A great financial crisis can be regarded as a technical problem in the management of a monetary system, but it can also be seen as marking a crisis of the established order.
The U.S., in the 1920s, was excited by the possibilities of the new economy of telephones, electricity, automobiles, movies, radio and television. But, the old economy of agriculture and steam was played out, and fully half the population was stuck on the farm and sinking rapidly into deeper and deeper poverty and despair. The financial crisis, brought on by a hysteria expressed in runaway speculation in fraudulent schemes, marked the beginning of 20 years of crisis, as the world came apart and a new architecture was developed, to rebuild it.
The U.S. today has played out the economic and political architecture of the New Deal and WWII. Those structures, concepts, opportunities, imperatives, habits -- they are all dead and broken and played out, exhausted.
It isn't just our political system, but the whole basis of our economic and national life.
The country is like an old man, the powers and ideals of youth faded away, consumed, at the end, by the final triumph of bad habits and weaknesses of character. The smoking that was a daring rebellion at 20 is cancer at 60; the generosity and confidence of the prosperous 30-something is poverty and anxiety at 70.
Building out new suburbs, buying a second car and a television, going to the new shopping mall, bearing any burden in a fight against godless communism -- these hopeful, idealistic and highly productive ideas have become caricatures and monstrosities: McMansions, SUVs, the Global War on Terrorism, 500 channels and nothing to watch. Kennedy's taxcut and Johnson's Great Society, that triggered the prosperity of the 1960s, reducing poverty, and encouraging the country to cast off the conventionalism imposed with WWII discipline, have become Bush's taxcuts for the rich, creeping authoritarianism in law and custom, and a dumb acceptance of the inexorable rise of poverty.
The indecision and irresponsibility of our politics is just a symptom of a political economy at the end of its natural life -- an analogue to the senility and incapacity of a diseased old age.
Even if the political system, in its near-terminal corruption and paralysis, continues to refuse to answer, reality presses on, and necessity increases its demands.
The sense that the country is progressing toward becoming a banana republic of authoritarian politics, with a vicious corporate elite oppressing and exploiting a passive population is palpable. And, the evidence of the institutional decay to bring about this result is plentiful, as one after another institution of the New Deal has been destroyed or corrupted, and every ideal of liberal internationalism has been made into a bad joke, in a farcical parody called, "American Empire". (America Triumphant is spending record defense budgets to tramp around the absolute poorest places on earth, blowing holes in the sand and knocking one rock off another, while using the Constitution as toilet paper in a camp for some pathetic group of alleged scary terrorists, many of whom aren't scary or terrorists!)
"Change we can believe in" -- We still desperately want the change, but no one believes we are going to get it.
Everything -- every fundamental thing about how this country and the world is organized, economically and politically, has to change to adapt to the new reality of peak oil and global warming and globalized communication.
The most frustrating thing to me, about the way Krugman abstracts, say, the case for fiscal stimulus spending on a vast scale, is that he never connects it to any reality, but the mere fact of unemployment. No other context, which might point us toward what to spend money on. It is true that the Keynesian "technical insight" is that it doesn't really matter what you spend the money on. But, it matters to the political moment.
It isn't coincidental, that we have this financial crisis, and massive unemployment in the old economy of building suburbs and cars to drive to them, at this moment. We don't just need "JOBS" -- though surely we do need them -- we need a completely different system for powering the economy. By 2050, power generation and transportation in the U.S. has to produce no net greenhouse gas emissions. That's very ambitious. It requires rebuilding everything. We need a new rail net, for example. We will have to abandon suburban sprawl for something else -- some combo of denser cities and locally dense ex-urban places.
If the U.S. is not to become a banana republic, then we have to find a new basis for middle class incomes, a new medium for a sensible political discourse, other than 24/7 corporate-advertising-supported cable news.
Everything has to change.
My personal hypothesis is that the sense of that, the necessity of that is well-known out here, among ordinary people. Not just people, who blog. Tea Partiers are responding, in their way, to the felt sense of massive change coming.
It is the elite -- comfortable and self-interested and vested in how things have "always been" -- which doesn't want change, and is resisting it with all of its power -- and the elite has all of the power, after all.
The middle class has lost is HomeATM, but the corporate and banking and political elite is still drawing down on its credit lines. The banks can up their credit card fees. The high-flyers of Wall Street can resume selling their CDSs or exploiting the Bernanke Carry Trade. The political class thanks the Supreme Court for opening the floodgates of corporate money. Apple orders some new iPads from China for gadget-hungry America, and H-P is a horrible place to work, but, hey, it's a job.
The elite, upon whom we depend for our daily dose of propaganda and to run our corporations and our politics -- that elite, vested in how things have long been, and which has been increasing its skim off the top by small increments, year after year, really doesn't want anything to change. And, they're in charge.
The only good news is the impending bad news: the bad news is that the system doesn't work, and the good news, sort of, is that the system doesn't work, and so, won't survive.