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(Please scroll down for The Bailout: Socialism For Wall Street: Interview with Mark Engler)

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From Karen House Catholic Worker:

-  Building a New Society: Spring 2008 RoundTable

- The Global Economy: Fall 2001 RoundTable


From the Los Angeles Catholic Worker:

- Free Market Capitalism: Robbing the Poor  - Jeff Deitrich

- The Bailout: Socialism For Wall Street - Interview with Mark Engler


From the Houston Catholic Worker:

- Faith and the Financial Crisis  - Jim Consedine

- It's All About Usury - John Médaille








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- On Economics: Easy Essays- Peter Maurin

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The Bailout: Socialism For Wall Street:

Interview with Mark Engler


Mark Engler is a writer based in New York City and an analyst with

Foreign Policy in Focus. His book How to Rule the World: The Coming Battle Over the Global Economy came out in Spring 2008.

Please visit the LA Catholic Worker website to download the Catholic Agitator, and this article.


Agitator: Thank you for your

excellent book. Your book is largely

focused on the world economy,

but I wanted to begin talking about

the bailout. I wonder if you could

explain how we got into our current

mess, and if the bailout is really necessary.

It seems as if this is the biggest

robbery in this nation's history!

Public discourse on this issue seems

so constrained, it's just not obvious

what is going on. Also, I want to

talk about neo-liberalism and Milton


Mark: There are several things to

say about the current financial crisis

we are experiencing. The first is

that this is a deregulation crisis; it's a

crisis of market fundamentalism; it's

a crisis of neo-liberalism—and other

parts of the world understand this.

Market fundamentalism is a term I

use. Its proponents advocate handing

over larger and larger sections of

public life to the market on the basis

that people operating out of their own

greed and self interest in a totally unregulated

fashion can create the best

of all societies.

Agitator: Where does this ideology

come from?

Mark: There was a very small minority

of people, led by the Chicago

School of Economics, notably Milton

Friedman from the University of

Chicago, who wanted to harken back

to the era of total laissez faire market

dominance with a much more constricted

government role. In fact, he

advocated for a very radical program

where the government wasn't really

involved at all. In other parts of the

world, this is known as neo-liberalism.

Now you have, I think, a number

of people who have done a good

job documenting the rise of neo-liberalism.

Naomi Klein, for one, in her

book, The Shock Doctrine, has done a

good job demonstrating that this huge

shift in ideology was implemented

not under democratic, open, participatory

circumstances, but rather under

the most undemocratic and often

the most violent of circumstances.

In fact, it first happened in Chile,

under the Pinochet dictatorship. We

know that the United States did not

support the democratic government

there. In the name of fighting communism,

fighting the Cold War, they

ousted the democratically elected

leader Allende. We helped put in a

dictator, Pinochet. His advisors were

students who studied under Milton

Friedman at the University of Chicago.

In fact, they brought their professor

down to Chile to take a tour.

These advisors handed the dictatorship

a fully fleshed-out neo-liberal

program: total deregulation, open

market, tax cuts for the wealthy...

Agitator: And the end of social programs?

Mark: Yes, austerity. This became

the economic program of the dictatorship

and was the first time neoliberalism

was implemented. It is

interesting to look at what happened

in Chile—the economy experienced

a number of wild fluctuations, going

up and going down, and finally it

experienced a total crash. Chile then

needed a bailout, and even Pinochet

realized the system was too crazy.

He began to re-impose some capital

controls, though it remained by and

large a neo-liberal economy under his


Unfortunately, that was not the end

of the story for neo-liberalism. The

ChicagoSchool economists were

gaining power in institutions like the

World Bank and IMF. Essentially,

these institutions started to grant development

assistance only if recipient

countries were willing to implement a

program along the lines of neo-liberal

ideology—rolling back the welfare

state, deregulating corporate access,

opening markets to corporations...

Agitator: Part of deregulation is

allowing corporations to invest in a

country and then take all wealth out

of the country and suck it into the

world market or into their own pockets.

Mark: Almost every country wants

foreign investment, but there is foreign

investment that helps, and there

is foreign investment that doesn't

help. If a company goes into to a

country, hires a lot of local workers,

and really invests in the economy,

and some of the profits stay in the

country and help the people there,

that's a relatively benign type of

foreign investment. But, if they go

into a country, they ship in a lot of the

work force, they extract the natural

resources and send all profits back

home, that doesn't help the poorer

country at all. There used to be laws

to regulate that—you had to hire local

people, you had to put a certain

amount of money back into the local

economy. These types of protections

were outlawed under neo-liberalism.

One other thing of importance for

us here is that we are experiencing

a financialization crisis. What this

means is finance becomes a larger and

larger part of the economy...

Agitator: You mean finance as opposed

to production?

Mark: Exactly. Finance is not production;

it's not bricks and mortars

investments; it's not services; it's not

education. It's essentially making

money by moving money around.

Essentially it's the speculative part of

the economy. It doesn't have anything

to do with real production, with

real jobs, or real anything. It is making

money out of money—making

money by gambling. This has become

a larger and larger percentage

of profit in the United States. I don't

have the graph in front of me, but in

the 1980s, corporate profits that came

from finances were in the 10% to

15% range; in the '90s that went up to

20%; in the last decade, it was 25%;

recently it was 27%. Corporations

are turning to finance and speculation,

which creates an environment

where people are gambling on...

Agitator: So, that’s what happened

in the United States—housing became

an investment bubble.

Mark: We saw it happen first in the

Asian crisis. People tried to make

money on real estate. They tried to

make money just on the strength of

the currency, betting on the currency

going up or down. And then,

at the first sign of trouble, at the first

sign that maybe the housing market

wouldn’t go up forever, someone

starts to panic. They start to pull all

the money out, in the absence of any

capital control. All of a sudden, in a

way that has not before been seen in

history, all this money can rush out

at the push of a button on someone’s

computer, and the economy is left in

desperate shape.

Our current crisis started in the

housing bubble. It started in sub

prime loans, which is a part of the

housing market that preyed on

working class and poor people who

could not afford expensive homes,

but banks gave loans on the idea that

housing values were going to forever

increase. They gave loans that

looked good for the first year, but

then had interest payments that ballooned

out of control the next year

or further down the line. You had to

really read the fine print, and these

loans were given to people who, for

whatever reason, were not able to

read the fine print, or the fine print

was hidden. That’s the nature of the

crisis—you had this totally deregulated

gambling fed by this fevered

speculation around housing. All that

has now fallen apart.

Agitator: What’s the 700 billion dollar

bailout being used for?

Mark: OK, we’ve talked about the

crisis of market fundamentalism and

the crisis of speculation. Now we’ll

talk about what some people call

“Wall Street socialism,” where profit

is privatized and risk is socialized.

This is the genius of the free market

system—as long as everyone is making

money, individual initiative and

private entrepreneurialism creates

all this expansion. But the moment

everyone starts to lose money, it is

no longer private ingenuity that is responsible.

Instead it becomes a public

issue. We need a public response;

we need the government to step in

and bail us out.

Agitator: It seems to me that there

used to be a regulation in place that

kept the financial market separated

from the investment market. Banks

were prevented from investing in

high-risk financial markets. Those

safeguards were removed.

Mark: Yes. I think you are talking

about a bill that specifically deregulated

that one sector of banking. But

this is a long-term plight. Beyond

that one bill, we have seen a twenty

or thirty year process of deregulation.

We have institutions that are

supposed to deal with these problems.

This is a crisis of “experts.” The

people who are supposed to bail us

out of this are the very people who

got us into this problem. They are

people who made a ton of money...

The current Treasury Secretary, Paulson,

came out of Goldman Sachs.

He made something like $400 million

when he had to sell his Goldman

stocks to become Treasury Secretary.

He made $400 million, plus his salary,

from this deregulation process.

There is a mandate for a government

response, although some measures

will seem odious to us on the

Left. Now, all that being said, there

are good bailouts and bad bailouts.

Paulson’s initial proposal for $700

billion was a bad bailout—he wanted

the money to dole out as he chose

with no regulations, no strings

attached, no oversight—the same deregulation

mentality that got us into

this mess to begin with, but this time

using public money. The "experts"

got us in trouble, but fortunately ordinary

people said this was a ridiculous

proposal. So, the bailout that

they actually passed was a step in the

right direction.

Anyway, to sum it up, the original

bailout in the United States had

no equity whatsoever. The slightly

improved bailout does have some equity,

so there's some prospect of some

of the $700 billion coming back to us.

However, it didn't give the government

the controlling share.

Agitator: What is the $700 billion

bailout, along with the $800 billion or

so cost of the Iraq war and occupation

going to do to the possibility

of improved social programs in this

country as the next president takes


Mark: Well, it hurts. We have the

bailout; we've seen huge tax cuts for

the wealthy; we've seen runaway

military spending; we've seen the

wars in Afghanistan and Iraq—these

are things that are rather comparable

when it comes down to crunching

numbers, in the tens and hundreds of

billions of dollars.

Agitator: If not trillions.

Mark: Yes, easily it adds up to trillions.

With $700 billion we could do an

awful lot toward creating a "new

deal" in this country. When we propropose

a $700 billion social investment,

they say there is no money,

we're in debt, the country's in a

deficit, etc. When Wall Street wants

it, when there are wars in Afghanistan

and Iraq, all of a sudden money

becomes available.

What this ultimately illustrates is

that it's a question of priorities more

than economics. The economics

always gets sorted out later. It isn't

a budgetary question, it's a political


Agitator: What do you see as the

best short-term scenario for the future

in the United States.

Mark: As I discuss in my book, the

deregulation policies or market fundamentalism—

all the things that led

to this crisis—are not just a Republican

program. Unfortunately, these

very same policies were pursued by

Clinton in the '90s. Clinton did more

to enhance corporate globalization

than anyone else, and most of Barack

Obama's advisers come from that

same camp. This is very, very frightening

to me.

Agitator: They are essentially neoliberals?

Mark: Exactly. There is a distinction

I make between imperial globalization

and corporate globalization.

There is a tendency to say, especially

in the Bush years, that this is all the

same thing. I think we need a language

to distinguish them.

Agitator: What would your advice

be for people who want to see the

economic change that is necessary

for this country—change that would

provide full employment, good jobs,

and investment in public spending?

Mark: It's very simple: don't just

sit around and think that Obama is

going to do it for you. We have to

get out and organize. It is no mystery

how you organize. It involves going

to meetings, getting together with

people to plan, then act. There are a

hundred ways to do that. Ω