Friday, March 4, 2011

How Oligarchs Grab What is Yours

You may use points from this dialog to explain how oligarchs operate and how they become very comfortable enriching themselves at the expense of the poor and middle class.

Q. Times are getting tougher. European Central Bank economists have called for austerity measures around the world. Why?

A. The story goes, because governments around the world are in the red they cannot do what is expected of them: Things like rescues from natural disasters, law enforcement, keeping up the infrastructure, and last but not least, making sure that the poorest of the poor, even though they may not be entitled to shelter, have enough food to survive.

Q. So it would mean that governments, if they want to remain in existence, need to cut services. A sudden stoppage of all the services would be too much of a shock for any given country. If for example, roads would no longer be repaired, laws no longer enforced, fire fighting no longer available etc., even some of the very wealthiest would be unhappy because if a fire went out of control in a middle class area, the fire might spread to the more upscale neighborhood. So, where can governments cut?

A. As perhaps a majority of the wealthy would not want any cuts on any service that might affect them personally--an example might be the elimination of air traffic control because it would effect the flying safety of private jets--the areas that could be cut are the so-called entitlements...

Q. Like what?

A. Anything that would benefit people of middle and lower income. Food stamps and shelters for the very poor, aid to schools and universities, health care, subsidies to Amtrak, infrastructure grants to small and large communities etc.

Q. Are you trying to say that "entitlements" are services that the wealthy think those with less money are not entitled to?

A. Exactly.

Q. Why? What's the philosophy behind that?

A. It is a philosophy that says the wealthy deserve what they get and that they merit their fortune by being "chosen." As evidence that this is so they assume that people with low net worth are simply not worth as much as human beings and therefore are not entitled to "entitlements."

Q. They don't actually say that?

A. No, but they act it. Even though many of the wealthy have never ever produced anything of value, they assume that they have earned all they own.

Q. You are not being clear.

A. Take, for example, executives in the banking sector. They may have made good decisions in their lending or investments benefiting their institution, or they may have made decisions that ran their bank into bankruptcy. At the end of a year they still collect millions in salary and bonuses, simply because they have made arrangements that as corporate officers they will get paid, not for performance, but for the position they have assumed in the corporation.

Q. Who makes the decisions about how much money executives get and how do the decision makers justify giving high compensations to non-performers?

A. It is the board of directors who decides. Board members also get paid without having to perform. As to giving huge bonuses to non-performing executives, they claim it is necessary to pay such high compensations so that they can compete for top level talent with other corporations.

Q. Doesn't sound too logical to me. Why would they want executives with ever higher compensations to run companies into the ground?

A. Because in today's financial world there is money to be made whether the value of a company goes up or down.

Q. This does not make any sense at all.

A. It makes sense when you begin to understand how derivatives work. Derivatives work like insurance policies. If you take out an insurance policy on a house and that house burns down, you break even when the policy pays off. But if you buy several insurance policies on the same house and it burns to the ground, you win by however many policies you have bought. So where your property value was that of one house, you now have a property value of five houses if you bought five policies.

Q. So holders of the right derivatives make out when sectors of the economy collapse?

A. Yup, and they get away with it because people don't know how derivatives work...


Harmon said...

Very instructive. I hope this is a first installment. I would be interested to see where this might lead (it already explains more about your blog on Calif. University "bloat").

I saw an expose (American Greed) that included Goldman Sachs and was shaken to realize that the people interviewed actually seemed to be asleep. They insisted that people and not profit was their bottom line and that they still adhered to having done nothing wrong. I had to agree. According to their understanding of current global human ethics and finance they had not. Considering the devastation left behind from theirs and other financial instituition's actions, it begs the question (as I can summon up), "What is ethics?" Is ethics principled and essential like the definition of energy, being neither created nor destroyed; or is it merely relative or secondary to current circumstances; human desires; and fashionable mental concepts of the world and human relations?

I don't know, it's hard to give voice to how much I was shaken after watching those interviews. I became acutely aware that I and anyone else could be seen to be just as much asleep as those interviewees under many circumstances. Being awake or asleep, even just beyond in either direction of others in these states has a huge impact on the substance of converstations and relative conclusions.

A bit more. If I thought myself a clever go-getter and had 5 policies against one property, I would logically be the insured and the arsonist.

Howard said...


Thanks again for your comments. Ethics is a broad domain of general philosophy, and it is quite complex in its ramifications. The most basic principle, of course, is the golden rule: "Do unto others as you would have them do unto you," and its corollary, "Don't do unto others as you would not have them do unto you." While generally very useful, this axiom is by no means watertight because in the minds of many masochists being abused in this life is good because it will bring them rewards in another life.

As for people being asleep, it is a sad but true observation. Why is there no general awareness about the ever-present slumber? It is because the sleepers walk and talk and and give the appearance of being awake, and in general only those who are themselves awake have the capacity to spot the sleepwalkers.

The not-so-secret wish of many of us is, of course, that one could find ways to wake up the somnambulant. This is not so easy because for the walking comatose, somnambulism is bliss. It is thus a supreme challenge for those who are alert and conscious to find the right wake-up calls to bring somnambulists back to reality.