MATERIAL WORLD: How Alan Greenspan Ruined My Life
I wish I'd been taught economics in school, instead of how to dissect a frog, and make a tomato surprise.I wasted years on vestigial technologies, like slide rules, and mimeograph machines, when I could have been learning the relationship of trade imbalances to Gross National Product. Had I skipped field hockey, I would have been well on my way to understanding why the NAFTA has nothing to do with opening markets, and everything to do with movements of capital across borders. I rarely encounter a situation in which "A Tale of Two Cities" comes in handy, but economics affects me on a daily basis.Like bilinguality, economics takes up a lot of cortex, and is best implanted at an early age. Past the age of consent, this study tends to evoke math phobia taken to the hundredth power. The eyes glaze, the synapses clog, and brain shuts down on overload. At this late date, with my circuits already chock full, any capacity to comprehend the global economy requires the jettisoning of large blocks of stored information. Goodbye forever to the uses of the pluperfect tense, "Jude the Obscure", and the greatest hits of Earth, Wind and Fire.On the face of it, budget surpluses, trade defecits, and the strength of the dollar against the Deutschmark would seem to be stupefying irrelevancies, often imparted in terms so obscure they appear to be typos. But Politics and Economics are now inseparable, and together they have a profound influence on our lives from start to finish, beginning with obstetrical costs and ending with funeral expenses. And everything inbetween.Not so very long ago, little kids wanted to grow up to be the President of the United States, because he was the most important person in the world. I can't remember anyone who wanted to become Chairman of the Fed. But, in point of fact, the Federal Reserve Board is now the major policy setting institution in the country, which makes Alan Greenspan, not Bill Clinton, the most powerful individual on the planet.The Chairman of the Fed serves a 14 year term, by presidential appointment. The members of the Board are likewise, appointees, presidents of regional federal reserve boards, chosen by bankers. This single political appointee, and some bankers and their friends, have the ability to turn our lives upside down every time they so much as hiccup. Today it's a blip in the variable home mortgage rate, tomorrow it's the value of your 401K. When Greenspan speaks, we all better listen.On paper, the Federal Reserve Board doesn't do much. Its only power is the direct control of short term bank-to-bank interest rates. In fact, the ability to change short term interest rates influences long term interest rates, which affect exchange rates, and thence imports, exports, and the global economy.The official mandate of the Federal Reserve is to maximize employment, consistent with price stability. In practice, that goal is little more than smoke and mirrors. Current unemployment figures, deleriously proclaimed by President Clinton at every photo op, are artificially low. The yardstick used to measure unemployment ignores underemployment, those no longer eligible for unemployment benefits, and part-time employees unable to find full-time work. Full employment, in fact, runs counter to the interests of the current administration. The interests of the average citizen take a backseat to the well-being of the investment community.Nor is a living wage is a priority of the Federal Reserve Board. If unemployment were to fall to zero, the available labor pool would disappear, and the power of workers to bargain for higher wages would rise dramatically. This would effectively raise the cost of goods and services, and boost prices. It is this cycle, culminating in higher wages, which the Fed perceives as inflationary. The overvalueing of paper assets, as reflected by the runaway stock market, is considered the sign of a healthy economy.As long as unemployment figures remain above a level fixed by the Fed, corporate profits will continue to rise, and wages in real dollars will decrease or remain stagnant. So a corollary of the anti-inflationary function of the Fed is the suppression of both income and bargaining power of salaried workers.Federal budget defecits have historically functioned as shock absorbers for downturns in the economy. Greenspan has recently decided that any Congressional economic package must include a balanced budget. So the cushion is now longer available, and any falloff in the stock market, a signal of economic downturn, will trigger a reduction in government spending. These cuts always come in the form of diminished spending on social welfare programs. Those living at or below the poverty level still remain the only consitutuency with no voice in the nation's capital.Remember the parable of the blind men asked to describe a collection of objects simply by touch? What they perceive to be tree trunks, a snake, and a leaf, are in reality, the legs, nose, and ear of an elephant. The value of economics is that it removes the blinders, and lets us see the entirety. It enables us to understand that seemingly disparate events are connected, all parts of the same creature.From that perspective, the record breaking accumulation of campaign dollars by George W. Bush, the push toward privatization of Social Security, the bailout of Long Term Capital, and IMF investment in Third World countries, are all parts of the same elephant. Not Dumbo, Wall Street.