In 1993, the gross global product represented about $20 trillion and derivatives traded in the world markets, $12 trillion. Although derivatives have appropriate functions, such as making hedging possible and lending liquidity to markets, they are instruments whose value is not intrinsic but derived from that of mortgages, securities and other assets. Yet by 2008, while the gross global product had grown to $56 trillion, derivatives had reached approximately $530 trillion! When the derivatives’ underlying value was eroded by reckless mortgage loans, the huge excess in speculation and the artificiality in the financial edifice were revealed.
As far back as the early 90s, books such as When Corporations Rule the World; hearings by the House Banking Committee on the derivatives market; leaders in academia such the former president of Harvard University, Derek Bok; and reporters, such as Thomas Friedman, laid out different consequences of the practices and policies unfolding in global markets. Economists of the stature of Joseph Stiglitz and a handful of prudent, long-time investors including Warren Buffet called attention to the growing dangers. The outcome was foreseen by those who were willing to see.
If there’s any hope of full recovery, we must look at the mythical mindset, symbolized by the infamous Bridge to Nowhere, which blinded us to that outcome as a means of connecting us to a brighter future.
Many believed that “the end of history” had been reached, that capitalism — not on the basis of enlightened self-interest but unregulated and unrestrained self-interest — was infallible, and that the U.S. had become the only “indispensable nation,” free to disregard others. Meanwhile, over 40 million Americans did not have a bank account, approximately 45 million did not have health insurance, and 30 million adults were considered illiterate.
The need for inter-connectedness with our own poor and with other nations means that Americans’ image of ourselves, and our aspirations — the essence of what defines “the American Dream” — must undergo radical change.
When Americans disconnected the identity of the nation from the reality of its own marginalized community and from the international reality, during a period of rapidly evolving globalization, our mindset became dysfunctional. We manifested our own loss of faith in the principle of broadly-shared prosperity.
Now, it’s time to stop being awe-struck by the cleverness of those who have been intent on succeeding at the expense of everyone else.
Intelligence, knowledge and power alone do not necessarily translate into ethical, moral, or enduringly productive behavior; without wisdom and balance, they have repeatedly produced elitist excess … and they did so once again in bringing about the current crisis.
We the people need to ask what changes and sacrifices are required in order to move in a worthwhile direction. The future of our country demands that all of us build a bridge back to reality. A good start is recognizing that the necessary flows of capital, products and services of globalization are not sustainable in a ruthless system of commerce that relies on low- or no-pay for work, and the assumption that our natural and human resources are expendable. The notion of unending, increasing affluence, and of lax or nonexistent accountability, must be abandoned.
It is not too late and our history holds the answers: a return to honoring the truths that are “self-evident,” “a decent respect for the opinions of mankind,” and the full, educated, responsible engagement of the people. This is the essence of modern democracy and the source of the longstanding success of our country.
The timing is favorable. President Obama has been a bridge between those in power and the rest of the country on a platform built on hope and inclusiveness. The economic crisis has placed us outside our comfort zone, which makes a revolution of thought possible. We can all help replace the paradigm built on the fantasies of self-proclaimed masters of the universe with one based on the profound realities that the founders of the nation modestly disclosed. This paradigm shift will reveal the new 21st century frontier. It is a challenge to be grasped now. As candidate Obama observed, this is our and the peoples of the world’s moment.
Hector Garcia is a consultant on international trade and investment and on intercultural communications.