It's not going to be OK

I'm finding it difficult to have much to say about this article. For once, I don't have anything to criticize. I thought I might be able to pick on the reporter himself, but he's impeccably credentialed, as far as I can tell.

It’s Not Going to Be OK

Posted on Feb 2, 2009

AP Photo / Nikolas Giakoumidis

Riots have spread across Europe since the economic crisis began. Here, Greek riot police stand near a burning car.

By Chris Hedges

The daily bleeding of thousands of jobs will soon turn our economic crisis into a political crisis. The street protests, strikes and riots that have rattled France, Turkey, Greece, Ukraine, Russia, Latvia, Lithuania, Bulgaria and Iceland will descend on us. It is only a matter of time. And not much time. When things start to go sour, when Barack Obama is exposed as a mortal waving a sword at a tidal wave, the United States could plunge into a long period of precarious social instability.

At no period in American history has our democracy been in such peril or has the possibility of totalitarianism been as real. Our way of life is over. Our profligate consumption is finished. Our children will never have the standard of living we had. And poverty and despair will sweep across the landscape like a plague. This is the bleak future. There is nothing President Obama can do to stop it. It has been decades in the making. It cannot be undone with a trillion or two trillion dollars in bailout money. Our empire is dying. Our economy has collapsed.

How will we cope with our decline? Will we cling to the absurd dreams of a superpower and a glorious tomorrow or will we responsibly face our stark new limitations? Will we heed those who are sober and rational, those who speak of a new simplicity and humility, or will we follow the demagogues and charlatans who rise up out of the slime in moments of crisis to offer fantastic visions? Will we radically transform our system to one that protects the ordinary citizen and fosters the common good, that defies the corporate state, or will we employ the brutality and technology of our internal security and surveillance apparatus to crush all dissent? We won’t have to wait long to find out.

There are a few isolated individuals who saw it coming. The political philosophers Sheldon S. Wolin, John Ralston Saul and Andrew Bacevich, as well as writers such as Noam Chomsky, Chalmers Johnson, David Korten and Naomi Klein, along with activists such as Bill McKibben and Ralph Nader, rang the alarm bells. They were largely ignored or ridiculed. Our corporate media and corporate universities proved, when we needed them most, intellectually and morally useless.

Wolin, who taught political philosophy at the University of California in Berkeley and at Princeton, in his book “Democracy Incorporated” uses the phrase inverted totalitarianism to describe our system of power. Inverted totalitarianism, unlike classical totalitarianism, does not revolve around a demagogue or charismatic leader. It finds its expression in the anonymity of the corporate state. It purports to cherish democracy, patriotism and the Constitution while cynically manipulating internal levers to subvert and thwart democratic institutions. Political candidates are elected in popular votes by citizens, but they must raise staggering amounts of corporate funds to compete. They are beholden to armies of corporate lobbyists in Washington or state capitals who write the legislation. A corporate media controls nearly everything we read, watch or hear and imposes a bland uniformity of opinion or diverts us with trivia and celebrity gossip. In classical totalitarian regimes, such as Nazi fascism or Soviet communism, economics was subordinate to politics. “Under inverted totalitarianism the reverse is true,” Wolin writes. “Economics dominates politics—and with that domination comes different forms of ruthlessness.”

I reached Wolin, 86, by phone at his home about 25 miles north of San Francisco. He was a bombardier in the South Pacific during World War II and went to Harvard after the war to get his doctorate. Wolin has written classics such as “Politics and Vision” and “Tocqueville Between Two Worlds.” His newest book is one of the most important and prescient critiques to date of the American political system. He is also the author of a series of remarkable essays on Augustine of Hippo, Richard Hooker, David Hume, Martin Luther, John Calvin, Max Weber, Friedrich Nietzsche, Karl Marx and John Dewey. His voice, however, has faded from public awareness because, as he told me, “it is harder and harder for people like me to get a public hearing.” He said that publications, such as The New York Review of Books, which often published his work a couple of decades ago, lost interest in his critiques of American capitalism, his warnings about the subversion of democratic institutions and the emergence of the corporate state. He does not hold out much hope for Obama.

“The basic systems are going to stay in place; they are too powerful to be challenged,” Wolin told me when I asked him about the new Obama administration. “This is shown by the financial bailout. It does not bother with the structure at all. I don’t think Obama can take on the kind of military establishment we have developed. This is not to say that I do not admire him. He is probably the most intelligent president we have had in decades. I think he is well meaning, but he inherits a system of constraints that make it very difficult to take on these major power configurations. I do not think he has the appetite for it in any ideological sense. The corporate structure is not going to be challenged. There has not been a word from him that would suggest an attempt to rethink the American imperium.”

Wolin argues that a failure to dismantle our vast and overextended imperial projects, coupled with the economic collapse, is likely to result in inverted totalitarianism. He said that without “radical and drastic remedies” the response to mounting discontent and social unrest will probably lead to greater state control and repression. There will be, he warned, a huge “expansion of government power.”

“Our political culture has remained unhelpful in fostering a democratic consciousness,” he said. “The political system and its operatives will not be constrained by popular discontent or uprisings.”

Wolin writes that in inverted totalitarianism consumer goods and a comfortable standard of living, along with a vast entertainment industry that provides spectacles and diversions, keep the citizenry politically passive. I asked if the economic collapse and the steady decline in our standard of living might not, in fact, trigger classical totalitarianism. Could widespread frustration and poverty lead the working and middle classes to place their faith in demagogues, especially those from the Christian right?

“I think that’s perfectly possible,” he answered. “That was the experience of the 1930s. There wasn’t just FDR. There was Huey Long and Father Coughlin. There were even more extreme movements including the Klan. The extent to which those forces can be fed by the downturn and bleakness is a very real danger. It could become classical totalitarianism.”

He said the widespread political passivity is dangerous. It is often exploited by demagogues who pose as saviors and offer dreams of glory and salvation. He warned that “the apoliticalness, even anti-politicalness, will be very powerful elements in taking us towards a radically dictatorial direction. It testifies to how thin the commitment to democracy is in the present circumstances. Democracy is not ascendant. It is not dominant. It is beleaguered. The extent to which young people have been drawn away from public concerns and given this extraordinary range of diversions makes it very likely they could then rally to a demagogue.”

Wolin lamented that the corporate state has successfully blocked any real debate about alternative forms of power. Corporations determine who gets heard and who does not, he said. And those who critique corporate power are given no place in the national dialogue.

“In the 1930s there were all kinds of alternative understandings, from socialism to more extensive governmental involvement,” he said. “There was a range of different approaches. But what I am struck by now is the narrow range within which palliatives are being modeled. We are supposed to work with the financial system. So the people who helped create this system are put in charge of the solution. There has to be some major effort to think outside the box.”

“The puzzle to me is the lack of social unrest,” Wolin said when I asked why we have not yet seen rioting or protests. He said he worried that popular protests will be dismissed and ignored by the corporate media. This, he said, is what happened when tens of thousands protested the war in Iraq. This will permit the state to ruthlessly suppress local protests, as happened during the Democratic and Republic conventions. Anti-war protests in the 1960s gained momentum from their ability to spread across the country, he noted. This, he said, may not happen this time. “The ways they can isolate protests and prevent it from [becoming] a contagion are formidable,” he said.

“My greatest fear is that the Obama administration will achieve relatively little in terms of structural change,” he added. “They may at best keep the system going. But there is a growing pessimism. Every day we hear how much longer the recession will continue. They are already talking about beyond next year. The economic difficulties are more profound than we had guessed and because of globalization more difficult to deal with. I wish the political establishment, the parties and leadership, would become more aware of the depths of the problem. They can’t keep throwing money at this. They have to begin structural changes that involve a very different approach from a market economy. I don’t think this will happen.”

“I keep asking why and how and when this country became so conservative,” he went on. “This country once prided itself on its experimentation and flexibility. It has become rigid. It is probably the most conservative of all the advanced countries.”

The American left, he said, has crumbled. It sold out to a bankrupt Democratic Party, abandoned the working class and has no ability to organize. Unions are a spent force. The universities are mills for corporate employees. The press churns out info-entertainment or fatuous pundits. The left, he said, no longer has the capacity to be a counterweight to the corporate state. He said that if an extreme right gains momentum there will probably be very little organized resistance.

“The left is amorphous,” he said. “I despair over the left. Left parties may be small in number in Europe but they are a coherent organization that keeps going. Here, except for Nader’s efforts, we don’t have that. We have a few voices here, a magazine there, and that’s about it. It goes nowhere.”

Theiving Merrill executives accelerated bonuses before BofA deal

Every time I think I've seen the lowest, most despicable, most brazen, unconscionable, outright theft, something like this comes along and proves me all wrong. When do we start seeing these fucking executives in handcuffs?

Merrill delivered bonuses before BofA deal
Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America.

The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal.

Merrill and BofA shareholders voted to approve the takeover on December 5. Three days later, Merrill’s compensation committee approved the bonuses, which were paid on December 29. In past years, Merrill had paid bonuses later – usually late January or early February, according to company officials.

Within days of the compensation committee meeting, BofA officials said they became aware that Merrill’s fourth-quarter losses would be greater than expected and began talks with the US Treasury on securing additional Tarp money.

Last week, BofA said it would be receiving $20bn in Tarp money, in addition to the $25bn that had been earmarked for it and Merrill last year. It was then revealed that Merrill had suffered a $21.5bn operating loss in the fourth quarter.

Despite the magnitude of the losses, Merrill had set aside $15bn for 2008 compensation, a sum that was only 6 per cent lower than the total in 2007, when the investment bank’s losses were smaller.

The bulk of $15bn in compensation was paid out as salary and benefits throughout the course of the year. A person familiar with the matter estimated that about $3bn to $4bn was paid out in bonuses in December.

Nancy Bush, an analyst with NAB Research, described the size of the 2008 Merrill bonus payments as “ridiculous”.

BofA said: “Merrill Lynch was an independent company until January 1 2009. John Thain (Merrill’s chief executive) decided to pay year-end incentives in December as opposed to their normal date in January. BofA was informed of his decision.”

BofA declined to specify when Mr Thain informed the bank of his decision.

A source familiar with the matter says Mr Thain, in the weeks leading up to the December 8 compensation committee meeting, had been weighing the possibility of requesting a bonus of at least $10m for himself before ultimately deciding against such a move.

So, if you're not clear what this means, let me break it down for you. Merrill decides they are too broke to function as an independent company, so they decide to sell themselves to Bank of America. Bank of America gets $25,000,000,000 (it seems like a bigger number if you use all the zeros instead of just saying "$25 billion") from the Paulson to make the deal work. Merrill decides a couple of days later that they've done a hell of a wonderful job and still deserve their bonuses, but they've got to hurry up and pay them out before BofA takes them over. In the meantime, BofA realizes that Merrill's eyeball deep in bad shit, and wants out of the deal. Paulson says, "no way", and kicks in another $20,000,000,000 and agrees to guarantee up to $118,000,000,000 in bad loans. Today, BofA says to John Thain (former CEO of Merrill Lynch) "your services are no longer needed."

In short: Merrill executives are fucking theives, and have perpetrated a massive heist on Bank of America, who passed the buck on to you, the taxpayer. How does that make you feel?

Riots continue in Iceland

As I noted here December 23rd, riots and violent protests were disrupting Iceland, a country not known for these types of actions. Admittedly, the economic situation there is much worse (currently) than in the United States, but perhaps not for long. The Icelandic current account deficit is currently 22% of GDP, vs. 7% for US; the Icelandic GDP is forecast to decline by 9.6% for 2009- a number nobody is contemplating for the US. Inflation in Iceland is rampant, while deflation has taken hold in America.

However, there are several parallels worth noting. Iceland is forecasting a rise in the unemployment rate to 7.8% in 2009 (a number the US would be lucky to maintain in the face of steeply mounting layoffs and business closures). Iceland's currency has lost more than half its value, which is certainly not unforeseeable in the future for the US. But more than just the numbers, the story certainly sounds familiar to those of us in the United States. From The Guardian:

The fault is clearly shared between the business elite and the government, which failed to regulate the newly privatised financial sector, allowing a few incompetent and egotistical business tycoons to gamble with the nation's fortune. And yet neither the government nor the bankers – who, by the way, seem to have disappeared into the cold thin air – see anything wrong with their own behaviour.

The governor of the central bank blames the risk-seeking bankers, the bankers blame the government and the prime minister attributes the whole crisis to the international credit crunch. This lack of any sense of responsibility has angered the Icelandic public to the extent that they have turned to the streets in greater numbers than ever before.

Sound familiar? Do you hear anyone in American politics or banking accepting responsibility?

From the Huffington Post:

Thomas Jefferson wrote in the American Declaration of Independence that "Governments are instituted among Men, deriving their just powers from the consent of the governed [and] whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government." As the protesters fight to enforce that right, in this county that has known no war for generations, that has not seen violent conflict among its citizens for centuries, we must ponder what could be.

Today, as the United States makes a fundamental shift in direction, Iceland is tearing itself apart. The peaceful transition of power we watched in Washington following a fiercely contested election is a symbol of hope to us. The competent confidence and inspiring rhetoric of Barack Obama have rallied the vast majority of Americans behind him to face the myriad challenges all around us. The arrogance and obliviousness of Iceland's ruling elite has had the opposite effect.

Once again, I sincerely hope that I am wrong about the direction we are headed. However, the way I see it, he stimulus package cannot stand up to the kind of fiscal devastation that has been unleashed around the planet, nor can the TARP (or TARP 2.0, 3.0, etc... which are surely going to be coming). Please consider what could happen here if the results that people expect from the incoming administration fail to live up to the expectations engendered by the utterly non-specific rhetoric of "hope", and "change", and "yes, we can". What happens if we simply cannot? Once more, from The Guardian:

It is the first time in Icelandic history that a young anarchist can well expect to meet his grandmother in the crowd demonstrating against the government and drumming with her kitchen knife on pots and pans. The government is surely hanging by a thin thread and might fall at any moment.

The Icelandic public fear that their country has virtually been stolen by the globetrotting business elite that spent more time rubbing shoulders with international high society than giving back to the society that enabled them to enjoy this privileged lifestyle. Now ordinary Icelanders are determined to take their country back.

Cynicism part II- "How's that 'change' working out?"

I praised David Sirota's reporting on the bailout earlier, here's a perfect example of what I mean:

The veto is the legislative equivalent of a nuclear warhead — a rarely used instrument of devastating force that singularly vaporizes the votes of 535 elected representatives. So when a president-elect issues a veto threat before being sworn into office, it sets off a particularly big explosion because it is a deliberate agenda-setting edict about priorities for the next four years. That's why every American who isn't a financial industry executive should be nervous.

After President Bush this week asked Congress to release the bank bailout fund's remaining $350 billion, Obama pledged to veto any bill rejecting the request, meaning he is beginning his presidency not by "turn[ing] the page on policies that have put the greed and irresponsibility of Wall Street before the hard work and sacrifice of folks on Main Street," as he once pledged. Instead, he is promising a mushroom cloud unless lawmakers let taxpayer cash continue flowing to the biggest of Big Money interests.

Amid paeans to "new politics," we're watching old-school paybacks from a politician who raised more Wall Street dough than any other, a president-to-be whose inauguration festivities are being underwritten by the very bankers who are benefiting from the bailout largesse. Safely distanced from electoral pressure, Obama has appointed conservative economists to top White House positions; floated a tax cut for banks; and is now trying to preserve corporate welfare that almost exclusively benefits the political donor class.

This isn't much-ballyhooed "change"; it's money politics by a different name. How do we know? Because neither Obama nor anyone else is genuinely trying to justify the bailout on its merits — and understandably so. Even the most basic queries prove such merits don't exist.

Has the bailout increased bank lending, as was its stated objective? "Hundreds of billions of dollars have been injected into the marketplace with no demonstrable effects on lending," says a new report by the congressional panel charged with overseeing the money.

Do federal officials have a solid plan to improve the bailout? The report raises alarms about "the shifting explanations of its purposes," noting that the government has "not yet explained its strategy."

Is the cash being spent responsibly? The report says a lack of transparency means the public "still does not know what the banks are doing with taxpayer money."

But the most damning question isn't even being voiced: Is a bank bailout the best way to boost the economy?

Somehow, immediately releasing more bailout funds is being portrayed as a self-evident necessity, even though The New York Times reported this week that "the Treasury says there is no urgent need" for additional money. Somehow, the burden of proof is on bailout opponents who make these points, not on those who want to cut another blank check.

This bizarre dynamic is anything but the "pragmatism" Obama rhetorically fetishizes — and the anti-bailout majority knows it.

Cynicism and the electorate

David Sirota has done some really excellent reporting on the massive theft....errr... "bailout". Today he highlights one senator that criticized the bailout to get elected, then turned around and voted for it yesterday. Sirota opines:

When politicians campaign on populist themes, and then weeks later quite literally vote for the bills they attacked, it makes a mockery out of our democracy. It tells the American people that those representing us think representative democracy - with its campaigns, and promises to voters - is a laughingstock. And what we end up getting are policies that turn our economy into a laughingstock whereby those at the top guffaw their way to the bank, while the rest of us are the butt of the joke.

And so the reason to be disgusted with this kind of vote - whether it comes from Merkley, the Udall brothers or anyone else - has as much to do with the bailout being awful policy as it does with leaders defiling the very political process they are a part of. When that happens thousands of times over the course of many years (as it has in this last decade), it sows the kind of deep cynicism that erodes the public's foundational confidence in its own government.

The only question left is why do people keep voting? What recourse do you have now? As a voter, you thought you were getting someone who was going to vote the way he said he would- silly rabbit! Now you have to wait another 4 years before you can vote him out, and get someone else who is going to tell you appealing lies during the campaign, then ignore you once they are safely in office. Consider the following:

A central question that any voter who claims to wish to be informed must ask is: why is this man’s name on the ballot?

The standard answer is that he has a vision to fix the neighborhood, the city, or the country, and so he has nobly dedicated his life to public service, and needs your vote so that he can begin fixing the problem. He is a pragmatic idealist who knows that compromises must be made, but who can still make tangible improvements in your life.

Of course, this is all pure nonsense, as we can well see from the fact that things in a
democracy always get worse, not better. Standards of living decline, national debt explodes, household debt increases, educational achivements plummet, poverty rates increase, incarceration rates increase, unfunded liabilities skyrocket – and yet, election after election, the sheep run to the polls and feverishly scribble their hopes on to the ballots, certain that this time, everything will turn around! (For those reading this in the future, we are currently right in the middle of “Obama-mania.”)

The question remains – why is this man on the ballot?

We all know that it takes an enormous amount of money and influence to run for any kind of substantial office. The central question is, then: why do people give money to a candidate? I’m not talking about a national presidential campaign, where obviously people give a lot of money to the candidate in the hopes of giving him power to achieve some sort of shared goals and so on.

No, I mean: where does the money to get started even come from?

Why would pharmaceutical companies, aerospace companies, engineering companies,
manufacturing companies, farmers, and public-sector unions and so on give money and support to a candidate? Clearly, these groups are not handing out cash for purely idealistic reasons, since they are in the business of making money, at least for their members. Thus they must be giving money to potential candidates in return for political favors down the road – preferential treatment, tax breaks, tariff restrictions on competitors, government contracts etc.

In other words, any candidate that you get to vote for must have already been bought and paid for by others. Does this sound like an odd and cynical assertion? Perhaps – but it is very easy to figure out if a candidate has been bought and paid for.
Candidates will always talk in stirring tones about “sacrifice” and so on, but you surely must have noticed by now that no candidate ever talks specifically about the spending that he is going to cut. You never hear him say that he is going to balance the budget by cutting the spending of X, Y or Z. Everything is either couched in abstract terms, or specific promises to specific groups. (At the moment, the current fetish – in leftist circles – is to pretend that 47 million Americans can get “free” healthcare if the government lowers the tax breaks on a few billionaires.)

In other words, if you don’t see anyone else’s head on the chopping block, that is because it is your head on the chopping block. Of course, if the government really wanted to help the economy at the expense of some very rich people, it would simply annul the national debt – in effect, declare bankruptcy, and start all over again.
Why does it not do this? Why does it never even approach this topic? We have seen price controls on a variety of goods and services over the past few generations – why not simply place a moratorium on paying interest on the national debt, at least for the time being? Well, the simple answer is that the government simply cannot survive without a constant infusion of loans, largely from foreign lenders. This is a bit of a clue for you as to how important your vote really is, and how concerned your leaders are about your personal and particular issues – relative to, say, those of foreign lenders.

Ah, you might argue, but why would a pharmaceutical company, say, give money to a
potential candidate, since no deal can possibly be put down in writing, and that potential candidate might well take the money, and then just not take the calls from that pharmaceutical company when he or she gets into power?

Well, this is a distinct possibility, of course, but it has a relatively simple solution.
When a candidate is interested in taking a run at any reasonably high office, he goes around to various places and asks for money. When you ask someone for a few thousand dollars, naturally, his first question is going to be: “What are you going to do for me in return?”

Early on in any particular political race, there are quite a number of candidates. Anyone who wants to donate money to a political candidate in the hopes of gaining political favors down the road is only going to do so if he believes that the candidate will fulfill the unwritten obligation – the “anti-social contract,” if you like.
In politics, as in business, credibility is efficiency. Those who have built up reputations for keeping their promises end up being able to do business on a handshake, which keeps their costs down considerably. No new person entering a field will have the credibility or track record to be able to achieve this enviable efficiency, and so will have to earn it over the course of many years.

Thus we know for certain that when a company gives money to a political candidate, in the expectation of return favors in the future, that political candidate already has an excellent track record of doing just that. This kind of information will have been passed around certain communities – “Joe X is a man of his word!” – just as the reliability of a drug dealer and the quality of his product is passed around in certain other communities.

Thus we know that any candidate who receives significant funding from special interest groups is a man who has consistently proven his “integrity to corruptibility” in the past – for if he has no track record, or an inconsistent track record, no one will give him money to get started. (Just as a side note, this is a very interesting example of exactly why anarchism will work – we do not need the state to enforce contracts, since the state itself functions on implicit contracts that can never be legally enforced.)

In other words, whenever you see a name on the ballot, you can be completely certain that that name represents a man who has already been bought and paid for over the course of many years, and that those who have paid for him do not have, let us say, your best interests at heart.

But we can go one step further.

Since all the money that moves around in a political system must come from somewhere – the millions of dollars that are given to the sugar farmers must come from taxpayers – we can be sure that just about every benefit that special interest groups seek to gain comes at your expense. Pharmaceutical companies want an extension on their patents so they can charge you more money. Domestic steel companies want to increase barriers against imported steel so they can charge you more money. If a government union wants additional benefits, that will cost you. If the police want to expand the war on drugs, that will cost you security, safety and money. Whoever strives to benefit from the public purse has their hand groping towards your pocket.

Thus it is perfectly fair and reasonable to remind you that every name that you see on the ballot is diametrically opposed to your particular and personal interests, since they have been paid for by people who want to rob you blind.

Another aspect of “democricide” is the inevitable and constant escalation of public
spending necessary to achieve or maintain political power. Let us take the example of a mayor running for his second term. When he was running for his first term, sewage treatment workers donated $20,000 to his campaign, and in return he granted them a 10% raise. Now that he is running for his second term, and cannot give them another 10% raise, they have no reason to donate to his campaign. Thus he either has
to offer the sewage treatment workers some other benefit, or he has to create some new program or benefit which he can dangle in front of some new group, in order to secure their donations. This is why political candidates always announce new spending when they throw their hats into the ring – the new spending is the rather unsubtle promise of benefits which will be granted to those who donate to his campaign. A new stadium, a new convention center, a new bridge, a new arts program, new housing projects, highway expansions and so on – all of these inevitably and permanently raise the “high water mark” of governmental spending, and are an absolute requirement of running for office. Now, our aforementioned sewage treatment workers would of course prefer a permanent 10% raise rather than a one-time cash bonus. Thus they will always try to negotiate a permanent contract rather than continue to be at the mercy of the will and whim of their
political masters.

As this process continues, the proportion of non-discretionary spending in any political budget grows and grows. This is another reason why new spending initiatives must always be created in order to secure new donations. Money cannot be shifted from one area to another, because it has permanently been earmarked for a particular group in return for a one-time political contribution in the past.
If the mayor who is running for his second term decides to attempt to roll back the 10% raise, in order to free up money which he can then offer to someone else in return for campaign contributions, he would be committing political suicide. He would be breaking a freely-signed contract, sticking it to the working man, and provoking a very smelly strike – but for his own particular self-interest, the effects would be even worse.

Remember, people will donate to a political campaign based on an implicit contract of
future rewards from the public treasury. If a candidate attempts to “roll back” benefits that he has distributed previously in return for donations, not only will he incur the wrath of the existing special-interest group, but he will be revealed as a man who breaks his implicit and unenforceable “contracts.” Since this candidate can no longer be relied upon to give public money back to those who donate to his campaign, he will find that his campaign donations dry up almost immediately, and his political career comes to an abrupt end.

Of course, ex-politicians are highly prized as lobbyists as well, but if this mayor breaks faith with a donator, he will no longer be valuable in that capacity either, and will forego significant income in his post-political career.

Finally, any political candidate who has channeled public money to past donators faces the problem of blackmail. If he attempts to cross any of his prior supporters, mysterious leaks to the press will start to emerge, talking about the sleazy backroom deals that got him in power – thus also effectively ending his political career. All the other candidates will piously deride his cynical corruption, while of course making their own sleazy backroom deals in turn.
(It is highly instructive to note that two well-known fictional portrayals of the political campaign process – “The West Wing” and “The Wire” – repeatedly portray the candidate begging for money, but never once show why he receives it – the motives of his donors. The reason for this is simple: they wish to portray an idealistic politician, and so they cannot possibly reveal the reasons why people are giving him money. If the fictional story were to follow the inevitable “laws” of democracy, the storyline would be abruptly truncated, or the lead character would be revealed as far less sympathetic. The candidate would ask for money, and then the potential donor would indicate the favor he wanted in return. Then, the candidate would either refuse, thus ending his campaign for lack of funds – or he would
agree, thus ending any real sympathy we have for him. This basic truth – like so many in a statist society – can never be discussed, even on a show like “The Wire,” which has little problem revealing corruption everywhere else. A policeman can be shown breaking a child’s fingers, but the true nature of the political process must be forever hidden…)

Thus we can see that – at least at the level of economics – democracy is a sort of slowmotion suicide, in which you are told that it is the highest civic virtue to approve of those who want to rob you.

Eliot Spitzer

I recently quoted from an article by Eliot Spitzer, the former Attorney General and Governor of New York. I remember being impressed with his stance on the bailout issue. It prompted me to re-examine his record, here are some highlights:

• 2002: Global Settlement case. Spitzer sued several investment banks over various conflicts of interest. Ten banks were forced to pay $1.4 billion in compensation and fines- among them Bear Stearns, Goldman Sachs, J.P. Morgan Chase, Lehman Brothers, Merrill Lynch, and Morgan Stanley.
• 2003: Finds evidence that mutual funds were offering preferential services to certain clients. Secures more than $1 billion in fines.
• 2005: Brings lawsuit against Maurice "Hank" Greenberg (then-chairman and CEO of AIG) and Howard Smith (ex-CFO of AIG), "alleging fraudulent business practice, securities fraud, common law fraud, and other violations of insurance and securities laws." Spitzer later dropped several of the charges, while AIG "announced in February [2006] that it would pay $1.64 billion to resolve allegations that it used deceptive accounting practices to mislead investors and regulatory agencies."

So what do we know based on the above? Spitzer had a track record of winning billion-dollar-plus settlements against the largest investment banks, as well as targeting the CEOs and other executives of those banks. His focus began to shift in the 2004-2005 to mortgage lending and related predatory lending practices by these banks, and named the Bush Administration as specifically blocking investigations into violations of predatory lending laws. Consumer affairs reported in June, 2005:

Spitzer said the OCC's claim "defies common sense and a century of joint state and federal oversight of the banking industry."

"This position, coming as it does after the OCC effort last year to shield nationally-chartered banks from enforcement of state consumer protection laws, is another indication that the Bush administration sides with corporate interests over consumer interests."

Spitzer noted that the OCC's efforts to protect banks has been opposed by all 50 state attorneys general and all 50 state banking superintendents. Numerous consumer groups also have voiced their opposition, as have the NAACP and AARP.

In recent testimony to Congress, New York State Banking Superintendent Diana Taylor said the OCC's actions "usurp the powers of the Congress, stifle state efforts to protect their citizens, and threaten not only the dual banking system but also public confidence in our financial services industry."

Spitzer ended up losing that case in October, 2005, on a jurisdictional basis. He spent 2006 running for governor, and took office in 2007. His time as governor was plagued with several other scandals, and he apparently didn't focus much on this issue until his editorial in February, 2008, entitled "Predatory Lenders' Partner in Crime: How the Bush Administration Stopped the States from Stepping In to Help Consumers." This prescient editorial ends with this paragraph:

When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.

Less than a month after his editorial, he was forced to resign amid a prostitution scandal... an investigation that was "opened in the last few months" (as of March 2008).

Did his investigation begin to hit too close to home? I don't know, but consider a few other facts:
A known GOP "henchman", Roger Stone, tipped the FBI to Spitzer's penchant for prostitutes in late 2007, through a letter from Stone's attorney.

Stone's lawyer wrote to the FBI after investigators asked to speak with Stone, although they didn't specify for what purpose. He refused to talk to them, but sent the letter about Spitzer.

Obviously, something is missing there. If the FBI wants to talk to you, you can't ordinarily say "No, but here's some dirt on Eliot Spitzer!" Well, maybe you can if you're the eponymous author of "Stone's Rules": (Admit nothing, deny everything, launch counterattack.) But why would Stone go after Spitzer? Perhaps because Stone was thown overboard by his client (N.Y. state senate leader Joseph Bruno) after leaving this message for Spitzer's father:

This is a message for Bernard Spitzer. You will be subpoenaed to testify before the senate committee on investigations on your shady campaign loans. You will be compelled by the senate sergeant at arms. If you resist this subpoena, you will be arrested and brought to Albany--and there's not a goddamn thing your phony, psycho, piece of shit son can do about it. Bernie, your phony loans are about to catch up with you. You will be forced to tell the truth. The fact that your son is a pathological liar will be known to all.

So, a known GOP dirty-trickster throws some dirt around to save his own skin, and it works. I'll be the last person to argue that Spitzer didn't do it, or that he's clean. But at least he was trying to stand up on the side of consumers, against an all-powerful banking oligarchy and the Bush administration. What did he learn? You better have more dirt on them than they've got on you if you expect to win that fight.

Riots: coming to America?

If you thought yesterday's post on the possiblity of civil disorder was outside the realm of possibilities, Freakonomics blog is discussing (for the second time this year) the possibility of economy-related riots in the US. The Freakonomics authors cite an article in the Atlantic by Robert Kaplan where he writes

It’s tempting to dismiss this as a purely Greek affair that carries little significance to the outside world. But the global economic crisis will take different forms in different places in the way that it ignites political unrest. Yes, youth alienation in Greece is influenced by a particular local history that I’ve very briefly outlined here. But it is also influenced by sweeping international trends of uneven development, in which the uncontrolled surges and declines of capitalism have left haves and bitter have-nots, who, in Europe, often tend to be young people. And these young people now have the ability to instantaneously organize themselves through text messages and other new media, without waiting passively to be informed by traditional newspapers and television. Technology has empowered the crowd—or the mob if you will.

Pay close attention to Greece; at a time of world-wide economic upheaval, it might eerily presage disturbances elsewhere in 2009.

So consider, whether in the United States, the "uncontrolled surges and declines of capitalism [that] have left haves and bitter have-nots". Wikipedia ranks Greece as having less economic inequality than the United States. The Gini coefficient is a statistical measure of the inequality within a given country, where the lower the number, the more equality exists. Greece has a Gini coefficient of 34.3, while the US is 40.8 (equally ranked with Ghana and Turkmenistan). Once people wake up and realize the true measure of inequality in this country, it will be hard to keep them satisfied with platitudes about the vagaries of the free market.

Goldman moves profits offshore: taxes go from 6 billion to 14 million

The hits just keep coming:

Goldman Sachs cuts taxes to one percent by moving profits offshore

Texas Democrat Rep. Lloyd Doggett, who serves on the House Ways and Means Committee, said Goldman, like other banks, shifted income to countries with lower taxes to reduce its tax burden.

"This problem is larger than Goldman Sachs," Doggett told Bloomberg. "With the right hand out begging for bailout money, the left is hiding it offshore."

Freakonomics:The Fiendish Genius of Credit-Card Minimum Payments

From the Freakonomics blog:

New research finds that credit-card holders pay down their debts more slowly when their statements suggest a minimum monthly installment.

I don't think anyone is shocked by that. The credit card industry has long had bare minimum payments, enough to keep their consumers solvent. The interesting part of the study they cite is that even for customers that tend to pay more than the minimum payment, the existence of a stated minimum payment acts as a kind of "anchor" on what they actually pay. That is, if you were inclined to pay $100 on your balance this month, and then you see the statement and it only carries a minimum payment of $48, you're likely to pay far less than the $100 you intended and then rationalize that you are still paying more than the minimum.

Say you’re a credit card company. You make money every time one of your card holders carries a balance at the end of the month, because you charge interest on that debt. A lot of interest. The longer your card holder carries debt, the more money you make.

But if that debt tips out of control, and the card holder defaults, you lose everything.

So you want to find a middle road, a strategy that will keep your card holder’s debt manageable, but that will stretch out repayment as far into the future as possible, maximizing your profits.

I thought I remembered some changes to the minimum payment structure as a part of the bankruptcy overhaul from a few years ago, and I was right.

In the past, credit card companies required customers to pay an average of just 2 percent of their total credit card balance, which meant constant debt for many consumers. The 2 percent minimum payment only covered interest and other fees, so it often could take a lifetime to pay off the principal balance.

By the end of 2005, new banking guidelines went into effect in an effort to save consumers from themselves. Banking regulators issued the guidelines that pressured credit card companies to boost minimum payments so debts would be paid off in a reasonable time. For many banks, that has translated into new rules requiring monthly minimums to cover interest, any fees or extra charges and at least 1 percent of the principal amount.

Some overhaul... now instead of just paying interest and fees, you have to pay interest and fees, plus 1% of your principal.

Corporate raiders turning to seeds of life

There's a tremedously important diary over at DailyKos. Please take some time and consider if you want the Monsanto corporation to literally control every seed for any food plant that's commercially available. I, for one, do not. As I argued here, there are some things that are simply too important to be left to monopoly corporations.

RAID on seeds (Life, itself) ... by Monsanto

The Onion: $700 Billion Bailout Celebrated With Lavish $800 Billion Executive Party

The Onion, they nail it again. Sometimes you have to laugh to keep from crying. See also their special video commentary: "Should the Government stop dumping money into a giant hole?"

GEORGE TOWN, CAYMAN ISLANDS—Amid the bleak backdrop of imminent economic collapse, worried observers got some good news last October when executives from the nation's top 10 failing companies celebrated the historic $700 billion government bailout with an ultra- extravagant $800 billion party aimed at restoring confidence and bolstering their resolve.

"It's never ideal for private corporations to rely on public funding, but we would not have been able to survive another week without letting loose and throwing this massive bash," Merrill Lynch CEO John Thain said aboard his newly purchased $22 million yacht, the Excelsior. "We can only hope it's not a case of too little too late."

Three thousand guests were reportedly flown on 750 separate private jets to the Caribbean, where they commemorated the last-minute financial aid package—which saved their companies from the subprime mortgage crisis that has left thousands of Americans without homes—with 4-tons of Beluga caviar, $250,000 bottles of vintage Dom Pérignon served over precious gems, a 36-hour fireworks display, an additional loan of $200 billion to cover the costs of the gala, and a private concert for each attendee with rock legend Rod Stewart.

Held October 4–7 on all three of the Cayman Islands, the historic economic-stimulus celebration, spokespeople said, sent an important signal to the world that Wall Street was weathering the crisis in style.

"I'm glad we were all humble enough to recognize that we couldn't do this on our own," said AIG CEO Edward Liddy, sitting in a hot tub filled with Cristal and seven dozen endangered-quail eggs. "Having come so close to disaster, it is crucial that I eat these 24-karat-gold-leaf-wrapped chocolate truffles to boost stockholder morale and show all the critics and naysayers that we are carrying on just as we always have."

"Do not worry, America," Liddy added. "It's business as usual at AIG."

In a sign of the new era of financial responsibility ushered in by the bailout, the CEOs estimated that they came in a full $100 billion under the party's projected $900 billion budget—a windfall they immediately reinvested in their companies' ailing executive-Christmas-bonus divisions.

Goldman Sachs slashes compensation: now only $363,654

Boo-fucking-hoo. But can anyone explain to me why wage concessions from workers (not executives) is part of the proposed automaker bailout, but we're not requiring any salary caps or executive compensation limits as part of the great Wall Street Bailout of '08?

Bloomberg.com: Worldwide: "Dec. 16 (Bloomberg) -- Goldman Sachs Group Inc. eliminated 2,500 jobs in the fourth quarter and slashed average pay per worker 45 percent to $363,654 as the firm posted the first quarterly loss since going public almost a decade ago."

But how will those poor bastards survive on only $363,654 apiece? Well, it's time for us as a nation to pull together, I guess we all have our burdens to bear, right?

Big Brother is listening! And watching...

Is the government listening to you? How would you know? As it turns out, you wouldn't.

The U.S. Commerce Department's security office warns that "a cellular telephone can be turned into a microphone and transmitter for the purpose of listening to conversations in the vicinity of the phone." An article in the Financial Times last year said mobile providers can "remotely install a piece of software on to any handset, without the owner's knowledge, which will activate the microphone even when its owner is not making a call."

Nextel and Samsung handsets and the Motorola Razr are especially vulnerable to software downloads that activate their microphones, said James Atkinson, a counter-surveillance consultant who has worked closely with government agencies. "They can be remotely accessed and made to transmit room audio all the time," he said. "You can do that without having physical access to the phone."

Because modern handsets are miniature computers, downloaded software could modify the usual interface that always displays when a call is in progress. The spyware could then place a call to the FBI and activate the microphone--all without the owner knowing it happened. (The FBI declined to comment on Friday.)

"If a phone has in fact been modified to act as a bug, the only way to counteract that is to either have a bugsweeper follow you around 24-7, which is not practical, or to peel the battery off the phone," Atkinson said. Security-conscious corporate executives routinely remove the batteries from their cell phones, he added.

I am uncomfortable with this technology, mostly because of the incremental way in which these changes come. At first, we are assured that it's only to be used against criminals and terrorists, but then we find out that it's used against everyone: soldiers, journalists, aid workers, even foreign leaders. Those on the right will argue, "If you're not doing anything wrong, then you shouldn't have anything to hide." Everyone else realizes that it's a clear example of the government overstepping the boundaries that once prevented us from calling our government "tyrannical". Sadly, since the advent of the Patriot Act, those boundaries are mostly gone.

It's not only cell-phones by the way. This surveillance is possible everywhere, making George Orwell's 1984 frighteningly prescient. Does your vehicle come with On-star? If so, it also comes with FBI. Does your computer have a webcam? How about the internet- ever use that? Walk down any street and keep a count of how many surveillance cameras you see. Do you have a passport? Have you ever made statements critical of governmental policy? Then you may find yourself in a situation like these Americans- entered into a database of terrorism suspects. And for nothing more than being outspoken against the death penalty, being anti-war, and/or being pro-environment. Regardless of how you feel about those issues, think about how it would apply in your case. Because unless you consistently agree with the government, then you are a potential target. These are not violent criminals being surveilled, they are ordinary citizens that disagree with the government and are expressing their dissent under the protections of the First Amendment.

I've mentioned elsewhere the legal prohibitions against the military performing law enforcement duties at home, largely ignored. And in the wake of the political conventions this year, we find out that spy satellites, military, as well as the major telecom companies were involved in "pre-emptive policing". In other words, arresting people before they've committed a crime.

Incidentally, notice in the article where they point out that, "Security-conscious corporate executives routinely remove the batteries from their cell phones." This implies one of three things:

• Corporate executives are concerned about being surveilled by the government due to criminal wrongdoing.
• Executives are worried about being surveilled by the government, even though there has been no criminal wrongdoing.
• The power to do this type of surveillance is already used by people other than the government, despite assurances from the telecoms.
  

None of these options are very palatable, but it's food for thought anyway.

UPDATE: A federal appeals court has made the right decision, and overturned part of the Patriot Act.

Because of the ruling, the government will now be forced to justify individual gag orders before a court, instead of casually wielding the power of a blanket gag as the Bush administration has done since the blindingly fast passage of the Patriot Act in Oct. 2001.

In Sept. 2007, a federal judge ruled unconstitutional provisions within the Patriot Act which allowed the government to obtain search warrants without probable cause.

Executive compensation-- Part II

Dean Baker has got a very credible alternative theory. Maybe Paulson's not a lone gunman here, Congress may also be to blame. Rather than actually limiting executive compensation, just tell everyone you limited it.

Let me suggest an alternative hypothesis. Perhaps Congress really did not want to cut executive compensation on Wall Street. After all, word has it that members of Congress gets lots of campaign contributions from very high paid Wall Street executives.

Of course, giving taxpayer dollars to the richest people in the country is not very popular with ordinary taxpayers. So, it might be in the interest of members of Congress to appear to be trying to rein in executive compensation on Wall Street, even if this is not their real intention. In other words, the restrictions of executive compensation put in the bailout bill were just a charade for the kids.

No limits on executive pay, after all

Paulson says, "All your dollars are belong to us!" Photo: AP

On September 24th, the New York Times reported Treasury Secretary Henry Paulson as saying "The American people are angry about executive compensation, and rightfully so. Many of you cite this as a serious problem, and I agree. We must find a way to address this in legislation without undermining the effectiveness of the program.” Paulson was ostensibly arguing that banks would rather go bankrupt than face these limits on the compensation paid to their top executives.

Soon thereafter, he capitulated and agreed to the limits, one of the few sticking points in Congress for a massively unpopular bailout bill. It seemed to me at the time that he agreed fairly quickly to this condition, but I chalked it up to his stated desire to get the bailout done with unprecedented speed. Turns out, he agreed to it because they had already figured out a way around the limits.

Today's Washington Post reports that during the tense bailout negotiations, a seemingly minor change took place:

But at the last minute, the Bush administration insisted on a one-sentence change to the provision, congressional aides said. The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.

Now, however, the small change looks more like a giant loophole, according to lawmakers and legal experts. In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives.

Is anyone even surprised with these revelations anymore? So now we know why Paulson decided not to use the auction mechanism after all, in favor of just giving the money directly to the banks. If there were auctions, then the big guys wouldn't get paid as much. Paulson couldn't do that to his old pals (who made $39 BILLION in bonuses alone last year), so he had to change the entire way the program worked. Luckily Congress gave him a bill that let him do whatever he wanted! As Barry Grey remarked during the original debate over executive compensation:

The universal mantra is the need for all Americans to “come together,” put aside their partisan differences and personal interests and accept the need for “sacrifice” in support of the common good—which just happens to coincide with the interests of Wall Street and the multi-millionaires and billionaires who control it.

But Paulson, in his weekend television appearances, was obliged to implicitly acknowledge that there is one segment of society that is not prepared to sacrifice a dime and will not hesitate to throw the country into a depression, if the alternative is the slightest diminution in its seven- and eight-figure compensation packages.

In spite of his intentions, Paulson’s comments demonstrate the utter fraud of the claims that the plan to place the national wealth at the disposal of Wall Street is driven by concerns for the well-being of the American people. His remarks reveal the most basic truth about American society: The interests of the overwhelming majority of the people are entirely subordinated to the money-mad strivings of a financial aristocracy.

The plutocrats call the shots. They determine public policy. They exercise an absolute veto on all decisions taken by the government, which is, in the final analysis, an instrument for the defense and advancement of their narrow and socially destructive interests.

The constant invocations of patriotism are purely for public consumption—a means of blinding the people to the class relations that dominate America.

We told you

He's exactly right.

We told you: "Please, forgive me for saying it. I know it's a tad annoying, but it has to be said to America's ruling class in this humble column space. Because if it's not said here you can bet it won't be said anywhere else in the media, and it needs to be said somewhere on behalf of the millions of citizens who were right.

We told you so.

In the slow-motion train wreck that became the current economic meltdown, our bipartisan political Establishment and the sycophantic punditburo have been wrong over and over and over again. They told us that eviscerating consumer protections would unleash the markets benevolent power and boost the economy. They told us that a trillion-dollar Wall Street bailout would solve a credit crisis. They told us that bailout would be subjected to intense oversight and scrutiny.

Wrong, wrong and wrong — and when critics predicted just that, sneering commentators and congressional leaders berated us as know-nothing Luddites, conspiracy theorists, or both.

But with the release of three new reports, there's no debate anymore about who was correct and who wasn't. The studies prove that the critics were right and the ideologues of Washington were wrong.

When in 2005 Congress overwhelmingly passed a credit card industry-written bill gutting bankruptcy laws, progressives were right to try to stop it — and not just because it was an immoral move to legalize usury. We were right because as the New York Federal Reserve Bank reports, the bill played an integral role in the recent foreclosure surge that crushed the economy.

In the past, bankruptcy laws made sure debtors first and foremost continued paying their mortgages so that they could stay in their home. But the 2005 legislation effectively compels debtors to first pay off their credit cards, meaning many then have no money left to pay their mortgage. The Feds report estimates that the bankruptcy bill is causing 32,000 more foreclosures per quarter than the economy would have already generated.

We told you so. When almost every media voice in America was sounding the alarm of financial panic and demanding a Wall Street bailout plan; when bailout opponents were roundly ridiculed as "irresponsible" by politician and pundit alike — those opponents were nonetheless right to say then what a study from the Minneapolis Federal Reserve Bank says now: that the case hadn't been made.

While reporters and the Bush administration frantically insisted that bank-to-business lending had ceased, inter-bank lending had stopped, and short-term "commercial paper" loans had dried up, the Minneapolis researchers tell us that "all three claims were false" and continue to be false; that "nobody has explained how the money system has frozen when the data says it has not"; and that "a trillion dollar intervention warrant(ed) a bit more serious analysis."

We told you so.

When lawmakers said the bailout included strict oversight measures, skeptics were right to say that claim was patently untrue. According to a new analysis by federal officials at the Government Accountability Office, virtually nonexistent oversight of the bailout means "taxpayers may not be adequately protected" and that the bailout's stated goal of fixing the economy "may not be achieved in an efficient and effective manner."

Yes, we told you so.

And so now, even though these damning reports have garnered scant news coverage, perhaps there will be a change. As we — the pragmatic progressive majority demand tough new financial regulations; job-creating investments in public infrastructure; labor law reforms; universal health care; revised international trade policies; a repeal of the odious bankruptcy bill and an end to Wall Street welfare maybe, just maybe, our humiliated rulers will start listening.

How's this for "Transparency"?

Remember the early days, when the bailout was first sprung upon an unsuspecting public? We were treated to lies like this:

Henry Paulson: "We need oversight. We need transparency. I want it. We all want it."

Seemed pretty clear right? Of course, the only reason he said that was because people actually read his original three-page proposal which revealed what he really wanted (this is the full text of Section 8):

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

So now, is anyone really shocked that not even a lawsuit will force them to be transparent?

The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral.

Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression.

...

“There has to be something they can tell the public because we have a right to know what they are doing,” said Lucy Dalglish, executive director of the Arlington, Virginia-based Reporters Committee for Freedom of the Press. “It would really be a shame if we have to find this out 10 years from now after some really nasty class-action suit and our financial system has completely collapsed.”

Consider also:

Bipartisan coalition of 75+ groups demand bailout transparency.

The three layers of oversight promised in the original bill is still not in place, despite spending almost all of the first $350 billion.

Economist: Paulson plan "truly idiotic"; shows a "complete leadership failure in Congress and the administration".

Blagojevich and the Pendulum of Public Distrust

Ordinarily, I like much of what Robert Reich has to say. In this case, however, he's vastly oversimplified what's happened.

Throughout its history, America has cycled back and forth between two distinct targets of distrust -- big business (including Wall Street), and government. In periods when big business is most distrusted, Americans seek protection from it, and reluctantly give government authority to expand its scope. When big government is most distrusted, Americans want less of it, and give big business greater leeway.

Bur what happens if business and government are one and the same, indivisible? If it were anyone else, I could let this comment slide, but Reich should know better. As I quoted him just the other day,

Supercapitalism has triumphed as power has shifted to consumers and investors. They now have more choice than ever before, and can switch ever more easily to better deals. And competition among companies to lure and keep them continues to intensify. This means better and cheaper products, and higher returns. Yet as supercapitalism has triumphed, its negative social consequences have also loomed larger. These include widening inequality as most gains from economic growth go to the very top, reduced job security, instability of or loss of community, environmental degradation, violations of human rights abroad, and a plethora of products and services pandering to our basest desires. These consequences are larger in the United States than in other advanced economies because America has moved deeper into supercapitalism. Other econoimes, following closely behind, have begun to experience many of the same things.

Democracy is the appropriate vehicle for responding to such social consequences. That's where citizen values are supposed to be expressed, where choices are supposed to be made between what we want for ourselves as consumers and investors, and what we want to achieve together. But the same competition that has fueled supercapitalism has spilled over into the political process. Large companies have hired platoons of lobbyists, lawyers, experts, and public relations specialists, and devoted more and more money to electoral campaigns. The result has been to drown out voices and values of citizens. As all of this has transpired, the old institutions through which citizen values had been expressed in the Not Quite Golden Age-- industry-wide labor unions, local citizen-based groups, "corporate statesmen" responding to all stakeholders, and regulator agencies-- have been largely blown away by the gusts of supercapitalism.

Some things are too important to be left to the "free market"

Amidst this implosion of financial markets, I think that it's critical to discuss a few ideas. Namely, that there are some things that are simply too important to be left to the vagaries of the market. Water and food, especially.

Since the days of Upton Sinclair, we've known that capital markets have been ineffective in guaranteeing food to consumers that is fair, clean and healthy. It's no different today- it seems as though there are new reports of tainted meat, tainted vegetables, or tainted milk.

But we are also still dealing with famine and food riots around the world. The UN's Food and Agriculture Organization reported this week that another 40 million people have been pushed into hunger this year, bringing the worldwide total to a staggering 963 million. FAO Assistant Director-General Hafez Ghanem:

For millions of people in developing countries, eating the minimum amount of food every day to live an active and healthy life is a distant dream. The structural problems of hunger, like the lack of access to land, credit and employment, combined with high food prices remain a dire reality.

Notice that he didn't implicate farming techniques, climate change, seed quality, or any other technological problems as the reason for hunger- the problems he cites are due to the failures of markets to ensure that people get fed. It's not just the UN either- Bloomberg news yesterday reported that the World Bank's consistent prioritization of free markets has been a "manmade recipe for famine [that] included corrupt governments and companies that profited on misery."

It's not just the World Bank, it's the World Bank working in concert with the IMF and the World Trade Organization (WTO) to create "open markets" that are increasingly unable to provide either farmers with a living, or consumers with food. At least 87,567 farmers in India committed suicide between 2002 and 2006, largely as a result of globalization of the food trade:

Analysts cite several factors for the suicides, including crop failure due to agrochemicals and climate change, lower prices due to U.S. farm subsidies, state restrictions on export trade, and the dumping of surplus crops in an oversaturated domestic market.

As the economic crisis is making us aware, capital markets to not always function properly in America either. Our food aid program has recently been implicated in starvation around the world, due largely to the influence of lobbyists and monopolistic corporations in charge of the food chain.

Increasingly, it's becoming clear that food and water are different. They should be basic human rights, completely independent upon one's ability to pay for them. I just hope we don't have to wait until billions are starving around the world before we figure that out.

Everyone should be unionized?

In the midst of an unprecedented economic crisis, and massive unemployment I agree with the calls of some for greater unionization. It appears that Republic Window and Door workers will get what they have earned, as a result of their unionization and sit-in. This is one small demonstration of the power that exists when we, as workers, unite.

The workers are "very, very satisfied" with the agreement, said Mark Meinster of the United Electrical Workers union, which represents the employees.

"Hopefully this is an example for workers across the country that when things like this happen, you can step up, you can speak out, and you can win," he said.

The wealthy of this country have been exploiting us all for far too long, it's time that we finally start to demand some reciprocity, especially as they continue to get bailed out to the tune of trillions of dollars. Some interesting tidbits:

* from 1980 to 2004, while U.S. gross domestic product per person rose by almost two-thirds, the wages of the average worker fell after adjusting for inflation. (source)
* Over the three decades from 1972 to 2001, the wages and salaries of even those Americans at the 90th percentile (those doing better than 90 percent of their fellow citizens) experienced income gains of only 1 percent a year on average. Those at the 99.9th percentile saw their income rise by 181 percent over these years (to an income averaging almost $1.7 million). Those at the 99.99th percentile had income growth of 497 percent. (source)
* Since 1969, the share of aggregate household income controlled by the lowest income quintile (one-fifth of the population) has decreased from 4.1 percent to 3.6 percent in 1997, while the share to the highest quintile increased from 43.0 percent to 49.4 percent. Most noticeably, the share of income controlled by the top 5 percent of households has increased from 16.6 percent to 21.7 percent.


(source)

• To compensate for this loss of purchasing power, middle-class America has been forced more and more deeply into debt (see the chart above). Consumer debt has increased, and at an ever-faster pace. In 2003, revolving consumer debt was growing at 2.9% per year. By 2007, that number had more than doubled to a growth rate of 7.4%. This debt is part of the current crisis in which we find ourselves.

• Noam Chomsky: [It's quite a long quotation, feel free to skip this and meet me below for some more analysis. That being said, it's definitely worth reading!] That's part of the driving force. The other part of the driving force is the Washington Consensus, the neoliberal policies that for the last 25 years have been one of the most dramatic disasters in economic history. It won't come as a surprise to anyone that has studied economic history since the industrial revolution, that it is very striking that where these neoliberal policies have been pursued, particularly in South America, there has been a rapid decline in virtually all macro-economic measures: rate of growth, rate of productivity, etc. And also a rise in inequality. The same can be said of the United States, where the measures have not been applied with the rigidity of Latin America, but they have, to some extent, been applied for the last 25 years. And this has been a bleak period in US economic history. For 25 years real wages have been in decline for the majority of the population. The United States is the richest country in the world and, as you would expect, 25 years ago had the highest wages and shortest working week of any industrialized country in the world. And now that's been reversed. Now it has the lowest wages and the longest working hours of any industrialized country in the world. Salaries have remained the same, but working hours have increased, and inequality has just soared.

  Throughout the first phase of post World War II history, the 1950s trough the 1970s, we had rapid growth, but we had egalitarian growth. And it was growth of social welfare and it resulted in a rise of all the social indicators. And there was a healthy society. That changed in the period of 1970 to 1975. The social indicators began to decline and growth fell very sharply and inequality fell back to what it was in the 1920s. And for most of the working population, it is one of the worst periods in economic history. That's been mirrored throughout the world. In the regions where these policies have been pursued, there has been a very sharp decline in comparison to the previous 25 years. There has been growth and development in the international economy during that period, but the social benefits have been seen in regions where these neoliberal policies have been ignored. South East Asia has been a striking example. Now the World Bank and other institutions, have figures that try to obscure these facts by putting together things that are quite unrelated. They put together participation in trade, with adherence to the Washington Consensus. So, for example China undergoes very high growth by violating the principles of the Washington Consensus. They ignore the total picture by making the claim that China has a high growth rate and never mentioning that it's a result of violating the principles of Washington Consensus. But, if you look at the World Bank figures and take them apart, then what you find is that adhering to these neoliberal policies has been economically harmful, in a surprisingly consistent way. The truth is that violating the principles of the Washington Consensus has often been associated with very high rates of growth, but that is rarely mentioned. It is similar to the first 25 years after World War II, often referred to as the "golden age".

  But that's only part of the story: these neoliberal measures, quiet apart from economic consequences, were virtually designed as an attack on democracy. There has been a dramatic decline throughout Latin America for support of democratic systems. Not that people don't want democracy, but support has fallen for the parliamentary systems as they exist. That's been a decline that has occurred parallel to the imposition of neoliberal polices. It was in the design of these policies, at every point, to undermine democracy. For example the imposition of financial liberalization is undermining democracy by taking away the capacity of governments to control things that will have an impact on the population. They took away governments' capacity to make public policy. Neoliberal policies create a virtual parliament of investors and landlords that is not democratic and is not under the control of the population in a democratic manner. Democracy existed before the neoliberal years, in the post-war period, because capital controls could be imposed by governments. And that was a way of exercising democracy. Capital controls were imposed not just as a way of controlling capital but also to give governments space to carry out the development programs that their populations wanted. That was a way to exercise democracy. Things have change in the last 25 years, and they have not changed in a democratic way. I should say that these are staples of economic theory and economic history. They are not obscure. They are in all of the economic text books.

  The same can be said about privatization. There is no empirical evidence that privatization has any economic benefits. The evidence is just the opposite, especially with health care and social services. But privatizations do have the effect of taking decisions and control out of the public realm. It takes things out of democratic control and puts them in the control of unaccountable private entities. "Services" includes just about everything that people care about; health, resources, education and the environment, all the things that people care about. These are called "services". And then there is "trade in services", when you add on trade. This means transferring all the things in life into the hands of private enterprises. They are unaccountable and they are taking things out of the public arena. When that happens you can have a formal democracy, but there is nothing left with which to make decisions. The same runs true trough the rest of the neoliberal package. And it is all of these factors, along with the rising inequality, that is driving people to call for change.

It seems like the "little guy" gets exploited at every turn. So what can be done? Increasingly, unions are becoming an attractive alternative. Starbucks workers have even organized (by the way, they need your support). Unionization of Walmart employees is slowly moving forward. Perhaps seeing the victory of the workers of Republic Window & Door in Chicago will help more of us to realize that the poor and middle-class have much more in common with each other than we will ever have with the ultra-wealthy.

It's worth remembering that WE are the true productive members of society. You can see that in the current disconnect between the financial crisis and the conditions on Main Street. Trillions of dollars have been wiped from the financial system, but those are speculative dollars, not real ones. We are the ones that pour your coffee, we fix your heater, we work on your car. We don't depend on speculative dollars, we live on real budgets that impact our real lives. We are not the ones that get hurt when credit default swaps go bad, or Collateralized Debt Obligations are not as well collateralized as the banksters thought. At least, if things were fair, we wouldn't be. We could continue on about our life, shaking our head at the folly of it all. Instead, they still get millions in bonuses, spa vacations, and billions of dollars in bailouts, all while we get pink slips. The only way to combat this is to demand better alternatives, to demand solutions that work for more than just those at the top. The time has come to demand justice for all of us.