Monday, April 14, 2014

Corruption in a Vacuum Tube

In today's disappointing New York Times column, Paul Krugman correctly blames the predatory financial industry for "undermining our economy and our society."

But he refrains from blaming the political system in general and the Obama administration in particular, even though "there is a clear correlation between the rise of modern finance and America’s return to Gilded Age levels of inequality." Instead, he writes that "we" are giving vast amounts of public money to the same people who screw the little guy every single minute of every single day (the words after "we" are mine, not Krugman's).

Besides never defining "we" he was vague about who to blame besides the greedy "flash boy" sociopathic traders highlighted in the recent bestseller by Michael Lewis. Instead, he laments that unfathomable piles of money are simply going to waste:
How much waste are we talking about? A paper by Thomas Philippon of New York University puts it at several hundred billion dollars a year.
Mr. Philippon starts with the familiar observation that finance has grown much faster than the economy as a whole. Specifically, the share of G.D.P. accruing to bankers, traders, and so on has nearly doubled since 1980, when we started dismantling the system of financial regulation created as a response to the Great Depression.
What are we getting in return for all that money? Not much, as far as anyone can tell. Mr. Philippon shows that the financial industry has grown much faster than either the flow of savings it channels or the assets it manages. Defenders of modern finance like to argue that it does the economy a great service by allocating capital to its most productive uses — but that’s a hard argument to sustain after a decade in which Wall Street’s crowning achievement involved directing hundreds of billions of dollars into subprime mortgages.
Wall Street’s friends also used to claim that the proliferation of complex financial instruments was reducing risk and increasing the system’s stability, so that financial crises were a thing of the past. No, really.
If there was a Republican administration cop not only asleep on the beat, but cheering the criminals on, I think Krugman would be naming names in this latest column. Actually, he does name Chris Christie, but only to compare the flash- trading fiber-optic tube under the Hudson River with the New Jersey governor's own canceled commuter tunnel. Democrats, as usual, receive Krugman immunity from polemical prosecution.

So, here is my published comment to Mr. Krugman:
There's a bill floating around that would slap a tax of only three pennies per $100 on those scammy high speed trades. It would raise an estimated $352 billion over ten years. Think of all the projects for the greater social good that such a tax could fund. Schools, jobs, infrastructure repairs, expansion of Social Security. What a great first step toward leveling the playing field and fighting back against the worst income inequality since the Gilded Age!
But guess who's adamantly opposed to this mild Robin Hood tax? President Obama, that's who. He's afraid that upsetting the volatile market would make Mr. Market more volatile. It's the same excuse his Attorney General uses for not prosecuting the Wall Street mob. Their rackets might actually lose money. Their feelings might get hurt. Jamie Dimon might move JP Morgan Chase out of the country. And then where would all the money for the election of complicit politicians come from?
Meanwhile, senatorial leaders like Chuck Schumer (D-Wall Street) openly complain to all who will listen that the vampires of finance are being unfairly demonized. "Left-wing blogs are the mirror image of the Tea Party," he fumed to The New Republic a few months ago. "They just have less credibility and less clout."
With Dem friends like that, who needs the Grand Guignol Party? Tax the rich, jail the banksters, ban legalized bribery, impeach half the Supreme Court, support Sanders and Warren.
Otherwise, it's R.I.P. democracy.
For a more refreshing overview of reality, here's a Guardian piece by Glenn Greenwald, which also links to the excellent PBS documentary "The Untouchables." The film, which aired a year ago, does place the blame for our continuing economic woes squarely upon the political corruption within the Obama administration. The film was so scathing that Holder henchman Lanny Breuer was forced to quit within days of its airing, purely for appearance's sake of course. Meanwhile, the gambling continues, and all the pundits express shock whenever a new blockbuster bestseller hits the stands and repeats the same old story over and over and over again.


Fred Drumlevitch said...

I too thought Krugman's column was more than a bit weak, both in its inadequate degree of condemnation and to where his criticism, such as it was, was directed. One basic characteristic I immediately noticed was his use of the term "financial industry" (four times, no less), with no quotation marks around "industry", nor implied ridicule or sarcasm regarding that term. As I've said before, language does constrain thought, and as @Jay - Ottawa reminded us a few Sardonicky columns back, "For starters, suppose we drop the term 'The Great Recession'". Point taken, and critics --- genuine critics --- of the money manipulators must stop referring to financial activity as the "financial industry". It's not an industry in the traditional meaning of that term, and there's nothing industrious about it.

Capitalism, at least as it is currently permitted to operate, has serious fundamental flaws. It argues that the so-called "free market" will allocate scarce resources to the "best use(s)". In fact, the "free market" does nothing of the sort, for two very different reasons:

First of all, because the "free market" doesn't exist. But while the right-wingers denounce government regulation as the impediment to a supposed glorious "free market", the fact is that most of the time the market is highly manipulated, and it's being done by the capitalists themselves. Whether we're considering LIBOR or millisecond stock trades, or consumer "demand", or governmental purchases (by which I mean both what government buys/subsidizes and how our government has itself been purchased!), a great deal of it has been manipulated by business.

Secondly, "best use" for most capitalists seems to mean nothing more than making the maximum amount of money. Civic responsibility, social justice, even basic decency have little or no place in either the thinking or actions of most modern capitalists as they pursue their vaunted "best use" of capital. It's all selfish --- and short-sighted, as there does not appear to be anyone with political power (or with likelihood of attaining it) who might be interested in saving capitalism from itself, as FDR did.

(Interestingly, as I get set to post this, I notice that one of the captcha words is Rico. Capitalized, that is the acronym for "Racketeer Influenced and Corrupt Organizations Act"!)

pvolkov said...

Karen and Fred: You would think that the responses to Krugman's current articles such as yours Karen and several other excellent readers would inspire him to tell us what is going on behind the curtains. Certainly he reads the reports you cite but by avoiding explaining his vague descriptions of the players in this financial drama, it becomes obvious where he stands on the issues. I think he has become more centralized which is a shame and loss all around. Does he read the comments of criticism many send in? At least many readers have become educated but not Krugman I am afraid.
There is a good article about reasons for supporting Bernie Sanders in Truthout which could take off if he is supported as he has made many excellent comments in the e-mails I get from his website.


Jay - Ottawa said...

Paul Krugman is to print journalism what Karen Maddow is to TV journalism. They are twins in different media. With every column, with every show, on whatever subject, they spin out the same formula, predictably going easy on the Democrats but tough on the Republicans. Is this clear eyed? Is it integrity? When Dante and Virgil take their next trip through hell, they’ll find Krugman and Maddow unveiled as partisan hacks roaming the First Circle of Propaganda, not all that far from the center where dwells the Father of Lies.

Is it news to you at this late date that both political parties are bought and corrupt? Not to recognize the reality is to be willfully ignorant or easily duped. We should be hard put to tell which party has done more damage. Any differences in degree would turn out to be spotty or measured in micrometers. Haven’t we been saying that very thing here and elsewhere for years?

On second thought, there is one major difference between the parties: with tears in their eyes the Dems will arrange for the heel to be placed squarely on your neck; the Reps will do it without apology. So the Dems are far in the lead for hypocrisy.

Krugman and Maddow consistently blow the whistle on the Republicans. Rarely do they catch sneaky fouls by the Democrats. Whether as temperate columns or colorful rants, their journalism is merely a variation of that tired campaign argument, since proven empty, about the lesser of two evils. Such journalism is unenlightening and at times downright dishonest. The consistency is not accidental. So, if it writes like a partisan hack, and talks like a partisan hack, and sticks to the party line like a partisan hack, and pleases a great crowd of partisan followers like a partisan hack, well maybe, even if it sports a Nobel Prize, just maybe it’s a partisan hack.

Pearl said...

Anyhow everybody, the Pulitzer prizes have gone to the Washington Post and the U.K.Guardian for printing Snowden's information on the NSA! A great comment from the Pulitzers about the importance of printing information that keeps the public duly informed. As I recall, the NYTimes refused to do so. They also did not receive any prizes for any written information, just some for photography assignments. Wonder how Krugman feels about that!


Jay - Ottawa said...

Here is the company Krugman and Maddow would keep if they were journalists worthy of the name:

Pearl said...

A small correction, the U.S.edition of the Guardian (which is also published in the UK) is the recipient of the Pulitzer Price since only U.S.publications and writing are permitted awards by Pulitzer's legacy.