Tag Archives: economics

Review 145: Griftopia

Griftopia by Matt Taibbi

This book made me want to get rip-roaring drunk, set a banker on fire, and kick a member of Congress square in the nuts, preferably from a running start. It put me one step closer to finally realizing my dream of living somewhere in the wilderness like the Unibomber (although without all the Unibombing). It took all of my already cynical ideas about how America works, patted them on the head and said, “You’re just adorable,” and then proceeded to tell me that Santa Claus is not only dead, but that his body was stuffed, covered in rhinestones and sold to the CEO of Goldman-Sachs to use as a towel rack in his guest bathroom.

Much like The Great Derangement, wherein Taibbi explains how Americans have built new realities for themselves based on their politics, this book really seems to be aimed right at me. My natural distrust of the government and especially of business makes me a natural reader for this kind of thing, and that sets off my bias alarms. So keep that in mind – I’m probably having a hard time evaluating Taibbi and his claims fairly, in that I think they’re all absolutely correct. They may not be, but that’s how they felt as I read the book.

"I'm sorry, but this diamond-encrusted nut-scratcher is clearly made of 14-karat gold, NOT 24-karat as I specified. I wouldn't give this to my stableboy's cheapest whore. Throw it away!"

Taibbi’s premise is disturbingly simple: the American political and economic system is set up to reward lying, cheating and grift. From the fraudsters who convinced poor families to take out loans on McMansions to the Great Greenspan himself, our economic engine has been running for years on an unstable fuel of high-octane mendacity. Every now and then, there is a hitch – the tech bubble of the late 90s, the housing crash, the oil price spike of 2008, the Great Financial Meltdown – but the engine keeps going. What’s more, the people who caused the bubbles and crashes manage to skate clear of damage and punishment, rewarded by lawmakers who are beholden to them. It’s a self-corrupting system that values short-term profit over long-term stability, and it’s probably going to be the ruin of us all.

The mortgage fiasco is well-described here. Taibbi takes us from the bottom of the financial food chain – a low-income homeowner who thought he was getting a great chance for a home of his own, and follows the chain of deceit up and up and up, from the mortgage broker who sold the deal (and, incidentally both lied about his client’s credit score and got him an adjustable mortgage in order to garner a higher finder’s fee) to the banks that put all these rotten mortgages together, to the insurance companies and financial institutions that bought them, sold them and traded them. All across the board, they lied about what they had and made sure that they passed their rotten goods off to some other poor sucker before the whole thing went wrong. And when it did, it was like some horrible chain of dominoes that started with people who discovered they couldn’t pay $1,500 a month for their home, and ended with the failure of banks that had ruled the financial sector for decades.

"Well, Congressman, I'm just going to put this down over here - it's heavy, you see - so just put it out of your mind. Don't worry about it at all."

What’s more, the US government let this happen. Under the guise of being “pro-business,” politicians have been loosening restrictions and adjusting interest rates for decades under the willful delusion that the free market can manage itself just fine. Under the direction of Ayn Rand disciples such as Alan Greenspan, the power of the government to manage corrupt banks and insurance companies is about as impressive as an elementary school crossing guard. They wanted business free of its regulatory fetters, and that’s what they got. What everyone else got, of course, was screwed.

Another example: during 2008, Taibbi noticed something weird. Gas prices were skyrocketing, but supply was keeping pace with demand. There were no lines at gas stations like there had been in the 70s, when OPEC refused to sell us oil. If you wanted to fill up, you could, as long as you were willing to pay a price that went up moments before you pulled into the station. Even people with the barest understanding of economics understands supply and demand – if the supply is lower than the demand, the price goes up, and vice versa. But here, neither the supply of gasoline nor the overall demand for it changed, yet prices were shooting up past $4 a gallon. What, as they say, the HELL was going on?

Our politicians – especially the ones battling for the White House – had pat answers ready for the cameras. Obama blamed the Evil Oil Companies and wasteful SUV drivers. McCain blamed anti-drilling legislation and environmental regulation. Everybody blamed China for its accelerating growth. All of that, as it turns out, was misleading at best, bullshit at worst.

Well how else are we going to get the bathroom redone? I mean look at it, the place is a sty!

The answer: oil speculation, the use of commodities futures to make a ton of money by driving the price of oil ever higher. Futures were originally intended to provide a safety net for buyers and sellers of commodities, so that neither one would lose too badly if supply or demand shifted unexpectedly. But a way was found to exploit this system, for profiteers to buy and sell massive amounts of stuff to each other, raising their profits to obscene levels.

While a few clever people on Wall Street were getting rich through oil money, thousands of regular people were getting boned. The higher price of gas meant people with long commutes had to quit jobs and leave schools, which put them in ever-deepening financial straits. The price of oil has a very real effect on lives, but that was all ignored so that some high rollers could get rich. The close ties between the banking sector and the US government were what allowed this to happen, after decades of “pro-business” deregulation.

The health care overhaul, the sale of American cities to foreign investors, the collapse of the stock market and the erasure of untold billions of dollars of savings and investments are all given a close, angry look in this book, and Taibbi does a good job at making it understandable to those of us who aren’t really good with the intricacies of the financial sector. He takes his time, breaking down each scam into its component parts, and makes sure you can see every piece of the puzzle as he puts it together.

But what he also does – and I don’t think this is necessarily intentional – is paint a picture of hopelessness. At least, that’s how I saw it. The “great vampire squid” of the financial sector (a metaphor he used specifically with Goldman-Sachs) is inextricably attached to our government and the people who run it, sucking the blood out of the country that we thought we had. The more you see the connections, the more it seems like that squid simply cannot be removed and will never be sated.

Such a vivid image, isn't it?

What’s more, our elected officials are doing a brilliant job at convincing the American people that removing the squid is not necessary. The Tea Party chants its simplistic message that the Constitution is all the law we need, and our leaders smile and nod and watch the money come in. Lawmakers rail against the evil of “earmarks” right up until the day they get elected, and then make sure they reward the people who got them into office. Every time someone tries to loosen the tentacles a bit, they’re attacked as anti-business or anti-capitalist or just out and out socialist, and they’re either shamed or threatened into submission. They tell us that it’s all really complicated, and we shouldn’t worry our pretty little heads about it – here’s another season of Jersey Shore.

And the American people? We are, after all, the holders of sovereignty for the country – what about us? We’re idiots. We don’t want to spend the time necessary to understand a problem as ridiculously complex as the fraud that’s being perpetrated in our names, and the leaders we elected aren’t at all interested in making sure we’re educated. We’re instantly distracted by the new shiny thing and forget what happened only a few months ago thanks to smooth talking fraudsters who want us upset about gay marriage and Mexicans in our schools. We trust a media that needs us to be angry, but only just angry enough to keep watching. We’re tied up with businesses that see us as nothing more than a resource to be exploited.

Contrary to popular belief, money does not always make it easier to get your message across.

As of this writing, the “Occupy Everything” movement is still going strong, and I think that’s great. If nothing else, it will cause people to ask questions about how the government is run and why, but I fear it will have little effect in the long run. Why? Because the Occupiers are going after the wrong people.

Corporations make money. That’s what they do. And they’ll do it good and hard if they can. Much like a tiger, they’re just obeying their nature. Chris Rock put it best when he was talking about the Sigfried and Roy incident where one of their show tigers nearly bit off Roy’s head. Everyone said that the tiger had gone crazy, but Rock disagreed – “That tiger didn’t go crazy! That tiger went tiger!”

"I said GOOD DAY, sir!"

Well, Wall Street is the tiger. Chant and occupy and wave your signs all you want, you’re not going to change the fundamental nature of corporate America and how it works. Where all this energy should be going is into Washington, to the people who let the tiger run loose through our villages and happily picked up whatever it left behind. The lawmakers are the ones who can stop this, but right now it’s not in their interest to do so. The status quo has kept them safely employed and empowered, and until they see a real threat from the voters, there’s no way they’re going to turn their backs on their plutocrat supporters.

When the whole thing finally becomes unsustainable, when that final bill becomes due, they will slip away in the night with the wealth of nations in their pockets, leaving the rest of us to kill each other over refrigerator boxes and dogmeat.

See? Told you this book made me angry…

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“This story is the ultimate example of America’s biggest political problem. We no longer have the attention span to deal with any twenty-first century crisis. We live in an economy that is immensely complex and we are completely at the mercy of the small group of people who understand it – who incidentally often happen to be the same people who built these wildly complex economic systems. We have to trust these people to do the right thing, but we can’t, because, well, they’re scum. Which is kind of a big problem, when you think about it.”
– Matt Taibbi, Griftopia

Matt Taibbi on Wikipedia
Griftopia on Wikipedia
The Taibblog at Rolling Stone
Griftopia at Amazon.com

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Review 28: Confessions of an Economic Hit Man


Confessions of an Economic Hit Man by John Perkins

This book probably would have enraged me if I hadn’t already more or less known what it was talking about. As it was, I was resigned and depressed.

The book is a short autobiography of an Economic Hit Man (EHM) who saw the error of his ways. The idea of the EHM, as he describes it, is to manipulate the governments of developing nations to accept huge loans from the IMF and the World Bank based on inflated projections of future income, under the theory that they would experience huge economic gains from the projects – things like electrical grid upgrades, roads, dams and the like. These nations would then become indebted to the United States and forced to give business to US corporations, thereby effectively putting that nation under US control. He calls it the Corporatocracy, and he was a part of it. He traveled around the world to manipulate cash-strapped world leaders into signing their nations over to the control of US corporate interests.

He describes himself as one of the earliest generations of EHM, the ones who knew exactly what they were doing. Perkins describes his entry and rise in the EHM world as a series of decisions inspired by coincidences, at least at first. His childhood was marked by clear class differences, growing up in a small New England town and going to school with the children of the super-rich. His family taught at the school, thus gaining him both entry into classes and a raging feeling of inferiority and anger.

After doing a stint in the Peace Corps, he was approached to work for the NSA. Following the NSA screening, he was tapped to work for MAIN, an engineering company who, in the 60s and 70s, was at the forefront of modernizing developing nations. At their expense, of course.

When Perkins was initiated into this world of money and power, he was explicitly aware of what he was doing: he would vastly overstate the economic potential of, say, a hydroelectric dam project, leading to the leaders of governments such as the Philippines, Columbia and Venezuela taking out massive loans based on expected future returns. When those returns didn’t come in – and they never did – they were forced to make concessions, which always, always benefited the interests of MAIN and other US corporations. By doing so, they became part of the American Economic Empire, without one politician ever laying a finger on it.

It’s considered the softest method of empire-building. Take a country that needs money to help its people, and arrange so that the government has to spend upwards of 50% of its GNP repaying loans. The people get nothing, a few rich leaders become richer, and US corporations spread further out into the world. All forwarding the cause of US economic interests. For Americans, it means cheaper gas, food and raw materials. For the corporations involved, it means higher and higher profits. For the people of the developing countries targeted, it means poverty and disenfranchisement.

The EHMs don’t always succeed, though – remember Panama? We had the canal, and made lots of money off it. Until the leader of Panama, in the 70’s, decided to take it back. Omar Torrijos was that rare breed of third world ruler who honestly wanted to help his people, and he knew that the best way to do that was to re-assert control over the Panama Canal. He knew what the EHMs were up to, and wouldn’t have any part of it. In his recollections of their meetings, Perkins sees him as the kind of leader every country should have, and it was his example that led him towards leaving this world. His example and, of course, his death.

When the EHMs fail, the jackals come in and people start dying in “mysterious” plane crashes. Torrijos was replaced by Manuel Noriega, who was in our pocket, but not quite far enough. He didn’t toe the line that Washington wanted, so we made him up to be the Hitler of South America, invaded Panama without cause (see, Iraq is not a new thing) and took him back to the US. The result? The canal is effectively back under US control, and any advances that Torrijos might have made are gone.

One of the reasons Perkins left the industry and wrote this book is because he’s worried about the future of the EHM. Not that it’s fading, but that it’s getting stronger. With the ever-increasing pace of globalization, governments are jockeying with corporations for power around the world, and the EHMs are coming with them. But the new breed is different. The people following in Perkins’ footsteps honestly believe that they are trying to help these beleagured countries They see themselves as part of a great march towards progress, never really noticing that the progress only really benefits them.

One thing I noticed about this book. While I don’t doubt Perkins’ honesty and intentions in writing this book, I do wonder how much of the “torn between two worlds” persona he adopts is honest. Throughout the book, he talks about his moments of indecision, of inner conflict as he tries to justify the things he’s doing. He talks about meeting dissidents in Iran, going to anti-American puppet shows in Bali, encountering supercilious Canal Zone residents in Panama, all of which serves to make him look like he’s much more thoughtful than the average corporate warrior.

Perhaps he’s representing himself sincerely as a person caught between his moral code and his pride. He did, after all, leave the business – and the vast amount of money and power that it offered him. But I kept thinking, how much of that conflicted feeling was real, and how much was remembered? It’s a small point, but one that kept nagging at me. It doesn’t add to or detract from his argument, however.

This is not a happy book, and it’s pretty likely to piss you off. It’s not about the US government, mind you – it’s about US corporations assisting the government in its imperial ambitions. It’s about the marriage of economics and governance and its dark, dark offspring….

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“Confessing a sin is the beginning of redemption.”
-John Perkins, Confessions of an Economic Hit Man
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Confessions of an Economic Hit Man on Wikipedia
John Perkins on Wikipedia
John Perkins’ website
Confessions of an Economic Hit Man on Amazon.com

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