Here is my image: The economy is in about the same condition as the airplane that landed in the Hudson River. The Corporate Media is watching carefully, speculating about whether it’s going to take off next month, or in three months. Has Wall Street revovered yet? Might take till next year…. I say, don’t hold your breath. This looks like a structural collapse, like 1929, not a deep recession.
In 1929 the stock market crashed and during the next 3½ years almost 40% of the banks failed. Herbert Hoover and the bankers didn’t know what to do, so they didn’t do much of anything. When FDR become president in 1933, the New Deal started employing people to do work that was worthwhile, like building post offices, improving our forests, creating art, and doing thousands of other things.
The conservatives always hated FDR and the New Deal, but it wasn’t until 1980, when Ronald Reagan came to power, that the Republicans were able to push back. Since then, the rich have been getting richer while working people have been working harder but getting a smaller piece of the pie, especially in the last eight years. In the 1980s, the ratio between the compensation of the average worker and the average U.S. CEO was 42-to-1. Today, it is 344-to-1. CEOs make as much in a day as their average worker earns in a year.
The situation now is both similar to and different from the 1930s, but one thing seems clear: this is a golden opportunity to make structural changes in our economic system. The consumer society that has evolved since WWII, and especially over the last generation, has been a destructive force on our planet and badly needs changing.
Remember when George W. Bush wanted to privatize Social Security? “It’s your money.” (Why don’t you let Wall Street take care of it for you?) Wall Street is not working for us; they are working for money. That is what they produce best. The pursuit of financial gains is not inherently bad, but the way it is being pursued is devouring what is best about our people and of the planet itself. When high-roller investors (unlike many prudent, careful investors) are given free reign, they speculate. This is Casino Capitalism, which unbalances the system, and eventually it crashes into the river. From 1725 onward, financial crises have occurred throughout the Western capitalist economies on average about every 8 ½ years, though big, structural collapses are more rare.
During the presidential campaign, John Edwards said there were two Americas; one for the wealthy and one for the rest of us. He knew, because he was part of wealthy America. In 2007 the fifty top Hedge Fund operators made on average $588 million each and this is just the tip of the iceberg. In the face of statistics like this, it is hard to deny the Two Americas theory.
Two ways massive amounts of money are made on Wall Street are buying and selling companies and issuing of IPOs, when new companies join the stock market. These have been the bread and butter of investment banks. When Citibank or the Bank of America buys another company or bank, a lot of money changes hands. Some people get very rich, but in secret.
When companies are bought, they’re often looted. One of the great prizes is the pension fund, which should be protected, since the workers have paid into it throughout their working lives. One of my pals, Jeff Sandler, has a father who worked for Knickerbocker Brewery most of his adult life. He was about six months from retirement when PepsiCo bought Knickerbocker, fired Jeff’s father, and never paid him a penny of his pension. To the financial whiz kids, pension funds are simply piles of money. In fact they are nest eggs that working class people and their families depend on for food, warmth, and shelter. Laws like ERISA have protected many nest eggs, but there is always pressure to “deregulate.” The owners write the rules and too often leave pension funds unprotected. To the free marketers, Jeff’s father was “collateral damage.”
I’m not opposed to companies who make things. I’m in awe of people I’ve known who make things. The father of another of my best friends, Russ Jolly, invented the machine that made twist-o-flex watchbands, the metal watchbands that you could tie in a knot. The invention was a piece of genius, but Russ’s father invented a machine that made these watchbands. Put in a bunch of raw material at the beginning and out pop watchbands at the end. This kind of work is what gave our country a well-deserved reputation for innovation, creativity, even genius. The complexity and the magnificence of what human beings have created is thoroughly astounding.
Financial creativity, however, whether practiced by Enron, AIG, or by the Wall Street investment banks, has destroyed our economy, as well as the world economy. How do derivatives and credit default swaps benefit society? The addiction to money creates greed, which easily tumbles into corruption and more greed. The famous “invisible hand of the market” is not stopping climate change, is not feeding the poor, is not helping people lead healthy lives or get the health care they need, is not promoting justice, is not ending war. There is something fundamentally wrong
Take the example of General Motors. The flight of GM’s CEO to Washington in one of GM’s corporate jets was business-as-usual. If I’d been one of the congressmen questioning him, I’d have asked why GM’s president was spending millions of his company’s money funding “faux-science” to cast doubt on global warming. To sell SUVs, they’re willing to undermine the balance of nature, upon which all life depends.
Are people bad at math? Many people who “hate math” can make dazzling calculations about baseball and football statistics. Maybe it’s good we don’t teach sports statistics in school. A more likely explanation of why people don’t understand economics is that the owners of corporations want us to be confused, preferring that we watch the stock market go up and down like we root for our favorite sports team. “Go Stock Market, Go!” This is a variation on the Bread and Circuses of the Roman Empire.
Aside from financial shenanigans, in my opinion there are three things that have ruined this country: the automobile, television, and permanent militarism. The automobile has reshaped everything: cities, vast suburbs, and interstate highways that dominate and make our society unmanageable, ugly, and destructive of life on earth. We’ve upset the balance of nature that has developed over billions of years. John Holdren, Obama’s chief science advisor, compared global warming to being “in a car with bad brakes driving toward a cliff in the fog.” This is serious. We’re in a crisis, but Wall Street is creating these problems, not solving them.
Television is owned by the corporate advertisers (not counting the always struggling PBS). Exhausted, multi-tasking parents plop their two or three year olds in front of the TV, turning their children over to corporations that pay very smart people extravagant salaries to capture the imaginations of our children when their brains are most vulnerable. Before television, there was a shared culture. In the musical realm, Stephen Foster songs, Broadway musicals, and popular songs were known by most people, while now everyone learns TV jingles and theme songs. TV has one overarching message: Buy Stuff!
The Depression in the 1930s was very traumatic and it took WWII to fully restore prosperity, but that came with the death of 72 million people. When the war was over the military was not fully dismantled and with Sputnik and the rise of the Cold War, we went back into full military production. We’ve been sold a ridiculous amount of arms that we periodically use up in a series of wars, all of which have been indefensible (sic). However, financed by Wall Street, a vast number of fortunes have been made.
Unfortunately, many people pay for these policies with their lives. Iraq has been destroyed by our invasion. One in every six people has been forced to move, one in 25 people are dead. While Saddam Hussein was a brutal dictator, he did not have the firepower to kill people like we do. If the United States had suffered a similar invasion, 12,000,000 of our people would be dead and 50,000,000 would have had to move or flee.
Long ago, a profit of five or seven percent was enough, but with the internationalization of capital, a vast sea of money went seeking greater investments. Deregulation of the banks and the development of unregulated hedge funds led people to believe that “the smartest guys in the room” could make 20% return on their investments. They did, for a while, but their innovations and greed eventually led to a crash landing in the Hudson River.
There are competing theories of history. One holds that we create our own reality: we’re responsible for what happens to us. If we’re not successful, it is our fault. It is up to the individual. Another view holds that the people who own the wealth rig the game so they continue to have more than everyone else, often more than everyone else put together. Put another way, we live in a plutocracy, a government of the rich, by the rich, and for the rich.
For 28 years our country has been looted, and with a vengeance during the last eight years. The extraordinary transfer of wealth from the bottom to the top is staggering, but the Corporate Media prefers not to mention this, since their bills are paid by the looters. If you talk about it you get accused of being a socialist or a communist, but why aren’t the people looting the public treasury accused of embezzlement?
This reality gets obscured by the fact that America is currently the reigning Empire, so enormous amounts of wealth have entered our country. It is not completely irrational to partake in the prosperity that comes our way as a result of our having been the most powerful nation on the planet for the last 74 years.
This is further complicated by the reality that most people have certain things they want. There really is a lot of freedom in this country. If you love restoring old cars, you can do it. If you love motorboats you can get one. If you love single malt whisky, you can indulge yourself. If you love cocaine, you can get some. Everything is for sale, if you have the money, and some people pursue money with a relentless vigor. Smart and successful CEOs use their access to corporate wealth to make sure that they, and their children, can join the owner’s club.
The short term fix is to dry out the plane and to send it up again. With the help of the next financial bubble, it may get up into the air again, but it will surely crash again. A better idea would be to rebuild the airplane. Don’t allow giant financial institutions to continue to control our economy. The banks made gigantic mistakes and deserve to be held accountable for their mistakes.
The stakes are very high. This could lead to the destruction of the Obama Administration. Unfortunatly, Larry Summers and Timothy Geithner, the chief financial advisors of President Obama, believe wholeheartedly in Wall Street. The do not see the obligation of the government to the citizens of the country, but to the health of the banks. They are not serving us; they are serving the financial interests. We need the economy to work for the good of us all. Banks can be redesigned so the will work for the common good. It happened in the 1930s and it worked for fifty years, until Casino Capitalism began to develop in the Reagan years.
The interests that control our financial world have created a system that has brought us to the brink of ruin. We can move from short-term profits to long-term investing; we can shift the priority from advancing the private interests of the few to advancing the individual and community interests of all. Envision a radical but achievable program built on the fundamental strengths of the American economy and rooted in the health of people and the planet.
We must change the stories that frame our culture by creating a new story of a country that invests in the living wealth of healthy children, families, and communities. The profound cultural and institutional transformation that we need goes against the short-term interests of the world’s most powerful people and institutions. Government has an essential role in maintaining socially efficient and fair markets. The corporate institutions are unlikely to transform themselves, so change must come from us. We must choose between following a path to collective self-destruction or joining together in a cooperative effort to navigate a dramatic turn to a new human era.
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