[Peace-discuss] Cui bono economico?

[C. G. Estabrook]

QUESTION: ...at the beginning of the financial crisis, International Monetary 
Fund proposals for the Third World were to pay back debt to core countries, 
raise interest rates, privatize and generally engage in pro-cyclical policies. 
For the U.S., the accepted prescriptions were: stimulate economy, forget about 
debt, nationalize industry. But since then, a very powerful current emerged and 
changed /the policy debate - now it's about deficit reduction and austerity at 
home, which the Obama administration is actively fueling with its deficit 
commission and talk of the federal government's need to tighten its belt/. Is 
this shift another indicator of what Simon Johnson talks about, namely the 
similarities between the U.S. and emerging-market oligarchies? Is the U.S. 
"becoming a banana republic," as he puts it? Your book mentions Citigroup's 
buoyant analysis of /plutonomies, in which the economy functions in all respects 
in the interests of its richest 10 percent,/ largely oblivious of the needs of 
everyone else. Is this what's taking place?

NOAM CHOMSKY: It's a development that's been going on, though even more so in 
Europe. The United States in many ways resembles a Third World country - far 
more elevated, but it has many of those structural characteristics:/the extreme 
inequality of wealth, the deterioration of infrastructure because it only serves 
poor people, predatory operations, huge corruption,/ and so on. These are all 
pretty typical of Third World countries, not countries that are trying to 
develop a sound future economy. Let's just steal what we can and go away. 
Regarding Citigroup's analysis, it's certainly more so than before. It's never 
been untrue, but certainly more so now. Take the period that was moving toward 
social democracy of some kind - say the '50s and the '60s -- that's when the 
technology that you're using right now was developed. And it was developed at 
taxpayer expense, but there was no particular thought that the taxpayer would 
benefit from it. People who would benefit from it were IBM, Microsoft, and so 
on. The corporate sector wanted the population of the country to pay the costs, 
take the risks. And it was done totally fraudulently, not so that you could have 
a computer. People thought they were defending themselves from the Russians or 
something. But planners understood ... They were building the economy of the 
future, from which they are going to benefit. And maybe incidentally others 
will, but that's only incidental.

...there was a period of regulation from the New Deal up to the '70s, and there 
were no financial crises. Since the '70s, the regulatory structure has partially 
been dismantled, partially captured - you know, regulatory capture - and 
partially it's been affected by what's sometimes called cognitive regulatory 
capture. That is, the regulators bought the ideology that's being peddled by 
economists, and business happily picks it up because it's so good for them, not 
because they think there's any merit in it. And as a result, since the '70s 
there have been repeated financial crises; this is not the first one, they've 
been regular.

...Reagan left the country with a major financial crisis - Savings and Loans 
(after another in 1987) - ten years later you had the tech bubble; in between, 
you had Long Term Capital Management; the fact that the economics profession 
could survive that is astonishing. You know the story, a couple years after that 
comes the housing bubble. For the population, the economy has been surviving on 
asset inflation, increasing debt and increasing work hours, often for both 
adults in the family.

 From <http://www.chomsky.info/interviews/20101119.htm>.
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