September 99

Views expressed are those of the authors, not necessarily of the AFSC.

Some thoughts on Robert Rubin leaving the Treasury Dept.

On May 12, Robert Rubin declared he was leaving his post as Secretary of the Treasury. Lawrence Summers is taking his position. Both of them played a crucial role in fortifying an infrastructure that supports financial capital.

The media has formed a consensus that the former co-chairperson of Goldman, Sachs, the big Wall Street investment firm, had done a stupendous job looking after the interest of capital. He insulated the US from economic meltdowns going on in Asia, Latin America, and Russia. Yet a million-and-a-half US-workers lost their jobs due to the economic crisis in Asia. Plants closed and corporations took advantage of abysmally low wages in Indonesia.

The press praises Rubin because corporate stocks rose nearly $7 trillion in value since last October. Most of it has little to do with productivity or job creation. "Emerging markets," a user-friendly term investors employ when they refer to poor countries, provides fertile ground for this kind of investment. James K. Galbraith, a Rubin critic, states: "The stock boom is fueled partly by capital inflows sparked by the collapsing world economy."

Meanwhile, the Treasury counted on its strongest ally, Federal Reserve Chairman Alan Greenspan, to champion a free market economy. The chairman enjoys more power than President Clinton and the Congress combined; he makes the big decisions about money. He has the power to pump money in or extract it from the economy by pressing a key on a computer keyboard. It seems he might tighten the money supply with unemployment down. The Fed has always been opposed to 100% employment. It is not good for business. Greenspan maintained the US remains cushioned from economic turmoil because most Americans, 70% of them, worried about losing their jobs. A couple of months ago he said workers would have to suffer for the economic good of the country. Workers earned, after six years of economic expansion, 3% less than they did in 1998.

Then Rubin demanded high interest rates in poor countries. Investors make a killing in emerging markets when interest rates go up. Brokerage firms borrow at low rates in the States and invest in countries where interest rates hover around 40% during difficult times. However the poor pay the price this. Rubin did his work well in bolstering a financial architecture that would allow capital to move rapidly around the world producing unprecedented profits for big banks and brokerage firms.

Perhaps those who laud Rubin's "accomplishments" failed to notice our cities bunkerized to protect those who enjoy unprecedented wealth from the growing unemployed, or underemployed, or the people who have just given up trying to find work. Perhaps they failed to read the "State of America's Children Yearbook 1999." The report reveals that "Sixty (of the world's 225 richest people) live in the United States. They have a combined wealth of $311 billion-an average of $5.2 billion each. That is equivalent to the combined annual income of more than 18 million American families, or the GNP of more than 100 developing nations or the 1997 budget of 35 states in the United States combined."

The policies that Rubin's analysis fueled left so many Americans out. He didn't come down on the side of New York City's bottom 10% whose income fell an astonishingly 28% last year. What's good for America appears to be what is good for the one percent of Americans who control 60% percent of the country's stock. So whose interest did he serve?

Rubin came to the rescue of the International Monetary Fund (IMF) when the "Washington Consensus" showed signs of cracking over the bank's structural adjustment programs (SAPs), that critics maintain further impoverish countries. The free-market ideology of the IMF requires countries to cut back on social expenditures. This means less money for education and health; the poorest of the poor bear the brunt. Transnationals profit with the IMF coming down hard on third-world countries. They can buy up companies the state has had to privatize. They buy them up at garage sale prices; have controlling interests in telecommunications, banking, and tourism. Goldman, Sachs makes out on this: it is the second largest purchaser of privatized corporations in the world.

When belt-tightening measures are imposed on countries to tune up economies, workers earn less. Indebted countries, in order to get money to pay off loans to transnational banks, need to devalue their currencies. Devaluation encourages poor countries to export to earn dollars to pay off debts.

The press said little about how the Treasury enthusiastically backed the Multilateral Agreement on Investment (MAI). This trade deal was discussed in secret for five years in the Paris-based Organization for Economic Corporation and Development (OECD). MAI would have eliminated all barriers to capital. Had the treaty passed, democracy around the world would have taken a back seat to corporate power.

The United Nations Development Program points out that OECD countries represent 20% of the world's population and control 84% of the wealth. The poorest 20% account for one and a quarter percent. Robert Rubin's tenure in office didn't help change this maldistribution of wealth: it exacerbated it.