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Neoliberals Celebrate Their Victory Five Years After The Great Crash

And how much did your net worth drop because of other people’s mortgage failures?

Crashes are a feature of our wonderful capitalist system, the best that money can buy. And that last one was a doozy. Millions unemployed, losing their homes, and, of course, the spectacle of slimy politicians bowing to the wishes of the perpetrators of the disaster. Yes, Mr. Bankster, we’ll dump cramdown in bankruptcy so you can foam the runway with the bodies of homeowners, said Larry Summers, Tim Geithner and Barack Obama. No, Mr. Bankster, we won’t prosecute anyone for the crimes committed in the run-up to the Great Crash, said Mary Schapiro, Robert Khuzami, Eric Holder and a raft of U.S. Attorneys including Charles Schumer’s protégé Preet Bharara, and Barack Obama. This is depressing. Let’s just skip to today: Yes, Mr. Bankster, I’ll appoint Larry Summers to the Fed, says Barack Obama. He’s done so much for you already, how can I refuse you Sweetie-pie?

This week is the five year anniversary of the Great Crash, and the media and the internet have been pointing out just how awful things were and are. Articles and blog posts featuring twelve charts on the non-recovery, personal stories of loss, the disruption of millions of lives, the pain and suffering, are everywhere. This one really pushed my buttons, Ex-Wall Street Chieftans Living Large in a Post-Meltdown World, from the Center for Public Integrity.

Many of the top Wall Street bankers who were largely responsible for the disaster — and whose companies either collapsed or accepted billions in government bailouts — are also unemployed. But since they walked away from the disaster with millions, they’re juggling their ample free time between mansions and golf, skiing and tennis.

In the same vein: Subprime Lending Execs Back In Business Five Years After Crash, also from CIPR. The refusal to prosecute, the deep respect shown by putative prosecutors to their betters and future employers (Lanny Breuer), is just the operation of the neoliberal view so clearly expressed by the soi-disant public intellectual Richard Posner in a 1985 article in the Columbia Law Review:

This means that the criminal law is designed primarily for the nonaffluent; the affluent are kept in line, for the most part, by tort law. This may seem to be a left-wing kind of suggestion (“criminal law keeps the lid on the lower classes”), but it is not. It is efficient to use different sanctions depending on an offender’s wealth. P. 1204-5, fn omitted.

Yes, the rich are different from you and me: they pay fines for crimes that would send you to prison. That’s fair, says the Seventh Circuit Court of Appeals Judge Posner, because:

The major function of criminal law in a capitalist society is to prevent people from bypassing the system of voluntary, compensated exchange — the “market,” explicit or implicit — in situations where, because transaction costs are low, the market is a more efficient method of allocating resources than forced exchange. Market bypassing in such situations is inefficient — in the sense in which economists equate efficiency with wealth maximization — no matter how much utility it may confer on the offender. P. 1195, fn omitted.

That last sentence is priceless. It says that stealing a course of HIV/AIDS antivirals to save your partner’s life is a vicious crime, because the Sacred Market insists that Big Pharma deserves all the profit it can rip off. It’s the principle of the thing. You wouldn’t understand; you aren’t an initiate into the Mysteries of the Mont Pelerin Society; you don’t worship at the altar of the Market, the most powerful computer of human desires, not created but spontaneously arising from the actions of millions in utter ignorance of the beauty they create. You can find a much better explanation in Philip Mirowski’s book Never Let a Serious Crisis Go To Waste.

But the worst part of this round of grinding down of the average American is what it has done to us as people. The apoplectic rage that these stories induce in me leads to writing ugly things about the clownish academics who infest the halls of the University of Chicago. But just look at the Tea Party. Their rage is directed against the victims of the Great Crash, the people dependent on food stamps, Section 8 housing, unemployment insurance, and, at the very top of the list, Medicare and Medicaid, and Social Security. Slash and Burn, they say. Destroy the ground on which those poor bastards live. Crush their children, they say: “The Lord…[visits] the iniquity of the fathers on the children and the children’s children, to the third and the fourth generation,” reveling in the language of Exodus 34:6-7, and in secret delight, they heap misery upon the 22% of American children living in poverty. “Let them die”, the new battle cry of the hateful in America.

As Mirowski points out, the Tea Party started with a rant about mortgages: “Do we really want to subsidize the losers’ mortgages?” That led to the proliferation of the motto: Your Mortgage Isn’t My Problem, which, as it turned out, is a filthy lie. The big source of losses in the Great Crash is the loss of home equity. Even those supposed winners found their net worth dropped like a stone. Maybe they can eat their victory along with their catfood.

Mirowski shows us in vivid language that the Losers are supposed to accept the judgment of the market on the risks they voluntarily undertook. They are to blame, and they should creep into a corner and die. At the very least, they should become the subjects of economic disaster porno (“How does living in a car in a Walmart parking lot make you feel?”), making money for Rupert Murdoch and Viacom and simultaneously furnishing object lessons for those who are momentarily safe.

Except, of course, that doesn’t apply to banksters and to the rich generally. Their corrupt businesses got bailed out, and they got to keep the money. They have to decide whether to play golf or tennis today, and then it’s cocktails at 6 with the Blankfeins and the Corzines; and Charles Koch is dropping by later.

And that’s precisely the outcome for which Posner and his triumphant neoliberal pseudo-intellectuals cheer.

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