Free market follies

Now that the big-time media is wrapping up its commemoration of the 20th anniversary of the Los Angeles riots, it can get back to its real job: bird-dogging celebrities and cheerleading a “jobless recovery.”

It can get back to its regularly scheduled programming, reporting on the sale price of movie stars’ homes while ignoring the persistent and unpleasant economic and political realities in low-income neighborhoods like south Los Angeles where the riots ignited.

But it was a different story at a terrific conference last week at the University of Southern California called “Up From the Ashes,” sponsored by the school’s Program and Regional  Equity.

It focused on how activists responded to the riots, their accomplishments and defeats, sweet victories and bitter frustrations, and the hard work that remains.

While many gave credit to the Los Angeles police for reforming their approach to minority and low-income communities, on other issues the prognosis was far grimmer. By critical economic measures such as unemployment, availability of affordable housing  access to health care, and the percentage of its sons and daughters in prison, low-income Los Angeles is worse off today than it was in 1992.

At the conference, longtime public transit activist Eric Mann pointed out that as in many other things, Los Angeles has been ahead of its time in its starkly contrasting communities of wealth and poverty.

He also tracked the decline of the government as a problem-solver and the rise of the worship of the free market as the panacea for even the most complex issues.

Mann compared the response to the earlier 1967 Watts riots with the response 1992 Los Angeles riots.

After the earlier riots, the McCone Commission, which had been appointed to investigate, predicted that if poverty and housing issues weren’t addressed, the city would erupt again.

While the War on Poverty initially resulted in some government attention to those problems, it wasn’t sustained. Antipoverty programs dried up as politicians embraced their new philosophy that demonized government as the problem and idealizing the private sector as the solution.

After the 1992 riots, the recovery was left in private hands, specifically to the Orange County-based former baseball commissioner who had organized the 1984 Los Angeles Olympics, Peter Ueberroth. While Ueberroth obtained promises for corporate funding for recovery for south Los Angeles, Ueberroth and his corporate colleagues were clueless about the community they were trying to help and the social issues they were wading into. As a result they failed to delivery any real economic benefit or social change. Government also failed to come through with any serious programs, leaving the community stranded once again.

Any gains came, not from corporate or government benevolence, but from determined efforts from the grass-roots, within the community.

Listening at the conference with ears attuned to the 2008 financial collapse and its aftermath, I heard a direct link between the “let the free market fix it” response the 1992 Los Angeles riots and the run-up to the economic meltdown.

The media and the politicians saw the geniuses who ran the big financial firms as not being unable to do wrong, with no need for the traditional oversight put in place after bank speculation led to the Great Depression. This led to the bipartisanship repeal of the 1933 Glass-Steagall Act, which had kept federally-guaranteed banks from engaging in other risky financial businesses, as well as the dismantling of the remaining regulatory structure.

Despite the massive failures of the free market to either regulate itself or solve social problems, we’re still in thrall to this faulty philosophy that the free market should largely be left alone to take on tasks for which it is clearly not equipped.

One of the biggest reasons for this is that the media has itself been so lax in holding the champions of the free market, like Ueberroth and the too big to fail bank bankers, accountable for the consequences of their missteps, broken promises, and failures, preferring instead to cheer them on in their folly.

Missing the Message

It’s absolutely clear that the Republicans mean to work with the big banks to block any financial reform, no matter how watered down, by any political means necessary.

The Republicans have opposed the president’s nominees in committee. As far as the Consumer Financial Protection Agency, they oppose not only the popular consumer champion Elizabeth Warren to be its chief, they will oppose anyone President Obama nominates. The Republicans have made their intentions clear – they want to gut the agency before it’s born.

Meanwhile the bank lobbyists have gone to work on the regulators who are writing the actual rules to implement last year’s financial reforms, and have effectively stalled the process in its tracks.

To make sure that no one is missing the message, J.P. Morgan Chase chief Jamie Dimon went on the offensive this week, publicly stating that excessive financial regulation was weakening the economic recovery. Without offering specifics, Dimon told Fed chair Ben Bernanke at a bankers’ conference, “I have a great fear someone’s going to try to write a book in 20 years, and the book is going to talk about all the things that we did in the middle of the crisis to actually slow down recovery.”

While the bankers have been working feverishly behind the scenes to further water down the weak Dodd-Frank version of financial reform, Dimon’s statements are the most aggressive public challenge yet to any attempts to rein in the big banks.

What’s unclear is why the president is not meeting this assault on one of his proudest achievements (Wall Street reform) head on, despite the Republicans’ and bankers’ clear signals that they have no intention to compromise. Rather than mounting a strong public case for Warren, for example, the White House continues to float alternative, less qualified, nominees. Obama seems to be laboring under the illusion that there is somebody else who satisfy the Republicans. What’s baffling is that he has no reason to think so: the Republicans haven’t exactly been ambiguous. The bankers are also taking off the gloves, with only a few lonely voices in Washington to make the case for stronger reform.

When will our president get the message?