Doug Henwood: Financial Sector and Power

September 14th 2014Doug Henwood Author of Wall Street: How it Works and for Whom and host of the weekly radio show Behind the News.

Relating the financial and the real
– Why focus on debt when it narrows potentially the political audience?
– Economists usually study either real sector and  financial   Sector
– Financial is dependent on real sector but struck by how little does finance actual play a role in financing real activity , real production
– Most firms are flush with cash…surplus cash…shuffling out to shareholders in form of stock buy backs
– Corps buying a lot of their own stock
– That’s why drugs are so expensive because drug companies buy back their own instruments
– most of the R&D is done by the government
– What really is the role of finance…aside minimal real finance activity?

Stocks are instruments of power
– and a way to exercising it…way of management and ownership
– Financial capitalist has become the capitalist in general
– Portfolio managers    Representing capital as a whole
– Everyone else works for them
– Government bond holders have power over governments look at Detroit and eurozone
– Central bank and IMF
– It’s opaque and difficult to understand by design
– Working for the powerful
– This aspect is very much under apreciated
– Politics = “who does what to whom and gets away with it”

– If you mess with finance you mess with ruling class power
– Power angle I soften overlooked rather than that it makes people rich
– Obama has done almost nothing to challenge dot frank aside calling them fat cats which was upsetting to them – maybe due to guilty conscience
– Steve Schwarzman (Blackstone) responded to Obama’s idea of ditching their 15% by comparing it to the Nazi invasion of Poland
– Even the mildest financial reforms are seen by the financier and political class as a threat
– Separation of ownership and control as Marx asked for would make capital class unessessary

Politics that emerged around occupy.
– I have a personal dislike of the small and local like credit unions and small banks
– Where do you think the money goes
– Credit unions, most of them have more money they know what to do with they lend it to banks
– Same true for small town banks lending it to big banks
– You have to look at what happens behind the deposit window
– Cooperatives…haven’t done well in recent years…Mondrian cooperative system
– At the core is a bank that offers financing and technical assistance …
– Interesting since it is a new model and different approach …bank is at the center of the
– Not easy to reproduce the basque model elsewhere.
– They have been expanding the model towards people who whee not inner circle and who we’re treated badly during the financial crisis.

Politics of debt
– Average numbers of student debt, average high indebted is small
– Same for cc debt and corporate debt
– Limits the audience to about 15% highly indebted of each group
– Talking about debt is a great entry to talking about how markets are organised,
– Is celebrating the rise of housing prizes is rising, why. What’s the benefit of an basic rising we don’t celebrate food price rising
– Debt problem is sign of stagnant income
– Even if you got rid of the current debt, it would be back due to the gap between income and expenditure
– Credit cards are used in lieu of an effective welfare system
– 401 k is a  way to get workers to think like Wall Street pursuing an anti worker agenda
– Profits up by down sizing…using worker funds to promote anti worker agenda

Private to Public
– People are seen as skill sets not that there needs robe collective political action
– We have been turned into ‘Little Neoliberalists’ – we think of our selves as a portfolio of skills and talk about investing in our ‘human capital’.
– If you’re unemployed, it becomes your skillet’s fault rather than the system’s.
– Health insurance we have financial approach to what it is a welfare problem
– If we had a welfare state it would eliminate a lot of the welfare sectors and private approaches
– Socialize a lot of the private activities and reduce the need for financial armed approaches
– Tradition in economics that money and finance and money are not very interesting

– Public bank would be a great idea… Cityscapes entire neighborhoods.  There is nothing accidental about it. Culture as magnet for gentrification. If we could put that to more humane ends …we we could do that openly that would be a great idea.

– Unemployment rate is rather 12% rather than 6% that’s reported
Fed is looking at it more than the president
– 6-7 million people would need to become employed to get back to our employment status before the crash – the Unemployment Rate doesn’t show this because so many of these people have stopped looking for work and are therefore not counted
– Unemployment rate is a measure of labor market tightness and not human pain.  It’s about whether or not they have negotiation power
– High Unemployment means that workers are desperate and less likely to make demands, therefore is better for ‘business’ – our Unemployment Rate reflects this by presenting the stats from an employer perspective rather than a worker perspective

– Do financiers know how much power they have – aren’t they insecure?
– Financiers hated Clinton because he had raised taxes on the top income bracket by 3% – they didn’t care that he had loosened regulations and maximised their profits, they just cared about their taxes
– Wall Street is run by people with the maturity level of 14-year-old boys
– Compare the current Ruling Class to post-WWII, when the Ruling Class was able to have long-term vision and considered their legacy.  The current Ruling Class doesn’t seem to care.

– As easy to imagine total revolution as it is to imagine regulation of derivatives
– Unfortunately knowledge doesn’t easily shift politics – how do you change common sense?

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