Capitalist Socialism

Sep.20, 2008 in Market Outlook

The most vital to underscore is that the beneficiaries of this week’s extraordinary Government schemes aren’t just the coincidental recipients of largesse due to some random stroke of good luck. The people on whose behalf these schemes are being implemented — the true beneficiaries — are the very same people who have been running and owning our Government — both parties — for decades, which is why they have been able to do what they’ve been doing without interference. They were able to gamble without limit because they control the Government, and now they’re having others bear the brunt of their collapse for the same reason — because the Government is largely run for their benefit.

If there is any “pitchfork moment” — an episode that understandably would send people into the streets in mass outrage — it would be this. Nobody really even seems to know how much of these losses “the Government” — meaning working people who had no part in the profits from these transactions — is undertaking virtually overnight but it’s at least a trillion dollars, an amount so vast it’s hard to comprehend, let alone analyze in terms of consequences. The transactions are way too complex even for the most sophisticated financial analysts to understand, let alone value. Whatever else is true, generations of Americans are almost certainly going to be severely burdened in untold ways by the events of the last week — ones that have been carried out largely without any debate and mostly in secret.

Third, what’s probably most amazing of all is the contrast between how gargantuan all of this is and the complete absence of debate or disagreement over what’s taking place. It’s not just that, as usual, Democrats and Republicans are embracing the same core premises (”this is regrettable but necessary”). It’s that there’s almost no real discussion of what happened, who is responsible, and what the consequences are. It’s basically as though the elite class is getting together and discussing this all in whispers, coordinating their views, and releasing just enough information to keep the stupid masses content and calm.

Can anyone point to any discussion of what the implications are for having the Federal Government seize control of the largest and most powerful insurance company in the country, as well as virtually the entire mortgage industry and other key swaths of financial services? Haven’t we heard all these years that national health care was an extremely risky and dangerous undertaking because of what happens when the Federal Government gets too involved in an industry? What happened in the last month dwarfs all of that by many magnitudes.

The Treasury Secretary is dictating to these companies how they should be run and who should run them. The Federal Government now controls what were — up until last month — vast private assets. These are extreme — truly radical — changes to how our society functions. Does anyone have any disagreement with any of it or is anyone alarmed by what the consequences are — not the economic consequences but the consequences of so radically changing how things function so fundamentally and so quickly?

Other countries are debating it. The headline in the largest Brazilian newspaper this week was: “Capitalist Socialism??” and articles all week have questioned — with alarm — whether what the U.S. Government did has just radically and permanently altered the world economic system and ushered in some perverse form of “socialism” where industries are nationalized and massive debt imposed on workers in order to protect the wealthiest. If Latin America is shocked at the degree of nationalization and government-mandated transfer of wealth, that is a pretty compelling reflection of how extreme — unprecedented — it all is.

But there’s virtually no discussion of that in America’s dominant media outlets. All one hears is that everything that is happening is necessary to save us all from economic doom. And what’s most amazing about that is that the Natural, Unchallenged Consensus That Nobody Questions can shift drastically in a matter of days and still nobody questions anything. This is what Atrios observed as I was writing this post:

It’s fascinating to watch how easily consensus is manufactured. A few days ago elite opinion seemed to be cheering Paulson’s “no bailout” line, and now they’re cheering a trillion bucks thrown down the crapper. All the Very Serious People will spend their days coming up with their pony plans, oblivious to the fact that the pony plan is not an option. The Bush administration’s plan is the option.
The way it works is that Bush officials decree how things will be, and then everyone — from Congressional Democrats to the Serious Pundits — jump uncritically and obediently on board, even if they were on board with the complete opposite approach just days earlier, and then all real dissent vanishes. That’s how the country in general works. As Atrios says: “We’ve seen this game played before.”

I don’t pretend to know anywhere near enough — in terms of either raw information or expertise — in order to opine on the necessity or lack thereof of The Latest Plan in terms of whether the alternatives are worse. But what I do know is that an injustice so grave and extreme that it defies words is taking place; that the greatest beneficiaries are those who are most culpable; and that the same hopelessly broken and deeply rotted institutions and elite class that gave rise to all of this (and so much more) are the very ones that are — yet again — being blindly entrusted to solve this.

UPDATE: Here is the current draft for the latest plan. It’s elegantly simple. The three key provisions: (1) The Treasury Secretary is authorized to buy up to $700 billion of any mortgage-related assets (so he can just transfer that amount to any corporations in exchange for their worthless or severely crippled “assets”) [Sec. 6]; (2) The ceiling on the national debt is raised to $11.3 trillion to accommodate this scheme [Sec. 10]; and (3) best of all: “Decisions by the Secretary 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” [Sec. 8].

Put another way, this authorizes Hank Paulson to transfer $700 billion of taxpayer money to private industry in his sole discretion, and nobody has the right or ability to review or challenge any decision he makes.

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