Tuesday, September 2, 2008

Gobblers on Parade: Portrait of a Highly Successful System

by Chris Floyd


Monday, 01 September 2008
Now let's talk turkey. Get down to brass tacks. Cut to the chase. Lay it on the line. Tell it like it is. In other words, let's talk money; viz., how our society has been deliberately and institutionally structured to employ money as a means of social and political ordering on behalf of the razor-thin sliver of the wealthy elite (and the many courtiers and sycophants who feed avidly on their crumbs).

First up: Mike Whitney in conversation with Michael Hudson, former Wall Street economist and now a professor and international economic adviser. From Counterpunch:

Mike Whitney: The housing market is freefalling, setting new records every day for foreclosures, inventory, and declining prices. The banking system is in even worse shape; undercapitalized and buried under a mountain of downgraded assets. There seems to be growing consensus that these problems are not just part of a normal economic downturn, but the direct result of the Fed's monetary policies. Are we seeing the collapse of the Central banking model as a way of regulating the markets? Do you think the present crisis will strengthen the existing system or make it easier for the American people to assert greater control over monetary policy?

Michael Hudson: What do you mean “failure”? Your perspective is from the bottom looking up. But the financial model has been a great success from the vantage point of the top of the economic pyramid looking down? The economy has polarized to the point where the wealthiest 10% now own 85% of the nation’s wealth. Never before have the bottom 90% been so highly indebted, so dependent on the wealthy. From their point of view, their power has exceeded that of any time in which economic statistics have been kept.

You have to realize that what they’re trying to do is to roll back the Enlightenment, roll back the moral philosophy and social values of classical political economy and its culmination in Progressive Era legislation, as well as the New Deal institutions. They’re not trying to make the economy more equal, and they’re not trying to share power. Their greed is (as Aristotle noted) infinite. So what you find to be a violation of traditional values is a re-assertion of pre-industrial, feudal values. The economy is being set back on the road to debt peonage. The Road to Serfdom is not government sponsorship of economic progress and rising living standards; it’s the dismantling of government, the dissolution of regulatory agencies, to create a new feudal-type elite.

The former Soviet Union provides a model of what the neoliberals would like to create. Not only in Russia but also in the Baltic States and other former Soviet republics, they created local kleptocracies, Pinochet-style. In Russia, the kleptocrats founded an explicitly Pinochetista party, the Party of Right Forces (“Right” as in right-wing)...

Whitney: Do you see the Federal Reserve as an economic organization designed primarily to maintain order in the markets via interest rates and regulation or a political institution whose objectives are to impose an American-dominated model of capitalism on the rest of the world?

Hudson: Surely, you jest! The Fed has turned “maintaining order” into a euphemism for consolidating power by the financial sector and the FIRE sector generally (Finance, Insurance and Real Estate) over the “real” economy of production and consumption. Its leaders see their job as being to act on behalf of the commercial banking system to enable it to make money off the rest of the economy. It acts as the Board of Directors to fight regulation, to support Wall Street, to block any revival of anti-usury laws, to promote “free markets” almost indistinguishable from outright financial fraud, to decriminalize bad behavior – and most of all to inflate the price of property relative to the wages of labor and even relative to the profits of industry.

The Fed’s job is not really to impose the Washington Consensus on the rest of the world. That’s the job of the World Bank and IMF, coordinated via the Treasury (viz. Robert Rubin under Clinton most notoriously) and AID, along with the covert actions of the CIA and the National Endowment for Democracy. You don’t need monetary policy to do this – only massive bribery. Only call it “lobbying” and the promotion of democratic values – values to fight government power to regulate or control finance across the world. Financial power is inherently cosmopolitan and, as such, antagonistic to the power of national governments.

The Fed and other government agencies, Wall Street and the rest of the economy form part of an overall system. Each agency must be viewed in the context of this system and its dynamics – and these dynamics are polarizing, above all from financial causes. So we are back to the “magic of compound interest,” now expanded to include “free” credit creation and arbitraging.

The problem is that none of this appears in the academic curriculum. And the silence of the major media to address it or even to acknowledge it means that it is invisible except to the beneficiaries who are running the system.

Next up, "The Scanner," writing at A Tiny Revolution, tells us more about the Fed and its role in crafting a system skewed almost exclusively toward the accumulation of more wealth and power by the wealthy and powerful:

Pursuant to the 1913 Federal Reserve Act and subsequent amendments, the government is effectively given an absolute monopoly on private bank reserves. A committee of government planning bureaucrats in Washington, known as the F.O.M.C., dictates the nationwide price of these reserves and feeds instructions to a bureaucratic department in New York. Based on these instructions, the department carries out constant intervention in the market -- literally on a minute-by-minute, hour-by-hour basis -- to control the quantity of bank reserves and ensure that the government-mandated price target is enforced at all times....

The market mindfuck thus reveals itself as a formidable tool of ideological control. In accordance with the ancient principle of heads-I-win-tails-you-lose, it works as follows: If you advocate Policy A -- in which the government involves itself in economic decision-making to advance the perceived self-interest of the ruling class -- you will receive the warm approbation of the sages: What a sophisticated proposal; what a pragmatic approach. The Federal Reserve Act, as it happens, was a compromise between a reactionary plutocrat, an apologist for the Belgian rape of the Congo who called the income tax “communistic” (Sen. Nelson Aldrich of Rhode Island), and a bloodthirsty Southern white supremacist for whom no law “is so obnoxious that I would be willing to submit its fate to 146,000 ignorant Negro voters” (Rep. Carter Glass of Virginia).

On the other hand, if you advocate Policy B, in which the government involves itself in economic decision-making to benefit the working class, you will be summoned in grave tones before a tribunal of the very best men, who are charged with the duty of upholding the sacred doctrine – the doctrine that “most of the time, it is best to leave markets alone, to let them work without intervention, and that should be our starting point.”

....There is only one cure for the mindfuck: The patient must refuse to recite the catechism. When enjoined by his ideological enforcers, a strictly rejectionist posture must be assumed: “No, I’m sorry. Most of the time the government should not refrain from intervening in the market. The market is not a better allocator of resources than the government. Government policies create markets. That should be our starting point. Once we all agree on that, then we can debate the real question: Who should benefit from those policies, and how?”

Finally, Chris Hedges at Truthdig shows us how this system plays out even in the supposedly populist programs of ostensibly liberal candidates operating within the system:

Barack Obama’s health care plan coddles the corporations that profit from the misery and illnesses of tens of millions of Americans. The plan is naive, at best, and probably disingenuous when it insists that we can coax these corporations, which are listed on the stock exchange and exist to maximize profit, to transform themselves into social service agencies that will provide adequate health care for all Americans. I wish we lived in such a rosy world. I know, and I suspect Obama knows, that we do not.

“Obama offers a false hope,” said Dr. John Geyman, the former chair of family medicine at the University of Washington and author of “Do Not Resuscitate: Why the Health Insurance Industry Is Dying, and How We Must Replace It.” “We cannot build on or tweak the present system. Different states have tried this. The problem is the private insurance industry itself. It is not as efficient as a publicly financed system. It fragments risk pools, skimming off the healthier part of the population and leaving the rest uninsured or underinsured. Its administrative and overhead costs are five to eight times higher than public financing through Medicare. It cares more about its shareholders than its enrollees or patients. A family of four now pays about $12,000 a year just in premiums, which have gone up by 87 percent from 2000 to 2006. The insurance industry is pricing itself out of the market for an ever larger part of the population. The industry resists regulation. It is unsustainable by present trends.”

We face a health crisis. The Democratic and Republican parties, awash in campaign contributions from the beasts they should be slaying on our behalf, have no interest in addressing it. A report in the journal Health Affairs estimates that, if the system is left unchanged, one of every five dollars spent by Americans in 2017 will go to health coverage. Half of all bankruptcies in America are because families are unable to pay their medical bills. There are some 46 million Americans without coverage and tens of millions more with inadequate policies that severely limit what kinds of procedures and treatments they can receive....

Obama, like John McCain, did not support HR 676, the single-payer legislation. The corporations that run our for-profit health care industry, which would be shut down if the bill was enacted, have vigorously fought it through campaign contributions and armies of lobbyists. A study by Harvard Medical School found that national health insurance would save the country $350 billion a year. But Medicare does not make campaign contributions. The private health care industries do. They have lavished money on Obama. He received $708,000 from medical and insurance interests between 2001 and 2006, according to the Center for Responsive Politics. And Michelle Obama is a vice president for community and external affairs at the University of Chicago Hospitals, a position that paid her $316,962 annually....

Obama’s plan, said Dr. Don McCanne, who writes on health care issues, would actually make health plans “more expensive, which compounds the problem.”

...Obama’s plan would also not cover all Americans...Americans would have to go looking for [health care plans] they could afford. And if they could not find one they would remain uninsured. Dr. Woolhandler, who is also a professor at Harvard Medical School, estimates that “tens of millions” of Americans would remain uninsured under Obama’s plan. These numbers would swell as employers, who provide plans for 59 percent of those who are employed, continue to reduce coverage.

“The only way everyone will get insurance is with national health insurance,” she said from Boston in a phone interview. “There is nothing in the Obama plan that will change the bitter reality that working-class families face when their breadwinner gets sick. People with catastrophic illnesses usually lose their jobs and lose their insurance. They often cannot afford the high premiums for the insurance they can get when they are unable to work. Most families that file for bankruptcy because of medical costs had insurance before they got sick. They either lost the insurance because they lost their jobs or faced gaps in coverage that meant they could not afford medical care.”

....But the fundamental problem is a health industry run for profit. Our health system costs nearly twice as much as national programs in countries such as Switzerland. The overhead for traditional Medicare is 3 percent, and the overhead for the investment-owned companies is 26.5 percent. A staggering 31 percent of our health care expenditures is spent on administrative costs. Look what we get in return.

....It is not about liking or not liking Obama. It is not about race or class or gender. It is not about growing up poor or a member of the working class. There is no shortage of greasy politicians who, once in power, sold out their own. Look at Bill Clinton. It is about fighting back. It is about confronting a system that belittles us, what we stand for and what is best for the majority of Americans. We need to throw our support behind alternative candidates who champion what we care about...

The Democrats, who promise to end the war in Iraq, create jobs and provide universal health care, ignore these promises once election cycles are over. And we never make them pay. They gave us NAFTA, the destruction of welfare and increased military spending, and we gave them our vote. This is the party that took back Congress in 2006 on an anti-war platform and then increased troop levels and funding for the Iraq war. This is a party that talks about the crushing weight of debt carried by Americans and then refuses to cap predatory interest rates as high as 30 percent imposed by credit card companies. This is a party that promises to protect our constitutional rights and then passes the FISA bill to protect the telecommunications companies. The list goes on. These politicians, including Obama, must begin to feel heat. They must learn that there is a cost to be paid for working on behalf of corporations and disempowering citizens.

Source: http://www.chris-floyd.com/content/view/1596/135/

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