Editorials

When Barack Obama won the presidency two years ago, the naysayers amongst us worried that the Bush financial tsunami was just about to crest, and that he and his party would be stuck with cleaning up the mess. Or even worse, that the Democrats would be blamed for it, even though the Republicans caused it.

Count me among the Cassandra crowd. (Recap: she was the ancient Greek who accurately predicted catastrophes but no one believed her.) And we were, of course, sadly, right. It was inevitable. And as predicted, the Democrats have paid in this election for the sins of George W. Bush and company. 

It was partly inevitable because with a very few exceptions the national commentators don’t seem to be able to see beyond the tip of their noses. One of the amazements of my adult life has been the way that people I know, for the most part not participants in lifestyles of the rich and famous, have been well aware of what’s going on when those who are (increasingly lavishly) paid to understand the big picture just don’t seem to get it.  

In all kinds of situations, all the way from the very beginning of the war in Vietnam to the collapse of the toxic mortgage products foisted on unsuspecting homebuyers by a corrupt financial industry, warning bells have sounded years before the major media and key decision makers heard them ringing. A friend, a former business reporter, told me perhaps 5 years ago that “no one seems to be able to figure out who owns the mortgages in the Stockton area”—and yet it’s just in the last couple of months that we’re finally hearing reports in the media of faked paperwork turning up in foreclosure proceedings. 

I had another Cassandra moment when I read a review in this week’s New York Review of Books about Ireland’s insane building boom, which has bought the country’s economy to its knees. The book’s title is Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger and that about says it all. Ian Jack, the reviewer, sums it up: “…political leaders were complicit in the boom’s every aspect: land acquisition, planning permission, funding.” Sound familiar? 

More from the review: 

“In 2006, Professor Morgan Kelly of University College Dublin said there could be no “soft landing” for property values that had risen so much more steeply than incomes. Nobody wanted to listen. Prime Minister Ahern mocked Kelly as a moaner, and the press tended to take Ahern’s side. More remarkable, as O’Toole writes, was how few mainstream economists came to Kelly’s defense: 

‘Every historically literate economist knew for sure that the Irish property boom was going to crash…. Yet the overwhelming majority of Irish economists either contented themselves with timid and carefully couched murmurs of unease, or, in the case of most of those who worked for stockbrokers, banks, and building societies and who dominated media discussion of the issue, joined in the reassurances about soft landings.’ “ 

It’s an appalling story. We saw the fancy houses standing vacant in former pastures in Sligo when we were in Ireland last summer, and the papers then were full of tales of woe.  

In the discussion of what’s happening now in the United States, it’s possible to observe a similar pattern: an insane escalation in property values, followed by overbuilding fueled by financial chicanery, and, increasingly, the inevitable crash to follow. And the economists and their politician allies are just as complicit here as they were in Ireland. 

While President Obama is not to blame for how this train wreck got started, his choice of economists has done little to put on the brakes. Summers and Geithner were participants in the run-up to the come-down, and their performance to date has been no more forceful than that of the derided Irish economists. Elizabeth Warren is a seeming exception, but she’s a law professor who teaches contracts, not an economist, which may explain why she has such a clear-eyed analysis of what’s gone wrong. Basically, it’s all about foolish deals sold to gullible consumers by people who should know better and probably do: Consumer Protection 101 

The suburban U.S. equivalent of Ireland’s folly can be seen today in Stockton, and Tracy, and Las Vegas and Atlanta. Here as in Ireland rows of fancy houses stand empty, abandoned by hapless buyers who were told by sharks that they could afford their mortgages.  

And today in Berkeley you can see the urban equivalent, the results of similar stupidity, in the empty new apartments and vacant storefronts which are proliferating downtown. The pattern of “political leaders…complicit in … every aspect: land acquisition, planning permission, funding.” is just as easy to find here if you know where to look.  

Seven out of nine Berkeley Planning Commissioners work in the building industry. The Zoning Adjustment Board and the City Council repeatedly permit huge developments to bypass the California Environmental Quality Act. Measure R, a green-washed scam intended to give a green light to even more overbuilding in downtown Berkeley, was completely funded by developers and even endorsed by former Massachusetts politician and economist Robert Reich, now a snowbird professor at U.C. Berkeley. And that’s just for starters. 

This morning (Wednesday) the radio voices of the chattering classes are making much of the Republican victories across the United States. They seem not to remember that the last three presidents have had their parties tossed out by the fickle electorate in mid-term elections, with not much outcome except two years of gridlock followed by re-election of a president handily able to run against a “do-nothing congress.” It will probably happen the same way this time, despite all the weeping and gnashing of teeth coming from some Democrats today. 

But nothing, still, will be done about what looks more and more like the systemic failure of capitalism as we know it. Both parties this year have run on platforms that talked vaguely about the need for “jobs”, but jobs doing what? Building more expensive condos with vacant ground floor retail? That provides jobs for a certain number of construction workers, right, and certainly fuels developers’ profits with borrowed money, but what are the long-term consequences? The catastrophic situation in Ireland should serve as a warning to us all, but it probably won’t.