"America the Banana Republic" - Christopher Hitchens in October of 2008

[Mira]

I am reading Christopher Hitchens' book "Arguably...Essays by Christopher Hitchens"
I was struck by this essay about our financial system which was published in October 2008 - at the time of the financial meltdown - and I was riveted by his observations recorded at that time.

Here are some excerpts:

politics
WEB EXCLUSIVE
October 9, 2008

Empire Falls
America the Banana Republic
The ongoing financial meltdown is just the latest example of a disturbing trend that, to this adoptive American, threatens to put the Land of the Free and Home of the Brave on a par with Zimbabwe, Venezuela, and Equatorial Guinea.

by Christopher Hitchens
In a statement on the huge state-sponsored salvage of private bankruptcy that was first proposed last September, a group of Republican lawmakers, employing one of the very rudest words in their party’s thesaurus, described the proposed rescue of the busted finance and discredited credit sectors as “socialistic.” There was a sort of half-truth to what they said. But they would have been very much nearer the mark—and rather more ironic and revealing at their own expense—if they had completed the sentence and described the actual situation as what it is: “socialism for the rich and free enterprise for the rest.”
I have heard arguments about whether it was Milton Friedman or Gore Vidal who first came up with this apt summary of a collusion between the overweening state and certain favored monopolistic concerns, whereby the profits can be privatized and the debts conveniently socialized, but another term for the same system would be “banana republic.”

What are the main principles of a banana republic? A very salient one might be that it has a paper currency which is an international laughingstock: a definition that would immediately qualify today’s United States of America. We may snicker at the thriller from Wasilla, who got her first passport only last year, yet millions of once well-traveled Americans are now forced to ask if they can afford even the simplest overseas trip when their folding money is apparently issued by the Boardwalk press of Atlantic City. But still, the chief principle of banana-ism is that of kleptocracy, whereby those in positions of influence use their time in office to maximize their own gains, always ensuring that any shortfall is made up by those unfortunates whose daily life involves earning money rather than making it. At all costs, therefore, the one principle that must not operate is the principle of accountability. In fact, if possible, even the similar-sounding term (deriving from the same root) of accountancy must be jettisoned as well. Just listen to Christopher Cox, chairman of the Securities and Exchange Commission, as he explained how the legal guardians of fair and honest play had made those principles go away. On September 26, he announced that “the last six months have made it abundantly clear that voluntary regulation does not work.”

snip

I was very struck, as the liquefaction of a fantasy-based system proceeded, to read an observation by Professor Jeffrey A. Sonnenfeld, of the Yale School of Management. Referring to those who had demanded—successfully—to be indemnified by the customers and clients whose trust they had betrayed, the professor phrased it like this:
These are people who want to be rewarded as if they were entrepreneurs. But they aren’t. They didn’t have anything at risk.

That’s almost exactly right, except that they did have something at risk. What they put at risk, though, was other people’s money and other people’s property. How very agreeable it must be to sit at a table in a casino where nobody seems to lose, and to play with a big stack of chips furnished to you by other people, and to have the further assurance that, if anything should ever chance to go wrong, you yourself are guaranteed by the tax dollars of those whose money you are throwing about in the first place! It’s enough to make a cat laugh. These members of the “business community” are indeed not buccaneering and risk-taking innovators. They are instead, to quote my old friend Nicholas von Hoffman about another era, those who were standing around with tubas in their arms on the day it began to rain money. And then, when the rain of gold stopped and the wind changed, they were the only ones who didn’t feel the blast. Daniel Mudd and Richard Syron, the former bosses of Fannie Mae and Freddie Mac, have departed with $9.43 million in retirement benefits. I append no comment.

link to the full essay:

http://www.vanityfair.com/politics/features/2008/10/hitchens200810.print

[FiveGoodMen]

1. "abundantly clear that voluntary regulation does not work"

There is no such thing as voluntary regulation.

Never was.

Never will be.

Anyone who tells you differently is a goddamned liar and is taking you for a fool.

Imagine football where there are no penalties for intentionally injuring another player (roughing the kicker, etc)

No rule, no penalty, just voluntary regulation.

In a short time, those teams with enough decency to follow the "voluntary regulations" wouldn't have enough players to start the game. All football would be dominated by those who treated it as a bloodsport.

It's inevitable.

Or take energy companies: Those who spend money to voluntarily protect the environment would be driven out by those that didn't.

There is no such thing as voluntary regulation.

Never was.

Never will be.

Anyone who tells you differently is a goddamned liar and is taking you for a fool.

[truedelphi]

2. Have you read the article on Gov Rick Perry and how they snookered the Texas public into

believing that the regulatory commissions they set up, using industry money, would actually protect people? It is in Rolling Stone this week.

And how industry people could pay the Governor a set amount and then have whatever they needed to have happen be allowed.

So the people of Texas now have this basically unregulated nuclear waste site that is more than likely already leaking radiation into a nearby Texas town, and also into Ogallala aquifer that offers up the drinking and irrigation water for seven states.

The article is proably available for a free read over at the Rolling Stone website.