Always on the prowl for new assets to exploit, investors are trying to push some of the crown jewels of American government – land, highways, civic infrastructure – onto the auction block. From the perspective of the owners of these assets, we the American people, it’s a terrible time to strike a deal. Why sell off prime equity assets in a down market for a fraction of their actual value? Ah, but that’s the point, from the point of view of investors: Let’s snatch these assets for a song while governments are so desperate for cash!
The latest example is a 387-acre tract of land in West Los Angeles that has long been prized as a precious bit of open space in an over-built city. The land is owned by the Veterans Administration, and is estimated to be worth $5 billion in today’s market.
As the Wall Street Journal (July 16) reports, “For 25 years, wealthy locals and veterans groups—backed by California's congressional delegation—have successfully resisted efforts to sell or develop the land, delighting in the open space and fearing the consequences of development.” But now the GOP – with scant resistance from Democrats – is pushing to sell off the land in order to raise money.
The potential deal is part of a nationwide trend to sell off valuable government-owned properties to raise money for federal government operating expenses. Granted, there are surely many government assets that are not needed and can be sold off without anyone missing them. The Government Accountability Office reported this year that 24 federal agencies own more than 45,000 under-utilized buildings that cost $1.66 billion annually to operate, according to the WSJ.
But it is also true that investors are itching to acquire prime real estate and office buildings for bargain-basement prices. Indeed, this may be the next stage of capitalism: market players leveraging their market power to dictate their demands to government. (One sign: Standard & Poor's chutzpah in downgrading the federal government's credit rating despite its own role in over-stating the creditworthiness of sub-prime securities, contributing to the 2008 crash.)
The corporate chieftains like to cast the problem this way: “The American people want more than they can pay for.” But the truth of the matter is that the corporations are the free riders. They enjoy insider deals with the government that give them cheap access to our common wealth, government-backed insurance and liability protections, special legal immunities and privileges, and countless taxpayer-borne subsidies. But when the elderly, working poor and truly impoverished seek simple healthcare, decent schools and basic public amenities, they are castigated as greedy and unwilling to pay for what they want. When "hard choices" have to be made, it's never Wall Street that bears those burdens.
The sad thing is, President Obama, the would-be successor to MLK and FDR, has gone along with this line of argument, acting as if the only sacrifices should come from the middle class and poor. Remember: no one from Wall Street has yet to be punished for crashing the global economy, and the Bush tax cuts that got us into this mess (along with two wars) are still on the books, contributing to the hole in the federal budget.
All of this is further evidence that the State’s cozy alliance with the market is reaching a new stage….the one in which the market consumes the state. So far, the Market/State duopoly has showered generous benefits on both corporate and political leaders. The State gives a patina of civic legitimacy to the state-subsidized, liability-limited workings of the unfree Market -- while the political elite, for their part, earn a handsome living by allocating sweetheart deals to corporate interests…..all of it sanitized by the benign tagline, a “private/public partnership.”
My question is, when will the Market call off its attempt to cannibalize the State? The riots in England may be a tame precursor of what happens when the insulated, cosseted investor class goes too far in its quest to dismantle the State while offering nothing in its stead, and elected leaders, forgetting the very meaning of common wealth, drink from the same vat of Kool-Aid.