Friday, March 23, 2012

Winners win, losers lose

The Age of Double Standards, Robert Kuttner, The American Prospect, March 19, 2012
"...Petty felons and 200,000 small-time drug users do prison time, while corporate criminals whose frauds cost the rest of the economy trillions of dollars are permitted to settle civil suits for small fines, with shareholders bearing the expenses. Ordinary families pay tax at a higher rate than billionaires. When fracking contaminates a property and makes a home uninhabitable, the homeowner rather than the natural-gas company suffers the loss. The mother of all double standards is taxpayer aid and Federal Reserve advances—running into the trillions of dollars—that went to the banks that caused the collapse, while the bankers avoided prosecution, and the rest of the society got to eat austerity.

"Linking all of these disparities between citizens and corporations is the political power of a new American plutocracy. Until our politics connects these dots and citizens start resisting, the financial elite will rule...

"The airline industry is only the extreme case. [No fewer than 189 airlines have declared bankruptcy since 1990.] In the past two decades, the roster of companies that declared bankruptcy includes Enron, WorldCom, Global Crossing, Adelphia, General Motors, Chrysler, Delphi, Kmart, and LTV Steel, not to mention several major financial houses.

"Private-equity companies routinely use Chapter 11 after they bleed dry the operating companies they acquire, load them up with debt, extract capital, and then declare that debts unfortunately exceed assets. Once out of bankruptcy, the company can be sold for more profit. Bain Capital, Mitt Romney’s firm, pocketed hundreds of millions of dollars as special dividends from such companies as KB Toys, Dade Behring, Ampad, GS Technologies, and Stage Stores, all of which subsequently filed for bankruptcy. In industries such as steel, airlines, and autos, where good union contracts were once common, one of the biggest appeals of a Chapter 11 reorganization is that contractual pension and retiree health obligations can be swept aside.

"In Chapter 11, even the executives who drove a company into the ground get a second chance. Post-bankruptcy, American Airlines’ president, Tom Horton, was promoted to CEO. And why not? Declaring bankruptcy will save American a small fortune. American, while in bankruptcy, has nonetheless found the money to pay a firm $525,000 a month to advise it on labor cuts. The firm is Bain Capital.

"...So while corporations continue to get a fresh start under Chapter 11, the aftermath of the financial crisis continues to sandbag millions of homeowners and the economy as a whole. This double standard is not just a question of fairness. The selective relief for corporations and banks, but not for the 99 percent, is killing the recovery. None of this will change until the citizenry builds a politics that demands a single standard."
Robert Kuttner is co-founder and co-editor of The American Prospect, as well as a distinguished senior fellow of the think tank Demos. He was a longtime columnist for Business Week and continues to write columns in The Boston Globe. He is the author of Obama's Challenge and other books. This piece draws on the themes of a book that Robert Kuttner is completing for Knopf, titled Debtors Prison.

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6 comments:

  1. thanks but i dont care about these foreigners. i have enough to worry about here in canada

    ReplyDelete
  2. You're wrong because similar forces are at work in Canada.

    And in Britain and continental Europe, Asia, Australia and every nation where nations are directed by plutocracies.

    .

    ReplyDelete
  3. Norm,
    I would simply direct Anon 11:36 to what is happening to BC Hydro and ask if he might see any similarities. The question is more where is it not happening?
    Don

    ReplyDelete
    Replies
    1. Good point Don. I'm sure you know Santayana's line: "Those who cannot learn from history are doomed to repeat it."

      He didn't just mean the events of long ago that we must learn from. The events of the past decade are relevant too.

      Delete
  4. Workers at Crofton (which makes money) are taking a pay cut. Why? Because the company that bought the mill has done a poor job of running the business , yet paid bonuses to the bosses for buying up and turning money making businesses into losers.

    ReplyDelete
  5. Maybe plutocracy is only part of the problem..."cleptocracy" is a more fitting term, after all, no matter how you slice it, it is still theft and fraud. Our legal system, does not deal with percieved threats to "wealth" as it does with threats and harm to a person. Although the system, has shortcomings in this area as well. True financial justice for shareholders, most often the real victims in financial scams, is tempered by the courts unwillingness, to go after all the money lost. Class action lawsuits, have limitations, due to jurisdiction and ultimately the courts resources. Increasingly, large scale frauds are purpetraited over a large number of victims and the "take", is usually held in off shore banks, or in jurisdictions without banking treaties or legal ties, to the country of the "frauds" origin.

    White collar crime, is not percieved as a "violent " crime and is not seen as a so called "serious offence". This crime, however does cause "greater harm" to the public, in that "wealth", that often takes years to create, is wiped out in seconds. The perception of loss, to the victim however, is just as "numbing" and "sickening" as an assult on one's person, would be.

    The public needs to change its attitude, towards these crimes and seek greater sentences and remedies, for the perpetraitors, as well as "total" compensation and return of the stolen resources.

    ReplyDelete

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