Have you noticed that people only give economic explanations for the current economic crisis? Well, actually a few people give non-economic explanations, like greed, for instance.

            Likewise, in trying to predict our economic future, have you noticed that mostly the arguments are grounded in economics, politics, and a little bit of psychology?

            Put on a lens of a sociologist or anthropologist for a few moments to see things a bit differently. Enter, Karen Ho, an anthropology professor at the U of M. Dr. Ho got a job on Wall Street in an investment bank for nearly a year in order to study the culture and organization of Wall Street, particularly with regard to dealing with financial crises.

            You can read some of her views in a Star Tribune interview, and a more in-depth analysis of her research in the academic journal, Cultural Anthropology (Vol. 20, #1, pp. 68-96, 2005). Or you can wait for her book to be published in July 2009.

            In her article, her interviews and public presentations, Karen Ho gives a compelling description of how Wall Street (the network of financial institutions) beginning about 1980, transformed and dominated American business by successfully campaigning for what she calls a “culture of liquidity,” by which she means organizational turnover and instability. A common tactic was takeover in order to liquidate a company’s assets. She concludes that Wall Street, with the control of capital, forced American businesses to continually restructure, downsize, outsource, and otherwise focus on short term planning, and the bottom line.

            Furthermore, Wall Street followed its own liquidity prescription for American business. In addition, Wall Street in its excitement took the primrose but deadly path of hedge funds, derivatives, securitizations, credit default swaps, and other elements of shadow banking.

            In her scenario, little by little the global economic system bought into the Wall Street model, seduced by the overvalued financial instruments and financial culture that appeared to be economic nirvana. Wall Street shadow banks marketed giant ponzi schemes and the remainder of the world didn’t want to lose out on the party.

            The tragedy of the culture of liquidity was the corporate sell off and neglect of organizational capital, human capital, research and development, and other resources with long-term value.

            Her view, and I subscribe to it, is that Wall Street has left us with a bankrupt financial sector and ailing manufacturing industries with greatly eroded capacity and value. Professor Karen Ho points out that companies like GM were the darling of Wall Street while they were downsizing, buying mortgage businesses, and designing bigger and bigger SUVs. GM and other such American businesses are now left with a relatively uneducated, poorly skilled workforce, and little capacity to innovate.

            The state of education and job training in American cannot be blamed on corporate America alone.  The politics of unequal, discriminatory financing of K-12 education have done much to hold it hostage, while the quality of learning in our trading-partner nations improves.

            Karen Ho does not argue this, but I think it follows that to compete in the global economy over the long-term, Americans and American businesses need a financial 12-step program to overcome addiction to self-centered consumption and investment growth-at-any-cost.

            Corporate America needs some time to reflect on what it can do best, do it with impeccable quality, and give good jobs and benefits to as many Americans as possible. Corporate America cannot do that with Wall Street breathing down its neck, so to speak. From their self-serving behavior in the past six months, it is clear that neither Wall Street nor Corporate America will reform on their own. It is up to the Federal Government to exert new leadership.

            Ironically, the Secretary of the Treasury for the first two years of the last Bush Administration, Paul O’Neill, holds a similar view of the Wall Street. On CNN’s GPS Program he recently called for truth and transparency on Wall Street. He would order the top 19 financial institutions to put the ratings classes of all their assets on the Internet for the public to see. He then would create quarantine accounts for the bad assets, only allowing public funds to be spent on the non-quarantined assets.

            Even if such reforms were made, the road to recovery will be rocky because we have come to expect the material comforts of living in financial bubbles. As millions of pensions have been converted to individual 401k accounts, the majority of Americans have a finger in Wall Street. Even if our daily moods don’t swing with the markets, we still pray for our retirement accounts to soar again.

            How then do we get out of the spiraling culture of corporate liquidity?  Establishing a modern, effective regulation system and other reforms in Washington DC will help. However, it is doubtful that we can successfully complete its financial addiction recovery program without learning to live with less, without accepting the need to sacrifice for the greater good. It is the perfect time to study Marc Lesser’s 2009 book, Less: Accomplishing More by Doing Less.

            Those with jobs and a retirement fund can afford to allow the economy to slowly recover from its ailments. But those unemployed, underemployed, or otherwise suffering from the lack of means to acquire necessities, cannot afford the luxury of a long, slow recovery. The rest of us must empathize with them and be generous, both personally and through public policy.

            For long-term prosperity, we need to work for the economy to stabilize itself without depending on another big bubble. This is the time to re-define patriotism to include sacrifice, modest lifestyles, and acting as a “Good Samaritan” to those around the world who are truly in pain and suffering.

            Should you be skeptical of my advice on returning to the ethics of the Good Samaritan, read the wonderful 2008 book by Deborah Stone, The Samaritan’s Dilemma: Should Government Help Your Neighbor? Professor of government Deborah Stone began advocating for an altruistic government long before the latest financial bubble burst. With the deep recession leaving so many jobless, hungry, and otherwise suffering, her powerful call for a moral awakening is even more urgent.

During the past year 1.9 million Americans lost their jobs, with almost a third of those losing them last month. When the U.S. Bureau of Labor Statistics (BLS) released these numbers this week, one of the Bureau’s commissioners said the report was probably the most negative report in BLS’s 124 year history.  

          Meanwhile this year over 2 million houses went into foreclosure. Many of those losing their homes did not lose their jobs; they were at least somewhat fortunate. But the firings and foreclosure together affected over 3 million workers.

          In the past year while the stock markets fell by nearly 50%, my retirement savings dropped 25%. I would imagine that most sociologists felt equivalent personal financial losses this year. Even those putting their savings in “fixed income” retirement funds have lost money because of the collapse of the bond markets.

          Despite the huge magnitude of this economic trauma, sociologists appear to be silent about the financial crisis. The American Sociological Association’s newsletter, Footnotes, has not mentioned the crisis nor is it a special topic of the forthcoming annual convention. It is even scarcely mentioned in Contexts magazine’s blogs. Isn’t there a big enough hurt yet to talk about?

          This month, after economists have begun comparing our current financial crisis to the great depression, the government finally admitted that the United States economy was in a recession. Ironically, they also added that we had been in a state of economic recession for 12 months.

          Sociologists, like the American government, have not told the public anything about the financial crisis. Wait, isn’t that criticism a bit unfair? After all, it takes at least a year or two, if not three, to conduct a thorough study. But have we not learned what social effects resulted from previous economic recessions and depressions? Maybe. It is difficult to find discussions in the sociological literature on this topic.

          About the only one discussing the sociological effects of the current recession is David Brooks, a journalist who writes Op-Ed Columns for the New York Times. Last month in “The Formerly Middle Class”, he wrote that those on the low rungs of the middle class are those for whom the recession is the most catastrophic. “Recessions breed pessimism,” he wrote, and he claimed that millions of Americans, to say nothing of the billions in the developing world, are “facing the psychological and social pressures of downward mobility.”

          Career reversals and job loss yields serious self-doubt, he argued. For the formerly middle-class, housing reversals mean returning from suburban dream homes to run-down apartments, to paraphrase David Brooks’ message.

          Brooks’ most interesting theories have to do with social capital and social identity. Quoting Robert Putnam, he argues that economic depression yields social isolation because people have to stay home more and their community bonds break up. In fact, the history of our great depression shows that suicide rates and divorce rates went up while birth rates went down.

          These predictable trends yield alienation and social protest, and therefore Brooks predicts that the next big social movements will start from the formerly middle class.

          Much of this analysis is conjecture, but isn’t it more relevant than any other sociological topic these days? Economic forecasters share the hunch that the economy will continue to worsen for at least a year. It is very likely that most of us in the middle class will have lost half of the value of our assets before the recession is over. Few will not face sacrifices, struggles and maybe even suffering during the years ahead. What can sociology say now, not next year, to help us understand better what is happening so that we can get through this with greater understanding, and compassion for ourselves as well as for others?

The $700 billion bailout for “financial institutions” requested by Treasury Secretary Henry Paulson amounts to $6,300 per household. Fortunately, we will not have to pay it off this year, but the amount with interest will be spread across several years.

            Many expert economists question whether the bailout will solve the economy’s problem. An even larger share, believe the bailout should not be approved without a variety of constraints on how the money is spent. Many also question the degree of urgency and the need to act right away.

            Not surprisingly, Secretary Paulson claims the sky is falling and he needs the $700 billion this week. Two years ago he made $37 million a year as CEO of a now-vulnerable investment bank. Then President Bush asked him to head the nation’s Treasury Department.

            On the other hand, some economists argue that the economy would be better off  without unregulated investment banking, and that real estate values would settle down faster without a bailout of the type demanded. After all, investment banking has become a collection of unregulated casinos that keep coming up with new games investors can play.

            In a political system such as ours that asks individuals to stand on their own and pay for their own welfare, shouldn’t corporations be allowed to fail if they take huge risks without insurance or collateral?

            For the sake of argument, let’s assume that the economy really has to be bailed out by the government. In a democracy like ours shouldn’t the people rather than Congress be asked to pull out their check books and pay for the bailout? They are asked to pay for our society’s social charity, why not economic charity?

            Individual Americans already write checks for charity for about $230 billion a year according to Giving USA. And according to the Independent Sector, last year American volunteers gave 8.1 billion hours of free labor worth $162 billion dollars  through formal organizations. On the basis of the American Time Use, I estimate that that Americans volunteered an additional $345 billion worth of free informal community service. Compare this huge value of charitable donations to last year’s United States Federal budget allocation of $294 billion for unemployment and welfare.

            Americans could do the same for the Investment Banking  industry if they thought it was important enough. Why should the  American people be given the option to be charitable to their fellow human beings, but forced to be charitable to the financial sector? Why should charity to businesses be determined by Congress and lobbyists but charity to the people left largely to private donations?

            Rather than buying assets of failing banks at inflated prices, the economy would be better served by loans to small as well as large businesses, and to home owners facing foreclosure as well as to businesses facing bankruptcy.

            Then the public should be asked to double their charitable donations this year and write checks to funds for ailing businesses. People should be given the choice as to which type of business receives their donation. This would be true economic democracy.

            The Bush administration’s enacted concept of democracy continues to be freedom for economic institutions with little regard to freedom for individuals. What is your conception of how democracy should deal with financial institutions?