In the 1987 film “Wall Street”, ruthless stock trader Gordon Gecko, played by Michael Douglas, famously declared “Greed is Good.” It summed up the credo of America – and, following America, most of the rest of the world – for the next two decades. Year by year the greed became ever more obscene, culminating in the catastrophic Presidency of Bush junior when an “absurdly wide gap between the rich and everyone else opened up” – as Robert Reich, the Clinton – era Labour Secretary, puts it.
Now the vultures are coming home to roost on the rotting remains of cowboy capitalism. Increasingly unregulated greed, celebrated in the mindless mantras of the advocates of unbridled market forces, has ended in a financial crash rapidly becoming worldwide. This in turn may capsize any number of economies and, most importantly, ruin the flesh and blood lives of hundreds of millions of ordinary human beings. Bundle up, hold on tight, the ride is going to become very rough indeed.
The only hope of saving the situation may be in the wholesale use of that powerful socialist tool, nationalisation, now being desperately utilized within the very fortress of anti-Socialism itself. How ironic that is!
This is how it happened. Millions and millions of housing loans in America were made to “ninjas”, people who had no income, no job and no assets and no chance whatsoever of paying back the loans unless house prices went up forever which, must I tell you, does not happen. These loans became a big part of the risk which banks took on, cut up into smaller chunks called “derivatives” and then sold to investors for lovely fat fees.
The theory was to spread the risk far and wide in the world banking system, spreading the risk being a good and safe thing to do.
The trouble was that some day the theory had to be tested in practice and now that it has been so tested it has proven to be horribly wanting. It is estimated that US$600 trillion of derivatives are outstanding in the world. Nobody knows how much of this is worthless and nobody really knows what on earth to do about this gigantic poisonous cloud hanging over the banks and treasuries of the world. While the good times were rolling this may have seemed a miracle of sophisticated banking and risk management.
Now derivatives have suddenly become, as that wisest of all investors, Warren Buffett, called them as long ago as 2002, “financial weapons of mass destruction.” By the way, it is also Warren Buffett who advised you and me years ago not to invest in companies “any fool can run because you can be sure one day some fool will run it.”
The financial catastrophe has been abetted, and even facilitated, over the last eight years by the awful Bush administration, by far the worst in American history, whose domestic agenda has been dominated by cutting taxes for corporations and the rich, helter-skelter deregulation and a pig-headed belief in the absolute supremacy of market forces.
In this incredible free-for-all, the rich and the mighty indulged in an historic, all-out binge while the income of the middle and lower working classes stagnated and even went down. Today in America the income of corporate executives are 400 times what the average worker earns – in 1973 the figure was 27 times.
On top of all this, these “masters of the universe” saw fit to unleash unjustified war on Iraq, killing hundreds of thousands, injuring and displacing millions while spending US$10 billion a month – to do what, for heaven’s sake, except kill thousands of their own, bankrupt their country financially and morally and make America hated in the world?
Well, the binge is well and truly over and the hang-over will be monumental but, sadly, it will be experienced not only or even so much by the rich and the mighty but also, as always in such situations, much more painfully by the poor and the middle-class. The whole ramshackle, obscene Wall Street edifice has come crashing down. Great banking names have been disgraced one after the other. Bare-faced greed combined with criminal negligence and outright fraud, aided by unbelievable Governmental incompetence, have ended in a come-uppance for a great nation of truly historic proportions. American financial and economic dominance in the world is over and, given the miserable example it was setting in the Bush years, this is bound to be a good thing.
The era of supreme American global leadership is surely over. The toxic combination of debt and unending war has brought America down as it does all empires. I am deeply sorry America has been brought to this pass. America is a great country and has in general been a force for good in the world.
But in the disastrous Bush years it lost its way completely. As I say, I am sorry to see this. The world needs a strong, democratic, economically dynamic and financially sound America setting a good example in the community of nations. Perhaps a cleansing will soon take place and America will regain such a standing in the world. But it will never again be the dominant power it was.
