Bulletin N°449



10 May 2010
Grenoble, France
Dear Colleagues and Friends of CEIMSA,
Memory is one important activity of the brain, according to Antonio Damasio; another is reason. Teaching history requires both of these faculties, and to transmit this knowledge in an effective way necessitates the production of strong feelings, and this sometimes involves extraordinary will-power. To evoke strong memories of past events and to submit these events to tentative analogies and rational analysis is not a value-free activity. Just as Harvard political scientist, Samuel Huntington, in his notorious book, The Clash of Civilizations (1998), evokes China and the entire Muslim world as the ineluctable enemy for "remaking the world order" after the Cold War, so critical visions, alternative to this bourgeois doomsday agenda, must be created to aim rationally at a destiny preferable to the "permanent war" economy of post-cold-war America.
Memory is necessarily selective, but this does not mean that it has to be dishonest. Remembering strategically that contradictions cannot be permanently concealed by the fumes of ideology, no matter how ardently they are generated, gives us reason for hope: the smoke will eventually dissipate, and the contradictions lying beneath this vail will sooner or later become apparent to all concerned. This, it would appear, is not an article faith, but rather a fact of life.
We live in an age when smoke screens have indeed become thin, and the outlines of underlying contradictions are gaining visibility: Military force cannot create social order, ideological indoctrination cannot substitute for free thought, economic inequality cannot destroy the urge for social justice, political power, if it is to be sustained, requires broadly recognized legitimacy --these are but a few of the elements embedded in the contradictions which govern our daily lives. We can expect a brief period of disorientation, disillusionment, and even denial before the focus on material relationships becomes general and the necessity to act becomes widely acknowledged. In the meantime, we might be well-advised to focus on these outlines of material reality “under the volcano,” so to speak, and prepare ourselves to recognize more fully what has always been there only partially concealed beneath the surface of our capitalist cultures, viz. the human sacrifice.

The 6 items below offer CEIMSA readers views --behind the smoke screen-- of material contradictions which might evoke thought (i.e. strong feelings, vivid memories, clear reason, determiuned will-power) to a degree that they could possibly contribute to our counter-cultural efforts to affect the lives of people living around us, near and far.

Item A. is an article by Immanuel Wallerstein on the future of the European Union in the context of the "Greek Crisis."

Item B., sent to us by professor Vicki Briaut, is an article by the Comité pour l'Annulation de la Dette du Tiers Monde on ending the economic war on the Greek nation.

Item C., is an essay by Business Insider reporter, Gus Lubin, on the new levels of economic inequality developing in the "reborn" US Plutocracy as we speak.

Item D., is a Your Call radio program by San Francisco-based journalist, Rose Aguilar, on "the military-industial-congressional complex" that President Eisenhower tried to warn us about in 1961. Has Obama not yet heard the bad news, or is he the bad news?

Item E., is an article by professor emeritus at the University of Massachusetts, Richard Wolff, analyzing the influence of national debts on class struggle.

Item F., is a brief statement by Robert Reich, Former Secretary of Labor and UC-Berkeley Professor, discussing : "The (Almost) Crash of Wall Street" last Thursday, 6 May.

And finally, we invite CEIMSA readers to view this "Report from the Middle East" series of videos on The Real News network : a story of greed and premeditated mass murders.


Francis McCollum Feeley
Professor of American Studies
Director of Research
Université Stendhal Grenoble 3

from ZNet :
Date: 28 April 2010
Subject: Europe on the edge.


"Is Europe Imploding?"

by Innanuel Wallerstein

Europe has had its nay-sayers since it started on the long road to unification. There were many who believed it impossible. And there were many who thought it undesirable. Still one has to say that, in the long and sinuous path it has taken since 1945, the project of European unification has done remarkably well.  After all, Europe had been torn apart by nationalist conflict for at least 500 years, conflict which culminated in the particularly nasty Second World War. And revenge seemed to be the dominating emotion. As of 2010, what is now called the European Union (EU) houses within it a common currency, the euro, which is used by 16 countries. It also has a zone with 25 members, called Schengen, which permits somewhat free movement without visas. It has a central bureaucracy, a human rights court, and is on track to having a president and a foreign minister.

One shouldn't exaggerate the strength of all these structures, but one shouldn't underestimate the degree to which all this has represented, for good or ill, the overcoming of nationalist resistance throughout Europe, especially in some of the stronger states. Yet, it is also the case that right now Europe seems in some important ways to be imploding. The code words for this implosion are "Greece" and "Belgium."

Greece, as all the world is aware, is undergoing a severe sovereign debt crisis. Moody's has declared Greek state bonds to be junk bonds. Prime Minister George Papandreou has said, very reluctantly, that he would probably have to turn to the International Monetary Fund (IMF) for a loan, a loan that would imply the usual IMF conditions requiring specific forms of neoliberal restructuring. This idea is very unpopular in Greece - a blow to Greek sovereignty, Greek pride, and especially Greek pocketbooks. It was also greeted with dismay in a number of European states that feel that financial assistance to Greece should come first of all from other EU members.

The explanation of this scenario is quite simple. Greece has a big budgetary deficit. Because Greece is part of the eurozone, it cannot devalue its currency to alleviate the problem. So it needs financial aid. Greece asked for European aid. The biggest and wealthiest European country, Germany, has been highly reluctant, to say the least, to give such aid. The German public is strongly opposed to helping out Greece, basically out of a protectionist reflex in a time of European stress. They also fear that Greece is the first of a line of others (Portugal, Spain, Ireland, and Italy) who will make similar demands if Greece gets such aid.

The German public seems to wish it would all go away, or at least that Greece somehow be thrown out of the eurozone. Aside from the fact that this is legally impossible, the country that would suffer most as a result, besides Greece, is surely Germany, whose own economic health is largely based on the strong export market it has within the eurozone. So, for the moment, we seem to be at an impasse. And the market vultures are hovering over all the eurozone countries that are in sovereign debt trouble.

In the midst of this, the now perennial Belgian crisis has reared its head in a particularly acute way. Belgium, as a country, came into existence as a result of pan-European politics. The collapse of the Habsburg empire of Charles V resulted in the partition of the so-called Burgundian Netherlands into the United Provinces in the north and the Austrian Netherlands in the south. The Napoleonic Wars led to the two parts being put together again in the restored Kingdom of the Netherlands. And the European conflicts of 1830 led to the two parts being split apart again, with the creation of Belgium in more or less the erstwhile Austrian Netherlands, with a king imported from elsewhere.

Belgium was always a composite of Dutch-speaking "Flemish" and French-speaking "Walloons," largely but imperfectly located in two different geographical sectors (the north and south of Belgium). There was also a small German-speaking zone.

 Up to 1945, the Walloons were the more educated, wealthier ones, and they controlled the major institutions of the country. Flemish nationalism was born as the voice of the underdogs fighting for their political, economic, and linguistic rights.  After 1945, the Belgian economy underwent a structural shift. Walloon areas lost strength and Flemish areas gained strength. Belgian politics became as a consequence a never-ending struggle of the Flemish to obtain more political rights - devolution of powers, with the ultimate objective for many of dissolving Belgium into two countries.

Bit by bit, the Flemish got more and more of their way. Today, Belgium as a country has a common monarchy, a common foreign minister, and very little more. The sticking-point in this arrangement is that Belgium is now a confederal state with three, not two, regions - Flanders, Wallonie, and Brussels (the capital).

Brussels is not only the capital of Belgium. It is the capital of Europe, the locus of the European Commission. Brussels is also a very bilingual city. And the Flemish are insisting on making it less so. The problem is that, even if there were to be agreement on the dissolution of Belgium, there would be no easy way to arrange the fate of Brussels.

The latest negotiations were so intractable that Le Soir, Belgium's leading French-language newspaper, proclaimed that "Belgium died on April 22, 2010." Their lead editorialist asked "Does this country make sense anymore?" At the moment, the king is trying, perhaps vainly, to recreate a government. He may have to call new elections, without much hope that the elections will produce a really different parliament. On July 1, Belgium assumes the rotating six-month presidency of the EU, and it is not certain there will be a Belgian Prime Minister to preside over it.

The Greek problem is the problem of spread. Will Greece's difficulties not be replicated - are they not already being replicated - elsewhere in Europe? Can the euro survive? The Belgian problem presents however an even greater problem of spread. If Belgium comes apart, and both parts are then members of the EU, will not other states consider coming apart? There are after all important secessionist or quasi-secessionist movements in many EU countries. Belgium's crisis could easily become Europe's crisis.

Of the two threatened implosions, the one symbolized by Greece is easier to solve. It basically only requires that Germany realize that its needs are better met by European protectionism than by German protectionism.

The Belgian crisis poses a much more fundamental question. If Europe were ready, right away, to move forward to a truly federal state, it could accommodate the break-up of any of its existing states. But it has not been ready up to now. And the world's collective economic difficulties have much strengthened the narrow nationalist elements in virtually every European country, as all the recent elections have shown. Without a strong European federation, it would be extremely difficult for Europe to survive a stream of break-ups. Amidst the political havoc, Europe could go down the drain.

There is a certain Schadenfreude among U.S. politicians about Europe's difficulties. What may however save Europe from any implosion is precisely the ever-increasing threat of the implosion of the United States. Europe and the United States are on a seesaw, on which as one goes up the other goes down. How this will play out over the next two to five years is not at all clear.

from Vicki Briaut :
Date: 4 May 2010
Subject: Comité pour l'Annulation de la Dette du Tiers Monde.

Hi Francis,
Just sending you the CADTM's latest communiqué concerning the neoliberal "final solution" to the problems of Greece.  As Marc pointed out, the way it is being reported in the French media is a perfect example of the "shock strategy" in action, as described by Naomi Klein.  Preparing us for the "inevitable"...

Comité pour l'Annulation de la Dette du Tiers Monde
Communiqué de presse - Mardi 4 mai 2010


Soutien à la résistance du peuple grec contre la dictature des créanciers !

3 mai, par CADTM international, CADTM France, CADTM Belgique, CADTM Suisse

Le nouveau plan d’austérité annoncé dimanche 2 mai est une véritable catastrophe pour la population grecque , les salariés du privé comme du public, les retraités et les privés d’emplois.

-  Gel des salaires et des retraites de la fonction publique pendant 5 ans ;
-  Suppression de l’équivalent de 2 mois de salaires pour les fonctionnaires ;
-  Diminution de 8% de leurs indemnités déjà amputées de 12% par le précédent plan d’austérité du gouvernement dirigé par le PASOK ;
-  Le taux principal de la TVA qui, après être passé de 19 à 21%, est porté à 23%, (les autres taux augmentent aussi (de 5 à 5.5% et de 10 à 11%))
-  Les taxes sur le carburant, l’alcool et le tabac augmentent pour la 2 ème fois en 1 mois de 10%
-  Les départs anticipés ( liés à la pénibilité du travail) sont interdits avant l’âge de 60 ans ;
-  L’âge légal de départ à la retraite des femmes est porté de 60 à 65 ans d’ici 2013.
-  Pour les hommes, l’âge légal dépendra de l’espérance de vie ;
-  Il faudra 40 ans de travail (et non plus 37, hors études et chômage) pour avoir une retraite à taux plein ;
-  Cette retraite sera calculée, non plus en fonction du dernier salaire mais selon le salaire moyen de la totalité des années travaillées (soit l’équivalent d’une baisse du montant net de la retraite de 45 à 60%°)
-  L’Etat réduira ses dépenses de fonctionnement (santé, éducation) d’1, 5 milliards d’euros.
-  Les investissements publics seront réduits aussi d’1,5 milliards d’ .
-  Un nouveau salaire minimum pour les jeunes et les chômeurs longue durée est créé ( soit l’équivalent du CPE rejeté en France par la jeunesse et les syndicats))

C’est une aubaine pour les marchés financiers et le capital !

-  Les transports, l’énergie et certaines professions réservées à l’Etat seront libéralisés et ouverts au privé (privatisations) ;
-  Le secteur financier (banques principalement) bénéficiera d’un fonds d’aide mis en place avec l’aide du FMI et l’UE ;
-  La flexibilité du travail sera renforcée ;
-  Les licenciements seront facilités.
-  L’économie grecque est placée sous contrôle du FMI.

La Grèce, restant dans la zone euro, ne pourra pas dévaluer sa monnaie, ni jouer sur les taux d’intérêt. La dette ne sera pas restructurée non plus, les institutions financières européennes en détiennent les 2/3. Ces mêmes banques continueront à emprunter auprès de la Banque Centrale européenne à un taux de 1% pour prêter aux Etats (moyennant rémunération). En contrepartie de ces mesures, les pays de la zone euro vont prêter un par un une aide de 100 à 135 milliards d’ sur 3 ans à la Grèce à un taux de 5% (45 milliards cette année). Les Etats riches et les banques vont donc faire de l’argent sur le dos du peuple grec. Christine Lagarde, ministre français des finances, prévoit un bénéfice de 150 millions d’euros par an. Pratiquant ainsi, ils vont accroître la dette publique pour permettre à l’Etat grec de payer ses créanciers spéculateurs !

La crise greque est la démonstration grandeur nature de la triple dangerosité du FMI, de l’Union Européenne et des marchés financiers.

Le FMI, décrié à juste titre pour ses catastrophiques « plans d’ajustement structurels » refait surface dans la zone euro, après avoir sévi ces 2 dernières années dans plusieurs ex-pays de l’Est. Il utilise aujourd’hui les mêmes procédés qu’hier adaptés aux mêmes commanditaires : les marchés financiers et les transnationales. Aujourd’hui comme hier, c’est sa véritable nature de pompier pyromane qui est révélée en plein jour.

L’UE et sa commission ont également réaffirmé leurs paradigmes au service de la « concurrence libre et non faussée ». La Banque Centrale Européenne n’est pas au service des populations de l’Europe mais uniquement à celui des banques et des organismes financiers. Les marchés financers, après avoir provoqué et précipité la crise greque, via les agences de notation rémunérées par les grandes banques américaines, veulent tirer encore plus de profits de leurs stratégies spéculatives. Le gouvernement PASOK, l’Union Européenne et le FMI lui en servent l’occasion sur un plateau.

Derrière l’industrie financière, il y a les multinationales de l’industrie, du commerce et des services.

Si nous stigmatisons à juste titre les fonds spéculatifs, les agences de notation et l’industrie financière, nous ne perdons pas de vue que ce n’est que l’arbre qui cache la forêt ! Cette spéculation débridée qui étrangle les populations pauvres n’a été rendue possible que pour 2 raisons principales :
-  Les dérèglementations successives des marchés financiers depuis les années 1980 ;
-  Les choix volontaires et conscients du grand patronat de destiner leurs nouveaux profits vers la spéculation plutôt que vers la production et l’emploi. Cette accumulation de nouveaux profits trouve, elle, son origine dans une nouvelle répartition des richesses au bénéfice des profits et au détriment de la part revenant aux salariés. Cette part à baissé d’environ 10% de PIB en 25 ans en moyenne dans l’ensemble des pays développés.
Cette orientation économique, portée par l’idéologie néolibérale, est la cause principale de la crise économique et financière que nous connaissons aujourd’hui.

Les différents gouvernements qui se sont succédés depuis 30 ans, en Grèce comme dans les autres pays du Nord, portent aussi une lourde part de responsabilité dans l’augmentation des dettes publiques. Les politiques fiscales, menées en faveur des ménages les plus aisés et des grandes entreprises (impôt sur le revenu, le patrimoine et impôt sur les sociétés), ont considérablement diminué les recettes budgétaires et aggravé les déficits publics, obligeant les Etats à accroître leur endettement.

Les responsables de la crise sont épargnés et c’est le peuple à qui on présente l’addition.

Dans le plan d’austérité PASOK UE-FMI imposé au peuple grec, il n’y a en effet que des mesurettes sans effet pour établir le début d’une justice fiscale et absolument rien pour lutter contre l’évasion fiscale des profits des grandes entreprises.
Les « solutions » du PASOK, de l’UE et du FMI précipitent la Grèce vers l’approfondissement de la crise. Une récession minimale de 4 points du PIB est déjà programmée pour 2010. Les petits artisans et commerçants, les petites entreprises vont connaître une longue suite de faillites et de fermetures d’activités. Le chômage va exploser et les couches populaires et les classes moyennes vont voir leur pouvoir d’achat tomber en chute libre. Les inégalités vont s’accroître et les droits humains fondamentaux (accès à l’énergie, à l’eau, à la santé, à l’éducation ) sont menacés pour la partie la plus pauvre de la population.

La colère du peuple grec est aussi la nôtre. Le CADTM soutient sans réserve les mobilisations contre le plan d’austérité.

Des solutions alternatives existent !

-  Le remboursement de la dette publique de la Grèce doit être immédiatement suspendue et un audit public de celle-ci doit être mené pour décider de sa légitimité ou de son illégitimité.
-  Des mesures d’annulation doivent être prises et les revenus financiers de la dette doivent être taxés à la source au taux maximal de l’impôt sur le revenu.
-  Des mesures fiscales peuvent immédiatement être prises pour rétablir la justice fiscale et lutter contre la fraude. Aujourd’hui, selon les comptes du Trésor grec, les fonctionnaires (désignés comme boucs émissaires) et les ouvriers déclarent plus de revenus que les professions libérales (médecins, pharmaciens, avocats) ou encore que les dirigeants des banques !
La quasi-totalité des grandes entreprises (armateurs, ) déclarent leurs profits dans des pays à fiscalité plus avantageuse (Chypre notamment) ou les cachent dans les paradis fiscaux. L’église orthodoxe continue à bénéficier d’exhorbitantes exonérations fiscales sur le patrimoine et l’immobilier
De l’argent, en Grèce, il y en a, mais pas là où le plan d’austérité veut le prendre ! Au CADTM, nous sommes solidaires du peuple grec qui sera en grève générale mercredi 5 mai prochain. Partout, en Grèce comme dans les autres pays européens, la solidarité par la mobilisation doit s’amplifier. Aujourd’hui, c’est la Grèce mais chacun sait que demain ce sera le Portugal, l’Irlande ou l’Espagne. Après-demain, toute la zone euro peut basculer, y compris les pays les plus « riches » de celle-ci.

Nous nous félicitons des premières déclarations solidaires et du début des mobilisations de soutien devant les ambassades grecques. Il faut aller plus loin !

Le mouvement social européen dans son ensemble doit être aux côtés du peuple grec ! les populations européennes ont tout à y gagner !

Le CADTM, à son niveau y contribuera !

from Information Clearing House :
Date: 7 May 2010

Real average earnings in the United States have not increased in 50 years.

15 Mind-Blowing Facts About Wealth And Inequality In America
by Gus Lubin

from Your Call Radio :
Date: 3 May 2010
Subject: The Military Industry, A Pillar of the US Economy.

     In 1961, President Dwight Eisenhower gave his now famous farewell speech about the military industrial complex. He said we must never let the weight of the disastrous rise of misplaced power endanger our liberties or democratic process. He said, “Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.
     What would he say today? In 1938, the U.S. had 14 overseas bases. Today, there are over 800 bases in 156 countries. The U.S. military spends $1.75 billion per day. In February, President Obama announced the largest military budget since World War II. The baseline budget, plus the occupations of Iraq and Afghanistan, and the 30,000 extra troops that the President is sending to Afghanistan equals $741 billion – and it’s expected to grow in the coming years.

The Costs of the Military-Industrial Complex
by Rose Aguilar

from Richard Wolff :
Date: 7 May 2010
Subject: The global class struggles to come.

Class Struggles and National Debts
by Rich Wolff

The political conflicts and street battles in Greece today foretell what is coming to many countries including the US. The struggles are basically over what the government spends on and who pays the taxes.  In today's class-divided societies, classes differ over what governments should do and who should pay the taxes. Governments in such societies often turn to borrowing -- which produces national debts -- as ways to defer and postpone the political problems of resolving class struggles focused on the state. By borrowing, governments can immediately accommodate -- at least partly -- the different class demands for government spending while postponing the raising of taxes into the future (when they will need to be raised more, of course, to repay the amount borrowed plus interest).

Problems arise when lenders to such governments demand much higher interest payments or refuse to lend more.  Then rising national debts can no longer postpone resolution of the underlying class struggles.  Those debts react back upon and intensify those struggles.  So it is in Greece today, and so it will be elsewhere in the months and years to come wherever governments cope with their societies' class divisions by borrowing.  Class struggles deferred often become class struggles sharpened.

Employers and employees struggle everywhere over what activities the government should and should not perform.  Employers want governments to support and enhance the profits they seek (build and secure the transportation and communication infrastructures they want, educate their workers, protect their markets, enforce their contracts in courts, etc.).  Employees, in contrast, want the government to support their incomes, families, and standards of living (provide unemployment insurance, social security, medical insurance, public parks, subsidized housing and public education, etc.).

At the same time, employees and employers struggle over who is to pay the costs of government expenditures.  Employers seek to burden employees by shifting income taxes onto middle and lower income earners, by imposing sales and property taxes that fall disproportionally on those earners, and so on.  Employees seek to push tax burdens in the opposite direction (more progressive income taxes, capital-gains and dividends taxes, etc.).

The two sides' relative strengths -- their organizations and resources -- usually determine the patterns of government expenditures and what portion of the tax bill each side pays.  Rarely employers and employees agree on these contentious issues.  Mostly, conflicts and struggles between the two sides pressure governments.

Governments fear the political costs of going so far in placating one side that they risk being ousted from power by the other side. Borrowing thus eases their problems at least temporarily.  Moreover, politicians borrow because the eventual costs of accumulating national debts fall upon their successors.

Of course, lenders to governments come chiefly from employers, not employees.  Lenders are, of course, complicit in building up national debts because they collect most of the interest payments from the borrowing governments.  From the employers' perspective, the national debt often looks like an attractive lesser evil.  The employers fear that when the government gets into a corner -- it needs to spend more, say, to bail out a capitalist crisis -- it may find it politically impossible to impose higher taxes on the mass of employees.  Indeed, employees might then seek, and the government might be tempted, to raise taxes on employers.  The employers prefer a lesser evil: instead of taxing us, they say in unison, how about we lend you the money.

Major lenders to governments around the world are banks; hence they are major gainers from national debts.  The current explosion in national debts is thus a bonanza for the world's banks.  As major contributors to the current crisis, banks now reap major gains from the government borrowing undertaken to cope with that crisis.  The alternative and much cheaper path -- to tax employers rather than borrow from them and repay with interest -- is barely discussed.

Lenders to governments understand that class struggles postponed may thereby be sharpened.  As Greece's national debts mounted, lenders worried about the rising interest costs facing the Greek government.  They watched Greek society wrestling over who would suffer to enable the government to pay the interest on its accumulated national debt.  They foresaw a possible stalemate where the Greek government would be unable to either raise taxes or cut spending on employees.  The lenders thus confronted the risk of a Greek government tempted into default, declaring it would not repay its lenders part or all of what it had borrowed (as, for example, Argentina did a few years ago).

The lenders therefore began refusing to lend any more to Greece (or even to roll over debt coming due) or they demanded much higher interest rates.  In effect, lenders demanded that the Greek government either tax employees more or else cut government spending on employees to free up money to service Greece's national debt.  Or else no more loans and/or much higher interest on loans.  The European Union's leaders repeated the demands of the private lenders when they offered public loans from the Union at lower interest rates than private lenders.  The European Union's leaders (chiefly Germany's Merkel and France's Sarkozy) shared the fears and perspectives of private lenders that Greece might default.  Then, too, German and French banks were the largest lenders to the Greek government and so had special vulnerability to a Greek government default.

The moral of the story of class struggles and national debts is this: government borrowing is capitalism's very employer-partisan way out from a political dead end.  It rewards lenders nicely, but it only works for a while.  Employers who avoid taxes and instead lend to governments eventually encounter the risk of default by over-indebted and politically stalemated governments.  Then employers refocus their own and governments' efforts back on the old, underlying class struggles by concerted attacks to reduce government spending on employees while taxing them more.  Americans will confront the same basic situation as the immense and growing US national debt brings its lenders to a similar crossroads.  Meanwhile, workers from Greece to Portugal, Spain, Italy, Ireland, and beyond ready themselves for massive, sharpened

Rick Wolff is a Professor Emeritus at the University of Massachusetts in Amherst and also a Visiting Professor at the Graduate Program in International Affairs of the New School University in New York.   He is the author of New Departures in Marxian Theory (Routledge, 2006) among many other publications.  Check out Rick Wolff’s documentary film on the current economic crisis, Capitalism Hits the Fan, at www.capitalismhitsthefan.com.  Visit Wolff's Web site at www.rdwolff.com, and order a copy of his new book Capitalism Hits the Fan: The Global Economic Meltdown and What to Do about It.

from Roberet Reich :
Date: 7 May 2010
Subject: The (Almost) Crash of Wall Street.

The (Almost) Crash of Wall Street
by Robert Reich

Ninety minutes before the end of the trading day Thursday, the U.S. stock market almost melted down. The Dow Jones Industrial Average dropped nearly 1,000 points. The market regained ground before the end, like a giant 747 narrowly averting a crash landing, but the questions of the day are: What happened? And what does it mean?

At this point no one knows why. Some say it was sudden burst of worries about Greece's debt and the increasing possibility of a default that might cause a run by global investors. Others point to a "trading error." Giant high-speed computers generate millions of trades based on instructions embedded in computer programs designed to move fast enough to beat everyone else. So when there's a glitch in one of them it can immediately spread to all the other programs designed to move just as fast. Some say it was an erroneous trade entered by someone at a big Wall Street bank who mistyped an order to sell a large block of stock, and that the big drop in that stock's price (Procter & Gamble?) triggered "sell" orders across the market.

Regardless of why it happened, it's further evidence that the nation's and the world's capital markets have become a vast out-of-control casino in which fortunes can be made or lost in an instant -- which would be fine except for the fact that most of us have put our life savings there. Pension funds, mutual funds, school endowments -- the value of all of this depends on a mechanism that can lose a trillion dollars in minutes without anyone having a clear idea why. So much of the market now depends on computer programs and mathematical models that no one fully understands, so much trading is in the hands of a few people whose fat thumbs or momentary carelessness might sink the economy, so much of global wealth now depends on who can move their money quickest at the slightest provocation -- that we are toying with financial disaster every day. The luck or foolishness of a few traders, and inside knowledge and information that some possess and others don't, combined with ultra high-speed computers, put us all at the whim of a system whose risk is way out of proportion to any public benefits.

The financial reforms being considered on Capitol Hill are steps in the right direction. But the "systemic risk" now embedded in our capital markets is higher than ever, and will require far greater understanding and vigilance than now being considered.