Popped bubble, liquidity freeze, credit crunch, big finance going down like the KT asteroid, making desperate appeals for a government bailout: it was like the revival of some bad old Broadway musical. Book goes like this: finance says to government, Pay us or the economy dies. Congress, assuming its paymasters on Wall Street know what they’re talking about, because it concerns the incomprehensible mysteries of finance, agrees to fork it over. Standard practice, precedent well established, and since government debt is already gigantic, just a case of more. Of course it means no new or old public programs will be affordable, and will require that austerity measures be tightened yet further, which will hamstring government completely, but this is just a matter of balancing the nation’s checkbook and simple common sense.
Same as always! But a new Congress arrived in January 2143, riding a wave of feeling that this crash should be different. Plans were in the air, hot words were in the air. Thus in February 2143, Federal Reserve chair Lawrence Jackman and the secretary of the treasury, both of course veterans of Wall Street, met with the big banks and investment firms, all massively overleveraged, all crashing, and they outlined a bailout offer amounting to four trillion dollars, to be given on condition that the recipients issue shares to the Treasury equivalent in value to whatever aid they accepted. The rescues being necessarily so large, Treasury would then become their majority shareholder and take over accordingly. Earlier shareholders would be given haircuts; debt holders would become equity holders. Depositors would be protected in full. Future profits would go to the U.S. Treasury in proportion to the shares it held. If at some point the recipients of aid wanted to buy back Treasury’s shares, the deals could be reevaluated.
In other words, as a condition of bailout: nationalization.
Oh, the tortured shrieks of outraged dismay. Goldman Sachs refused the deal; Treasury promptly declared it insolvent and arranged a last-minute fire sale of it to Bank of America, just as it had arranged the sale of Merrill Lynch a century before. After that, Treasury and the Fed offered any other company refusing their help good luck in their bankruptcy proceedings.
A lot of capital flight might have been occurring at this point, but the central banks of the European Union, Japan, Indonesia, India, and Brazil were also making salvation-by-nationalization offers to their own distressed finance industries. It wasn’t clear that being nationalized by any of these other countries would be a better deal for fleeing capital—if there was even any capital left to flee, given the tendency of “paper to vapor” in such moments of panic. Meanwhile China’s central bank officials politely observed that state intervention in private finance was often quite useful. They had achieved mostly good results with it over the last three or four thousand years, and they suggested that possibly state control of the economy was better than the reverse situation. March would see in the Year of the Rabbit, and rabbits of course are very productive!
Finally Citibank took the deal offered by Treasury and Fed, and in rapid order all the other banks and investment firms also took the deal. Finance was now for the most part a privately operated public utility.
Encouraged by this victory of state over finance, Congress became a little giddy and in short order passed a so-called Piketty tax, a progressive tax levied not just on incomes but on capital assets. Asset tax levels ranged from zero for assets less than ten million dollars to twenty percent on assets of one billion or more. To prevent capital from fleeing to tax havens, a capital flight penalty was also made law, with a top rate set at the famous Eisenhower-era ninety-one percent. Capital flight stopped, the law held, and nation-states everywhere felt even more empowered. Among the changes they quickly enacted at the WTO were tight currency controls, increased labor support, and environmental protections. The neoliberal global order was thus overturned right in its own wheelhouse.
These new taxes and the nationalization of finance meant the U.S. government would soon be dealing with a healthy budget surplus. Universal health care, free public education through college, a living wage, guaranteed full employment, a year of mandatory national service, all these were not only made law but funded. They were only the most prominent of many good ideas to be proposed, and please feel free to add your own favorites, as certainly everyone else did in this moment of we-the-peopleism. And as all this political enthusiasm and success caused a sharp rise in consumer confidence indexes, now a major influence on all market behavior, ironically enough, bull markets appeared all over the planet. This was intensely reassuring to a certain crowd, and given everything else that was happening, it was a group definitely in need of reassurance. That making people secure and prosperous would be a good thing for the economy was a really pleasant surprise to them. Who knew?
Note that this flurry of social and legal change did not happen because of Representative Charlotte Armstrong of the Twelfth District of the State of New York, also known as “Red Charlotte,” admirable woman and congressperson though she was. Nor was it because of her ex, Lawrence Jackman, chair of the Federal Reserve Bank during the months of the crisis, nor because of the president herself, much praised and excoriated though she was for her course of bold and persistent experimentation in the pursuit of happiness during a time of crisis. Nor was it due to any other single individual. Remember: ease of representation. It’s always more than what you see, bigger than what you know.
That said, people in this era did do it. Individuals make history, but it’s also a collective thing, a wave that people ride in their time, a wave made of individual actions. So ultimately history is another particle/wave duality that no one can parse or understand.