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ECONOMIC COMMENTARY:

Creative Destruction: The Solid Core Behind the Financial Crisis

by Chris Floyd
Wednesday, 17 September 2008

"There is great disorder under heaven, and the situation is excellent."
-- Chairman Mao

Fed’s $85 Billion Loan Rescues Insurer (NY Times)

The bailout [of American International Group]... effectively puts taxpayer money at risk while protecting bad investments made by A.I.G. and other institutions it does business with.
Despite all the disasters raging around us -- the wars, the atrocities, the tyranny, the economic collapse -- the system is working. It's doing exactly what it's supposed to do: serve the rich and powerful, and entrench them in their rule. Just like John McCain says, the[ir] system is fundamentally sound.

Do you get it now? The rich and powerful spend years making foolish deals in a market they rigged with the connivance of utterly corrupted politicians on both sides the aisle; their fraudulent scheme finally collapses, exposing them to some of the most horrific financial losses in history....and YOU will have to pay for it. For generations. Not only directly, with the tax money straight from your pocket, but even more so in the further degradation of national life: infrastructure, services, programs, amenities that will be starved or abandoned as even more of the government's money is poured out to shield the wastrel elite from suffering the consequences of their own rapacious folly.

And with all the talk of a "new Cold War," who knew that it would be Washington and Wall Street, not the Kremlin, who resurrected socialism in the 21st century, in what the Times called "the most radical intervention in private business in the central bank’s history"? Socialism for the rich only, to be sure. Ole Joe "Bankruptcy Bill" Biden and his bipartisan cohorts in Congress have long made sure that any ordinary citizen -- especially the old, the sick, the poor, the most desperate -- will be squeezed to the last drop to pay off their debts, even if these were incurred through illness or misfortune. But for our boardroom Bolsheviki, the state is always there, to cushion and to coddle.

And who knew there was so much money in the federal coffers? Endless, roaring torrents of money available for the ever-expanding operations of the global Terror War (up to $3 trillion for the rape of Iraq alone), and all of this on top of an ever-expanding "regular" military budget that tops half-a-trillion dollars each and every year. And now tens of billions for Bear-Sterns, Fannie Mae, Fannie Mac, A.I.G. and the next fat-cattery to go under. Gosh, you mean all that cash was just lying around under the federal mattress all along?

You mean we could have used some of it for, say, building schools and hospitals, or national health insurance, or rebuilding our globalization-gutted cities, or drug rehab programs, or caring for our elderly, or helping people start businesses, or repairing our rotted infrastructure, or supporting the arts and sciences, or building parks and other "common pleasures, to walk abroad and recreate yourselves"? You mean there has been enough money there all along to help create a more just, equitable, enjoyable and civilized society? Don't that beat all?

Well, there will be none of that now, thank god. Even if a party that was actually committed to the well-being and security of ordinary citizens (a description that of course excludes the ticket of "Wall Street Barry" and "Bankruptcy Bill Joe") were to somehow take power one day, they will be hogtied by the mess left behind by the elite's financial boondoggles and their many wars. They'll be lucky if there is enough spare cash on hand to buy a few sandbags the next time a hurricane turns toward New Orleans, much less address any of the massive civic, social, economic and infrastructural disasters that confront us.

But of course no ticket committed to such a thing will ever be allowed to get near the White House. That game too is now as rigged as the market. Arthur Silber explains this double-rigging in rich detail in a recent piece: "The Vampire, Struck by Sunlight." You should read the whole thing, but the passage below is particularly apt for the current situation (see original for links):

Those people who have followed the foreign policy catastrophes of recent years are repeatedly struck by this phenomenon: all the "experts" who are supposedly so knowledgeable in this area -- that is, all the "experts" who led us into the catastrophes and who were grievously, bloodily, murderously wrong about every significant matter -- remain entrenched in the foreign policy establishment. Moreover, they are precisely the people to whom everyone turns for the "solution" to the disasters that engulf us, both now and the disasters likely to come. This is what it means to have a ruling class. As I have said, the ruling class rules. The ruling class exercises a lethal monopoly on the terms of public debate, just as it exercises a lethal monopoly on the uses of state power.

What you have seen over the last six months and more, and what you will see in the coming months and years, is the same phenomenon in the realm of economic policy. All of the solons who led us into this abyss of mounting debt, worthless securities, failing financial institutions, economic contraction and collapse, rising taxation, and all the rest, will now instruct us as to how we should "solve" the crisis that they have created. The crisis may be ameliorated to a degree, and the worst of the consequences may be postponed for a while. But whatever "solutions" are implemented, whatever reorganization and reregulation is imposed, it will all be done in accordance with the ruling class's desires and goals. It will all be to protect their own wealth and power to whatever extent is possible, and to expand their wealth and power still more....

The ruling class is the state. The state exists to serve the interests of the ruling class, and only the interests of the ruling class. They may promise you greater unemployment benefits, better health care, and a host of other government benefits -- all benefits also paid for by you, please note (the ruling class does have a sense of humor, after all; vampires are often crudely funny creatures) -- and those promises will cause most Americans to fall for the con still one more time.

Whatcha gonna do? Not a goddamned thing. Vote for McCain! Vote for Obama! It doesn't matter. The ruling class wins either way. The ruling class always wins. That's how the system was designed, and that's how it works. For the ruling class, it works very admirably.

That last observation by Silber is perhaps the most telling, and frightening of all: despite all the disasters raging around us -- the wars, the atrocities, the tyranny, the economic collapse -- the system is working. It's doing exactly what it's supposed to do: serve the rich and powerful, guard and protect them, entrench them in their rule. Just like John McCain says, the system is fundamentally sound.

P.S. And for those who believe that the current conniption somehow presages the collapse of the American empire, please note that the sound system of elite service described above is backed up by the most powerful military machine in the history of the world (including a nuclear arsenal that can obliterate any nation at any time), directed by a militarized state that has never shown the slightest hesitation in using violent force against its own people should they step too far out of line. It's not going to collapse overnight because of a well-cushioned crash on Wall Street or a few botched wars. It still has many miles to go – and much blood yet to spill – before it faces the inevitable axe of history.


photo of Chris FloydChris Floyd has been a writer and editor for more than 25 years, working in the United States, Great Britain and Russia for various newspapers, magazines, the U.S. government and Oxford University. Floyd co-founded the blog Empire Burlesque, and is also chief editor of Atlantic Free Press. He can be reached at cfloyd72@gmail.com.

This column is republished here with the permission of the author.



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This story was published on September 17, 2008.