who really is in control

DOUG ORR DORR at mail.ewu.edu
Fri Feb 12 12:06:40 PST 1999

I have been catching up with several days of email and the juxtaposition of several threads was just too much to pass up.

Someone posted a survey that indicated that a strong majority of 18-30 year olds blame the government for all of our "problems." The post listed the top four sources of problems, and the power of large corporations did not appear. (The post did not include info on other age groups.)

The fiction that the gov't is all powerful, and the source of our problems is of great use to the corporations who really are the source of the problem, but want to remain invisible. This is not a new idea. In fact, it goes back to the thread on the Wizard of OZ.

Dorthy kills the witch of the East (the banks) by accident, but the people cheer and see her as a savior. She then leads the crew to the Wizard (the gov't) who APPEARS to control things, but in fact is only loud pontificating, smoke and mirrors, with no real control. What does she have to do to "escape"? Kill the witch of the West (the railroad monopoly corporations). How does she do it? With WATER, the scarcest resource in the west, also controlled by monopoly corportions.

A more modern myth is that the FED is part of the gov't. Doug Henwood wrote:
>There are many details that suggest that the Federal Reserve isn't really
>part of the U.S. government. There's the fact that the USG sold the land
>for the Fed's headquarters to the Fed back in the 1930s. Then there's the
>fact that the New York Fed is listed in the white pages, not the blue
>government pages, in the Manhattan phone book. Then there's the .org suffix
>the regional Fed banks use for their websites, rather than .gov. And now,
>in looking at the federal budget accounts, I'm seeing that the Fed is
>classified as part of the "public," rather than the government, when the
>holders of U.S. government debt are broken out. No wonder Alan Greenspan
>can't understand himself!

The FED has the power to "veto" any simulative fiscal policy of the gov't, simply by ratcheting up interest rates. Thus, the banking industry trumps the gov't and more importantly, Greenspan is more powerful than Clinton. But if the media keeps the focus on Clinton, the corporations can do whatever they want behind the scenes.

Brad DeLong asks:
>If it's private, then why does it pay 90%+ of its interest income back to
>the Treasury?

I am surprised he does not know the answer, or that Doug did not respond. Since the FED is a private corporation, it responds to the same incentives - profit maximization. At the start of the 1930s, when it was supposed to act as lender of last resort, it refused to lend to banks with liquidity problems. Why? Because they might default and hurt the FED's profits!! The perverse incentive structure of the FED lead to policies that made the Depression worse. Congress responded by placing a 100 percent profits tax on the FED. They get to keep the interest income necessary to pay for their functioning, the rest goes to the Treasury. It functions as a not-for-profit corporation and its clientele is the banking industry.

But the clearest indicator of the smoke and mirrors in gov't came early in Clinton's first term. He wanted to allow gays in the military. The myth is that the President is the Commander in Chief. If he is that, he would have ordered the generals to allow gays in the military, and they would have obeyed their commander. That did not happen.

Instead we got the great spectacle of elected officials on one side of the table, NEGOTIATING with the generals on the other side of the table. It was a picture right out of any of the Latin American dictatorships with pseudo democratic fronts. Yet nobody in the media seemed to notice!

Doug Orr Eastern Washington University dorr at ewu.edu

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