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A Month Later…

October 4, 2008

The blog has been down for nearly a month, the result of computer woes which it appears are partly solved (new machine). But as computers mimic life in that going from one machine to another is simply like going from one set of problems to another, there is a whole other set of issues that has arisen with the new machine. Boring, I know.

In the past month the news has been dominated by the financial crisis and the dulling of Sarah Palin’s star…(and with it Obama’s bounce in the polls). Just a few thoughts on both. I’ll try to explore both later in some depth.

Concerning the financial crisis..

As it broke, one of my friends, Jamie Roth, a retired prof from Regis College, suggested in an email that the whole thing was contrived, that the timing was suspicious, that the crisis was not so serious as it seemed. The logic here – others have argued along similar lines – is that the Bush Administration provoked the crisis so as to be able, in the waning days of power, to shape the financial direction of the country in the more and more likely case that Obama wins. A new Democratic administration would essentially have to accept the deal crafted – with some difficulty it is true – between the Bush Administration and Congress, rammed through with bi-partisan support.

The tempting hook of this logic is that it nicely reflects Naomi Klein’s thesis put forth in the `Shock Doctrine’ – her best selling book. According to Klein’s hypothesis – taken seriously enough by Stiglitz that he gave the book a generally positive review – we have been living in a epoch where the `forces of evil’ have developed a strategic approach to crises, be they man made (wars, collapses of nations) or natural (hurricanes, tsunamis, the like). A pattern emerges that one can see already from the September 1973 Chilean coup (actually it started before in Indonesia in the late 1960s) to 9-11 to the S. Asian tsunami. Some kind of event takes place which traumatizes a country or region. While the population remains in shock, unable to adequately respond to events, plans, which have been rotting in some neo-con’s drawer to radically restructure society both politically and economically quickly emerge, putting in place what amounts to neo-liberal policies (free markets usually free of state intervention or with a modest amount). Thus it was that conservative University of Chicago type economists, trying to tip toe around (and later justify) all the blood running in the streets, hit the ground running in Indonesia and Chile, the public education system of New Orleans was privatized and entire fishing communities on the east coast of India were replaced a chain of multi-national owned and built hotels.

The argument in the case of the financial crisis goes more or less along the same lines…By not buying out Lehman Brothers – that financial institution that saw its birth hoarding slave-produced cotton before the Civil War – and letting it go under an unnecessary panic was created. As the crisis deepened it permitted the Bush Administration to put forth its own kind of financial bail out – one that put very few conditions on the financial sector and gave Paulson extraodinary powers to determine how $700 billion in taxpayers money would be spent. As many have noted, the Administration let home owners facing mortgage foreclosurers hang by their tootsies but came in decisively to bail out the banks and financial institutions that had crafted most of the bad loans in that sector. The key point here is that the Bush Administration understood that some kind of government bail out was necessary but hoped to accomplish it with as little state control of the private sector as possible. They understood that sooner or later a bailout was likely (because the depth of this financial crisic continues to reveal itself every week). Realistic enough to understand that things could not go on like this indefinitely, the Bush Administration engineered what might be called a `pre-emptive financial strike’ on the American people (and the world).

It seems to have worked quite well (from their perspective). Yes, in the end, because of the first rejection of the plan by the House of Representative (in response to a national protest in which calls to congressmen were coming in at a rate of 200 to 1 against the proposal), a few crumbs wer thrown to the masses that the Democrats are trying to give the impression are quite significant. They are not. But the precedent has been set: the government has given $700 billion to the market with very few strings. Thus the state will intervene in the markets but very politely and with few strings attached. With mild interest, John Maynard Keynes will turn over a few times in his grave. eorge Bush, Henry Paulson and Bank of America will be content. Of course the financial crisis will also deepen as so little of the fundamentals – a financial sector still out of control – have been addressed.

So…was it planned? Or did `things’ just unfold this way?

I don’t know that we’ll ever know, but then, does it really matter?

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