TheMillerCircle.org

Who died last week? Who will live this week? The on-going changes in the American financial system are unfolding so rapidly that no one alive can tell us where we will wind up, or what kind of financial system we will have when all of this is over. Yet, this much is clear: the “free market” wing of the Republican Party is dead. Any Republican left standing who claims that the market will fix itself is out of alignment with the most conservative wing of the Republican Party, e.g., the current administration. Whether John McCain can keep up with his own party’s rapid conversion from free marketeer to financial regulator remains to be seen, but so far it doesn’t look like these new clothes fit very well, as he has been a genuflecting deregulator from the get go.

Perhaps the most compelling evidence for the death of the free market system is today’s news that Goldman Sachs and Morgan Stanley, two investment banking firms, have requested conversion into bank holding companies, which will mean that they will be more tightly regulated by agencies other than the Securities and Exchange Commission, in exchange for protections like those of a commercial bank. These two investment banking firms helped to initiate and sustain the modern Gilded Age, with seven figure bonuses for executives and lavish perks for mid-executives as well. As investment banks, they were regulated only by the Securities and Exchange Commission, which, under Cox, seems hopelessly inept (Bush seriously cut their budget). Both of these banking firms began to develop their own early version of a meltdown and requested new Federal protection. They grew envious of the more secure positions of banks, such as the Bank of America, that seems to have emerged from this crisis stronger than ever (so far). So the rush is on to secure a soft landing by keeping profits private and transfer risk to the public domain.

The current administration has marched in lockstep with the kinds of guarantees and regulatory reforms that would be endorsed by FDR, with one exception. FDR, whose first term began in 1933, had to be concerned with failing banks and the banking system, but he also had to be concerned with the farmers who were in desperate condition with massive farm closures and violent resistance in some parts of the country. But the most fundamental difference between the strategy of FDR and that of the Bush administration is that by the time FDR was president, the depression had been on-going for nearly four years and year by year, everything had become worse. One of the analytical truths to emerge was that workers didn’t have enough money to buy things. That deficiency was traced to the failure of business to have workers receive benefits through higer wages as corporate profits sky-rocketed through improved productivity. The corporations however, kept wages low and used the profits to enhance stock values and expand the companies through leveraging their profits. Does any of that sound familiar with the situation we are faced with today? Reaganomics has given us highly stagnant wages and a diminished vitality to the middle class and under Bush, we have seen middle class wages reverse against inflation, during a period of extreme profits by the very companies that now seek protection by the public. FDR was more concerned about the people at the bottom of the ladder, whereas the Bush administration has been solely concerned about those at the top. The Democrats who control Congress and who will vote on committing the country to the huge financial bailout, have good reasons for insisting that financial help should given to homeowners who lost their homes, but could benefit from refinancing under a more optimal arrangement. This of course requires that they also have good jobs that annually participate in the growth of their companies.

And most essential of all is the implementation of a health care system that is affordable and widely available. A single payer health care plan is the only one that will be fair and the one that will prove cost-effective in the long run. If we eventually decide that cuts must be made to benefits (things like eliminating viagra, which GM workers have access to), then having everyone covered by a single plan means that service denial will affect all of us, not just those covered by plan A but not plan B. The current fiscal crisis could well serve to the advantage of Obama if he can generate and identify with a plan that is cohesive and doesn’t freeze out important members of his constituency (young people). In all of this mess, there is a 900 lb gorilla in the room that has yet to be mentioned: the DOD budget. We still consider ourselves to be the World’s policeman, yet we have grown foolish enough to break our understanding with the Russians in the early 1990s, not to expand NATO into Russian border states, i.e., Georgia. The very thought articulated by Palin, that we should be at war with Russia, who still has thousands of nuclear missiles that can strike our cities, is a new form of political insanity created out of believing in the jingoism of the party. That too must die.

So, another death we can look forward to is the eventual breakup of our concept of American Hegemony: we simply can’t afford it. Howard Zinn has mentioned that analysis after the Cold War ended suggested that it would take about $60 billion to have a DOD that could defend the country and meet our military needs. It is time to start looking at those plans; it is time for Israel to make a serious peace with the Palistinians and for us to take a more even-handed approach to the Middle East and it is time for us to form a more sensible relationship with Russia and Europe. There is a good reason why many Europeans refer to us as the United Flakes of America.