Naomi Klein, Robert Kuttner and Michael Hudson
Dissect Obama's New Economic Team & Stimulus Plan
by Amy Goodman
Democracy Now (November 25 2008)
On Monday Obama named New York Federal Reserve Bank President Timothy Geithner to the post of the Treasury Secretary. Former Treasury Secretary under Clinton Lawrence Summers was named the Director of the National Economic Council in the White House. Obama also called for a stimulus plan that will "give a jolt to the economy". We host a roundtable discussion about Obama's latest economic moves [includes rush transcript].
Guests:
Naomi Klein, Investigative journalist and author of The Shock Doctrine: The Rise of Disaster Capitalism (2007).
Robert Kuttner, Veteran economic journalist and the cofounder and coeditor of The American Prospect magazine. His latest book is called Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency (2008).
Michael Hudson, president of the Institute for the Study of Long-Term Economic Trends, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Super-Imperialism: The Economic Strategy of American Empire (1972, 2003). He is the chief economic adviser to Representative Dennis Kucinich.
AMY GOODMAN: The Treasury and the Federal Reserve are expected to announce a major lending program today that will finance billions of dollars of consumer loans as well as business debt. President Bush said Monday that he expected the country would recover from the QUOTE "tough situation" and said his administration was working in "close cooperation" with Obama's economic team to draw up plans to calm the financial markets.
GEORGE W BUSH: This is a tough situation for America. But we will recover from it. And the first step to recovery is to safeguard our financial system. Last night on Air Force One coming back from Peru, I talked at length to the Secretary about his recommendation - on the decisions made to safeguard Citicorp. We have made these kind of decisions in the past and we made one last night. If need be, we will make these decisions to safeguard our financial system in the future.
AMY GOODMAN: Meanwhile Obama introduced the leading players in his new economic team at a news conference in Chicago. He named New York Federal Reserve Bank President Timothy Geithner to the post of the Treasury Secretary. Former Treasury Secretary under Clinton Lawrence Summers named Director of the National Economic Council in the White House. Obama also announced that he had chosen Berkeley economics professor Christina Romer to head his Council of Economic Advisers and Melody Barnes as Director of his White House Domestic Policy Council. Obama called for a stimulus plan that will quote "give a jolt to the economy".
BARACK OBAMA: We need a recovery plan for both Wall Street and Main street, a plan that stabilizes our financial system and its credit flowing again the same time addressing our growing foreclosure crisis, helping our struggling auto industry and creating and saving 2.5 million jobs. Jobs, rebuilding our infrastructure, roads, bridges, modernizing our schools and creating the clean energy infrastructure of the 21st century. Because of this moment, we need to restore both confidence in the markets and restore confidence of middle-class families who find themselves working harder, earning less, and falling further behind.
AMY GOODMAN: I'm joined now by three guests for a discussion on the state of the economy and what to expect in the coming months. Veteran economic journalist and the cofounder and co-editor of The American Prospect magazine, Robert Kuttner, joins me on the telephone from Florida. His latest book is called Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency (2008).
Investigative journalist Naomi Klein, author of The Shock Doctrine: the Rise of Disaster Capitalism (2007), joins us on the telephone from Toronto.
We're also joined here in the firehouse studio by Michael Hudson. He is president of the Institute for the Study of Long-Term Economic Trends, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Super-Imperialism: The Economic Strategy of American Empire (1972, 2003). He is the chief economic adviser to Representative Dennis Kucinich.
We welcome you all to Democracy Now! I wanted to begin with the appointments. This is how president-elect Obama introduced the next Treasury Secretary, if confirmed, Timothy Geithner.
BARACK OBAMA: Tim Geithner offers not just extensive experience shaping economic policy and managing financial markets, he has an unparalleled understanding of our current economic crisis in all its depth, complexity, and urgency. Tim will waste no time getting up to speed. He will start his first day on the job with a unique insight into the failures of today's markets and a clear vision of the steps we must take to revive to them.
AMY GOODMAN: And Lawrence Summers, named the Director of the National Economic Council in the White House.
BARACK OBAMA: One of the great economic minds of our times, Larry has the global reputation for being able to get to the heart of the most complex and novel policy challenges. With respect to both our current financial crisis and other pressing economic issues of our time, his thinking, writing, and speaking have set the terms of the debate. I am glad he will be by my side, playing the critical role of coordinating my administration's economic policy in the White House and I will rely heavily on his advice as to navigate the uncharted waters of this crisis.
AMY GOODMAN: We begin with Naomi Klein. Your response to these appointments, and what they signify. If you could begin with Larry Summers, the former Clinton Treasury Secretary.
NAOMI KLEIN: Hi Amy, its good to be with you. Well, I have to say it is a profound disappointment. It really does represent a very safe choice, but let's remember Barack Obama won this election saying that taking the status quo, that staying with the same policies that have been governing the country for the recent past, was actually a very dangerous course. I think in many ways we are paying the price of the frankly intellectual dishonesty of the progressive liberal left during the bush years. Because Obama said again and again during the campaign that the crisis on Wall Street represented the culmination of an ideology of deregulation and laissez-faire trickle-down economics that had guided the country for the past eight years.
And the truth is, it was not just eight years in which those policies guided US economic policies. They certainly guided them under Reagan and they certainly guided them under Clinton. That is where Larry Summers comes in because Larry Summers was the last Treasury Secretary under Clinton. And, he along with Alan Greenspan and Robert Rubin were really the key architects of the policies of deregulation that created the crisis that we're living now. And those key policies, as you know, are the killing of Glass-Spiegel that allowed a series of very large bank mergers that created these institutions that are too big and too intermingled to fail we're told again and again. The deliberate decision to keep the derivatives out of the reach of financial regulators - that was also a Summer's decision. And also allowing the banks to carry these extraordinary levels of debt - 33 to 1 in the case of Bear Sterns.
Now, in my book the Shock Doctrine I start a chapter with a quote from Larry Summers. The context in which he says it was 1992 and it was when he was making World Bank economic policy as it related to Russia, in the midst of a financial crisis. What he said and this is why I quoted him because it really shows the extent to which he is truly an ideologue, and truly a follower of the very ideology - not just a follower but a propagator of the very ideology that Obama ran his campaign against. And here's the quote?this is Larry Summers in 1992: "Spread the truth. The laws of economics are like the loss of engineering. One set of laws works everywhere." And then he laid out those laws a little bit later.
He referred to the three "ations", and those were privatization, stabilization, and liberalization. So he has been preaching the doctrine. He is by no means an innocent bystander. He is a dyed-in-the-wool privatizer, free trader. And he along with Tim Geithner, his deputy, played key roles during very important economic crises in Russia, during the Asian financial crisis, during the Mexican peso crisis. When these countries were suffering a profound economic crisis, created by deregulation, they preached more deregulation, more privatization and - this is key - economic austerity to disastrous results. So I think this is really troubling. One thing that Obama said is that Larry Summers set the terms of the debate for this financial crisis and that once again is very worrying. Because if Barack Obama thinks that these are the only terms, the parameters of the debate, then its very, very narrow.
AMY GOODMAN: Naomi are you there? Well lets turn to Robert Kuttner, we'll get Naomi Klein back on the line from Toronto. Author of Obama's Challenge (2008) and founder of American Prospect Magazine. Do you have the same feelings as Naomi Klein about these two choices?
ROBERT KUTTNER: Mostly, I'm not quite as pessimistic as she is because first of all, Obama is the President, and not Summers. I certainly wish someone other than Larry Summers had been appointed. My candidate had been Sheila Beir, the head of the FDIC, who has been much more proactive not just to throw money at banks but to take them over. I totally share Naomi's view of Summers, but I think there are a couple of differences. Number one, we have reality on our side in the sense that there is a very serious crisis. And if Obama follows the advice of the 90's version of Larry Summers, he will be politically toast.
I think even Summers, because he is such an opportunist, has lately been calling for a very large stimulus package, has been calling for tighter regulation of banks. Now you have no way of knowing whether that is sincere or whether its posturing, but I think Summers is smart enough to recognize that partly because of its own policies, things are in such disastrous shape, different policies indicated. Whether he can be the instrument of change is an open question. I can point to a couple of silver linings here. Number one, in Obama's own speeches on the subject, he's very much been on the side of stringent re-regulation of financial institutions as the price of recapitalizing them and also as the necessary policy.
There's a very good person who is going to be in charge of the specifics of what banking regulation should be going forward. That's Dan Torillo, who's one of the two or three progressives present at a fairly senior level inside the Obama administration. I completely agree with Amy's assessment of Larry Summers, I'm not quite as despairing ...
AMY GOODMAN: Naomi's assessment. But let me ask you something Bob: William Greider had an interesting piece in The Nation. He said:
"On Monday, Geithner was busy executing the government's massive rescue of Citicorp - the very banking behemoth that Geithner and Summers helped to create back in the Clinton years - along with Federal Reserve Chairman Alan Greenspan and Robert Rubin, Clinton's economics guru. Now Rubin is himself a Citicorp executive and his bank is now being saved by his old protege (Geithner) with the taxpayers' money. Geithner has been a central player in the deal-making, from Bear Stearns to AIG to Citi. The strategy has not only failed, it has arguably made things worse as savvy market players saw through the contradictions and rushed out to dump more bank stocks."
And ... Mark Ames ... in writes, "Ultimately Summers was one of the key architects of our financial crisis. Hiring him to fix the economy makes as much sense as appointing Paul Wolfowitz to oversee the Iraq withdrawal." Your response, Bob Kuttner?
ROBERT KUTTNER: I basically agree. The only thing I can say, and maybe this is because I am a congenital optimist and because I have some faith in Obama's own leadership, and intellect - although I have to contradict myself and say if he's such a smart guy why did he appoint these fellows? I do think Timothy Geithner is a competent technocrat. He is not an investment banker himself. He's been a civil servant for almost all of his career. And secondly, when he was pursuing these failed policies, he was doing so as part of a threesome that included Ben Bernanke and Henry Paulson. And of the three, Geithner was the most inclined toward tough regulation as the price of bailout. But Greider is absolutely right about the intense conflicts of interest of which Rubin is both the emblem and substance.
And the question is, whether Geithner and Summers - in very different historical moments - can turn into different kinds of people under the leadership of a president who knows his own survival depends on pursuing a recovery. I certainly wish other people had gotten these positions. I am not quite prepared to conclude before the man is even inaugurated that this dooms the Obama administration to failure, but it certainly would have been better if he had appointed more progressive people.
AMY GOODMAN: We're talking to Bob Kuttner co-founder and co-editor of American Prospect Magazine and author of Obama's Challenge. Naomi Klein wrote The Shock Doctrine: The Rise of Disaster Capitalism. And we will be joined by Michael Hudson. He's just back from Berlin. Stay with us.
[break]
AMY GOODMAN: As we talk about the latest appointments by the President-elect Barack Obama, Naomi Klein, our guest from Toronto, she wrote The Shock Doctrine: the Rise of Disaster Capitalism. She is just back from Poland. Bob Kuttner is with us. [He is] co-founder and co-editor of the American Prospect. He has written Obama's Challenge, and Michael Hudson, Co-founder and President of the Institute for the Study of Long Term Economic Trends, also the professor at the University of Missouri at Kansas City. You [Michael Hudson] are just back from Berlin [and will] talk about the international response.
And what Bob Kuttner says is he is an optimist and whoever [Obama] chooses, it does not mean that is the position Barack Obama will take.
MICHAEL HUDSON: I think in a way it does. I think the deal that Obama has made is that when he talked about change, he was not talking about the vested interest ... he wasn't talking about finance or real estate, or the FIRE sector. He is going to leave Wall Street and vested interest in the hands of the people who [represent] continuity from the Bush administration through the Clinton administration. And [Obama] is going to concentrate on infrastructure, and hiring, work-place conditions, the environment. But he is not going to change the debt position, and the most worrisome aspect of the appointment of Summers is indeed, as Naomi pointed out, what he [Summers] did in Russia under privatization. He created a kleptocratic class of billionaires who will be ruling Russia for the next hundred years. And the key was to use public expenditure that would increase private wealth. And I think what the plan is from everything Obama has said is that there is going to be a heavy government expenditure [on] infrastructure here. [It will be] very much like it was in Chicago and this infrastructure is going to create huge real estate fortunes for the property along the lines in the vicinity of the location infrastructure. It's going to create huge financial fortunes.
AMY GOODMAN: Michael Hudson, at least when he is talking about infrastructure, is he talking about mass transportation?
MICHAEL HUDSON: Largely that.
AMY GOODMAN: I mean, as opposed to highways and roads, and actually mass transit?
MICHAEL HUDSON: Yes, that is certainly the key. And mass transit in almost every country creates an increase in real estate values along the routes that could actually - the rental increase that is created by this transportation could actually finance the entire transport system. For instance in London when they built the tube extension to their financial district, they created thirteen billion pounds worth of increased real estate value. The tube itself cost only eight billion. They left this GBP 13 billion real estate value in the hands of the private landlords. Same thing in Chicago in the United States. There can be a very heavy investment in mass transportation here. This is going to create enormous real estate values. The tax system will leave these [increased values] in private hands.
And I think all of the tax proposals that Mr Obama has spoken about have to do with income tax, primarily. The rich people prefer not to earn income, because you have to pay taxes on them. They prefer to make capital gains. So the intention of the economic team that Mr Obama's brought in, is really to create a huge capital gains economy and even more disparity of wealth while leaving in place the one thing that should have been addressed in the last year and that is the enormous debt overhead. Nothing is happening at all on that. He is adding to debt, not reducing it.
AMY GOODMAN: Barack Obama throughout the campaign continually said that - wealthy the people should be taxed, and went after the Bush tax cuts. But now in yesterday's address, he seemed to back off, saying well, he would let them expire perhaps, that's a possibility, in that I think it was 2011. Your thoughts?
MICHAEL HUDSON: The kicker is when he [Obama] is talking about tax, he is talking about income tax. Most wealth, is not taxed, because most wealth takes the form of return capital gain, most wealth does not pay FICA wage withholding or others, so what Obama is talking about is taxation at the margin. He is not talking about the kind of wealth, and the kind of returns that Wall Street gets, which are not subject to taxation at all. In fact, the giveaways, that the treasury put into the bank bailout law, says that because the banks have bought affiliates that have tax loss carry-forwards, they are not even going to be subject to income taxation. So the whole issue of ... the devil's in the details of the small print and Mr Obama, thanks to his appointing Summers and Geithner and this team, is going to leave it there. The Russian kleptocrats didn't have to tax on income, As the phrase went, "only the little people pay taxes". I am afraid that's going to be the case under Mr Obama also.
AMY GOODMAN: Bob Kuttner, why are the banks not asked the same questions that [the] auto industry is asked? You have Nancy Pelosi and that others are saying, "When you bring us the plan, maybe we'll talk about giving you money". Do the banks have any plans with the money they're getting?
ROBERT KUTTNER: No, and of course that's what we should be doing. I think rather than throwing money at them we ought to probably nationalize one or two banks. That with the money taxpayers are putting into the banks does what money usually does, producing ... The amount of money taxpayers are putting into banks at this point is more than the total value of the stocks of these banks as valued by Wall Street.
Well if you're putting in a majority share of the money, you should get a majority share of the ownership. If banks are too traumatized to resume lending - even with public money - then if we had a publicly-owned bank or two, we could show them how to do it. We could also have a complete look at their books, which we don't now have. One question being asked about Tim Geithner is that if the Federal Reserve is the agency charged with examining bank holding companies and it was the strategy of Citigroup as a bank holding company, as shown in Sunday's Time investigative piece, the strategy of the holding company was to do all of these exotic speculative investments.
Where was Tim Geithner at the Federal Reserve of New York which has the examiners that are supposed to be examining the bank at the holding company level. Why didn't they get a look at the book? If we do not have tools to allow examiners to get inside to dig deep inside the plumbing and understand what dangerous risks bank speculators are taking, we need to do two things. We need to change the laws so the agencies can have adequate supervisory power. The agencies need to use that adequate supervisory power. And in the meantime, we need to take this money and just nationalize a couple of banks outright. I completely agree with you that there is a double standard vis-a-vis the banks and vis-a-vis Detroit.
It is a little bit easier ... [to have] the political will to just take over a bank [than it is] to take over an auto company. Because the question remains, even if we were to require the auto executives to come up with a plan for conversion to fuel efficient cars and [if we were to] fire the auto executives and get people who were competent and [if were were to] get public representatives on the company boards, you still [have] to come up with products consumers want to buy. And that has so far eluded Detroit. It has not eluded the Japanese competitors of Detroit. But, oddly enough, the recipe of how you fix a bank is somewhat easier than the recipe of how you fix an auto company. Stay away from these exotic financial instruments, get rid of conflicts of interest, have transparency. And we [if we] had the political will, it would not be that difficult to get the banking sector back on track. Detroit, if anything, is even harder.
I think Pelosi is right to say that we don't want to throw money at Detroit until we see the plan, but we ought be doing at least as much for the banking sector.
AMY GOODMAN: Naomi Klein, your comment?
NAOMI KLEIN: Just coming back to what we can expect from Summers [and] Geithner. I think it is clear there's going to be a major departure from the ideology of the idea the government cannot do anything. We'll see major economic stimulus, major investments in infrastructure, as Michael was discussing, and one hopes that there will be a lot of investment in infrastructure.
But the key issue [is] we also want to be optimistic. Part of what causes ... the situation that seems to be very disappoint[ing] appointments is the fact [that] we [have] not been honest about the legacy of the Clinton years. So much misinformation was spread during the election campaign, because it was a nice message to present the nineties as these wonder years in contrast to the Bush years. That is exactly what created the situation where you could have Summers been presented as the wise man instead of going down with Alan Greenspan. When Alan Greenspan's reputation was raked over the coals, it should have Rubin and Summers alongside him.
And I think we have nobody to blame but ourselves for that failure. So essentially, it was an electoral strategy ... that relied on intellectual dishonesty. And now to continue to make excuses for Obama is a real mistake, because he is not running for election anymore. He has already won, so there is no reason to be pandering in this way. In terms of the real issue here, yes there will be stimulus. But how will it be paid for? Obama ran an election campaign promising to increase taxes on the wealthy. And Rahm Emanuel has already hinted that he might not do that right away. We are already seeing hesitation about the commitment to not renew the Bush tax cuts. Then there's a huge fight over capital gains tax and the kinds of taxes paid by hedge funds.
Here I think it's important to remember [that] Larry Summers is coming straight from a hedge fund. He's managing director of one of the most secretive hedge funds around. So the real question is not whether they will spend taxpayer money - they will [spend] on infrastructure. But the point is will they just just rack up huge debt and deficits or will they actually pay for this with taxes on the wealthy, which is what they promised to do and what we're seeing Gordon Brown begin to do in Britain. Because if they do not pay for this [in] an equitable way, in a progressive way, then what will happen is this huge investment in infrastructure will a create huge economic crisis down the road. It will be blamed on Obama. And then, there will be a wave of privatizations [of] these new investments in public spending. There will be a whole new bubble.
AMY GOODMAN: You do not agree, Michael Hudson?
MICHAEL HUDSON: Here is the problem: most infrastructure is built by states and localities. I do not think there will be privatization of this new infrastructure because right now, the states and localities are broke. Here in New York city [it has been] announced they're cutting back on the Second Avenue subway, raising transport fares. All over the United States, municipalities are broke. The idea of bringing in Summers is to do this from the very beginning, with private funds that will be provided largely by the government itself. And if you look of the bailout money that has been given, yesterday Bloomberg calculated over 7.7 trillion dollars of just the government taking over from the financial sector this year. Of all of the 7.7 trillion dollars, what has not been done?
One thing that has not been bailed out has been the pension benefit guaranty corporation. They are already $25 billion in deficit. And Congress a few years ago passed a law [saying] that this year if they're not fully funded, they are going to have to suddenly make up the entire shortfall. Which is essentially going to make many corporations insolvent for their pension funds. Forcing a shift away from guaranteed pensions to sort of 'whatever we have we'll pay you'. Standardize contributions, but not standardized payoffs. So there's going to be an enormous squeeze on the kind of labor that is employed in states and municipalities, and unions for infrastructure to essentially privatize from the beginning with government guarantees, government funds and it will be a bonanza for the banks and that's out there - they are going to [try to] earn their way out of debt. By lending to private funds instead of government funds.
AMY GOODMAN: President-elect Obama was asked about his plans for the auto industry at his news conference yesterday. And he talked about his support for a bailout of the big three.
BARACK OBAMA: We can't allow the auto industry to simply vanish. We have to make sure it is there and the workers and suppliers and businesses that rely on the auto industry stay in business. What I have also said is that we cannot just write a blank check to the auto industry. Taxpayers cannot expected to pony up more money for an auto industry that is been resistant to change.
AMY GOODMAN: I want to turn to a film that came out a few years ago about the electric car. In 1996 General Motors introduced the EV-1 electric car in California and Arizona. Hundreds of the electric cars were soon on the road, then they all disappeared. The mystery behind their disappearance is the subject of this documentary Who Killed the Electric Car? We featured the documentary on Democracy Now last year. And we interviewed the filmmaker. In this clip, we start with Peter Horton the actor and then Tom Hanks is on David Letterman.
PETER HORTON: There's nothing like driving a car when you realize as you are sitting in traffic there's no pollution coming out of your tailpipe.
DAVID LETTERMAN: By driving an electric car, what are you sparing us from?
TOM HANKS: I'm saving America, Dave. That's what I am doing, I am saving America by driving electric cars.
AMY GOODMAN: That was Tom Hanks speaking on the David Letterman Show. Despite the praise from drivers, General Motors stopped manufacturing the cars and forced all drivers to return their EV-1s. GM was able to do this because none of the cars had actually been sold, only leased. After the electric cars were removed from the road they were sent to Arizona where they were crushed.
CHRIS PAINE: We flew over at General Motors and looking down, we could see right next to the racetrack where the EV-1 was first tested, we saw maybe 50 EV-1s, crushed and put on top of semi flatbeds right next to the yellow crusher. General motors is almost finished off I think. I don't imagine there's many EV-1s left that haven't been crushed out. It's pretty sad.
DAVE BARTHMUSS: There's one of four things that will happen with the EV-1s. They will go to colleges and universities, engineering schools. They'll go to museums and other displays across the country. Other EV-1 vehicles are being driven by our engineers and the other option for EV-1s at the end of their life is recycling. But know that every part of the EV-1 is going to be recycled, dismantled through a third party and then reused. Everything is going to be recycled, we are not just going to crush it and send it off to a landfill.
JIM BOYD: When I saw the picture of the pile of crushed cars, it hurt and I, you know, I thought it was pretty spiteful.
IRIS OVSHINSKY: To see on the computer, on the internet, that the crushed EV-1s that GM did?it was tragic.
AMY GOODMAN: An excerpt of Who Killed the Electric Car by Chris Paine the filmmaker. Robert Kuttner, could you imagine if the CEO of GM instead of coming with the other CEO's of Chrysler and Ford in a private jet came to an electric car, of course, he could not because GB killed the electric car.
ROBERT KUTTNER: That film is one of the most profound documentaries of our time. GM was actually ahead of Toyota. And now [we're] working our way back towards a plug-in electric car via modified hybrid. But they had the technology 12,14 years ago. You can't make this stuff up. The patent for the battery that made possible the EV1 was bought by Exxonmobil just so it would never be utilized again. I think that is why in restructuring the auto industry, you have to get rid of the executives.
It's not just enough [to] throw money at them. It gives you a sense of how profound the challenge is. Just analogizing Bob Rubin for a second, in a country where market capitalism has as much power as it does in the US, whether the villain of the piece is GM or Robert Rubin and Citigroup, it is bigger than any one person. It's a system you have to fight. It's the mark of their power - the residual power of the system. Even when the system has come to a crisis of its own making, and your president is as attractive and intelligent as Barack Obama, the institutional practice to reappoint the same standards [is] overwhelming. It is only when Obama looks over the cliff of the failure of his own administration because he has not thought boldly enough, that he may change his plans and move in a more radical direction.
So far the direction [he has moved], whether its taxing rich people, is disappointing. The same thing was true of the Roosevelt administration in the beginning. All you can do is hope that pressure from folks like us, ordinary people and social movements, and from the dire circumstances we face, will push the administration in a more progressive direction.
AMY GOODMAN: Michael Hudson?
MICHAEL HUDSON: I think the idea that Obama will change his economic philosophy is quixotic. In Berlin, almost everybody there was sure that Obama would be another Gorbachev, somebody laying low, somebody going along with seemingly conforming so that all of a sudden nce he was in he could do a revolution. Almost everybody was hoping against hope that would be the case. And instead of looking like Gorbachev, not all of the sudden MrObama is looking like Yeltsin. Just the umbrella for these kelptokrats to come back in. The point that Robert Kuttner made, the bottom line for that is the fatal alliance between the American auto industry and the oil industry. It was the auto industry that bought up public transportation in Los Angeles and other cities after the World War II, and tore it down some people would not have public transportation and would have to have oils to drive cars.
AMY GOODMAN: Naomi Klein, when you were last on, you were talking about structural adjustment programs for banks in the auto industry. But why aren't if the U.S. tax payers are going to bail out the wealthiest corporations and banks in this country, why aren't demands being made like the all the boards have to resign, the leadership has to be thrown out, and if the US has to inject money, sometimes the poorest people in this country, there have to be certain rules which include you cannot build another SUV? Naomi Klein.
NAOMI KLEIN: Exactly. The point I made before, when anybody comes looking for a [loan], whoever has the money has the leverage. We know that from the International Monetary Fund and you know that from your local bank. They set the conditions for that loan. When you look at deals that have been negotiated, not just by Henry Paulson, but also by Tim Geithner - you know he's the one, really the key person, that negotiated the JP Morgan-Bear Sterns deal; he was also central in the AIG deal. And what we see again and again [is that] taxpayers have taken on enormous risks from these companies. But they have not been exerting control in terms of reregulating the sector as a whole.
When exactly is the Re-regulation going to happen? This is the moment [that the government has] high leverage. It is not just about firing the boss and [those who sit] on the board. It is about...regulating exactly what Larry Summers and Tim Geithner de-regulated under the Clinton administration. The real question is: Do these people have the humility to fix their own mistakes? My question: Is his (Larry Summers') ego too big to fail? These guys should not be promoted at this point. Their reputations should really be destroyed by their own track records.
All these people are constantly talking about how brilliant [they are], despite the dismal track record in this country and other countries in which they have meddled, including [in] South Korea and Russia.
The key issue here, I think, in coming back [to] the issue is [that] Obama is coming to these decisions because he is under enormous pressure from above - Wall Street. How do you transition from a pro Obama campaign movement to an independent social movement that will put counter-pressure on him from [below]? Those are the conditions under which Roosevelt sold the new deal as a compromise to the elite. We do not have those dynamics right now. We have a situation where we have super-fans for Obama, constantly apologizing for every decision that he makes, versus a gloves-off elite who are putting real pressure on him behind the scenes. And we are seeing the result.
AMY GOODMAN: I want to thank you all for being on. Naomi Klein wrote The Shock Doctrine: the rise of disaster capitalism. Michael Hudson, just back from Berlin, has written Super-Imperialism: The Economic Strategy of American Empire.
http://www.democracynow.org/2008/11/25/naomi_klein_robert_kuttner_and_michael
Bill Totten http://www.ashisuto.co.jp/english/index.html
by Amy Goodman
Democracy Now (November 25 2008)
On Monday Obama named New York Federal Reserve Bank President Timothy Geithner to the post of the Treasury Secretary. Former Treasury Secretary under Clinton Lawrence Summers was named the Director of the National Economic Council in the White House. Obama also called for a stimulus plan that will "give a jolt to the economy". We host a roundtable discussion about Obama's latest economic moves [includes rush transcript].
Guests:
Naomi Klein, Investigative journalist and author of The Shock Doctrine: The Rise of Disaster Capitalism (2007).
Robert Kuttner, Veteran economic journalist and the cofounder and coeditor of The American Prospect magazine. His latest book is called Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency (2008).
Michael Hudson, president of the Institute for the Study of Long-Term Economic Trends, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Super-Imperialism: The Economic Strategy of American Empire (1972, 2003). He is the chief economic adviser to Representative Dennis Kucinich.
AMY GOODMAN: The Treasury and the Federal Reserve are expected to announce a major lending program today that will finance billions of dollars of consumer loans as well as business debt. President Bush said Monday that he expected the country would recover from the QUOTE "tough situation" and said his administration was working in "close cooperation" with Obama's economic team to draw up plans to calm the financial markets.
GEORGE W BUSH: This is a tough situation for America. But we will recover from it. And the first step to recovery is to safeguard our financial system. Last night on Air Force One coming back from Peru, I talked at length to the Secretary about his recommendation - on the decisions made to safeguard Citicorp. We have made these kind of decisions in the past and we made one last night. If need be, we will make these decisions to safeguard our financial system in the future.
AMY GOODMAN: Meanwhile Obama introduced the leading players in his new economic team at a news conference in Chicago. He named New York Federal Reserve Bank President Timothy Geithner to the post of the Treasury Secretary. Former Treasury Secretary under Clinton Lawrence Summers named Director of the National Economic Council in the White House. Obama also announced that he had chosen Berkeley economics professor Christina Romer to head his Council of Economic Advisers and Melody Barnes as Director of his White House Domestic Policy Council. Obama called for a stimulus plan that will quote "give a jolt to the economy".
BARACK OBAMA: We need a recovery plan for both Wall Street and Main street, a plan that stabilizes our financial system and its credit flowing again the same time addressing our growing foreclosure crisis, helping our struggling auto industry and creating and saving 2.5 million jobs. Jobs, rebuilding our infrastructure, roads, bridges, modernizing our schools and creating the clean energy infrastructure of the 21st century. Because of this moment, we need to restore both confidence in the markets and restore confidence of middle-class families who find themselves working harder, earning less, and falling further behind.
AMY GOODMAN: I'm joined now by three guests for a discussion on the state of the economy and what to expect in the coming months. Veteran economic journalist and the cofounder and co-editor of The American Prospect magazine, Robert Kuttner, joins me on the telephone from Florida. His latest book is called Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency (2008).
Investigative journalist Naomi Klein, author of The Shock Doctrine: the Rise of Disaster Capitalism (2007), joins us on the telephone from Toronto.
We're also joined here in the firehouse studio by Michael Hudson. He is president of the Institute for the Study of Long-Term Economic Trends, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Super-Imperialism: The Economic Strategy of American Empire (1972, 2003). He is the chief economic adviser to Representative Dennis Kucinich.
We welcome you all to Democracy Now! I wanted to begin with the appointments. This is how president-elect Obama introduced the next Treasury Secretary, if confirmed, Timothy Geithner.
BARACK OBAMA: Tim Geithner offers not just extensive experience shaping economic policy and managing financial markets, he has an unparalleled understanding of our current economic crisis in all its depth, complexity, and urgency. Tim will waste no time getting up to speed. He will start his first day on the job with a unique insight into the failures of today's markets and a clear vision of the steps we must take to revive to them.
AMY GOODMAN: And Lawrence Summers, named the Director of the National Economic Council in the White House.
BARACK OBAMA: One of the great economic minds of our times, Larry has the global reputation for being able to get to the heart of the most complex and novel policy challenges. With respect to both our current financial crisis and other pressing economic issues of our time, his thinking, writing, and speaking have set the terms of the debate. I am glad he will be by my side, playing the critical role of coordinating my administration's economic policy in the White House and I will rely heavily on his advice as to navigate the uncharted waters of this crisis.
AMY GOODMAN: We begin with Naomi Klein. Your response to these appointments, and what they signify. If you could begin with Larry Summers, the former Clinton Treasury Secretary.
NAOMI KLEIN: Hi Amy, its good to be with you. Well, I have to say it is a profound disappointment. It really does represent a very safe choice, but let's remember Barack Obama won this election saying that taking the status quo, that staying with the same policies that have been governing the country for the recent past, was actually a very dangerous course. I think in many ways we are paying the price of the frankly intellectual dishonesty of the progressive liberal left during the bush years. Because Obama said again and again during the campaign that the crisis on Wall Street represented the culmination of an ideology of deregulation and laissez-faire trickle-down economics that had guided the country for the past eight years.
And the truth is, it was not just eight years in which those policies guided US economic policies. They certainly guided them under Reagan and they certainly guided them under Clinton. That is where Larry Summers comes in because Larry Summers was the last Treasury Secretary under Clinton. And, he along with Alan Greenspan and Robert Rubin were really the key architects of the policies of deregulation that created the crisis that we're living now. And those key policies, as you know, are the killing of Glass-Spiegel that allowed a series of very large bank mergers that created these institutions that are too big and too intermingled to fail we're told again and again. The deliberate decision to keep the derivatives out of the reach of financial regulators - that was also a Summer's decision. And also allowing the banks to carry these extraordinary levels of debt - 33 to 1 in the case of Bear Sterns.
Now, in my book the Shock Doctrine I start a chapter with a quote from Larry Summers. The context in which he says it was 1992 and it was when he was making World Bank economic policy as it related to Russia, in the midst of a financial crisis. What he said and this is why I quoted him because it really shows the extent to which he is truly an ideologue, and truly a follower of the very ideology - not just a follower but a propagator of the very ideology that Obama ran his campaign against. And here's the quote?this is Larry Summers in 1992: "Spread the truth. The laws of economics are like the loss of engineering. One set of laws works everywhere." And then he laid out those laws a little bit later.
He referred to the three "ations", and those were privatization, stabilization, and liberalization. So he has been preaching the doctrine. He is by no means an innocent bystander. He is a dyed-in-the-wool privatizer, free trader. And he along with Tim Geithner, his deputy, played key roles during very important economic crises in Russia, during the Asian financial crisis, during the Mexican peso crisis. When these countries were suffering a profound economic crisis, created by deregulation, they preached more deregulation, more privatization and - this is key - economic austerity to disastrous results. So I think this is really troubling. One thing that Obama said is that Larry Summers set the terms of the debate for this financial crisis and that once again is very worrying. Because if Barack Obama thinks that these are the only terms, the parameters of the debate, then its very, very narrow.
AMY GOODMAN: Naomi are you there? Well lets turn to Robert Kuttner, we'll get Naomi Klein back on the line from Toronto. Author of Obama's Challenge (2008) and founder of American Prospect Magazine. Do you have the same feelings as Naomi Klein about these two choices?
ROBERT KUTTNER: Mostly, I'm not quite as pessimistic as she is because first of all, Obama is the President, and not Summers. I certainly wish someone other than Larry Summers had been appointed. My candidate had been Sheila Beir, the head of the FDIC, who has been much more proactive not just to throw money at banks but to take them over. I totally share Naomi's view of Summers, but I think there are a couple of differences. Number one, we have reality on our side in the sense that there is a very serious crisis. And if Obama follows the advice of the 90's version of Larry Summers, he will be politically toast.
I think even Summers, because he is such an opportunist, has lately been calling for a very large stimulus package, has been calling for tighter regulation of banks. Now you have no way of knowing whether that is sincere or whether its posturing, but I think Summers is smart enough to recognize that partly because of its own policies, things are in such disastrous shape, different policies indicated. Whether he can be the instrument of change is an open question. I can point to a couple of silver linings here. Number one, in Obama's own speeches on the subject, he's very much been on the side of stringent re-regulation of financial institutions as the price of recapitalizing them and also as the necessary policy.
There's a very good person who is going to be in charge of the specifics of what banking regulation should be going forward. That's Dan Torillo, who's one of the two or three progressives present at a fairly senior level inside the Obama administration. I completely agree with Amy's assessment of Larry Summers, I'm not quite as despairing ...
AMY GOODMAN: Naomi's assessment. But let me ask you something Bob: William Greider had an interesting piece in The Nation. He said:
"On Monday, Geithner was busy executing the government's massive rescue of Citicorp - the very banking behemoth that Geithner and Summers helped to create back in the Clinton years - along with Federal Reserve Chairman Alan Greenspan and Robert Rubin, Clinton's economics guru. Now Rubin is himself a Citicorp executive and his bank is now being saved by his old protege (Geithner) with the taxpayers' money. Geithner has been a central player in the deal-making, from Bear Stearns to AIG to Citi. The strategy has not only failed, it has arguably made things worse as savvy market players saw through the contradictions and rushed out to dump more bank stocks."
And ... Mark Ames ... in writes, "Ultimately Summers was one of the key architects of our financial crisis. Hiring him to fix the economy makes as much sense as appointing Paul Wolfowitz to oversee the Iraq withdrawal." Your response, Bob Kuttner?
ROBERT KUTTNER: I basically agree. The only thing I can say, and maybe this is because I am a congenital optimist and because I have some faith in Obama's own leadership, and intellect - although I have to contradict myself and say if he's such a smart guy why did he appoint these fellows? I do think Timothy Geithner is a competent technocrat. He is not an investment banker himself. He's been a civil servant for almost all of his career. And secondly, when he was pursuing these failed policies, he was doing so as part of a threesome that included Ben Bernanke and Henry Paulson. And of the three, Geithner was the most inclined toward tough regulation as the price of bailout. But Greider is absolutely right about the intense conflicts of interest of which Rubin is both the emblem and substance.
And the question is, whether Geithner and Summers - in very different historical moments - can turn into different kinds of people under the leadership of a president who knows his own survival depends on pursuing a recovery. I certainly wish other people had gotten these positions. I am not quite prepared to conclude before the man is even inaugurated that this dooms the Obama administration to failure, but it certainly would have been better if he had appointed more progressive people.
AMY GOODMAN: We're talking to Bob Kuttner co-founder and co-editor of American Prospect Magazine and author of Obama's Challenge. Naomi Klein wrote The Shock Doctrine: The Rise of Disaster Capitalism. And we will be joined by Michael Hudson. He's just back from Berlin. Stay with us.
[break]
AMY GOODMAN: As we talk about the latest appointments by the President-elect Barack Obama, Naomi Klein, our guest from Toronto, she wrote The Shock Doctrine: the Rise of Disaster Capitalism. She is just back from Poland. Bob Kuttner is with us. [He is] co-founder and co-editor of the American Prospect. He has written Obama's Challenge, and Michael Hudson, Co-founder and President of the Institute for the Study of Long Term Economic Trends, also the professor at the University of Missouri at Kansas City. You [Michael Hudson] are just back from Berlin [and will] talk about the international response.
And what Bob Kuttner says is he is an optimist and whoever [Obama] chooses, it does not mean that is the position Barack Obama will take.
MICHAEL HUDSON: I think in a way it does. I think the deal that Obama has made is that when he talked about change, he was not talking about the vested interest ... he wasn't talking about finance or real estate, or the FIRE sector. He is going to leave Wall Street and vested interest in the hands of the people who [represent] continuity from the Bush administration through the Clinton administration. And [Obama] is going to concentrate on infrastructure, and hiring, work-place conditions, the environment. But he is not going to change the debt position, and the most worrisome aspect of the appointment of Summers is indeed, as Naomi pointed out, what he [Summers] did in Russia under privatization. He created a kleptocratic class of billionaires who will be ruling Russia for the next hundred years. And the key was to use public expenditure that would increase private wealth. And I think what the plan is from everything Obama has said is that there is going to be a heavy government expenditure [on] infrastructure here. [It will be] very much like it was in Chicago and this infrastructure is going to create huge real estate fortunes for the property along the lines in the vicinity of the location infrastructure. It's going to create huge financial fortunes.
AMY GOODMAN: Michael Hudson, at least when he is talking about infrastructure, is he talking about mass transportation?
MICHAEL HUDSON: Largely that.
AMY GOODMAN: I mean, as opposed to highways and roads, and actually mass transit?
MICHAEL HUDSON: Yes, that is certainly the key. And mass transit in almost every country creates an increase in real estate values along the routes that could actually - the rental increase that is created by this transportation could actually finance the entire transport system. For instance in London when they built the tube extension to their financial district, they created thirteen billion pounds worth of increased real estate value. The tube itself cost only eight billion. They left this GBP 13 billion real estate value in the hands of the private landlords. Same thing in Chicago in the United States. There can be a very heavy investment in mass transportation here. This is going to create enormous real estate values. The tax system will leave these [increased values] in private hands.
And I think all of the tax proposals that Mr Obama has spoken about have to do with income tax, primarily. The rich people prefer not to earn income, because you have to pay taxes on them. They prefer to make capital gains. So the intention of the economic team that Mr Obama's brought in, is really to create a huge capital gains economy and even more disparity of wealth while leaving in place the one thing that should have been addressed in the last year and that is the enormous debt overhead. Nothing is happening at all on that. He is adding to debt, not reducing it.
AMY GOODMAN: Barack Obama throughout the campaign continually said that - wealthy the people should be taxed, and went after the Bush tax cuts. But now in yesterday's address, he seemed to back off, saying well, he would let them expire perhaps, that's a possibility, in that I think it was 2011. Your thoughts?
MICHAEL HUDSON: The kicker is when he [Obama] is talking about tax, he is talking about income tax. Most wealth, is not taxed, because most wealth takes the form of return capital gain, most wealth does not pay FICA wage withholding or others, so what Obama is talking about is taxation at the margin. He is not talking about the kind of wealth, and the kind of returns that Wall Street gets, which are not subject to taxation at all. In fact, the giveaways, that the treasury put into the bank bailout law, says that because the banks have bought affiliates that have tax loss carry-forwards, they are not even going to be subject to income taxation. So the whole issue of ... the devil's in the details of the small print and Mr Obama, thanks to his appointing Summers and Geithner and this team, is going to leave it there. The Russian kleptocrats didn't have to tax on income, As the phrase went, "only the little people pay taxes". I am afraid that's going to be the case under Mr Obama also.
AMY GOODMAN: Bob Kuttner, why are the banks not asked the same questions that [the] auto industry is asked? You have Nancy Pelosi and that others are saying, "When you bring us the plan, maybe we'll talk about giving you money". Do the banks have any plans with the money they're getting?
ROBERT KUTTNER: No, and of course that's what we should be doing. I think rather than throwing money at them we ought to probably nationalize one or two banks. That with the money taxpayers are putting into the banks does what money usually does, producing ... The amount of money taxpayers are putting into banks at this point is more than the total value of the stocks of these banks as valued by Wall Street.
Well if you're putting in a majority share of the money, you should get a majority share of the ownership. If banks are too traumatized to resume lending - even with public money - then if we had a publicly-owned bank or two, we could show them how to do it. We could also have a complete look at their books, which we don't now have. One question being asked about Tim Geithner is that if the Federal Reserve is the agency charged with examining bank holding companies and it was the strategy of Citigroup as a bank holding company, as shown in Sunday's Time investigative piece, the strategy of the holding company was to do all of these exotic speculative investments.
Where was Tim Geithner at the Federal Reserve of New York which has the examiners that are supposed to be examining the bank at the holding company level. Why didn't they get a look at the book? If we do not have tools to allow examiners to get inside to dig deep inside the plumbing and understand what dangerous risks bank speculators are taking, we need to do two things. We need to change the laws so the agencies can have adequate supervisory power. The agencies need to use that adequate supervisory power. And in the meantime, we need to take this money and just nationalize a couple of banks outright. I completely agree with you that there is a double standard vis-a-vis the banks and vis-a-vis Detroit.
It is a little bit easier ... [to have] the political will to just take over a bank [than it is] to take over an auto company. Because the question remains, even if we were to require the auto executives to come up with a plan for conversion to fuel efficient cars and [if we were to] fire the auto executives and get people who were competent and [if were were to] get public representatives on the company boards, you still [have] to come up with products consumers want to buy. And that has so far eluded Detroit. It has not eluded the Japanese competitors of Detroit. But, oddly enough, the recipe of how you fix a bank is somewhat easier than the recipe of how you fix an auto company. Stay away from these exotic financial instruments, get rid of conflicts of interest, have transparency. And we [if we] had the political will, it would not be that difficult to get the banking sector back on track. Detroit, if anything, is even harder.
I think Pelosi is right to say that we don't want to throw money at Detroit until we see the plan, but we ought be doing at least as much for the banking sector.
AMY GOODMAN: Naomi Klein, your comment?
NAOMI KLEIN: Just coming back to what we can expect from Summers [and] Geithner. I think it is clear there's going to be a major departure from the ideology of the idea the government cannot do anything. We'll see major economic stimulus, major investments in infrastructure, as Michael was discussing, and one hopes that there will be a lot of investment in infrastructure.
But the key issue [is] we also want to be optimistic. Part of what causes ... the situation that seems to be very disappoint[ing] appointments is the fact [that] we [have] not been honest about the legacy of the Clinton years. So much misinformation was spread during the election campaign, because it was a nice message to present the nineties as these wonder years in contrast to the Bush years. That is exactly what created the situation where you could have Summers been presented as the wise man instead of going down with Alan Greenspan. When Alan Greenspan's reputation was raked over the coals, it should have Rubin and Summers alongside him.
And I think we have nobody to blame but ourselves for that failure. So essentially, it was an electoral strategy ... that relied on intellectual dishonesty. And now to continue to make excuses for Obama is a real mistake, because he is not running for election anymore. He has already won, so there is no reason to be pandering in this way. In terms of the real issue here, yes there will be stimulus. But how will it be paid for? Obama ran an election campaign promising to increase taxes on the wealthy. And Rahm Emanuel has already hinted that he might not do that right away. We are already seeing hesitation about the commitment to not renew the Bush tax cuts. Then there's a huge fight over capital gains tax and the kinds of taxes paid by hedge funds.
Here I think it's important to remember [that] Larry Summers is coming straight from a hedge fund. He's managing director of one of the most secretive hedge funds around. So the real question is not whether they will spend taxpayer money - they will [spend] on infrastructure. But the point is will they just just rack up huge debt and deficits or will they actually pay for this with taxes on the wealthy, which is what they promised to do and what we're seeing Gordon Brown begin to do in Britain. Because if they do not pay for this [in] an equitable way, in a progressive way, then what will happen is this huge investment in infrastructure will a create huge economic crisis down the road. It will be blamed on Obama. And then, there will be a wave of privatizations [of] these new investments in public spending. There will be a whole new bubble.
AMY GOODMAN: You do not agree, Michael Hudson?
MICHAEL HUDSON: Here is the problem: most infrastructure is built by states and localities. I do not think there will be privatization of this new infrastructure because right now, the states and localities are broke. Here in New York city [it has been] announced they're cutting back on the Second Avenue subway, raising transport fares. All over the United States, municipalities are broke. The idea of bringing in Summers is to do this from the very beginning, with private funds that will be provided largely by the government itself. And if you look of the bailout money that has been given, yesterday Bloomberg calculated over 7.7 trillion dollars of just the government taking over from the financial sector this year. Of all of the 7.7 trillion dollars, what has not been done?
One thing that has not been bailed out has been the pension benefit guaranty corporation. They are already $25 billion in deficit. And Congress a few years ago passed a law [saying] that this year if they're not fully funded, they are going to have to suddenly make up the entire shortfall. Which is essentially going to make many corporations insolvent for their pension funds. Forcing a shift away from guaranteed pensions to sort of 'whatever we have we'll pay you'. Standardize contributions, but not standardized payoffs. So there's going to be an enormous squeeze on the kind of labor that is employed in states and municipalities, and unions for infrastructure to essentially privatize from the beginning with government guarantees, government funds and it will be a bonanza for the banks and that's out there - they are going to [try to] earn their way out of debt. By lending to private funds instead of government funds.
AMY GOODMAN: President-elect Obama was asked about his plans for the auto industry at his news conference yesterday. And he talked about his support for a bailout of the big three.
BARACK OBAMA: We can't allow the auto industry to simply vanish. We have to make sure it is there and the workers and suppliers and businesses that rely on the auto industry stay in business. What I have also said is that we cannot just write a blank check to the auto industry. Taxpayers cannot expected to pony up more money for an auto industry that is been resistant to change.
AMY GOODMAN: I want to turn to a film that came out a few years ago about the electric car. In 1996 General Motors introduced the EV-1 electric car in California and Arizona. Hundreds of the electric cars were soon on the road, then they all disappeared. The mystery behind their disappearance is the subject of this documentary Who Killed the Electric Car? We featured the documentary on Democracy Now last year. And we interviewed the filmmaker. In this clip, we start with Peter Horton the actor and then Tom Hanks is on David Letterman.
PETER HORTON: There's nothing like driving a car when you realize as you are sitting in traffic there's no pollution coming out of your tailpipe.
DAVID LETTERMAN: By driving an electric car, what are you sparing us from?
TOM HANKS: I'm saving America, Dave. That's what I am doing, I am saving America by driving electric cars.
AMY GOODMAN: That was Tom Hanks speaking on the David Letterman Show. Despite the praise from drivers, General Motors stopped manufacturing the cars and forced all drivers to return their EV-1s. GM was able to do this because none of the cars had actually been sold, only leased. After the electric cars were removed from the road they were sent to Arizona where they were crushed.
CHRIS PAINE: We flew over at General Motors and looking down, we could see right next to the racetrack where the EV-1 was first tested, we saw maybe 50 EV-1s, crushed and put on top of semi flatbeds right next to the yellow crusher. General motors is almost finished off I think. I don't imagine there's many EV-1s left that haven't been crushed out. It's pretty sad.
DAVE BARTHMUSS: There's one of four things that will happen with the EV-1s. They will go to colleges and universities, engineering schools. They'll go to museums and other displays across the country. Other EV-1 vehicles are being driven by our engineers and the other option for EV-1s at the end of their life is recycling. But know that every part of the EV-1 is going to be recycled, dismantled through a third party and then reused. Everything is going to be recycled, we are not just going to crush it and send it off to a landfill.
JIM BOYD: When I saw the picture of the pile of crushed cars, it hurt and I, you know, I thought it was pretty spiteful.
IRIS OVSHINSKY: To see on the computer, on the internet, that the crushed EV-1s that GM did?it was tragic.
AMY GOODMAN: An excerpt of Who Killed the Electric Car by Chris Paine the filmmaker. Robert Kuttner, could you imagine if the CEO of GM instead of coming with the other CEO's of Chrysler and Ford in a private jet came to an electric car, of course, he could not because GB killed the electric car.
ROBERT KUTTNER: That film is one of the most profound documentaries of our time. GM was actually ahead of Toyota. And now [we're] working our way back towards a plug-in electric car via modified hybrid. But they had the technology 12,14 years ago. You can't make this stuff up. The patent for the battery that made possible the EV1 was bought by Exxonmobil just so it would never be utilized again. I think that is why in restructuring the auto industry, you have to get rid of the executives.
It's not just enough [to] throw money at them. It gives you a sense of how profound the challenge is. Just analogizing Bob Rubin for a second, in a country where market capitalism has as much power as it does in the US, whether the villain of the piece is GM or Robert Rubin and Citigroup, it is bigger than any one person. It's a system you have to fight. It's the mark of their power - the residual power of the system. Even when the system has come to a crisis of its own making, and your president is as attractive and intelligent as Barack Obama, the institutional practice to reappoint the same standards [is] overwhelming. It is only when Obama looks over the cliff of the failure of his own administration because he has not thought boldly enough, that he may change his plans and move in a more radical direction.
So far the direction [he has moved], whether its taxing rich people, is disappointing. The same thing was true of the Roosevelt administration in the beginning. All you can do is hope that pressure from folks like us, ordinary people and social movements, and from the dire circumstances we face, will push the administration in a more progressive direction.
AMY GOODMAN: Michael Hudson?
MICHAEL HUDSON: I think the idea that Obama will change his economic philosophy is quixotic. In Berlin, almost everybody there was sure that Obama would be another Gorbachev, somebody laying low, somebody going along with seemingly conforming so that all of a sudden nce he was in he could do a revolution. Almost everybody was hoping against hope that would be the case. And instead of looking like Gorbachev, not all of the sudden MrObama is looking like Yeltsin. Just the umbrella for these kelptokrats to come back in. The point that Robert Kuttner made, the bottom line for that is the fatal alliance between the American auto industry and the oil industry. It was the auto industry that bought up public transportation in Los Angeles and other cities after the World War II, and tore it down some people would not have public transportation and would have to have oils to drive cars.
AMY GOODMAN: Naomi Klein, when you were last on, you were talking about structural adjustment programs for banks in the auto industry. But why aren't if the U.S. tax payers are going to bail out the wealthiest corporations and banks in this country, why aren't demands being made like the all the boards have to resign, the leadership has to be thrown out, and if the US has to inject money, sometimes the poorest people in this country, there have to be certain rules which include you cannot build another SUV? Naomi Klein.
NAOMI KLEIN: Exactly. The point I made before, when anybody comes looking for a [loan], whoever has the money has the leverage. We know that from the International Monetary Fund and you know that from your local bank. They set the conditions for that loan. When you look at deals that have been negotiated, not just by Henry Paulson, but also by Tim Geithner - you know he's the one, really the key person, that negotiated the JP Morgan-Bear Sterns deal; he was also central in the AIG deal. And what we see again and again [is that] taxpayers have taken on enormous risks from these companies. But they have not been exerting control in terms of reregulating the sector as a whole.
When exactly is the Re-regulation going to happen? This is the moment [that the government has] high leverage. It is not just about firing the boss and [those who sit] on the board. It is about...regulating exactly what Larry Summers and Tim Geithner de-regulated under the Clinton administration. The real question is: Do these people have the humility to fix their own mistakes? My question: Is his (Larry Summers') ego too big to fail? These guys should not be promoted at this point. Their reputations should really be destroyed by their own track records.
All these people are constantly talking about how brilliant [they are], despite the dismal track record in this country and other countries in which they have meddled, including [in] South Korea and Russia.
The key issue here, I think, in coming back [to] the issue is [that] Obama is coming to these decisions because he is under enormous pressure from above - Wall Street. How do you transition from a pro Obama campaign movement to an independent social movement that will put counter-pressure on him from [below]? Those are the conditions under which Roosevelt sold the new deal as a compromise to the elite. We do not have those dynamics right now. We have a situation where we have super-fans for Obama, constantly apologizing for every decision that he makes, versus a gloves-off elite who are putting real pressure on him behind the scenes. And we are seeing the result.
AMY GOODMAN: I want to thank you all for being on. Naomi Klein wrote The Shock Doctrine: the rise of disaster capitalism. Michael Hudson, just back from Berlin, has written Super-Imperialism: The Economic Strategy of American Empire.
http://www.democracynow.org/2008/11/25/naomi_klein_robert_kuttner_and_michael
Bill Totten http://www.ashisuto.co.jp/english/index.html
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