A Painful Anniversary

Exactly ten years ago this past April 7, I posted an article on Marxism-Leninism Today entitled Tabloid Political Economy: The Coming Depression (for those who missed it, it is reproduced below). It was my first and only attempt at economic prognostication, always a challenging and risky venture. The “Tabloid” in the article’s title was a tongue-in-cheek reference to the headline in the April, 2007 issue of a now defunct supermarket tabloid, Weekly World News. Featured between Virgin Mary Slaps Boy and Jews Invented Pizzoh was the shrill admonition: Surviving the Next Great Depression! It’s Coming This Summer!

It didn’t come in the summer of 2007.

In fact, the Dow Jones Industrial Average continued to climb seemingly with no limit, reaching a new peak in the fall of 2007. The pundits continued to extol the virtues of unbridled capitalism.

While the folks at WWN built their case on scant evidence (“Skyrocketing gas prices, escalating war, crashing housing prices, calamitous weather and freefalling stock prices…”), there were many other good reasons to take their prediction seriously, reasons which I offered in my article. Unfortunately, the print edition did not survive to see the collapse that rocked the foundations of the global capitalist economy the following year. Nonetheless, the zany supermarket tabloid proved to be far more prescient than the Nobel laureates, academics, and popular pundits who postured as learned economists yet never saw the collapse coming. 

Ten Years On

The global economy never fully recovered from the crash of 2008. Instead, it has stumbled along from one setback to another, with economic growth only marginally topping population growth. When both the enormous loss of wealth from the crash and the obscenely unequal distribution of the wealth recovered since the crash are configured, it is fair to say that the vast majority of the world’s population have seen little or no recovery. In fact, the casualties from the crash continue to pile up.

The US economy is neither healthy nor without serious symptoms. Despite the market euphoria that surprisingly accompanied the Trump election, the Atlanta Federal Reserve has lowered its growth expectations for the first quarter to .5% from an earlier forecast of 3%. Other projections have similarly dropped.

For three months in a row, since January, durable goods orders (excluding volatile transportation orders) have dropped. Industrial production fell .1% in January and was unchanged in February. Factory output dropped .4% in March from February and was only up .8% from a year earlier.

Bank loan growth has slowed.

Retail sales slowed by .3% in February and .2% in March. Inflation, as a measure of consumer demand, dropped .3% in March. Retail stores are closing in unprecedented numbers and retail employment growth has slowed.

Sales of new cars-- the principal driver of consumption growth since the crash-- has fallen for three straight months. Auto dealers are now offering buyer incentives that are greater than the labor costs of production (labor costs are less than $2500 per car, on average). Incentives account for 10.5% of average sticker price ($31, 435). Yet the average car sits for over 70 days on the lot.

Used car prices were down 8% in February, another sign of declining demand. And auto loan defaults are on the rise.

The US trade gap-- the difference between imports and exports-- reached a 5-year high in February.

In stark human terms, the US economy is failing working people. Between January 2016 and January 2017, average hourly earnings slipped .1% and the hours of the average workweek dropped .3%. This calculates to a .4% loss in real average earnings for those twelve months.

With reduced earnings, more and more workers are drawing on their retirement savings: 20% of 401(k)s have been reduced through self-loans.

Not surprisingly, household debt in 2016 grew the most in a decade. Unlike in the lead-up to the crash, mortgage debt is growing modestly, still below the explosive growth rate of that time. Instead, the growth in debt is in credit cards, auto loans, and student loans. Auto loan debt has reached $1.2 trillion, while student debt has risen to $1.3 trillion.

Student debt is particularly crippling. There are 42 million outstanding loans. The average student loan debt jumped from $26,300 in 2013 to $30,650 in 2016. Defaults went from 3.6 million in 2015 to 4.2 million in 2016.

And senior citizens are saddled with growing debt as well. In 1998, 30% of people 65 and older were in debt. In 2012, the percentage of seniors in debt reached 43.3. Growing debt comes in the wake of the collapse of net worth since 2005, when it topped $300,000 among those 55 to 64. By 2013, average net worth within that group dropped to $168,900 (even below the net worth of $175,300 reached in 1989).

Talking heads and media “experts” hail the job market. But they seldom delve deeply into its performance. Put simply, capitalists are hiring additional workers, rather than purchasing labor-saving equipment, because labor is cheap and flexible. The failure of organized labor to defend or advance labor’s relative position has served as a disincentive for capitalist investment in new technologies and equipment. They see no need to do so, when labor power can be used on demand, with no restrictions, and at low costs.

That trend is clearly reflected in the most recent period’s historically poor growth in productivity, among the lowest periods of productivity growth since the Second World War. Contrary to the widespread hawking of the idea that most workers are in danger of being replaced by robots, corporations are showing little interest in the introduction of new or old technologies. They are spending very little on equipment. While the technology may be there, capitalists have shown little need for it, given low labor costs.

As Shawn Sprague shows in a recent BLS paper, since 2009 the growth of aggregate hours-worked has grown more quickly than the growth of non-farm business output. This fact demonstrates that US capitalists feel little pressure to “save” labor while restoring profits during the so-called “recovery.” Rather than having existing workers work more hours, they are hiring more workers at low wages and contingently. Profits rebounded nicely because the working class had been slammed by the downturn, rendering the employment costs so low that there was no need to invest in labor-saving equipment.

This harsh truth has been ignored by economists and labor leaders alike because it shows the complete bankruptcy of class collaboration as an approach to social justice for workers.

US capitalists have enjoyed a decade of low labor costs, no pressure to invest retained earnings, and high profits (corporate after-tax profits dipped in 2015, but came back smartly in 2016). By securing labor power at low costs, they have foregone the purchase of labor-saving instruments and achieved modest growth by expanding employment. Today, capital is profoundly afraid that, with reduced unemployment, competition for labor power will drive up the costs of labor and erode profits. The Trump tax change package, favorable to corporations and the repatriation of profits, is one ruling class response to this anticipated problem.

Despite the return of an overheated housing market with escalating prices (lagging new construction is fueling demand), no systemic accumulation crisis comparable to that of 2007-2008 appears on the immediate horizon. Instead, the post-collapse era of stagnation and deteriorating living standards continues for the working class. As the shrinking income and mounting debt of working people erodes aggregate consumption, the possibility of a business cycle contraction grows more and more likely. The long, tepid expansion transferred nearly all its gains to the wealthy few, leaving little but debt or asset cannibalization for the majority. With declining retail sales, especially auto sales, and the growing weight of personal debt, the likelihood of further consumption growth is in doubt.

A business cycle contraction will only further weaken the position of working people, setting them up for a further dose of sacrifice and pain.

Isn’t it time to get off the capitalist roller coaster?

Zoltan Zigedy

zoltanzigedy@gmail.com

April 7, 2007 MLToday (unedited)

Tabloid Political Economy: The Coming Depression

Always alert to emerging trends, I spotted the latest issue of the Weekly World News at the checkout counter of my supermarket. The headline announced the coming depression scheduled for this summer. Sandwiched between a sighting of Batboy in the New York Subway and alien abductions was the dire warning to prepare for a severe decline in the world capitalist economy. Now, Left sects sport this prediction more frequently than Elvis sightings or the announcement of Armageddon. Nonetheless, I paused for a moment. Who, I asked myself, has their fingers on the pulse of the economy more than the tabloids? Should we trust the tabloids less than the battery of economists periodically assembled by The Wall Street Journal? Would Ben Bernanke of the Federal Reserve tell us a depression was coming if he knew? Would Bush? Or Hillary?

The pieces of the economic puzzle began to come together for me. The housing bubble - the steady march of rising residential values that fueled enormous borrowing against assets - had finally began deflating, with no signs of let-up. The US middle class - saddled with record consumer debt and living from pay check to pay check – mortgaged their homes to maintain their “middle” status. Deathly afraid of falling below the media fueled standards of respectable success, they drew from their most precious assets to stay in the game.

At the same time, predators seized the moment afforded by the heralded market-place. Sub-prime lenders fed on the false prosperity by drawing the poor and the status-hungry to absurd loans, front loaded with instant gratification and back loaded with long-term pain. Stoking the housing bubble, budding entrepreneurs borrowed irresponsibly to purchase residential properties fully expecting values to rise and affording them the opportunity to “flip” the properties for an easy profit.

Like all hustles, the lure of easy money drew the most vulnerable, the most gullible, and the greediest into the game just as the bubble was bursting. Millions are facing stifling debt, foreclosures, and destruction of much of the value of their most valuable asset, their home. Economists estimate that 1,300,000 homes will foreclose this year, throwing additional housing stock into a market already suffering low demand. With an expected 50% decline in sub-prime and other easy mortgage terms in 2007, fewer people will have even a remote chance to buy from the swelling housing glut.

Of course those wiser heads who diligently worked two jobs, overtime, and  ignored the temptation of easy credit also lost big time.  The value of all housing is expected to drop 5% this year - the steepest drop since the Great Depression. In other words, the most precious asset of the working class will decline to 95% of last year’s value through the sheer irrationality of the market economy.

Nor is this a short term setback. A late March report by Emmanuel Saez and Thomas Piketty shows a level of inequality in 2005 unmatched since before the Great Depression (see The New York Times 3-29-07). Based upon 2005 IRS data, the authors concluded that the top 10% of the US population now commands 48.5% of all annual income, leaving 51.5% for the other 90%. Similar inequalities exist within the top 10%: The top 1% receives 21.8% of all income (nearly half of the income share of the top 10%). And so it goes. The top 1/10 of 1% (roughly 30,000 individuals) shares nearly as much income as the bottom 150,000,000.

In short, the US has become a society rivaling and exceeding pre-industrial England in class division and inequality. One of the earliest reasonably accurate surveys of class and income division – the famous 1688 estimates of English incomes by Gregory King – show the top 5% of English families garnering 28% of incomes (the top 1% of US individuals receive 21.8% of all incomes!). So the barons, lords, merchants, and traders of Olde England were less privileged than our own capitalist class. And we fought a revolution to escape the tyranny of the English ruling class only to replace it with our own home – grown privileged class!

No doubt the insightful team of political economists at the Weekly World News are aware that the post-2000 economic “recovery” was fueled by consumer spending, a source of energy that would appear to be nearly tapped out with personal debt at an all time high and personal wealth - the home - declining in value.

While bourgeois economist whistle past the graveyard, the coveted market – the magical mechanism that guides capitalist economic growth—seems to reflect deep – seated fears and insecurities. Despite being awash in capital, financial power searches for investment opportunities to no avail. Economic theorists have been puzzled by the low returns available, even for high-risk or long-term investment. Under normal circumstances, risk and patience earn a premium in investment, but not today. Instead, the enormous pool of wealth concentrated in fewer hands can only lure borrowers at modest rates. There is simply too much accumulated wealth pursuing too few investment opportunities.

Other alarm bells sound: Productivity growth, a centerpiece of US economic health, is now slipping below historic averages. Much of the economic success of the Clinton era is attributed to the restoration and maintenance of high productivity. During the last half - decade of his term productivity hovered at the same level as the post - World War II period. Most economists attribute this largely to the integration of new technologies into US industry. After the 2000 decline, productivity rose again thanks to the Bush administration's support for draconian management practices that squeezed every extra ounce of labor from the retreating working class. Outsourcing, downsizing and bankruptcy maneuvers forced fewer workers to work harder for less. Thus, the first hike in productivity came from technological change and the second from sweated labor.

But now productivity is dropping. Apparently, the technology impact has played out and the squeeze on labor is bearing limited returns: productivity growth dropped to a low of 1.4% in the last quarter of 2006.   

The enormous national debt adds to the list of ominous signs of decline. The obscene costs of the Iraqi occupation, the hysterical “war on terror”, and tax relief for the rich have left the US with unprecedented debt. Foreign trading partners have largely financed this debt by using their enormous surplus of dollars to buy US treasury notes. Yet there are increasing signs that as the dollar declines in value, they may be looking at other options.

The recent US tariff against Chinese high – gloss paper signals increasing tension between the US and its leading trading partners. There is a strong feeling internationally that the US is anxious to pass its economic burdens onto others. In the past, US economic might was sufficient to bully other countries to accept this sacrifice. But today, there is a growing resistance to US unilateralism—another sign of declining economic power.

Since both political parties maintain a general consensus on economic doctrine, it is unlikely that any new solutions will emerge to confront these serious cracks in the US economy. This ideological uniformity limits the policy decisions of the two parties to faith in the neo-liberal market and free, unfettered trade. With no answer to growing inequality, wasteful imperial aggression, and market anarchism, the prospects for avoiding crisis appear bleak. Let’s see if the Weekly World News gets it right.

Zoltan Zigedy

Tutoring Trump

After agreeing that the US attack upon a Syrian air force base constituted a violation of international law, a violation of Syrian sovereignty, an Ivy League law professor told NPR that he believes that the premeditated strike was justified nonetheless. The professor likened it to running a stop sign or a stop light in an emergency.

This is the level of tortured hypocrisy to which US intellectual elites have sunk.

Across the corporate media spectrum similar irresponsible “justifications” dominate the conversation, including from the center left. Some, like the once discredited, but still indulged, Brian Williams of MSNBC, border on the crazed, invoking songster Leonard Cohen to marvel at the “beautiful” cruise missile launches.

Within the two-party political circle, a similar consensus welcomes or approves the missile attack. The corporate Republican leadership, including Senate leader McConnell and House leader Ryan, join the corporate Democratic leaders, Senator Schumer and Senator Feinstein, in their approval. Senate hawks McCain, Graham, and Rubio, who had earlier criticisms of Trump, hail the attack. McCain saw Trump’s leadership of the aggression as “presidential.”  

This sounds eerily like the drumbeat accompanying previous US aggressions against countries that refuse to honor the imperial playbook. An equally ready consensus emerged with recent US military violations of sovereignty in the former Yugoslavia, in Iraq, and in Libya, not to mention numerous uninvited covert actions throughout the world.

The Sales Effort

Sadly, the US establishment has succeeded in selling aggression as “humanitarian intervention,” the modern equivalent of nineteenth-century “civilizing the savages.” As this selling job has gotten more sophisticated and the perpetrators have grown more successful, the need for allies has declined. The US used the UN as a cover after the demise of the Soviet Union; it contrived a “coalition of the willing” to mask aggression in the Middle East; and it hid behind the NATO shield in recent years. Today, it acts unilaterally, brazenly.

Making full use of the compliant corporate media, naive human rights organizations, and corporate and government-funded NGOs, imperialism relies upon opportune “incidents” that cry out for sympathy and prompt a call for action.

Of course, provocation is not really a new ploy. It has been part of the imperialist tool box since the dawn of empire. The US introduction to contrived provocation coincided with its entry into imperialist competition: the sinking of the battleship Maine. With the help of Hearst and Pulitzer, icons of US journalism, the incident “justified” the US military embarking on a colonial mission against Spain.

More recently, the phony Tonkin Bay incident notoriously served to gather public opinion behind a massive escalation of the war against Vietnam.

And of course, there was the “weapons of mass destruction” hoax that, thanks to the media frenzy generated by Judith Miller, the New York Times, and the Washington Post, led to war and the loss of hundreds of thousands of lives.

In the post-Soviet era, “humanitarian intervention” replaced imperialism’s Cold War strategy of fighting national liberation under the banner of “anti-Communism.” Today, US imperialism uses a multi-faceted approach: subversion, covert support for discontented “democrats” and surrogate “freedom fighters,” and naked intervention.

The corporate media is only too happy to fan the flames, shamelessly turning national leaders into “brutal dictators” regardless of the frequency of elections or their apparent legitimacy. That same media instantly converts religious zealots into righteous democrats and neo-Nazis into human rights activists. Any country that strengthens its military against threats of imperialist intervention becomes a threat to its neighbors or dangerous aggressors. And imperialist military maneuvers or buildups are merely responses to belligerency. All that is needed beyond the propaganda campaign is a provocation to spark a policy shift or military adventure.

Strike the Match!

Two recent events--the death of Kim Jong-nam and the alleged gas attack on a Syrian village--have disrupted processes that had promised to lower international tensions, derail the prospects of further conflict, and disrupt imperialist plans. One process held out hope that US-DPRK relations would improve, opening the door to reconciliation on the Korean peninsula. The other offered an early end to the war devastating Syria and its people.

Both processes were interrupted in a manner that should generate doubt and suspicion on the part of any reasonable person. Both processes were thwarted by “incidents” or provocations that were instantly inflated and characterized by a corporate media that follow a line uncannily identical with that crafted by imperialism.

In February, Kim Jong-nam died under suspicious circumstances in an airport in Malaysia. Kim traveled on a DPRK passport and was purportedly the half-brother of Kim Jong-il, the leader of DPRK. Immediately, a narrative circulated in the Western press that attributed the death to agents of the DPRK. Because of the haste in reporting the conspiracy, parts of the narrative had to be replaced, patched, or modified as questions arose. No independent investigation was permitted; nor was the DPRK allowed access or possession of the body of its national until much later. Questions arose over why security agencies of the ROK were engaged at the onset of the incident. And clear indications of KCIA invention loomed over the most glaring discrepancies in the story.

But most telling were the circumstances. The President of the ROK, Park Geun-hye, an anti-DPRK hardliner and US puppet, was about to be removed from office because of corruption and massive demonstrations for her impeachment in response to that corruption. Waiting in the wings was the likely new leader, an opposition politician known for his commitment to steps toward reconciliation with the DPRK. Few US citizens knew of the large southern Korean reconciliation movement because of the veritable news blackout of anything placing DPRK in a favorable light.

At the same time, a hysterical media campaign was popularizing the “North Korean military threat” and the US was rushing its sophisticated THAAD missile system to the ROK, a direct provocation of the DPRK and the PRC. The US moved quickly to take advantage of Park’s waning days and the impolitic of removing the missiles once they were there. The Kim affair conveniently added to the argument that the DPRK could not be trusted, part of a blatant effort to thwart any attempt at North/South reconciliation.

More recently, the alleged gas attack in Syria occurred in the midst of considerable hope that the war would be coming to a close. Assad and his allies had turned the war against the US, Salafist, and Turkish-sponsored opposition as well as their mercenaries. The Trump administration made noises about accepting Assad’s continued governance in Syria. Peace talks were continuing amidst renewed hopes and there was an air of optimism about forthcoming talks between the Trump administration and the Russians.

But since the first of the year, a campaign had been waging against elements of the foreign policy of the Trump administration. Charges of unsavory contacts with Russia took on a relentless public life, spread by political foes and the media, and fueled by carefully placed leaks and innuendo by the security services. Despite little evidence of anything out of the ordinary or seriously compromising, the association of Trump with Russian machinations quickly reached hysterical proportions. What began as a diversion from the exposed chicanery and electoral failure of the Democratic Party gathered momentum and transformed into a broad attack on Trump’s deviations from the ruling class playbook. The Russia-baiting was served up to discredit Trump’s renegade isolationist, America First policy. Trump had drifted off the reservation with his hands-off foreign policy, his live-and-let-live approach to Russia, Syria, and the DPRK.

To get him back on the reservation a provocation was needed. It was found or contrived with the alleged Syrian government gas attack on civilians.

The Soft Coup

Whatever really happened in the village in Syria will likely never be known. Like the death of Kim in Malaysia, any hope of an objective investigation has passed with the politically charged rush to judgement on the part of Western leaders and their media shills. Truth was a victim of opportunity. Both events, as depicted in the Western media, were better seen as carefully crafted, politically useful theater than as part of the fabric of reality.

The last glimmer of truth-based journalism disappeared from the corporate media when the work of the US’s greatest investigative journalist was exiled. Since 2015, when Seymour Hersh’s article on Syria could find no US publisher inclined to publish it, US mainstream international reporting has been universally politically motivated, tainted by bias, and, frankly, ignorant. Hersh was celebrated when he exposed the crimes of My Lai or Abu Ghraib, but he is no longer wanted when he dares to question today’s foreign policy consensus. One finds more truth in celebrity gossip reporting than in international reporting datelined from a comfortable foreign city with a media-friendly US embassy available.

The upshot of a lapdog media is the readiness of media puppies to do their master’s bidding.

Since Trump’s election, the media has once again served loyally as the instrument of the US ruling class. It should be no secret that all of the candidates but Trump were carefully vetted by that same ruling class; while they all played different hands, they recognized the same rules. Trump did not always play by those rules, he didn’t play nice, and he had some outlier ideas. And the media has set out to punish him for his audacity.

With his victory, alarms went off. Plans were hatched to force Trump back in line. The security services and the corporate media collaborated to realize those plans. With ruling class fear of a measured position on Russia, a tale of intrigue and secret plotting was created out of whole cloth. The old Russian bear-baiting strategy was brought out of retirement and the game was on!

The war rages in the Trump administration between those who cling to the isolationist position promised in Trump’s campaign and those who urge him to return to the reservation and embrace the ruling class line of belligerence towards Russia and the stoking of aggression in the Middle East and Asia. Clearly, the purge of Flynn and the removal of Bannon from the National Security Council paved the way for the attack on Syria and the saber-rattling in and near the Korean peninsula. For the moment, the corporate, establishment faction has the upper hand. Son-in-law Jared Kushner, trusted military advisor H. R. McMaster, and reliable corporate boss, Gary Cohn, former president and COO of Goldman Sachs, appear to be steering Trump back to the ruling class mainstream and away from a sane foreign policy.

The retreat from sanity owes much to US liberal elites who shamefully stoked and continue to stoke the anti-Russia hysteria that presses Trump to attack Syria. As the PRC news service, Xinhua, noted, the attack on Syria was meant to send the message that Trump’s administration was not “pro-Russia”.

How the battle will conclude is unsure. Rumors abound that Trump will exile Bannon (and Priebus) and put Goldman Sach’s Cohn in charge at the White House. That would constitute a solid victory for the ruling class-- ironically, for the policies of Hillary Clinton. Given that businessman Trump has no principles-- only ambition-- that is not an unlikely outcome.

Through the turmoil of the last few months, a soft coup has been unleashed, a coup meant to bring Trump back in line with the ruling class foreign policy consensus, an imperialist game plan. In the waning days of his administration, Barack Obama acknowledged this game plan. He noted the intense pressures from the ”humanitarian interventionists” and their dominance among the foreign policy establishment. They don’t wear the badges “liberal” or “conservative.” Nor do they owe allegiance to “Republican” or “Democrat.” Rather they represent a ruling class consensus.

While some leeway in execution is permitted, the goals are non-negotiable. Trump threatened to modify those goals. He is being schooled in the rules.

A Sober Reflection on Trumpism?

New Developments in Political Economy: The Demise of “Globalization”

New Developments in Political Economy: The Politics of Oil

Since the military build-up leading to the First World War, petroleum production has been the figurative, if not literal, motor for economic growth. Modern machines of war demonstrated the future. The imperialist powers recognized the crucial role of motorized vehicles, airplanes, and naval vessels and their thirst for oil in modern warfare, as well as anticipating the many important peacetime uses to come. At the same time, these same powers foresaw that securing sources of crude oil would be an essential, if not the essential, key to achieving and maintaining a dominant position in the global economy.

It is not far-fetched to view the post-First World War victor’s settlement, especially regarding the peoples of the Middle East, as significantly driven by considerations of future energy resources. The secret Sykes-Picot agreement likely had as its unspoken goal the guarantee of access to petroleum in the Middle East by both France and the British Empire. The conquest and oversight of oil reserves and the anti-Communist crusade became two essential pillars of twentieth-century imperialism.

US oil companies joined the European imperialists in sourcing Middle Eastern oil to complement domestic production. And the acquisition of sources of oil played no small part in the Second World War. All three Axis belligerents-- Germany, Italy, and Japan-- lacked sufficient petroleum access to sustain their imperial designs. The course of their aggression was shaped, to a great extent, in order to accommodate their thirst for oil.

In the Cold War era, the US took responsibility for securing oil for itself and its allies, installing Iran and Israel as Middle Eastern gendarmes. The oil issue became particularly acute with the collective organization of oil-rich nations into the Organization of Petroleum Exporting Countries in 1960, a development coming to a head with the oil embargo of the early 1970s that debilitated the advanced capitalist economies. This blow coincided with the beginning of a decline of US domestic oil production, sending shock waves through the US ruling class. A further shock struck with the loss of the Shah’s policing of the Middle East as a result of the Iranian Revolution.

Thus, the US entered the last two decades of the twentieth century facing shrinking domestic oil supplies and Middle East instability, two developments prompting more imperialist attention upon the affairs of oil-producing nations.

The Iraq-Iran War, beginning in 1980, further destabilized the region; US imperialism sided with Iraq out of fear that the Iranian revolution would spread throughout the Middle East, jeopardizing oil security.

And in 1991, the US undertook a massive military intervention in Iraq to protect the government of Kuwait, a reliable oil source threatened by an Iraqi invasion. US imperialism then recognized both Iran and Iraq as major threats to imperialist dominance of the region.

The Twenty-first Century

With the demise of the Soviet Union, the US enjoyed an unprecedented freedom of action. At the same time, US rulers faced growing dependence on foreign petroleum resources-- the US imported twice as much crude oil as it produced domestically at the turn of the new century. The Bolivarian Revolution in Venezuela was perceived as a threat to a once reliable source of petroleum products. Long-compliant allies in the Cold War sought their own independent arrangements with oil producers, stoking inter-imperialist rivalries. The explosive growth of the People's Republic of China and its dramatically expanded energy needs stressed global oil production.  

A panicky US ruling class looked to different paths to ensure access to resources for its mighty military machine and to assuage a restive public rocked by energy-price volatility. On one front, the US began to explore moving away from traditional sources of oil imports. Capitalist Russia enjoyed vast petroleum reserves and production capacity rivaling Saudi Arabia. And capitalist Russia was also in need of foreign investment. Two factors blocked this route (see Bloomberg Businessweek, 1-16/1-22-17, An Oily Reset in US-Russia Relations): first, Russian nationalization of some of its private oil business, and, two, the beginning of a revolution in domestic energy extraction (fracking and shale production). US allergy to supporting nationalization and the emergence of promising technologies (not to be shared with an imperialist rival) soon closed the opening to Russia in the eyes of many policymakers.

On the other hand, a substantial sector of the US ruling class favored achieving oil security through military intervention and under the guise of human rights and democratization. Tested in the Cold War, this strategy of imposing US capital’s will upon other nations by posturing as high-minded saviors proved even more effective after the demise of the Soviet Union as a counterforce. Before, imperialism promised to bring civilization to its victims; today, it is human rights and democracy.

The twenty-first century overt and covert interventions in Afghanistan, Iraq, Libya, Iran, Egypt, Syria, and possibly Turkey can all be seen, through the lens of the politics of oil, as related to securing or protecting petroleum resources. Because of active resistance to US domination, because of the strategic importance of oil, the US has been at continual war in the region since 2001 under the tattered banner of fighting terrorism.

Matters began to change in the last decade, with US domestic oil production nearly doubling between 2010 and 2014. In the last few years, US oil production has reached levels in line with the world’s largest producers, Saudi Arabia and Russia. For the first time in decades, the US is again exporting extracted energy products. In fact, many experts expect the US to become a net energy exporter in the next decade.

The return of the US as an energy competitor has predictably shifted US foreign policy. The Obama administration began to sour on leading the way in regime change in the Middle East as US energy production ramped up domestically. ENI, the Italian oil company led the call for regime change in Libya, backed up by the Italian and French governments. ENI’s relations with Gaddafi had worsened. The US joined, but did not lead the intervention. Obama later spoke of regret at being drawn into the schemes leading to the overthrow of the Gaddafi government.

Similarly, the US intervention in Syria was modest in contrast to the massive military expedition in Iraq eight years earlier. The Obama administration refrained from establishing a “no fly” zone, a military maneuver expected to open the way to the defeat of Syria’s military.

US relations with Iran improved during the later years of the Obama administration as well, despite Iran’s independent foreign policy.

These developments signal the change brought on by the US shift from a voracious consumer of Middle Eastern oil to becoming a potential rival for markets.

This shift is further demonstrated by US relations with the two largest oil producers in the world: Saudi Arabia and Russia. During the later years of the Obama administration, officials and a compliant press ginned up a new Cold War against Russia. Sanctions, saber-rattling, and hysteria brought tensions far beyond the actual points of contention. An energy-hungry, resource-poor EU has grown dependent upon Russian energy supplies, particularly natural gas. As the US is fast achieving energy independence and beginning the export of liquefied natural gas, the battle for the European market is intensifying and driving hostility with Russia.

Similar tensions arose between the US and its long-term ally, Saudi Arabia. The growth of the US as an energy producer certainly alarmed the Saudi regime. With the threat of a former customer becoming a rival, and with the effects of dramatic increases in global production, Saudi leaders reacted. While they may not have precipitated the collapse of world oil prices in 2014, they did nothing to stop it. They made no effort to lobby OPEC for price-supporting cutbacks.

A falling price of oil advantaged the Saudis, who had one of the lowest costs of production among producers and harmed the new US producers, who had a much higher break-even point. Indeed, the price drop slowed, even reduced US production, but at great cost to the Saudis. Despite having efficient production, their reserves are diminishing. But more importantly, their social costs, budget balance, and the maintenance of foreign exchange reserves require a much higher price for oil. Saudi Arabia has achieved all the trappings of a modern, wealthy state thanks almost entirely to oil. But that state cannot be supported without high oil prices, a massive surplus over their low cost of production. Moreover, the costly war that Saudi Arabia has pressed in Yemen has helped drain reserves and expand the budget. It is not lost on the Saudis that the Obama administration was less than enthusiastic about this adventure.

Consequently, the Saudis surrendered going into the new year, working a deal to cut production in the OPEC states and with other producers, raising the price of oil.

It should be clear, then, that the approaching oil independence of the US, the changing role of the US from consumer to producer, and the attention to markets-for-oil over sources-for-oil profoundly influences US strategic policies, including the weakening or souring relations with other major oil-producing nations like Saudi Arabia and Russia. Oil self-sufficiency also accounts for the reluctance, on the part of the Obama administration, to resolve the profound Middle Eastern antagonisms created by US intervention. Instability among oil-producing nations only secures the US a better opportunity to penetrate new markets and a higher margin over relatively high costs of production.

While it is too early in the Trump administration to be confident, the appointment of Rex Tillerson, the CEO of Exxon/Mobil, to direct State Department policy would seem to suggest a significant change. As the world’s largest multinational energy company and one of the largest corporations in the US, Exxon/Mobil has enormous interests in nearly every energy-producing country. With extensive investments in Russia, it feels neither bound nor moved by diplomatic or political niceties; the Obama-era sanctions on Russia cost Exxon/Mobil hundreds of millions of dollars.

Tillerson’s direction of foreign policy will likely return to embracing, protecting, and securing oil-producing countries while seeking enemies elsewhere to appease the military-industrial complex. The most recent US casualty in Yemen, a death dramatically acknowledged by Trump, would seem to support a friendlier approach to Saudi Arabia. The hysterical pre-emptive attack on better relations with Russia would likewise seem to suggest that improved links with Russia are seen by a prominent section of the ruling class as imminent and to be contested.

Some may see a contradiction in Obama, the internationalist, having moved towards a nationalist foreign policy, or in Trump, the nationalist, opting for an internationalist Secretary of State; but they are contradictions only if the decisive control of the state by monopoly capitalism is neglected. Ultimately, the dominant interests of monopoly capital always defeat professed principles.

The disparate interests of the smaller domestic drillers of shale oil and the large multinationals like Exxon/Mobil are reflected in US foreign policy. The upstart domestic drillers need higher prices, modest capital investments, and growth to insure profits; the giant international oil companies need massive capital investments for development of new reserves and continual cost cuts to guarantee profits.

Trump’s new regime reminds us that bourgeois politics is not about personalities or civility, but about differing visions of service to monopoly capital. The politics of oil underscores this truth. Further, the politics of oil tells us that inter-imperialist rivalries are coming to a boil.

Zoltan Zigedy

zoltanzigedy@gmail.com

Tracking Trump

The 2016 election taught many lessons, few of which have penetrated the talking heads of the mainstream media. Most of what we could learn has been lost in the frenzy of the most outrageous political maneuvering witnessed in decades.

One of the more notable lessons is the diminished role of campaign money in determining this Presidential election outcome. Trump spent a third less than Clinton in this election (Washington Post: $932 million versus $1.4 billion). Some have made much of this discrepancy, along with the fact that Trump largely ignored the advice of his hired consultants and advisors. Of course, Clinton’s money actually bought over 3 million more votes in the nationwide count. And the mass media enthusiastically provided Trump with uncountable dollars’ worth of free coverage (Remember CBS CEO Les Moonves’s comment on Trump’s loud mouth, Berlusconi-like antics during the primaries: “I've never seen anything like this, and this is going to be a very good year for us… Man, who would have expected the ride we're all having right now? ...Who would have thought that this circus would have come to town?”)

Nonetheless, the Trump election undeniably showed that it is possible to mount an impactful campaign outside of the conventional rules of the game, especially when a substantial portion of the electorate has soured on the rules of the game.

It was this fact-- the fact that there was a new mood emerging, especially among those most devastated by the continuing economic crisis -- that was underestimated or missed by the punditry and is still largely ignored.

While the Trump election was a surprise, something new is clearly in the air. I wrote nearly a year ago:

The Sanders and Trump successes suggest that voters are not appeased by the thin gruel offered by the party elites this go-round. But something more profound is occurring—a refusal to settle for the usual charade. Moreover, party loyalty is unusually thin this time, challenging party leaders’ ability to count on a transfer from one candidate to another. What the pundits call “unpredictability” is actually the exercise of a new level of political maturity and independence. A recent Pew Research Center poll (December 8-13, 2015) bears out the mood of voter alienation: 62% of all respondents maintain that “the federal government does not do enough for middle-class people.” Thus, the notion that anti-government sentiment runs deep in the populace is a media-inspired illusion. Instead, people want better government. (A Moment Charged with Possibility 2-11-16)

We now know, thanks to Wikileaks, that the Democrats had no intention of allowing an insurgent like Sanders to address the “new mood” of the electorate. Instead, they chose to covertly ensure the nomination of the candidate of more-of-the-same-- Hillary Clinton. In undermining Sanders, Democratic Party elites guaranteed that Trump would be perceived as the only authentic “outsider” candidate.

I wrote last year, in April, that the failures of the traditional support system for the “working class and poor people-- unions, religious institutions, the Democratic Party, ethnic organizations, etc.-- explains, in no small part, the desperate turn to Trump. Tepid, aloof liberalism breeds desperate options, like the outlandish Trump, when conditions deteriorate sharply and no radical options appear available.”

Thus, a careful assessment of the Trump victory should ascribe a role to working class disaffection with business-as-usual politics, but without a simplistic blanket condemnation of the working class, without a calloused dismissal of white workers as wholly racist, misogynist, or xenophobic.

But careful assessment is not popular after the recent election. Liberal pundit and darling of the “responsible” left, Paul Krugman, penned a harsh attack on the white working class:

...the fact is that Democrats have been pursuing policies that are much better for the white working class than anything the other party has to offer. Yet this has brought no political reward… The only way to make sense of what happened is to see the vote as an expression of, well, identity politics-- some combination of white resentment at what voters see as favoritism toward non-whites (even though it isn’t) and anger on the part of the less educated at liberal elites whom they imagine look down on them. The Populist Perplex, Pittsburgh Post-Gazette, 11-26-2016.

Krugman is hardly out of step with mainstream liberals with his barely concealed contempt for the motives of white workers. But compare this statement with what he said eight years earlier when he was shilling for Hillary Clinton against Barack Obama in the midst of their primary competition:

[Princeton colleague Frank] Bartels cited data showing that small-town, working class Americans are actually less likely than affluent metropolitan residents to vote on the basis of religion and social values… Does it matter that Mr. Obama has embraced an incorrect theory about what motivates working-class voters? His campaign certainly hasn’t been based on Mr. Frank’s book [What’s the Matter with Kansas?], which calls for a renewed focus on economic issues as a way to win back the working class. Indeed, the book concludes with a blistering attack on Democrats who cater to “affluent, white collar professionals who are liberal on social issues” while dropping the class language that once distinguished them sharply from Republicans.”... Anyway, the important point is that working-class Americans do vote on economic issues-- and can be swayed by a politician who offers real answers to their problems. Clinging to a Stereotype, Pittsburgh Post-Gazette, 4-19-2008.

Apart from the blatant hypocrisy exhibited by the marked reversal of Krugman’s views in only eight years, the earlier Krugman gets it right. Economic issues have been decisive in working class vote patterns, especially since the deindustrialization of the 1970s and 1980s and the economic catastrophe of 2007-8. And the earlier Krugman’s judgement that “working-class Americans… can be swayed by a politician who offers real answers to their problems” proved accurate with the campaign of Bernie Sanders. But with the Democratic Party actively burying that option, many workers misguidedly turned to the only other candidate promising to address their interests.

Contrary to the widespread impressions disseminated by media elites, the working-class vote was not overwhelmingly for Trump, nor was the working class vote the backbone of his success. The Electoral College totals swung his way thanks to narrow victories in a few key rust-belt states. Many factors contributed to the Trump victory, but two stand out, especially for a left analysis.

First, there was a discernable shift among many voters in working class strongholds previously giving majorities to Obama to turn in the direction of Trump in 2016. As Krugman noted in his 2008 alert and warning to the Democrats, addressing relevant economic issues is decisive in winning the working class vote. With the Sanders economic program strangled in the cradle, desperate voters saw nowhere to turn but to the false, demagogic hope of putting the industrial toothpaste back into the tube, of creating jobs out of Trump’s magic.

Democratic Party operatives and their media lapdogs have done their most to evade blame for the Party’s abandonment of working people’s interests. Instead, they have painted workers as pathologically bigoted and ignorant, a handy theme reinforced by elite media since the era of TV stereotype, Archie Bunker. Today’s archetypes for the socially dysfunctional (white) worker is found in the best-selling tell-all from a working class “escapee” (Hillbilly Elegy, J. D. Vance). By diverting the spotlight to working class dysfunction, the third-way, New Democrats who dominate the party can escape blame for their willful neglect of the multiracial working class’s increasingly desperate plight.

Second, Trump was a magnet for every backward, reactionary, racist element in the US. They, too, saw the arrogant, abrasive, loud-mouth as someone in whom they could place their hopes. Trump’s aggressive break with the typical politician’s syrupy civility was taken as a sign of contempt for the alien, the different, those perceived as threatening (Ironically, these same hates and fears were, in the past, invested in soft-spoken religious leaders and smooth-tongued conservative gentlemen). Trump engages in the Old South tactic of drawing attention by surpassing all others in race baiting and fear mongering, but it’s important to note that this simplistic tactic only works where an atmosphere of racial friction and fear already exists. It’s just that Trump opportunistically says it the loudest.

The contradiction between Trump’s appeal to workers and his courtship of the extreme right is unresolvable. Nevertheless, it is a common feature of right-wing populism, a political phenomenon emerging strongly in Europe and the US. It takes root where both objective and subjective conditions are ripe for radical change, but a weak or discredited left offers little hope. The extreme right reaches to fill the void with vague populism.

While it is not yet possible to entirely discern how Trump will attempt to resolve this contradiction, it is becoming increasingly clear that he is surrounded by advisors, confidents, and attendants fully committed to a pro-corporate, pro-capitalist domestic agenda, an agenda that, apart from theatrical moments, will leave little for workers.

Trump’s foreign policy is, however, a different kettle of fish. Domestic policy is crafted by many hands. Congress, which is 100% bipartisan for the interests of capitalism over any other interest, will have a big say over where Trump takes it. Moreover, there is space for debating divergent interpretations of the best interests of capital.

But foreign policy is largely crafted through the executive (even war powers have been commandeered by the executive branch). And there is little tolerance for dissidence from the policies of the foreign policy establishment. The tight reign over policy fixed by generations of rabid Cold Warriors continues to be a feature of governing. Many of Trump’s comments on prospective foreign relations challenge both the current consensus and those who police that consensus.

Trump’s deviance from that consensus on relations with Russia, NATO, and other matters explains the brazen intervention of US security services in post-election politics. A massive media campaign was mounted to distract the people from the Democratic Party fiasco and construct a reliable straw man, Russia, to take the blame for the embarrassing loss. The mainstream media shamelessly and nearly uniformly spread the speculative story that Russia had intervened profoundly in the US election. With skepticism rising, the joint US security agencies released an amateurish report, allegedly confirming Russian intervention. Many private security experts remained skeptical. Trump challenged the report.

Within days, government insiders released a second document-- an addendum-- reputedly based on a UK private investigation, alleging outrageous misconduct on Trump’s part and an extensive Russian disinformation campaign. The security agencies admitted sharing the report with Obama and Trump, denied leaking it, and refused to attest to its accuracy. In a recent interview, CIA Director Brennan was said “to give it no particular credence.” He said, instead: “I would have no interest in trying to give that dossier any additional airtime.” That, he says, “...would make no sense at all.”

So, if the report had no credence, if it made “no sense” to give it “more airtime,” why was it shared with the President and President-elect and leaked to the press in the first place?

The answer should be obvious to all but the gullible and kept corporate press: The memorandum was meant, on the part of the security agencies, as a threat to Donald Trump, a reminder that wandering off the establishment reservation is not tolerated.

The media’s failure to challenge this “memorandum,” its veracity, its timing, its source, and its leak is a new low in groveling before power. To think that the head of the CIA, the most formidable intelligence apparatus in the world, had a hand in confronting Trump with a document that Brennan claimed “he had no way to assess the allegations contained in the dossier of political opposition research…” (Wall Street Journal, 1-19-17) is outrageous (Brennan even claimed that he hadn’t read it). That the CIA held no interest or lacked the ability to confirm a dossier written by a former member of the close-knit intelligence community is preposterous. That the security agencies promoted a dossier that bore “no credence” and that they released it for any other reason than to intimidate Trump is unbelievable.

Of course, this would not be the first time that security agencies scared the hell out of politicians challenging establishment shibboleths. FBI Director J. Edgar Hoover famously kept extensive files on virtually all political players and would frequently leak embarrassing information to media friends whenever he felt it was necessary to bring dissenters back into the fold. Among many other political maneuvers, the CIA notoriously overstated Soviet capabilities in order to influence US Cold War policies, elections, and funding. And beyond any dispute, the intelligence and foreign policy communities constructed an argument of lies to support the 2003 invasion of Iraq. We are asked to trust them today? And the too-often uncritical, gullible media believes them today?

In the wake of contemporary revelations of torture protocols and comprehensive spying on everyone, apparently witting opinion makers have now found the intelligence community to be wholly reliable and trustworthy. They surrender their critical faculties to the professional liars and plotters. Even George Orwell would be aghast!

We assuredly have every reason to fear the policies of President Trump and his supporters.

But based on recent events, we equally have every reason to fear the brazen power and intrusion of clandestine security agencies and the unreliability of the fawning, supine corporate media.

Zoltan Zigedy

zoltanzigedy@gmail.com

Obama’s Legacy

I thought it was a good idea.

In the midst of Trump-panic and electoral finger pointing, The Nation magazine offered a special issue devoted to assessing the Obama Presidency. Providing a bit of historic context to the Trump victory would, I should hope, dampen the hysteria embraced by US liberals in place of sober analysis.

The Obama Years (The Nation, January 2/9 2017) does have its moments of insight, but far too many of the contributing liberal/soft-left writers tried desperately to polish the dull finish of the Obama stewardship. Most sought to retroactively apply a glow by comparing the Obama years with a yet-to-be experienced Trump reign.

Bizarre comparisons abound: Marilynne Robinson found Lincoln in the Obama legacy, while Patricia J. Williams detected a bit of Frederick Douglass in Obama’s character. Eric Alterman announced that “Obama was the coolest guy in the room.”

Obama defined a new “progressive patriotism” for John Nichols. Katha Pollitt opined under the headline--How Good We Had It-- without a hint of irony. She offers a weak attempt at a clever epigram with “...too many Americans weren’t ready for a black president, even if they voted for him.” Didn’t they know he was Black?

Faint praise indeed from Laila Lalami: “...I’ve never doubted that Obama tried to put his country’s interest above his own.”

In a lengthy appraisal of Obama’s foreign policy, Andrew J. Bacevich charts Obama’s course from “callow rookie to seasoned veteran.” He finds the mature Obama in the carefully staged valedictory interview delivered to trusted journalist Jeffrey Goldberg (The Obama Doctrine, The Atlantic, 4-2016 [my commentary is here]). Unfortunately, the mature Obama that Balevich sees as rejecting the “foreign-policy establishment” only found himself after he had surrendered to conventional thinking for over seven years. Remember the talk of the real Obama who would be unleashed in his second, lame-duck term?

Robert Barosage agrees that the Obama epiphany came belatedly, if at all: “Although Obama grew skeptical of the Washington “playbook” on foreign policy, he failed to offer an alternative.” He questions whether Obama was “transformational,” since transformational “presidents do more than simply govern well. They challenge and change the direction of the country.” Barosage continues by recounting the disappointments and policy shortfalls that kept Obama from being “transformational.” 

Following Harvard professor Theda Skocpol, Barosage recommends envisioning Obama rather as a “pivotal” President. That is, on “his watch, the United States began to recognize its corrosive inequality, the power of big money to rig the rules, and the way the deck was stacked against the vast majority.” But surely this is a howling non sequitur. Obama didn’t bring about any of these realizations, they simply happened while he governed.

It is far better to understand Obama as a “transitional” President. He was the choice favored by a majority of the ruling class to clean up the mess left by the Bush administration, a thoroughly discredited regime both nationally and internationally. With a raging economic crisis, failed wars, and barely measureable poll numbers, a fresh face, a face that promised renewed confidence from “hope and change,” Barack Obama was the prescription. 

The Obama story was as distant from the Bush narrative as the two-party dictatorship would allow. Race, youth, and eloquence separated him from his predecessor. Never mind that, excepting race, these traits were of little serious consequence.

Like President James Carter, after the Nixon fiasco, Obama was meant as a transition back to political credibility, a purifier of a political stench.

As such, Obama was a trusted cheerleader for the existing order. Christopher Hayes, in his lead article, unwittingly admits this when he notes that the “story that Obama kept telling was the story of meritocracy and social mobility.” Of course, it was a Black man who could make this story credible at a time when both merit and social mobility were disappearing. 

Hayes relates an interview with Senate Democratic leader Harry Reid in which Hayes pressed him on the message of the Democratic Party. Reid obliged: “I want everyone in America to understand, if Harry Reid can make it in America, anyone can… That’s what America is all about.”

Obama, similar to Reid and other political elites, sought to keep this mythology alive. Is it any wonder that a significant portion of the devastated US industrial working class abandoned the Democrats after the Obama era?

The thoughtful Eric Foner concludes the Nation chronicle of the Obama years with useful insights:

Obama’s 2008 campaign, which mobilized millions of people new to politics, served as an illustration of the symbiotic relationship between popular movements and political action. Unfortunately, even before Obama assumed office, it became clear that he had little interest in building upon the popular upsurge that helped to elect him.

Foner offers a counter-narrative to Obama-worship that simply ignores Obama, the figure, and focuses upon the forces erupting around him that he, opportunistically, rode to power. For Foner, the popular social forces are far more indicative of what is possible and worthwhile than the personalities that ride those social forces in and out of the Presidency. Rather than heap unwarranted praise on Obama, Foner traces the often-tortured path that the popular urge for change takes through US institutions. 

Thus, Foner sees manifestations of the urge for change that are springing up at the close of the Obama era as more worthy of discussion:

For a while after the end of the Cold War, it seemed like we were condemned to live in a world where the only alternatives to unregulated capitalism were religious fundamentalism or xenophobia and racism. Then the financial collapse of 2008 drove a stake through the heart of neo-liberalism, the dominant ideology of the past generation (although its ghost still walks the earth, including the corridors of the Obama administration). The great achievement of the Sanders campaign was to step into the vacuum and begin to offer a new vision. The election of Donald Trump, while disastrous in so many ways, is yet another illustration of the bankruptcy of neoliberalism. It is also an opportunity for the left to forge a new set of policies to promote political, social, and economic equality.

While the current political moment is indeed an opportunity to restore what Foner calls the “American Radical Tradition,” it is wishful thinking to imagine that the popular thirst for change will be satisfied with the final demise of “the dominant ideology of the past generation.” It is not the “bankruptcy of neoliberalism” (“unregulated capitalism”) alone that opened the door to Trump, but the bankruptcy of the two-party system that disallows a social democratic insurgency or a third-party opening to the left. 

Moreover, it is not the latest incarnation of capitalism (neoliberalism) that is demonstrating its bankruptcy, but it is capitalism itself that stands accused.

With his stress on social movements, Foner knows that the existing political institutions, including both major parties, have resisted the “American Radical Tradition” at every juncture. Radicalism must always be sparked and nurtured independently and outside of the two-party system. Foner’s academic work attests to the fact that real social change-- including the New Deal, the Great Society, etc-- never comes when insurgents accept the limitations imposed by capitalist political organizations. 

 And where right-wing populism threatens-- like the Trump candidacy-- it draws its oxygen from the failure of the left to offer authentic options that address the popular yearning for change.

Those who uncritically thought the Obama Presidency would satisfy that yearning helped pave the way to the Trump victory.

Zoltan Zigedy

zoltanzigedy@gmail.com