John Talbot and Simon Johnson Exchange Email Part Two

Here is Simon Johnson's reply to John Talbot from the previous post. Equally important read. Johnson seems much more pessimistic about the threat to democracy that large financial and corporate interests have on our government and policy makers. Definitely worth a read.

From: Simon Johnson

To: John Talbott

Subject: Re: Taking Back the Country

John:

I admire your energy and focus in trying to mobilize a broader cross section of people against the big banks in particular and the way our political-financial system operates in general. I'm sure this is worthwhile and not at all a waste of time. Any efforts you or others put into educating people -- or enabling people to better educate themselves -- will surely pay off over time.

However, my sense of the political cycle around these issues is perhaps a bit different from yours. On the first round -- the crisis, immediate policy response and first-round "reform" efforts -- the big bankers have definitely won.

You were right when you argued way back that it would take a crisis before anyone really understood that we have a problem. But even so, most people still do not fully understand what has happened to them over the past 12 months -- and why their future taxes will be so much higher. I spend quite a lot of time talking to relatively well-informed people. After an hour or so of intense discussion and argument, I would say that most people see much more clearly just what the big banks got away with, although they do not necessarily agree with the idea of stricter regulatory controls on those banks. Left to their own devices, or just relying on the usual sources, I'm not sure how clear any of this is to most people.

And I worry that e-mailing friends doesn't necessarily engage people at the necessary level. You need repeated reinforcement of the key themes -- and a lot of back and forth with people you trust -- to really change minds on something this big. Or, as you say, you need to see it again and again, and perhaps you need to worry about the consequences for your own well-being.

If the big banks could just lie low for a while, I honestly think they would get away with everything -- the backlash would fade, and we'd be setting ourselves up for another massive crisis down the road.

Fortunately (in a sense), the banks cannot back off from their most egregious behavior. Perhaps this is in their DNA; definitely it is in their organizational culture and how they see the world -- the people who run the biggest financial institutions really think they are the masters of the universe and are proceeding on that basis.

Their profits, their wages, their bonuses, and their behavior have begun to antagonize people greatly. Already, some of my contacts who are close to the administration wince at the latest news from the financial sector, be it the bonuses that were paid last year to senior people who oversaw major mistakes (some of whom are now rewarded with senior policy roles!) or the blatant bragging about political influence that some CEOs are now making public.

And even if some sensible people at these banks would like to rein in employee compensation to more moderate and reasonable levels, they have a problem. If you lower the wages for your people, another bank -- perhaps one based in Europe -- will hire them away with a crazy package. The rat race, across companies and between people, means that this can only be curtailed through regulation. But the survivor banks are so strong politically that they will defeat all meaningful regulation for compensation.

This very success makes them more vulnerable to further criticism and backlash.

I'm not saying that the banks will simply commit political suicide. Nothing is ever so simple. But they will likely undermine themselves with Congress and eventually even with the administration. The midterm elections in 2010 and the presidential election in 2012 could well be very much about restricting the power of the big banks.

American democracy does not get on well with overweening unelected individuals who pretend to great power. Andrew Jackson saw off Nicolas Biddle in the 1830s. Teddy Roosevelt stood up to -- and eventually towered over -- even J.P. Morgan at the beginning of the 20th century. And FDR remade everything in the 1930s.

As I said before, I'm optimistic that President Obama can do the same. The challenge to democracy is palpable and growing. The fact that two -- and only two -- big banks came through the crisis unscathed is a perfect symbol of the problem. In the past, part of the myth of Wall Street was that it was competitive, that many could enter the industry, and that its political power was not too concentrated. This myth, among many, has now exploded.

We see the power for what it is. Mainstream media increasingly picks up the story line. And still the big banks cannot step back and curtail their most troubling activities.

Keep explaining and let the big banks provide the supportive evidence you need.

Best wishes,

Simon

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John Talbot and Simon Johnson Exchange Email

Two very important economists, John Talbot and Simon Johnson, today have the third and final segment about the status of the economy at Salon.com. Here is the e-mail that Talbot send to Simon Johnson. Reading this is a mixed bag; he highlights the flaws of our unjust and corrupted economy, but also his desire to organize ordinary Americans to fight back against the establishment.

From: John Talbott

To: Simon Johnson

Subject: Taking Back the Country

Simon,

I think you and I and most economists suffer from an antiquated belief that if we can just figure out exactly what went wrong, policymakers will beat a path to our door to ask our help in enacting necessary reforms. Unfortunately, the world no longer works that way. Our corrupted government, our criminal businesses and banking institutions, lobbyists, special interests, and the corporate controlled media are not interested in fixing this problem. They are making trillions of dollars through a vast scheme that transfers wealth from ordinary American taxpayers and consumers to their corrupt coffers. You are right that if big business thought about it, they should support efforts at restricting lobbying so that growth-oriented government policies could be implemented without the influence of corrupting special interests. But each lobbying corporation is also its own special interest, and so such internal reform is impossible.

The million-dollar question is: Why haven't ordinary Americans reacted more passionately and angrily in taking real action to end this systemic abuse? A decade ago, I wrote my first book on the corrupting influence of big business lobbying on our government and concluded at the time that average Americans would not focus on the issue until they had suffered real pain. I concluded that you can't defuse a bomb in America until after it has gone off.

But now the bomb has exploded. Forty million Americans are unemployed, millions have lost their homes, and most have taken a very substantial hit to their incomes, retirement savings and wealth. Why aren't Americans in the streets protesting this corrupt, enormously damaging criminal enterprise? I have traveled enough around America to realize that even though the current situation is enormously complex and not all Americans can describe exactly how the CDO market works, almost without exception every American can relate to you his frustration with how corrupt this government is and how unjust corporate lobbying and special influence in Washington has become. They get it. As a matter of fact, some of my high school-educated friends from my home state of Kentucky understand it a lot better than my Harvard-educated friends from Wall Street.

So I don't think the current challenge is figuring out exactly what caused the crisis. Focusing on what caused this episode will lead to narrow regulatory reform that reminds me that we all now take off our shoes at airports because one crazy fellow had the idea of putting a bomb in his heel. So while reform is needed in subprime mortgages, securitization, derivatives, and even in the magnitude of our financial institutions, none of these get at the fundamental problem: The people of this country are no longer making the rules by which they wish to live. If subprime mortgages hadn't blown up, some other area of highly leveraged bank lending would have eventually imploded. Even if the banking industry hadn't crashed, some other sector of the corrupt business/government criminal enterprise would have. Maybe the ice shelf of Greenland would have collapsed into the North Atlantic, maybe we would have run out of oil, maybe Microsoft's monopoly position in operating systems would have led to a worldwide computer virus shutdown, maybe poor consumer safety standards with China would have led to a global disease epidemic. The point is that when corporations make the rules, the results are not always good for the inhabitants of the planet.

So we don't have to decide today exactly what the reforms will be -- we just need to get corporate America out of our government so that the people can deliberate and make these reform decisions themselves without undue influence from bankers and corporations.

But there are two huge impediments to accomplishing this. This is not a traditional economics problem, it is an organizing problem or a collective action problem. People know the system is rigged and broken and unjust, but they feel as if there is very little that any one of them can do to effect much change. The organizing task is further complicated by the fact that our media, including television networks, cable TV, radio, newspapers, and magazine and book publishing, are almost all sponsored, owned and controlled by big corporations. The only hope is the Internet, over which big business has tried but to date failed to successfully exert its dominance. The Internet will prove to be both a source of unbiased news and information as well as the communication tool concerned citizens can utilize to fight back against big government, big business and big media.

What has to happen to get this movement started? First, I think people need to see that there is a channel being constructed that has the potential to be effective in directing their anger into real positive reform and change. I am in the process of beginning just such an organization and encourage people who are interested in fighting back against the system and against corporate lobbyists and special interests to contact me at my e-mail address, johntalbs (at) hotmail (dot) com.

Next, people have to believe that if they invest their time in such an effort they have the potential of winning. In this case, this is rather straightforward and easy to explain. If we are successful in organizing 5 million to 10 million Americans who want to see real change about how business is conducted in Washington, then by definition, we will have not only substantial political and voting power, but more important, the beginnings of a real consumer movement that could easily boycott the products and services of the worst corporate lobbyers in our government.

And this is where the magic of the Internet comes in. No one person could organize a 10 million person database in his lifetime. But Obama was able to accomplish it in less than two years. How? We don't have his money. Instead, we create our own Ponzi scheme. We create the ultimate chain letter. I e-mail 30 of my friends who each e-mail 30 of their friends and so on and so on. If only four cycles of people pass on the info we end up contacting 25 million Americans. We ask people to give us their e-mails and then contact them when we want to boycott a new offender.

It is time for Americans to realize that things are not going to improve until they get involved. It will take time. But the economy is not going to improve until we straighten out our corrupt system. Do you have anything more important that you are working on than this? The survival of liberal democratic society in the world.

Thanks for a great exchange of ideas. And best of luck in your future research and work.

John

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Organizing average citizens against powerful financial interests has always been the central challenge of any democratic society. The only way that is going to happen is if the citizenry is informed and empowered to take a stand against the corrupt state of affairs in this country. In my opinion, the two-party system that is dominated by corporate financial interests is one of the main problems in our political system. Both Democrats and Republicans are heavily influenced by a variety of corporate interests, and corporate interests do not discriminate against either party; they fund both parties, making any real reform incredibly difficult in the face of an unorganized, disenfranchised populace. This will be an ongoing struggle for those of us interested in social justice and an undoing of the corrupted capitalistic economy that has exploited average Americans for decades.

Letter to Dick Morrison

After viewing this segment on The O'Reilly Factor, I had to write Dick Morris a letter explaining why I objected to his distortions of the health care debate. It is because of people like him and O'Reilly that spout propaganda that health care remains such a distorted and misunderstood subject in American society. Here is Obama's former physician in Chicago, Dr. David Scheiner, and Amy Goodman speaking the truth about the state of health care in this county.

Here is the letter I wrote:

I would really appreciate it if you actually used some common sense and stop distorting the facts around the health care debate. Obama and the Dems bill is not perfect, far from it. The main factor hindering health care reform is the insurance industry that has a highly effective public relations campaign. I mean look at all the pharmaceutical drugs they put out each year, and most of the stuff is addicting and gets abused by the very people it is supposed to help. This is one aspect of this very complex issue. There are many problems with our health care system, and the biggest one of them all is the private health care industry that blocks reform by getting people like you to scare impressionable people into believing all the lies and distortions that come out of Fox News. We already have socialized medicine in this country. The VA system, all federal, state, and local employees, Medicare, and Medicaid are perfect examples. Why not universal Medicare, which practically every other country in the world has?

Our Policies Backfire, Once Again

Today, Glenn Greenwald interviewed Jonathan Horowitz of the Open Society Institute who is currently in Afghanistan researching the impact of American policy in the country. The transcript can be read here. Horowitz is primarily concerned with the draconian detention policy of the US, in which hundreds of prisoners are in US custody without legal rights, credible evidence of the crimes they supposedly committed, and humane living conditions. Horowitz's main conclusion, based on the interview, is that this policy specifically, and one could argue our militaristic, "bomb who we please" military strategy generally, has led to increased resistance against US forces and a loss of American credibility. This is just the latest example of "blowback", a term coined by the CIA in which the local population turns against American interests based on the policy implemented. Think about it: if France invaded the US to bring democracy and modernization to our country, for example, and started bombing targets that inevitably kill innocent civilians, indefinitely detained US citizens without any credible evidence or any legal rights, and tortured detainees, sometimes to death, wouldn't you think that would cause a major credibility problem for the French? The problem with the "War on Terror" is that we have abandoned our most basic values in the pursuit of al-Qaida and other terrorist cells. All of this is based on the idea that "we are bringing democracy to the Middle East." At least that is the justification now, especially in Iraq. We are trying to export democracy at the same time we are subverting it in very substantial ways at home.

US Soldier Captured by Taliban

A US soldier was captured in late June by Taliban forces in Afghanistan and a recent video has surfaced showing the soldier eating and being interviewed by his captors. The video can be seen here. Shortly after the video release, commentators, pundits, and political officials condemned the Taliban for the soldier's treatment and exploitation. While the soldier's capture is lamentable, especially after hearing reports that he may have been drunk when captured, it is hard to take seriously any US official scolding the Taliban for "exploiting" this soldier considering the litany of immoral, brutal, and illegal acts committed by the US in the name of fighting terrorism. We all hope this soldier will be treated humanely and released. But after what our government has done to terror suspects, many of whom have turned out to be innocent, how can we expect the Taliban to do any better?

Healthcare Debate

Wendell Potter, a former public relations specialist with CIGNA, was on Democracy Now! today discussing the healthcare debate taking place in this country. Potter dissects the healthcare industry during the interview, exposing the industry's avarice and concern for profits for shareholders over the well-being of their clients. He also breaks down the industry's public relations campaign to discredit any healthcare reform proposed by anyone other than them. An overarching theme of Potter's characterizations of the healthcare industry is the incredible influence it has on members of Congress, both Republicans and Democrats alike. It is amazing how distorted the debate is over healthcare, with critics demonizing anyone who supports a public plan as a socialist. The recent bank bailout and various forms of corporate welfare, from tax breaks to outright subsidies, are a revealing indication of how our political system works. Healthcare is socialist and would bankrupt the country, but Wall Street and major financial interests are rescued in a heartbeat by the Fed and US Treasury. Private interests essentially took over and looted the American government at the expense of taxpayers in the last few months. But because the healthcare industry is a for-profit industry that has a highly manipulating (and, regrettably, effective) public relations arm and an extraordinary influence over Congress, millions of Americans remain uninsured.

New York Times' "News Analysis" by Scott Shane

Scott Shane, a New York Times national security correspondent, had a revealing "news analysis" in yesterday's edition regarding the Obama administration's possible decision to open an investigation into Bush-era national security policies.  Shane cites four different examples of the Bush administration's national security policies coming under increasing scrutiny from lawmakers and civil liberties groups, including a highly classified counterterrorism policy kept secret (presumably illegally) by former Vice President Cheney, the torture of detainees in US custody, the recent report about the National Security Agency's domestic spying activities and the massacre of Afghan prisoners by Afghan security forces allied with American forces directly after the 9/11 attacks.  Shane characterizes these disturbing revelations as a "distraction from Mr. Obama's domestic priorities."  Here is a brief excerpt from the article:

It is just the kind of distraction from Mr. Obama’s domestic priorities — repairing the economy, revamping the health care system, and addressing the long-term problems of energy and climate — that the White House wanted to avoid.

A series of investigations could exacerbate partisan divisions in Congress, just as the Obama administration is trying to push through the president’s ambitious domestic plans and needs all the support it can muster.

“He wants to dominate the discussion, and he wants the discussion to be about his domestic agenda — health care, energy and education,” said Martha Joynt Kumar, a professor of political science at Towson University who studies the presidency.

The Bush national security controversies “are certainly a diversion from what he wants to do,” Professor Kumar said. “He wants to talk about the present and not the past.”

In the establishment world of our mainstream media outlets and politicians, breaking the law, at least when it is done by the nation's highest political leaders, is acceptable and any investigation into this law-breaking would be a "distraction" to Obama's domestic agenda (as if Republicans would be willing to acquiesce to Obama's "socialist" agenda anyways).  It doesn't matter how much evidence there is for such crimes.  Any investigation, according to the standard establishment argument, would be purely for partisan gain and would ignite a deep divide in Washington (as if Dems and Reps agreed on everything anyways).  In Shane's view, upholding the law is secondary to Obama's domestic agenda.  Why can't anyone seem to understand that this is not a partisan witch-hunt to go after Dick Cheney and Co. but a matter of upholding the rule of law.  After all, we are supposed to be "a nation of laws, not of men."

President Obama, making a speech this morning in Accra, Ghana to the Ghanian Parliament, had this to say:

"No person wants to live in a society where the rule of law gives way to to the rule of brutality and bribery.  That is not democracy, that is tyranny, and now is the time for it to end."

President Obama, like most journalists and establishment politicians, refuses to apply this same logic to the country he actually lives in.  Instead of lecturing Africans on democracy and the rule of law, the President could have included this in his speech:

"Look, upholding the rule of law is the most important thing any democracy can do, especially when the law applies to the most senior government officials.  That is why I am opening an independent investigation into the conduct of the former Bush administration in their prosecution of the War on Terror.  9/11 was a horrific event, no one can deny that.  But the truth of the matter is that 9/11 was a direct response to US foreign policy in the Middle East, specifically the presence of US troops in Saudi Arabia, something Osama bin Laden took particular offense to, considering the two holy cities of Islam, Mecca and Medina, are both located in this country (which also happens to have a large supply of oil).  Under my administration, it will not be the policy of the US government to lecture and criticize other countries for their failures to uphold the rule of law, democracy, and human rights when we have clearly not lived up to those standards, especially since 9/11.  Investigating the previous administration is not a partisan, vindictive attack on Republicans.  It is a matter of upholding the law.  We have clear stipulations, under domestic law and international treaties that we have signed and the US Senate has ratified, that our government does not torture, physically or psychologically.  There have been numerous reports, from the International Red Cross to Congressional investigations, that have highlighted the flawed legal opinions justifying the expansion of executive power and abuses of the law under the auspices of national security.  Under our system of governance, everyone is afforded a fair trail before an impartial judge.  Everyone, even so-called enemy combatants, has access to defense and is assumed innocence until proven guilty.  I am not here today to convict anyone for anything.  What I am saying is that the law applies to everyone in my country, not just ordinary citizens."

Just a thought...

John Yoo and Alberto Gonzales Rewarded for Illegal Behavior

A truly mystifying development has taken place in the past two months.  John Yoo, a former lawyer for the Office of Legal Council during the early years of the Bush administration, has been hired by the Philadelphia Inquirer.  Alberto Gonzales, former Attorney General in the Bush administration, has also been hired by Texas Tech University.  Yoo, as you may recall, was the author of several secret memos, released by the Obama administration, that gave legal cover for torture and other executive branch abuses.  Gonzales was the head counsel for President Bush at the time, and apparently approved the memos that opened up a new chapter in the abuse of executive power.  The fact that these two men, deeply involved in the lawlessness that characterized the Bush administration, have been rewarded for their illegal behavior is astounding.  It is truly amazing that instead of these men facing criminal charges, or at least an investigation, they are promoted.  This development speaks volumes about the state of the justice system in the United States.  

Obama's Embrace of Illegal Bush Era Policies

President Obama's embrace, and even expansion, of the most egregious and lawless aspects of former President Bush's national security policies are a shock to many progressives that put their hope in an Obama administration.  Examples abound, including denial of basic civil liberties for detainees, an expansion of war in Afghanistan, and a refusal to investigate past and current abuses of the law (torture and rendition come to mind, both of which are clear violations of domestic and international law) by our highest political officials.  The most frightening, however, is the Obama administration's embrace of a policy called "preventive detention", in which the executive branch detains individuals, even if found innocent in a court of law (if they are even given a chance in court!), for crimes that they could potentially commit.  Every reasonable person, including ALL Democrats, were vehemently opposed to these policies under former President Bush.  The fact that a Democrat is in office now does not make these policies justifiable and Democrats should be outraged.  For a more comprehensive and detailed analysis of President Obama's embrace of Bush era policies, see this article by Jack Goldsmith, who worked in the Bush Justice Department in the Office of Legal Counsel.  

Roxana Saberi and the Contradictions of American Political Dialogue

Roxana Saberi, the Iranian-American journalist who was briefly detained in Iran earlier this year, harshly criticized the Iranian government for their draconian response to the recently disputed presidential election and the protests that followed.  Speaking of the plight of political prisoners in Iran, Saberi said:

They are detained without due process of law, and the whereabouts of most of them are unknown.  They have little or no contact with the outside world.  They are likely under severe psychological and, in some cases, physical pressures.  Many may be forced to make false confessions, and they have no access to lawyers.  This is very similar to the treatment I received.  

Since the protests began following the disputed presidential election a few weeks ago, political pundits and politicians of all stripes have condemned the Iranian government for their extreme and violent response to protesters, their dismissal of the rule of law, and their censorship of the media.  Many have also criticized President Obama's response to the upheaval in Iran as not going far enough in its' rebuke of the Iranian regime.  The funny thing is, Saberi's quote above could perfectly describe what our government has been doing for years with people we have detained prosecuting the War of Terror.  A list of examples include: the Bush administration ordering the torture of detainees to "get highly valuable information that saves American lives", the refusal to allow detainees access to lawyers and adequate defense, the dismissal of lawsuits brought by plaintiffs seeking justice and compensation for their illegal treatment by the US government on the basis of  the "State Secrets" priviledge, so-called "expert" legal opinions offered by the Office of Legal Counsel that give shield to the executive branch to get away with these abuses.  So, even though we have shredded our Constitution fighting the War on Terror, our elite political and media class cannot bring themselves to critically analyze what our own government has been doing with regard to basic civil liberties, the rule of law, and ensuring due process.  Many media outlets still will not call what took place at Guantanamo, Bagram Air Base and other CIA "black sites" torture, even though the evidence overwhelmingly shows that detainees were brutally tortured, often to the point of death.  Before we even contemplate criticizing other countries for civil rights and human rights abuses, we need to reflect on our own record on these issues.  The hypocrisy coming from the establishment media and Washington is astounding.