But consider this: From a purely business and profits point of view, why on earth would America's biggest banks and corporations make any of their money available for loans to new and small businesses in the USA when they can "earn" so much more with that money by either building new factories in China or using it to gamble on derivatives and stocks in the great Wall Street casino? (Using special lightning fast computer programs, traders at companies like Goldman Sachs can sneak in ahead of other traders to almost always ensure a win.)
Galbraith continues:
Over the last decade our government has essentially "de-supervised" America's financial sector and more or less turned it over to the perpetrators of one of the largest swindles in history. This swindle originated with the securitization of tens of thousands of fraud-based mortgages, i.e. near-worthless mortgages that were fraudulently bundled together and (thanks to government deregulation and no supervision) sold, criminally, to unsuspecting investors all over the world, thereby leading to the near collapse of the world's financial system when banks lost all trust in each other. Banks would ask of each other: "Who has what amount of toxic securities on their books, falsely claiming this junk as assets?", which ultimately resulted in the disappearance of credit (i.e. the ability of businesses to borrow money to make a payroll or buy supplies or equipment).
So, as a result of this unprecedented fraud and swindle, we still do not have a financial system that adequately serves the public purposes for which banks are chartered -- purposes like supporting small businesses and the investment projects of large businesses, so as to provide the jobs people need. And until we are somehow able to re-create a properly functioning financial system that can again assume these traditional responsibilities, we're not going to be able to solve some of the major economic problems that bedevil us, including the budget deficits that Republican worry about so much.
Ratigan: Would you agree that the biggest lie or misunderstanding that dominates the leadership of both the Democrat and Republican parties is one which they hide behind so that they don't have to deal with the development of new economic policies that would end the ongoing extraction of resources and wealth from the middle class?
Galbraith: First of all, we have to somehow get rid of the notion that what is good for the big banks is good for America. We now have a set of institutions which, for lack of proper regulation, went wildly out of control, and which desperately need to have competent and active supervision of a kind that was present for a good many years prior to, say, 1980, which is why we had stable economic growth and a thriving middle class for all those years.
Our industrial structure is now being managed more for the sake of financial maneuvering by stock market casino player-speculators than for the long term success of American business enterprises. Look at Germany for an example of how such financial maneuvering has been banned, so that money and effort can be properly invested, for the good of the country and all its people. Germany has the highest labor costs in the world, yet they also have the largest per-capita export sector in the world. And, aside from having banned financial maneuvering, here's the rest of the explanation: Their business enterprises are on average much smaller than our megacorporations, plus Germany has the benefit of much better educated and better trained workers than ours. There is no shortage of qualified engineers and extremely capable technicians in Germany, plus they have much stronger and more prevalent unions -- so strong and so prevalent, in fact, that they have managed, with the help of a very progressive and very democratic government, to see to it that half the number of people on each board of directors must be non-executive employees at the company, often from the factory floor.
In addition, when the worldwide recession threatened to impinge on Germany (by a reduction of demand for Germany's export goods), German companies simply reduced the hours of almost every employee -- but did not reduce their salaries. And from where did the extra money come to keep salaries constant in spite of the reduced hours? The German government chipped in, to make up the difference. That way, worker spending did not much decline and potential layoffs at other companies, for lack of consumer spending, were forestalled.
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