When Volker opines, people listen. I do, too.
Volker rehearsed the causes of the current economic crisis with some insight and even an ounce of venom. He shows an awareness of the often predatory, speculative direction of the US financial sector with a series of verbose, but pregnant questions:
Has the contribution of the modern world of finance to the economic growth become so critical as to support remuneration to its participants beyond any earlier experience and expectations? Does the past profitability of and the value added by the financial industry really now justify profits amounting to as much as 35 to 40 per cent of all profits by all US corporations? Can the truly enormous rise in the use of derivatives, complicated options, and highly structured financial instruments really have made a parallel contribution to economic efficiency? If so, does analysis of economic growth and productivity over the past decade or so indicate visible acceleration of growth or benefits flowing down to the average American worker who even before the crisis had enjoyed no increase in real income?
Volker is nothing, if not blustery. But it was good to see such an acclaimed figure pose questions that others and I have been asking for some time. Sadly, he could not bring himself to frankly answer these rhetorical questions. Of course the answers are simple: The white guys in business suits occupying the offices of the financial sector are vastly overpaid; the financial sector has engaged in an enormous speculative orgy to capture the lion’s share of corporate profits; the newly contrived investment instruments have nothing to do with efficiency or economic desert; and the US worker gets nothing, but exploited.
Volker went on to offer cautious praise for the Senate’s financial reforms, suggesting that these legislative moves should offer a fire break to future speculative excesses: “The essential logic is that the taxpayers need not, and should not, be called upon to support essentially speculative activities within the protected, implicitly subsidized financial sector.”
Hear! Hear! Chairman Volker.
Would anyone disagree – without showing any unearned confidence that the Senate reforms will actually be effective – that the working people of the US should not bail out mega-banks from their folly?
But then matters took a strange and mean turn:
If we need any further illustration of the potential threats to our own economy from uncontrolled borrowing, we have only to look to the struggle to maintain the common European currency, to rebalance the European economy, and to sustain the political cohesion of Europe. Amounts approaching a trillion dollars have been marshaled from national and international resources to deal with those challenges… The hard fiscal and economic adjustments are necessary…
In an uncertain world, our currency and credit are well established. But there are serious questions, most immediately about the sustainability of our commitment to growing entitlement programs… [my emphasis]
When I read this, I felt a growing anger, a recognition that I had been taken in by a consummate con artist, a shill for those who care not a whit for “the average American worker.” Volker knows, or should know, that the European drama of the last nine months was wholly caused by the same parasitic, speculative financial wizards that he rails against in his article. The ominous-sounding near-trillion dollars to meet this challenge is no different for the European taxpayer than the challenge that US taxpayers faced to “support essentially speculative activities” nearly two years ago. It is no different – in his words - than the “trillions of dollars of official funds [that] came to the rescue of the broken system in the forms of loans, capital, and guarantees.”
To conclude from this indictment of a voracious and renegade sector of capitalism that entitlement programs – Social Security, Medicare and Medicaid - benefiting millions of the most vulnerable of our citizens should be cut or “reformed” is intellectually dishonest and morally corrupt. There is no connection – absolutely no link - between the popular entitlement programs and the crisis hammering the global economy. If anything, these entitlement programs have blunted some of the misery brought on by the financial sector and sustained consumption and even survival among the neediest retirees and the poor.
But there is a stealth agenda in Volker’s talk, an agenda that shows him to be nothing more than a courtier for Wall Street, which would benefit dramatically if social security were privatized, and the corporate cabal who oppose all social or public programs on principle.
Elite support for this is deep and broad. From the Heritage Foundation and the Reaganauts to Bill Clinton, who sought privatization of Social Security in his Administration, and President Obama, who has now established his own stealth “reform” Commission, the attack on entitlements has raged for thirty years. When it snows, they blame it on Social Security.
The current European rampage to cut public spending for social programs and to privatize is part and parcel of this same vicious attack on the working class and the most disadvantaged that Volker is proposing. The same spurious connection between financial aggression and public spending is offered to justify destruction of the European safety net and working class living conditions.
They say that every crisis presents opportunities; the ruling classes are certainly not letting this crisis pass without seizing the opportunities. We must fight tirelessly to curb President Obama’s National Commission on Fiscal Responsibility and Reform; we must work equally hard to expose lapdogs like Volker who seek to clear the way for this disgusting process.