Possible models for newspapers

As a result of the financial pressures that all papers face, my local newspaper, the Plain Dealer has adopted the cost-saving strategy of cutting back on national and international coverage and op-eds, focusing more on local news and sports. The paper is now a lot thinner with the sports section now the largest, and sports news often dominates even the front page.

Is this a bad thing? Some time ago I would have said yes, especially since I rarely read anything in the sports section beyond the first page. It would have signified the further dumbing down of news. But now I am not sure. The coverage of local news seems to have got better and more interesting, and many people do care passionately about sports and can’t seem to get enough of it, so the paper is now perhaps finding a niche. The paper’s regular stable of local and syndicated op-ed columnists is unbelievably vapid so the reduction assigned to them is not something I mourn. In fact, I hardly ever read them, unless they publish the occasional new voice.

But are these kinds of changes sufficient to save newspapers? If not, what can they do to survive?

It is almost certain that newspapers will be forced to go exclusively to the web. The hardcopy model is simply too wasteful of resources to justify continuing it, even if it were financially viable. In doing so, they will save a lot of money on the production costs of newsprint, ink, and gas and other distribution costs, although this will also result in many people losing their jobs.

But newspapers cannot simply transfer the existing paper into a web form. They will also have to make other drastic changes to survive. It seems likely that they will have to transform to a much leaner format, using reporters only for hard news, leaving the soft features to the many other outlets that cater to those needs. Newspapers will also have to develop news niches, rather than trying to provide something for every member of the family, from children to retirees.

Newspapers may depend more on free-lancers and ‘citizen journalists’, people who see their role as seeking and giving the news organizations information to work on. Maybe newspapers will also shift to a not-for-profit model like public radio and TV that manages to provide news of sufficient quality that people are willing to subscribe or donate money to keep it going. By not having to meet the insatiable demands for increased profits, they will be more able to maintain a state of equilibrium.

News gathering organizations can survive in an online journalism format. There are already some models in place, like the excellent Talking Points Memo and the not-so-good Politico. They do a mix of original news reporting along with analysis. TPM has also depended on citizen journalists, regular readers that it deploys to either read through large document releases for information or to get information scattered all over the country that it then pieces together to see patterns. The latter method was what enabled them to break the story about the politicization of the US Attorney’s office by the Bush administration

But most online news organizations still depend for their raw material on traditional reporters doing traditional work for traditional organizations. If newspapers disappear altogether, where would we get the basic news? TV and radio may be able to partially fill that void, except that cable news has shown itself to be pathetic, devoting most of its time to pointless blathering, hyping, and scaremongering. But I do not think there is cause for panic. Wherever there is a need and a niche, people will fill it. When it comes to politics, there are enough people who care passionately enough about it that they will do the work that is necessary. In fact, we might actually get better reporting because only those who really care about getting at the truth will be willing to get into the news business, so will have real news reporters rather than the current glut of news personalities.

We will probably have fewer reporters covering formal staged events like press conferences, official trips by the president, etc. Those things rarely generate any actual news but they cost a lot in that they require reporters to just hang around and follow dignitaries on a permanent basis. Reporters might shift to doing things that are cheaper but more likely to produce real news, like carefully reading official reports and statements.

Newspaper reporters have a valuable role to play in a democracy. Trained investigative reporters who can get information, sift through it to get at the kernels of truth, and present that in an understandable form to the public are essential, though in practice their performance in the US has been pretty mediocre. I would prefer to see a system where reporters are able to do a better job than one in which they are eliminated. But the delivery method is not what is important. What is important is that whatever new model of journalism emerges, it breaks free of the current incestuous relationship between news organizations, politicians, and big business, each supporting the interests of the other, while the interests of the general public gets ignored.

The losers in this shift will be those people who do not have internet access, who will be totally dependent on TV and radio for their news.

POST SCRIPT: Alternative news sources

Once you shift to the internet for your news, it becomes imperative that people be able to descriminate between good sources and unreliable sources of news. Paul Craig Roberts gives some recommendations for diversifying your news sources that I largely agree with.

People who have access to television services that provide English language foreign broadcasts, such as Iran’s Press TV, Russia Today, or Al Jazeera, can get get [sic] news and insights from those parts of the world demonized by the US media. [You can get many world TV and radio news services for free by downloading Livestation.]

The BBC World Service still reports facts while covering itself by providing the views of the US, UK, and Israeli governments.

Both the Asia Times and Israeli newspapers, such as Haaretz can be read online in English. There are other such newspapers, and all of them provide information that Americans will never see in their own media. Any American newspaper that was as truthful about the Israeli government as Haaretz would be closed down.

The only US print source with which I am familiar in which some honest reporting can be found on a regular basis is the McClatchy papers.

Whatever model emerges, we all have to become more connoisseurs of a wide range of news and analysis, rather that depend on just one or two sources.

Skyhooks and cranes-2: Replacing skyhooks with cranes

(For other posts in this series, see here.)

Darwin’s big idea of natural selection essentially removed the necessity for skyhooks. According to natural selection, complex things could and did emerge from simpler things and hence we no longer need to invoke skyhooks to explain how they came about. Instead we now have ‘cranes’ that can do all the lifting we need.

Daniel Dennett in Darwin’s Dangerous Idea (1995) uses the metaphor of the cranes used in building construction to contrast with skyhooks. Cranes are devices that can lift things, just like skyhooks can, but they are not magical devices that suddenly appear out of the sky. They are real, we know how they are built and where they come from, and they are planted on solid ground. Furthermore, small cranes can be used to build bigger cranes that can in turn be used to build yet bigger cranes and so on, until we end up with some really powerful cranes that can do amazing and, to the untrained and unobservant eye, may appear to be skyhooks and do seemingly magical things. But the wonderful thing is that they come about naturally.

Dennett argues that in the evolution context, cranes are natural processes that speed up the process. Starting with the simple and basic process of natural selection, increasingly sophisticated organisms have appeared over time that act like cranes, enabling even more complex life forms to be created even more quickly. In other words, we have evolutionary cranes creating even bigger, more efficient evolutionary cranes.

For example, the evolution of DNA likely started with point mutations at single locations. But once that produced organisms that were capable of reproducing sexually, the process of gene swapping that occurs during the process of meiosis (by which the sex cells that contribute to reproduction are created in the testes and ovaries) has led to much faster genetic changes and more rapid evolution than could be obtained using point mutations alone. So sexual reproduction is a powerful evolutionary crane.

Natural selection favors those systems that can evolve faster because they are more adaptable to changes in the environment, so that the rate of change of systems increases with time. In other words, evolution speeds up. Massimo Pagliucci suggests that “natural selection may favor the evolution of particular molecules (called “capacitors” of evolution), or arrangements of gene networks, that make it easier for a population to evolve in response to new environmental changes.”

All these processes eventually resulted in the emergence of human beings who have language and science and technology and thus can be considered as yet more powerful cranes because we are now able, through our ability to significantly control our environment and with genetic engineering technology, to create new organisms that would have taken a long time to come about by themselves without our presence.

Thus we humans are not only the product of work done by other cranes, we ourselves serve as cranes for future development. As Dennett says:

Vast distances have been traversed since the dawn of life with the earliest, simplest self-replicating entities, spreading outward (diversity) and upward (excellence). Darwin has offered us an account of the crudest, most rudimentary, stupidest imaginable lifting process – the wedge of natural selection. By taking tiny – the tiniest possible – steps, this process can gradually, over eons, traverse these huge distances. Or so he claims. At no point would anything miraculous – from on high – be needed. Each step has been accomplished by brute, mechanical, algorithmic climbing, from the base already built by the efforts of earlier climbing. (p. 75)

To me this is an amazing and exciting thing to conceive, that we have the power to explain life without invoking skyhooks, if not in all its details now, at least in principle. But not everyone shares this sense of excitement at the ever-increasing explanatory power of science. In particular, many people (and not all of them are religious) are uneasy about the idea that we humans, with all our sophistication, are also simply the end products of this mechanical algorithmic process. They simply can’t wrap their minds around the idea that there is nothing at all, no vital essence or soul, that is unique and makes us human, not even our minds or our consciousness or our sense of morality. While we have some qualities (like language) that distinguish us (at least partially) from other species, there is not a single thing that we humans possess that could not have come about through the same algorithmic processes that also produced slugs or worms or a leaf.

This can be hard to take for those who have a sense of superiority about the human species. Darwin’s theory so completely undercuts the basis for believing that humans are possessed of some quality that is not the product of the Darwinian algorithm that it distresses people and many have tried to find ways to suggest that it is incomplete. As Steven Pinker says, “People desperately want Darwin to be wrong . . . because natural selection implies there is no plan to the universe, including human nature.” (Steven Pinker, How the Mind Works (1997), p. 165)

Next: The intelligent design skyhook

POST SCRIPT: From bacteria to humans in four minutes

In the space of four minutes, Richard Dawkins gives an overview of the sweep of evolution from bacteria to our common ancestors with apes.

Newspapers in crisis

As someone who grew up in Sri Lanka, a country that has a strong newspaper-reading ethos, I feel a sense of regret at what seems to be an irreversible decline in the fortunes of daily newspapers. Growing up, my family subscribed to two morning newspapers and two evening newspapers each weekday, and three papers on Sundays, if you can imagine that. Wherever I have lived I have had a daily subscription to the local paper.

For almost all my life, I used to have a rigid routine in the mornings. I would start the day by getting a cup of coffer and reading the newspaper for national and world news. If for some reason the paper was not delivered, I felt disoriented without my fix of news the first thing in the morning.

But with the arrival of the internet it is usually the case that I already know what national and international news the paper is likely to contain. So lately my habits have shifted to reading the paper in the evening, more as a form of relaxation, and to get mostly local news and the comics. There is no urgency anymore to read the paper as soon as it comes. My attitude to it is more like towards a magazine. In fact, I could probably do quite well without the paper, and I continue to subscribe more out of habit and a vague sense of loyalty to preserve what I used to consider a valuable institution.

The next generation clearly does not have the same habits as I have, for the same reasons that caused me to change my own habit. Neither of my daughters subscribes to their local newspapers although they both live in cities (San Francisco and Philadelphia) that have large metropolitan dailies. They, like their peers, are getting their news from the internet and do not have the sense that if they do not read the daily paper that they are missing important information. Because they are so networked with others, their attitude seems to be that if the news is important enough, it will find them without them having to seek it out. This attitude is a nightmare for newspaper publishers. Editor & Publisher published data yesterday that average daily circulation had dropped severely in the last six months for the top 25 newspapers, except for the Wall Street Journal, which was flat.

This is largely the reason that newspapers are in trouble. Hardly a day passes without a story about some newspaper somewhere in the nation going into bankruptcy or making cutbacks in reporting staff or reducing the number of pages or the number of days they publish. It seems fairly clear that newspapers are finding it difficult to survive, though in some cases this is due not so much to decline in readership as to bad financial decisions or bad management or just the unrealistic profit expectations of their stockholders.

While I used to think that continuing to subscribe to the daily paper was a worthy attempt on my part to preserve an important institution, I became aware of the generational shift in attitudes when my daughter came home for a few days and she noticed me reading the paper. She said, “So, you still support the killing of trees, I see.” I had not thought of it like that, but she had a point. In many ways, publishing a newspaper, with its vast daily consumption of paper and ink and gas for transportation, to produce something that is then immediately thrown away, is a huge waste in resources, something that the next generation is more keenly conscious of.

Going completely online would be the environmentally friendly thing to do. On the surface, it might seem that simply putting the paper on the web and charging a subscription might work. But the revenue models are not there yet to support such change. Only part of a newspapers’ revenue comes from subscriptions. Newspapers depend heavily on advertising and a big problem for the newspaper is the decline in classified advertising due to people shifting to free outlets on the internet like Craigslist for that purpose. The internet is the perfect vehicle for classified advertising because it strength lies in its ability to link people up with like minded people, buyers with sellers, employers with employees. Newspapers will never regain classified advertising.

Furthermore, people are used to getting information free on the web and are unlikely to pay much for web subscriptions to newspapers. I pay $250 for daily delivery of my paper and definitely would not pay that for online access to the same material. But that does not mean people are not willing to pay for content. For example, I am willing to donate money to websites like Antiwar.com and to my local NPR stations because they provide good quality information. I am also willing to pay subscriptions to get online newsletters. But in each case, it is because these sources provide information that I cannot easily get elsewhere and would be sorry to see disappear. I do not feel that same strong sense of affiliation with my local newspaper. If it went completely online but otherwise remained unchanged, I would likely stop reading it and probably would not subscribe.

Those newspapers that have experimented with charging for online content (like the New York Times putting its columnists behind a pay wall called Times Select) found their readership declining and gave up the practice. I could have predicted that. As I have said before, the old-style columnists are mostly useless and the only reason people read them is because they come bundled up with the rest of the paper. Did the publishers think that many people would actually pay to read the fatuous musings of Thomas Friedman and Maureen Dowd?

Next: Possible models for newspapers

POST SCRIPT: Comics on the plight of newspapers

The comic strips Pearls before swine and Non sequitur highlight the problems with having both print and online versions, with the latter being free.

Skyhooks and cranes-1: Why skyhooks are appealing

I occasionally meet people who, knowing something about my interests with science and religion, say something like “I am not religious but I am skeptical of the theory of evolution.” These people are often well-educated but not biologists or archeologists or paleontologists or anthropologists, so it is unlikely that they have done any kind of scholarly study of the evidence in favor of evolution and found it wanting. Their skepticism of evolution seems to spring from a different well.

When questioned, it usually turns out that the major reason for their doubts is that we live in a world that has an amazing array of diverse and complex organisms. If one doesn’t closely into the science and mathematics of evolutionary theory, it can seem quite incredible that all this could have emerged by purely natural causes. So for some people, skepticism about evolution arises purely from a sense, a gut feeling if you will, that it is highly unlikely that life arose in the unguided way that evolution proposes. Just last week I had a discussion with a professor of chemistry who argued in precisely this way, that he could not imagine that all this could have come about without some kind of guiding intelligence, and what could that be but a supernatural agency of some kind?

I have argued before that evolution by natural selection, though unguided, is very far from something that happens purely by chance. While it is chance that produces the variations, the process of natural selection is highly focused. Furthermore, people’s intuitions about probability are notoriously poor, and people should be wary of placing too much weight on them.

The other major source of discomfort is that people cannot properly conceive of very long timescales, especially the hundreds of millions of years that are involved in evolutionary processes. Things that are unlikely over shorter time periods can become likely, even inevitable, if you wait long enough, but people have no real feel for that. For example, we all know that the chance of winning a big lottery prize is very small. But if I were willing to play for a very, very long time, the probability of my winning becomes very high, almost inevitable. But of course, the amount I would have bet would be almost certainly be much more than my winnings and I would be long since dead anyway, so the whole exercise would be pointless. But our tendency is to take the probability over our short lifetimes, and erroneously assume it remains the same over very long time scales.

But even allowing for that, there is something strange about the theory of evolution being singled out for skepticism. After all, all manner of small probabilities and long time scales are involved in the Big Bang theory, involving the way that the primordial matter coalesced to form the stars, planetary systems, and galaxies. Why aren’t people similarly skeptical about how the Earth and our Solar system came into being? Some religious fundamentalists, of course, do argue that god created everything and reject pretty much all of science, but I am not talking about them. I am talking about people who have no problem accepting scientific theories of how the entire universe came to be, but yet remain unconvinced that scientific theories can explain how all of life came into being.

There is another possible reason for this focused skepticism against evolution. The Big Bang is a spectacular thing to visualize. There is a magnificence to it that is commensurate with the importance we attach to something that happened at the very beginning of time. But the theory of evolution is the very opposite, saying that life in all its grandeur came about very slowly as a result of a vast number of tiny little plodding steps, each too small to observe. There is no arresting visual image that we can seize upon.

Daniel Dennett’s book Darwin’s Dangerous Idea (1995) says that the basic idea of Darwin’s theory, that everything is a product of an algorithmic process, a simple set of rules mindlessly applied, is what many people find hard to accept.

Among the controversies that swirl around us, most if not all consist of different challenges to Darwin’s claim that he can take us all the way to here (the wonderful world we inhabit) from there (the world of chaos or utter undesignedness) in the time available without invoking anything beyond the mindless mechanism of the algorithmic processes he proposed. (p. 74)

As a result of this skepticism, people have consistently, over time, invoked what Dennett calls skyhooks as explanations. A skyhook is defined as an “imaginary contrivance for attachment to the sky” that can be used for lifting things easily. The skyhook concept is similar to the deus ex machina (“god from a machine”) literary device used by inferior Greek dramatists to suddenly swoop down and lift their characters out of a tight spot. So a skyhook is basically a mysterious and advanced mechanism that can be invoked as an explanation. The existence of skyhooks as explanatory mechanism leads naturally to an acceptance of the existence of a designer, since someone had to have created the skyhook.

The search for skyhooks has historically taken many forms. In the early days, skyhooks were used to explain the appearance of every species. This was the theory of ‘special creation’, popular up to Darwin’s day, where god (the ultimate skyhook) created species to fit into the various ecological niches. As time went by and science explained more and more of what was previously inexplicable, the number of skyhooks needed as explanatory devices has decreased, but never gone away.

The ‘God of the Gaps’ that I have written about earlier is a manifestation of this desire for skyhooks.

The idea of skyhooks is seductive and is what draws many of us in to believing in a creator, especially when we are young. It is a form of magical thinking that all young children find attractive and which is what makes believing in a god easy.

But why do people continue to feel the need for skyhooks as adults when there are other good explanations?

Next: Replacing skyhooks with cranes.

POST SCRIPT: The appeal of skyhooks for children

In this interview with Jonathan Miller, Richard Dawkins says that as a boy he accepted the need for skyhooks for the creation of life, before he discovered that the theory of evolution solved the problem, and the sense of intellectual freedom and liberation that it generated.

American oligarchy-7: What needs to be done

(For previous posts in this series, see here.)

So where does Barack Obama fit into this picture? We saw him strike various populist themes during the campaign. But it should be clear from the people he has surrounded himself with on economic policy that he too is completely subservient to Wall Street interests. In fact, populist and supposedly liberal Democratic politicians like Bill Clinton and Barack Obama are far more useful to Wall Street in many ways, because they hide their subservience to Wall Street better. Liberal watchdogs tend to let down their guard and thus allow these politicians to give away the store in ways that Republicans, with their naked greed, would find hard to get away with.
[Read more…]

American oligarchy-6: The victories of the oligarchy

(For previous posts in this series, see here.)
In his article in the May 2009 issue of The Atlantic magazine titled The Quiet Coup, Former chief economist of the IMF Simon Johnson lists the fruits of the collusion between both political parties and Wall Street interests.

From this confluence of campaign finance, personal connections, and ideology there flowed, in just the past decade, a river of deregulatory policies that is, in hindsight, astonishing:

  • insistence on free movement of capital across borders;
  • the repeal of Depression-era regulations separating commercial and investment banking;
  • a congressional ban on the regulation of credit-default swaps;
  • major increases in the amount of leverage allowed to investment banks;
  • a light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement;
  • an international agreement to allow banks to measure their own riskiness;
  • and an intentional failure to update regulations so as to keep up with the tremendous pace of financial innovation.

Just examine that list for a moment. Did you hear about any of those important actions while they were being carried out? Were there front page news reports and commentary on them? Loud arguments? Highly publicized congressional hearings? Fierce partisan debates? When all that was going on, was there any attempt at informing the public of the potential consequences of these wide-ranging decisions? Of course not. The chances are that during those times our attention was focused on Monica Lewinsky, Terri Schiavo, gay marriage, Chandra Levy, Valerie Plame, and the like. This is why observing politics has to be like watching a magician. If you look at what your attention is being drawn to, you are missing what is actually happening. The real action takes place in obscure committee hearings, at the regulatory bodies, in private meetings between members of government and the heads of the financial firms, over lunch and dinner and on golf courses.

Did you notice how in the fall of 2008, as we lurched daily from crisis to crisis as one big firm after another like Merrill Lynch and Lehman Brothers fell, we were presented by the Treasury and Federal Reserve officials with ‘solutions’ to the problems that had been worked out seemingly overnight involving the taxpayer-subsidized purchase of one major institution by another that involved hundreds of billions of taxpayer dollars? The only way that consensus could be reached so quickly and smoothly on such major actions was if there had always been collusion between the government and the financial firms involved and they saw their interests as one and the same.

Simon Johnson continues:

Throughout the crisis, the government has taken extreme care not to upset the interests of the financial institutions, or to question the basic outlines of the system that got us here. In September 2008, Henry Paulson asked Congress for $700 billion to buy toxic assets from banks, with no strings attached and no judicial review of his purchase decisions. Many observers suspected that the purpose was to overpay for those assets and thereby take the problem off the banks’ hands—indeed, that is the only way that buying toxic assets would have helped anything. Perhaps because there was no way to make such a blatant subsidy politically acceptable, that plan was shelved.

Instead, the money was used to recapitalize banks, buying shares in them on terms that were grossly favorable to the banks themselves. As the crisis has deepened and financial institutions have needed more help, the government has gotten more and more creative in figuring out ways to provide banks with subsidies that are too complex for the general public to understand.

This latest plan—which is likely to provide cheap loans to hedge funds and others so that they can buy distressed bank assets at relatively high prices—has been heavily influenced by the financial sector, and Treasury has made no secret of that.

Johnson says that the same remedies that the IMF routinely gives to developing countries in similar financial crisis should also apply to the US. But they are not, because the American oligarchy is immune to the pressure that the IMF can put on oligarchies in other countries. The American oligarchy is not responsible to anyone.

As the IMF understands (and as the U.S. government itself has insisted to multiple emerging-market countries in the past), the most direct way to do this is nationalization… Nationalization would not imply permanent state ownership. The IMF’s advice would be, essentially: scale up the standard Federal Deposit Insurance Corporation process.

This may seem like strong medicine. But in fact, while necessary, it is insufficient.

Then Johnson gets to the crux of the problem and what must be done. When reading it, remember that Johnson is a centrist technocrat, not some ideologue, and his understanding comes from dealing with many countries that have gone through financial crises.

The second problem the U.S. faces—the power of the oligarchy—is just as important as the immediate crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy. (my italics)

But the IMF is not going to give this advice to the US because the US oligarchy, through the US government, pretty much dictates IMF policies.

The only way that the oligarchy will be broken is if the public demands it.

Next: Barack Obama’s role


When you look at god’s actions as revealed in the Bible, you realize that he is not very good at strategic long-range planning, preferring to go for cheap and popular gimmicks. But not to worry! His apologists know how to explain away all the absurdities and contradictions.

(Thanks to Machines Like Us.)

American oligarchy-5: How Wall Street builds its power

(For previous posts in this series, see here.)

In the previous posts, we saw how people with connections to big Wall Street firms like Goldman Sachs are everywhere in government, especially in key economic policy-making positions, so that whichever party wins, their interests are protected and advanced.

In his article in the May 2009 issue of The Atlantic magazine titled The Quiet Coup, Simon Johnson explains how firms like Goldman Sachs have carefully cultivated their power structure.

[T]he American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world.

One channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.

These personal connections were multiplied many times over at the lower levels of the past three presidential administrations, strengthening the ties between Washington and Wall Street. It has become something of a tradition for Goldman Sachs employees to go into public service after they leave the firm. The flow of Goldman alumni—including Jon Corzine, now the governor of New Jersey, along with Rubin and Paulson—not only placed people with Wall Street’s worldview in the halls of power; it also helped create an image of Goldman (inside the Beltway, at least) as an institution that was itself almost a form of public service.

Recall that once in a while, a maverick like Brooksley Born gets into a position such as head of the Commodity Futures Trading Commission, where she could be a thorn in the side of the oligarchy. I described how the oligarchy was able to marginalize her and neutralize her efforts and force her to leave. To make sure that that does not happen again, they then put their own people in that slot. As Glenn Greenwald points out:

More amazingly still, the CFTC, headed back then by Born, is now headed by Obama appointee Gary Gensler, a former Goldman Sachs executive (naturally) who was as instrumental as anyone in blocking any regulations of those derivative markets (and then enriched himself by feeding on those unregulated markets).

Just think about how this works. People like Rubin, Summers and Gensler shuffle back and forth from the public to the private sector and back again, repeatedly switching places with their GOP counterparts in this endless public/private sector looting. When in government, they ensure that the laws and regulations are written to redound directly to the benefit of a handful of Wall St. firms, literally abolishing all safeguards and allowing them to pillage and steal. Then, when out of government, they return to those very firms and collect millions upon millions of dollars, profits made possible by the laws and regulations they implemented when in government. Then, when their party returns to power, they return back to government, where they continue to use their influence to ensure that the oligarchical circle that rewards them so massively is protected and advanced. This corruption is so tawdry and transparent — and it has fueled and continues to fuel a fraud so enormous and destructive as to be unprecedented in both size and audacity — that it is mystifying that it is not provoking more mass public rage.

And of course Obama nominee Gensler was confirmed in his post without a single dissenting vote in the Senate Agriculture Committee, a perfect example of bipartisan subservience to Goldman Sachs and Wall Street.

POST SCRIPT: Stephen Colbert’s anti-gay marriage ad

A group called the National Organization for Marriage has put out an ad opposing gay marriage. Stephen Colbert thinks that ad doesn’t go far enough and ups the ante.

The Colbert Report Mon – Thurs 11:30pm / 10:30c
The Colbert Coalition’s Anti-Gay Marriage Ad
Colbert Report Full Episodes Political Humor NASA Name Contest

American oligarchy-4: How oligarchies work

(For previous posts in this series, see here.)

Simon Johnson is a professor at MIT’s Sloan School of Management. He used to be the chief economist at the International Monetary Fund and in that role had to deal with many countries in financial crisis and had plenty of experience with oligarchies. He is hardly an ideologue. In fact, he calls himself a ‘centrist technocrat’, which is the kind of person that these international financial institutions usually have in their technical divisions. But yet he has no hesitation in identifying the current financial crisis in the US as caused by the same kind of oligarchies that he encountered in his dealings with developing countries in crisis. In a must-read article titled The Quiet Coup that appeared in the May 2009 issue of The Atlantic magazine, he describes how oligarchies work and how they end up ruining the economies of countries.
[Read more…]

American oligarchy-3: Welcome to the club

(For previous posts in this series, see here.)

It is not just Geithner who is a slave to Wall Street interests. Key economic advisor in the Obama administration Lawrence Summers, although he comes from academia, is also enmeshed in that world. In just 2008 alone, Summers received $5.2 million from the hedge fund firm D. E. Shaw. Mind you, he was still a full-time professor at Harvard at that time, so this was for just part-time work. (Jonathan Schwarz breaks down the links to all his financial dealings.)

Summers also received $135,000 as a speaking fee for two speeches given at Goldman Sachs, the company that has been, and continues to be, a huge beneficiary of the bailout. (Recall that the previous Treasury Secretary Henry Paulson and before that Robert Rubin also used to head that same firm). At that time, Summers was already heavily involved in the Democratic campaign and it was clear that he would be a major player in either the Obama or Clinton administration. So Goldman Sach was likely buying “insurance” or, as Glenn Greenwald says, paying an “advanced bribe”, making sure that a friendly face would be in a major decision making position in the new Democratic administration, since they could not pay him once he joined the administration.

Here’s another examination by David Sirota of the close-knit and like-minded people from both parties who control economic policy.

At the top is Lawrence Summers, the director of Obama’s National Economic Council. As Bill Clinton’s Treasury secretary in the late 1990s, Summers worked with his deputy, Tim Geithner (now Obama’s Treasury secretary), and Clinton aide Rahm Emanuel (now Obama’s chief of staff) to champion job-killing trade deals and deregulation that Obama Commerce Secretary-designate Judd Gregg helped shepherd through Congress as a Republican senator. Now, this pinstriped band of brothers is proposing a “cash for trash” scheme that would force the public to guarantee the financial industry’s bad loans. It’s another ploy “to hand taxpayer dollars to the banks through a variety of complex mechanisms,” says economist Dean Baker—and noticeably absent is anything even resembling a “rival” voice inside the White House.

This financial oligarchy makes sure that those who are not with the program of letting the big financial firms have unfettered control over the economy get shut out of power. The story of Brooksley Born, former head of the Commodity Futures Trading Commission, is illustrative. She describes how her efforts in the 1990s to bring the wild derivative markets that caused the current crisis under regulation was vigorously opposed and defeated by a coalition of Alan Greenspan (then head of the Federal Reserve), then Treasury Secretary in the Clinton administration Robert Rubin (who used to head Goldman Sachs), and Lawrence Summers. Her story shows the bi-partisan nature of the protection given to Wall Street’s interests.

As chairperson of the CFTC, Born advocated reining in the huge and growing market for financial derivatives. Derivatives get their name because the value is derived from fluctuations in, for example, interest rates or foreign exchange. They started out as ways for big corporations and banks to manage their risk across a range of investments. One type of derivative—known as a credit-default swap—has been a key contributor to the economy’s recent unraveling.

Back in the 1990s, however, Born’s proposal stirred an almost visceral response from other regulators in the Clinton administration, as well as members of Congress and lobbyists. The economy was sailing along, and the growth of derivatives was considered a sign of American innovation and a symbol of the virtues of deregulation. The instruments were also a growing cash cow for the Wall Street firms that peddled them to eager takers.

Ultimately, Greenspan and the other regulators foiled Born’s efforts, and Congress took the extraordinary step of enacting legislation that prohibited her agency from taking any action. Born left government and returned to her private law practice in Washington. (my italics)

Speaking out for the first time, Born says she takes no pleasure from the turn of events. She says she was just doing her job based on the evidence in front of her. Looking back, she laments what she says was the outsized influence of Wall Street lobbyists on the process, and the refusal of her fellow regulators, especially Greenspan, to discuss even modest reforms. “Recognizing the dangers . . . was not rocket science, but it was contrary to the conventional wisdom and certainly contrary to the economic interests of Wall Street at the moment,” she says.

All this occurred during Bill Clinton’s administration during which Republicans controlled both houses of Congress for most of the time. So the concept of ‘divided government’ applies only as long as Wall Street interests are not involved. We see that all these people from across the political spectrum, so-called conservatives and so-called liberals, Democrats and Republicans, united to give Wall Street a free hand by removing restrictions from the financial institutions and thus sowed the seeds of the current crisis, showing how the financial oligarchy maintains continuity even though political parties come and go.

Alan Greenspan was such a die-hard Ayn Rand devotee that he even told Bonds that he did not think there should be any laws against fraud because the market would take care of things. We saw how well that turned out. The problem is that in an oligarchic system as currently exists, market forces only apply to powerless people. When the markets turn against the big financial interests, they have the power and influence to get the government to use taxpayer money to bail them out. Oligarchies never lose unless there is a popular revolt.

POST SCRIPT: The need for strong oversight

Jon Stewart has an excellent two-part interview with Elizabeth Warren, chair of the Congressional Oversight Panel on TARP (Troubled Asset Relief Program), who has been charged with overseeing the current bailout.

Part 1 explains what is going on now and part 2 explains clearly how we got into this mess and what we need to do in the future.

Part 1:

The Daily Show With Jon Stewart M – Th 11p / 10c
Elizabeth Warren Pt. 1
Daily Show
Full Episodes
Economic Crisis Political Humor

Part 2:

The Daily Show With Jon Stewart M – Th 11p / 10c
Elizabeth Warren Pt. 2
Daily Show
Full Episodes
Economic Crisis Political Humor

My concern is that because Warren seems to be honest and smart, she may be seen as a thorn in the side of the oligarchy which will try to make her serve as the usual window dressing to make it look as if there is accountability when in reality there is none. It seems clear that she is already being slowly frozen out of the information loop by the Obama administration. I wonder how long it will be before she quits in frustration, like Brooksley Born.