A New Kind of Shock and Awe

In Inaugural Hope, but America is in Shock, Nathan Gardels (really smart guy), editor of the New Perspectives Quarterly, states what I believe is an important point, perhaps overlooked by many: America, we are, collectively, in shock, sleepwalking through current events in a daze. All the blood has left our limbs and is heading for our trunk, focused on corporeal survival. Someone should lay us down and raise our feet up above our hearts. (I was a Boy Scout).

These are, to put it mildly, unprecedented times.

In the space of a few short months, we have morphed from the citadel of free-market capitalism and freewheeling consumerism -- from a land of high-flying hedge funds, Hummers and homes that doubled as ATMs -- to a system in which the banks, insurance companies, mortgage industry and auto manufacturers are quasi-socialized. Adding to that shock is the fact that middle-class investors have seen their portfolios, upon which they depended for retirement, diminished nearly by half.

The tax-and-spend epithet that defined America's partisan politics for decades has been replaced overnight with a bipartisan mantra calling for a nearly trillion-dollar fiscal stimulus. No sooner had Milton Friedman been laid to rest (he died in 2006) than John Maynard Keynes was resurrected. Amazingly, even the historical aversion to state-guided industrial policy in the United States has yielded to urgent demands for political oversight of private enterprise, starting with the Big Three automakers in Detroit.

The year 2008 is thus likely to go down in American history as an even more pivotal one than 2001, when the 9/11 terrorist attacks occurred, because the life of the average American is going to be shaped far more by the consequences. We're not talking about the inconvenience of lining up to go through metal detectors at the airport. We're talking about the transformation of the American model itself. Nobel Prize-winning economist Joseph Stiglitz was not exaggerating when he quipped to me earlier this year that "the fall of Wall Street is to market fundamentalism what the fall of the Berlin Wall was to communism." Just like that, we're in a different era.

For those born after oh, say 1970, the fall of the Berlin Wall may not seem so remarkable - something else to learn about history. But for those of us who grew up in the Cold War, it seemed as if that wall would be there forever, a glaring symbol of the pain of a world divided between Free and Communist. It was THE SYMBOL of the oppression of Communism. Then one day, the guards just up and left their posts and there they were, those young people in their European clothes, sitting up there on top, breaking the wall apart piece by piece with hammers. Amazing.

Similarly, one must wonder about the fall of Wall Street. The demise of the capital of Investment Banking - those powerful, rich dudes that knew everything and had all that power - here was an industry, here was the symbol of our economy, in free fall, with dramatic events falling down one on top of the other, all over a mere 1-2 months. Giants like Lehman Brothers and Merrill Lynch, built up over decades, came down in days. AIG, Citibank, GE, GM - struggling to stay afloat...

I'm in shock, I'll freely admit it. But I wonder how many of you, my fellow Americans, realize the truly awesome moment we are living through. We have gone through the looking glass, when it comes to economics, and we don't know what lies ahead in this Alice in Wonderland world we now inhabit.