OBAMA AND HIS BANKSTERS:
And it all got much, much worse after 2008,
when the schemes collapsed and, as Lemann points out, Barack Obama did not
aggressively rein in Wall Street as Roosevelt had done, instead restoring the
status quo ante even when it meant ignoring a staggering white-collar crime
spree. RYAN COOPER
The Rise of Wall Street Thievery
How corporations and their
apologists blew up the New Deal order and pillaged the middle class.
by Ryan Cooper
America has long had a
suspicious streak toward business, from the Populists and trustbusters to
Bernie Sanders and Elizabeth Warren. It’s a tendency that has increased over
the last few decades. In 1973, 36 percent of respondents told Gallup they had
only “some” confidence in big business, while 20 percent had “very little.” But
in 2019, those numbers were 41 and 32 percent—near the highs registered during
the financial crisis.
Clearly, something has
happened to make us sour on the American corporation. What was once a stable
source of long-term employment and at least a modicum of paternalistic benefits
has become an unstable, predatory engine of inequality. Exactly what went
wrong is well documented in Nicholas Lemann’s excellent new book, Transaction
Man. The title is a reference to The Organization Man, an
influential 1956 book on the corporate culture and management of that era.
Lemann, a New Yorker staff writer and Columbia journalism
professor (as well as a Washington Monthly contributing
editor), details the development of the “Organization” style through the career
of Adolf Berle, a member of Franklin D. Roosevelt’s brain trust. Berle argued
convincingly that despite most of the nation’s capital being represented by the
biggest 200 or so corporations, the ostensible owners of these firms—that is,
their shareholders—had little to no influence on their daily operations.
Control resided instead with corporate managers and executives.
Transaction Man: The Rise of the Deal and the
Decline of the American Dream
by Nicholas Lemann
Farrar, Straus and Giroux, 320 pp.
Berle
was alarmed by the wealth of these mega-corporations and the political power it
generated, but also believed that bigness was a necessary concomitant of economic
progress. He thus argued that corporations should be tamed, not broken up. The
key was to harness the corporate monstrosities, putting them to work on behalf
of the citizenry.
Berle
exerted major influence on the New Deal political economy, but he did not get
his way every time. He was a fervent supporter of the National Industrial
Recovery Act, an effort to directly control corporate prices and production,
which mostly flopped before it was declared unconstitutional. Felix
Frankfurter, an FDR adviser and a disciple of the great anti-monopolist Louis
Brandeis, used that opportunity to build significant Brandeisian elements into
New Deal structures. The New Deal social contract thus ended up being a
somewhat incoherent mash-up of Brandeis’s and Berle’s ideas. On the one hand,
antitrust did get a major focus; on the other, corporations were expected to
play a major role delivering basic public goods like health insurance and
pensions.
Lemann
then turns to his major subject, the rise and fall of the Transaction Man. The
New Deal order inspired furious resistance from the start. Conservative
businessmen and ideologues argued for a return to 1920s policies and provided
major funding for a new ideological project spearheaded by economists like
Milton Friedman, who famously wrote an article titled “The Social
Responsibility of Business Is to Increase Its Profits.” Lemann focuses on a
lesser-known economist named Michael Jensen, whose 1976 article “Theory of the
Firm,” he writes, “prepared the ground for blowing up that [New Deal] social
order.”
Jensen
and his colleagues embodied that particular brand of jaw-droppingly stupid that
only intelligent people can achieve. Only a few decades removed from a crisis
of unregulated capitalism that had sparked the worst war in history and nearly
destroyed the United States, they argued that all the careful New Deal
regulations that had prevented financial crises for decades and underpinned the
greatest economic boom in U.S. history should be burned to the ground. They were
outraged by the lack of control shareholders had over the firms they supposedly
owned, and argued for greater market discipline to remove this “principal-agent
problem”—econ-speak for businesses spending too much on irrelevant luxuries
like worker pay and investment instead of dividends and share buybacks. When
that argument unleashed hell, they doubled down: “To Jensen the answer was
clear: make the market for corporate control even more active, powerful, and
all-encompassing,” Lemann writes.
The
best part of the book is the connection Lemann draws between Washington
policymaking and the on-the-ground effects of those decisions. There was much
to criticize about the New Deal social contract—especially its relative
blindness to racism—but it underpinned a functioning society that delivered a
tolerable level of inequality and a decent standard of living to a critical
mass of citizens. Lemann tells this story through the lens of a thriving
close-knit neighborhood called Chicago Lawn. Despite how much of its culture
“was intensely provincial and based on personal, family, and ethnic ties,” he
writes, Chicago Lawn “worked because it was connected to the big organizations
that dominated American culture.” In other words, it was a functioning
democratic political economy.
Then
came the 1980s. Lemann paints a visceral picture of what it was like at street
level as Wall Street buccaneers were freed from the chains of regulation and
proceeded to tear up the New Deal social contract. Cities hemorrhaged
population and tax revenue as their factories were shipped overseas. Whole
businesses were eviscerated or even destroyed by huge debt loads from hostile
takeovers. Jobs vanished by the hundreds of thousands.
And
it all got much, much worse after 2008, when the schemes collapsed and, as
Lemann points out, Barack Obama did not aggressively rein in Wall Street as
Roosevelt had done, instead restoring the status quo ante even when it meant
ignoring a staggering white-collar crime spree. Neighborhoods drowned
under waves of foreclosures and crime as far-off financial derivatives
imploded. Car dealerships that had sheltered under the General Motors umbrella
for decades were abruptly cut loose. Bewildered Chicago Lawn residents
desperately mobilized to defend themselves, but with little success. “What they
were struggling against was a set of conditions that had been made by faraway
government officials—not one that had sprung up naturally,” Lemann writes.
Toward the end of the
book, however, Lemann starts to run out of steam. He investigates a possible
rising “Network Man” in the form of top Silicon Valley executives, who have
largely maintained control over their companies instead of serving as a sort of
esophagus for disgorging their companies’ bank accounts into the Wall Street maw.
But they turn out to be, at bottom, the same combination of blinkered and
predatory as the Transaction Men. Google and Facebook, for instance, have grown
over the last few years by devouring virtually the entire online ad market,
strangling the journalism industry as a result. And they directly employ far
too few people to serve as the kind of broad social anchor that the car
industry once did.
In
his final chapter, Lemann argues for a return to “pluralism,” a “messy,
contentious system that can’t be subordinated to one conception of the common
good. It refuses to designate good guys and bad guys. It distributes, rather
than concentrates, economic and political power.”
This
is a peculiar conclusion for someone who has just finished Lemann’s book, which
is full to bursting with profoundly bad people—men and women
who knowingly harmed their fellow citizens by the millions for their own
private profit. In his day, Roosevelt was not shy about lambasting rich people
who “had begun to consider the government of the United States as a mere
appendage to their own affairs,” as he put it in a 1936 speech in which he also
declared, “We know now that government by organized money is just as dangerous
as government by organized mob.”
If
concentrated economic power is a bad thing, then the corporate form is simply a
poor basis for a truly strong and equal society. Placing it as one of the
social foundation stones makes its workers dependent on the unreliable goodwill
and business acumen of management on the one hand and the broader marketplace
on the other. All it takes is a few ruthless Transaction Men to undermine the
entire corporate social model by outcompeting the more generous businesses. And
even at the high tide of the New Deal, far too many people were left out,
especially African Americans.
Lemann
writes that in the 1940s the United States “chose not to become a full-dress
welfare state on the European model.” But there is actually great variation
among the European welfare states. States like Germany and Switzerland went
much farther on the corporatist road than the U.S. ever did, but they do
considerably worse on metrics like inequality, poverty, and political
polarization than the Nordic social democracies, the real welfare kings.
Conversely,
for how threadbare it is, the U.S. welfare state still delivers a great deal of
vital income to the American people. The analyst Matt Bruenig recently
calculated that American welfare eliminates two-thirds of the “poverty gap,”
which is how far families are below the poverty line before government
transfers are factored in. (This happens mainly through Social Security.)
Imagine how much worse this country would be without those programs! And though
it proved rather easy for Wall Street pirates to torch the New Deal corporatist
social model without many people noticing, attempts to cut welfare are
typically very obvious, and hence unpopular.
Still,
Lemann’s book is more than worth the price of admission for the perceptive
history and excellent writing. It’s a splendid and beautifully written
illustration of the tremendous importance public policy has for the daily lives
of ordinary people.
Ryan Cooper
Ryan Cooper is a national
correspondent at the Week. His work has appeared in the Washington Post, the
New Republic, and the Nation. He was an editor at the Washington Monthly from
2012 to 2014.
A record $31.5 trillion hoarded by corporate oligarchs
8 September 2018
According to the Wealth-X World Ultra Wealth Report 2018, 255,810 “ultra high net worth” (UHNW) individuals with a minimum $30 million in wealth now collectively own $31.5 trillion, an increase of 16.3 percent between 2016 and 2017.
In other words, a group of oligarchs equal in number to the population of Plano, Texas or Nottingham, England own more than the poorest 80 percent of the world—some 5.6 billion people.
The figures of wealth concentration are hard to fathom:
* In North America, the total number of UHNW individuals rose 9.5 percent to 90,440 and their wealth rose 13.1 percent to $11 trillion.
* In Europe, the UHNW population rose 12.8 percent to 72,570, with a total wealth of $8.8 trillion, up 13.5 percent.
* In Asia, there were 68,970 UHNW individuals in 2017, an 18.5 percent increase from 2016. Their wealth shot up 26.7 percent during this period to $8.4 trillion.
* By 2022, the UHNW population is expected to increase to 360,390 people, whose combined wealth “is projected to rise to $44.3 trillion, implying an additional $12.8 trillion of newly created wealth over the next five years.”
* Those 22.3 million people with a net worth over $1 million own a combined $91.7 trillion, almost triple the combined wealth of the poorest 90 percent of the world’s population.
The Wealth X report makes clear that the rise in wealth concentration is the product of deliberate policies enacted by governments all over the world. It credits loose monetary policy—market liberalization in China, tax reform and corporate deregulation in India, and massive tax cuts for the wealthy in the US—that the report notes were “aimed squarely at providing generous exemptions to corporations and the ultra wealthy.”
In Volume 1 of Capital, Karl Marx, the founder of scientific socialism, wrote: “Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil slavery, ignorance, brutality, mental degradation, at the opposite pole.”
Under capitalism, the wealth of the super-rich comes from the exploitation of the international working class.
* Half the world lacks access to healthcare and 100 million people are forced into extreme poverty each year due to healthcare expenses (World Health Organization, 2017).
* 1.2 billion people lack access to electricity (Rockefeller Foundation, 2017).
* 2 billion people use a drinking water source that is contaminated with feces (World Health Organization, 2018).
* 8.6 million people die each year from lack of healthcare or poor quality healthcare ( The Lancet, 2018).
* 750 million adults do not know how to read or write (UNESCO, 2017).
* By 2020, 1.6 billion people will lack access to secure, adequate housing (World Resources Institute, 2017).
* 50.5 million children under the age of 5 are “wasting” due to malnutrition (World Bank, 2018).
* 850 million people suffer from “chronic undernourishment” (UN Food and Agriculture Organization, 2016).
* 4 billion people do not have internet access (UNESCO, 2017).
Even in the most advanced countries of Europe and North America, the working class faces increasingly precarious conditions dominated by declining life expectancy, greater incidences of suicide and drug/alcohol abuse, growing student debt, declining wages and cuts to social programs. In the United States, home to roughly one third of the world’s ultra-wealthy individuals, some 69 percent of people have less than $1,000 in total savings.
The international working class has no representation in any government or any capitalist political party, and the political establishment is dominated by the super-rich. The billionaire and multimillionaire “ultra-high net worth” individuals deliberate and reach decisions regarding state policy and the distribution of resources entirely behind the backs of the population.
All the official and semi-official institutions of government, including academia, the corporate media, and the trade unions, are subordinated to the interests of the modern aristocracy and serve to constrain and block the development of a unified movement of the working class for social equality. As inequality grows, the ruling elite are preparing for the threat of social revolution by rescinding basic democratic rights, censoring the internet, establishing permanent states of emergency, and elevating extreme-right-wing and neo-fascistic parties to poison the airwaves with racism, xenophobia and nationalism.
However, the working class is not only an oppressed class, it is also a powerful revolutionary social force.
Advances in technology, communications and transportation have led to a significant expansion of the numeric size of the international working class. Over the last 50 years, countries like India, China, Nigeria, South Africa, Brazil, Turkey, Iran and many more have been transformed from countries with relatively small working-class populations to massive centers of industrial output involving tens of millions or billions of workers.
At the same time, globalization has linked workers in all corners of the world together in the process of production. The internet has made it possible for workers to communicate and strategize with one another across workplaces and national borders. The democratic and revolutionary potential of the internet has made it a target of censorship by the ruling class around the world, led by the efforts by US-based corporations Google, Facebook and Twitter to downgrade and hide left-wing websites like the World Socialist Web Site .
The Wealth X report points to the immense revolutionary potential in the present situation. As Friedrich Engels wrote in Anti-Duhring :
“The growing perception that existing social institutions are unreasonable and unjust, that reason has become unreason, and right wrong, is only proof that in the modes of production and exchange changes have silently taken place with which the social order, adapted to earlier economic conditions, is no longer in keeping. From this it also follows that the means of getting rid of the incongruities that have been brought to light must also be present, in a more or less developed condition, within the changed modes of production themselves.”
The Wealth X report confirms that the resources for the transformation of the planet on an egalitarian basis already exist.
No aristocracy has ever given up power simply because their existence is a brake on the development of the productive forces. To free up the tens of trillions of dollars needed to meet the needs of the world population requires a socialist revolution.
Ranks of long-term jobless soar as US
unemployment aid dries up
The number of long-term jobless workers in the United States continues to rise with millions of workers being forced to fend for themselves as the US Congress refuses to provide any aid to protect them against hunger, poverty and homelessness.
Last week’s job report from the US Department of Labor showed that a staggering 695,000 workers dropped out of the workforce.
The number of long-term unemployed out of work for 27 weeks or more increased by 781,000 to 2.4 million. These workers have exhausted their 26-week limit on state unemployment benefits, and another five million laid-off workers will reach this limit over the next two months.
At the end of July, Congress allowed the $600-a-week federal supplement to state benefits to expire, reducing weekly income in many cases by two-thirds or more over the last two months.
While Trump promised a $300-a-week Lost Wages Assistance benefit for six weeks, the funds allocated for this totally inadequate program have quickly dried up, with at least nine states announcing they have ended paying the additional benefit.
Congress has shown no interest in restoring any jobless benefits and the issue has hardly rated a mention in the corporate media, let alone by Democratic candidate Joe Biden. The issue of extending jobless benefits was not raised a single time during the debate last week.
Under these conditions, hunger is rising. In August, the Feeding America network food banks distributed an estimated 593 million meals, an increase of 64 percent from a typical pre-pandemic month. Meals on Wheels America, another charity, reported that their food programs were serving an average of 77 percent more meals and 47 percent more high-risk seniors in August than they were on March 1.
An analysis released last week by Feeding America projects a 6 billion to 8 billion meal shortfall over the next 12 months. The total need for charitable food over the next year, Feeding America estimates, will reach 17 billion pounds, more than three times last year’s distribution.
A recent survey taken by the US Census Bureau in August found that 10.5 percent or 22.3 million adults say they cannot afford to adequately feed their families, up from 18 million in March.
This situation is being worsened by a new round of mass layoffs, including from airlines, entertainment companies and aircraft manufacturers, which received billions in CARES Act money and tax cuts. Over the last few days alone, corporations have announced almost 100,000 new layoffs.
Last Thursday, United, American and other major US airlines began laying off 32,000 flight attendants, pilots and other airline workers after the expiration of the temporary prohibition on permanent job cuts which was contained in the CARES Act’s $24 billion bailout of the airlines. On Monday, Southwest Airlines CEO Gary Kelly said all employees would have to take a 10 percent pay cut by Jan. 1, 2021, to avoid permanent job cuts.
This week Cineworld, the world’s second-biggest cinema chain, is closing its US and United Kingdom theaters, laying off 45,000 workers, including nearly 40,000 at 536 Regal theaters in the US. This follows the announcement by Disney last week that it is laying off 28,000 of its 100,000 employees at its US parks and resorts.
Department store chain JCPenney will close 149 stores and cut 15,000 jobs ahead of the holiday shopping season as part of its plan to emerge from bankruptcy.
Another 280,000 workers lost jobs last month in local and state education, as new austerity measures were imposed even as teachers and students were forced back into unsafe schools.
The American ruling class is seeking to use mass unemployment and the threat of poverty as bludgeons in its drive to herd workers back into unsafe factories and workplaces in order to further enrich the financial oligarchy. This is the policy not only of Trump and the Republicans but the Democrats on the federal, state and local levels. That is why the cutoff of jobless benefits has received bipartisan support.
But workers are fighting back in their own defense. This week, nurses and other health care workers are set to strike in Minneapolis and northern California. Protests by teachers, parents and students against the unsafe return to schools, which has already led to the deaths of 30 educators and the infection of thousands of students, are spreading across New York, Wisconsin and other states.
In opposition to the treachery of the unions, which have collaborated in the deadly back-to-school and back-to-work campaign, educators, autoworkers and other workers have set up rank-and-file safety committees in Michigan, Indiana, Illinois, Texas, Florida and other states.
In a report yesterday, World Bank Group President David Malpass warned of an “inequality pandemic,” a term first coined by the World Socialist Web Site, and warned the ruling elites of the potentially revolutionary consequences of international working-class resistance. “In an interconnected world, where people are more informed than ever before,” Malpass warned, “this pandemic of inequality—with rising poverty and declining median incomes—will increasingly be a threat to the maintenance of social order and political stability.”
The ruling class’s fear of mounting popular resistance to the Trump administration’s homicidal “herd immunity” policy is what lies behind the increasing moves towards authoritarian measures, including Trump’s threats of a presidential coup if he loses the elections. A report in the Wall Street Journal Monday noted that New York City Police Department was training its 35,000 cops “to prepare for the possibility of widespread unrest after the US presidential election and the vote on the nomination of a new Supreme Court justice.”
As for Biden and the Democrats, there is nothing they fear more than a movement from below against Trump because of the danger this would pose to the corporate and financial oligarchy, which the Democrats defend just as ruthlessly as the Republicans.
But that is exactly what needs to be done. The growing opposition of workers and young people over the pandemic, social inequality, police killings, the danger of fascism and war must be united. In every workplace and community, new organizations of struggle, rank-and-file committees, must be formed, independent of the corrupt unions and both capitalist parties, to prepare a political general strike.
The American ruling class, which has produced only mass death and social misery, has no legitimate claim to hold onto political power. It is up to the working class to take the reins of power into its own hands, expropriate the private fortunes of the billionaires and carry out a socialist restructuring of economic and social life, to meet the needs of society, not the wealthy few.
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