There is a school of thought that the crash of ’08 was not the bottom of the current economic cycle, and that we’re due for yet another, and possibly worse crash. For example, progressive Thom Hartmann published in 2013 the book The Crash of 2016. The basic tenet of this view (if I may oversimplify) is that increasing income inequality and the ability of the rich to set the political agenda have vastly undermined the economic engine of the US.
I’ll expand below on why I think this possibility has huge implications on our candidate choice.
Though this decade into the 70’s, the US sort of followed the rational of Henry Ford when he decided to pay the people assembling his cars enough so that they could afford one to buy one. When everyone has money to by the products made by the economy, earned by working to make those products, you have a working economic system. The US in the 80’s (and Ford, I guess, before that) abandoned that philosophy, however. We’ve shipped our jobs overseas, slashed wages and the middle class has shrunken severely. A very wealthy man still only eats one dinner, and only needs so many cars and phones and houses. They put the rest in investments, which often tend to be bubbles (like the housing market pre 2008) since there’s too much “hot” money chasing few real opportunities. Our economy is a bit of smoke and mirrors, with Wall Street getting much of the take while adding little value.
Concern also focuses on how the bank problems in the US and world have not really been fixed, and most of the same people are still in charge and bank wealth is greater than ever. And that China’s growth has not really been sustainable and that a crash there could have huge ripple effects. Darkside has mentioned the concerns a crashing oil market could have on the global economy in a couple of post quite a while back. Gjohnsit’s post Oil bust is about to get real is yet another hint at this problem, and what finally prompted me to finally write this diary that I’ve been pondering. All of these problems could destabilize the big banks, which is what I focus on below.
Sooo: let’s suppose that there is to be another economic collapse in the near future. First, let’s consider our two candidates. Bernie Sanders have been talking about the fundamental problem of income inequality for decades. But more to the point, he’s been openly and frequently calling for the break-up of the big banks in his current campaign, and calling out the harmful effects of money in politics. Senator / Secretary Clinton has also been talking about Citizen’s United, but her big donors have actually been big banks. That may not be surprising for a former New York senator, but it still is true. She has also spoken to audiences such as Goldman Sachs, and reportedly told them that people should not demonize the big banks. My personal opinion, and I suspect that this is shared by most people, is that there doesn’t seem to be a lot of daylight between Hillary Clinton and Barack Obama when it comes to the banks.
Now, let’s take two Scenarios:
Scenario 1: A big crash before the 2016 election. The GOP will undoubtedly try to capitalize on the fact that Democrats have been in power for 7 or so years, and so are responsible for the crash. And “throw the bums out and put in a new team”, etc. My concern with Secretary Clinton is that they sort of have a point, although of course they’d have made the situation much worse. But President Obama’s failure to break up the banks, his justice department’s failure to punish anyone for fraud, the forking over of $Billions with few conditions and the appointment of wall street insiders as regulators have all allowed the bank situation to fester. And is anyone going to think that a President Clinton wouldn’t have done pretty much the same?? The GOP will cite all the wrong reasons, but the big concern is whether the Democratic candidate can show that they’ve been calling out the bank situation as a problem, or if they can point to a long-standing and passionate desire to address a broken bank system before it implodes. I believe that Senator Sanders is the only one who can demonstrate convincingly that he had identified that problem and his policy choices are not those that had been in place under Obama. This is a situation where it really would be good for the candidate to have distinguished himself from the current president.
Scenario 2: A big crash after the 2016 election. I think people are not really considering this scenario, which I think is shortsighted. A President Clinton could be blamed for the policies of the past, as her positions would not have been demonstratively different. This could lead to a midterm disaster, and a real throw-the-bums-out election in 2020 if the economy hadn’t improved. And you know that the GOP would do everything they could to prevent that recovery. The rich have profited greatly from both the crash and the subsequent state of affairs where corporate profits rise while the job market is stalled. They aren’t worried about a crash because they’ll profit again from the next one.
Senator Sanders, on the other hand, would in this scenario be in a perfect position to say “this has happened because we’ve let the banks become too big. As I’ve been saying for years, we need to break them up.” Obviously the GOP would do everything they could to prevent that, but at least the Democrats could make an argument which I suspect would ring true to a great many people. I think our midterm chances would be way better with us being able to say “throw the bums out who won’t break up the banks”. In fact, it could actually trigger the political revolution that we really need.