All Things
- Take Control
When critics call President Obama's health reform plans “socialist” they often worry about the overwhelming power of government. The Federal government is very powerful; the worry is justified. But if the same people then go on to say that health...
- Why Are People Afraid Of Socialism?
Twenty years ago the Berlin wall came down and Soviet communism collapsed. Chinese communism has morphed into an authoritatian capitalism that destroys the environment and mercilessly exploits working people. Except for the tiny island of Cuba, communism...
- Business Cooperating With Government
The Boston Globe reports that big business has recently begun to cooperate with Pres. Obama and his team. The CEO of Dow Chemical praises the president's efforts to control carbon emissions. The healthcare industry is joining Sen. Kennedy to write...
- The Bailout And Democracy
The current financial crisis is not only a disaster for the economy but it exposes in the starkest terms the collapse of American democracy. A significant number of legislators in Congress, both Democrats and Republicans, refused to vote for the first...
- Praise Be . . . !
Praise be . . . ! Thomas Friedman, a prominent, nationally syndicated commentator chose Easter Sunday for reaffirming his conservative beliefs. One of those beliefs is that government does not make things better. The less government, the better we are...
All Things
A preventable crisis?
The Federal Crisis Inquiry Commission, appointed to find out why banks and financial institutions collapsed in 2008, has reported to the nation. They found that the current economic crisis could have been prevented.
The report points out that banks and other financial institutions took irresponsible risks. The government agencies created to oversee financial institutions failed in their task of keeping risk taking within safe limits. In order to prevent future economic crises, all we need is more vigilant government oversight.
Not to worry.
Once again, the powers that be once again reassure the public that our economic system, even with more than 8% of the workforce unable to find work after three years of “recovery”, with millions of Americans losing their homes, is still the best in the world.
But all of that is propaganda. The truth is that as long as our economic system remains unchanged, economic crises will recur at regular intervals. It is the price we pay for the blessings of capitalism.
Here is how it works.
Imagine that you are running a bank. You are a sensible, conservative person and when other banks lend money to people with poor financial credentials, you just shake your head. But those other banks are, at the moment, making a lot of money selling mortgages to low income people. Your rate of profit is lower because you are more cautious. But you don't own the bank. You just manage it for the stockholders and the stockholders are angry at you because their returns are below those of the stockholders of other banks. They demand that you raise profits by making risky loans to home buyers. You can resist the clamor and lose your job or hold on to your position by engaging in what you regard as unsafe banking practices.
In a system aiming above all at private profit, the temptation to take excessive risks is always present. That's why we experience a series of economic bubbles that regularly burst and leave some people out in the financial cold. No well-meaning admonition by a federal commission will change that. It is built into the system.
The federal inquiry commission also criticizes government agencies for insufficient oversight over financial markets, over mortgages, and credit cards.
Having heard that criticism, will the government regulatory agencies do a better job?
Let's be real. Government regulatory agencies enforce legislation passed by Congress. Congress is under constant assault by thousands of well-paid lobbyists advocating for the interests of their wealthy clients, such as the banks, financial institutions, and credit card companies. Congress passes legislation slanted towards the interests of people with money. Ordinary citizens who suffer through an economic crises such as the currently unemployed or underemployed have no money to pay lobbyists. Their interests are not represented in Congress – with very few exceptions.
But that's not all. The same companies hire lobbyists to lean on the regulatory agencies to interpret congressional legislation in ways that favor banks, and hedge funds, and credit card companies.
Finally, there is a revolving door between the halls of Congress, the lobbying offices on K St. in Washington DC, and the government regulatory agencies. These agencies are run by people predisposed to favor the people they are supposed to regulate. They will never do a job sufficient to the needs and rights of the rest of us.
As long as our democracy is for sale, government will not represent the interests of common citizens. The government will be on the side of – not to say in the pocket – corporations and the rich. Regulatory agencies will do a half-hearted job.
Admonitions by an Inquiry Commission will fall on deaf ears. Brace yourself for the next economic bubble. They are NOT preventable.
- Take Control
When critics call President Obama's health reform plans “socialist” they often worry about the overwhelming power of government. The Federal government is very powerful; the worry is justified. But if the same people then go on to say that health...
- Why Are People Afraid Of Socialism?
Twenty years ago the Berlin wall came down and Soviet communism collapsed. Chinese communism has morphed into an authoritatian capitalism that destroys the environment and mercilessly exploits working people. Except for the tiny island of Cuba, communism...
- Business Cooperating With Government
The Boston Globe reports that big business has recently begun to cooperate with Pres. Obama and his team. The CEO of Dow Chemical praises the president's efforts to control carbon emissions. The healthcare industry is joining Sen. Kennedy to write...
- The Bailout And Democracy
The current financial crisis is not only a disaster for the economy but it exposes in the starkest terms the collapse of American democracy. A significant number of legislators in Congress, both Democrats and Republicans, refused to vote for the first...
- Praise Be . . . !
Praise be . . . ! Thomas Friedman, a prominent, nationally syndicated commentator chose Easter Sunday for reaffirming his conservative beliefs. One of those beliefs is that government does not make things better. The less government, the better we are...