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.


Class War in America

The super-rich have launched a class war against the people of the U.S., a war that, for most of our politically naive population, was revealed only with the Financial Crisis of 2008, yet the super-rich continue to gain ground. An extraordinarily clear statement describing how this class war against America is being fought was given in testimony before Congress on July 10, 2012 by Dennis Kelleher, President and CEO of Better Markets, Inc. His statement is invaluable in outlining concisely what occurred and forecasting in detail the likely consequences of a continued failure of Washington to start representing the interests of, not corporations and the super-rich, but the American people. Every word is worth reading. What follows is just the outline.

Customers, credit and credit markets, job creators, businesses, investors and
consumers – all of Main Street and much of America, for that matter – have been devastated by a terrible economy that is a direct the result of the financial collapse and economic crisis that began in 2007, reached a peak in 2008-2009 and continues to this day.  Indeed, it was the worst financial collapse since the Stock Market Crash of 1929 and it is the worst economy since the Great Depression of the 1930s.

While many played a role in the recent collapse and crisis, Wall Street is at the top of the list of those responsible because it caused that collapse and crisis by the reckless and irresponsible creation and distribution of toxic and often worthless securities, among their many other actions.

Unfortunately, Wall Street, many of the major financial industry participants, and their trade groups and other allies deny or minimize their role in the financial collapse and the economic crisis.  Moreover, they are trying to obscure and conceal the cost of the collapse and crisis.  Perhaps most importantly, they are also engaged in a comprehensive misinformation campaign that attempts to refocus the public debate away from the crisis and Wall Street’s role in creating it to the new financial reform law and the rules being put in place to prevent
another crisis and protect the American people, taxpayers, Treasury and economy.

Thus, before the “impact” of the Dodd-Frank financial reform law–more properly
understood as the Wall Street re-regulation law – on customers, credit and job creators can be properly considered, a thorough discussion of the Wall Street-created financial collapse and economic crisis that gave rise to that law must come first.  After all, it would be impossible to evaluate the impact of a law without the context and an understanding of why the law exists, what the law was intended to do and how it was designed to do it.

Wall Street was able to cause the collapse and crisis largely because it used its
economic power to gain political, academic, media and other power that enabled it to tear down the many laws, rules and regulations put in place during the Great Depression of the 1930s to protect the American people from Wall Street’s recklessness and greed.
 It must be remembered that, after those laws, rules and regulations were put in place, our country did not have a financial or economic crisis on that scale for more than 70 years.

It must also be remembered that, even with all those many laws, rules and regulations– a truly unprecedented degree of government regulation of Wall Street and the U.S. capital markets – our country prospered; we built the largest and most broad-based middle class in the history of the world; and Wall Street, our financial industry, our nonfinancial businesses and our economy all thrived.
By 2000, virtually all of those protections were torn down and Wall Street was not just de-regulated, but almost entirely un-regulated.  The results are clear: after 70 years of regulation that protected the American people, our financial system and our economy, it took just 7 years for Wall Street’s unregulated investment, trading and other activities to cause what almost became a second Great Depression.
Those actions by Wall Street required the U.S. government to spend, lend, guarantee, pledge, assume, or otherwise use trillions of dollars to save Wall Street from itself and to prevent the crisis from becoming even worse.  While they may deny it, every single major bank and all of the other too big to fail financial institutions would have collapsed into bankruptcy but for the actions of the U.S. government and the taxpayer dollars used to bail them out and put them back on the road to profitability. Thus, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Merrill Lynch, Bank of America, AIG, Citigroup and the others are only
in business today because they were all bailed out by the U.S. government and the American taxpayer.

But, those bailouts were only part of the costs of that crisis.  The economic wreckage caused by Wall Street’s actions has touched every corner of our country:  high and persistent unemployment and under-employment, historically high foreclosures and underwater homeowners, slow-to-no economic growth, business failures, untold wealth destruction, widespread and growing poverty, and so many other costs continue to mount, including, increasingly, a loss of belief in the American Dream.

Just one measure of these costs reveals how deep and overwhelming the crisis has been and continues to be on our country:  the Federal Reserve Board recently released a study that shows that the net worth of the median family declined 38.8% in just three years, from 2007-2010, wiping out more than $7 trillion in wealth – almost two decades of  crisis. [Dennis Kelleher in testimony before Congress.]

That is what class war in America looks like.