More in the Lifestyles of the Wealth Supremacists

There's been a recent tempest (a very small one) over suggestions that New York City develop "micro-apartments" — very small apartments catering to people who want to live in the big city at low cost. NYC mayor (emperor) Michael Bloomberg supports this proposal. There's been speculation over the real reason for his support, given that he owns five or six palaces around and about (a couple of adjacent townhouses in Manhattan, a place in Westchester County, his shorefront mansion in Bermuda,  a mansion in London, and a place in Colorado, I think).

The economics behind developing smaller spaces is solid. But there is another rationale behind Bloomberg's push for microflats, one based on his conviction that the wealthier are just better.

There is an obvious way to provide more space for more people — build up. It wouldn't take a city of endless high-rises, the fifty-story, engineer-designed monstrosities that developers love. Going from 3 or 4 story standards to 5 or 6 would provide an enormous increase in space while still keeping many neighborhoods "cozy." But it costs more to go higher than it does to subdivide smaller.

More important, developers think in terms of dollars per square foot, and in their view, they are entitled to a minimum rent for a unit, based on its size. It can be a roach-ridden, bed bug-infested, rundown as you like. Square footage means money. And Bloomberg is a real-estate Keynesian (to adapt Paul Krugman's "military Keynesian" expression for right-wingers who endorse big government for military purposes). Bloomberg is a strong believer in government intervention to keep real-estate prices ridiculous.

Floor area is the most 'objective' (watch as real estate agents come up with an argument for why that 300 square foot hole is really 500 square feel) and tangible factor in valuing living spaces. A quick coat of paint, a cleaning, and air freshener and most people will over look the real problems in a 5 minute look at a place. (And most New York landlords will still gripe about doing even a minimal cleaning.) Smaller size is the most cheapest way to cram low-budget proles into otherwise pricey neighborhoods.

That brings us to part 2 of Bloomberg's thinking. He and his rich buddies will play loco parentis for us, but they sure as hell aren't going to have anybody telling them what to do. They want they're Manhattan MacMansions. But they still need their servants. But living costs are soaring and rippling outwards, so that places 50 or 60 miles from New York are seeing prices typical for Brooklyn (and Brooklyn sees Manhattan prices).

How are Bloomberg-style wealth supremacists to keep their servants within reasonable distance so they can get to servitude on time? Have to get those living costs down in town. And, as noted in part 1, the best way to do that is smaller area. Bloomberg and Co. do want Manhattan (and parts of Brooklyn — maybe) to be a gated community for Wall Street, but the last thing they want to do is anything resembling work — laundry, cleaning, cooking. They need their servants close enough so that they can be at hand at a moments notice (since, for now, the days when servants lived on-site, in the mansion, are still gone by — for now).

Wealth Supremacists

A story is making the rounds of a particularly snotty-nosed Romney donor throwing her weight around in the Hamptons during the Mitt Romney fundraising this past weekend of July 7th (which happened also be one of the hottest on record in the US). Arriving at the gate to the estate, according to the Times, this woman "yelled to an aide to Mitt Romney. 'Is there a V.I.P. entrance? We are V.I.P.' " No doubt all the other millionaires and billionaires attending appreciated her distinction.


This election is highlighting the full commitment of many Americans (almost all of the super-rich and, I suspect, a majority of everyone else) to the divine rights (plural) of wealth. This is the firm conviction of Michael Bloomberg, Bill Gates, the Koch brothers, and of course, Mitt Romney. But it is also an article of faith among many Democrats, including Bill Clinton and Barack Obama. 


The picture is complicated, but it is coherent and explains the social and economic development of the US over the past 35 years. It explains why even many poor Americans vote to deprive themselves and further enrich the wealthy. It explains the cult of testing in public schools, coupled with the vilification of teachers by people who send their own kids to private schools. It explains a criminal justice system that allows the systematic crimes of wealth to go unpunished while sending poor law-breakers to prison for years for even the most minor offenses. It explains why Obama, with an easy line of attack against Romney, instead pussy-foots about. 


A wide array of public figures endorse wealth supremacism. And many more quietly endorse it while publicly paying lip-service to issues of justice. These quiet idolaters of wealth include people like Bill Keller, former Editor-in-Chief of The New York Times and son of Chevron CEO George Keller. They include Thomas Friedman, himself a billionaire by marriage. Numerous corporate executives, sports figures, and Hollywood stars are also among this number. Again, they may say all the right things, but actually doing something to counteract the trend is beyond their imagining.


The cult of wealth, the divine rights of wealth, are reinforced in popular entertainment, in schooling (both grade school and so-called "higher-education", in the criminal justice system, in housing — everywhere. Crucially, the notion of superiority the wealthy embrace today is not accompanied by notions of noblesse oblige endorsed by past aristocrats. I'll explore this further in forthcoming posts. 


To begin:


The first and most important of the divine rights of wealth is the right to wealth itself. Why do the rich have a right to wealth? Well, they are superior to the rest of us. They merit wealth. Why do they merit wealth? They are better — harder working, more intelligent, more honest, more virtuous. 


This view was expressly endorsed by Harvard economists and Romney adviser Gregory Mankiw in a 2009 blog post entitled "The Least Surprising Correlation of All Time:" 

"Smart parents make more money and

pass those good genes on to their offspring."

This is the crux of the position held by an enormous percentage of the wealthy and by, as I said I suspect, most Americans. 


In this simple statement we see a confluence of several seemingly disparate strains of thought. In this statement are elements of the reductionist thinking that plagues psychology (especially evolutionary psychology) today. We see also the tacit assumptions of virtue attached to wealth. We see elements of what is called "meritocracy." And we see the air of superiority embraced by those who are better off.


To all this and more, I will return soon.

Transitioning Out of Democracy

I'm trying to remember what Simon Johnson saw as the time to the next financial crisis in a discussion with Bill Moyers two or three years ago (in what might have been one of the last editions of the Bill Moyers Journal before Moyers retired). Certainly, Johnson predicted no more than ten years to the next crisis, but my recollection is that he said something like three to seven years. That's just my recollection, but we can be sure of one thing — Barack Obama, Democrats and Republicans, despite weak public protestations to the contrary, have sent very clear substantive signals. Wall Street and megabank risk-taking, misconduct, and even criminality will be thoroughly underwritten by the United States government and, by extension, a willfully ignorant American populace.

This all fits into what a growing number (including Paul Krugman and Nouriel Roubini . . . I don't know about Messrs. Johnson and Kwak) have described as a large, perhaps the largest, transfer of wealth from labor to capital ever.

My own few is that the phenomenon is even broader than that, encompassing economic and legal, even constitutional, features. A transfer of wealth and economic and political power from the general population to an increasingly rapacious class of American oligarchs is underway. My view unifies developments across the economic and political spectrum:

• the Supreme Court's creeping grant of the status of personhood to corporations,
• the gross disparities in wealth and income (and all concomitant benefits, like health, education, longevity, etc.),
• Bush and Obama attacks on civil liberties (including Habeus Corpus, Posse Comitatus, whistleblower protections, protections for journalists — the few who actually investigate US government misconduct),
• the Democratic-Republican assault economic protections for elderly Americans.
• the effective criminalization of poverty,
• the cultural glorification of the New American Virtues — wealth, fame, good looks, longevity, fashion, etc.

I do not like the "tipping point" terminology, but the trends that accelerated in the Reagan years (having arguably begun in the Carter years) and that have continued through every president since may now have crossed some threshold, an increasingly formal grant of power to a tiny percentage of elite Americans. Any new bailouts will only be part of larger developments.

This Is What Obama, Republicans, and the Oligarchs WANT

Yves Smith directs us to, among others things, a discussion by Kate Pickett. Pickett's presentation notes that the US has more "bads" than most other wealthy, 'modern' countries — across the board. Greater inequalities in longevity, crime, mobility, happiness, education, and on and on.

It is time to stop pretending that this is an accident of other phenomena in the US. Rather, this is what the American elite want.

Americans equate wealth, longevity, "good looks" (in the form of housing, fashion, personal appearance) with virtue. Americans embrace the notion that the wealthier, longer-lived elite are better, innately better, morally better, intellectually better.

Americans embrace an innateness of status that was rejected by Europeans through the French Revolution and numerous other social upheavals.

Worst, Obama, most Democrats, all Republicans, and most important, the Oligarchs (the top 1% or so), want the rest of us to be worse off — in every sense.

This is an explanation that has all the merits attributed under the scientific method. It is simple. It explains what we observe. It has predictive power. Above all, it explains why Obama and others would pursue the policies they do despite overwhelming factual evidence.

As With Bailout, So With Social Security

Recall that the first attempt to bailout banks in September 2008 failed in Congress after a deluge of calls from voters in opposition. Then Congress rallied. After all, if 95% of members support policy X, how can you play one off against another?

The same is happening now. The oligarchs have ruled against Social Security. They know they will never need it, but in time there will be no one left to raise taxes on but the rich, so in time, if social programs are to be preserved, the rich will have to pay a share more closely representing the degree to which they disproportionately benefit in out society.

The solution is to kill social programs in their entirety, let the poor and middle classes suffer. Why? Congress and every president since Reagan have demonstrated repeatedly that they place a near-exclusive priority on the interests of the wealthiest (not just to the exclusion of others, but at the expense of others).

The political economist Carles Boix has argued that democracy thrives when the privileged perceive that the masses cannot vote away the wealth of those privileged. So countries with diverse and liquid assets like the U.S. can tolerate democracy. I suggest that the United States is proving Boix's argument incomplete. The rich are saying, again and again, "No!" to democracy.

It may be no more complicated than this: In a society where a huge majority show no interest in current events, politics, economics, justice, truth, government, why should power-brokers deal with democracy when they can just as easily — or more easily, given the population's passivity — deal without?

Democracy's End

Philip Weiss of Mondoweiss has some comments on a current Ethan Bronner story in The New York Times. Weiss notes Bronner's effective recognition of the death of the Two State Solution to the Israeli-Palestinian conflict. If I read Weiss correctly, he thinks it may portend the end of the Jewish State. I think it may mark an alternative, depending on how wedded Israelis and their American champions are to Democracy. Israelis and Americans are facing, largely independently, a parallel choice between preserving two increasingly incompatible Articles of National Faith. In Israel's case, they are the notions of Democracy and Jewish Statehood (which were arguably incompatible from the start, emphasis on arguably — not necessarily in my view). In the case of the US, the two are Democracy and (unlimited acquisition of) Wealth (termed free enterprise, private property — it has several names).

If the US and Israel are not already at a Moment of Truth (drumroll), they soon will be. The Jewish State may be finished, or — if Americans and Israelis choose to junk some other cherished notion — it may continue in radically altered form.

The obvious alternative to be junked is democracy. My view is that it will be the democracy that is dumped — not explicitly, but in substance and with a widespread, unstated recognition that this is what is happening.

There are calls in the Knesset for a more systematic denial of rights to Palestinians, but this has been true for some time. Likewise, there is a systematic denial of equal rights to non-Jews in Israel. The vast majority of non-Jews are Palestinian, so that systematic denial does the work, not just of latent racism, but of preserving the "Jewish character" of the Jewish state.

A further emphasis on protecting "Jewish character" to resolve the tension between a Two State Solution and Jewish Statehood will also bring denials of democracy to Jews in Israel. This, too, is happening with the grossly disproportionate power of the religious right. Israel is also seeing some evidence of liberal-intellectual flight.

How is the de-democratization of Israel to be managed in The World's Greatest Democracy? A good deal of Orwellian linguistic construction aided by the non-quite-coincidental de-democratization of the United States. Economists, first on the left and now increasingly among liberals, are noting this. And progressives generally have been warning of this since the Reagan years, when the "Danger of Too Much Democracy" was first attacked with malice aforethought.

In an interview with Bill Maher, Paul Krugman said, "The American Dream isn't dead, but it's dying pretty fast." Dean Baker has an essay on the service Congress renders to Wall Street and corporate America — not to us. Essential to Democracy are social mobility and some ideal of socio-economic equality serving as a goal. Both are near-dead in the US. Our politicians are becoming a political class. They become wealthier, use their elected positions to ensure or promote their own wealth and, if they leave office, go to work for precisely the companies they regulated (or didn't) through legislation. Their children take office after they leave. If we haven't already, when will we see a third-generation Kennedy take office — or a Murkowsi, Paul, Cuomo, Bush . . . ?

Elections are becoming near-irrelevant in the US. The great beacon of Change and Hope — Obama — has proved to be anything but, indeed almost the opposite. Who could imagine that Obama would not just fail to address Bush crimes, but actually further some of Bush's worst?

The decline of democracy in the US — coupled crucially with Orwellian language to perpetuate the Myth of Democracy — will make it easier for Israel-idealogues in the US to maintain the pretense that Israel is a democracy.

The irony in Israel's case is that a profound change in Judaism itself may be a consequence. If Judaism is identified with the Jewish State (as it is, above all by conservatives), then as Israel becomes more right-wing, less democratic and more discriminatory, Judaism will, sadly and possibly tragically, be also so identified. Liberal Jews will seek religious solace elsewhere, some abandoning Judaism, others seeking to create a true, liberal Jewish faith. Judaism will evolve in a way exactly counter to, and as a consequence of, what conservatives intend.

What will happen in the US is anybody's guess. Legal institution of oligarchy? Perhaps that is already happening with the formal protections granted Wall Street and corporate profiteering.

Lowell Bergman Investigates the Credit House of Cards

Economic Treason?

At what point does an official's abrogation of duty cease to be mere incompetence and rise to the level of crime? At what point does a public official's crimes rise to the level of treason, particularly when those crimes seem entirely domestic in scope?

"Treason against the United States, shall consist only in levying War against them, or in adhering to their Enemies, giving them Aid and Comfort."

So reads the Constitution. George W. Bush gave us a new definition of "enemy," one President Obama has yet to reject. Nevertheless, it is little more than rhetoric to charge Treasury Secretary Timothy Geithner with treason. To do so seriously, we would have to suppose that the Oligarchs of Wall Street are enemies of the United States. That case could be made. They have enriched themselves at the expense of 300 million Americans. But we know that case will never be made by anyone other than lefty ranters like yours truly.

As president of New York Federal Reserve, Geithner was merely a conniving, grovelling servant of the American Oligarchs. Now he is conniving, grovelling servant endorsed, abetted, and presumably directed by President Obama. (Obama is playing the political plausible deniability well by just keeping largely silent, except for the occasional pitch for stocks.)

This administration, a public 'champion' of transparency, has recently been forced, by lawsuit, to make its and Bush's scheming public. So we now know who Geithner, a public servant, really served.

The New York Times reports,

Last June, with a financial hurricane gathering force, Treasury Secretary Henry M. Paulson Jr. convened the nation’s economic stewards for a brainstorming session. What emergency powers might the government want at its disposal to confront the crisis? he asked.

Timothy F. Geithner, who as president of the New York Federal Reserve Bank oversaw many of the nation’s most powerful financial institutions, stunned the group with the audacity of his answer. He proposed asking Congress to give the president broad power to guarantee all the debt in the banking system, according to two participants, including Michele Davis, then an assistant Treasury secretary.

The proposal quickly died amid protests that it was politically untenable because it could put taxpayers on the hook for trillions of dollars.

[...]

But in the 10 months since then, the government has in many ways embraced his blue-sky prescription. Step by step, through an array of new programs, the Federal Reserve and Treasury have assumed an unprecedented role in the banking system, using unprecedented amounts of taxpayer money, to try to save the nation’s financiers from their own mistakes.

And more often than not, Mr. Geithner has been a leading architect of those bailouts, the activist at the head of the pack. He was the federal regulator most willing to “push the envelope,” said H. Rodgin Cohen, a prominent Wall Street lawyer who spoke frequently with Mr. Geithner.

Today, Mr. Geithner is Treasury secretary, and as he seeks to rebuild the nation’s fractured financial system with more taxpayer assistance and a regulatory overhaul, he finds himself a locus of discontent.

Even as banks complain that the government has attached too many intrusive strings to its financial assistance, a range of critics — lawmakers, economists and even former Federal Reserve colleagues — say that the bailout Mr. Geithner has played such a central role in fashioning is overly generous to the financial industry at taxpayer expense.

An examination of Mr. Geithner’s five years as president of the New York Fed, an era of unbridled and ultimately disastrous risk-taking by the financial industry, shows that he forged unusually close relationships with executives of Wall Street’s giant financial institutions.

His actions, as a regulator and later a bailout king, often aligned with the industry’s interests and desires, according to interviews with financiers, regulators and analysts and a review of Federal Reserve records.

[...]

[F]or all his ties to Citi, Mr. Geithner repeatedly missed or overlooked signs that the bank — along with the rest of the financial system — was falling apart. When he did spot trouble, analysts say, his responses were too measured, or too late.

In 2005, for instance, Mr. Geithner raised questions about how well Wall Street was tracking its trading of complex financial products known as derivatives, yet he pressed reforms only at the margins. Problems with the risky and opaque derivatives market later amplified the economic crisis.

As late as 2007, Mr. Geithner advocated measures that government studies said would have allowed banks to lower their reserves. When the crisis hit, banks were vulnerable because their financial cushion was too thin to protect against large losses.

In fashioning the bailout, his drive to use taxpayer money to backstop faltering firms overrode concerns that such a strategy would encourage more risk-taking in the future. In one bailout instance, Mr. Geithner fought a proposal to levy fees on banks that would help protect taxpayers against losses.

The bailout has left the Fed holding a vast portfolio of troubled securities. To manage them, Mr. Geithner gave three no-bid contracts to BlackRock, an asset-management firm with deep ties to the New York Fed.

To Joseph E. Stiglitz, a Nobel-winning economist at Columbia and a critic of the bailout, Mr. Geithner’s actions suggest that he came to share Wall Street’s regulatory philosophy and world view.

[...]

A bill sent recently by the Treasury to Capitol Hill would give the Obama administration extensive new powers to inject money into or seize systemically important firms in danger of failure. It was drafted in large measure by Davis Polk & Wardwell, a law firm that represents many banks and the financial industry’s lobbying group. Mr. Geithner also hired Davis Polk to represent the New York Fed during the A.I.G. bailout.