Sunday, February 27, 2011

Welcome to Plutocracy - What is it? Why should I care?

I wrote my last post, Living in Non-duality, over the New Year's weekend hopeful toward a new year. By late January the Tunisian revolt captured our national attention; then rapidly on the heels, the demand for jobs, ability to afford food, democracy over dictatorship explodes on the Egyptian scene. This yearning fanned the flames next in Libya. We are still holding our breath in these last hours in wait of the outcome of a brutal dictatorship. How will it end? How many lives will be lost?  (This may be a  l o n g  post, take your time, return to read bit by bit, or print it out for further digestion.)

Now, at the end of February we find the flame erupting here on our own doorstep-- igniting the need for political reform. In Madison Wisconsin at least 70,000 demonstrators flooded the square around the Wisconsin Capitol on Saturday in what the authorities here called the largest protest yet in nearly two weeks of demonstrations, 'ordinary' folk—teachers, firefighters, policemen/women... 

Unions are the only organized group in this country that, at this juncture, have the power to stand up to corporate greed.

Most of us, whether or not we are backed by unions, are experiencing the larger health insurance payments demanded by insurance companies that are eating up a higher percentage of our income; and low-income employees are feeling the squeeze more sharply than those of high-income employees.

An ideology is a conceptual framework with the way people deal with reality. Everyone has an ideology. The question is whether it is accurate or flawed.

Bill Moyers addressed Boston University with his speech:    
                          "Welcome to Plutocracy"

Plutocracy defined:  Literally 'rule by the rich', the term is used to denote a wide range of situations where a group of individuals are able to exert disproportionate power and influence in society and social institutions because of their wealth.

here are some excerpts:

Whirlpool refrigerator factory in Evansville, Indiana—female employee of 17 years was making $ 18.44 an hour when Whirlpool announced (2010) that it was closing the operation and moving it to Mexico. Eleven hundred workers lost their jobs. Their opportunity for affording a middle class way of life snatched from their hands. The company defended its decision by claiming high costs, underused capacity, and the need to stay competitive.

Between 2001 and 2008, about 40,000 US manufacturing plants closed.
Six million factory jobs have disappeared over the past dozen years, representing one in three manufacturing jobs.
Many of us are wondering: “How, without any good-paying jobs here in the United States, are people going to pay for their health care, put their children through school, save some money to avoid living pay-check to pay-check.”

The new BMW plant that recently opened in South Carolina. Workers will be paid $15 an hour – about half of what BMW workers earn in Germany
In polite circles, among our political and financial classes, this is known as “the free market at work.” In fact, it is “wage repression,” and it’s been happening in our country since around 1980.

Note this seeming contradiction – falling sales and rising profits – Example: despite falling motorcycle sales, Harley-Davidson profits are soaring – with a second quarter profit of $71 million, more than triple what it earned the previous year
That’s how financial capitalism works today: Conserving cash rather than bolstering hiring and production; investing in their own shares to prop up their share prices and make their stock more attractive to Wall Street. To hell with everyone else.

How Deregulation and the Evolution of Wall Street Culture 
                       Led to the Financial Crisis.
A bit about history. Following the Great Depression, between 1933-35, motivated by financial abuses that contributed to the Great Depression, new laws such as the Glass-Steagall Act and the Securities and Exchange Act placed limits on financial risk-taking and required extensive disclosure of financial information . Furthermore, bankers/traders earned salaries in line with other professionals; tightly regulated financial sector. Local banks and investment banks formed small, private partnerships putting up their own capital. So, naturally, conducting business in a traditional financial manner, and putting up their own money, the bankers of forty to sixty years ago care about the loans they are making and to whom.
     Fast forward to the 20th & 21st century: 
  • investment banks went public--no longer using their own money - allowing for risky investments & higher rates of pay-back, 
  • the safety laws for financial institutions that had been put in place were stripped away (deregulation)
  • borrowers without adequate credit or down-payment were not only allowed - but encouraged to take large loans to purchase inflated-priced homes
  • investment banks paid rating agencies to distort the truth on the safety ratings of these loans (ie. subprime loans rated as excellent)
  • subprime loans most profitable--predatory lending--these buyers were charged higher interests rates > their loans bundled and sold to unsuspecting investors as Triple-A rattings - 
  • CDO's (Collateral debt obligations) - Pay an investment banking firm $15 Million to put together a CDO full of bad mortgage- related assets that were believed to likely lose value. Next, sell slices of the bundle to many global investors . Next, secretly bet against it - knowing that it will fail. Then, make       $1 Billion in profit - while the global investors lose over $1 Billion. This is how Goldman Sachs defrauded investors.
Example: these unsuspecting investors from all over the world bought these bad bundled loans (subprime) - here's  a small scale scenarioVisualize yourself going into a meat market to purchase a quantity of what you anticipate to be prime quality beef because you are hosting a large party. You trust your meat market to carry nothing but the best because the proprietor has a Triple A rating. When you return home, however, and unwrap the package of beef, to your horror you discover the meat is rotting - You've not only been lied to - you are also out considerable amount of money - and, imagine there is Nothing you can do, now - No one you can turn to. This is what happened to investors who purchased these subprime loan packages that were rated Triple A by the Credit Rating Agencies.
  • Goldman Sachs sold 3.1 Billion dollars of bad loans & worthless securities
  • CDO's (collateral debt obligations) - imagine the owner of your meat department betting against the bad meat he sells - knowing it is bad - in the same way these investment banks bet against the bad mortgage securities - betting that they would fail - and then profiting from the high interest they made!
  • Foreclosures jumped to Six Million by 2010 and are expected to grow to Nine Million.
  • Men who destroyed their companies got to keep there money (in the Millions $$$) and didn't go to jail
  • NO Attempt made to recoup the millions $$$ made by these CEO's who defrauded the financial system - nor No attempt to indict them!

Also, from 1950 through 1980, because the nation’s economy was growing handsomely, the average income for 9 out of l0 Americans was growing, too – from $17,719 to $30,941. 

But then it stopped. 

  • Since 1980s we live in a more UNequal society
  • Outsourcing jobs to other countries - corporations save money, Americans lose jobs
  • American factory workers laid off to the tens of thousands
  • Americans trying to pay for college go into debt - $50 to 100 thousand dollars
  • American tax policies shift to Favor the Rich - Bush decreases taxes for the wealthiest 1% of Americans
  • Americans RESPOND to these changes by: working  longer hours, going deeper into debt to afford their homes, cars, college for children, vacations 

Since 1980 the economy has also continued to grow handsomely, but only 1% at the top have benefited. A dramatic change in the ratio of the average CEO's paycheck to that of the average factory worker over the past 40 years. The line flattens for the bottom 90% of Americans. Average income went from that $30,941 in 1980 to $31,244 in 2008. Think about that: the average income of Americans increased just $303 dollars in 28 years.
That’s wage repression.
Furthermore, remember how the traditional bankers put up their own capital in making loans? In the 1980's the investment banks went public—no longer using their own money. The Reagan administration and the lobbyists started in with deregulation. With it, away went the Glass-Steagall Act! With deregulation and the selling off of bad (sub-prime) loans to unsuspecting others, the investment bankers went unscathed in the global financial meltdown in 2008. 

Notice how these high powered men continue to be Recycled through the Government/Banking system Despite their unethical conduct.
1989 - early '90s: Savings & Loan Crisis - the Chairman, Keating serves five years for corruption charges;
DeConcini, a senator involved in the scandal was later appointed by President Clinton in February 1995 to the Board of Directors of the Federal Home Loan Mortgage Corporation
In 1990s: Clinton era and increasing revolving door between Washington and Wall Street
In the decade of 2000s: George Bush pushes for further deregulation and relaxed enforcement—remember Enron, Worldcom, accounting fraud of Fannie Mae & Freddie Mac. ?
massive housing and mortgage credit bubble sweeps the United States; mortgage lending quadruples, housing prices double
2004: After intense lobbying by investment banks, the SEC lifts the leverage limits on the investment banking industry, allowing them to borrow more
2005: IMF chief economist warns of dangerous incentives and risks in the financial system; Larry Summers, who later became director of the National Economic Council dismisses his concerns, calling him a “Luddite”
2005-2008: investment banks begin using credit default swaps to bet against the same 'bad' mortgage securities that they are selling and calling extremely safe
2006: Hank Paulson, CEO of Goldman Sachs, becomes Treasury Secretary
2007: The housing bubble bursts
2008: Great Recession begins with the collapse of Lehman Bros--one of the 4 largest investment banks in the US, a primary dealer in the US Treasury Securities market; and AIG--an American Insurance Corporation- suffering a liquidity crisis when their credit ratings were downgraded to below AA
Housing prices drop by 32 percent over three-year period
Record foreclosures
Unemployment rises from 5% to 10% in one year
Tens of billions in bailout money go to AIG and Goldman Sachs
$700 billion emergency bailout for the financial industry- because of threats to our economy if we didn't!! 
   Turns out these weren't so true. 
The beautiful thing about creating fear is people will not only accept that something must be done, but – if enough fear is created – they're usually willing to act without even contemplating or debating the direction.  

In the mad rush to privatization over the past few decades, democracy itself was put up for sale, and the rich are the only ones who could afford it; the Great American Rip Off – Too Big To Fail Bank Bail Outs; Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail.

"Terrified that this injustice would inspire a movement to change all of that, corporate interests including the Koch Brothers spent billions in 2009 and 2010 on misinformation campaigns and political theater designed to turn the resulting Great Recession into a weapon to divide us rather than the unifying wake-up call it was destined to be.

Obama appoints many Wall Street executives to senior regulatory and economic policy positions (the foxes are strategically placed in positions of guarding the hen houses)
WHO ARE THESE FOXES who were put in trusted positions 
                 to GUARD OUR HEN HOUSE? 

  • Larry Summers - head of the NEC (National Economic Council) - hired as Chief Economic Adviser to Obama -- and former Clinton Treasury Secretary - influenced deregulation
  • Henry Paulson - Chairman and CEO of Goldman Sachs (one of the top defrauders for promoting investments they new would fail) - was hired by Obama to be (74th) US Treasury Secretary - denying any problems: "We're going to keep growing - if we're growing then we're not in a recession."
  • Timothy Geithner - previously the president of the Federal Reserve Bank of NY - put him at the heart of the global economic crisis as it unfolded in 2008. Hired by Obama in January 2009  as (75th) US Secretary of the Treasury    -- defending the Bail Out of the banks.
  • Ben Bernanke - previously served as the Federal Governor & Chairman of George W. Bush's Council of Economic Advisors - sitting on the Financial Stability Oversight Board that oversees troubled asset relief (appointed in 2006 - during the heat of the impending financial melt-down)             In 2009, appointed by President Obama
  • Alan Greenspan - Chairman of the Federal Reserve from 1987 (remember Ronald Reagan Administration - deregulation) to 2006.  He rebuked regulations.

Some dramatic facts: how the wealth distribution became even more concentrated between 1983 and 2004, in good part due to the tax cuts for the wealthy and the defeat of labor unions:
Of all the new financial wealth created by the American economy in that 21-year-period, fully 42% of it went to the top 1%.
A whopping 94% went to the top 20%, which of course means that the bottom 80% received only 6% of all the new financial wealth generated in the United States during the '80s, '90s, and early 2000s

Just as wealth can lead to power, so too can power lead to wealth. Those who control a government can use their position to feather their own nests, whether that means a favorable land deal for relatives at the local level or a huge federal government contract for a new corporation run by friends who will hire you when you leave government. If we take a larger historical sweep and look cross-nationally, we are well aware that the leaders of conquering armies often grab enormous wealth, and that some religious leaders use their positions to acquire wealth.
If the top 1% of households have 30-35% of the wealth, that's 30 to 35 times what they would have if wealth were equally distributed, and so we infer that they must be powerful. And then we set out to see if the same set of households scores high on other power indicators (it does). Next we study how that power operates. Furthermore, if the top 20% have 84% of the wealth (and recall that 10% have 85% to 90% of the stocks, bonds, trust funds, and business equity), that means that the United States is a power pyramid.

It's tough for the bottom 80% -- maybe even the bottom 90% -- to get organized and exercise much power.
Hear the chief economist at Bank of America Merrill Lynch, Ethan Harris, who told the Times: “There’s no question that there is an income shift going on in the economy. Companies are squeezing their labor costs to build profits.”

The financial sector employs Three Thousand lobbyists - Five BILLION $$ on lobbying and campaign contributions - Wall Street Government -  Plutocracy at its finest! 

Years from now, we will think of February 2011 as the tipping point in America’s great awakening.
Wake UP calls: Tunisian revolt; Egyptian Revolt (Egyptian people 'have made clear they will settle for nothing less than greater democracy and more economic opportunities); Libyan Revolt, Wisconsin protests & the Prank Call --Americans are being asked to settle for less democracy & fewer economic opportunities. After all the warnings and wake-up calls, this be will remembered as the time when the American people came together to confront the plutocracy that plagues our republic, and do something to change the economic inequality / instability that has grown from it. There is a tide. 

Charles Ferguson, producer of Inside Job > "For decades in the past the financial industry was safe but something changed - the financial services industry went corrupt and they corrupted the regulators and the academia and engaged with the government. They will tell us it won't happen again."

The more people who get involved, the more meaningful it will be. So, please share this page with others who may still need a reason to wake up and stand up.

Socrates said to understand a thing, you must first name it.

The name for what’s happening to our political system is Corruption – a deep, systemic corruption. Democracy has gone on sale in America.


  1. nancy: This certainly is a challenging and interesting time (as your Blog indicates!) Trying to stay balanced and not too hopeful and not too pessimistic.

  2. I remember hearing and reading Bill Moyers' speech when it first came out on the web. He really nails it. Thanks for giving his prescient and wise words a further airing. And, in terms of astrological influences, it seems as if what we've seen so far in uprisings is just the beginning with everything moving into Aries this spring! Anyone who has a seat belt to fasten should do so. :^)

  3. I am not sure that these servants of the system are all bad with all bad intentions. In fact, I have a strong feeling Geithner & Obama are trying to serve us all. But they lack Third Force as most do. They need to risk their future legacy and reelection to serve with greater creativity and be ready to sacrifice the power possessors to the will of the democracy. But, the will is not there due partially to conditioning and suggestibility. As you said there was a misinformation campaign.

    Nancy, I do not see your solution here, and some of you major points are not backed up with examples, but I like what you are saying and it's true.

    So, maybe the threat of all of us getting together like in Egypt is so large that they big they will do anything to keep it from happening. Yet it could happen here more quickly than anywhere!

    Our best hope is for us to understand what is going on and how to reconcile it using Education. I suppose that is what you are saying. Thank you for this blog. It is logged and noted.

  4. The events in Wisconsin and other places are having the unforeseen (by the conservatives) result of energizing the working class across American like nothing else in the last several decades (ever since Reagan busted the air traffic controllers). The giant is waking from it’s long slumber.

    I am amazed by the reaction of many commentators, even on the left, who freak out at the suggestion of class warfare. We don’t want class warfare in this country, they say.

    Oh, yes, we do! More accurately, we have been in a state of class war for a long time and the wealth possessors have been winning and winning and workers are being crushed.

    I am not saying that workers deserve anything more than their fair share. When a corporation makes a profit, they made that profit from the sweat of their workers and the workers must share in that profit.

    This is a democracy. Each man/woman has one vote. -- John

  5. Nancy, you wrote:

    "Unions are the only organized group in this country that, at this juncture, have the power to stand up to corporate greed....When you return home, however, and unwrap the package of beef, to your horror you discover the meat is rotting - You've not only been lied to - you are also out considerable amount of money - and, imagine there is Nothing you can do, now - No one you can turn to."

    This really resonates with me--this feeling of hopelessness. However, upon introspection I have to ask myself what am I doing to resist? To fight so that my nieces and nephews have a future? Writing and informing certainly helps. And I like the idea of supporting the unions since they are, as you so aptly pointed out, the last organized front against corporate greed and a literal slavery state. I just gave some money to Amnesty International but I am thinking next time I will send some to union workers.

    Thanks for your research and post.

    - Deborah