An excellent (if unexpected0 piece from the online Economist. And speaking of which, let's hope Wall Street is still occupied (https://occupywallst.org/) during the AAG in February - any chance of convening and emergency session there?

Bipartisan corporatism: Class war!

Economist online

Sep 20th 2011, 21:57 by W.W. | OXFORD, MS

BARACK OBAMA'S proposal to raise tax rates on the rich has resulted in the usual ruckus. Republicans have declared class war. Mr Obama has replied: "This is not class warfare—it's math". Not to say it's good math. Whether or not it is, it's certainly not class war. As far as I can see, Democrats have no more interest in fighting one than do Republicans.

In a speech in Storm Lake, Iowa, Mr Obama pitched his proposals to more heavily tax high earners as a counterbalance to high levels of economic inequality:

    "Our tax policy has been skewed toward the top 1 percent and away from the middle class, working class in this country. Reversing that would make a significant difference. That’s not trivial. That’s not around the edges."

Mr Obama claims to be on the side of the working and middle-classes, but I would submit that this sort of tax policy is in fact trivial. It's electoral public relations. The edges are precisely what this sort of thing is around. Our economy is riddled with a multitude of deeply-embedded structural flaws that allow the well-connected to enrich themselves at the expense of the rest of us, but nobody will do anything about it. There is a class war in this country, a war between the subsidy barons, the regulatory arbitrageurs, the patent monopolists and the rest of us. Mr Obama is a class warrior. The trouble is he's on the wrong side.

During Mr Obama's reign, the revolving door between Washington and Wall Street has been replaced with an open garage door you can drive a hybrid truck through. Consider the case of Jim Millstein, courtesy of Bloomberg Businessweek:

    Jim Millstein, the U.S. Treasury Department’s former chief restructuring officer who helped oversee the bailouts of American International Group Inc. and Citigroup Inc., is forming a turnaround advisory firm.

    [...]

    “While it is clear Fannie and Freddie need to be fundamentally restructured to end government conservatorship, there are practical limits to the bandwidth available in D.C. for fundamental reform,” Millstein said. He decided that he could be “more productive doing restructuring-related work in the private sector,” he said.

Assuming AIG and Citi needed bailing out, it makes sense for the government to bring on a private-sector restructuring specialist to do it. But it's worth asking whether it really makes sense to allow these specialists to turn around and start advisory firms capitalised by their inside information of the Treasury's suspiciously opaque bail-out proceedings. One wants to have faith in one's fellow man, but when someone is charged with overseeing the redistribution of billions upon billions of dollars to banks and insurers no doubt staffed by people he knows, one might worry that prior business relationships, and the prospect of highly remunerative future relationships, might skew his decisionmaking, especially if he is left almost entirely free from public scrutiny.

On another front, Matthew Continetti considers the case of Solyandra. I agree with him that the small debacle offers in miniature a model of the larger approach of Mr Obama in waging class war:

    Government meddling isn’t limited to alternative energy. The U.S. Treasury stands behind Fannie Mae and Freddie Mac, General Motors, and AIG, not to mention all the other companies that profit from loopholes, sweetheart loans, and subsidies. The cliché has it that government is picking winners and losers. But that’s wrong: It picks only losers. Winning companies don’t need public support.

    Fiscal and monetary policy serve the well connected. Wall Street titans benefited not only from TARP but also from the Federal Reserve’s money creation. Labor dictated the terms of the auto bailout. The health insurers were more than happy when the Democratic Congress handed them millions of new paying customers. The CEOs of GE and American Express got to sit next to the first lady at the president’s last address to Congress. Are we really surprised to learn that the Solyndra loan was approved a week after George Kaiser, the firm’s single largest shareholder and an Obama donor, met with White House officials?

Reading Mr Continetti, one might get the impression that this sort of thing is worse under the Democrats, which I doubt. It is not surprising that, given the public's inevitable ignorance of the niggling details of corporatist system-rigging, the two-party political cartel has very little interest in doing anything about any of this. And it's not at all clear to me what can be done about any of this. It wouldn't hurt, though, if more of us were to give up any illusions we may have about which side of the class war our favourite major political party is fighting on: probably not yours. So let's start a Pirate Party.



Dr Jon Cloke
Lecturer/Research Associate
Geography Department
Loughborough University
Loughborough LE11 3TU

Office: 01509 228193
Mob: 07984 813681