THE PREDATOR STATE

To help understand what has happened to this
country over the past 30 years, I am drawing
extensively from an article in Mother Jones
(May, 2006) by James K. Galbraith (JKG),
titled "The Predator State." It states a thesis
that he developed and explained fully in a book
by the same name that appeared last year.
(Galbraith is a distinguished professor of eco-
nomics at the Univ. of Texas.) In the article he
writes about the free market religion: "The
doctrines of the 'law and economics" movement,
now ascendant in our courts, hold that if people
are rational, if markets can be 'contested,' if
memory is good and information adequate, then
firms will adhere on their own to norms of
honorable conduct. (Emphasis mine.) Any
public presence in the economy undermines this.
Even insurance -- whether deposit insurance or
Social Security -- is perverse, for it encourages
irresponsible risk taking. Banks will lend to bad
clients, workers will 'live for today,' companies
will speculate with their pension funds; the move-
ment has even argued that seat belts foster reck-
less driving. Insurance, in other words, creates a
'moral hazard' for which 'market discipline' is the
cure; all works for the best when thought and
planning do not interfere. It's a strange vision,
and if we weren't governed by people like John
Roberts and Sam Alito, who pretend to believe it,
it would scarcely be worth our attention."

"In the mixed-economy I grew up in" (continues
JKG a little further down), "there existed a post-
capitalist, post-Marxian vision of middle-class
identity. It consisted of shared assets and en-
titlements, of which the bedrock was public edu-
cation, access to college, good housing, full em-
ployment at living wages, Medicare, and Social
Security. These programs, publicly provided,
financed or guaranteed, had softened the rough
edges of Great Depression capitalism, rewarding
the sacrifices that won the Second World War.
They also showcased America, demonstrating to
those behind the Iron Curtain that regulated
capitalism could yield prosperity far beyond the
capacities of state planning. (This, and not the
arms race, ultimately brought down the Soviet
empire.) These middle-class institutions survive
in America today, but they are frayed and tat-
tered from constant attack. (Ital. mine) And
the division between those included and those
excluded is large and obvious to all."

"Today (still Galbraith), the signature of American
capitalism is neither benign competition, nor class
struggle, nor an inclusive middle-class utopia. In-
stead, predation has become the dominant feature
-- a system wherein the rich come to feast on de-
caying systems built for the middle-class. The
predatory class is not the whole of the wealthy;
it may be opposed by many others of similar
wealth. But it is the defining feature, the leading
force. And its agents are in full control of the
government under which we live." (Emph. mine.)

He continues: "Our rulers deliver favors to their
clients. These range from Native American casino
operators, to Appalachian coal companies, to Saipan
sweatshop operators, to the would-be oil field
operators of Iraq. They include the misanthropes
who led the campaign to abolish the estate tax;
Charles Schwab, who suggested the dividend tax
cut of 2003; the 'Benedict Arnold' companies who
move their taxable income offshore; and the finan-
cial institutions behind last year's bankruptcy bill.
Everywhere you look, public decisions yield gains
to specific private entities."

"For in a predatory regime, nothing is done for
public reasons. Indeed, the men in charge do not
recognize that 'public purposes' exist." (That's why
they let our infrastructure degrade, I comment.)
"They have friends, and enemies, and as for the
rest -- we're the prey. Hurricane Katrina illus-
trated this perfectly, as Halliburton scooped up
contracts (a la The Shock Doctrine by Naomi
Klein, me again.) And Bush hamstrung Kathleen
Blanco, the Democratic governor of Louisiana.
The population of New Orleans was, at best, an
afterthought; once dispersed, it was quickly
forgotten."

Professor Galbraith says further: "The predator-
prey model explains some things that other mo-
dels cannot: in particular, cycles of prosperity
and depression. Growth among the prey stimu-
lates predation. The two populations grow to-
gether at first, but when the balance of power
shifts toward the predators (through rising in-
terest rates, utility rates, oil prices, or embezzle-
ments), both can crash abruptly. When they do,
it takes a long time for either to recover."

Remember: JKG wrote this in Mother Jones
three years ago. It was predictive, as well as
descriptive. He continues: "The predatory model
can also help us understand why many rich people
have come to hate the Bush administration. For
predation is the enemy of honest business. (my
emph.)In a world where the winners are all
connected, it's not only the prey who lose out. It's
everyone who hasn't licked the appropriate boots.
Predatory regimes are like protection rackets:
powerful and feared, but neither loved nor respec-
ted. They do not enjoy a broad political base."
(That last was also predictive.)

"In a predatory economy, the rules imagined by
the law and economics (free mkt) crowd don't
apply. There's no market discipline. Predators
compete not by following the rules but by break-
ing them. They take the business-school view of
law: Rules are not designed to guide behaviour
but laid down to define the limits of unpunished
conduct. Once one gets close to the line, stepping
over it is easy. A predatory economy is crimino-
genic: it fosters and rewards criminal behaviour.
(Madoff and Stanford, Abramoff, Enron , etc.,etc.,
ad nauseum) Why don't markets provide the
discipline? Why don't 'reputation effects'
secure good behaviour? Economists have been
slow to answer these questions, but now we have
a full-blown theory in a book by my colleague
William K. Black, The Best Way to Rob a Bank Is
to Own One."

The subtitle for JKG's book is: "How Conservatives
Abandoned the Free Market and Why Liberals
Should Too." Obviously, it was written B. O. (be-
fore Obama.) We'll have to see whether O. sees
the problem or is prepared to deal with it. Some
of his appointments are not reassuring, because
a lot of them come from the Clinton crew, who
got very rich in the system. His closest econo-
mics people were trained in and enriched by,
the wall street and banking crowd that ran the
Ponzi scheme that has now crashed. These folks
are still pampering the banks and indulging their
whims with taxpayer's bucks. That isn't change
I can believe in! Small banks are being taken
over every day by the F. D. I. C. and either
liquidated, sold, or cleaned up and restored.
Paul Krugman calls the big banks "zombies,"
(dead men walking) and says the government
should treat them the say way as little banks.
Instead we are throwing good money after bad.
Insanity is repeating the same behaviour and
expecting a different result.

jgoodwin004@centurytel.net