As is usually the case, Arianna Huffington makes some very good points in this commentary about the bigger picture as it relates to the ongoing financial crisis and efforts at reform.
Shorting The Middle Class: The Real Wall Street Crime
The press is all abuzz with news of the SEC suing Goldman Sachs for fraud. While this is certainly big news in itself, even more important is what it says about what the financial elite has been doing to America for the last 30 years: shorting the middle class.
The SEC’s action is a perfect moment for us to look at the bigger picture of how the American people were sold on the promise of never-ending prosperity while Wall Street was overseeing a massive transfer of wealth from the middle class to the richest Americans.
The results have been devastating: a disappearing middle class, a precipitous drop in economic and social mobility, and ultimately, the undermining of the foundation of our democracy.
Thirty years ago, top executives made an average of 30 times what their workers did — now they make 300 times what their workers make.
Those familiar with such works as Paul Kennedy’s The Rise and Fall of Great Powers might argue that policymakers had little choice in the matter decades ago and opted for twenty or thirty more years of faux prosperity rather than letting U.S. standards of living immediately begin the painful adjustment toward those in the rest of the world.
But, that would be giving elected officials far too much credit for having any foresight at all, that is, beyond the next election.
What we’ve been experiencing in recent decades is more likely the natural sequence of events for empires as they reach old age. What, at the time, is viewed as a “Golden Age of Finance” is ultimately revealed to be the last gasps of a fading empire, as has been the case throughout history – the Dutch, the Spanish, the British, etc.
Nonetheless, the pain that the middle class now feels is all too real, prime evidence provided in the case of one Dean Blackburn of Alameda, California who was laid off on the last day of the month so the company wouldn’t have to pay for another month of health insurance.
Here are the closing paragraphs of a commentary that is well worth reading in its entirety.
The evidence that the middle class has been consistently shorted is so overwhelming — and the results so potentially damaging to our society — that even bastions of establishment thinking are on alert. In a new strategy paper, The Hamilton Project — the economic think tank founded by Robert Rubin (a big beneficiary of the shorting of the middle class) — argues, in the Project’s own words, “that the American tradition of expanding opportunity from one generation to the next is at risk because we are failing to make the necessary investments in human, physical, and environmental capital.”
Of course, it’s even worse than that. We are actually cutting back on our current investment in people (see the human cost of massive budget cuts in education, health care, and social services in state after state after state — all across America).
After reading the details of the SEC’s filing against Goldman Sachs, it’s hard not to come away thinking: “Why would anyone ever do business with that firm again?” Likewise, after even a cursory examination of the treatment of the American middle class by the Wall Street/Washington class over the past few decades, one should also wonder why anyone would ever do business with that crowd again. And yet, there they are, still running things at the Treasury, the Fed, and the National Economic Council.
The urgent need for the reorganization of our financial system goes far beyond the upcoming debate on new financial regulations. And it goes far beyond the media’s right versus left framing. It’s a question about the future of our country, and whether we are going to stop the slide toward a Third World system in which there are just two classes: those at the bottom and those at the top.
A lot of people at the top of the economic food chain have done very well shorting the middle class. But the losers in those bets weren’t Goldman Sachs investors — they were millions of hard working Americans who had heard the pitch and bought into the American Dream, only to find it had been replaced by a sophisticated scam.
Unfortunately, at this late stage of the Pax Americana, there are no good policy choices left.