Chomsky on Wall Street Crisis

Disasters and spectacular events like the Wall Street crisis have a way of invoking the recreational imaginations of Americans usually vaguely aimed at the personal lives of movie stars and the performance of sports celebrities.

So perhaps America can hear from people whose thoughts are usually excluded from discussion.

Noam Chomsky offers some thoughts on the antidemocratic face of capitalism.

The simultaneous unfolding of the US presidential campaign and unraveling of the financial markets presents one of those occasions where the political and economic systems starkly reveal their nature.

Passion about the campaign may not be universally shared but almost everybody can feel the anxiety from the foreclosure of a million homes, and concerns about jobs, savings and healthcare at risk.

The initial Bush proposals to deal with the crisis so reeked of totalitarianism that they were quickly modified. Under intense lobbyist pressure, they were reshaped as ‘a clear win for the largest institutions in the system . . . a way of dumping assets without having to fail or close’, as described by James Rickards, who negotiated the federal bailout for the hedge fund Long Term Capital Management in 1998, reminding us that we are treading familiar turf.

The immediate origins of the current meltdown lie in the collapse of the housing bubble supervised by Federal Reserve chairman Alan Greenspan, which sustained the struggling economy through the Bush years by debt-based consumer spending along with borrowing from abroad. But the roots are deeper. In part they lie in the triumph of financial liberalisation in the past 30 years - that is, freeing the markets as much as possible from government regulation. …

Financial liberalisation has effects well beyond the economy. It has long been understood that it is a powerful weapon against democracy. Free capital movement creates what some have called a ‘virtual parliament’ of investors and lenders, who closely monitor government programmes and ‘vote’ against them if they are considered irrational: for the benefit of people, rather than concentrated private power. …

John Maynard Keynes, the British negotiator, considered the most important achievement of Bretton Woods (commercial and financial system) to be the establishment of the right of governments to restrict capital movement.

In dramatic contrast, in the neoliberal phase after the breakdown of the Bretton Woods system in the 1970s, the US treasury now regards free capital mobility as a ‘fundamental right’, unlike such alleged ‘rights’ as those guaranteed by the Universal Declaration of Human Rights: health, education, decent employment, security and other rights that the Reagan and Bush administrations have dismissed as ‘letters to Santa Claus’, ‘preposterous’, mere ‘myths’.