Noam Chomsky on the economy and democracy

From Information Clearing House :

Chomsky: Plan is recycled Bush/Paulson. We need nationalization and steps towards democratization.

JAY: So a few days ago, the Obama administration and Geithner, they announced their plan for the banks. What do you make of it?

CHOMSKY: Well, there are several plans, actually. One is capitalization. The other, the more recent one, is picking up the toxic assets with a private-public coalition. And that sent the stock market zooming right away. And you can see why: it's extremely good for bankers and investors. It means that an investor can, if they want, purchase these valueless assets. And if they happen to go up, well, it makes money; if they go down, the government insures it. So there might be a slight loss, but there could be a big gain. And that's—one financial manager put it in The Financial Times this morning, "It's a win-win situation."

JAY: A win-win situation if you're the investor.

CHOMSKY: If you're the investor, yeah.

JAY: If you're the investor.

CHOMSKY: For the public it's a lose-lose situation. But they're simply recycling, pretty much, the Bush-Paulson measures and changing them a little, but essentially the same idea: keep the institutional structure the same, try to kind of pass things up, bribe the banks and investors to help out, but avoid the measures that might get to the heart of the problem—however, at the cost, if you consider it a cost, of changing the institutional structure.

JAY: What's the plan you would support?

CHOMSKY: Well, I mean, say, for example, take the bonuses, the AIG bonuses that are, you know, causing such anger, rightfully. Dean Baker pointed out that there's an easy way to deal with it. Since the government pretty much owns AIG anyway (it just doesn't use its power to make decisions), split off the section of AIG—the financial investment section—that caused all the problems, split it off, and let it go bankrupt. And then the executives can seek to get their bonuses from a bankrupt firm if they like. So that would pretty much take care of the bankruptcy problem, and the government would still maintain its large-scale effective control, if it wants to exert it, of what's viable in AIG. And with the banks, the big banks, like Bank of America, one of the big problems is nobody knows what's going on inside. You know, there are very opaque devices and manipulations which technically the government—. They're not going to tell you themselves. You know, why should they? It's not their business. In fact, when Associated Press sent journalists to interview bank managers and investment-firm managers and ask them what they've done with the TARP [Troubled Assets Relief Program] money, they just laughed. They said, "It's none of your business. We're private enterprises. Your task, the public, is to fund us, but not to know what we're doing." But the government could find out—namely, essentially, take over the banks.

JAY: Is all of this sort of machinations of policy because they want to avoid nationalization?

CHOMSKY: You don't have to use the word "nationalization" if it bothers people, but some form of, you know, receivership which would at least allow independent investigators, government investigators, to get into the books, find out what they're doing, who owes what to whom, which is the basis for any form of modification. I mean, it could go on to something much beyond, but it's not contemplated. It's not a law of nature that corporations have to be dedicated solely to profit for their shareholders. It's not even legislation. It's mostly court decisions and management rules and so on. And it's perfectly conceivable for corporations, if they exist, to be responsible to stakeholders, to the community, to the workforce.

JAY: Well, especially when it's all public money at this point that's running the system.

CHOMSKY: Look, fact of the matter is it's almost always public money. So take, say, the richest man in the world, Bill Gates. How did he become the richest man in the world? Well, a lot of it was public money. In fact, places like where we're sitting right now,—

JAY: MIT.

CHOMSKY: —that's where computers were developed, the Internet was developed, fancy software was developed, either here or in similar places, and almost entirely on public funding. And then, of course, I mean, the way the system works, fundamentally—it's kind of an overstatement, but fundamentally, is that the public pays the costs and takes the risks, and the profit is privatized.

~ full transcript and original video posted here ~