For Economic Change, Say Goodbye to Wall Street, Hello to the Digital Route 66

There is a bit of gridlock in the corridor between New York and Washington, D.C. that none of Mr. Obama's proposals for highway improvements can correct. It is quite amazing that, in an age where the Internet makes real time communication from Trenton to Timbuktu a reality, that the bulk of our elite bankers still emerge from a handful of ivy-clad intellectual hatcheries, and bounce back and forth between Wall Street investment banks and the government agencies that regulate them.

Before we can fix the broken financial system, is it not about time in the 21st century that we also revisit the 19th century structure of our financial systems?

For the last 150 years we have built a massive financial and industrial machine based on the idea that you needed to concentrate people, wealth and power in major city centers to make something happen.

There was a good reason for this. With limited communication systems, having all of that economic and political power of millions of people living on top of one another allowed for a kind of productivity that you could not have with people spread out over wide stretches of the country where it might take days or weeks to just get information, people, goods and services from place to place.

The Industrial Age was built around these concentrated population centers, connected by roads and rail, then telegraph and early telephones. New York became the financial and industrial capital of the United States, a position that it has enjoyed since the founding of the nation. Wall Street has been stoked with Ivy League pedigrees who are the supposed brain trust that keep the engine of progress oiled and running smoothly.

This is 2009, not 1909, though, and the world has changed. FedEx and the Internet lead a revolution of instant information and just-in-time delivery of goods and documents that have allowed mega-businesses to sprout up all over the world. Microsoft is in Redmond, Washington, not Rego Park. Dell Computer is in Round Rock, not Flatbush, Brooklyn. The industrial grid map of top companies has more weight in California and Texas than New York City and Chicago.

Along with that change, our academic institutions have also vastly changed. While Harvard and Yale still hold their name value because of their ties to the power centers of this country, other fine institutions from UC Berkeley to Northwestern to the University of Michigan have generated some of the finest minds that have reshaped the modern world.

So why is it that when Washington is looking for the best and brightest, even the dynamic Obama Administration feels compelled to reach out to the same Wall Streeters and Harvard Club members whose lemming-like myopia took the country's financial system to the brink of ruin?

There was a certain degree of historic "validity" which, in sixty second news sound bites we rely on for public opinion, to say that John Q. Treasury Secretary is from this old boys' club or that weighty financial institution, conveyed a sort of instant comfort and credibility with the public.

The problem is that all of those Wall Street stalwarts sold this country down the river for a quick buck in a way so poorly engineered and transparently Emperor Has No Clothes that confidence in those names has turned instead to mistrust. Once untouchable CEOs at the Morgan Stanleys and Chases and Citibanks and Bank of Americas are suddenly facing pressure to step down.

The bigger questions, though, are:

• Does all of the nation's financial might have to be centered in a half-mile of the southern tip of Manhattan?
  


• Are the best and brightest really only centered around the Northeast in the 21st century?

To the second question, the answer must assuredly be a resounding "no." Politically, the Obama administration has had no problem reaching out to the Leon Panettas and Bill Richardsons and other experts from different parts of the 50.

So why can't the Fed and the Treasury reach out more to a Brad DeLong at CAL, or even the different viewpoints of a David Aschauer of Bates College, just two examples out of many, many interesting and diverse voices with expertise in the field who can contribute meaningfully to the dialogue about moving our economy into a 21st century track.

Part of change, it would seem to me, would be not reproducing the same mistakes of the past by going to the same dogmatic approaches that have been used by the schools that have controlled this country since the advent of the Industrial Age.

Some of our most progressive businesses, like Apple, Oracle, Microsoft, AmGen, and the next generation of electrical power manufacturers call the West and the Southwest home. If the Obama administration is up for a new idea, how about not only bringing in some new thinkers, but bringing in the point-of-view of some of the most successful economies in America?

Instead of resurrecting its archaic and decrepit bones of an aging and incestuous financial system, we need to take the opportunity that the dismantling of its corrupt and arcane practices have opened to find a new, more dynamic way of using the Internet to connect the great thinkers, the economists, bankers and business entrepreneurs that are the dynamism that drive the new world economy, together. Obama did it in politics with his change website. He will need to work this miracle of uber-think-tank on the banks and business world.

We changed the nation with an Interstate road system, and the web. Wall Street is dead. Web Street needs to arrive, and soon.

Comments

[ManwithaParachute]

Capitalism will not die because society has valued greed to such an extent that we are suspect of anyone who appears altruistic. Government must be a barrier to capitalism as the ultimate goal of any capitalist business is monopoly. There appears to me several similarities between the Great Depression and whatever it is we are at the beginning of. The global impact is not fathomable at this point. Those at the bottom have less to lose which may be a benefit.

If the TARP monies would have been dispersed to those with mortgages in stress for the sole purpose of paying off that debt, then we would have removed the troubled asset from the books and the little guy is relieved as well. Consumer is free to consume and the finance people are not anchored by troubled assets.

There has to some intervention at a grand scale. While I do not know what should be done certainly giving anything to the folks who caused the problem is not going to result in a different outcome.

Financial mechanisms like credit default swaps should be canceled and made illegal. Investing should not be gambling.

On the premise that we have financial institutions which are too big to fail so we have to bail them out then we need to break them up so we will never have to pay for this mistake again.

[Brian Ross - Huffpost Blogger]

Outstanding thought!

[HamletsMill]

This event since September 2008 foreshadows a situation far, far worse than anyone yet fully comprehends. This is indeed the end of capitalism as we know it. By June 2009 we are going to be in something never before seen on this Earth. Free fall far worse than 1932. The U.S. Stock Market will NEVER come back. Never. There are $1 trillion bet in Credit Default Swaps on GM going under in the next 1-5 years. 35%-70% of many people's 401K's are completely gone. Many state and city governments in the United States are broke. We have a very capable and intelligent President. The stimulus plan is a worthy idea and has to be tried but I do not think it is going to work. The stakes are going to keep going up week by week. Eventually, this is going to be a 300 year rethink of fractional reserve banking and how central banks work across the entire world in every society. It is nothing short of a true world wide revolution. But it is with thought not bullets. We were led by complete madmen over the last ten years in the greatest period of financial fascism in human history. The chickens have now all come home to roost. It is amazing, amazing stuff.

[Brian Ross - Huffpost Blogger]

Neither history nor common sense support the idea that the stock market will NEVER come back NEVER NEVER. Same pessimism pervaded the 1930s as well. The fundamental values of the majority of American businesses, their net asset value, still remains strong and, even if you lopped all of them in half, would still be nearly double what the market is valuing most of them. Just as their has been irrational optimism in a 14,400 DOW, there is irrational pessimism in the current market, which you have expressed rather well.

[HamletsMill]

I genuinely hope you are right and I am wrong. I really do. I hope the stimulus package works brilliantly. I am very much Keynesian in my outlook. But somehow the piper of the Austrian School is going to have to be paid. Bad management must be punished if those holding equity are wiped out. So far that has not happened. Perhaps it will. The market may come back. But if you were in the stock market in October 1929, it took you 25 years to get your money back. Maybe it will turn out better this time. I certainly hope so. You article, BTW, was spot on. I am an Ivy league graduate of the Wharton School and I foresaw this in 1968. Ivy league universities are just places of indoctrination where gullible people are made to feel they are an elite. The greatest method ever devised by man to control someone is to make them feel they are an elite. We just lived through a Harvard MBA President. Jeff Skillings and his ilk also comes to mind. All men who never started on the shop floor in an economic enterprise. Your analysis was spot on.

[jackwaddington]

Wow ... finally we are beginning to see outside the box. Yep, start by closing Wall St: this rich man's casino den. BUT we need to go further than that. We really have to start to look into what economics really means. The study of economics is the study of money flow. BUT money is a symbol and it is a symbol of 'value' not of real value but of a sort of agreed value by the population in general. But as the housing bubble and every other bubble we've experienced in the stock market, that value is not real but merely a speculative assessment of value. Next, studying the money flow is as unpredictable as studying pedestrian flow or the weather. It is not a science but a guessing game. Yet we issue degrees at universities for a three year course studying this unpredicta­bility!!!!­!

For he last four centuries there has a been another idea, little thought through (resurrected about ever century) that transcends money and economics. Yeah, yeah, it's a scary idea until you really get into it deeply then viola, there is some light at the end of this tunnel. All that is currently happening is really telling us that the days of capitalism are sinking fast and are irredeemable and OVER. Dare we contemplate that????

[Brian Ross - Huffpost Blogger]

A little too extreme. Capitalism isn't dead. It is evolving. We go through periods of correction where excess causes the system to stumble or falter. Usually, if the Great Depression is an example of one of those centennial events that causes massive change, it reshapes our systems to reflect the needs of the time and we move forward. I do not believe that this is any different.

[HamletsMill]

Probably the greatest attribute for political candidates for the foreseeable future is knowledge of the sorry economic history of the United States. How could anyone have broken the firewalls of the Glass-Steagall Act and not realize what would happen? How could anyone not have known of the bucket shops that were magnifiers in the Panic of 1907? The Credit Default Swaps are pure global financial nuclear fission chain reaction magnifiers. How could anyone not have recognized that? The basic and fundamental ignorance of the people that wrought this just astounds me. By my count there are at least eight bubbles out there. A financial nuclear event could start in Europe or China well beyond President Obama's control. Lehman and AIG were the first 1931 Vienna Creditanstalt event. I am sure Bernanke must have seen it in that filter. But is there another one out there brewing over the horizon?