Thursday, September 25, 2008

Our Deregulated Disaster

The moment has finally arrived. This moment, that of the biggest financial crisis since the Great Depression, has been brewing for some time and was predicted by those who had the long-term vision to look beyond the rhetoric of deregulation. This is the same concept of deregulation that has its roots in Reaganomics and manifested itself in the form of the legislative efforts of Phil Gramm. Gramm worked to pass the Gramm-Leach-Bliley Act of 1999 and the Commodity Futures Modernization Act of 2000 ; both of which attributed to the repeal of the Glass-Steagall Act of 1933 and ushered in the deregulatory practices which have contributed to the crisis that the U.S. finds itself in today.

In response to the collapse of numerous institutions, President Bush has proposed a plan that would effectively give Treasury Secretary Henry Paulson complete control over $700 billion of taxpayer money to bail out some of the major financial institutions. Not only would this plan give Paulson complete control over this money, but there would be no oversight and no accountability for any actions that Paulson may take with this money. From Section 8 of the plan:

"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."

It is language such as this that has led some to describe this bailout plan as an economic version of the PATRIOT Act. This parallel references the speed with which this act is being pushed through Congress after a crisis, as well as the sweeping power that would be invested in one central figure, in this case regarding economic policy. In the following paragraphs I will use this opportunity to discuss the viewpoints of three individuals who have given some insight into this recent crisis and will hopefully work to form a more productive narrative in the discussion of these issues.

Naomi Klein is a journalist and the author of The Shock Doctrine: The Rise of Disaster Capitalism. In this book, her primary thesis is that during times of crisis, the right has pushed through radical economic policies that are otherwise publicly unpopular. It is during this time of crisis where the public is "shocked" and the window for debate on these policies is often very small. Klein argues that this is exactly what is happening with this current financial crisis. This bailout plan is being touted by the government as a necessary fix and there are claims that this plan needs to be approved within the next week in order to prevent further damage from occurring. Meanwhile, this crisis is being used in an attempt to push through policies that Klein claims would worsen the problem. She wrote a recent piece for the Huffington Post in which she describes this:

"The best summary of how the right plans to use the economic crisis to push through their policy wish list comes from Former Republican House Speaker Newt Gingrich. On Sunday, Gingrich laid out 18 policy prescriptions for Congress to take in order to "return to a Reagan-Thatcher policy of economic growth through fundamental reforms." In the midst of this economic crisis, he is actually demanding the repeal of the Sarbanes-Oxley Act, which would lead to further deregulation of the financial industry. Gingrich is also calling for reforming the education system to allow "competition" (a.k.a. vouchers), strengthening border enforcement, cutting corporate taxes and his signature move: allowing offshore drilling."

With the attempt to push through this massive bailout for the financial corporations, Klein also insists that this is a ticking time bomb that will eventually explode on the next administration. Klein was on Democracy Now! earlier this week and explained how this bailout plan may only be the first shock. From the transcript:

I’m also arguing that this is only stage one of the shock doctrine. They’re getting this—they’re lobbying for this huge bailout, obviously, but this bailout is a kind of a time bomb, because it’s all these bad debts, and they are going to explode on the next administration. I mean, we know that the Bush administration has already left the next administration with huge debt and deficit problems. They’ve just exploded those, expanded them. And what that means is that whoever the next president is is going to be inheriting this economic crisis that is being exacerbated by this bailout.

It is predictable, Klein argues, how a John McCain administration would handle this scenario because he has already expressed his support for privatizing Social Security and his willingness to cut social programs. An Obama Administration would also face very serious pressure from the corporate interests which have funded his campaign as well as from campaign advisers such as Robert Rubin. Klein claims that we can learn a lot from the candidacy of Bill Clinton. He ran a populist campaign during the primary season, but when he found himself in the middle of economic troubles, he took a turn towards policies that favored Wall Street at the urging of his advisers tied to corporate interests. There will be immense pressure upon an Obama Administration to do the same, which is why Klein calls for massive grassroots pressure on all the candidates and members of Congress to not pass this bailout plan in its current form and bend to the corporate interests that caused this problem in the first place.

Glenn Greenwald is a former constitutional law and civil rights litigator. He is also the author of a few books and currently writes daily for Greenwald has written a few pieces in the recent week regarding this financial crisis and brings an interesting look into some of the issues of hypocrisy surrounding this crisis. From his piece this previous Saturday:

What is more intrinsically corrupt than allowing people to engage in high-reward/no-risk capitalism -- where they reap tens of millions of dollars and more every year while their reckless gambles are paying off only to then have the Government shift their losses to the citizenry at large once their schemes collapse? We've retroactively created a win-only system where the wealthiest corporations and their shareholders are free to gamble for as long as they win and then force others who have no upside to pay for their losses.

This proposed bailout plan does exactly that. It creates a win-win system for those who have engaged in practices and policies which have enriched those on Wall Street to the detriment of the working class. This is a plan that would justify these actions through not only saving these institutions, but by providing no oversight or accountability for the way that the Treasury Secretary will handle the process of bailing these companies out. Needless to say, in light of this it has been confusing to watch members of the right voice grave opposition to the Paulson Plan. We now see the likes of Bill Kristol, Michelle Malkin, and Newt Gingrich vehemently opposed to a bailout plan that would save Wall Street at the expense of the taxpayer. Greenwald explains the reason for this outrage:

They say it themselves: with the looming prospect of an Obama presidency, they may no longer be in charge of that Government and these "small government conservatives" have thus suddenly re-awoken to the virtues of checks and balances, oversight and other restraints.

This very re-awakening that Greenwald describes outlines the very hypocrisy of those on the right who are suddenly interested in regulation and oversight. Many of these figures (including John McCain) have worked for the majority of their careers to limit government regulation and free the market from any kind of oversight. Now, with the very real possibility of the power structure shifting, these same figures are suddenly calling for regulation and oversight. There is sudden concern that too much power would be concentrated in the hands of the Treasury Secretary and these right wing opponents are expressing the need for checks and balances so that one man does not have too much concentrated power. These are the same people who have spent the last eight years voicing their support for legislation such as FISA, the PATRIOT Act, and the Military Commissions Act; all of which had the radical affect of, you guessed it, concentrating power into the hands of one man. Oddly enough, to quote Greenwald: "Right-wing opposition to the Paulson plan is vital for having any meaningful chance to stop it." So we now find ourselves in the odd situation where it is necessary for the right-wing's hypocrisy to help save us from the incompetence of the Congressional Democrats. This would seem to point us toward the conclusion that there could be more wrong with this country than this financial crisis lets on.

This leads me to Dan La Botz. La Botz is a Cincinnati born writer, teacher, and activist who has written numerous books and a recent paper on "Who Rules Cincinnati". The Beacon did an interview with him recently on this topic and I attended his lecture this past week at the main branch of the Cincinnati Public Library. While La Botz's primary focus was on corporate influence in Cincinnati, he also spoke to the recent financial crisis because, as he put it, it would be silly for him to give a financial talk the day after the stock market crash of 1929 and not mention the stock market crash.

La Botz began with the point that this current financial problem is part of a bigger crisis of the American Capitalist system. He gave several reasons for why he believes this is so. Two of which were:

1. The United States embarked upon a plan to control a central source of petroleum in order to expand American interests and control a region of the world from which they would be able to protect these interests. This plan, La Botz argues, has failed. The War and occupation of Iraq have ended up costing the United States, by some estimates, over a trillion dollars and has left the U.S. in debt to several foreign nations (most notably China and Japan).

2. There is a disjuncture between the envisioned economy and what we see around us. As a people, we have been continually told that our economy is strong and that the United States is a top player in the world markets. This contradicts what people see around them. People are experiencing a damaged infrastructure, job loss due to globalization, and the lack of basic needs to members of our society.

These points lead to the conclusion that this crisis is not only about finance, but about the status of our society and our place in the world. Now you have a situation where you have governmental leaders and those on Wall Street running around trying to save capitalism by proposing sticking a band-aid on a gaping wound. It is because of this that Dan La Botz does not think that we have the forces to fundamentally change things. Similarly, Naomi Klein cautions those who think that capitalism is dead:

So, we should be really, really wary of this claim that we’re hearing that free market ideology is dead, that this marks the end of, you know, of capitalism. You know, I’m sorry, that is not the case. It may be going dormant for a little while to rationalize these massive bailouts, but it will come roaring back, and the crisis that is being deepened right now through these bailouts will be invoked for even more radical deregulation, privatization, tax cuts and so on.

In spite of the massive evidence that deregulation and a lack of oversight have caused the greatest financial crisis since the Great Depression, you still see the same giant corporate forces trying to bailout the very system that led us to this very moment in time. While it may be slightly encouraging to see members of Congress voicing their displeasure with the Paulson Plan it will not be enough to simply amend the plan and end up passing another so-called compromise bill. These are the times when we need to be engaged in a serious discussion about what brought us to this point. We can not afford to make decisions that will lead this country back down the same road which will continue to leave those who have the least suffering the most. Massive public pressure must be applied to the leadership of this country demanding a fundamental examination of these policies and we must begin to have a conversation about the danger of concentrating even more power into the hands of the few and the necessity of returning more power to the people.

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