Yesterday’s press release from Senator Sanders’ office yesterday called for a “four point plan” to salvage the economy that included a tax on wealthy Americans to pay for the massive corporate bailouts underway, greater regulation, a new economic stimulus package, and this doozy tossed in there like it was an ol’ casual policy notion (emphasis added):
Third, he said giant businesses like Bank of America should be broken up so no company in the future could bring the American economy down with it. Said Sanders, “This country can no longer afford companies that are ‘too big to fail.’ If a company is so large that its failure would cause systemic harm to our economy, if it is too big to fail, then it is too big to exist.”
Bernie doesn’t know how right he is. And from the tone of his press release, I don’t think he realizes just how radical his suggestion is, either. “Too big to fail” is obviously a ticket for disaster, but its not the size per se that’s the issue – its the overall character of the economic system.
All systems need diversity. It is both the means and the end for functional, healthy systems. If you have any doubt, look to nature as the guide. In terms of process, diverse, complex ecosystems weather diseases, disasters and gradual changes, whereas monocultures don’t. And as far as ends go, the very directionality of the natural world is towards complexity and diversity. Socially, its no coincidence that the “melting pot” US jumped to the top of the international heap by so many metrics, and its no coincidence that now that our cultural and economical diversity has been moving towards the simpler and less diverse, that status is plateauing.
Although I used to feel otherwise, I’ve gotten rather blandly analytical in my old age. The fact is that large scale market capitalism is neither inherently “good” nor inherently “evil” as the more parochial on the different ends of the political spectrum would say. Such dogmatic terms only muddy the water. Terms such as “beneficial” or “destructive” are safer, but even those are too reductive. Capitalism is unique in its organic quality that exists largely independently from the more straightforward organic natures of other large institutions, who owe that quality to a reflection of their human components. Large scale capitalism develops its own organics, and those organics are strangely circular. At smaller scales, capitalism encourages diversity and complexity making for a rollicking robust nature.
But as it moves from the micro to the macro (especially when it truly goes global), it wants to consolidate its new, grander-scale functionalities into sets of intermediary institutions that act as organs, and the system takes on a life of its own – a singular life and, as such, one that works against diversity and complexity.
The diversity point is probably self-evident, but so is the complexity when you think about it. The global economy and all its interdependent institutions creating a cross-border capital circulatory system are not really that complicated when you get into it. I think this is even part of the appeal to laissez faire purists. It’s not that hard to “get” at a fundamental level, and I think some people become so entranced (or even proud of themselves) when they do “get it” that they smile, get an endorphine rush, pat themselves on the back and turn off their brains then and there (Jack Kemp waxing aroused over the Laffer-curve comes to mind…). And the more these transnational systems have grown, the less complex they’ve gotten. Now the some of the absurdities have grown (the much discussed practice of short selling is pretty absurd, in a sense), but absurdities are not complexities.
And because the system has coalesced into something new and big, and also simple (simplistic?) and uniform, its easy for boneheads to throw wrenches into the mix, either through their boneheadedness, or through straight up greed (or both). Insuring bonds like you would a car, for example.
Although I don’t think its looked at this way, regulation has traditionally had the effect of building in barriers to some of these forces towards simplicity and uniformity. When misguided doofuses look at the resulting picture, though, all they see is blockages in the wealth circulatory system, so they want to cut them right out, despite the fact that by doing so, they’re allowing a new institutional entity to evolve that has less and less natural resistance to disaster, disease or gradual changes in the environment. It may get very big very fast, but it wont be long before it has a stroke.
But that’s where we are. The body economic is having a stroke. The Treasury Department and Congress are, at least at this point, trying to come up with a life support system.
Bernie’s suggestion, however – whether he realizes it or not – is to forcibly move back across the line we left behind years ago. By eliminating “too big to fail” corporations, he wants to fundamentally change the character of the global economy – in the process creating far more diversity and complexity in the system, and in that process, making it a far more disease and disaster resistant entity.
That’s not to say that Bernie’s proposal will take us back to purely localized economies – far from it. That’s still another institutional manifestation of capitalism entirely. And whether or not we’d want to turn things back that far or not is a great debate, but one that would take a lot more space.
Still, as far as the current Washington policymakers are concerned, I suspect that Bernie might as well have just recommended we move the US Capital to Mars…
