The AIG bonuses were covered heavily in the blogosphere last week, and I didn't have to much to say about them. I had more important things to talk about. I still don't intend to talk, directly, about the AIG bonus issue except to say briefly they are merely more evidence of the breakdown of ethical culture in our financial markets. The bonuses were part of a tax dodge, by paying executives nominal salaries and giving them the bulk of their pay in bonuses, AIG was able to write the entire paycheck for every executive off their corporate taxes. Instead of pandering to populist fury over the bonuses, both Congress and the administration should be focused on meaningful evaluation and reform of the system.
There has been focus on more meaningful issues in some quarters. Senator Bernie Sanders (I - Vermont) wrote a very on-target piece for CommonDreams.org. He hammers the financial industry leaders as loan sharks and advocates a strong national usury law to control the interest rates banks charge consumers. I particularly enjoyed the piece because it's not every day one gets to see a socialist (Senator Sanders is a real socialist, as opposed to being called one by Republicans) cite an amendment offered by a conservative Republican in 1991 in support of his proposal for new regulation. Senator Sanders also makes cogent statements about the way credit unions (non-profit by definition) have been unscathed despite the credit disaster. I am a credit union member myself, and I can testify to the truth of the senator's statements. I have been given no reason to believe my money is in jeopardy, and my financial institution is in no danger of going out of business tomorrow and not demanding government bailout money. Conservatives should really stop and think about that when railing against 'socialism'... the capitalist banks are in trouble and the cooperative credit unions are not. I have to say I support an usury law.
On HuffPo, Ian Welsh writes with equal cogence about the stock market's recovery last week. He states, clearly:
"Repeat after me. The market is not the economy. The market is not the economy."
That is common sense one does not hear or read often enough, from the left or the right.
In fact, this is very important to remember. The same thing that conservatives say about government is also true of Wall Street: the capital/financial markets cannot create wealth, they can only redistribute it. Wall Street takes money from individual investors and funnels it to corporations. This is a necessary part of capitalism, but it has become the cart that drives the horse. Does anyone remember the stock manipulation scandals of a few years back? Enron ring a bell? Corporations manipulated their stock price to increase capital gains, while ignoring actual business operations. During the tech bubble of the '90s, a slough of companies that never made a profit were trading at huge volumes. This is not capitalism, this is policy banking in the guise of capitalism.
Financial markets serve an important purpose in a capitalist economy, at least in theory: they serve to finance entrepreneurism. The theory is that one buys stock in a company to finance its growth with the understanding one will share in its prosperity if it succeeds. Our markets, repeatedly through our history, have been hijacked by speculators, corrupt business leaders, and banking scandals. When this happens, they do not properly serve capitalism. Instead, they do it terrible damage. This is why they were regulated during the 1930s in the first place.
I am going to repeat a point that I have made on several other occasions, when discussing several topics, a point that I continue to repeat because of its importance in today's political climate. The greatest threat to the civil rights of American citizens, right now, is not the government. It is unfettered corporate power, allied to political corruption. Equality before the law is impossible when massive coporate interests concentrate the bulk of society's capital in a few hands. Steps must be taken to rectify the balance. A vast amount of law (from the privatization of state services to the mandating of digital television technology to the Medicare Prescription Drug Benefit of the Bush administration to the repeal of Glass-Steagal during the Clinton administration) has been passed for the benefit of corporations to the detriment of the public interest. Corporations are able to secure this kind of governmental assistance because of the vast imbalance of wealth in American society. The American worker, the middle class voter, the family farmer, and the small businessman are all there to be screwed for the benefit of these interests. They do not have the 'political capital' the corporations possess.
A common conservative response to these concerns is to expound at length about class warfare and to justify supply side economics on the notion that what is good for business is good for the economy, as Jenn Q Public does in the linked post. Clearly, however, what was 'good for AIG' wasn't even good for AIG, let alone the economy. This returns to another theme I have repeated before: the capitalist system is based on enlightened self interest and cannot succeed when sufficient enlightenment to determine one's own self-interest does not exist.
The Founding Fathers are frequently quoted in support of numerous positions by all factions in American politics, but I want to offer a very different kind of quote from the usual offered from the heady days of America's origins.
A Privates Committee drew up a bill of rights for the Pennsylvania state constitution during the framing convention in 1776. It included the following clause:
"An enormous proportion of property vested in a few individuals is dangerous to the rights, and destructive of the common happiness, of mankind; and therefore every free state hath a right by its laws to discourage the possession of such property."
I am not advocating dispossessing the rich of their property, but I do believe that the public interest, the economy, and the stability of capitalism in America would be best served by remembering that this is a nation in which citizens are supposed to enjoy equality before the law. We need to be genuinely aware of the practical truths of daily American life and to think about them, in our political debate, as much as we think about ideology.
The clause quoted above was ultimately not included in the Pennsylvania state constitution, but it can be taken as prophecy if one changes the word 'individuals' to 'corporations.' Type it up in note pad with that change and just look at it for awhile, and think about what is happening now. Do you think the credit crisis would have happened on the same scale if a few companies didn't have such a tight grip on the financial markets nationwide?