In 2007 Naomi Klein published a book titled "The Shock Doctrine: The Rise of Disaster Capitalism". The book makes a good case that libertarian free market policies (as advocated by the economist Milton Friedman) have risen to prominence in some developed countries because of a deliberate strategy by some political leaders. While citizens are too busy dealing with meeting basic survival needs during disasters to pay attention or mount resistance, these policies are passed into law and become entrenched in the society as "acceptable ways of life" in a democratic society.
One such example includes the removal of usury laws. In the USA we once had laws that protected us from lenders who would charge more than the total value of the loan in interest rates. Those laws have long since disappeared in our society and debt is now one of the leading causes of poverty in the world today--particularly in the USA. Instead of looking at the fact that lenders are making the total value of the loan in profit and condemning this raw greed, we blame the borrower. We label them as "losers" who shouldn't have borrowed in the first place--after all this is a "free" country. Instead of charging wealthy people who can afford it higher interest rates, we think it fair to charge higher interest rates to poor people who can't afford these higher rates. Thus poor borrowers are more likely to default on their loans because of this extra burden. We are living in a world with upside down values and few are even aware of it. Instead, we accept it as the norm.
Such disasters referenced in the shock doctrine include natural ones such as hurricanes and earthquakes and those created by the leaders themselves such as economic recessions and wars, and even those created by corporations who cut corners creating disasters such as the BP oil spill. In short, the disaster is the intial reason for leaders to act outside the bounds of the law and/or what is generally accepted as the decent way for human beings to behave. Then such behaviors over time become the rule, the accepted way of doing things and not the exception. One change that has occurred over time since the creation of our last and present recession that begin in 2008 is that work has been devalued. People now receive less pay for the same work they did prior to 2008. In fact, many people are even doing more work for less pay.
Justifications for this behavior are made and new words creep into our language to justify it. In 2010, for example, we began to read about the "jobless economic recovery". When I first heard a pundit using the term "jobless recovery", I laughed in disbelief. This term was introduced to explain the rise of wealth in the USA at a time when so many people were and are still out of work. People belonging to the investor class (those with annual incomes exceeding $170,000 whose wealth comes primarily from their investments and not work they actually perform) are doing just fine.
In 2010 I looked back at the increase in the net worth of our elected officials in Washington D.C. in the year from 2009 to 2010. At a time when many of their constituents were losing their jobs and homes, U.S. Senators and Representatives were increasing their net worth by hundreds of thousands of dollars. Some of them, such as Nancy Pelosi, increased their net worth by millions (far exceeding their annual $176,000 salary). Rep. Pelosi increased her net worth during that one year by almost $21,000,000. The wealthy class in the USA have never experienced the current recession that most Americans are still reeling from.
I haven't thought of all the above for a couple of years now. It's too depressing and too frustrating because I understand fully how little control or power I have to change any of that. However my thoughts returned to that national scene this morning when a friend wrote to me requesting money to help the Detroit Water Brigade send water to residents in Detroit. The Detroit Water and Sewage Department is going door to door in Detroit, cutting off approximately 3000 customers per week who are delinquent on their water bills. As the Detroit Channel 4 news noted, it’s hard to understand why poor residents who owe a few hundred dollars should have their water turned while Detroit golf courses and stadiums that owe “big money” (per Channel 4) have no such threat.
Democracy Now did a segment on Detroit’s water woes within the past couple of weeks. People in Detroit paid an average of $150/month for water. The US average was about $50/60. (Per capita income in Detroit is $14,861 as compared to $25,547 for the state of Michigan.)
The people of Detroit are paying to help service the outrageous debt their city leaders incurred for them years ago by signing a rigged contract.
So why is Detroit in the horrible place it is today? The answer is DEBT.
Detroit must use the revenues from its three casinos: MGM Grand Detroit, Greektown Casino, and Motor Casino to cover a $4.2 million monthly payment to the banks before a single cent can go to schools, transportation and other critical services.
A few years ago Detroit struck a derivatives deal with UBS and other banks that allowed it to save more than $2 million a year in interest on $800 million worth of bonds. But the fine print carried a potentially devastating condition. If the city’s credit rating dropped, the banks could ope out of the deal and demand a sizable breakup fee. That is precisely what happened in January of 2009. After years of fiscal trouble, Detroit saw its credit rating slashed to junk. Suddenly the sputtering Motor City was on the hook for a $400 million tab.
So what does all of this have to do with us who live in the DFW area?
There are some lessons that we can bring home from Detroit.
1. We can remember the value and importance of local politics and thereby start attending our council meetings where important decisions are made (twice a month in Garland) that directly affect our lives. We can also run for local office and volunteer to sit on city government commissions. It is most unlikely that we can influence politics at a national level or even at the state level; however, we can change things at a local level.
2. We can plant gardens in our homes, apartments. We can join groups like Loving Garland Green and the Greater Dallas Organic Garden Club. Gardens support the local economy by creating new markets and also by supporting existing markets.
Today, Detroit is struggling to return to a plant-based economy. It remains to be seen if they will be successful in converting "Mo Town" to "Grow Town". Municipalities who begin the transition to a strong local plant-based economy while their local governments are still solvent have a better chance of success. Begin preparing for your fall garden today.
UPDATE ON Detroit's Debt
April 11, 2014 Detroit won permission to pay UBS AG (UBSN) and Bank of America Corp. (BAC) about $85 million to cancel interest-rate swaps, a deal that may help the city speed the end of the biggest-ever U.S. municipal bankruptcy. U.S. Bankruptcy Judge Steven Rhodes approved Detroit’s third attempt at a settlement with UBS and Bank of America’s Merrill Lynch unit. The swaps have cost Detroit taxpayers about $200 million since 2009.
Please remember that even if this ruling sticks that the people of the City of Detroit still must pay these lenders $85 million on top of the $200 million they have already paid.
And how do you think all these payments to these lenders are being financed? They are being financed by cutting jobs and pensions to workers. Apparently anything goes to pay the banks and their investors. This is all the more ironic since the money was initially borrowed in the first place in 2005 to help meet the city's obligation to pay these pensions.