The day Fannie Mae and Freddie Mac finally fell, six long weeks ago, and the government stepped in with hundreds of billions of dollars of loan guarantees, I was returning from a weekend trip to Yosemite. The day before, my friend Jason and I had scaled Half Dome rock.
Half Dome is nearly two miles above sea level. To get to it, you have to walk nearly five miles, up steep, winding mountain paths. Then, your legs weak and lungs burning, you have to climb up hundreds of steep steps cut into the granite. Finally, you reach a plateau; you lie down and try to get your body back under control; and then you go for the summit. To reach it is a leap of faith. Half Dome is too steep to walk up; but one small part of the cliff face is "only" at a 45 degree angle. Pairs of stakes have been hammered into the rock at 10 or 20 feet intervals; and steel cables threaded along them.
To conquer Half Dome, you have to pull yourself up 400 feet of cables. You take deep breaths, haul yourself from one set of stakes to the next, wedge your feet against the wooden slats at each set of stakes; and then repeat the process. If you fall, there's absolutely nothing to stop you – a terrifying fact you're reminded of every few minutes when someone drops their water bottle. Fall at just the right angle and you'll land hundreds of feet below with broken bones galore, but alive; fall at a slightly different angle and you slide off the edge of the cliff and drop thousands of feet to the valley floor.
So, what does this have to do with our current economic woes? Well, we know we've lost our footing and fallen from a great height. In the weeks since Freddie and Fannie were essentially nationalised, investment banks and thrift banks have failed, credit markets have frozen, investors started runs on money market accounts, banks the world over have been semi-nationalised, trillions of dollars of taxpayers' money has been put on the line to support the system, stock markets have dived and several countries have themselves veered towards insolvency. That much is a given. What we don't yet know – and won't for months, possibly even years – is the extent of the damage. Will our economies and societies emerge battered but alive? Or will the system of exchange and wealth creation that we have taken for granted for generations prove unfixable?
If that sounds melodramatic, it's meant to be. We're in the midst of the sort of collective re-imagining of national and global institutions, of the obligations of government and the needs of citizenries, that occurs perhaps once every couple of generations.
At the end of the day, governments will emerge from the near-meltdown of the global financial system either larger or smaller. If they succeed in staunching the fiscal haemorrhage, governments will emerge much larger – with ownership stakes in pillars of the economy, with roles as extensive regulators and arbiters of the marketplace that they have not previously had, and with populations demanding they use that new clout not just to keep financial markets solvent but to keep populations out of poverty – through, for example, new health coverage systems and new employment schemes. If they fail, recession will turn into depression, tax revenues will shrivel, meaning that governments, too, will contract, and even the most powerful nations will find their organs of state incapable of mitigating the consequences of the meltdown. Within that broad range of possibilities the one thing we can be pretty certain of is that governing apparatuses and international relations won't emerge looking identical to how they did going in to 2008.
In the desperate days before France fell to the Nazis, Churchill and the French government parlayed about the possibility of merging France and the United Kingdom into one country. In the years after the second world war and the explosion of two atomic bombs over Japan, many scholars pondered the possibility of world government as a way to avoid competing nations marching toward nuclear catastrophe.
Both of those ideas hadn't a snowball in hell's chance of success, but they did in some ways affect the timbre of international relations. England and France never unified, but during the 60 years following the end of the war the European Union emerged as a continental entity with at least some supranational governing responsibilities. World government was never a serious option, but the United Nations has remained a durable institution and organisations such as the International Atomic Energy Agency, the IMF and the World Bank have operated, with varying degrees of success, on a transnational basis for many decades.
So, as the current order crumbles, how about a bit more emphasis on the eirenic? The 15th and 16th century scholar Desiderius Erasmus advocated a system of international relations based around harmony and fairness rather than competition and warfare. As new domestic institutions, along with a new system of international relations, emerges out of the failed economic experiment of the past three decades, let's start a real conversation about who's included in the new system. Already responses to the crisis are being hammered out not by the G-8 but by the G-20. That's a start, but it still leaves unconsidered the interests of the billions of people living outside these 20 large economies.
There's been a lot of talk in America recently about saving the middle classes; as well as propping up the structure of the first world economy upon which global prosperity depends. And I certainly don't underestimate the importance of that. But there's a risk that attention to poverty, to domestic working classes and impoverished peoples overseas, gets lost in this mix.
Both Barack Obama and John McCain have gone out of their way to appeal to the struggling middle class in the US election. Partly that's because the vast majority of Americans, no matter how blue collar they might be, self-identifies as either middle class or as aspiring to attain middle-class status. But partly it's because there's more political capital to be gained from paying attention to people who've lost thousands of dollars in their 401(k)s than to people who never had 401(k)s to begin with. The wealthier you are in America, the more likely you are to vote. That's been true for decades.
Obama's economic package at least talks about raising the minimum wage and indexing it to inflation; and his advocacy of a three-month halt to home foreclosures would give at least some reprieve to working families teetering on the edge of personal catastrophe. McCain, by contrast, does little more than advocate more tax cuts – which doesn't really address the problem of a growing underclass too poor to pay significant amounts of taxes in the first place, already reliant on government and charity food subsidies, and increasingly unable to establish decent credit, relying instead on exorbitantly high interest payday loans, check-cashing outlets, and pawn shops for their borrowing needs.
Commentators have spent much time analysing Obama and McCain's differing body language in their third debate. To my mind, the most interesting moment was when McCain challenged Obama on why he opposed a free-trade agreement with Columbia. Obama answered that labour leaders in Colombia were being targeted by death squads. The camera panned to Mccain; as Obama talked of trade union leaders being assassinated, the Republican rolled his eyes.
I think at this point we can take it as a given that Obama is more concerned with the rights of working people than is McCain. But that doesn't necessarily mean Obama's talking in strong enough terms about poverty in the post-fall era.
If we're going to set up new institutions to mediate money-flows, let's set up some system to invest in developing countries, especially around tackling the issue of global warming. Last year the United Nations Development Programme issued a report detailing how poorer nations needed access to billions of dollars to alleviate the affects of already-unleashed climate change; and billions more to upgrade their energy systems so as to be able to move into a post-carbon age and limit any further planetary temperature increases. Without it, they warned, poor regions would see increased drought, water shortages, epidemics and starvation.
At the same time, let's have a serious conversation about developing bigger and better micro-lending institutions, so that small business owners and farmers around the world can survive the hard times ahead, and, down the road, move their families toward economic security. Let's talk about renegotiating poor countries' debt obligations; after all, if first world governments can buy up trillions of dollars in "toxic debt" from banks, why can they not perform a similar function for development-hindering debt owed by poorer nations? That wouldn't mean a canceling of debt, but rather a renegotiation, akin to the notion of revamping the corrosive variable rate sub-prime mortgages pushing so many US families into homelessness.
These are just a few anti-poverty measures that could be taken. Many more could, and should, be developed over the coming years.
Early on in the Democratic primary season, John Edwards talked passionately about a fairer deal for America's poor. Like Bobby Kennedy 40 years earlier, he went beyond mere platitudes about "Main Street" and the hurting middle classes. As we enter the final days of the presidential race, and start imagining the new institutions, the new social compact that a post-financial meltdown world demands, there's even more urgency that issues of engrained poverty, both in the US and overseas, are addressed in a smart, transnational manner.
