Think about the costs of the financial crisis. According to the International Labor Organization, 34 million people around the world have lost their jobs. According to the World Bank, 60 million people were pushed further into extreme poverty, living on less than $2 a day. And what caused it? Greed. Excessive risk-taking by a financial sector, secure that it could keep the upside and have the taxpayer pay all the downside. It was a lucrative one-way bet and it paid off.
This is why it is imperative to close the casino, to make sure this never happens again. We need far stronger regulation over the financial sector, to reverse the damaging trends of deregulation from the 1980s onwards. We also need to impose a levy on the financial sector – to make them pay pre-emptively for future crises, to reduce risk-taking, and to reduce the size, wealth, and power of the sector. After all, inequality today is back at the level it had reached just before the Great Depression, and yet again, a powerful and aggressive financial sector is one of the main reasons for that. Just look at what Pope Pius XI was saying at the time in Quadragesimo Anno:
“In the first place, it is obvious that not only is wealth concentrated in our times but an immense power and despotic economic dictatorship is consolidated in the hands of a few, who often are not owners but only the trustees and managing directors of invested funds which they administer according to their own arbitrary will and pleasure.
This dictatorship is being most forcibly exercised by those who, since they hold the money and completely control it, control credit also and rule the lending of money. Hence they regulate the flow, so to speak, of the life-blood whereby the entire economic system lives, and have so firmly in their grasp the soul, as it were, of economic life that no one can breathe against their will.
This concentration of power and might, the characteristic mark, as it were, of contemporary economic life, is the fruit that the unlimited freedom of struggle among competitors has of its own nature produced, and which lets only the strongest survive; and this is often the same as saying, those who fight the most violently, those who give least heed to their conscience.
This accumulation of might and of power generates in turn three kinds of conflict. First, there is the struggle for economic supremacy itself; then there is the bitter fight to gain supremacy over the State in order to use in economic struggles its resources and authority; finally there is conflict between States themselves, not only because countries employ their power and shape their policies to promote every economic advantage of their citizens, but also because they seek to decide political controversies that arise among nations through the use of their economic supremacy and strength.”
And yet today, to no surprise, the Republicans refuse to back re-regulation. Look to their leaders. After a closed-door meeting with Wall Street investment managers, Mitch McConnell tried to spin the reform effort as another “bailout”. More recently, John Boehner said that the bill was akin to using nuclear weapons to kill an ant. Think about this. The greatest economic crisis since the Great Depression, millions thrown into unemployment and poverty – is like an ant. In this view, there is nothing fundamentally wrong with the financial sector. And certainly, you don’t need to worry about little things like unemployment benefits.
Unfortunately, this tawdry alliance between government and big finance is bipartisan scam. The New York Democrats are some of Wall Streets biggest defenders. But with the Republicans, there is an added issue – common sense runs straight into inflexible ideology and the mantra of Reaganism. A quarter of a century later, we are reaping the ugly rewards of this ugly ideology, and the zealots seem to have learned no lessons at all.
And then there are the latest developments, involving the tiny number of moderate Republicans who actually believe that regulation is important. But even here, they cannot get past the ideology. They opposed a levy on the biggest banks and the biggest hedge funds. But since there is no free lunch, that means taxpayers pay, as the money will now be raised from unspent bank bailout money and higher bank assessments. It’s actually even more perverse – while the big investment banks pay nothing, the small community banks are worse off. To sum up, we have a free market ideology that manifests itself as a government alliance with big business and big finance. So much for subsidiarity.
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