The rich grow more powerful as we suffer
As you watch your assets bleed away this week and into the future, take time to recognize two facts thus far not mentioned much, if at all, by the panting reporters and sweating pundits:
What is happening now was easily preventable, but it perfectly suits the goals of the tiny minority of super rich who hold most of the real power in this country.
Given the docility and frequent dimness of the media, it may be years before a handful of obscure economic experts publish largely ignored books addressing what happened and how we have come to the miserable state we will by then be in. They may have to publish abroad.
But though the details of how this mess came to be are very complicated indeed, the basic situation is easy to understand.
In the early 1930s, after the unfettered greed of the country's economic and industrial leaders had led to yet another, particularly horrendous, depression, Americans elected Franklin Roosevelt president and put a bunch of Democrats in Congress. That led quickly to a whole lot of necessary regulation of American business, particularly of financial businesses. Central to the Roosevelt recovery was the strict separation of commercial banking from investment banking, insurance and brokerage businesses.
Most people know that. I'm sure everyone reading this knows the history.
What didn't get taught in most public high schools, however, is the fact that the American brahmins hated Roosevelt to a degree barely comprehensible today and fought every move he made.
George W. Bush's grandfather, Prescott Bush, was one of the most active of Roosevelt enemies, incidentally. (That's a particularly interesting story; check it out while you can still afford to keep your computer on line.)
One of the things they hated most was government regulation of their businesses. That people were starving didn't matter a damn; they believed, as their real and psychological descendants believe today, that some people are born to have power and wealth, and the great unwashed simply don't matter.
Think that's farfetched? Have you read Ayn Rand? A recent survey showed that something over half of top-level corporate executives have read and subscribe to the theory espoused in her awkwardly written novel, “Atlas Shrugged” -- that unmitigated self-interest is the only proper guiding principle.
You know the “great” economist Milton Friedman, the hero of the rich and the far right? His views were similar to those of Rand; he spent the last years of his life working to do away with public education because he didn't believe the “lower classes” should be taught any more than what is essential for them to do whatever work is assigned to them.
It was a long, slow climb back from the Roosevelt years for the very rich, and a couple of wars got in the way, but the brahmins conned the American public and in 1980 elected Ronald Reagan president of the United States.
Enough history. Everyone knows enough of what has happened since then, although we probably should note that the only blip in the return of almost all power to the extremely wealthy was the brief presidency of Jimmy Carter. The other Democratic president since then, Bill Clinton, helped rather than hindered the return of the American aristocracy to full strength.
Separation of commercial banking and investment market firms, which had been slipping for some time, was erased by Congress, with the approval of President Bill Clinton, in 1998.
So what's happening now is beyond even what happened in the 19th century “gilded age” and in the 1920s:
The concentration of control over this country's financial life -– and many of the world's key economic entities –- is proceeding with dizzying speed this week.
When I was covering the activities of investment bankers and brokerage houses in the 1960s, I was regularly in touch with at least a dozen firms, several other of them based in Minneapolis and locally owned. There were hundreds of others around the country. As of a few weeks ago, there were just five free-standing investment banking/brokerage firms of any size in the entire country.
As I write this, only two of those investment houses remain, and at least one of those, Morgan Stanley, probably will be gone in a matter of days, probably sold to Wachovia, according to the New York Times and CNBC. Wachovia is a giant with fingers in every aspect of finance, insurance and investment. The other independent investment house, Goldman Sachs, probably will be auctioned off, CNBC reported Wednesday (Sept. 17).
Then, of course, there are the direct government (taxpayer-funded or backed) buyouts. Jobs are disappearing at a great and accelerating pace, our incomes are shrinking and our assets are being siphoned off because of the crimes and incompetence of the financial industry executives, but we are being put on the hook, without our permission, for literally trillions of dollars to prop up entities that are “too big to fail.”
In fact, it is unfortunately true in at least some instances. The collapse of Fannie Mae and Freddie Mac or the insurance behemoth American International Group (A.I.G.) undoubtedly would have brought international panic and collapse. We're on the hook now for $85 billion just for A.I.G.
(Keep in mind, as these buyouts and other deals build, that the U.S. auto industry also is looking for a handout -- $50 billion in government aid to pay for what they should have been doing for years on their own dime, shifting to energy efficient vehicles.)
But here's another fact to contemplate: In a decently regulated economy, those entities would not have been allowed to grow to a size that put them beyond reach of paying for their failures. If their growth had been limited, they could have suffered the consequences of the stupidity, criminality and greed of the people who ran them and who in most cases run them still.
We're suffering because of a terrible failure to regulate even as our politicians not only allow but play midwife to the birth of other beyond-reach financial giants.
Think back just a couple of years, and a couple of decades before that. We've seen hundreds of mergers, as no longer regulated corporations and financial institutions got bigger and bigger. Each merger was described as being done “for competitive reasons.” When I was covering some of those mergers for a newspaper, I pointed out, when I could, that they actually shrunk the pool of competitors.
So the money guys now have merged most industries to the point where competition in critical businesses is all but nonexistent. They did it “for competitive reasons.”
The current “consolidation” under pressure to prevent worldwide panic is pretty much the last step in the process of bringing our economy and much of the world economy under control of a tiny handful of Randian tycoons.
While we're going broke, while we watch what we've spent a lifetime building collapse through no fault of our own – except perhaps voting Republican – the fat cats grow to the ultimate obesity.
I don't know that there is anything that can be done at this point. I'm damned sure there is nothing that can be done without a radical upheaval in our government even more powerful than Franklin Roosevelt and his congressional allies brought to it in the 1930s. And, really, what are the chances of that?
If John McCain is elected president, it will amount to turning our government over to the people who run Bank of America and Wachovia and a few other entities and removing all opposition. McCain always has been a loud voice for deregulation of all financial businesses and, until the past three days, was braggingly proud of it.
Americans should remember that he also was one of the Keating Five – the worst of the Keating Five to be truthful, and the only one to survive in office through pandering, begging, groveling and lying. (Google “Keating Five”; you'll get the gist of the story in 10 or 15 minutes.)
But even with great advice, superior intelligence and the best intentions in the world, how can anyone now unscramble what the political/social extreme right has done, with the stupid, inadvertent help of the religious right? How do you break the brokerage and investment banking businesses from the giant commercial banks that have absorbed them into their very entrails? How do you get control of a gigantic insurance company that now is an “everything financial” hodgepodge with bases in almost every country in the world?
I have no answers to those questions. Neither, I suspect, do people who are infinitely more knowledgeable than I am on such things. But if someone doesn't come up with answers, and if the public doesn't demand the answers, we are on our way to seeing the final move into what amounts to a worldwide oligarchy.
To somewhat rework a crude but apt old army saying, used when a situation appeared hopeless: Either promote a massive upheaval in our government or stick your head between your legs and kiss your assets goodbye.