'Setting the Crown for a Corporate State': The Monopolization of Democracy by Corporations (Dale Tavris)
Oct. 13, 2009 -- It’s now been a little over a year since Congress agreed to bailout our banks, despite substantial opposition from the American people. In March 2009 our new Secretary of the Treasury, Tim Geithner, revealed plans to continue the bank bailout, which largely went into effect shortly afterwards. So how has that gone?
That depends upon whom you ask. If you listen to the corporate media you’d think everything is just fine. Typical of their opinions on this is a TV talking head that I recently heard bubbling over with praise for our economy. She mainly talked about the recovery of the stock market, concluding that this has resulted in large gains for American “taxpayers”. Taxpayers? She didn’t voice the slightest awareness that there is not a one to one correspondence between investors and taxpayers.
Actually, the banks have done quite well. But what about the rest of us?
The effects on ordinary Americans
Home foreclosures
There were 106,007 home foreclosures during the second quarter of 2009 – up 17% from the first quarter of the year. When Geithner was asked why efforts to help home owners haven’t helped more of them, he responded that:
Well, maybe that’s because our government gave vast amounts of money to failing banks instead of giving it to those who need it most. And maybe it’s also because we have a plan where “Lenders are paid to lower a borrower's monthly payments”. Maybe the plan would have worked better if the money was given to the borrowers instead of the lenders.
Unemployment
The official unemployment rate for September 2009 showed unemployment in the United States reaching 9.8%. However, it is widely accepted that the actual unemployment rate is far higher than that, when people who have given up looking for work are taken into account, or when under-employed persons are taken into account.
This graph puts the official unemployment rate into historical perspective: It rose during the Bush 41 administration, to reach as high as 8.2% in early 1993 – an important reason why Bush lost the 1992 presidential election. When Bill Clinton took over the presidency in January 1993, the unemployment rate was at 8.0%. It then consistently declined during the Clinton administration, reaching 3.7% by December 2000. It then rose, declined, and then rose again during the George W. Bush administration, reaching 8.5% by January 2008. The current official unemployment rate of 9.5% represents a modern-time high.
Jared Bernstein, Vice President Biden’s Economic Policy Advisor, in his book “Crunch – Why Do I Feel So Squeezed”, discusses the apparent paradox of a financial situation where so many Americans are doing so poorly in the presence of healthy “economic indicators”. The following excerpt applies to the “jobless recovery” of the Bush/Cheney administration, but the same principle applies to any “jobless recovery”:
If you feel squeezed, chances are it’s because you are squeezed. Most of the indicators that matter most to us in our everyday lives… are coming in at stress inducing levels, but GDP… keeps on truckin’. Something’s wrong, something fundamental…
The name of the problem is economic inequality… It’s a sign that something important is broken: the set of economic mechanisms and forces that used to broadly and fairly distribute the benefits of growth… unions, minimum wages… full employment… quality jobs, safety nets, and social
Economic inequality
Speaking of economic inequality, Paul Krugman recently commented on the most recent income inequality statistics in the United States, saying that they “didn’t get much attention but they’re truly amazing”. The important points to observe in the graph that is contained in the link are:
Income inequality rose precipitously during the 1920s under three Republican presidents, reaching a high just prior to the Stock Market Crash of 1929, which led to the Great Depression. Numerous measures put in place during FDR’s New Deal led to declining income inequality, which reached record lows late in his presidency and remained at record lows for four decades, until they began to rise again shortly after Ronald Reagan became president. With the corporate friendly, deregulation policies of the “Reagan Revolution”, income inequality began a steady rise, interrupted by a decline during the late years of the Clinton administration, and then a precipitous rise during the George W. Bush administration, reaching an all-time high for 2007, preceding our current economic recession (or depression). With current levels of unemployment, it seems extremely unlikely that the situation has reversed since 2007. The lesson that many economists take away from this is:
Massive corporate deregulation and tax cuts for the wealthy ==> severe income inequality ==> financial collapse.
In summary, our current financial situation looks pretty good from the standpoint of corporate CEOs, but dismal for ordinary Americans.
What was the magnitude of our bank bailout?
One of the biggest problems with our bailout of the banks is the lack of transparency of the whole process. According to the Special Inspector General for the TARP program:
But that’s not the worst of it. According to Nomi Prins and Christopher Hayes, writing in The Nation:
Actually, I am not going to walk you through it, because it is too complex for me to understand (You can look it up at the link). But I’ll give you the bottom line of their article:
Lack of accountability seems to be something of a theme. Despite conducting themselves recklessly, compulsively, almost sociopathically, (the banks) got a lot of money to help maintain their lifestyle and assets. But what happens when they take all that money and double down on the wrong bet? Will they be back for another helping? Why wouldn’t they be? Given everything our government has said and done so far, and the meager reform ideas on the table, it’s very likely there will be another bad bet coming from the entire industry – and with it, the vaporizing of much of the assistance doled out to avoid that very occurrence.
We were warned by non-corporatist economists
As the Obama administration was considering putting the Geithner plan into effect – which was largely a continuation of the Bush administration plan – several eminent non-corporate economists warned them and us of the consequences. They used different words, but the basic message was quite similar: a reverse Robin Hood scheme, conducted behind closed doors:
Paul Krugman
This is what Paul Krugman had to say about Geithner’s bank bailout plan:
In other words, this is a gift from the American taxpayers to the banks.
Krugman said that Geithner’s plan is very similar to Hank Paulson’s abandoned "cash for trash" plan, and that it won’t work. Well, that makes sense to me. How could the economic condition of the average American be improved by handing over trillions of dollars to banks? And worse yet, Krugman added:
Joseph Stiglitz
What Joseph Stiglitz had to say about the Geithner bailout plan was very similar to what Krugman said. He uses different words than Krugman, but the basic principle is the same:
James Galbraith
James Galbraith, the son of John Kenneth Galbraith didn’t mince words in castigating Geithner’s plan:
Robert Reich
Robert Reich, the Clinton administration’s first Secretary of Labor, also saw much similarity in the Geithner and Paulson plans (though he does say that Geithner’s plan is better). He explained how, through the actions of the Federal Reserve, Geithner’s plan could stick it to the American taxpayer for trillions:
If the trillions of dollars the Fed has already committed and the trillions more it's about to commit can't be recouped, the federal debt explodes and you and I and other taxpayers are left holding the bag….
Reich noted the very poor track record of Wall Street thus far, and complained about the lack of transparency in Geithner’s plan:
Dean Baker
Dean Baker said this about the Geithner plan:
William Greider warns that we’re on the path to a corporate state
William Greider is a political journalist who has warned us many times in the past about the dire consequences of government becoming too cozy with the corporatocracy:
In a recent article on the subject, Greider emphasized our dysfunctional political system – especially the disproportionate role of money in politics – as a major cause of our current crisis, as well as our movement towards a corporate state. He said:
Deepening suspicions over our current state of affairs
Greider sees hope in the rising suspicions of numerous improprieties as a major cause of our current financial crisis:
Congress, and even former Federal Reserve Chairman Paul Volcker have expressed serious concerns about our current course:
Congressional investigations into the problem
Most important, Greider sees some hope in two investigations that are currently being conducted, despite the lack of attention to the problem by our corporate media, the lack of serious reforms to date, and the apparent lack of interest by our government in addressing the problem. He discusses these investigations in his most recent article, “Memo to Investigators: Dig Deep”.
One investigation is being undertaken by the 10-member Congressional Financial Crisis Inquiry Commission, chaired by Phil Angelides. Angelides seemed optimist about the investigation in his interview with Greider. He said:
The other investigation is being conducted by the House Committee on Oversight and Government Reform, chaired by Edolphus Towns. Greider notes that that committee:
Greider discusses a long series of questions that should be addressed by these committees:
Our current crisis in the perspective of history
History is replete with stories of the powerful attempting to maintain an iron grasp over society and its wealth and resources. In our own country we saw the effects in the Great Depression that followed the Stock Market Crash of 1929. At that time we were very fortunate to be led by one of the two greatest presidents of our history. FDR was quite aware of the effects of economic inequality and the greedy powers behind it. In his 1936 Democratic Convention speech he called them “Economic Royalists”:
The privileged princes of these new economic dynasties, thirsting for power, reached out for control over Government itself. They created a new despotism and wrapped it in the robes of legal sanction. In its service new mercenaries sought to regiment the people, their labor, and their property. And as a result the average man once more confronts the problem that faced the Minute Man…
FDR responded with the “New Deal”, a program that provided relief to those who needed it, reversed the economic inequality that had risen to record levels during the 1920s, and made great progress towards lifting us out of the Great Depression. So successful were those policies that for several decades no successful challenge could be mounted against them. Our next Republican president, Dwight D. Eisenhower, recognized the popularity and worth of FDR’s policies in a letter that he wrote to his brother on the subject:
But few people living today remember those times. Beginning in the 1980s with the Reagan presidency, the Economic Royalists ascended again and began the dismantling of the New Deal. Greider gives a brief history of the financial aspects of this process:
And lastly, Greider notes that a thorough investigation is a first step towards a cure:
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CreatedFriday, October 23, 2009
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