BREAKING THE BIFURCATED ECONOMY: Financiers and the Crisis of Public Imagination

“Someone once said that it is easier to imagine the end of the world than to imagine the end of capitalism. We can now revise that and witness the attempt to imagine capitalism by way of imagining the end of the world.” Fredric Jameson

“To allow money to become a source of revenue to private issuers is to create, first, a secret and illicit arm of the government and, last, a rival power strong enough ultimately to overthrow all other forms of government.” Frederick Soddy

“A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.” Mark Twain

“Yet even as finance capital eludes and defies governments, and as legislators bow to the sector’s demands to cut public services in the name of ‘austerity’, finance has become more, not less, dependent on the state and on taxpayer support. Despite its detachment from the real economy and from state regulation, the global finance sector has succeeded in capturing, effectively looting, and then subordinating governments and their taxpayers to the interests of financiers”. Ann Pettifor

As Mark Fisher (of Capitalist Realism fame) keeps telling us the unmitigated mythology of capitalist omnipotence has taken us all in. Plus, as for it being “easier to imagine the end of the world”, we might not have to tax our imaginations on that score much longer. Besides, as I maintain, capitalism (if it ever really existed) has already been reorganized (with the substantial aid of leading economists) into NEOFEUDALISM. In fact, despite their naturalistic claims about innate qualities and staying power of Capitalism, they nurtured latent oligarchic patterns and processes all along. In true fascistic fashion they repeated the lie “there is no alternative” for so long that our capacities for imagination, congruent with our democratic processes, have been deeply impaired. Not that many years ago, the prevailing policies that maintain that banks (including small regional banks like the Silly Con Valley Bank) could be “too big to fail” would have elicited hysterical laughter. When it comes to our comically nonsensical political economy, perhaps regaining our public imagination might also restore our sense of humor.

The Bifurcated Economy

Neofeudal economists and their well-heeled patrons have built a vast bifurcation between FINANCIAL INSTITUTIONS and processes, which they readily admit are NOT the “real economy”, and the world where most of live, work, and suffer the consequences of this mega scam. Despite the gulf and its wildly disparate processes, this fake economy completely cannibalizes the real economy. Hence, it openly violates the bounds the capitalist system that they so vigorously exalt. In the word of Michael Harrington’s (of The Other America fame) it facilitates “socialism for the rich and free enterprise for the poor”. As Clara Mattie of the New School for Social Research in NYC (and a student of the famed Giovanni Dosi) proclaims in her book, The Capital Order: How Economists Invented Austerity and Paved the Way for Fascism, flawed economic theories fueled our Janus-headed (two faced) economy and may again enable the rise totalitarian governments.

Why do you think modern economists outlawed history and politics from their discussions, despite their own deep-seated ideological commitments? Aside from overblown scientific aspirations, why would they actively seek to divorce preordained economic outcomes from the institutional artifacts that enable them? And, if this was not odd enough, then why would they maintain a static system completely devoid of the evolutionary and ecological dynamics that drive all other natural systems? At this point we can set aside these mostly rhetorical questions, if more interested (Note: WHO BUILT THE EXPRESSWAY TO SERFDOM: Are Economists Acutely Culpable? | by Greg Daneke, Emeritus Prof. | Jan, 2024 | Medium, and ADAPTING A MALADAPTIVE SOCIETY: Institutional Ecology vs. Economics | by Greg Daneke, Emeritus Prof. | Medium). For now, suffice it to say that reducing the damage of the bifurcated economy is mostly a matter of political imagination (or the lack thereof). We just need to extricate ourselves from up our own excretory canals long enough reduce the grip of these patterns and panderers of predation. We have lots of imaginative schemes to reform the economics profession (from the “economy as a donut” to a Hawaii pizza). However, it is far too late in the game to get Neofeudalists to get their heads out, when real sciences (with repeated experiments) “only change one funeral at a time” in the words of Max Planck. Besides it is the politics “stupid”, and the current upheaval our flagging democracy might be an opportune time begin to redress our obvious deficiencies.

The Loss of Countervailing Power

One need not be John Lenon, to imagine a less ridiculous political economy. As Robert Reich (former labor secretary and distinguished professor public policy at UC Berkeley) suggests in his book The System: Who Rigged it, and How to Fix it, it is all about the politics and power of our financial oligarchs. He even addresses the book to Jamie Dimon, CEO of J.P. Morgan Chase. It might also be interesting to observe that Dimon, a life-long Democrat, recently implied his acquiescence to the return of the convicted financial criminal and defender of elite privilege, Donald J. Trump. But I digress, because it is not by the grace of bankers and their well-paid politicians that we will revamp our economy.

Back during the era of broadly shared prosperity following WWII, Institutional Economist and statesman, John Kenneth Galbraith, explained in his book, American Capitalism, that its genius was “countervailing power”. This notion goes back to antiquity and was once imbedded in US politics via the US Constitution and its “separation of powers” (between the three branches of government, plus a “free press” as the “fourth estate”). Yet, it is critical to note that Galbraith was talking about more germane, yet tenuous, balance between the competing centers of power including: 1) Corporations and their bankers; 2) Uncaptured and aggressive government regulators; and, 3) Organized and unionized labor.

Of course, an unholy alliance of corporate owners and executives (especially in the twin industries of arms and oil), bankers, select lawyers/judges, residual billionaires, and economists managed to trick us into systematically dismantling the basis of our successful economy with their fairy tales of free markets and free trade. It is as if they said (under their breath of course) “we don’t need no stinking regulations, nor an industrial base. We are the bloody financiers of the galaxy, and all we need are unlimited derivatives, fees, interest, rents, and cheap & compliant labor as well as “forever wars” and a perpetually juiced stock market, fueling a few technological monopolies.” They also erected “the mother of all” Ponzi schemes’ economy, with debts that can never be paid only renegotiated with much more debt (Note: WHEN WANK BECAME SWANK: Money, Banking, and The Evolution of the All-Debt Economy | by Greg Daneke, Emeritus Prof. | Medium). Just don’t get stuck without a chair (or with a mortgage, a margin call, a kid in college, or a small business to run) when the music stops. Moreover, according to Hyman Minsky’s Instability Hypothesis, our economy is institutionally designed to implode at relatively regular intervals (See: SO, WHAT IF OUR MINSKY IS MORE THAN A MOMENT? Towards a Reduction in the Perils of the Perpetual Ponzi Economy | by Greg Daneke, Emeritus Prof. | Medium).

Restoring Public Imagination to Our Political Economy

In direct contrast to what mainstream (Neofeudal) economists might tell you, “It ain’t rocket science” (except when “quants” working on Wall Street tried, unsuccessfully, to use Ito Calculus to design more arcane derivatives). We know what to do when the financial powers-that-be overwhelmed us with their skullbuggery (my word), we did it in response to the Great Depression (1929–39), via FDR’s imaginative New Deal. Despite having gained a few tons (and over a quadrillion in derivatives), we could again address huge gorilla (as well as guerilla bankers) in the room as well as in the shadows (Pirate Equity and Vulture Capitalists). If we could divert a small portion of our fascist fueled anger and energy devoted to building a wall between the US and Mexico, perhaps we could restore the wall between commercial banking and speculative finance. Take a postcard (or email) and write two words on it (Glass-Steagall) and a question mark, and send it to your elected representative, plus attend a candidate’s speech and hold up a similar placard. One could also withhold their support from any elected official who receives funding from the financial service industry.

I have introduced plethora of other political reimagining in previous missives (e.g., MONEY CHANGES EVERYTHING: The Assent of Money (as Credit) is a Descent into Total Madness | by Greg Daneke, Emeritus Prof. | Medium and, IT IS THE BANKING STUPID. Business and financial monopoly… | by Greg Daneke, Emeritus Prof. | Medium) from public banking and public money (currencies actually issued by the Treasury, interest free) to raising the reserve requirements and stopping banks from using self-securitized garbage in their rehypothecated and synthetic collateral shell games. Plus, the imposition of a slight tax on nominal value of each financial transaction might reduce the constant churning of financial markets and their phantom wealth derivatives and serve as a place holder till the return our senses and to progressive and windfall taxation.

As we begin to seriously entertain some sort of Universal Guaranteed Income as response to accelerating redundancies in the wake of widespread applications of Artificial Intelligence (AI), we might even begin to ask, what the heck is an economy for anyway? At some point we might even consider another ingredient from the Great Depression, FDR’s suggestion of an “Economic Bill of Rights” (Note: SLOUCHING TOWARD UNTOPIA. The main way we are fooled is by being… | by Greg Daneke, Emeritus Prof. | Medium). Moreover, once we rid ourselves of the utopia pipe dreams as well as the out-and-out lies about both Capitalism and Socialism (or all isms for that matter), we could more fully address the deeply embedded dynamics of oligarchy and societal predation which plague all systems of government (even libertarian).

Have you noticed the ads on your TV, telling you to tell your Congressperson that you're against “New Capital Rules” (without telling you what they are). Why would shady financiers' waist their ill-gotten gain to get your help in further forestalling compliance with Basel III, if we matter so little? The character and performance of our economy is far too important to be left to the “banksters”, as FDR called them. What have we got to lose by exercising our “little gray cells” and our political power, aside from the fascist demigods who are eagerly offering to do all our thinking for us.