On a run this past weekend in Mississippi, 
I ran over the levee and past some dilapidated farming homes that had been abandoned after this springs’ floods. I was struck by the nobility of the structures and the spirit of farming, and I caught myself thinking nostalgic thoughts about farm life and all that it represents.
But these were not quaint relics, they’re not there to remind anyone of our past – they are, or were, someone’s livelihood that had, again, let them down thanks to climate change, increasing farm productivity and a changing global economy. What was once a thriving rural community on the banks of the Mississippi River has seen agricultural incomes decline, the Air Force base go away, and a downtown that’s been hollowed out into a living ghost town. It may be that there’s a brighter future in sight, but it’s hard to see the path that lead from here to there.
This isn’t a new story. Nor did I think it was a particularly instructive story for our current economic woes…at least I didn’t until I read a new piece by Nobel Prize-winning Economist Joseph Stiglitz in this month’s Vanity Fair titled “The Book of Jobs.” In it Stiglitz argues that while everyone notices the banking system parallels between the current economic downturn and the Great Depression, Stiglitz’s own analysis, together with Bruce Greenwald, tells a different story.
While the financial sector, specifically poor monetary policy (a monetary tightening by the Fed just when there should have been a loosening) pushed the American economy from recession to full-blown depression in 1929, this analysis masks what was really going on: the fundamental shift from an agricultural to a manufacturing economy, one in which the rising productivity of the agricultural sector caused supplies to balloon, prices to plummet, and real incomes (and towns) to decline beyond repair. So too today, Stiglitz argues, during our Long Slump: while it looks like we are having a financial crisis, what we really are experiencing is a tectonic shift in our economy from manufacturing to services. Huge increases in productivity, coupled with globalization, are causing a decline in income and jobs in the US.
If Stiglitz is right, then the medicine we’ve applied (tons of free money to the banks, with no strings attached) is all wrong. No amount of monetary tinkering will get you out of this kind of crisis; instead, like in the wake of the Great Depression, one needs a huge fiscal stimulus (read: huge government spending) to get out of this sort of mess. Back then it was, ironically, World War II. What will it be this time around?
Whether this is precisely the right analysis isn’t what’s on my mind. Rather, what worries me is that the chance that we’re going to find and execute the right policy seems preposterously low. Whereas in the 1930s we simply didn’t know enough in terms of monetary policy to respond appropriately, today each and every issue is so politicized that it feels almost naïve to think that we’ll turn to apolitical experts who just plain know more (about the economy, the environment) than everyone else. No one is seen as smart enough or neutral enough to be fully above the fray (remember when the chair of the Fed was someone everyone liked?).
How do we get to a point where certain issues are important enough that they become nonpartisan? It happens when we weave them into the fabric of our identities rather than leave them at the periphery in the realm of ideological debate. It happens when we create new narratives that transcend ideologies or, worse, when issues become so dire that we have no choice but to act together. I hope we get our act together before then.
As you allude, there are bigger forces at work here.
I doubt that global climate change is a major player in the abandoned farms you saw. One of the leading candidates is declining soil fertility. In fact, although (because?) we have in effect put our soils on steroids (aka petrochemical fertilizers) since the middle of the last century, the yield-per-acre of our soils (and, everyone else’s, by the way) is declining year by year, and absent wiser husbandry, will continue to do so. This plus the market forces will put marginal soils out of business.
That farm was a lot more productive per acre 50 years ago. We are wearing out the soil by unwise and short-term agricultural practices. (We are not unique, by the way. Almost all agricultural civilizations have done this. The difference now is, we have nowhere else to go, all arable soil worldwide is already under cultivation. )
I’m not so sure about this alleged fundamental shift from agriculture to manufacturing. In fact the United States is THE world’s big food exporter: many millions of people in the world depend on our grain exports to survive. (We are one of the world’s ONLY food exporters, in fact.) Furthermore, like any poor subsistence farmer, the world now lives from harvest to harvest. There are no reserves of any consequence. So one bad harvest, and people die. Couple these facts with a human population which continues to increase at unsustainable rates, plus climate instability, and you have a train bearing down the tracks at us which dwarfs any problems we may have with the Federal Reserve.
I am convinced that no one really knows what caused the Great Depression (there are too many different theories, all of them held by eminent authorities, to convince me that any of them know what they are talking about), and no one really knows what’s happening now. I’m content to say that the market economy goes up and down. It is in the nature of the market economy. It always has, and it always will. What did we think? That it was just going to go up and up forever? Why would it do that?
By the same token, it will not go down forever either.
One of your best posts ever…