Monday, June 25, 2012

'I Didn't Do It': "Intelligence Squared" and the 2008 Crash

Hello again dear unreaders. I wrote in a previous blog post ("The Triumph of the Lame", 25 May 2012) about how I have been recently watching the American version of the British debate programme Intelligence Squared on PBS. I wrote in that blog post that I have been somewhat disappointed with the level of argument in some previous debates I have watched while I enjoyed the level of intellectual debate in others I have seen. What is nice about this age of computers and the World Wide Web we in the West now live in is that I (and other interested viewers) can take advantage of the World Wide Web to watch past debates of the American version of Intelligence Squared I missed thanks to the Intelligence Squared website (http://intelligencesquaredus.org/index.php/past-debates/). Recently I took the Intelligence Squared webpage plunge.

One of the debates that caught my eye since I am interested in economic history, political history, and the ideologies, polemics, and apologetics associated with public policy was the debate over whether the US government or Wall Street were primarily to blame for the 2008 economic crash (http://intelligencesquaredus.org/index.php/past-debates/blame-washington-more-than-wall-street-for-the-financial-crisis/). On the side arguing that the US government was the primary villain who caused the crash of 2008 were that omnipresent polemical celebrity historian Niall Ferguson, NYU economics professor Nouriel Roubini, and author and commentator John Steele Gordon. Arguing for Wall Street were businessperson and Reagan administration regulator Nell Minnow, New York Times business reporter Alex Berenson, and investor Jim Chanos.

Despite the binary division inherent in debates of this sort all of the participants in the was it primarily the US government or was it primarily Wall Street who was responsible for the crash of 2008 debate agreed that both played important and critical roles in bringing about the crash of 2008. The differences between the sides lay in where each side placed greater responsibility for the crash. Those on the US government did it side tended to blame the federal government for its lack of relevant regulation. This position, by the way, is a much more accurate view of what actually happened than the reading which blames the US government and "its" Fanny Mae and Freddie Mac for the collapse thanks to its forcing of poor Wall Street to give NINJA loans to house buyers who couldn't afford to buy houses, or the reading which blames the US government and its Federal Reserve Bank for the collapse, a reading with a very long history among some on the right including Milton Friedman. Those who blamed Wall Street agreed that there was insufficient government regulation but they blamed this not on the government but on the captains of corporate "industry" who control the government and who lobbied the government for deregulation since the 1980s.

Though those present and voting at the debate--the audience votes for which position they support before the debate begins and again after the debate ends and the side that has the greatest percentage shift in its vote "wins" the debate--sided with the government did it side I came down on the Wall Street side though I agree that the US government played a major role in the crash of 2008 for a number of reasons including not enough regulation. By the way, it should be no surprise that not much has changed since 2008 thanks to the continuing corporate control of the American government and state governments.

Why? Because it is clear to anyone with eyes that government oversight of corporations and particularly financial corporations that really matters has been cut off at the knees by corporate lobbying, corporate money, the revolving door between corporations and the federal government, and a Supreme Court that has ruled again and again that corporations are people and which recently ruled that money is free speech thereby giving corporations the right to use their monies in basically any which way they want. Apparently the US Supreme Court has forgotten what Cecil Rhodes is once reputed to have said, "money is power". It is clear to anyone with eyes that so much of the reason for the crash of 2008 was grounded in widespread, including in the press, and popular optimistic ideologies that the economy would continue to go up, up, up, up, up and that the real estate market would never collapse. These recent optimistic ideologies, of course, parallel similarly optimistic ideologies before the crash of 1929. It is clear to anyone with eyes that those naysayers who burst this optimistic bubble were attacked for being spoil sports by virtually everyone on Wall Street, in government, and in the press. It is clear to anyone with eyes that the derivatives developed by corporate bureaucrats at J.P. Morgan, the derivatives given AAA status by ratings agencies who were either in on the scheme or were mystified by derivatives, and diffused from Wall Street to other investment banks around the financial capitalist world played a major role in the crash of 2008. It is clear to anyone with eyes that Brooksley Born, head of the US government regulatory Commodity Futures Trading Commission (CFTC), did try to regulate the "black box" derivatives market but was cut off at the knees by free market true believer (at least until recently) and then chair of the Federal Reserve Bank Alan Greenspan, Robert Rubin, Bill Clinton's then Secretary of the Treasury who, by the way and not surprisingly, came to government from investment bank Goldman-Sachs, and then Deputy Secretary of the Treasury and Rubin protege Larry Summers, after their corporate buddies got on the phone to them complaining about Born and her attempt to a regulate derivatives. They claimed that any attempt to regulate the derivatives market, a relatively new and unregulated market that had spreading risk and the belief that risk could be conquered by spreading it at its heart, and which US government regulators knew nothing about because it wasn't and couldn't be regulated would undermine the booming American and global economy. Shades again of the laissez-faire rhetoric that predominated in the 1920s before the Great Crash and the Great Depression. It should be clear to anyone with eyes and minds, in other words, that the government has essentially been bought by Wall Street and is being largely run by Wall Street. It is thus at Wall Street's door that the blame for the collapse of 2008 should lie.

By the way, derivatives, which were at the heart of the 2008 crisis, derivatives which were, as was Wall Street in 1929, unregulated (do you see the connection between a lack of regulation and the periodic booms and busts of capitalism?), were not fully understood by those who were flimflammed into buying them by the used derivatives salesmen and women from the investment bank world who hawked them, including corporations like Proctor and Gamble, convents in Italy, and local and national governments from Greece to Jefferson County, Alabama. After the crash and as a result of the crash the toxic derivatives held by banks, states, and localities resulted in severe revenue problems for all three all around the modern world. As I type this blog post the political right is using the 2008 financial crisis, the financial crisis they helped cause thanks to their mania for deregulation and opposition to re-regulation, to manipulate the masses, via the worst form of demagoguery imaginable, into believing that the government did it and to use popular anger at the bailout of Wall Street banks to do something they have dreamed of doing since the Third New Deal, cutting back on government social programmes and cutting the unions off at the knees. And they are succeeding bit by bit in this Dixiefornication of America.

As historians and others have pointed out for years when you allow the foxes to guard the hen house, anti-regulatory ideologues to run government departments, and corporations to lobby and give millions of dollars to members of Congress and those running for Congress you are going to end up with the "best" government corporate money can buy. And that is what we have and this is what we are likely to have for many years to come thanks to the Supreme Court's Citizens United decision, a ruling that will continue to give us a government controlled by corporate oligarchs and their minions in Congress, their minions in state governments, their minions on right wing radio, their minions in think tanks, their bread and circuses advertising, and their bread and circuses popular culture, for the foreseeable future.

Beyond the debate over who was primarily responsible for the crash of 2008 there were a number of other things that fascinated me about the Intelligence Squared debate over who was more responsible for the crisis of 2008, the US government or Wall Street. One thing in particular I found fascinating was the seeming consensus among everyone on the panel that greed could not only be good but that it was part of human nature. What I find so fascinating about this assertion, this ideology, this belief that greed is an inherent part of our very humanness, is that is is generally assumed and rarely analysed either empirically and historically. Sure humans can and sometimes are greedy. I give you the infamous Kitty Genovese incident that occurred in 1964 in Kew Gardens, Queens. I give you Wall Streeters in the 1920s and the 2000s who manipulated the market, often using other people's money to do it, for personal profit and gain. But humans can be and sometimes are altruistic as well. Traditionally in !Kung Bushman society the fruits of hunting and collecting were distributed freely to all members of the tribe. This economic communalism or sharing was very likely practised by early humans in general since the earliest humans were all hunters and collectors. Altruism, by the way, was not shoved onto the dust pile of human history as most humans moved beyond hunting and collecting. I give you those Danes who sailed Jews to safety and freedom during World War II. Conclusion? Humans are both greedy and altruistic and no sophistry of how altruism is really greed masquerading will change that.

Given that humans can and are both naturally greedy and altruistic we have to ask whether certain social organisational forms can and do exaggerate one or the other of these human traits. Do hunter-gatherer forms of social organisation, because they place a premium on cooperation, tend to lead to societies characterised by a greater degrees of altruism? Do large scale trading, agricultural, and modern centralised corporate and consumer capitalist societies, because they reduce everything and everyone over time to private commodities, tend to lead to ever greater expressions of human greed? I would answer yes to each.

I want to end this blog post without a mea culpa. I didn't do it. I didn't cause the great crash of 2008. But then I never swallowed the Wall Street and DC utopian gobbledygook that all deregulation was good, that the economy would never collapse, that free markets would make us all rich, and that greed was really really good. Soooooo. Blame each other. Blame yourselves. The enemy as Pogo once said, is some of us.



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