I’ve probably heard and read dozens of times over the past two weeks that this is the most serious financial crisis since the Great Depression. Our stock market and confidence in the banking system are allegedly on the brink of a 1929-style collapse.
But what is fascinating and somewhat alarming is how our collective perception of the economy has shifted in the past 75 years. In the early 20th century, agriculture was the backbone of the country. When commodity prices went south, people suffered. And the effects went well beyond the farm gate because farm income provided the capital for businesses in rural communities all over the country. The lack of jobs and farm income resulted in poverty and hunger.
Now, instead of an economy built on the labor of farmers and manufacturing, the backbone is perceived to be Wall Street. Debt and financial instruments are the new wheat and corn. The rising costs of housing, food and gasoline have been a concern for a few years, but it took the collapse of financial institutions to create a national panic. The proposed solutions to this crisis by Congress and the Bush administration are much different than the response in the 1930s.
Seventy-five years ago, the New Deal focused on getting people back to work and getting farmers a fair price for their commodities. Nowadays, the solutions largely revolve around assuring adequate assets in financial markets, and bolstering domestic and global confidence in our financial institutions. I’m glad that a poor farm economy, like the downturn in the late 1990s and early 2000s, no longer devastates the country, but perhaps we’ve drifted too far from a Main Street focus to a Wall Street focus.
I have no idea if using $700 billion to provide Wall Street this assurance is the best way of avoiding a financial crisis. But it is striking how much the current focus is on a top-down approach of fixing global markets rather than the previous grassroots approach of getting adequate income back into workers’ pockets. With such an emphasis on financial indicators such as stock prices, currency valuations and interest rates rather than focusing on the well-being of workers and families, the 21st century New Deal may be missing the forest for the trees.
