On November 8, 2009, the Sunday Times of London ran a story on the Wall Street firm Goldman Sachs, which was headlined: “I’m doing ‘God’s work’. Meet Mr. Goldman Sachs.” The idea of the investment firm doing God’s work was attributed to the Chairman and CEO Lloyd Blankfein. The rich irony that underpinned this image of Blankfein was indicative of the rhetoric that has emerged in the defense of the workings of Wall Street amid growing evidence of both incompetence and chicanery on the part of major investment houses and assorted banks. In earlier times, Jesus Christ used a whip to drive the money changers from the temple for their desecration of the sacred space. Today, the American government will have to redefine the spaces within which the money changers will operate and, perhaps, jail more of the perpetrators of fraud like Bernard Madoff rather than whip them in the manner of Christ.
All of the major Western countries are faced with the task of wresting control over financial markets in order to ensure that the threat of a global meltdown that started in Wall Street in 2007-2008 does not re-emerge with even greater impact upon the international economy. In effect, the era and the error of the deregulation of banks and financial markets have proven disastrous and have led to the greatest economic crisis since the Great Depression of the 20th century. Once again, governments will have to enact measures that will restrain the cupidity and stupidity of bankers who become seized by fantasies of omnipotence and bouts of “irrational exuberance” – to use the term coined by Alan Greenspan, a key architect of the policies that led to the current crisis.
Blankfein and his colleagues at Goldman Sachs had helped to orchestrate the “dance of death” that overtook the American financial system in 2007-2008. A complete collapse was barely averted by the massive bailout provided by the Bush and Obama administrations that saved Goldman Sachs and other financial firms from ruin. In recent weeks, it would appear that Goldman Sachs has also been implicated in questionable practices that have resulted in the Greek financial crisis that has mushroomed into a threat to the eurozone’s financial stability. The European Union has had to mount a massive bailout on a scale similar to the United States to compensate for the ineptitude and deceptive practices that triggered the crisis. In real terms, Goldman Sachs has proven itself to be a destabilizing force in the international financial system and the firm’s reckless investment practices reflected the hubris among its leaders about their capacity to inflict widespread damage across the international system.
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Unfortunately, the hubris displayed by the Goldman Sachs leadership has been a quality that moved beyond Wall Street and its desperate quest for short-term profits at the expense of a wider sense of social responsibility. American political leaders displayed a similar lack of awareness about the long-term consequences of an invasion of Iraq in violation of the United Nations Charter. Like Blankfein, George W. Bush apparently assumed that the invasion of Iraq was an instrument of divine will to bring about regime change and the creation of an American protectorate in that country. The Congressional resolution authorizing Bush’s decision to use military force in Iraq reflected the reality that Bush’s hubris was shared by a majority of the American elected leadership. That invasion has inflicted grievous harm on Iraq ,and it has severely eroded American influence across the international system. While much of the pre-war debate focused upon the certainty of a quick military victory and the opportunity it provided for George W. Bush to appear as a decisive and successful leader, it has been evident that the rush to war in Iraq had blinded American political leaders to the long-term consequences of an invasion. The United States has paid, and continues to pay, the price for a foolish war of choice – as it will continue to pay for the bailout of Wall Street and for an even more foolish war in Afghanistan.
It would be easy to say that the hubris that overtook both Wall Street and the Bush administration over the first decade of the new millennium was due to the anti-government and the anti-regulatory ideology championed by the Republican Party and their institutional dominance at the level of both the presidency and the Congress for much of the Bush era. However, it is important to recognize that the invocation of divine authority by both Bush and Blankfein reflects a broader and more fundamental problem in contemporary American society and culture – flawed decision making based upon a lack of vigorous public debate among stakeholders. That lack of debate is a function of a media that is extraordinarily deferential to both corporate and government elites. The invocation of divine sanction for economic and political decisions during the Bush era, in fact, represented a trade-off of the strategic thinking required to run a complex society in favor of the pieties that would allow leaders to evade the scrutiny needed for serious accountability and transparency in the political process. In effect, the turn to religious justification for secular policies was a strategy of obfuscation designed to exploit a major contradiction in American life – the increasing availability of information for Americans, but limited access and/or use of such information in shaping public and political debate.
The gap between the availability of information and the use of that information was particularly evident in the case of the Bush administration’s justification of its invasion of Iraq. Despite the absence of concrete evidence to show that Iraq possessed weapons of mass destruction and amid public doubt surrounding the charges by members of the Bush administration that Iraq possessed such weapons, the American government mounted an invasion and occupation of that country with considerable popular support. After the invasion, the failure to find any weapons of mass destruction in Iraq did not produce a widespread domestic crisis of credibility for the Bush administration. Rather, The Associated Press reported on September 6, 2003, that a Washington Post poll had found that 69 percent of Americans believed that Saddam Hussein had been involved in the al-Qaeda attacks in the United States on 9/11 – despite the lack of evidence to support that view. From fiction to fiction in the construction of Iraq as a “clear and present danger” to America and the world, American debate over the war was reflective of limited engagement and/or deference to the Bush administration. It was not a proud moment for American democracy.
While it would be easy to assert that the credulity that informed the American popular acceptance of the Bush administration’s propaganda with regard to the war in Iraq might be due to an unwillingness to question elected officials, it became clear that this credulity was also very evident among other elected officials who should have known better. In October 2002, as the Bush administration sought Congressional authority for the use of force in Iraq, one of the most experienced and conservative members of the Senate, Robert Byrd, challenged the administration’s efforts. According to Byrd:
We are rushing into war without fully discussing why, without thoroughly considering the consequences, or without making any attempt to explore what steps we might take to avert conflict.
The newly bellicose mood that permeates this White House is unfortunate, all the more so because it is clearly motivated by campaign politics. Republicans are already running attack ads against Democrats on Iraq. Democrats favor fast approval of a resolution so they can change the subject to domestic economic problems.
It was a telling moment as Byrd, an erudite and thoughtful senator, who had supported Lyndon Johnson’s Gulf of Tonkin resolution that paved the way for the American disaster in Vietnam, was offering a powerful critique of the Bush administration’s political strategy to secure domestic support for a war he recognized could lead to disaster. Like others of his generation, he had learned a painful lesson about pandering to a president who was blinded by hubris. As a member who took great pride in the traditions of the Senate, he also offered an incisive analysis of the meaning of the resolution under discussion:
The resolution before us today is not only a product of haste; it is also a product of presidential hubris. This resolution is breathtaking in its scope. It redefines the nature of defense and reinterprets the Constitution to suit the will of the Executive Branch. It would give the President blanket authority to launch a unilateral preemptive attack on a sovereign nation that is perceived to be a threat to the United States. This is an unprecedented and unfounded interpretation of the President’s authority under the Constitution, not to mention the fact that it stands the charter of the United Nations on its head.
Notwithstanding Byrd’s trenchant critique, the Senate duly supported the Bush administration’s proposal to give the president the authority to pursue military action in Iraq. In early 2003, Byrd again challenged the Bush administration’s rush to war and, in a speech on the Senate floor on February 12, 2003, said:
To contemplate war is to think about the most horrible of human experiences. On this February day, as this nation stands at the brink of battle, every American on some level must be contemplating the horrors of war. Yet, this Chamber is, for the most part, silent – ominously, dreadfully silent. There is no debate, no discussion, no attempt to lay out for the nation the pros and cons of this particular war. There is nothing.
We stand passively mute in the United States Senate, paralyzed by our own uncertainty, seemingly stunned by the sheer turmoil of events. Only on the editorial pages of our newspapers is there much substantive discussion of the prudence or imprudence of engaging in this particular war.
And this is no small conflagration we contemplate. This is no simple attempt to defang a villain. No. This coming battle, if it materializes, represents a turning point in U.S. foreign policy and possibly a turning point in the recent history of the world.
Byrd’s critique of the Bush administration’s pursuit of war in Iraq was prescient and stands as testimony to his wisdom, and it serves as a reminder that American political leaders of his generation valued education as an instrument of good governance. The unwillingness of many of his younger colleagues within the American political leadership to heed his concerns was a reflection of their own intellectual and political limitations and reflected the abandonment of reason that swept through much of the American political class in 2002-03 in the wake of the events of 9/11.
The flight from reality and reason that was emblematic of the search for war in Iraq in 2002-03 was anticipated by the repeal of the Glass-Steagall Act in 1999 during the Clinton administration. Originally enacted in 1933 as a response to the speculation by banks that helped to trigger the Great Depression, the Glass-Steagall Act had established a regulatory system that helped to minimize the risk of banks triggering another Great Depression for more than six decades. Today, a decade and more after the repeal, the United States is in search of a regulatory regime that would function effectively to prevent another disaster as occurred in 2007-2008 as a result of Wall Street’s desire to maximize profit through unsound investments. American leaders had acted recklessly in repealing Glass-Seagull in deference to Wall Street and their decision was based upon a failure to recognize that regulation of the banking sector is a cornerstone of stability and efficient macro-economic management. As in the case of the invasion of Iraq, the repeal of Glass-Steagall reflected wishful thinking among American policymakers rather than serious analysis based upon historical precedent, hard-won experience and a thorough consideration of the consequences that were likely to arise from the abandonment of a true and tested regulatory regime for the banking sector.
This propensity to base policy upon wishful thinking is also manifest in current debates about American energy policy. America’s reliance upon energy imports is a fundamental threat to its long-term economic stability and there is growing recognition that the United States must move towards an alternative energy regime in the future which places greater emphasis upon domestic sources of energy. American oil production peaked in the 1970s, and the country has become increasingly dependent upon foreign oil imports in the years since the oil crises of that decade. As early as 1979, President Jimmy Carter warned:
In little more than two decades we’ve gone from a position of energy independence to one in which almost half the oil we use comes from foreign countries, at prices that are going through the roof. Our excessive dependence on OPEC has already taken a tremendous toll on our economy and our people. This is the direct cause of the long lines which have made millions of you spend aggravating hours waiting for gasoline. It’s a cause of the increased inflation and unemployment that we now face. This intolerable dependence on foreign oil threatens our economic independence and the very security of our nation. The energy crisis is real. It is worldwide. It is a clear and present danger to our nation. These are facts and we simply must face them.
Carter’s recognition of the gravity of the energy challenges that faced America was largely dismissed by his successors after 1980 as the United States opted to assert an exclusive sphere of influence over the Middle East and the Persian Gulf in order to secure unfettered American access to the region’s petroleum. That decision allowed the United States to discard Carter’s effort to pursue a strategy of energy independence and to increase its reliance upon the Middle East and Persian Gulf to meet its energy needs. The assumption seemed to be that the oil producing states would have little concern about the American defense umbrella that was being extended to the region – despite the emergence of radical Islamic tendencies in the Iranian Revolution and in the seizure of the Grand Mosque in Mecca by radicals from within Saudi Arabia. Both events occurred in 1979 and presaged a major shift in the region’s relationship with the wider world.
Three decades later, that American decision to establish a cordon sanitaire in the region has exposed American vulnerabilities in both domestic and foreign policy. At the level of foreign policy, it is evident that the Shia-led Iranian Revolution and its anti-American focus has unleashed long-term changes across the Middle East and Persian Gulf that have eroded American efforts to shape the strategic context of the hub of the international energy order. Iran looms as a major military and strategic power across the region that has used its ties to Russia and China to contain American efforts to isolate the country. In continuing the effort originally promoted by Shah Reza Pahlavi in the 1970s to create an Iranian nuclear sector, the Islamic Republic has also demonstrated its willingness to challenge American efforts to limit Iran’s efforts to become the dominant power in the region.
The challenge from Iran has been complicated by the rise of al-Qaeda and its mobilization of radical tendencies among Sunni Muslims that are as rabidly anti-American as the Iranian Revolution was at its zenith. The 9/11 attack on the World Trade Center and the Pentagon brought into sharp relief the ways in which Islamic radicalism had become a major threat to American foreign policy – even as the United States had become increasingly dependent upon petroleum exports from the Middle East and the Persian Gulf. The emergence of al-Qaeda was stimulated in part by the American military bases in Saudi Arabia that were established as a consequence of the 1991 American-led war against Iraq after the latter had occupied Kuwait.
The rise of radical Islam in Iran had been fueled by the American intervention in 1953 to overthrow the Mossadegh regime and to restore the shah to the Peacock Throne. The shah’s seeming uncritical embrace of the United States, his alienation of the Shia religious leadership within Iran and his increasing reliance upon repression to govern Iran were all contributors to his eventual demise in 1979. The Shia religious leaders exploited popular disaffection with the shah to establish the Islamic Republic, to limit American influence in the society and to create a political system that married religious and state authority with regular elections for the political leadership. In effect, American support for the shah had rendered him vulnerable to a popular revolution that would transform Iran into a formidable opponent of American influence in the region.
Similarly, the American decision to establish military bases in Saudi Arabia, home to the holiest sites of Islam – Mecca and Medina – fueled the rise of anti-American sentiment in Saudi Arabia and the wider Arab world. The American presence also raised questions about the legitimacy of the Saudi royal family, given their dependence upon American military garrisons. Cognizant of the fate of the shah, the Saudi royals, after the World Trade Center attack in 2001, rapidly moved to ensure that the American military presence was reduced in the country. In addition, the Saudis had begun in the 1980s to reorient their foreign policy to bring China into the region as a counterweight to the United States – a strategy also pursued by Iran. Further, Saudi Arabia began to pursue an active policy of support for an end to the Israeli occupation of Palestinian and other Arab territories and the creation of a Palestinian state – again a policy supported by Iran. As a consequence, America’s post-1979 effort to assert a sphere of influence in the region stumbled when confronted by increasing anti-Americanism among both Sunni and Shia communities in the region. The American reliance upon Israel as its principal partner in the region, even as it invaded and occupied Lebanon and tried to destroy the Palestinian Liberation Organization, worsened the American position in the region.
It was particularly interesting that even after the Iranian Revolution had illustrated the dangers of American identification with the shah’s regime and the mobilization of religious sentiment to challenge American influence, the United States proved unable to learn from its experience with the shah’s Iran when dealing with Saudi Arabia and the Islamic Republic. The illusion that America was the “indispensable” power in the Middle East and Persian Gulf was being eroded in the 1980s and 1990s by the growth of anti-American and anti-Israeli sentiment, and the current occupations of Iraq and Afghanistan have illustrated the failure of American policymakers to learn from the last six decades of its increasing involvement in the region. The American desire to dominate the region and its resources has created a quagmire from which the US is currently trying to extricate itself by implementing a plan to create two contiguous states – Israel and Palestine – that would lay the basis for a regional settlement that could be guaranteed by the United Nations Security Council.
After three decades of worsening relations with Iran and increasingly fraught relations with the Arab world, the United States is again constrained to face the challenge of energy independence that Carter had identified as a crucial issue in 1979. However, the recent explosion of an oil well at 5,000 feet below sea level in the Gulf of Mexico, south of Louisiana, has provided clear evidence that the failure to address the shifting structure of the international energy market that resulted from the oil crises of the 1970s will impose greater costs today. The recent explosion that sank the Deepwater Horizon rig in the Gulf of Mexico has exposed the limits of existing underwater drilling technology, the failure of effective containment mechanisms for dealing with undersea accidents and the resulting environmental damage and the lack of real knowledge about strategies for dealing with accidents at such deep levels of the sea. The search for energy independence in the Gulf of Mexico as an alternative to the Persian Gulf is problematic.
In addition to the limits of existing technology, the lack of stringent pre-operational reviews of drilling plans by the federal government, the limited oversight of actual drilling operations exercised by the relevant federal agencies and the Obama administration’s decision to open new areas of the continental shelf to drilling have all come into question in the wake of the disaster. Given the sensitive ecology of the region for various animal species including whales, turtles and tuna and the vitality of its resources such as oysters, shrimp and fish upon which many Gulf Coast residents depend, the Deepwater Horizon incident has exposed the limits of America’s current energy strategy. “Drill, Baby, Drill” – that evocative slogan from the 2008 election campaign in support of the drilling off the American continental shelf as a strategy for increasing domestic oil and gas production will have to be reconsidered in light of the recent disaster. In effect, the current search for American energy independence is being conducted in an era of an increasing awareness of climate change and environmental degradation related to the increased used of carbon fuels. America will face a choice about its historic preference for energy derived from a preponderance of carbon fuels and there will be increasing pressure to focus upon the development of alternative energy sources and more efficient use of existing energy sources. The Deepwater Horizon disaster has imparted even greater urgency to those debates and the longstanding role of petroleum companies as players in the American political process will be under increased scrutiny.
America’s current dependence on energy imports and its rising levels of indebtedness due to the pursuit of wars of choice in Iraq and Afghanistan to secure a position of advantage in the competition for access to the energy resources of the Middle East, the Persian Gulf and Central Asia, reflect the failures of American leaders in the 1970s and 1980s to think through the consequences of the choices made with regards to energy self-sufficiency and diversification of energy sources. Thirty years on, American policymakers have validated George Santayana’s pithy observation, “Those who cannot remember the past are condemned to repeat it.” Hopefully, the Deepwater Horizon disaster will help them to focus their minds on both history and the future – given the unsustainable present that has been based upon wishful thinking that Wall Street’s financial speculation and wars for energy resources are sound bases for economic success. Sen. Robert Byrd’s prediction of a turning point in the recent history of the world has come to pass.
1. The term “irrational exuberance” derives from some words that Alan Greenspan, chairman of the Federal Reserve Board in Washington, used in a black-tie dinner speech entitled “The Challenge of Central Banking in a Democratic Society” before the American Enterprise Institute at the Washington Hilton Hotel December 5, 1996. Fourteen pages into this long speech, which was televised live on “C-SPAN,” he posed a rhetorical question: “But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?” Robert J. Shiller, “Definition of Irrational Exuberance,” New Page.
2. Ewen MacAskill, George W. Bush: “God told me to end the tyranny in Iraq,” The Guardian, October 7, 2005.
3. Poll: 70% believe Saddam, 9-11 link, USA Today, September 6, 2003.
4. Robert Byrd, Bush War Plan: “Blind and Improvident,” in Counterpunch, October 4, 2002.
6. CommonDreams.org, February 12, 2003.