The Economic Drama
Who would have believed that the drama in the news is on the Business Report.
Everyone acts as if the US meltdown of the American economic system is a great surprise. How did all this happen so fast? Well, I don't know what the politician are reading but I have read articles for over a year that indicated that there were deep problems. And I am no authority!
As I wrote in a previous blog entry, American capitalism is deeply flawed. Since the Reagan Administration the economic orthodoxy has been "privatise and deregulate". Let the free market exert it's discipline. When corporations do well and make big profits they will invest them in job creating enterprises and there will be a trickle down effect so workers will also share in the economic success. "What is good for General Motors is good of all." Well we now know that even General Motors is trouble.
The economic problem is dramitically being worked out in the banking sector. The money manipulators make profit for themselves but create few jobs for others to share in the new wealth. We have seen the rich get richer and the rest get poorer in that last decades. The free market operated to the benefit of the few without adequate regulation and fair taxation. The former protects the broad base of the economic pyramid while the later helps to redistribute the wealth by having those best able to pay carry the biggest burden of taxation to pay for the services that bring benefits to the society as a whole.
Bankers have cultivated their respectable image over the years: conservative, careful, trustworth. As those who take on the responsibility of handling other people money they ask us to have faith in them to exercise their wisdom in the mysteries of economics. We now know they do not practice "due dilligence". They are, in fact gamblers, (if not crooks) with other peoples' money. Unrestrained capitalism makes it possible for the criminal and greedy to take advantage of those who have been lead to trust them.
In the US, there was a trial run of what we have experiencing now. It was the Savings and Loan Crisis for which Charles Keating went to jail. Briefly, he got a group of senators to help him lobby the regulators to get rid of regulations so he could criminally abuse the Savings and Loan business.
The United States Senators who help Keating are know as the Keating Five. These trusted public servants that lobbied on Keating's behalf included a couple of American heros: John Glenn and John McCain. Yes, the same John McCain who is running for President. The same John McCain who rails against corruption in Washington. The same John McCain who claims he has credentials as a reformer of the corrupt political system in Washington. The same John McCain who is opposed to Washinton lobbyests. The same John McCain who now thinks the US needs new and better regulations in the banking system. Yes the same John McCain who now (reluctantly perhaps) government bail-out for the corporate gamblers who in all fairness in a free market economy should be allowed to fail.
In fairness to John Glenn and John McCain they were the least culpable among the Keating Five. The Ethics Committee found that they did not do anything "illegal" . They were censured for showing very "Bad judgment". They took money from Keating toward their election campaigns in exchange for their work toward deregulation. They also were wined and dined by Keating and hosted at his Caribbean Estate, all paid for my Keating.. John McCain's wife and father in law invested in a Keating enterprise and made as much as one million dollars.
Why Barack Obama does not use John McCain's shoddy record in the Savings and Loan Scandal against him is beyond me. For some reason he get a bye in this area.
In the Savings and Loan Sandal the lesson to be learned is that when regulations are removed and the regulators do not do their job, the criminal move in to take advantage of the free market.
Sadly the free market capitalism as practiced in the US had become the orthodoxy around the world in International Trade through the American dominated World Bank and International Monetary Fund. Privatise and deregulate is the economic mantra around the World, to the disadvantage of many particularly in the Third World.