The World Isn't Just Flat Anymore

Tycoons, stand warned: Gaming the system isn't a way to achieve perpetual motion.

1 The next stage of the protest. The gift of prophecy was given to fools. Nobody predicted Wall Street's collapse in 2008, the Arab Spring or the Israeli protests of summer 2011. So let's not try to predict what the protest will do next. But a counterattack by powerful economic forces can be predicted.

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Stormy sea - Reuters - August 30 2011

The following is an extract from a blog published on Reuters about the Tea Party movement in the United States, a movement that purports to be grassroots but is actually funded by some of the richest people in America. "I don't need an invitation to a secret plutocrat retreat to point out what may be the single most destructive legacy of Big Business's chokehold on the political system: its persistent success at hiding its true agenda from the public."

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Big business spends a fortune to manipulate "fringe element" platforms that distract the public from Tea Party opinions - ideas like banning big bonuses at bailed-out banks, wrote the blogger.

Coming soon to a newspaper near you: the Israeli version. Our local tycoons are already planning campaigns to distract the public from the need for fundamental structural reforms. They will be abetted by "social" activists and academics unwittingly furthering the tycoons' ends by presenting a host of ideas that serve mainly to distract, a la the Tea Party. Some of their ideas may sound terrific, but the bill will be presented to the middle class, today or tomorrow.

2 The regulators. The ones supposed to spearhead economic reforms, with sophistication, expertise and determination, are the regulators and bureaucrats in Jerusalem. In the weeks to come they will have to prove that Israel's public service has not become tainted like its American counterpart in recent years. Last week an article in Rolling Stone magazine accused the Securities and Exchange Commission of abetting U.S. investment banks in fraud, no less.

For the last 20 years, claims the article, the SEC systematically destroyed files on preliminary investigations, once they had closed, denying investigators the chance to see past inquiries into rot on Wall Street. Many people at the SEC were offered cushy, high-paid jobs at the banks, claims the article. When newcomers to the watchdog organization wanted to investigate these banks, their superiors would rein them in.

"Even a cursory glance at a list of the agency's most recent enforcement directors makes it clear that the SEC's top policemen almost always wind up jumping straight to jobs representing the banks they were supposed to regulate," wrote Matt Taibbi. "Small wonder, then, that SEC staffers often have trouble getting their bosses to approve full-blown investigations against even the most blatant financial criminals."

For a fledgling suspicion to become a formal investigation, it has to make the treacherous leap from the lower rungs of career-level staffers all the way up to the revolving-door level at the top, "where senior management is composed largely of high-priced appointees from the private sector who have strong social and professional ties to the very banks they are charged with regulating," Taibbi wrote. And at no level is there fear of ramifications.

In Israel too, one can find many former regulators earning millions of shekels a year from the companies they used to regulate. Their job is to engineer the regulators still in position.

The social protest presents a special opportunity to clean up the system, and mainly, instill values among the regulators; to get them back to work for the 7 million Israeli people they represent, after much too long a time serving an alien lord (whether by omission or commission, knowingly or naively, weakly or cynically ).

3 The guns rumble. A lot of people in government and at the monopolies and cartels are sighing with relief following the escalation on the Egyptian border. They figure that when the guns are rumbling, the people will forget exactly what spurred hundreds of thousands of Israelis to abandon their couches for the streets.

They're wrong. Very much so. First of all, the demons unleashed in the past month aren't about to vanish in a puff of smoke. The Internet, social networks and just people communicating with one another won't let the government and Big Business interests bury the whole thing. Second of all, even if this wave of protest ebbs in time, the following ones may be higher.

Remember that the protest of summer 2011 erupted despite brisk economic growth and low unemployment, due in part to the bloating real estate market thanks to growing mortgage leverage. Going by the debt troubles in Europe, descent into another global recession is possible. So is the resurgence of financial crisis.

When the debate turns from how to divvy up the budget to cutting it, the public will have a say, in contrast to the past. Now it knows it has power. It has influence. The greater its distress, the more the public will become involved.

Sooner or later the people who benefit from the economic and social agenda as they are will discover that the summer of 2011 was a mere precursor, a courteous little systems test. If the public doesn't see change in Israel's social and economic agenda, the next summer of protests could be grimmer.

4 New York Times columnist Thomas Friedman has been visiting Israel for decades, sometimes several times a year. His long list of acquaintances includes senior journalists and politicians. But only after hundreds of thousands of people took to the streets last month did Friedman discover another side to Israel. "The Israeli Summer brings 250,000 Israelis into the streets, protesting the lack of affordable housing and the way their country is now dominated by an oligopoly of crony capitalists," he wrote last week.

Until two months ago, the only newspaper articles you might find about Israel were about the struggle with the Palestinians or "the startup nation" - the wonders of Israeli high-tech. Now the international press has discovered another aspect: the oligopoly of crony capitalists, as Friedman put it.

Most Israeli newspapers don't write about the oligopoly. Perhaps they're still investigating. Or they see themselves as part of that oligopoly.

But if you deny the oligopoly and the dangers it poses, read the last paragraph of Friedman's column.

The NYT commentator's main claim to fame is his book "The World is Flat," in which he describes technology and globalization as a tremendous economic engine that could achieve global prosperity.

Yet in his column last week, Friedman again addressed the reasons for the vast inequality that has been developing worldwide, and the rising resentment of the middle class. In the past he ascribed it mainly to the world being flat. Now he added a point in parentheses. According to Friedman, "This same merger of globalization and I.T. is creating huge wages for people with global skills (or for those who learn to game the system and get access to money, monopolies or government contracts by being close to those in power - thus widening income gaps and fueling resentments even more )."

There you have it. The world isn't just flat, it's also corrupt and riddled with economic concentration. The great wealth machine isn't just global technology and skills, it's those bad old rotten ties between wealth and government - use and abuse of other people's money. What's changed is mainly the scope of action by the people who have learned how to game the system.