I.H.: I guess, neo-liberalism, I would class as being in this class of propaganda which is appealing both to the normal majority and to this minority. At the time that neo-liberalism began, it was around the time of collapse of the Soviet Union and so on and so there was this idea that communism and the control of government, that the government then was a bad thing and so it's the neo-liberalism then was this ideology that was around how freeing ourselves from any form of government, even democratically elected government was the means of freedom.
That government was bad by definition, that the root to, that markets were the way that we would, there was this, again a connection between free markets and freedom and democracy as if those things were exactly the same thing. That this, the economy was somehow this self regulating thing that you just stood back and you let this economy take care of itself and don't interfere in it.
But actually what was happening was government and that business were re-writing the rules in their own favor and the, as I said, the ideology was one that could appeal to a lot of people because it was couched in terms of freedom and choice and so forth but it would appeal to the people who are re-writing the rules because this was a means of re-writing the laws so that they got an advantage and they accrued much more of the profits and the gains from the system.
I think what happened in this past thirty years or so under neo-liberalism has been an absolute catastrophe for the world and not just because of the financial crisis, I mean the financial crisis has been a catastrophe for many Western countries including Ireland but on a bigger picture, the financial crisis under neo-liberalism has skewed the model of capitalism and I write about that in the book.
The model of capitalism that brought us from the Industrial Revolution through to the modern world was one in which capitalism was based on people actually making things that improved people's lives so we were developing new technologies and creating huge numbers of jobs from the manufacturing of new technologies and that fed through like having electricity and so forth. It fed through to real improvements in people's lives and people's health and so forth.
R.K.: Now, now I just want to jump on this for a minute because what you write of it, first of all this section of your book is brilliant and the way you've woven together different models of economic theories is like nothing I've seen.
You've really pulled together some great ideas and materials into a bigger picture that is very valuable. You talk about Schumpeter's, I'm not sure if I'm saying his name right, and his model and then how that's changed, how neo-liberalism has skewed the model of capitalism, maybe talk about that.
I.H.: That's exactly this. Up until neo-liberalism this model of capitalism was one which there were lots of arguments about the redistribution of the profits but there was not doubt that the capitalism was based on making new technologies that improved people's lives.
But with neo-liberalism, with de-regulation of capital flows around the world, the profits were no longer lying in making new things to improve people's lives, the profits lay in speculation around currency in currency transactions. In making currency transactions across borders and then the kinds of things that we saw in the financial crisis: packaging debt, selling debt, and so forth.
All of the derivative products and so on. So the model of financial capitalism is one that doesn't, you often hear a communist saying that in the "real economy" and what they mean by the "real economy" is the economy where things are being made whereas the "financial economy" is an economy where people who have money can make more and they make more by speculating with the money they already have, not by making something that improves people's lives.
I think it's a catastrophe for the world because at the moment when we were having this development that capitalism was improving and still has to improve people's lives in the majority world. The West then turned and developed this model of capitalism which is really about making rich people even richer.
R.K.: Now, I'm going to grab a couple more quotes from your book, "history shows that it was only by strengthening the power of governments acting within the safeguards of representative democracy, the rule of law and human rights protection that humanity has managed to partially overcome oppression by pathological elites."
Then you go a little later on to quote Harvard economist Josh Lerner, "virtually every hub of cutting edge entrepreneurial activity in the world today had it's origins in proactive government intervention." A little later on you say neo-liberalism provided psychopaths and people with narcissistic and paranoid personality disorders with the smoke screen they needed to rise to positions to power in global financial organizations, to loot those financial institutions with the support of government and ultimately to bankrupt the Western financial system. You tied it together there.
I.H.: Well I think that's what's been happening and again it comes back to the very beginning of our conversation you know? That there's the psychopaths that we characterize as being violent and there are psychopaths who are so-called successful and who can get to positions of power and get to positions of authority in situations like the financial sector and so forth. Again there were a few quotes that I had in the book about what the culture is like within the financial services sector, so Yves Smith summarized the environment as one characterized by weak regulation, supervision is inherently difficult, high levels of responsibility are devolved to even relatively junior employees and there are huge incentives fueled by highly aggressive competition for promotion.
It doesn't have to be the people at the top who are the ones who are creating the damage. The financial services, on the whole, financial industry again, and this is being said by people who are in the book, I'm using quote from people who are inside the system and, former Morgan Stanley employee Frank Portnoy said he went in to work and craved the sensation of ripping someone's face off.
You have to be a criminal to be good at this business and to retain supremacy banks had to prey upon their clients. If we go back again to the type of, we talked about culture and culture can either enable these people to operate or you can have cultures in which it's very difficult for them to operate and all the evidence that's coming out about how the culture within the financial sectors industries, a lot of that culture is one in which I'm arguing psychopaths and people with narcissistic personality disorders can thrive.