The Enemy of Society

U.S. society remains, despite war and recession, sufficiently comfortable and deluded so that it refuses to face up to the harm it is suffering from allowing its pro-business/anti-people system to continue to exist. It is not necessary to eliminate business, which is a useful tool, but when that tool is transformed by a misguided elite into an idol existing not to benefit society but for its own sake, then the fundamental shape and values of society are warped, and the tool becomes a weapon employed by rich CEOs to plunder the wealth of everyone else. The solution is to create institutions that serve, not exploit.

The campaign by the super-rich to profit by stealing from the poor and using the funds for financial manipulations (rather than investment in productive enterprises) is the worst of all possible worlds for the long-term economic health of the country. Wisconsin Governor Walker’s union-busting campaign and the Supreme Court’s replacement of “one man, one vote” with “one dollar, one vote” are symptomatic. Whatever his sins, at least Stalin did concentrate funds on industrial growth; Wall St. today is worse – using the funds it takes from society for leveraged gambling that destroys lives quite as effectively as Stalin did but without building anything in return. The Obama Administration has wasted four years carefully refusing to face the need to punish financial crime, so the behavior that caused the Financial Crisis of 2008 remains unchanged, as illustrated by the libor scandal and mess at Morgan. As for the millions who lost jobs and homes, they are being defined as “superfluous,” like the Neo-Liberal victims of Pinochet and the Argentine junta’s “dirty war.” More precisely, if the populations of Chile and Argentina were suppressed with tanks and torture by a capitalist elite while the U.S. population faces little worse than mass unemployment combined with bank-plotted and court-supported foreclosures, in a capital-first, people-second society, that preferential treatment is no more than a momentary privilege for the oppressed. Either the U.S. population must demand a new system that puts people first or Chile’s past will be our future.

In the U.S., as is now commonly observed, we do indeed face a major economic challenge, but that challenge is not the cause of our troubles; it is the result. The cause, i.e., the real challenge facing the U.S., is socio-political: the social contract we call the New Deal essentially allowed the super-rich to remain super-rich as long as they accepted sufficient controls (regulation) so that the pie would continue to grow and the rest of society would also get steadily larger pieces. The class war is the decision by the super-rich over the last generation to break that agreement and ignore the size of the pie (long-term economic growth) in order to focus on increasing the size of their pieces by seizing slices from the vastly smaller but more numerous pieces in the hands of everyone else (short-term consumption of the seed corn). Roubini’s enumeration of our economic problems focuses only on second-order effects caused by our first-order socio-political challenge: we are under attack by the super-rich.

Like matches in the hands of a two-year-old, a corporation in the hands of a CEO whose primary value is self-enrichment is a dangerous misuse of a good tool. Wall St. would have burned the house down if its financial conflagration had not been doused by a flood of cash from the poor taxpayers it was fleecing. Corporations, whether financial firms or oil companies, constitute far too powerful a tool to be allowed to exist without the strictest oversight and the firmest sanctions for corruption. In practice, neither of those two forms of “social security” will function in the absence of a solid bolt locking the revolving door. We need a value system that makes it crystal clear that corporations may be useful institutions that society may choose to permit, but that they have no inherent moral or legal “right” to exist any more than a road or a red light or a sewer system has a “right” to exist. Sewer systems are not people; sewer systems are tools. Society constructs and uses sewer systems and red lights and, if it is wise, corporations to the degree that they appear to constitute the best tools available at the moment to achieve social goals. It should be perfectly clear that I am describing a fundamentally restructured political and economic system, with a fundamentally distinct moral foundation in comparison with that currently in place in the U.S. 

To put it briefly, economics and politics can be structured for capital (profit) or social well-being. In practice, the two are obviously not mutually exclusive: economic crumbs may trickle down to the masses and a decent, moral, caring society can–given tight regulation, harsh punishment for financial corruption, and firm oversight by an educated population–permit a degree of individual wealth. (Despite a half century of vigorous effort in that direction, it is now clear that the U.S. population lacks both the level of education and the will to exercise sufficient oversight to create such a society.) 

To the degree that capital accumulation is preferred over creating a good society, then that is exactly what will happen. Over the last decade, Wall St. has become a marvelous machine for short-term capital accumulation (except for those, like Lehman, that Wall St.’s political lackeys decide to sacrifice). The only problem is that society is being sacrificed. Wall St. need not be, but in its hubris has defined itself to be, the enemy of society.

Bankers Take Welfare, Let America Rot

Whether the bankers who so crippled the American economy end up being punished for their irresponsibility or not, the harm they caused is worsening, not improving, and we are setting ourselves up for a real collapse the next time around. Perhaps the key battle won by those of the super-rich who survived 2008 was the decision by Washington to “save the system” by saving the bankers at the expense of throwing away the victimized homeowners, leaving unanswered the question, “Why would bankers holding millions of mortgages want all that property in foreclosure and rotting away?”

[Details on Class War Page]

It will be up to the courts (if democracy wins) or historians (if the banks win) to judge whether the officials in charge of the largest financial institutions in the U.S. have, over the last decade, been criminals or just idiots. The fact is they accepted millions of dollars of mortgages so risky that it trashed the whole financial system. The job of bankers is, at its core, to assess risk, and they failed to do their jobs. Then Washington rewarded the…criminals? idiots?…well, let’s be polite and just call them the “perps”…while turning its back on the victims.

One of the most egregious examples is the corporate socialist scheme of loaning Government funds at below market rates to the banks while denying such loans to homeowners facing foreclosure. (Remember the obvious: saving those homeowners meant saving the homes…which were owned by the banks! Helping corporations may not help any actual human except the CEO; helping people helps everyone…and every corporation.) Apparently, Jamie Dimon and his very small circle of good buddies at Goldman Sachs, Citibank, Bank of America, and Wells Fargo, etc. [for the list of culprits, see The Warmonger Report] felt that they could not compete on equal terms (i.e., paying equal rates for loans) with the average American homeowner. No socialism for individuals! No Sir! That would be un-American. If a man can’t pay his mortgage, then he deserves to sleep in the gutter. But a banker earning $25M a year, well, now, anyone can see, that’s a different thing altogether. You don’t expect Jamie Dimon to play on a level playing field with the likes of you, do ya? Huh, do yah?

The evidence of this closely guarded secret policy of corporate socialism has been emerging slowly:

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates….

Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year. [Bloomberg 11/28/11]

How the banks managed this cute trick is no mystery any more. As Senator Bernie Sanders of Vt. noted:

At a time when small businesses could not get affordable loans to create jobs, the Fed was providing trillions in secret loans to some of the largest banks and corporations in America that were well represented on the boards of the Federal Reserve Banks. [As quoted by Abby Ziment, “Naming Names: Jamie Dimon Is Not Alone,” in Common Dreams 6/15/12].

As Zimet points out, “the bankers bailed out themselves.” 
In the event, 3.6 M homes were foreclosed [RealtyTrac via Bloomberg], and the banks that happened, after all the corporate welfare, to survive are using a good chunk of those welfare payments to “persuade” Washington to continue looking the other way. Many of those homes are at this moment sitting rotting in my own town – with the banks refusing to take care of them yet insisting on trying to sell them for far more than they are now worth, as they steadily fall apart.

Recognizing Class War

After a generation of subtle class war by the rich, a new pattern is emerging in the West: popular anger.

Which is more violenta man who riots because he is starving and is being ignored by the authorities or a bank that sends in armed private thugs to evict a homeowner from a house the bank wants to foreclose on?
Which is more radicalforcing workers into unemployment or nationalizing the bank responsible for that wave of unemployment?
It is time for the West to wake up to socio-economic realities before the class war being provoked by the lust of the superrich returns us all to the grim battle between the extreme left and fascism. Bad as it has become, overall the last 75 years have been far better for Westerners than the bloody 1914-1945 war years. A rising class of educated, comfortable workers, both blue- and white-collar, is the goose that lays the rich banker’s golden eggs, and now these bankers are smashing those eggs out of pure spite – if they can’t have everything, they prefer to destroy society. That is what I call extremism. The total defeat and disappearance of the extreme left after the moderate tide of the New Deal compromise began lifting all boats contained a built-in poison: nothing inherent in that compromise actually prevented the super-rich from taking over, and the complacence of the increasingly comfortable and complacent middle class has permitted exactly that: the moderate middle moderately allowed the extreme right to continue to exist and now it is taking control.
The super-rich have many weapons, from wealth to the revolving door that enables them to control public policy and warp the system to their private advantage, but perhaps the most powerful weapon of the rich is linguistic: the rich define words, and both the complacent middle class and the increasingly angry but confused poor accept those definitions. As long as the 99% use the definitions of the super-rich, they will fail to see what is being done to them.

“Radical” is defined as anything that threatens the privileges of the rich. “Violence” is applied only to violence by the poor, never to violence by the rich. As for moderation, that would be an approach designed to preserve the livelihood that our society is accustomed to, would it not? Is it not self-evident that policies supporting the lives of all are moderate, while policies that steal from society for the benefit of some small group are…extremist?

Once our definitions are made logical, we can begin defending our values. How? Send Jamie Dimon to Hollywood to play the bad guy in a cops-and-robbers flic. Consummate actor that he is, he’d be a star. Then, appoint Elizabeth Warren to dismantle that great casino called J.P. Morgan and replace it with a thousand small-town banks that…do banking.
A pattern is emerging in the West as the class war of the rich slowly slaps people awake. The S&L crisis, today remembered only by William Black, was “unique,” so no lessons needed to be learned. Mexico was just Mexican; we quickly bailed out the Wall St. banks. The Asian Financial Crisis was just “Asian,” even though it exploded into Russia and Brazil, so what did that have to do with “us?” The crisis was amusing. No one was ever guilty, and even if they were, they were foreigners or nerds. Then came 2007 and a few million foreclosures. “Change” put a closet conservative who refused to jail billionaires into the White House, provoking the Occupy Movement; then France returned the Socialists to power; then Greeks said, “Enough!” And now Ireland will have a May 31 referendum on, essentially, the EEC policy of austerity for the poor and a pass for the rich. In the background looms Spain, with 20% unemployment, and over there, the Spanish Civil War is not forgotten.

Big Capital Makes the Case for Socialism

J.P. Morgan and Bank of America just this week illustrated again the need for big, socialist government.

Sometimes government should be small, to allow individual creativity, and sometimes big, to achieve victory over society’s enemies. In just the last few days, two behemoths of capitalism–J.P. Morgan and Bank of America–have made the case, unintentionally, for government not just big but socialist. J.P. Morgan admitted that it was up to all the old Wall St. tricks that created the Financial Crisis of 2008 that stole homes out from under millions of Americans and left millions of others unemployed. Bank of America arrogantly refused stockholders’ calls for it to investigate itself to detect fraudulent foreclosure behavior. A well brought up five-year-old knows enough to think critically about his or her own behavior.

Everyone is of course now having fun at Jamie Dimon’s expense, not that he can’t afford it with his repulsive $25M a year salary, unfortunately eclipsing Bank of America’s sneering attitude toward both stockholders and customers, which may cause even more harm to U.S. society. Unfortunately, the critical rhetoric focuses on the obvious but superficial calls for regulation.

Regulation of the out-of-control financial piracy of Big Capital is a perhaps useful band-aid that may stem the loss of financial blood while we move the U.S. financial system to the hospital, but what the patient needs is either major surgery or to be put out of its misery. Americans need to have a real national debate about the terms of this restructuring but must take care to avoid wasting time; four years have already been wasted, and Romney clearly feels no embarrassment in defending the system that brought us the Financial Crisis, suggesting that he at least feels that enough Americans can be hoodwinked once again to get him into the
White House.

There is perhaps no harm in immediately instituting some obvious regulations:

  • no bank should be permitted to gamble with its own money;
  • derivatives should be regulated with total transparency if not banned entirely; 
  • the revolving door between financial institution management and government positions that facilitates capitalist pirates writing laws to cheat the American people should be slammed shut.

Beyond regulations, new laws would help.

  • Punishments should be made up close and personal for all officials of financial institutions that take government bailouts. All income beyond minimum wage levels obtained (one hardly dares say “earned”) for, say, the five years leading up to any receipt of government welfare or bailouts should be forfeited.
  • The tax code should immediately be reformed to ensure that income tax levels for workers are always lower than capital gains. It is a fundamental moral point that earned income should be taxed less harshly than unearned income: there is a reason it’s called “unearned,” folks!
But all this is just band-aids. The real issue that Americans should be discussing in this election year is how to put the American people back in the driver’s seat and put Big Finance in its place. Our individualist capitalism system may work great on Main Street, but on Wall Street it has become too big to tolerate. In a word, then, to what degree does the U.S. now need to replace capitalism with socialism?

Capitalism or Socialism?

Arguing over “capitalism or socialism, small government or big government” serves only to confuse voters; indeed, that is often the point: when the rich advocate “small” government, they almost always mean “small” for someone else. The banquet of a good lifestyle requires both the salt of capitalism and the pepper of socialism, big government when it helps society, small government otherwise.

The issue we face is deciding when government should be big, when it should be “small,” to what degree the economic system should be capitalist or socialist.  Given an environment of strict regulation and a well educated citizenry, capitalism in certain sectors of the economy can facilitate rapid development by replacing tedious and inefficient government oversight with self-organized popular creativity. But fraud is inherent in a system that allows some to become grossly more powerful than others, as 99% of us have learned to our sorrow since 2007.
Moreover, even the rich would not like pure capitalism. Who wants to pay a toll on every single road? The West had such a system once – in the Middle Ages, where local noblemen and other robbers interrupted trade and travel to line their pockets. Who, except a dictator, would want a capitalist Internet charging a fee every time you surfed or sent an email? Who would want to buy the air they breathe from a local vendor?
Does that last example sound idiotic? Corporations are already trying to steal the planet’s drinking water and then sell it back to the thirsty. This particular abuse of the commons (drinking water, like air, being a “common” good that should be shared by all) provoked a revolution in Bolivia and a bit of a revolt in Atlantaas well. As extremist fans of extreme capitalism undermine government’s power to regulate while corporations take advantage by polluting the air we breathe, the temptation to buy clean, bottled air can only increase. A better way to go for all breathers (even rich ones) would obviously be to defend the commons by keeping the air clean.
Other examples of situations where capitalism seems pretty clearly inappropriate are legion. Extreme capitalism is not even appropriate in that capital of capitalism, Wall Street – it leads to fraud, distortions of fundamentals, and the chaos that requires emergency Big Government of the most extreme type. Even the purest and richest of pure capitalists, it seems, cannot function efficiently without oversight; just ask the boys at AIG and Lehman.
Education provides another example of an area where small government and unrestrained capitalism (in this case, turning education into a private business) risks real harm to the common good. Conservatives love to advocate private schools, but would they appreciate having to send their kids to a private socialist or Salafi school? Once society grants private schools the right to exist, where is the line to be drawn?
Health care is a second misleading example of conservative knee-jerk hostility to government leading to outcomes harmful to themselves as well as everyone else. Why would anyone want a capitalist health care system, with doctors focused on profit rather than helping the sick? Who wants medicine prescribed on the basis of the profit it returns to the doctor rather than the health value for the patient? On the other hand, Big Government-Big Pharma corruption widespread in government-run health care is equally pernicious. Any system can be abused, but the very purposeof capitalist health care is to make money, and the easiest way to do that is to treat only the affluent and to ignore…the sick! The purpose of socialist health care, in contrast, is for society to decide on some minimum level of health care and then provide it to all. The real argument should center not on the size of government involvement in health care but whether the government role protects the public or acts as a cover for Big Pharma greed.
Morally, there is no contest. Socialist principles are indistinguishable from the Declaration of Independence’s call for government “of the people, by the people, and for the people.”
In practice, the issue is less clear-cut. Even the richest corporate leaders want some socialism: Big Oil happily takes billions in U.S.welfare every year; Big Pharma designs the health care system to maximize profits rather than health care quality; Big Finance warps the U.S. tax code to its private benefit. No billionaire wants pure capitalism.
On the other hand, there is no doubt that social regimes can become both oppressive and inefficient. Moreover, many examples of situations where socialism (i.e., ownership by society) is inappropriate also exist. Public (i.e., socialized) libraries are great as long as the government’s role is restricted to funding and depoliticizing, but who would want the government to decide which books we could read? Public management of the Internet is crucial to its contribution to society, but who would want the government to censor their emails? Government inspectors are critical to a safe food supply, but who would want the government setting their dinner menu?
And then there’s the little matter of physical security. Who wants private armies? The West had that system once, too. It was called feudalism. On the other hand, a state that controls all means of force is an invitation to dictatorship. One possible compromise is to have both central and local powers, with the central government having only those powers explicitly awarded to it. But ultimately security for society must rest on strong government combined with the rule of law, transparency, and popular vigilance…not private enterprise.
It matters little to the victim whether oppression comes at the hands of a corporation or a regime. And yet, a fundamental distinction exists between the worst socialist regime and the worst capitalist system: at least under socialism, the people always have the option of voting. (If a socialist system removes the right to vote or, as in the USSR, rigs the vote, then the system has turned into something else – call it a dictatorship or communism or whatever you want; it is no longer “socialism;” it is no longer rule for society but rule for the rulers.) In a system with a weak regime and powerful, unrestrained corporations, the people have no defense at all. Such a system has surely never existed in modern human history, for the corporations would immediately demand and receive special privileges and transform the system into a Big Government Corporate Welfare System, essentially fascism without brutality, and, indeed, that is precisely the goal of the class war launched by the super-rich in the U.S. Under a Big Government for Corporations system, the people would have no recourse but armed revolt, which would surely provoke a corporate crackdown and the transformation of the system into full-blown fascism.
The problem in the is essentially Big Government that works for Big Capital rather than Society and does so in an atmosphere of unadulterated corporate piracy. There is a fundamental distinction between the corporations of the 1950s that provided lifetime careers at good salaries while they made America rich and the banks that run mortgage mills to make a quick buck off high fees with the intention of selling the mortgage fast enough to avoid responsibility for what happens to the deluded new owner. The rich seem to recognize no common interest between themselves and the society that protects them from foreign aggression or domestic street crime, that paves the roads their limousines use, that buys the product they produce (if, indeed, they still produce anything). Government is indeed “big” and uses its power to hand out corporate welfare on the basis of the size of the corporation rather than the utility of the service that corporation provides to society.
Life is too complicated to be regulated at every point, and people are too vulnerable to be left on their own in a world of enormous institutions. It’s not a matter of capitalism vs. socialism. Rather, the challenge is to balance freedom for individual creativity against the common need for protection. Capitalism with a heavy dose of socialism in sectors critical to the common good works in a strong democracy, enabling economic efficiency to be combined with popular oversight. “Strong democracy,” however, implies the acceptance by all of a social contract that puts government in the hands “of the people.” Room exists for powerful private interests as long as the economic pie is expanding faster than the rate at which power and wealth flow to the most powerful private elements. To the degree that those private power centers seek profit at the expense of the common good, capitalist tendencies need to be curtailed in favor of socialist tendencies; put differently, government power needs to be enhanced for the express purpose of protecting the commons (be it air, water, civil rights, freedom of education, protection against police brutality, clean food, or reliable health care) against abuse by those powerful private interests.
Today in the U.S., conservatives are correct that government is too big: too big when it allows corporate fraud to go unpunished, too big when it allows war profiteers to make billions, too big when it gives welfare to wealthy oil corporations, too big when the police suppress protests against corporate crime). When government tries to regulate and finds itself too weak to control corruption or corporate abuse, then the government is too small. The problem is not the size of the government but in whose interests the government functions. 

Here we go again –