So the first question, just to get things started, what’s the future of the US economy and capitalism?
NC: Who’s supposed to answer? Who are you posing it to?
PCR: You have a shot at it.
Rob: Go ahead Noam.
NC: Well the first point to mention is that we’re very far from a capitalist economy and have never been one — it’s a state capitalist economy with substantial state intervention that, in many respects from basic research and development to manipulating interest rates to determining the laws that administer regulations that permit CEOs to pick their own boards and hence to enhance their salaries, and thousands of other ways. What’s the future of it? That depends on how the public will respond to the circumstances in which there are. I mean, there is an institutional logic which will perpetuate things in a certain direction, but it is not graven in stone. It has been in the past, and can be in the future, influenced, modified, even radically changed by public engagement and action. And there’s no way to predict that — those are matters for action not for speculation.
Rob: OK, Paul?
PCR: Well I think that’s a very insightful view of it. All I would add is that in more recent years, the private interest groups seem to have taken control of the government. Wall Street, Military Security Complex, Agribusiness, the extractive industries — their campaign donations elect the House, the Senate, the President, and they then write most of the bills that Congress passes and the President signs, so it’s a form of state capitalism in which the capitalists seem to have the upper hand.
I think that greed has run away with them to such an extent that they have let it undermine the domestic economy on which they themselves depend. For example, they greatly increased profits in managerial or executive performance bonuses by offshoring so many of the middle class jobs, not only the manufacturing jobs but the professional tradable service jobs, such as software engineering, research, design — these things have left, or a large percentage of them, and it erodes consumer purchasing power. The middle class is damaged, the kids who graduate from university expecting jobs find that jobs are offshored, they’ve got debts, increasingly the big retail box stores just offer part-time employment — you can’t form a household on one of those jobs. You can’t get married, buy a house. You have to work two of those jobs, some people three. There are no benefits, no pension. The years of zero interest rate, in order to save the big mega banks, have caused the retired element to have to draw down their savings because they don’t get any interest income, and so inheritance for children is disappearing. And so the whole system has become a house of cards.
Massive debt/money creation is not matched by the increase in real goods and services. As Chomsky said, interest rates are rigged, the gold price is rigged, the stock market is a bubble, the dollar is a bubble — in a way it’s a house of cards. And the power of the United States rests, to a substantial extent, on the dollar being the world reserve currency. And yet, when you create massive new dollars to support quantitative easing but the goods and services don’t increase, you worry the whole world about their dollar holdings. And then you step in and threaten other countries with sanctions? That gives them an incentive to leave the dollar payment system, which means the demand for dollars drops.
So, I think the whole thing is a house of cards and that change could come from a substantial collapse that simply totally discredits the elites from both parties; and some kind of collapse of that extent would give room for the sort of thing Noam mentioned — that people could get back in and be determining factors in the process and some kind of new leadership could arise.
Rob: You had a question for Noam?
PCR: No, not about that. I was just adding my two cents to his two dollars worth.
Rob: OK, Noam, do you have a response to Paul?
NC: Well, I mean there…he brought up a great many points. I think a lot of them merit much closer scrutiny and discussion. We don’t have time for it now, but I think there’s some…I would just like to say that what he’s describing, you know, we can disagree about this and that part, but the major picture that he’s describing does reflect a certain logic of the state capitalist institutional structure as it now exists. So let’s say take offshoring, the CEO of a corporation has actually a legal obligation to maximize profit and market share. Beyond that legal obligation, if the CEO doesn’t do it, and, let’s say, decides to do something that will, say, benefit the population and not increase profit, he or she is not going to be CEO much longer — they’ll be replaced by somebody who does do it.
Also, the government has stepped in — partly I think because of the enormously increasing power of financial institutions and decision making in the last generation — it has stepped in to provide mechanisms by which this institutional obligation of CEOs is magnified. For a particular CEO, actually Hacker and Pearson had a good discussion of this years ago, it used to be the case, say, 50 years ago 60 years ago, that the CEO of a corporation had a stake in the survival and growth of that corporation. That’s much less true today because of the way compensations are determined. For today’s CEO, because of the mechanisms that allow them to essentially set their own salaries, bonus systems and so on, the incentive is to guarantee profit in the short term– the next quarter– no matter what happens to the institution. That way they’ll become the multibillionaires who are forming the fraction of 1% who are designing policy. Those are very perverse incentives. And they are now part of the basic logic of an institutional system that is driving towards serious disaster. Now I hope we don’t have to wait for a catastrophe for the population of the country to act in ways to reverse this. If we do, it’ll be I think too late. But clearly these are tasks that have to be undertaken. And there are others.
For example, we were marching — well, there was a big global march, a march on global warming a couple days ago, drew a couple hundred thousand people to New York, that happened to take place on the same day that an international commission that monitors global emissions reported that global emissions had increased to a record level last year by over 2%, and in the United States by even higher than the global average. Another report predicted that in another…it reported that August was the hottest month yet and that in another maybe 30 years the number of over 90 degree days in New York would probably triple with much more dire effects in warmer climates — all of these things are happening and we’re reaching a point of literal no return. If they pass a certain not very distant level we can be quite confident that the basis for the decent survival will have been seriously eroded. And we can’t wait for a catastrophe to bring a change in policy — that has to be done very quickly.
Rob: Now, my next question, well, is going to be about climate change. What role will climate change play in the future of economics and world power balances? Why don’t you keep going Noam.
NC: Well, if current tendencies persist, we are reaching a point where there’ll be a substantial rise in sea level, inundating coastal planes — that could mean millions of people dying in Bangladesh, inundating cities — most major cities are coastal cities — in Boston, New York, San Francisco, others…
NC: Yeah, Miami — much worse in the global south typically. We’re already at a level of species extinction that is comparable to what happened 65 million years ago when a huge asteroid hit the earth and ended the age of the dinosaurs and opened the possibility for small mammals to survive…ultimately us. That level of species extinction is now being matched and it’s going to increase. All of these are really catastrophic consequences, unpredictable in fact. You can’t even talk about the global economy — it’s going to have far more harmful consequences than that. And it’s not that far off. We’re marching toward the precipice.
Rob: I have to wonder, will…there are some people and companies that seem to want this to happen. What will happen to the economy, to the world, and the power balance in the world?
NC: Well, I think this goes back to a point that Paul made. Take say, Exxon Mobil…you know, biggest energy corporation. I mean, it’s not that they want these catastrophes to happen. It’s that the logic of the institutional framework in which they function is almost compelling them, unless there are external pressures, to march toward that precipice. They have recently announced, Exxon Mobil, that they are going to intensify their focus on fossil fuel extraction instead of alternatives because it is simply so much more profitable.
Chevron, another major energy corporation, had a small sustainable energy program that was doing ok — it was profitable, but they just shut it down because the profits are so much greater on extraction of fossil fuels. Within the given institutional logic, you can’t really blame the managers and directors for choosing these options — they simply have no choice within that framework, or very little choice. There was a day when Henry Ford could manage the considerations that Paul was talking about — he could see I’ve got to pay the workers $5.00 per hour or else there won’t be anybody to buy my cars. But there aren’t…the contemporary institutions don’t allow that.
PCR: Yes, I can remember when I was going to university, we were taught that corporations had responsibility to shareholders but also to employees, to customers, to the communities…and that they had to balance those. But what happened, I can’t remember exactly when, but all of the responsibilities were eliminated, except to shareholders. And so, as Noam Chomsky said earlier, if you get pressure to move jobs offshore where the labor costs are substantially slower and the profits rise, and you resist, then Wall Street simply says ‘if you resist we’re going to finance a takeover, and we’ll have somebody there who will move them.’
So it’s this sort of short-run focus on profits that makes it hard, or in fact I would say impossible, like Chomsky believes, for these kinds of issues to be responsibly dealt with. So if everyone is operating on a short run basis, focused only on return to executives and shareholders, then you destroy the system. And what surprises me is how many corporate interests fund groups and economists to go around saying that there is no global warming — they still deny it as a climate problem. This is very prominent among what they call free market economists. It’s seen as some sort of government propaganda in order to takeover business or to limit growth.
If you look at economic theory even, it supports these kinds of notions because the science is built up on a production function known as the Stiglitz Solow Production Function — two Nobel Laureates. And the assumption is that man-made capital is a perfect substitute for Nature’s capital. And so what that says is you can never run out of resources. And so the whole notion of depletion or depleting the sinks in the environment…they can absorb waste — it’s difficult to get economists to even think about that. So you even have, on top of the other failure, you have this sort of major intellectual failure.
Rob: It seems like…
NC: If I could make one suggestion. I’d suggest that you invite Bob Solow on the program because I’m pretty confident, though he would understand the logic of what Paul just described, he would not accept the consequences. That’d be interesting to hear why.
Rob: Well we can work on that. It seems like both of you agree that it’s basically the nature of the corporation that is causing the problem.
PCR: It’s the incentive…it’s the incentives placed before them.
NC: Yeah, exactly.
PCR: That’s just one of the causes. I mean Chomsky gave you a number of things. And it’s the total lack of any sort of foresight that would come from some ability to plan or lay out possible scenarios that are developing and then how to minimize the worst ones. Any of that type of thing would help, even though people don’t always see the future very clearly. But I just have the feeling if they made some effort it’d be better than just marching ahead with nothing but next quarter’s profits in front of their nose.
NC: No, that’s devastating.
PCR: Yeah, that is a devastating result.
NC: But we have to remember throughout that what corporations are and what they do and can do is not just up to them. Corporations, after all, are state-created legal fictions basically. They’re created, supported, sustained by state action, and the rights that they have and the options available to them have changed dramatically over the years. So if you go back to the, say, founding fathers — the early days of the republic, corporations had none of the right that they have today. A corporation meant basically, say, that people of the town in getting together and deciding to incorporate with a specific purpose to build a bridge over the nearby river, and when they did it that was the end of the corporation. Now that’s basically what a corporation was — it changed…began to change through the nineteenth century. By about a century ago, corporations were gaining personal rights even though they are incomparable to persons. I mean for one thing they’re basically immortal. For another thing, they have limited liability. They’re sustained by state power in all sorts of ways. And by now they have rights well beyond persons.
So for example, the so-called Free Trade Agreements, which aren’t free trade agreements, grant corporations rights far beyond that persons have. For example, if the state…if Mexico carries out an action, which might reduce my future profits from some investment, I can’t sue Mexico — but a corporation can under the trade agreements, and they do and many other things like that. And these are all…it even goes down to CEO compensation, which is based on government regulations mostly in the last 30 years that have created highly perverse incentives to maximize very short term profit which yields very high pay, and particularly bonuses, and other techniques for the deferred stock options and so on for the CEOs themselves. These are government decisions, which means in principle, popular decisions — but only in principle, because unfortunately the public has very little impact on government policy decisions. Actually there’s interesting work on this in mainstream academic political science, which shows very convincingly that the bottom 70% of the population, roughly, in terms of income, is essentially disenfranchised. They’re opinions and attitudes have no effect on policy choices. Influence increases slowly as you move up the scale. And when you get to the top, which means really a fraction of 1%, as Paul mentioned earlier, they’re basically making policy. Well that’s not a democracy, that’s a plutocracy. And until that’s changed, we’re going to find that this devastating institutional logic will persist.
PCR: Yes, I agree with that. I’m not sure that it will change other than a catastrophe, collapse that discredits the entire elite structure. Rob, can I change the…
Rob: Sure, go ahead.
PCR: I want…there’s something that I’d really like to know from Professor Chomsky and that is what is his take on what seems to me to be the risk that the United States is taking with its European vassal states by pushing them into conflict with Russia that is not in the interest of Europe? And it seems to me that this is a risky thing for Washington, that it could lose control over its vassals if it pushes them into too much conflict that’s just clearly against European interests. And, for example, what if the Russian government announced that they don’t sell energy to NATO members? That would bust up NATO, I think. I don’t think the Europeans could do without supplies for 3 or 4 years, or however long it would take for a different infrastructure, assuming there are supplies somewhere. And I just wonder what Chomsky makes of what looks to me like reckless risk-taking on the part of Washington with its own empire by pushing it into conflict with Russia and perhaps, that means also with China, because it seems to be a strategic alliance developing between these two massive countries.
NC: Well, I think that’s true. I think it’s extremely reckless and it is driving Russia into an alliance with China that’s been a very conflicted relationship for many years — there’s plenty of antagonism, they’ve almost been at war frequently. But we’re driving them together…we’re essentially driving Russia into closer integration with the Shanghai Cooperation Organization, the Chinese-based international organization, which has been…it’s mainly based on energy interchange, energy access, other commercial access. But some have seen it a potential China-based, kind of NATO-style organization. It includes Siberia, India, Iran as an observer, Pakistan, all the central Asian states, which are big energy producers. The United States wanted to gain observer status but was turned down. It’s kind of developing quietly like a lot of Chinese (? growth and?) influence, but its substantial. It may also someday be a currency alternative as Paul suggested. And were driving Russia into closer connections with it, and this is very risky and it does even risk major war. I mean, at this point we are threatening core strategic interests of any Russian government — can’t blame Putin — it’d be any Russian government, you pick it…they would be deeply concerned about US expansion of NATO, which is a hostile military alliance, right to their heartland. I mean, if the Warsaw Pact were attempting to take over Canada and Mexico, we wouldn’t be happy about it. And it’s comparable.
There’s a very good article on this in the current issue of Foreign Affairs, the main establishment journal, by John Mearsheimer, a well-known IR… international relations specialist. Now this goes back to 1990, the collapse of the Soviet Union, fall of the Berlin wall….collapse of the Soviet Union, right in those years. At that point, Mikhail Gorbachev, who was a real statesman, made an incredible offer. He offered to allow Germany to be unified and to join NATO, a hostile military alliance. You take a look at the history of the last preceding century, that’s astonishing. I mean, Germany alone had several times virtually destroyed Russia, even when Russia was supported by western power. Now he was offering to allow Germany to join much…huge western power, far beyond Russia’s, in a hostile military alliance. Now he did have a quid pro quo. The phrase was “not one inch to the east.” That was the phrase he used together with President Bush, number one, and James Baker, Secretary of State in working out this issue…also Helmut Kohl of Germany. The “one inch to the east” meant East Berlin…East Germany. The condition was that this militarized, united Germany part of NATO would not move to East Germany. Well the Bush Administration quickly moved to East Germany. Gorbachev was outraged, but he was informed that it was only a verbal agreement — there was nothing on paper…which was correct, there was nothing on paper. And so he had no basis for objecting, well, not very convincing. But anyhow, under Clinton, NATO was expanded much further to the east, way beyond East Germany….right to the borders of Russia.
Now the last step, which we’re now facing, is the effort to bring Ukraine into NATO. I mean that’s been…now people deny it, but they’ve been calling for that for years and the Russians can hear it. That’s really right at the heart of Russian basic strategic interests as well as historical connections…but we’re pushing it. And that’s…you know, ‘risky’ is kind of an understatement. That’s laying the basis for what could become a major war — a nuclear war, which of course destroys everything. And we’ve come pretty close to that in the past.
If you look at the record of the past years since 1945, it’s frightening. It’s, even by accident, come very close a number of times. And playing this kind of a risky game is just….I don’t know what word to describe it…’suicidal’ is, again, an understatement. So I agree, it’s very risky in all sorts of ways.
PCR: But Noam, is this due to hubris in Washington? Or are they so determined to have hegemony over the world that they can’t think or they don’t see the risk? Because it is such a huge risk, you would think people would be attentive and cautious, and yet it seems like they don’t even know it’s a risk.
NC: Well I think that on the part of the general, you know, sort of foreign policy elite political class, I think they see it as a risk. That’s why, I presume, that’s why Foreign Affairs, which is the main establishment journal, Council on Foreign Relations, why they ran Mearsheimer’s article as in fact their lead article in the last issue — it’s a powerful argument about the risk. But I think Washington, you know, they got their own logic — we’ve got to maximize our power, without limits.
NC: I’m afraid I’ve got to take off…I’ve just been informed.
PCR: Well it was nice to have a chance to speak with you.
NC: Yeah, good to talk to you. Wish we could continue some time.
PCR: We’ll leave that up to Rob.
Rob: Well let’s do that.
NC: Yeah, okay.
Rob: Stay with us folks. Thank you so much Dr. Chomsky.
NC: Yep, bye.
Rob: Yeah, he’s got people that take great care of him. As an octogenarian it’s probably a great thing. So what…tell me more about your thoughts on what’s going on with Russia and what Washington is doing. Chomsky’s words are pretty sharp there…’suicidal,’ ‘nuclear war’?
PCR: Yeah, well of course I think nuclear war is a more present threat than the climate warming because that takes longer. And of course if there’s a nuclear war that’ll be the end of everything, including the climate. So I’m more focused on that than I am the climate change, because I think that is the most imminent mass extinction threat. And I think it’s happening because of the Wolfowitz doctrine, which in many ways is similar to the Brzezinski doctrine. And that is that the United States can’t tolerate the rise of any other power that could constrain Washington’s ability to act its will freely in the world. And of course Russia and China have the capability of restraining Washington, and so I think that the Wolfowitz doctrine is the driving force and that the foreign policy establishment, which I think remains essentially neo-conservative, including the Council on Foreign Relations because if you look at a lot of their fellows, they are neocons…you know, Max Boot, and I think…the husband of Victoria Nuland…I mean there’s a whole bunch of them in that. Which is natural in the sense that so many neo-conservatives had high positions in the Defense department and the State department in the last several administrations. And those are the kinds of people that usually go into the Council on Foreign Relations.
So I think that this hegemonic impulse that came…that was released with the Soviet collapse — but I think this impulse has always been there. There’s a new book out by Steven Kinzer, it’s called The Brothers. And it’s about John Foster Dulles and Allen Dulles — John Foster Dulles was the Secretary of State and Allen Dulles was the head of the CIA. And they clearly had this notion of American supremacy over all others. And there are other instances in our history in which this notion that we were somehow the superior of all, has been very prominent.
I think with the neocons, it has reached a new level of intensity. And their call for weakening Russia, breaking up the Russian Federation, their military bases that they plan to build from the Philippines to Vietnam to control the flow of resources in the South China Sea — these are highly aggressive actions against nuclear powers. It is suicidal, like Noam Chomsky said. And it’s hard to understand the recklessness of it. And so, I think it’s a big concern…and the people, the American people, and even a lot of the Europeans, they don’t see the threat. They get worked up — ‘Oh, the Russians, they invaded Ukraine, the Russians did this, the Russians did that.’ ‘Oh, the Chinese, they violate human rights’…of course, nothing like the United States violate human rights. I mean, it’s not China that’s bombed 7 countries in the 21st century — and now 8, because we started bombing in Syria — and wants to bomb Iran. The sort of…you know, people call it double standards and so on. But, it’s almost like the American people themselves believe that whatever we do is okay but anybody else does it, it just proves how wicked and evil they are and we need to destroy them. And when you have that type of situation it’s just hard to convey information to people. They just are concerned with prevailing. And that’s the way the government is, it wants to prevail over Russia, prevail over China, and its got the people as cheerleaders, like they’re rooting for their home team. They don’t give it much thought.
Rob: You know I’ve been doing a series of interviews and articles about psychopaths and narcissism. And what you just described…domination, only caring about ourselves — this is narcissism and psychopaths…that’s what they do.
Rob: What’s the role that you think psychopaths, sociopaths, and narcissists play in the troubles and challenges of the world and humanity?
PCR: Well I think those kind of people dominate governments. Less, I think, now in Russian and China because they came out of a period of extreme oppression and failure. And I think that they’ve been cleansed of a lot of the evil that has intensified in the west. So I think the worst psychopaths are in Washington. And the trouble is that the long Cold War, when the success of America propaganda made the world fearful of Russia and Mao’s China, has created a view that Washington — which is full of psychopaths — is really wearing the white hat; and it was the defender of us from the totalitarians and Moscow and Beijing, and that kind of attitude makes people blind to the presence of psychopaths in their leadership.
Rob: Well one thing I’ve learned is that one of the things that narcissists do — and every psychopath and sociopath is also a narcissist — is they label all the people around them as ‘the bad people,’ they shame everybody else that they can label themselves as ‘the good guys.’
PCR: Exactly, that’s right. So any critic is a bad guy, opponents/opposition, anyone who doesn’t accept their will — so this is what happens to China and Russia, they get demonized…and Iran. Iran gets demonized because they don’t accept being American vassals. We would leave China, Russia, and Iran alone if they would simply do what we wanted….like Europe-like, all of eastern and western Europe. Those countries are just vassals — they don’t have an independent foreign policy. The British do not have an independent foreign policy, the French do not, the Germans don’t, the Italians don’t…nobody. They followed Washington for so long because of the Cold War, that they don’t even know how to have an independent foreign policy. They’re not independent states, they are part of an empire. And that was what I was asking Chomsky…why does Washington take the risk with its European empire, of pushing them so hard against their own interests that they might actually rebel. And I notice that in the bombing that we’ve undertaken of ISIS, NATO is not participating. We’ve got Qatar, United Arab Emirates, Bahrain, Jordan, and Saudi Arabia. Now, that’s some kind of cover so it doesn’t look like naked American aggression, but that is not a coalition of the willing, it’s not NATO, even the British aren’t in it — which is surprising because you have to remember when we were prepared to invade Syria, having set up Assad with a false charge of using chemical weapons, Cameron was all for it and the British Parliament said no.
So it could well be that we keep pushing people against their interest, I mean other countries, that we’ll break up our own empire. I’ve been wondering for a long time how much longer Japan would inflate its currency in order to protect the dollar. See one of the reasons the dollar stays strong is we’ve got the Japanese printing yen hand over fist. So the dollar can’t decline relative to yen, it can’t decline relative to the euro because if it starts any major move in that way we have a swap agreement — we give the European Central Bank billions of dollars and they give us the counterpart in euros, then we go in and buy the dollars.
Rob: Now when you say that it could be that we could break up our own empire, that empire includes Germany and France, and Italy and Japan…
PCR: Yeah, it’s mainly Western Europe. That’s the cover because the west has long reigned as the moral civilization — the white hats, the moral people, the industrial-developed world. Now all of this is beginning to go by the wayside because other countries are developing…Brazil, China, of course…
Rob: The BRICS…
PCR: Right. India — I mean India has got a strong professional services economy. You know all the engineering skills and things, information technology, computers. So the economic superiority of the west is not as pronounced as it was previously. So that takes away some of its claims to be, you know, the leader or the best.
And I think that the fact that both Russia and China recovered from communism or from the form that it took in those countries with fairly ruthless leadership, the fact they’ve recovered from that…the fact that Russia insists over and over and over on following the law, and on international law. They, themselves, and their criticisms of the United States increasingly are that Washington acts illegally, not merely on terms of international law but in terms of Washington’s own domestic law. And so you see increasingly these claims that…or statements, very strong statements, like the Russian Foreign Minister made one just the other day. He said, ‘Look, you have no right to bomb in Syria just because you notify Syria that you’re going to bomb. That’s illegal, you can’t do that. You have to have the permission of the Syrian government.’ And so they point these things out over and over and over. So the emphasis on legality that used to be a strong point for the United States is now Russia’s strong point — they make the points.
So I think that the white hat appearance of the United States, which it achieved because of the Cold War…well it started with the war against Nazi Germany, but really the Cold War was the main thing. This plus, the entirety of the 21st century, that Washington has been bombing other countries, always on the basis of a lie. At the time they start their lie is not realized, but by the time they finish everybody knows it was a lie. I don’t think anybody any longer believes Sadam Hussein had weapons of mass destruction. I don’t think anybody any longer believes the Taliban were a threat to the United States. I don’t think anybody believes the lies about Gaddafi. I don’t think anybody believes Assad used chemical weapons. I don’t know if people are still so uninformed that they think Iran has nukes. But all these things undermine the image that…or the so called “soft power” of the United States. And when the western countries in Europe just go along and follow blindly, and rah-rah, and repeat the same nonsense, it undermines them too. And so the west, I think, is wearing out its welcome as some kind of place where the world’s decisions are made.
So I think that in that sense its hopeful that the power in the west, which is in the hands of psychopaths and the puppets of psychopaths…that this power may be rapidly diminishing. And I think it will be associated with crisis, particularly economic crisis. I remain convinced that the United States economy is a house of cards, and it could blow at any time.
Rob: What do you mean by a house of cards?
PCR: Well, nothing in it is substantial. All of the markets are rigged, they’re bubbles. The bond market is rigged — it’s a bubble. The interest rate is rigged. The price of gold and silver is rigged. So as not to cause suspicion about the dollar, the dollar is rigged because it’s supported in various ways. The stock market is rigged. The major purchases of stocks in recent years have been the companies buying back their own shares. So everybody is…’Oh, the stock market is up…’ But it’s not up because the economy is doing good or profits. You know retail sales have gone nowhere. The latest report from the government on wealth and poverty says that the real median family income in the United States has declined and is now back at the level of 1994…and is actually below levels in the late 1960s and early 1970s. So if people don’t have any money, how is the economy doing anything? How are they spending it?
They’re over their heads in debt, they can’t borrow to use borrowing or consume credit to spend. Retail stores are having trouble…we know about all the middle class stores — JC Penny’s, Macy’s, Sears are closing stores, and now we know the dollar stores themselves are in trouble — of the 3 chains, two of them are losing money. One is on the verge of bankruptcy, going to be bought up by the only dollar chain that is profitable. There’s no sign of anything to support the economy. You got this tremendous debt. There’s been tremendous money creation, but not creation of goods and services. If that money gets into the economy…if it gets out of the banks and into the economy, there’ll be a massive inflation. We already talked earlier when we had Chomsky on, that there are no good jobs — part time, low pay domestic service jobs. We have massive trade deficits because all the off-shored production for US markets, when it comes back into the country, it’s counted as imports. And consistent massive trade deficits add to the pressures on the dollar.
And in a way, the United States is surviving because of history, tradition, custom — people are used…accustomed to the United States — if there’s trouble anywhere, oh they run into treasury bonds…it’s the safest place to be. Well it’s always been, but when that started, the United States government debt was not almost double the national income in real terms. It wasn’t 100% in nominal terms. It had tremendous manufacturing industrial capacity — could turn out all kinds of goods that could be sold. So, what made the United States a safe haven is gone. But it continues just from tradition — people haven’t caught on or they haven’t figured out what else to do. It’s what they’ve always done.
I remember when I was doing graduate studies and focused for a while on medieval economic history, and long after Rome had collapsed, the various barbarian kingdoms, when they issued coinage, it still had the head of Caesar because that’s what people were used to. If it didn’t have Caesar’s head on the coin, it wasn’t money — whether it was gold, or silver or not…it had to have Caesar for them to think it was money. And that showed how long tradition carried something that was no longer present. So that’s sort of my take on it Rob.
Rob: Okay. What do you see…you know it seems to me like you think that the way this is going to change is because things are going to collapse, right?
PCR: Oh bad, yeah, bad troubles. Right…bad troubles. And they keep adding to it, you see, because…the jobs. I mean look, what happens when you…you know they tell you ‘Education is the answer, education is the answer.’ It’s a lie, it’s not the answer. All these kids have come out of school thinking education was the answer, they got massive debts, and they can’t get any jobs to have an independent existence. I don’t mean all of them can’t, but a large percentage –the jobs just aren’t there anymore. If you’re not the top of your class, you don’t have much of a favorable outlook…if you don’t graduate at the top of your class. If you want to get into a law firm, you better at least be in the top ten percent.
Rob: Even that won’t…I mean I know an attorney with a law firm in Chicago, and it doesn’t matter if you’re in the top ten percent of your class if you’re not from one of the handful of Ivy League law schools.
PCR: Well, that’s right…but you could be from Harvard, if you’re not in the top ten percent you’re not any good either. So, I think…
Rob: Yeah but again, it’s just a different form of elitism really though. And the guy I know, the attorney I know was talking to some…a new law school graduate who he wanted to hire but he couldn’t because it was the firm’s policy.
PCR: Yeah, well…I think the major problem is that the political elites have made such a mess, I don’t think it can hold together. And therefore if it doesn’t hold together, they will be discredited in a big way. You have to remember the reason we got the reforms in the 1930s was because of the Great Depression…and the elites couldn’t find an answer. And the elites were in power in Wall Street, the banks, and in the Republican party, and all that got discredited. And up came Roosevelt — not that they were very clever or successful, but some of the things they did worked and persisted until the Clinton administration. For example, the Glass Steagall Act, which was probably the best thing that ever happened to give financial stability…it was Clinton, or it was his regime, that gave that up.
So I think when elites are perceived as having failed publicly, that’s when you get changes…but it’ll be harder now because then there were still some independence in the media — the media wasn’t concentrated into 5 or 6 hands. There was still some media independence — a lot of newspapers had been owned by families, they were independent, they weren’t part of a conglomerate. And so there were different voices. See today the media is almost one voice, isn’t it? I mean you can turn on FOX News, you turn on CNN, you turn on ABC, CBS, NBC, whatever…you turn it on, it’s all the same. It’s the government lying, Wall Street lying, it’s the Federal Reserve lying…investigative reporting has just about disappeared in the United States. The newspapers can’t afford it. And then you have the problem when they all get close to bankruptcy, and then the CIA subsidies become ever more appealing. CIA has always had assets in the media, but now they can have practically any asset they want because of the pressure of profitability on the print media…and I think also TV. So it’s easier for them now to produce and maintain false stories that create in the public, illusions or that create a reality that’s not the real reality. And so that can make the kinds of change that catastrophe makes possible — that can make that kind of change harder to actually do even though you have the opportunity, because they can still control perception. And because you know, not too many people…
Rob: Well this is what you said in your recent article about gold…
Rob: That, basically…you said you wrote this your last article about gold, how, after the Great Depression the collapse was allowed to happen. The wealthy people were allowed to lose all their…everything, and this time Obama and Bush, they saved them. So I think what you’re saying is they were able to save face too?
PCR: Yeah. Yeah, I mean, the whole purpose of quantitative easing was to save five banks.
Rob: Save who?
PCR: Five banks….five mega-banks: Goldman Sachs, JP Morgan Chase, Citibank, Bank of America…these were the focus — this has been the only focus of American economic policy since 2008. So that’s now 6 years. Our economic policy based entirely on saving 4 or 5 mega-banks. And these mega banks are the Treasury Sec…their former CEOs are… have been the Treasury Secretaries, their executives run the federal regulatory…financial regulatory agencies, such as the Commodity Futures Trading Corporation, which is supposed to regulate derivatives. The person running that is a former Goldman Sachs executive. This is why there are no prosecutions of the fraud because the banks control the regulatory agencies, their executives are the top officials. The New York Fed…the New York Federal Reserve Bank, which is the main money center bank, their trustees or board of directors…I don’t know which is the title, I’ve forgotten at the moment…but they’re all the big mega-banks.
Rob: We’re going to have to wrap. This is Rob Kall Bottom Up Radio Show WNJC 1360 AM. You’ve been listening to Paul Craig Roberts and Noam Chomsky. You wanted to finish that…say anything to finish up Paul?
PCR: No, I think we covered a pretty good job Rob. Let me know when you get it out.
Rob: I will, thank you so much. You’re really appreciated…
PCR: Well I appreciate you and everything you try to do.
PCR: Alright, all the best to you.