Bubbles, Trickles, Clogs and Spigots
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You’ve no doubt noticed how we resort to liquid metaphors to describe the economy. When capital flows at will it is liquid; if not, it is frozen. Liquidity was astonishingly absent in 2008’s economic crisis, making banks and corporations vulnerable to failure. It wasn’t that they didn’t have assets; their assets were clogged.
Plumbing is a time-honored metaphor for money, where it goes and how. NPR correspondent and Planet Money Blog-author Adam Davidson likened the economy to a system of pipes and spigots, describing the current credit crunch like this: the spigots are being turned on but hardly anything dribbles out.
This noir version of the trickle-down economy owes something to the original trickle-down economy instituted by Ronald Reagan. The pipes really are down to a trickle now and need fixing. We should move beyond the old ideological paranoia about economic planning and make substantial investments in our financial infrastructure, the plumbing of our economic system.
In the ‘nineties and early 2000s we had a bubble problem. Bubbles happen when air gets into the line, producing overblown collections of fictitious capital destined to burst. For the last two decades the economy was propelled forward by the dot.com and housing bubbles respectively. Bubbles sure are fun. But, as every plumber knows, leaks and bubbles are signs of trouble.
There are historical reasons why our use of liquid metaphors to describe the economy is ironic. For example, you could compare the inequalities of the trickle-down economy to the inequalities of tap water. Yes, tap water.
In Texas, near where I grew up, there are households that only received running water in the ‘seventies. That’s the nineteen seventies. They are part of an all-black community still known by the name that bears the imprint of a history of racial segregation: Bordersville.
Although the availability of running water is immediately linked to public health issues, the expansion of an infrastructure to provide tap to residences occurred unevenly in our country and more so in specific regions, like Texas, lagging behind when it came to black and poor white households.
How strange, then, for us to have embraced as our metaphor for wealth distribution the image of leaky pipes, when leaky and late-coming pipes were, in reality, symbols for the failure of markets to address the needs of ordinary citizens?
In light of all this, I find it simply astonishing that it was none other than a plumber who emerged in recent months as a makeshift symbol for the debate between small government with lower taxes, on the one hand, and active government with the tax burden shifted to the wealthy, on the other hand!
And yet, Joe the plumber (who wasn’t a licensed plumber, in any case) didn’t grasp the nation’s financial plumbing problems well enough to know that the candidate he endorsed, John McCain, promoted tax policies that would have made him worse off personally, as well as finance policies that greased the wheels of what has now become a global recession.
All of the fear about big government spending and economic planning as economic stimulus, and about Barack Obama’s intentions to recreate the New Deal, are a straw man case against common sense financial foresight. I hope Obama takes this as an opportunity to make smart and bold investments in the country’s economic plumbing system.
We should stop leaving the work of sustaining wages, jobs, small businesses, affordable healthcare, education, access to college, housing, support for those in need and other issues to a neglected set of leaky pipes. We can no longer rely on trickles. We need to make sure the spigots work.
Stumble It!
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