A long time ago there was this skinny young kid from Pittsburgh, and when he was at Westinghouse High School he was reading the New Yorker and learning French – an odd thing for a young, gay black man. And young Billy Strayhorn was studying to become a classical pianist, and dabbling in composing and arranging.
But he had to get out of Pittsburgh and escape the life he’d be stuck in there if he stayed. Of course he dreamed of Paris. Luckily, in 1938, when Duke Ellington was performing in the city, he introduced himself. He played for Ellington and showed him a few of his compositions, and re-imagined arrangements of some of Ellington’s charts, and the rest is history. Strayhorn became Ellington’s arranger, and a composer for him, and the other pianist. That was the rest of his life, as it was supposed to be.
One of the tunes Strayhorn wrote as a teenager became a jazz standard – Lush Life (the link is to the Johnny Hartman, John Coltrane version, which is the benchmark for everyone else). The chord changes are very Debussy in a way, all chromatic with those major ninths, and the lyric contains the classic line – “A week in Paris will ease the bite of it, all I care is to smile in spite of it.” Some of us, also from Pittsburgh, have tried that out – the week in Paris, usually two weeks – repeatedly. It does help, a bit. Paris is not Pittsburgh, and it is certainly not Pittsburgh in 1938, in the depths of the Great Depression.
But many feel we’re in the same straights now. The economy is collapsing. Flying off to Europe could ease the bite of it all – there is something about walking the gray streets of Paris in the cold rain, alone, with a rueful smile on your face, that makes you feel as if you finally understand things, and that you can accept them. Cognac in a clean, well-lighted place after that confirms it all.
So, on Tuesday, March 31, another skinny black kid flew off to Europe – but Obama is no longer young, nor is he gay. Still, a rueful smile would have been quite appropriate:
Desperate but divided on ways to lift their nations from economic misery, world leaders converged for an emergency summit Tuesday holding scant hopes of finding a magic-bullet solution for the crisis that brought them hurrying to London.
The big G20 meeting was in London, not Paris – France came next – but things looked dismal. Our government had already pretty much acknowledged that our European allies would not go along with any substantial burst of stimulus spending, while at the same time they had been forced to give up their hopes for tighter international financial regulation. No American president could sell that to America – we don’t let other countries make rules for us – never have and never will.
No one was going to be happy. The AP item puts it this way:
Instead, leaders are trumpeting the limited common ground they could reach, including more money for the International Monetary Fund and closer scrutiny of hedge funds and tax havens. As for the broader issues, they’re hoping for the best – or at least that they will do no harm.
It was a time for rueful realism, and a spot of cognac perhaps.
Oddly, there was the French Drama Queen:
Adding to the pressure, French President Nicolas Sarkozy said Tuesday the leaders cannot afford to let the week pass without making substantial progress in fixing the world’s economy. “We have to obtain results, there is no choice, the crisis is too serious to allow us to have a summit for nothing,” he said.
Sarkozy threatened to walk out unless everyone agreed to strict international financial regulations – but he will be humored until he calms down. This meeting was about what’s possible, not what’s ideal – even if trade is deteriorating, protectionism is on the rise – everyone protecting their own industries and workers, to stay in office – and joblessness is rising fast everywhere. Yeah – street demonstrations have increased and widespread protests spread around the world. But you do what you can.
And the AP also adds this bit of dismal background:
London does not have a good history for successful economic summits. One held in London in 1933, attended by more than 1,000 world leaders and financial officials – although not President Franklin D. Roosevelt – met for six weeks and then gave up.
Yep – “All I care is to smile in spite of it.”
Still, in Making the G20 Mean Something, Matthew Yglesias thinks the summit is a good idea, even if “nobody’s actually expecting anything incredibly useful to come out of this week’s meetings.” You just need to have meeting like this, even if there is a bit of a problem:
Ultimately, however, in economic terms the world is suffering not just from a lack of institutions but from something of a leadership gap. The United States is a major economic player. But the economic realm isn’t like the military realm where we have a hegemonic position. By some measures, the European Central Bank actually presides over a larger economic unit than does the Federal Reserve and by all measures the European Union as a whole is bigger than the United States. Then beyond the two economic superpowers, there are a number of other really major players. That means the world really can’t just assume the US is going to pull a rabbit out of a hat and put everything back together. But at the moment, nobody else seems especially interested in stepping up.
There’s little wonder in that, as there’s little hope for a rabbit. The market have been up a bit, and there’s chatter about a bottom forming and things rising, but Paul Krugman, with his Nobel Prize in Economics, explains how he sees things:
I’m detecting a trend in commentary that I find slightly ominous. Some of the economic news lately has been slightly better than expected, which was bound to happen at some point (on average, after all, half the news should be better than expected). Mostly this is in the form of things getting worse more slowly, but it wouldn’t be surprising if we see, say, an uptick in industrial production in a few months, as the inventory cycle runs its course.
If so, that doesn’t mean the worst is over. There was a pause in the plunge in early 1931, and many people started to breathe easier. They were wrong.
So far, there’s nothing pointing to a fundamental turnaround this year, or next, or for that matter as far as the eye can see.
There’s nifty chart of the markets in the thirties at the link, if you like historical precedent.
Ryan Avent thinks Krugman is way off base:
Whoa! There is nothing pointing to a recovery at any time in the future? As I said, the world spent four years doing everything wrong, and yet the Depression finally came to an end. Even if we’re not taking all the steps Krugman would have us take, we are at least avoiding the big errors that doomed the economy before. Krugman is basically saying that this downturn will last as long as the Depression or longer, despite the drastically different – and economically orthodox – policy path taken by the world’s large economies. This seems crazy to me.
Yes, yes – we know more now and all that.
But in another odd way, and bad way, this is not the thirties. Yglesias argues that now, higher skill levels may mean slower recovery.
Just look at the thirties:
A majority of Americans hadn’t so much as set foot inside a high school. These days, about 80 percent of Americans have a high school diploma and about a quarter have a bachelor’s degree. As the 2007 CPS report on educational attainment says “this reflects more than a three-fold increase in high school attainment and more than a five-fold increase in college attainment since the Census Bureau first collected educational attainment data in 1940.”
This reflects a large-scale increase in the skill-level of the population which has done a great deal to drive prosperity. But it also points to a problem with recovering from economic downturns in modern circumstances.
It’s just common sense:
Unskilled workers do work that, by definition, requires few skills. You need to be willing to show up and work hard, but beyond that it’s easy to teach you how to do the job. That means that an unskilled worker can, broadly speaking, be a generalist. If there’s a downturn in demand for maids in a given labor market but an uptick in demand for CVS cashiers, then unskilled workers can shift from one sector to another without much of a problem.
Skills, by contrast, tend to be somewhat specialized. When a fifteen-year veteran newspaper writer gets laid off, his fifteen years worth of experience leave him with skills that have some value outside of the newspaper sector – general writing and verbal ability are always useful. But fifteen years worth of newspaper experience is most valuable in a world where there continues to be robust demand for newspaper writers and that’s not the world we live in.
So while the skill-base of the American workforce “is the cornerstone of our prosperity” it may be killing us now. Work is not generalized. We all work in sectors, as they say:
A large economic dislocation typically forces some sectoral shifts. And when you have large sectoral shifts, the value of your workforce’s skills diminishes. I believe something similar is true for capital goods. The cars manufactured in the 1920s and 1930s were crude compared to today’s cars. And the tanks of the 1940s were crude compared to today’s tanks. So it was easier to convert the car factories of the 30s to tank production than it would be to effect an equivalent transformation these days. Or, more to the point, it was easier to do that than it will be to convert capital goods related to the production of houses into capital goods related to the production of import-substituting manufactured goods.
And he points out that our key export industries – aviation and entertainment – “are both in long-term structural decline.” Pass the cognac.
So we bail out failing industries. How dumb is that?
Actually, in spite of McCain and the Republicans saying let them all fail and be done with it, bailouts may not be a bad strategy. Timothy Noah, in The Bailout Record, offers the history of such things:
1971: The Nixon administration guaranteed $250 million in loans to the Lockheed Aircraft Corp. The government ended up netting the equivalent in 2008 dollars of $112 million in loan fees.
1974: The Nixon, Ford, and Carter administrations spent the equivalent of $7.8 billion in 2008 dollars to bail out Franklin National Bank, the 20th-largest bank in the country, eventually selling off its assets for the equivalent of $5.1 billion in 2008 dollars.
1980: The Carter administration provided Chrysler with $1.5 billion in loan guarantees. Chrysler finished paying off the loans in 1983. The US government netted the equivalent in 2008 dollars of $660 million.
1984: The Reagan administration assumed an 80 percent share of Continental Illinois National Bank and Trust Company. This remains the “most significant bank failure resolution in the history of the Federal Deposit Insurance Corporation,” according to an official FDIC history. In 1991 the government sold off Continental Illinois at a loss to the FDIC of $1.1 billion. This was the bailout that bequeathed the catchphrase, “too big to fail.”
1989: The first Bush administration bailed out the savings-and-loan industry at a cost to the taxpayer equivalent to $220 billion in 2008 dollars.
2001: After 9/11, the second Bush administration lent the airline industry $10 billion and gave it $5 billion outright. A stock warrant provision in the deal netted Treasury somewhere between $140 million and $330 million.
These transactions did not take a bad situation and make it worse – “The evidence suggests that the government tends to lose money when it bails out banks and to gain money when it bails out other sorts of companies.” But things get saved from collapse. Sneer if you want, but bailouts work.
Still, what Yglesias notes – that we’ve become too specialized to get out of this mess easily – is not insignificant. A prime example of that might be a fellow who worked as a shrimper and ditch digger before he turned to systems programming. That would be Michael Osinski. In New York Magazine he tells his tale – he helped bring about the financial crisis as the behind-the-scenes wizard who wrote the widely-used software application that sliced mortgages into bonds, spreading appalling risk in clever ways so that no one would be left holding the bag, ever. He now says it was like grinding up chicken and labeling it steak. He blew it. Osinski is still proud of his work, but he is grappling with the results – “To know that a dozen years of diligent work somehow soured, and instead of benefitting society unhinged it, is humbling.” Perhaps we don’t bail out that industry – and Osinski can go back to the shrimp boat.
But that is the one industry that made us successful. See this video clip – David Shuster interviews the former IMF chief economist Simon Johnson, about whether the United States could be headed for another Great Depression. There’s a bunch of talk about all this getting tough with the auto industry and why Wall Street is not getting the same treatment, but they come down to discussing Johnson’s article at The Atlantic The Quiet Coup:
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government – a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the US, it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
That article is an eye-opener. For the last ten years almost half of our growth came from the financial services industry – nothing of intrinsic value was made, no products, no services, no big buildings, no nothing. We passed promises around, buying and trading them, and everyone made a cut on the sale. But there was nothing there. Johnson has the data, and charts. America’s business was trading promises and lying to each other. And all the hypothetical wealth was made possible by a cadre of those who became very rich doing such things offering massive goodies to those who wrote the rules, or more precisely, those who eliminated one rule after another. No one knows the country’s real GDP from 1990 forward. That accounting is just beginning. A rueful smile is appropriate.
The hypothetically wealthy will fight hard to hold onto their hypothetical wealth. They produced it, damn it, and they’ll keep it, such as it is. Those losing their jobs or homes or healthcare will hate them for that – they feel they’ve been scammed. If there is any wealth it’s time to make sure everyone gets a fair deal.
This may be tearing the country apart. Andrew Sullivan thinks so:
The new cultural divide will not be on guns, gays and God. It will be between the makers and the takers, the producers of wealth and the recipients of redistribution. And it will be about tempering the over-reach that the Democrats will be unable to resist.
But that means the critique should not be undermined by mindless partisanship now, and it should be based upon clear and constructive policy proposals to advance individual liberty and restrain the cold, clammy hand of the state. That’s the medium term challenge for the sane, imaginative, serious right. It requires discipline and thought. And it also requires time.
One of his readers rips into him for that:
The vast majority of Americans are just like me: we’re “makers” who are also “takers.” We have jobs; we work hard and take care of our personal business even though we don’t have much money. Broadly speaking, a lot of us middle-class “makers” are also “recipients of redistribution” in that we don’t, by conservative standards, pay our fair share of taxes. And thank God; spread the tax load evenly and an awfully lot of productive and self-sufficient people are going to be suddenly poor. I, personally, would suddenly be without healthcare and unable to keep my son in the local public university he attends. (There are few things more subsidized than public education.)
This reader suggests the defenders of those who create wealth, or what passes for wealth, are going to be in deep trouble:
Do you really think the Republicans are going to assemble a majority out of those who want to gut Social Security (one of the most successful “taker” programs in human history), healthcare, and just about everything else government does to make our country a more civilized place to live? Maybe you ought to define just exactly what you mean by “makers.” Then calculate how many of them aren’t going to be offended even a little by the Democratic agenda. Then figure out how conservatives are going to find majority support without resorting to the same kind of divide-and-conquer strategy they’ve worked since Nixon.
The key to Republican success in the last few decades has been getting people angry enough about crap issues like flag burning and gay marriage that they’ll vote against their own economic interests. Now we’re staring into the abyss, and one of the good things that is happening is that those largely irrelevant social issues don’t have the punch they used to have. If a conservative is a liberal who’s been mugged, a liberal is a conservative who’s lost his health insurance. At that point, you don’t really care that much who is sleeping with whom.
And this is also tearing CNBC apart – the business channel, considering this:
Kinda surprised that few have picked up on the news which broke late last Friday that CBNC’s Dylan Ratigan had abruptly walked off the set of his “Fast Money” show and announced his immediate departure. Ratigan was a true rising star at the under-fire network, hosting two shows daily, as well as making many mainstream media appearances on Leno, The View. He also recently guest hosted MSNBC’s “Morning Joe” for an entire week.
Ratigan was consistent in his opinion that the average investor would never return to the stock market until we saw some Wall Street CEOs being hauled away in handcuffs. His riffs on the stupidity of 30-1 leverage were legendary. He was one of the most visible and outspoken staffers there. Regardless of the spin from the network, it’s a huge loss for them. I’m sure the Cramer/Stewart thing didn’t help either.
Actually, Marisa Guthrie, at Broadcasting and Cable had the full story:
Dylan Ratigan’s abrupt departure from CNBC last week was the latest blow to the top-rated financial news network. The CNBC anchor was among the network’s more outsize personalities whose star had ascended as the financial markets plummeted.”I’m willing to take the risk of not renewing my contract at CNBC and looking at opportunities in cable and broadcast,” said Ratigan during a phone conversation on Monday.
Ratigan came out early against the rampant greed of Wall Street. Months before populist outrage over the bailout and AIG bonuses reached a fever pitch, Ratigan was railing against the “vampires” on Wall Street who were bleeding our 401Ks dry. It was a point of view that put him in opposition with many of his colleagues at CNBC.
He got fed up with the bullshit – or the bulls:
Ratigan’s departure underscores some of the programming issues at CNBC. Ratigan’s star vehicle was the ribald stock-picking show Fast Money. (Melissa Lee is filling in as host until a permanent replacement is named.) And while the tone of Fast Money had gradually shifted from wealth accumulation to wealth preservation as the financial crisis deepened, it is still primarily a show for a bull market. How long Fast Money can persevere in a decidedly bear market remains to be seen.
All of the internal upheaval comes as CNBC has endured two very public episodes – the fallout from Rick Santelli’s Howard Beale moment and Jon Stewart’s public lashing of Jim Cramer. And while both of these incidents brought CNBC a modicum of mainstream media notoriety, they haven’t exactly burnished the brand.
Dylan Ratigan should take a vacation. A week in Paris will ease the bite of it. And oddly, down in Santa Monica, Digby has been watching CNN:
Rick Sanchez just asked Wolf Blitzer if the fact that Europe loves Obama will hurt him at home. (Blitzer said he didn’t think so.)
But I have to wonder: aside from a handful of neocon nutballs and the far right fringe of the Republican Party, do villagers actually believe the rest of the country hates Europe? Really?
If that’s the case, perhaps the better question is “who don’t Americans hate?”
If Europe really is considered an enemy to the extent that Europeans liking our president is a liability, then I’m hard pressed to think of any country we could consider a friend.
Hey, let’s all go to Paris. It’s a fine place, and as Strayhorn implied, a place where you actually do figure out what’s what.
Pass the cognac.