The cultural crisis of capitalism

David Brooks tells us that the cultural consequences of recessions are rarely uplifting and then goes on to suggest, quite rightly I think, that the next "big social movements" will come from the "formerly middle class", the victims of today's economic meltdown.  I'm not sure, however, that Brooks quite recognizes the seriousness of the situation. For him, today's "recession" is about the formerly middle class giving up the affordable luxuries of brands like Coach, Whole Foods, Tiffany and Starbucks and finding their solace in "older, heavier, more reassuring" Playboy Playmates. For Brooks, today's situation is a standard economic downturn like the recession of the Seventies and its cultural consequences have no special historic significance.

Unfortunately, Brooks may be underestimating the problem. As MarketWatch's Paul Farrell argues, there are 30 reasons why today's economic crisis will probably metastasize into the Great Depression 2 by 2011. I won't bore you with the first 29 reasons which are financially quite technical. But it's the 30th reason that is most worrying because it is a cultural cause rather than a consequence of the meltdown. Farrell quotes the 86 year-old former Goldman Sachs chairman John Whitehead who, at a recent Reuters Global Finance Summit, argued that America's economic problems will take many years to be resolved and will cost the country at least ten trillion dollars. The problem is so bad that poor old Whitehead is thinking about the downgrade of US government bonds before he goes to sleep at night:

"nothing but large increases in the deficit ... I think it would be worse than the depression. ... Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S&P will announce a downgrade of U.S. government bonds.... It'll get worse because the public is not prepared to increase taxes. Both parties were for reducing taxes, reducing income to government, and both parties favored a number of new programs, all very costly and all done by the government."

Whitehead is right. In spite of the deadly seriousness of the crisis, there is a common delusion in America that the situation can be repaired through a new New Deal that won't involve any increases in taxation, but will magically be solved by huge government investment. It's the bipartisan no-pain all-gain myopia that got us into this dreadful mess in the first place. Both Obama and McCain clung to this lie because anything else would have meant certain electoral defeat. And this is why today's financial situation is so toxic -- at its root, it is a cultural crisis of democracy.

So let's go back to David Brooks' formerly middle class. These, of course, are the very people who have bought most fully into the convenient lie that they not only have a god-given right to lower and lower taxes but also have a right to government protection when things go wrong. So what happens if Paul Farrell is right and by 2011 we find ourselves in another Great Depression where the American government teeters on bankruptcy and tens of millions of people have neither jobs nor homes? What sort of social movements will emerge from this miasma? I suspect that these will be mass movements of rage characterized by an anti-government hysteria rather than by a nostalgia for the affordable luxuries of Starbucks or Whole Foods.