Wall Street crisis: Poor to bail out the rich again
By Peter Boyle
September 26, 2008 -- "Rich people got it good in this country", said African-American comedian Wanda Sykes on the September 24 Tonight Show with Jay Leno. "We refuse to let them not be rich. Think about it. Broke people are about to bailout rich people. This is what is going on."
"And they want no oversight. $700 billion dollars and no oversight! No oversight? Why should we? I want receipts dammit! What do you mean no oversight? Because, oh, you're so good with the other money?"
"This is the biggest piece of garbage ever. You know what? It's welfare for the rich...
"It's going to cost every taxpayer $7000. You got the guy there busting his gut working two jobs and barely making $12,000 a year and he's got to cough up something so some Wall Street guy can keep his swimming pool. Man, that's garbage!"
[Read more on the capitalist economic crisis HERE.]
Sykes pre-empted US President George W. Bush's television address to the nation later that night where he demanded that Congress pass the US$700 billion bailout or else face "a long and painful recession". Bush summonsed presidential contenders Barack Obama and John McCain to attend an emergency briefing in the White House.
The pressure is on Congress to endorse the bailout but the politicians report a groundswell of opposition from their constituents to the bailout. And no wonder. A million people have lost their homes in the US over the last two years and real wages have fallen while corporate profits have soared. The richest 1% of the US population received their highest share of the nation's income in at least two decades while their average tax rate fell to the lowest level in eighteen years or more (Wall Street Journal, July 23, 2008).
As progressive US writer Rick Wolf explained in MR-zine:
"Real wages stopped rising in the US in the 1970s, yet the American psyche and self-image, subject to relentless advertising, was committed to rising consumption. To enable that, workers with flat wages had to borrow to afford rising consumption. For the last 30 years loans replaced wages, but rising consumer debt introduces new risks and dangers. If, simultaneously, politicians use state borrowing to avoid taxing the rich while providing vast corporate subsidies and waging endless wars, the debt problems mushroom. Aggressive, deregulated financial companies grabbed the resulting `market opportunity' by devising ever more complex, hidden, and dangerously risky ways to profit hugely from the social debt bubble.
"A sub-prime economy produced sub-prime wages, sub-prime borrowers, sub-prime lenders and sub-prime government regulation..."
From the point of view of the great majority, a corporate elite that has ruthlessly enriched itself at the working majority's expense now, having tripped themselves up through an orgy of speculation in deregulated financial markets, comes begging to the public for a $700 billion bail out. Actually its more than twice that. In the last year, Wall Street has already received some $900 billion worth of bailouts. So what we are looking at is more than a billion and half dollars of corporate bailout.
And who is to say it will stop there? Conservative estimates of the amount of bad debt still in the US financial system are $1-2 trillion. But it could be more. No one knows and the banks aren't opening their books so the public can find out.
The Bush administration's bailout proposal is basically for the public to keep buying bad debt off these banks at inflated prices, and demanding little in return. William Greider wrote in the US Nation (September 19): "If Wall Street gets away with this, it will represent an historic swindle of the American public--all sugar for the villains, lasting pain and damage for the victims."
Chain-ganged to US economy
If the US public feels blackmailed and swindled, they are not alone.
Walden Bello, writing in the September 24 Manila Nation, noted growing trepidation in the Third World, where the current Wall Street crisis looks like "a replay, though on a much larger scale, of the 1997 Asian financial crisis, which brought down the red-hot 'tiger economies' of the East".
"The shocking absence of Wall Street regulation brings back awful memories of the elimination of capital controls by East Asian governments, which were under pressure from the International Monetary Fund and the US Treasury Department. That move triggered a tsunami of speculative capital onto Asian markets that sharply receded after sky-high land and stock prices came tumbling down.
"Treasury Secretary Paulson's proposed massive bailout of Wall Street's tarnished titans reminds people here of the billions the IMF hustled up after '97 in the name of assisting them--money that was used instead to rescue foreign investors."
Bello added: "Trillions of dollars of Asian public and private money are invested in US firms and property, with the five biggest Asian holders accounting for over half of all foreign investment in US government debt instruments. Funds from Asia have become a key prop of US government spending and the middle-class consumption that have become the driver of the American economy. With so much of Asia's wealth relying on the stability of the US economy, there is not likely to be any precipitate move to abandon Wall Street securities and US Treasury bills ...
"There is, moreover, resignation throughout Asia about the inevitability of a deep US recession and its likely massive impact on the East: the United States is China's top export destination, while China imports raw materials and intermediate goods from Japan, Korea and Southeast Asia to shape into the products it sends to the United States. Despite some talk a few months ago about the possibility that the economic fate of Asia could be `decoupled' from that of the United States, most observers now see these economies as members of a chain gang shackled to one another, at least in the short and medium term."
Trillions could be spent on real needs
The hundreds of billions being wasted on this string of corporate bailouts already overtakes the at least $750 billion the US has spent on the wars of occupation in Iraq and Afghanistan. And soon it could match the $3 trillion spent globally on the arms.
In his September 24 address to the 63rd session of the United Nations General Assembly, Jose Ramon Machado, Cuba's vice-president, spelled out a program of alternative use for such large amounts of money.
"While a trillion of dollars is spent on weapons in the world, more than 850 million human beings are starving, 1.1 billion people don't have access to drinking water, 2.6 billion lack sewage services and more than 800 million are illiterate.
"More than 640 million children lack adequate housing, 115 million do not attend primary school and 10 million die before the age of five, in most cases as the result of diseases that can be cured."
Machado added: "The formula is not difficult nor does it require great sacrifices. All we need is the necessary political will, less egotism and the objective understanding that if we do not act today, the consequences could be apocalyptic and would affect the rich and poor alike. For this reason, Cuba once again calls on the governments of the developed countries, on behalf of the Movement of Non-Aligned countries, to honour their commitments and, in particular, Cuba urges them to:
- Put an end to the wars of occupation and to the plunder of the resources of the Third World countries and to free up at least a part of their millions in military spending to direct those resources towards international assistance for the benefit of sustainable development.
- Cancel the foreign debt of developing countries since it has been already paid more than once, and with this, additional resources would be released that could be channeled to economic development and social programs.
- Honour the commitment of directing at least 0.7% of the gross domestic product for Official Development Assistance, unconditionally, so that the South countries would be able to use those resources for their national priorities and promote access of poor countries to substantial sums of fresh financing.
- Direct one-fourth of the money that is squandered each year on commercial advertising to food production; this would free up almost 250 billion additional dollars to fight hunger and malnutrition.
- Direct the money being used for the North's agricultural subsidies to agricultural development in the South. By doing this, our countries would have about a billion dollars per day available to invest in food production.
- Comply with the Kyoto Protocol commitments and set commitments to reduce [greenhouse gas] emissions more generously starting in 2012, without wanting to increase restrictions for countries that, even today, maintain per capita emission levels that are much lower than those of the North countries.
- Promote the access of the Third World to technologies and support the training of their human resources. Today, in contrast, qualified personnel from the South are subjected to unfair competition and incentives presented by discriminatory and selective migratory policies applied by the United States and Europe.
- And something that is today more urgent than ever, the establishment of a democratic and equitable international order, and a fair and transparent trading system where all states will participate, in sovereignty, in the decisions that affect them."
Back in the land of neo-liberal bull
Wanda Sykes isn't the only person who has noticed that the battery on her bullshit meter has been run flat in recent weeks. She's voiced the outraged sentiment of the great majority in the US and probably around the world. When US President Bush made his September 24 television speech to sell the biggest corporate bailout plan since the Great Depression, their batteries went well and truly flat.
"I'm a strong believer in free enterprise, so my natural instinct is to oppose government intervention", affirmed Bush to a incredulous audience. "I believe companies that make bad decisions should be allowed to go out of business."
Then came the big "BUT".
"Under normal circumstances, I would have followed this course. But these are not normal circumstances. The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America's financial system are at risk of shutting down.
"The government's top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold."
But the multibillion dollar socialisation of corporate losses is not a break from "normal" capitalist practice but an essential feature of 21st century capitalism. Despite all the right-wing, neoliberal, ideological blabbering about reducing government intervention, in the home of "free-market" capitalism, state spending as proportion of gross domestic product (GDP) has increased from 8.6% in 1937 to an average of 20% over the last decade. Taxes as a proportion of GDP have also increased.
Modern capitalism totally depends on being propped up by public funds – and not only when it goes into crisis. Think of the corporate take from the trillion of dollars of public expenditure on arms, roads and other infrastructure. Think of the fat subsidies for private health insurance companies and for agribusiness. The "free market" talk disguises the fact that the public purse has been spent on tax cuts for the corporate rich and on corporate welfare, bailouts being only a part of this.
Right-wing myths about how the economy supposedly thrives on individual effort and individual reward belie the actual history of the capitalist system. In the first instance, capitalism developed only through the greatest socialisation of human labour. Almost everything that is sold for profit today is the product of manual and intellectual collaboration beween large numbers of workers. Without this fundamental process of socialisation there would not be a single capitalist corporation today.
Today, the giant corporations even depend on a sort of tax on wages even to get together the huge amounts of capital they need to take over other corporations and become even more gigantic. They use our superannuation [pension] funds for this as well as for the sort of mind-blowing speculation that is now wiping out a large share of these funds. You thought it was your money, but they always saw it as theirs to play with to amass more ill-gotten gains.
The rational thing would be to put an end to this nightmare born of greed. If the public has to socialise the losses of the banks than it should socialise its profits and put the trillions to addressing urgent social and environmental needs. This isn't just a nice idea, it is what is needed for human survival.
[Peter Boyle is national secretary of the Democratic Socialist Perspective of Australia.]
[Read more on the capitalist economic crisis HERE.]