Abstract: Those who believe in money-power (plutocracy) love to say that all and any excess of the “free market” will self correct. And thus such excess will stay self contained to the economy. Not so. We give one class of examples.

Two very severe quakes occurred in urbanized Japan during the last month (7 to 7.5 Richter). Nearly nobody was killed, and there was little damage. These miracles occurred because of the tough earthquake code in Japan, and reconstruction according to it. In California, similar quakes, centered on cities, could kill up to 100,000 people, or more. They are expected soon.

Why are so many deaths coming to California soon? Because, only in the city of San Francisco (a tenth of the Bay Area’s population) dozen of thousands of buildings are ready to collapse if the expected quake(s) occurred (a 7 to 8 Richter earthquake in the central Bay is predicted, within 30 years). The city of San Francisco has realized there is a serious problem, and that is what it says. It advises real estate owners of “soft buildings” to fix them, but it will not make the fixes mandatory, nor will it address the case of “non ductile” concrete buildings (there are thousands in the Bay). In case of severe quake, those are expected to “pancake”.

Why no mandatory fix? Why not prevent “pancaking”? Because there are not enough engineers to inspect and find out what to do, building by building.

This problem has been long in evidence (after a deadly quake in the LA area, the LA city council tried to make quake fixes mandatory in 1995, but rich real estate owners stopped them). Instead of directing economic activity that way, by morally correct legislation, it was directed towards speculation (Internet bubble, credit bubble, real estate bubble). The speculation made a few people much richer, and they were the ones pulling all the strings.

Thus the present US financial crisis it is not just a question of self correcting excesses in the financial sector. The financial sector directs the whole economy. By going crazy, it made the economy crazy.

By controlling the electoral process the financial sector and its attached plutocracy led the whole country in the wrong direction. A good example was the refusal to limit frantic consumption, energy waste, etc… Result: Iraq was invaded, but the USA did not get ready for quakes. Just as there is only a finite number of building inspectors, there is only so much capital. If most of the disposable capital, human or financial, is spent on the military, and “nation building” on the other side of the planet, among the haters, there is none for infrastructure, material or otherwise, inside the USA.

Senator Obama’s economic plan proposes a tax loophole for Venture Capitalists, supposedly to stimulate the economy. This makes little sense. Most of the economy does not have to do with improving widgets, and making the hyper rich richer is the Reagan way to go at it. This has been proven to be a disaster. Moreover, all the hyper billionaires will turn into “Venture Capitalists” overnight, to benefit from the zero percent taxation. They will probably all invent “new” financial “instruments”. No wonder they are all in love.

The preceding shows that gigantic infrastructure spending is not just a question of creating a real economy, but of basic morality. There are no mostly military solutions to socioeconomic problems, be it in Afghanistan or in the USA. There are no efficient financial markets without efficient law and morality to guide them, either.

Patrice Ayme,


Technical addenda: 1) To make an old building earthquake safe is not obvious, and requires highly technical assessments, which vary from building to building. The cost can be anywhere between 5% and 70% of total replacement by a brand new building.

2) The “financial engineering” found in the USA in recent years is a tail banging the dog around. So much so, the dog has lost its mind. The word “engineering” in this context is an abuse of a glorious concept. The late “investment bank” Bear Stearns used a leverage about 30 (the expression “investment bank” meant it went around all international regulations that banks have to respect, by law). It mostly “invested” in financial “products” of a type so obscure that more than one TRILLION dollars worth of it cannot be sold at any price. Meanwhile China is building the Bay Bridge piece by piece, in China; real economy for real (Chinese) people. That crucial bridge was broken in 1979, in a preceding quake. Excuse us if it’s so slow: we are spending all our money invading other countries, to justify spending more on “defense” than the rest of the world combined. In 1941, the USA was a country of engineers. That’s why it won the war in three years. In 2008, the USA has become a country of puppet masters pulling financial strings to nowhere, except decay, death and destruction. That’s why, even with Chinese help, it can’t repair earthquake damage in 20 years.

3) Japan can be said to be three times more egalitarian than the USA (using the RP 10% measure). Japan is actually (as measured by the Gini index) one of the most egalitarian countries in the world. Uniquely among the most developed countries, inequality has been rising considerably in the USA. (since 1970, leading to a decay of health and education).

4) The entire west coast of the USA (just like the entirety of Japan) is very exposed to earthquakes. There are many faults next or below Los Angeles, massive ones around Seattle, and no less than three major ones in the San Francisco Bay Area. The frequency at which segments shake is known, hence the predictions above. Four massive quakes occurred in the SF Bay Area in the last 170 years.

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