Harvard – Bought and Paid For

September 18, 2011

Inside Job is an excellent documentary about the financial crisis of 2008.  The basic point, very well documented, is that an extremely small group of people with lots of money managed to tweak the economic system of the country, to divert huge sums of cash their way.  Some timely deregulation legislation, carried forward by a thirty-year drumbeat of intellectual support from influential economists, made it happen.

In the end, the vast collective wealth of the United States, and much of the world economy, became the gambling stake of these people, and when it all crashed, they walked away with their loot, and were free from any consequences.  The people in charge now, under Obama, are the same ones who made it possible, and who made it happen:  it’s a Wall Street administration, as one critic in the film says.  As Mr. Rosewater says in Kurt Vonnegut’s novel, God Bless You, Mr. Rosewater, getting rich in America is largely a matter of positioning yourself to get your straw into the money stream:  These people had very big straws.

Towards the end of the film, there is a section in which various heavyweight academic economists are interviewed about the possible conflicts of interest inherent in consulting and publishing articles for firms that were pursuing extremely risky behavior.  These firms crashed and burned, despite the intellectuals’ assertions that they were sound, a good idea, helping stabilize the economy, etc.  The opinions of these people, from Columbia, Harvard, and other schools, were extremely influential.

In one stunning sequence, the chairman of the Harvard Economics Department, John Campbell, is asked if he thinks it’s relevant that people like Larry Summers, Obama’s economic advisor and a Harvard economist, made tens of millions of dollars from finance firms while he was writing papers and pushing policies extolling their virtues and efficiency.  “No, I don’t see why it’s relevant at all.”  The interviewer asks a hypothetical question:  What if a medical researcher published and spoke about the importance of using a certain drug, and then it was found that 80% of his income was from the company that manufactures that drug?  Is that relevant?  What follows is a series of ums, aahs, and hmms… as Campbell looks away from the camera and finally offers in a mumble, “Well, I think this is very different…


Origins of the Modern Thieving State

June 13, 2011

 

In an earlier post, I mentioned that Putin’s brutal tactics against his billionaire political opponents (he throws them in jail and convicts them of trumped-up charges) rang a bell in my head.  The trial of Nicolas Fouquet, Finance Minister to Louis XIV came to mind.  This got me started on the whole notion of what Krugman called today, Rule by Rentiers, and the tremendous and parasitical hold over our society of the financial élite…and whence it came to be.

Fouquet has interested me for a long time, not least because he built one of Europe’s great architectural gems, the estate at Vaux-le-Vicomte.  The gardens were designed by André Le Nôtre, who went on to design the overwhelmingly magnificent landscapes at Louis XIV’s palace at Versailles.  Fouquet also came to my attention early in life because in high school, I read some letters by Madame de Sévigné, including a famous one describing the fate of Vatel, formerly cook to Fouquet.  During a grand banquet for the Prince (the Great) Conde, the fish course was threatened – the fish had not been delivered!  Vatel was so humiliated by this failure, that he threw himself on his sword.  His death was treated as a national tragedy.  But Fouquet and his ilk are the story here.

Fouquet is not mentioned much these days – all attention goes to his destroyer, Le Roi Soleil, Louis XIV.  But Fouquet was Louis’ faithful servant during a time when the king was young, and just getting a firm grip on power.  (The childhood of Louis was during the civil war called The Fronde.)  He always served the interests of the king and the French state (no difference between the two!), and along the way, he enriched himself.  Well, so did everyone else, and most didn’t do such a good job as he did.  Nor were they as handsome, intelligent, charming, cultured, and imaginative.  Richelieu, Mazarin, and Colbert are not on any historian’s list of fun people.

The job of Nicolas Fouquet was to ensure that the royal treasury was full so it could pursue its endless war against the Spanish Hapsburg Empire.  The state of national finance at the time was so chaotic and desperate that it makes American budget issues look like textbook examples of perfect accounting practice.  Books were duplicated, or secret.  Huge ‘loans’ to government figures were standard.  It was not illegal to rake off a substantial sum from tax collections or financing from the merchant élite, it was how the system worked!  There was no separation of the personal interest from the state interest at the level on which these high ministers worked.  After all, if they did not have the cash to present a good front, what financier would lend to the state they represented?  Opulent show was all part of the process.

The crime of Fouquet was simply to do his job far better than anyone else, thus exciting the envy and hostility of Colbert, and to be neglectful or unaware, to a shocking degree, of how his activities might be interpreted by the young king.  Three weeks after hosting the king at a vast banquet in his brand new palace, Vaux-le-Vicomte, he was enlightened:  Louis had him arrested on charges of embezzlement and treason.  The charges were totally trumped-up, and Louis probably did not believe them a bit:  he simply wanted to get rid of a too-independent servant.

The trial was a milestone in the history of political show trials, but Fouquet did not play the docile, self-incriminating defendant that students of the USSR might expect.  He was cool, calm, and collected, and even managed to smuggle out some letters that were the basis of quickly printed pamphlets that generated tremendous popular support for him.  Louis XIV did not have the resources of the total terror-state, but he did his best.  He hanged a few people who helped Fouquet communicate with the outside world from prison, but it is a measure of the not-yet-established nature of his absolutist rule that many elements of the trial were not under his control.  He learned, and acted differently in the future.

Convicted, but not sentenced to death, the verdict of eternal banishment did not please the king.  He did not get his wish, and did not feel strong enough to impose execution, but he did change the verdict to life in prison.   Fouquet languished in a fortress in the remote alpine Piedmont region of France.

The details of the trial are recounted in some of Madame de Sévigné’s letters, which are always very readable.  This popular biographical treatment is also quite good:

A side note:  When Fouquet and his wife lost a very young daughter to disease, they were advised by a cleric “to learn to love death.”  What a tremendous gulf this reveals between our world and theirs!  Death was all around, and the death of one, or many children, was a common occurrence.  To accept and love death was the only salvation.  No “youth culture” for them!


Wild Abandon!

December 24, 2009

Zola as prefiguring film noir – now there’s a thought.  And if you think his writing is limited to depressing catalogues of social realities, remember, he can be damn funny too, in a dark, satiric way:

He was a man of superb stature, with the white, pensive face of a great statesman,  and since he was a marvelously good listener, with a deep gaze and a  majestic calm in his expression, it was possible to believe that he was engaged in a prodigious inner labor of comprehension and deduction.  Of course, his mind was completely empty.  Yet he had a disturbing effect on people, who had no idea whether they were dealing with a superior man or an imbecile.  [One of the fellows madly on the make, in The Kill]

And the city as one giant bubbling pot of money and flesh:  what does The Naked City have that Zola lacks?

Meanwhile, the Saccards’ fortune seemed to have reached its apogee.  It blazed like a gigantic bonfire in the middle of Paris.  It was the hour when the hounds were ardently devouring their share of the spoils [La curée, translated as The Kill] …The appetites that had been unleashed at last found contentment in the impudence of triumph, in the din of crumbling neighborhoods, and fortunes built in six months.  The city had become a orgy of millions and women.  Vice, come from on high, flowed through the gutters, spread across ornamental basins, and spurted skyward in public fountains, only to fall again upon the roofs in a fine driving rain.  And at night, when one crossed the bridges, the Seine seemed to carry off all the refuse of the sleeping city: crumbs fallen from tables, lace bows left lying on divans, hairpieces forgotten in cabs, banknotes slipped out of bodices – everything that brutal desire and immediate gratification of instinct shattered and soiled and then tossed into the street.  Then in the capital’s feverish sleep, better even than its breathless daylight quest, one sensed the mental derangement, the gilded voluptuous nightmare of a city driven mad by its gold and its flesh. Violins sang until midnight.  The windows went dark, and shadows fell upon the city.  It was a like a colossal alcove in which the last candle had been blown out, the last vestige of modesty extinguished.  In the depths of the darkness, there was now only a great gurgle of frenetic and weary love, while the Tuileries, at the water’s edge, reached out its arms as if to embrace the vast blackness.

Not quite a new story for Paris.


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