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November 2010, Week 2

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Tue, 9 Nov 2010 21:01:20 -0500
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Outrage, Misguided

By Noam Chomsky
InTheseTimes
November 4, 2010

http://readersupportednews.org/off-site-opinion-section/72-72/3890-outrage-misguided

The U.S. midterm elections register a level of anger, fear
and disillusionment in the country like nothing I can recall
in my lifetime. Since the Democrats are in power, they bear
the brunt of the revulsion over our current socioeconomic and
political situation.

More than half the "mainstream Americans" in a Rasmussen poll
last month said they view the Tea Party movement favorably-a
reflection of the spirit of disenchantment.

The grievances are legitimate. For more than 30 years, real
incomes for the majority of the population have stagnated or
declined while work hours and insecurity have increased,
along with debt. Wealth has accumulated, but in very few
pockets, leading to unprecedented inequality.

These consequences mainly spring from the financialization of
the economy since the 1970s and the corresponding hollowing-
out of domestic production. Spurring the process is the
deregulation mania favored by Wall Street and supported by
economists mesmerized by efficient-market myths.

People see that the bankers who were largely responsible for
the financial crisis and who were saved from bankruptcy by
the public are now reveling in record profits and huge
bonuses. Meanwhile official unemployment stays at about 10
percent. Manufacturing is at Depression levels: one in six
out of work, with good jobs unlikely to return.

People rightly want answers, and they are not getting them
except from voices that tell tales that have some internal
coherence-if you suspend disbelief and enter into their world
of irrationality and deceit.

Ridiculing Tea Party shenanigans is a serious error, however.
It is far more appropriate to understand what lies behind the
movement's popular appeal, and to ask ourselves why justly
angry people are being mobilized by the extreme right and not
by the kind of constructive activism that rose during the
Depression, like the CIO (Congress of Industrial
Organizations).

Now Tea Party sympathizers are hearing that every
institution-government, corporations and the professions-is
rotten, and that nothing works.

Amid the joblessness and foreclosures, the Democrats can't
complain about the policies that led to the disaster.
President Ronald Reagan and his Republican successors may
have been the worst culprits, but the policies began with
President Jimmy Carter and accelerated under President Bill
Clinton. During the presidential election, Barack Obama's
primary constituency was financial institutions, which have
gained remarkable dominance over the economy in the past
generation.

That incorrigible 18th-century radical Adam Smith, speaking
of England, observed that the principal architects of power
were the owners of the society-in his day the merchants and
manufacturers-and they made sure that government policy would
attend scrupulously to their interests, however "grievous"
the impact on the people of England; and worse, on the
victims of "the savage injustice of the Europeans" abroad.

A modern and more sophisticated version of Smith's maxim is
political economist Thomas Ferguson's "investment theory of
politics," which sees elections as occasions when groups of
investors coalesce in order to control the state by selecting
the architects of policies who will serve their interests.

Ferguson's theory turns out to be a very good predictor of
policy over long periods. That should hardly be surprising.
Concentrations of economic power will naturally seek to
extend their sway over any political process. The dynamic
happens to be extreme in the U.S.

Yet it can be said that the corporate high rollers have a
valid defense against charges of "greed" and disregard for
the health of the society. Their task is to maximize profit
and market share; in fact, that's their legal obligation. If
they don't fulfill that mandate, they'll be replaced by
someone who will. They also ignore systemic risk: the
likelihood that their transactions will harm the economy
generally. Such "externalities" are not their concern-not
because they are bad people, but for institutional reasons.

When the bubble bursts, the risk-takers can flee to the
shelter of the nanny state. Bailouts-a kind of government
insurance policy-are among many perverse incentives that
magnify market inefficiencies.

"There is growing recognition that our financial system is
running a doomsday cycle," economists Peter Boone and Simon
Johnson wrote in the Financial Times in January. "Whenever it
fails, we rely on lax money and fiscal policies to bail it
out. This response teaches the financial sector: Take large
gambles to get paid handsomely, and don't worry about the
costs-they will be paid by taxpayers" through bailouts and
other devices, and the financial system "is thus resurrected
to gamble again-and to fail again."

The doomsday metaphor also applies outside the financial
world. The American Petroleum Institute, backed by the
Chamber of Commerce and the other business lobbies, has
intensified its efforts to persuade the public to dismiss
concerns about anthropogenic global warming-with considerable
success, as polls indicate. Among Republican congressional
candidates in the 2010 election, virtually all reject global
warming.

The executives behind the propaganda know that global warming
is real, and our prospects grim. But the fate of the species
is an externality that the executives must ignore, to the
extent that market systems prevail. And the public won't be
able to ride to the rescue when the worst-case scenario
unfolds.

I am just old enough to remember those chilling and ominous
days of Germany's descent from decency to Nazi barbarism, to
borrow the words of Fritz Stern, the distinguished scholar of
German history. In a 2005 article, Stern indicates that he
has the future of the United States in mind when he reviews
"a historic process in which resentment against a
disenchanted secular world found deliverance in the ecstatic
escape of unreason."

The world is too complex for history to repeat, but there are
nevertheless lessons to keep in mind as we register the
consequences of another election cycle. No shortage of tasks
waits for those who seek to present an alternative to
misguided rage and indignation, helping to organize the
countless disaffected and to lead the way to a better future.

c The New York Times News Service/Syndicate

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