“Democracy is always a hindrance to the market plan.”

That title is a quote from Naomi Klein, whose Shock Doctrine perfectly explains what is currently going on America right now viz. our incredible economic upheaval. According to Milton Friedman, “Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.” The ideas lying around are accurately described by Klein as “disaster capitalism,” which is the modus operandi of neo-conservatives who love to capitalize on crises – actual or perceived – to implement policies that benefit the few at the expense of the many. Even Newt Gingrich seems taken aback: “Watching Washington rush to throw taxpayer money at Wall Street has been sobering and a little frightening.”

They’re throwing taxpayer money at Wall Street via the “Paulson Plan,” a plan so enormous (851 words) that as of Tuesday Sen. John McCain still hadn’t even read it. When he gets around to it (a timeout might help), I suggest he pay particular attention to:
Sections 6 and 10: raise our debt limit by 3 trillion and hands Sec. Paulson $700 billion to play with. Where’d they get this number from? According to a Treasury spokeswoman, “”It’s not based on any particular data point. We just wanted to choose a really large number” (emphasis mine).
Section 8: lets Sec. Paulson do as he wishes without any real oversight – “Decisions by [Paulson] pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency” (emphasis mine). Comforting, eh?

In other words, we supposedly can’t afford $150 billion for universal healthcare but $700 billion for Wall Street fatcats is simply A-OK (not to mention the $400 million per day we’re spending on the unjust Iraq War). I swear off credit cards and my only debts are from school… I get no help whatsoever, but Washington’s corporate drinking buddies can have whatever they need when their own sorry asses get in trouble. It’s enough to convince me that when Vermont secedes I’m definitely going with ’em.

I opened with Naomi Klein and so I’ll leave you with the full text of her analysis of our market meltdown:

Free Market Ideology is Far from Finished
by Naomi Klein
September 19, 2008

Whatever the events of this week mean, nobody should believe the overblown claims that the market crisis signals the death of “free market” ideology. Free market ideology has always been a servant to the interests of capital, and its presence ebbs and flows depending on its usefulness to those interests.

During boom times, it’s profitable to preach laissez faire, because an absentee government allows speculative bubbles to inflate. When those bubbles burst, the ideology becomes a hindrance, and it goes dormant while big government rides to the rescue. But rest assured: the ideology will come roaring back when the bailouts are done. The massive debts the public is accumulating to bail out the speculators will then become part of a global budget crisis that will be the rationalization for deep cuts to social programs, and for a renewed push to privatize what is left of the public sector. We will also be told that our hopes for a green future are, sadly, too costly.

What we don’t know is how the public will respond. Consider that in North America, everybody under the age of 40 grew up being told that the government can’t intervene to improve our lives, that government is the problem not the solution, that laissez faire was the only option. Now, we are suddenly seeing an extremely activist, intensely interventionist government, seemingly willing to do whatever it takes to save investors from themselves.

This spectacle necessarily raises the question: if the state can intervene to save corporations that took reckless risks in the housing markets, why can’t it intervene to prevent millions of Americans from imminent foreclosure? By the same token, if $85bn can be made instantly available to buy the insurance giant AIG, why is single-payer health care – which would protect Americans from the predatory practices of health-care insurance companies – seemingly such an unattainable dream? And if ever more corporations need taxpayer funds to stay afloat, why can’t taxpayers make demands in return – like caps on executive pay, and a guarantee against more job losses?

Now that it’s clear that governments can indeed act in times of crises, it will become much harder for them to plead powerlessness in the future. Another potential shift has to do with market hopes for future privatizations. For years, the global investment banks have been lobbying politicians for two new markets: one that would come from privatizing public pensions and the other that would come from a new wave of privatized or partially privatized roads, bridges and water systems. Both of these dreams have just become much harder to sell: Americans are in no mood to trust more of their individual and collective assets to the reckless gamblers on Wall Street, especially because it seems more than likely that taxpayers will have to pay to buy back their own assets when the next bubble bursts.

With the World Trade Organization talks off the rails, this crisis could also be a catalyst for a radically alternative approach to regulating world markets and financial systems. Already, we are seeing a move towards “food sovereignty” in the developing world, rather than leaving access to food to the whims of commodity traders. The time may finally have come for ideas like taxing trading, which would slow speculative investment, as well as other global capital controls.

And now that nationalization is not a dirty word, the oil and gas companies should watch out: someone needs to pay for the shift to a greener future, and it makes most sense for the bulk of the funds to come from the highly profitable sector that is most responsible for our climate crisis. It certainly makes more sense than creating another dangerous bubble in carbon trading.

But the crisis we are seeing calls for even deeper changes than that. The reason these junk loans were allowed to proliferate was not just because the regulators didn’t understand the risk. It is because we have an economic system that measures our collective health based exclusively on GDP growth. So long as the junk loans were fuelling economic growth, our governments actively supported them. So what is really being called into question by the crisis is the unquestioned commitment to growth at all costs. Where this crisis should lead us is to a radically different way for our societies to measure health and progress.

None of this, however, will happen without huge public pressure placed on politicians in this key period. And not polite lobbying but a return to the streets and the kind of direct action that ushered in the New Deal in the 1930s. Without it, there will be superficial changes and a return, as quickly as possible, to business as usual.

11 thoughts on ““Democracy is always a hindrance to the market plan.”

  1. You forgot to mention the 9 trillion dollars ‘invested’ in welfare in the last ten years. Perhaps you can find the $185 billion you are looking for from a partition of that.

    Furthermore the free market did not cause this problem, government did. Government bureaucracy birthed this problem by being too generous in their approval for mass lending to people with no credit (often through Fannie Mae housing), often in the nice name of equality.

    There are many CEO’s getting outrageous salaries but nonetheless it is far too easy to target ‘the rich’ when the government broke the system. We may envy the mega wealthy but less we not forget Exxon — one company — paid more in taxes last year than 55% of the entire United States population combined (from the bottom up).

    Socialism diseased the healthy free trade in our nation and further increased socialism (like this proposed bailout) will only make things worse.

  2. It’s not socialism, it’s plain old cronyism. Sorry bud, Goldman Sachs and Morgan Stanley are private corporations — to say that this is a government-created problem is simply unsupported by facts. The government tried to halt this before it got too far (at first, simply in the form of state regulators whom Bush ignored).

    Fundamentalist free markets (read: laissez faire) simply do not work: unworkable in theory (require pure, closed systems), and unworkable in practice (35 years of experiments world over have bore this out).

    Those not blinded by ideology realize there’s an enormous catch-22 here: either Goldman & Co. fail and demonstrate that truly free markets don’t work, OR we bail out Goldman & Co. and we admit that truly free markets don’t work (this would be the 3rd trillion+ bailout in 20 years). Either way, the Friedmanite fantasy is crumbling and the intellectually honest across the political spectrum have already admitted as much. This catch-22 is the very reason neo-cons are hysterically split on the Paulson plan — no matter which way you slice it, they have to admit failure.

  3. This video explains my position, minus the cheesy music:

    http://www.youtube.com/watch?v=H5tZc8oH–o

    All of the legislative references (although some flashed quickly) are accurate and controlling. Matt Drudge listed this thing on his front page a few hours ago, it goes hand in hand with my original claims that this problem is the result of bad loans and mortgages handed out to people with bad credit and no income (and like I said, commonly in the name of ‘nice’ legislation, some under the Clinton years).

    Anyone who thinks a problem this huge is the result of the last 8 years needs to realize that none of the financial failures began until democrats took congress in 06. But to pin it on them in two years is equally unfair — my point is that this has been a problem created over decades as a result of socialist legislation that (as usual) asserts rights without responsibilities.

  4. RE: Lehman. Seriously! That’s the first thing I thought of when AIG got bailed out. And now all this? I understand next to nothing about the realm of high finance, but I don’t see how they could have been so much terribly worse than anyone else.

  5. “Anyone who thinks a problem this huge is the result of the last 8 years needs to realize that none of the financial failures began until democrats took congress in 06.”

    Huh?

    Nevermind that legislation doesn’t take effect that quickly, but have I been dreaming? Hasn’t the economy been more or less crappy since, I don’t know…2001?

    It is interesting to see the true colors of various people fly in all this though…it has really divided conservatives who really believe in small government from those who just say they do.

  6. Gump,

    Only two of these positions are intellectually viable:
    1. The US race to the moon was warranted.
    2. The US race to the moon was unwarranted.
    3. The US did not land on the moon.

    Likewise, only three of these positions are intellectually viable viz. our current crisis:
    1. Consumers are to blame for taking out loans they couldn’t afford.
    2. Banks are to blame for distorting terms, pressuring consumers, and twisting rules.
    3. Government is to blame because they didn’t regulate enough and/or didn’t enforce regulation.
    4. Government is to blame because there were too many regulations.

    Your last post advocated both (1) and (4), and the latter is simply laughable no matter how many YouTube videos you throw in here. You (and Andrew Sullivan, etc) are wrong about #1, but at least it’s grounded in reality.

    So which kind of neo-con are you: the kind that’s willing to let these banks fail and prove neo-con economics faulty, or the kind that’s willing to let government jump in and prove neo-con economics faulty?

  7. Andrew,
    Wish I could find this great Lehman quote, but it was basically: “WTF? We fail, and THEN you decide to jump in?”

    Thing is, they should’ve seen it coming. Their competitor, Goldman Sachs, has a fellow bandit running the Treasury. Paulson was formerly the largest single shareholder in Goldman Sachs and walked away with $500 million when he left for the Secretary position.

  8. Logic games have nothing to do with a bunch of statements drawn without valid conclusions or invalid conclusions drawn on an absence of hard numbers. You haven’t referenced/cited a single thing that contains the hard numbers of the financial market, just a bunch of philosophical theory on the dangers of free markets. I’m not saying you can’t, you just have yet to do so in a compelling manner.

    Furthermore, Obama and Bush are supporting the bailout as it currently is…..Jim DeMint, Mike Pence, Ron Paul and many, many others (including myself) do not.

    My statements have been echoed by Ron Paul and again, while cheesy, are supported by a ton of statutorial references in that video I posted. There’s nothing neo-con about agreeing with Ron Paul and strongly disagreeing with Bush. Bush and Obama are both wrong on this.

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