Chasing Wealth, Not Jobs

by Steve Soto

Paradox and others have already written about this, but the market may tumble today at the news surrounding the fire sale at Bear Stearns, after the Fed stepped in late last week to pump money into the financial and banking sectors. JP Morgan Chase is swooping in to buy Bear Stearns at bargain basement prices, and the Fed is lowering rates again after a flurry of government activity to avoid a financial sector meltdown stemming from the credit implosion.

It sure seems like a lot of effort is being made to prevent Wall Street from reaping what it has sown these last several decades. When you hear that the Fed is setting up multi-billion dollar funds to provide liquidity and make things easier for investment banks to be sold to other banks, you wonder why we do not do the same for sectors of our economy that actually produce things. This isn’t simply Bush’s fault; this is a bipartisan plague that goes back to the 1986 tax reform, when incentives were put in place that placed a higher value on generating paper wealth than they did on actually producing widgets. And when we followed that up with NAFTA and globalization several years later, wherein our modern “money chasing money” economy fully replaced our manufacturing economy, the die was set for a “Wall Street instead of Main Street” economy.

If we can suddenly find $200 billion, or even $30 billion to save an investment bank from toppling Wall Street, what would happen if instead we “found” $30 billion in seed money to start an alternate energy industry and thousands of green jobs? But the focus is not on producing wealth here at home or jobs for that matter. Instead, it is all about creating investment opportunities and new ways for the investor class to make money. Again, this is not a Bush problem, it is a bipartisan problem, one where any attempt to generate new industries here at home is tagged negatively as industrial policy.