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Sunday, June 23, 2013

Power And The Illusion Of Control




Science News

... from universities, journals, and other research organizations
 
 


Mar. 4, 2009 — 

Power holders often seem misguided in their actions. Leaders and commanders of warring nations regularly underestimate the costs in time, money, and human lives required for bringing home a victory. 

CEOs of Fortune 500 companies routinely overestimate their capacity to turn mergers and acquisitions into huge profits, leading to financial losses for themselves, their companies, and their stockholders. Even ordinary people seem to take on an air of invincibility after being promoted to a more powerful position. The consequences of these tendencies, especially when present in the world's most powerful leaders, can be devastating.

In a new study, Nathanael Fast and Deborah Gruenfeld at Stanford Graduate School of Business, Niro Sivanathan at the London Business School and Adam Galinsky at the Kellogg School of Management at Northwestern University, show that power can literally "go to one's head," causing individuals to think they have more personal control over outcomes than they, in fact, do.

"We conducted four experiments exploring the relationship between power and illusory control - the belief that one has the ability to influence outcomes that are largely determined by chance," said Galinksy, "In each experiment, whether the participant recalled power by an experience of holding power or it was manipulated by randomly assigning participants to Manager-Subordinate roles, it led to perceived control over outcomes that were beyond the reach of the individual. Furthermore, the notion of being able to control a 'chance' result led to unrealistic optimism and inflated self-esteem."

For example, in one experiment, power holders were presented with a pair of dice, offered a reward for predicting the outcome of a roll, and then asked if they would like to roll the dice or have someone else do it for them. Each and every participant in the high power group chose to roll the dice themselves compared to less than 70% of low power and neutral participants, supporting the notion that simply experiencing power can lead an individual to grossly overestimate their abilities, in this case, influencing the outcome of the roll by personally rolling the dice.

These results, reported in Psychological Science, a journal of the Association for Psychological Science, have implications for how power, once attained, is maintained or lost. The authors note that positive illusions can be adaptive, helping power holders make the seemingly impossible possible. But the relationship between power and illusory control might also contribute directly to losses in power, by causing leaders to make poor choices. They conclude that "the illusion of personal control might be one of the ways in which power often leads to its own demise."

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Journal Reference:
  1. Fast et al. Illusory Control: A Generative Force Behind Power's Far-Reaching Effects. Psychological Science, 2009; DOI: 10.1111/j.1467-9280.2009.02311.x

The Global Corporate Elite: Meet the Elite Business and Think-Tank Community That's Doing Its Best to Control the World



Occupy Wall Street  


The large foundations of America's industrial giants have played a truly profound – and largely overlooked – role in the shaping of modern society. 

 
 
Photo Credit: Shutterstock.com/Gabi Moisa

 
Read more at Occupy.com.

"The corporate-policy network is highly centralized, at both the level of individuals and that of organizations. Its inner circle is a tightly interwoven ensemble of politically active business leaders..." -- Academics William K. Carroll and Jean Philippe Sapinski


In an article titled "The Global Corporate Elite" in the journal International Sociology, William K. Carroll and Jean Philippe Sapinski examined the relationship between the corporate elite and the emergence of a “transnational policy-planning network,” beginning with its formation in the decades following World War II and speeding up in the 1970s with the creation of “global policy groups” and think tanks such as the World Economic Forum, in 1971, and the Trilateral Commission, in 1973, among many others.

The function of such institutions was to help mobilize and integrate the corporate elite beyond national borders, constructing a politically “organized minority.” These policy-planning organizations came to exist as “venues for discussion, strategic planning, discourse production and consensus formation on specific issues,” as well as “places where responses to crises of legitimacy are crafted,” such as managing economic, political, or environmental crises where elite interests might be threatened. These groups also often acted as “advocates for specific projects of integration, often on a regional basis.” Perhaps most importantly, the organizations “provide bridges connecting business elites to political actors (heads of states, politicians, high-ranking public servants) and elites and organic intellectuals in other fields (international organizations, military, media, academia).”

One important industry association, according to researchers Carroll and Carson in the journal Global Networks (Vol. 3, No. 1, 2003), is the International Chamber of Commerce. Launched by investment bankers in 1919, immediately following WWI, the Paris-based Chamber groups roughly 7,000 member corporations together across 130 countries, adhering to largely conservative, “free market” ideology. The “primary function” of the ICC, write Carroll and Carson, “is to institutionalize an international business perspective by providing a forum where capitalists and related professionals... can assemble and forge a common international policy framework.”

Another policy group with outsized global influence is the Bilderberg group, founded between 1952 and 1954, which provided “a context for more comprehensive international capitalist coordination and planning.” Bringing together roughly 130 elites from Western Europe and North America at annual closed meetings, “Bilderberg conferences have furnished a confidential platform for corporate, political, intellectual, military and even trade-union elites from the North Atlantic heartland to reach mutual understanding.”

As Valerie Aubourg examined in an article for the journal Intelligence and National Security (Vol. 18, No. 2, 2003), the Bilderberg meetings were organized largely at the initiative of a handful of European elites, with heavy financial backing from select American institutions including the Rockefeller Foundation, the Ford Foundation and the CIA. The meetings incorporate leadership from the most prominent national think tanks, such as the Council on Foreign Relations, Brookings Institution, Carnegie Endowment and others from across the North Atlantic ‘community.’

Hugh Wilford, writing in the journal Diplomacy & Statecraft (Vol. 14, No. 3, 2003), identified major philanthropic foundations such as the Rockefeller, Ford, and Carnegie foundations as not only major sources of funding but also providers for much of the leadership of the Bilderberg meetings, which saw the participation of major industrial and financial firms in line with those foundations (David Rockefeller of Chase Manhattan is a good example). Bilderberg was a major force in helping to create the political, economic and strategic consensus behind constructing a common European market.

With the support of these major foundations and their leadership, the Bilderberg meetings became a powerful global tool of the elites, not only in creating the European Union but in designing the process of globalization itself. Will Hutton, a former Bilderberg member, once referred to the group as “the high priests of globalization,” and a former Bilderberg steering committee member, Denis Healey,once noted: “To say we were striving for a one-world government is exaggerated, but not wholly unfair...we felt that a single community throughout the world would be a good thing.”

The large industrial foundations have played a truly profound – and largely overlooked – role in the shaping of modern society. The ‘Robber Baron’ industrial fortunes of the late 19th century – those of Morgan, Rockefeller, Carnegie, Harriman, Vanderbilt, etc. – sought to shape a new order in which they would maintain a dominant influence throughout society. They founded major American universities (often named after themselves) such as Vanderbilt, or the University of Chicago which was founded by John D. Rockefeller.

It was through their institutions that they sought to produce new elites to manage a new society, atop of which they sat. These universities became the harbingers of modern social sciences, seeking to "reform" society to fit the needs of those who dominated it; to engage in social engineering with the purpose of social control. It was in this context that the Carnegie Corporation, the Rockefeller Foundation, and later the Ford Foundation and others were founded: as engines of social engineering. One of their principal aims was to shape the development of the social sciences – and their exportation around the world to other industrial and imperial powers like Great Britain, and beyond. The social sciences were to facilitate the “scientific management” of society, and the foundations were the patrons of "social control."

The Rockefeller, Carnegie and Ford foundations were instrumental in providing funding, organization and personnel for the development of major American and international think tanks such as the Council on Foreign Relations, which became essential to the emergence of a dominant and entrenched U.S. business class linking academia, political, strategic, corporate and financial elites. The Rockefeller and Ford foundations in particular constructed the field of modern political science and "Area Studies" with a view to educating a class of people who would be prepared to help manage a global empire.

They were also prominent in developing the educational system for black Americans designed to keep them relegated to labor and “vocational” training. They helped found many prominent universities in Africa, Asia and Latin America to train indigenous elites with a "Western" education in the social sciences, to ensure continuity between a domestic and international elite, between core and periphery, empire and protectorate.

Another major policy planning group is the Trilateral Commission, created out of the Bilderberg meetings as a separate transnational think tank and founded by Chase Manhattan CEO (and Chairman of the Council on Foreign Relations) David Rockefeller along with academic-turned-policymaker Zbigniew Brzezinski in 1973. The Trilateral Commission linked the elites from Western Europe, North America and Japan (hence “trilateral”), and it now also includes members from China, India and a range of other Pacific-East Asian countries.

Consisting of a membership of roughly 350 individuals from finance, corporations, media, think tanks, foundations, academia and political circles, the Trilateral Commission (TC) has been immensely influential as a forum facilitating the development and integration of a "transnational elite." The aim of the TC was “to foster closer cooperation among these core industrialized areas of the world with shared leadership responsibilities in the wider international system.”

The most famous report issued by the Trilateral Commission in the mid-1970s suggested that due to the popular activism of the 1960s, there was a “crisis of democracy” that it defined as an “excess of democracy,” which needed to be reduced in order for “democracy to function effectively.” According to the Trilateral Commission, what was needed was increased “apathy and noninvolvement on the part of some individuals and groups” to counter the “crisis” being caused by “a highly educated, mobilized, and participant society.”

Moving elsewhere, the World Economic Forum, founded in 1971, convenes annually in Davos, Switzerland and was originally designed “to secure the patronage of the Commission of European Communities, as well as the encouragement of Europe’s industry associations” and “to discuss European strategy in an international marketplace.” The WEF has since expanded its membership and mandate, as Carroll and Carson noted, “organized around a highly elite core of transnational capitalists (the 'Foundation Membership') – which it currently limits to '1000 of the foremost global enterprises’.” The meetings include prominent individuals from the scientific community, academics, the media, NGOs and many other policy groups.

Another major policy planning group emerged in the mid-1990s with an increased focus on environmental issues, called the World Business Council for Sustainable Development (WBCSD), which “instantly became the pre-eminent business voice on the environment” with a 1997 membership of 123 top corporate executives, tasked with bringing the “voice” of big business to the process of international efforts to address environmental concerns (and thus, to secure their own interests).

Among other prominent think tanks and policy-planning boards helping to facilitate and integrate a transnational network of elites are many nation-based organizations, particularly in the United States, such as with the Council on Foreign Relations, the Brookings Institution and the Center for Strategic and International Studies (CSIS), among many others. The advisory boards to these organizations provide an important forum through which transnational elites may help to influence the policies of many separate nations, and most importantly, the world’s most powerful nation: the United States.
The Council on Foreign Relations, founded in 1921, refers to itself as “an independent, nonpartisan membership organization, think tank, and publisher,” with roughly 4,700 members. It is largely based in New York with affiliate offices in Washington D.C. and elsewhere. The CFR is, and has been, at the heart of the American foreign policy establishment, bringing together elites from academia, government, the media, intelligence, military, financial and corporate institutions.

The CFR worked in close cooperation with the U.S. government during World War II to design the post-War world over which America would reign supreme. The Council was active in establishing the “Grand Areas” of the American Empire, and in maintaining extensive influence over the foreign policy of the United States.

As Carroll and Carson noted, there is a prominent relationship between those individuals who sit on multiple corporate boards and those who sit on the boards of prominent national and transnational policy-planning groups, “suggesting a highly centralized corporate-policy network.”

Studying 622 corporate directors and 302 organizations (five of which were the major policy-planning groups: ICC, Bilderberg, Trilateral Commission, World Economic Forum and World Business Council for Sustainable Development), Carroll and Carson assessed this network of transnational elites with data leading up to 1996, and concluded: “The international network is primarily a configuration of national corporate networks, integrated for the most part through the affiliations of a few dozen individuals who either hold transnational corporate directorships or serve on two or more policy boards.”

Out of the sample of 622 individuals, they found roughly 105 individuals (94 “transnational corporate linkers” and 11 others “whose corporate affiliations are not transnational but who sit on multiple global policy boards”) making up “the most immediate structural contributions to transnational class formation.” At the “core” of this network were 17 corporate directors, primarily European and North American, largely linked by the transnational policy groups, with the Trilateral Commission as “the most centrally positioned.” This network, they noted, “is highly centralized in terms of the individuals and organizations that participate in it.”

In undertaking a follow-up study of data between 1996 and 2006, published in the journal International Sociology (Vol. 25, No. 4, 2010), Carroll and Sapinski expanded the number of policy-planning groups from five to 11, including the original five (ICC, Bilderberg, TC, WEF, and WBCSD), but adding to them the Council on Foreign Relations (through its International Advisory Board), the UN Global Compact (through its advisory board), the European Round Table of Industrialists (ERT), founded in 1983, the EU-Japan Business Round Table, the Transatlantic Business Dialogue, and the North American Competitiveness Council.

The results of their research found that among the corporate directors, “policy-board membership has shifted towards the transnationalists, who come to comprise a larger segment of the global corporate elite,” and that there was a growing group of elites “made up of individuals with one or more transnational policy-board affiliations.” As Carroll and Sapinski concluded:
"The corporate-policy network is highly centralized, at both the level of individuals and that of organizations. Its inner circle is a tightly interwoven ensemble of politically active business leaders; its organizational core includes the Trilateral Commission, the Bilderberg Conference, the European Round Table of Industrialists and the World Business Council for Sustainable Development, surrounded by other policy boards and by the directorates of leading industrial corporations and financial institutions based in capitalism’s core regions."

Organizations like the European Round Table of Industrialists (ERT) are not think tanks, but rather, industry organizations (exclusively representing the interests and individuals of major corporations), wielding significant influence over political and social elites. As Bastiaan van Apeldoorn wrote in the journal New Political Economy (Vol. 5, No. 2, 2000), the ERT “developed into an elite platform for an emergent European transnational capitalist class from which it can formulate a common strategy and – on the basis of that strategy – seek to shape European socioeconomic governance through its privileged access to the European institutions.”

In 1983, the ERT was formed as an organization of 17 major European industrialists (which has since expanded to several dozen members), with the proclaimed objective being “to revitalize European industry and make it competitive again, and to speed up the process of unification of the European common market.” Wisse Dekker, former Chairman of the ERT, once stated: “I would consider the Round Table to be more than a lobby group as it helps to shape policies. The Round Table’s relationship with Brussels [the EU] is one of strong co-operation. It is a dialogue which often begins at a very early stage in the development of policies and directives.”

The ERT was a central institution in the re-launching of European integration from the 1980s onward, and as former European Commissioner (and former ERT member) Peter Sutherland stated, “one can argue that the whole completion of the internal market project was initiated not by governments but by the Round Table, and by members of it... And I think it played a fairly consistent role subsequently in dialoguing with the Commission on practical steps to implement market liberalization.” Sutherland also explained that the ERT and its members “have to be at the highest levels of companies and virtually all of them have unimpeded access to government leaders because of the position of their companies... So, by definition, each member of the ERT has access at the highest level to government.”

Other notable industry associations include the Canadian Council of Chief Executives (CCCE), formerly called the Business Council on National Issues (BCNI), a group comprised of Canada’s top 150 CEOs who were a major force for the promotion and implementation of the North American Free Trade Agreement (NAFTA). The CCCE remains one of the most influential “interest groups” in Canada.

In the United States there are prominent industry associations like the Business Council, the Business Roundtable, and the Financial Services Forum. The Business Council describes itself as “a voluntary association of business leaders whose members meet several times a year for the free exchange of ideas both among themselves and with thought leaders from many sectors.”
Likewise, the Business Roundtable describes itself as “an association of chief executive officers of leading U.S. companies with more than $7.3 trillion in annual revenues,” which believes that “businesses should play an active and effective role in the formation of public policy.”

Finally, the Financial Services Forum proclaims itself to be “a non-partisan financial and economic policy organization” which aims “to pursue policies that encourage savings and investment, promote an open and competitive global marketplace, and ensure the opportunity of people everywhere to participate fully and productively in the 21st-century global economy.”


Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada. He is project manager of The People’s Book Project, and he hosts a weekly podcast, “Empire, Power, and People,” on BoilingFrogsPost.com.

Sunday, May 19, 2013

The Real Scandal: The IRS Will Continue to Favor the Rich with More Public Support




For all the outcry about targeting by ideology, IRS has for years unfairly favored a different group: the rich.

Crowdfunding, a practice which allows startup firms to raise money from small investors over the Internet, picked up steam in 2012 with some $2.7 billion invested, a study showed Monday.



For all the talk of scandal regarding the IRS targeting groups named “Tea Party” or “Patriot,” it’s not hard to draw an additional lesson from the facts of the case — a pattern that follows the well-worn model of the modern political age: Benefits flow to the rich and the well-connected, with pain for the rest.

The Cincinnati incident, which has already cost the job of Acting IRS CommissionerSteven Miller (who was not the commissioner when the scandal occurred – this would be like the State Department reacting to the tragedy at the Libyan consulate by firing a low-level bureaucrat coincidentally named Ben Ghazi), is definitely scandalous in its own right. As the Treasury Inspector General report details, it’s completely inappropriate for the IRS to burden any subset with invasive information requests based merely on keywords or policy positions.

But let’s consider how this played out. The New York Times’ Nick Confessore reported this week that the groups applying for tax-exempt 501(c)(4) status and singled out for inspection were primarily small, local conservative (and a few liberal) organizations, who barely spent any money on elections. Meanwhile, groups like Karl Rove’s Crossroads GPS and the liberal Obama-supporting Priorities USA, who did the lion’s share of campaign spending among these types of organizations, not only faced no such examination, but survived multiple efforts by campaign finance reform advocates to get the IRS to revoke their tax-exempt status because of their voluminous political activities.

Why would this be the case? First of all, a 501(c)(4) group need not apply with the IRS to prove its tax-exempt status; it can simply self-declare, avoiding an initial review process. The IRS encourages groups to file applications, but those with the resources to hire a smart tax lawyer know they aren’t required to go through the trouble. Needless to say, most local Tea Party groups didn’t have that kind of professional expertise. So generally speaking, the small fish revealed themselves to the IRS initially, and since Congress requires reviews of every application for tax-exempt status, these groups become the low-hanging fruit, prone to investigation.

Furthermore, Tea Party groups did themselves no favors by filling out the applications in an amateurish manner, according to Pulitzer Prize-winning former reporter for the New York Times and columnist at TaxAnalysts.com David Cay Johnston. “It’s like applying for a mortgage,” Johnston told Salon. “If you write it out wrong, you’re going to get flagged. And there are examples of these groups saying they’re not political and then saying their goal is to influence legislation.”

Crossroads GPS apparently did file an application for tax-exempt status, but it had very smart tax form preparers who knew how to exploit the ambiguites in the 501(c)(4) statute. The tax code says these groups must “exclusively” engage in the vague-sounding “social welfare activity,” which suggests a ban on political spending. But the IRS subsequently interpreted this to mean that groups fall within the rule as long as they don’t “primarily engage” in political activities.
Since the Citizens United ruling, which heralded the growth of the 501(c)(4) sector because corporations could donate to these tax-exempt groups without disclosing their donations, savvier groups have simply worked to stay a hair under 50 percent with their campaign spending, putting them in the clear. David Cay Johnston cited this as a major problem with how the IRS defines social welfare organizations. He said, “Is there any married person in America who doesn’t understand exclusivity? 49.9 percent is not exclusive.”

It’s pretty simple, then, to figure out what took place. The IRS, faced with the enormous task of dealing with a surge of 501(c)(4) groups taking advantage of an often contradictory law, performed triage by taking the path of least resistance – going after the most obvious targets, who didn’t have the resources to artfully stay within the tax laws, or to fight back against invasive reviews. They shied away from the heavily lawyered-up big-money groups, and instead focused on battles they thought they could win.

This has precedent within other parts of the IRS. According to data from the Transactional Records Access Clearinghouse at Syracuse University, IRS audits of the largest and richest corporations have steadily declined since 2005, down 22 percent in the ensuing four years and even more from 2011-2013. In the same period, the agency accelerated its scrutiny of small and midsize corporations. Since 2000, the IRS has been more likely to audit the working poor, individuals and families making under $25,000 a year, than those making over $100,000 annually. The middle class received disproportionately more auditsthroughout the past decade as well. An IRS unit formed in 2009 called the Global High Wealth Industry Group, designed to give special attention to tax compliance of high-wealth individuals, performed exactly two audits in 2010 and 11 in 2011.

Salon asked David Cay Johnston, author of many of the above-linked reports, whether it was fair to assess the IRS fixing its attention on more vulnerable populations as a pattern. “We know broadly that when government takes enforcement actions, it tends to go after the little guy,” he replied. Johnston gave the example of so-called financial fraud prosecutions that target penny-ante operators instead of the largest Wall Street institutions. And just as the Justice Department tends to avoid suspects with more clever lawyers, the IRS could shy away from more fearsome individuals and groups as well.

There is one alternative explanation. Johnston explained that the IRS budget has shrunk 17 percent since 2002. And yet Congress has loaded on the agency more responsibilities, between the Affordable Care Act, orders to deal with offshore accounts, and other matters. This has only grown worse with the indiscriminate 5 percent sequestration cuts. “There’s no way they can do all these things they’ve been asked to do,” Johnston said. “Imagine if the head of Nordstrom announced in November that they would eliminate half the store clerks right before Christmas shopping season. Everyone would say that’s bad. But that’s what Congress did to the IRS.” And this is true of the nonprofit division in particular.

Visit any office location in America where fewer employees have to produce more work, and what do you see happen? They take shortcuts, as the only way to keep up with the workflow. That’s precisely what we saw with the so-called rogue agents using “Tea Party” or “patriot” as keywords to trigger additional scrutiny. The IRS routinely lumps organizations by category, for the purposes of equal treatment but also to save time. In other divisions of the agency, claiming a particular deduction will often trigger an audit. These heuristics reveal an agency that has to get by on the cheap, using crude automation to get their jobs done. And not only did it backfire in this case, it predictably swept up the less savvy, more resource-starved organizations.

There’s a certain poetry to all this. Congress knows full well that defunding the IRS will lead to these outcomes, and that gives a definable benefit to the rich and powerful, who know how to slip through the cracks of the tax code. “For a big corporation wanting to play fast and loose, this is manna from heaven,” David Cay Johnston said. “They’re the ones this is helping: the political donor class. It’s a subtle way of taking care of your friends.”

In remarks yesterday, President Obama stated that “we have to make sure the laws are clear, so we can have confidence that they are enforced in a fair and impartial way.” Yet like so much in America, this fairness and impartiality rarely crosses class lines. An underfunded IRS means a direct cash subsidy for the top 1 percent. It’s a peculiar Occupy Wall Street-style byproduct of a scandal that’s supposed to be about the Tea Party.

David Dayen is a writer for FDL News Desk, at Firedoglake.com.

Friday, May 3, 2013

3 Troubling Things To Know About Billionaire Penny Pritzker

IN THESE TIMES

WITH LIBERTY AND JUSTICE FOR ALL...





On May 2, 2013, in the White House Rose Garden, U.S. President Barack Obama announces his nominee for Secretary of Commerce, Hyatt hotel heir Penny Pritzker. (SAUL LOEB/AFP/Getty Images)

3 Troubling Things To Know About Billionaire Penny Pritzker

Obama’s Commerce Secretary choice raises serious questions.

'Penny Pritzker has still not answered for her and her family’s role in the subprime mortgage meltdown of the world-wide economy,' says bank-advisor-turned-banking-watchdog Tim Anderson.

BY David Moberg

Despite her business-friendly history, billionaire heir Penny Pritzker, President Obama’s nominee for Secretary of Commerce, will likely face standard Republican flak in her Senate confirmation hearings.

But progressive Democrats are the ones with real reasons to be upset with her record and that of her family, which is among the wealthiest in America. Here are just a few:

1) Union-busting. Pritzker’s family businesses have often engaged in anti-union practices. She is a director of the Hyatt Hotels, which fired and then replaced long-time room cleaners in its Boston hotels with non-union subcontracted workers. Hyatt has refused to settle several contract disputes with UNITE HERE, some lasting nearly four years, on terms similar to those accepted by other big hoteliers.

2) Conflicts of interest. The family’s $20 billion empire was built on a diverse base of businesses, including Hyatt, Marmon (an industrial conglomerate), the TransUnion credit rating agency, and many others in industries such as container leasing, insurance and travel.

The family has long had a reputation for not only accumulating its wealth through elaborate schemes of tax evasion, including offshore accounts, but also for using its political clout to win favored treatment.

For example, community and teacher union critics berated Pritzker, who recently resigned from the Chicago Board of Education, for supporting the closing of dozens of public schools because of financial pressures. At the same time, the highly profitable Hyatt was receiving financial assistance from a Tax Increment Finance fund (a pool of money intended to support blighted neighborhoods in the city) whose assets effectively had been diverted from support of the schools.  Pritzker also has drawn fire for her leading role in promoting privately operated charter schools, including networks of non-profits to which she has contributed.

While some Pritzkers support Republicans, others, like Penny, are active patrons of corporate-oriented Democrats. Penny Pritzker, who knew Obama before he ran for president, served as financial chair of his first campaign and is credited with bringing in millions of dollars in donations. Many observers see her appointment to the relatively weak—if symbolically still important—commerce post as typical campaign spoils for big contributors.

But if she is approved, it will burnish her reputation and increase her potential influence. The Pritzkers, who have contributed large sums to education, medicine, architecture and the arts in their hometown of Chicago and elsewhere, gain protection from the fallout of their questionable business practices through their public image as philanthropists.

3) Shady business dealings. The Pritzkers have a long history of business malfeasance at the expense of people of modest means. In one notable case, Congress passed legislation in 2003 to address issues raised by widespread charges that the Pritzker’s credit rating agency, TransUnion, had made serious flaws in its credit reports on individuals—and then failed to correct them upon discovery.

But perhaps the most infamous and pernicious Pritzker abuse of power was the Superior Bank scandal, a predatory subprime mortgage securitization racket that led to the failure of Superior Bank in 2001 and prefigured the 2008 crash.

 Penny Pritzker played a leading, decision-making role in the lead-up to the failure, which ultimately lost 1,400 depositors an estimated $10 million and cost the Federal Deposit Insurance Corporation approximately half a billion dollars. After the Pritzkers and a family friend took over a failed suburban Chicago bank on very favorable terms in 1988, they began aggressively pursuing high-interest, high-risk subprime loans. They were able to repackage the loans in securities given an investment grade, Anderson says, because they promised to replace any failed mortgage with a good one. But as they pumped out profits for themselves, they eventually failed to live up to their promises, including a pledge to invest more capital.

Bert Ely, a prominent bank consultant, says that Superior Bank “was a really sleazy operation” and “pretty gross.” The bank essentially told others in the business to “bring us your crappiest loans you’ve got and we’ll securitize them.”
In 2001, the bank collapsed. But thanks to an unusual deal with the FDIC that allowed the Pritzkers to share in a lawsuit against the bank’s auditors, Penny and her family ultimately profited from the failure. They “didn’t own up to their responsibility,” says Ely. “My estimate is that the owners of Superior ended up making big money on the deal after taking into account tax laws, and it’s unconscionable that they made money while pensioners lost money.”

When FDIC took over, the Pritzkers continued the operation, giving it an air of legitimacy and setting up the global economy for disaster. Superior’s exploitation of securitization of sub-prime loans, coupled with federal regulators’ lax treatment of the Pritzkers, inspired other lenders, helping to spawn the huge subprime loan market in exotic derivatives that precipitated the 2008 Great Recession. “They plowed the ground,” says former Federal Reserve staffer Walker Todd. “They were the first to show how bankers could make money in the sub-prime business.”

“Penny Pritzker has still not answered for her and her family’s role in the subprime mortgage meltdown of the world-wide economy,” says bank-advisor-turned-banking-watchdog Tim Anderson.

Why it matters

The power of the Commerce Secretary is limited, with many doing little more than promoting American business. But when a Democratic president chooses a business ambassador who has played so loose with the rules, caused so much harm, and shown—despite the philanthropic overlay—so much selfishness and greed in her business practices, it sends the wrong message to an already out-of-control plutocracy.

Is this the model for American business that President Obama and the Democrats really want to promote?
David Moberg, a senior editor of In These Times, has been on the staff of the magazine since it began publishing in 1976. Before joining In These Times, he completed his work for a Ph.D. in anthropology at the University of Chicago and worked for Newsweek. He has received fellowships from the John D. and Catherine T. MacArthur Foundation and the Nation Institute for research on the new global economy. He can be reached at davidmoberg@inthesetimes.com.
More information about David Moberg

Wednesday, March 27, 2013

6 Ways the 7th Richest Man in America Has Screwed the Poor






Mayor Michael Bloomberg leaves behind one of the biggest wealth gaps in the country.

 
Photo Credit: AFP
 
The following piece is part of AlterNet's series on poverty, Hard Times, USA. 
Earlier this month, Mayor Michael Bloomberg perfectly described a day in the life of your average homeless New Yorker. “You can arrive in your private jet at Kennedy Airport, take a private limousine and go straight to the shelter system and walk in the door and we've got to give you shelter," he said on his radio show, addressing the record rate of homelessness in the city.

50,000 people, including 21,000 children, are currently crowded into the city's emergency shelters, a 61 percent rise from when the Mayor took office, according to the Coalition for the Homeless. 

Last month, the Mayor had assured reporters that "Nobody's sleeping on the streets," a claim easily refuted by a look at the city's homelessness statistics and/or going outside in New York. As it turns out, the Department of Homeless Services (DHS) had recently suspended a program making it easier for homeless families to get into shelters when the temperature dips below freezing. The DHS did not share this information widely; it came to light after a New York Daily News report highlighted the case of 23 year-old Junior Clarke, who told the News that he, his wife, and 4 year-old daughter were turned away from the city's intake center on a freezing day. When they refused to leave, staff threatened to call the police.

“They tried to make us leave and we refused,” Clarke told the Daily News.  “You know some people leave, walk away and go sleep on the train with their families.”

As the 7th richest man in America finishes his final term in office, he leaves behind one of the biggest wealth gaps in the country:  income inequality in Manhattan is the second worst in the US, according to the New York Times. New York's poverty rate has risen to the highest level in a decade, the Times also noted. 1 in 3 New York kids live below the poverty line. In parts of the Bronx, two thirds of residents live in areas of extreme poverty.

At the start of his second term, the Mayor raised the hopes of advocates for the poor by expanding the definition of poverty to account for the high cost of living in the city. But as sociologist Francis Fox Piven told the Gotham Gazette, "If we thought a new measure would mean more generous policies, we were wrong."
In fact, many Mayoral actions have significantly worsened the lives of the poor. Here's a look at some of his greatest hits.

1. Booting Homeless Families from Priority Access to Housing Aid

At the start of his second term, the Mayor promised to reduce the rate of individual and family homelessness in the city by two-thirds in 5 years. Today, there are as many homeless New Yorkers as during the height of the Great Depression, according to the Coalition for the Homeless. The Mayor blames the recession and, strangely, the Coalition for the Homeless itself, but homelessness advocates point to a series of ill-advised policy decisions that separated homeless families from the government aid that had kept many of them housed.
In 2005, the administration cut homeless families' priority access to Section 8 federal housing aid. In its place, DHS came up with Housing Stability Plus, a program designed to fire up homeless families' magic bootstrap powers by making aid temporary and contingent on work requirements. Families were only eligible if they were on Public Assistance but they also had to work, which counterproductively meant that if one parent got a full-time job they could lose their housing. A 2007 Coalition report found that families were being funneled into slumlord properties, where kids could build character by overcoming hardships like rat infestations and lead in the walls. The Advantage program, another impermanent rental subsidy that restricted rental help to 2 years, followed. Despite the administration's efforts, the rate of homelessness continued to climb as families ran out of Advantage subsidies without substantially improving their economic situation and had no choice but to return to shelter.

Half of the program's costs were paid by New York state. When Governor Cuomo cut off funds, the Bloomberg administration scrapped the whole thing, leaving the city with no permanent housing plan for the city's neediest families.

2. No Plan to Address Homelessness

That didn't go well! This week, a report by Coalition for the Homeless found that as of November, 2,818 former Advantage families had returned to a shelter.  A quarter of the families going into the city's shelters are former Advantage users, which explains, in part, why the rate of homelessness is high as during the 1930s.

The Mayor's current plan seems to consist of saying out-of-touch-rich-guy things (" ... it is a much more pleasurable experience than they ever had before," Bloomberg said when asked why homeless families were staying in shelters so long), and opening up emergency shelters. Spending on temporary shelter has jumped 30 percent since 2008, according to the Independent Budget Office. 
If the Mayor had his way though, the best strategy for lowering the cost of shelter is to let fewer people stay in them. At a press conference defending his large soda ban, the Mayor philosophized about the responsibility we have to take care of one another. Minutes later he warned that the city's policy of housing the homeless threatened to set off mass unrest.

"You're gonna see an uprising here," he said. "The public cannot afford to continue to do what we've been doing with homeless where everybody has a right to shelter, whether they need it or not. The public at some point is going to say to their elected officials: 'I don't want to pay anymore," he said.

Although the Department of Homeless services can deny families shelter -- only 35 percent of families that apply for shelter are accepted -- they don't have the same luck with homeless individuals because of various state and city laws that require the city to house any individual who asks for shelter.

Meanwhile, a plan by City Council members Christine Quinn and Annabel Palma to move homeless families into permanent housing instead of putting them in expensive emergency shelters is gathering dust. They suggest re-prioritizing shelter residents in the allocation of federal housing subsidies, and adding a rental assistance program similar to Advantage. So far, the administration seems intent to leave the problem to the next guy.

3. Crushing the Living Wage Laws

Contrary to nasty stereotypes, many people without permanent housing have jobs; they just don't earn enough to support life in one of the costliest American cities.

The campaign for a living wage in New York famously united clergy, antipoverty advocates, and unions. A large majority of City Council members stood behind the two bills. The widespread support was not surprising, since it's pretty hard to come up with a convincing opposition to the measures, which simply demanded that development projects that receive more than $1 million in taxpayer subsidies pay their workers a decent wage: 10 dollars an hour with health insurance, or $11.50 without.

Advocates pointed out that developers who underpaid their workers were being subsidized by taxpayers twice: once when they got the initial public money and again when their workers were forced to resort to food stamps, housing aid, and other social services in order to survive on their measly earnings. The city had already been more than kind to developers, with business tax subsidies growing by 180 percent in the past decade, according to the Fiscal Policy Institute. 
While the Mayor enthusiastically supported that government intrusion into the market, he deemed the living wage to be an unacceptable government overreach. The measures were "a throwback to the era when government viewed the private sector as a cash cow to be milked, rather than a garden to be cultivated," the Mayor mused poetically. But things were serious. "The last time we really had a big managed economy was the USSR and that didn't work out so well," he warned on his radio show. 

When the City Council overwhelmingly passed the legislation, the Mayor vetoed it. When the Council overrode his veto, the Mayor actually sued the City Council to prevent the measures from taking effect. In the meantime, Council member Christine Quinn got busy weakening the measure. In the end, the legislation applied to only 400 or 500 workers, reported the New York Times, allowing companies like Fresh Direct, which was about to receive a $100-million package of tax breaks for moving to the Bronx, to underpay their workers in peace.

4. Budget Cuts

At the start of his second term, the Mayor launched an anti-poverty initiative that consisted of a series of pilot programs, many of them privately funded. They included job training and teaching poor families how to save money. The administration also introduced conditional cash transfers, rewarding families that met goals like going to the doctor, school attendance for the kids or even getting a library card. The money could certainly make a short-term difference for families that participated but antipoverty advocates argued that the cash transfers and other programs were too small to address the root causes of poverty like high rates of unemployment, skyrocketing rents and low wages. (Cash transfer was abandoned when it showed little impact on the behavior of participants.) 

At the same time that the Mayor was introducing and then giving up on untested programs, the administration's proposed budget cuts ended up primarily impacting public services that helped the poor. An analysis by the Gotham Gazette found that programs aiding the city's poor and working class residents -- including those providing child care, health, education and homeless services "have lost a disproportionate number of workers -- 6 percent to more than 26 percent of their staffs." They point out that at the same time the police department "lost fewer than 3 percent of its uniformed officers, and the corrections department has actually increased its uniformed staffing by 2 percent."

Every year, like clockwork, the Mayor's proposed budget contains massive proposed cuts to programs that help poor kids and parents, like child care and after school programs. Between 2007 and 2011 more than 40,000 subsidized child services spots were canned, according to the Center for New York City Affairs. "This year, the slots face the guillotine once again, with a $60 million cut to afterschool programs in Mayor Bloomberg’s proposed budget, and another $77 million to child care services," writes Abigail Kramer Child Welfare Watch.

5. Affordable Housing for Rich People

One area the administration has been willing to spend money is in building affordable housing in the city. The New Housing Marketplace Plan, a multi-billion dollar investment, is expected to produce up to 140,000 housing units (the initial goal was 165,000). Small snag: many will only be affordable for upper-income people. A new report prepared by the Association for Neighborhood and Housing Development found that two thirds of the new spaces cost too much for most neighborhood residents. In half of the districts surveyed, the majority of units are too expensive for residents that make the neighborhood's median income (the administration disputes their conclusions). "The typical Bronx household would have to make 1.5 times its income in order to be able to afford the majority of the affordable housing built in the Bronx," they write. As Eric Jaffe points out in Atlantic Cities, "In general terms, the affordable housing plan did create low-income housing, but it was upper-low-income housing."

For example, an "affordable housing" apartment built in Central Harlem costs $1,492, most likely to be rented by a relatively high income person. In contrast, the report points to another 3 bedroom apartment in the neighborhood, built in collaboration with a non-profit, which rents for $531.

The plan certainly isn't ideal for poor residents being priced out of their neighborhoods. As Alyssa Katz points out in the American Prospect, even if the housing units provided by the initiative served low-income people, they would not make up for the impact of gentrification. "New York is losing far more than it's building to deregulation and gentrification. According to the Community Service Society, every year nearly 60,000 apartments become too expensive for the poorest two-fifths of city residents to afford. "

While gentrification is often seen as being inevitable, it's strongly shaped by city policy, and the Bloomberg administration has been an especially ardent advocate of redevelopment. In the past decade the city has rezoned a record number of neighborhoods, which allows developers to come in and build expensive new apartments or fill a street with H&Ms and Old Navys.   While in many cases neighborhood change can be positive, advocates for lower-income people and protestors of gentrification say that despite big promises made at city meetings, development is rarely met with matching measures that ensure residents can stay in the neighborhood.

6. Stop and frisk

The NYPD's stop-and-frisk policy essentially makes it a crime to be a poor black or Latino person in New York (the policy is currently the target of a large class action lawsuit). The shocking stats have become familiar: 5 million stops in the last decade, close to 90% of them minorities. Only 1 in 1,000 stops yields a gun, undermining the Mayor's contention that the policy plays an essential role in keeping guns off the streets.  But as AlterNet's Kristen Gwynne has reported, stats somberly repeated by the New York Times mask the horrific on-the-ground experience of the department's violent policing: the cold numbers obscure what it's like to have a cop touch your penis while your girlfriend watches.

Gwynne has also documented how aggressive enforcement of so-called "quality of life laws" in poor neighborhoods  -- like riding your bike on the sidewalk  -- sucks kids into the criminal justice system:
A “Quality of life” summons for disorderly conduct may seem like no big deal, but young people in the South Bronx told me that misdemeanor summonses are so often handed to them that they “lose track” and miss a court date. Next thing they know, a stop-and-frisk turns up a warrant for arrest, and they are hauled down to the precinct. The $25 fine quickly turns into $100, stacking up to exorbitant fees for crimes prosecuted almost exclusively in low-income neighborhoods of color.
One can see how fining low-income people hundreds of dollars for riding their bikes on the sidewalk doesn't ease their path out of poverty. Also, probably pulling yourself up by your bootstraps is more complicated when going to school or work involves being yelled at, fondled, cited, or arrested by police.


Tana Ganeva is AlterNet's managing editor. Follow her on Twitter or email her at tana@alternet.org.

Saturday, March 9, 2013

Chomsky: Corporations and the Richest Americans Viscerally Oppose Common Good




Visions



The Masters of Mankind want us to become the "stupid nation," in the interests of their short-term gain -- damn the consequences. 

The following is Part I of the transcript of a recent speech delivered by Noam Chomsky in February. AlterNet will publish Part II on Sunday, March 10.

Whether public education contributes to the Common Good depends, of course, on what kind of education it is, to whom it is available, and what we take to be the Common Good. There’s no need to tarry on the fact that these are highly contested  matters, have been throughout history, and continue to be so today. 

One of the great achievements of American democracy has been the introduction of mass public education, from children to advanced research universities. And  in some respects that leadership position has been maintained. Unfortunately, not all. Public education is under serious attack, one component of the attack on any  rational and humane concept of the Common Good, sometimes in ways that are  not only shocking, but also spell disaster for the species. 

All of this falls within the  general assault on the population in the past generation, the so-called “neoliberal era.” I’ll return to these matters, of great significance and import. 

Sometimes the attacks on education and on the Common Good are very closely  linked. One current illustration is the “Environmental Literacy Improvement Act” that is being proposed to legislatures by ALEC, the American Legislative  Exchange Council, a corporate-funded lobby that designs legislation to serve the  needs of the corporate sector and extreme wealth. This act mandates “balanced”  teaching of climate science in K-12 classrooms.” 

“Balanced teaching” is a code  phrase that refers to teaching climate change denial, to “balance” authentic climate  science – what you read in science journals. It is analogous to the “balanced  teaching” advocated by creationists to enable the teaching of “creation science” in  public schools. Legislation based on ALEC models has already been introduced in  several states. 

The ALEC legislation is based on a project of the Heartland Institute, a corporate-funded Institute dedicated to rejection of the scientific consensus on the  climate. The Institute project calls for a “Global Warming Curriculum for K-12  Classrooms,” which aims to teach that there is “a major controversy over whether  or not humans are changing the weather.” Of course, all of this is dressed up in  rhetoric about teaching critical thinking, and so on. It is much like the current  assault on teaching children about evolution and science quite generally. 

There is indeed a controversy: on one side, the overwhelming majority of  scientists, all of the world’s major National Academies of Science, the professional  science journals, the IPCC (Intergovernmental Panel on Climate Change) : all agree that global warming is taking place, that there is a substantial human  component, and that the situation is serious and perhaps dire, and that very soon,  maybe within decades, the world might reach a tipping point where the process  will escalate sharply and will be irreversible, with very severe effects on the   possibility of decent human survival. 

It is rare to find such consensus on complex  scientific issues. 

True, it is not unanimous. Media reports commonly present a controversy between  the overwhelming scientific consensus on one side, and skeptics on the other, including some quite respected scientists who caution that much is unknown –  which means that things might not be as bad as thought or they might be worse:  only the first alternative is brought up. Omitted from the contrived debate is a  much larger group of skeptics: highly regarded climate scientists who regard the  regular reports of the IPCC as much too conservative: the Climate Change group  at my own university, MIT, for example. And they have repeatedly been proven  correct, unfortunately. But they are scarcely part of the public debate, though very  prominent in the scientific literature. 

The Heartland Institute and ALEC are part of a huge campaign by corporate  lobbies to try to sow doubt about the near-unanimous consensus of scientists that  human activities are having a major impact on global warming with truly ominous  implications. The campaign was openly announced, including the lobbying  organizations of the fossil fuel industry, the American Chamber of Commerce (the  main business lobby) and others. It has had an effect on public opinion, though  careful studies show that public opinion remains much closer to the scientific  consensus than policy is. That is undoubtedly why major sectors of the corporate  world are launching their attack on the educational system, to try to counter the  dangerous tendency of the public to pay attention to the conclusions of scientific  research.

You probably heard that at the Republican National Committee’s winter meeting a  few weeks ago, Gov. Bobby Jindal warned the leadership that “We must stop being the stupid party…We must stop insulting the intelligence of voters.” ALEC  and its corporate backers, in contrast, want the country to be "the stupid nation” –  which may encourage them to join the stupid party that Jindal warned about. 

The major science journals give a sense of how surreal all of this is. Take Science, the major US scientific weekly. A few weeks ago it had three news items side by side. One reported that 2012 was the hottest year on record in the US, continuing  a long trend. The second reported a new study by the US Global Climate Change  Research Program providing additional evidence for rapid climate change as the  result of human activities, and discussing likely severe impacts. The third reported  the new appointments to chair the committees on science policy chosen by the  House of Representatives, where a minority of voters elected a large majority of  Republicans thanks to the shredding of the political system. 

In Pennsylvania, for  example, a considerably majority voted for Democrats but they won just over one-third of House seats. All three of the new chairs deny that humans contribute to climate  change, two deny that it is even taken place, one is a longtime advocate for the  fossil fuel industry. The same issue of the journal has a technical article with new  evidence that the irreversible tipping point may be ominously close. 

For those whom Adam Smith called the "Masters of Mankind,” it is important  that we must become the stupid nation in the interests of their short-term gain,  damn the consequences. These are essential properties of contemporary market  fundamentalist doctrines. ALEC and its corporate sponsors understand the  importance of ensuring that public education train children to belong to the stupid  nation, and not be misled by science and rationality. 

This is far from the only case of sharp divergence between public opinion and  public policy. That tells us a lot about the current state of American democracy,  and what that means for us and the world. The corporate assault on education and  independent thought, of which this is only one striking illustration, tells us a good deal more. 

In climate policy, the US lags behind other countries. Quotes a current scientific  review: “109 countries have enacted some form of policy regarding renewable  power, and 118 countries have set targets for renewable energy. In contrast,  the United States has no adopted any consistent and stable set of policies at the  national level to foster the use of renewable energy” or adopted other means  that are being pursued by countries that do have national policies. Some things are being done in the US, but sporadically, and with no organized national  commitment. That’s no slight problem for us, and for the world, in the light of  the great predominance of American power – declining to be sure as power is  diversified internationally, but still unchallenged. 

There are other respects in which the concept of Common Good that has come  to dominate policy – but not opinion -- in the US is diverging from the affluent  developed societies of the OECD, and many others. A recent OECD study  shows that the US ranks 27th  out of 31 countries in measures of social justice,  barely above Mexico. It ranks 21st in inequality, poverty, life expectancy, infant  mortality, maternity leave, environmental performance, 18th  in mental health and  19th in welfare of children. Also ranks toward the bottom in high-school dropout  rates and poor student performance in math. 

Figures like these are signs of  very severe systemic disorders; particularly striking because the US is the richest country in the world, with incomparable advantages. 

Another crucial case is healthcare. US costs are about twice the per capita  costs of comparable countries, and outcomes are relatively poor. Studied by  economist Dean Baker reveal that the deficit that obsesses the financial sector and  Washington, but not the more realistic public, would be eliminated if we had health care systems similar to other developed societies, hardly a utopian idea. The US  healthcare system deviates from others in that it is largely privatized and lightly  regulated, and – not surprisingly – is highly inefficient and costly. There is an  exception in the US healthcare system: the Veterans Administration, a government  system, much less costly. 

Another partial exception is Medicare, a government-run system, hence with far lower administrative costs and other waste, but still  more costly than it should be because it has to work through the privatized system  and is trapped by the extraordinary political power of the pharmaceutical industry,  which prevents the government from negotiating drug prices so that they are far  higher than in other countries.  

Current policy ideas include proposals to increase age eligibility to cut costs:  actually it increases costs (along with penalizing mostly working people) by  shifting from a relatively efficient system to a highly inefficient privatized one. But  the costs are transferred to individuals and away from collective action through  taxes. And the concept of the Common Good that is being relentlessly driven into  our heads demands that we focus on our own private gain, and suppress normal  human emotions of solidarity, mutual support and concern for others. That I think  is also an important part of what lies behind the assault on public education and  on Social Security that has been waged by sectors of corporate wealth for years,  on pretexts of cost that cannot be sustained, and against strong public opposition.  

What lies behind these campaigns, I suspect, is that public education and Social S ecurity, like national healthcare, are based on the conception that we care for other people: we care that the disabled widow across town has food to eat, or  that the kids down the street have schooling ("why should I pay taxes for schools? I don’t have kids there"). And beyond that, that we care about the tens of millions are  dying every year because they cannot obtain medical care, or about dying infants,  and others who are vulnerable. 

These conflicts go far back in American history. It’s particularly useful to look  back to the origins of the industrial revolution, in the mid-19th century, when the  country was undergoing enormous social changes as the population was being  driven into the industrial system, which working people bitterly condemned,  because it deprived them of their basic rights as free men and women – not the least  women, the so-called factory girls, who were leaving the farms to the mills. 
It is worth reading the contributions in the press of the time by factory  girls, artisans from Boston, and others. It's also important to note that working- class culture of the time was alive and flourishing. There’s a great book about  the topic by Jonathan Rose, called The Intellectual Life of the British Working Class. It’s a monumental study of the reading habits of the working class of the  day. He contrasts “the passionate pursuit of knowledge by proletarian autodidacts”  with the “pervasive philistinism of the British aristocracy.” 

Pretty much the same  was true in the new working-class towns here, like eastern Massachusetts, where  an Irish blacksmith might hire a young boy to read the classics to him while he  was working. On the farms, the factory girls were reading the best contemporary  literature of the day, what we study as classics. They condemned the industrial  system for depriving them of their freedom and culture. 

This went on for a long  time. I am old enough to remember the atmosphere of the 1930s. A large part of  my family came from the unemployed working-class. Many had barely gone to  school. But they participated in the high culture of the day. They would discuss  the latest Shakespeare plays, concerts of the Budapest String Quartet, different  varieties of psychoanalysis and every conceivable political movement. There was also a very lively workers' education system with which leading scientists  and mathematicians were directly involved. A lot of this has been lost under the relentless assault of the Masters, but it can be recovered and it is not lost forever. 

The labor press of the early industrial revolution took strong positions on many  issues that should have a resonance today. They took for granted that, as they  put it, those who work in the mills should own them. They condemned wage  labor, which to them was akin to slavery, the only difference being that it was  supposedly temporary. 

This was such a popular view that it was even part of the  program of the Republican Party. It was also a main theme of the huge organized  labor movement that was taking shape, the Knights of Labor, which began to  establish links with the most important popular democratic party in the country’s  history, the Farmers Alliance, later called the Populist movement, which originated  with radical farmers in Texas and then spread through much of the country,  forming collective enterprises, banks and marketing cooperatives and much more,  movements that could have driven the country toward more authentic democracy  if they had not been destroyed, largely by violence – though, interestingly,  similar developments are underway today in the old Rust Belt and elsewhere, very  important for the future, I think. 

The prime target of condemnation in the labor press was what they called “The  New Spirit of the Age: Gain Wealth, Forgetting All But Self.” No efforts have  been spared since then to drive this spirit into people's heads. People must come  to believe that suffering and deprivation result from the failure of individuals, not  the reigning socioeconomic system. There are huge industries devoted to this  task. About one-sixth of the entire US economy is devoted to what's called "marketing,"  which is mostly propaganda. Advertising is described by analysts and the business  literature as a process of fabricating wants – a campaign to drive people to the  superficial things in life, like fashionable consumption, so that they will remain  passive and obedient. 

The schools are also a target. As I mentioned, public mass education was a major  achievement, in which the US was a pioneer. But it had complex characteristics,  rooted in the sharp class conflicts of the day. One goal was to induce farmers  to give up their independence and submit themselves to industrial discipline and  accept what they regarded as wage slavery. That did not pass without notice.  Ralph Waldo Emerson observed that political leaders of his day were calling for  popular education. He concluded that their motivation was fear. The country was  filling up with millions of voters and the Masters realized that one had to therefore  “educate them, to keep them from (our) throats.” 

In other words: educate them  the “right way” -- to be obediently passive and accept their fate as right and just,  conforming to the New Spirit of the Age. Keep their perspectives narrow, their  understanding limited, discourage free and independent thought, instill docility and  obedience to keep them from the Masters' throats. 

This common theme from 150 years ago is inhuman and savage. It also meets  with resistance. And there have been victories. There were many in the struggles  of the 1930s, carried further in the 1960s. But systems of power never walk  away politely. They prepare a new assault. This has in fact been happening since  the early 1970s, based on major changes in the design of the economic system.  

Two crucial changes were financialization, with a huge explosion of speculative  financial flows, and deindustrialization. Production didn't cease. It just began to  be offshored anywhere where you could get terrible working conditions and no  environmental constraints, with huge profits for the Masters. Within the US, that  set off a vicious cycle, leading to sharp concentration of wealth, which translates at  once to concentration of political power, increasingly in the financial sector. That  in turn leads to legislation that carries the vicious cycle forward, including sharp  tax reduction for the rich and deregulation, with repeated financial crises from  the ‘80s, each worse than the last. The current one is so far the worst of all. And  others are likely in what a director of the Bank of England calls a “doom loop.”  

There are solutions, but they do not fit the needs of the Masters, for whom the  crises are no problem. They are bailed out by the Nanny State. Today corporate  profits are breaking new records and the financial managers who created the  current crisis are enjoying huge bonuses.  Meanwhile, for the large majority, wages and income have practically stagnated in  the last 30-odd years. By today, it has reached the point that 400 individuals have more wealth than the bottom 180 million Americans. 

In parallel, the cost of elections has skyrocketed, driving both parties even deeper  into the pockets of those with the money, corporations and the super-rich. Political representatives become even more beholden to those who paid for their victories.  One consequence is that by now, the poorest 70% have literally no influence over  policy. As you move up the income/wealth ladder influence increases, and at the  very top, a tiny percent, the Masters get what they want. 

Copyright Noam Chomsky, 2013. All rights reserved. Permission to republish this text must be granted by the author. 

Noam Chomsky's latest book is Power Systems: Conversations on Global Democratic Uprisings and the New Challenges to U.S. Empire (Metropolitan Books 2013). He is a professor of linguistics and philosophy at MIT.