Contracts are the sacred glue that binds virtually all capitalist social, political and economic relations. Indeed, the contractual model stands as the basic ideological building block in virtually the entire edifice of social thought in bourgeois ideology. From Hobbes to Rawls, contracts are viewed as the basis for moral and legal legitimacy. Modern constitutions are taken to be social contracts between citizens and with their leaders. No idea is more central to the very existence of a market-based economy and its superstructure.
Thanks to the decline of class struggle unionism and its replacement – business unionism – the contract assumes a similar sacrosanct role in the relation between labor and capital. Where unions still exist, labor and management agree to a contract binding both parties to obligations that govern compensation, benefits, work rules and all other matters deemed important.
But like so much of capitalist mythology, the force of contracts is always trumped by the interests of the privileged and wealthy while sternly enforced against the weak and vulnerable.
Take, for example, the unionized auto workers. Their mutually agreed contracts with automakers have been challenged, attacked, and renegotiated persistently and aggressively for years. Their benefit packages, compensation and work rules have been assaulted by lawmakers, media pundits, and management. The contractual obligations to retirees have been sliced and diced through an onerous VEBA agreement followed by another demand to convert the employers’ obligations to virtually worthless stock. Despite a firm, consensual agreement, the autoworkers were extorted under the threat of plant closings and bankruptcy – moves that would have simply obliterated a contract thought to be the bedrock of labor/management relations. Of course these actions would benefit only management and shareholders. The same tactics stripped earlier contracts in the airline and steel industry. The workers’ contracts were firm and unbreakable until capital decide they weren’t.
Daily, the mouthpieces of big capital – the media and politicians – call for workers to forego management contractual obligations, in the interest of the economy, the company, the nation and their fellow citizens. No sacrifice – by workers – is too great to demonstrate patriotism and selflessness, in short, a greater good. Yet every worker knows that the mortgage, the car note, the credit cards, the school tuition – the obligations owed to capital - are sacrosanct, sealed by the holy bond of a contract.
Given this demonstrated hypocrisy, it should surprise no one that the AIG cabal and their ever helpful pals on Obama’s economic team – Geithner, Summers, et al – posture the obscene bonuses paid to AIG’s cowboy speculators as contractual obligations. We were told that denying bonuses to those who brought AIG –and the economy – to its knees would be akin to cracking the foundations of Western civilization. In this case, a contract is holy writ, to be worshipped with solemn reverence. This claim became challenged in the court of public opinion when management drug out the tired, risible argument that AIG’s derivative team was so indispensable that the managers’ exit would halt efforts to unwind the complex instruments that they foolishly contrived. Analogies abound: It’s like paying the thief a handsome bonus to tell us where he hid the money that he stole.
With the tortured explanation that these were retention bonuses, the public outrage increased. And this pathetic excuse evaporated when it was disclosed that many of the bonus recipients had already left AIG. How did they earn a retention bonus if they left? So much for the integrity of these sacred contracts.
But AIG did honor their insurance contracts (credit default swaps) with numerous firms like Goldman Sachs. In the spirit of the inviolability of contractual obligations, they paid out collateral obligations in full, preserving their high reputation and integrity with public funds obligingly supplied by Treasury Secretary Geithner, a protégée of former Goldman Sachs exec Robert Rubin.
In the face of public outrage, the rascals who looked away, aided and abetted, or encouraged the AIG fiasco turned on each other. Senator Dodd, chairman of the Senate Finance Committee, came in for harsh attack because he modified his amendment to the stimulus bill, weakening the restraints upon executive pay and bonuses. In the face of criticism, Dodd - dodging any personal responsibility in the time honored tradition of his class, the Senate and his father – quickly pointed his finger at the Treasury Secretary who, he alleges, told him to remove any containment of corporate remuneration.
Both Dodd and Geithner, throughout their careers, have been joined at the hip with the financial sector which they are charged with overseeing. Dodd has raised over $1.5 million for his Senatorial campaign from the securities industry over the last six years in addition to the $2.7 million it gave for his Presidential run. He was also the recipient of two questionable, favorable mortgages arranged by the former CEO of Countrywide Bank.
The public outrage at the AIG bonuses exceeds even the massive anger over the original Paulson stealth plan to bailout the banking industry. While it is both welcome and promising, we must not lose sight of the political hypocrisy enabling AIG arrogance. The overriding idea of obscene amounts of public funds dedicated to a second chance for a thoroughly corrupted discredited, and irresponsible financial sector while the working class struggles under growing unemployment, debt, foreclosures, and insecurity borders on the criminal. The urgency of the bank bailouts contrasted with the snail-like progress on the people’s agenda underscores the class bias of our policy makers and the compliant media. Two demands are urgent: Nationalize the banks! Out with Geithner and crew!