It is becoming increasingly clear that the financial meltdown of 2008 and the subsequent economic contraction that continues to this day represent more than just another recessionary cycle. More importantly, they represent a structural change, a new phase, the phase of the dominance of "finance capital," as the late Austro-German political economist Rudolf Hilferding put it.
Although the current domination of our economy by finance capital seems new, it is in fact a throwback or "retrogression" (as financial expert Michael Hudson puts it) to the capitalism of the late 19th and early 20th centuries; that is, the capitalism of monopolistic big business and gigantic financial institutions. The rising economic and political influence of powerful financial interests in the early 20th Century led a number of political economists (such as John Hobson, Rudolf Hilferding and Vladimir Lenin) to write passionately on the ominous trends of those developments -- developments that significantly contributed to the eruption of the two World Wars and precipitated the devastating Great Depression of the 1930s, by creating an unsustainable asset price bubble in the form of overblown stock prices.
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February 15, 2010
February 5, 2010
Congress, Not the Regulators, Must Draw Hard Lines
Since the financial meltdown in 2008, America and Congress have remained stuck at a crossroads. Not since the Great Depression of the 1930's have we experienced a financial and economic crisis of such magnitude that it forces us, as a society and lawmaking body, to reconsider the legal and institutional underpinnings of our financial system.
The history of our nation shows that we have been at this crossroads before -- at times we have made the right decision, while sadly at others, we have made the wrong one.
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The history of our nation shows that we have been at this crossroads before -- at times we have made the right decision, while sadly at others, we have made the wrong one.
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January 11, 2010
Obstruction for Obstructionism’s Sake
For a high school history and government teacher, 2009 brought with it many challenges that provided unique fodder for classroom discussion. The financial meltdown and stimulus raised questions about government intervention, and the balance between personal responsibility and institutional accountability. The health care battle forced a dialogue about what citizens can and cannot expect in a democratic, but also capitalistic, society. And concerns about the future of the planet at a time of severe economic downturn forced my young charges to consider how government should prioritize dollars and resources whose objects often seem to be at cross-purposes.
Because my students were just beginning to engage in current events (OK, I forced them, but some of them actually liked it!), none of them was particularly ideological. They wholly believed in the nation's ability to solve these problems, and therefore made their arguments in good faith -- a welcome departure from the current political debates and ideological warfare unfolding in our nation's capital.
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Because my students were just beginning to engage in current events (OK, I forced them, but some of them actually liked it!), none of them was particularly ideological. They wholly believed in the nation's ability to solve these problems, and therefore made their arguments in good faith -- a welcome departure from the current political debates and ideological warfare unfolding in our nation's capital.
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December 17, 2009
Bring Back the Glass-Steagall Act to Break Up the MegaBanks that Caused the Crisis
In the midst of the Great Depression, Congress approved the Banking Act of 1933, which among other things, separated investment banking from commercial banking. This measure, more commonly referred to as the Glass-Steagall Act, was adopted after many banks had taken depositors' money, invested it in the stock market, and lost big time. This resulted in people pulling their money out of banks and led to a financial disaster. By separating commercial lending from investment activity through the Glass-Steagall Act, Congress took a prudent step to protect the American public from greedy banks.
Unfortunately, Congress ignored history and reversed the Glass-Steagall Act in 1999 through what is commonly referred to as the Gramm-Leach-Bliley Act. The repeal of Glass-Steagall contributed a great deal to the financial collapse we recently experienced. The greed of these megabanks resulted in the American people having to pay the price as they bailed out these oversized financial institutions.
We must learn from history once more and restore commonsense safeguards to the financial sector. That is why today I introduced the Glass-Steagall Restoration Act, which would separate investment banking from commercial banking. I was pleased to have U.S. Reps. Peter DeFazio (D-OR), Jay Inslee (D-WA), Marcy Kaptur (D-OH), Jim McDermott (D-WA), and John Tierney (D-MA) all sign on as original cosponsors to this bill, which would break up these oversized banks, restore consumer protections, and avoid future financial collapses like the one that began last year.
The repeal of Glass-Steagall has exposed the U.S. economy to a level of risk that is simply unacceptable. This bill reinstates an important protection that will help ensure average Americans are not taken advantage of by banks and help mitigate the risk of another financial meltdown like the one from which we're still recovering.
Today, just four huge financial institutions hold half the mortgages in America, issue nearly two-thirds of credit cards, and control about 40 percent of all bank deposits in the U.S. In addition, the face value of over-the-counter derivatives at commercial banks has grown to $290 trillion, 95 percent of which are held at just five financial institutions. We cannot allow the security of the American economy to rest in the hands of so few institutions.
When you take a look at history and see the situation in which we find ourselves today, it is clear that we need to bring back the Glass-Steagall Act. The bill I introduced today would statutorily require banking giants to decide whether they want to serve as a commercial bank or an investment bank and require them to cease activities in one of those areas within one year of the bill's enactment. This bill would help right the ship and return our country to the days when banks either participated in commercial lending activities or investment activities, but not both.
We need to bring the American banking system back to earth so that it functions in a way that benefits all Americans, not just bank executives who stand to make a fortune if things go well and a smaller fortune if they don't. The financial system in this country has been rigged and this bill will help undo the circumstances that led to this most recent collapse while helping to prevent future ones.
Congressman Maurice Hinchey (D-NY) is serving in his ninth term representing New York's 22nd Congressional District. He is a member of the Joint Economic Committee.
Unfortunately, Congress ignored history and reversed the Glass-Steagall Act in 1999 through what is commonly referred to as the Gramm-Leach-Bliley Act. The repeal of Glass-Steagall contributed a great deal to the financial collapse we recently experienced. The greed of these megabanks resulted in the American people having to pay the price as they bailed out these oversized financial institutions.
We must learn from history once more and restore commonsense safeguards to the financial sector. That is why today I introduced the Glass-Steagall Restoration Act, which would separate investment banking from commercial banking. I was pleased to have U.S. Reps. Peter DeFazio (D-OR), Jay Inslee (D-WA), Marcy Kaptur (D-OH), Jim McDermott (D-WA), and John Tierney (D-MA) all sign on as original cosponsors to this bill, which would break up these oversized banks, restore consumer protections, and avoid future financial collapses like the one that began last year.
The repeal of Glass-Steagall has exposed the U.S. economy to a level of risk that is simply unacceptable. This bill reinstates an important protection that will help ensure average Americans are not taken advantage of by banks and help mitigate the risk of another financial meltdown like the one from which we're still recovering.
Today, just four huge financial institutions hold half the mortgages in America, issue nearly two-thirds of credit cards, and control about 40 percent of all bank deposits in the U.S. In addition, the face value of over-the-counter derivatives at commercial banks has grown to $290 trillion, 95 percent of which are held at just five financial institutions. We cannot allow the security of the American economy to rest in the hands of so few institutions.
When you take a look at history and see the situation in which we find ourselves today, it is clear that we need to bring back the Glass-Steagall Act. The bill I introduced today would statutorily require banking giants to decide whether they want to serve as a commercial bank or an investment bank and require them to cease activities in one of those areas within one year of the bill's enactment. This bill would help right the ship and return our country to the days when banks either participated in commercial lending activities or investment activities, but not both.
We need to bring the American banking system back to earth so that it functions in a way that benefits all Americans, not just bank executives who stand to make a fortune if things go well and a smaller fortune if they don't. The financial system in this country has been rigged and this bill will help undo the circumstances that led to this most recent collapse while helping to prevent future ones.
Congressman Maurice Hinchey (D-NY) is serving in his ninth term representing New York's 22nd Congressional District. He is a member of the Joint Economic Committee.
November 26, 2009
Sharing the Privilege of Abundance
Thanksgiving always evokes memories of the days when, as mothers of young children, we would bundle them up to deliver turkey baskets -- family to family -- to those in Washington, DC who couldn't afford a holiday dinner of their own.
That simple act connected our children to the original spirit of Thanksgiving -- where families stop not only to give thanks for plenty, but to share with strangers in need. Thanksgiving is one of the few days where soup kitchens and food pantries around the country burst at the seams -- not just with turkey and stuffing, but with volunteers eager to serve.
Americans, in fact, are the most generous people in the world when it comes to private philanthropy: 85 percent of American families give their time or money, with private giving averaging $300 billion a year.
This year Thanksgiving strikes at a critical hour for families everywhere who have been hit hard by the global financial meltdown.
In the United States, one in nine people rely each month on food stamps. Demand at food pantries and homeless shelters is at record levels. And 17 million American households have had difficulty putting food on the table during the last year -- a 14-year high.
Yet while we concentrate our efforts on addressing hunger at home, we must remember another face of hunger in our world -- one that's largely invisible until we glimpse it on our TVs from some distant country, when a typhoon, earthquake, flood, drought or conflict makes the evening news.
It's easy to forget the silent tsunami of hunger that rips an ever-greater swath through the places where there are no streets, where mothers wonder if their malnourished babies will survive and fathers despair that they cannot provide even a single meal for their desperate families. The compounding impact of the food, fuel and financial crises has pushed the numbers of those suffering chronic hunger past one billion -- one in six people on earth -- for the first time in history.
Those in the "Bottom Billion" subsist on a dollar a day or less. Each day, hunger and related ailments claim 25,000 lives, mostly children -- making hunger the world's No. 1 public health threat. Even when chronic hunger does not kill, it maims -- shattering health, longevity, and hope.
Malnutrition in children under age two causes irreversible damage to their minds and bodies. In countries like Ethiopia, Pakistan and Guatemala, one in two children is stunted. Not only is this an incalculable human loss, but it is a quantifiable financial loss to these nations. Studies show malnutrition causes tens of billions of dollars in losses to poor countries -- or as much as 11 percent of GDP.
As we've traveled the world, the two of us have shared stories and tears with other mothers -- far from Washington -- who have watched, helplessly, as their children slipped from their grasp into the maws of hunger. For them, Thanksgiving never comes.
Although the mind reels with the huge needs of the world, the solutions are surprisingly achievable. Many nations -- Ireland, China, Brazil, and a growing number of African countries -- have beat back the worst of hunger. Inexpensive nutritional interventions can dramatically improve the health -- and lives -- of women and children. For just 25 cents a day, we can feed a child at school, giving them a real shot at forging a better future.
And with $3.2 billion a year -- or $1.5 billion less than Americans spend on Halloween annually and a fraction of America's private giving -- we can feed the 66 million children worldwide who go to school hungry. This alone won't end hunger, but it would be a huge step forward.
If we are to solve hunger, it will take the political will and resources of governments. It's encouraging that the Obama administration and Congressional leadership recognize that a sustainable, comprehensive food security strategy is vital to ensure our planet's future peace and prosperity.
Yet every one of us, at all levels, can make a difference -- especially if we work together. The World Food Programme's first Internet citizens' campaign, www.wfp.org/1billion, is mobilizing the online community: if a billion Internet users donate a dollar a week, we could transform the lives of a billion hungry people across the world.
As we enter the season of colossal Wall Street bonuses and a frenzy of holiday spending, it is time for us to once more share the privilege of plenty. It is time to declare, once and for all, that not a single child should die from -- or be irrevocably stunted by -- hunger.
Not on our watch.
Read more HuffPost Thanksgiving coverage and commentary
That simple act connected our children to the original spirit of Thanksgiving -- where families stop not only to give thanks for plenty, but to share with strangers in need. Thanksgiving is one of the few days where soup kitchens and food pantries around the country burst at the seams -- not just with turkey and stuffing, but with volunteers eager to serve.
Americans, in fact, are the most generous people in the world when it comes to private philanthropy: 85 percent of American families give their time or money, with private giving averaging $300 billion a year.
This year Thanksgiving strikes at a critical hour for families everywhere who have been hit hard by the global financial meltdown.
In the United States, one in nine people rely each month on food stamps. Demand at food pantries and homeless shelters is at record levels. And 17 million American households have had difficulty putting food on the table during the last year -- a 14-year high.
Yet while we concentrate our efforts on addressing hunger at home, we must remember another face of hunger in our world -- one that's largely invisible until we glimpse it on our TVs from some distant country, when a typhoon, earthquake, flood, drought or conflict makes the evening news.
It's easy to forget the silent tsunami of hunger that rips an ever-greater swath through the places where there are no streets, where mothers wonder if their malnourished babies will survive and fathers despair that they cannot provide even a single meal for their desperate families. The compounding impact of the food, fuel and financial crises has pushed the numbers of those suffering chronic hunger past one billion -- one in six people on earth -- for the first time in history.
Those in the "Bottom Billion" subsist on a dollar a day or less. Each day, hunger and related ailments claim 25,000 lives, mostly children -- making hunger the world's No. 1 public health threat. Even when chronic hunger does not kill, it maims -- shattering health, longevity, and hope.
Malnutrition in children under age two causes irreversible damage to their minds and bodies. In countries like Ethiopia, Pakistan and Guatemala, one in two children is stunted. Not only is this an incalculable human loss, but it is a quantifiable financial loss to these nations. Studies show malnutrition causes tens of billions of dollars in losses to poor countries -- or as much as 11 percent of GDP.
As we've traveled the world, the two of us have shared stories and tears with other mothers -- far from Washington -- who have watched, helplessly, as their children slipped from their grasp into the maws of hunger. For them, Thanksgiving never comes.
Although the mind reels with the huge needs of the world, the solutions are surprisingly achievable. Many nations -- Ireland, China, Brazil, and a growing number of African countries -- have beat back the worst of hunger. Inexpensive nutritional interventions can dramatically improve the health -- and lives -- of women and children. For just 25 cents a day, we can feed a child at school, giving them a real shot at forging a better future.
And with $3.2 billion a year -- or $1.5 billion less than Americans spend on Halloween annually and a fraction of America's private giving -- we can feed the 66 million children worldwide who go to school hungry. This alone won't end hunger, but it would be a huge step forward.
If we are to solve hunger, it will take the political will and resources of governments. It's encouraging that the Obama administration and Congressional leadership recognize that a sustainable, comprehensive food security strategy is vital to ensure our planet's future peace and prosperity.
Yet every one of us, at all levels, can make a difference -- especially if we work together. The World Food Programme's first Internet citizens' campaign, www.wfp.org/1billion, is mobilizing the online community: if a billion Internet users donate a dollar a week, we could transform the lives of a billion hungry people across the world.
As we enter the season of colossal Wall Street bonuses and a frenzy of holiday spending, it is time for us to once more share the privilege of plenty. It is time to declare, once and for all, that not a single child should die from -- or be irrevocably stunted by -- hunger.
Not on our watch.
Read more HuffPost Thanksgiving coverage and commentary