When the Soviet Union and its state socialism collapsed, the promoters of capitalism kvelled. But ten years later, in the early Bush years, ENRON, a super giant corporation got caught cooking its books to disguise the real state of its operations. It defrauded its stockholders and bilked California taxpayers by planning for an energy shortage at peak times and then jacking up prices. In doing its hanky panky ENRON colluded with a major accounting firm, Arthur Anderson. WorldCom and Adelphia went through similar versions of this corporate hanky panky — pre-dating the later banking and insurance horrors.
The monster-sized companies stole billions. Some of the thieves went to prison. Until then, they had been role models for Republicans and even some Democrats. Business, not government, should run the economy became the mantra of the 1980s, 90s and first eight years of the 21st Century. Business did run the economy — right into the ground. The men — and a couple of women — who directed the scandalous companies came from a culture in which large-scale theft masqueraded as solid business practice. Bernie Madoff and his imitators were only extreme examples. Create a façade. That’s the premise from which grand corporate theft derives. Dress well (expensively), rent a high priced office and promise easy money. The public (suckers) will come like flies to honey.
When the house of cards collapses — the U.S. economy among many other economies — a few of the more obvious (super greedy) thieves get caught and even go to prison. The conservative bankers and Wall Street moguls turned out to be reckless radicals who played fast and loose with other people’s money. The rest of the country is paying a terrible price.
The scandals should teach us lessons at a time of economic — dare I say it? — depression. Driving through Oakland, California, one doesn’t have to explain how giant banks suckered poor people into buying home mortgages they couldn’t afford. I wonder if one added up the salaries, bonuses and stock options of the former masters of the universe together with the money they spent on vacations, parties, mistresses and yachts, and if we could somehow rematerialize it, could we then use it toward bringing some of the public and private buildings up to modern standards! Slums have reemerged along with the expression "poor people." Drive through Newark, New Jersey, Wilmington, Delaware, or Pontiac, Michigan — or dozens more cities throughout the country whose governments have not invested in their poor or in infrastructural repair for decades. Capitalism has failed — again!
It still warps the minds of public servants — excuse the word. Oakland’s mayor and city council now drool at the chance to build a new police station and a municipal building — not to repair schools or build clinics.
"What do they need new buildings for?" asked a long time Bay Area resident. "They can continue to do nothing in the lousy buildings they now occupy. And what the Hell does the government do with all the money it gets from all the taxes? They sure can’t spend it all on wars and boondoggles."
"Why don’t they rent the space just vacated by Toyota? [Alameda Toyota moved to larger quarters in Oakland and a month later went belly-up] They weren’t selling cars. The place is big enough to house a new police station and mayor and his impotent staff."
In Contra Costa County, home to about 1 million people, 40,000 families have applied "for just 350 affordable-housing vouchers." (Vivien Lou Chen, Bloomberg, Feb. 26)
People routinely line up to get free food in the cities of Antioch, Pittsburg and Oakley. But local churches don’t have enough to satisfy the growing numbers of needy. In Antioch, a Family Stress Center now occupies the place where a bank once thrived: a symbolic illustration of the state of the economy. In Watsonville, south of Santa Cruz, they would discover that many Mexicans have had to return home because they cannot find work.
California agencies can no longer accommodate the hordes of formerly middle class people who now need "social services." Those who had job-related medical coverage now seek help from the sparse public health services.
Page 1 of the March 1 New York Times focused on how people who lost well-paying executive jobs have taken menial labor jobs for $12 an hour. The casualties cascade and as they do under-funded government agencies, federal, state and local cannot cope with the stress — on their shrinking funds and personnel.
The once fabled free market brought boom to California’s Silicon Valley during which "developers" bought fertile farmland and converted it into tract homes for commuters to San Francisco and other high tech centers. Food shortages now loom throughout the world as once good soil got converted into single home foundations. Lots of people in the area got laid off, or saw their home values shrink; or lost them. State tax revenue dried up and social service budgets diminished at a time they were most needed.
A construction worker in San Bernardino County told me he hadn’t worked one day since November. He paved driveways (his specialty) for new homes. "I just took a job stocking shelves for $8.50 an hour [a cut of $41.50 an hour] because I needed some income. What the Hell!"
He told me that a four bedroom house he helped finish near Riverside had sold for $495,000 in 2006. "I saw the same place on sale for $90,000. I wonder if someone will buy it."
One of his relatives pays a little more that $200 a month on his mortgage, but a balloon payment due in May will drive payments up by more than $1,000. "He just got moved from full to part time and had some of his benefits stripped away. No way they can make their mortgage payment and still buy groceries."
A real estate agent who deals in Contra Costa property complained that home prices in one year have fallen almost 60%. According to MDA Dataquick in San Diego (a resource for business students studying real estate), between October and January 2009, more than 3,100 default notices were filed (first stage of foreclosure) there.
"Bank-owned home" signs in areas of California’s Central Valley have become as common as the Golden Arches. Malls, they will observe, have grown significantly less populated; except for grocery and pharmacy chains the other stores have few customers. TJ Maxx, Old Navy, See’s Candy and even Radio Shack look bereft of buyers.
What’s happening in California reflects the rest of the country as well. The Agriculture Department reported in November last year it had qualified more than 31 million people as eligible for food stamps — almost 15% higher than a year before.
By early February, some 5 million collected unemployment insurance checks. The official jobless rate in Contra Costa County, 9.3 percent, was higher than the U.S. 7.6 percent. But worse is coming. In the Bay Area, like much of the country, employers have cut jobs, reduced work from full to part time or furloughed staff.
What happens to people when they lose jobs and receive foreclosure notices? They apply for employment insurance and get stressed. Some lose their cars, which limits their chances of finding jobs. Family tensions increase — divorce, separation and worse. This analysis of system breakdown should become part of "business ethics" classes.
The behavior of the large property owning class remains constant. Landlords continue to seek opportunities to squeeze more from tenants; bosses from workers. The owner of an apartment complex in Alameda demanded that tenants begin to pay for water and garbage collection. The tenants expressed their sentiment by threatening to move.
Socialism failed in the Soviet Union and East Europe. Nature now threatens alongside economic chaos caused by failing capitalism. But rather than face facts the political class still freaks out over the mention of the word "nationalization." Refusal to face dire economic facts will cause foolishness or inaction. The President cannot afford to put his head in the sand on the economy or health care. Yet, Obama apparently fears to even raise the idea of a national health system. Without a national plan the corporate insurance companies will continue to waste precious resources and suck blood from the poor.
Isn’t it time that the poor — previously called the middle class — who put him in the White House begin to organize themselves to force him to promote their own interests: survival?
Saul Landau is an Institute for Policy Studies fellow and filmmaker. His DVDs are available at [email protected].