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Monday, October 6, 2008

Kevin Phillips: The Financialization of America

My neighbor Gerry Lange may read more than all of the other District 8 legislative candidates combined. This weekend he forwards me some material he was reading about Kevin Phillips, a former Republican strategist who worked for President Nixon and came up with the Southern strategy that wrested Dixie from Democratic domination. Phillips also writes books. His latest, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, appears to demonstrate a keen grasp of exactly what has led us to our current financial quagmire.

Thing is, as Gerry points out, Phillips has been writing about our profligate spending and out-of-kilter economy for years. He directs me to this New York Times review of Phillips's 2006 book American Theocracy, which I thought was just about how our whacky fundagelical friends are wrecking the GOP and the Constitution. "[T]he ominous intrusion of radical Christianity into politics and government" is but one of three dangers Phillips identifies. The other two: "the role of oil in defining and... distorting American foreign and domestic policy" and "the astonishing levels of debt — current and prospective — that both the government and the American people have been heedlessly accumulating."

Wow—Phillips wrote that in 2006, but he perfectly describes the McCain-* campaign.

So how did we get into this mess?

The creation of a national-debt culture, Phillips argues, although exacerbated by the policies of the Bush administration, has been the work of many people over many decades — among them Alan Greenspan, who, he acidly notes, blithely and irresponsibly ignored the rising debt to avoid pricking the stock-market bubble it helped produce. It is most of all a product of the "financialization" of the American economy — the turn away from manufacturing and toward an economy based on moving and managing money, a trend encouraged, Phillips argues persuasively, by the preoccupation with oil and (somewhat less persuasively) with evangelical belief in the imminent rapture, which makes planning for the future unnecessary [Alan Brinkley, "Clear and Present Dangers," New York Times, 2006.03.19].

Phillips explains the financialization of America in much greater detail in an interview with Bill Moyers from last month. While the federal government has been propping up and bailing out the financial sector since the 1980s (ask John McCain and his pal Charles Keating about the savings and loan collapse), it has done little to nothing to keep factories from closing. Sure, all those loans and stock investments created lots of wealth on paper and computer screens, but the manufacturing sector created wealth that, as Phillips points out to Moyers, supported a growing blue-collar middle class that could afford fishing cabins on Lake Michigan.

We have done nothing to keep open those factories in Michigan and elsewhere, engines of prosperity whose only fault was not paying their workers Chinese subsistence wages. But for bankers and brokers who invest in loans that an Accounting 101 student would have recognized as toxic, we break out the federal checkbook and authorize the single biggest federal disbursement in history.

One more partisan note: keep in mind that a key part of Senator Obama's plan for America is huge investment in alternative energy, not just to get us off oil, but to create five million new "green-collar" jobs—manufacturing jobs for folks to build all those windmills, solar panels, and whatever else American ingenuity can invent. Maybe that's why McCain couldn't compete in job-hungry Michigan.

Thanks to Gerry, I'll be reading more of Kevin Phillips. We all should, so we understand why Hank Paulson has a $700-billion blank check... and why we may be in for long Japan-style recession.

Party's over, Wall Street. Time to get America back to real work.


  1. Very good report. But, if we don't deal with the debt, then this is all pointless. We already owe the Chinese $2 Trillion in Treasury bonds and that is a piece of the $10.1 Trillion debt we are in today. I discuss that today on my blog, but, I've got some more facts and figures coming out later this week.

    Mondak at Dakota 21

  2. It seems that dealing with that debt will require putting our economy back on a stronger manufacturing footing, where our wealth is based on making real things, not in incurring more debt. Suggestions, anyone?

  3. Brinkley writes:

    Prophetic Christians, Phillips writes, often shape their view of politics and the world around signs that charlatan biblical scholars have identified as predictors of the apocalypse — among them a war in Iraq, the Jewish settlement of the whole of biblical Israel, even the rise of terrorism. He convincingly demonstrates that the Bush administration has calculatedly reached out to such believers and encouraged them to see the president's policies as a response to premillennialist thought. He also suggests that the president and other members of his administration may actually believe these things themselves, that religious belief is the basis of policy, not just a tactic for selling it to the public. Phillips's evidence for this disturbing claim is significant, but not conclusive.

    Sounds like the false prophets we were warned about in Roman times are alive and well today in the United States of America.

    In answer to your question, Cory: How about manufacturing wind turbines, solar arrays, power distribution systems, and the like? How about rebuilding our bridges, pipelines, and roads? How about tax breaks for companies willing to undertake these massive projects? How about devoting the same degree of attention to these things as we did to the war effort in the 1940s?

  4. You're sounding a lot like my man Barack, Stan! In addition to the green-collar jobs mentioned above, Obama is proposing big investment in transportation infrastructure to create jobs and make those vital repairs. McCain... well, anyone have a copy of his plan handy?

  5. To make green technology work efficient energy storage mechanisms must be developed. I'm getting pretty excited about synthetic hydrocarbon fuels generated from water, atmospheric carbon, and excess electricity:


    From relatively recent work, fuels produced in this way could be economically viable (<$4/gallon at the pump). More importantly though, they aren't limited to bio-stock and use CO2 from the atmosphere so it's a closed carbon cycle.

    Anybody want to see the US become a net fuel exporter?

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