Keeping up appearances: the US economy

“Ever get the feeling you’ve been cheated?” shouted John Lydon, singer of The Sex Pistols, at the end of their last (real) gig. One can only wonder how many Americans wake up each morning, and feel that somehow they’ve been cheated as well. Millions of them grew up with mom and dad telling them they work, and work hard, they could make quite a decent living for themselves. What are the moms and dads of today telling their kids as they load up the U-Haul trailers, to move away from the house they can no longer afford?

Let’s face it. Let’s be honest about it, for once. There actually are millions of Americans who have to work two – or sometimes even three – jobs just to pay for the rent or the mortgage, and the daily costs of living. And now many of them, who were told by their banks that they could get a huge mortgage for almost no money, find out that even all that work isn’t enough.

So what’s going on?

In simple terms: life has simply gotten too expensive in the land of the free market economy. There, I’ve said it; you can exhale now. Yes, for many Americans the free market economy isn’t working. But hold on, wasn’t that market economy supposed to be this fantastic paradise, which would benefit everyone?

Well, no. A free market economy does not benefit everyone. You need proof? How about this: approximately 35 to 40 million Americans are not able to pay for their medical needs. They haven’t been for years. Millions more are barely able to, and these are the people who were working two jobs and had the killer mortgage. They’ll soon be joining the ranks of the medically uninsured.

These people are now getting pretty pissed off. They were always told that, if they worked hard, bread would fall from the skies. Now all they get from the daily news are statistics about forced home sales, foreclosures and free market gurus who are calling them “whiners”.  (Phil Gramm, the door’s right over there and your coat’s the one with the bullseye painted on the back.)

People like Phil Gramm – i.e. your average, out-of-touch, Grand Old Party fat cats – have been praying at the altar of the free market for decades, and when the going gets tough and someone smacks them against the forehead with a frying pan that holds a sign that reads, “it’s a failure, you schmuck!”, the only thing they can belch out is, “errr… More free market…?”

When confronted with statistics about the people who are forced to foreclose on their homes because they can no longer pay their sub-prime mortgages, Grammites (let’s call ‘em that, shall we?) say that it was all their own fault. That they couldn’t afford those mortgages and that they shouldn’t have taken them out in the first place. “They should have been sensible!”

All well and good, but there’s a problem with that argument.

It were the Grammites who said, no – demanded that the American Dream exists, and that it consists of having Your Own Big Home. The Grammites told the very people they are scolding nowadays to take out loans and buy a house, because it helped the economy. Grammite Alan Greenspan was ready to help, lowering the interest rates. Mortgage rates followed suit.

The Grammites were the ones who called the smart people ‘Trailer Trash’. People who could have gone for the cheap sub-prime mortgages, but who didn’t, and who elected to stay in their cheap trailer homes. I’m sure that a lot of them are laughing hard.

At the same time, the Grammites yelped that worker’s salaries were too high, that wage costs prevented US companies from competing with lower wage countries like China. Of course, the Grammites were also the shareholders who demanded of CEOs that they move production facilities to China, but that’s a different story.  (Or so they say, anyway.)

Perhaps the Grammites should have been honest. Perhaps they should have been clear and tell The People that the way things were going, people should get used to…a lower standard of living.

Because in a free market economy, there are winners and losers. It’s part and parcel of the system. No matter where you go, no matter where you look, in each society that employs a free market system, there are winners and losers. It’s not just haves and have-nots politics, like the kind George W Bush advocates. Winners and losers are part of the free market core.

And of course, the Grammites knew this. That’s why they started telling people that it was perfectly okay to live on borrowed money. They had to; it was the only way to keep alive the illusion of the free market economy.

How ironic. The last leaders of the Soviet Union tried that for their model, too, just before the Soviet Union broke up.

Russia, by the way, is a prime example of a Winners and Losers society. Russia had a pure free market economy for some 15 years. “Free market shock therapy”, the Grammites who advised the Russian leadership called it. But it only brought the Russians the market economy in extremis; if you have something to sell, you’re alright. If you don’t, you’re in deep doo-doo.

If America’s leading politicians would unleash that kind of free market “shock therapy” on the American people today, there would be civil war tomorrow.

So is this blog advocating socialism, then? No, but it evidently also isn’t advocating the kind of anarchist free-for-all that is the vanilla free market economy. It’s alright to have such a system, of course, as long as there are more winners than losers. The calculating career politician in a democratic system, though, should pay heed to statistics that show expanding numbers of losers, while the winners’ demographic is shrinking.

The Western European model also isn’t a paradigm. Daily costs of living are rising fast on the European continent, too. Like each living person on any patch of this world, except perhaps for the tribal hunters in villages in the Amazon or Papua New Guinea, Europeans too are paying much more money for fuel, energy and food than they were a year ago.

The only difference between the Western European model and the more individualist, corporate-anarchist model in the US is that the blows do not yet land as hard in Europe. That’s because of the existing social safety nets, borne out of an ideal of solidarity. They act as air bags in a car.

But those models are already under pressure too.  Social security is arranged through governments and the money needed to pay for it is harvested through a progressive, accumulative system of taxes. The more you earn, the more you’re taxed.

Higher costs for just about everything are forcing governments to cut benefits, while at the same time keeping the influx of money the same. At the same time, costs of living that are not part of the social security and medical insurance system are rising. Fuel and food costs, for example, are going through the roof.

So middle class people see their governments cut down on the social and medical security benefits, but not bringing down tax levels, while on the other end of the costs spectrum, they’re also bleeding money. Those people have no say in the costs of a cucumber or a gallon of gasoline, but they can vote for a political party that promises to slash taxes. And those parties are getting increasingly popular all over Europe these days.

The problem is that the system of solidarity still stands the best chance for everybody. Yes, benefits can be expensive and yes, there will always be abuse. But it is simply a choice between everybody chipping in a bit to help out everyone, thereby keeping the costs per individual relatively low, or a system in which the winners pay a lot of money for their own social security, while leaving the losers out to rot on the street.

Czar Nicolas II, the last ruler of Imperial Russia, would nowadays probably advise anyone not to opt for the second choice. He did once, and he ended up with a bullet in his forehead outside a daft farm in Siberia.

So is the free market economy all that bad? Well, no. It has also brought us good things. Hopefully, the shortage of oil and the subsequent quadrupling of prices will really kick-start a new industry of non-polluting energy.

The free market is good for something. It just needs to be contained, and it certainly isn’t the harbinger of good fortune.