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A Crisis of American Capitalism

Lawrence R. Velvel

You don't have to be a socialist (and I certainly am not) to understand that this capitalistic country is confronting a crisis of capitalism.  This is not merely a matter of the huge losses and meltdowns that have taken place and have threatened to bring down the whole system with them.  It is also a matter of the failure of a culture, a culture that has grown and grown since the sainted Reagan introduced the twin pillars of his morning in America:  unchecked greed and militarism.

Militarism today holds high carnival:  in Iraq, on somewhere between 700 and 1,100 American bases around the world (the exact number being a secret, even if known to the Pentagon), on huge carriers patrolling seas all over the world, in Bush/Cheney ideas that we should intervene all over the world, in a Pentagon budget of what -- something in the neighborhood of 500 billion dollars or more, I suppose?

Unchecked greed also held high carnival, as it drove the housing market ever higher by means visibly pregnant with failure because they defied history, economics, human comprehension and sense:  Adjustable rate mortgages, with initially low rates that one knew -- I certainly knew, often said, acted accordingly, and wholly fail to grasp why everyone didn't know -- were pregnant with disaster because they would be unsustainable for the buyers when the interest rates increased, as inevitably they would because rates always rise and fall; securitization that gave rise to so-called tranches so complicated that nobody could understand what the risks and rights were; derivatives which may be even more complicated and which nobody has a real handle on apparently.  It was all nuts (as this writer often said to people), and now it has come crashing down, as was inevitable.  The acclaimed geniuses -- like Alan Greenspan (who led the way) -- who lived in and loved celebrification, who profited from it, have been shown the fools that they are.  In Greenspan's case, this is at least the second burst bubble he promoted, the other being the high tech stock market which melted down at the beginning of the 2000s.  (Of course, in America, where nothing succeeds like failure, as is oft typified by celebrified coaches, baseball managers and university presidents, Greenspan remains a great man.)

The heads of major firms have likewise fallen, as their houses of cards collapsed.  The fall of titans represents a horrid, economy-threatening failure of the culture of greed, dishonesty (which often was a major part of pushing the insane instruments on uncomprehending buyers), and unchecked capitalism, the culture which has been pushed on us by conservative intellectuals, politicians and the uncomprehending mainstream media since Reagan took office in 1981.  This vile culture (and the militarism which is in some important ways associated with it (e.g., a war for oil, huge profits for contractors)), came to dominate much of the American nation.  Now the culture of unchecked greed and celebrification of its richest practitioners has come acropper (as did the war in Iraq).  That it would come acropper was inevitable, based as it was on stupidity.  Leaders have been exposed as fools -- yet again.

Here is an interesting fillip to this point.  Goldman Sachs is one of the few huge investment houses which has not gone down, at least not yet.  From what I've read, the reason is that Goldman was smarter than the others.  It sold the garbage to others, it sold the securitized crap to anyone who wanted to buy it, but, from what I gather, it did not keep any of it.  So it was not stuck with hundreds of millions or billions of worthless or deeply discountable securities on its books, as the others were.  One might say that Goldman was very greedy, like the rest of them, so it made tons of money selling the garbage to fools, but it was a lot smarter than the rest of them because it apparently knew that what it was selling was garbage that should not be allowed to drag down Goldman's own value by being owned by Goldman.  Which, of course, raises the question of isn't it morally worse, maybe morally far worse, on the one hand, to sell other people stuff you know is such garbage that you won't keep it on your own books as part of your own assets, than to sell them stuff, on the other hand, that you yourself consider good enough to keep on your own books as part of your own asset base?  The latter represents "only" a triumph of stupidity.  The former represents sheer immorality, doesn't it?  (And the irony, of course, is that what happened to the other houses which held the stuff may yet drag down Goldman too.)

You know, both stupidity and greed seem always to be with us, sometimes in combination, sometimes separately.  Particular examples of them over the years have stuck in my mind indelibly, but I shall skip the details.  Suffice to say here that, in the public realm, greed and stupidity are promoted by the corporate mainstream mass media's constant promotion of the conventional wisdom, the MSM's blotting out of non-celebrity voices of opposition to the conventional wisdom, and the MSM's celebrification of fools.  Of course, since the mainstream media has such a huge percentage of people who are not very competent or intelligent, maybe it is hopeless to expect better from it.  Regardless, we shall have to figure out some way to overcome the roadblock of the MSM, no doubt using the internet in some way.

That, however, is for the future.  For the present, we are seeing the meltdown of a culture of unchecked greed and stupidity that has been the driving force in American capitalism since Reagan took office and began 27 years of propagandizing for this.  Government is now seeking to lessen the effects of this capitalistic crisis by bailing out the big boys, the Wall Streeters.  We are told, of course, that they have to be bailed out lest the whole economy, and maybe even the world's economy, undergo collapse.  And what we are told is true, I would guess.  But also noticeable -- and, as always, expected -- is who is getting the short end of the stick.  It is the small guys, the small people who get no relief on the mortgages whose interest rates are now way too high for them, the small investors who are losing their shirts, and the like.  This, too, of course, is a despicable part of American culture:  help the big boys and screw the small man.  And this too has been ever more prevalent since the days -- dare I say it yet again -- of the falsely sainted Reagan.

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Lawrence Velvel, Dean of Massachusetts School of Law, an honors graduate of the University of Michigan Law School, has practiced law in the public and private sectors, and been a law professor. He is the author of the trilogy Thine Alabaster Cities Gleam: Misfits In America; Thine Alabaster Cities Gleam; and The Hopes and Fears of Future Years: Loss and Creation

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