HOW MUCH CHANGE?

The fatal flaw in Barack Obama’s promise of “change” lies in the mindset of most Americans that the marketplace, like Adam Smith’s:”invisible hand” will make everything right. Unless Obama can change the deeply ingrained mindset in “the world’s greatest democracy,” his best-intentioned “change” will be thwarted.

Why the stubbornness? Even the sub-prime mortgage crisis did not change the basics of the American view of life and reality. Sure, it has scared millions into a state where they no longer are buying clothes or cars or houses. A cataclysmic event seems to throttles their initiative. The utter panic that followed 9/11 with enemies lurking around every corner and terrorists were hiding Under every bed – all but paralyzed commerce. Airplanes stopped flying and airline companies headed for bankruptcy protection.

It is no wonder then, that the current financial chaos has throttled them – and us!
It has even choked the banks. The federal money they are getting, which was supposed to return calm to the credit markets, has been used, not to lend to people to buy cars or houses, but to improve the balance sheets of the bank. So far, the government, even as part-owners of major banks, seems powerless to make them release the capital into the lending stream.

So what “change” has amounted to – so far – is, as the old metaphor expresses, like rearranging the deck chairs on the Titanic.
It seems to me that ideology rules supreme. It seems to me that “change” is always kept within the parameters of the market economy and as they love to call it – capitalist democracy. In the case of the recent economic catastrophe, the definition is something of an oxymoron, since there was nothing “democratic” about the way the greedy gorged themselves at the table of sub prime mortgages and obscene bonuses.

Obama is talking fiscal stimulus. To the Bushies, that meant an extra thousand dollars to every American to go out and spend. That was pump-priming of the worst kind.

If America is to return to basics they must, and so must we all, recognize that when Adam Smith preached wealth creation, he did not mean that overnight your house doubled in value. That’s not new wealth.

Obama is talking “fiscal stimulus.” He seems to mean spending money on infrastructure to put people back to work, not unlike the public works projects of Roosevelt’s New Deal. (But it will have to be much broader to work. Even Roosevelt could not restore the economy. It took a war to do that.)

Start with the Obama promise to subsidize the creation of new automobile technology, and less dependence on oil by using newer technologies: wind, solar, biomass, clean coal, and yes – nuclear. The impediment to that is that in a profit-sensitive economy, the high cost of alternative power will only be acceptable as long as conventional fuel prices remain high. Now that the oil price has plummeted, it will be back in favour. Profit trumps good intentions.

Obama hints at “infrastructure” investments. To me that means public money will be spent on things that private capital does not do: transit systems, bridges, water works, and the environment.

The fact has never been clearer: government must do what private capital will not: invest in the future whether or not it is conventionally bottom-line profitable. We do not nor should we, operate solely for short-term profit at the expense of the environment, and as we have seen, economic stability..

Will America stumble, believing as they do, that the marketplace is still king and that Adam Smith’s “invisible hand” will make everything right? It will be difficult for Obama to tell America that their insurance-run, profit-based health care system is obsolete. Even he, with his ideas about change, will not dare offend America by taking health care out of the hands of insurance companies. His promise is to provide virtual universal health care but to use the existing framework of private capital insurance companies.

There is iron determination in the belief that only private does it right and that government is good at nothing – with the possible exception of making war.I’m beating the horse that died with the $700 billion dollar bailout and the socialization of major banks.

Can the new president move to “save” the car industry? Yes – he must. But at the same time he must ask for a piece of the action. Americans will have to get used to the idea that Washington is a partner in making Chevrolets. If he does give them the money to stay afloat, can he also demand even more than new technology to create gas-less cars? Can he perhaps put GM and Ford and Chrysler into the business of creating a mass transit system to run America’s new high speed railway system – a significant public works initiative that will put millions to work, reduce dependency on the infernal combustion engine and finally bring American transportation into the 21st century. And the new high speed trains will run on electricity.

He can partner with airline companies to bring them into the transit business. He can build, as they have in major European airports, train stations at air terminals.
With revived railroad, he can, with tax incentives, promote an intermodal system that takes heavy long-haul transport trucks off the highways and puts them on railway flat cars. It is already being done, but not enough to make a significant difference.

Remember too, and there are economic models to prove the point: building highways is far more expensive and less labour intensive than building railways.

For America this could be the dawning of a new reality. Out of chaos comes change. Out of desperation comes sanity. That’s nothing new. We have long believed that “necessity is the Mother of Invention.”
Can Obama be the great innovator – the inventor the country needs?