We know not to expect heroic rhetoric from the current US president on any subject, especially one as seminal as a global economic crisis. Watching him being presidential this week was like listening to someone reading items off a menu … tuna, salad, Armageddon. But at least something has filled the void created by the failure of vacuous politicians to inspire action: the voices of a handful of commentators and journalists.

The old aphorism about journalism being the first rough draft of history is hackneyed (and repeated) enough, but reading the international op-ed pages over recent days is a reminder of the essence and relevance of the journalism of ideas. This is how Martin Wolf started his column in Tuesday’s Financial Times:

It is just over three score years and ten since the Great Depression. Judged by its rejection of the plan put forward by Hank Paulson, US Treasury secretary, Congress believes it is time to risk another one. That slump was, arguably, the greatest catastrophe of the 20th century: it was, among other things, responsible for the events that led to the second world war — not least Hitler’s rise. One can only imagine what horrors a depression might bring now?

Such forebodings must seem exaggerated. So, I expect, they will be. But that dire outcome is no longer impossible, not because a slump is inevitable, far from it, but because action is needed to prevent one.

We are watching the disintegration of the financial system. Finance is the web of intermediation binding economic agents to one another, across both space and time. Without it, no modern economy can survive. Yet that is now threatened, with the ongoing collapse in trust and flight to safety. We can indeed run this experiment. But why should we?

And this is how he finished it:

None of what is happening is easily palatable. The need for a rescue is hard to swallow. The emergence of bigger and even more complex financial behemoths — all too big to fail — is a harbinger of crises to come. Yet, while one must consider the long-run implications of how a crisis is resolved, one must resolve it first.

Franklin Delano Roosevelt famously said that “the only thing we have to fear is fear itself”. In truth, the economic processes unleashed by the bursting of the housing and credit bubbles are real. But fear is also a danger. When confidence collapses, a market economy cannot function. It must now be restored.

The problem is not lack of knowledge of how to do this: we know how to recapitalise and restructure damaged financial systems. The problem is lack of will. Government must start to show it is in control of events. In the twilight of a failed US administration, that may seem far too much to ask. Winston Churchill, Roosevelt’s partner, said: “The United States invariably does the right thing, after having exhausted every other alternative.” The alternatives are now exhausted. It is time for politicians to do the right thing.

Over in Manhattan, on the same day, Thomas Friedman was thinking — and writing — along the similar lines in The New York Times:

I’ve always believed that America’s government was a unique political system — one designed by geniuses so that it could be run by idiots. I was wrong. No system can be smart enough to survive this level of incompetence and recklessness by the people charged to run it.

This is dangerous. We have House members, many of whom I suspect can’t balance their own checkbooks, rejecting a complex rescue package because some voters, whom I fear also don’t understand, swamped them with phone calls. I appreciate the popular anger against Wall Street, but you can’t deal with this crisis this way.

This is a credit crisis. It’s all about confidence. What you can’t see is how bank A will no longer lend to good company B or mortgage company C. Because no one is sure the other guy’s assets and collateral are worth anything, which is why the government needs to come in and put a floor under them. Otherwise, the system will be choked of credit, like a body being choked of oxygen and turning blue.

And concluding with the same baleful conclusion:

I always said to myself: Our government is so broken that it can only work in response to a huge crisis. But now we’ve had a huge crisis, and the system still doesn’t seem to work. Our leaders, Republicans and Democrats, have gotten so out of practice of working together that even in the face of this system-threatening meltdown they could not agree on a rescue package, as if they lived on Mars and were just visiting us for the week, with no stake in the outcome.

The story cannot end here. If it does, assume the fetal position.

Quality journalism may be suffering its own crisis of confidence, but it still matters a great deal, especially in an age of unremitting political blandness and partisanship.

Peter Fray

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