"In a time of universal deceit telling the truth is a revolutionary act." -George Orwell

Posts Tagged ‘Fianancial-Industrial Complex’

Cyprus As Canary – It Can Happen Here: The Bank Currency Confiscation Scheme for US & UK Depositors

In Uncategorized on March 30, 2013 at 7:57 pm

https://i1.wp.com/media.npr.org/assets/img/2013/03/28/cyprusbank282way_wide-8b44df5e0364c2692b832eafdc77152c95ea425d-s6-c10.jpgOldspeak: “While U.S. Corporate media has been focused on Gay marriage and “gun control”, events in Cyprus are giving us a preview of things to come in the rest of Europe and the U.S. Things to come that according to “A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland” What we’re witnessing is the planned demolition of sovereign governments to finance the greed-fueled, reckless and illegal behavior of the international banking cartel. We’ve now reached point in this global economic looting scheme where tax financed bank bailouts are no longer sufficient. Now the hard-earned life savings of bank depositors will be appropriated without their consent. Inequality is at never before seen levels, conditions on Wall Street are basically the same and in many ways worse than they were prior to the last global economic collapse. 2 mega banks, JP Morgan Chase & Bank of America hold more in notional derivatives; 79 TRILLION and 75 TRILLION respectively, than the amount of the ENTIRE GLOBAL GDP of 70 Trillion. Let that sink in. It’s not a matter of if the next collape happens, but when. It’s already begun. Nameless Russian billionaires have been rendered broke, as a result of events in Cyprus. They won’t be the last. Eventually the confiscations will trickle down to people like you and me. Your politicians have already laid the groundwork for banks to legally use your money to bail themselves out. This sort of madness depends on the complacency and indifference of the public to get passed. In this age of Austerity sadly complacency and indifference are abundant. “Propaganda always wins  if you let allow it.”-Leni Riefenstahl . How much longer will we allow it?

By Ellen Brown @ Washingtons’ Blog:

Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds.  

New Zealand has a similar directive, discussed in my last article here, indicating that this isn’t just an emergency measure for troubled Eurozone countries. New Zealand’s Voxy reported on March 19th:

The National Government [is] pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts . . . .

Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.

Can They Do That?

Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay. (See here and here.) But until now the bank has been obligated to pay the money back on demand in the form of cash. Under the FDIC-BOE plan, our IOUs will be converted into “bank equity.”  The bank will get the money and we will get stock in the bank. With any luck we may be able to sell the stock to someone else, but when and at what price? Most people keep a deposit account so they can have ready cash to pay the bills.

The 15-page FDIC-BOE document is called “Resolving Globally Active, Systemically Important, Financial Institutions.”  It begins by explaining that the 2008 banking crisis has made it clear that some other way besides taxpayer bailouts is needed to maintain “financial stability.” Evidently anticipating that the next financial collapse will be on a grander scale than either the taxpayers or Congress is willing to underwrite, the authors state:

An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company [meaning the depositors] into equity [or stock]. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution.

No exception is indicated for “insured deposits” in the U.S., meaning those under $250,000, the deposits we thought were protected by FDIC insurance. This can hardly be an oversight, since it is the FDIC that is issuing the directive. The FDIC is an insurance company funded by premiums paid by private banks.  The directive is called a “resolution process,” defined elsewhere as a plan that “would be triggered in the event of the failure of an insurer . . . .” The only  mention of “insured deposits” is in connection with existing UK legislation, which the FDIC-BOE directive goes on to say is inadequate, implying that it needs to be modified or overridden.

An Imminent Risk

If our IOUs are converted to bank stock, they will no longer be subject to insurance protection but will be “at risk” and vulnerable to being wiped out, just as the Lehman Brothers shareholders were in 2008.  That this dire scenario could actually materialize was underscored by Yves Smith in a March 19th post titled When You Weren’t Looking, Democrat Bank Stooges Launch Bills to Permit Bailouts, Deregulate Derivatives.  She writes:

In the US, depositors have actually been put in a worse position than Cyprus deposit-holders, at least if they are at the big banks that play in the derivatives casino. The regulators have turned a blind eye as banks use their depositaries to fund derivatives exposures. And as bad as that is, the depositors, unlike their Cypriot confreres, aren’t even senior creditors. Remember Lehman? When the investment bank failed, unsecured creditors (and remember, depositors are unsecured creditors) got eight cents on the dollar. One big reason was that derivatives counterparties require collateral for any exposures, meaning they are secured creditors. The 2005 bankruptcy reforms made derivatives counterparties senior to unsecured lenders.

One might wonder why the posting of collateral by a derivative counterparty, at some percentage of full exposure, makes the creditor “secured,” while the depositor who puts up 100 cents on the dollar is “unsecured.” But moving on – Smith writes:

Lehman had only two itty bitty banking subsidiaries, and to my knowledge, was not gathering retail deposits. But as readers may recall, Bank of America moved most of its derivatives from its Merrill Lynch operation [to] its depositary in late 2011.

Its “depositary” is the arm of the bank that takes deposits; and at B of A, that means lots and lots of deposits. The deposits are now subject to being wiped out by a major derivatives loss. How bad could that be? Smith quotes Bloomberg:

. . . Bank of America’s holding company . . . held almost $75 trillion of derivatives at the end of June . . . .

That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.

$75 trillion and $79 trillion in derivatives! These two mega-banks alone hold more in notional derivatives each than the entire global GDP (at $70 trillion). The “notional value” of derivatives is not the same as cash at risk, but according to a cross-post on Smith’s site:

By at least one estimate, in 2010 there was a total of $12 trillion in cash tied up (at risk) in derivatives . . . .

$12 trillion is close to the US GDP.  Smith goes on:

. . . Remember the effect of the 2005 bankruptcy law revisions: derivatives counterparties are first in line, they get to grab assets first and leave everyone else to scramble for crumbs. . . . Lehman failed over a weekend after JP Morgan grabbed collateral.

But it’s even worse than that. During the savings & loan crisis, the FDIC did not have enough in deposit insurance receipts to pay for the Resolution Trust Corporation wind-down vehicle. It had to get more funding from Congress. This move paves the way for another TARP-style shakedown of taxpayers, this time to save depositors.

Perhaps, but Congress has already been burned and is liable to balk a second time. Section 716 of the Dodd-Frank Act specifically prohibits public support for speculative derivatives activities. And in the Eurozone, while the European Stability Mechanism committed Eurozone countries to bail out failed banks, they are apparently having second thoughts there as well. On March 25th, Dutch Finance Minister Jeroen Dijsselbloem, who played a leading role in imposing the deposit confiscation plan on Cyprus, told reporters that it would be the template for any future bank bailouts, and that “the aim is for the ESM never to have to be used.”

That explains the need for the FDIC-BOE resolution. If the anticipated enabling legislation is passed, the FDIC will no longer need to protect depositor funds; it can just confiscate them.

Worse Than a Tax

An FDIC confiscation of deposits to recapitalize the banks is far different from a simple tax on taxpayers to pay government expenses. The government’s debt is at least arguably the people’s debt, since the government is there to provide services for the people. But when the banks get into trouble with their derivative schemes, they are not serving depositors, who are not getting a cut of the profits. Taking depositor funds is simply theft.

What should be done is to raise FDIC insurance premiums and make the banks pay to keep their depositors whole, but premiums are already high; and the FDIC, like other government regulatory agencies, is subject to regulatory capture.  Deposit insurance has failed, and so has the private banking system that has depended on it for the trust that makes banking work.

The Cyprus haircut on depositors was called a “wealth tax” and was written off by commentators as “deserved,” because much of the money in Cypriot accounts belongs to foreign oligarchs, tax dodgers and money launderers. But if that template is applied in the US, it will be a tax on the poor and middle class. Wealthy Americans don’t keep most of their money in bank accounts.  They keep it in the stock market, in real estate, in over-the-counter derivatives, in gold and silver, and so forth.

Are you safe, then, if your money is in gold and silver? Apparently not – if it’s stored in a safety deposit box in the bank.  Homeland Security has reportedly told banks that it has authority to seize the contents of safety deposit boxes without a warrant when it’s a matter of “national security,” which a major bank crisis no doubt will be.

The Swedish Alternative: Nationalize the Banks

Another alternative was considered but rejected by President Obama in 2009: nationalize mega-banks that fail. In a February 2009 article titled “Are Uninsured Bank Depositors in Danger?“, Felix Salmon discussed a newsletter by Asia-based investment strategist Christopher Wood, in which Wood wrote:

It is . . . amazing that Obama does not understand the political appeal of the nationalization option. . . . [D]espite this latest setback nationalization of the banks is coming sooner or later because the realities of the situation will demand it. The result will be shareholders wiped out and bondholders forced to take debt-for-equity swaps, if not hopefully depositors.

On whether depositors could indeed be forced to become equity holders, Salmon commented:

It’s worth remembering that depositors are unsecured creditors of any bank; usually, indeed, they’re by far the largest class of unsecured creditors.

President Obama acknowledged that bank nationalization had worked in Sweden, and that the course pursued by the US Fed had not worked in Japan, which wound up instead in a “lost decade.”  But Obama opted for the Japanese approach because, according to Ed Harrison, “Americans will not tolerate nationalization.”

But that was four years ago. When Americans realize that the alternative is to have their ready cash transformed into “bank stock” of questionable marketability, moving failed mega-banks into the public sector may start to have more appeal.

Comment by Washington’s Blog:  The big banks have already been “nationalized” in the sense that they are state-sponsored institutions .  In fact, the big banks went totally bust in 2008, and are now completely subsidized by the government.

Americans may not like the idea of nationalization, but they are even more  disgusted by crony capitalism … which is what we have now.

Moreover, as we pointed out in 2009:

Many argue that it would be wrong for the government to break up the banks, because we would have to take over the banks in order to break them up.

That may be true. But government regulators in the U.S., Sweden and other countries which have broken up insolvent banks say that the government only has to take over banks for around 6 months before breaking them up.

In contrast, the Bush and Obama administrations’ actions mean that the government is becoming the majority shareholder in the financial giants more or less permanently. That is – truly – socialism.

Breaking them up and selling off the parts to the highest bidder efficiently and in an orderly fashion would get us back to a semblance of free market capitalism much quicker.

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Finance Experts: Speculators At Wall Street ‘Casinos’ Continue To Manipulate Prices At The Pump

In Uncategorized on April 5, 2012 at 12:25 pm

Gas Pump PriceOldspeak: “No, high gas prices have NOTHING to do with President Obama. The debate in Washington over cutting oil subsidies is another manufactured issue, diverting attention from the true cause of rising oil and commodities prices; unregulated, unchecked financial speculation and derivatives trading. Coincidentally the cause of the recent crash of the global economic system. Recently passed “financial reform” did nothing to reform this fatally flawed financial system. A simple and totally correctable (stricter regulation) flaw; corporate media, corporate economists,  no one is talking about it. “no one wants to talk about, because so many powerful people armed with legions of lawyers want unquestioning allegiance, and will sue you into silence.”- Danny Schechter. The other Ginormous elephant in the room. We’re running out of oil. Tar sands, offshore drilling
its all an indication that the easy to get to oil is gone. The oil we’re consuming now is infinitely harder to process and produce. Speculators are doing what they do best: profiting handsomely from scarcity. Disaster capitalists are having a field day as the people suffer. This is what oligarchy looks like.

Related Stories:

Finance Expert Says Speculators Are Behind High Oil and Gasoline Prices

Unchecked Financial Speculation Drives Oil Price Hikes; Is There A Scam Behind The Rise In Oil And Food Prices?

By Anna Staver @ The Huffington Post: 

Americans are paying for $4-a-gallon gasoline because Wall Street “casinos” have blocked regulators from cracking down on rampant oil speculation, finance experts argued on Capitol Hill Wednesday.

In an effort to counter Republican claims that gas prices are high because the Obama administration does not allow enough drilling, House Democratic leaders staged a hearing featuring former Reagan and Clinton administration oil and trading analysts who blame the surge on speculation.

And the vast profits from that speculation do not go into developing more oil or creating jobs, the analysts argued.

“Your constituents should know that every time they break their heart by buying $4 and maybe soon $5 gasoline, that money isn’t going into production,” said University of Maryland professor Michael Greenberger, who served as director of the division of trading and markets for the Commodity Futures Trading Commission in the Clinton administration. “It’s going into homebuilding in the Hamptons and yacht building.”

And the big finance firms are working overtime to ensure that the speculative commodity keeps flowing, he said.

“They’ve got hundreds of millions of dollars that they are using in lobbying on the Hill” or the Commodity Futures Trading Commission, Greenberger told HuffPost after the session. “Now they are bringing all these lawsuits; they are stopping the action that has already been asked for by Congress to stop the speculation.”

He was referring to suits that seek to limit certain Dodd-Frank financial reforms that, among other things, grant the commission the power to crack down on excessive oil speculation.

Greenberger told the Democratic Steering and Policy Committee that curtailing the speculation — some of which he said was necessary — would cost nothing and would not stop any markets from functioning.

“What are you stopping here? Are you stopping money from going into production? Are you stopping money from [reaching] people creating jobs?” Greenberger asked. “Unless you think casinos — which come to us with names like Goldman Sachs and Morgan Stanley — are job creators, you’re stopping betting. If we’re wrong about this — if everything we’re telling you is incorrect — what will you have done except close a couple of casinos?”

Rep. Xavier Becerra (D-Calif.) pressed Greenberger if there was contradictory evidence when it comes to figuring out whether high gas prices could be cured through increased drilling and domestic oil production.

Greenberger conceded that one or two experts in the country would hold that opinion but said the vast majority in his field believe that Wall Street sets the price of oil.

“Many would like you to believe that this is a supply-demand problem. It’s not,” Greenberger said. “It is excessive speculation, which is a fancy way of saying that gamblers wearing Wall Street suits have taken over and created investment vehicles designed to drive the price of oil up.”

He cited testimony by Goldman Sachs earlier this year asserting that speculation drives up the cost of a barrel of oil by as much as $23.39.

Gene Guildford, a former president of the Maine Oil Dealers Association and a Reagan administration Commerce Department official, estimated that speculation translates into roughly a dollar added to the price of each gallon of gasoline bought by the U.S. consumer. “Instead of spending four dollars, you should have been spending something closer to three dollars for your gallon of gasoline,” he said.

The extra cost to America’s drivers is staggering, Guildford said. “At 11 billion gallons a month that Americans consume, Americans today are paying $10 billion more a month for gasoline today than they did in December.”

Both men urged the committee to fully fund the Commodity Futures Trading Commission and propose legislation in the House aimed at cutting oil speculation to what is required to keep the markets liquid.

Otherwise, it’s just making millionaires richer and middle-class Americans poorer, they and Democrats argued.

“Wall Street speculators are artificially driving up the price at the pump and causing pain to millions of American consumers,” said House Minority Leader Nancy Pelosi (D-Calif.).

Using Debt To Crush Democracy: How Financiers Are Waging Economic Warfare Against Nations

In Uncategorized on December 16, 2011 at 10:23 am

Oldspeak:”Everything is version of something else”. The eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history. Financial oligarchy has happened before. Many times throughout history. This recent debt protests from Iceland to Greece and Spain suggest that creditors are shifting their support away from democracies and crushing national self-determination” As they have in the past.  It will be interesting to see if an aristocracy is coming in our future. Highly recommend reading John Perkins’ “Confessions Of An Economic Hit Man” to understand what is going on.

By Michael Hudson @ Michael Hudson’s Blog:

Book V of Aristotle’s Politics describes the eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history.

Debt has been the main dynamic driving these shifts – always with new twists and turns. It polarizes wealth to create a creditor class, whose oligarchic rule is ended as new leaders (“tyrants” to Aristotle) win popular support by canceling the debts and redistributing property or taking its usufruct for the state.

Since the Renaissance, however, bankers have shifted their political support to democracies. This did not reflect egalitarian or liberal political convictions as such, but rather a desire for better security for their loans. As James Steuart explained in 1767, royal borrowings remained private affairs rather than truly public debts [1]. For a sovereign’s debts to become binding upon the entire nation, elected representatives had to enact the taxes to pay their interest charges.

By giving taxpayers this voice in government, the Dutch and British democracies provided creditors with much safer claims for payment than did kings and princes whose debts died with them. But the recent debt protests from Iceland to Greece and Spain suggest that creditors are shifting their support away from democracies. They are demanding fiscal austerity and even privatization sell-offs.

This is turning international finance into a new mode of warfare. Its objective is the same as military conquest in times past: to appropriate land and mineral resources, communal infrastructure and extract tribute. In response, democracies are demanding referendums over whether to pay creditors by selling off the public domain and raising taxes to impose unemployment, falling wages and economic depression. The alternative is to write down debts or even annul them, and to re-assert regulatory control over the financial sector.

Near Eastern rulers proclaimed Clean Slates to preserve economic balance
Charging interest on advances of goods or money was not originally intended to polarize economies. First administered early in the third millennium BC as a contractual arrangement by Sumer’s temples and palaces with merchants and entrepreneurs who typically worked in the royal bureaucracy, interest at 20% (doubling the principal in five years) was supposed to approximate a fair share of the returns from long-distance trade or leasing land and other public assets such as workshops, boats and ale houses.

As the practice was privatized by royal collectors of user fees and rents, “divine kingship” protected agrarian debtors. Hammurabi’s laws (c. 1750 BC) cancelled their debts in times of flood or drought. All the rulers of his Babylonian dynasty began their first full year on the throne by cancelling agrarian debts so as to clear out payment arrears by proclaiming a clean slate. Bondservants, land or crop rights and other pledges were returned to the debtors to “restore order” in an idealized “original” condition of balance. This practice survived in the Jubilee Year of Mosaic Law in Leviticus 25.

The logic was clear enough. Ancient societies needed to field armies to defend their land, and this required liberating indebted citizens from bondage. Hammurabi’s laws protected charioteers and other fighters from being reduced to debt bondage, and blocked creditors from taking the crops of tenants on royal and other public lands and on communal land that owed manpower and military service to the palace.

In Egypt, the pharaoh Bakenranef (c. 720-715 BC, “Bocchoris” in Greek) proclaimed a debt amnesty and abolished debt-servitude when faced with a military threat from Ethiopia. According to Diodorus of Sicily (I, 79, writing in 40-30 BC), he ruled that if a debtor contested the claim, the debt was nullified if the creditor could not back up his claim by producing a written contract. (It seems that creditors always have been prone to exaggerate the balances due.) The pharaoh reasoned that “the bodies of citizens should belong to the state, to the end that it might avail itself of the services which its citizens owed it, in times of both war and peace. For he felt that it would be absurd for a soldier … to be haled to prison by his creditor for an unpaid loan, and that the greed of private citizens should in this way endanger the safety of all.”

The fact that the main Near Eastern creditors were the palace, temples and their collectors made it politically easy to cancel the debts. It always is easy to annul debts owed to oneself. Even Roman emperors burned the tax records to prevent a crisis. But it was much harder to cancel debts owed to private creditors as the practice of charging interest spread westward to Mediterranean chiefdoms after about 750 BC. Instead of enabling families to bridge gaps between income and outgo, debt became the major lever of land expropriation, polarizing communities between creditor oligarchies and indebted clients. In Judah, the prophet Isaiah (5:8-9) decried foreclosing creditors who “add house to house and join field to field till no space is left and you live alone in the land.”

Creditor power and stable growth rarely have gone together. Most personal debts in this classical period were the product of small amounts of money lent to individuals living on the edge of subsistence and who could not make ends meet. Forfeiture of land and assets – and personal liberty – forced debtors into bondage that became irreversible. By the 7th century BC, “tyrants” (popular leaders) emerged to overthrow the aristocracies in Corinth and other wealthy Greek cities, gaining support by canceling the debts. In a less tyrannical manner, Solon founded the Athenian democracy in 594 BC by banning debt bondage.

But oligarchies re-emerged and called in Rome when Sparta’s kings Agis, Cleomenes and their successor Nabis sought to cancel debts late in the third century BC. They were killed and their supporters driven out. It has been a political constant of history since antiquity that creditor interests opposed both popular democracy and royal power able to limit the financial conquest of society – a conquest aimed at attaching interest-bearing debt claims for payment on as much of the economic surplus as possible.

When the Gracchi brothers and their followers tried to reform the credit laws in 133 BC, the dominant Senatorial class acted with violence, killing them and inaugurating a century of Social War, resolved by the ascension of Augustus as emperor in 29 BC.

Rome’s creditor oligarchy wins the Social War, enserfs the population and brings on a Dark Age
Matters were more bloody abroad. Aristotle did not mention empire building as part of his political schema, but foreign conquest always has been a major factor in imposing debts, and war debts have been the major cause of public debt in modern times. Antiquity’s harshest debt levy was by Rome, whose creditors spread out to plague Asia Minor, its most prosperous province. The rule of law all but disappeared when the publican creditor “knights” arrived. Mithridates of Pontus led three popular revolts, and local populations in Ephesus and other cities rose up and killed a reported 80,000 Romans in 88 BC. The Roman army retaliated, and Sulla imposed war tribute of 20,000 talents in 84 BC. Charges for back interest multiplied this sum six-fold by 70 BC.

Among Rome’s leading historians, Livy, Plutarch and Diodorus blamed the fall of the Republic on creditor intransigence in waging the century-long Social War marked by political murder from 133 to 29 BC. Populist leaders sought to gain a following by advocating debt cancellations (e.g., the Catiline conspiracy in 63-62 BC). They were killed. By the second century AD about a quarter of the population was reduced to bondage. By the fifth century Rome’s economy collapsed, stripped of money. Subsistence life reverted to the countryside as a Dark Age descended.

Creditors find a legalistic reason to support parliamentary democracy
When banking recovered after the Crusades looted Byzantium and infused silver and gold to review Western European commerce, Christian opposition to charging interest was overcome by the combination of prestigious lenders (the Knights Templars and Hospitallers providing credit during the Crusades) and their major clients – kings, at first to pay the Church and increasingly to wage war. But royal debts went bad when kings died. The Bardi and Peruzzi went bankrupt in 1345 when Edward III repudiated his war debts. Banking families lost more on loans to the Habsburg and Bourbon despots on the thrones of Spain, Austria and France.
  
Matters changed with the Dutch democracy, seeking to win and secure its liberty from Habsburg Spain. The fact that their parliament was to contract permanent public debts on behalf of the state enabled the Low Countries to raise loans to employ mercenaries in an epoch when money and credit were the sinews of war. Access to credit “was accordingly their most powerful weapon in the struggle for their freedom,” notes Ehrenberg: “Anyone who gave credit to a prince knew that the repayment of the debt depended only on his debtor’s capacity and will to pay. The case was very different for the cities, which had power as overlords, but were also corporations, associations of individuals held in common bond. According to the generally accepted law each individual burgher was liable for the debts of the city both with his person and his property.”[2]

The financial achievement of parliamentary government was thus to establish debts that were not merely the personal obligations of princes, but were truly public and binding regardless of who occupied the throne. This is why the first two democratic nations, the Netherlands and Britain after its 1688 revolution, developed the most active capital markets and proceeded to become leading military powers. What is ironic is that it was the need for war financing that promoted democracy, forming a symbiotic trinity between war making, credit and parliamentary democracy in an epoch when money was still the sinews of war.

At this time “the legal position of the King qua borrower was obscure, and it was still doubtful whether his creditors had any remedy against him in case of default.”[3] The more despotic Spain, Austria and France became, the greater the difficulty they found in financing their military adventures. By the end of the eighteenth century Austria was left “without credit, and consequently without much debt” the least credit-worthy and worst armed country in Europe (as Steuart 1767:373 noted), fully dependent on British subsidies and loan guarantees by the time of the Napoleonic Wars.

Finance accommodates itself to democracy, but then pushes for oligarchy
While the nineteenth century’s democratic reforms reduced the power of landed aristocracies to control parliaments, bankers moved flexibly to achieve a symbiotic relationship with nearly every form of government. In France, followers of Saint-Simon promoted the idea of banks acting like mutual funds, extending credit against equity shares in profit. The German state made an alliance with large banking and heavy industry. Marx wrote optimistically about how socialism would make finance productive rather than parasitic. In the United States, regulation of public utilities went hand in hand with guaranteed returns. In China, Sun-Yat-Sen wrote in 1922: “I intend to make all the national industries of China into a Great Trust owned by the Chinese people, and financed with international capital for mutual benefit.”[4]

World War I saw the United States replace Britain as the major creditor nation, and by the end of World War II it had cornered some 80 percent of the world’s monetary gold. Its diplomats shaped the IMF and World Bank along creditor-oriented lines that financed trade dependency, mainly on the United States. Loans to finance trade and payments deficits were subject to “conditionalities” that shifted economic planning to client oligarchies and military dictatorships. The democratic response to resulting austerity plans squeezing out debt service was unable to go much beyond “IMF riots,” until Argentina rejected its foreign debt.

A similar creditor-oriented austerity is now being imposed on Europe by the European Central Bank (ECB) and EU bureaucracy. Ostensibly social democratic governments have been directed to save the banks rather than reviving economic growth and employment. Losses on bad bank loans and speculations are taken onto the public balance sheet while scaling back public spending and even selling off infrastructure. The response of taxpayers stuck with the resulting debt has been to mount popular protests starting in Iceland and Latvia in January 2009, and more widespread demonstrations in Greece and Spain this autumn to protest their governments’ refusal to hold referendums on these fateful bailouts of foreign bondholders.

Shifting planning away from elected public representatives to bankers
Every economy is planned. This traditionally has been the function of government. Relinquishing this role under the slogan of “free markets” leaves it in the hands of banks. Yet the planning privilege of credit creation and allocation turns out to be even more centralized than that of elected public officials. And to make matters worse, the financial time frame is short-term hit-and-run, ending up as asset stripping. By seeking their own gains, the banks tend to destroy the economy. The surplus ends up being consumed by interest and other financial charges, leaving no revenue for new capital investment or basic social spending.

This is why relinquishing policy control to a creditor class rarely has gone together with economic growth and rising living standards. The tendency for debts to grow faster than the population’s ability to pay has been a basic constant throughout all recorded history. Debts mount up exponentially, absorbing the surplus and reducing much of the population to the equivalent of debt peonage. To restore economic balance, antiquity’s cry for debt cancellation sought what the Bronze Age Near East achieved by royal fiat: to cancel the overgrowth of debts.

In more modern times, democracies have urged a strong state to tax rentier income and wealth, and when called for, to write down debts. This is done most readily when the state itself creates money and credit. It is done least easily when banks translate their gains into political power. When banks are permitted to be self-regulating and given veto power over government regulators, the economy is distorted to permit creditors to indulge in the speculative gambles and outright fraud that have marked the past decade. The fall of the Roman Empire demonstrates what happens when creditor demands are unchecked. Under these conditions the alternative to government planning and regulation of the financial sector becomes a road to debt peonage.

Finance vs. government; oligarchy vs. democracy
Democracy involves subordinating financial dynamics to serve economic balance and growth – and taxing rentier income or keeping basic monopolies in the public domain. Untaxing or privatizing property income “frees” it to be pledged to the banks, to be capitalized into larger loans. Financed by debt leveraging, asset-price inflation increases rentier wealth while indebting the economy at large. The economy shrinks, falling into negative equity.

The financial sector has gained sufficient influence to use such emergencies as an opportunity to convince governments that that the economy will collapse they it do not “save the banks.” In practice this means consolidating their control over policy, which they use in ways that further polarize economies. The basic model is what occurred in ancient Rome, moving from democracy to oligarchy. In fact, giving priority to bankers and leaving economic planning to be dictated by the EU, ECB and IMF threatens to strip the nation-state of the power to coin or print money and levy taxes.

The resulting conflict is pitting financial interests against national self-determination. The idea of an independent central bank being “the hallmark of democracy” is a euphemism for relinquishing the most important policy decision – the ability to create money and credit – to the financial sector. Rather than leaving the policy choice to popular referendums, the rescue of banks organized by the EU and ECB now represents the largest category of rising national debt. The private bank debts taken onto government balance sheets in Ireland and Greece have been turned into taxpayer obligations. The same is true for America’s $13 trillion added since September 2008 (including $5.3 trillion in Fannie Mae and Freddie Mac bad mortgages taken onto the government’s balance sheet, and $2 trillion of Federal Reserve “cash-for-trash” swaps).

This is being dictated by financial proxies euphemized as technocrats. Designated by creditor lobbyists, their role is to calculate just how much unemployment and depression is needed to squeeze out a surplus to pay creditors for debts now on the books. What makes this calculation self-defeating is the fact that economic shrinkage – debt deflation – makes the debt burden even more unpayable.

Neither banks nor public authorities (or mainstream academics, for that matter) calculated the economy’s realistic ability to pay – that is, to pay without shrinking the economy. Through their media and think tanks, they have convinced populations that the way to get rich most rapidly is to borrow money to buy real estate, stocks and bonds rising in price – being inflated by bank credit – and to reverse the past century’s progressive taxation of wealth.

To put matters bluntly, the result has been junk economics. Its aim is to disable public checks and balances, shifting planning power into the hands of high finance on the claim that this is more efficient than public regulation. Government planning and taxation is accused of being “the road to serfdom,” as if “free markets” controlled by bankers given leeway to act recklessly is not planned by special interests in ways that are oligarchic, not democratic. Governments are told to pay bailout debts taken on not to defend countries in military warfare as in times past, but to benefit the wealthiest layer of the population by shifting its losses onto taxpayers.

The failure to take the wishes of voters into consideration leaves the resulting national debts on shaky ground politically and even legally. Debts imposed by fiat, by governments or foreign financial agencies in the face of strong popular opposition may be as tenuous as those of the Habsburgs and other despots in past epochs. Lacking popular validation, they may die with the regime that contracted them. New governments may act democratically to subordinate the banking and financial sector to serve the economy, not the other way around.

At the very least, they may seek to pay by re-introducing progressive taxation of wealth and income, shifting the fiscal burden onto rentier wealth and property. Re-regulation of banking and providing a public option for credit and banking services would renew the social democratic program that seemed well underway a century ago.

Iceland and Argentina are most recent examples, but one may look back to the moratorium on Inter-Ally arms debts and German reparations in 1931.A basic mathematical as well as political principle is at work: Debts that can’t be paid, won’t be.

Footnotes:

[1] James Steuart, Principles of Political Oeconomy (1767), p. 353.

[2] Richard Ehrenberg, Capital and Finance in the Age of the Renaissance (1928):44f., 33.

[3] Charles Wilson, England’s Apprenticeship: 1603-1763 (London: 1965):89.

[4] Sun Yat-Sen, The International Development of China (1922):231ff.

 

Michael Hudson, a former Wall Street Journal reporter, is a staff writer at the Center for Public Integrity (http://www.publicintegrity.org), a nonprofit journalist organization. He is the author of “THE MONSTER: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America – And Spawned a Global Crisis” (2010, Times Books)

© 2011 Michael Hudson’s blog All rights reserved.
View this story online at: http://www.alternet.org/story/153338/

 

Trickle-Down Cruelty And The Politics Of Austerity

In Uncategorized on July 11, 2011 at 3:38 pm

In Philadelphia, budget cuts have led to fire departments closing on a daily rotating basis, delaying response time. (Photo: Sam Blackman)

Oldspeak:”Austerity porn functions within the current political climate to promote deficits in order to return the United States to the Gilded Age policies of the 1920s. What should be clear is that the politics of austerity is not about rethinking priorities to benefit the public good. Instead, it has become part of a discourse of shame, one that has little to do with using indignation to imagine a better world. On the contrary, shame is now used to wage a war on the poor rather than poverty, on young people rather than those economic and political forces that undermine their future and on those considered other rather than on the underlying structures and ideologies of various forms of state and individual racism.” Henry A. Giroux The fear-mongering being propagated 24-7 on your corporate news networks is designed to prepare the population for the in progress implementation of shock doctrine based “Austeriy Measures” and “Structural Adjustment Policies” which facilitate privatization of all things public to the great benefit of the Financial-Industrial Complex, and a complete full functioning corptalitarian state. For their invaluable help in selling the U.S. out from under its people, the corptalitarian elites, ensure continued control by spending untold millions  for their minions in politricks with (thanks to Citizens United vs. F.E.C.) reelection campaigns and other rarely disclosed perks and advantages.

 

By Henry A. Giroux @ Truthout:

There is a certain irony in the fact that the party of debt has now become a flock of austerity hawks. This is the same Republican Party that gave us two wars, an increase in military spending and whopping loss of tax revenues due to tax breaks for mega-rich corporations and the wealthy Americans. Nobel Prize-winning economist Paul Krugman raises the question of what happened to the federal government budget surplus of 2000 and insists that the answer is, “three main things. First, there were the Bush tax cuts, which added roughly $2 trillion to the national debt over the last decade. Second, there were the wars in Iraq and Afghanistan, which added an additional $1.1 trillion or so. And third was the Great Recession, which led both to a collapse in revenue and to a sharp rise in spending on unemployment insurance and other safety-net programs.”(1) All told, President George W. Bush added $4 trillion to the national debt – and there was no debate about raising the debt ceiling at that time, which was raised seven times.(2) What is often missed in these discussions is that deficits have always been the objectives of hard right-wing Republicans and some equally conservative democrats who see them as an excuse for cutting social benefits and generating massive amounts of inequality that benefit the rich.(3) Michael Tomasky further legitimizes this claim with the charge that “the Republican Party cares nothing about the public debt. In fact, it wants more … It is the party of debt. It is the party of deficits. It is the party of recession. It is the party of unemployment. It is the party of inequality. And it is the party of middle-class stagnation and slippage…. They scream about crisis because what they desire is to use the crisis as an excuse to do things to this country that the hard right has wanted to do for 30 years.”(4) What Tomasky leaves out is that the current crop of right-wing Republicans controlling the shots in Washington and various states appear to revel in “a deep urge to inflict pain.”(5) How else to explain that during recent debt negotiations between leaders of both parties, the Republican leadership walked out as soon as the Democrats suggested the need to talk about not only cutting programs that benefit the poor, but also limiting tax breaks for corporate jets, hedge-fund managers, the obscenely wealthy and corporations.

According to the children of Ayn Rand, Milton Friedman and Ronald Reagan, “free-market economics,” individual interests and needs trumped social needs; brilliant individuals were more qualified to run government and largely blossomed within institutions committed to making money; freedom was largely defined as freedom from regulation; and any government that passed policies to provide social protections, regulate corporations, or lessen inequality were either grossly authoritarian or unwise. In this scenario, especially under the administration of Ronald Reagan, government was declared the enemy and the market was turned into a form of casino capitalism as a series of policies were inaugurated in which there was a sustained assault on the working and middle classes through “the busting of unions, the export of millions of decent-paying jobs and the transfer of enormous wealth to the already rich. The tax rates for the wealthiest were slashed about in half. Greed was incentivized.”(6) Accordingly, the ideologues of casino capitalism believed that as the rich and corporations paid less taxes and inequality was left unchecked, society as a whole would benefit, wealth would trickle down. Of course, what has actually happened in the last decade with the unchecked, Wild West, Bush-type casino capitalism is that wages for workers have stagnated; the top 1 percent of the population has gotten fabulously wealthy; health care has deteriorated for the vast majority of the population; schools have been turned into test centers; the nation’s infrastructure has been allowed to rot; and, more recently, millions of people have lost their jobs, homes, and hope. Moreover, two-thirds of US corporations paid no taxes. For example, Bank of America has not paid any taxes for the last two years.(7) At the same time, increases in inequality in the United States dwarf the rest of the world, while increases in executive pay undercuts any claim we might have on democracy.

The working and middle classes have been condemned to a new form of neoliberal tyranny “in which there can be only one kind of value, market value; one kind of success, profit; one kind of existence, commodities; and one kind of social relationship, markets.”(8) The global recession has intensified the war on the American public, as professionals and politicians who make up a global business class now displace democracy with the call for austerity and, in doing so, produce a hidden order of politics in which the “demand for the people’s austerity hides processes of the uneven distribution of risk and vulnerability.”(9) Under the guise of austerity, politically motivated attacks are now being waged on young people, low-skilled workers, the poor, African-Americans and the elderly. On the other hand, austerity measures against the rich are almost nonexistent. Richard D. Wolff provides the details in looking at what he calls “some alternative ‘reasonable’ kinds of austerity.” He writes:

Serious efforts to collect income taxes from US-based multinational corporations, especially those who use internal pricing mechanisms to escape US taxation, would generate vast new federal revenues. The same applies to wealthy individuals. The US has no federal property tax on holdings of stocks, bonds and cash accounts (states and localities levy no such property taxes either). If the federal government levied a 1 per cent tax on assets between $100,000 to 499,000 and 1.5 per cent on assets above $500,000, that would raise much new federal revenue (everyone’s first $100,000 could be exempted just as the existing US income tax exempts the first few thousands of dollars of individual incomes). Exiting the Iraq and Afghanistan disasters would do likewise. Ending tax exemptions for super-rich private educational institutions (Harvard, Yale, etc.) and for religious institutions (church-goers would then need to pay the costs of their churches) would be among the many other such alternative “reasonable” austerity measures. Comparable alternatives apply – and are being struggled over – in other countries.(10)

One side effect of this blatant, if not corrupt mode of austerity is what I call the politics of trickle-down cruelty. This is evident in policies in which austerity-based cuts are used to reward corporations and billionaires with tax breaks, while simultaneously exploiting the budget crisis in order to eliminate protections provided by the welfare state. The resulting reductions in state spending have drastically cut many basic social services so as to endanger the lives of many young people and others at the margins of society structured in massive financial inequality. For example, in Philadelphia “fire departments have been closed on a daily rotating basis” delaying response time. One unfortunate and possibly preventable consequence occurred “when two children were pulled from a burning row home too little too late…. Mike Kane of the Philadelphia Firefighters Union Local 22 said there was no way to tell whether the children would have lived had the fire station been open, but if not for the brownouts, ‘maybe them kids would have had a shot.'”(11) In Arizona, Gov. Jan Brewer signed a bill that effectively denied health care to over 47,000 low-income children.(12) More recently, a 59-year-old man in Gastonia, North Carolina, robbed a bank for $1 so he could get health care in America. He handed the teller a note asking for only a dollar and medical attention. He sat in a chair in the bank waiting for the police to arrive. As he pointed out to the press, he had lost his job of 17 years as a Coca Cola deliveryman and ended up taking a part-time position in a convenience store. But the work was backbreaking, compounded by the fact that he had arthritis, carpal tunnel syndrome and a painful lump on his chest. With no health insurance, he decided that his best option was to rob a bank and get health care in prison.(13) We also hear about the return of debtors’ prisons, which were abolished in the US in the 19th century. The Minneapolis Star Tribune reports that “people are routinely being thrown in jail for failing to pay debts” and that in some cases “people stay in jail until they raise minimum payment. In January [2010] a judge sentenced a Kenney, Ill., man to ‘indefinite incarceration’ until he came up with $300 toward a lumber yard debt.”(14) Joy Uhlmeyer, a 57-year-old patient care advocate spent 16 hours in jail because she missed a court hearing over a credit card debt.(15) Surely, it is hard to miss the irony of putting someone in jail for not paying a small debt while, as Matt Taibbi has pointed out, law enforcement under the Obama regime has not convicted a “single executive who ran the companies that cooked up and cashed in on the phony financial boom – and industry wide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities – has ever been convicted.”(16) These financial crooks hid billions from investors and ripped off the American people so as to cause untold suffering and hardship. And, yet, law enforcement does not consider them liable for the crimes they committed, and the Obama administration rewards them with a weak regulatory laws and an open season on obscene bonuses. Such stories serve as flashpoints about a society. And as Zygmunt Bauman points out, even though they may tell us little about deeper causal connections, they “prod the imagination. And sound an alert. They appeal to the conscience as well as to survival instincts…. [They also show] that the ideal that one can ‘do it alone’ is a fatal mistake which defies the purpose of self-concern and self-care.”(17)

All of these examples point to the collateral damage invoked by a casino capitalism that now takes austerity as its clarion call to gut social protections and weaken the rights of labor and unions. Moreover, austerity in this instance is designed to reward the fabulously wealthy while imposing in some cases poverty, suffering and severe hardship on those marginalized by race, disability and class. For many people, these examples I have noted above suggest that the writing is on the wall regarding their future and the message is dark indeed. Complaints by right-wing politicians and conservative pundits about the growing federal deficit and their call for a harsh politics of austerity are both hypocritical and disingenuous. Hypocritical, given their support for massive tax breaks for the rich, and disingenuous, given their blatantly transparent goal of implementing a market-based agenda that imposes the burden of decreased government services and benefits on the backs of the poor, young people, the unemployed, the working class and middle-class individuals and families. As Wolff’s quote suggested above, in this transparent scenario, austerity measures apply to the poor, but not to the rich, who continue to thrive under polices that produce government bailouts, support deficit-producing wars, tax breaks for the wealthy and deregulation policies that benefit powerful corporations. The conservative and right-wing politicians and policy wonks calling for shared sacrifices made in the name of balancing budgets have no interest in promoting justice, equality and the public good. Their policies maximize self-interest, support a culture of organized irresponsibility, and expand the pathologies of inequality, military spending and poverty. Austerity porn functions within the current political climate to promote deficits in order to return the United States to the Gilded Age policies of the 1920s.(18)

This conservative assault is not just about the enactment of reactionary government policies, it is also about the proliferation of a culture of cruelty whose collateral damage is harsh and brutalizing, especially for young people, the unemployed, the elderly, the poor, and a number of other individuals and groups now bearing the burden of worst economic recession since the 1920s. Cruelty in this instance is not meant to simply reference the character flaws of the rich or to appeal to a form of left moralism, but to register the effects especially since the 1970s of how the institutions of capital, wealth and power merge not only to generate vast modes of inequality, but also to inflict immense amounts of pain and suffering upon the lives of the poor, working people, the middle class, the elderly, immigrants and young people.(19) What should be clear is that the politics of austerity is not about rethinking priorities to benefit the public good. Instead, it has become part of a discourse of shame, one that has little to do with using indignation to imagine a better world. On the contrary, shame is now used to wage a war on the poor rather than poverty, on young people rather than those economic and political forces that undermine their future and on those considered other rather than on the underlying structures and ideologies of various forms of state and individual racism.

As the welfare state is dismantled, it is being replaced by the harsh realities of the punishing state, as social problems are increasingly criminalized and social protections are either eliminated or fatally weakened. The harsh values of this new social order can be seen in the increasing incarceration of young people, the modeling of public schools after prisons, harsh anti-immigration laws and state policies that bail out investment bankers but leave the middle and working classes in a state of poverty, despair and insecurity. For poor youth of color and adults, the prison-industrial complex is particularly lethal. Michelle Alexander has pointed out that there are more African-American men under the control of the criminal justice system than were enslaved in 1850 and that, because of the war on drugs, four out of five black youth in some communities can expect to be either in prison or “caught up in the criminal justice system at some point in their lives.”(20) In states such as Georgia, Alabama and South Carolina, new immigration laws “make it impossible for people without papers to live without fear. They give new powers to local police untrained in immigration law. They force businesses to purge work forces and schools to check students’ immigration status. And they greatly increase the danger of unreasonable searches, false arrests, racial profiling, and other abuses, not just against immigrants, but anyone who may look like some officer’s idea of an illegal immigrant…. The laws also make it illegal to give a ride to the undocumented, so a son could land in jail for driving his mother to the supermarket, or a church volunteer for ferrying families to a soup kitchen.”(21) The Obama administration fares no better on punishing immigrants. In fact, its stance on immigration suggests something about its own misplaced priorities in that it refuses to prosecute Wall Street crooks and CIA thugs who tortured men, women and children in Iraq. And, yet, “it has used its criminal justice system and law enforcement apparatus to deport 393,000 people, at a cost of $5 billion.”(22) White-collar crooks produce global financial havoc because of their crooked deals and go scot-free while illegal immigrants looking for work that most Americans will not perform are put in jail.

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The trickle-down cruelty of the anti-tax, anti-public and anti-government extremists is on full display in Minnesota where Republicans have refused Gov. Mark Dayton’s call for a tax on “the 7,700 Minnesotans who make more than $1 million a year” in order to raise revenue to address the state’s budget deficit. Rather than tax the rich, Republican legislators have called for slashing “billions from … education, health care and safety programs” and, in order to get their way, have literally shut down state government.(23) The result is that 22,000 workers have been laid off, child care subsidies have dried up and essential services for the poor have been suspended, all so taxes on the rich will not be raised. The mean-spirited Gov. of New Jersey, Chris Christie, has followed the same playbook and has used his veto to eliminate $1.3 billion in spending, most of it for schools, Medicaid and aid to cities. But he also cut much smaller items favored by Democrats, like programs to help abused children and provide legal aid to the poor.

The culture of cruelty, illegal legalities and political illiteracy can also be seen in the practice of socialism for the rich. This is a practice in which government supports for the poor, unemployed, sick and elderly are derided because they either contribute to an increase in the growing deficit or they undermine the market-driven notion of individual responsibility. And yet, the same critics defend without irony government support for the ultra-wealthy, the bankers, the permanent war economy, or any number of subsidies for corporations as essential to the life of the nation, which is simply an argument that benefits the rich and powerful and legitimizes the deregulated Wild West of casino capitalism. As public services are eliminated, health insurance cut for over a million kids and teachers and public workers are laid off, corporate profits have soared and Wall Street executives are having a bonus year. The average worker in the United States made $39,000 in 2010 and got a 0.5 percent pay increase, which amounted to $40,100. According to The New York Times, “the median pay for top executives at 200 big companies last year was $10.8 million. That works out to a 23 percent gain from 2009.”(24)

The moral obscenity that characterizes such salaries becomes clear at a time when 14 million people are looking for work, millions are losing their homes and thousands of families are trying to survive on food stamps. How can any society that calls itself democratic and egalitarian justify salaries that are so grotesquely high that it is difficult to imagine how such wealth can be spent? For example, how can anyone justify paying CEOs such as Philippe P. Dauman, the head of Viacom, $85 million in 2010? Or for that matter, the $32.9 million paid to Michael White of DirecTV?(25) The hidden order of politics and culture of cruelty comes into play when it is revealed that Mark G. Parker, the CEO of Nike, got $13.1 million in 2010 and cut 1,750 jobs, while Peter L. Lynch, the CEO of Winn-Dixie, got $5.3 million and cut 2000 jobs. One of the worst offenders is Michael Duke, the CEO of Wal-Mart, who got $18.7 million in pay in 2010 while eliminating 13,000 jobs.(26) Even more alarming is that some of these bonuses paid to risk-taking bankers were paid for, in part, with taxpayer’s money. For example, Benjamin M. Friedman writing in The New York Review of Books claims that this is precisely what happened in the case of the bonuses paid to Citigroup’s executives. He writes:

Despite the destruction of so much of the stockholders’ value and notwithstanding the enormous taxpayer assistance, Citi’s management announced in the spring of 2009 that it was paying out $5.3 billion on bonuses for 2008, including payments of more than $5 million apiece to forty-four employees of the bank. Because of the $45 billion investment of AARP and TIP money, by 2009 the US government was Citigroups’s largest shareowner. Hence the issue these lavish bonuses raised was not merely a private firm’s right to set its employees’ compensation. What Citi’s management was giving away was, in significant part, the taxpayers’ money. Yet the Obama administration voiced no objection, at least not publicly.(27)

What is daunting about all of these figures beyond being partly subsidized by taxpayer money and the human costs in hardship and suffering is that executive pay raises not only deepen inequality in the United States, lay off workers in order to deepen the pockets of rich CEOs, but they also concentrate enormous amounts of political, economic and social power in the hands of a few individuals and corporations. In the end, such practices contribute to massive amounts of suffering on the part of millions of Americans; they corrupt politics and they undermine the promise of a viable democracy. Frank Rich expands this critique in arguing, “As good times roar back for corporate America, it’s bad enough that CEOs are collectively sitting on some $1.9 trillion? America’s total expenditure on the Iraq and Afghanistan wars over a decade has been $1.3 trillion. But what’s most galling is how many of these executives are sore winners, crying all the way to palm each while raking in record profits and paying some of the lowest tax rates over the past 50 years.”(28)

Of course, this form of economic Darwinism is not enforced simply through the use of a government in the hands of right-wing corporate extremists, a conservative Supreme Court or reliance upon the police and other repressive apparatuses; it is also endlessly reproduced through the cultural apparatuses of the new and old media, public and higher education, as well as through the thousands of messages and narratives we are exposed to daily in multiple commercial spheres. In this discourse, the economic order is either sanctioned by God or exists simply as an extension of nature. In other words, the tyranny and suffering that is produced through the neoliberal theater of cruelty is coded as unquestionable, as unmovable as an urban skyscraper. Long-term investments are now replaced by short-term gains and profits, while at the same time, compassion is viewed as a weakness and democratic public values are scorned because they subordinate market considerations to the common good. Morality in this instance becomes painless, stripped of any obligations to the other. As the language of privatization, deregulation and commodification replaces the discourse of the public good, all things public, including public schools, libraries and public services, are viewed either as a drain on the market or as a pathology. In addition, inequality in wealth and income expands, spreading like a toxin through everyday life, poisoning democracy and relegating more and more individuals to a growing army of disposable human waste.(29)
But there is more at stake than an increase in the hard currency of human suffering and the theater of trickle-down cruelty; there are also disturbing signs that US society is moving toward an authoritarian state largely controlled by corporations and a grotesquely irresponsible financial elite.(30) A market-driven society is not synonymous with democracy and the privileges of the rich and the corporate elite do more to crush democracy than uplift society as a whole. Any society that allows the market to constitute the axis and framing mechanisms for all social interactions has not just lost its sense of morality and responsibility; it is given up its claim on any vestige of a democratic future. Market fundamentalism along with its structure of extreme inequality and machinery of cruelty has proven to be a death sentence on democracy. The time has come to not only demystify the authoritarianism inherent in casino capitalism and the political and institutions that mimic its policies, practices and values, but to rethink not only what a real democracy might look like, but also what it will take to actually organize to make it happen.

Footnotes:

1. Paul Krugman, “The Unwisdom of Elites,” The New York Times, (May 8, 2011) p. A23, online here.

2. Paul Krugman, “To the Limit,” The New York Times (June 30, 2011), online here.

3. James Crotty, “High Deficits were the Objective of Right Economics,” The Real News, (May 10, 2011), online here.

4. Michael Tomasky, “Why The GOP Loves the Debt,” The Daily Beast (July 1, 2011), online here.

5. Paul Krugman, “The Urge to Purge,” New York Times (June 27, 2011), onlinehere.

6. Robert Parry, “If Ayn Rand and the Free Market fetishists were Right, We’d be Living in the Golden Age – Does This Look Like the Golden Age to You?” Alternet (June 28, 2011), online here.

7. Allison Kilkenny, “2/3 of US Corporations Pay Zero Federal Taxes,” AlterNet (March 27, 2011), online here.

8. Lawrence Grossberg, “Caught in the Crossfire: Kids, Politics and America’s Future” (Boulder, CO: Paradigm Publishers, 2005), 264.

9. Gesa Helms, Marina Vishmidt and Lauren Berlant, “Affect and the Politics of Austerity: An Interview Exchange with Lauren Berlant,” Variant 39/40, Winter 2010, online here.

10. Richard D. Wolff, “Austerity: Why and for Whom?” In These Times, (July 15, 2010), online here.

11. Rania Khalek, “Death by Budget Cut: Why Conservatives and Some Dems Have Blood on Their Hands,” AlterNet (June 13, 2011), online here.

12. Ibid.

13. Diane Turbyfill, “Bank Robber Planned Crime and Punishment,” Gaston Gazette (June 16, 2011).

14. Chris Serres and Glenn Howatt, “In Jail for Being in Debt,” StarTribune.com (June 9, 2010), online here.

15. Ibid.

16. Matt Taibbi, “Why Isn’t Wall Street in Jail?” Rolling Stone (February 16, 2011). Online here.

17. Zygmunt Bauman, “Collateral Damage: Social Inequalities in a Global Age” (Cambridge, Polity Press, 20110), p. 39.

18. James Crotty, “High Deficits were the Objective of Right Economics,” The Real News, (May 10, 2011), online here.

19. This issue is taken up in great detail in Zygmunt Bauman, “Collateral Damage: Social Inequalities n a Global Age” (London: Polity Press, 2011).

20. Cited in Dick Price, “More Black Men Now in Prison System Then Were Enslaved,” LA Progressive, (March 31, 2011), online here. See also Michelle Alexander, “The New Jim Crow: Mass Incarceration in the Age of Colorblindness” (New York: New Press, 2010).

21. Editorial, “It Gets Even Worse,” The New York Times (July 3, 2011), p. A16.

22. Matt Taibbi, “Why Isn’t Wall Street in Jail?” Rolling Stone (February 16, 2011), online here.

23. Editorial, “Antitax Extremism in Minnesota,” The New York Times (July 6, 2011), p. A18.

24. Pradnya Joshi, “We knew They Got Raises. But This?” The New York Times (July 2, 2011), p. BU1

25. Ibid.

26. Josh Harkinson, “10 CEOs Who Got Rich by Squeezing Workers,” MotherJones (May 12, 2011), online here.

27. Benjamin M. Friedman, “Cassandra Among the Banksters,” The New York Review of Books (June 23, 201), online here.

28. Frank Rich, “Obama’s Original Sin,” New York (July 3, 2011), online here.

29. On the pernicious effects of inequality in US society, see Tony Judt, “Ill Fares the Land” (New York: Penguin Press, 2010). Also see, Göran Therborn, “The Killing Fields of Inequality,” Open Democracy, April 6, 2009, online here.

30. There are too many books on this issue to cite. Some of the more notable are Sheldon S. Wolin, “Democracy Incorporated: Managed Democracy and the Specter of Inverted Totalitarianism” (Princeton, NJ: Princeton University Press, 2008); Henry A. Giroux, “Against the Terror of Neoliberalism” (Boulder, CO: Paradigm Publishers, 2008); Chris Hedges, “Death of the Liberal Class” (Toronto: Knopf Canada, 2010); and Jacob S. Hacker and Paul Pierson, “Winner-Take-All Politics” (New York: Simon and Schuster, 2010).