The Economics of Legalized Corruption and the Consolidation of Power: Some Historical and Critical Realities Behind the Bail-Out

September 28, 2008 5 Comments

for Adeeb and his fellow classmates, and others who live these ideas and topics in our troubled times

I often cite Napoleon’s famous words to my students, “Dress me slowly I’m in a hurry.” Students, particularly American students, often look puzzled. What does that mean? How can you go fast by moving slowly? How does approaching the world by proceeding with little or less than usual speed or velocity, requiring a comparatively long time for completion and contemplation, enable better solutions to immediate problems?

American culture is addicted to many things but mainly to sugar and speed, anything labeled “new” and deception. William Burrough’s Naked Lunch was viewed as obscene and censored not because of wild pictures of dark characters shooting up but because it demonstrated American’s obsessive compulsive addiction to anything. Power, sugar, horror, violence and destruction, speed, the “new” as well as the decadent, and corruption.

The current attempts by the US Government to bail-out our banking system has all the markings of an addicted culture that in fact enables corruption through laws meant to protect only the wealthiest–the property of the wealthiest. “Corruption is why we win.“

We are now rushing into yet another scheme laid out by those that raced into Iraq and who left Afghanistan in the dust; these are the same folks that can’t work to make our education and healthcare systems stronger and better for all Americans; the same people that can’t run Amtrak.

This is perhaps the reason why the Paulson and Bernanke proposal to stem the financial crisis is a plan “that everyone can find something in it to dislike. The left accuses it of ripping off taxpayers to save Well Street, the right damns it as socialism; economists disparage its technicalities, political scientists its sweeping powers” (The Economist, Sept 27th, 2008; 17).

The truth of the matter is that it’s none of the above. We have to add another condition: The human condition has entered into the mix and no one, but no one trusts “the other.” “In economics and in the remainder of the social sciences as well, the translation from individual aggregate behavior is the key analytic problem. Yet in these disciplines the exact nature and sources of individual behavior are rarely considered. Instead, the knowledge used by the modelers is that of folk psychology, based mostly on common perception and unaided intuition, and folk psychology has already been pushed way past its limits” (Edward O. Wilson, Consilience, 1998; 202).

Money is not the root of all evil, but our perception of money is. When wealth is involved, we Americans are addicted to outdoing “the other” by any means necessary. Long term repercussions are not in our plans. Immediate short term and costly gain–derivatives and predatory lending–is all we see. The devastation and suffering we leave behind is for others. Even when Paulson and Bernanke unveiled their plan before Congress, callous indifference reared its ugly head when they never even mentioned a word about the middle class, the working class that’s going to carry the burden imposed on it by greed.

Working Americans are going to pay more for greed and corruption because it’s permissible.

Globally there is money. Markets are not standing still–it’s the law of survival. Stand still and you die. Warren Buffett and Japan’s Mitsubishi-UFJ agreed to buy stakes in Goldman Sachs and Morgan Stanley. There are more enterprises–and governments–with money to bail-out corruption in Wall Street. We can’t be nervous that foreign capital is buying up America. This has been going on for quite some time since foreign capital knows that when push comes to shove, we will make the mistake of rushing towards immediate gratification. America is fat and now we got caught, one too many times, with our hand in the cookie jar. One bad apple can spoil the bunch. Many rotten apples, supported by laws that enable graft, deceit and corruption, have brought us to where we now are.

But where are we?

Historically, we can argue that this is the culmination of vituperative actions that began at the dawn of World War I, the War to End All Wars, which was the sure sign that it was the war to begin all notions of modern warfare. This is the war that was dominated by an aggressive attempt to control power, which is another way of saying that we sought to control wealth by a very few. There are many obvious reasons why we went to war–Mexico potentially allying with Germany, sabotage, and more–but none is more poignant than “a movement on behalf of Big Government in all walks of the economy and society, in a fusion or coalition between various groups of big businessmen, led by the House of Morgan, and rising groups of technocratic and statist intellectuals. In this fusion, the values and interests of both groups would be pursued through government” (World War I as Fulfillment: Power and the Intellectuals).

Since WWI, the agenda has been the consolidation of power. Government’s role is to protect the few with the most power–the extreme form of John Locke’s economic theories. It’s not surprising that Goldman Sachs, as it becomes “a bank,” will be one of the two firms who will benefit most from the bail-out. Hank Paulson, “the hammer,” as he was called at Dartmouth College, was Staff Assistant to the Assistant Secretary of Defense at The Pentagon from 1970 to 1972. He then worked for the administration of U.S. President Richard Nixon, serving as assistant to John Ehrlichman from 1972 to 1973. Finally he became Chairman and Chief Executive Officer of Goldman Sachs. Is this former eagle scout operating with our best interests in mind, given his uncanny allegiance to the most powerful in society? Or is Paulson finalizing the work that began during WWI, the complete consolidation of all power in the hands of the smallest number of powerful men? Our laws show the history and evolution of this crisis to these ends.

Much as we did in WWI, we could be headed towards the illusion of victory (illusion is the prodigal son of avarice, greed and corruption; we can’t see these and live these as real solutions unless we believe illusions as truth). But if we don’t want to go as far back as WWI, we can look at more recent events.

John Kenneth Galbraith pointed out one of the causes of the Great Depression was “The large-scale corporate thimblerigging that was going on. This took a variety of forms, of which by far the most common was the organization of corporations to hold stock in yet other corporations, which in turn held stock in yet other corporations.” Galbraith tells us that, “during 1929 one investment house, Goldman, Sachs & Company, organized and sold nearly a billion dollars’ worth of securities in three interconnected investment trusts—Goldman Sachs Trading Corporation; Shenandoah Corporation; and Blue Ridge Corporation. All eventually depreciated virtually to nothing.”

When Franklin Roosevelt took office, both the President and Congress knew the banking crisis demanded immediate action. The result was one of the crown jewels of the New Deal: the Glass-Steagall Act, officially known as the Banking Act of 1933.

A Frontline report on the repeal of Glass-Steagall shows how those with money end up with pens from the President of the United States on their walls:

Sandy Weill calls President Clinton in the evening to try to break the deadlock after Senator Phil Gramm, chairman of the Banking Committee, warned Citigroup lobbyist Roger Levy that Weill has to get White House moving on the bill or he would shut down the House-Senate conference. Serious negotiations resume, and a deal is announced at 2:45 a.m. on Oct. 22. Whether Weill made any difference in precipitating a deal is unclear.

Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill’s chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, “You’re buying the government?”

When Bill Clinton gave that pen to Sanford Weill, it symbolized the ending of the twentieth century Democratic Party that had created the New Deal. Although the 1999 law did not repeal all of the banking Act of 1933, retaining the FDIC, it did once again allow banks to enter the securities business, becoming what some term “whole banks” (Bill Clinton’s Role in the Mortgage Crisis).

The house of cards begins to topple, the inevitable fate of coalitions fused by greed and avarice.

In “Experts Predict Money Crisis,” Christopher Ruddy (August 2007) writes that “there is evidence that this global boom is anything but natural and sustainable, but is really the artificial result of a global liquidity bubble, a bubble that could now be on the verge of bursting. In this global bubble, literally hundreds of trillions of dollars in leveraged debt are at risk. It’s no secret that in today’s society, everyone from the family next door, to major corporations, to the U.S. government is deeply in debt. But while some debt statistics are widely reported, such as our $8 trillion national debt, other debt figures are never mentioned.”

Everyone knew. The US Government–and the White House–knew. The candidates knew. Banks knew. And, most importantly, media knew. Why didn’t anyone act? When silence of this magnitude ensues, something is indeed rotten somewhere.

The role of modern day government is to ensure enough instability to maintain levels of power in the hands of few. This is how it works. (See also: The Conservative Origins of the Sub-Prime Mortgage Crisis: Everything you ever wanted to know about the mortgage meltdown but were afraid to ask.) We can see evidence of this in Dick Cheney who, we can argue, has moved vice-presidential powers beyond what we have known in the past.

In journalist Barton Gellman’s Angler, (Cheney’s CIA cover name is “Angler”) we learn the details of Cheney’s forty-year political career that gives evidence of subterfuge for the sake of power and mission. His first act, according to Gellman, is Cheney’s self-selection to vice-president. Prior, Cheney, from 1979 to 1982, voted “yes” on all bills for oil tax breaks and for indexing income tax (H.R. 1176, H.R. 2225, H.R. 5318); between 1984 to 1986, he voted to keep mortgage bonds and loosen capital gains rules; he brought in Paul O’Neill, for instance; he mislead Congress and the American people about Iraq; and, to support our discussion, here, Cheney was behind tax cuts for the rich and the reduction of capital gains (see more about Cheney the economist). Cheney believed very strongly that there should be a capital gains cut to unleash producers, which has never worked but has indeed made the wealthy wealthier.

Furthering the irony that by enabling a loosening of rules and regulations–and taxes–for the rich is healthy for the economy, we learned that McCain, for instance, defended the “Enron loophole” and “oppose(d) the $307 billion farm bill because it would dole out wasteful subsidies, but his chief economic adviser Phil Gramm also want(ed) to stop its proposed regulation of energy futures trading, a market that was famously abused when Enron Corp. manipulated California’s electricity prices in 2001.” In fact, “Gramm, as a powerful Texas senator in 2000, slipped an Enron-backed provision into the Commodities Futures Modernization Act that exempted from regulation energy trading on electronic platforms.”

We can see, therefore, how carefully and in ways that may seem complex to the general public, we have politicians as front men for powerful corporations that are looking to consolidate power. The fusion of power at the highest levels is the aim. In September, for instance, McCain said that he thought “deregulation in banking worked well (what is he smoking?) and wants to borrow from Wall Street’s brilliant success to help reform healthcare.” (more on how the Wall Street crisis has been helped by the McCain – Gramm team, here) Any changes in McCain’s rhetoric are merely means by which to soften his image to voters; he is beholding to the most powerful men and their corporations and he’s evolved his political life, not as a maverick, but as a bold advocate–and mouthpiece–for the extraordinarily wealthy. John McCain is a scam artist, applying media-rich extravaganza, like parachuting into Washington the other day to save the day and to continue the pursuit of the fusion of power that began long ago. In fact, John McCain is the most influential supporter of gambling, as reported by The New York Times.

What are we then to expect from Obama? He has not been tested on this yet given his short term in the Senate; however, real estate, Wall Street financiers, and lawyers, all support Obama. In their first debate, when Obama had ample room to really attack–and address–McCain on this, he did not, which raises suspicions, of course. Or is it the continued Obama problem that he may be too cerebral for the American public?

I also often say to some of my “econ majors” to practice the following: “Would you like french fries with that?” They laugh nervously. But suffice to say that “the econ major” is such, not because s/he is trying to work out strange and interesting theories about future markets, but rather, s/he studies economics in a rush to gain a foothold, to have “the good life,” which more often than not means luxury and enough money to buy leisure–the most expensive commodity today.

The only hope I have in Obama is that, perhaps, given that he seems to enjoy deliberation, he’ll be able to speak across differences–our own and those we have with aggressive nations; that he might be able to begin to quell our thirst for more and more and more; and that he may begin to at least entertain a dialog, among us, about who we might want to be when we grow up. This is romantic, of course, but given the signs of the times–the aggressive push to consolidate and fuse centers of power–it’s the only thing I have left. Can you imagine Sarah Palin in this world?

Filed under cultural studies, Media, philosophy, politics Tagged with , , , , ,

America’s Future After an Obama Victory: Hope Hangs by a Thread

September 15, 2008 1 Comment

Disorder and uncertainty are the guiding principles of our world today, made more so by violent storms and the unpredictability of the environment, the mortgage crises and the constriction of world finances, and always war and the threat of more war and violence in different parts of the world. Instability reigns supreme.

The voting citizenry, almost too late, last minute, gives Obama a healthy victory.

What happened?

Some of the very wealthy–not all, the golf course set mostly–in the top 1 to 2% of the population, fearing a capital gains tax and estate taxes, vote for McCain believing that our national debt and growing financial uncertainty can be solved by reducing taxes, the myth of Republican Fiscal Conservatism. The golf course set turns its back on the history telling us that this has never worked.

The next socioeconomic rung (we begin to understand that we live in a class-based, racist society; see also the July/August The Atlantic) finally realizes that under every Republican presidency since Ronald Reagan, taxes have increased, the debt has mushroomed, defense spending has increased (so have loans to support defense/war), and the size of government–the business of government delving into the privacy of citizens–has grown to an uncontrollable size (and weight).

The working class is divided into two camps, one for McCain and one for Obama. The right wing extremists, the religious fundamentalist who reject science, civil liberties and the unity of knowledge known as consilience, which all thinking persons are beginning to understand as the way to bridge culture and science–and who likewise could never vote for a Black president (somehow this is appropriate for Christians)–vote for McCain (see election 2008, from Salon for interesting insights). (see also how the Republicans want to control the 21st Century, as reported to Terry Gross, Fresh Air)

Convincingly, though, Black America and the working class behind Hillary Clinton, better educated on the relationships between science, technology, evolution and the future that depends on our cooperation and collaboration, vote for Obama.

And finally, students and those commonly referred to as the “educational elite,” as opposed to the “political elite” and the “media elite,” but who also cross these rather bogus lines of demarcation made popular by the lackluster press insistent on reporting only the surface structure of things, vote overwhelmingly for Obama.

The citizenry thus awakens to the fact that from Henry Kissinger on, all those who are advising and working closely with the “Maverick” McCain are lobbyist of the strongest sort; all support and advocate special interests, which in reality has been the hallmark of the McCain campaign, made obvious by the selection of Sarah Palin, a puppet, we finally realize, propped up to excite the extremists that near the end of the campaign are worked up to a frenzy about abortion and (gay) marriage as if nothing else mattered.

The citizenry wakes up to the fact that the first presidential decision made by John McCain, the selection of Palin, puts the country at risk. As Bob Herbert, writing for The New York Times, said, “For those who haven’t noticed, we’re electing a president and vice president, not selecting a winner on ‘American Idol’.” We therefore realize that another 4 or 8 years of a continuation of a “Bush doctrine” and Republican control, which is unenlightened and uncreative, would put the country into a tail spin from which we might never recover.

Can we afford electing another half-wit from the bottom of his graduating class? Or should we try something different?

American Culture After an Obama Victory:

Many in America are worried. A Democratic intellectual, the first Black President, is elected. What will this mean?

The first challenge is cultural, societal.

We have to address the notion that we are divided–we are a divided country. For far too long many people have been kept from the seats of power; too many Americans lacking education and healthcare are disenfranchised. Now we are nervous that we are being asked to trust in a process of change without a light at the end of the tunnel–just trust. Trust the rhetoric. Trust the will of this new leader. Trust the judgment.

Where are we headed?

It is a nebulous time. People are scared and immediately following the election, the extreme right wing begins a relentless media attack against Obama, his policies and his ideas. It’s what the citizenry is used to–media instead of substance. The hopeful remain so, but hanging by a thread. The Clintons, and Al Gore, rally around Obama and Biden.

Wall Street is more optimistic, and since they’ve backed Obama all along, continue to their support.

But within the first 100 days, it’s the citizenry that awakens. Some, the older voters who supported Obama come to realize that they’ve heard this before, echoes of the JFK era (this doctrine was never finished; it never even got off the ground), and thus begin to take leadership positions in communities across the country pushing the notion that this election was NOT about Obama or McCain, but rather about what kind of country we want to work for. This becomes the rallying cry and Americans, slowly, some reluctantly, begin to understand that the bigger, faster, stuffed America of the past is not the way and that we must look elsewhere to find solutions.

We in fact have to look at ourselves for the solutions. Obama provides ideas and methods, processes and procedures, but we, the citizens, have to put our shoulders to the wheel–in America and across the world. Innovation is the only solution to change.

Imagination, will and determination, collaboration and cooperation, consilience, and humanity–these are the new words after the election which help us look at energy solutions, education and healthcare, and the wars. The shift in the American perspective begins within 100 days of Obama’s election–but not without war cries from the opposition entrenched in old models.

Energy Policy:

Moments after his inaugural address, Obama is pressed hard to drill for oil in Alaska. But he weathers the storm–some people, and oil companies (the Russians and the Venezuelans, too) get angry. It’s the intelligent thing to do, though. As Thomas Friedman says about drilling for oil, writing for The New York Times, “I’ll tell you what they would have been doing: the Russian, Iranian and Venezuelan observers would have been up out of their seats, exchanging high-fives and joining in the chant louder than anyone in the hall — “Yes! Yes! Drill, America, drill!” — because an America that is focused first and foremost on drilling for oil is an America more focused on feeding its oil habit than kicking it.”

What most people hadn’t realized is that Obama has surrounded himself, not with lobbyists (only one of his team members even resembles a lobbyist), but with experts in different areas–the environment, education and healthcare, defense, technology and so on. The drilling for oil controversy raises the curtain on how Obama is working to move the culture towards what we know–consilience–making this the beginning of an era that will rely on knowledge and information, rather than the gloss given by media and its pundits, usually advocating for one special interest group or another.

Linking energy to defense and the economy, Obama, with the help of Al Gore and his followers, begins to make it easier to invest in green technologies.

Eric Janszen for instance, “an angel investor and founder of the contrarian market website iTulip.com, which The New York Times credited with ‘accurately predicting that the [internet] bubble would pop.’ Now Janszen believes the American economy needs a fundamental restructuring away from its foundations in finance, insurance and real estate. His prescription: a new bubble based on green technologies.” (Also see Harpers, “The Next Bubble…”)

Literally, all sectors of the economy need to comply–the auto industry, oil and gas, building and construction, local governments, and so on. This calls for mass restructuring but it begins by engaging citizens about what is important. We reach out to other countries, such as the Netherlands, that have far outpaced our evolution into green technologies, and begin collaborative projects.

This is a slow, contentious process but it sends a message to the world that we are indeed operating quite differently than we have in the past. The price of oil stabilizes, though still high because of Chinese demand and because of environmental factors.

Education and Healthcare:

Education: This is a difficult area because the K-12 educational system has mushroomed into an unhealthy and unmanageable nightmare, particularly following the Bush era No Child Left Behind.

First off, Obama places an emphasis on early child care; then on strengthening the next rung. But it gets tricky after: The size of schools and teacher unions make it hard to change or modify existing–and complacent–practices. Obama encourages “innovation” in education, but it’s unclear what this means (I will write on this at another time, in The Uncanny, laying out the challenges and solutions for America’s disastrous educational system, which is, after all, all about class).

On a positive note–since this is going to be even slower then healthcare reform–Obama is calling forth for all citizens to be involved in the education of our children. This coincides with our citizen-roles post the Obama election; however, no sound plan has yet emerged, not in the first 100 days. Vouchers, magnate schools, private vs public, merit pay and accountability, innovation vs the status quo–all these points of contention remain and are the areas of specialization the Obama White House will have to address.

It is a truism that education reform, which is extremely necessary, will be the most painful domestic undertaking in the next 10 years, more painful than healthcare reform. Education is where we can gauge how the rest of the culture is working–another truism.

Healthcare: Healthcare and Education run side-by-side. The way of healthcare is the way of education. This is always true.

But Obama has promised that all Americans will have insurance comparable to that held by government employees. Obama and Biden begin by addressing disparities in healthcare coverage for Americans. This addresses their first theme, “Quality, Affordable and Portable Coverage for All.” A good idea, but insurance companies and pharmaceuticals push back–too much money to be made off illness.

Likewise lowering the costs by modernizing the U.S. Healthcare system–reducing costs of catastrophic illnesses, helping patients in numerous ways, ensuring providers deliver quality care across the board–is important and valuable, but other sectors of the economy have to grow and become healthier since this is an extraordinary expensive venture. And again, given the high cost of providing healthcare in this country, the profits enjoyed by pharmaceuticals and the salaries commanded by some doctors who fear making less and having to change lifestyles, there is significant push back. Obama considers Hillary Clinton’s role in this and she becomes a major policy contributor.

But perhaps the single most important, long term possibility exists in Obama’s plan to fight for new initiatives. Not unlike the environment–and what’s necessary in education and still missing–new advances in science and technologies, advances in biomedical research, as well as continued and renewed support for the fight against AIDS worldwide create an approach to healthcare based on a delicate balance between prevention, intervention and treatment–and this includes mental health care.

Foreign Policy:

To say that Obama and Biden inherit a nightmare is an understatement. The first item on the agenda is to move away from a Machiavellian approach to foreign policy, but which will reinstate the United States as a strong and competent ally.

Though Obama was accused of lacking experience during the campaign, his foreign policy approach calls for a bipartisan, consensus building journey of renewal. The problem has been that the carrot and stick approach has not worked, so we must find new or different ways. Obama calls for more dialog, even with “enemies,” thus enabling us to have better grasp of the challenges ahead–something totally alien to the Bush Administration, which would have been the policy followed by McCain.

The key to Obama’s plan is bipartisanship and an open approach, this way we can all contribute to the complex world we all live in. Diplomacy must be used first and foremost, and it’s the only way to continue a relationship with, say, Iraq, since within 11 or so months after taking office, troops leave and only a small group remains for consulting and training.

But the biggest mess is Afghanistan, particularly following the increase in violence and attacks into Pakistan–and Iran–perpetuated by the Bush Administration between September and the end of December of 2008. Pakistan has become hostile to the US for the attacks; likewise, the country has become increasingly unstable.

While bringing troops out of Iraq, Obama and Biden must stabilize rising insurgency in Afghanistan, as well as the instability in Pakistan. This is the new front. It has of course always been there, but the Bush Administration–which McCain supports–kept it off the front burner until moments before the presidential election.

Summary:

Thi is a citizen’s election–our electin; it is about how we feel about our country and in what direction we want to go. Nothing more, nothing less. It is clear that an Obama victory brings challenges. This is because he, unlike McCain, is asking that we participate, that we involve ourselves in our domestic as well as global problems. We can’t do this any other way.

McCain, on the other hand, is a salesman doing the two-step around a faulty model–we’ve been here. It’s true, during the last 8 years we’ve allowed a failed student, a failed businessman, and a rather unsuccessful governor rule our country. Bush boasts about his place at Yale, a place that was held for him not because he earned it, but because his family gave it to him. The same holds true for McCain. He graduated 5th from the bottom at the US Naval Academy, a place guaranteed him by his father. McCain went on to destroy 5 aircraft. At one point killing over 100 people on an aircraft carrier; his flight fitness report described him as “less than average.” But he went on to be given the honor of being a flight instructor. How does that happen? Daddy, family, the business as usual of privilege. Yes, he suffered greatly and he acted with great honor in Vietnam. Unfortunately, these are not qualifiers for the presidency. McCain is no maverick, this is obvious; he has been a part of the privileged mainstream, which awards blood not merit.

Isn’t it time we tried something else, please, for our sake this time?

Filed under cultural studies, Media, philosophy, politics Tagged with , , , , , , , ,

Follow

Get every new post delivered to your Inbox.

Join 84 other followers