For Obama's sake, and for the sake of all the rest of us who have mothers with retirement plans, we can only hope that the bottom has been reached and we can now begin to see the equity market rebuild itself. Sure Citibank is still trading under $3.00 and General Electric is barely over $10.00. Given that Citi was at 30.00 a year ago, and GE was close to 40.00, the fall of these once mighty stocks is dramatic.
General Motors is up over $3.00 today, certainly better that the 1.27 it hit early this month, but miles away from the $25.00 it traded at last March. Bank of America is trading around $7.00, well off of the $42.00 price it fetched last March.
Yes, the carnage on Wall Street looks like a medieval war scene. Giants have fallen. And even though a lot of folks, really really rich folks have been, and to some degree still are sitting on the sidelines waiting to buy the bottom, there are legions of folks who have left their shirts, pants, and panties in that dark canyon of capitalist excess.
When I hear Obama speak of returning to growth and building the economy, I can't help but feel a little empathy for him. He's a smart guy. He knows well that we must change.
And he even says it when he speaks of moving to a sustainable economy.
But what is a sustainable economy?
This piece from the Oil Drum says it pretty well.
Toward a New Sustainable Economy
Robert Costanza [University of Vermont, USA]
The current financial meltdown is the result of under-regulated markets built on an ideology of free market capitalism and unlimited economic growth. The fundamental problem is that the underlying assumptions of this ideology are not consistent with what we now know about the real state of the world.
The financial world is, in essence, a set of markers for goods, services, and risks in the real world and when those markers are allowed to deviate too far from reality, “adjustments” must ultimately follow and crisis and panic can ensue. To solve this and future financial crisis requires that we reconnect the markers with reality.
What are our real assets and how valuable are they? To do this requires both a new vision of what the economy is and what it is for, proper and comprehensive accounting of real assets, and new institutions that use the market in its proper role of servant rather than master.
The mainstream vision of the economy is based on a number of assumptions that were created during a period when the world was still relatively empty of humans and their built infrastructure. In this “empty world” context, built capital was the limiting factor, while natural capital and social capital were abundant.
It made sense, in that context, not to worry too much about environmental and social “externalities” since they could be assumed to be relatively small and ultimately solvable.
It made sense to focus on the growth of the market economy, as measured by GDP, as a primary means to improve human welfare.
It made sense, in that context, to think of the economy as only marketed goods and services and to think of the goal as increasing the amount of these goods and services produced and consumed.
But the world has changed dramatically.
We now live in a world relatively full of humans and their built capital infrastructure. In this new context, we have to first remember that the goal of the economy is to sustainably improve human well-being and quality of life.
We have to remember that material consumption and GDP are merely means to that end, not ends in themselves. We have to recognize, as both ancient wisdom and new psychological research tell us, that material consumption beyond real need can actually reduce well-being.
We have to better understand what really does contribute to sustainable human well-being, and recognize the substantial contributions of natural and social capital, which are now the limiting factors in many countries.
We have to be able to distinguish between real poverty in terms of low quality of life, and merely low monetary income. Ultimately we have to create a new model of the economy and development that acknowledges this new full world context and vision. (clip)
The role of government also needs to be reinvented. In addition to government’s role in regulating and policing the private market economy, it has a significant role to play in expanding the “commons sector”, that can propertize and manage non-marketed natural and social capital assets. It also has a major role as facilitator of societal development of a shared vision of what a sustainable and desirable future would look like. (clip)
The long term solution to the financial crisis is therefore to move beyond the "growth at all costs" economic model to a model that recognizes the real costs and benefits of growth.
We can break our addiction to fossil fuels, over-consumption, and the current economic model and create a more sustainable and desirable future that focuses on quality of life rather than merely quantity of consumption.
It will not be easy; it will require a new vision, new measures, and new institutions.
It will require a redesign of our entire society.
It will require a New Economy.
And I don't doubt that Obama knows.
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