Fighting the Last (Economic) War

01/14/2009 02:21 pm ET | Updated May 25, 2011

It is curious that the blame gets passed around to plenty of people for the economic crash we are experiencing -- money managers, bankers, politicians, even home-buyers and workers. But somehow the academics, the MBA factories, have managed to duck any criticism. These are the guys (yes, mostly guys) who extolled the virtues of globalization and shipping industry overseas, who initiated the race to the bottom, who drank the Milton Friedman free market and deregulation Kool-Aid. Now they are back, dispensing more advice.

What is especially odd is how narrow is the reach of their analysis, or even their imagination. Some hold on to the talismans of deregulation. Others, the "progressives," invoke FDR and the recovery from the Great Depression. So this is all they can come up with -- a solution that is 75 years old -- priming the pump, rebuilding consumer demand, propping up the banks, creating jobs. In other words, they hope to implement measures to take us to the status quo ante.

So many things are wrong with this picture that I don't know where to start. But let me at least suggest one talking point on this new crisis which is built in to the global economy constructed by the US and western powers. The economic machine hummed along quite nicely for awhile -- goods were produced in Third World countries, consumption was the main task of the metropolitan economies. The US economy was parasitic, relying more and more on information systems, financial manipulations, military spending, and service industry. It was an embarrassment of riches, a perfect storm for the creation of a massive bubble.

The talking heads of economics have one proposal: to recreate that world, to get people in China, India, Guatemala, etc. back to the work benches and get people in Europe and the US back to the trough of consumption. We will be out of this crisis when we start doing out duty again, consume-consume-consume so the engine cranks up again.

There is one obvious problem with this scenario. If the factory managers in China, for instance, are stuck with a slow-down because of a lack of demand for their products, why shouldn't they pump up wages so that their workers can purchase the products they are building? In other words, why wouldn't the Chinese bosses come up with the FDR solution? After all, Roosevelt (assisted by economists such as John Maynard Keynes) realized that worker pay had to go up so that workers could buy the products and the factories could get going again. Why should Chinese factories wait around for the US consumer to start clamoring for goods again? Why not short-circuit the process and get those goods sold at home?

This is not just a wild guess. We have seen Venezuela's Hugo Chavez make just such a proposal in his development of the Bolivarian Alternative for the Americas trade bloc (ALBA). The economic plan for ALBA is to increase consumption, and living standard, health status, and education for the people of Latin America. Chavez has been in extensive talks with China about other global relationships that might benefit the Third World and bypass the US.

And this is not such a bad idea. We don't have to be addicted to domination, madly pursuing our version of Global Darwinism. We could learn to live in a world where the US was not the king of the hill. Instead of dreaming how to get back on top, we should be imagining another world, a more just and equitable world, in which production and distribution makes economic sense for the US -- while at the same time benefiting, instead of shamelessly exploiting, the rest of the world.