Disaster Economics

Naomi Klein, the author of The Shock Doctrine:  The Rise of Disaster Capitalism, wrote an op-ed for yesterday's LA Times which should be required reading for every liberal, progressive, every Democratic politician and official, all economists and all Republicans who haven't yet drunk their fill of Bush economic Kool-Aid (all 3 of them).

Moody's, the credit-rating agency, claims the key to solving the United States' economic woes is slashing spending on Social Security. The National Assn. of Manufacturers says the fix is for the federal government to adopt the organization's wish-list of new tax cuts. For Investor's Business Daily, it is oil drilling in the Arctic National Wildlife Refuge, "perhaps the most important stimulus of all."

But of all the cynical scrambles to package pro-business cash grabs as "economic stimulus," the prize has to go to Lawrence B. Lindsey, formerly President Bush's assistant for economic policy and his advisor during the 2001 recession. Lindsey's plan is to solve a crisis set off by bad lending by extending lots more questionable credit. "One of the easiest things to do would be to allow manufacturers and retailers" -- notably Wal-Mart -- "to open their own financial institutions, through which they could borrow and lend money," he wrote recently in the Wall Street Journal.

I don't know which is worse:  that these people are using economic decline to cynically push their personal agendas and enrich themselves, or that people might seriously believe that opening ANWR to drilling and letting Wal-Mart become its own bank are good ideas.

All that's missing from Klein's article is the understanding that the financial crises which have provided such fertile ground for conservative mischief-making are themselves the direct result of the conservative economic principles enacted during previous financial crises.

Consider this:

A decade later, John Williamson, a key advisor to the International Monetary Fund and the World Bank (and who coined the phrase "the Washington consensus"), went even further. He asked a conference of top-level policymakers "whether it could conceivably make sense to think of deliberately provoking a crisis so as to remove the political logjam to reform."

Is it really so surprising that "beneficiaries" of IMF and World Bank assistance have been complaining that such assistance is designed to alleviate immediate concerns while setting the stage for long-term dependency upon those institutions?  If IMF/WB clients can be kept in a state of low-level economic crisis, it's therefore easier for those institutions' patrons to force their economic agenda: "free" trade, removal of worker protections, etc.

We need to remember that there is no incentive whatsoever for the wealthy to help ensure the existence of a large middle class.  Before the rise of America's middle class, the rich in this country actually controlled a higher share of its wealth than after - and when we control for inflation, they were wealthier than the likes of Bill Gates and Warren Buffet.  We also need to remember that wealth is only one half of the equation; the other is the power that wealth brings.  A healthy middle class not only dilutes the distribution of wealth, it dilutes the distribution of political power.

Klein finishes her article by noting that the public is showing itself resistant to such disaster capitalism and that the "time has come, once again, for disaster populism."  Let's hope so.  It cannot be said enough that there is already a class war raging in this country, indeed in the whole world.  It's time for our side to start fighting.

Comments

[alkali]

I'm not sure what the downside of letting Wal-Mart open its own bank. Poor and lower-middle class people could use low-cost access to a financial institution. It theoretically could be true that Wal-Mart would be really bad at banking and we'd have to bail out its depositors, but I don't see why we'd expect that to be more true of Wal-Mart than any other bank.

[Phoenician in a time of Romans]

Moody's, the credit-rating agency, claims the key to solving the United States' economic woes is slashing spending on Social Security. The National Assn. of Manufacturers says the fix is for the federal government to adopt the organization's wish-list of new tax cuts. For Investor's Business Daily, it is oil drilling in the Arctic National Wildlife Refuge, "perhaps the most important stimulus of all."

Neat. The World Bank is coming home to roost.

[Nate]

Lots of political non starters there, always nice to see progressives write off viable solutions without any discussion. For example;

ANWR and The Continental shelf do hold considerable oil reserves. Every dollar of oil we purchase from other countries is another dollar of borrowing and negative cash flow. Not to mention those nations are usually of the most unsavory type. If we did open ANWR and the shelf to drilling that’s billions lopped off our trade imbalance immediately. That’s billions pumped directly into our economy. That’s billions that could be spent pushing renewable energy. Take for example the electric car initiative Israel just rolled out, it’s a fairly simple and logical progression. The only thing stopping the US from implementing it is the money. Allow drilling with graduating tax increases, each year the revenue is taxed at a higher percentage, tax dollars collected would be used as loans to build battery change stations and to fund retro fitting existing cars. 5 years from now don’t allow the building of new gas powered cars.

The environmental opposition is hypocritical, the oil is being drilled and purchased your just saying we rather some poor third world country take the risk of a spill then jeopardizing our pristine beaches. If we are consuming the oil we need to take the responsibility for it. The only way we re going to be off oil 20 years from now is by investing the money for alternatives. When we send trillions to other nations for their oil we sustain our addiction why not furthering the goal of beating it. How ironic that UAE, Saudia Arabia et all are purchasing American Assets with American dollars spend on oil. In hindsight wouldn’t you rather those trillions stayed domestic?

Wal Mart being denied their bank charter is a perfect example of politics of the worse kind. The only reason they are being denied is people don’t like them, hardly a legal or legit reason to impede business. Take 5 minutes and read how much Wal Mart customers pay in Debit and Credit card processing fees then justify your opposition. Apparently progressives are ok with a billion dollar tax on the poor as long as it hurts Wal Mart as well. Visa and MasterCard just lost some lawsuits for price fixing and anti competitive behavior, would it really be that bad to allow Wal Mart to beat up on them some? Does it really cost your bank $.75 to process a debit transaction, it’s almost identical then ACHs that run through the fed at .08.

[greg in ak]

Nate- If we open up Anwr tomorrow it will 10 years before oil starting flowing. that will not do anything for our trade imbalance or economy for a long while. There is nothing immediate about it.

Also Anwr is our last reserve. Maybe, just maybe, now is not the biggest crisis we will face. we could crack open the reserve now (10years) or save it for 50-75 years when the oil situation will certainly be worse. If we are at or near peak oil, our last reserve is precious and should not be used until we absolutely need it. We don't absolutely now. Three dollar gas will feel cheap in a few decades.

[DMonteith]

The environmental opposition is hypocritical, the oil is being drilled and purchased your just saying we rather some poor third world country take the risk of a spill then jeopardizing our pristine beaches.

Dude, it takes well over a hundred years for arctic tundra to recover from being disturbed because of the short growing seasons there.

...always nice to see progressives conservatives write off viable solutions valid objections without any discussion...

There, fixed that for you.

Besides which, ANWR only holds enough oil to satisfy US demand for 12-18 months at the most, and at the maximum expected recovery rate would provide less than 5% of US daily consumption.

And as for this:

Allow drilling with graduating tax increases, each year the revenue is taxed at a higher percentage, tax dollars collected would be used as loans to build battery change stations...

I don't see anything remotely resembling your proposal coming from your vaunted conservative friends who, you know, run the government, so why don't you spend your time trying to convince them to adopt your program before trying to convince us that we should agree to start drilling ANWR in the hopes that maybe republicans at some point in the future will agree to use the proceeds wisely.

[DMonteith]

Hmmm...The strike through the words "progressive" and "viable solutions" in the second quote above looked fine in preview but now just show "0" at the end of them.

test

[DMonteith]

Yep, did it again on my test there. Oh well.

[Stephen]

DMonteith, what tags are you using? The strike tag seems to work ok.

[Stephen]

Woah! I'll have to take a look at this.