Crisis in the United States: Suggestions from the South

The crisis in the USA poses major domestic challenges. A virulent struggle is taking place among sectors to avoid or elude the costs of the present situation. While some profit from it, the rest tries to subsist until the storm is weathered. The solutions adopted will strongly condition future trajectories. When the turbulence passes it will be very difficult to transform the newly established dynamics. In the face of that, a puzzled look will be of no use. It is critical that the consequences of the different way out strategies be considered in the light of the country’s founding principles. The crisis does not require other principles; rather, it puts the existing ones to the test. The country needs to stay away from costly bailouts that instead of re-launching it on more inclusive bases might reinforce concentration processes.The United States is going through a crisis that is affecting the country and the rest of the world. Its causes are complex and diverse. For quite some time ago Juan Eugenio Corradi has offered from Opinion Sur Geopolitical section his sharp vision on the nature of the process that originates the current crisis. Based on that perspective and on our experience in the South, I wondered if I would have anything to contribute to American public opinion.

At the beginning this idea appeared to me somewhat odd because advice and suggestions more often tend to follow a course North-South than South-North. Then I also remembered the resistance with which we received in the South the canned recipes that were generated in certain organizations and think tanks of the North. And I told myself that out of respect for our brothers of the North I did not have the right to reproduce those mistakes. Any suggestion I could offer should not be comprehensive or definitive as those who are living that process have a better understanding of its potentials and difficulties; those circumstances are innumerable, unique, and change over time; sometimes they are obvious, other times they are deeply rooted in long-standing traditions, visions and national concerns. So the following lines are simple suggestions to reflect upon that may or may not serve as an input to those who have taken the task of facing such a severe crisis.

The Need to Respect Basic Principles when Searching for Solutions

Each society carries some basic principles that shape its identity and influence its behavior. These principles must be respected and integrated into any solution. Only if some of those principles were incompatible with the current times could they be abandoned or adjusted.

My aim is not to list the set of US foundational principles that still guide citizen behavior. For the purpose of this article let me pick out only some of the principles that are most valued by the American people.

-* The principle of freedom of thought and of creation and management of all kinds of initiatives that do not go against the law.
-* The democratic principle of offering equal opportunities to all.
-* The principle of national unity and of care for the most vulnerable.
-* The principle of responsibility for our acts and for the consequences that derive from them.

There are certainly many other important principles but, as I have just pointed out, this set provides a good support for the suggestions that will be offered in the following lines.

Co-responsibility when Faced with the Crisis and the Solutions

Although to different degrees, really all or almost all of us are responsible for a crisis. This is not the time to build, and it is also very difficult to do so, a final and detailed scale of each one’s degree of responsibility, yet it is clear that there are great differences among actors.

It could be stated that the main direct responsibility lies in those who generated the speculative bubbles that have now gone down, plus those who did not exercise the control that was their institutional duty. They are the ones that should face up to the major costs of getting out of the crisis. Major responsibility also falls on those who designed the policies and regulations that led the country to this crisis.

There are other co-responsible actors who, without having produced those bubbles, participated in them and benefited from their existence. They should also assume their share of responsibility for the risks they took and for the subsequent results. To a certain extent, all the remaining sectors of American society –by action or omission- have decreasing degrees of responsibility and, as such, will have to shoulder -in that smaller proportion- the costs of the solutions.

Why this emphasis on the different degrees of co-responsibility? It happens that interests groups also operate in crises. The most agile, connected or informed will try as much as possible to slip the costs derived from their co-responsibility on other shoulders. In the midst of the turbulence, of the fear and of the confusion that grip the common minds in a crisis, the most seasoned take advantage of those same factors to avoid costs and, if possible, even profit with the situation. Eventually the crisis will be solved, as a country with the political, economic and military power the United States has, will not let itself go down. This article does not analyze the costs the United States could transfer to third countries but, from an internal perspective, the issue is who will pay for the mistakes made and which segments of the American society will emerge strengthened and which weakened or demolished. If the market is ferocious in normal times, one can imagine its voracity at times when the limits and possibilities are being violently restructured, allowing dramatic progresses and backward movements. The popular saying goes “it’s good fishing in troubled waters”; yet in circumstances of crisis the winning fishermen are not usually the most honest, caring and concerned with the situation of the social whole, but rather the most skillful to make a profit in the middle of many others’ disgrace. It is up to regulators and a conscious public opinion to rise so as to encourage those who are really contributing to the recovery and, at the same time, to limit the abuse and depredation, thus protecting the common citizen and, especially, the most vulnerable.

Fair and Effective Solutions while Weathering the Storm

The fact is that, faced with a crisis, the most daring operators take advantage of the fear and real risk of a generalized collapse to shape in their own interests the solutions that are being designed to weather the storm. While the majority seeks refugee till the storm dies down, the audacious make fat differences in the very course of the turbulence. They are not concerned with facing up to the direct consequences of what is going on. Let public agencies, religious or development organizations, common citizens assume them. Speculators have their energy free to profit from the juncture. In the countries of the South we have extensively seen that, sure enough, crises generate opportunities but that those opportunities are not democratically within everyone’s reach.

Those with liquidity, contacts, privileged information, usually profit outrageously, while the rest, cornered by the effects of the crisis, can barely focus on subsisting during the storm. When the turbulence passes, it is already late to restore situations: the newly established dynamics are then harder to transform.

There is much to be safeguarded in a crisis, and this author is incapable of identifying all that needs to be done. I can only point out that the challenge lies not in surviving the storm but in taking advantage, for the sake of the social body, of the opportunities forced by or born out of the present situation. In particular, given the focus of Opinion Sur on the base of the social pyramid, we can highlight some emergency measures to assist these sectors so that they can emerge strengthened rather than weakened from the crisis.

During the storm, and not after it, it is necessary to energize the productive mobilization of small producers; right away, with strength and determination. It is essential that the conditions for the functioning of the vast base of the US productive apparatus be strengthened: through credit and access to capital, but also by providing information about good market opportunities and available modern business engineering. It is not a question of doing a little more of the same but to take advantage of “the reshuffle and deal again” that comes with the crisis and give way to something that is much better and sustainable.

The US counts with instruments to face an initiative of such significance and transcendence. Yet the challenge’s magnitude demands reinforcing those instruments. Community Venture Capital Funds already exist: they must be capitalized and replicated taking advantage of the experience accumulated in the last two decades. There are public and private programs aimed at small businesses; this is the time to increase their funding and exert the maximum tension on them. There is a specialized small credit banking: it needs to develop even further and very much enlarge its coverage.

All this is possible and necessary. Yet there are some catalytic elements that can dramatically enrich the mobilization of the US huge productive base. Knowledge is their common denominator.

Catalyzing a Better Way Out from the Present Situation

The US scientific and technological community is impressive. It may not be perfect and there must be in fact a lot to be improved on, but the country’s science and technology is a matchless instrument to effectively mobilize its productive base. In general, small producers have not been their main focus and, although no one could recommend that other areas of strategic importance be overlooked, the fact is that there is a great margin, until now poorly exploited, to dynamize the base of the social pyramid; that is, to facilitate the accelerated and sustainable development of a significant number of promising small ventures.

We emphasize the notion of “promising”, which is associated to the concepts of excellence and opportunities, because it is not a question of reproducing mediocrity or non-sustainable ventures but rather of causing the best in the entrepreneurial and innovating spirit to germinate. Only that excellence, to acquire a significant magnitude, has to be raised not for a handful of initiatives but for the vast majority of small ventures. How can such a formidable and complex challenge be met? To begin with, it should not surprise us that it is with crises that the conditions to try new solutions to old problems are created. Rather than giving a puzzled look on how recession and speculation advance, the scientific and technological community should declare itself in a state of emergency and support small entrepreneurs during the crisis so that they may take advantage of the new economic spaces. Thus, instead of emerging from the present situation with an even more unequal society, the United States might find itself having a wider, more dynamic and creative productive base.

There are thousands, tens of thousands of entrepreneurs ready to face the challenge. There is not a lack of opportunities, but the conditions to take advantage of them should be available. One of those conditions is that development agencies and angel investor networks reinforce their social and economic knowledge of small entrepreneurs. If possible, they should bring in business engineering tools (such as franchise systems, export consortia, pools of service providers) capable of articulating disperse small production into medium-sized organizations that can access better opportunity thresholds. It will also help to work better links between angel investors and an increased number of venture capital community funds, to generate new good business developers to serve the base of the social pyramid, to multiply social innovation promotion mechanisms, to reorient business schools to better focus on small producers, to activate the mesoeconomic responsibility of leading corporations in productive chains so that they may explicitly include in their decision matrix the impact of their own actions upon suppliers, distributors and the communities where they do business (beyond the traditional public or corporate relations programs). It comes without saying that the role of the public sector becomes more important during crises, especially in the field of improving public spending allocation and eliminating regressive aspects of the tax system.

The list of possible actions and measures to best emerge from a crisis is endless. The guiding criterion, however, is to face the crisis by adhering adamantly to the principles the US people deem foundational of their identity and the future they wish to attain. The principles for normal times and those for moments of crisis do not differ. Crises do not require different principles but rather emergency measures aligned with those same principles. Freedom of thought and of the creation and management of initiatives, democratizing opportunities, preserving national unity, caring for the most vulnerable, assuming responsibility for our acts and for the consequences derived from them, are principles that do not go away with the crises; they are rather put to the test by them. Carrying this compass, Americans can explore new avenues to emerge strengthened and hopefully renewed from the crisis rather than to resort to costly bailouts that end up exacerbating serious phenomena of economic concentration.

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