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Bottle of Lies; The Inside Story of the Generic Drug Boom, Katherine Eban, 2019
Katherine Eban
The US government is prevented from negotiating drug prices through Medicare, Medicaid, and the ACA because of industry lobbies. The exclusive way the government has chosen to attempt to control runaway drug prices is through generic drugs. Generic drugs must be proven to be bioequivalent to brand-name drugs. Healthy volunteers are given the drug and their blood measured to determine the maximum concentration (Tmax) and peak concentration (Cmax) of drug in the blood. The blood can not fall below 80% or rise above 125% of the brand-names concentration. Companies are required to impose a 90% confidence interval on their testing to assure that less then 20% of samples fall outside the range. Drug companies are required to run these tests themselves. What happens if a foreign or domestic drug company sets out to systematically generate false test results in order to deceive and defraud the FDA? This is the story of one such company Ranbaxy Laboratory of India.
To increase companies incentives to produce generic drugs, the FDA offered a six month exclusive to whichever company first filed an application to produce a generic dug. On Aug 19, 2002, Ranbaxy submitted a 7,500 page application to produce Pfizer’s Lipitor then a blockbuster drug at $2.5 Billion annually. The Lipitor patent was set to expire in 2011.
Ranbaxy hired two Indians working for Bristol-Meyers Squibb. Rashmi Barbihaiya had been developing drugs for BMS for 21 years. Dinesh Thakur specialized in the application of robotics to eliminate human error from the manufacturing process. Thakur had helped Barbihaiya transfer and reconcile data from a BMS purchase. Barbihaiya decided to join Ranbaxy, set to acheive sales of $1 billion in 2002, and suggested Thakur join him. Thakur arrived in India on Aug 17,2002, two days before the Lipitor application was filed. Thakur had just become a US citizen.
Barbihaiya mysteriously quit Ranbaxy in 2004 receiving a sizable severance package (Hush money?). Thakur’s new boss in 2004 was London trained Arun Kumar who immediately started finding troubling discrepancies in testing and data. In mid 2004 he assigned Thakur to thouroughly research the records and data. On October 14,2004 Kumar met with members of the scientific committee of the Ranbaxy board of directors. Kumar showed a PowerPoint of 24 slides prepared by Thakur entitled “Risk Management for ANDA Portfolio”. The presentation showed that Ranbaxy had lied to regulators, falsified data, and endangered patient safety in almost every country where it sold drugs. More than 200 products in more than 40 countries had data that were fabricated to support business needs. The board asked Kumar if he could bury the data. Realizing the problems were systemic coming from the top, Kumar resigned. Ranbaxy did not know Thakur had prepared the presentation.
Dinesh Thakur
Thakur’s grandmother read him tails from the Ramayana and the Mahabharata and he credits his moral and ethical grounding in these stories. He resigned Ranbaxy after 32 months and with no plans for what to do next. On Aug 15, 2005, after wrestling with his conscience for four months following his resignation, Thakur posted, in broken English, an email using a newly created Yahoo account. Thakur did not consult his wife about his action, because whistle-blowing in India can be fatal with no legal protection. Finally on Nov 2, 2005, Thakur sent the incriminating Power Point Presentation to FDA’s Rivera-Martinez. Andrew Beato’s whistleblower law firm agreed to represent Thakur. Thakur was now protected and his identity would remain secret.
On Nov 30, 2011 the FDA notified Ranbaxy that it was approved to start producing generic Lipitor. Ranbaxy promised they would purchase the active ingredient from Pfizer and produce the drug in an FDA approved facility. They did neither, using their own non approved active ingredient and producing in a non approved facility. The FDA did nothing about this deception believing Ranbaxy would need the revenue from generic Lipitor to pay the settlement. Ranbaxy shipped $600 million in their 6 month exclusive period.
The case was settled May 13, 2013 for $500 million. Thakur received $48 million for his role as whistleblower. No individual was held to account. It had taken the FDA and Justice Dept. almost 8 years to settle the case. Japanese drug maker Daiichi Sankyo had purchased Ranbaxy during this period relying on false information so they sought redress from the International Court of Arbitration in Singapore. In Apr 2016 the court ordered to Singh brothers to pay Daiichi Sankyo $550 million in legal damages.
Former Ranbaxy employees, all highly trained in fraudulent data manipulation and generation are today scattered throughout the industry, even in the US.

The Ranbaxy case defied the imagination of US regulators and investigators so long because the fraud was so all-encompassing. The company’s intricate system for faking data involved hundreds of people. And the US government all but volunteered to be fooled by announcing its inspections in advance.

Rajiv Malik $25 million per year
Another company featured here is Mylan Pharmaceuticals, a Pennsylvania based company registered in the Netherlands. In June 2003, Rajiv Malik resigned from Ranbaxy. In Jan 2007, Mylan acquired Matrix Laboratories, an Indian publicly traded drug manufacture. Along with Matrix, Mylan acquired Malik who became executive VP in charge of global technical operations. Malik brought his team of specialists from Ranbaxy with him to Mylan. He quickly rose to become Mylan COO. Heather Bresch, daughter of West Virginia senator Joe Manchin, became CEO of Mylan in 2012. She advocated for and got passed in Jan 2012 the Generic Drug User Fee Amendment (GDUFA) which called for drug producers to pay fees into a fund at the FDA in increase inspections. The fees were also intended to speed up applications for new drugs which had a huge backlog.
Bresch did not understand that her own corporate culture, thanks in large park to Malik, was in need of massive reform.
Mylan agreed to purchase for $1.6 billion, Agila Specialists in India. In June 2013 the FDA scheduled an inspection at a sterile injectable plant in India as part of the Agila purchase. FDA inspector extraordinaire Peter Baker was part of the inspection team. The problems uncovered were massive. Inspection Problems at two more Agila plants followed. All three plants had to be shut down. These plants also supplied Pfizer and GSK creating a worldwide panic.
Deb Autor FDA’s Revolving Door
Mylan hired Deb Autor, one of FDA’s top officials as its senior vp of strategic global quality and regulatory policy. Malik had suceeded in corrupting almost every Mylan owned plant in India. A Mylan whistleblower came to FDA headquarters with detailed accusations about Malik’s data fraud in India. His detailed information could have guided further inspections of specific plants. The FDA did nothing for a full Year. Remember that Deb Autor was formerly at the FDA and Bresch was a Senator’s daughter. The whistleblower in July 2016 jolted the FDA in an email, holding the FDA accountable for what happened to US patients and suggesting that the FDA revolving door (Autor) was responsible for their inaction. Two inspections at Nashik (India) and Morgantown followed.
Tom Cosgrove Covington Food, Drug and Device Practice Group 2017
In May 2017 FDA’s director Tom Cosgrove downgraded the FDA findings from Official Action Indicated to Voluntary Action Indicated. Cosgrove then left the FDA.
Another whistleblower from within the Morgantown plant came forward in early 2018 saying that Mylan had developed an embedded culture that permitted fraud. The Ranbaxy fraud virus had spread to the US.

From 2012 to 2018, the agency (FDA) downgraded 112 inspections in India to make the final classification less severe. For company after company — Mylan, Cipla, Aurobindo, Dr. Reddy’s, Sun Pharma, Glenmark — findings of Official Action Indicated (OAI) became Voluntary Action Indicated (VAI). These downgraded essentially nullified the judgments made by its investigators in the field and replaced them with judgements made by bureaucrats in Maryland. Cosgrove and other officials waived import restriction. They chose to communicate confidentially with some firms through so-called untitled letters instead of issuing public reprimands. Politics seemed to guide the agency’s enforcement actions.

Peter Baker FDA Inspector

After Baker’s inspection at the Pfizer-affiliated Zhejiang Hisun plant, the FDA restricted the import of thirty of the plant’s drug products. But fifteen of the drug ingredients were in short supply in the United States, so the agency lifted the restriction on about half of the drugs, including a crucial chemotherapy drug for treating Leukemia and breast and ovarian cancers.
To Baker, the decision made no sense. According to regulations, the drugs had no place in the US supply. They weren’t good or safe enough. Shortages didn’t change that fact.

In July 2018 a widely used active ingredient for Valsartin a blood pressure medication was found to contain a cancer causing toxin known as NDMA. The ingredient was made by Chinese Zhejiang Huahai Pharmaceuticals who had changed its production process in 2012. In the US more than a dozen manufactures had to recall their product as did dozens more worldwide. Some patients had been consuming the toxins for 6 years. Just a year earlier the FDA had downgraded an investigators report of impurities at another Valsartin ingredient plant to VAI. The company was let off the hook only to end up in the middle of a worldwide scandal a year later.

In 2013 Harry Lever, cardiologist at the Cleveland Clinic, sent a detailed letter to the FDA concerning Wockhardt’s generic metropolol succinate which he found could not control patient’s chest pain, heart rate, or blood pressure. NPR’s The People’s Pharmacy radio program with the Graedons had been flooded with complaints about this generic. The FDA sent Peter Baker to inspect the plant in India. Baker on July 24, 2013 joined two Indian FDA inspectors already on site. Baker had previosly inspected this plant in March. On this inspection they got a partial confession from an employee and amassed further damaging information. One of the inspectors became ill and their hotel room was bugged. Both Wockhardt and Dr. Reddy’s recalled their metoprolol succinate from the market with admission that the drugs were not bioequivalent at all. Lever had been right after all.
In 2008, again reacting to the People’s Pharmacy and Harry Lever’s patient’s generic Toprol XL experience, The Graedons began to focus on extended release (ER) drugs. In 2006 Teva began marketing a generic antidepresent for Wellbutrin XL sold by GSK. The FDA didn’t respond to the deluge of complaints. The FDA had 85 independent reports in 2007 which they ignored. Consumerlabs joined the fight and tested the Teva generic against the GSK. The result was that the generic dumped four times as much active ingredient in the first two hours as the brand name did. So a new, largely unidentified cause, dose dumping, came to the forefront of Doctor’s attention but not that of the FDA. The FDA’s bioequivalence tests were set in 1992. New drugs often feature extended release (ER). They release their doses evenly over a twelve hour period. If a generic dumps its dose quickly, the patient can be potentially harmed, sometimes in dramatic ways. The FDA 1992 bioequivalence definition is out of date and unable to account for the time pattern of dosage for an ER drug. The FDA ignored the results and one official even suggested the difference in dosage might be an advantage. On Apr 16, 2008 the FDA asserted that they had been right to approve the generic. Reading the report, it was clear the FDA had tested the 150 mg and not the 300 mg dose where all the complaints were centered. When asked, the FDA said they were afraid to test the 300 mg because it “might lead to seizures”. When Graedon looked at the 150 test results, the dosage dumping of the generic was still clear and unmistakable. It took five years for the FDA to agree to revisit the tests. They finally agreed that Teva’s drug was not bioequivalent. In 2010, the FDA official obstructing the Teva investigation, Gary Buehler, left the FDA to become vp of global regulatory intelligence and policy at Teva, another classic example of regulatory capture and the FDA revolving door.
Gary Buehler FDA To Teva
In June 2018 a woman arrived at Cleveland Clinic suffering from chest pain and shortness of breath. The 35 year old woman had had a successful heart transplant three years previously and had been taking the immunosuppressant Prograf daily to prevent organ rejection. But six months earlier, a CVS pharmacy refilled her prescription with generic tacrolimus, made by Dr. Reddy’s. Over the six months she felt progressively worse. Lever and his colleague Randall Starling sent her blood tests and tacrolimus capsules to a Massachusetts laboratory. The patient died of a heart attack in Sept. 2018. Preliminary test results from Massachusetts showed that tacrolimus released its active ingredient very rapidly compared with the brand.
Revising bioequivalence to address ER and dose dumping has not been done by the FDA. Peter Baker was no longer sent to do inspections and has left the FDA.

The Power Broker; Robert Moses and the Fall of New York, Robert A. Caro, 1975
This classic Pulitzer Prize work at 1162 pages details the 44 year career from 1924 to 1968 of Robert Moses, the most powerful builder in New York history. Born in 1888, Moses grew up at the birth of the automobile, was educated at Yale and Oxford and earned a PhD degree from Columbia. Starting his career as a reformer helping Governor Al Smith reorganize the government of the state of New York, he asked Smith to be named Commissioner of Parks and Parkways for Long Island and Moses drafted the legislation creating the position from which he could not be removed and in which he had absolute power of property condemnation, which he called “appropriation”. He built a reputation for incorruptibility and non partisanship; a man who got things done. Politicians including FDR in 1932, while disliking Moses and his methods, relied on his accomplishments in their campaigns. Moses took over New York City’s parks consolidating the system into a single commission under his total control. He next took over the stalled Triborough Bridge effort drafting his own Triborough Authority legislation to allow his absolute control including bond issuance. His legislation allowed him to hold simultaneously state and city positions, previously not allowed.

Robert Moses Building Randalls Island in 1936
He completed the Triborough system and the West Side Highway including the Henry Hudson Bridge. When traffic levels assured that the bonds could be repaid in eight years or less Moses redrafted the legislation to extend the Authority to cover any bridge or highway in the New York Area and to allow the bonds to be refinanced which allowed the Authority to live forever. The surpluses from tolls were to give Moses a funding power independent of city, state, or federal influence.

The entrance and exit ramps would have required demolition of historic Castle Clinton and much of Battery Park.

Ole Singstad Rendering of the Battery Park Bridge

Just before WWII, Moses proposed a huge bridge connecting Battery Park in Manhattan to Brooklyn. A tunnel, designed by Ole Singstad who finished the Holland tunnel and designed the midtown and Lincoln tunnels, was already planned for the same route. Conservationists were unable to stop Moses proposed destruction of the historic park and contacted Eleanor Roosevelt who told FDR of the plans. The bridge required War Department approval which was denied. Moses was never able to prove FDR was behind the War department decision. For revenge, Moses moved the hugely popular at 2.5 million visits per year, free, Aquarium out of the CLinton Castle and threatened to destroy the Castle itself. He didn’t and Battery Park was later given to the Federal Government for preservation.
Moses added the East River New York Tunnels to his bridge and highway authority and Singstad, who played a significant role in defeating the bridge never designed or built a tunnel in New York again. His existing tunnel plans were implemented exactly as he had drawn them up.
In the mid 1950’s Moses joined with the separate Port Authority, which operated the George Washington Bridge and the Hudson river tunnels to New Jersey, to take advantage of the new Interstate Highway Federal program. Moses was nominal head because of his long relations with Washington. Under the agreement, the Port Authority would add a second level to the George Washington bridge and build interstate highways in New Jersey and connect Staten Island to New Jersey to handle traffic from Moses Verrazano Narrows bridge which he would build between Long Island and Staten Island as well as connecting highways. Tolls were not allowed under the Interstate Highway program.
The Port Authority had opened, in 1950, a multi level commuter bus station on 8th Ave one block from the Lincoln Tunnel entrance. The buses had their own road connecting the station to the tunnel and dedicated lanes through the tunnel assuring that bus commuters would never be stuck in traffic. Under the station was a subway station. When the Port Authority planned the World Trade Center they made provision for subway stations directly under the Center with high capacity escalators to the mall and offices. They also planned a direct PATH link from Hoboken NJ to the Center. Hoboken NJ was the location of the commuter train and bus station connecting to PATH. Imagine if Moses had this foresight into mass transit when he was building Idlewild and the Expressways.
As if this were not enough power for one man, Moses became head of New York electric power where he built huge hydroelectric dams on the St. Lawrence near Niagara. After WWII he extended his power to include nuclear power generation.
At his peak, Moses held 14 independent power positions simultaneously.
During Moses’ entire 44 year career the city and state of New York never spent a single dime on mass transit development and the city and state even failed to maintain the existing plant. In 1924, when Moses came to government, New York Subways were the envy of the world. By 1968 these subways were perhaps the worst in the world. When building his expressway to Idlewild (now Kennedy) airport Moses refused to consider adding a center median rail system. He did the same for the Long Island Expressway denying requests to add a center rail for mass transit. The long Island railroad was allowed to deteriorate even though large numbers of city commuters were dependent on it. It was around this time that planners discovered that Moses had built his many parkways with bridges and overpasses so low buses were precluded from using them. Moses, who never had a driver’s license and had never experienced a traffic jam doomed the entire New York metropolitan area to perpetual traffic jams. His vision was for scenic drives along the water so he built the West Side Highway right on the Hudson River denying Riverside park users access to the River except for exclusive yachting clubs.

His thinking had been shaped in an era in which a highway was an unqualified boon to the public, in which roads were, like automobiles, sources of relaxation and pleasure. Changing realities could have changed his thinking but he was utterly insulated from reality by the sycophancy of his yes men; by his power, which, independent as it was of official or public opinion – of, in fact, any opinion but his own — made it unnecessary for him to take any opinion but his own into account; by, most of all, his personality, the personality that made it not only unnecessary but impossible for him to conceive that he might have been wrong; the personality that needed applause, thereby reinforcing the tendency to repeat the simplistic formula that had won him applause before; the personality that made it possible for him to relate to the class of people that owned automobiles and were repelled by the dirt and noise, such as the dirt and noise he associated with trains; the personality that made him not only want but need monuments and that saw in highways- and the adjunct suspension bridges (“the most permanent structures built by man”) – the structures that would leave a clean, clear ineradicable mark on history; the personality that, driven by the lust for power, made him anxious to build more revenue- (and power-) producing bridges and parking lots (and highways to encourage their use) and that made him indifferent or antagonistic to subways and railroads which would compete with his toll facilities not only for users but for city construction funds. He was insulated from experience. Most of the millions who used his roads were now using them primarily not for weekend pleasure trips but back and forth to work twice a day, five days a week, and driving was therefore no longer a pleasure but a chore; but for Moses, comfortable in the richly upholstered, air conditioned, soundproofed rear seat of his big limousine, driving was still as pleasurable as it had always been. Robert Moses, who had never had to drive in a single traffic jam, really believed that his transportation policies would work.

This blogger experienced the result of his work in 1977 when a group of us traveled by van from Tarrytown NY, home of Washington Irving, to Kennedy Airport on a Friday afternoon following a week of training. Our driver didn’t use a single highway during the entire trip. When we asked him about the route, he explained that side streets were the only to get us to our flights on time. We traversed the entire city from the north and couldn’t use even one of Moses’ creations.

The press treated Moses uncritically with the New York Times leading the cheers until a couple of young, unintimidated investigative reporters with smaller papers started, in 1959, digging into his Title I Federally subsidized housing and slum clearance programs. Soon the reporters were inundated with tips and material on the corruption and suffering. Targets for slum clearance were often not slums at all but stable well maintained neighborhoods. “Slum” clearance was destroying of lives of tens of thousands if not hundreds of thousands of New Yorkers including hard working respectable families. The resulting deluge of stories of horror and corruption forced even the NYT to assign investigative journalists to the stories.

The Incorruptible, Uncorrupting, Apolitical, Utterly Selfless Public Servant Moses had been a synthetic character, largely puffed up by the press. That character had endured for thirty-five years. But in 1959 the process of deflation by the press-a process that had been going on intermittently for several years-had begun in earnest. In that process there had been a large amount of unfairness. But that process had in the end arrived at the truth. At the beginning of 1959, the Moses image had stood in most of its glory, intact except for a few small chips. At the end of 1959, it lay in unsalvageable ruins. Popularity, Al Smith had warned him, was a slender reed. Now the reed was broken.

Moses resigned his position as head of Title I but his reputation was forever tarnished.

Moses with Nelson
Moses had survived many attempts by governors and mayors to reduce his power and all, including FDR had failed.
Then, in 1959 Nelson Rockefeller became governor of New York. Nelson was 50 and Moses was in his 70’s. Nelson was a Rockefeller, with access to power never before seen by Moses in a mayor or governor. Nelson was tougher than Moses. Rockefeller pressured Moses to give up all his parks posts so Nelson could give them to Nelson’s brother Laurance, a man with impeccable credentials in New York’s conservation movements serving for 27 years on the Palisades Interstate Park Commission. The well conceived and run Palisades Interstate Park had been funded heavily by the Rockefellers. Moses made a huge mistake, accusing Nelson of nepotism in the press. All Moses’ park positions were stripped but in compensation Nelson offered Moses Presidency of the 1964 Worlds Fair to be held in Flushing Meadows.

Moses at Flushing Meadows Park
The position came with very attractive compensation which could help Moses pay for care for his ill wife. Moses took the job thinking he could turn Flushing Meadows into a huge Park after the fair ended. The Fair, as the earlier one in 1930 was a financial disaster complete with Moses lavish contracts to friends. In the end Moses had less than $8 million to pay off $24 million in loans. He used the $8 million to create a small park on the site and the creditors were given nothing. Nelson stripped Moses of his remaining highways position and Moses was down to one title, the one that counted, head of the Triborough Authority.
Nelson moved slowly in his efforts to create the Metropolitan Transit Authority (MTA) to encompass mass transit and bridges and highways. Nelson ambiguously offered Moses a significant role in the new setup which Moses interpreted as head of Triborough and a position on the board of the MTA. Moses believed he held a trump card that the bondholders would have to approve any change to their bond contract which they would never do without Moses’ approval. The bondholders had agreed that any dispute which arose would be handled in litigation by Chase Bank’s lawyer Thomas Dewey. Moses prepared the Triborough Authority to bring suit. Chase was at that time a private bank owned by the Rockefellers and controlled by David Rockefeller who Moses had worked with for decades. The Rockefeller brothers met at Nelson’s apartment and agreed to a plan. Moses held fire believing Nelson would keep him on at Triborough but on March 1 1968 Triborough went out of business merging into the MTA. Moses was stripped of control of Triborough and offered a consultant’s position at $25,000 per year plus his limousine and driver and secretaries. He was never consulted or given meaningful work again. Moses, at age 79, took the job. Moses lived to the age of 92 dying in 1981 on Long Island.

The Age of Surveillance Capitalism; The Fight for a Human Future at the New Frontier of Power, Shoshana Zuboff, 2018

This is a look at the transformation of Google, Facebook, and others from their initial mission to serve their users to the exploitation of those users by selling their privacy to the highest bidder to achieve enormous personal wealth and power.

In her personal experience Zuboff describes sitting as a nineteen year old in the back of a seminar where Thomas Friedman (founder of the Chicago school of economics) instructs doctoral students who will soon run the economy of Chile after the CIA inspired coup and assassination of elected President Salvador Allende in favor of the Pinochet military dictatorship in 1973.

Thomas Friedman and Friedrich Hayek, economics as ideology and their opposite John Maynard Keynes

Zuboff also briefly alludes to debates she had at Harvard with the aging and discredited behaviorist BF Skinner, author of the novel Walden Two. She spends time in the book discussing Alex Pentland of the MIT media lab who she considers a BF Skinner intellectual successor armed with the tools Skinner could only dream of having and using. She calls Pentland a high priest of Surveillance capitalism. Pentland helps provide the intellectual justification that legitimizes instrumentarian (a new word coined by Zuboff) practices. Pentland never mentions Skinner in his work but his behavior modification goals are the same.
BF Skinner at Harvard and Alex Pentland of MIT Media Lab

Zuboff explains why user consent through opt-in or opt-out has been rendered meaningless under Surveillance Capitalism. To read a single contract agreement in detail might take hours and with third parties almost always involved there may be 1,000 individual contracts to read and digest. If you opt out surveillance capitalists will threaten to downgrade your system and will probably still collect and distribute your information without your permission. You have no way to find out what they are doing. If you ask for the information collected, as a Belgium privacy attorney attempted to do of Google, they are unable to retrieve it for you. It is buried somewhere in a second tier of automatic computation technology. The user has no way of determining what software is currently running on your computers or smart phones or what peripherals like GPS, cameras, microphones, etc. have been usurped for external control. To add insult to injury, you will pay for the transmission bandwidth they secretly steal from you to illegally surveil your activities. If you have installed smart home devices like thermostats or security systems you have no way to know what these smart devices are observing and collecting. Your car driving behavior can be monitored with bad insurance consequences, not only by your new car, but by your smart phone. Your new car can be disabled by the finance company and its GPS location sent to the REPO people to come get your car. Then imagine advances in voice and face recognition and you start to get the terrifying idea. Then imagine all of this surveillance capability in the hands of a non democratic government like China. You can’t do anything at all without the state monitoring (and influencing) your behavior.

What does older capitalistic history teach us?

It (government interventions into free market capitalism) appeared in the trust busting, civil society, and legislative reforms of the Progressive Era. Later it was elaborated in the legislative, judicial, social, and tax initiatives of the New Deal and the institutionalization of Keynesian economic during the post-World War II era; labor market, tax, and social welfare policies that ultimately increased economic and social equality.

In fact the Bretton Woods conference of 1944 created a new world economic order based on a US-centric dollar based fixed exchange rate system, created the IMF and World Bank, and was a complete repudiation of Keynesian economics. This system worked only so long as the US remained the dominant manufacturing power, creating large trade surpluses that the US could recycle as investments. When trade reversed around 1970 and the US became a trade debtor nation, the American economy shifted from manufacture to financialization, convincing trade creditors to invest their surpluses with Wall Street, who kept inventing new and innovative ways to use the mountains of cash suddenly at their disposal. The Neoliberal contribution to all this was the erosion of government regulation of corporations and the use of IMF and Worldbank loans to vulnerable nations and colonies whose defaults resulted in the massive transfers of state owned commons into private hands like Wall Street hedge funds. See Greek Spring by Yanis Varoufakis. None of this history is clear from her book. For an excellent introduction to macro economics from Bretton Woods to the present see Yanis Varoufakis’ minotaur book. The breakup of the Soviet Union in the 1990’s was another opportunity for the Neoliberals who descended on the former Soviet Union members with plans to transfer all public commons into private hands. The result was to create a new class of asset owners in each country that more resembled a mafia than capitalists. We remain in this condition to this day. The massive and fundamental shift of the American economy from manufacture to financialization is not mentioned by Zuboff.

To her credit, Zuboff does site French economist Thomas Piketty’s monumental work on wealth and income distribution in England and America from the eighteenth century to the present.

A market economy…if left to itself…contains powerful forces of divergence, which are potentially threatening to democratic societies and to the values of social justice on which they are based…If we are to regain control of capital, we must bet everything on democracy.

Our present economic system has been accurately described as corporate welfare with massive government subsidies for agriculture, energy, extraction, and other industries. Hayek and Friedman would turn over in their graves if they knew where American capitalism has taken us. This trend reached its pinnacle (we only hope) with the Bush-Obama massive bailouts of the financial institutions and Zuboff’s beloved General Motors after the sub-prime financial scandal-crisis of 2008. Shiela Bair (W appointee to head the FDIC) was fully prepared to break up the big banks starting with Citibank using her FDIC authorization and charter, but was prevented from doing so by Tim Geithner who was shockingly appointed by Obama as his treasury secretary. See more at Scamming a President. No meaningful reforms were enacted to prevent a recurrence of this collapse and we anxiously await the next iteration.

Zuboff mentions Rand Corporation futurist Herman Kahn’s 1967 book The Year 2000, where the author anticipates the future possibilities of computer power intrusions into our lives characterizing this as “a twenty-first century nightmare”. She says Kahn was the model for the character of Dr. Strangelove in Stanley Kubrick’s 1964 movie. No!

Herman Kahn wrote an earlier book published in 1960 “On Thermonuclear War” where Kahn speculated that it would be possible to create a “Doomsday Machine“; a vast collection of nuclear weapons connected to an automated trigger mechanism that, upon detection of a threat and without any human intervention, would initiate nuclear holocaust. Most experts at the time believed such a system could not be built. In fact the Soviet Union built just such a secret machine called The Dead Hand whose current status is unknown. See Daniel Ellsberg’s Doomsday Machine book. Kahn’s 1960 book was the inspiration for Kubrick’s movie where the Soviet Union have successfully built a doomsday machine but have kept it secret from the US. The character Dr. Strangelove is a caricature of a former Nazi scientist, not Kahn. Kahn was a consultant on the movie.

Zuboff uses a discussion of totalitarianism to illustrate how slow academics and intellectuals are to understand completely sui generis unprecedented developments. Our understanding of totalitarianism came into focus only in the 1960’s, well after the demise of European Fascism and dramatic changes following Stalin’s reign of terror. She points out that between 1930 and 1953 Stalin appears ten times on the cover of Time magazine. She leaves out any discussion of Mao’s China, but China emerges later in her discussion of State uses of surveillance capitalism.

She introduces and coins Instrumentarian power as a contrast to totalitarian power.

Instumentarian power moves differently and toward an opposite horizon. Totalitarianism operated through the means of violence, but intrumentarian power operates through the means of behavioral modification, and this is where our focus must shift. Intrumentarian power has no interest in our souls or any principal to instruct. There is no training or transformation for spiritual salvation, no ideology against which to judge our actions. It does not demand possession of each person from the inside out. It has no interest in exterminating or disfiguring our bodies and minds in the name of pure devotion. It welcomes data on the behavior of our blood and shit, but it has no interest in soiling itself with our excretions. It has no appetite for our grief, pain, or terror, although it eagerly welcomes the behavioral surplus that leaches from our anguish. It is profoundly and infinitely indifferent to our meanings and motives. Trained on measurable action, it only cares that whatever we do is accessible to its ever-evolving operations of rendition, calculation, modification, monetization, and control.

Deng Xiaoping Architect of Democracy Free Capitalism in China

Instrumentarian power in the hands of non democratic States like China is almost beyond comprehension in its potential power. Yanis Voroufakis describes Singapore under Lee Kuan Yew and his disciple Deng Xiaoping who transformed China’s economy using the Singapore model as democracy free capitalism.

Voroufakis primary point in Voroufakis Ted talk is that Western capitalist corporations are hording massive mountains of profit, investing only in corporate consolidation, and are in direct contradictions of Keynesian economics to recycle surpluses to level the cycles of boom and bust. These uninvested surplus mountains may doom democracy and life as we know it.

Industrial capitalism depended upon the exploitation and control of nature, with catastrophic consequences that we only now recognize. Surveillance capitalism…depends instead upon the exploitation and control of human nature. The market reduces us to our behavior, transformed into another fictional commodity and packaged for others’ consumption.

Surveillance capitalism’s successful claims to freedom and knowledge, its structural independence from people, its collectivist ambitions, and the radical indifference that is necessitated, enable, and sustained by all three now propel us toward a society in which capitalism does not function as a means to inclusive economic or political institutions. Instead, surveillance capitalism must be reckoned as a profoundly antidemocratic social force.

As Thomas Paine noted in the Eighteenth century; “…a body of men holding themselves accountable to nobody, ought not to be trusted by any body.”

Surveillance capitalism’s antidemocratic and anti egalitarian juggernaut is best described as a market-driven coup from above. It is not a coup d’etat in the classic sense but rather a coup de gens: an overthrow of the people concealed as a technological Trojan horse that is Big Other…It is a form of tyranny that feeds on people but is not of the people.

The young people we have considered…are the spirits of Christmas yet to come. They live on the frontier of a new form of power that declares the end of a human future, with its antique allegiances to individuals, democracy, and the human agency necessary for moral judgment. Should we awaken from distraction, resignation, and psychic numbing…it is a future that we may still avert.

Zuboff starts her book with the assertion that Surveillance capitalism cannot be controlled or contained through the lens of antitrust or privacy. She mentions the EU regulation the General Data Protection Regulation (GDPR) which only went into effect in May 2018 and only within the EU. It is too early to see if this ambitious effort will have any impact as it works its ways through EU regulators and the courts. She appears sceptical. For the Guardian’s take on GDPR. So what do we do?

If democracy is to be replenished in the coming decades, it is up to us to rekindle the sense of outrage and loss over what is being taken from us. In this I do not mean only our “personal information”. What is at stake here is the human expectation of sovereignty over one’s own life and authorship of one’s own experience. What is at stake is the inward experience from which we form the will to will and the public spaces to act on that will…That Surveillance capitalism has usurped so many of our rights in these domains is a scandalous abuse of digital capabilities and their once grand promise to democratize knowledge and meet our thwarted needs for effective life.

For more on the despotic behavior of Facebook and Google

Reporter; A Memoir, Seymour M. Hersh, 2018
This is Hersh’s eleventh book. His Henry Kissinger book was first published in 1983, long after Kissinger left the government. We are still awaiting his Dick Cheney book. Hersh explains that writing always came easy to him:

<> <> <> <> <> <> <> <> <> <> Sy Hersh

I grew up in a world where the incentive to learn came from within me, as did a sense of whom to trust and whom to believe. I was guided as a confused and uncertain eighteen year old by a professor who saw potential in me, as did Carroll Arimond at the Associated Press, William Shawn at The New Yorker, and Abe Rosenthal at The New York Times. They published what I wrote without censorship and reaffirmed my faith in trusting those in the military and intelligence world whose information and friendship, I valued but whose names I could never utter. I found my way when it came to issues of life and death in war to those special people who had the integrity and intelligence to carefully distinguish between what they knew — from firsthand observation at the center — from what they believed. The trust went two ways; I often obtained documents I could not use for fear of inadvertently exposing the sources, and there were stories I dared not write for the same reason.
I never did an interview without learning all I could about the person with whom I was meeting, and I did all I could to let those I was criticizing or putting in professional jeopardy just what I was planning to publish about them.
I will return to the Cheney book when the time is right, and when those who helped me learn what I did after 9/11 will not be in peril.

Kissinger Cheney Bush

Cardinal O’Conner Archbishop of New York told Hersh:

“My son, God has put you on earth for a reason, and that is to do the kind of work you do, no matter how much it upsets others. It is your calling.”

<> <> <> <> <> Abe Rosenthal

Some of the more interesting parts of this book deal with the relationship of Hersh with Abe Rosenthal, Executive Editor of The New York Times. Their first interaction was a phone call while Hersh was working on the Meadlo (a soldier at the My Lai massacre) story. A copy of the story had been sent to the Times and Rosenthal wanted to send a Times reporter to interview Meadlo. Hersh grabbed the phone:

“Mr. Rosenthal, it’s Sy Hersh. Listen, you want an interview with Paul Meadlo? Well he’s somewhere in New York. Find him.”

Hersh slammed the phone down. Seconds later the phone rings again. Hersh grabs it:

“Mr. Hersh”, Abe Rosenthal yelled, ” Do you know who I am?”. “Yes”, replied Hersh and hung up on him again.

CBS Evening News aired Mike Wallace’s interview with Paul Meadlo that same evening. Hersh later regretted his temper tantrum but Rosenthal hired him anyway.
William Calley, the only soldier court martialed for My Lai served three months in prison. Stories continue to break about the attempted cover up and the role of higher officers. My Lai was not an isolated event. On the same day as the My Lai 4 massacre, at My Khe 4, another massacre occurred with more than a hundred civilian deaths.
The Times hired Hersh on the basis of his My Lai reporting. Hersh wanted to pursue three other stories at the Times; the secret bombing of Cambodia and military falsification of documents; Nixon, Kisssinger, and the CIA’s interference with the Allende government in Chili; and the several hundred million dollar effort by the military to recover a Soviet Nuclear submarine sunk in the Pacific. Rosenthal, however, was tired of reading the daily Washington Post reporting by Berstein and Woodward on the Watergate break in and reassigned Hersh to this story. Hersh uncovered the existence of the Nixon plumbers operation and the break in of Daniel Ellsberg’s psychoanalyst’s office in California. Nixon was paranoid that Ellsberg might have other documents beyond the Pentagon papers that might be damaging to him. Ellsberg and Hersh became friends and saw Oliver Stone’s movie Platoon together. Ellsberg did have additional documents about nuclear war planning which he hid in a trash dump. A mud slide destroyed those files and Ellsberg spent almost 50 years reconstructing them for his latest doomsday machine book.
When the Nixon white house tapes were found, the Watergate story exploded and Bob Woodward and Hersh started sharing information to save duplication and time. They often met over tennis and Woodward quipped that Hersh never paid for the tennis time. Hersh clarifies here that Katharine Graham, publisher of the Washington Post was paying for the court time.

William Calley 3 months Reality Winter 5 years

This book doesn’t deal with whistle-blowers other than to note how tough Obama was on them. Virtually all NSA whistle-blowers have had their careers ruined. The latest, Reality Winter, has been sentenced to at least five years for telling the public that the Russians attempted to hack electoral systems and voter lists during the 2016 elections. Calley, convicted of killing 21 innocent Vietnamese, served three months.

<> <> <> <> <> <> Mob Fixer Korshak

Hersh briefly dipped into an investigation of organized crime with a series of articles on the Chicago Jewish fixer attorney for the mob Sidney Korshak. Korshak’s influence with the Teamsters in New York prevented delivery of part 1 of the Times Korshak story.

When Hersh undertook to investigate the New York based corporation Gulf and Western, he hired a graduate school knowledgeable about securities issues to help him. Unfortunately, Punch Sulzberger, publisher of the Times did not want to offend his club buddies from Gulf and Western and the articles were mercilessly edited and all anonymous quotations removed. Rosentenhal was unable to defend Hersh and this was the start of the end of Hersh’s career at the Times. Nonetheless, John Kenneth Galbraith, Harvard economist wrote Hersh:

“The pieces on Gulf and Western are excellent — better than most readers will know. Extracting usable information from these characters, as I can attest from slight experience, is more difficult by a factor of ten than from the CIA. Thanks again.”

<> <> <> <> <> <> John Kenneth Galbraith

Hersh wondered why there was still so little cooperation between the intelligence community even after 9/11. He asked a long time CIA operative:

Don’t you get it Sy? The FBI catches bank robbers. We rob banks. And the NSA? Do you really expect me to talk to dweebs with protractors in their pockets who are always looking down at their brown shoes?”

When Hersh had a story about the killing of Osama Bin Laden that contradicted much of the Obama administration account, neither the Times nor the New Yorker (under David Remnick) would touch the story and Hersh published the story with the London Review of Books. He then published the book about the killing. Steve Cole in his recent book about Afghanistan and Pakistan entitled Directorate S does not mention Hersh’s killing account but seems to endorse the Obama version of events. Hersh comments:

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The possibility that two dozen navy SEALs could escape observation and get to bin Laden without some help from the Pakistani military and intelligence community was nil.

Hersh says the focus of the coverage should have been the double cross of Pakistan, not the refusal of the Times and The New Yorker to publish the story. During his long career he has often been challenged sometimes very bitterly. Hersh replies;

I will happily permit history to be the judge of my recent work.

Hersh discovered that James Jesus Angleton oversaw CIA domestic spying on Vietnam war protestors from 1967. Hersh’s story led to Angleton’s resignation in 1974.

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Hersh disclosed that in 1968 6,000 sheep died in a nerve gas experiment gone wrong at the Dugway Proving Ground in Utah. A different wind could have carried the gas to Salt Lake City.

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Also featured in this book is Harrison Salisbury who covered the Soviet Union for the Times from 1949 to 1954. He returned to New York where he covered the civil rights movement, the assassination of JFK and other stories until he retired from the Times as associate editor in 1973. He wrote his book on the Times, Without Fear or Favor in 1980. In this book, Salisbury wrote about the Watergate investigation:

“It was as though Sy Hersh had been born for this moment.”

In all Salisbury wrote 29 books including the 1969 Siege of Leningrad. He witnessed the Tienanmen demonstrations and massacre in 1989 and wrote The New Emperors: China in the era of Mao and Deng in 1992, portraying Mao and much of the leadership as Opium addled. Salisbury was from the beginning against the Vietnam War and was the first American journalist to be given a visa to visit Hanoi in 1966. He wrote extensively about the US bombing of Hanoi at this time. Hersh was the second American reporter to be given a visa to Hanoi. There he met Defense Minister Vo Ngyuyen Giap and the Paris negotiator Le Duc Tho .

Adults in the Room; My Battle with the European and American Deep Establishment, Yanis Varoufakis 2017.

This political memoir is best read as a companion to Varoufakis’ 2016 And the Weak Suffer What they Must? Europe’s Crisis and America’s Economic Future. Both were written after Varoufakis’ short term as the Greek Syriza government’s Finance Minister in 2015.

The 2016 book is a macroeconomic primer describing how we got from the 1920 gold standard to Bretton Woods to financialization and the Great Moderation to the worldwide economic and banking collapse of 2006. It explains how the European Union was set up without a political union, with a currency like the 1920’s gold standard and without a central bank like the US Federal Reserve capable of recycling surpluses. What can possibly go wrong? The 2008 global financial meltdown. Yanis estimates a Greek bankrupsy in 2010 would have required a European wide bailout costing each European citizen €10,000. A similar market turn against Wall Street would have cost U.S. taxpayers an estimated $258. That is why the 2010 Greek bailout was so important to the EU.

Finance Minister Limousine

The 2017 book is a page turner describing Varoufakis’ attempts to deal with the European troika made up of the European Commission the European Central Bank and the IMF to restructure Greece’s debts and to put the Greek economy on a path to recovery. The troika were only interested in a third bailout with even harsher austerity to punish Greece for having elected a left leaning government and to serve as an example to other weak EU members not to defy the troika.

Yanis describes an early meeting with the formidable Larry Summers who Yanis had previously called “the prince of darkness”. Summers:

There are two kinds of politicians, he said, insiders and outsiders. The outsiders prioritize their freedom to speak their version of the truth. The price of their freedom is that they are ignored by the insiders, who make the important decisions. The insiders, for their part, follow a sacrosanct rule: never turn against other insiders and never talk to outsiders about what insiders say or do. Their reward? Access to inside information and a chance though not a guarantee, of influencing powerful people and outcomes… So, Yanis, he said, which of the two are you?

In 2009 Germany’s Angela Merkel had requested a €406 Billion bank bailout from her Bundestag. It was barely enough to cover losses from German bank investments in US toxic derivatives. By 2010, losses from German bank loans to the governments of Italy, Spain, Ireland, Portugal and Greece totaled €477 Billion of which €102 Billion had gone to Greece. Merkel knew it would be suicide to return to the Bundestag to request a second bailout. This was the birth of “Bailoutistan”; a complex and deceptive way to get the banks their bailout without the voters knowing how it was done. Corrupt Greek politicians and tax dodging oligarchs were complicit in the deception which pretended to put weak European countries on the road to recovery via extreme austerity measures.

Strauss-Kahn and wife at his NY Trial

The EU charter prohibits financing of government debt. To get around this the EU persuaded the notorious Dominic Strauss-Kahn, who was desperate to save the French banks, to have the IMF make the loans. The beauty for Germany and France was that more than half the loans were guaranteed by the citizens of other poorer countries, many of whom are not in the EU. The other countries all believed they were lending money to the troubled countries. They were unaware the money went directly to the German and French banks. Bailoutistan ultimately became a more than €1 Trillion scam.

James Galbraith

In 2012, James Galbraith arranged for Yanis to teach at the University of Texas LBJ School of Public Affairs in Austin Texas where he taught courses, including one on the European financial crisis. Yanis was able to organize lectures by Syriza’s leaders that he hoped would reassure Washington, should Syriza became the government of Greece. When Syriza came to power in 2015, Jamie joined Yanis in the finance ministry where he worked tirelessly on plans to restructure the EU debt and economy of Greece. Jamie was nearby during most of Yanis’ meetings with troika leaders, continually revising plans for reform and writing presentations.

Economist William Black who exposed the frauds at the heart of the US Savings and Loan scandal and wrote the book The Best Way to Rob a Bank is to Own One, wrote in support of Yanis after a BBC profile labeled Yanis Greece’s Cassandra:

So why does the BBC treat Varoufakis as a sexy leftist and Dijsselbloem (president of the Eurogroup) as the respected spokeperson for the troika even though Dijsselbloem is a fanatic ideologue who has caused massive human misery because of the intersection of his inflexible ideology and economic incompetence? Varoufakis’ views on the self destructive nature of austerity as a response to the Great Recession are mainstream economic views. He certainly is a leftist, but his policy view arise from different ideological traditions most people would find antagonistic (to left wing thinking). That makes him a non ideologue as the term is defined. The troika, by contrast, is led entirely by ideologues. The primary difference is that they are exceptionally bad economists and exceptionally indifferent to the human misery they inflict on the workers of the periphery that they despise and ridicule. The BBC, the New York Times, and the Wall Street Journal will never write a profile of the troika’s leadership that makes any of these points. The BBC profile is another of what I and call revealed biases. Journalists and media organs routinely reveal and betray their biases — biases that they hotly deny but rarely escape.

Jeffrey Sachs

Among Yanis’ strongest supporters was American Jeffrey Sachs who was involved in the attempts to restructure the economies of Eastern Europe after the breakup of the Soviet Union in the 1990s and who came to understand the destruction caused by austerity. Sachs accompanied Yanis at many meetings and worked behind the scenes on developing plans:

Yanis and Christine Laguarde IMF head – “We need adults in the room”

At the end of a busy but arid day punctuated only by Wolfgang Schauble’s (German Finance Minister) statement that Grexit (Greece leaving the EU) was inevitable, Jeff (Sachs) rewarded me with what I took to be a massive compliment. “Having sat in your meetings with Thomasen (European IMF Director), Draghi (ECU president), Schauble, and Regling (head of the ESM), I must tell you that I have never seem anything like this in my decades of experience with meetings between debtor governments and creditors such as the IMF the US government, the World Bank…In every meeting you were positive, bristling with ideas regarding practical solutions. And they kept knocking your ideas down, even though they were good ideas, without proposing a single one of their own. Unbelievable.”

Daniel Ellsberg (Pentagon Strategist, Whistleblower, and economist) emailed Yanis:

Keep in mind that the ruling class can be self-destructively mad, not just pretending:

Yanis and Alexis Merkel and Alexis

On June 26, after the troika issued an ultimatum, Alexis Tsipras, Greece’s Prime Minister, called a cabinet meeting to announce a referendum on the third bailout to take place in one month. During the wait, the troika closed all Greek banks. The Greek oligarchs, the Greek media, previous political leaders and even Syriza leaders all advocated voting yes to a third bailout. Vanis attended a huge rally for “no” where he was cheered for standing up to the troika. It was one of the happiest moments of his time as finance minister. The Greek people voted 61.3% no to the troika. When Yanis went to get his government’s instructions to proceed with plans for a counter offensive he realized that Alexis was capitulating to troika demands. He commented to Danae that evening: “Tonight we had the curious phenomenon of a government overthrowing its people.” Because Yanis would never sign a third bailout he was replaced as finance minister.

And the Weak Suffer What they Must? Europe’s Crisis and America’s Economic Future, Yanis Varoufakis, 2016

White and Keynes at Bretton Woods

Shortly after D day in 1944, the allies met at Bretton Woods to hammer out a post war global economic order. The American delegation was led by New Deal economist Harry Dexter White:

Bretton Woods offered White an opportunity to project the New Deal onto a global canvas. His brief for the Bretton Woods conference was nothing less than to design from scratch a stable, viable worldwide financial system for the postwar era.

But the New Deal stabilized capitalism in the US by instituting a broad range of political recycling mechanisms; among them the Federal Reserve, the FDIC Federal Deposit Insurance with the power to restructure failed banks, social security, even the military budget.

John Maynard Keynes attended the conference armed with a plan that would stabilize global capitalism for the long run by creating just such political recycling structures on a global scale. But White, who as a student had been heavily influence by Keynes, was charged to push through a very different and flawed system, totally dependent on America maintaining a global trade surplus and recycling that surplus to deficit nations at the will and whim of the American government. Thus was born the system wherein all other currencies would be tied to the dollar at fixed rates of exchange and the dollar would in turn be tied to gold at $35 an ounce.

By the late 1960’s, America’s trade surplus evaporated as Europe, led by Germany, and Japan started exporting more manufactured goods to the US than the US was exporting to them. This could not continue and in 1971 the Nixon administration, led by Paul Volcker, announced the Nixon Shock, dumping the gold standard and cutting all other currencies loose from the dollar.

The moment men like Paul Volcker saw that political surplus recycling was beyond the American economy’s capacity, they brought the whole damned (Bretton Woods) system down- with the 1971 Nixon shock. For they understood the fallacy that Europe refuses to grasp: if you set up a free trade, free capital and single currency system without a political surplus recycling mechanism, you will end up with something like the 1920’s gold standard.

From the moment that Europe was discarded form America’s comforting postwar dollar zone, European elites struggled to re create the defunct dollar zone within Europe. Never having grasped the lessons that the New Dealers learned during the 1930s and 1940s, European officialdom repeated the same mistakes made during the 1920s, creating an ill designed gold standard like currency in the heart of Europe

It is dangerous error to believe that monetary and economic union can precede a political union or that it will act (in the words of the Werner report) “as a leaven for the evolvement of a political union which in the long run it will in any case be unable to do without. Cambridge economist Nicholas Kaldor 1971

France’s Francois Mitterrand and Britain’s Margaret Thatcher believed that the next big economic shock in Europe would force Europe into a political federation with the creation of political institutions capable of recycling surpluses just as the US has done in the 1930’s and 1940’s.

Francois Mitterrand and Margaret Thatcher

Thatcher’s mistake was to assume that Mitterrand’s scheme would succeed. She failed to recognize, as Mitterrand had also failed, that is was not in the European Union’s DNA to carve a federation out of its monetary union’s troubles…Only inefficient, sweeping authoritarianism could emerge from its wooden underbelly.

So, unable to learn from history and unwilling to forget their petty agendas, Europe’s ruling class set out to re-create the gold standard, demonstrating a grandiose failure of perception of what they were doing. Keynes had described the gold standard as a “a dangerous and barbarous relic of a bygone era.” Little did he know that Europe would re-create it in the late 1990’s, thus replicating circumstances ripe for another Great Depression in the 2010’s; and economic crisis that ended up…preventing the very political union that was to have been its antidote.

Lacking a political surplus recycling mechanism, Europe’s monetary union meant that the weakest nations and their frailest citizens had to suffer a sharp contraction the moment Europe’s capitalism went into a spasm in response to financialization’s inescapable seizures. Mitterrand’s original hope (that a future global financial would force upon the euro zone a federal solution) offered any respite from the pitiless reality. By 2010, two years after the type of crisis Mitterrand had in mind, that hope had died out too.

Paul Volcker, now President of the New York Federal Reserve next brilliant move came during the Carter Administration with his little known Warwick speech in which he declared: “A controlled disintegration in the world economy is a legitimate objective for the 1980’s.” Here is what Volcker, about to become Federal Reserve Chairman had in mind:

Volcker’s Controlled Disintegration

If America cannot recycle its surplus, having slipped into a deficit position back in the mid-1960’s, it must now recycle other people’s surpluses!
The trick for America to gain the power to recycle other countries’ surpluses in the 1980’s, Volcker believed, was to persuade foreign capitalists to voluntarily send their capital to Wall Street…The trick was to hit two usually contradictory targets at once: on the one hand push American interest rates through the roof while on the other, ensuring that Wall Street offered a more lucrative market for investors than its equivalent in London, Frankfurt, Tokyo, Paris, or anywhere else.

What do bankers do when such a tsunami of capital comes their way daily? When billions of dollars, net, run through their fingers every morning of each week? They find ways to make it breed on their behalf. Throughout the 1980’s the 1990’s and all the way to 2008, Wall Street took in the daily influx of foreign capital and, on its back, built mountains of derivative trades which, in time, acquired the property of private money.
Financialization, as we now call this process, was the critical byproduct of maintaining and enhancing US dominance on the back of increasing trade imbalances and in the interest of financing America’s ever-expanding twin deficits. It began as froth on top of the stream of profits flowing from Germany and Japan to Wall Street, once Volcker’s “controlled disintegration” of the world economy was taking effect. But soon the froth took over, usurping the underlying stream of actual values, turning finance into the driver and industry into the servant.

Reagan’s Massive Government Spending Program

But things began to go awry after 1986 when American authorities decided to wind back their vacuum cleaner, limiting the rate at which US deficits grew. The recession in the early 1980’s, caused by Volcker’s sky high interest rates and Ronald Reagan’s early budget cuts, frightened the Reagan administration into action. Using the US military budget as its main instrument, Washington effected the most Keynesian macroeconomic expansion in America’s history… The president,who had won the 1980 election by preaching against public spending and in favor of shrinking the state, won reelection in 1984…on the basis of a massive public spending spree.

Undermining New Deal Regulations

Enter Bill Clinton in 1993:

The Clinton administration, and especially Robert Rubin and Larry Summers in the National Economic Council and the US Treasury Department respectively, were busily working toward maintaining the Minotaur’s feeding frenzy. America’s deficits kept global capitalism effervescent, creating the illusion of a Great Moderation when underneath the surface, markets were increasingly addicted to America’s growing imbalances. If the American Minotaur’s frantic consumption of other people’s products and money were to end, markets take a hit, banks would go under, and the global economy might keel over. Precisely as it did in 2008.

Global Minotaur

As we have seen, the birth of America’s global Minotaur needed finance to be liberated so that the beast could do its work (supplying German, Japanese, Swedish, and later Chinese factories with sufficient demand) while also being nourished (by the profit of the German, Japanese, Swedish, and later Chinese factory owners), who sent them streaming into Wall Street.

The banker’s emancipation from their New Deal fetters was both a symptom and prerequisite for the new phase of American dominance. Who else but the bankers could facilitate the vast capital transfers, the perpetual tsunami of capital necessary to satiate American deficits that had to keep growing in order to maintain the illusion of what Ben Bernanke, one of Volcker’s successors, named the Great Moderation? Fair-weather recycling writ large, had taken over globally from the planned, political recycling that was the essence of the Bretton Woods system. Though this was never going to end well, it had the capacity to put the global economy on a spending spree that lasted three decades before crashing down in 2008.

During the same period, from the 1990s onward, Europe’s banks were copying the practices of the Anglo-sphere’s all-singing all-dancing financial sector, without having the safety net of a Federal Reserve, or a Bank of England, or even a Bank of Japan to catch them when the inevitable fall from grace occurred. The combination of the euro zone’s flimsy monetary architecture and the imperatives of Anglo-Saxon financialization, which infect the Parisian and Frankfurt banks under the noses of Brussels and Frankfurt, produced a reliance on money markets that Europe’s monetary union could not withstand.

Of American Officials views, Varoufakis notes:

They know America no longer has the power to stabilize the world economy by itself. They understand that Europe’s policies are detrimental to America’s future. And they are frustrated that their European interlocutors are not only ignorant of simple macroeconomic laws, but, curiously that they are not even ashamed of their ignorance.

Ponzi Austerity

The European monetary union’s reaction to the 2008 crisis was to create the mother of all Ponzi schemes Ponzi austerity:

These toxic transfers (of bank debt into taxpayer debt), effected in the name of European solidarity, led to a death dance of insolvent banks and bankrupt states, and couples that were sequentially marched off the cliff of competitive austerity. Deflation, ultra-low investment, social fragmentation and rising poverty ensured that large sections of proud European nations, most the weakest of their citizenry, were dragged into the contemporary equivalent of the Victorian poorhouse.