Financial power concentrates, boding ill for the planet

Posted July 17th, 2009 in Blog, Featured 1 Comment »

Fostering Ecological Hope
Today from Margaret Swedish:

You know, in this economic meltdown, you look at the signposts to see if there is any direction in terms of where we are headed.  I have a few for us today.

Goldman Sachs — stunning profits
JP Morgan Chase — stunning profits
Citigroup — terrific profits
Bank of America — surprising profits

U.S. Treasury Department and Federal Reserve: from Clinton to Bush to Obama, pretty much run by Goldman Sachs (see: How Goldman Sachs Took Over the American Economy by Matt Taibbi, originally in Rolling Stone, but this link has it all in one place).

In whom do we really trust?

In whom do we really trust?

Total taxpayer contribution to the bailout of these institutions is already in the many tens of billions of dollars.  Our deficits soar (over $1 trillion) placing severe limits on future policy to address the needs of this nation, while these guys…  Your tax dollars and mine, enriching the rich for the supposed purpose of keeping the system from collapsing.

A system like this ought to collapse.  It is time and more than time to begin to bring it down gently — and quickly — so that we can create a new one at the service of the planet, its ecosystems, and the human beings living within them.

From the NY Times today, writing of JP Morgan and Goldman Sachs:

Both banks now stand astride post-bailout Wall Street, having benefited from billions of dollars in taxpayer support and cheap government financing to climb over banks that continue to struggle. They are capitalizing on the turmoil in financial markets and their rivals’ weakness to pull in billions in trading profits.

And this:

JPMorgan’s transformation into one of the industry’s strongest players is underpinned by the shelter it received from the government: The bank used the money as a cushion until it was able to raise new capital. “There is no doubt all of us benefited from the government help — all of us,” said a senior executive at another Wall Street bank.

I recommend reading this entire article if you want a sense of what is really going on.

Here’s another, not from mainstream news either:

‘Government Sachs’ Strikes Gold…Again, from Robert Scheer at Truthdig.  Important reading to remind us of who is really in charge here — and it ain’t us.

Angry yet?

dollarCapitalism went through yet another shakedown from a pinnacle of excess — excess consumption, excess debt, excess risk — and is coming out with the power-brokers preselected (e.g., Lehman allowed to fail, Goldman Sachs, AIG, JP Morgan allowed to grab more control of global finances), wealth concentrating, more people thrown to the margins of the economy — a shakedown.

Turns out some of that excess that the global economy needed to shed were workers, small banks and community financial institutions, small farmers, small locally-based businesses, overextended home-owners, etc.

We need to be clear about this.  Our ecological crisis cannot be addressed in this kind of economic system, or within the kind of politics that protects that system. Rather than concentrating and centralizing financial and economic power, we need to be getting local, we need to be getting investment into community organizations, local businesses, schools, alternative locally based food and other productive systems that serve the needs and richness of ecosystems and the people that exist within them.

I know this seems crazy, but we are talking about survival here.

Of course, as the Times notes, some of these banks are not healthy; they are hiding the crisis for the sake of executive bonuses and big shareholders, to keep their world from crumbling.  But as Paul Krugman points out today, what is being prepared here is the ground for a greater crisis in the near future (Krugman did a good job of predicting this one, so best take him seriously).  Read: The Joy of Sachs.

Krugman describes how Sachs makes its money:

Over the past generation — ever since the banking deregulation of the Reagan years — the U.S. economy has been “financialized.” The business of moving money around, of slicing, dicing and repackaging financial claims, has soared in importance compared with the actual production of useful stuff. The sector officially labeled “securities, commodity contracts and investments” has grown especially fast, from only 0.3 percent of G.D.P. in the late 1970s to 1.7 percent of G.D.P. in 2007.

Such growth would be fine if financialization really delivered on its promises — if financial firms made money by directing capital to its most productive uses, by developing innovative ways to spread and reduce risk. But can anyone, at this point, make those claims with a straight face? Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls. They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers.

But there is more to be concerned about here.  We need money, financing, available for our necessary move to a new ecological era. Where do these big bank investments go, because money has to go somewhere in order to make more money?  They go into financial ‘instruments,’ derivatives, securities, hedge funds, and also to the very industrial and technological systems of scale that are wrecking the planet now.  As wealth generation concentrates, so does the corporate world — fewer and fewer people make decisions of enormous impact farther and farther away from the reality of you and me, much less the reality of Rwandans, Indonesians, or Lakota Sioux out west, for example.  We ain’t got much to invest.

Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

Now what these banks are also counting on to get the economy moving again is that those who remain in the system, those who will hold jobs and have some money to spend, will start spending money again — buying homes and boats and over-priced hybrid cars and stuff.  We are hearing that siren song again that freedom has something to do with an array of consumer choices, and that you can have stuff by getting those credit cards busy again.  Let’s get going here, folks!

Centralization of power, political, but especially financial power, is a scary dynamic in a world of growing needs, shortages, disruptions, poverty, and conflict.  I’m afraid our new president has taken us in the wrong direction here because he is trusting the wrong people, or worse, agrees with their world view.

Matt Taibbi reminds us that Obama received $981,000 in campaign donations from Goldman Sachs employees.  I urge you to read to the bottom of Taibbi’s  article where he writes about how the firm is going to benefit from the new CO2 emissions cap-and-trade regime if it is passed in its current form.

Where does that leave us?

Right in the heart of the movement for ecological sanity.  The economic crisis has got to get connected to the ecological crisis, and that means breaking up the power concentrated in big banks and investment firms and protected by elected politicians, and then reclaiming our own resources to put to work in the healing of our planet and of our frayed and broken local communities.  That means real democracy, you know, the kind where the people matter more than the return on the investments of the rich and powerful.


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One Response

  1. hombredelatierra

    I believe the present interlinked crises provide us with a golden opportunity to promote EQUITABLE, DECENTRALIZED, PARTICIPATORY, COMMUNITRY BASED Sustainable Development (SD).

    This may appear counter-intuitive but I believe that we can, with willpower and imagination (and maybe some help from above..), exploit these crises to change the trajectory of society in a positive direction.

    What is the effect of Peak Oil (declining reserves)?

    1- “tightens supply” which, in turn,

    2- increase prices and

    3- increases their “volatility”: prices become unstable, showing rapid and sharp fluctuations.

    In practical terms, as the world economy emerges from the recession, demand – especially in rapidly industrializing economies – will rise putting pressure on the “tight” oil supplies. Oil prices will rise, encouraging speculation and price spikes like those we saw back in the summer of 2008 (to 147 dollars per barrel!) These price hikes and spikes will increase the price of transporting goods over international borders and across seas. This will particulary affect the transport of bulky, low priced commodities like foodstuffs. A knock on effect: the volatility of prices will make it difficult or impossible for the planification of energy megaprojects (which require a stable cost platform upon which to build their projections of future costs, returns, profits and investments). Peak oil may very well kill off globalization within a couple of decades!

    Which of course provides a golden opportunity for those promoting small scale / regionalized, sustainable, participatory / democratic development.

    Think about the OPPORTUNITIES..

    I have been told that the Chinese ideogram for “crisis” is composed of a “root” signifying “danger” and another for “opportunity”.