The Great Economic Misdirection

Off With Their Heads, Redux

by ROB URIE

 

A central challenge for left critiques of capitalism as it exists today is the distance between the mythologies that craft understanding of the issues for the great majority and more probable explanations based on examination and analysis. The issues are that concentrated wealth is claims on social resources; that wealth ‘creation’ is an artifact of particular arrangement of social circumstances / relations and that wealth distribution is the social distribution of economic and political power. Concentrated wealth as it exists is hardly likely to distribute this power away from itself. And conspicuously missing is class-consciousness in any revolutionary sense amongst the poor and middle classes whose circumstances in the ‘developed’ West are in rapid decline. Taken together this is a formula for escalating consolidation of economic and political power against people who have little apparent understanding of the economic forces that are overtaking them. Were it not for the risk of growing political and economic dysfunction and its likely effects in social and environmental catastrophes— wars for resources to benefit the residual plutocracy, the inability to address global warming because doing so lowers corporate ‘profits’ and the increasing immiseration of a broadening swath of the socially dis-empowered, concern might rightly be considered effete.

For instance, a survey of public perceptions of wealth distribution undertaken by Michael Norton and Dan Ariely in 2011 found wide disparities between wealth distribution as it is perceived and as it actually is. Even that study grossly understated the concentration of income and wealth because the researchers were working with overly broad categories—quintiles, or fifths, of wealth distribution when the real concentration is at the very top. On the other side of public perceptions is the tiny group of very wealthy who see their wealth, even inherited wealth, as deserved, and who frame challenges to the idea that it is in psychological terms, as ‘envy.’ Adding to social misdirection is the mainstream economic frame that views concentrated ‘capital’ in some confused conflagration of money, quasi-money and things as the prerequisite to economic production. The predominant economic mythologies surrounding income and wealth distribution clearly work the service of the very rich.

Graph (1) above: Most people have no conception of how concentrated incomes and wealth are at the very top. When Norton and Ariely (link above) asked people what they believed this concentration to be respondents tended to underestimate concentration in the top 20%. Illustrated above is that even within the top 10% of incomes average executive compensation is so great that the average top incomes are barely visible. With the extremes illustrated in this graph as evidence, looking at the issue in quintiles, as Norton and Ariely did, obscures more than it illuminates. But this written, the authors found that even when viewed in quintiles there was broad objection to such concentrated incomes and wealth. One can only imagine responses if the issue were more precisely framed. Sources are the Federal Reserve Survey of Consumer Finances and Forbes. Units are in thousands of dollars.

Capitalist mythology has it that incomes and wealth are largely ‘earned.’ This myth unites the wages of the poor and middle classes in social understanding with those of the very wealthy in a hierarchy of justly differentiated outcomes—the incomes and wealth of hedge fund managers and corporate executives are perceived to be analogous to the paychecks received by truck drivers and service workers, only larger. In fact, through expression of social power in ‘public’ policies that decide which industries get subsidized and bailed out and through granting monopoly and cartel privileges to favored industries and industrialists, the incomes and wealth of the wealthy are not commensurate with the wages of labor in either type or scale. The contrived division of economic and political power that is a central precept of capitalist democracy serves to hide the role of concentrated wealth in crafting ‘political’ decisions that benefit the already wealthy. This is the central factor driving perceptions of political dysfunction in the West when the political system is working just as the plutocracy wishes it to work.

Graph (2) above: The growth of finance and the rise in financial asset prices has played a large role in inflating executive compensation. Captive Boards of Directors grant huge stock options to corporate executives who now earn hundreds of times more than their workers do. The mythology that the stock market reflects the ‘true’ value of companies ignores the role of the Federal government and the Federal Reserve in subsidizing corporate profits and in raising stock prices through monetary policies specifically designed to do so. Source: Forbes.

One reasonably well-known example of the public sources of corporate ‘profits’ is Wal-Mart, which is dependent upon government subsidies of both its customers and its employees. The heirs to the Wal-Mart ‘fortune’ are individually amongst the richest people in the world. Wal-Mart employees are the largest beneficiaries of Medicaid and food stamp expenditures in a number of states and the company has admitted (link above) that its sales and revenues are dependent on food stamp (SNAP– Supplemental Nutrition Assistance Program) payments to its customers. Another way of saying this is that many Wal-Mart employees couldn’t afford to work for the company if Federal and state governments weren’t subsidizing their paychecks and many of its customers couldn’t afford to shop at Wal-Mart if they didn’t receive food assistance. Left un-addressed is the use of coerced and / or sweatshop labor to manufacture the products Wal-Mart and the rest of ‘retail’ America sells. The use of overseas labor requires a subsidized global infrastructure for the transfer of resources, a standing army to assure repatriation of profits and the social means of coercing labor at ‘profitable’ wages. Historical examples of this latter tendency can be seen in U.S. military invasions throughout Central and South America and Haiti when the institution of higher minimum wages was threatened.

Graph (3) above: The pretense / premise of Western economics is that ‘we are all in this economy together.’ This was / is the improbable foundation that has kept variations on ‘trickle-down’ economics alive in economics departments across the West. Without apparent irony or much public comment is that executive compensation and the need for food assistance have risen in tandem since the 1980s. The need for food assistance is evidence of severe poverty. Not illustrated is the rapid increase in those living at half of the poverty level or less since financial asset prices and executive compensation began to ‘recover’ in 2009. Sources: U.S. Department of Agriculture and Forbes.

As can be seen in Graph (2) above, in addition to government bailouts, subsidies and protections that boost corporate profits, a rising stock market also contributes to inflated executive compensation. Many people believe / assume that the stock market is unaffected by ‘external’ factors and therefore reflects ‘true’ market values for company stock. In fact, in recent decades the ‘monetary’ policies of the Federal Reserve have been designed to inflate the values of financial assets.  Low interest rates affect the price of the borrowing (leverage) used to buy financial assets on margin and quantitative easing (QE) is the direct purchase of financial assets by the Federal Reserve. Interest rates intentionally kept low by former Fed Chair Alan Greenspan inflated the dot-com and housing bubbles and the policies of subsequent Fed Chairs Ben Bernanke and Janet Yellen have re-inflated financial asset prices since 2009. There is nothing ‘natural’ about these sequential bubbles. Through the role that rising stock prices play in inflating executive compensation and the salaries and bonuses of bankers and hedge fund managers a tiny group of connected insiders has been made wealthy beyond the conception of most people. And the low interest rate policies of the Federal Reserve can also be seen as a subsidy of corporate profits through lowering the borrowing costs of corporations.

Graph (4) above: There are multiple ways of valuing the stock market. Most of those in use today incorporate the extreme valuations of the dot-com bubble of the 1990s and 2000s thereby making recent valuations appear more typical than they really are. When compared to long term corporate earnings (CAPE—Cyclically Adjusted Price Earnings) ‘cycles’ over one-hundred and thirty-five years of stock market history today’s valuations are very far above typical valuation levels and are currently at levels only seen a few times before in history at bubble peaks. With executive compensation coming from bubble level stock market valuations corporate executives can try to claim that they’ve ‘earned’ their compensation. But the more plausible explanation is that the Federal Reserve and a financial system run amok are far more responsible for it. Source: Robert Shiller.

Graph (5) above: Part of the explanation that the Federal Reserve gives for policies favoring the rise in financial asset prices is the ‘wealth effect,’ the tendency for people to spend more because they feel richer when stock prices rise. While some statistical analyses suggest that this may be true, who benefits from rising stock markets are the people who own stocks. As is illustrated above, the richest twenty-percent of households own almost all of the stock market. Again, as with income distribution, the true concentration of ownership of financial assets is at the very top of the top ten percent. Federal Reserve policies to raise stock prices overwhelmingly benefit already wealthy households. As Graph (3) illustrates, the contention that everyone benefits from policies to make the rich richer faces the reality that extreme poverty is rising as the rich are being made richer.

The great misdirection of Western economics in recent decades is conflation of financial wealth with economic ‘value’ creation. Apparently left unconsidered by much of the ‘income inequality’ crowd is that were financial asset prices to implode, as they did in 2001 and again in 2008, some fair proportion of the mechanism of concentrated income and wealth distribution would implode with it. This goes far in explaining the complete devotion of the political and financial establishments to resurrecting banking and finance since 2008 while ignoring the plight of the vast majority on the other side of this system. Many of the homes of the housing boom and bust are still standing but under new ownership by the financiers who took them, the role of finance in economic production exists as facilitator and not as producer. The role of facilitator could come straight from Western governments through their ability to create and distribute fiat currency ‘out of thin air.’ That this wasn’t the route taken from 2008 forward illustrates the control that the existing plutocracy has over ‘political’ policies. The real tragedy is still underway— the incapacity for social and environmental reconciliation without major social upheaval. Anyone who doubts this should spend time with the flaccid hallucinations posed as economic ‘explanation’ coming from the banker ghettoes in New York and London.

US Economy Is A House Of Cards

Paul Craig Roberts

The US economy is a house of cards. Every aspect of it is fraudulent, and the illusion of recovery is created with fraudulent statistics.

American capitalism itself is an illusion. All financial markets are rigged. Massive liquidity poured into financial markets by the Federal Reserve’s Quantitative Easing inflates stock and bond prices and drives interest rates, which are supposed to be a measure of the cost of capital, to zero or negative, with the implication that capital is so abundant that its cost is zero and can be had for free. Large enterprises, such as mega-banks and auto manufacturers, that go bankrupt are not permitted to fail. Instead, public debt and money creation are used to cover private losses and keep corporations “too big to fail” afloat at the expense not of shareholders but of people who do not own the shares of the corporations.

Profits are no longer a measure that social welfare is being served by capitalism’s efficient use of resources when profits are achieved by substituting cheaper foreign labor for domestic labor, with resultant decline in consumer purchasing power and rise in income and wealth inequality. In the 21st century, the era of jobs offshoring, the US has experienced an unprecedented explosion in income and wealth inequality. I have made reference to this hard evidence of the failure of capitalism to provide for the social welfare in the traditional economic sense in my book, The Failure of Laissez Faire Capitalism, and Thomas Piketty’s just published book, Capital in the 21st Century, has brought an alarming picture of reality to insouciant economists, such as Paul Krugman. As worrisome as Piketty’s picture is of inequality, I agree with Michael Hudson that the situation is worse than Piketty describes. http://michael-hudson.com/2014/04/pikettys-wealth-gap-wake-up/

Capitalism has been transformed by powerful private interests whose control over governments, courts, and regulatory agencies has turned capitalism into a looting mechanism. Wall Street no longer performs any positive function. Wall Street is a looting mechanism, a deadweight loss to society. Wall Street makes profits by front-running trades with fast computers, by selling fraudulent financial instruments that it is betting against as investment grade securities, by leveraging equity to unprecedented heights, making bets that cannot be covered, and by rigging all commodity markets.

The Federal Reserve and the US Treasury’s “Plunge Protection Team” aid the looting by supporting the stock market with purchases of stock futures, and protect the dollar from the extraordinary money-printing by selling naked shorts into the Comex gold futures market.

The US economy no longer is based on education, hard work, free market prices and the accountability that real free markets impose. Instead, the US economy is based on manipulation of prices, speculative control of commodities, support of the dollar by Washington’s puppet states, manipulated and falsified official statistics, propaganda from the financial media, and inertia by countries, such as Russia and China, who are directly harmed, both economically and politically, by the dollar payments system.

As the governments in most of the rest of the world are incompetent, Washington’s incompetence doesn’t stand out, and this is Washington’s salvation.

But it is not a salvation for Americans who live under Washington’s rule. As all statistical evidence makes completely clear, the share of income and wealth going to the bulk of the US population is declining. This decline means the end of the consumer market that has been the mainstay of the US economy. Now that the mega-rich have even more disproportionate shares of the income and wealth, what happens to an economy based on selling imports and off-shored production of goods and services to a domestic consumer market? How do the vast majority of Americans purchase more when their incomes have not grown for years and have even declined and they are too impoverished to borrow more from banks that won’t lend?

The America in which I grew up was self-sufficient. Foreign trade was a small part of the economy. When I was Assistant Secretary of the Treasury, the US still had a trade surplus except for oil. Offshoring of America’s jobs had not begun, and US earnings on its foreign investments exceeded foreign earnings on US investments. Therefore, America’s earnings abroad covered its energy deficit in its balance of trade.

The economic stability achieved during the Reagan administration was shattered by Wall Street greed. Wall Street threatened corporations with takeovers if the corporations did not produce higher profits by relocating their production of goods and services for American markets abroad. The lower labor costs boosted earnings and stock prices and satisfied Wall Street’s cravings for ever more earnings, but brought an end to the rise in US living standards except for the mega-rich. Financial deregulation loaded the economy with the risks of asset bubbles.

Americans are an amazingly insouciant people. By now any other people would have burnt Wall Street to the ground.

Washington has unique subjects. Americans will take endless abuse and blame some outside government for their predicament–Iraq, Afghanistan, Libya, China, Russia. Such an insouciant and passive people are ideal targets for looting, and their economy, hollowed-out by looting, is a house of cards.

The Double Bed of Business and Government

Interpenetration in the Obama Administration
by NORMAN POLLACK


Oh Mary Jo, we eagerly awaited your cleaning up of the stench, crud, dreck of SEC—all, and obviously, in vain, as your appointment to head the Commission once more reveals the Obama Administration’s mighty efforts on behalf of the American Business System, especially its most problematic, exploitative, illegal features, i.e., those which create the greatest unearned profits for the perpetrators of economic skullduggery and sleight-of-hand, now, as the latest attraction, derivatives trading. Obama has found his soul mate in regulation in Mary Jo White, just as in paramilitary operations in John O. Brennan. Government, at its finest hour of political treachery in serving the American people.

Let’s get serious. The United States throughout its historical development has interiorized the structure and values of capitalism, a puristic capitalist-institutional formation, still more greatly accelerated since the aftermath of World War II, to a far more intensified expression than any advanced industrial nation, thereby making America and capitalism itself synonomous, identical, indistinguishable one from the other—a synchronism of the two transcending party, and with thorough bipartisan support, creating clear boundaries to social change and political protest. Obama is merely the latest spear carrier in a continuous line—with few notable exceptions in the nation’s past—of presidents ministering to the needs of dominant groups and attempting, sometimes unsuccessfully (witness the latest financial crisis and its still unfolding consequences), to satisfy the imperative needs of the economic system. Rather than seek, even within capitalism, the moderation of its war-prone, imperialist, underconsumptionist tendencies and societal class differentials, thereby adding some degree of justice and melioration to its execution and operations, America, now particularly under Obama, is going for broke to liberate its oppressive, even nightmarish, inner reason and potential, in which militarism, deregulation, and an economic freefall for working people become increasingly evident.

In this light, Mary Jo White at SEC, rather than a disappointment (for those who still hold out hope of Obama’s essential honesty as dedicated to social welfare and structural democracy), is par for the course, one that started off with the appointments of Geithner, Summers, and Robert Rubin’s policies, ideas, and confederates under Clinton, the placation of and support for Big Pharma and health insurers under Obamacare, the more pointed assistance to the defense, nuclear, and oil industries, and the heartfelt embrace of Wall Street, and continues in a sophisticated corporatism—the real definition of liberalism—far more dangerous for its realization of a social order founded on monopolism and wealth concentration than is the unsystematic business favoritism and chisling mindset, the penny ante mode of capitalist development, which fails to marshall the full resources of the State, of the Republicans.

Obama has a step up on his predecessors—for reasons still difficult to determine, given that his personal acumen and brightness have been grossly exaggerated. Perhaps he simply has allowed the gathering historical forces inhering in the US’s global posture, in which America can no longer dictate the course of world events, to coalesce in his administration: an aggressive defensiveness against the very democratization his candidacy supposedly represented. Capitalism serves as the battering ram for the restoration of American world power. Its helpmate, more than previously, is naked force displayed as the doctrine of permanent war, the military juggernaut adjusted to the specific theaters of concern from naval power in the Pacific to drones for targeted killing, intervention, CIA activities of regime change, the JSOC paramilitary operations, springing up throughout the globe.

Interpenetration, the integrative, instead of merely parallel, structures, values, relations of mutual dependence and inspiration, of business and government, has in America since the time of Theodore Roosevelt (Gabriel Kolko’s Triumph of Conservatism, after more than a half-century, still has not been assimilated into the collective realization that REFORM is largely big-business inspired, to achieve the consolidation of wealth and, relatedly, the security of capitalism at home and in the world, free from radical challenges, and even that of lesser-capitalist competitors), provided the foundations designed to ensure that capitalism in America, because inseparable from the State, could rely on government for its stabilization and global expansion. Now, under Obama, there is no longer any question (one muted or nonapplicable for long stretches of the past, frequently embodied in the strategy of the Open Door) that a mainspring of capitalism is the reliance on the military, for purposes of counterrevolution abroad, economic stimulation at home, and in both arenas, a system of power fusing national and international purpose to create Fortress Capitalism as an eternal source of wealth and leadership.

Welcome Mary Jo; do your mischief with respect to derivatives, themselves already mischievous enough, knowing that you will sleep soundly in the knowledge that, if your Boss can sleep soundly after personally selecting targets for assassination, you too deserve restful slumber for participating in the wreckage of an economy whose victims are all but assassinated in their despair, loss of employment, and for some, foraging in the ash cans as in days of yore—under your counterpart servants of wealth.

Here follows my New York Times Comment (May 6) on its editorial disappointment on Ms. White’s record as the newly-installed head of the SEC. My fond wish is that Times disappointment will turn into forthright and fundamental criticism of the whole shebang (but I’m not holding my breath):

The Times’ analysis of SEC partiality to banks and their role in the dervatives trade is wise, sound, and timely, but lacking fuller context: Obama’s wider posture of deregulation, exemplified by the appointment of White but actually running through the regulatory apparatus. SEC, FDA, EPA, in areas crucial to the welfare of the American public, we are being left to hang out to dry. The issue of derivatives cannot be treated in isolation: In all respects, internal corporate-banking hegemony defines the American scene, suitably disguised in liberal rhetoric.

When will the con game stop? Probably not for a long time, as both major parties contribute to the widening of economic and class differentials, accompanied by the weakening of the social safety net. Symbolically, derivatives signify the splitting apart of America–not the 1% vs. the 99%, too simplistic by far, but a structural cleavage sufficiently acute to result in underconsumption, unemployment, and the need to rectify domestic hardship through greater militarism, both as distraction and as the source of further enrichment for America’s wealthy.

Yes, we are witnessing the financialization of the US economy, introducing basic distortions across the board, from loss of manufactures to further financial crises. As a nation, we seem not to learn, possibly even incapable of learning. But I’m glad The Times in this editorial helps to open the can of worms.

How Corporate Power Seized the Internet

Digital Grab
by NORMAN SOLOMON


If your daily routine took you from one homegrown organic garden to another, bypassing vast fields choked with pesticides, you might feel pretty good about the current state of agriculture.

If your daily routine takes you from one noncommercial progressive website to another, you might feel pretty good about the current state of the Internet.

But while mass media have supplied endless raptures about a digital revolution, corporate power has seized the Internet — and the anti-democratic grip is tightening every day.

“Most assessments of the Internet fail to ground it in political economy; they fail to understand the importance of capitalism in shaping and, for lack of a better term, domesticating the Internet,” says Robert W. McChesney in his illuminating new book, Digital Disconnect.
Plenty of commentators loudly celebrate the Internet. Some are vocal skeptics. “Both camps, with a few exceptions, have a single, deep, and often fatal flaw that severely compromises the value of their work,” McChesney writes. “That flaw, simply put, is ignorance about really existing capitalism and an underappreciation of how capitalism dominates social life. . . . Both camps miss the way capitalism defines our times and sets the terms for understanding not only the Internet, but most everything else of a social nature, including politics, in our society.”

And he adds: “The profit motive, commercialism, public relations, marketing, and advertising — all defining features of contemporary corporate capitalism — are foundational to any assessment of how the Internet has developed and is likely to develop.”

Concerns about the online world often fixate on cutting-edge digital tech. But, as McChesney points out, “the criticism of out-of-control technology is in large part a critique of out-of-control commercialism. The loneliness, alienation, and unhappiness sometimes ascribed to the Internet are also associated with a marketplace gone wild.”

Discourse about the Internet often proceeds as if digital technology has some kind of mind or will of its own. It does not.

For the most part, what has gone terribly wrong in digital realms is not about the technology. I often think of what Herbert Marcuse wrote in his 1964 book One-Dimensional Man: 

“The traditional notion of the ‘neutrality’ of technology can no longer be maintained. Technology as such cannot be isolated from the use to which it is put; the technological society is a system of domination which operates already in the concept and construction of techniques.”

Marcuse saw the technological as fully enmeshed with the political in advanced industrial society, “the latest stage in the realization of a specific historical project – namely, the experience, transformation, and organization of nature as the mere stuff of domination.” He warned that the system’s productivity and growth potential contained “technical progress within the framework of domination.”

Fifty years later, McChesney’s book points out:

“The Internet and the broader digital revolution are not inexorably determined by technology; they are shaped by how society elects to develop them. . . . In really existing capitalism, the kind Americans actually experience, wealthy individuals and large corporations have immense political power that undermines the principles of democracy. Nowhere is this truer than in communication policy making.”

Huge corporations are now running roughshod over the Internet. At the illusion-shattering core of Digital Disconnect are a pair of chapters on what corporate power has already done to the Internet — the relentless commercialism that stalks every human online, gathering massive amounts of information to target people with ads; the decimation of privacy; the data mining and surveillance; the direct cooperation of Internet service providers, search engine companies, telecomm firms and other money-driven behemoths with the U.S. military and “national security” state; the ruthless insatiable drive, led by Apple, Google, Microsoft and other digital giants, to maximize profits.

In his new book, McChesney cogently lays out grim Internet realities. (Full disclosure: he’s on the board of directors of an organization I founded, the Institute for Public Accuracy.) Compared to Digital Disconnect, the standard media critiques of the Internet are fairy tales.

Blowing away the corporate-fueled smoke, McChesney breaks through with insights like these:

• “The corporate media sector has spent much of the past 15 years doing everything in its immense power to limit the openness and egalitarianism of the Internet. Its survival and prosperity hinge upon making the system as closed and proprietary as possible, encouraging corporate and state surreptitious monitoring of Internet users and opening the floodgates of commercialism.”
• “It is supremely ironic that the Internet, the much-ballyhooed champion of increased consumer power and cutthroat competition, has become one of the greatest generators of monopoly in economic history. Digital market concentration has proceeded far more furiously than in the traditional pattern found in other areas. . . As ‘killer applications’ have emerged, new digital industries have gone from competitive to oligopolistic to monopolistic at breakneck speeds.”
• “Today, the Internet as a social medium and information system is the domain of a handful of colossal firms.”
• “It is true that with the advent of the Internet many of the successful giants — Apple and Google come to mind — were begun by idealists who may have been uncertain whether they really wanted to be old-fashioned capitalists. The system in short order has whipped them into shape. Any qualms about privacy, commercialism, avoiding taxes, or paying low wages to Third World factory workers were quickly forgotten. It is not that the managers are particularly bad and greedy people — indeed their individual moral makeup is mostly irrelevant — but rather that the system sharply rewards some types of behavior and penalizes other types of behavior so that people either get with the program and internalize the necessary values or they fail.”
• “The tremendous promise of the digital revolution has been compromised by capitalist appropriation and development of the Internet. In the great conflict between openness and a closed system of corporate profitability, the forces of capital have triumphed whenever an issue mattered to them. The Internet has been subjected to the capital-accumulation process, which has a clear logic of its own, inimical to much of the democratic potential of digital communication.”
• “What seemed to be an increasingly open public sphere, removed from the world of commodity exchange, seems to be morphing into a private sphere of increasingly closed, proprietary, even monopolistic markets. The extent of this capitalist colonization of the Internet has not been as obtrusive as it might have been, because the vast reaches of cyberspace have continued to permit noncommercial utilization, although increasingly on the margins.”
• “If the Internet is worth its salt, if it is to achieve the promise of its most euphoric celebrants and assuage the concerns of its most troubled skeptics, it has to be a force for raising the tide of democracy. That means it must help arrest the forces that promote inequality, monopoly, hypercommercialism, corruption, depoliticization, and stagnation.”
• “Digital technologies may bring to a head, once and for all, the discrepancy between what a society could produce and what it actually does produce under capitalism. The Internet is the ultimate public good and is ideally suited for broad social development. It obliterates scarcity and is profoundly disposed toward democracy. And it is more than that. The new technologies are in the process of truly revolutionizing manufacturing, for example, making far less expensive, more efficient, environmentally sound, decentralized production possible. Under really existing capitalism, however, few of the prospective benefits may be developed — not to mention spread widely. The corporate system will try to limit the technology to what best serves its purposes.”

The huge imbalance of digital power now afflicting the Internet is a crucial subset of what afflicts the entirety of economic relations and political power in the United States. We have a profound, far-reaching fight on our hands, at a crossroads leading toward democracy or corporate monopoly. The future of humanity is at stake.

Wall Street and the Politics of Finance

A System of Economic Exploitation and Domination

by ROB URIE

 

In the early days of the Obama administration there was an opportunity, at least in theory, to reconsider the role of finance in Western economies. The financial part of the economic crisis that the banks created left them vulnerable and dependent on visible public support. And while Mr. Obama came relatively late to this history, his decision to wholly revive finance capitalism will haunt the economies of the West until banks are returned to their useful social function as utilities.

Public anger over outsized paychecks, predatory practices and freedom from liability for several decades of straightforwardly criminal behavior aside, banks and the debt based economy they produce force the most destructive elements of capitalism onto a fragile world. Ironically, finance capitalism produces monumental wealth redistribution, the great boogieman of capitalist economists, and serves to justify acts of human and environmental devastation that, when viewed on their own, are quite obviously insane. And while this tendency can be attributed to capitalism in general, financial leverage adds a structural element to economic production that amplifies the worst tendencies of capitalism. The existing system of global finance must be gotten out of the way before less destructive modes of economic life are possible.

Andrew Haldane of the Bank of England has pulled together a critique of Western economics that is one step in the direction of understanding what banks have wrought. A central point in Mr. Haldane’s thesis is that economists in the West have simply forgotten what was formerly known about the role of bank money creation in structuring the broader economy. Economist Mike Hudson knows this history and has gone a long way toward recovering it and adding new insights. Likewise Steve Keen (Primer on Endogenous Money) has taken the heat  for formalizing what thoughtful economists understood in a general sense a century ago.

But ultimately economics is only a framework for understanding the material facts that must be addressed.
A purposefully irrelevant discourse has surrounded wealth distribution in capitalist economies for eons. Most people don’t consider banks to distribute, and redistribute, wealth, but they do. An intuitive understanding of this can be got to as follows—banks create money by making loans. (Mr. Keen provides the most straightforward explanation of the mechanics in his Primer, link above). When banks were heavily regulated, bankers earned regular bourgeois livings. When banks were deregulated, suddenly bankers had all of the money for themselves. They accomplished this (1) by creating a whole lot more money than they previously had (Haldane) and (2) by creating ‘innovations’ like securitization and off-balance sheet financial garbage dumps like SIVs (Structured Investment Vehicles) that allowed bankers to keep more of the money that they created.

The structural problems created by debt based money are (1) debt shifts real wealth from borrowers (labor) to lenders (financiers) and (2) this system is intrinsically unstable and ultimately, economically destabilizing. As Mr. Hudson argues, bank loans are predominately used to buy existing assets like houses and stocks and bonds rather than to invest in economic production. With mortgage loans in particular, rising debt inflates house prices, in turn requiring borrowers to commit ever-greater proportions of their future economic production to pay for them. But to fully understand how economically destructive this set of relationships is, it must first be understood how finance capitalism is economically destabilizing.

The late economist Hyman Minsky developed a range of theories around his insight that “stability is destabilizing” in an economic system with bank money creation. The theory states that during times of relative economic stability banks compete for profits by lending increasingly to marginal borrowers. In the later stages of a financial epic this leads them to make loans on the basis of rising asset values, e.g. home loans that can only be repaid while home prices continue to rise. (‘Margin’ loans made by Wall Street firms to their customers are behind every financial crash in modern history).

In the housing ‘boom’ of 1998-2006 bankers drove house prices higher by making loans to people who could only repay them if house prices continued to rise. When house prices began to decline in 2006, the gig was up and the banking system and the economy imploded. What wasn’t reconciled, despite the implosion, is the banking sector’s claims on future economic production. People who borrowed money to buy a house overwhelmingly still owe it against declining house prices. And ‘Ponzi’ finance, the term Mr. Minsky used to describe loans that can only be repaid when asset values are rising, is unambiguously ‘predatory’ in that bankers understand, or should understand, that incomes alone are insufficient to repay the loans.

Put another way, bankers don’t care if someone borrowed $250,000 against a house that is now only worth $100,000—the loan amount to be repaid is $250,000. But because the house price has declined to $100,000, bankers can now buy two and one half of these houses for the original loan amount. And because the borrower must repay the full $250,000 plus interest and fees for a house now only worth $100,000, this represents a transfer of their future economic production to bankers of $150,000 plus interest and fees. When this is aggregated across all of the borrowers and all of the bank loans, it represents a massive transfer of wealth from the people who produce it to a group of people who have been given the right to create money at the push of a button— Wall Street.

Andrew Haldane argues that bank balance sheets across the West have expanded by the largest amount in human history in recent decades. This means banks have been making loans, and in so doing creating money, at the fastest rate in human history. In the early stages increased lending led to increased economic production fulfilling the capitalist rationale for finance capitalism. When banks were fully deregulated in the late 1990s bank lending led to financial boom-bust cycles, first in financial assets and later in housing. (S&L deregulation did the same in the 1980s). With financial profits now leading overall corporate profits higher, finance receives its largest proportion of economic ‘production’ in modern history (Corporate Profits as % of GDP, 2^nd graph), this as the rate of overall economic growth is the weakest since the 1930s.

The residual issue not well understood by mainstream economists is the ‘debt deflation’ that existing debt causes because it must be repaid from declining incomes for houses that are worth less than the loan amounts against them. (Note to housing ‘bulls’: don’t confuse policy particulars with ‘natural’ economic activity. Banks were forced to stop foreclosing on delinquent homeowners in 2011-2012 because they were doing so illegally. The recent ‘mortgage settlement’ allowed illegal foreclosures to resume with government protection). And while average incomes have been rising, median incomes continue to decline. Generally, median incomes represent the income of labor and average incomes (right tail of Pareto or ‘power law’ distributions) the incomes of finance.

Whatever the visceral anger toward Wall Street, the reasons why finance capitalism must be ended and banking returned to its social purpose as a utility are analytical. While financial crashes like that of 2008 are emblematic of systemic instability, it is the transfer of social wealth from labor to finance that is most socially, economically and politically destructive. The focus of official Washington on restoring the existing system as a means to restore economic vitality gets it exactly wrong. And calls to simply re-regulate the banks ignore that while the banks were regulated financial profits accrued that allowed them to buy deregulation from a compromised political system.

Finance capitalism can’t be fixed because of its inherent contradictions. There is no ‘natural’ reason why banks, rather than public institutions, have the right to create money—that is a political outcome. And the political power of finance capitalism is more than just capture of the political system, it lies in the everyday power over the way that the world is set up—the relation between ‘natural’ needs like shelter, transportation, education and healthcare and the debt system used to ‘buy’ them that converts an increasing proportion of the product of our work to financial profits.

It is this last point that mainstream economists, liberals and most progressives don’t get. By focusing attention on the nominal political system, the politics surrounding economic conditions are left hidden. The calls to ‘get the money out of politics’ also need to get the politics out of money. Finance capitalism, and capitalism more broadly considered, is a system of economic domination. And economic domination is political. As the saying goes, ‘economic democracy is a prerequisite for political democracy.’ And economic democracy requires institutions in the public interest.

Chris Hedges on Capitalism's "Sacrifice Zones": Communities Destroyed for Profit

Tuesday, 24 July 2012 By Bill Moyers, Moyers & Company | Interview

There are forgotten corners of this country where Americans are trapped in endless cycles of poverty, powerlessness, and despair as a direct result of capitalistic greed. Journalist Chris Hedges calls these places "sacrifice zones," and joins Bill this week on Moyers & Company to explore how areas like Camden, New Jersey; Immokalee, Florida; and parts of West Virginia suffer while the corporations that plundered them thrive.
These are areas that have been destroyed for quarterly profit. We're talking about environmentally destroyed, communities destroyed, human beings destroyed, families destroyed," Hedges tells Bill.

"It's the willingness on the part of people who seek personal enrichment to destroy other human beings... And because the mechanisms of governance can no longer control them, there is nothing now within the formal mechanisms of power to stop them from creating essentially a corporate oligarchic state."

The broadcast includes a visit with comics artist and journalist Joe Sacco, who collaborated with Hedges on Days of Destruction, Days of Revolt, an illustrated account of their travels through America's sacrifice zones. Kirkus Reviews calls it an "unabashedly polemic, angry manifesto that is certain to open eyes, intensify outrage and incite argument about corporate greed."

A columnist for Truthdig, Hedges also describes the difference between truth and news. "The really great reporters — and I've seen them in all sorts of news organizations — are management headaches because they care about truth at the expense of their own career," Hedges says.

TRANSCRIPT
Exploring parts of America "that have been destroyed for quarterly profit."

Bill Moyers: Welcome. Here we are, barely halfway through the summer, and Barack Obama and Mitt Romney have stepped up their cage match, each attacking the other, throwing insults and accusations back and forth like folding chairs hurled across the wrestling ring.
Governor Romney pummels away at the economy; President Obama pummels away at Mr. Romney—when he was or wasn't at his company Bain Capital, his tax returns and his offshore accounts. All the while, as they bob and weave their way through this quadrennial competition, punching wildly, the real story of what's happening to ordinary people as capitalism runs amok is largely ignored by each of them. But not in this book "Days of Destruction, Days of Revolt"—an unusual account of poverty and desolation across contemporary America. It's a collaboration between graphic artist and journalist Joe Sacco, about whom more later, and my guest on this week's broadcast, Chris Hedges.

Chris Hedges: All of the true correctives to American democracy came through movements that never achieved formal political power.

Bill Moyers: This is just the latest battle cry from Hedges, who, angry at what he sees in the world, expresses his outrage in thoughtful prose that never fails to inform and provoke. As a correspondent and bureau chief for "The New York Times," he covered wars in North Africa, the Balkans and the Middle East—leaving the paper after a reprimand for publicly denouncing the 2003 invasion of Iraq.

In such books as "War Is a Force that Gives Us Meaning," his weekly column for the website "Truthdig" and freelance articles for a variety of other publications, Chris Hedges has taken his life's experience covering the brutality of combat and shaped a worldview in which morality and faith, and the importance of truth-telling, dissent and social activism take precedence, even if it means going to jail.

Welcome, Chris Hedges.

Chris Hedges: Thank you.

Bill Moyers: Tell me about Joe Sacco. He was your companion on this trip. And he was your, in effect, coauthor. Although he was sketching instead of writing.

Chris Hedges: I've known Joe since the war in Bosnia. We met when he was working on his book, "Gorazde." And I was not a reader of graphic novels. But I watched him work. And I certainly know a brilliant journalist when I see one. And he is one of the most brilliant journalists I've ever met.

He reports it out with such depth and integrity and power, and then he draws it out. And I realized that an extremely important component of this book was making visible these invisible communities, because we don't see them. They're shut out. They're frightening, they're depressing. And they're virtually off the radar screen in terms of the commercial media.

Bill Moyers: This is a tough book. It's not dispatches from Disneyworld. It paints a very stark portrait of poverty, despair, destructive behavior. What makes you think people want to read that sort of thing these days?

Chris Hedges: That wasn't a question that Joe Sacco and I ever asked. It's absolutely imperative that we begin to understand what unfettered, unregulated capitalism does, the violence of that system, which is portrayed in all of the places that we visited.

These are sacrifice zones, areas that have been destroyed for quarterly profit. And we're talking about environmentally destroyed, communities destroyed, human beings destroyed, families destroyed. And because there are no impediments left, these sacrifice zones are just going to spread outward.

Bill Moyers: What do you mean, there are no impediments left?

Chris Hedges: There's no way to control corporate power. The system has broken down, whether it's Democrat or Republican. And because of that, we've all become commodities. Just as the natural world has become a commodity that is being exploited until it is exhausted, or it collapses.

Bill Moyers: You call them sacrifice zones.

Chris Hedges: Right.

Bill Moyers: Explain what you mean by that.

Chris Hedges: Well, they have the individuals who live within those areas have no power. The political system is bought off, the judicial system is bought off, the law enforcement system services the interests of power, they have been rendered powerless. You see that in the coal fields of Southern West Virginia.

Now here, in terms of national resources is one of the richest areas of the United States. And yet these harbor the poorest pockets of community, the poorest communities in the United States. Because those resources are extracted. And that money is not funneled back into the communities that are sitting on top of, or next to those resources.

Not only that, but they're extracted in such a way that the communities themselves are destroyed quite literally because you have not only terrible problems with erosion, as they cause when they do the mountaintop removal, they'll use these gigantic bulldozers to push off all the trees and then burn them.

And when we flew over the Appalachians, and it's a terrifying experience, because you realize only then do you realize how vast the devastation is. Just as when we were both in the war in Bosnia, you couldn't grasp the destruction of ethnic cleansing until you actually flew over Bosnia, and village after village after village had been razed and destroyed.

And the same was true in the Appalachian Mountains. And these people are poisoned. The water is poisoned, it smells, the soil is poisoned. And the people who are making tremendous profits from this don't even live in West Virginia--

Bill Moyers: You said something like, "While the laws are West Virginia are written by the coal companies, 95 percent of those coal companies--"

Chris Hedges: Right.

Bill Moyers: "--are not in West Virginia."

Chris Hedges: That's right. They no longer want to dig down for the coal, and so they're blowing the top 400 feet off of mountains poisoning the air, poisoning the soil, poisoning the water.

They use some of the largest machines on earth. These draglines, 25-stories tall that are very efficient in terms of ripping out coal seams. But by the time they left, there's just a wasteland. Nothing grows. Some of the richest soil, some of the purest water, and these are the headwaters for much of the East Coast, You are rendering the area moonscape. It becomes inhabitable. And you're destroying you know, these are the lungs of the Eastern seaboard. It's all destroyed and it's not coming back.

And that violence is visited on these communities. And you see it played out. I mean, Camden, New Jersey, which is the poorest city per capita in the United States and always, the one or two in terms of the most dangerous, it's a dead city. There's nothing left. There is no employment. Whole blocks are abandoned. The only thing functioning are open-air drug markets, of which there are about a hundred.

And you're talking third or fourth generation of people trapped in these internal colonies. They can't get out, they can't get credit. And what that does to your dignity, your self-esteem, your sense of self-worth.

BILL MOYERS I was struck by your saying Camden is "beset with the corruption and brutal police repression reminiscent of the despotic regimes that you covered as a correspondent for the New York Times in Africa, the Middle East, and Latin America." You describe a city where the per capital income is $ll,967. Large swaths of the city, as Joe Sacco Shows us, are abandoned, windowless brick factories, forlorn warehouses.

Chris Hedges: At one point in the 50s, it was a huge shipyard that employed 36,000 people. Campbell's Soup was made there, RCA used to be there. But there were a variety of businesses it attracted in that great migration a lot of unskilled labor from the South, as well as immigrants from New York

Because without an education, it was a place that you could find a job. It was unionized, of course, so people had adequate wages and some protection. And then it just-- everything went down. With the flight of manufacturing overseas.

It's all gone. Nothing remains. And that's why it's such a stark example of what we've done to ourselves, without realizing that the manufacturing base of any country is absolutely vital to its health. Not only in terms of its economic, but in terms of its, you know, the cohesion of a society because it gives employment.

Bill Moyers: But give me a thumbnail sketch of Pine Ridge, South Dakota, the Pine Ridge Reservation.

Chris Hedges: Well, Pine Ridge is where it began, Western exploitation. And it was the railroad companies that did it. They wanted the land, they took the land, the government gave them the land. It either gave it to them or sold it to them very cheaply. They slaughtered the buffalo herds, they broke these people. Forcing a people that had not been part of a wage economy to become part of a wage economy, upending the traditional values.

And it really is about the maximization of profit, it really is about the commodification of everything, including human beings. And this was certainly true in the western wars.

And it's appalling. You know, the average life expectancy for a male in Pine Ridge is 48. That is the lowest in the Western Hemisphere outside of Haiti. At any one time, 60 percent of the dwellings do not have electricity or water.

Bill Moyers: You write of one tiny village, tiny village, with four liquor stores. And that dispense the equivalent of 13,500--

Chris Hedges: Right.

Bill Moyers: --cans of beer a day. And with devastating results.

Chris Hedges: Yes. And they start young and some estimates run that, you know, alcoholism is as high as 80 percent. This contributes, of course, to early death. That's in Whiteclay, Nebraska. There is no liquor that is legally sold on the reservation, itself. But Whiteclay is about two miles from Pine Ridge. And that's where people go. They call it "going south." And that's all they do, is sell liquor.

That's true everywhere. You build a kind of dependency which destroys self-efficiency. I mean, that's what the old Indian agencies were set up to do. You take away the livelihood, you take away the buffalo herds, you make it impossible to sustain yourself, and then you have lines of people waiting for lard, flour, and you know, whisky.

And that has been true in West Virginia. That's certainly true in Camden. And it is a form of disempowerment. It is a form of keeping people essentially, at a subsistence level, and yet dependent on the very structures of power that are destroying them.

Bill Moyers: One of the most forlorn portraits is in your description of Immokalee, Florida. You describe Immokalee as a town filled with desperately poor single men.

Chris Hedges: Most of them have come across the border illegally. Come up from Central America and Mexico, especially after the passage of NAFTA. Because this destroyed subsistence farms in Mexico, the big agro businesses were able to flood the Mexican market with cheap corn. Estimates run as high as three million farmers were bankrupt, and where did they go? They crossed the border into the United States and in desperate search for work. They were lured into the produce fields. And they send what money they can, usually about $100 a month home to support their wives and children.

Bill Moyers: And they make $11,000, $12,000--

Chris Hedges: At best.

Chris Hedges: It's brutal work, physically.

Bill Moyers: Yeah.

Chris Hedges: But they're also exposed to all sorts of chemicals and pesticides. And it's very hard to show the effects because as these workers age, you know, they're bent over eight, ten hours a day. So they have tremendous back problems. And by the time they're in their thirties, the crew leaders, they'll actually line up in these big parking lots at about 4:00 in the morning, the busses will come.

They just won't pick the older men. And so they become destitute. And they go back home physically broken. And it's hard to tell, you know, how poisoned they've become, because they're hard to trace. But clearly that is a big issue. They talk about rashes, respiratory, you know, not being able to breathe, coughing, it's really, you know, a frightening window into the primacy of profit over human dignity and human life.

Bill Moyers: Fit this all together for me. What does the suffering of the Native American on the Pine Ridge Reservation have to do with the unemployed coal miner in West Virginia have to do with the inner-city African American in Camden have to do with the single man working for minimum wage or less in Immokalee, Florida? What ties that all together?

Chris Hedges: Greed. It's greed over human life. And it's the willingness on the part of people who seek personal enrichment to destroy other human beings. That's a common thread. We, in that biblical term, we forgot our neighbor. And because we forgot our neighbor in Pine Ridge, because we forgot our neighbor in Camden, in Southern West Virginia, in the produce fields, these forces have now turned on us. They went first, and we're next. And that's--

Bill Moyers: What do you mean we're next?

Chris Hedges: Well, the--

Bill Moyers: We being—

Chris Hedges: Two-thirds of this country. We are rapidly replicating that totalitarian vision of George Orwell in "1984." We have an inner sanctum, inner party of 2 percent or 3 percent, an outer party of corporate managers, of 12 percent, and the rest of us are proles. I mean--
Bill Moyers: Proles being?

Chris Hedges: Being an underclass that is hanging on by their fingertips. And this is already very far advanced. I mean, numbers, I mean, 47 million Americans depending on food stamps, six million exclusively on food stamps, one million people a year going filing for personal bankruptcy because they can't pay their medical bills, six million people pushed out of their houses.

Long-term unemployment or underemployment-- you know, probably being 17 to 20 percent. This is an estimate by "The L.A. Times" rather than the official nine percent. I mean, the average worker at Wal-Mart works 28 hours a week, but their wages put them below the poverty line. Which is why when you work at Wal-Mart, they'll give you applications for food stamps, so we can help as a government subsidize the family fortune of the Walton family.

It's, you know these corporations know only one word, and that's more. And because the mechanisms of governance can no longer control them, there is nothing now within the formal mechanisms of power to stop them from the creating, essentially, a corporate oligarchic state.

Bill Moyers: And you say, though, we are accomplices in our own demise. Explain that paradox. That corporations are causing this, but we are cooperating with them.

Chris Hedges: This sort of notion that the corporate value of greed is good. I mean, these deformed values have sort of seeped down within the society at large. And they're corporate values, they're not American values.

I mean, American values were effectively destroyed by Madison Avenue when, after world war one, it began to instill consumption as a kind of inner compulsion. But old values of thrift, of self-effacement, or hard work were replaced with this cult of the "self", this hedonism.

And in that sense, you know, we have become complicit, because we've accepted this as a kind of natural law. And the acceptance of this kind of behavior, and even the celebration of it is going to ultimately trigger our demise. Not only as a culture, not only as a country, but finally as a species that exists, you know, on planet Earth.

Bill Moyers: As we came here, I pulled an article published in "Nature" magazine by a group of rather accomplished and credible scientists who have done all the technical studies they need to do, who come to the conclusion that our planet's ecosystems are careening towards an imminent, irreversible collapse. Once these things happen, planet's ecosystems as we know them, could irreversibly collapse in the proverbial blink of an eye. Connect that to what you've been reporting.

Chris Hedges: Well, because the exploitation of human beings is always accompanied by the exploitation of natural resources, without any thought given to sustainability. I mean, the amount of chemicals and pesticides that are used on the produce in Florida is just terrifying.
And that, you know, migrates from those fields directly to the shelves of our supermarkets and we're consuming it. And corporations have the kind of political clout that they can prevent any kind of investigation or control or regulation of this. And it's, again, it's all for short-term profit at long-term expense.

So the, you know, the very forces that we document in this book are the same forces that are responsible for destroying the ecosystem itself. We are watching these corporate forces, which are supranational. They have no loyalty to the nation state at all, reconfigure the global economy into a form of neo-feudalism. We are rapidly becoming an oligarchic state with an incredibly wealthy class of overlords.

Sheldon Wolin writes about this in "Democracy Incorporated" into what I would call, what he calls inverted totalitarianism, whereby it's not classical totalitarianism, it doesn't find its expression through a demagogue or a charismatic leader, but through the anonymity of the corporate state that purports to pay fealty to electoral politics, the Constitution, the iconography and language of American patriotism, and yet internally have seized all of the levers of power. This is what it means when lobbyists write all of our legislation, or when they stack the Supreme Court with people who serve the interests of corporations. And it's to render the citizen impotent.

Bill Moyers: And what is it, you think, led us to this point of this mind-boggling inequality, mind-boggling consumption, which obviously many of us like, or we wouldn't be participating? And the grip that money has on politics? What are the forces that got us to this?

Chris Hedges: I think it began after World War I. You know, Dwight McDonald writes about how after World War I, American society became enveloped in what he called the psychosis of permanent war, where in the name of anti-Communism, we could effectively banish anyone within the society who questioned power in a serious kind of way.

And of course, we destroyed populist and radical movements, which have always broadened democracy within American society, it's something Howard Zinn wrote quite powerfully about in "A People's History of the United States." It has been a long struggle, whether it's the abolitionist movement that fought slavery, whether it's the suffragists for women's rights, the labor movement, or the civil rights movement. And these forces have the ability to essentially destroy those movements, including labor unions, which made the middle class possible in this country. And have rendered us powerless. And--

Bill Moyers: Except for the power of the pen. You keep writing, you keep speaking, you keep agitating.

Chris Hedges: I do, but, you know, things aren't getting better. And I think, you know, like you, I come out of the seminary, and I look less on my ability to effect change and understand it more as a kind of moral responsibility to resist these forces. Which I think in theological terms are forces of death. And to fight to protect, preserve, and nurture life.

But you know, as my friend, Father Daniel Berrigan says, you know, "We're called to do the good, or at least the good insofar as we can determine it. And then we have to let it go." Faith is the belief that it goes somewhere.

Bill Moyers: So let's talk about you. You've been showing up in the news as well as well as just reporting the news, you took part in that mock trial down at Goldman Sachs.

Chris Hedges: Goldman Sachs is an institution that worships death, the forces of Thanatos, of greed, of exploitation, of destruction.

Bill Moyers: And I still remember the picture of you and the others sitting down, locking arms, and blocking the interests of the company. What was that about?

Chris Hedges: That was personal for me. Goldman Sachs runs one of the largest commodities index in the world. And I've spent 20 years in places like Africa, and I know what happens when wheat prices increase by 100 percent. Children starve. And I knew I was going to get arrested because, you know, I was, I covered the famine in Sudan and was in these huge U.N. tents and feeding stations trying to save.

And you know, the people who die in famines were usually elderly and children. The place was, I mean, everyone had tuberculosis. I have scars in my lungs from tuberculosis, which I successfully fought off. And those are sort of the whispers of the dead. All those children and others who couldn't didn't have the ability to go in front of a place like Goldman Sachs and condemn them.

Bill Moyers: But surely those people, as you were arrested, there were people working for Goldman Sachs looking down from the windows--

Chris Hedges: They were taking pictures--

Bill Moyers: Taking pictures, laughing. Surely you don't think they would wish that outcome in Africa or anywhere else, right?

Chris Hedges: Well, it's moral fragmentation. I mean, they blind themselves to what they do all day long, and they define themselves as good human beings by other criteria, because they're a good father or a good husband or because they go to church. But it is that human trait to engage in what I would have to describe as a system of evil. And yet, look at it as just a job.

Bill Moyers: But are we all then therefore, and I come back to this, aren't we all part of this system that in some way produces Pine Ridge, Immokalee, the coal fields, the inner-cities, and the starving children in Africa? Aren't we all who have jobs and participate in the culture and are in the economic game, aren't we all, in a way, as complicit as those people looking down on you from those windows at Goldman Sachs?

Chris Hedges: No. Because you know, the people who actually run the commodities index are very tiny, elite, and extremely wealthy group. And they're highly compensated. These people make hundreds of thousands, often millions of dollars a year. And most of us don't make that. And that personal enrichment, I think, is a powerful inducement to ignore their complicity in what is clearly a crime against other human beings.

Bill Moyers: But do you think what you did made any difference? Goldman Sachs hasn't changed.

Chris Hedges: Well, that doesn't matter. I did what I had to do. I did what I believed I should've done. And faith is a belief that it does make a difference, even if all of the empirical signs around you point otherwise. I think that fundamentally is what faith is about. And I'm not a very good Christian anymore. But I retain enough of my Christian heritage and my seminary training to still believe that.

Bill Moyers: What are you?

Chris Hedges: A, you know, a sinner.

Bill Moyers: Welcome to the clan.

Chris Hedges: You know, a doubter.

Bill Moyers: But you're driven by something. I mean, I talked to you when you wrote your first and remarkable book "War is the Force that Gives Us Meaning." I haven't seen anyone as affected in their life after their experience as a journalist as you had been. I mean, there have been others, I just don't know them. But somehow what you're doing today goes back to what you saw and did and felt and experienced in all those years you were overseas and on the frontiers of trouble.

Chris Hedges: Well, because when you spend that long on the outer reaches of empire, you understand the cruelty of empire, what Conrad calls, "The horror, the horror." And the lies that we tell ourselves about what is done in our name. Whether that's in Gaza, whether that's in Iraq, whether that's in Afghanistan, Yemen, Somalia, El Salvador, I mean, there's a long list.
And when you come back from the outer reaches of empire, you are, and I think, you know, many combat veterans feel this who come back, you're forever alienated. And you to speak a very unpleasant truth about who we are, a truth that most people don't want to hear. And yet I think to hold that truth in and to remain silent and not to speak that truth destroys you.

That it's better to get up and speak it even as you correctly point out, you know that Goldman Sachs, you know, everyone at Goldman Sachs gets up the next morning and does it. I mean, this was also true as a war correspondent. I mean, the Serbs would kill.

They'd block all the roads into the village, we'd walk in with our satellite phones, we'd file it, we never believe they weren't going to do it again the next day. But somehow not to chronicle it, not to take the risks to report it, was to be complicit in that killing. And I think that same kind of thought goes into what's happening here.

Bill Moyers: But do you think taking sides marginalizes your journalism? I mean, when you were being arrested, and some businessman was quoted in the paper passing by and looking at those of you being carried away and said, "Bunch of idiots." He needs to hear what you, read what you say. Do you think he will once he knows you've taken sides?
Chris Hedges: Well, I think that in life we always have to take sides.

Bill Moyers: Do journalists always have to take sides?

Chris Hedges: Yes. Journalists always do take sides. You know, you've been a journalist a long time. The idea that there's something objective and impartial is just a lie. We sell it. But I can take the same set of facts-- I was a newspaper reporter for a long time, and I can spin that story one way or another. We manipulate facts. That's what we do. And I think that the really great journalists--

Bill Moyers: Not necessarily to deceive though. Some do, I know, but--

Chris Hedges: Right, but we do.

Bill Moyers: We choose the facts we want to organize--

Chris Hedges: Of course, it's selective. And it's what facts we choose, how we place, where we put the quotes. And I think the really great journalists, like the great preachers, care fundamentally about truth. And truth and news are not the same thing.

And the really great reporters, and I've seen them, you know, in all sorts of news organizations, are management headaches because they care about truth at the expense of their own career.
Bill Moyers: What do you mean truth as opposed to news?

Chris Hedges: Well, let's take the Israel occupation of Gaza. You know, if I had a dinner with any Middle East correspondent who covered Gaza, none of us would have any disagreements about the Israeli behavior in Gaza, which is a collective war crime. And yet to get up and write it and say it within American society is not a career enhancer.

Because there's a powerful Israeli lobby, and it's a lobby that I don't think represents Israel, it represents the right wing of Israel. And you know it. But, the great reporters don't care. And they're there.

But you know, large institutions like "The New York Times" attract huge numbers of careerists like any other large institutions, the Church of course, being no exception. And those are the people who are willing to take moral shortcuts to promote themselves within that institution.
And when somebody becomes a headache, even if they may agree with them, even if they may know that they are speaking a truth, and it puts their career in jeopardy-- they will push them out or silence them.

So I think that one can take sides, and Orwell becomes the kind of model for this. But one can never not tell the truth. And I've often written stories that are not particularly flattering. And there's much in this book about people in Pine Ridge or Camden, you know, that is not flattering. I mean, we're interviewing people that are drug addicts and this kind of stuff. And--

Bill Moyers: Drug dealers--

Chris Hedges: --prostitutes and--

Bill Moyers: Yeah, drug dealers--

Chris Hedges: Yeah.

Bill Moyers: --prostitutes.

Chris Hedges: So we're not, you know, the lie of omission is still a lie. But I don't think any foreign correspondent who covers war, whether it was in Bosnia or whether it was in Sarajevo can be indifferent to the tremendous human suffering before them and not want that human suffering to stop.

Bill Moyers: But there is a price, as you have said, to be paid for stepping outside of the system that enabled your name and reputation and becoming a critic of that system. I mean, what price do you think you've paid?

Chris Hedges: I don't think I paid a price, I think I would've paid a price for staying in. I wouldn't have been able to live with myself. You know, I was pushed out of "The New York Times" because I was publicly denouncing the invasion of Iraq. And again, it comes down to that necessity to speak a truth, or at least the truth as far as you can discern it.

I've spent months of my life in Iraq. I knew the instrument of war. I understood in all the ways that this was going be a disaster-- including upsetting the power balance in the Middle East. It's one of the great strategic blunders of the United States, it's empowered Iran. And to remain silent would've been the price. Was it good for my career? Well, of course not.

But my career was never the point. I didn't drive down Mount Igman into Sarajevo when it was being hit with 2,000 shells a day because it was good for my career. I went there because what was happening was a crime against humanity. And as a reporter, I wanted to be there to chronicle it.

Bill Moyers: Well, you should. But, so you don't think journalism is futile?

Chris Hedges: I think journalism is essential. I think it's essential. And we're watching its destruction. You know, journalism, the power of journalism is that it is rooted in verifiable fact. You go out as a reporter, you seek to find out what is factually correct. You crosscheck it with other sources. It's sent to an editor. It's fact-checked, you put it out. That's all vanishing.
That's what we're really losing with journalism. Yes, you know, commercial journalism, there were things they wouldn't write about. You know, as Schanberg says, "The power of great newspapers like "The Times" is that at least it's stopped things from getting worse." I think that's right.

Bill Moyers: But can it make things better? I mean, do you think you can accomplish more as a dissenter, and I look up on you now, when I ask you what's your faith, I think your faith is in dissent, if I may say so. It's in "This far and no further." But do you think you can accomplish as much as a dissenter than as a journalist?

Chris Hedges: Yeah, it's not a question that I've asked. Because the question is, "What do you have to do?" I certainly knew after 15 years at "The New York Times" that running around on national television shows denouncing the war in Iraq was, as a news reporter, tantamount to career suicide. I mean, I was aware of that.

And yet, you know, as Paul Tillich writes about, you know, "Institutions are always inherently demonic, including the Church." And you cannot finally serve the interests of those institutions. That for those who seek the moral life, there will always come a time in which they have to defy even institutions they care about if they are able to retain that moral core. And in essence, what, you know, "The New York Times," or other institutions were asking is that I muzzle myself.

Bill Moyers: But all institutions do that, don't they?

Chris Hedges: All institutions do.

Bill Moyers: Intuitively or explicitly.

Chris Hedges: That's right. And I think for those of us who care about speaking, you know, the truth, you know, or if you want to call it dissent, we are going to have to accept that at one day, there's going probably mean a clash with the very institutions that have nurtured and supported us. And I have been nurtured and supported by these institutions.

Bill Moyers: But your columns, your essays, your recent book, this book, contained repeated calls for uprisings, for civil disobedience. You even say in here, quote, "Revolt is all we have. It is our only hope. It is our only hope." Unpack that from our viewers who are sitting there thinking, "What is he asking me to do? What does he mean by revolt? What's he talking about?"

Chris Hedges: Nonviolence civil disobedience. And accepting the fact that engaging in that process will mean arrest. I've lived in societies that are rent and torn by violence, and I don't want us to go there. And I think that we don't have a lot of time left. And that for those of us who care about veering off into another course, a course that's rational and sane and makes possible the perpetuation of not only the human species but the planet itself, we have to take this kind of radical action. And if we don't, then as things disintegrate and as the paralysis within the centers of power become more and more apparent, then we will fuel very frightening extremes.

You know, again, which I saw in places like Central America or Bosnia. And I look at this as many ways, a kind of, a preventive action. A way to respond peacefully. A way to respond, in a Democratic fashion, to the problems in front of us before it's too late.

Bill Moyers: Bear with me as I explore this, 'cause there's a paradox at two levels. One at a conceptual level, and the other at a practical level. You write in here, "Either you join the revolt or you stand on the wrong side of history. You either obstruct through civil disobedience, or become the passive enabler of a monstrous evil." But in an early book, "Death of the Liberal Class," which I think is one of your best, you wrote that, "The fantasy of widespread popular revolts and mass movements breaking the hegemony of the corporate state is just that, a fantasy."

Chris Hedges: I wrote that before Occupy. And I was writing out of a kind of belief that this was what was absolutely necessary and yet I saw no signs within the wider society that was happening. And then suddenly, on September 17th, Zuccotti Park appears. And mostly fueled by the young. And I was writing out of a present reality. And I didn't see Zuccotti coming. I was writing out of a kind of despair, for all of the reasons that I said.

Bill Moyers: Why did you take hope from that? Because after you'd been down there? You subsequently write that "By the end, even the most dedicated of the Occupiers in Zuccotti Park burned out."

Chris Hedges: Yeah.

Bill Moyers: "They lost control of the park. The arrival in cold weather of individual tents, along with the numerous street people with mental impairment and addictions," that you're nothing if not honest in what you write, even about those people you support, "tore apart the community. Drug use as well as assaults and altercations became common." So how is that square with what you said earlier that the Occupy Movement gave us a blueprint for how to fight back?

Chris Hedges: Because this is the trajectory of all movements. You know, it's not a linear progression upwards. And the civil rights movement is a perfect example of that. All sorts of failures, whether it's in Albany, Mississippi or anywhere else. You know, there were all sorts of moments within the civil rights movement where King wasn't even sure he was going to be able to hold it together. And what happened in Zuccotti is like what happened in 1765 when they rose up against the Stamp Act.

That became the kind of dress rehearsal for the rebellion of 1775, 1776, 1905. The uprising in Russia became again the kind of dress rehearsal. These movements, this process, it takes a very long time. I think the Occupy was movement and I was there.

I mean, I certainly understand why it imploded and its many faults and how at that size, consensus doesn't work, everything else. And yet it triggered something. It triggered a kind of understanding of systems of power. It, I think, gave people a sense of their own personal power. Once we step out into a group and articulate these injustices and these grievances to a wider public, and of course they resonated with a mainstream. I don't think it's over. I don't know how it's going to mutate and change, one never knows. But, I think that it's imperative that we keep that narrative alive by being out there because things are not getting better.

The state is not responding in a rational way to what's happening. If they really wanted to break the back of the opposition movement, rather than sort of eradicating the 18 encampments, they would've gone back and looked at Roosevelt. There would've been forgiveness of all student debt, $1 trillion, there would've been a massive jobs program targeted at those under the age of 25, and there would've been a moratorium on more closures and bank repossessions of homes.

That would've been a rational response. Instead, the state has decided to speak exclusively in the language of force and violence to try and crush this movement while people continue this dissent.

Bill Moyers: In one of your earlier books, you wrote that, quote, "We stand on the verge of one of the bleakest periods in human history, when the bright lights of civilization blink out, and we will descend for decades, if not centuries, into barbarity." Do you really think that's ahead?

Chris Hedges: If there's not a radical change in the way we relate to the ecosystem that sustains life, yes. And I see, if you ask me to put my money down, I see nothing that indicates that we're preparing to make that change.

Bill Moyers: But here's another paradox then, you present us with a lot of paradoxes. You just-- you and your wife a year and a half ago had your fourth child. How can you introduce another life into so forlorn a future?

Chris Hedges: That's not an easy question to answer. I look at my youngest son, and his favorite book is "Out of the Blue," which are pictures of narwhales and porpoises and dolphins. And I think, "It is most probable that within your lifetime, every single one of those sea creatures will be dead." And in so many ways, I feel that I have to fight for them.

That even if I fail, they'll say, "You know, at least my dad tried." We've deeply betrayed this next generation on so many levels. And I can't argue finally, you know, given the empirical facts in front of us that hope is rational. And I retreat, like so many people in my book, into faith. And a belief that resistance and fighting for life is meaningful even if all of the outward signs around us deny that possibility.

Bill Moyers: That faith in human beings?

Chris Hedges: Faith in that fighting for the sanctity of life is always worth it. Because you know, if we don't fight, then we are finished. Then we signed our own death sentence. And Camus writes about this in "The Rebel," that I think resistance becomes a kind of way of protecting our own worth as an individual, our own dignity, our own self-respect. And I think resistance does always leave open the possibility of change. And if we don't resist, then we've essentially extinguished that hope.

Bill Moyers: H. L. Mencken, the celebrated iconoclast of the early part of the last century once wrote, "The notion that a radical is one who hates his country is naïve and usually idiotic. He is more likely one who likes his country more than the rest of us and is those more disturbed than the rest of us when he sees it debouched. He is not a bad citizen turning to crime, he is a good citizen, driven to despair." Is that you?

Chris Hedges: Yeah--

Bill Moyers: A good citizen driven to despair?

Chris Hedges: Yes. And a good citizen driven to despair who will not remain apathetic and passive. And, you know, in every single place that we went to, Camden, West Virginia, Pine Ridge, we found these utterly magnificent human beings. I mean, this woman Lolly in Camden, African American woman, who you know, raised her own children. And I think by the time she was done, 19 others.

Her fiancé was shot and killed, one of her little seven-year-old daughters died of an asthma attack because they didn't have the right medicine. And I said, "Lolly, how do you do it?" And she said, "I never ask why." And when you spend time in the presence of people like that, and they were everywhere you know, they understood what they were up against.

It is deeply empowering. Because not to resist, not to fight back is on a very personal level to betray these people. And when you build relationships, as over the two years Joe and I did, with figures like that, it really, you know, almost comes down to something that simplistic. You can't betray Lolly. You can't betray any of these great figures who've stood up. Because their fight is our fight. And oftentimes they've endured far, far more-- well, they have endured far, far more than I have endured or ever will endure.

Bill Moyers: The Book is, "Days of Destruction, Days of Revolt." Chris Hedges and Joe Sacco. Thank you very much Chris for being with me.

Chris Hedges: Thanks Bill.

Bill Moyers: For all his power of expression, sometimes words fail even Chris Hedges, and a picture can say more in a single frame, well-drawn, than paragraphs of explanation. That's what makes his partnership with graphic artist Joe Sacco on their book, "Days of Destruction, Days of Revolt," so potent and so effective. Joe Sacco has traveled all over the world, using the techniques of the comic book illustrator as a tool of journalism, telling stories with insight and humanity.

Joe Sacco: My name's Joe Sacco and I'm a comics journalist. Drawing really often provides mood and atmosphere, and writing is that sort of precision. The facts. And you can put those two things together with comics, which I think is what makes the medium very powerful.
When I'm in the field, I meet people who are really in hard situations. I'm not interested in tears. I'm not even interested in sentimentality. But I am interested in telling people's stories as well as possible who are oppressed or are poor.

Chris and I had already worked on a magazine piece about Camden and we decided we would expand that. You can read about poverty. You can read about despair. Or you can read about resignation. But to see it is really, it's eye-opening.

I didn't do that many stories in the book, maybe five or six. They all moved me quite a bit. I think the one that was sort of hit me in this way, because it was so unfamiliar to me was the woman who came out from Guatemala, the one that we call Anna in the story.

Her waiting by the phone after her husband had made the long, arduous trip so the United States. Waiting eight days, knowing he had to cross a desert where many people die. And that sort of story really touched me. Because when we think of migrant workers, we can be so dismissive of them. They're just working in a fields. Oh, you see them bent over and they're just doing their job, and you know they're getting minimum wage. And you sort of feel sorry for them in a sense.

But to get a sense of, and to actually hear an individual story like that, for some reason that just really got to me when I was drawing it.

When I was about seven years old. I started drawing stories. Because I liked forms of self-expression and that was just one I never let go of. I never really drew just for the sake of drawing. There always had to be a story to go with it.

A story can be more true if you just let it be told. It's very important for me, with my work, not to create these angelic people. You want to show people as nuts and bolts. Those are the people who seem real. With the Michael Red Cloud's story, a story about his drug dealing days, making big money, partying, having women with him at all times. Now, he wasn't necessarily pleased with how he'd lived his past life, he wasn't. But to me, the idea is just to present the complete human being. You know, he's a real person. I was moved by his story, or I saw the changes that he made through his story. And then you see the hard things in the context of his upbringing, in the context of what was around him, in the context of what he learned from people around him.

You see the commonalities between people who have nothing around them but despair. They are born into a context which simply doesn't provide them opportunities or even the thought of opportunities. To me, it's incumbent upon the journalist to go and see for himself or herself what's actually going on. Journalism to me isn't like a tennis match, where you're just watching the ball, and each side is hitting it, hitting it back and forth to each other.

At some point, you have to arrest where the ball is, and that's where truth is, you know? And like I say, truth doesn't necessarily reside in the middle. And I've always had a problem with journalists who say things like, "Well, I pissed off both sides. I must be doing something right." That is the laziest sort of phrase I've ever heard.

You know, hundreds of stories that still need to be told. I'm interested in sort of answering questions that journalism doesn't really put its finger on.

To me, it's very important to remind ourselves of the costs of what is going on in this world. The human costs.

I feel like I wouldn't be where I need to be for myself if I didn't look to those things, and I didn't face them squarely. I just feel that's who I am, and what I have to do.