Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington under nine presidents and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

January 13, 2009


Matthew Rothschild, Progressive - We wouldn't be in the Great Recession today if Bill Clinton and Robert Rubin hadn't deregulated the financial industry.

We wouldn't be in the Great Recession today if Alan Greenspan and Ben Bernanke and Henry Paulson hadn't let the housing bubble expand to the popping point.

We wouldn't be in the Great Recession today if the Bush Administration had bailed out homeowners instead of just bankers. But here we are, right smack in the middle of the Great Recession, and now it's on Barack Obama's plate. . .

Obama may have to spend between $500 billion and $1 trillion to forestall double-digit unemployment. What he spends that money on is almost as vital as the aggregate amount. Fortunately, he is wisely talking about repairing our infrastructure, sharing money with state governments, and initiating a green jobs program. . .

Unfortunately, his economic appointments leave a lot to be desired. He could have picked someone like Joseph Stiglitz or James Galbraith or Dean Baker to head the Treasury and the National Economic Council. All have been critics of corporate globalization. All are strong proponents of reregulating financial institutions and reflating the economy.

Instead, he chose Lawrence Summers to head the council and Timothy Geithner to be Treasury Secretary. Both are experienced at ramming free market policies down the throats of other nations. Both were disciples of Robert Rubin when he began to deregulate the financial industry as Clinton's Treasury Secretary in the late 1990s.

Summers served as chief economist at the World Bank from 1991 to 1993, when it was foisting structural adjustment policies on developing nations. And when he moved over to Treasury, he got Stiglitz fired from the World Bank after the Nobel Prize-winner criticized such policies.

"Spread the truth-the laws of economics are like the laws of engineering," he said while at the World Bank. "One set of laws works everywhere." . . .

Summers also helped knock down Glass-Steagall, the wall erected in the New Deal to keep commercial banks and investment houses separate.

Then as Treasury Secretary, Summers approved the deregulation of the financial industry even further. He and Clinton signed off on the Commodity Futures Modernization Act that removed oversight from the credit default swaps and derivatives trading that have so imperiled our economy.

Summers was Rubin's disciple. And Timothy Geithner is Summers's disciple.

Geithner got his start working for Kissinger and Associates, which should be a disqualification in and of itself. So, too, should be working for the IMF for Bush Jr., which Geithner did from 2001 to 2003.

In between, Geithner worked in the Treasury Department under Bush I and Clinton. . .

Since 2003, Geithner has been president of the Federal Reserve Bank of New York. He testified to Congress in March that he couldn't explain what precipitated the financial instability we're in right now.

"What produced this is a very complicated mix of factors," he said. "I don't think anybody understands it yet."

That's either a cop-out or a confession. Maybe he should have just taken the Fifth. Because he's also been intimately involved with the criminally negligent bank bailouts.

"His easy terms protected shareholders and executives but demanded almost nothing from the failing banks for the public," William Greider noted in The Nation. "Worst of all, the deals did not work. They have failed to stabilize much of anything and are still putting Wall Street preservation ahead of the national interest. Where is the evidence that we can expect a different approach if Geithner is in charge? Or even that he understands the true dimensions of this crisis?"

Another disturbing appointment by Obama was Peter Orszag to head up the Office of Management and Budget. When he was on the campaign trail, Obama accused John McCain of planning to cut Social Security benefits. Well, Orszag wants to do that, too.

In 2005, he co-wrote a paper called "Saving Social Security: The Diamond-Orszag Plan." It calls for "a reduction in benefits, which would apply to all workers age 59 and younger." . . .

Social Security is not in crisis. And there's no reason to be hacking away at the safety net-especially if you're a Democrat.

Now is the time for a new New Deal, not for ripping up the old one.

At some level, Obama appears to understand that. But his economic team-that's another story.


Blogger Kevin Carson said...

I take vehement exception to calling the policies Summers and Geithner pushed down other countries throats as "free market."

Neoliberal elites like to refer to their corporatist, state capitalism as the "free market." But then Stalin liked to refer to his system as "socialism." In both cases, the language and symbolism of a movement were misappropriated to legitimize a system of statist control.

Corporate globalization depends on massive state intervention, subsidy and protection at every stage of its existence.

For example, so-called "intellectual property" plays the same protectionist role for TNCs that tariffs played for the old national industrial economies. All the major sectors of the global economy are heavily dependent on IP (software and entertainment), direct government subsidies (armaments and agribusiness), or both (pharma, biotech, electronics).

Global corporations also depend heavily on the state to subsidize their investments (e.g. World Bank loans and foreign aid for building power and road infrastructure needed to make overseas plants profitable), to subsidize their distribution costs (transportation subsidies), or to assume risk (e.g. the role of the U.S. national security community in propping up capital-friendly regimes, keeping agribusiness-friendly landed oligarchies in power, etc.)

The truth is, Big Business hates genuine free markets as much as Stalin hated genuine socialism. If there were even a remote threat of a genuine free market, the Fortune 500 would launch a coup to forestall it. A genuine free market society, without any subsidies or special protections to Big Business, would be decentralized and relocalized beyond our wildest imagination.

January 13, 2009 10:30 PM  
Anonymous Anonymous said...

It's telling, unfortunate and tragic that Mr. Smith insists on promulgating this kind of outdated, counterproductive, misleading economics-as-religion nonsense. This kind of analysis entirely misses the forest for the trees. Dead, fictional trees at that.

Trying to understand the current economic situation without the context of a finite planet is like trying to breathe without air.

Hint, Me-Myself-and-I Libertarianism is not the answer.

I recommend reality:

1) An excellent, big-picture interview with geologists, Howard G. Wilshire and Jane E. Nielson:

At one point in the interview, Jane E. Nielson says, "[I]t’s probably no coincidence that the US went off the gold standard in the same stretch of years that the US reached its peak production of petroleum and really began to be unable to expand its gold supply. So that produced a constraint on how much more wealth could be created. So we went on to a different footing for our currency and that has lead to where we are now, by means that I won’t go into."

The "means" are well explained by:

2) The Disconnection Between Financial Assets and Real Assets, by reality-based economist, Herman Daly


3) Biophysical Economics: In the future, economists will return to earth

Unfortunately, they won't do it voluntarily and if Status Quobama is any indication, neither will we.


The Not-So-Unites States

January 14, 2009 2:04 AM  
Anonymous Anonymous said...

A 'genuine free market society' is an absolute fiction, a naive utopian concept doomed by the very nature of human nature. Mankind remains a savage, combative, greedy, and self-centered animal.

January 14, 2009 8:31 AM  
Blogger Kevin Carson said...

The view of the state as something that protects ordinary people against big business is the real "naive utopian concept." If your Hobbesian view of human nature is correct, rather than my Kropotkinian view, then we're doomed. The state, since the beginning of history, has been the instrument of a ruling class. It first came into existence when human predators figured out the peasantry produced a sufficient surplus to be milked like cattle; since then, starting with the king, priests and nobles, moving on to feudal landlords and capitalists, one ruling class after another has been milking us.

It's utterly naive and utopian to believe a majority of the public can exert meaningful control over the state apparatus. A minority of insiders will always have an advantage in time, attention span, interest, information, and agenda control over those of us on the outside. The average person on the outside only has a limited amount of time or energy for maintaining an interest in politics, after dealing with the primary issues of work and family, friends, and local community. But for the elites that control the state, politics IS a major part of their daily work and social life. It's utterly naive to believe that, in the long run, we can maintain a higher degree of vigilance over the functioning of the state than they can.

If the state exists as a level of economic control by which a ruling class can profit, you'd better believe the most "savage, combative, greedy and self-centered" will always have a leg up in gaining control of it. Our only hope, in that case, is that the self-centered savages who gain control of the state will be smart enough to see it as in their self-interest to take good care of us so they can get more work out of us.

You seem to believe that the violence, greed and self-centeredness of human beings is an argument for a state to control them. I see it as an argument against trusting them with the control of a state.

The so-called "progressive" policies of the 20th century were, in fact, (contrary to the Art Schlesinger received version of history) undertaken in the interest of one faction of the capitalist elite. The two factions of the state capitalist elite are like two farmers. One farmer is smart enough to realize he'll get more work out of his livestock in the long run by feeding them well and not pushing them too hard. The other farmer figures he'll come out ahead by working them to death and replacing them. If I have to be someone's chattel, I'd prefer it be the kindly farmer. But I'd prefer not to have an owner at all.

May your illusions rest kindly on you.

January 14, 2009 2:14 PM  

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