Princeton's guest lecture archives are chock full of great stuff. One example is The Current State of the Economy (video and audio) a discussion between Matthew Taibbi and Gillian Tett moderated by Harrison Hong held in April 2010.
In case you listen, the audio for Gillian Tett is a little screwed up.
Taibbi is the guy who called Goldman Sachs a a great vampire squid wrapped around the face of humanity. Tett is the author of Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe. Both experts in central asian politics and corruption.
Taibbi got started as a journalist covering privatization in post-Soviet Russia. He describes the western media's story line as,"Communist gorilla gets first bananas". He covered the loans for shares program, which set up the well-connected entrepreneurs know as oligarchs during Yeltsin's time.
Nobody does corruption like the Russians ...until now.
The most interesting bit was an exchange about shaping the cognitive map. How did the public and the media fail to note the always cozy relations between Wall Street and Washington that were spiraling into an ever tighter nexus of finance and power?
[Tett believes that] a social silence (a concept outlined by French anthropologist/sociologist Pierre Bourdieu in his work Outline of a Theory in Practice) was a factor in facilitating and perpetuating the global credit boom that [collapsed in 2008]. Bourdieu’s social silence, as Tett explains, allows an elite group to control society not just by controlling the physical means of production but also by influencing the cultural discourse. Crucially, influencing the way society talks about itself also influences what is left unsaid – i.e. that which is regarded as impolite, taboo, boring, or taken for granted. Such silences can arise through overt strategies, but often come about less deliberately through social conformity or shared ideology and assumptions. According to Bourdieu, all that is required for the ideology to establish itself in this way is a complicit silence. Tett speculates that such a social silence may have been pivotal in the general acceptance of the idea that financial markets could regulate themselves.
Taibbi points that the news covers finance and the economy separately from politics. The fact that a newspaper has a separate section for business news and politics means that it's hard to tell economics as a political story or politics as an economic story. This reaffirms something I've thought for a long time. Politics and the economy are so entangled that studying one in isolation from the other is an express route to wrong answers.
During the Q&A, a fascinating side story comes up about Phil and Wendy Gramm and their involvement in Enron.
Phil Gramm, as Senate Finance Chairman, sponsored two key bills that deregulated finance. Gramm–Leach–Bliley Act of 1999, which repealed the Glass–Steagall Act of 1933, and Commodity Futures Modernization Act of 2000 which passed just before Christmas with little debate. This legislation specifically denied either the SEC or the CFTC the authority to regulate financial derivatives and swaps and contained the Enron loophole.
Phil Gramm's wife Wendy Lee Gramm headed the Commodity Futures Trading Commission (CFTC) from 1988 to 1993, during the presidency of Bush the first. In 1993, after a lobbying campaign from Enron, the CFTC exempted it from regulation in trading of energy derivatives. Weeks after resigning from the CFTC, Wendy Gramm took a seat on Enron's board of directors. Enron collapsed in fall 2001.
While this conversation is nearly a year old now, it is a reminder of a huge and tragic missed opportunity. The conditions existed during the financial meltdown that could have made it possible to fix the financial system, to truly modernize the legislation that emerged from the Great Depression, to break the hold of Wall Street on the political system. Was that opportunity used wisely?.
