Arthur Magazine, Spring 2008 - Douglas Rushkoff
There’s two kinds of people asking me about the economy lately: people with money wanting to know how to keep it “safe,” and people without money, wanting to know how to keep safe, themselves.
Maybe it’s the difference between those two concerns that best explains the underlying nature of today’s fiscal crisis.
Is what’s going on in the economy right now really worse than anything that’s happened in the past few decades? Are we heading towards a bank collapse like what happened in 1929? Or something even worse?
On a certain level, none of these questions really matter. Not as they’re being phrased, anyway. What we think of as “the economy” today isn’t real, it’s virtual. It’s a speculative marketplace that has very little to do with getting real things to the people who need them, and much more to do with providing ways for passive investors to grow their capital.
This economy of markets was created to give the rising merchant class in the late middle ages a way to invest their winnings. Instead of actually working, or even injecting capital into new enterprises, they learned to “make markets” in things that were scarce. Or, rather, in things that could be made scarce, like land.
That’s how speculation was born. Speculation in land, gold, coal, food…pretty much anything. Because the wealthy had such so much excess capital to invest, they made markets in stuff that the rest of us actually used. The problem is that when coal or corn isn’t just fuel or food but also an asset class, the laws of supply and demand cease to be the principle forces determining their price. When there’s a lot of money and few places to invest it, anything considered a speculative asset becomes overpriced. And then real people can’t afford the stuff they need.
The speculative economy is related to the real economy, but more as a parasite than a positive force. It is detached from the real needs of people, and even detached from the real commerce that goes on between humans. It is a form of meta-commerce, like a Las Vegas casino betting on the outcome of a political election. Only the bets, in this case, change the real costs of the things being bet on.
That’s what happened in the housing market and the credit market—which, these days, are actually the same thing. Here’s the story, in the simplest terms:
Bush’s tax cuts and other measures favoring the rich led to the biggest redistribution of wealth from poor to rich in American history. The result was that the wealthy—the investment class—had more money to invest, or lend, than there were people and businesses looking to borrow.