The State-Corporate Complex: A Threat to Freedom and Survival

[L.A. BRONCOS FAN]

Noam Chomsky

Text of lecture given at the The University of Toronto, April 7, 2011

(Transcript courtesy of Yvonne Bond)


I'm going to talk mostly about the United States, in part because I know it better, but also in part because it its unique significance in the global system. That's been true dramatically since the Second World War. The character and extent of this uniqueness often isn't understood and would be easily worth a talk in itself, but I won't go into that.

However, we constantly see that even in relatively small ways. So for example when the housing bubble in the United States burst a couple of years ago, that initiated a global economic crisis which most of the world is still mired in. The worst outcomes were just averted by quite desperate measures.

In another domain, when France and Britain wanted to bomb Libya a couple of weeks ago, they had to turn to a more reluctant Washington to do the heavy lifting and provide the vast bulk of the means of violence. The U.S. has a huge comparative advantage in that domain. Furthermore, although the United States -- U.S. society and its political economy -- are unusual in some respects, it's not that different from elsewhere. And in fact developments within the United States over the years have often foreshadowed what is going to happen pretty soon in other industrial societies in the state capitalist world.

That world, in fact the whole world, is of course always changing, but there are significant continuities and they're worth bearing in mind. One continuity is that those who control the economic life of a country also tend to have overwhelming influence over state policy. That should be a truism taught in elementary school. It was formed succinctly by Adam Smith in words that I've quoted before but are important enough to repeat. He, speaking of Britain of course, wrote that the principle architects of policy are the owners of the society, in his day the merchants and manufacturers, “the masters of mankind” as he called them. And they insure that state policy serves their interest, however grievous the effect on others, including the domestic population, but primarily the victims of what he called their savage injustice abroad, and India was his prime example. That was early in the days of the destruction of India.

Today the masters of mankind are multinational corporations and financial institutions, but the lesson still applies and it helps explain why the state-corporate complex is indeed a threat to freedom and in fact even survival. By now there are important elaborations of Smith's truism applied to the modern world. The most significant and sophisticated version that I know is by political economist Thomas Ferguson, what he calls his investment theory of politics which in brief, simplified, simply views U.S. elections as occasions in which the coalitions of private investors coalesce to invest to control the state. It turns out to be a thesis of quite predictive success over more than a century as he shows.

What it means in effect is that elections are pretty much bought and that the buyers expect to be rewarded, and that happens all the time. It's illustrated very clearly in the last U.S. Presidential election in 2008. President Obama's victory traces largely to a huge influx of capital from the financial institutions, especially toward the end of the campaign. They preferred him to his opponent, McCain, and they expected to be rewarded. And of course they were. The country at that time was mired in a deep recession, so Obama's first act was to select an economic team. It was drawn almost entirely from those who had caused the severe economic crisis that he inherited. He systematically avoided critics of their practices, including quite prestigious ones, Nobel laureates.

Actually the business press wrote rather ironically about this. The Bloomberg News did a review of Obama's economic team, went through each one of them and looked at their records and concluded that these people shouldn't be on the economic team to fix up the economy. They should be getting subpoenas, which was pretty correct. They didn't, of course.

Well, not surprisingly the team chose measures which rewarded the major culprits who are now richer and more powerful than before, and poised to lead the way to the next and probably more severe financial crisis. There was recently an interesting article about this by the Special Inspector of the bailout programs, Neil Barofsky. He wrote a bitter condemnation of the way it was executed. He points out that the legislative act that authorized the bailout was a bargain. The financial institutions that were responsible for the crisis would be saved by the taxpayer and the victims of their misdeeds, in fact real crimes -- the victims would be somewhat compensated by the measures to protect home values and preserve home ownership. It was mostly a housing crisis.

Only the first part of the bargain was kept. The financial institutions were rewarded lavishly for causing the crisis and they were forgiven for outright crimes, but the rest of the program floundered. As Barofsky points out, I'm quoting him, “Foreclosures continue to mount with eight to 13 million filings forecast over the program's lifetime while the biggest banks are 20% larger than they were before the crisis and control a larger part of the economy than ever.” They reasonably assume that the government will rescue them again if necessary. Indeed, credit agencies incorporate future government market bailouts into their assessments of the largest banks. That means exaggerating market distortions that provide them with an unfair advantage over smaller institutions which continue to struggle.

So in short, as he puts it, Obama's programs were a giveaway to Wall Street executives and a blow in the solar plexus to their defenseless victims. In other words, the government listened to those who have a voice in the political system and acted accordingly, all completely in accord with Smith's truism.

While there should be no surprises here, there are careful studies of Senate votes over a long period and they show that the Senate is indeed responsive to the sector of the population [that is] the top third in income. Actually a closer analysis would show that it's a very small fraction of that top third. In contrast there's no correlation at all between Senate votes and opinions of the middle third. And for the bottom third there is a correlation. It's negative. Senate votes are counter to preferences for the bottom third. And on major issues of foreign and domestic policy, there's quite a sharp disconnect between public opinion and public policy over a long period.

One might argue that these results don't really depart very far from the intentions of the founders of the society. So James Madison, who was the main framer of the Constitutional order, explained to the Constitutional Convention that power should remain in the hands of the Senate. The Senate was not chosen directly by voters until about a century ago. In those days the executive was pretty much an administrator, not an emperor. And the House, the third part of the system, which is closer to the public, had much more limited authority. That's the way in fact it was set up. As Madison explained to the Constitutional Convention, “the Senate represents the wealth of the nation, the more capable set of men, men who have respect for property owners and their rights and understand that government must protect the minority of the opulent against the majority.”

That's quite accurate. Something else that ought to be taught in elementary school.

We should bear in mind, however, kind of in Madison's defense, that his mentality was pre-capitalist. So he assumed that a Senator would be, as he put it, “an enlightened statesman and benevolent philosopher.” The Senate would be a “chosen body of citizens whose wisdom may best discern the true interests of their country and whose patriotism and love of justice will be least likely to sacrifice it to temporary or partial considerations.” They would therefore refine and enlarge the public views by guarding the public against the mischiefs of democratic majorities. This is all rather like the noble Roman gentleman of the fantasies of the day. Adam Smith before him had a sharper eye.

Well, it didn't take long for Madison to shift his thinking about this. As he viewed the early results of the democratic experiment, he had second thoughts. In fact by 1792, a couple of years later, by then he deplored what he called “the daring depravity of the times as the stock-jobbers become the Praetorian band of the government, at once its tool and its tyrant, bribed by its largesses and over-aweing it by clamors and combinations,” which isn't a bad description of today's political system and its social and economic correlates.

Today in the richest country in human history, 20% of the population qualify for food stamps. Real unemployment today is at the level of the Great Depression for much of the population, manufacturing workers for example. And in fact their actual circumstances are much worse than in the Great Depression, which I'm old enough to remember. Most of my family were unemployed working class and the country was of course far poorer than it is today. But it was a hopeful period in many ways. There was a sense that people were doing something about it and that times would get better. And indeed they did, thanks to very active organizing, CIO, other things. And then an immense government stimulus, first during the War and then continuing through the post-war decades.

That's not true today. The jobs that are being lost are unlikely to return, at least under the current programs of the masters of mankind. Not graven in stone, but that's their programs. While the population suffers, Goldman Sachs, which is one of the main architects of the current crisis, is now richer than ever and they have just quietly announced 17.5 billion dollars in extra compensation for last year with the CEO, Lloyd Blankfein, getting 12.6 million while his base salary more than triples. And exactly as Barofsky said, they're poised to play the same game again.

And why not? They can rely on the government insurance policy that enables them to safely engage in risky transactions, make huge profits, and they don't take into account what in the jargon of economics are called externalities -- the effect of a transaction on others; crucially in their case what's called systemic risk, that is, the likelihood that the whole system will collapse as a result of their risky and hence profitable transactions.

And when it does collapse, as is anticipated, that's not a big problem. They can run to the powerful nanny state that they nurtured, clutching in their hands their copies of Hayek and Milton Friedman and Ayn Rand and so on and they can demand the bailout to which they're entitled because they're too big to fail as it's put. As one commentator added, Riley, also too big to jail for quite serious crimes. It's a pretty impressive scam. Of course it's in radical violation of capitalist principles, but the masters of mankind believe in those principles only for others, not for themselves.

Continues here: http://chomsky.info/talks/20110407.htm

[alkemical]

http://strike-the-root.com/

[L.A. BRONCOS FAN]

"With Liberty and Justice for Some: How the Law is Used to Destroy Equality and Protect the Powerful.

WEDNESDAY: Democracy Now! talks to Glenn Greenwald on his new book "With Liberty & Justice for Some"

[epicSocialism4tw]

Socialism sucks

[L.A. BRONCOS FAN]

Originally Posted by epicSocialism4tw

Socialism sucks

Spoken like a Wall Street puppet.

If you really believed this, then you'd join the OWS movement as the only "socialism" extant in America is the nanny state that supports your Wall Street puppet masters.

[Tombstone RJ]

Chomsky is 100% correct. Oh an btw, he's parroting everything I've been saying. I wonder if he's been reading my posts, thank you very much.

vote Ron Paul.

Oh, and btw. I've also said that Senators should have term limits and should not be elected by the general population because only the richest 1% can afford to run for the US Senate. I've said that it needs to go back to the way the founding fathers initially set up--the US Senators would be elected from the state congress.

[Tombstone RJ]

Also, the fringe benefits Congress gets should be eliminated. Also, they should not be in DC 365 days of the year. Nope. The congress should only be in DC a few times a year to vote on issues. The rest of the time congressmen/women should be in their own friggen states fixing their own state's problems.

Man I get tired of being right all the time!

[epicSocialism4tw]

Originally Posted by L.A. BRONCOS FAN

Spoken like a Wall Street puppet.

If you really believed this, then you'd join the OWS movement as the only "socialism" extant in America is the nanny state that supports your Wall Street puppet masters.

Socialism sucks.

[barryr]

Someone should tell Obama about this since he does business with Wall Street more than anyone else as the small businessman is put out to pasture.

[epicSocialism4tw]

Originally Posted by barryr

Someone should tell Obama about this since he does business with Wall Street more than anyone else as the small businessman is put out to pasture.

The small businessman doesn't pad his wallet.

[barryr]

Originally Posted by epicSocialism4tw

The small businessman doesn't pad his wallet.

But he's pro business though, as still claimed by his fellow idiot supporters. More pro big business if anything, which apparently is ok with liberals. Well, the corporations that do business with government are cool. Those that don't, are evil.

[epicSocialism4tw]

[Popcorn Sutton]

Originally Posted by Tombstone RJ

Chomsky is 100% correct. Oh an btw, he's parroting everything I've been saying. I wonder if he's been reading my posts, thank you very much.

vote Ron Paul.

Oh, and btw. I've also said that Senators should have term limits and should not be elected by the general population because only the richest 1% can afford to run for the US Senate. I've said that it needs to go back to the way the founding fathers initially set up--the US Senators would be elected from the state congress.

No question who the bankers want elected:

Mitt Romney:
Goldman Sachs $354,700
Credit Suisse Group $195,250
Morgan Stanley $185,800
HIG Capital $176,500
Barclays $155,250

http://www.opensecrets.org/pres12/co...php?cycle=2012

[Tombstone RJ]

Originally Posted by BrewCrew

No question who the bankers want elected:

Mitt Romney:
Goldman Sachs $354,700
Credit Suisse Group $195,250
Morgan Stanley $185,800
HIG Capital $176,500
Barclays $155,250

http://www.opensecrets.org/pres12/co...php?cycle=2012

And this is a pittance compared to what BO is getting from banks.

[L.A. BRONCOS FAN]

Originally Posted by Tombstone RJ

Chomsky is 100% correct. Oh an btw, he's parroting everything I've been saying. I wonder if he's been reading my posts, thank you very much.

Chomsky parroting you?

L0L!

[L.A. BRONCOS FAN]

Originally Posted by epicSocialism4tw

Socialism sucks.

^

Speaking of parroting...

Does the world really need another Glenn Beck?

[alkemical]

Originally Posted by Tombstone RJ

Chomsky is 100% correct. Oh an btw, he's parroting everything I've been saying. I wonder if he's been reading my posts, thank you very much.

vote Ron Paul.

Oh, and btw. I've also said that Senators should have term limits and should not be elected by the general population because only the richest 1% can afford to run for the US Senate. I've said that it needs to go back to the way the founding fathers initially set up--the US Senators would be elected from the state congress.

Funny, i've been saying these things for ten years. I guess my influence has helped you and Noam see the light.

[L.A. BRONCOS FAN]

[Tombstone RJ]

Originally Posted by alkemical

Funny, i've been saying these things for ten years. I guess my influence has helped you and Noam see the light.

If that's the case you throw in a lot of other crap that has nothing to do with DC corruption and how congress works or does not work. I stay more on point so perhaps this is why your brilliant ideas get washed away, no?

[Tombstone RJ]

Originally Posted by L.A. BRONCOS FAN

not all your posts suck.

[alkemical]

Originally Posted by Tombstone RJ

If that's the case you throw in a lot of other crap that has nothing to do with DC corruption and how congress works or does not work. I stay more on point so perhaps this is why your brilliant ideas get washed away, no?

Oh i know, i post lost of science and culture issues, as well as trends and business ideas.

Perhaps I'm not a one trick pony, and i'm able to actually give depth to conversations and not skate out when my argument gets blowed up.