Cross-posted from Truth-Dig
Noam Chomsky’s new book, “Requiem for the American Dream: The Ten Principles of Concentration of Wealth and Power,” based on the film of the same name, is a primer in Chomsky’s analysis of the faults of the American political and economic system. Taking as its backbone the idea that “a significant part of the American Dream is class mobility: You’re born poor, you work hard, you get rich,” Chomsky systematically documents the many ways the system is rigged from top to bottom to ensure that corporations always win.
As Truthdig columnist Chris Hedges notes in a blurb for the book, “Its power to write its own laws and regulations, Chomsky points out, has ultimately created a mafia economic system and a mafia political system that is exemplified in the rise to power of the demagogue Donald Trump.”
In this book excerpt, we present here Chomsky’s Principle #6: Running the Regulators.
Running the Regulators
If you look over the history of regulation — railroad regulation, financial regulation and so on — you find that, quite commonly, it’s either initiated by the economic concentrations that are being regulated, or it’s supported by them. And the reason is because they know that, sooner or later, they can take over the regulators and essentially run what they do. They can offer what amounts to bribes — offer them jobs or whatever it may be — it’s an advantage to the regulators to accommodate themselves to the will of the powerful. It happens naturally in many ways, and ends up with what’s called “regulatory capture.” The business being regulated is in fact running the regulators. The banks and bank lobbyists are actually writing the laws of financial regulation — it gets to that extreme. That’s been happening through history and, again, it’s a pretty natural tendency when you just look at the distribution of power.
During the Depression, one of the regulations instituted was to separate commercial banks, which are where deposits are federally guaranteed, from investment banks, which just take risks and there are no federal guarantees. They were separated in what was called the Glass-Steagall Act.
In the 1990s, the economic programs of the Clinton administration were run pretty much by Robert Rubin and his associates — people who basically came out of the financial industries — and they wanted to overrule this law from back in the ’30s. They succeeded, in 1999, by undermining Glass-Steagall with the cooperation of right-wing Republicans, Phil Gramm and others. That meant that, essentially, the risky operations of investment banks ended up being guaranteed by the government. Well, you can see where that was going to lead — and it did. At the very same time, they also barred regulation of derivatives — exotic financial instruments — which meant that they could take off unregulated. Now all of this is quite safe as long as you know the government is going to come to your rescue…