Layer 83 Looting The Public Wealth.

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There’s a brilliant cartoon by the wonderful Martin Rowson in yesterday’s Guardian , a perfect Halloween summary of the state of our society. It sums up more graphically and powerfully the insanity that’s all around us than any amount of well-argued column inches.

In the background, silhouetted against the light and smoke of flaming torches, are the unmistakable figures of Russell Brand, who’s dangling from a gallows, and J Ross who’s still fighting off a mob that’s armed with pitchforks and rakes.

In the foreground are two hideously fat, grinning, pinstripe-suited fat cats with a case bulging with bank notes, unconcerned about the mob which is clearly not interested in them. One of them says, looking towards us, the readers, “Hey! HE fucked your economy!! Ha Ha Ha!”

And his companion responds, “An’ I ain’t going to APOLOGISE or RESIGN or NUFFINK!”

http://www.guardian.co.uk/theguardian/cartoon/2008/oct/31/cartoon-credit-crunch-crisis

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Meanwhile, alongside the cartoon, there’s a column by Reihan Salam, an editor at Atlantic magazine, who begins, “Despite running one of the worst presidential campaigns I’ve ever seen, John McCain would, I’m convinced, make an excellent president”.

So in other words, he’s convinced that a man who can’t even run a half-decent political campaign is capable of running the most powerful, complex and significant country on earth. Brilliant.

His rationale, naturally, goes like this: “Only Nixon could go to China, and only McCain can reconcile conservatives to some of the hard steps that the US will have to take”.

Reconcile? Interesting word. They have to be reconciled do they? And those hard steps can’t be taken if they’re not? Hmmmm. We shall see.

http://www.guardian.co.uk/commentisfree/2008/oct/31/john-mccain-us-elections-barack-obama

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The wonderful Naomi Klein, who’s been sadly missing from the Guardian of late, though it’s possible to read her columns at http://www.thenation.com/ , is back with a brilliant piece called, “The Bush gang’s parting gift - a final, frantic looting of public wealth.”

“There has been no nationalisation, partial or otherwise. American taxpayers have gained no meaningful control over the banks, which is why the banks are free to spend the new money as they wish. At Morgan Stanley, it looks as if much of the windfall will cover this year's bonuses. Citigroup has been hinting it will use its $25bn buying other banks, while John Thain, the chief executive of Merrill Lynch, told analysts: "At least for the next quarter, it's just going to be a cushion." The US government, meanwhile, is reduced to pleading with the banks that they at least spend a portion of the taxpayer windfall for loans - officially, the reason for the entire programme.

What, then, is the real purpose of the bail-out? My fear is this rush of dealmaking is something much more ambitious than a one-off gift to big business: that the Bush version of "partial nationalisation" is rigged to turn the US treasury into a bottomless cash machine for the banks for years to come. Remember, the main concern among the big market players, particularly banks, is not the lack of credit but their battered share prices. Investors have lost confidence in the honesty of the big financial players, and with good reason.

This is where the treasury's equity pays off big time. By purchasing stakes in these financial institutions, the treasury is sending a signal to the market that they are a safe bet. Why safe? Not because their level of risk has been accurately assessed at last. Not because they have renounced the kind of exotic instruments and outrageous leverage rates that created the crisis. But because the market will now be banking on the fact that the US government won't let these particular companies fail. If they get themselves into trouble, investors will now assume that the government will keep finding more cash to bail them out, since allowing them to go down would mean losing the initial equity investments, many of them in the billions.

This tethering of the public interest to private companies is the real purpose of the bail-out plan: Paulson is handing all the companies admitted to the programme - a number potentially in the thousands - an implicit treasury department guarantee. To skittish investors looking for safe places to park their money, these equity deals will be even more comforting than a triple-A from Moody's rating agency.

Insurance like that is priceless. But for the banks, the best part is that the government is paying them to accept its seal of approval. For taxpayers, on the other hand, this entire plan is extremely risky, and may well cost significantly more than Paulson's original idea of buying up $700bn in toxic debts. Now taxpayers aren't just on the hook for the debts but, arguably, for the fate of every corporation that sells them equity.

Not only were profits privatised while risks were socialised, but the implicit government backing created powerful incentives for reckless business practices.

With the new equity purchase programme Paulson has taken the discredited Fannie and Freddie model and applied it to a huge swath of the private banking industry. Again, there is no reason to shy away from risky bets, especially since the treasury has made no such demands of the banks (apparently it doesn't want to "micromanage".)

This may be Bush's most creative innovation: no-risk capitalism.

Meanwhile, every day it becomes clearer that the bail-out was sold to the public on false pretences. Clearly, it was never really about getting loans flowing. It was always about doing what it is doing: turning the state into a giant insurance agency for Wall Street, a safety net for the people who need it least, subsidised by the people who will most need state protections in the economic storms ahead.

This duplicity is a political opportunity. Whoever wins on November 4 will have enormous moral authority. It should be used to call for a freeze on the dispersal of bail-out funds, not after the inauguration but right away. All deals should be renegotiated, this time with the public getting the guarantees.”

http://www.guardian.co.uk/commentisfree/2008/oct/31/useconomy-banking

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It’s all happening just as George Orwell forecast it would in 1949, in “1984”.

Wikipedia says,

The book has major significance for its vision of an all-knowing government which uses pervasive and constant surveillance of the populace, insidious and blatant propaganda, and brutal control over its citizens.

Nineteen Eighty-Four is set in Oceania, one of three intercontinental totalitarian super-states. The story occurs in London, the "chief city of Airstrip One", itself a province of Oceania that "had once been called England or Britain"

Winston Smith has in his possession a book called The Theory and Practice of Oligarchical Collectivism by Emmanuel Goldstein.

http://en.wikipedia.org/wiki/Nineteen_Eighty-Four

When the aforementioned Reihan Salam talks about reconciling “conservatives” to the steps the country needs to take he is, of course, referring to the oligarchs whose collective views and decisions determine what goes on in the country, with “conservatives” like McCain (or Mandleson, or Osborne, or Cameron, or Brown) acting as their mouthpiece.

Arguably there are four, and not three, “intercontinental totalitarian super-states” - the US and its satellites (including the UK and Japan), the EU, Russia and its remaining satellites, and China. Things are a little blurred, however, by the existence of NATO, which acts as a unifier for the US and the EU.

What’s clear, however, is that in the USA, at least, there’s now no separation whatsoever between the government and business (the oligarchs), and the government is now clearly and blatantly revealed in its role as first and foremost supporting US finance and US business (think Halliburton and Blackwater as well as the banks and Wall Street), which in turn determine the policies of the government.

This is in contrast to a social democratic system of government which sets out to make we, the people, the governors of the country’s business and financial sectors - laying down strict regulations to ensure that their activities benefit the nation as a whole, rather than enrich those who already possess most of its wealth and are greedy to possess even more.

Control of the planet, as such, is now less of an issue than control of its remaining oil and gas reserves, as they now begin to go into serious decline, at a time when consumers in China and India are beginning to compete very seriously for these resources with consumers in the so-called First World.

Control of the planet’s finances also seems to be a key issue, and China holds several trump cards. The US, as the world’s biggest debtor, would appear to be in considerable difficulties. They borrowed low in order to lend high, but will the creditors want to continue to make credit available?

We’re now entering a very interesting period of history in which the power of the US is being seriously challenged and there are several possible scenarios ahead of us.

1) The US becomes even more of a neo-fascist militaristic superstate, which is less likely to happen if Obama wins. In this scenario the US presses ahead with military expansion and a quest for world domination, with disastrous consequences for world peace, justice and enlightened cooperation between nations.

2) The “intercontinental totalitarian super-states” compete ever more vigorously, but peacefully, for power, influence and resources, with dire consequences for the masses, the proles.

3) The superstates realise that the only possible way of achieving a stable, sustainable, peaceful and viable planet is for governments to work together with an agreed set of principles based on human values. Perhaps set up an umbrella organization called something like the United Nations. George Orwell’s preferred option.

Place your bets.
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