"Corruption is a tree, whose branches are
of an immeasurable length: they spread
Everywhere; and the dew that drops from thence
Hath infected some chairs and stools of authority."
Beaumont and Fletcher, The Honest Man's Fortune
Michael Lewis has written an excellent pocket analysis of the financial crisis in The New Republic, in his review of Greg Smith's book about why he left Goldman Sachs. I have to admit some prejudice, because he says all of the things which I have been saying, and says them very well.
Crony capitalism has always been with us, but it took wing in the 1990's, and has brought us to this place where we would not wish to be.
Michael Lewis does an excellent job of distilling the problem and its solution to the basics, without necessarily touching on the need to reform the political campaign process, and the revolving door that enriches the politicians and regulators through betraying the spirit, if not the technical word, of their oaths of office.
I had hoped that Obama might have risen above that as an 'outsider' with a mandate for change, but that notion was quickly dispelled in his first 100 days in office. He has pursued a policy of subsidy and appeasement and failed leadership that is killing the legacy and effectiveness of his administration, but enriching many participants in the process. And it works, because the US has become a culture of personal greed.
One can speculate on motives endlessly, but we'll leave that one to history. The end result remains the same. And the pity is that the 'opposition party' is even worse, even more servile to special interests.
And the oddest thing is that this is almost a general phenomenon throughout the developed world, and not some anomaly of the US. And the culture of greed and economic repression was spread by highly placed political appointments affiliated in many cases with the same handful of US-UK banks.
In the aftermath of the first Great Depression there was a general spread of militant fascism, and a great world war. So why not a rise of oligarchies employing financial repression this time, with a global currency war? There appears to be some precedent of corruptible, power mad people rising to the occasion.
The Western governments have come to resemble competing crime families, more than an open democratic process of policy formulation for the good of the entire nation through constructive give and take. It's mostly take, with the common people being taken, while the media and the pundits weave an alternative reality for them with words and emotion.
So, here we are.
What do you want to do tonight, Marty?
"Stop and think once more about what has just happened on Wall Street: its most admired firm conspired to flood the financial system with worthless securities, then set itself up to profit from betting against those very same securities, and in the bargain helped to precipitate a world historic financial crisis that cost millions of people their jobs and convulsed our political system.
In other places, or at other times, the firm would be put out of business, and its leaders shamed and jailed and strung from lampposts. (I am not advocating the latter.) Instead Goldman Sachs, like the other too-big-to-fail firms, has been handed tens of billions in government subsidies, on the theory that we cannot live without them. They were then permitted to pay politicians to prevent laws being passed to change their business, and bribe public officials (with the implicit promise of future employment) to neuter the laws that were passed—so that they might continue to behave in more or less the same way that brought ruin on us all.
And after all this has been done, a Goldman Sachs employee steps forward to say that the people at the top of his former firm need to see the error of their ways, and become more decent, socially responsible human beings. Right. How exactly is that going to happen?
If Goldman Sachs is going to change, it will be only if change is imposed upon it from the outside—either by the market's decision that it is no longer viable in its current form or by the government's decision that we can no longer afford it. There is a bizarre but lingering aroma in the air that the government is now seeking to prevent the free market from working its magic in the financial sector-another reason that the Dodd-Frank legislation is still being watered down, and argued over, and failing to meet its self-imposed deadlines for implementation.
But the financial sector is already so gummed up by government subsidies that market forces no longer operate within it. Could Goldman Sachs fail, even if it tried? If someone invented a cheaper way to finance productive enterprise, would they stand a chance against the big guys?
Along with the other too-big-to-fail firms, Goldman needs to be busted up into smaller pieces. The ultimate goal should be to create institutions so dull and easy to understand that, when a young man who works for one of them walks into a publisher's office and offers to write up his experiences, the publisher looks at him blankly and asks, 'Why would anyone want to read that?'"
Michael Lewis, The Trouble With Wall Street