If someone had used the word “elites” in 2006, they would have been seen as a hair-on-fire hysteric, long on conspiracy theories and short on sober understanding of How Things Work. But as the 1% and 0.1% amass more and more of total income and wealth, so too have they come to believe their interest diverge from those of the rest of us (and in a literal sense, they often do, since in too many cases, their wealth rests at least in part on predatory conduct). And now that that gap has become obvious, it has reshaped the role of the ruling class, as in the people who are in charge of the administrative apparatus of society. While some members of these top income groups play a direct role in running powerful organizations (CEOs of large an/or strategically important businesses, for instance), it also includes much less affluent individuals, like government officials and those who influence values and collective perceptions, like major publishers and public intellectuals.
Increasingly, these administrators, influencers, and top professionals seek to use their roles as an entry ticket to the top cohort. The prototype is the revolving door regulator, but there are plenty of other embodiments.
A recent example is Raj Date, who was the Deputy Director at the Consumer Financial Protection Bureau after having worked at Deutsche Bank, Capital One, and McKinsey. I’m told consumer groups were never comfortable with him; he was too slick to be seen as trustworthy. And he tried to elbow Elizabeth Warren aside and he grab the directorship of the new agency before Warren put a stop to that by throwing her weight behind Richard Cordray. Date founded Fenway Summer, a “venture investment firm focused on financial services.” It sought to compete with Promontory Group, a money and influence machine headed by former Comptroller of the Currency Gene Ludwig. Established readers may recall the prominent role that Promontory played in the Independent Foreclosure Review fiasco, in which Promontory walked away with over $600 million in fees for a job badly performed and never completed (for details, see Regulatory Looting, Promontory-Style: Botched Foreclosure Reviews Alone Generate More than Double Goldman’s Revenues per Employee, Bank of America Foreclosure Reviews: Why the OCC Overlooked “Independent” Reviewer Promontory’s Keystone Cops Act (Part VB)) and Bank of America Foreclosure Reviews: How Promontory Became a Shadow Regulator (Part VA).
Date just sold Fenway Summer to Promontory. As a well-recognized banking expert said via e-mail:
Not surprised. I read it as a failure of Fenway Summer. It was supposed to be a rival to Promontory, not bought out by it. I sure as hell wouldn’t pay for Raj’s advice.
But members of the elite like Raj manage to fail upwards, or at worst sideways. And that helps preserve the widening gap between them and everyone else.
This Real News Network interview with Robert Scheer, which is number six in a ten part series, discusses how the self-serving attitudes among the supposed leaders of our society became entrenched.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to Reality Asserts Itself on The Real News Network. We’re continuing our discussion with Bob Scheer. Bob is a veteran U.S. journalist, currently the editor-in-chief of the Webby Award-winning online magazine Truthdig. And his whole biography you’ll find beneath the video player.
We’re just going to pick up where we were.
So here’s what I’m accusing you off, that you seem to be suggesting that there’s some rationality left in this system within the elites. And I’m not talking–of course there are some individuals that have some rational long-term view. I mean, even people like Soros has been crying about the lack of banking regulation. And there’s people in different sectors of the elites who realize this is a train wreck and about go over a cliff. But those voices are actually marginalized. Even somebody who’s got as much money as Soros within the banking and financial elite is completely marginalized. Nobody really listens to a word he says–people with power, at any rate. [1:07]
PROF. ROBERT SCHEER, JOURNALIST AND AUTHOR: Well, they listen to–.
JAY: Let me finish the point.
SCHEER: They listen to Buffett.
JAY: Well, maybe. But Buffett doesn’t raise as much alarm as Soros does. But within there–they don’t even seem to be able to rule in their own interest. It would be in the interest of global capitalism to have more rational banking regulations as they introduced in the 1930s. It would be in the interest of global capitalism to deal with the threat of catastrophic climate change. It would be in the interest of any rationality not to let fossil fuel and the arms industry so dominate U.S. foreign policy, particularly in the Middle East, I mean, this fueling of a Saudi-Iranian conflict. The idea that, you know, could there be a United States without a massive military, yeah, there could, but not this United States, not this economic system, not this elite. These guys aren’t going to come around to some kind if view of we could be an equal, modest country.
SCHEER: Well, you’re absolutely right that the current configuration of power in America is irrational. We don’t have adults watching the store. And we go from one disastrous pursuit to another. I mean, there was no reason whatsoever, if we had adults watching the store, you’d go knock off Saddam Hussein in Iraq, who had nothing to do with al-Qaeda, was a force against Iran, which–you know, we backed him in his war with Iran. So the contradictions are obvious, that we don’t have adults watching the store, we don’t have rational policy.
However, I think you are not the only person that now knows that.
JAY: Oh, I’m sure lots of–I would say most ordinary people kind of know it.
SCHEER: No, I think even in those circles there’s an awareness that we’re not doing very well, and there are reminders that we’re not doing well. You know, our economy is stagnant. We’re up against some real problems in terms of our future. Income inequality is one. You don’t have to be some wild lefty liberal to see that. I mean, the whole foundation of our country was always on a stable middle class and an expanding middle class, opportunity, equal playing field. I’m not saying that was the reality, but that was always the expectation. You know. And, you know, whether it’s de Tocqueville or the founding fathers, there was always an assumption that at least for what you thought was the base population there would be this opportunity. You know. And we have been forced over the last couple of decades to recognize that no, it’s going alarmingly in a different direction.
Internationally, we know we’re not doing very well. I mean, we don’t produce a whole lot of products that everybody in the world is dying to get their hands on. The main thing that we’ve been effective on is this tech stuff, and our tech companies are the ones that are most concerned that our political model is not a good one. They’re the ones that are out there having to sell this stuff, and this stuff involves getting confidence and knowing the culture, caring about other people, winning their confidence. And that’s been endangered.
So the only thing I would–I don’t disagree with you at all as to whether our model is in trouble. It’s in trouble. I disagree with you only on whether–the number of people who know it’s in trouble.
JAY: I would say even most of them–I would probably think most of the elite know it’s in trouble. They’re just going to cash in on it, and it’s going to be someone else’s problem to do something about it.
SCHEER: Okay. You’re putting your finger on something that I feel is very critical. And I have spent my life interviewing people generally around power, in government and so forth. I’ve traveled with Nelson Rockefeller and David Rockefeller. You know, I have interviewed people who became president, from Richard Nixon, Clinton, and so forth and so on.
And if I were to try to explain, the big shift that I’ve seen is long-term as opposed to short-term, that most of the people I had interviewed in the first stage of my career, say somewhere up until 1970, were people that at least were concerned what their grandchildren might think. You know? There was either through family, inherited wealth, or going to certain schools, or there was some sense of social responsibility, you know, that you could find, that we have to leave our mark, we have to leave it a better place, we have to–and just for our place in history, that it mattered. Okay? So you could be concerned, oh, we’d better get with the civil rights movement, because otherwise we’re going to fall apart, or we’d better care about the economic condition of the rest of the world, because otherwise it will rebel, we’d better worry about the living condition of our own people here or they’ll rise up with pitchforks and toss you out.
I think what happened is we went into this madcap period of short-term greed.
JAY: And let me just–Bob wrote a book called The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street. And this was a kind of turning point you’re talking about.
SCHEER: Yeah, that’s really what my book is about, because you had sensible rules of the road that came out of the New Deal, and there was a recognition, because of the Great Depression, that you just can’t have this madcap, crazy, Gilded Age society. Again I overuse this concept of adults watching the store, but I remember going back to just being a kid in the Bronx, and you didn’t leave the children to run the fruit stand, ’cause they’d give everything away or they’d go off themselves and play stickball. Somebody had to be there to make sure the stuff got sold and money was paid and things. And you lost that. You got people coming out of the law schools and the business schools that were shysters. You know, they just wanted some hustle, some scam. That’s how you got into credit default swaps and collateralized debt obligations.
JAY: Yeah, but the bubbles are euphoric,–
JAY: –if you’re in on cashing in on the bubble.
SCHEER: And anybody who looked at that knew. I mean, I was interviewing people during those years, and they’d say, this is, you know, as Buffett said, financial instruments of mass destruction. You know, how could you believe in any of this stuff? How could anybody believe if you–this is what my book was about–you take all these loans and you redefine them and you talk about the risk in stupid ways and you give loans to people who can’t support it, and somehow, okay, and whether you were in Fannie Mae, Freddie Mac, or whether you were in the private sector, ’cause Fannie Mae and Freddie Mac were being traded on the stock market, you had to know that this was going to explode. They knew it. And they got the laws to change to make it legal. It should have been illegal.
You know. I mean, the Commodity Futures Modernization Act, which Bill Clinton signed off as a lame duck president in 2000, after it was already–you know, the election was over, he was now a lame duck, and he signed this bill. What was the purpose of it? It was to make all of this garbage legal. It said–I think it was Section 3 of the Commodity Futures Modernization Act–a Republican-Democratic bipartisan bill–said no existing law or regulatory agency will have jurisdiction over credit default swaps or collateralized debt obligations or any of these new financial mechanisms. Why? Because they said this is modern. We have to compete with Europe. You have to be able to do these things. We can’t let–we have to give legal certainty–Lawrence Summers, you know, secretary of the Treasury–we have to have legal certainty for these financial instruments; otherwise, they won’t be effective. Right? Legal certainty meant no one’s going to look at it, no one’s going to challenge it, no one’s going to set any standards, no existing regulatory agency or law will apply. So it was a license to steal.
JAY: Now, for people that don’t understand the concept, quickly.
SCHEER: Well, quickly, what happens is they developed all these new financial gimmicks. You know, a credit default swap was something that was an insurance policy, but it was not an insurance policy. It’s what AIG did and got into so much trouble. They said, you do these collateralized debt obligations, you take all these different loans, subprime mortgages–.
JAY: Which were invented in Baltimore, by the way.
SCHEER: Yeah, auto loans, or any of these things, and then they don’t make sense on their own and they all seem quite risky, but we’ll put them into a pool and we’ll assess their value and we’ll get these credit rating agencies that have a stake in saying, yeah, they’re all good to go because they’re going to get money from it. So there was no regulation. And then you pass a law that says you’re allowed to do this, no one will look at it carefully, no existing regulatory agency will have control. So you’ve got a license to steal. Go knock yourself out. You know? And they, selling all these loans, packaging them, and then reselling them to people over the world. Right? And we can predict, you know, get this income and so forth. And then, if it looks shaky, we’re going to give you these phony insurance policies, right, that will seem to back them up. But there’s no money behind it. It’s not like a real insurance policy. Nobody’s putting any resources.
So, suddenly, you’ve got this thing that’s going to explode, and AIG, which is supposed to be backing up the insurance, says, hey, we can’t do that; we have no money for that. So now your housing bubble has collapsed and AIG can’t support it. And it’s nothing more than the mafia doing a scam, only you have passed laws that say that’s all legal, that’s all legal.
Now, you’re absolutely right. You wouldn’t do that if you were worried about how even you would appear to your grandchildren. Okay? People looking back now know these people were crooks, whether they went to–they didn’t go to jail, ’cause they they get the law passed to make it that it’s not a crime to defraud people. It’s legal. It wipes out half of the wealth of African Americans in this country, wipes out the economic gains of the civil rights movement, ’cause they were particularly a group that was particularly victimized. It wipes out two-thirds–these are Pew Research Center figures–wipes out two-thirds of the wealth, the collected wealth over generations of Hispanics in this country because they were subject to these subprime. They lose everything when they lose their house. But the guys putting it all together, they escape with their billions. They don’t go to jail. So, yes, if what you mean by your opening statement was we don’t have solid, responsible people who even care how they will appear to their grandchildren–.
You’ve got a guy like Robert Rubin, okay? Robert Rubin was secretary of the Treasury under Bill Clinton. He had come from Goldman Sachs. He had convinced Clinton you could do all this stuff, this is all great, we’ll do all this crap. He brings in Lawrence Summers. Timothy Geithner, who’s a younger person working in there, he becomes the Treasury secretary under Obama. They do all this stuff. They get Clinton to sign off on it. He does it with Phil Gramm, the Republican, so it’s bipartisan. Very few people challenge it. You know, now, I think if you ask anybody about Robert Rubin, they say, God, yeah, he wasn’t too good for it. I’ll bet you his own family members think he got his–you know, what happens? He leaves the Clinton administration; he goes to work for a bank that he makes legal, right? The merger of Citibank and Travelers Insurance they make legal with their reversal of Glass-Steagall, the Financial Services Modernization Act, and then they got the Commodity Futures [Modernization Act], which makes these gimmicks legal. He gets $10 million a year for the next decade. Sure, he’s got money salted away. But I don’t think he’s got a reputation that’s worth anything. I don’t know. Lawrence Summers, again, I don’t think people particularly treat those with respect. But they have money. You know, they can take care of their nephews and nieces. But I think it’s generally accepted they caused a lot of damage to the economy.
JAY: But it’s not, like, that it’s just a bad group of people happened to get into power. And I’m not suggesting you’re suggesting that.
SCHEER: No, it’s the best and the brightest that Halberstam wrote about in Vietnam. These are very well educated people who know what they’re doing and, I believe, have to know it’s going to destroy the lives of millions of people, and they go ahead and do it. It’s just like–.
JAY: Yeah, ’cause they say if it ain’t me doing it, it’s going to be him doing it, or her.
SCHEER: Whatever their rationalizations, they surround themselves with lawyers and PR people who tell them this is all wonderful, and they get away with it.
JAY: But it’s the way the system has evolved that so much money is in so few hands. There’s not much else for them to do with it than bet and gamble against each other, create this massive speculative sector of the economy, which is financializing everything. Even when they talk about climate change, all they really have in mind is a way to financialize it. So whether it’s this group or the other group, the sort of system itself is created where there’s–so much capital has become completely parasitical.
SCHEER: Yes, but they could also be decent people. They could actually wonder about what would Jesus do. They could actually think about what does their lives mean.
JAY: I think some do and drop out.
SCHEER: A few.
JAY: Some do, and they can’t take it anymore, and they drop out.
JAY: But they’re not in any position to change the course of the ship.
SCHEER: Well, but also the question you should ask is why aren’t they being observed in doing this. And the reason is because they can buy off everyone.
JAY: Especially the media.
SCHEER: The media, but the universities, the grants of–you know, build buildings at universities. Come on.
JAY: I want to stress the media ’cause they have this theatrical show going in the elections–I’m not saying there isn’t a real contention for power, but when you have unlimited contributions, unlimited spending, what are they spending it on? They’re spending it on TV advertising.
SCHEER: Yeah, and they’re spending it on candidates who will not give them a hard time. There’s no question about it.
But it’s not just the media. I mean, I don’t want to exonerate the media, but you–you know, in the day of the internet, you should have more critical voices, right, ’cause–but even there you look at where could–you know, okay, to understand the economy or foreign policy requires a little brainwork, okay? Most people have got to take care of their job and their family and pick the kid up and how do I pay this bill and am I going to lose my job and/or how am I going to make that sale. And so their lives are taken up. And then we have a group of people, whether they’re called journalists or professors or consultants or what have you who actually have the time and are really charged with figuring stuff out.
Now, most of this stuff is not all that difficult to figure out. So then you have to ask yourself the question, why didn’t you figure it out? I mean, why didn’t the media–in my book I describe how The New York Times was a cheerleader for this radical deregulation. They used words like modernization. They said long overdue. Now, why? You know, because they were living in a culture and benefiting from a culture that was benefiting from the ripoff. These are the people who advertise. These are the people who invest in your venture, in your media. These are the people who buy chairs at the schools where you’re teaching. These are people who support the charities or political causes that you happen to agree with. There is a culture of corruption, I mean, ’cause anyone else looking at this, they say, wait a minute, this is nonsensical, this is bad. Why are you selling–I remember writing about this stuff. I would go out to what they call the Inland Empire in California where they’re building all of these–. I said, who’s going to live here? How are they going to get to work? Who’s paying for this? Why are they making the loans? And then you realize there is no there there. Don’t confuse the thing–I remember an old advertising [incompr.] don’t confuse the thing being sold with the thing itself. They’re not selling a house to somebody who needs a house and is going to live and be able to afford the payment; they’re selling this collateralized debt obligation that’s 1,000 of those houses that you have made and chopped up and iced and diced and everything and sliced, and then you’re going to make that seem like a good bet to somebody. Where? In Saudi Arabia or in France or–.
JAY: Knowing it’s all going to default.
SCHEER: Yeah, but you’re going to get in and out before it defaults.
JAY: Yeah. So please join us for the next segment of Reality Asserts Itself with Bob Scheer on The Real News Network.
O tempora O mores.
Little changes really?
Scheer understates (just a bit) what the Commodities Futures Modernization act was all about. What all these credit default swaps and other exotic new derivative instruments were all about was recreating and expanding the list of instruments in use on Wall Street. CFMA’s purpose was to insure that this parallel market was unregulated. I one fell swoop, CFMA gave Wall Street the ability to recreate itself, only the recreation was to be entirely without government oversight.
I’m sure there were a few incompetent fools (like Alan Greenspan and Phil Gramm) who actually believed the toxic hype that this was all about leading the curve to the new Nirvana, but pretty much everyone else knew that is was nothing more than a government-sanctioned heist, because almost at once, everyone started acting like it was. Even as early as 2000, the national association of real estate appraisers was petitioning the government for relief from bankers forcing them to scam their appraisals or get kicked out of business. By 2002, Dean Baker was complaining that the rent-vs-own ratios that had been constant for a hundred years were careening wildly, with no apparent cause. By 2004, the FBI was begging Congress to fund more investigators, saying that the mortgage industry had become a swamp of corruption. By the end of 2005, the entire mortgage market began collapsing, and the only thing that delayed it for another 30 or so months was that the Bush administration forced Fannie and Freddie to take their hundreds of billions of wealth … OUR WEALTH … and throw it against that market’s collapsing edifice. The only thing left was that the next President would have to owe his election to the very people who needed to be indicted, conviced, and jailed.
With Enron we saw it immediately, didn’t we? I mean, people died in California and they didn’t care. Something had happened that was bad for the public in general and the financial wizzes didn’t care.
But short term there could be a million dollar wedding for your daughter and foundations, lots of foundations. Like toxic high fructose corn syrup; you get diabetes of the soul.
The wealthy’s acceptance of the New Deal was always grudging, and lasted only as long as they thought their wealth/safety depended on some of the rest of us being fairly prosperous. When they found a way out of it (globalization) they were happy to toss the New Deal away.
Bubble talk leads us back to the mainstream of economic thought. The notion of bubble is a deviation from some normal state of affairs, namely a growing, self-equilibrating economy and markets (called growth theory among neoliberals.) Some event, it is presumed, external to the normal state forces the economy out of kilter but once this is dealt with economic growth and employment will return to the trajectory everybody knows and loves.
What happens to the concept of economic bubbles if we do not assume that markets are self-correcting? It goes out the window because there is no norm from which to stray.
Actually what happens is that we reach an overproduction crisis, which is the natural thing to do for Capitalism, at least according to Marx.
But while we are in that overproduction crisis, the financier capitalists still grow in power and wealth, because they speculate with it, being almost the only ones able to still make a sustained profit, and use that power to contain any attempt of reform and rather promote even greater deregulation, like the triple-T secret treaties. All very natural and expectable, albeit unfortunate, in good economic and political science.
TRNN are generally very worth watching, thank you. Although they may have overdone the interviewer’s makeup on this occasion.
This links very well with what I was saying in another thread: modern financier capitalism has no plan other than “loot while you can”. The last comment of Scheer points to pyramidal or Ponzi schemes being all what is, and, if that’s the backbone of the economy, we are certainly in for a massive shock that will make the 2007-08 one look almost anecdotal.
Another interesting comment of Scheer is that a key “rational” (or “productive”) US economic sector is the technological one, what is no doubt true. I am under the strong impression that the USA could for example be leading the transition to renewables, as most technological advances in solar energies, for instance, happen in the USA. But paradoxically the republic is actually betting heavily on oil and not using that advantage to reaffirm itself as avant-guard global economic power, what could well give Washington another whole century of hegemony.
So indeed there is no plan, only short-termism and loot-while-you-can.
I’m glad that the concept of ‘elites’ is finally gaining widespread acceptability. It is a sorry state of affairs when a class of people develops an “us or them” worldview, but there it is. If I understand it correctly, MMT is a system based on a rational and pragmatic view of how money works. ‘Elites,’ as an organizing model serves a similar function in the socio political sphere of human endeavour. Each contends with ‘official’ ideologies promoted by the system itself.
I agree with Feynmans’ contention that the system architecture of a human institution defines and circumscribes it’s functionality. His addendum to the Space Shuttle Challenger Accident Report lays out his contention. Essentially, the idea is something I’ve read in other accounts of how the government bureaucracies work. Functionaries are punished for presenting facts and analysis counter to the perceived desired outcome. The perceptions guiding the process are generally internally produced and shaped. No sinister ‘master criminal’ is required. The group as a whole develops it’s own world view, and designs systems to support and expand that “World.”
It has been asserted that Bernays et. al. applied the scientific method to crowd control and manipulation. That generation is now long gone, and with them the concept of ‘public service.’ Even if one were to apply a maximum degree of cynicism, that bygone generation of ‘elites’ had an infinitely greater regard for the ‘public good’ than today’s ‘elites.’ As the article above plainly states, even that degree of concern for out groups is gone.
Something will eventually break, if only for the reason that the ‘elites’ have forgotten the basic rule of parasitism: Do not kill your host.
Blast! I forgot to append Feynmans appendix to the Rogers Report. (I’ve put this up once before, so please excuse the redundancy.)
Thanks for the link, interesting report.
Am struck with the NASA managers over-riding their engineers’ concerns. This is not a result of a “bureaucratic mind-set” but of people not being held responsible for their actions. The managers were paid to have a flight go on time. The engineers held to their belief that the flight should be as safe as they could make it.
The fault is not in our stars, but in our compensation systems. I don’t think any NASA manager lost their job, got demoted, or a letter of reprimand over the Challenger accident.
Yes, but that very “flight go on time” consideration is a part of the “bureaucratic mind set.” When a functionary believes that adherence to an even unstated expectation will determine that bureaucrats future career arc, ways will be found.
The other dimension of this, seldom voiced, is the fact that President Reagan was scheduled to give the annual State of the Union speech the night of the launch day, January 28, 1986. Rumours have since circulated that Christina McAuliffe was scheduled to participate by remote camera link from orbit. Having a cameo in the State of the Union speech by Americas favourite teacher in space is exactly the sort of stunt a trained Hollywood actor would endorse. I blame Ronnie Reagan and “politics as usual” for this disaster.
As for bureaucrats overriding the opinions of technocrats, well, that’s life. The political actors keep pushing the envelope regarding safety, and especially cost, until someone gets killed. Then the game is reset. I have personally seen this dynamic play out several times.
Even better than the Challenger fiasco was the outright negligence that caused the Columbia ‘event’ in 2003. There had been serious concern voiced by engineers about the big piece of foam that broke off of the main tank and struck the underside of the shuttle during launch. This was no love tap. The foam chunk hit the shuttle going approximately 1900 miles per hour. This made a hole in the underside left wing heat tile array. Hot gasses from re-entry entered the wing root and broke up the shuttle. The defining factor again was the mindset of the NASA bureaucracy. This excerpt from the Columbia disaster wiki shows how it happened.
In a risk-management scenario similar to the Challenger disaster, NASA management failed to recognize the relevance of engineering concerns for safety for imaging to inspect possible damage, and failed to respond to engineer requests about the status of astronaut inspection of the left wing. Engineers made three separate requests for Department of Defense (DOD) imaging of the shuttle in orbit to more precisely determine damage. While the images were not guaranteed to show the damage, the capability existed for imaging of sufficient resolution to provide meaningful examination. NASA management did not honor the requests and in some cases intervened to stop the DOD from assisting. The CAIB recommended subsequent shuttle flights be imaged while in orbit using ground-based or space-based DOD assets. Details of the DOD’s unfulfilled participation with Columbia remain secret; retired NASA official Wayne Hale stated in 2012 that “[a]ctivity regarding other national assets and agencies remains classified and I cannot comment on that aspect of the Columbia tragedy.”
So, there you have it. Bureaucracies, large and small, exhibit definable and consistent patterns of behavior. The fault lies not in our stars, as you observed, but in our Chairs.
It’s not as if methods which potentially could prevent these sorts of ‘myopia of management’ clusterf**cks haven’t been available for some time.. would these eminently avoidable disasters have occurred if Stafford Beers’ Viable Systems Model been implemented as the decision making apparatus with sufficient lead in time to be securely embedded?
The Model looks awfully abstruse but at its core is the conviction that bottom up is better than top down, and that optimal outcomes are more likely to be realised if each element (management, operational, environment) is mandated to talk to each other via formal recursive structures, so that while each section is self-managed and far more autonomous than conventional counterparts, they have the capacity, even the responsibility, to participate in the affairs of the others, so that the ‘control’ of direction is distributed rather than hierarchical.
Really, it is the merest common sense, but we humans have this ingrained predilection for hierarchy. Stupidity, cowardice, arrogance, laziness and greed as well (to be fair, along with, more rarely, their opposites) but a decently organised system ought to be able to weed their influences out. But it can’t if its not adopted, and I suspect that even if it was the one thing it couldn’t eradicate would be the antipathy toward it, as the obstacle precluding ambition and the will to power.
Stafford Beers had such a system going in Chile for two years until the military overthrew Allende and whacked him. Then the Chicago Boys came in, and the rest is history as we know it, plus the cattle prods and electrodes.
Yes, makes you wonder if the Beers system was one of the reasons the US went in.
NASA also exhibited such managerial fubar-ness in the run-up to the Hubble main mirror fiasco – here is a 1990 NYT piece on that. The punchline: For more than a year pre-launch NASA had not one but TWO fully finished main mirrors in storage – the flawed one made by Perkin-Elmer, and a perfectly sound one subcontracted by P-E to Eastman Kodak. Did NASA bother to do the simple “let’s comparison-test these 2 mirrors and use the better one, if one proves superior, in the Hubble” thing? Of course not. Hell, a simple scaled-up Foucault test of the kind amateur telescope makers have been doing for over 150 years using primitive tools would have revealed the problem right quick. Classic other-people’s-money insular elite stupidity.
I like that! Biologically true, and also true in the realm of political economy.
Except the parasites think TINA and therefore are unaware that they ARE parasites and thus don’t have the good sense to recognize that their lucre is filthy.
The flash ad that appears over “Recent Comments” (some sot of Starbucks tea) keeps repeating (every 30 seconds or so), and is impossible to turn off or even silence. Not only that, but each time it restarts, the page jumps to it, no matter where I am on the page. (The page eventually crashed. The reload placed a different, non-flash ad there, which stopped the problem.)
As I’ve been pointing out over the last week, ad programming has come with increasingly poor quality programming, but this (overriding user control of the page to force jump to an ad) is a new low, and certainly not a function of poor programming.
As is usual with these sorts of ads, once one ad provider figures out a new, more forceful way of delivering ad content, others begin to adopt the practice until all of them use it. Can you imagine what pages are going to be like when 3 of 4 ads are running together, crushing the performance of all but gaming computers, and they all are force-jumping to their ads as they all repeat? This is what happens in a world with no standard practices, which pretty much sums up why ads are increasingly crapifying the internet. I’m hoping flash eventually is forced into addressing this problem (since they are the ones creating it), but so far, I see no sign of this.
When I submitted this comment, the offending Starbucks ad returned along with its obnoxious conduct. I understand that ads are important for paying the bills, but they won’t pay for anything if they drive your readership away.
I can’t get to the links page because it’s in a hard loop crash. If I start to fight it, I eventually bet to this frame error in the address bar, which is typical of flash ad crashes.
(I also had a bunch of trouble getting back here, with the same problem I described earlier. Again, it went away when the ad changed.)
A Guaranteed Income could go a long way to making Yves and Company independent of ad revenue, no?
Won’t happen without 501(c)3 status.
clear history …cookies and dont keep multiple browsers or tabs open…your browser is probably bleeding data into the ad auction systems
I’ve found that if I click on the webpage, it will stop it from jumping. I agree that this is a nuisance, but for now, I have a workaround (in the Chrome browser). Although I don’t know if I have experienced the exact same problem that you are encountering, so I can’t be certain that my workaround will be effective for you.
“… is impossible to turn off or even silence.”
Not it’s not – I’ve been reading your regular whinge-spams for weeks now, and it’s clear to me you need to stop blaming NC for your issues and take the little time it needs to STOP BEING A COMPLETE EFFING BROWSER WEENIE. I described the basic FF toolkit for doing this in a reply to one of your recent whine-posts. Other browsers have their own such toolsets. If your online homework-doing indicates that your particular browser doesn’t, then stop using it or, if that’s too much effort for you, just shut up.
“and you talk about the risk in stupid ways and you give loans to people who can’t support it,” Prof. Robert Scheer
If bank “loans create deposits”, then what moral right do people who CAN repay those loans have to them, ie. why should the ability to repay new purchasing power entitle one to borrow it in the first place?
The best answer is, if people taking a loan can repay the loan, then those people will probably enrich society by their efforts to repay the loan. If a person can’t repay the loan, they should not get the loan – they should get charity, another kettle of fish entirely. And if the person could repay the loan, but refuses to pay the loan (they took it under the false pretence of their desire to repay the loan), that person should not get the loan, but should be jailed for false witness.
“The best answer is, if people taking a loan can repay the loan, then those people will probably enrich society by their efforts to repay the loan.” H. Alexander Ivey [bold added]
1) Why is interest charged?
2) But if interest is charged then why isn’t it distribute equally to the public since it was the public’s credit that was extended in the first place? Instead of going to bank owners?
3) Why is collateral required?
4) But if collateral is required then why aren’t the proceeds therefrom distributed equally to the population in the event of default? Instead of to bank owners?
Excellent answer, btw. Thanks.
A lot of those issues are apparently addressed in what’s called “Sharia-compliant finance and banking.” http://www.investopedia.com/terms/s/shariah.asp Could that be the real reason us white folks are supposed to hate and fear Sharia Law? Other than the eccentricities of local custom like stoning and decapitation and such, which are more artifacts of particular local cultures.
Well . . . I believe the theory is that if they spend the borrowed credit all at once on some wealth creating or service providing enterprise for which they can charge a set amount of money for a set amount of product or service; then they can repay the amount-of-the-credit plus calculated interest on the credit in the form of money.
Only if the would-be borrower had saved up enough money to be able to spend just as much of herm’s own money as if heeshee had borrowed the same amount of monetized credit could the borrower be said to have not needed the credit to begin with. ( If I even understand what is being talked about here).
Capitalism. What is most exceptional about this site is its name. The mere fact that it uses the name capitalism at all, even nakedcapitalism, is the most taboo breaking aspect announcing a real discussion about a real topic. Notice how Yves preambles this discussion to pre-2006 conformity of thought:
“If someone had used the word “elites” in 2006, they would have been seen as a hair-on-fire hysteric, long on conspiracy theories and short on sober understanding of How Things Work.”
You might as well add “capitalism” to ill chosen words.
The apex of American power in the aftermath of the Clinton years coupling robust job creation and technological advancement of an extensive internet infrastructure to produce the capitalist propaganda theme of the coming the 21st Century: Supertanker America! Remember when the unbroken quarters of growth, low interest rates, steady stock market index rising and company after company emerging from the pages of science fiction to launch from NASDAQ into the real economy? The American Economy would ride out any boom or bust, out sail any crashing waves of stormy global contraction and lead the world economy out of any doldrums just as our military stood dominant across the oceans to the West and East of the continental hegemon. Our military might, our economic resilience and now, our triumphant ideology of capitalism would be consumed by the world more readily than any other export. There was a plan drawn up for a bold new global order of the ages, The Project for a New American Century PNAC. Of course, that failed miserably, unleashing WWIII across the Arab/Muslim world.
But amidst all of the talk of globalization, world trade organization, international summits of G-7s and G-20s, NATO and NAFTA, we have Davos. The Woodstock for capitalists, but never spoken of any such terms. In the above TRNN interview, “the system” and its “elites” are discussed. But as usual, there is always an internalize euphemism, socialized squeemishness for giving the system a formal name and giving its actors a title. Capitalism and the capitalists who love it. There, I said it, the love that dare not speak its name! And the key to breakdown from long term perspective to short term greed came from banking deregulation. Not surprising for capitalism to turn its longing eyes to banking, the platform it was built upon 500 years ago from the banking centers of Genoa, Venice, Florence etc. Despite Simon Johnson’s supposed revelation of a silent financial coup, capitalism all along has ruled implicitly, with the only silence coming from the people who master the rules of capitalism not resorting to its name.
Giovanni Arrighi in an essay points out the disappearance of capitalism from academic research, almost in its entirety from economics. Notice, there are Marxist Economists or Keynesian Economics, and then there is just plain Economics. Not Capitalist Economics, that would not be value free positivism, the purest of methodological based scientific endeavors.
Arrighi finds in an almost 800 page ” THE HANDBOOK OF ECONOMIC SOCIOLOGY”, sparse mention of capitalism. Basically, a small usage of the word and a single reference, but mostly, a great number of writings by Marx, Weber and what others have had to say about capitalism, but not much about capitalism by its presume supporters. Much of this Arrighi attributes to the micro focus of the social sciences and its failure and or unwillingness to deal with long term structural features of capitalism. Basically, an ahistoric or short term approach has capitalism disappearing altogether under the weakened methodology too attenuated to measure the processes that compose capitalism. It is not there because the unit of analysis is too small, too short in time or too segmented by focusing on one nation or one enterprise and not the whole economy of one nation connected with and trading with other nations in a global system.
An entire generation of myopia induced social science, including economics has produced nothing less but the short term crisis producing best and brightest, who can’t see beyond the next quarter. The motto is; “Are we there yet?”. Impatience, hyper frequency trading, dedicated fiber optic fast as the speed of light trading cables from where ever to Wall St, all to shave off a few seconds or micro seconds or quantum seconds, in order to turn a profit of pennies a few billion times over a second or a minute, hour after hour, day after day. No wonder this cognitively captured educated elite can not see anything larger than a minute portion of reality that their algorithms symbolically represent.
‘The Project for a New American Century PNAC. Of course, that failed miserably, unleashing WWIII across the Arab/Muslim world’
That was the one part of the PNAC plan that worked!
‘the key to breakdown from long term perspective to short term greed came from banking deregulation’
I would argue that the ‘circulation of elites’ has played a part there too; aristocratic churn has increased in the last generation or two, not providing the nouveau the grace period required to develop the confident security necessary for noblesse oblige to become established.
Also, I think that the future possibility of that security has been compromised by the shifting power balances associated with a rising Asia, and ironically by the hyper-powerism (Supertanker America!) enabled by the end of the Cold War and the fall of the Wall. The status quo, the old order had given way to a more fluid state, with a range of potentialities. Add the competitive uncertainties unleashed by globalisation and in a relatively short space of time, all the old certitudes were gone. Elites became nationally unmoored, so that the hollowing out of US industry for example, while it might seem regrettable, and even eventually counterproductive from a national point of view, made perfect sense in the more short term, get it while you can mindset that has increasingly prevailed.
Banking deregulation from this perspective seems more like a proximate than an underlying cause.
There’s nothing inherently wrong with managing risk by aggregation. In fact insurance companies have been doing that for centuries…But one of the early signs that the market for RE loans was suffering from irrational exuberance was the fact that the mortgage insurance business (where traditional underwriters and experts set the price for insurance) was effectively pricing the risk of default for riskier mortgages VERY differently than the bond market was pricing the exact same risk.
The godly person has perished from the land,
And there is no upright person among men.
All of them lie in wait for bloodshed;
Each of them hunts the other with a net.
Concerning evil, both hands do it well.
The prince asks, also the judge, for a bribe,
And a great man speaks the desire of his soul;
So they weave it together.
Micah 7: 2-3
Don’t forget MIT economist Lester Thurow’s classic essay “An Establishment or an Oligarchy?”
Some if it’s a little dated, but the key points remain pertinent.
“The central goal of an establishment is to insure that the system works so that the country will in the long run be successful. An establishment is self-confident that if the system works and if their country does well, they will personally do well. Being self-confident they don’t have to make their own immediate self-interest paramount when they influence public decisions.”
“In contrast an oligarchy is a group of insecure individuals who amass fumds in secret Swiss bank accounts. Because they think that they must always look out for their own immediate self-interest, they aren’t interested in taking time and effort to improve their country’s long-run prospects. They aren’t confident that if the country is successful, they will be successful.”
A great catch, thanks.
I said above: I would argue that the ‘circulation of elites’ has played a part there too; aristocratic churn has increased in the last generation or two, not providing the nouveau the grace period required to develop the confident security necessary for noblesse oblige to become established.
Thurow’s dichotomy makes me realise that what we’ve witnessed is the evolution (devolution? transfer?) from establishment to oligarchy. We should target public policy to tolerate, perhaps even encourage establishments, but to destroy oligarchies.
Bad science makes bad law.
When kindness is kicked to the curb, the jungle is free to grow.
William K. Black at UM-KC is instructive about so much of what has gone on in regulatory and financial circles.
For reference, see his website including archived articles
Depressing, but important, interview
Belongs in a time capsule ?
Sheer talks about the aftermath of going off the gold standard. After 1970 there was a long hysteria (still in motion) that translated into austerity (supply side nonsense) because maintaining the value of the dollar meant everything. If the dollar took a dive, both our military and our finance complex would begin to fail. There would be no confidence in the once great USA. Witness the EU today. Those guys would rather bleed Greece to death than allow the euro to slide too much. They only pretend that they are protecting the EU taxpayers. It is such a fiction to try to maintain austerity for a strong currency because it defeats itself every time, and in order to surface an economy must do bubbles because there is no economy left after austerity. So it all turns into froth. There is a reason derivatives were invented and laws were passed making them legal. Because Larry Summers et.al. all knew their own positions were at stake if capitalism no longer produced profits for the elite. As Stephanie Kelton has informed us, we do not need to worry about the “value” of the dollar – the exchange rate – all we need to do is manufacture products that people want to buy. But that won’t save the bloated ranks of the elite.
I must say that the moral and intellectual depravity of the world’s elites is great news for the planet. From the point of view of the robin building her nest in the tree outside my window, humans are a toxic cancer, poisoning the soil that produces the worms she needs to feed her hatchlings. (assuming they survive the overly thin eggshells that agricultural chemicals have caused her to produce).
Indeed, for most of the planet’s inhabitants homo sapiens are the biggest threat to their continued survival. So rapid economic collapse brought on by the Masters of the Universe’s insatiable greed and the human species fatal inability to behave as part of an interconnected ecosystem is the best hope for the survival of a planet capable of supporting all the other life forms that have evolved with it.
Thinking back to elites past, at least civilization got some great art or architecture or literature out of the surplus. Sure, the Italian elites were adept at poisoning each other, but the world got Michelangelo and DaVinci. The Elizabethan elites had the Star Chamber, but the world got Shakespeare. The Victorians had the empire, but also Alice in Wonderland and Dickens. The Bourbons lost their heads, but the world got the Louvre. And on and on and on.
But for this elite, I’m trying to think of one great artist and I can’t come up with one. Jeff Koons?
OK, the meta, I get it. But still. Am I wrong on this? Is there a squillionaire Medici out there somewhere?
Stupidest, most vile, and destructive elites in the history of the world and that is saying something.
Nowadays, the members of the top 0.01% just seem to buy and sell, at ever escalating prices, the art that was created in previous generations:
I really appreciate Paul Jay insisting on calling out the media for their role in all of this. It really puts me up the wall how supposedly left wing media outlets always insist on having a right wing propagandist sit in as a counter weight to the lefty when conducting an interview, but then NOBODY calls out the right wing propagandist on his/her blatantly obvious, totally false bullshit regardless of crazy their claims.
Perfect example was the Amy Goodman hosted “Democracy Now” segment on the TPP which was linked here yesterday. They had a guy from Public Citizen on to denounce the TPP and a professional liar from the Cato institute to defend it and no one batted an eye or piped up to say word when the Cato guy floated this howler:
“You know, I certainly do think that the TPP, to the extent that it liberalizes trade, is going to increase wages. It’s going to improve the economy of the United States. By opening markets to exports, the TPP will help create jobs. By opening up access to imports, the TPP will help create jobs. Most of the imports that come to this country are used by American manufacturers. It will increase productivity, increase wages and promote growth. So I think that for the criteria that Hillary Clinton sets out, the TPP will most likely be a good deal.”
Why in the world Amy Goodman the host of the show or her guest from Public Citizen doesn’t even make an attempt to counter this blatant lie in the interest of truth or journalistic ethics is beyond me. Why not something like this: ” Excuse me Bill, what did you just say? Did you just claim the TPP is going to raise wages and create jobs in the United States? My god Bill, that is the biggest fucking lie I have ever heard and you know it. As I’m sure you know Bill the entire point of the TPP and other Free Trade pacts is to open the borders of low wage, low regulation countries so companies in the United States can offshore more jobs or at least use the threat of relocating as leverage to further drive down wages, so don’t you dare sit there with a straight face and your little American Flag lapel pin and insult this show and my audience with such blatantly false lies. Shame on you Bill, you’re a disgrace.”
How hard would that be?
Jerry, I agree with you on the Democracy Now show (I listened to it, too) … but what really got me was this lovely exchange:
“JUAN GONZÁLEZ: And, Bill Watson of the Cato Institute, your reaction to the impending, now appears to be, passage of the fast-track legislation?
BILL WATSON: Well, I’m really looking forward to seeing the TPP be completed, find out what’s in the agreement and how well it liberalizes trade between the United States and the other 11 members in the agreement.”
Um … explain to me how you’re looking forward to the TPP being completed, but you still need to “find out what’s in the agreement …”
WHAT? You don’t know what’s in it, but it’s all good?
If only someone had quoted Pelosi’s very words . . . . ” you mean we have to pass it to find out what’s in it?”
I read comments like Scheers, that “these are educated people” and they knew what they were doing, and I just am not sure how correct they are. It just does not make sense to me that these people allowed what is essentially a “crimogenic environment” (as Bill Black often writes) to devolve into the open sociopathy and psychopathy we have today. Something is missing; it all just does not fit together.
The one thing nobody ever mentions is the role of organized crime. The mergers and acquisitions and the leveraged buy outs of the 1960s through 1990s was heavily financed and influenced by organized crime. Look at Penny Pritzker’s family, and its roots in The Outfit of Chicago. Look at Lord Hanson and his connections to organized crime. Look at the historical legacy of HSBC as the Hong Kong and Shanghai Bank in the opium trade and opium wars. Good lord, look at Ronald Reagan – who is fingered as organized crimes’ favorite politician by Gus Russo in his book Supermob.
Was it a good thing that organized crime “went legit”? Or is the true legacy the “crimogenic environment” we have today?
“heavily financed and influenced by organized crime” Sourcing?
Gus Russo, Supermob: How Sidney Korshak and His Criminal Associates Became America’s Hidden Power Brokers (Bloomsbury, 2006).
Ovid Demaris, Captive City: Chicago in Chains (Lyle Stuart, 1969) provides details on the outfit’s connections to politicians, its control of the Teamsters, and the sordid deals behind the immense wealth of Henry Crown.
R.T. Naylor, Hot Money and the Politics of Debt (Simon & Schuster, 1987)
Connie Bruck, The Predators’ Ball: The Inside Story of Drexel Burnham and the Rise of the Junk Bond Raiders (Penguin, 1988) mentions a slew of characters without delving into their unsavory pasts. The value of the book is tieing these characters together with Wall Street in the same social circles and business deals.
Robert I. Friedman, Red Mafiya: How the Russian Mob Has Invaded America (Little, Brown and Company, 2000) details the connections to Wall Street
Michael C. Ruppert, Crossing the Rubicon: The Decline of the American Empire at the End of the Age of Oil (New Society Publishers, 2004); for example, Chapter 3, “The CIA is Wall Street, and Drug Money is King”
Alain Deneault, Offshore: Tax Havens and the Rule of Global Crime (The New Press, 2011)
U.S. Senate Select Committee on Improper Activities in Labor and Management (also known as the McClellan Committee), 1950
Interim Report to the President and the Attorney General, The Cash Connection: Organized Crime, Financial Institutions, and Money Laundering (October 1984, The President’s Commission on Organized Crime), something of a cover up, as it focuses on small fish, not the big boys
Rick Perlstein, Penny Pritzker’s Commerce (Part One)
Rick Perlstein, Penny Pritzker’s Commerce (Part Two)
“Suspicions that Lord Hanson, who died on November 2, was linked to the Gambino and Genovese organised crime families were revealed in a confidential report by the Metropolitan Police.” Lord Hanson acquired a number of US companies for billions of dollars during his career.
Mark Huband, Financial Times, 19 November 2004
European Lawsuit Against RJR Nabisco
V. THE LINK BETWEEN RJR’S CIGARETTE SALES, MONEY LAUNDERING, AND ORGANIZED CRIME
Money-Laundering Links Between Europe, The United States, Russia, and Colombia
Fitts believes that the money laundering is the reason why Kohlberg Kravis & Roberts was willing to overpay $25 billion for RJR Nabisco. She has a couple interesting things to say about how she saw the culture on Wall Street change, and one explicit reference to the impact organized crime had on this change.
Dillon Read and the Aristocracy of Stock Profits, by Catherine Austin Fitts
This is by no means an exhaustive list. It tells you something that very, very few people have tried to pull everything together in a “big picture” and they have all been dismissed as crackpots and conspiracy theorists. But I think you have to look at the sociological aspect of how practices and beliefs are passed down through generations to begin to understand why today’s elites are as awful as they are. So, what happens when the sons and daughters of mafia dons enter into careers on Wall Street? What moral system do they bring with them?
There is plenty of other material on the British oligarchs and the heritage of their opium wars and opium trade which I have not looked at as carefully as the USA story.
Ah, the opium trade! Why should I think this country would be any different. Quite right. And I’m sure Rick Perlstein nails it, because he does that. Thanks for the reading list (sigh).
Air America. Nuff said.