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The not-so-big picture: Public TV explains the great economic meltdown

Public TV explains the Crash of "08

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5 minute read
'Look out, here comes a crash!': Henry Paulson, the villain as hero.
'Look out, here comes a crash!': Henry Paulson, the villain as hero.
Back in the early days of nuclear power, people worried about a meltdown of reactor cores. Not to worry, said the experts; and then came Chernobyl. More recently, it's become fashionable to fidget about polar meltdowns, and to speculate which Indian Ocean or Pacific islands will need to be raised on stilts. Well, we'll figure out something, won't we?

Now we have a new meltdown, not confined to the Ukraine or the icecaps, but worldwide and spreading. It's our former friend the economy, which only a few years ago seemed to promise unlimited riches, at least to the already rich, but which has turned out to be as fickle as the nuclear genie, and just as ready to blow the planet up.

Things have grown so bad in the past year that even PBS has taken notice; hence the Frontline documentary on the Great Crash of '08, produced by Michael Kirk and aired locally on WHYY. Frontline's resident Deep Throat did the narrating, in his sepulchrally calm and yet unnerving voice, while the cameras panned the glass canyons of Wall Street in between stints from the talking heads and shots of an increasingly beleaguered-looking Henry Paulson, on whose shoulders the woes of the world had descended.

Three meltdowns with a common thread

The exposition focused, very briefly, on the housing bubble, the most recent of the devices by which Wall Street and its revolving-door cronies in government have sought to prop up our capitalist Humpty-Dumpty. No mention of the Silicon Valley and S & L bubbles that preceded it, leaving the moderately well-to-do consumer's principal equity asset as the last thing to be bilked. No mention, either, of the essentially stagnant economy of the past 40 years, in which relaxed credit alone has fostered the illusion of sustainable economic growth.

When you come to think about it, our three meltdowns share a common thread. The atomic age was born in the Second World War, which in turn was the solution (at least for Americans) of the intractable Great Depression of the '30s. Rebuilding a world wrecked by war and creating a pollution-intensive economy gave us a couple of decades of artificial growth and set us on the road to global warming. Resource depletion ran up our energy bill (remember last summer's $140-a-barrel oil?), and set the stage for a new economic contraction. The housing bubble just beat the energy shortage to the punch.

A high-finance version of the Cuban missile crisis

Frontline's rapporteur wasn't interested in digging into this ancient history, though, or considering the squeeze on middle and working-class incomes engineered by the deprofessionalization of the former, the deunionization of the latter, and the regressive tax policies that set in with Eisenhower and continue unabated under Obama. Instead we had a high-finance version of the Cuban missile crisis, with the fate of the world resting on the wisdom and judgment of savvy insiders pulling desperate all-nighters while the rest of us slept.

Paulson, of course, was the flawed hero at the center of the drama, balancing the banker's code of moral hazard (simply stated, the bigger they are, the harder they should fall) against the realities of systemic risk (if the big do fall, they take down everyone else). At Paulson's side, and occasionally tugging his sleeve, was Ben Bernanke, the chair of the Federal Reserve, and, off in the distance, our new, tax-delinquent Treasury secretary, Timothy Geithner, then head of the New York Fed and, like the others, a prime mover in the deregulation fiasco of the past decade. A simple story, the heart of which was capitalist true believers undergoing shotgun conversions to government bailouts and de facto nationalizations.

Paulson embraces state socialism

What we need to remember is that the heroes of this story are also its villains (as we, outside the glass canyons, are its victims). Paulson, prior to agreeing to baby-sit the Bush administration through its last two years, was a Wall Street tycoon who had amassed a fortune in the high hundreds of millions on the same junk finance that was cratering the economy. Saving the Street meant protecting his own wealth, so perhaps embracing state socialism was a less difficult call for Paulson than Frontline made it appear.

In any event, when Paulson finally acted, it was with a plan that would have made him the most powerful man in the world, unaccountable to Congress, the president who employed him, and even the law. Julius Caesar himself never finagled such a coup. Congress finally resisted, but the power of the people's purse was effectively in Henry Paulson's hands for several months. Jefferson and Madison would have been agape.

As Frontline noted, we are only at the beginning of capitalism's latest crisis. The banking system is still on life support, state governments are rolling toward defaults, and unemployment is growing at the rate of 20,000 per day. That we haven't had riots in the streets yet is only owing to the extraordinary political docility of the American public, but they are taking place at an increasing tempo abroad. Let's not forget that the last time the world's economy was this bad, we got Hitler, Mussolini, and Franco.

I can't wait for Frontline to cover that.



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What, When, Where

“Inside the Meltdownâ€: Frontline documentary aired on PBS stations February 17, 2009. www.pbs.org/wgbh/pages/frontline/meltdown.

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