Opinion
To Boost the Economy Decentralize Wall Street
Mar 10, 2010
By Siegfried Sutterlin, Ph.D.
By Siegfried Sutterlin, Ph.D.
To revitalize the economy the focus has been on the stimulus package. Much of it relating to infrastructure is necessary and long overdue. But, as was the case with TARP, it restores, consolidates, centralizes and continues Wall Street unabatedly. In spite of tens of billions in bonuses for Wall Street for a disastrous '09, Congressional reform efforts don't change much of the financial industry.
This means one of the most crucial elements of recovering and boosting the economy, namely, decentralizing Wall Street, is not in the offing. It is totally avoided in spite of the fact that without it no genuine long-term recovery will materialize and without it no long-term benefits will nor can accrue to the people. To restore trust and confidence in Wall Street as it has evolved in the last 60 years will continue a major burden that has afflicted the U.S. economy.
On top of this, to allow the three major ratings agencies, Moody, S and P, and Fitch, to continue as before is not only unethical but will perpetuate the economic disease. All three get paid by and make profits from the very corporations they grade and rate. To put it mildly, this is silly.
Many of the causes of the current economic crisis could have been prevented if Wall Street had not been allowed to centralize intensively and relentlessly and to collectivize a national investment stream catastrophically into one location, the New York stock exchange. Merrill Lynch, in the late forties, started to sell shares from trucks that literally brought Wall Street to Main Street. The first nationwide newspaper, the Wall Street Journal, for over a 100 years acted as a sales instrument for Wall Street.
Eventually, a giant nationwide flow of money developed that siphoned savings and investments from across the economy on an unprecedented scale, maximized geographical distances, minimized transparency and maximized fraud. Unlike some major economies, it concentrated investments into a market, which by its very nature is an asymmetric knowledge market. In it the insiders, the CEOs, the brokers and even, lo and behold, the Sovereignty Funds of foreign governments (which play a profitable nationalistic mercantilist game!) transferred wealth from the 54 percent of Americans who partook in the market by 2000. Essentially, it was a market that produced, according to Paul Volcker, few if any products or services that primarily benefited the living standard. On balance, it appears to have done the contrary too much.
Wall Street's surreal high salaries and criminal bonuses attracted large numbers of bright and talented graduates who did not mind ethical compromise. They partook in the financialization of the economy, which catastrophically deserted and neglected the manufacturing sector. From this asymmetrical knowledge market, the money was then, in turn, relentlessly re-injected into the economy decade after decade. It spread chain fast food outlets, chain hotels, chain restaurants, chain businesses of one form or another that demolished family owned businesses by the tens of thousands and, lo and behold so perceptive observers can recognize, even demolished architectural standards.
To reverse this and to speed up the recovery and to produce products and services that genuinely serve the people, popular share ownership, always a desirable pattern, should be decentralized, even if it necessitates having a stock market in most states. Though a complex process that cannot fully decentralize, it does produce genuine investment diversification and diminishes the influence of Wall Street on monetary and fiscal policies.
Local and regional investments must become the goal. They can easily be tracked, and the results are more ascertainable, accessible and become quite gratifying. Transparency, geographical distances, local businesses and regional developments, among many elements, would all benefit. A policy of spreading wealth more uniformly across the nation would be enacted. Products and services that raise the living standard would be the focus on which the rich and those attempting to get rich, would reap their just desserts. The rich would get richer by making the poorer richer instead of doing too much the contrary.
In the long run, slum houses, marginal mobile homes, and a rusting infrastructure would gradually disappear. The increasing numbers of gated and securitized communities, into which the wealthy and Wall Street CEOs tend to retreat too often, would indeed become superfluous. Wall Street CEOs would no longer have to secede from precisely what they, directly or indirectly, produced!
Unfortunately, Wall Street is at the present still expanding the wrong policy: it is advising its clients to invest, not in the U.S., but in China and Brazil. This will maximize geographical distances even more, minimize even more transparency and expand all other historical weaknesses globally, as well as maximizing the chances for more Madoffs.
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Siegfried Sutterlin has his Ph.D. in Diplomatic/Comparative Economic History, from the University of Minnesota, and was a Senior Fulbright Scholar in Germany in 1991. He has done various scholarly publications and presentations and taught at several colleges; Hibbing C. College; St. Cloud State University, Buena Vista University, and Indian Hills C. College, Ottumwa, IA., from which he retired. He also published 200 op-ed pieces in 10 Midwestern newspapers. He has traveled extensively in Europe and the U.S.
