American and probably world financial institutions continued to reel today as an outcome of the credit collapse that began with the sub-prime mortgage mess. Because primary and secondary mortgages and other forms of personal and institutional debt were completely essential for whatever economic strength the old economy has shown since 2001, it seems probable to me that the latest failures are just a harbinger of worse money-economy times to come. However this plays out in detail, it is very likely that the new Attention Economy will grow in importance, and possibly irrevocably take the lead over the old economy, in more and more visible ways.
The facts remain that
1. the money economy is fundamentally an industrial-market economy, based on the production and sale of standardized goods, which
2. due to growing productivity continues to require a decreasing fraction of the world’s potential workforce.
Since 2001, the US economy kept going fitfully, through creating further inequality, through purely financial maneuvering, such as by hedge funds, through consumers’ making ends meet by cashing in on higher home prices through second mortgages, through added construction both residential and commercial, and through a growing luxury market to tend to the newly rich and superrich. That was clearly destined to come undone at some point, and now the point has been reached.
The lack of safeguards in investments, speculation and debt creation allowed the 2001-07 “growth”, and without it the old economy would have gotten anemic that much sooner.
But now, unstable debt instruments piled one on top of the other have led to a disaster that will extend far beyond the financial sector. Pension funds and mutual funds will mostly have dismal or negative returns, which will in themselves affect buying power for many retirees. Businesses will be unable to obtain loans they need to even maintain current efforts. Layoffs and declining work weeks will spread to many sectors. Construction — both residential and commercial — will be curtailed for some time to come. Housing prices will continue to fall as new would-be buyers will find it hard to obtain even prime mortgages. Tax revenues will decline, leading, very likely to government layoffs. And further cuts will arise because of these curtailments in consumer wealth.
More people without work, and finding it difficult, for instance, to afford college or medical care and the like will further involve themselves with the Attention Economy, especially online. As I mentioned in the previous post, the Internet draws in in new modes of attention- seeking and paying, and these in turn draw in more people more tightly to this instantiation of the Attention Economy.. Sooner or later, probably, the monetary economy will revive to a degree, but the growth meanwhile of the Attention Economy will make it less central and less necessary.
Given all this, what can government do, and what kind of program should Obama be putting forth if he hopes to win now? ( I am not yet sure how much government can do, or how much Obama is likely to propose or actually do, but I am pretty sure a McCain triumph would be by far the worse possibility.)
Here are some obvious steps:
1. Take steps to increase and universalize access to the Internet, by a combination of regulation, tax policy and direct subsidy. See to it that affordable and usable two-way Internet connections, including wi-fi, high speed, etc. spread access to all. Encourage easy to use versions of hardware and software, so more can be online. Increase transparency and responsiveness of government agencies at all levels to Internet communications, and make sure what is done online by government is archived permanently. Modify intellectual property laws to allow easier sharing of good ideas and expressions.
2. Devise formulas to modify tariff agreements so that too cheap foreign labor is discouraged in favor of policies that promote decent pay. Also improve environmental standards and working conditions for foreign factories, etc. If done right, these new requirements should aid ordinary people on both sides.
3. Press for a wide range of energy- and resource-saving inventions and practices, and see that they are put into effect. Develop renewable energy methods and devices, and try to sell these abroad, offering them at reduced cost to the neediest countries.
4. Put out-of-work construction workers to work rebuilding some infra-structure such as certain bridges, and making other infrastructure, such as airports and roads more energy conserving.
Vastly increasing educational opportunities in ways that genuinely fit possible careers to to talents and proclivities. That would include new medical and nursing schools.
5. New regulation for financial sector that is robust enough to prevent the equivalent of the curent boom-bubble-bust cycle and ove -generous rewards to bankers who are and financial officers doing little but taking money out one pocket and putting it in another (sometimes known as theft)