Masthead graphic based on a painting by Gudrun Thriemer.

Saturday, May 17, 2008

Henry C K Liu, The Shape of US Populism, Part 1, Asia Times, March 12, 2008.

Populism, as a political principle empowering "the people" in their conflict with "elites", is the historic political theme within which Henry C K Liu sees the dialectic of the next era emerging.

Is a "wave of populist reform" an imminent response to the debt crisis currently plaguing the US economy? In a series of four articles for Asia Times, Henry C K Liu digs deep into US history for the answer. He finds issues of race and economic justice are even now unresolved.

Liu writes about "the blatant global manipulation of debt" which has produced "handsome" corporate profits along with extremely high executive pay. On March 7, 2008, the US House Committee on Oversight Investigations convened a hearing on executive pay which comprises the first part of this essay on the re-emegence of American populism.

To those who argue that executives have also suffered financial losses in the present credit collapse, he replies, "No executive has yet been forced to lose their second or third vacation homes."

Liu sees deregulated free market capitalism as the culprit. "Risk models" used by Citigroup and others to assess mortgage-backed securities did not entertain the possibility of massive market failure.

That the "risk models" in question saw the Federal Reserve as a saviour points to "self-regulating markets" as an opportunistic concept of convenience rather than a serious theoetical anchor.

Liu reports that "Systemic market failure was alluded to by several witnesses and committee members in the hearing but the issue was deemed out of the jurisdiction of the committee and the particular aim of this hearing, and was categorically brushed aside unanswered."

Liu interprets the corporate defense in these hearings of lavish executive compensation to imply that the failure is "with the system, not the individual who responds to the system's incentives." The link between executive pay and the present market failure (aka liquidity or debt crisis) is that

"executive compensation tied to annual performance has become an irresistible incentive for top management to take on increased risks for the companies they manage, at the expense of the long-term wellbeing of the company and by extension, of the economy. The system has been designed to push risk to the limit until it fails."

Read Part 1 of the Shape of US Populism here =>Recommend this Post

Sphere: Related Content