Tuesday, July 15, 2008

Fanny Mae, Freddy Mac and Jürgen Habermas: The crisis of advanced capitalism.

I was on my way to political theory class this morning, to hear the wrap-up of a lecture on German post-marxist political theorist Jürgen Habermas. I flipped on the radio to NPR (National Public Radio) and immediately started to get pissed off.

There was a piece on the current housing market downturn and the possible crisis of Freddie Mac and Fanny Mae, mortgage lending institutions established by congress but publically owned by shareholders. Global markets are plunging based on fears of a financial collapse of these two mammoth institutions in which most of the risk is assumed by taxpayers and all the profit goes to private individuals. There is talk of a congressional bail-out, to protect the markets, but which ultimately would lead to lining the pockets of the executives running these two institutions at the expense of tax-payers and creating a precedent in which they will become reckless with risk since they will have a black check from the U.S. government to bail them out in the future.

In brief, Jürgen Habermas (1929-- ) believes that Marx’s concept of the driving economic base with a resulting but less powerful cultural superstructure is too simplistic for advanced capitalism. Habermas updates and alters Marxist theory by dividing human society into three semi-autonomous but overlapping spheres: the economic subsystem, the political subsystem (where the state is located) and a socio-cultural subsystem which he calls the “lifeworld” which is where people live, think and experience the effects of the other two subsystems.

In Advanced capitalism, similar to industrial capitalism, there is an inherent contradiction which results in periodic boom-bust cycle of system “crises” that can either be described as recession or depression. In Habermas’ theory, it is the job of the political-administrative subsystem to anticipate and “bail-out” these economic crises as they occur. This has meant a great strengthening and centralization of the political subsystem to the expense of the socio-cultural “lifeworld.” This leads inevitably to a “Legitimation crisis” or “rationality” crisis of the political subsystem with the socio-cultural lifeworld.

In others words, when a lot of people lose their jobs, go bankrupt, or lose their house through foreclosure while the government provides a welfare “bail-out” to guarantee the “welfare” of Fanny Mae and Freddy Mac executives and share-holders, the people tend to get pissed and begin to have doubts about the system and to suspect it is rigged against them. Habermas believes that these tensions and crises in the advanced capitalist system will continue until people in the socio-cultural lifeworld come together to find a better way of running the whole system. Remember September 11? What did the government do in response to a security failure of the politico-administrative system? The advice was to “go shopping.” In the words of my esteemed professor, when there is a crisis, the government tells us not to worry, but just go to the “megachurch of your choice and have a Starbucks coffee.” He apologized for being a bit cynical.

I remember a popular Bible teacher that I admired saying in the mid-1980s that “God is a capitalist.” At the time, I was naïve enough to accept his statement at face value (I know, it is embarrassing) My response now? Please, do not pin this on God … he has enough problems!

I have heard several interviews on NPR about building troubles at Freddy Mac and Fanny Mae. One report detailed a large number of executives in both institutions that have been paid salaries in excess of a million dollars and huge bonuses. Today’s interview on NPR details the lobbyist role of both institutions in giving large donations to both the Republican and Democratic parties.

Fanny Mae is a corporation that is supposed to be the mortgage lender of last resort. It is private but was initially funded with public funds. The Federal Reserve has offered Fanny Mae a line of credit. There have been repeated calls for reform of Freddy Mac and Fanny Mae (see this article from 2005).

The logic is, “we have to do this or the crisis will spread.” In other words, the government tells us, “We are going to use your money as a tax-payer, to bail out these people whose job was to evaluate risk and help first-time home buyers, and we are doing it for your good.” What a croc of cow manure! A welfare system for wealthy mortgage bankers!

Yesterday on NPR, Peter Wallison, a former Treasury and White House counsel under Reagon, questioned whether congress controls Freddy Mac and Fanny Mae, or whether they actually control Congress.

According to former Rep. Richard Baker, a Republican from Louisiana and a longtime critic, "I noted that, of the top 20 officials of the company, none made less than $1 million a year," Baker says. "And during the course of a 5-year period, there were bonuses, not salaries ... bonuses paid out of $245 million. This, going to an entity that was supposed to be focused on helping first-time, low-income homebuyers getting access to housing credit."

Here is how Habermas describes the means that the political-administrative system of advanced capitalism uses to resolve these boom-bust cycles:


“In the decades since World War II the most advanced capitalist countries have succeeded in keeping class conflict latent in its decisive areas; in extending the business cycle and transforming the periodic phases of capital devaluation into a permanent inflationary crisis with milder business fluctuations; and in broadly filtering the dysfunctional secondary effects of the averted economic crisis and scattering them over quasi-groups (such as consumers, the sick, the elderly, etc.)”

(Habermas, 1975:39).

Check it out -- Miami-Dade County is in the process of laying off several hundred school teachers, including about 70 school psychologists. Consumers are paying $4.14 per gallon for gas, and cannot afford to live in a house, (or keep the house they already purchased). Don’t even talk to me about the sick and the elderly.

In my short and mostly uncomfortable lifetime, I have seen the anti-war riots of 1968-70, the oil crisis of the late 1970s, the economic downturn of the late 1980s, the dot.com boom and bust of the late 1990s, and now the boom and bust of the housing market. Somehow, through it all, the wealthy get wealthier and the poor get poorer…. The kingdoms of this world are being shaken, including the good ole U.S of A.

Makes me glad that my hope is not in U.S. nationalism, nor in storing up wealth that the thief can steal (mortgage bankers? oil companies?) or the moth corrupt (inflation? Cell phone companies?) but my treasures are in heaven … not a place of fluffy clouds but the dimension where absolute, incorruptible TRUTH reigns along with Divine Love.

-- Jurgen Habermas, Legitimation Crisis (Beacon Press, 1975)

Monday, July 7, 2008

TOCQUEVILLE AND RELIGION - part 1

The Problematic Relationship Between Religion And Democracy


Their mutual centrality is not surprising. Politics, after all, deals at the most general level with the organizing principles and symbols of the entire society. Religion, in turn, provides values which give meaning to human life, placing any given set of social or political events in a broader framework of significance.” – Daniel Levine

Alexis de Tocqueville astutely observed that the “spirit of religion” was an essential factor in the success of American democracy. Unlike other social observers of his time and since, Tocqueville did not trace American political culture and institutions solely back to the rational traditions of John Locke, John Stuart Mill and other Enlightenment philosophers. Tocqueville believed that it was essential to go back to the starting point of a civilization in order to best understand the normative framework or national character of a people. In most cases, these early beginnings of European nations are lost in the mists of time, but the United States, according to Tocqueville, offered a unique case in which the beginnings were relatively recent and well documented. Rather than only looking to the Scottish Enlightenment to explain the apparent success of democracy in the United States of the 1830s, Tocqueville carefully examines beliefs, mores, institutions and motivations of the early Puritans of New England to discover the normative framework that makes the U.S. a unique example of democracy and civil society.

Tocqueville believed that Puritan political culture provided a normative basis for American constitutional democracy. A key element of the Puritan influence on the American political system was the belief in popular sovereignty, which Tocqueville calls a “generative principle,” which spread from New England to the rest of the colonies. Early examples include the Mayflower Compact and other covenants which established the right the people under God to form a "civil body politic." Democracy at the level of the local township was predominant in New England by the mid-seventeenth century. Puritan political processes were very democratic and encouraged citizen participation. Despite Great Britain's overall jurisdiction, democracy prevailed in the local townships with the making of their own laws, raising taxes, and judicial accountability (Kessler:784). Due to the separation of church and state, along with the Puritan tradition, the spirit of freedom and the spirit of religion, in Tocqueville’s view, successfully co-existed in the United States and provided a religious fabric to social mores unlike France, where the spirit of freedom led to a strong current of anti-clericalism and even an attack on religion.