I have a confession to make. I don’t understand how the economy works. Does this make me stupid? Probably.
But then again, there are plenty of complex things I do understand: I can explain the physiological differences between Neanderthals and Cro-Magnons, I can pick out all the classical allusions in Ulysses, and I can play “Stairway to Heaven” on guitar. There’s a lot of knowledge rattling around in my head and at least eight percent of it is useful. But when I hear the prefixes "micro" and "macro" I think they must be referring to a cheesy and easy to make noodle dish by Kraft rather than the financial system.
For some reason, the field of economics is major gap in my knowledge base. I never took an economics course in college. It just seemed so boring every time an Economics major mentioned interest rates. Because of my youthful, anti-corporate ethos I chose to not to study the subject at all, but three and half years after graduation I realize what a mistake this was. You can opt out of Economics 101, but you can’t opt out of the economy.
Don’t get me wrong, I understand what the economy is in an abstract and theoretical sense. I can contrast John Maynard Keynes with Milton Friedman and discuss the implications of their theories and ideologies. I can explain how liberals think the government should take an activist role in the economy through regulation and the creation of a social safety net. I know that libertarians think that any regulation whatsoever is akin to setting up Stalinist death camps in Siberia. I realize that conservatives want taxes low and are against government spending except for when it pays for things like war. I can interpret phrases like “supply side,” “invisible hand,” and “trickle down,” which are all basically code for “screw the poor.” I can pronounce "laissez-faire" with a decent French accent and know that it translates to the title of my favorite Beatles song. I got all that.
I know I want the Dow Jones to go up. Unfortunately, I don’t know why it keeps going down. And that’s the problem. I have a vague understanding of the economy in theory, but zero understanding of it in practice. I have absolutely no clue how political unrest in Syria, for example, helps cause a factory in Des Moines to shut down. I know the crisis in Greece affects us, but to be honest I can’t really fathom why.
Despite this lack of knowledge I’ve still managed to achieve a pretty decent credit score.
But I’m not alone here, am I? We all want to see the economy improve, but most of us haven’t the slightest idea of how to make that happen. Even the experts can’t agree on a solution. Liberal economists argue that the market is stagnant because the government is doing too little, while proponents of the Friedman school say that stagnation is the result of too much government interference. When a stimulus plan fails to, well, stimulate the economy, the conservatives and libertarians say that it proves their criticism of government interference in the free market. Meanwhile, the liberals claim that unemployment would have been much worse without it and that growth was hampered because the stimulus didn’t go far enough.
Even when discussing history this supposition persists: one side arguing the New Deal rescued the country from the Great Depression brought on by Hoover’s inaction, while the other side claims Roosevelt’s social programs exacerbated the situation and that the market would have righted itself sooner without them. Economics is supposed to be a science, but there’s little consensus. At least physicists can agree that what goes up must come down. Like the Dow Jones.
People paid their brokers thousands upon thousands of dollars to lose their life savings, trusting in their expertise and experience. In the end, the brokers didn’t know much more than the rest of us. You would have had better luck taking your entire life savings to Atlantic City, placing it down on the roulette table, and betting it all on black. Then you would have had at least a 50-50 chance, which is way safer than investing in stocks.
I once had a student ask me during a class discussion about poverty why the government didn’t just make more money so there’d be more to go around. I tried to explain that this practice was called inflation, and describe how a dollar is only a symbol for wealth with fixed value so that printing more would actually decrease the value of the money you do have and that this is actually what caused World War II. He didn’t get it. To him the solution was simple: if people need money, make more. His naiveté would have been adorable if he wasn’t sixteen years old and over six feet tall.
However, is his plan really that crazy? Of course we can’t just print money, but we sometimes forget that wealth is an artificial concept. Libertarians like to pretend that the free market is the natural state of man when the market is actually manmade, a system we’ve created to distribute resources. We shouldn’t forget this fact. The market is a tool, but since the industrial revolution it’s been elevated to deity status and seems to act with a will of its own.
Consider the case of ethanol fuel. It can be produced from corn, sugar cane, or potatoes, all crops grown here in the United States. Every year we even pay farmers not to grow corn! Reason would suggest that the United States would embrace this renewable biofuel and end our dependence on foreign oil. But of course we don’t. Most people believe that this is the result of an oil company conspiracy, but the truth is actually more disturbing.
If the United States were transform corn into a fuel crop it may help our economy, but it would absolutely crush Mexico’s where corn tortilla is a food staple of the diet relied upon by many to survive. The price of corn has already risen to levels difficult for many impoverished families in Latin America to the point that in 2007, Noam Chomsky wrote that biofuels were “starving the poor.” But isn’t this insane? The planet provides us with resources that can function both as food and renewable fuel, but our economic system prevents us from using it to our collective benefit for fear of the plague that would befall the continent. So sayeth the Almighty Market, so shall it be done!
The president is often referred to as the most powerful man in the world, yet his power pales in comparison to that of The Market. Bush and Obama alike seemed helpless to influence it, and whether this is the result of incompetence or evidence that perhaps the market is out of our control is a matter for debate. Nevertheless, any president’s re-election chances hinge on the state of the economy. Kings may rule, but the market decides who wears the crown and in that respect, its power is truly godlike.
I’m hardly the first cultural observer to notice an eerie resemblance between economics and religion. South Park won an Emmy in 2009 for an episode in which Kyle saves the American economy through a Christ-like sacrifice of taking on the entire nation’s debts and allowing his credit score to die for our mistakes. Meanwhile, Stan discovered that Washington’s economic policy was set by sacrificing a chicken (God, I love South Park). This theme is also central to Darren Aronofsky’s masterful debut film π, which tells the story of a number theorist attempting to discover a numerical pattern to the stock market and his conflict with (for lack of a better phrase) a group of Hasidic gangster rabbis that believe he has found a numerical code sent by God.
The debate of whether God created Man or Man created God is one of the most divisive in our culture. But here’s an issue on which there should be no debate: Man created The Market. And it’s time for us to get it back under control. I’m not going to posit a theory on how to do that, since most people who try that don’t have the highest success rate (see Marx, Karl). Besides, I never even took economics, so why the hell would you listen to me? I don’t have a clue what I’m talking about.
Image courtesy of Daniel Victor