Why I Write This Blog
“I read the script [The Big Short] and didn‘t understand most of it, which scared the hell out of me because it‘s important to learn about our economic system. My generation is the next generation up. It‘s important for us to understand what happened”.
-Selena Gomez, Press Notes, The Big Short
Almost daily there are blog posts and monthly there is a new book in the quest to understand America’s discontent. What can I add to the discourse? As a lawyer, I have acted for multinational corporations, banks, and auditing firms. As I tell my economist acquaintances, “You guys get invited into the board room to give a presentation catered by a five-star restaurant. Lawyers get invited into the back room”.
We know that from the reforms of the Great Depression until the 1970s, on a single salary, a family could afford a home, a car, and comfortably save for retirement. Why can’t most do that today. Why have all attempts at reform of the economic system to end extreme inequality failed?
The graph below by economist Thomas Piketty shows income inequality lessening from 1930 to 1970 when it began to increase.
Once workers shared fairly in the increase in the nation’s productivity. In the 1970s that stopped. While worker productivity continued to increase, the elite took that increase for themselves leaving worker pay to stagnate when adjusted for inflation. While wages, stagnated, the value of capital, especially houses, increased to the point that workers can no longer afford to pay rent or buy a house. The rise in the GDP became a tide that raised only yachts.
Commentators point to the increasing GDP and job creation statistics and wonder why the outrage in so much of the white working class. America seems to have turned upside down. But the statistics are dangerously misleading. The GDP fails to disclose that the increases go to the top 10% only. They live in luxury while the bottom 90% are in economic despair. The new jobs do not pay a living wage. One Internet meme showed a politician bragging about the job creation statistics that month in front of a fast-food worker. She replied, “And I got three of those jobs, but I still cannot pay my rent.”
Many reforms to restore a better sharing of the GDP have been tried. As the above graph shows, none have been successful. This is no accident. Since the 1970’s the wealthiest among us have used their knowledge of the corporate, banking, and tax systems to achieve this. It is a knowledge not easily available to even the educated voter. While courses in finance and in law provide a foundation, they are only taught to those who want to become part of the system and profit from it. Never to those whose concern is reform.
Sounds improbable?
Consider: Sophisticated financial journalists, influential economists, and senior government regulators all reported that the economy was thriving until one minute after the failure of the first bank in 2008. Why didn’t any of these, among the most learned in our land, understand what was really happening in our financial system?
Additionally, the House of Representatives were in shock that their distinguished economic advisors so totally failed to understand the banking system that they were united in saying that the system was sound before 2008. A House committee asked David Colander, a leading economics educator, to explain why the leading economists were so wide off the mark. He couldn’t.
Financial Times editor Gillian Tett gave us the answer in a paper to the Central Bank of France. She concludes that the wealthiest keep the knowledge of the inner workings of the financial system from even the above groups by what she calls, ‘social secrecy’.
One economist who correctly foresaw the 2008 meltdown, Ann Pettifor, notes that anthropological economist Karl Polanyi, writing in the 1940s, predicted that poor economic conditions would drive citizens to seek fascism and a “strong man” not a progressive thinker. We see that happening now around the world as well as in the U.S. The hope to end this trend is to understand how, since the 1970s, the ultra wealthy have been using our financial system to bring about these conditions that are making the ground fertile for fascism.
This blog will open the lid on the black box of our financial system to explain those inner workings and probe its flaws that still threaten a continued use of our financial system for economic inequality — and the entry of fascism.
Readers may wonder why, when I quote a conservative or republican source, I always identify it as such. The positions taken in this book may be wrongly judged as purely leftist. Many on the political right have raised their voices in concern. These issues hold a key to uniting some on the right and the left.
Acknowledgements: Presidents names addition to inequality graph by David W. Brethauer
Lead graphic from the Organization of Economic Development(OECD)
