Thread: The Meaning of the British Riots

The Meaning of the British Riots

Washington's Blog


Painting by Anthony Freda

Corruption At The Top Leads To Lawlessness By The People

I've repeatedly noted that corruption and lawlessness by our "leaders" encourages lawlessness by everyone else. See this, for example.

Peter Oborne - the Daily Telegraph's chief political commentator - wrote yesterday:

The criminality in our streets cannot be dissociated from the moral disintegration in the highest ranks of modern British society. The last two decades have seen a terrifying decline in standards among the British governing elite. It has become acceptable for our politicians to lie and to cheat. An almost universal culture of selfishness and greed has grown up.

It is not just the feral youth of Tottenham who have forgotten they have duties as well as rights. So have the feral rich ....
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The so-called feral youth seem oblivious to decency and morality. But so are the venal rich and powerful – too many of our bankers, footballers, wealthy businessmen and politicians.

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The sad young men and women, without hope or aspiration ... have caused such mayhem and chaos over the past few days. But the rioters have this defence: they are just following the example set by senior and respected figures in society. Let’s bear in mind that many of the youths in our inner cities have never been trained in decent values. All they have ever known is barbarism. Our politicians and bankers, in sharp contrast, tend to have been to good schools and universities and to have been given every opportunity in life.

Something has gone horribly wrong in Britain. If we are ever to confront the problems which have been exposed in the past week, it is essential to bear in mind that they do not only exist in inner-city housing estates.

The culture of greed and impunity we are witnessing on our TV screens stretches right up into corporate boardrooms and the Cabinet. It embraces the police and large parts of our media. It is not just its damaged youth, but Britain itself that needs a moral reformation.

Osborne also gives specific examples of corruption, such as the prime minister's involvement in the Murdoch scandal, and members of parliament abusing expense accounts.

Indeed, the rioters themselves agreed. As Reuters notes:

Speaking to Reuters late on Tuesday, looters and other local people in east London pointed to the wealth gap as the underlying cause, also blaming what they saw as police prejudice and a host of recent scandals.

Spending cuts were now hitting the poorest hardest, they said, and after tales of politicians claiming excessive expenses, alleged police corruption and bankers getting rich it was their turn to take what they wanted.

"They set the example," said one youth after riots in the London district of Hackney. "It's time to loot."

(Indeed, looting by the bankers has been shown by a Nobel prize winning economist as being the root cause of the S&L crisis and today's economic crisis).
Austerity Leads To Rioting And Unrest
I've previously argued that the British riots are due to bad economic policy which has created rampant inequality. (As I've noted for years, raging inequality and policies which help the big boys at the expense of the "little people" are causing unrest - not just in Egypt - but worldwide.)

As the above-quoted Reuters article notes:

"I don't think the implications of this have been fully thought through or accepted yet," said Pepe Egger, western Europe analyst for London-based consultancy Exclusive Analysis.

"What we have here is the result of decades of growing divisions and marginalization, but austerity will almost certainly make it worse. Yes, the police can restore control with massive force but that is not sustainable either in the long term. You have to accept that this may happen again."

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Analyst Louise Taggart at security consultancy AKE said that in time urban unrest worries could make it harder to cut other programs as well, including sorely needed education and community services. It went well beyond Britain, she said.

"Across Europe, we've already seen some incidence of civil unrest," she said, saying it would almost inevitably impact policy. "There's definitely a likelihood that similar scenes might erupt when austerity cuts really start to be felt."

Indeed, a study this month by economists Hans-Joachim Voth and Jacopo Ponticelli shows that - from 1919 to the present - austerity leads to violence and instability:

Does fiscal consolidation lead to social unrest? From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble cross-country evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the key factor. We also analyse interactions with various economic and political variables. While autocracies and democracies show a broadly similar responses to budget cuts, countries with more constraints on the executive are less likely to see unrest as a result of austerity measures.

As CNN notes:

Studying instances of austerity and unrest in Europe between 1919 to 2009, Ponticelli and Voth conclude that there is a “clear link between the magnitude of expenditure cutbacks and increases in social unrest. With every additional percentage point of GDP in spending cuts, the risk of unrest increases.â€

RELATED

Thee Fraud Started At the Very Top: With Government Leaders


The government's entire strategy now - as during the S&L crisis - is to cover up how bad things are.

But it is not only a matter of covering up fraud that has already happened. The government also created an environment which greatly encouraged fraud.

Here are just a few of many potential examples:

The government-sponsored rating agencies committed massive fraud (and see this)

The Treasury department allowed banks to "cook their books"

Business Week wrote on May 23, 2006:

"President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations."

Regulators knew of and allowed the use of debt-hiding accounting tricks by the big banks

Tim Geithner was complicit in Lehman's accounting fraud, (and see this), and pushed to pay AIG's CDS counterparties at full value, and then to keep the deal secret. And as Robert Reich notes, Geithner was "very much in the center of the action" regarding the secret bail out of Bear Stearns without Congressional approval. William Black points out: "Mr. Geithner, as President of the Federal Reserve Bank of New York since October 2003, was one of those senior regulators who failed to take any effective regulatory action to prevent the crisis, but instead covered up its depth"

The former chief accountant for the SEC says that Bernanke and Paulson broke the law and should be prosecuted

Freddie and Fannie helped to create the epidemic of mortgage fraud

The government knew about mortgage fraud a long time ago. For example, the FBI warned of an "epidemic" of mortgage fraud in 2004. However, the FBI, DOJ and other government agencies then stood down and did nothing. See this and this. For example, the Federal Reserve turned its cheek and allowed massive fraud, and the SEC has repeatedly ignored accounting fraud. Indeed, Alan Greenspan took the position that fraud could never happen

Bernanke might have broken the law by letting unemployment rise in order to keep inflation low

Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy, when they were not

Arguably, both the Bush and Obama administrations broke the law by refusing to close insolvent banks

Congress may have covered up illegal tax breaks for the big banks

Of course, deregulation by Larry Summers, Robert Rubin, Phil Gramm and many other high-level politicians and regulators also helped to grease the skids for fraud

Economist James K. Galbraith wrote in the introduction to his father, John Kenneth Galbraith's, definitive study of the Great Depression, The Great Crash, 1929:

The main relevance of The Great Crash, 1929 to the great crisis of 2008 is surely here. In both cases, the government knew what it should do. Both times, it declined to do it. In the summer of 1929 a few stern words from on high, a rise in the discount rate, a tough investigation into the pyramid schemes of the day, and the house of cards on Wall Street would have tumbled before its fall destroyed the whole economy. In 2004, the FBI warned publicly of "an epidemic of mortgage fraud." But the government did nothing, and less than nothing, delivering instead low interest rates, deregulation and clear signals that laws would not be enforced. The signals were not subtle: on one occasion the director of the Office of Thrift Supervision came to a conference with copies of the Federal Register and a chainsaw. There followed every manner of scheme to fleece the unsuspecting ....

This was fraud, perpetrated in the first instance by the government on the population, and by the rich on the poor.

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The government that permits this to happen is complicit in a vast crime.

In other words, the fraud started at the very top with Greenspan, Bush, Paulson, Negraponte, Bernanke, Geithner, Rubin, Summers and all of the rest of the boys.

As William Black told me today:

In criminology jargon: they created an intensely criminogenic environment. I have no knowledge whether the national security aspects played any role, but the anti-regulatory dogma was devastating.

http://www.washingtonsblog.com/2010/11/ ... -with.html