Saturday, April 12, 2008

Wanna help the economy? Kill neoliberalism.

Mike Whitney sez:
Working people don't need lectures on saving money; they need a raise. The big-wigs at Bear Stearns are still dining on crab-cakes at the Four Seasons while the working folk are just trying to make their way through Greenspan's nuclear winter living on beef jerky and Big Gulps. Where's the justice?

Volumes have been written about the current crisis; subprime-this, subprime that. Everything that can be said about collateralized debt obligations (CDOs) credit default swaps(CDS) and mortgage-backed securities (MBS) has already been said. Yes, they are exotic "financial innovations" and, no, they are not regulated. But what difference does that make? There's always been snake oil and there have always been snake oil salesmen. Greenspan simply raised the bar a notch, but he's not the first huckster and he won't be the last. What really matters is underlying ideology; that's the root from which this economy-busting hydra sprung. 30 years of trickle down, supply-side gibberish; 30 years of idol worship for the waxy-haired reactionary, Ronald Reagun; 30 years of unrelenting anti-labor, free market, deregulated orthodoxy which inflated the biggest equity-Zeppelin in history.

Now the bubble is hissing out of the blimp and the escaping gas is wreaking havoc across the planet. There are food riots in Haiti, Egypt, and Kuwait. Wherever the local currency is pegged to the falling dollar, inflation is soaring and trouble is brewing. Also, European banks are listing from the mortgage-backed garbage they bought from brokerages in the US and need central bank bailouts to stay afloat. It's just more fallout from the subprime swindle. Finance ministers in every capital in every country are getting ready for a 1930's-type typhoon that could send equities crashing and food and energy prices rocketing into the stratosphere. And it can all be traced back to the wacko doctrines of neoliberalism. These are the theories that guide America's "screw-thy-neighbor" monetary policies and spread financial turmoil to every city and hamlet around the world.

The present stewards of the system are incapable of fixing the problem because they represent the interests of the people who benefit most from the disruptions. Paulson's latest "blueprint" for the financial markets is a good example; a more pro-business, self-serving scheme has never been put to paper.


Currently, Paulson and Bernanke are expanding the balance sheets of the Government Sponsored Enterprises (GSEs) so that Fannie Mae and Freddie Mac will underwrite 85 per cent of all mortgages while FHA will cover 10 per cent more. The mortgage industry is being nationalized to save banking fellowship while the taxpayer is on the hook for another $4.4 trillion of dodgy loans. Paulson doesn't care if the taxpayer gets stuck with the bill. What bothers him is the prospect that, somewhere along the line, workers will demand higher wages to keep pace with inflation. Then all hell will break loose. Paulson and Co. would rather see the economy perish in a deflationary holocaust than add another farthing to a working person's salary. He and his ilk take class warfare seriously; that's why they are winning. But their strategy also creates problems. When wages don't keep pace with production, demand decreases and the economy falters. That's what's happening now and Paulson knows it. Workers are over-extended and can't buy the things they make. They barely have enough to feed the kids and fill the tank for work. Consumer spending (which is 72 per cent of GDP) is nose-diving at the very same time the Fed's equity bubble is exploding.

Neoliberalism has a twenty-year record of producing the very same economic calamities. Why is this crisis different? Why should the US be spared the same predatory treatment as the many other victims of the global corporate oligarchy? After the Fed's equity bubble bursts, the corporate vultures will swoop down and buy up vital resources and industries for pennies on the dollar.


The financial system is doing exactly what it was designed to do, it is crumbling from the decades-long trickle-down experiment. Social programs have been gutted, civil infrastructure is in tatters, legal protections have been savaged, and workers rights have been trounced. Is it any wonder why we're embroiled in an unwinnable war and the financial system is on its last legs?

The only way to break the stranglehold of Wall Street's financial Politburo is to level the playing field through greater wealth distribution. That's the best way to rekindle democracy and make America the land of opportunity again. And it all starts with giving America's workers a raise.
One of the darlings among the "progressive" Dem blogs, Barack Obama, doesn't exactly fill me with hope when it comes to killing neoliberalism - hell, he's down with Friedmanism. Check it:
"Before welfare reform, you had, in the minds of most Americans, a stark separation between the deserving working poor and the undeserving welfare poor," Mr. Obama said in an interview. "What welfare reform did was desegregate those two groups. Now, everybody was poor, and everybody had to work."
Well, I'd say he got the "everyone was poor" bit exactly right. He didn't consciously intend to put it that way, but it pretty well explains what's happened as whatever paltry safety net we once had has been torn to ribbons, the public sector was privatized, and this generation's Robber Barons cashed in. When someone of my income level looks at what's available on election day, and realizes that no matter what happens, there will be no change except for the worse, is it any wonder that more and more of them will want to stay home? As long as the status quo continues, there will be no "hope" beyond the feel-good pronouncements of charismatic wannabe emperors. Farce doesn't even begin to cover it. Sadly, it'll take a catastrophe of Great Depression proportions to spook enough elites to reluctantly re-open the political system to reformers - which by that point may or may not do much good.

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