Is No National Economy
this summer my family and I spied the Yes Men, our local culture
jammers best known for practicing audacious “corporate identity
correction.” They were at the Troy Farmers Market. Trailed
by a camera crew, they were wearing ripped business suits
and wandering dazedly about. We never found out exactly what
the project was, but it was pretty easy to come up with a
plausible guess: They were broke financiers discovering what
a real, honest to god market looked like.
Clearly, this is on my mind this week on account of the latest
installment in the unraveling of the gambling bonanza known
as Wall Street.
The other thing the hullabaloo surrounding the collapse of
Lehman Brothers and purchase of Merrill Lynch has been reminding
me of is conversations I’ve been having with people across
the country on the fallout of the subprime mortgage crisis.
One of the things they keep pointing out over and over is
this: There is no national housing market. L.A. is not Cleveland
is not Seattle is not rural Georgia. That’s why it’s so hard
to describe what’s happening to housing markets when you’re
taking a national view.
Taking it one step further, Kermit Lind, a law professor at
Cleveland State University, argues that people on Wall Street
acting as if there were one national housing market is a large
part of what got us into this. They started to act like they
could know enough when they bought these bundled packages
of loans from all over to have any idea how good of an investment
they were. They thought they didn’t need any information about
local economies, didn’t actually need to know anything about
the specific houses, neighborhoods, borrowers, or loans that
were underpinning their “market.”
Of course this is not surprising. I’ve said it before, and
author Doug Henwood said it before me: Wall Street is not
actually about investing, it’s about speculating. And as such,
it’s a ridiculous measure of the health of the economy.
Investment happens when someone with some resources lets someone
else use them, with the expectation that that person will
be able to use them to develop their capacity to provide a
good or service in some way that will allow them to return
the resources, plus a little for the privilege of having borrowed
it—either as interest or as profit sharing.
Speculation, on the other hand, is buying something, whether
it’s real estate or stocks, in the hopes that for reasons
that have nothing to do with the money you put in, the value
will increase and you can pocket the profits. For example,
nearly all of the stock market’s activity is about stocks
changing hands in hopes their values will change, not infusions
of capital to enable a business to grow.
Speculation rarely does anyone but the speculator any good.
Speculation on real estate leads to vacant lots and crumbling
buildings that can’t be fixed because someone is hanging on
hoping someone else will do the investment to improve
an area so they can reap the rewards of increased values.
Speculation on stocks leads to all the bizarre kinds of things
that CEOs do to privilege increasing quarter-by-quarter returns
at the expense of long-term stability.
How did the speculation frenzy of Wall Street become our measure
of how the economy is doing, as opposed to, say, measures
of per capita income or savings, poverty rate, unemployment,
patents, efficiency gains, improved public health, increased
leisure time, or any of a number of other more concrete indicators
of our well-being? Why has even NPR decided that the Dow Jones
Industrial Average is worth reporting with a straight face
as a meaningful number that reflects something about “the
Well, maybe part of the problem is that like with housing
markets, there is no national economy. Detroit’s economy is
just not the same as Silicon Valley’s. New York City’s economy
has more to do with London’s and Dubai’s than it does with
Louisiana’s. Ohio’s banking and land regulations are different
from Vermont’s, and generate very different mortgage markets.
A drought in the Southwest doesn’t topple our Northeastern
We can’t tell if we’re in a national recession because some
places are and some places aren’t and some places have been
Given that, most of the measures I suggested above are pretty
meaningless when averaged out across the whole country. Perhaps
that’s why we turn to Wall Street as a symbol of some mythic
unified “economy.” So we have something simple to measure
and report on.
Now, our regional economies are certainly not isolated or
independent. There are national (well, global) markets for
specific commodities. National regulations and tax policies
and spending priorities affect us all.
And what happens on Wall Street also affects all of our local
economies—by loosening or restricting availability of credit,
driving employment and merger decisions of companies we work
for, inspiring fraudulent mortgage practices to fulfill a
bottomless demand for high-return “low-risk” “investments,”
and so on.
So I won’t say we should stop paying attention to what’s happening
in the stock market. But perhaps we should not look at it
as a reflection of reality, but more like a predictor, a warning.
Perhaps we should watch it like we watch the weather or the
spread of epidemic diseases—for clues about what it will bring,
how its whims and greed and blind spots will trickle down
to the regional economies that matter, and how we might consider