Yves Smith on the art of class war
Yves Smiths's post Tuesday summarizes the challenges of reigning in (pun intended) the One Percent and of running a blog with that purpose. Knowing your opponent is key, but mastering the gory details of finance is its own challenge. It is a worthwhile read.
You need to be a soldier in the war to demystify finance, because its supposedly arcane and impenetrable nature is one of its biggest weapons. It’s easy to dismiss critics if they can be depicted as ignorant. There are costs to citizenship. One such cost is knowing your enemy, their strategies, their tactics, and the terrain on which they fight. That requires not passing familiarity with finance, but knowledge of it.
A key piece of that knowledge is "private equity is a government sponsored enterprise." From tax subsidies to investments in government pension funds to sovereign wealth funds, these investments make money using the government, she writes, and,
... close to half the investment capital in private equity funds is contributed directly by government entities. In this respect, private equity is little different than companies like Fannie, Freddie, and Solyndra that are regularly criticized in the media as recipients of government subsidies."
It no longer seems magic once the audience knows how the trick is done. That's why private equity masters cloak their methods in arcana:
And this process explains the hypersensitivity of financiers like Tom Perkins and Steve Schwarzman, who become outraged by even mild criticisms of or attempts to regulate their industry. They recognize that the biggest threat to them is delegitimation. As long as they can maintain the illusion that their profits are fairly earned by their own effort (as opposed to extensive government subsidies and backstops), that all of their services, as currently configured, are essential for commerce, and that it’s all so complicated and difficult that no one can replace them, they will continue to have the whip hand. Over you. And your pension, if you have one. And your workplace, if they buy it for one of their asset-stripping projects.
That is why it is important to penetrate their veils of secrecy and complexity. Pay attention to these men behind the curtain. They don’t have superpowers and their know-how is not as lofty as they pretend. Their secrecy and sleight of hand are meant to disguise that many of their services are socially destructive (like most over-the-counter derivatives, which are used for tax or accounting gaming) or extractive by virtue of being overpriced, which might be defensible in a truly private industry but not one that is even more heavily supported by the government than the defense industry. In other words, your apathy and resignation play straight into the hands of the banksters. Do you really want to make their lives easier?
So broadcast the trick. Call them socialists. Make them own it. When even financiers are doing it, the term is, as George Will writes this morning in his forumlaic snark, "a classification that no longer classifies."