On Friday, Paul Krugman summed up the economic news:
As recently as three weeks ago it was still possible to argue that the state of the U.S. economy, while clearly not good, wasn’t disastrous—that the financial system, while under stress, wasn’t in full meltdown and that Wall Street’s troubles weren’t having that much impact on Main Street.
But that was then.
The financial and economic news since the middle of last month has been really, really bad. . . . Indicators of financial stress have soared to the equivalent of a 107-degree fever, and large parts of the financial system have simply shut down.
Over the weekend, things deteriorated further as news spread of plummeting consumer spending, imploding credit markets, and bank collapses in Europe. The worse-case scenario of an economic free fall, like a jet stalling in mid-flight, is starting to seem less farfetched.
With this post, we are launching a Daily Score series to monitor and comment on the economic crisis and its implications for Cascadia’s jobs, businesses, and communities; for our climate; and for our shared natural heritage. Neither I nor anyone else at Sightline has great expertise on financial institutions. Consequently, we will not plumb the depths of the big-money netherworld: hedge funds, derivatives, counterparty risk, and the tangled web of collateral debt swapping. Instead, we want to understand what the crisis and resulting recession mean for Cascadia. More important, we want to explore what we northwesterners ought to do, both as individuals and especially as communities.
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The impacts of this economic storm may be severe. The cascading failures of major banks and corporations is threatening Northwest businesses large and small—from local restaurants to large manufacturers—that employ us, generate prosperity here, and provide the extraordinary variety of goods and services that we Cascadians get to enjoy. Most businesses carry loans to cover their expenses, paying off the loans from their earnings. That’s the big fear about this crisis: that such loans could dry up, becoming too scarce or expensive, as happened in the Depression.
This worst-case scenario could not only decimate our family and public budgets, further indebt our national treasuries, and push hundreds of our businesses into the abyss of insolvency. It could also undermine our belief in ourselves and in our democratic institutions, creating a bunker mentality that precludes the kind of concerted collective action we need.
It is time to advance, but will we mobilize in time? My hope—maybe my hunch—is that we will. Indeed, this economic storm may even clear a path to healthy, lasting prosperity: when crisis hits, political barriers can fall, constituencies can coalesce, and leaders can rise to the occasion. If we Cascadians mobilize, we can win lasting victories. We can advance economic security, green-collar jobs, clean energy, compact communities, and climate stability all at once. We can turn economic crisis into an opportunity.
In fact, energetic northwesterners across the region have been hard at work for months, creating these opportunities. They’re inventing the policies, business models, and community programs that we need. The only question is whether we, collectively, will follow their hopeful lead.