Last month, in response to Japanese broker Masatoshi Sato's remarks about seeing to the needs of the "real economy," I offered the proposition that, if Main Street is unhappy, then Wall Street cannot help but be unhappy. Since that time it has become increasingly apparent that this unhappiness is a two-way street: When Wall Street is unhappy, Main Street has little to be happy about, since happiness has so much to do with having money to spend. The economic crisis may have had some impact on readjusting individual spending priorities to focus more on necessities and less on the unrealistic luxuries of a consumerist culture; but, at the end of the day, it is still all about money. Money may be the root of all evil; but it is also the root of happiness in any society developed enough that each individual is no longer directly responsible for providing his/her own food, clothing, and shelter. As Niall Ferguson has put it in his new book The Ascent of Money: A Financial History of the World, money is the "root of most human progress." Given the critical role that progress plays in any "developed" culture, one may just as well say that money is the root of that culture's very existence.
Those who have become familiar with Ferguson's book (which is based on a television series that will hopefully air soon in the United States, although his recent interview on Book TV provided an excellent introduction) now know his hypothesis that the root of money itself is trust. This is a point of view that I addressed in comparing the comparatively sound status of Grameen Bank, where trust is based on the day-to-day utility of cows and chickens, compared with Citigroup (to choose a timely example), where trust resides in the anticipated benefits from complex instruments of exchange based on even more complex mathematical models whose underlying hypothesis of efficient markets is, to say the least, questionable. There is a phrase that describes the prospect of trusting a system that, through its complexity, you really do not understand: that phrase is "confidence game." In the "developed world" economic theory has acquired such a level of sophistication that Main Street cannot help but be caught up in the confidence game; but, because the game can only survive as long as it has players, every now and then theory gets dragged back down to the realities of practice. From a dialectical point of view, "economic recovery" may ultimately be a matter of reconciling the opposition of those realities of practice with increasingly complex (because of the complexities of life itself) theories through some sort of synthesis.
We may now be seeing moves towards such a synthesis in both the current and incoming Administrations. Thus, one may be cynical and suggest that Barack Obama chose his economic team with the deliberate intention of cheering up Wall Street, more through trust than through concrete achievement; but, like it or not, the first moves in his confidence game have yielded a payoff in the short run that has circulated from Wall Street to the markets in both Asia and Europe. The same can be said about Treasury Secretary Henry Paulson's decision to apply his "bailout budget" to Citigroup. At the same time Obama is trying to keep his eyes on the fundamental role played by Main Street by seeing to the needs of the unemployment crisis, while the Federal Reserve is trying to see to the needs of resolving the credit crisis. Ultimately, it will still be about putting trust into a system that is poorly (if at all) understood, which means that we are all still stuck in playing a confidence game.
However, if we cannot get away from the game itself, we would still like to be able to count on our government to do something when we are egregiously cheated. That is why we have, for example, the House Committee on Oversight and Government Reform; and it is why some (enough?) of us voted the way we did in the (audacious?) hope for an Executive Branch that would show more respect to the Legislative responsibility for such oversight (thus solving the deeper problem of what Patricia Williams dramatically described as "a failure to govern at all"). Perhaps the path to that synthesis between economic theories and the practices on Main Street begins with taking government seriously again. If Obama can restore trust in a government that takes itself seriously, that trust may propagate into trust in fiscal operations. The confidence game may still be there, but we may all feel less vulnerable to being victimized by it.