The Trickle-Down Bailout

As Dr. King wrote from Birmingham City Jail, “We know through painful experience that freedom is never voluntarily given by the oppressor; it must be demanded by the oppressed.”

That’s as strong a sociological law as there is.

Despite protestations to the contrary by the powerful and their political and media lapdogs, it applies in spades to the phenomenon currently being called “the bailout.”

In truth, the bailout is a program of delay and denial, not rescue or reform.  In fact, it is the enactment of the overclass’s pet theory of how to resolve a corporate capitalist Great Depression.  As such, it is an attempt to deny the patently obvious fact that the one irrefutable way to do so is to spend huge amounts of public money employing the previously un- and sub-employed.  That’s what happened in World War II, which put an end to the last corporate capitalist Great Depression.

Of course, beginning with Ronald Reagan’s ascendancy from the ideological tar pits of California, our masters have been prosecuting what I think of as a Great Restoration — a reactionary elite political movement to deny and roll back the always besieged lessons of the 1930s and 1940s.  Ever since this Great Restoration survived its initial recession and burst out into victorious self-confidence, its core planners have been convincing themselves that what really caused the last Great Depression was the failure of FDR to step in and bolster the money-lenders in 1933.

And, despite the repeatedly stated and broken promises of the Tweedle-D Party, the trickle-down gurus have long since crowded out the last of the New Dealers, even within the alleged party of alleged “change.”  Hence, what we are seeing is actually this self-serving pet theory being put into action.  Rubin and Geithner and Summers, oh my!  Heilbroner, Galbraith, and Vatter, bye-bye…

The odds of it working are very low.  That’s because, generally speaking, if your poker game is shrinking because one player has almost all the chips, it’s a rather weak idea to try to revive the game by giving that same player more chips, hoping s/he will lend them out.  This is particularly true when you know damned well the other players have already been drawn into gambling away their pay and can’t shoulder more debts.

Yet, is this not precisely and exactly and completely the theory behind what’s now being done?  “Let them eat loans!”

I will be reporting regularly on this theme of doing more of the same but expecting different results, this pseudo-bailout via more “trickle-down” efforts.

For starters, I’ll just mention a couple items of interest, drawn from Business Week, which has been running some decent reports on the emerging contradictions of the whole “bailout” scheme:

1. Seems whatever new loaning capacity gets created is going to be hawked by the same old predators on the same old basis:

Thousands of subprime mortgage lenders and brokers—many of them the very sorts of firms that helped create the current financial crisis—are going strong. Their new strategy: taking advantage of a long-standing federal program designed to encourage homeownership by insuring mortgages for buyers of modest means. [story link here]

2. Likewise, BW thinks a big share of any jobs created by boosting popular spending capacity will wind up creating jobs overseas, in the same old low-wage places:

But a giant issue lurks: How much of Obama’s mammoth fiscal stimulus will “leak” abroad, creating jobs in China, Germany, or Mexico rather than the U.S? This is a question with big economic and political implications—and no easy [for capitalists] answers.

One problem is that over the past 25 years the U.S. has become the “consumer of last resort” for the world economy. Imports have risen from the equivalent of 9% of gross domestic product to almost 19%. Even more astonishing, the value of imported goods now is equal to almost 40% of the output of U.S. manufacturing. For some types of consumer goods, such as clothing and consumer electronics, it’s increasingly difficult to find items that were not made abroad. As a result, fiscal stimulus that boosts consumer spending in the U.S. may be diffused through the global economy, reducing its impact on jobs here. [story link here]

All this repetition and “leakage” figures. That’s because it’s the structure of power/wealth, not merely the level of funds within the credit system, that is the primary problem. In this poker game, the big player chooses the cards and always wins, even when the game’s in trouble of collapsing. That pattern won’t change unless the other players walk away and demand a new dealer. It’s the whole reason for the existing shuffle.

Alas and again: “We know through painful experience that freedom is never voluntarily given by the oppressor; it must be demanded by the oppressed.”

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11 years ago

In my opinion, you are absolutely right about, “…the structure of power/wealth.” I find this topic very interesting. Like the Ivy Leaguers who followed America’s fast track to wealth (I’ll describe their Alma Maters as simply “CEO University”), many members of our government are second and third generation American royalty. I find it interesting and somewhat similar to the theory that first generation business owners who create a successful business are likely to have their life’s work destroyed by the third generation, who think they know better, buy eventually squander the family fortune, along with any consumer trust over the… Read more »

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