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Did ordinary Americans question the wisdom of George W. Bush's call for an Ownership Society or even question what it meant?  Simply assuming that “ownership” makes life better.  While “better” means different things to different people, most would agree that if it doesn't include making our lives less risky and day-to-day living more secure that it wouldn't be better.

In Blowup, Malcolm Gladwell tackles risk in the modern world.  It's a fascinating read for many reasons beyond the scope of this diary and as such is recommended.  What I want to highlight from it is 1) systemic risk  2) how people perceive risk and 3) what do they do.

Modern systems, Perrow argues, are made up of thousands of parts, all of which interrelate in ways that are impossible to anticipate. Given that complexity, he says, it is almost inevitable that some combinations of minor failures will eventually amount to something catastrophic.

A mostly forgotten fact is that It's A Wonderful Life was a box office flop.  One reason for that may have been that it presented a contemporary story that was out of date.  Potter was as out of his time as alcohol bootlegging gangsters were in 1946.  New Deal banking legislation had made the deposits in George Bailey's Building and Loan safe.  What was contemporary in the story was the simplicity and stability of community based savings and loan companies.  Nobody got rich off those companies.  Unleashed to become complex and pots of gold, they went kaboom.  As Elizabeth Warren has said,

Late 1980s, savings and loan crisis—should have been a warning.
Moving on to a second point made by Gladwell:
But the basic idea, which has been laid out brilliantly by the Canadian psychologist Gerald Wilde in his book "Target Risk," is quite simple: under certain circumstances, changes that appear to make a system or an organization safer in fact don't. Why? Because human beings have a seemingly fundamental tendency to compensate for lower risks in one area by taking greater risks in another.
He uses the example of anti-lock braking systems that weren't used to reduce accidents but were used as permission to drive more recklessly.  Not so different from what Americans did as they began to see the values of their homes quickly increase.  

When complex systems fail:

...bafflement that so much could go wrong for so little apparent reason. There was no one to blame, no dark secret to un-earth, no recourse but to re-create an entire system in place of one that had inexplicably failed.
Couldn't the initial public response to the financial meltdown have been described as bafflement?  Quickly followed by fear because well, that's what we're always told we're supposed to feel when things go wrong.  Anger slowly set in when there was someone to blame – the government for bailing out the crooks on Wall Street.  

Over the past forty years, banking and investing has become freakishly complex, mostly thanks to deregulation.  Far beyond what an ordinary person can and wants to comprehend.  A house (and low taxes) is what makes sense to them.  That's their ticket into the ownership society.  They wanted into the game where everybody is winning.  The desire never more so then when the barriers to sitting down at the gaming table seemed to magically disappear and the winnings were larger than ever.  

However, when GWB said, ownership society, he didn't mean Tom, Dick, and Harry, but his kind, and his kind know how to play the long con.  And part of the long con is lulling the mark back to a state of confidence by investigating and fixing what what went wrong.  Again from Gladwell,

But what if the assumptions that underlie our disaster rituals aren't true? What if these public post mortems don't help us avoid future accidents? Over the past few years, a group of scholars has begun making the unsettling argument that the rituals that follow things like plane crashes or the Three Mile Island crisis are as much exercises in self-deception as they are genuine opportunities for reassurance. For these revisionists, high-technology accidents may not have clear causes at all. They may be inherent in the complexity of the technological systems we have created.
What if all our assumptions about the value of home ownership to an economy and individuals are all wrong?  

Originally posted to Marie on Tue Feb 14, 2012 at 04:30 PM PST.

Also republished by ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement and Community Spotlight.

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Comment Preferences

  •  We have been set up to fail since a bunch (3+ / 0-)
    Recommended by:
    Marie, joe shikspack, sb

    of evil rich guys got poor people to fight their wars Amer revolution Civil war. "We the people" was a set up from the start. W and his minions knew that.

    The radical Republican party is the party of oppression, fear, loathing and above all more money and power for the people who robbed us.

    by a2nite on Tue Feb 14, 2012 at 04:37:33 PM PST

  •  The US Economy Is Mind Numbingly Simple. (17+ / 0-)

    What's complex is the bullshit voodo that's been used to convince us to build it.

    If it was complex it would have been squirting wealth randomly in all directions with nobody able to profit from it.

    Let's see if it's done that.
    Image Hosted by

    Well looky there. Only 1% made any gain at all since Disco. Almost nobody's been able to profit from it.

    Looks pretty God damned simple to me.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Tue Feb 14, 2012 at 04:58:03 PM PST

    •  Not so simple for regular folks -- (3+ / 0-)
      Recommended by:
      cotterperson, x, sb

      percentages and inflation are difficult for them to grasp and trends totally elude them in real time.

      I personally think that economies are very complex.  The application of certain macro-economic policies are simple enough -- but don't always work as intended - because there are complexities that aren't acknowledged or understood.  Some look like paradoxes which is where I'm going in Part II.    

      •  what's not simple (12+ / 0-)

        I believe are the "markers" we use to signify economic success: so in common parlance having lots of money and low taxes and "owning" things makes people "well off", when in reality the definition of "lots" of money can only be figured in relation to what basic needs cost, so for example while many folks claim that raising minimum wage makes it "too much" what we really need to ask is what is a "living wage".  Or in reality Europeans have and pay higher tax rates than we do, they get something of value from their taxes in the form of far better health care, a secondary education system that everyone in their nation can afford to access and utilize, comprehensive child care and even publicly funded media and postal systems that work.   Or in reality, what we call "ownership" is actually "debtorship", what most of us own when we take out mortagages is a 30 year debt.  But we don't view it that way.

        It might be a bit simpler if we didn't speak in economic euphemisms all the time.

        Words can sometimes, in moments of grace, attain the quality of deeds. --Elie Wiesel

        by a gilas girl on Tue Feb 14, 2012 at 05:39:12 PM PST

        [ Parent ]

    •  Simple enough to be gamed easily (4+ / 0-)
      Recommended by:
      semiot, Marie, a2nite, sb

      Seems to me like avery few years another big economic scam/game opens up. The S&L thing is a good example. By the time everyone figured it out, the game was over, rich people profited (like Neal Bush) and the taxpayers were left holding the bag. Andthen there's the bank bailouts....and the Real Estate bubble....and.......
      And our Congressional people are always there to take advantage of it, almost like they knew about it in advance.
      Ya think......................................???

      Happy just to be alive

      by exlrrp on Wed Feb 15, 2012 at 05:16:10 AM PST

      [ Parent ]

  •  In that excellent second link, (7+ / 0-)

    I just quickly read the part about the Challenger disaster, having just listened to a piece on NPR about the death of one of the whistleblowers who sought to prevent it.

    What caught my eye after reading your diary was this:

    What NASA had created was a closed culture
    IIRC from reading about systems theory, closed systems are cut off from outside input, i.e. "reality checks," so they are eventually doomed. In the meantime, though, they have such measures as "acceptable risk" and "normalized deviance."

    Isn't that something like what happened when the ratings agencies crawled into bed with banksters, who had made their bogus mortgage-backed securities complex on purpose to keep the system closed?

    Interesting stuff, Marie. Thanks for the thoughtful post.

    "Let each unique song be sung and the spell of differentiation be broken" - Winter Rabbit

    by cotterperson on Tue Feb 14, 2012 at 05:37:07 PM PST

  •  Size and complexity guarantee accidents (3+ / 0-)
    Recommended by:
    Marie, cotterperson, semiot

    ...and make crisis management and the post-mortems productive, not so much to prevent another accident but to prevent repeats.

    Also, the larger the system the more it can withstand (if desired). Airline fight seems to be a good example of process expertise.

    China has such an advantage over our economy which is patched together over generations. The Chinese started with a clean slate, have fewer unknown contingencies than we do.

    Sounds like an interesting book.

    An anecdote... During a crisis management event, which I did a considerable amount of for large critical national health and financial systems, a guy lost his job and was reassigned out of the crisis response loop. His "crime"? For a second, just one sentence, his voice betrayed the slightest but detectable defensiveness so he could no longer be relied upon for brutal honesty.

    Post-mortems are not insurance against crises, of course. But they're nevertheless essential introspection of which we can never get enough since the only thing we can be sure of is that unplanned, natural and unnatural disasters will happen. We just always have to be increasingly aware of our premises and limitations.

    Eliminate the Bush tax cuts Eliminate Afghan and Iraq wars Do these things first before considering any cuts

    by kck on Tue Feb 14, 2012 at 05:43:42 PM PST

  •  bush touted a lesser value of ownership... (5+ / 0-)

    than the word implies.  what he was selling was indebtedness rather than enfranchisement.

    it was an ugly equivocation.

    i'm part of the 99% - america's largest minority

    by joe shikspack on Tue Feb 14, 2012 at 05:50:32 PM PST

    •  Don't know what Bush thought he was selling; (3+ / 0-)
      Recommended by:
      cotterperson, nathanfl, joe shikspack

      only what people thought they were buying which was that houses always increase in value and therefore, is an investment.  Throughout the whole chain in the real estate market and bubble everyone bought that notion.  

      •  i couldn't believe it when i first heard ... (2+ / 0-)
        Recommended by:
        joe shikspack, Marie

        some one actually say that in RL.  It was a friend of mine while I was working as a software engineer, he was one of the technical leads and was workign on his Harvard MBA, but bought the lie because he wanted to believe it.  

        When it comes to software, estimating and scheduling etc, was a complex art.  What made it more difficult is that we (the developers) were too optimistic about progress.  The other problem was that often these timelines were developed in the abscence of design documents.  You don't need detailed design docs to give good estimates, but you have to have something more than a guy feeling or a cursory design.  Of course, the more information you have, the easier it can be to make those types of estimations, but people want to know now and are willing to "accept" uncertainty - that is, the will "accept" it if it means you will give them a number directly from your ass, which they will then duly hold you too.

        Compounding that, it is often difficult to get people to realign their expectations once new data comes in, no matter how arbirtary or imaginary the original estimate is.  I remember this time in particular, when implementing a new feature, the tech lead estimated a week, which seemed off to me, but I was not included in the planning stages.  After I got the requirements, I built a quick and dirty document to visually show the complexity of what they were asking for and to realign their expectations to a new number - 4 weeks.  This blew over as well as you'd imagine, and the business team and tech lead said they still felt that a week was "doable".  So, despite the reality that new information showed them, they chose to stick with a number they wanted to believe, not what reality presented them with.

        I believe that once information reaches a certain complexity, we seek to generalize it or to message it in a way that is helpful to us, even if we do it in a way that is clearly wrong.  The "acceptance" of uncertainty is just a way of deluding ourselves into being able to see what we wanted to see all along.

        •  Odd isn't it that delusions are (0+ / 0-)

          easy to sell than uncertainty.  Once worked on the design and cost estimate phase of a project.  Building it in phases increased the total cost and time to construct, but it had the advantage of getting 60-70% operational in half the time the single system alternative and in dollars was the biggest bang for the buck component.  The $1.5 million phase one estimate was more than they management wanted to spend even though it more than paid for itself in reducing other costs.  Was told to go back to the drawing board and come up with something for under a million.  Finally ended up with being asked what can be done for $100,000, and had to tell them nothing as that much had already been spent on all the preliminary design work and reports.


  •  Risk (1+ / 0-)
    Recommended by:

    Risk is averted in several ways, or I should say it is assessed. When I hear the Republicans say that their pet job creators aren't going to move to "invest" unless X, Y or Z occurs, I know that they are full of it. There are whole sciences of risk assessment hidden in niches you never hear about because they are compartmentalized and jealously guarded. They rely on the ignorance of a certain target demographic that they intend to prey upon. The odds are weighed and the bean counters predict what percentage of failure may arise and they have assigned a number to make it go away.

    The system might work if everybody had a broad range of education. But we don't, we specialize and compartmentalize because we are a social species that has a vast array of needs, wants and capabilities. Add on top of that we have different countries, different governments, different languages, and within this country alone, more than 51 distinct and different sets laws concerning every aspect of our lives and a Federal overlay of laws on top of that. Plop religion, culture and race into the mix and we are ripe to be exploited. We tend to think in a binary manner, so it is easy to divide and conquer with the thinnest of issues.

  •  I would quibble with something. (2+ / 0-)
    Recommended by:
    Marie, Sparhawk

    The complexity of the technological system itself wasn't a problem in this case. At best, it was a technicality, at worst, a distraction. It's a bit like obsessing about the complexity of murder because the murder weapon is techologically sophisticated.

    The crisis itself had a very similar dynamic to other, older and contemporary financial crises: A debt-driven speculative bubble became self-sustaining, which could clearly be seen from relatively simple macroeconomic indicators (house price to wages, house price to rent, measures of indebtedness, leverage in the financial sector, and so on). There was nothing really new about it, and our great-grandfathers would've understood what happened immediately - after all, they lived through crises with similar dynamics.

    And therein lies the rub. Financial institutions had all the necessary information at their disposal to predict what would happen. They possessed the necessary analytical knowledge. But everyone simply shut their eyes tight and chose to ignore the problem. An interesting case of mass psychology and institutional dynamics, that.

    Iuris praecepta sunt haec: Honeste vivere, alterum non laedere, suum cuique tribuere. - Ulpian, Digestae 1, 3

    by Dauphin on Wed Feb 15, 2012 at 03:27:27 AM PST

    •  Many different ways to look at the dynamics (0+ / 0-)

      of fraud and financial bubbles.  Most have validity and explanatory power.

      I would quibble with you about:

      Financial institutions had all the necessary information at their disposal to predict what would happen. They possessed the necessary analytical knowledge.
      They really didn't or they wouldn't have all been bankrupt when the bubble collapsed.  
      •  Yes, they did. You needed only to look (0+ / 0-)

        at about five variables to figure out what was going on. But they did nothing, some because they were counting on getting out before the whole thing crashed, and others because they didn't want to believe: After all, everyone was making so much money during the bubble... it's hard to be a killjoy, and if your bosses don't want to listen, the prudent will be replaced. So everyone kept dancing.

        Iuris praecepta sunt haec: Honeste vivere, alterum non laedere, suum cuique tribuere. - Ulpian, Digestae 1, 3

        by Dauphin on Wed Feb 15, 2012 at 08:25:02 AM PST

        [ Parent ]

        •  Have you calculated the number of possible (1+ / 0-)
          Recommended by:

          permutations when your "five variables" interact?  Not saying that nobody correctly foresaw a looming financial meltdown based on what seemed to be going on.  But nobody -- and I mean nobody -- had access to all the relevant information.  Robert Reich frequently mentions that he is given credit for having predicted the 1987 Wall St. crash, but unlike others, he doesn't let that pass without also pointing out that he predicted the same thing a few other times and it didn't happen.

          Not sure additional back and forth between us would be productive as you either didn't bother to read Gladwell's "Boom" or you and I took something very different from it with regard to what I'm interested in discussing in this diary and the next one.

      •  Some knew, and took advantage (1+ / 0-)
        Recommended by:

        Take the ratings houses for example. There's no way somebody didn't know and they probably had a scenario like this:

        "I think you're over extended and if the values go down instead of up, you're screwed, and all of these instruments down the line are screwed."

        Said analyst is then hired away for 10 times what he makes at the ratings house and some less astute person is hired in his place.

        And there were other lone guns seeing the picture and played the other side. There are books about it.

        As I said before, information is compartmentalized. The retail end of the system had salesmen who had no idea what they were selling, they had the ratings and some bland blurb with past performances and blah, blah, blah and why don't you take your capital and borrow at X percent and put it into this and make X+(y) percent and write off the interest. This is exactly what happened.

        •  Not disagreeing with you that there (0+ / 0-)

          weren't plenty of people that saw and found ways to take advantage of a situation that enriched them.  However, the guys on Wall St. and even less the analysts at the ratings agency didn't know that Joe Schmo mortgage broker was manipulating FICO scores (sometimes down to sell a high interest rate mortgage) and inflating borrowers' income and the property appraisers were inflating the house values.  But none of that would have been operational if not for the massive amounts of cheap money that was flooding Wall St. looking for an investment and a principle player in the was Alan Greenspan who never saw a housing bubble.  


          •  Of course they knew (0+ / 0-)
            However, the guys on Wall St. and even less the analysts at the ratings agency didn't know that Joe Schmo mortgage broker was manipulating FICO scores (sometimes down to sell a high interest rate mortgage) and inflating borrowers' income and the property appraisers were inflating the house values.
            They most definitely knew because the vanilla tranches paid the least. The high risk tranches were the high payers because they had the higher risk.
  •  The Bush years weren't an ownership society... (2+ / 0-)
    Recommended by:
    exlrrp, a2nite

    ...they were a debtor's society.

    It's fine to have ownership, but people need to have real jobs to pay for their possessions, not bankster tricks that put them into houses they can't afford, thereby allowing businesses to pay them a pittance while everybody pretends there's nothing wrong with productivity not matching wages.

    If Obama doesn't deserve credit for getting Bin Laden because he didn't pull the trigger, Bin Laden doesn't deserve the blame for 9-11 because he didn't fly the planes.

    by Bush Bites on Wed Feb 15, 2012 at 04:28:10 AM PST

    •  Inspiration and aspirations tend to (0+ / 0-)

      come before the reality.  I would never discount the impact Bush's call for an "ownership society" that meant home ownership to the average person in the housing construction boom and standard supply and demand curves of economics.  And was repeated in many countries at the same time.


  •  Dubya Sez: We Aren't Saving Enough... (1+ / 0-)
    Recommended by:

    ...and it was simply a way to cause serfdom to put their hard earned cash into banks earning 3% interest so Bush's buddies could turn around and leverage that capital at double or more the interest.

    Dubya was no more the bad guy than Nero was for burning Rome:  He did it because he could, it worked 2 thousand years ago, and it works today.

    When did we stop feeding the Christians (or Muslims) to the lions?

    •  Americans didn't save and put their (2+ / 0-)
      Recommended by:
      a2nite, WheninRome

      "hard earned cash into banks" during the time of Bush.  iirc, the savings rate during those years was negative.

      What Bush did was cut taxes for his buddies and that's what they used to leverage the financial markets into the disaster zone.

      •  I'm not saying that's what happened... (1+ / 0-)
        Recommended by:

        It was wishful thinking when Dubya said it.  But the intent was as I outlined, and in the end he found another way to do it, as you outlined...

      •  Savings rate was inadequate, but only went (1+ / 0-)
        Recommended by:

        negative in 2006. I had the same impression, and checked it out a couple of years ago.

        Teaser rate mortgages, home equity loans, and transferring credit card debt to more traditional loans all made it easy for the imprudent to spend instead of save.

        Too much of the Bush economy was running on fumes. In 2006 I told my financial adviser that it was a house of cards, but he scoffed. I told him I wanted to stay out of real estate. He said that's where the money was, but I stayed out anyway. The sinkhole was bigger than I expected. At the time, I hadn't heard of mortgage-backed securities or credit default swaps.

        Many who did save, lost painful chunks in equity when the real estate market fell down. Even before that, most baby boomers had not saved enough for retirement.

        The next twenty years are going to be ugly at best.

        Supply follows consumption. You cannot stimulate consumption by crushing the consumer. Deal with it.

        by Zera Lee on Thu Feb 16, 2012 at 01:45:29 AM PST

        [ Parent ]

        •  But they didn't know they weren't saving -- (0+ / 0-)

          told for decades that putting one's money into a house was better than a bank and recent evidence, particularly in strong housing market locations, supported that.

          This gets to exactly why I began this diary and will conclude in Part III.  

          •  My financial advisor pointed out that real estate (0+ / 0-)

            value was not growing as fast as most investments - little more than cost of living, over time.

            Even after the housing bubble collapse, he recommended that I open a home equity line of credit - I said no. That was the ATM view of home ownership. I would only do that to finance major repairs or improvements, not to enable spending unrelated to maintaining the house.

            I did not buy my house as an investment with an expected return, but because I thought that $730/month for a 4-bedroom house with growing equity was a better deal than $550/month for a 1-br apartment with no equity.

            I also had a reasonably secure job.

            I paid off my mortgage 7 years ago, and life without rent or mortgage is what has gotten me through the recession. This was my ultimate goal in buying a house - to end monthly payments for housing. The actual market value of my property only has meaning for tax and insurance purposes. (it hasn't really lost that much value after the bubble collapsed)

            But cheap and stable housing comes at the price of having a job market limited by transportation. Taking a job outside the range of my personal transportation would involve more economic complications than changing apartments.

            For others, the foreclosure problems and tightened credit could prevent them from moving at all. Shorter terms of employment also make such long term financial commitments a more difficult choice.

            If I had approached home ownership with the expectation of selling again in a matter of years, I would have been looking for reasons to sell instead of making extra principle payments each month.

            I might have upgraded my house, and lost it in the recession.

            But a more transient home owner also makes a less stable neighborhood and community. The sense of belonging diminishes.

            The first 7 years I lived in Minnesota, I had 3 different apartments. I have lived in this house for nearly 25 years.

            Small changes in a community are healthy for it, but large-scale changes affect the identity of a community. A more transient population discourages the residents of the hour from making commitments to the community. If carried too far, this could destabilize society.

            There used to be a sense of pride in being a long-term resident of a neighborhood.

            The sense of community is migrating from the real world into cyberspace and social networking. Ironically, social networking may be the means to rebuild the physical community - with political activism leading the way.

            Supply follows consumption. You cannot stimulate consumption by crushing the consumer. Deal with it.

            by Zera Lee on Fri Feb 17, 2012 at 10:04:26 PM PST

            [ Parent ]

  •  My definition (1+ / 0-)
    Recommended by:

    "Ownership society" is what MBAs rebrand feudalism as.

  •  Part of it also was a Medicare Part D type of scam (1+ / 0-)
    Recommended by:

    Lots of home builders are big Repub donors. In fact, the guy bankrolling the Swiftboaters was a rich home builder from Texas.

    Banks made money, home builders made money, wall street made money -- Bush made sure to let everybody in on the scam.

    ......Just like the drug companies cleaned up on Medicare Part D

    If Obama doesn't deserve credit for getting Bin Laden because he didn't pull the trigger, Bin Laden doesn't deserve the blame for 9-11 because he didn't fly the planes.

    by Bush Bites on Wed Feb 15, 2012 at 05:11:08 PM PST

  •  We may be moving away from a home ownership (1+ / 0-)
    Recommended by:

    culture. When workers could expect to spend 15-20 years, or an entire career at a single company, home ownership made sense. In an economy where workers shifting companies several times in a career is the norm, home ownership becomes an impediment to job change.

    When even white collar workers are treated like resources that can be used up and discarded instead of investments to be treated like long-term assets, the utility of buying a home instead of renting one goes down.

    It is a shift from stability to mobility.

    Supply follows consumption. You cannot stimulate consumption by crushing the consumer. Deal with it.

    by Zera Lee on Thu Feb 16, 2012 at 01:58:18 AM PST

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