No 249 Posted by fw, August 17, 2011
“I think the most pernicious thing that’s happening in America right now is that you see large financial institutions and investment funds all putting together what I would call infrastructure funds. And what they basically want to do is with campaign contributions go out to these state and local governments in crisis . . . . These are what you might call preventable crises but when financiers can make money because they see a crisis coming, and they can prepare for it . . . they can buy privatizations at 20 cents on the dollar. They don’t want to preserve the services for the people. They want to make more money.” Rob Johnson
The above passage was extracted from an interview with Rob Johnson conducted by Paul Jay of the Real News Network, August 17, 2011. Whether they think of themselves as citizen activists or not is moot. Johnson and Jay are making a difference by delivering a detailed perspective on economic news that is rarely matched on North America’s mainstream media, including PBS, NPR, CBC, and CTV.
Regarding the title of this post, I realize that it may have been said in previous posts in slightly different words, but it needs to be repeated until, as Paul Jay says in his opening remark, we “Don’t roll over. [We] Take over.”
Here is the video of Jay’s 10-minute interview with Rob Johnson, Picking the Bones of US Public Economy, followed by my transcript with added subheadings. Johnson is an international investor and consultant to investment funds on issues of portfolio strategy, a Senior Fellow of the Roosevelt Institute and also the Executive Director of INET (Institute for New Economic Thinking).
Paul Jay – We have a new tag line: “Don’t roll over. Take over.” We’re going to do news for people who want to take over. Lobbying people need to lobby. But you go and you lobby on the Dodd-Frank Finance Bill, and you try to lobby on regulation, but you’re up against 40 or 50 to 1 in terms of Wall Street lobbyists versus people trying to lobby for real reform. Lobbying needs to go on. But people also need to have a clear idea of demands they want from the system, demands they want from the politicians, and things they should be doing themselves. Start with that. What kind of policy would make sense for ordinary people to be demanding?
Rob Johnson – I would say the first thing is public financing of elections. Second thing I would say is media companies are given their licences by the government and they should be forced to allocate some of their bandwidth, some of their time to public service announcements for political elections. What I’m essentially saying is it’s very hard to stop the money flow into politics, but you should stop the need for a politician to have money in order to get elected — in which case the politician would represent people more that special interests and lobbyists that come with money less. You talk about the number of lobbyists on the Dodd-Frank bill, but the fact of the matter is that it’s the number of dollars not the number of lobbyists that’s really matters. Yeah, you gotta pay to have a hundred guys there lobbying on Dodd-Frank and those law firms’ billable hours are very expensive. But it’s the hundreds of millions of dollars of campaign contributions, media programs, and lobbyists that those people can afford that citizens cannot. We’ve got to change the rules of the game.
Paul Jay – and of course the Supreme Court decision . . .
Rob Johnson – Citizens United made it worse, significantly worse. And senators and congressmen are acutely aware somebody could drop in with a $40 million smear campaign 6 days before their election that they can’t respond to under the current rules. In the old days, you had to stop 60 days before the election. When we look at reforming the American political process, many people are saying we need to get rid of the Electoral College. And I’m actually concerned about that because if you get rid of the Electoral College, after Citizens United, you unleash national corporate money. If you say, okay, two states are the swing states, Florida and Ohio matter. There are enough benevolent wealthy people, and grassroots money coming from the Internet, that you can pick a major media fight in those two swing states. But if you have to fight in all 50 states, money will drown you. When I talk to people about the kind of things they would like to see, a more representative democracy makes sense to me. But a more representative national democracy by eliminating the Electoral College will strengthen the hand of money before it strengthens the hand of the population. What we need is to reform money in politics and then eliminate the Electoral College.
Paul Jay – President Obama advocated the public option in health care. In fact, when he was fighting for it, he said it’s the only way to have real cost controls in health care and the only way to actually discipline that sector of the economy. If it made sense for health care why doesn’t it make sense for finance?
Rob Johnson – It made sense in health care, it makes sense in finance, but the people who are making dollars and cents are the people who can stop you from doing those things. And he had to let go of the public option in order to pass legislation. In the question of banking and capital and so forth, a public option competing with the private option is something that Wall Street will heartily resist. As a matter of fact, the demonization of Freddie Mac and Fannie Mae is part and parcel to stopping public allocation of capital. You can’t imagine a Congress going before the people now and saying, “Well, we lost $170 billion playing with this housing finance mechanism, let us have a capital infrastructure bank now.” The public doesn’t trust that. One of the ironies of the most recent period – the bank bailouts – is that the markets made a mess, intervention in Wall Street, manipulation of regulators, manipulation of legislation, and manipulation of Congress led to a lax unenforced financial system that blew itself up. Now everybody blames the government and they want less government. Which probably means you’ll get more of that willy nilly out of control financial system.
Paul Jay – That’s a really important point because at the really sharpest points of the crisis there was lots of talk about possible nationalizations and possible role of a public interest kind of banking.
Rob Johnson – I think it’s a bit surprising that the American people cannot do what I call “comparative economic systems”. Everyone says, “Oh, the Chinese are kicking our butt.” And the Chinese are building infrastructure, increasing R&D, investing in education. And what we’re doing is saying “We have a municipal crisis.” Wall Street blew up the economy, we’ve tipped over, and so what we have to do is cut teachers’ pensions. Everybody says, “Oh, look at teachers’ pensions. They’re getting too much.” Well, if you want to invigorate the next generation, education, human capital, and inspire productivity here in the 48 states of the United States, making teachers less secure and lower paid is contrary to that objective. Most Wall Street guys talk about education but they act like what you can do is reduce the price of teachers and probably increase the income of investment bankers and somehow produce better education. That’s kind of silly.
Paul Jay – So what’s the real logic here then for the people who are pushing for these kinds of cuts? It’s not like they’re dumb. They know the repercussions. They know this could lead to even longer recession.
Rob Johnson – I think the most pernicious thing that’s happening in America right now is that you see large financial institutions and investment funds all putting together what I would call infrastructure funds. And what they basically want to do is with campaign contributions go out to these state and local governments in crisis – Probably the first act is like Greece, they get them to paint some crazy derivative that hides things until after that mayor or governor’s election. Then when they get done with that they want privatizations – and privatizations not done with ethical, wide open auctions with the highest bidder, but a handful of oligopoly guys bidding, maybe some campaign contributions, selling the private assets at 20 cents on the dollar and then they give them these monopolies which they set up and then they charge the American people tooth and nail. These are what you might call preventable crises but when financiers can make money because they see a crisis coming, and they can prepare for it – they can set up a fund, they can play games with politicians and fundraisers — they can buy privatizations at 20 cents on the dollar. They don’t want to preserve the services for the people. They want to make more money.
Paul Jay – This issue of privatization is perhaps even the biggest piece of this agenda isn’t it?
Rob Johnson – <person’s name lost in crosstalk> . . . wasn’t stupid. He had ideas about liquidation, liquidation. He knew how to make money from buying assets in distress. And there are an awful lot of people with money now. Excuse me, there are very few people that have an awful lot of money right now that have, what you might call, the incentive to grind everything down and buy it on the cheap.
Paul Jay – Pick the bones of the American public economy.
Rob Johnson – Right. And not tolerate much inflation because that erodes the wealth that they already do have.
Paul Jay – One thing people watching should be doing is watching for the types and extent of privatization in their states.
Rob Johnson – Privatization can be a good thing. I mean it’s not like always and everywhere an evil. And there are times when the private sector can provide services much more efficiently than the public sector. But when you do the privatization you should get for the public the value of the assets. If you look at Russia, what you might call the state, the people, the former Soviet Republic’s population owned all those natural resources. It wasn’t like all the guys became billionaires in Russia, invented great things, cured cancer or did what Steve Jobs did or whatever. These guys just worked the political system and created windfall oligarch billions. In America, I’m afraid we’ve kind of learned the lesson of what they did. It’s a bad example but it’s an attractive one to aggressive people.
Paul Jay – If you’re sitting on enough capital.
Rob Johnson – Yes.