William Greider: Creative Destruction on Wall Street

[marmar]

from The Nation:



Creative Destruction on Wall Street
By William Greider

September 15, 2008




The epic deflation of Wall Street rolls forward like a blood-spattered steam roller, claiming more important victims. It takes down noble old names like Merrill and Lehman Brothers, destroys the savings of large pension funds and mom-and-pop investors, throws tens of thousands of financial workers out of jobs.

But let's not dwell on the downside. This is the process Joseph A. Schumpeter famously described as "creative destruction"--capitalism's way of clearing away debris from the past so that new flowers may bloom. In this drama, what is being swept away is the monumental arrogance of celebrated financiers, also the fraudulent gimmicks that created lots of new billionaires by selling bad paper to the world's investors. A great bubble of wealth grew in the canyons of Wall Street--a run-up of falsified financial assets that lasted for roughly twenty-five years. Now the air is rushing out of that balloon, no way to stop it.

In the long run, the destruction of concentrated wealth and power is always good for democracy, liberating people from the heavy hand of the status quo. Unfortunately, many innocents are slaughtered in the process. As the US manufacturing economy was dismantled by downsizing and globalization, the learned ones (Alan Greenspan comes to mind) told everyone to breathe easy--ultimately this would be good for the workers and communities who lost the foundations of their prosperity. Now that "creative destruction" is visiting the bankers, we now observe they are not so accepting of their own fate.

The destruction of Wall Street's girth and power is unavoidable, in any case. To switch metaphors, Humpty Dumpty fell off the wall and not even the king's horses in Washington can put him back together again. It would have been far better if the federal government and national politics had recognized the great deceptions of Wall Street and put a stop to them before catastrophe unfolded. Since that didn't happen, we are all now doomed to take a perilous ride--the economy, the country, the world--and hope for the best. ......(more)

The complete piece is at: http://www.thenation.com/doc/20080929/greider

[whistle]

1. Could all of Wall Street end up being outsourced to China and India?

[napi21]

3. I doubt they'd want them either. n/t

[napi21]

2. It would be hard to describe it better than that. n/t

[Batgirl]

4. thanks for this link

"Last weekend's events come down to this: the authorities in Washington and Wall Street finally admitted what they persistently brushed aside during this year of turmoil and government bailouts. The Federal Reserve and Treasury treated the financial system's problem as "psychological" and assumed they could manipulate investor confidence by pumping lots of public money into the embattled financial firms and banks. Financial markets are gripped by desperate psychology--fearful people fleeing from the consequences of their own reckless behavior--but the core of this crisis is real and will not yield to happy talk from the authorities."

This quote from Greider's article made me want to look up the origins of the phrase, "reality-based community." It was in a piece by Ron Susskind (http://www.nytimes.com/2004/10/17/magazine/17BUSH.html) in which a white house aide is quoted:

"The aide said that guys like me were ''in what we call the reality-based community,'' which he defined as people who ''believe that solutions emerge from your judicious study of discernible reality.'' I nodded and murmured something about enlightenment principles and empiricism. He cut me off. ''That's not the way the world really works anymore,'' he continued. ''We're an empire now, and when we act, we create our own reality. And while you're studying that reality -- judiciously, as you will -- we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors . . . and you, all of you, will be left to just study what we do.''

Well, we've seen this notion play itself out over and over now, in the Iraq war, the Bush presidency itself, and on Wall Street. It's actually one of the signature rightwing beliefs: The ability to manipulate perception of reality is vastly more important than reality itself.

[Karenina]

5. K&R!

[Phoebe Loosinhouse]

6. Thanks! I particularly like that he specifically writes "fraudulent gimmicks"

without mincing words. Also, a "great bubble of wealth" "new billionaires" who were created by selling "bad paper".

These are all points I have been attempting to make:

1. This isn't just the normal swings of the market. This is the result of the concerted effort of some people to knowingly fleece shareholders and investors and pocket the proceeds before their scam collapsed.

2. REAL wealth transferred. Some people made out like bandits because they WERE bandits.

3. Fraud is criminal. There should be criminal as well as civil culpability for these con men. Just like Enron but bigger.

4. The little people (taxpayers) will be hurt the most as their 401Ks plummet and they will simultaneously be asked to float the big boys.

Thanks for posting! K&R

[malaise]

8. Many of the 'fraudulent' gimmicks were created in the

in the Economics and Business departments of Universities funded by the said criminals on Wall Street.
Humpty Dumpty is sure falling down.

The real question should be who is going to prison for this criminality.

[Phoebe Loosinhouse]

7. kick!

[Douglas Carpenter]

9. Excellent Article!!! Highly Recommended!!! EVERYONE SHOULD READ!!