Views » October 19, 2008 » Web Only

Americans Unwilling to Face Reality

By John R. MacArthur

It’s not as though no one saw it coming. Here’s the economist Michael Hudson, writing in the May 2006 issue of Harper’s magazine: “The reality is that, although home ownership may be a wise choice for many people, this particular real-estate bubble has been carefully engineered to lure home buyers into circumstances detrimental to their own best interests… . The bubble will burst, and when it does, the people who thought they would be living the easy life of a landlord will soon find that what they really signed up for was the hard servitude of debt serfdom.”

Other commentators, including Warren Buffet, said similar things about the derivatives market. It was prescient stuff for anybody who cared to listen, but hardly anybody did. Americans, perhaps even more than other people, have difficulty embracing the concept of “reality.”

In part, this is religious. America remains the land of infinite redemption where any crook can suddenly go straight. In part, it stems from our turbo-charged ethos of capitalism. America has always been the land of get-rich-quick and damn the consequences. We are a nation of fantasists, and things have to get really bad before a politician has the right to trade in hard truth.

So far, I don’t think they’ve gotten bad enough. Even with all the frenzied commentary about the credit crisis now choking the media (while the financial geniuses assembled at the corner of Wall and K Streets scramble to save their hides), I’m struck more by what’s not being said than what is.

Every day I add to a list of critical omissions from the debate. Where, for example, is the voice of organized labor? In previous generations, we could have expected to see the president of the AFL-CIO or the United Auto Workers on the sets of the major talk shows. Apart from David Brancaccio’s NOW on PBS, I couldn’t find a single TV program that featured what might be called a “labor leader.”

Where are the alternative candidates for president like Ralph Nader and Bob Barr? I was pleased to hear that Nader, a long-time critic of the deregulated economy, was permitted to appear on CNN and The O’Reilly Factor after the second McCain-Obama debate, but the time for that was before the House passed the bailout bill.

Why is the heavy financial support for Barack Obama and John McCain from Wall Street off limits for discussion? It’s unlikely they will be asked about it in tonight’s debate — the two parties write the rules to discourage tough questions — but some impertinent journalist might. If you can’t get the media-trained Obama to give a straight answer, why not simply present a graphic contrasting Obama’s Reno speech supporting the bailout and Nader’s argument against it?

For that matter, in its recent take-down of Alan Greenspan and Clinton administration deregulation (including the refusal to regulate derivatives trading), why didn’t The New York Times mention that former Clinton Treasury secretaries Robert Rubin and Lawrence Summers are principal advisers to Obama on the economy? In the same vein, why isn’t Treasury Secretary Henry Paulson, the former CEO of Goldman Sachs, challenged on his slow response to the Fannie Mae and Freddie Mac failures?

The only serious critic I’ve found was interviewed in France’s Le Monde: Columbia finance Prof. Rama Cont argues that six months ago the bailout of the two mortgage agencies would have cost $100 billion instead of an eventual $400 billion to $500 billion. Who pocketed the difference, thanks to Paulson’s “indulgence” of his former colleagues? According to Cont, it was short sellers at Goldman Sachs and hedge funds.

Meanwhile, where are the deep thinkers who might enlighten us in this hour of fear, including Karl Marx? Don’t laugh. Marx had much to say about the so-called “contradictions of capitalism” that bears re-reading today. Nothing he wrote is perfectly applicable to subprime mortgages and the derivatives crapshoot. But Marx’s understanding that unfettered capitalism, while fantastically productive, leads to instability by concentrating wealth in too few hands — that a mass-production/mass-consumption society is fundamentally incompatible with oligarchic control of wealth — is something even Rush Limbaugh could appreciate.

If Marx is too rich for your blood, at least we might hear from John Gray, the renegade former adviser to Margaret Thatcher. Gray is today’s most intelligent critic of globalization and “free trade.” He could explain to a television audience that a great deal of America’s “real economy” (as opposed to an economy based on derivatives trading and shopping at Wal-Mart) has already left the country for cheap-labor locales such the Pearl River Delta, in China, and the south bank of the Rio Grande, never to return. And he could describe the destruction wreaked on traditional societies that suddenly become host to outsourced American factories. Youngstown and Utica are hurting, to be sure, but it’s no picnic either these days for the working class in Nogales or Dongguan.

Finally, there are the great realist novelists, who often see more clearly than journalists. So far, my Google search has not picked up any excerpts from Zola’s novel Money being read on the nightly news. In this brilliant chronicle of a speculative stock bubble, launched by a character named Saccard in 1860s Paris, Zola cuts right to the heart of America’s boom-and-bust neurosis: “Wasn’t such great and rapid prosperity the result of the methods for which [Saccard] was now being blamed. All of this came together. If one accepted the success, one had to accept the risks. When you overheat a machine, it sometimes explodes.”

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• Reader Comments

  You can find many people who had warned of this latest financial crisis. If one understands bubbles, one can see when they are ready to pop.

  James Howard Kunstler in his book “The Long Emergency” predicted these days in 2004. His book is premised on peak oil and the slow but sure decline of nations that depend on an oil economy, zeroing in on the US. He was quite clear in describing the housing bubble and thought it was due anytime, and also describes the exotic financial vehicles ready to fall apart.

  But listening to the “naysayers” in times of ignorant dancing for money isn’t popular in the media.

  And this latest crisis is at least the third in the last decade. Who can forget the Enron, Worldcom, AND yes, Wall Street crap going down in 2002/2003? And way back in 1998, (just ten years ago) we had the Asian crisis that nearly took out the whole shebang due to an American hedge fund, Long Term Capital Management, which was quietly bailed out by the our government.

  Those two previous crisis’ were simply a harbinger of things to come. AND if this bailout proves to be the fix to halting the housing bubble in mid burst or keeping the status quo of freewheeling Wall Street, then we can easily predict another crisis in just a few years.

  Until this nation can face the facts that a well regulated capitalism with average growth is far more fair and healthy for an economy than letting the elites have their rules, ethics and rigged games and everyone else different ones. That’s always what trickle down economics has been about. They play by a different set of rules than everyone else and in so doing they would allow a small portion of their wealth to filter down. They thought this was fair, as egotistical elites would naturally think that they know better than anyone else.

  As far as outsourcing, most of those jobs will never come back it is true. Mainly because as we enter the age of declining oil reserves and prices are trending ever upwards, our wasteful way of life will paradoxically somewhat temper that upward trend because we are going to have to sacrifice our suburbia in the long run and as well the cheap WalMart crap that will become more expensive to ship.

  Posted by Jon B on Oct 20, 2008 at 11:54 AM

  To address other points in the article;

  MacArthur only briefly mentions Hank Paulson. This guy is forming Wall Street in his own image, the God of finance. He allows certain firms to fail, others to merge and others to get funding. All the bailout money is going directly to banks that are the buyers of government treasures at auctions named Primary Dealers. This is no accident and by the way the primary dealers include some foreign banks which you KNOW will be saved by either the foreign government of the banks or by the US.

  Paulson of course was from Goldman Sachs and so is the guy he appointed to oversee the bailout. Can you say, crony capitalism? There is absolutely no way that Goldman Sachs will be allowed to fail, at least as long as Paulson is the God of finance.

  MacArthur rightly points out the campaign contributions from Wall Street to Obama and McCain. He didn’t delve into the contributions made to other presidential candidates that have fallen by the wayside, Mitt Romney and Chris Dodd as the highest recipients. As well, for years Congress has received gazillions from Wall Street, both parties gladly extending their hand. Sitting on the finance committees is a guarantee to big campaign contributions. Can you repeat, crony capitalism?

  What amazes me is that as these firms and companies on Wall Street as they were understanding their plight, that they were throwing money around to politicians like it was Monopoly money. It amazes me because they figured no one would think back a few months to see that this was what they were doing as they were contemplating their possible demise. But then again, I seem to be the only one that has looked back a few months. Crony Capitalism with capital cees.

  And let’s not forget that the next shoe to drop that the media is actually beginning to mention is credit card defaults at high rates. No surprise that the credit card companies were ahead of the curve and lobbied and bribed (let’s just call big time campaign contributions what they really are) hard to get that bankruptcy bill through Congress.

  So again I agree with MacArthur. Until people in this country understand that you can’t create wealth by simply moving numbers around a sphere of deceit rather than actually creating growth by making things, then we will doom ourselves to repeat more economic crisis’.

  Posted by Jon B on Oct 20, 2008 at 12:32 PM

  The history of dynamic capitalism is marked by great literature of disintegration. I adapted Balzac’s play LE FAISEUR some years ago, as BALZAC’S GODOT. For that is what the speculators at the end are really waiting for: for the gentleman who absconded with the funds to return. It’s great comedy but—of course—no one wants to put it on!

  Mr. McArthur is right in many ways but fails to anticipate Lenin who would forecast a big foreign war for the corporate state,

  
  MICHAEL ROLOFF
  Member Seattle Psychoanalytic Institute and Society
  this LYNX will LEAP you to all my HANDKE project sites and BLOGS:
  http://www.roloff.freehosting.net/index.html

  “MAY THE FOGGY DEW BEDIAMONDIZE YOUR HOOSPRINGS!” {J. Joyce}

  “Sryde Lyde Myde Vorworde Vorhorde Vorborde” [von Alvensleben]

  Posted by mikerol69 on Oct 21, 2008 at 3:37 AM

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