The current government bailout plan (scam) aims to prop up a failing US economy by rescuing its mismanaged, unscrupulous lending corporations in the largest corporate welfare project in modern history. The very existence of the US financial environment is at stake. The country is in crisis. The future is in doubt. The sky is falling.
The Bush Administration is, yet again, asking for a blank check and averted eyes to deal with this doomsday scenario. It's the Patriot Act and the invasion of Iraq all over again, only a thousand times more pressing and urgent. At least that's what they would have you believe.
The key to understanding this development and the dangers that are presenting themselves to us, as they do in crises of this nature from time to time, is best followed by digging into Naomi Klein's work on disaster capitalism and The Shock Doctrine. That said, I want to direct your attention to a further step back in the process by looking at David Harvey's work "A Brief History of Neoliberalism," as he was quite prescient regarding the current state of affairs in 2008 in writing this 2005 work.
Harvey says, in an interview about the book with Sasha Lilley of Monthly Review:
[T]he theory takes the view that individual liberty and freedom are the high point of civilization and then goes on to argue that individual liberty and freedom can best be protected and achieved by an institutional structure, made up of strong private property rights, free markets, and free trade: a world in which individual initiative can flourish. The implication of that is that the state should not be involved in the economy too much, but it should use its power to preserve private property rights and the institutions of the market and promote those on the global stage if necessary.
The alternative to the free market, neoliberal ideology, at least in terms of our capital framework is embedded liberalism. Embedded liberalism is a form of state regulated capitalism that favors regulation, protections, and occasional intervention to stabilize and manage markets. It's also known as Keynesian economics. Economic liberalism is "embedded" in the mechanism of the state. Free marketeers, led by the disciples of Milton Friedman and his University of Chicago school of thought, are now alive and well in the guise of the Heritage Foundation, an entity familiar to us all here.
The Friedman people got their chance to flex some muscle and put the free market into play for the US economy thanks to the stagnation of the 1970s caused by capital accumulation, and the financial crisis facing New York City. This is where the title of this diary comes into play. Harvey tells Lilley:
In the New York case, the city was heavily indebted for a variety of reasons which are rather complicated to go into. And at a certain point in 1975, the investment bankers in the city decided not to roll over the debt, that is, they decided not to fund New York City debt any more.
Now, I don't think this was an application of neoliberal theory; I think it was the way in which the investment bankers were beginning to think about the city. And it was a kind of major experiment, in which the investment bankers took over the budgetary structure of the city. It was a financial coup as opposed to a military coup. And they then ran the city the way they wanted to do it and the principles they arrived at was that New York City revenues should be earmarked so that the bondholders were paid off first and then whatever was left over would go to the city budget. The result of that was that the city had to lay off a lot workers, had to cut back on municipal expenditures, had to close schools and hospital services, and also had to make user charges on an institution like CUNY, which up until that point was tuition-free.
What the bankers did was to discipline the city along ways which I think they didn't have a full theory for, but they discovered neoliberalism through their practice. And after they had discovered it, they said, ah yes, this is the way in which we should go in general. And of course this then became the way that Reagan went and then it became, if you like, the standard way the International Monetary Fund starts to disciple countries that run into debt around the world.
The Reagan Revolution, in which John McCain proudly proclaims he was a foot soldier, was based on this economic model. It was based on the gutting of social services and the basic infrastructure of the social contract as it relates to the citizenry. What we see today is the collapse of that ideology, as we saw vividly through Argentina in Naomi Klein's documentary "The Take." We see the banking industry collapsing and the major players scrambling to pick up the financial pieces to keep what they can, and to pick up the political pieces so they can regain what they've lost. Were the shoe on the other foot, we've already seen what these people would do to the rest of us, if we pay attention to the lesson of New York City in the 1970's. Remember the famous NY Daily News headline, "Ford to City - 'Drop Dead'."
I suggest that anyone with a curious mind and a strong stomach read Harvey's book, but the new media afficionados among us will be happy to know that there is an extremely interesting lecture on-line from October 26, 2005 at the University of Chicago in which Harvey goes into detail about his book and the implications of its message. As I listen to this on my i-Pod today, some of the more interesting points strike me. At around the 23:30 minute mark, Harvey deals with New York in the 70's saying:
And, William Simon went on record as saying, "I want New York City to hurt so bad that no other jurisdiction in this country will ever try to do what they've done again. And what they had tried to do, of course, was to build the equivalent of a social democratic state, a welfare state, strong education, strong social services, strong public health services, lots of investment, and of course lots of employment in municipal unions and the like, which is partly compensating for the deindutrialization that had set in during the 1960s. So, this disciplining of New York City was a very crucial element in the situation. But, in disciplining New York City the investment bankers didn't simply walk away from the city, and there's a very simple reason they didn't, they had a lot of property in the city. And the big problem that had occurred in the 1970s was, of course, a propery crash...a property market crash and it will be interesting if we're going to see the same thing in the not too distant future.
New York City was the greatest of all enemies to the deregulation types. It was a social experiment in welfare, education, social and public health services, and unions. These are things the conservatives hate. The punishment met out by the Ford Administration was intentionally severe and filled with the loathing of the government as a force for social good. The new era of conservatism takes this a step further in its adoption of the religious right's social agenda, putting God in the place of government. Not only is government a bad word, but it actually masquerades semantically as the Devil in that tandem. So, here we are. Harvey's prophetic words about a property market crash have come to pass and what are we doing? We're handing out welfare to the criminals that forced this mess upon us, and in particular my fellow New Yorkers. Anyone who was alive and aware in the 1970s remembers the Bronx burning. The conservative revenge on the people of New York for supporting the left and its ideas. Now that Wall Street and many of the same people that brought us a burning, garbage-filled, crime infested New York back then are now at our doorsteps asking for help. They ask in the name of the nation, but I'm sitting here at my keyboard with a middle finger in the air for those crooks and heartless bastards.
The Democrats in Congress have a chance to give New York a little come-uppance to the usurpers of Lower Manhattan, and the American people are in line for an assist. The final coup-de-grace in this affair would be to send John McCain packing and elect Barack Obama. It will be our job to hold Obama to a more responsible form of economic organization for our capitalist state, but he's got to get there first.