury secretaries Robert Rubin and Lawrence Summers are principal advisers to Obama on the economy? In the same vein, why isn't Treasury Secretary Henry Paulson, the former CEO of Goldman Sachs, challenged on his slow response to the Fannie Mae and Freddie Mac failures?
The only serious critic I've found was interviewed in France's Le Monde: Columbia finance Prof. Rama Cont argues that six months ago the bailout of the two mortgage agencies would have cost $100 billion instead of an eventual $400 billion to $500 billion. Who pocketed the difference, thanks to Paulson's "indulgence" of his former colleagues? According to Cont, it was short sellers at Goldman Sachs and hedge funds.
Meanwhile, where are the deep thinkers who might enlighten us in this hour of fear, including Karl Marx? Don't laugh. Marx had much to say about the so-called "contradictions of capitalism" that bears re-reading today. Nothing he wrote is perfectly applicable to subprime mortgages and the derivatives crapshoot. But Marx's understanding that unfettered capitalism, while fantastically productive, leads to instability by concentrating wealth in too few hands - that a mass-production/mass-consumption society is fundamentally incompatible with oligarchic control of wealth - is something even Rush Limbaugh could appreciate.
If Marx is too rich for your blood, at least we might hear from John Gray, the renegade former adviser to Margaret Thatcher. Gray is today's most intelligent critic of globalization and "free trade." He could explain to a television audience that a great deal of America's "real economy" (as opposed to an economy based on derivatives trading and shopping at Wal-Mart) has already left the country for cheap-labor locales such the Pearl River Delta, in China, and the south bank of the Rio Grande, never to return. And he could describe the destruction wreaked on traditional societies that suddenly become host to outsourced American factories. Youngstown and Utica are hurting, to be sure, but it's no picnic either these days for the working class in Nogales or Dongguan.
Finally, there are the great realist novelists, who often see more clearly than journalists. So far, my Google search has not picked up any excerpts from Zola's novel Money being read on the nightly news. In this brilliant chronicle of a speculative stock bubble, launched by a character named Saccard in 1860s Paris, Zola cuts right to the heart of America's boom-and-bust neurosis: "Wasn't such great and rapid prosperity the result of the methods for which [Saccard] was now being blamed. All of this came together. If one accepted the success, one had to accept the risks. When you overheat a machine, it sometimes explodes."