Politics and finance: an incestuous relationship
There was once a time when what was good for General Motors was as a matter of course good for the USA. Nowadays, what’s good for Wall Street is good for the USA, a country that now lives under the influence of a financial oligarchy. The powerful myth of the US as a “nation of shareholders” has lived on, because those who hold shares are no longer in any way representative of the American society of yesteryear where grandad would buy shares on the stock market for the family savings account.
In politically undeveloped societies, power is taken by violent means or by threats of violence. In emerging nations, it is transferred via corruption and money laundering. For our democracies, we are subjected more and more to the stranglehold of the banking and finance sector, like for example in the United States where it holds significant sway over electoral campaigns for which it is – by a long way – the biggest donor. In fact, despite the subprime crisis that laid bare the duplicity of a system that makes no hesitation in lying and manipulating the facts for its own gain, the American banking world today plays as big a role in the US economy as it did in the JP Morgan era. The great financial institutions of the US and the conviction of the leading elites, according to whom the free flow of capital is vital in protecting the nation’s power, both had a big part to play in the concentration of wealth in this industry and in the establishment of its major political might. This explains the incestuous relationship between Wall Street and Washington.
Isn’t it an extraordinary toing-and-froing that’s taking place before the eyes of a public that is relatively indifferent to such collusion? It involves people like Robert Rubin, former head of Goldman Sachs and who was United States Secretary of the Treasury before departing to become president of Citigroup. And his colleague Henry Paulson, former CEO of Goldman, before also being appointed Secretary of the Treasury. And then John Snow who had left Cerberus Capital Management upon being appointed, him too, as Secretary of the Treasury. Without forgetting of course the legendary head of the US Federal Reserve, Alan Greenspan, who took a well deserved retirement…as a special advisor to the world’s biggest bond group, Pimco. In truth, it’s a whole generation of legislators and politicians who have been fascinated with Wall Street and seduced economists, who are very easily transferred from their universities to central banks and hedge funds. It’s a small world where everyone shares the same views, creating an alliance that is profitable for everyone. Indeed, universities see increased revenue while Wall Street gains legitimacy. It is therefore understandable that no one flinched in the face of the collapse of Long Term Capital Management, known as LTCM, in 1998, which was to be a dress rehearsal for the subprime crisis of 2007. Didn’t LTCM, the biggest startup in the history of investment funds with its 100 billion dollars, boast the prestigious personnel of two Nobel prize winners for economics, Myron Scholes and Robert Merton? This inbreeding between the academic world and the banking world gave legitimacy and status to the world of finance, and thus allowed it implicitly to take all kinds of risks.
Could politics just be an outgrowth of finance then? Whatever the case may be, this proximity between the two worlds plays a central role in the creation of excesses, and therefore global crises. Officially stricken with Stockholm syndrome, politics has become enamoured with finance, that bit by bit has deprived it of the very essence of its powers. While it is true that collusion between public power and oligarchy is a constant that routinely leads to a hoarding of profits but a communal sharing of losses, our Western democratic nations seem to have taken the same route as the banana republics that strive to systematically defend and protect certain private interests via public powers.