The Secular Fundamentalist

Denazification As a Model of Change

Chapter 28: Denazification As a Model of Change

The social reform network, Avaaz, does a lot of good work in spreading and empowering grassroots activism in a world that has become corporatized to the point of totalitarian control.  And nothing could more succinctly illustrate the state of that world and the challengers to its established power, than the Occupy Wall Street Movement, and its confrontation with the unreconstructed bank sector.

‘Bankworld’, as exemplified by the values and behavior of the people who, for instance, have been running Goldman-Sachs, is a good example of a culture that completely lost touch with its social responsibilities and behaved not dissimilarly to the Mafia that controls what is left of the Russian empire.

The catastrophe that was the GFC was in some measure, their handy work.  Most of those who were responsible got away with it scot free.  And I think the rest of us have had plenty of reason to be very angry with them.

Having said that, I also think that when Avaaz said, “…working families pay the bill for a financial crisis caused by corrupt elites…”, they were also avoiding the larger elements of corruption that went to the very heart of American society, regulatory governance and the taxation regime, in relation to the use of credit.

I think the misuse of credit by mass populations, whether it be excessive use of credit cards, to 100% mortgage instruments to borrow against speculative property appreciation, or enormous leveraging in the futures markets, was very widespread.  The corrupt roots of the system were pervasive and it was just a bit twee for Avaaz to pretend that it was only the few privileged people at the top who were into it.  They were certainly by far the largest players, but it was a game everyone who could afford to be in, as well as those who couldn’t, played their part.

Systemic corruption needs to be treated as such.  The best reform model that I have found was that used to denazify Germany after World War 2.  Where you see Nazi references below, think bank, banker or ‘Bankworld’.

I am not suggesting that the US financial system and its GFC are necessarily the moral equivalent of Nazi Germany and its shameful exploits in WW2.  Nor am I making any causal link between them or trying to smear the US banking system by association.  What I am suggesting is that the assignment of criminal responsibility, the extent of punitive action and the need for mass rehabilitation must be viewed and administered in the same way, because essentially, both systems were equally pervasive in the societies within which they operated.

Clearly, it was just not practical to punish everybody who had been a Nazi.  Almost everyone in the country who had had any position of responsibility, down to the grassroots, had been a member of the party.  Nazism was seamlessly part of society, from top to bottom.

The Allied occupiers realized that the country would need massive physical and social rehabilitation, if it were ever to recover and take its place again in the new world order.  To purge everybody who had been a Nazi from civil society would in effect further paralyze the country and create a massive reservoir of resentment and anger (which is what happened in Iraq after the Baath party was proscribed by US occupation forces).

The result was a minimum of punitive action.  There were some early summary and military court executions of SS and German military personnel who had been directly involved in gross war crimes.  Millions of German and Axis allied prisoners-of-war were given an extremely tough time and suffered variously high casualty rates as a result, particularly in the Soviet sector (not surprisingly). 

The leading acolytes of the Nazi system were given full scale international war crimes trials and were either executed or given life prison terms, for life.  Second and third tier Nazi apparatchiks were given stiff prisons terms that were later shortened.  Most of those were out of the prison system by the early/middle 50s.

A rigorous process of democratic governance was put in place in West Germany to replace the Nazi autocracy and the subsequent allied military occupation, which was up and running by May 1949.

But by far the largest action taken was to discredit the Nazi system amongst the mass of the German population and shift its loyalty to the new democratic system.  Everybody was obliged to watch extremely graphic film documentaries of the liberation of the Concentration camps.  All children were required, as part of their studies, to learn about what had happened to the victims of Nazi power and its monstrous international aggression, in which many of their fathers/brothers/sons  were deeply implicated. 

It was an extremely salutary experiment in group shame and some very hard self questioning, and it worked, to the point that even now, it is almost impossible to get the Germans involved in any sort of military aggression, even where it is unquestionably appropriate, as in the Balkan Wars, which the Americans eventually had to sort out for them.

So, if we follow the denazification model, with some modifications, the top responsible and incriminated US banking apparatchiks would get stiff prison sentences.  Second and third rankers would be bankrupted and all their assets seized.  All those more junior financial industry personnel who unduly profited from the malfeasance that led to the financial disaster would be expected to repay a percentage of their ill gotten bonuses, according to their rank/status, to the taxpayers who had to bail out the system they so comprehensively screwed.

And none of that “I was only following orders” baloney.  It didn’t wash at Nuremberg. They knew what they were doing!

The financial regulatory and tax system would be reformed so that for at least twenty to thirty years, there would be no repeat of the folly, incompetence and greed that undid the system.  The regulators would get their dentures back and use them to substantially tighten credit availability and suppress inflation.  The tax system would discipline the use of that credit so that it no longer so egregiously favored its use for speculative enterprises and negative gear/capital gains tax sheltering.

Overall, the size and scope of Bankworld would end up being cut down to an appropriate size to service the needs of the production economy that delivered tangible infrastructure, products and services for the longer term.  This would mean that speculation and its nefarious activities would take a financial haircut and the speculators would be obliged to take what was left of their capital and try to engage in some useful investment in the real world.

Finally, and most importantly, every last citizen and school child over 13 would have to watch a financial educational video series and pass a test to show they have satisfactorily understood it.

This education program would ensure that everybody recognized what had happened to them and the country as a whole to necessitate this social effort and why it was necessary for them to have enough planning skills to know how to budget with a view to regular saving, control use of credit and be able to assess financial risk.

To fully pass the extended part of the course, everybody would have to draw up a financial plan, as families or individuals and even children with their pocket money, and be able to demonstrate that they had followed it for at least two years, and longer, if they failed to do that effectively within that time.  And no pass no credit rating.

From then on, anyone wanting to borrow money without significant adverse risk penalties would have to be able to prove they had a functional and demonstrably operating year on year financial plan in place.

Like the German rehabilitation process, this mass re-education program would permanently change the financial landscape so that from then on, there would always be a collective reluctance to ever get back into an unproductive and irresponsible financial bubble culture built around a society systematically living beyond its means at all levels, and increasingly paying for it on the never-never.

All that went on in the wake of the GFC was mutual recrimination.  That wasn’t even the beginning of a solution to anything.  I say remember 1945.  US rehabilitation of the former Nazi state was probably the greatest reform process ever undertaken by any great power, in the history of our species.  It was a glowing testament not just to magnanimity, but intelligent social change.

America, and the western world that it fronts for is not just declining in relative economic terms to Asian players, but suffering a loss of compass, ideological anchoring and perspective as to what it is that makes societies tick and gives them sustainable benchmarks in their commercial, civil, and dare I say it, ecological values.  Pervasively disgraceful and dysfunctional behavior and attitudes have permeated all levels of society, as if there weren’t a long term future and bottom lines worth fighting for.

Can America et al fix the hemorrhaging of their legitimacy and long term prospects ?  They are not under foreign occupation and pigs might fly.  But even a watered down rehabilitation and re-education version of this template might make at least a marginal difference, so that the pigs would only have to make at least some small leaps, even if it weren’t very far.  It would be better than nothing.

We are unlikely to find out just how badly damaged the global financial system was out from the GFC until the next financial shock arrives.  The tough questions, the street riots and the spectacular revelations have petered out, but the persistent potential to compound patterns of malpractice into increasingly severe debt binge recessions, is bound to eventually catch up with us, if some kind of root and branch reform process does not take place.

If and when the unhappy day arrives, as it surely eventually will, when the financial boat will once again face the prospect of sinking, everyone, from captain to stowage passenger and deckhands will all have to pull together to save the ship.  Everyone will need to make sacrifices, put in the hard graft and pray that it’s enough.

There won’t be any point in putting all the officers overboard or into the ship’s brig, because while they might have been criminally irresponsible and negligent guardians, and their incarceration would make everyone feel better for five minutes, we will still need their skills to get out of trouble, just as Germany did with its establishment of former Nazis.  They might be put on salutary rations of humble pie until further notice, their pay hit (which captains of industry can afford at 344x the pay of the average employee who works for them) and their privileges curtailed.  Beyond that is just self-defeat.

The fact is that the rise of a democratic, peace loving and prosperous state in post 1950 West Germany was in very large measure accomplished by the work and commitment of ex-Nazis and their once very willing collaborators.  The US Bankworld Adjustment process needs be no different.

Avaaz and its left constituencies need to see the bigger picture and stop anger from doing the talking.  Society does not live by slogans alone.  It needs a plan.  And the denazification model is a good one that is worthy of any society that has lost its way and got itself into serious trouble.