Saturday, February 14, 2009

US Political and Economic Elites Stealing the Wealth of a Nation

"John F. Kennedy famously said, 'Life is unfair,' and so it is. But it wouldn't feel as unfair if the shackles wound up instead on the well-heeled feet of Wall Street and Washington's elect. That's the change we need, the change we can really believe in." -- Bill Moyers, Bill Moyers Journal, 8 Feb 2009.
All day long, 24-hours a day, 365 days a year, the talking heads of cable television spew gibberish about almost every subject, quoting lies from the mouths of drones launched by the political and economic elites and who are represented primarily by the GOP. Little fact checking is attempted. Like a whirlpool, the talking heads interview one another. Only in public sector accidents or incidents, health and a few other areas do they interview subject matter experts. But, when it comes to politics, like Chris Matthews, they believe they are the experts! Given the technology available today, networks could easily check the facts almost in real time to determine the veracity of distorted, outright lies or propaganda-based statements, but do not do so, or at least do so recently only in so far as political campaigns are concerned. So, what the US public receives everyday from mainstream media is garbage and what they repeat is also garbage as in "garbage in, garbage out." Anyone who has a dependence upon the mainstream media is consumed by smoke and mirrors. It's all a mirage.

Consequently, when someone like Paul Krugman or David Harvey or Chalmers Johnson articulates a different vision, there is little deep discussion of their views. Oh, Krugman maintains access to the public through his columns in the New York Times, but few Americans read newspapers. When interviewed, his understanding of contemporary political economics is so far above the heads of the talking heads that they are unable, with few exceptions, to hold a reasonable conversation with the man. So, it's 3 minutes and done. Slam, bam, thank you Paul. Don't call us, we'll call you when we need you.

What's really scary to those of us on the Left is that Krugman might be considered a relative intellectual moderate, but at least he sees the trees in the dense forest of misinformation. David Harvey, who is a distinguished professor and teaches Marxism, among other things, at City University of New York, is persona non grata, but is far more insightful about the current economic crisis than Krugman. Nonetheless, we have yet to see him interviewed by any of the 24-hour cable news programs. Its management would rather replay the daily accident or insider interview ad nauseum than prospect for original ideas coming from the Left. Only YouTube saves Harvey, and us, from his views being obscure and relatively anonymous.

Chalmers Johnson, a distinguished social scientist and public intellectual, is the author of three linked books on the crises of American imperialism and militarism. They are Blowback (2000), The Sorrows of Empire (2004), and Nemesis: The Last Days of the American Republic (2006). All are available in paperback from Metropolitan Books. To listen to a TomDispatch audio interview with Johnson on the Pentagon's potential economic death spiral, click here. He is a consistent critic of the encumbrance of the military budget on US society.

Marxism in the United States, of course, has been relegated (censored) to the landfill of ideas never to see the light of day by both the right and the center. It is only on the left that any real world discussions take place about the type of society that the United States should be or can be. On the right are predators, scavengers and vermin. In the center are the sheep. On the Left, of course, are the patriots and the humanists. Believe it! Do you think the right would have authored a Bill of Rights. They couldn't even read at the time the Constitution was enacted. For that, we are all blessed. Furthermore, Marx and Hegel were humanists—you know the folks who fight for human rights. Their writings expanded upon the ideas about capital Adam Smith introduced less their three generations before and like many intellectuals of their age were derived directly from the natural and physical worlds in which they lived, in the same way that Isaac Newton, and later Albert Einstein and Rudolf Steiner used the natural world to innovate their own ideas. The point here is that trying to understand capitalism and having no knowledge of Marxism is like astrophysicists not understanding Newton or Einstein. More importantly, as the world is coming to agree, trying to manage a rational economy based upon capitalism with a democratic intent and not understanding Marxism is impossible!

When Adam Smith published his treatise on the Wealth of Nations (1776), he could not envision people making money by just investing the capital of others as Wall Street pirates do today. He writes:
A capital may be employed in four different ways: either, first, in procuring the rude produce annually required for the use and consumption of the society; or, secondly, in manufacturing and preparing that rude produce for immediate use and consumption; or, thirdly, in transporting either the rude or manufactured produce from the places where they abound to those where they are wanted; or, lastly, in dividing particular portions of either into such small parcels as suit the occasional demands of those who want them. In the first way are employed the capitals of all those who undertake the improvement or cultivation of lands, mines, or fisheries; in the second, those of all master manufacturers; in the third, those of all wholesale merchants; and in the fourth, those of all retailers. It is difficult to conceive that a capital should be employed in any way which may not be classed under some one or other of those four. (Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations. Edwin Cannan, ed. 1904. Book II, Chapter V — "Of the Different Employment of Capitals Library of Economics and Liberty.")

In fact, it's possible that Somali pirates would find some empathy from Smith. In Wealth of Nations, he defends smuggling as a legitimate activity in the face of "unnatural" legislation—unnatural, I assume to mean unwarranted and irrational, such as the prohibition legislation on alcohol in the first decades of last century, and the current legislation regarding marijuana in this generation. Where he is unlikely to show empathy, however, is with the type of unethical piracy shown by CEO's of Wall Street financial institutions that appeared arrogantly before Congress recently. News reports have it that four of these CEO's received bonuses in excess of $120 million dollars. Where did this money come from? Was it really "created" by their labor? The answer to the second is absolutely not; it was stolen from the public trust.

Which is to say, in response to the first question, that the money came from average working Americans, past and present, through the machinations of institutional investors, organizations that pool large sums of money and invest those sums in companies. These include banks, insurance companies, retirement or pension funds, hedge funds and mutual funds. "Their role in the economy is to act as highly specialized investors on behalf of others. Furthermore, because institutional investors have the freedom to buy and sell shares, they can play a large part in which companies stay solvent, and which go under. Influencing the conduct of listed companies, and providing them with capital are all part of the job of investment management." (Wikipedia).

In brief, then, prior to the implosion of the US economy, income on Wall Street came from investment profits rather than the creation of new wealth. And the income that Wall Street was amassing was overwhelmingly in the form of paper profits that have now vanished as quickly as they appeared.

In other words, once the implosion began, those recent gross bonuses that Wall Street executives gave themselves came directly from the PRINCIPLE held in pension funds of working and retired Americans. These executives and the whole of Wall Street have had their own private run on the banks while the American people have been kept in the dark. The deregulation of capital markets has rendered the entire financial services industry one BIG Ponzi scheme in which the entire US Congress is an accomplice. In terms of relative guilt, the US Congress under Republican stewardship was no different from Bernie Madoff. Madoff may, however, become the proverbial straw that stirred a social revolution. He only absconded with $50 billion, some of which will be recovered. The Wall Street financial services community and their local partners have absconded with $100s of billions, NOT as investment profits, but as principle from their accounts, and the Obama administration is not showing that it cares.

In fact, what this administration appears to be doing is hiding the fact that our treasury is empty. So much for transparency. The administration's posture, as the editors of The Nation have noted with respect to the lack of rational discourse concerning the "Bailout," is deafening.
What are they hiding? If Geithner had spoken with any clarity, he would have revealed that his "new" plan is basically a continuation of the one that failed spectacularly in the closing months of the Bush administration: Washington intends to deliver vast additional sums of public money to the very largest banks while demanding little in return for the public interest. The Obama administration is adding new wrinkles to a doomed effort, attempting to put Humpty Dumpty back together again. Since the old order led the country into this mess, enlarging its rescue package is certain to stoke further the ferocious public outrage. So Geithner cannot say plainly what he is up to. Neither he nor Larry Summers, Obama's chief economic adviser, can think his way out of the problem or propose a more aggressive approach, as both men are wedded to the old way of doing things.
Worst, apparently Obama's economic advisors are arrogant enough not to seek advisement from the Japanese about their economic crisis in the 1990's. Perhaps, the only question remaining at this point is how much real money actually remains in these pension funds or in social security, for that matter. Obviously, it's all virtual monopoly money, not real property. My guess is not much, which is why the public is not being told what has happened to their savings. Paulson and the Fed knew. The TARP funding is being used to hide the bad news. We now see why the past and current presidential administrations asked the Federal Reserve, the bank that is not a bank, to print more money. Can you say "revolt"? I hope so. Americans need to do with peaceful force of will what the Icelanders and Argentinians have been forced already to do—drive these neoliberals to the prison cells they have earned. "All of them must go!"

No comments: