Bank-Centric Universe

Arianna Huffington writes:

A series of recent meetings with members of Barack Obama's economic team (including running into Larry Summers on my way to an appointment in the West Wing, leading to a spirited back-and-forth that made me feel like I was back at Cambridge, debating the smartest kid in the class), left me with a pair of indelible impressions:

1) These are all good people, many of them brilliant, working incredibly hard with the best of intentions to solve the country's financial crisis.
2) They are operating on the basis of an outdated cosmology that places banks at the center of the economic universe.

Talking about our financial crisis with them is like beaming back to the 2nd century and discussing astronomy with Ptolemy. Just as Ptolemy was convinced we live in a geocentric universe -- and made the math work to "prove" his flawed theories -- Obama's senior economic team is convinced we live in a bank-centric universe, and keeps offering its versions of "epicycles" and "eccentric circles" to rationalize their approach to the bailout. And because, like Ptolemy, they are really smart, they are really good at rationalizing.

The successive bailout plans have been frustrating to many observers (yours truly included), but when you realize how fully the economic team is mired in a bank-centric universe, all the moves suddenly make perfect sense. Luckily, there is a plethora of economic Galileos out there who recognize that the old bank-centric cosmology is just plain wrong. But while Joseph Stiglitz, Simon Johnson, Jeffrey Sachs, Nassim Taleb, Niall Ferguson, Paul Krugman, etc. are not being imprisoned for life for their heretical views -- they are also not being listened to. Which is really surprising for an administration that has prided itself on a "team of rivals" approach.

President Obama needs to open his inner economic circle to those untethered to this flawed way of thinking and acknowledge that navigating our economic crisis using maps based on a cosmology that places banks at the center of the universe can only lead to our being lost at sea for years to come.

I would call the outdated cosmology 'neo-liberalism.' During the election last year, I thought that Obama was more centrist than he might appear. But I didn't realize that he was quite as neo-liberal in his economic and foreign policy views as he has subsequently proven to be.

I thought we had a more distinct choice between Hillary Clinton and Barack Obama. I wanted to put the Clinton years behind us. It doesn't look like its going to happen. That doesn't mean that good things won't happen. Obama's current foreign trip, for example, is very good, and will produce real dividends.

But in many areas, such as our financial structure here at home, we need real change and not just a return to the 90s, with its bubble mentality, easy money, financial deregulation, and American industrial outsourcing and deindustrialization.