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Noam Chomsky Looks at How the System Is Rigged to Ensure That Corporations Always Win


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Posted 19 May 2017 - 02:31 PM

Noam Chomsky Looks at How the System Is Rigged to Ensure That Corporations Always Win
Posted on May 17, 2017

By Noam Chomsky / Moyers and Company

 

Noam Chomsky’s new book, “Requiem for the American Dream: The Ten Principles of Concentration of Wealth and Power,” based on the film of the same name, is a primer in Chomsky’s analysis of the faults of the American political and economic system. Taking as its backbone the idea that “a significant part of the American Dream is class mobility: You’re born poor, you work hard, you get rich,” Chomsky systematically documents the many ways the system is rigged from top to bottom to ensure that corporations always win.

 

As Truthdig columnist Chris Hedges notes in a blurb for the book, “Its power to write its own laws and regulations, Chomsky points out, has ultimately created a mafia economic system and a mafia political system that is exemplified in the rise to power of the demagogue Donald Trump.”

 

In this book excerpt, we present here Chomsky’s Principle #6: Running the Regulators.

 

If you look over the history of regulation — railroad regulation, financial regulation and so on — you find that, quite commonly, it’s either initiated by the economic concentrations that are being regulated, or it’s supported by them. And the reason is because they know that, sooner or later, they can take over the regulators and essentially run what they do. They can offer what amounts to bribes — offer them jobs or whatever it may be — it’s an advantage to the regulators to accommodate themselves to the will of the powerful. It happens naturally in many ways, and ends up with what’s called “regulatory capture.” The business being regulated is in fact running the regulators. The banks and bank lobbyists are actually writing the laws of financial regulation — it gets to that extreme. That’s been happening through history and, again, it’s a pretty natural tendency when you just look at the distribution of power.

 

Glass-Steagall

 

During the Depression, one of the regulations instituted was to separate commercial banks, which are where deposits are federally guaranteed, from investment banks, which just take risks and there are no federal guarantees. They were separated in what was called the Glass-Steagall Act.

 

In the 1990s, the economic programs of the Clinton administration were run pretty much by Robert Rubin and his associates — people who basically came out of the financial industries — and they wanted to overrule this law from back in the ’30s. They succeeded, in 1999, by undermining Glass-Steagall with the cooperation of right-wing Republicans, Phil Gramm and others. That meant that, essentially, the risky operations of investment banks ended up being guaranteed by the government. Well, you can see where that was going to lead — and it did. At the very same time, they also barred regulation of derivatives — exotic financial instruments — which meant that they could take off unregulated. Now all of this is quite safe as long as you know the government is going to come to your rescue.

 

Revolving Door

 

In fact, what Robert Rubin himself did after having achieved this, he went and became a director of Citigroup — one of the biggest banks — and made use of the new laws. He helped them take over a big insurance company and so on — made a lot of money — and it crashed. He went off with all his money, came back as Obama’s chief adviser, and then the government bailed out Citigroup — as they’ve been doing for years, in fact, since the early ’80s. As senators, representatives and advisers in the government leave the government and go into the commercial industrial (by now mostly financial) systems that they’ve been theoretically regulating, it is almost a consequence to have regulatory capture. That’s where their associations are, that’s where they belong. So they move in and out of these systems, and what it means is that there’s the same very close interaction — one aspect of which is the “revolving door.” So you’re a legislator and you become a lobbyist, and as a lobbyist, you want to control legislation.

 

Lobbying

 

One of the things that expanded enormously in the 1970s as the business world moved sharply to try to control legislation is lobbying. There was a huge effort with lobbyists to try even to write legislation. The business world was pretty upset by the advances in public welfare in the ’60s, in particular by Richard Nixon — it’s not too well understood, but he was the last New Deal president, and they regarded that as class treachery.

 

In Nixon’s administration, you get the consumer safety legislation (CPSC), safety and health regulations in the workplace (OSHA) and the EPA — the Environmental Protection Agency. Business didn’t like it, of course — they didn’t like the higher taxes, didn’t like the regulation. And they began a coordinated effort to try to overcome it. Lobbying sharply increased. New think tanks were developed to try to control the ideological system, like the Heritage Foundation. The spending on campaigns went way up — in part, the result of television. And there was just fantastic growth of the role of finance in the economy. With this, deregulation began with a real ferocity.

 

Deregulation and Financial Crashes

 

Remember, there were no financial crashes in the ’50s and the ’60s, because the regulatory apparatus of the New Deal was still in place. As it began to be dismantled under business pressure and political pressure, you get more and more crashes, and it goes on right through the years — the ’70s is where deregulation starts, and the ’80s is where crashes really take off.

 

Take Reagan — instead of letting them pay the cost, Reagan bailed out the banks, like Continental Illinois, the biggest bailout of American history at the time, 1984. In the early 1980s, the US went into the deepest recession since the Great Depression, only to be pulled out by various forms of subsidy, and so on. In 1987, there was another financial crash — well, pretty close, Black Monday. Reagan actually ended his term with a huge financial crisis — the savings and loan crisis — and, again, the government moved in and bailed it out.

 

Too Big to Jail

 

The savings and loan crisis was a little different from the 2008 financial crisis, because the perpetrators were brought to court and tried, and a lot was learned from the trials about the chicanery, shenanigans, trickery and crimes that were carried out. Not this last time. Power has become so concentrated that not only are the banks “too big to fail,” but as one economist put it, they are also “too big to jail.” The only kind of criminal investigations that can be undertaken are, for instance, insider trading, where the criminal is actually harming other businesses — that you can do something about. But where they’re just robbing people, that’s done with impunity.

 

Deregulation went on through the Clinton years. Clinton came along, and there was a tech boom — but by the end of the 1990s there was another bubble that broke, the dot-com bubble. In 1999, regulation separating commercial banks from investment banks was dismantled. Bush came along and we had the housing boom, which, amazingly, the policy economists didn’t notice — or they ignored the fact that there was about an $8 trillion housing bubble that held no relation to the relevant facts about cost of housing. Of course, that broke in 2007, and trillions of dollars of capital just disappeared — fake wealth. That led to the biggest financial crisis since the Great Depression. Then comes the Bush and Obama bailout, which reconstructed the powerful institutions — the perpetrators — and left everyone else floating. There was severe harm to people, who had houses taken away from them, jobs diminished, and so on. That’s where we are now. It was done with impunity, and they’re building up to the next one.

The Nanny State

 

Each time, the taxpayer is called on to bail out those who created the crisis, increasingly the major financial institutions. In a capitalist economy, you wouldn’t do that. In a capitalist system, that would wipe out the investors who made risky investments. But the rich and powerful, they don’t want a capitalist system. They want to be able to run to the “nanny state” as soon as they’re in trouble, and get bailed out by the taxpayer. They’re given a government insurance policy, which means that no matter how often you risk everything, if you get in trouble, the public will bail you out because you’re too big to fail — and it’s just repeating over and over again.

 

Their power is so enormous that any attempt to deal with it is essentially beaten back. There have been mild attempts, like the Dodd-Frank regulatory proposal, but that’s whittled down in the implementation by lobbyists — and it doesn’t go after the main issues anyway. And the reasons for this are pretty well understood. There are Nobel laureates in economics who significantly disagree with the course that we’re following — people like Joseph Stiglitz, Paul Krugman and others — and none of them were even approached or consulted. The people picked to fix the crisis were those who created it — the Robert Rubin crowd, the Goldman Sachs crowd. They created the crisis and are now more powerful than before. Is that an accident? Well, not when you pick those people to create an economic plan. I mean, what do you expect to happen?

 

The last bailout was unprecedented in scale. These corporations were kept viable in a period where, in a capitalist economy, they would’ve crashed. But we don’t have a capitalist economy — business wouldn’t accept that, and they have enough power to prevent it — so, therefore, the public comes in to pour literally trillions of dollars into the hands of failing corporations and maintain them. And that’s true in all sorts of ways. There’s one major technical study of bailouts over several years that concludes that probably 25 percent — a study of the hundred biggest corporations on the Fortune list by two well-known economists — 25 percent of them survived thanks to public subsidy at some point, and most of the rest gained from it. So while this is unprecedented in scale, there’s nothing new about it. The same is true after all financial crises.

 

Externalities and Systemic Risk

 

The financial system is close to a market system — it does approximate a market, unlike the production system, which has enormous state dynamism and intervention to keep it going — and in a market system there are well-known inherent problems, namely the participants in a transaction try to take care of only themselves. They don’t pay attention to the effect on others. Let’s say you sell me a car. You’ll try to make a profit, I’ll try to get a decent car, but we’re not considering the impact on others: environmental problems, congestion, rising price of fuels and so on. Those may be individually small, but they mount up. Those are called “externalities” in economic terminology.

 

Now, in the case of a big investment bank like Goldman Sachs, if they make an investment or a loan, they try to calculate in the risk to themselves — of course, that’s pretty easy to do when they know they’re going to be bailed out because they’re too big to fail. What they don’t take into account is what’s called “systemic risk.” The risk that if their investments collapse, the whole system may collapse. Well, that’s what happened, has repeatedly happened, and is probably going to happen again. And that’s been exacerbated by the deregulatory mania and also by the development of very complex financial instruments, which, again, have no known contribution to the economy, but make it possible to distribute risks in complex ways.

 

That’s what happened with the mortgage crisis. Mortgage sellers were offering subprime mortgages to people who they knew would never be able to pay them back, and the banks were picking them up as mortgage-backed securities (MBSes). But they didn’t have to worry, because they did what’s called “securitizing” — they broke them up into many small parts and handed them off to someone else as collateralized debt obligations (CDOs). Now, those investors often didn’t even know what they were buying and, meanwhile, the instruments that allowed the buying were essentially the insurance against the failure of what you’re doing. Technically that was supposed to reduce risk. What it in fact did was magnify risk in such a way that when the system suffered a break — as it did with the collapse of the housing crisis — then the effects were enormous. And again, the taxpayers were called in to bail it out. That’s not just bailing out the banks, that’s hundreds of billions of dollars coming out of the Fed and Treasury, providing cheap credit and so on.

 

There’s nothing surprising about this — it’s exactly the dynamics you expect. If the population allows it to proceed, it’s just going to go on and on like this. Until the next crash — which is so much expected that credit agencies, which evaluate the status of firms, are now counting into their calculations the taxpayer bailout that they expect to come after the next crash. This means that the beneficiaries of these credit ratings, like the big banks, can borrow money more cheaply, they can push out smaller competitors, and you get more and more concentration.

 

Everywhere you look, policies are designed this way, which should come as absolutely no surprise to anyone. That’s what happens when you put power into the hands of a narrow sector of wealth, which is dedicated to increasing power for itself — just as you’d expect.

 

Let the Market Prevail

 

The simplest definition of “neoliberalism” is “let the market run everything.” Get the government out of policy formation except to support market activities. Nobody really means that. Those are measures applied to the poor and the weak but not to yourself. And that runs all through modern economic history back to the 17th century. They didn’t call it neoliberalism then.

 

Take Adam Smith’s recommendations to the newly liberated colonies. He was the great economist of the day, and he gave the colonies advice — which is essentially what the World Bank and IMF tell poor countries today, and the poor in the United States too. He said that the colonies should concentrate on what they’re good at — that was later called “comparative advantage” — export primary products, like agricultural products, fish and fur, and import superior British goods. Furthermore, don’t try to monopolize your resources. The main resource in those days was cotton. That was like the fuel of the early Industrial Revolution. He pointed out to the colonies that that would improve the total economic product, and so on.

 

Of course, the colonies were liberated, so they were free to completely ignore “sound economics” as it was called. They imposed high tariffs to block superior British goods — at first textiles, later steel and so on — and therefore were able to develop domestic industry. They tried very hard and, in fact, almost succeeded in monopolizing cotton — that was a large part of the point of the conquest of Texas and half of Mexico. The reasons were very explicit — the Jacksonian presidents said if we can monopolize cotton, we can bring Britain to their knees. They won’t be able to survive if we control the main import that they need. So, without going further into the details, the colonies did exactly the opposite of the neoliberal prescriptions (which, incidentally, Britain had also done as it developed). Meanwhile the poor and oppressed, they had these principles rammed down their throats. So India, Egypt, Ireland and others, they were deindustrialized, deteriorated — something that continues even now.

 

And that’s happening right in front of our eyes. Take inside the United States — for the large majority of the population, the principle is you’ve got to “let the market prevail.” Cut back entitlements, cut back or destroy Social Security, cut back or reduce the limited health care — just let the market run everything. But not for the rich. For the rich, the state is a powerful state, which is ready to move in as soon as you get into trouble and bail you out. Take Reagan, he’s the icon of neoliberalism, free markets and so on. He was the most protectionist president in postwar American history. He doubled protectionist barriers to try to protect incompetent US management from superior Japanese production. Again, he bailed out banks instead of letting them pay the costs. In fact, government actually grew during the Reagan years relative to the economy, and that’s the icon of neoliberalism. I should add that his “Star Wars” program, SDI, was advertised openly to the business world as a government stimulus, a kind of cash cow that they could milk. But that was for the rich — meanwhile, for the poor, let market principles prevail, don’t expect any help from the government, the government is the problem, not the solution and so on. That’s essentially neoliberalism. It has this dual character, which goes right back in economic history. One set of rules for the rich. Opposite set of rules for the poor.


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Posted 19 May 2017 - 02:36 PM

A Nation of the Walking Dead
By Chris Hedges
Truthdig 2 April 2017

 

Opioids and experiences that simulate the deadening effects of narcotics are mechanisms to keep us submissive and depoliticized. Desperate citizens in Aldous Huxley’s 1932 novel “Brave New World” ingested the pleasure drug soma to check out of reality. Our own versions of soma allow tens of millions of Americans to retreat daily into addictive mousetraps that generate a self-induced autism.

 

The United States consumes 80 percent of opioids used worldwide, and more than 33,000 died in this country in 2015 from opioid overdoses.

 

There are 300 million prescriptions written and $24 billion spent annually in the U.S. for painkillers. Americans supplement this mostly legal addiction with over $100 billion a year in illicit marijuana, cocaine, methamphetamine and heroin. And nearly 14 million U.S. adults, one in every 13, regularly abuse alcohol.

 

But these monetary figures are far less than what we spend on gambling. Americans in 2013 lost $119 billion gamblingImage result for US lottery, with an additional $70 billion—or $300 for every adult in the country—spent on lottery tickets.

 

Federal and state governments, reliant on tax revenues from legal gambling and on lottery ticket sales, will do nothing to halt the expansion of the industry or the economic and psychological toll it exacts on those in financial distress. State-run lottery games had sales of $73.9 billion in 2015, according to the North American Association of State and Provincial Lotteries. This revenue is vital to budgets beset by declining incomes, deindustrialization and austerity.

 

    “State lotteries provided more revenue than state corporate-income taxes in 11 of the 43 states where they were legal, including Delaware, Rhode Island, and South Dakota,” Derek Thompson wrote in The Atlantic. “The poorest third of households buy half of all lotto tickets,” he noted.

 

Gambling is a stealth tax on poor people hoping to beat the nearly impossible odds. Governmental income from gambling is an effort to make up for the taxes the rich and corporations no longer pay.

 

Slot machines and other electronic gambling devices are engineered to draw us into an Alice-in-Wonderland rabbit hole. They, like our personal computers and hand-held devices, cater to the longing to flee from the oppressive world of dead-end jobs, crippling debt and social stagnation and a dysfunctional political system. We become rats in a Skinner box, frantically pulling levers until we are addicted and finally entranced by our compulsion to achieve fleeting, intermittent and adrenaline-driven rewards. Much like what happens to people using slot machines, the pigeons or rats in Skinner’s experiments that did not know when they would get a reward, or how much they would get, became the most heavily addicted to operating the levers or pedals. Indeed, Skinner used slot machines as a metaphor for his experiments.

 

Image result for opioidThe engineers of America’s gambling industry are as skillful at forming addiction as the country’s top five opioid producers—Purdue Pharma, Johnson & Johnson, Insys Therapeutics, Mylan and Depomed. There are 460 commercial casinos, 486 tribal casinos, 350 card rooms, 55 racetracks and hundreds of thousands of gaming devices, many located in convenience stores, gas stations, bars, airports and even supermarkets.

 

The rush of anticipation, available in 20-second bursts, over hours, days, weeks and months creates an addictive psychological “zone” that the industry calls “continuous gaming productivity.” Heart rates and blood pressure rise. Time, space, the value of money and human relationships hypnotically dissolve. A state of extreme social isolation occurs.

 

Gambling addicts, like many addicts, are often driven to crime, bankruptcy and eventual imprisonment. Many lose everything—their marriages, their families, their jobs, their emotional health and sometimes their lives. Gambling addicts have the highest rate of suicide attempts among addicts of any kind—1 in 5, or 20 percent—according to the National Council on Problem Gambling.

 

Donald Trump is in large part a product of gambling culture. His career has not been about making products but about selling intangible and fleeting experiences. He preys on the desperate by offering them escapist fantasies. This world is about glitter, noise and hype—Trump called the Trump Taj Mahal, his now-closed casino, “the eighth wonder of the world.” The more money you spent, the greater your “value,” the more you were pampered, given free hotel rooms and gifts, handed passes to special “clubs” with lavish buffets. Scantily clad hostesses hovered around you serving complimentary drinks. If you spent big, you were invited to exclusive parties attended by supermodels and famous athletes. Decorated chips—some featuring a photo of Donald Trump—turned cash into a species of Monopoly money. But in the end, when you were broke, when there was no more money in your bank account and your credit cards were maxed out, you were thrown back, in even greater financial distress, into the dreary universe you tried to obliterate.

 

Roger Caillois, the French sociologist, wrote that the pathologies of a culture are captured in the games the culture venerates. Old forms of gambling such as blackjack and poker allowed the gambler to take risks, make decisions and even, in his or her mind, achieve a kind of individualism or heroism at the gambling table. They provided a way, it can be argued, to assert an alternative identity for a brief moment. But the newer form, machine gambling, is an erasure of the self. Slot machines, which produce 85 percent of the profits at casinos, are, as the sociologist Henry Lesieur wrote, an “addiction delivery device.” They are “electronic morphine,” “the crack cocaine of gambling.” They are not about risk or about making decisions, but about creating somnambulism, putting a player into a trancelike state that can last for hours. It is a pathway, as sociologist Natasha Dow Schüll points out, to becoming the walking dead. This yearning for a state of non-being is what Sigmund Freud called “the death instinct.” It is the overpowering drive by a depressed and traumatized person to seek pleasure in a self-destructive activity that ultimately kills the organism.

 

    “It is not the chance of winning to which they become addicted,” Schüll writes in “Addiction by Design: Machine Gambling in Las Vegas,” “rather, what addicts them is the world-dissolving state of subjective suspension and affective calm they derive from machine play.”

 

Gamblers are closely tracked by the casino industry. The length of time gamblers spend on machines increases the profits for the casino. The science of keeping people in front of slot machines—called “time on device” within the industry—has led to the creation of ergonomic consoles, the appealing, warm screens on slot machines, seductive video graphics and surround-sound acoustics.

 

Image result for slot machineThe industry also invests heavily in surveillance. Gamblers carry player or loyalty cards. They insert these cards into the slot machines when they play. These cards, linked to a central database, are used by the industry to build profiles of gamblers. The value and frequency of bets are captured, along with wins and losses. The industry knows when the players take breaks, where and what they eat in the casinos, what they drink and what hotel rooms they select. Slowly the traits and the habits of the gambler, triangulated with demographic data, are pieced together to allow the industry to build a personal profile. With the profile, the casino determines at what point a player will accumulate too many losses and too much pain and is about to walk away from a machine. A few moments before that pain level is reached, a hostess will magically appear with a free drink, a voucher for a meal or tickets to a show. Casinos can also use profiles to project how much a player will spend gambling during his or her lifetime.

 

The industry was the human laboratory for refinements now incorporated into the security and surveillance organs of the state.

 

    “Many surveillance and marketing innovations first used in casinos were only later adapted to other domains,” Schüll writes, “including airports, financial trading floors, consumer shopping malls, insurance agencies, banks, and government programs like Homeland Security.”

 

    “They have an algorithm that senses your pain points, your sweet spots,” Schüll told me. “The zone is a term that I kept hearing over and over again as I went to gamblers’ anonymous meetings and spoke to gambling addicts. This really describes a state of flow where time, space, monetary value and other people fall away. You might say a state of flow, or the zone, sounds very different from the thrills and suspense of gambling. But what the casinos have hit upon is that [they] actually make more money when [they] design a flow space into these machines. People don’t even know that they’re losing. They just sit there. Again, it’s time on machines.”

 

    “When you look at contemporary slot machines, they don’t operate on volatility,” she continued. “One designer of the mathematics and algorithm of these games said we want an algorithm that makes you feel like you are reclining on a couch. The curves, architecture and the softly pixelated lights, they want you to sit back and go with the flow. I just couldn’t make sense of that for the longest time in my research. Gamblers would say, ‘It’s so weird, but sometimes when I win a big jackpot I feel angry and frustrated.’ What they’re playing for is not to win, but to stay in the zone. Winning disrupts that because suddenly the machine is frozen, it’s not letting you keep going. What are you going to do with that winning anyway? You’re just going to feed it back into the machines. This is more about mood modulation. Affect modulation. Using technologies to dampen anxieties and exit the world. We don’t just see it in Las Vegas. We see it in the subways every morning. The rise of all of these screen-based technologies and the little games that we’ve all become so absorbed in. What gamblers articulate is a desire to really lose a sense of self. They lose time, space, money value, and a sense of being in the world. What is that about? What does that say? How do we diagnose that?”

 

    “It’s the flip side to the incredible pressure, which is experienced as a burden, to self-manage, to make choices, to always be maximizing as you’re living life in this entrepreneurial mode,” she said. “We talk about this as the subjective side of the neoliberal agenda, where pressure is put on individuals to regulate themselves. In this case, they are regulating themselves, but they are regulating themselves away from that. This really is a mode of escape. It’s not action gambling. This is escape gambling. You can see it on their faces. The consequences and ethics are distasteful. It’s predatory. It’s predation on a type of escape where people are driven to exit the world. They’re not trying to win. The casinos are trying to win. They are trying to make revenue. They’re kind of in a partnership with the gamblers, but it’s a very asymmetrical partnership. The gamblers don’t want to win. They want to just keep going. Some people have likened gamblers to factory workers who are alienated by the machine. I don’t see it that way. This is more about machines designed to synchronize with what you want—in this case escape—and [to] profit from that.”

 

Trump understands this longing for escape and the art of creating an updated version of P.T. Barnum’s “Grand Traveling Museum, Menagerie, Caravan & Hippodrome.” Trump used his skills as a con artist to pull in hundreds of millions of dollars and then to achieve the presidency.

 

    “People have called it a mode of ludo-capitalism,” Schüll said. “In a way, you can connect that to the ludo-politics that we see. Pleasure. To get what you want. What you want is to escape into a flow, to be taken away. We see this in the political domain a lot—in the rallies, in the surging of feelings, the distraction. If you look at the way a casino is designed, and you remember that Trump is a designer of many casinos, including his non-casino properties, they follow the same design logic of disorientation and trying to sweep people away from themselves, away from rationality, away from a position where they have clear lines of sight and can act as decision-making subjects. You see that on the floors of casinos, you see that in political rhetoric today.”

 

The corporate state will expand our access to a variety of opioids and numbing situations to temporarily alleviate our stress, financial dislocations, depression and anxiety. Aided by state and local governments, it will build new pleasure palaces. It will lure millions into its glittering and seductive Venus’ flytraps. It will make sure we have tempting retreats within easy reach to achieve a death-in-life experience. Much of the society will be put to sleep. Those who refuse to become zombies, who rise up to resist, who seek at all costs to remain distinct individuals, will be silenced with the corporate state’s cruder tool for submission: force.
The original source of this article is Truthdig
Copyright © Chris Hedges, Truthdig, 2017


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