Pollyanna Creep: False economic security gone wild

By GottaLaff

No, Pollyanna Creep isn't about some character who torments Hayley Mills about her impossibly optimistic "Glad Game". One of our many astute Commenters linked me to a different sort of explanation, via Bill Moyers Journal:

Why has all this taken Main Street by surprise? In part, according to Kevin Phillips, because we've been served up years of faulty statistics and even faultier economic projects. This, Phillips maintains, has lead to a spiral of false economic security — Pollyanna Creep. [...]

Kevin Phillips, a political analyst and historian, has been watching this crisis unfold for a long time now, and has a theory about what's gone wrong. As he explains to Bill Moyers on THE JOURNAL:

This is the denouement of the 25-year debt buildup which was undertaken mostly by the financial sector putting themselves on steroids to-- get bigger and bigger and bigger. And we've finally gotten to the point where the bubble isn't sustainable anymore but a lot of Wall Street is dedicated to minimizing the spattering of the bubble, so to speak.

Phillips explains that these are the fruits of what he calls the "financialization" of the United States: the decline of manufacturing and the rise of finance as the central driver of the nation's GDP. It is not a change Phillips believes happened by chance:

You had essentially a financial sector that let's say was sort of neck and neck with manufacturing back in the late 1980s. But they got control in a lot of ways, in the agenda. Finance has been bailed out. I mean, everybody thinks this is horrible now what we're seeing in terms of bailouts. Even a lot of the people who do it think it's bad.

This has been going on since the beginning of the 1980s. [Laffy Note] [...] Finance has been preferred as the sector that got government support. Manufacturing slides, nobody helps. Finance has a problem, Federal Reserve to the rescue. Treasury to the rescue. Subsidies this, that, and the other.

So bit by bit, they got bigger. And the other reason they got bigger was because this became a country that was further and further in debt. Consumerism was just pushed to the nth degree. People were given the sense that they had to buy everything and they had to borrow to do it increasingly.

But we've seen the central component of the rise of the financial sector is the rise of the debt industry. Mortgage, credit cards, all these gimmicks that Wall Street sells-- just all kinds of products. And, of course, the products are laying an egg all over the world right now.

That was so easy to understand that even I, who glaze over at the mere mention of economics, got it.

H/t: Wotching