The Long Crisis

Samah El-Shahat, is Al Jazeera’s resident economist. She will be writing a regular column for Al Jazeera analysing key elements that have contributed to the global financial downturn and its impact across the world. In this article posted on the Al Jazeera website she gives her reasons why she believes that America is a bank owned state.

Before dismissing this article one should take a good look at the international news organization that Al Jazeera has developed over the past few years. Al Jazeera has earned the respect of journalists by conducting in depth reporting in many of the world’s dangerous to cover hot spots. The reports are often accompanied by raw video clips that show conditions on the ground for the viewer to analyse. No effort is made to spin these frequently vivid and graphic video reports in any direction.

For example, in the recent Israeli campaign in Gaza, on pictures and video clips of the conflict produced by Al Jazeera, the tell tell plumes of white trails from the use of white phosphorus bombs were clearly disclosed. This was an unwelcome revelation from the Israeli’s and American’s point of view as the use of white phosphorus as weapons is strictly forbidden and is banned by the UN’s third convention on conventional weapons.

America was involved as America supplied the white phosphorus weapons to Israel. This news was revealed in the UK Guardian and Al Jazeera. As far as I know it was not reported in the US MSM.

Al Jazeera, then usually delivers the news in an old fashioned way, news without the spin. The article “Why America is a Bank Owned State” by Samah El-Shahat is presented in that format.

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In my last column I introduced the idea that America’s handling of the financial crisis, and in particular the way it has refused to deal with the banks, is more in keeping with how an “emerging” economy might behave and act.

So this week, I will say that America has become a bank-owned state, allowing its banking oligarchs to suffocate the economy so they can survive at any price.

As a development economist, what always made developing and poorer countries stand out was the level of inequality between individuals.

That is, the difference between how a small percentage, usually the country’s capitalists, oligarchs and those close to people in power, were overdosing on wealth as the rest struggled to make ends meet, or even survive.

Money and power makes for a toxic bond. Everyone in the country knew it, from the poorest farmer on the street to the richest oligarch. It was in your face, unashamed, unabated and highly discomforting.

Discomforting because it made all of us who witnessed it feel crippled at the power of the status quo, ruing the unfairness of life when merit always comes last, relative to who you know and who you are.

We took some relief from believing that this only happens because these countries were authoritarian, and not so accountable to their electorate.

Yet, if we look closer at the leading capitalist economies such as those of America and the UK, we will find that inequity raises its ugly head equally, and as starkly, when you look at the numbers.

Kept in the dark

Here too, a small percentage have the lion’s share of national income in their hands, while the rest of the population experience stagnant incomes, all within a democratic, rather than an authoritarian, political regime.

Yet the real difference here is that, away from the numbers, the wider population and the electorate were mostly kept in the dark about this.

In 2006, the top one per cent of American households’ share of all disposable income amounted to almost a quarter of all households’ disposable income, according to Robert Hunter Wade, professor of political economy at the London School of Economics.

Signs that the crisis would become a great recession were apparent for a long time. In crude terms, one per cent of the population have a quarter of all the wealth.

Moreover, Wade found the average income of the bottom 90 per cent of the population remained almost stagnant after 1980, although consumption kept rising thanks to the build-up of private debt.

This means that 90 per cent of the American economy were financing their American dream on debt.

Back in 1989, chief executives pocketed 17 times more than average earners.

By 2007, those same “captains of industry” were earning 75 times more than the average worker.

That is one enormous leap and I wouldn’t mind that happening to my salary!

What’s good for Wall Street …

Warning signs that the financial crisis would become the great recession were there for all to see for a long time.

But where were the alarms in the system itself to say that these countries and the individuals in them were pursuing an unsustainable way of life?

Where were the signs that things were going to end disastrously and, worse still, that the most vulnerable might end up paying the heftiest and most disproportionate price than anyone else?

I believe the status quo was allowed to go unquestioned because banks were benefiting obscenely from the interest on our debt, and governments were in cahoots with these banks.
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For the remainder of this article go to the Al Jazeera website.

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