It's Like a Survivor Economy" There are two ways to view the financial markets today: from the perspective of a hedge-fund manager with $100 billion in assets under management or from the perspective of an ordinary citizen who is just starting to realize that he or she is not being asked to play by the rules. Hedge fund managers are used to market forces and make big bets on corporate stocks. Ordinary citizens have been taken on a ride by a giant casino called Wall Street, where billions are made in short bursts. People say, "We're making progress," because in 2010 the Dow closed at its highest ever. "I think it's a great time to invest," President Obama said. For one day, all went right for the 1 percent. But the financial sector as a whole did not. Most of the hedge fund managers did not make any money. Average wages and benefits fell 1.3 percent last year, and, despite Wall Street bonuses totaling more than $20 billion, the average hourly wage was $22.34 in February, down 6 cents from the same month in 2010. A large part of the labor force in the middle class has been swept into the 1 percent. The numbers are stunning: $8.7 trillion of the national debt was held by the top 1 percent of income earners in 2011, while more than half of American families lived from paycheck to paycheck. The average rate of return for the top 1 percent was 18.6 percent in 2007-2009, while the rate for the bottom 90 percent was minus 0.7 percent. In short, financialization has done to the United States what the East German Stasi did to East Germany: create a population at once envious and compliant. What has made this possible is a profound shift in the relationship between the government and the people, made possible by changes in social relations that date to at least the 1970s. The political elite is captured by Wall Street, and the financial elite takes advantage of the capture of the political elite to capture the people. The result is an economy and a society run from the top down in a rigged game whose rules are never publicly acknowledged. How is it possible that we had no experience of that in our lives prior to the crash of 2008? For one thing, there was no bubble during the years of economic growth under presidents Bush and Clinton. There was no bubble, that is, until there was a bubble—one for which no one was paying. This is what I have learned about the 2008 crisis. The crash was not an accident. It was caused by the transformation of an economy based on real work into an economy based on fraud, waste, and abuse. That transformation started in the 1970s, and it continues to this day. What you see on television on the nightly news is an economy of fraud and waste. What you have missed is the rest of the story. Here's how it went down: In 1971, a Supreme Court Justice by the name of Lewis Powell wrote a memo for an investment banking firm called Brown Brothers Harriman. The memo explained that it was necessary to change the legal environment of a society before it was possible to get away with fraud on a massive scale. Powell had served on the Warren Commission investigating the assassination of John F. Kennedy and written a memo that became the blueprint for the Warren Commission's cover-up. Powell was a lawyer, not a scientist, and his memo became the basis for a new "science of the law" that gave birth to a new, more powerful form of organized crime. The new business model involved paying for what you wanted from the legal system by finding a political scientist willing to write a "legal" study supporting your business interests. These lawyers then got hired as part of the government's war against organized crime. From his vantage point in the top echelons of power in the United States, George W. Bush saw this corruption for what it was. As a young man, he had worked as a CIA intelligence analyst. He saw the world of the CIA as a world of dirty secrets, and he knew that only the threat of death or jail would keep people in line. He had no intention of becoming a dirty politician. The plan was to become president. On September 11, 2001, after the destruction of the World Trade Center towers, Bush put on his business suit and started working. "I don't know what we do in the aftermath of a tragedy," he said at one point. "I don't know how life goes on after the shock." That was all it took. He came from an America where people knew that the rule of law was in danger and the people had to do something about it. He could not imagine that it was business as usual. Over the following months, he set in motion what would later be called "preventive war." He would justify all he did after 9/11 as his duty to protect his country. He would justify what he had done to the American people as the defense of their interests, although he had no plans to restore the rule of law that he had helped to destroy. His actions would make it easy for Americans to understand why "the road to ruin is paved with good intentions," and when people realized what they had done, they would blame someone else—as if this were the way that things were supposed to be. The Bush administration launched a war against Iraq. They were not after terrorists. They were after Iraq's old enemy—Saddam Hussein. It was a textbook example of preventive war, just as the Bush administration's "global war on terror" was a textbook example of preventive war. They had learned the lesson that any means would do. The CIA helped to put Saddam in power in Iraq. They installed him in order to protect the oil industry, and his overthrow was a CIA operation. The same was true in Guatemala. The CIA helped to overthrow a democracy there. They had to pretend that they were fighting communism. The business of preventive war has continued under President Obama, as it has under any president. A presidential candidate, whether from the right or the left, can run on the promise of restoring law and order. What is a promise to do to Iraq, Libya, or any other country when the candidate needs to make it in a global war against terror? The wars waged by the United States—as an example of preventive war—have not produced peace and prosperity for the people in any country we have invaded. On the contrary, for the United States and other Western countries, war has been the primary engine of economic growth. American economic growth, despite the Great Recession of 2008-2009, was 2.1 percent in 2010 and 3 percent in 2011. The wars on behalf of the oil and gas companies have been good for Wall Street, which in turn has been good for the defense contractors. But for the people, the results have been worse than bad. The war in Iraq, which started in 2003, took more than half a million lives in that country and has claimed almost 5,000 American lives in Afghanistan. As of 2011, America had had 1,600 soldiers killed since 9/11. The destruction of the rule of law is not a new idea. There have been moments when it seemed that the United States could not get away with it, but they were only moments. I never thought that the United States was immune from its own brand of organized crime. I always had a sense that the entire history of the United States was a history of the rise and fall of business interests that have found their way into the government bureaucracy and the halls of power. The political elite is captured by Wall Street and the financial elite takes advantage of the capture of the political elite to capture the people. One thing I learned during my time in government is that the only way to stop a program like the one for the war on terror was to take the money out of it. Even presidents in a position to lead could be overruled. There was nothing anyone could do about anything. Even now, years later, when a Republican like David Kirkpatrick at _The New York Times_ refers to the war in Afghanistan as a mistake, he is in for a political lesson from the White House. He is an official enemy of the administration and can be destroyed. If you were not in the government, you could feel outraged by what was going on. You could ask yourself: how is it possible for things to get this far? A secret program becomes a national policy. Congress becomes a rubber stamp. Money is lavished on private interests, and the same people give money to elected representatives. The business of war is good for business. The people go along, but do not know it is a business. They learn the true face of America from friends and neighbors who have been sent to foreign lands for the crime of reading the wrong Internet sites or writing letters to a newspaper. Or they find out from the Internet. What we are experiencing now is a deep crisis in democracy. It is like a financial bubble in which the people are the ones left holding the bag. The government that is supposed to keep watch over the people has allowed the rich to get away with theft. The people are not to blame. You must understand that if you were looking for government by experts, this is what you would have gotten: a team of economic advisers who had no experience in real work, and government by industry lobbyists who represented the interests of Wall Street and the weapons industry. If you did not have much of a democracy, it was because the political system made it so. If you did not know what was going on, it