Commentary—

Time For A 21st Century New Deal

By Mark Muller

We have all probably heard and read dozens of times over the past several weeks that this is the most serious financial crisis since the Great Depression. Our stock market and confidence in the banking system are allegedly on the brink of a 1929-style collapse. 

But what is fascinating and somewhat alarming is how our collective perception of the economy has shifted in the past 75 years. In the early 20th Century, agriculture was the backbone of the country. When commodity prices went south, people suffered. And the effects went well beyond the farm gate because farm income provided the capital for businesses in rural communities all over the country. The lack of jobs and farm income resulted in poverty and hunger.

Now, instead of an economy built on the labor of farmers and manufacturing, the backbone is perceived to be Wall Street. Debt and financial instruments are the new wheat and corn. The rising costs of housing, food, and gasoline have been a concern for a few years, but it took the collapse of financial institutions to create a national panic.

The proposed solutions to this crisis by Congress and the Bush Administration are much different from the response in the 1930s. 

Seventy-five years ago, the New Deal focused on getting people back to work and getting farmers a fair price for their commodities. Nowadays, the solutions largely revolve around assuring adequate assets in financial markets, and bolstering domestic and global confidence in our financial institutions. I’m glad that a poor farm economy, like the downturn in the late 1990s and early 2000s, no longer devastates the country, but perhaps we’ve drifted too far from a Main Street focus to a Wall Street focus. 

In the long term, maybe the financial crisis could be alleviated by using some of the new ideas that are driving change in our food system — and making that food system more resilient. Not long ago, the vast majority of Americans had little choice but to consume a diet dominated by industrially produced food. But environmental groups raised concerns about the chemicals used in agriculture and the impact those chemicals had on soil, water, and health. “Foodies” sought heirloom varieties of vegetables, heritage breeds of livestock, pasture-raised animals, locally produced foods, and other culinary treasures. Community leaders recognized the quality of life benefits of agricultural open space, farmers markets, and localized food systems. 

We still have a food system dominated by the centralized, industrial production model, but we also have local food, organic food, slow food, and many other labels and initiatives. People now have more choice in the food marketplace. And this greater diversity, with an emphasis on paying a fair value and keeping money in the local community, is the first step toward a stronger system.

Money, on the other hand, is rarely thought of in such lofty terms. It is perceived to be simply a vehicle for facilitating commerce. Perhaps the looming financial collapse will create new relationships with money and more opportunities for people who want to avoid supporting the bizarre moneymaking schemes of Wall Street. Just as consumers now have a better opportunity to buy into local food systems, the time is ripe for a more localized money system that recirculates money within the community. Similar to the tremendous growth in farmers markets, will I soon be able to purchase a mortgage, insurance policies, and car loans with assurance that my loans and investments are being used to help others locally?   

It is hard to know whether using $700 billion to prop up Wall Street is the best way of avoiding a financial crisis. But it is striking how much the current focus is on a top-down approach of fixing global markets rather than the previous grassroots approach of getting adequate income back into the pockets of people and communities. With such an emphasis on financial indicators such as stock prices, currency valuations and interest rates rather than focusing on the well-being of workers and families, the 21st Century New Deal may be missing the forest for the trees.

(Mark Muller is a senior fellow at the Institute for Agriculture and Trade Policy in Minneapolis.)