Galbraith talks about a new leisure class that has arisen in America which sets out to take over the state and run it for the purpose of making as much money for itself as it can. Should things go wrong, he says, the predators provide rescue for themselves. This high-paid class preys on existing American institutions that regulate and/or provide welfare for all its citizens.
Predation occurs where this very rich leisure class does not work but holds office and performs work rituals. Income is valued for the prestige that if offers rather than for the work that is being done. Predation is what this class does: they do not provide work of social value but rather live off the work of others. (Some of these ideas in the book come from Thorstein Veblen).
The excerpt below is found on p 127:
The ecology of predator-prey relationships is one of mutual interdependence. Predators rely on prey for their sustenance, but they also require and must motivate their assistance. The normal function of the clan, tribe, family unit, or company is not to enrich the owner or master at the expense of the underlings, but to enrich him at the expense of surrounding clans, tribes, families, or companies. In this contest, the underlings naturally must enjoy some benefit both to motivate their cooperation and illustrate the success of the collective enterprise. The success of the enterprise depends in turn on keeping the predators sufficiently in check. If in their compulsion to fight, they lay waste to the environment, then neither they nor their prey will survive.
Such predation is made possible through deregulation where the business community, for example, no longer plays by a common rule (e.g., a shadow banking system emerges that is not open to public scrutiny). Power devolves to the CEO rather than to the entire organization or corporation. The CEO is the front man who appears not to know everything that is going on in his company.
Public and private collaboration diminishes. Business leadership seeks to prevent public purposes through the complete control of the state. Economic activities become opportunities for profit alone. These firms are not loyal to any country; they are loyal only to the pursuit of profit. The public purpose of the state is alien to them.
(End of the summary of ideas.)
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To apply these ideas to the financial system in general and to Goldman Sachs in particular, Goldman Sachs sets out to maximize its profits and to serve out its bonuses without restraint. Huge bonuses given to the underlings ensure their continuing work for GS.
Goldman Sachs has many men in the government who will look out for its interests and who will make sure that the profit making continues unabated. Thus, you see the Treasury Secretary, H. Paulson, formerly of Goldman Sachs, consulting with his former firm and other banks before bailing out another firm like AIG (the prey) on which GS is dependent. GS works for GS.
Many alumni from GS have gone both ways through the revolving door of government and finance. So you have someone like Rubin, who worked for GS for 26 years, becoming Secretary Treasurer and then works in the government to prevent regulation of derivatives, for example, from which GS makes billions of dollars. When Rubin leaves that position, he goes back to working for Citigroup, another financial company.
Geithner provided rescue for GS before anyone in government thought about the needs of main street in the wake of numerous foreclosures. Firms like Goldman Sachs took advantage of sub-prime mortgages to create derivatives and to make money from the suffering of homeowners.
Besides providing men to run the financial system for the government, Goldman Sachs lobbies to get bills struck down or manipulated if they attempt to regulate banking activities. GS pays politicians on both sides of the aisle to promote laws that are favorable to GS's activities. GS gives large amounts of money to both the Republicans and the Democrats in an effort to promote and advance their policies and profits.
The bundling of mortgage-backed securities that were exchanged in an opaque manner provided GS with vast amounts of money for the predatory firm, money that came from pension funds, savings, and the investments of homeowners or, in other words, from the public.
When Blankfein was questioned by the FCIC, the commission to investigate the causes of the financial meltdown, he stated that he regretted not making clear to the public just what socially responsible work Goldman Sachs does. Well, Goldman Sachs does not do anything that is socially responsible because it is only responsible for its own profit-making and cares nothing about society as individuals or in general.
Blankfein also claimed that no one knew that a bubble crash was going to occur and yet he knew full well that to bet against the mortgage market would make his company billions: he played well the role of front man who doesn't know what is going on. Firms like GS are always searching for new ways to make private profit usually at the expense of public organizations.
Blankfein may not have known exactly what day the bubble would burst but because he and his company securitized sub-prime mortgage backed loans which were rated as extremely safe then sold them to clients as such knowing all the while that they would turn to junk (which happened). Goldman Sachs got richer; the public at large got much poorer.
GS has contributed mightily to the financialization of the GDP and that is hardly socially responsible.
Two more quotations are in order. This from p. 147:
Predatory regimes are, more or less exactly, like protection rackets: powerful and feared but neither loved nor respected.
and from p. 145:
Predators do not mind being thought incompetent: the accusation helps to obscure their actual agenda.
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The first three chapters of the book, The Predator State by James K. Galbraith can be found here
2 COMMENTS:
How things work in Washington...we're all gamed like prey!
Evil Corporate Tax Holiday Deal Still Alive
By Matt Taibbi
However, the tax holiday turned out to not be part of that deal. That does not mean, however, that the proposal is dead. In fact, calling around in the last few days, I’m hearing that it is very much alive.
The action revolves around a bill sponsored in May by Texas Republican Kevin Brady (and co-sponsored by Utah Democrat Jim Matheson) called the Freedom To Invest Act, which would “temporarily” lower the effective corporate tax rate to 5.25 percent for all profits being repatriated.
http://jessescrossroadscafe.blogspot.com/2011/08/here-comes-freedom-to-invest-act.html
Matt Taibbi has found another example of those who are predators of the state.
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