The Crisis Behind the Crisis: In Search of New Model of Democracy
| Autor | Augustus B. Cochran, III |
| Páginas | 2-20 |
THE CRISIS BEHIND THE CRISIS:
IN SEARCH OF NEW MODEL OF DEMOCRACY
A CRISE POR TRÁS DA CRISE: EM BUSCA
DE UM NOVO MODELO DE DEMOCRACIA
Augustus B. Cochran, III
ISSN 1982-0496
Licenciado sob uma Licença Creative Commons
Revista de Direitos Fundamentais e Democracia, Curitiba, v. 14, n. 14, p. 2-20, julho/dezembro de 2013.
1
More than four years into the Great Recession of 2008, despite improved
unemployment rates (though still at historic highs near 8 %) and the reelection of
President Barack Obama, the recovery lags badly and the economy totters on the
edge of collapsing anew. Painful austerity measures in Europe, contemplated
Chinese economic retrenchment, and the possibility of either plunging over a
seemingly ever-present “fiscal cliff” of drastic automatic budget cuts or locking into
a debt-reduction deal that could stall even the weak recovery, threaten economic
destimulations that could drag the world economy back into the vicious cycle of
debt and dampened demand that could mean widespread and longlasting
economic pain for people around the world.
INTRODUCTION
More than four years into the Great Recession of 2008, despite improved
unemployment rates (though still at historic highs near 8 %) and the reelection of
President Barack Obama, the recovery lags badly and the economy totters on the edge
of collapsing anew. Painful austerity measures in Europe, contemplated Chinese
economic retrenchment, and the possibility of either plunging over a seemingly ever-
present “fiscal cliff” of drastic automatic budget cuts or locking into a debt-reduction deal
that could stall even the weak recovery, threaten economic destimulations that could
drag the world economy back into the vicious cycle of debt and dampened demand that
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could mean widespread and longlasting economic pain for people around the world.
One study, cited by the Congressional Budget Office, estimated that the implementation of
automatic across-the-board budget cuts slated for February, 2013, could cost the American economy 2.14
million jobs and increase the unemployment rate by 1.5% (Blow, 2013).
AUGUSTUS B. COCHRAN, III 3
Although the crisis is global, the United States is clearly its epicenter, and the
failure of the US government to effectively respond to the crisis since 2008 hints at the
underlying political foundations of an overtly economic crisis. Many voters in the US
blamed President Obama's policies, including some prominent critics to the left of the
administration (Krugman, 2012), fueling a stronger-than-warranted challenge from a
weak candidate leading an otherwise unappealing Republican Party. The inability of the
administration to lead vigorously in the face of intransigent Republican opposition,
however, signals that the problem is deeper than misguided or timid policies, however.
Centrist political scientists Thomas Mann and Norman Ornstein (2012) have recently
departed radically from the tradition of mainstream political science of justifying and
rationalizing US political institutions; in warning readers that the crisis of US politics is
actually “worst than it looks,” Ornstein and Mann defy the journalistic mania for “balance”
by squarely blaming primarily the extremism of the Republican Party for the inability of
Washington to resolve social and economic issues, but they also note that the
combination of tightly ideological, almost European-style parliamentary parties and US
political institutions designed to slow government action and check policy initiatives has
led to a situation where the government is simply unable to respond effectively to the
issues of the day, including severe economic crisis. US politics has arrived at an
impasse without an exit.
Moreover, the world-wide and long-enduring nature of the crisis itself indicates
that the Great Recession is more than the usual cyclical crises endemic to capitalism,
but instead is a structural crisis rooted in our contemporary economic institutions. The
crisis of 2008 began as a bursting of the housing market bubble in the US, reflecting the
huge household debt level that had been sustaining consumption since the 1980s when
income levels for all but the top income categories began to stagnate. When housing
prices leveled off and variable rate mortgages kicked in, the debts came due and the
mortgage market crashed. Because deregulated financial institutions had aggressively
bought up and liquidized mortgages in speculative investment vehicles, the housing
crisis quickly morphed into a financial crisis, bringing some of the world's largest banking
and investment houses into bankruptcy. When government stepped in to bail out the
banks, and the US auto industry, with massive transfusions of government cash, the
costs, added to years of waging wars without paying for them and escalating entitlement
programs matched with tax cuts, jolted public debt to new heights. The efforts to cope
with the crisis revealed the interlocking nature of the dilemmas faced. Families tried to
cope by lowering their indebtedness, but in the aggregate this merely undercut
consumer demand. State governments laid off thousands of public employees and cut
expenditures, ironically offsetting almost exactly the stimulus plan passed early in the
Obama administration. In Washington, Republicans and Democrats agreed with the
need for deficit reduction, but wrestled over the tax increases and spending cuts
necessary for moving the budget toward balance, while most economists warned that
prioritizing short-term deficit reduction risked inducing another deep recession by
weakening demand in a still-struggling recovery.
These dilemmas reveal the structural dimensions of the problem. What is at
stake is more than policies for recovery but a choice, and possibly a change, of our
economic model, of how we are to organize our productive activities. To analogize the
economy to a car (an appropriate metaphor since cars are the motors of contemporary
economies), we face not simply a question of who is going to drive the car and how fast,
but rather what type of car will we drive (a Cadillac or a Ford, or more likely a Toyota) and
where we are going to go.
Revista de Direitos Fundamentais e Democracia, Curitiba, v. 14, n. 14, p. 2-20, julho/dezembro de 2013.
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