Yesterday we saw with interest an
Aaron Task/Daily Ticker interview of Meredith Whitney. Ms Whitney is
a banking analyst who now manages her own advisory firm. She is a
frequent contributor to business and financial news, especially after
she publicly and correctly called out Citigroup in 2007 for
overexposure in the sub-prime mortgage lending market.
Her most recent comments are about
Detroit's bankruptcy. We like the fact that there really is a
general consensus about what happened to Detroit. Both Ms Whitney
and tosoc.org are part of that consensus. The facts are pretty
straightforward and few deny them. See our most recent post Deer
in the Headlights, for example – for which this is a
companion piece.
We also like some of the details she
noted. For example, she commented that the rich and businesses are
the first to leave when an area starts having difficulties. This
parallels what we pointed out in our Loyalties
post and elsewhere. She also said that this left mainly the poor
behind in Detroit, living in a welfare state and in conditions that
are approaching third-world status.
Related to this, here is a quote from
her 2013 book Fate of the States (which
came out prior to the Detroit bankruptcy):
"The housing industry that drove growth in America for the past thirty years is a perfect example of the new velocity of capital. Banks and home builders do not stay the course. When home prices start dropping, they pick up stakes and search for new markets. There is no loyalty ..."
The
basic premise in her book, however, is that, roughly speaking, the
economies of the East Coast states and the West Coast states will be
hobbled for years by poor economic policies and too many obligations.
The economic hope for the U.S. is growth in the "fly-over"
states in the middle of the country, from Texas to North Dakota,
because of their better economic policies.
What
we do not like about Ms Whitney's analysis (and many similar ones) is
that it both glosses over the losers in these processes and it does
not point out the obvious lesson for the future: what happened on
the Coasts and to Detroit will eventually happen to the heartland
unless significant changes are made. In fact she talks about boom
and bust cycles as natural events, resulting in the ongoing creation
of boom towns that later become ghost towns.
The
idea is that big money moves into a promising area, then
"strip-mines" it and the lives of its people for wealth.
When prospects look better elsewhere, they leave and take their
wealth with them. What is left is human detritus with little hope
for the future. This process is a sort of demented ongoing rapture
in which the rich are transported to heaven and the poor are left
behind to deal with the apocalypse.
Tosoc.org
says that this is unacceptable. It is unacceptable to build and then
devastate a sequence of cities like Detroit, filling our landscape
with economically burned-out places where once-wealthy workers have
to live in near third-world conditions. Allowing it seems like a
bland acceptance of a dystopic future in which eventually most of the
nation will be impoverished. We feel certain that is not what Ms
Whitney and other financial analysts desire, but perhaps their "deer
in the headlights" acceptance of it indicates that they see no
way out. Or perhaps, being trained to think on what is now the
"wrong" side of capitalism, they do not even believe that
there is a way out.
That
is what tosoc.org is about – providing a way out. Ms Whitney
still believes in having a single currency, but that will no longer
do. The people of Detroit are chained to their poverty by that
single currency. Like Greece they cannot earn enough of it to dig
their way out of the economic hole that their leadership dumped them
in.
The
first step then is to define Detroit as a geographic region which
will have its own markets and currency. The purpose is to get money
in the hands of the people again, however valueless it might be at
first in the external economy. Money is the lifeblood of the
markets, and Detroit has been bled out. The economic heart of
Detroit will not beat again without enough money as lifeblood, but
that money cannot be in external U.S. dollars. If a bailout were
possible, it would have been done already.
By
using an internal currency, the people of Detroit would live in a
market economy again instead of a demoralizing welfare, third-world
state in the middle of the wealthy U.S. Detroit's markets might be
small and protected, but their markets would encourage them to
improve their lives by their own efforts to earn more. We must
restore their faith in the markets to provide jobs. Therefore we
must make sure that there are more jobs than there are able-bodied
persons in Detroit.
Supply
and demand for Detroit would at first be managed by the nation as a
whole, as represented by the federal government. Naturally, not all
people and businesses in Detroit need to be part of the internal
markets, but many will need to be. The federal government will
provide for their needs by buying for them collectively in the
external markets and then selling to them individually in the
internal markets. The federal government will also provide for their
incomes by collectively "buying" jobs for them in the
external markets and then making sure that the hiring is done in the
internal Detroit markets.
This
should be enough to get economically-sick Detroit back on the road to
recovery. A transfusion of money within exclusive and protected
markets should do. We do not believe that the full tosoc.org program
of "mutually exclusive currencies and markets" is necessary
in this case. For example, we do not think that the guarantee of
basic living requirements is advisable at this point, even though it
possibly could replace pensions and be a solution for pension
problems in the Detroit budget.
It is
expected that this program would run at a deficit for a while until
the people of Detroit regain their productivity and start to build
wealth. It would not be a bailout, however, and it would not be
charity. Workers would get what they earn. We think that is
important. Rather than handouts, it would just be a chance for the
people of Detroit to enrich themselves once again by their own
efforts. But our leaders will have to think of capitalism and
finance in new ways. Traditional solutions based on thinking from
"the wrong side of capitalism" will not do any more.
Finally,
Detroit could be a proving ground for the tosoc.org program. A lot
of experience would be gained regarding the systems and processes
needed to handle exclusive currencies and internal markets. It would
also be a chance to show that people are never to be treated as just
detritus of the economic process. No one should be left behind just
because the big economic machines have moved on.
That
is the key, after all. As we said in the first Deer
in the Headlights posting, one purpose of our government is to
protect its people (Detroit) from being wiped out, economically or
otherwise. It is a balancing act, however, because it is also
important to keep competitive capitalism going. Therefore we should
not ignore Detroit's problems but neither should we bail Detroit out.
We need an intermediate solution that keeps the markets going and
the people working. If we cannot do it with standard U.S. dollars,
then we have to find another way. At tosoc.org, we have an
alternative and we do not know anyone else who does.
The way capitalism should be.
Socialism for the socialists and
capitalism for the capitalists.
TheOtherSideOfCapitalism
(admin@tosoc.org)
Copyright
© 2013 TheOtherSideOfCapitalism
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