wo lessons stand out among the many emerging from the sight of stock markets looting themselves into shambles: panic breeds panic as never before, and no national leadership is strong enough to project international reassurance.
The lessons are linked in that the Great Depression set the standard for modern financial hysteria just as the restorative presidency of Franklin D. Roosevelt gradually determined a means of repair.
True, an inflationary cataclysm beset post-World War I Europe with defeated Germany most damaged, but the first “winning” peacetime economy to go belly-up in public was America’s. Its spectacular collapse had an immediate impact on Europe, with aid to Germany suspended and the Nazi Party manipulating the ensuing discontent to its nationalist advantage. But most of disconnected continental Europe watched from afar. Passage between London and New York took five days by sea; there was no viable air connection.
Such an afar no longer exists. Nor does an American presidency capable of delivering domestic reassurance, moral and economic, into a global context. What most helped revive America’s depressed economy was not federal intervention but a world war that produced an industrial boom.
World war and its Cold War aftermath helped launch the United States into a position of economic pre-eminence that it now clings to in name alone.
But the pulverizing mood of ongoing stock chaos is negatively indebted to more recent events. The September 11 terrorist attacks — centered after all in New York’s financial heartland — exposed Americans to real and imagined threats and predisposed them to the contemplation of risk. A collective precipice was established.
Financial institutions and trading reflect ambition and optimism. Systematic threat of any kind unsettles their premises. Though menace was presented in terms of atomic or biological terrorist attacks, anxiety’s overspill conferred psychological legitimacy to a world of bad tidings waiting to happen.
While the current wave of sell-offs arises chiefly from international credit concerns it also reflects a near-paranoid response to broader vulnerabilities that those schooled in alarm have learned to recognize viscerally and flee from. Frightened crowds — whether stock holders or mobs of the righteous — are indifferent to anything except withdrawing to save themselves.
Unlike the 1930s, however, no leadership is poised to wipe away tears. The much-hailed process of global interconnectedness ironically defeats any one power’s ability to broadcast credible reassurance. This all the more the case when a crisis strikes both the United States and Europe, communicative partners in prosperity and doubt.
The sell-off has also put both presidential contenders on the defensive, since both are in fact observers and neither wishes to risk pledging repairs that might be mocked as unrealistic. Their neutering is the latest sign that the American presidency no longer automatically asserts a calming power.
As grave as the financial undoing is, it will abate. Progressive economist John Kenneth Galbraith once spoke of crisis as a central nutrient. Here then is fright’s cleansing occasion: downturn as both avenging and redeeming angel. Economies based on investment can cycle into recession or depression as purchases drop and prices escalate. Trust recedes. What markets cannot do is dissolve the commerce that created them. Capitalism’s ticking clock — Daniel Alarcón’s phrase — never stops telling time.
People and purchase power frame the allocation of money. Both can be spooked, greed as well; but none of these components fizzles completely. Companies and banks have, can and will. Affluence will also be depleted. Recovery may take a decade — or longer. But among the truly poor, panic is a malady limited to those well-off enough to suffer its symptoms.
What is surely coming undone, however, is the notion that the Western middle class is invulnerable to the malfunctioning of devices that ensure a central part of its power: credit. Mass credit, a post-war concept, is under siege.
So is pause for thought.
Franklin Roosevelt was not forced to reckon with corrosive immediacy of bad news and the restlessness of its urgency. He was in a better position to make end-of-the-day radio broadcasts that made some sleep easier. Now, there is no end of the day.
George W. Bush is having little effect, and there’s little reason to believe either Barack Obama or John McCain, in his shoes, would be significantly more successful.
Panic is no longer a lullaby away from fixing. It’s out there, germ warfare of a sort, adjusting its makeup to resistance and insisting on contagion. Panic — which Roosevelt memorably labeled “fear itself” — causes the malady it feeds on.
Pope Benedict burrowed astutely into the wound (calmingly, he might say) when he used the financial rip-tide to remind his deaf folk that money plus money usually totals woe. Only God has the right stuff. God does not invest. Nor does he panic.
It’s an easy sell from a pope, of course — if only anyone still believed in the literal spirit of reassurance.
