Tuesday, March 03, 2009

First, be suspicious of "simple" solutions...

You'd think that farmers who have a devil of a time explaining our subsidies or crop insurance to non-farmers who see only checks in the mail would appreciate the complexities of solving the banking mess. As I've tried to point out, shutting down Citi/AIG/GM by denying government intervention is warmly satisfying to us until we notice the linkages to our lives.

H. L. Menken captured this perfectly: "There is always an easy solution to every human problem--neat, plausible, and wrong."  These simple, wrong answers are the daily fodder for commentators, and especially detractors of any government policy.

Partly this is due to thinking [incorrectly] the government is like a person financially, and mostly it's due to the fact we're trying to correct the damage done by financial systems we now know nobody understood in the first place.
 James Baker becomes the four-hundredth or so person to write a column explaining just what America should do about its banking system. His recommendations are pretty typical—figure out which banks are in which kind of trouble, fix or shutter them based on that, and wipe out shareholders and (as far as possible without collapsing the financial system) bondholders in assisted banks. The big failure, to me, of all of these columns is that they largely fail to convey the challenge the government faces. They generally take the form, "This won't be easy, but here's what we should do in a few simple steps", suggesting that Tim Geithner and company (and Hank Paulson and company before them) are just dense. But of course they aren't. In fact, this is a really difficult situation to address, with enormous potential downsides to missteps. [More]

For mere mortals, we have passed our comprehension level long ago in these issues.  The result is we have to choose to trust those who are best trained and experienced to do the best they can for all of us.

Only we don't do trust so well anymore. Anyone caught trusting is obviously a dupe of political trickery, a pawn of corporate scheming, or a naive sucker who doesn't understand how rotten their fellow citizens are.

Instead we despair, unable to find hope in our own intellect or from those around us.  This gospel of cynicism will not lift us out of this economic chasm. In fact, I am utterly convinced even misplaced hope will allow us to function better because it at least permits action, which leads to empirical, real-world data.  Even if the results of action as bad news, we now know something we didn't before, and in the process of trying we have often developed a chance to build trust in fellow strugglers.

I can understand the fear behind the snarling and name-calling of those who find our response to this crisis to be entirely wrong. But their approach is often so harsh it fails the crucial test of trust-building. Perhaps doing much of what is suggested is wrong.  But there is only one way to find out, and my belief is we're smart enough to adjust as we go to lessen the chances for failure.

In the process of action, we create possibilities to rebuild the trust our system must have for efficient operation.

No comments: