No Confidence!

The big losers in the recent NPR/PBS NewsHour/Marist confidence polling (January 08-10-2018) are Congress, the two parties, and the media. Based on the poll, most people in the US have “not very much” or “no confidence” in the legislative body, corporate news and entertainment, or the Democratic or Republican parties. In fact, over two-thirds of those surveyed lack confidence in the media and nearly three-fourths show little or no confidence in Congress!

In light of these numbers, one can only wonder when the pitchforks are coming out. Clearly, dissatisfaction with major US institutions extends very broadly. Yet these results are not new. Nearly a decade ago, a similar Gallup poll showed that only 11% of respondents had a “great deal” or “quite a lot” of confidence in Congress. A Wall Street Journal/NBC News poll in 2014 showed that both parties earned a decidedly more negative than a positive image. That same poll put the approval rate for Congress at 12%.

Those pundits and political operatives who discount the depth of dissatisfaction and disregard the festering anger in the US are doomed to misread the meaning of past and most-recent elections. The mainstream media mock Trump’s “fake news” charges while blithely ignoring the negative sentiments of the population toward the news industry. Don’t media elites see that “lack of confidence” is, in fact, a scathing indictment of their own collective performance in delivering the truth?

Failure to recognize the widespread disdain for core US political institutions hinders the understanding that Trumpism is not merely a malignant political alternative, but the consequence of a long history of malignant political alternatives; Trump isn't the cause of the problem, he's the result of the problem. As much as Trump disgusts with his vulgarity, he openly expresses thoughts shared by other powerful people who voice them only behind the walls of their mansions or private clubs. As much as Trump attacks the living standards of working people and degrades their safety net, he stands at the end of a relentless, unrelieved half-century of assault on the gains won in the New Deal era. As much as Trump has embraced belligerence and aggression in his foreign policy, he has only belatedly and somewhat reluctantly fallen in line with the imperialist agenda crafted and executed by his predecessors in the post-Soviet era.

He has Defense Secretary ‘Mad Dog’ Mattis to remind him of the agenda. The Wall Street Journal tells us (January 19, 2018) that Trump recently proposed to call off joint ROK/US military exercises as a pacifying gesture to Kim Jung Un. Mattis stepped in and purportedly flattered him with “Your instincts are absolutely correct,” while cajoling him into betraying those same instincts and going forward with the exercises. Incredibly, Mattis is the figure that many liberals cite as the restraining force in the Trump White House.

“Making America Great Again” is the mark of an empire facing increasingly effective threats from imperialist rivals as well as anti-imperialist resistance. While the dream of a Pax Americana imposed on the world is now discredited, Trumpism clings to the illusion that robust, blustery nationalism is the answer to an increasingly fruitless globalism.

Last year, in his lengthy, candid valedictory interview with Jeffrey Goldberg in The Atlantic magazine, one will find many hints of Obama’s lost confidence in the aggressive reordering of the world that he inherited and that was represented in his administration by Clinton, Rice, Power, and Rhodes. Mattis and General Kelly play that same role of sabre-rattlers and war-instigators in the Trump administration despite the popular caricature of them as wise counsel to a wild man.

With Trump, the missionary mask, so long a feature of US imperialism, is cast off. The “humanitarian, human rights” pose used so skillfully by Clinton and Obama’s war makers is of little interest to Trump and his consort. Any renegade thoughts Trump may have of exercising his self-proclaimed “deal” skills or imagined “charm” in negotiating with rivals are quickly squashed by the two pillars of militarism (Mattis and Kelly) within the Trump administration.

In better times, one could count on a sizeable segment of activist liberals to stand with the anti-imperialist left against US militarism and aggression. But, today, they have been mesmerized by a phantasmagoric anti-Russia campaign framed to distract attention away from real issues and the chronically flawed democratic process.

Apart from the demonstrated thinness of liberal principles, the NPR/PBS NewsHour/Marist poll explains exactly why RussiaGate could gain traction despite a lack of evidence. Behind the hysteria are two institutions that retain a great deal of misplaced confidence with the public: the FBI and the military. And behind that confidence is a glorifying and romanticizing of the two in popular culture, especially since the onset of the Mission Impossible-like War on Terror. Network and cable television feature drama of attractive, upright, and diligent FBI agents standing between the US public and chaos, night after night. Similarly, the military enjoys a heroic stature nourished by the media, the entertainment industry, and the chicken-hawk elites whose children never see the enlistment office.

Glenn Greenwald clarifies the self-deception lurking behind this cult of self-righteousness, while speaking in Santa Fe recently: “Every time Trump says or does something that is xenophobic, or bigoted, or militaristic, or threatening, people always say, ‘This is not what America is about,’... I always react to that by saying, ‘It’s not?’”

The RussiaGate mania is now runaway paranoia, perfectly suited to turn the populace from its real problems. Democratic Party operatives have crossed over to insanity, detecting Russia behind the announced candidacy of Chelsea Manning for US Senate. Neera Tanden, prominent head of the Center for American Progress, smelled a Kremlin plot behind Manning running against a corporate Democratic Senator. It may be a long wait for the soft left and the identity Democrats to render support to the heroic Manning. But then they wouldn’t comprehend the real heroism of serving jail time for exposing US war atrocities.

Emboldened by its success in fabricating RussiaGate from nothing, the FBI has turned its scrutiny on the People's Republic of China. Our intrepid spy hunters are casting their vigilance on Rupert Murdoch’s ex-trophy wife, Wendi Deng Murdoch, a prominent DC socialite. According to “sources” friendly to The Wall Street Journal, Ms Murdoch lobbied for a Chinese garden funded by the PRC at the National Arboretum. The FBI explained that the Arboretum was less than 5 miles from the White House and the Capitol. And, if that were not enough, the plan included a 70-foot tower that the FBI feared might be used for surveillance!

As if the Chinese could not rent a room in a six- or seven-story building in downtown DC to further their nefarious plot without spending $100 million on a Chinese garden.

So, we have a prominent figure who might have lobbied for a project that might have served PRC intelligence purposes by constructing a 70-foot tower that might have a surveillance purpose. But this twisted conspiracy tale goes further-- Ms Murdoch socialized with Ivanka Trump and Jared Kushner! The FBI has a picture of them together! Of course, that is the point of this inane exercise: meddling in US politics. Let’s see if deranged liberals buy this, too.

And we have the NBC story that reports that a CIA agent who retired in 2007 has been arrested for collaborating with the PRC. But there is a hitch: “U.S. officials told NBC News they don't believe Lee ever will be charged as a spy, in part because they don't have all the proof they might need, and in part because they would not want to air the evidence they do have in a public courtroom.” A careful read of the NBC article might lead one to believe that the CIA is embarrassed because their PRC counterparts broke the secret communication system that the CIA used to communicate with their covert agents. One might further surmise that Jerry Chun Shing Lee is the patsy for this failure. But the uncritical, trusting media report the damaging charge even though sources admit that “...they don't have all the proof they might need…” A fine example of a responsible press in the age of Trump!

As the US empire undergoes further and further stress, more and more dysfunction, the search for scapegoats and distractions will only intensify, and the barbarism of apocalyptical conflict will grow even more probable.

It is not enough to take a small step or two back from the brink, as liberals and the compromised left would like. Delivering a world two steps from catastrophe is a feckless award to future generations.

An angry, disappointed public that has lost confidence in its institutions is searching for a new, more promising road forward. Isn’t it the time to bring the promise of democracy and social justice embedded in socialism before the US public?

Greg Godels

zzsblogml@gmail.com

Looking Back

The year 2017 was not entirely a bad one in the US. We learned that, despite the fact that we have no serious, mass party for socialism, millions of US citizens have a favorable, positive view of socialism. Actually, we first learned that fact from a Gallup poll in mid-2016. To the surprise of many and the alarm of others, Gallup found that over half of 18-29 year olds had a favorable view of socialism. The Wall Street Journal/NBC poll discovered a year later that over half of every age group thought that “To help people, government should do more.” This result is perhaps an even more significant finding since it provides some meaning to what people want when they endorse socialism, as well as what they want even with their fear of the word “socialism.” In that poll, nearly two-thirds of 18-29 year olds agreed with the statement.

The fact that interest in “socialism” is growing dramatically though there is no mass socialist or communist party is a paradoxical reflection on US political life (though not only that of the US). Part of the reason for this paradox, of course, is the enormous effort that US elites, corporations, academic institutions, security services, media, and politicians have made to intensely demonize all but the most benign expressions of socialist thought and organization.

But much blame must be shared by our own left, which has been shattered into a thousand sects, cults, and tendencies and cowed into submission from fear of red-baiting. The Cold War anti-Communist mentality remains deeply embedded in the generations that preceded the more open-minded millennials. Anything-but-Communism (ABC) constitutes an attitude that promotes “respectable” socialisms like utopian cooperatives, socialism through the backdoor of the Democratic Party, trickle-down socialism, armchair academic socialism, socialism of the soul, and a host of socialisms that dissolve into tepid reformism or socialism over the horizon. No wonder the ruling class sleeps well at night.

Death to the NFL!

Another change that came into sharp relief in 2017 was the persistent loss of fan support for professional football. In 2016, TV viewership dropped by 8%. And last year, TV numbers dropped another 9.7%, a precipitous two-year decline!

Given that professional football represents almost everything that is wrong with the US and combines all of the elements, from other sports, that are socially harmful, I would like to think that the NFL decline is inversely proportional to the growth of interest in socialism.

The NFL transmits violence and bullying to our youth. It celebrates the victory of power over weakness, without any respect for compassion, pity, fair play, or empathy. The business-posing-as-a-sport pillages municipal and regional coffers for stadia and amenities while paying little or no taxes. The teams glorify militarism and the cult of the hero. The owners are super wealthy, including a nasty group of right-wing racists. And Black gladiators risk limb and life to fill the owners’ coffers.

It’s no wonder that no other country shows a serious interest in an NFL franchise.

Of course, we must credit the disgusting blacklisting of Colin Kaepernick for some of the decline in interest.

Let’s hope that a similar disconnect from Dr. Phil, celebrity-worship, British royalty, and zombies will bring further interest in socialism in 2018.

2017 was not Pro-Life

For the first time since the early 1960s (before Medicare and Medicaid), life expectancy in the US dropped for two consecutive years. The head of the Center for Disease Control and Prevention attributes the drop to the increase in opioid use, a phenomenon that correlates pretty closely with desperation, poverty, and alienation.

A year ago, when The New York Times reported the 2016 decrease, its sources were puzzled. Yes, they saw the increase in deaths from opioid abuse, but eight out of the top ten causes of death were also up, as was the infant mortality rate. The Times discovered a more revealing datum, a finding that cut to the heart of the matter: a Brookings Institute study found that a man in the lowest 10% of incomes born in 1950 will live fourteen years less than his counterpart with earnings in the top 10%.

Inequality!

Clearly, the Obama jewel, the ACA, has done less than nothing to address this great cause of premature death.

And yet the chief battle of 2017 was a semi-successful struggle waged by the leaders of Labor, the Democratic Party, and a host of “progressive” organizations to save this bloated, corporate-friendly, drug company-sponsored, bureaucratically bewildering sham of a healthcare program.

How far we have fallen!

Deplore the Deplorables

Certainly 2017, like the run-up to the 2016 election, was the climax of willful blindness to the plight of vast numbers of the working class and the working poor in the small towns and cities outside of the major metropolises. Hillary Clinton famously stubbed her presumptive Presidential toe on this neglect when she characterized the group as “deplorables.” For petty bourgeois liberals, a best-selling book gave sustenance to their elitist contempt for the decimated working class in the US heartland. Venture capitalist J.D. Vance’s Hillbilly Elegy, a memoir of his early years, hit the top of The New York Times best-seller list in both 2016 and 2017. Vance, telling a modern-day Horatio Alger story, titillated the burghers with his tales of abuse, failed character, and backwardness. Vance paints the deplorables as, indeed, deplorable.

A Fordham University professor published a scholarly rejoinder to Hillbilly Elegy at the end of 2017. Based on extensive research and historical backgrounding, Ramp Hollow: The Ordeal of Appalachia tells a story of capitalist exploitation, neglect, and political chicanery that refutes the blame-the-victim anecdotes of Vance. Author Steven Stoll offers context and nuance, compassion and respect, where Vance projects arrogant contempt. Given its unlikely appeal to jaded liberals, Ramp Hollow will likely not make the best-sellers list.

...the First Time as Tragedy, the Second Time as Farce

It is impossible to leave 2017 without reflecting on the new Red-less “Red Scare.” The old Red scare was a mid-century ruling class reign of terror in response to the Soviet victory over fascism and its painfully won respect with the world’s millions. The perceived threat of socialism ascendant brought a hysterical panic in the bastions of capitalism. A tragic, ruthless clampdown followed.

The farcical RussiaGate of 2017 reignites the old Russia fears, but this time against a capitalist rival. The perpetrators of this giant scam count on the public’s faulty memory and mass confusion of a Cold War adversary with the current government of Russia. To any disinterested follower of recent Russian history, Russia looks like a junior version of the US, with similar great power aspirations, hopes of imperial penetration of new markets, and rampant militarism. History teaches, for those not contemptuous of history, that these tendencies are features of every developed capitalist state. Similarly, Russian “democracy” more and more resembles its US counterpart which is dominated by wealthy, powerful elites and sustained by a gutless, fawning media.

We can, however, rejoice that Russian interests often conflict with the most belligerent, arrogant policies of US elites (Syria, for example) in ways that neutralize or forestall US aggression. But only a fool would mistake checking the US internationally with embodying the cause of anti-imperialism.

But vilifying Russia is useful. For US ruling elites, portraying Russia as an enemy prepares the public for confrontations to come. Much as the Maine debacle of 1898 set the stage in the US for a war for Spain’s colonies, the endless tales of Russian intrigue and mischief justify the saber-rattling and aggressive sanctions that follow.

The Democratic Party and the media eagerly join this project for their own purposes. RussiaGate has revitalized cable news and breathed life back into the print media and the news services. Sensationalized stories and fear-mongering are the stock-in-trade of the modern entertainment-oriented monopoly media.

Of course, RussiaGate is tailor-made for a political party suffering huge electoral setbacks despite overwhelming resources, especially if it can link its loss to external factors like Russian interference. The Democrats-- ideologically hollow-- have pulled every trick to link Russia to the sitting Republican President, Donald Trump. Unwilling to project a peoples’ program, the Democrats intend to win the 2018 interim elections by simply attacking Trump and his vaporous Russia connections. For the Democrats, Trump’s propensity towards arrogance, outrageousness, and lies is the gift that keeps on giving. They plan to run on Trump and Trump alone, nothing substantial.  

While most people find their living standards stagnant or sinking, and while climate change, rising inequality, racism, and foreign killing go ignored in the corporate media, the RussiaGate theatrics dominate the news.

RussiaGate does serve as a reminder of the thinness of liberal commitment to ‘liberal’ values. In the Red Scare era, liberal devotion to the Bill of Rights collapsed like a house of cards in the face of the McCarthyite onslaught. Today, liberals are leading the charge in an assault on fair play, due process, and the rules of evidence. Innuendo, anonymous sources, and hearsay form the tissue that supports the daily Russia insanity. And the glorification of the odious-- the FBI, CIA, and NSA-- is shameless.

The fact that the celebrated Mueller investigation has produced nothing substantial beyond an obvious fact-- Israel meddles in our elections-- should calm the unhinged. But it doesn’t. The Democrats need both Trump and Russia at least until the November elections.

May we all survive 2018!

Greg Godels

zzsblogml@gmail.com

MOMENTS ON AND OFF THE CAMPAIGN TRAIL

Fortunately, young activists have failed to learn the lessons accepted by many who have preceded them. For example, they fail to respect Hillary Clinton as the wife of “the first Black president.” Young African Americans have held her to the same standards applicable to white politicians who display racist code words. They do not accept that when Hillary or Bill lecture youth on Black “social predators” or defend Bill’s policies leading to the mass incarceration of Blacks that the Clintons are speaking as members of the family-- Uncle Bill and Aunt Hillary. Consequently, the power couple has been roughed up on the campaign trail when faced with reminders of earlier racial transgressions.

Therefore, it was necessary last week for the first real Black President to intercede with a lesson on the proper etiquette when addressing the wielders of power. While in London, Obama attended a town hall meeting of young people, and explained:

Too often what I see is wonderful activism that highlights a problem but then people feel so passionately and are so invested in the purity of their position that they never take that next step and say, ‘How do I sit down and try to actually get something done?’

Curiously, “getting something done…” would seem to be the task for legislators, for elected officials and not the activists “highlighting” problems. But Obama elaborates, drawing on his own experience as a “community organizer”:

You can’t just keep on yelling at them and you can’t refuse to meet because that might compromise the purity of your position… The value of social movements and activism is to get you at the table, get you in the room and then start trying to figure out how is this problem going to be solved.You then have a responsibility to prepare an agenda that is achievable, that can institutionalize the changes you seek, and to engage the other side, and occasionally to take half a loaf that will advance the gains that you seek, understanding that there’s going to be more work to do, but this is what is achievable at this moment.

Embedded in this lecture for young activists are the modern liberal values of deference to power, compromise, and incrementalism. These values are not the values that have inspired the more profound changes that have markedly advanced life in the US. These are not the values that inspired Thomas Paine, John Brown, Frederick Douglass, Eugene Debs, or Martin Luther King. These are not the values that demanded a Bill of Rights, ended slavery, built a labor movement, and ended institutional segregation. Demands, and not polite requests, inspired these fundamental improvements in the lives of the many. In fact, it was the opponents of change, in every case, who preached quietly sitting at the “table,” preparing an “agenda” and accepting “half a loaf.”

Activists need only reflect on the last seven years of the Obama administration to see the fruits of civil discourse, trusting power, and gaining polite access: endless wars, declining living standards, growing debt, housing crises, escalating racism, and eroded civil liberties-- in short, more of the same.

The liberal activist playbook has succeeded in accomplishing one thing for Obama and those who will follow him: it has successfully corralled many idealistic, energetic advocates for change, tamed them, and kept them firmly in the grip of the Democratic Party.

And Obama knows that holding serve, guaranteeing that his party and its corporate, pro-business candidate (Hillary Clinton) will gain the presidency, will require that another generation of young activists is similarly co-opted. The post-Sanders campaign to assimilate Sanders’ youthful followers is already underway, with party loyalists ginning up the “Stop Trump” hysteria.

While liberal angst over Trump will sway many, it’s important to remind the left that though Trump is a clownish Mussolini/Berlusconi-like reprobate, he is, in essence, an opportunist with no core ideology beyond power and attention. For that reason, he has alarmed the corporate elites who rule the Republican establishment. They fear his unpredictability and maverick views. He is shattering the unity of the party. The left should welcome that development.

Of course there should be no doubt as to which class Clinton wholeheartedly and reliably represents. If there was any doubt, the recent comments by ultra-conservative billionaire Charles Koch should have dispelled that notion. His carefully worded statements legitimized Clinton as an option in a field of unreliable conservative candidates whose unimpeachable corporate fealty is in question-- Clinton is the more corporate candidate. While liberal apologists scramble to prove that Koch did not endorse Clinton, they miss the point: she could be more acceptable than her rivals (because she is a proven corporate politician).

The big question remaining is what becomes of the admirable fire and brimstone conjured by the aging pied piper of social democracy, Bernie Sanders. As with earlier insurgencies fought within the Democratic Party and contained by the Democratic Party, this youthful movement may well be absorbed into the party. History and the left’s inability to cut the cord with the Democrats suggest that it will. After all, to effectively break the bondage imposed by the corporate Democrats only two options are available: shake loose the iron grip that corporate power maintains over the Democratic Party or reject two-party politics and build an independent movement. The former is popular, but a pipe dream; the latter is difficult, but the only viable option.

However, hope resides in a younger generation that both suffers greater burdens than any generation since the Great Depression and is largely oblivious to the scare-tactics of anti-Communism. The latest of several polls shows a significant and growing interest in socialism and an even greater rejection of capitalism. The Harvard University study of young adults between 18 and 29 found that 51% do not support capitalism. With the same group of respondents, 33% supported socialism. Of older respondents, a majority of support for capitalism could only be found among those fifty years old or older.

In a 2011 Pew Research Center poll, 49% of 18 to 29 year-olds had a positive view of socialism, a higher percentage than those with a positive view of capitalism.

Reporting the Harvard Survey in the Washington Post, author Amy Cavenaile is rankled by these results. She searches far and wide for an authority or a poll result that can diminish these findings. Accordingly, she finds Frank Newport, the editor-in-chief of Gallup, who opines: “Young people could be saying that there are problems with capitalism, contradictions… I certainly don’t know what’s going through their heads.”

Further disturbing to the author and other pundits, young people do not identify socialism with government regulation or government spending-- the establishment’s vulgar characterization of socialism-- but with “Basic necessities, such as food and shelter [and healthcare], are a right that the government should provide to those unable to afford them.”

Clearly, the seemingly unassailable truth of a few decades ago-- “there is no alternative”-- fails to resonate with recent generations. Shaping and sharpening a realizable vision of socialism for the latest generations is the most critical task before us.

Zoltan Zigedy

zoltanzigedy@gmail.com

Ellen Meiksins Wood: Against the Tide

Ellen Meiksins Wood died on January 14.

Ms. Wood was a prolific academic, writing many books and articles from a Marxist perspective. Among her peers, her work on the transition from feudalism to capitalism, the advocacy of so-called “political Marxism,” and her views on Ancient modes of production are remembered.

With a broader audience, she will be remembered for her staunch defense of classical Marxism at a time of full retreat.

After the fall of the Soviet Union, most of Western Marxism—both Party-based and otherwise—lost its way. Disillusionment and despair held sway. In academic circles, a period of “rethinking” Marxism grew like a virus. The fundamentals of classical Marxism were challenged by the supposed rigor of rational choice theory on one hand and the wildly wielded scalpel of post-modernism on the other.

Rational choice theory announced ominously that the Marxist foundation was not and could not be built on the basis of homo economicus, a result that was both obvious and welcome to any serious student of Marx. Nonetheless, so-called “Analytical Marxism” took a toll.

A wave of epistemological relativism penetrated Western political thought from its pretentious and esoteric perch in European-- especially French-- universities. The idea that we could not defend any foundation for our world views apart from our own subjective and uniquely shaped perspective took hold. The fact that thinkers formerly associated with Marxism promulgated these views carried considerable weight in the English-speaking world. The unity that Marxism had striven to achieve between workers and other oppressed groups was shattered into a multitude of self-reflecting identities by the post-modern turn. Students and budding intellectuals hurled the epithet of “reductionism” at every effort to reveal underlying structures or processes.

The expansion of world markets to previously market-adverse economies dramatically boosted trade and investment to new levels. Theorists dubbed this quantitative burst “globalization” and hastily heralded it as a new stage of capitalism. Some went further, counting it as a harbinger of a world with transnational corporations overruling the governance of historically constructed states.

Indeed, it was an ugly time. Nonsense abounded.

The intellectual climate fed a similar floundering of the activist left in the nineties. Socialism, as a societal vision, was diluted into a regimen of “social markets” or receded behind the allure of anarchism and spontaneity. The fuzzy, unfocussed anti-globalization movement replaced anti-imperialism as the organizing principle of the left. A nostalgic yearning for the supposed golden era of post-World War Two prosperity and a thread-bare safety net substituted for the quest for full social justice—“revolution” was retired.

It was in this context that Ellen Meiksins Wood declared war on the navel-gazers, the timid, and the opportunists abandoning Marxism. Even before the fall of the Soviet Union and the ensuing Western ideological Great Plague, she exposed the “new,” eviscerated Marxism in her Retreat from Class (1986). Reflecting upon it years later in a new introduction, she wrote:

People have, in their various ways, moved on, in ways that have very little to do with Marxism, or even socialism, except to repudiate it. It seems clear that Post-Marxism was just a short pit-stop on the way to anti-Marxism. The Retreat from Class (1998)

She carried out much of her struggle against traitors, slackers, and opportunists in the pages of Monthly Review while serving as co-editor with Paul Sweezy and Harry Magdoff from 1997 to 2000.

Her stinging attacks on the globalization thesis (‘Globalization’ or ‘globaloney’?), along with the equally biting polemics by Doug Henwood, were aimed at anyone who would dare to defend it: “…globalization…is the heaviest ideological albatross around the neck of the left today.” (MR, February 1997)

Wood saw the global dominance of markets not as a defeat, but as an opportunity for the left:

Now capitalism has no more escape routes, no more safety valves or corrective mechanisms outside its own internal logic… So maybe it’s time for the left to see the universalization of capitalism not just as a defeat for us but also as an opportunity—and that, of course above all means a new opportunity for that unfashionable thing called class struggle. (Back to Marx, MR, June, 1997)

The recurring theme in Ellen Meiksins Wood’s writings was the centrality of class struggle. Against the tide of New Leftism, neo-Marxism, post-Marxism, post-modernism, and other wooly, confused departures from Marxism, she saw the working class as the essential agent for change.

When Frances Fox Piven and Richard A. Cloward engaged her on the pages of Monthly Review (January, 1998), challenging her “nostalgia for the working-class formations of the industrial era” and asserting that “We are all social democrats now,” she responded sharply:

‘There are no social-democrats now.’ People are waking up to the fact that social democracy is not a viable option. For those who have tended to identify social democracy with socialism, there seems to be no other alternative to capitalism—in fact no alternative to the more inhumane, neoliberal forms of capitalism. So the loss of social democracy is for them indeed an awesome one. It is for them a more cataclysmic and perhaps even final loss than for those who, while certainly supporting the welfare state or any amelioration of capitalism’s destructive consequences, have always doubted the long term sustainability of capitalism “with a human face.” Those who used to place all their hopes in social democracy are inclined to explain their awesome loss not by conceding that a humane capitalism was never sustainable in the long term but by invoking some massive epochal shift which had destroyed what used to be, but no longer is, a real possibility.

In answer to the then fashionable skepticism toward the socialist project, Ms. Wood asserted that the naysayers could offer nothing beyond “a better and maybe more humane management of ‘flexible’ capitalism,” an insight that presages by nearly two decades the principled refusal of Greek Communists today to join SYRIZA in the management of capitalism.

Lest anyone believe that Wood harbored any illusions about reformism apart from the goal of socialism, she offered the following thoughts to a 1999 forum in South Africa which included participants from the ANC, COSATU, and the South African Communist Party:

My main point is that there can be struggles and objectives short of a socialist transformation, but there can’t be such a thing as a Third Way. There really is no middle ground between capitalism and socialism.

That’s not a paradox. It simply means that all oppositional struggles… should be informed by one basic perception: the class struggle can’t, either by its presence or by its absence, eliminate the contradictions in the capitalist system, even though it can ultimately eliminate the system itself… without falling into the hopeless trap of believing that the left can do a better job of managing capitalism. Managing capitalism is not the job of socialists, but, more particularly, it’s not the job that can be done at all. (MR, September, 1999)

No doubt events have played the largest role in washing away much of the ideological fashions that enjoyed such popularity with the Western left in the 1990s. Endless wars, exploding inequality, and an epochal economic crisis make what appeared to be learned assessments and ominous projections appear little more than naïve.

We should not forget, however, how important it was to have a few courageous voices defend principle against the current, to stand firm while others were in full retreat.

Ellen Meiksins Wood was one.

Zoltan Zigedy

zoltanzigedy@gmail.com

Capitalism, Environmental Crisis, and Socialism

A hundred years from now, humans may remember 2014 as the year that we first learned that we may have irreversibly destabilized the great ice sheet of West Antarctica, and thus set in motion more than 10 feet of sea-level rise.

Meanwhile, 2015 could be the year of the double whammy — when we learned the same about one gigantic glacier of East Antarctica, which could set in motion roughly the same amount all over again. Northern Hemisphere residents and Americans in particular should take note — when the bottom of the world loses vast amounts of ice, those of us living closer to its top get more sea level rise than the rest of the planet, thanks to the law of gravity... (Washington Post, March 16)

The latest findings on climate change reported by the Washington Post mark another step on the path toward environmental catastrophe. Apart from philistines, apocalyptists, and other celebrants of ignorance, people understand that the growing degradation of our planet promises pain in the short run and disaster beyond. When humans first emerged on the planet, the environment, the climate, and other features of the natural world presented seemingly insurmountable obstacles to survival. The pre-history and early history of humankind was a tenuous struggle to construct bulwarks against natural calumny and a desperate effort to exploit nature's meager offerings.

Nearly two hundred thousand years after the appearance of homo sapiens, circumstances have turned full circle. Humanity has found the means to dominate nature (though far from in a humanitarian way), but with seemingly little regard for the sustainability of the human project. Today, the formerly vulnerable species threatens to render the earth inhospitable to itself, a kind of mindless suicide by the only species that genuinely claims to own a mind.

For those determined to avoid this suicidal path, locating the cause and finding solutions is an urgent task.

Is “Progress” or “Growth” the Enemy?

It is fashionable in some quarters to locate the cause of the environmental crisis in the insatiable lust for “progress,” a term as elusive as it is imprecise. Harking back to the sixties and the “counter-culture” era, many envision a world where consumerism and the fetish for the new are banished in favor of a simpler life style and intellectual, spiritual, or artistic values. There is much to admire in a commitment to modest consumption and arrested acquisitiveness.

However admirable this may be as a personal choice, it is extremely short-sighted social policy. Certainly, the upper-middle classes of the developed countries could benefit the environment by exiting the insane competition for larger houses, more luxurious cars, and the latest techno-gizmo. Unquestionably, the mindless quest for more and better is neither admirable nor sustainable. But before we condemn progress or growth, we must recognize that more is at stake in rejecting progress or growth than thwarting rampant consumerism in the US and Europe or the vulgar excesses of the upper classes.

Apart from consumption madness, billions of the world's population lack even the basics of sustainable life. They barely survive in the midst of poverty, disease, and inadequate shelter, food and water. Until the material means to rectify the sorry, inhuman plight of billions is available, progress and growth must be an imperative. To callously deny them a future out of scorn for hyper-consumerism is petty and, paradoxically, selfish. They cannot be made the scapegoat for Western privileged waste and excess. Those who so easily condemn progress or growth are shamefully blind to the inequities of class, race, and nationality.

Solutions

Prospective solutions come in many forms and many shades. Individual solutions are useful and defensible provided that they do no deny the disadvantaged the opportunity to achieve standards of living reasonably commensurate with the standards of the more privileged. For example, asking people without access to modern appliances to curtail usage of inefficient technologies is both irrational and unjust. Equality of sacrifice in the face of vast economic inequities cannot be the solution to environmental degradation. While recycling, re-use, and other personal conservation projects are necessary and meaningful, they are incapable of sufficiently slowing the global expansion and exhaustion of resources. Nor do individual, personal solutions offset the major sources of environmental destruction: corporations and governments.

Conventional policy solutions cluster around market-based and regulatory approaches to the environmental crisis.

Most environmental activists see the failure of either market-based or regulatory measures as a failure of political will. They believe that politicians and political movements have yet to recognize the dire consequences we face by ignoring the environmental crisis. While this may be true, it fails to recognize the acute limitations of market-based and regulatory solutions and the impossibility of their effectiveness in a global capitalist economy.

The political will is not absent because of ignorance, but because the political system is owned and nourished by the capitalists. Moreover, the global economy-- overwhelmingly a capitalist economy-- is fueled by profits and profits alone. And profits are sustained and expanded by turning everything material or immaterial into a commodity. As a commodity, nature's resources hold no value other than what can be attached to the pursuit of profit.

It is the exploitation of human and natural resources-- labor and nature's bounty-- that is the grist for profit's mill. And capitalism puts profits ahead of nature as well as ahead of people. Both history and the logic of capitalist accumulation and expansion demonstrate the inevitability of waste and destruction. Only when environmental degradation impedes the process of accumulation and profit expansion will the capitalist system respond to the crisis; environmental scientists tell us that will be too late.

And that is precisely the point acknowledged by Naomi Klein in her recent book, This Changes Everything: Capitalism vs. the Climate. Klein's anti-capitalism, like so many versions associated with the social democratic, soft-left, has been somewhat fuzzy, vacillating between rejecting the neo-liberal incarnation of capitalism and something elusive, but more daring. But her current thinking is sharper, though still short of an endorsement of a coherent vision of socialism. She concedes: “But because we have waited as long as we have, and we now need to cut our emissions as deeply as we need to, we now have a conflict not just with neoliberalism, but a conflict with capitalism because it challenges the growth imperative.” (quoted in Monthly Review, Notes from the Editors, March, 2015). For this, Klein has been criticized widely by her liberal readers still anchored in fealty to capitalism.

The editors of Monthly Review perceptively point out that “Klein’s argument here is irrefutable. To be sure, in criticizing neoliberalism for removing the tools needed to address climate change she deftly avoids the issue of whether capital as a system could ever have seriously mitigated the problem.” (op. Cit.)

Capital cannot mitigate the problem.

The MR editors go on to persuasively argue:

Klein is realistic and radical enough to realize that her recognition of this necessity, together with her readiness to act on it, puts her and the entire left climate movement that she represents in conflict with capital as a system—and not just with its most virulent form of neoliberalism. It is, as she says, a “two stage argument,” and we are now in the second stage. There is no avoiding the fact that the logic of capital accumulation must give way if we are to have a reasonable chance of saving civilization and humanity. (op. Cit.)

For “the entire left climate movement” to move beyond individual solutions, market-based answers, regulation, rejection of neo-liberalism, and even capitalism, the movement must define and embrace another goal. What would it be?

Only a system that will replace the logic of profit-before-all with the broad interests of humanity can answer the question. Only a system that can supplant the anarchy of production and distribution with rational planning could count as an answer. Only a system that can substitute forward-looking public ownership for individual short-term self-interest will cope with the crisis. And only a system that erases the existing extreme inequalities associated with capitalism and imperialism can meet our need to bring social justice to the disadvantaged.

As reluctant as much of the left is to utter the word, the answer is quite simply: socialism.

The Unseen Elephant in the Room
Lost on most of the environmental movement, including the “left climate movement,” is the role of imperialism in stoking the environmental crisis. According to Wikipedia:

The United States Department of Defense is one of the largest single consumers of energy in the world, responsible for 93% of all US government fuel consumption in 2007... In FY 2006, the DoD used almost 30,000 gigawatt hours (GWH) of electricity, at a cost of almost $2.2 billion. The DoD's electricity use would supply enough electricity to power more than 2.6 million average American homes. In electricity consumption, if it were a country, the DoD would rank 58th in the world, using slightly less than Denmark and slightly more than Syria (CIA World Factbook, 2006). The Department of Defense uses 4,600,000,000 US gallons... of fuel annually, an average of 12,600,000 US gallons... of fuel per day.

Add to this total the electricity and fuel usage of the rest of NATO, Japan, Russia, The Peoples Republic of China as well as those belligerents constantly at war with imperialism and you have uncountable and socially unnecessary waste of natural resources as well as ecological destruction.

Count the hundreds of military bases-- outposts for imperialism-- that devour resources better employed in a war to protect the environment.

Add to this total the unceasing pollution, the destruction of natural and man-made structures, the spoilage of land and water, etc. that accompany the endless use of devastating weapons.

The full effects of militarism and imperial aggression stagger the imagination.

Pentagon estimates of the production and maintenance of one weapons system alone-- the F-35-- have been reduced to over three-quarters of a trillion dollars-- an enormous unmentioned cost to the environment.

Unfortunately, far too many environmentalists are more cognizant of the environmental damage of littering than they are aware of the enormous threat to the environment of imperial design and endless war. Joining the anti-imperialist, anti-war movement, fighting for an end to militarism, is potentially a far more effective way to reverse the ecological wounds that threaten the planet than the entire bundle of liberal and social democratic panaceas that currently dominate the discussion in the environmental movement: Prius, yes, but Predator drones, no.

As the environmental movement matures, it must embrace the socialist option. It must stand resolutely against militarism and its threat to the environment. No other stance will deflect “civilization” from its determined march toward self destruction. Authentic, militant environmentalism comes with partisanship for socialism and anti-imperialism.

Zoltan Zigedy

zoltanzigedy@gmail.com

Why are They Afraid of Thomas Piketty?

When I first wrote about Thomas Piketty and his book-- a month before the publication of the English language edition of Capital in the Twenty-first Century-- I felt confident that he, and it, would have a large impact even beyond the academic community. For sure, I never expected it to be a best-seller, but I thought I saw the book filling a particular, urgent need for one segment of the political spectrum. While others noted the book's timely appearance in the wake of the 2007-2008 economic catastrophe and arrival concurrent with attention to revealed trends in inequality, my sense was that the book would be received as a godsend by liberals and social democrats.

Though the crisis cast a long ideological shadow over neo-classical economics and its associated policies, the widely expected return to the Keynesianism of the post-war era never materialized. Despite the best efforts of high-exposure, acclaimed economists like Joseph Stiglitz and Paul Krugman, New Deal-like policy prescriptions failed to gain popular traction or political support. The dashed high hopes invested in center-left governments in the UK, the US and, most recently, France, further disappointed reform-minded forces in North America and Europe. Accordingly, hopes of turning away from the conservative, free-market paradigm of the last thirty-five years were at a low ebb before Piketty's book.

It was my view that the Piketty book would be enthusiastically welcomed outside of the conservative consensus. His exposure of historical patterns of inequality demonstrates the tendency of capitalism to generate inequality, a condition seeming to cry out for a remedy. In Piketty's research and his theoretical claims, liberals and social democrats might find a new foundation for reforms, even a grand assault on conservative hegemony. Indeed, some economists have likened the anticipated impact of Piketty's book to the much earlier publication of Keynes's General Theory of Employment, Interest, and Money.

Indeed, the Piketty phenomenon continues to draw interest. My Google alerts on “Piketty” show fewer entries, but continue unabated. Yet liberal and social democratic ideologues and policy makers are not nearly as enthusiastic as I expected. The initial euphoria has been tempered as Piketty's ideas are digested and their implications carefully examined.

A recent issue of Real World Economics Review demonstrates the widespread and growing hesitancy to accept Piketty as the messiah of reform. Friends in the Communist Party of Ireland brought attention to the Review's Special Issue on Piketty's Capital in which 17 economists of liberal and social democratic persuasion reflect on the popular book.

The “Respectable” Left Sours on Piketty

The participants in the RWER forum are established social scientists sincerely troubled by persistence of inequality and poverty. Some-- Yanis Varoufakis, Ann Pettifor, Richard Parker, Michael Hudson, James K. Galbraith, and Dean Baker-- are prominent commentators in liberal and left circles. All express admiration for Piketty's success in drawing attention to inequality. Yet nearly all are uncomfortable with his research results and theoretical claims. Some challenge his “fundamental laws of capitalism,” others his “determinism.” In the end, the stone in the shoe of these liberal or social democratic thinkers is Piketty's notion that, ceteris parebis, capitalism systemically produces and reproduces inequality. Dean Baker confirms this when he states: “It is the adoption of policies that were friendly to these business interests that led to the increase in profit shares in recent years, not any inherent dynamic of capitalism, as some may read Piketty as saying.” (My italics)

It is the “inherent dynamic of capitalism” that troubles liberals and social democrats. If capitalism necessarily generates inequality, if inequality follows from the laws of capitalist development, then reforms will never satisfactorily conquer social inequality. Should it be true that inequality is a systemic product of capitalism, then a basket of reforms, as advocated by nearly all of the RWER commentators (and Piketty), will, at best, only slow or retard the growth of inequality.

It is this question that separates capitalist reformers from socialists, and social democrats from Marxists. Marxists embrace Piketty's claim that inequality is the capitalist norm, that periods of diminishing inequality are the exceptions. Moreover, the very logic of capitalism, with exploitation at its core, promises to increase inequality. For capitalism to continue, capital must accumulate-- not in social consumption, but in investment targeted to more accumulation. Efforts to resist, reform or regulate will only retard that process.

For sure, progressive governments may enact reforms to redistribute wealth, but eventually this inhibits accumulation and results in a capital strike or capital flight. Capitalism is not an equality-generating mechanism. Nor is it equality tolerant.

Labor may fight for a larger share of wealth, but only to be trumped by capitalist threats of plant closure or mass unemployment. Today's collaborative labor leaders are caught in the compromised position of being both an agent for corporate profitability and an advocate for working class living standards. Surely no advance against inequality is possible in the face of this dilemma.

The RWER writers would prefer to address the decades since Reagan and Thatcher rather than the centuries studied by Piketty. Where Piketty finds a long-term tendency for capitalism to generate growing and extreme inequality, they prefer to ignore that elephantine fact and debate the causes of growing inequality since the nineteen seventies.

They are intent upon ignoring centuries of enduring inequality because accepting that reality would cast doubt on the possibility that equality and capitalism are compatible, that the capitalist system can be reformed. Piketty's long-term data and theoretical argument challenge that possibility.

Rather than accept the implications of capitalism's long-term tendency, its centuries-old trajectory, liberals and social democrats point to the historically brief respite from income inequality after World War II (in the US and parts of Europe) along with the post-war expansion of the welfare state as a kind of golden age for social democracy. They see the abrupt turn away from the moderation of inequality-- occurring only some twenty-five years later-- not as a return to the normal course of capitalism, but as a political coup against tamed and tempered capitalism. With little more than nostalgia to support this view, reformists cling to the illusion that an egalitarian, humane capitalism is in the cards. Liberals and social democrats refuse to see the maintenance and growth of inequality as systemic; rather they want to believe that growing inequality is merely a matter of political choices. Thus, they rail against the ideology of “neo-liberalism,” as though the explosion of inequality in North America and Europe over the last 30-40 years was the result of a right-wing confidence game and not driven by the logic of capitalism. “Defeating neo-liberalism” has become a convenient mantra for those ill-disposed to fighting for a new socio-economic order: socialism.

Writing for the RWER forum, Claude Hillinger bluntly states his opposition to Piketty and his allergy to capitalism as inequality's father: “By treating inequality as an economic problem, Piketty diverts attention away from what it really is–a political problem.”

A “political problem” that has proven intractable for hundreds of years under capitalism? A “political problem” better solved under twentieth-century socialism than by any and all twentieth-century bourgeois politicians? A “political problem” only if we choose to slight or ignore Piketty's data.

It is an unpleasant, unstated truth that liberals and social democrats are much more comfortable addressing the concept of poverty rather than inequality. Under capitalism, alleviating the pain of those at the very bottom of the economic hierarchy appears to be much easier and more desirable than tackling the economic hierarchy in its entirety. Not surprisingly, many well-compensated academics are impressed with their own merit and, thus, find a ready defense of the hierarchy of inequality.

RWER contributor V.A. Beker gently attempts to move the spotlight on to poverty: “Let me now ask an awkward question. Should reduction of inequality or reduction of poverty be our main concern?” Certainly by reducing the target to poverty, the question of inequality's relationship to capitalism can be evaded.

Another evasion is to interpret “egalitarianism” as “procedural egalitarianism,” as does YanisVaroufakis in the EWER forum. While taking a gratuitous, but well-deserved pot shot at John Rawls's liberal theory of distributive justice, Varoufakis cavalierly dismisses all distributive egalitarianism in favor of procedural justice, a lofty euphemism for “equal opportunity.” Proponents of “procedural egalitarianism” claim victory for equality when the rules of life apply equally to everyone. Outcomes are irrelevant if no one violates the shared mutually agreeable procedures, standards, or rules of participation. Everyone has the same opportunity-- the “created equal...” of the US Declaration of Independence.

Thus, nine innings of baseball, played according to the rules, constitute an example of procedural justice. And while the outcome might be lopsided, the game would be played consistent with procedural egalitarianism.

What the advocates of procedural justice dare not address is the case of a Little League team playing the Chicago Cubs. While the rules of that game may be assiduously observed, the outcome is certainly not fair, just, or egalitarian. I doubt if any political philosophers would show enough confidence in procedural justice to bet on the Little League team.

Should the advocates of procedural justice modify the rules of baseball to disallow the inequality of resources or skills enjoyed by the Cubs, they must also recognize that outside of the world of games, differential resources and skills always affect fairness, justice, and equality. Accordingly, “procedural” egalitarianism can be no answer to inequality, unless it comes to grips with the inequality of resources, skills, and power ever present in capitalism. But addressing questions of asset distribution returns us to distributive justice and, ultimately, how capitalism distributes these assets.

Try as they may, liberals and social democrats are faced with an impossible task in imagining a capitalist world that evades or transcends the inequalities of the system's past. Inequality is inherent in capitalism, deeply embedded in its genetic code.

Piketty's conclusions from studying “la longue durée” of inequality-- its trajectory over centuries-- stands as an obstacle to those who believe the myth of capitalism without inequality. Or put another way, the results stymy those who want equality without socialism.

Zoltan Zigedy

zoltanzigedy@gmail.com

The Chronic Crisis, with Worse to Come?

Looking back on the ten years following the 1929 stock market crash, Marxist economist and Science and Society co-editor, Vladimir D. Kazakevich, wrote of the “chronic crisis” that persisted throughout the nineteen thirties in the US (“The War and American Finance,” Science and Society, Spring 1940). Kazakevich drew attention to the stagnation that lasted over the decade, noting that after World War One, the United States became the most dominant economy in the world. Yet “[a]s the most powerful capitalist country, the United States developed particularly glaring financial weaknesses, attributable, for the most part, precisely to its foremost place in a capitalist world torn by economic contradiction and frustration.”

Kazakevich, a good Marxist instead of a born-again Keynesian, reflected on the collapse of growth of the capital goods sector through the New Deal decade: “These figures show how enormously capitalist activity had shrunk in the thirties as compared to the twenties. Most of the Federal expenditures of the New Deal period were directed towards sustaining the demand for consumers' goods rather than for capital or producers' goods... Although widely advocated, 'priming of the pump' from the end of consumers' goods alone, has proved a complete failure as an economic measure for resuscitation of the capitalist organization harassed by a chronic crisis.”

Economic commentators today are increasingly nervous about a similar slump in capital goods accompanying our own “chronic crisis.” Because the growth of capital spending (and capital equipment spending) is running well below its long-term average of 8% (growing just 3% in 2013), the average age of industrial machinery and equipment in the US has surpassed 10 years, the highest average age since 1938 when Kazakevich was painting his dire picture! (The Wall Street Journal, 9-3-14) Thus, the slug-like motion of the US economy during the last seven years mimics in an important way the stagnation following the great crash initiating the Great Depression.

While capital spending may not now play quite the decisive role it played in the US economy during the 1930s, it remains a strong indicator of the hesitancy of managers to expand the productive core of the economy. They fail to see prospects for profit expansion in the extensive growth or retooling of the manufacturing sector. Of course that does not mean that managers are not seeking profits or investors are not seeking a return on investment. Managers have plowed more cash into mergers and acquisitions during the first half of 2014 than any time since 1999. That also is typically a part of capitalist restructuring after a severe crash. This rationalizing of capitalist production serves and has served to restore the growth of profit following a capitalist misadventure.

In the wake of the crash of 2007-2008 the US economy experienced a dramatic jump in labor productivity (in the absence of capital investment, this necessarily came largely from an increase in the rate of exploitation). Massive layoffs, plant closings, and weak union leadership combined wage stagnation with extreme speed up of a shrunken labor force. Profits ensued. And consequently the previously depressed rate of profit resumed its growth.

Unfortunately for the prospects of capitalism, the growth of productivity has petered out: its past 5-year average is only slightly more than half of the 20-year average, with productivity actually falling 1.7% in the first quarter of 2014. So this road to profit recovery and growth is seemingly closed.

Of course if the past productivity gains had been shared with the working class, capitalism likely would have experienced an increase in revenues (folks would have purchased more goods and services) and a rosier earnings outlook. But that did not happen. Adjusted for inflation, the cumulative growth of median household income has dropped precipitously since the crash, settling at the level of 1990. Consequently, corporate revenue growth peaked in the third quarter of 2011 and has shrunk ever since.

Thus, three signal measures promising profit-rate increases-- capital investment, labor productivity, and revenue increases-- are failing the US economy.

Not surprisingly, reported corporate profit growth has suffered. From its peak in the last quarter of 2009 (over 10%), it has receded steadily.

Profits, Profits, Profits!

It is important to emphasize that it is profits that fuel the capitalist system. While it seems an obvious point, it is the starting point of the Marxist theory of crisis. The capitalist system only appears healthy when the capitalist both holds capital and expects a return. He or she dreads two things: idle capital (capital with no prospect of return) and a stagnant or declining rate of return. Consequently, capitalism generates systemic growth if and only if capital is abundant, investment opportunities are rife, and the rate of profit is sufficiently enticing.

But this law of capitalist accumulation contains the seeds of capitalist crisis. As noted above, the growth of the rate of profit has been declining for some time. At the same time, the accumulation of capital is expanding faster than the overall US economy. The relative mass of profits-- measured by US corporate profits as a percentage of GDP-- reached unprecedented levels in the second quarter of 2014 (a level of profit/GDP only approached twice since 1947: immediately before the crash and in 1950). In other words, despite the fall in the rate of profit, the profit-generating capitalist engine is producing potential new capital faster than wealth is being produced. Three conclusions follow: capital is winning the class war, growth is lagging, and the mass of capital is growing relative to the size of the economy while the profit rate is declining.

And new capital must seek a home, a place to go to accumulate more capital.

Combine the profit-generated capital with the unprecedented cash held by corporations and the availability of cheap credit (nearly non-existent interest rates) and the capitalist class is faced with a daunting task of finding investment opportunities for a vast pool of capital.

If this sounds familiar, it is. Before the crash, many economic commentators noted that the investment world was awash in cash searching for opportunities. I wrote in April of 2007 (Tabloid Political Economy: The Coming Depression, Marxism-Leninism Today, April 5, 2007) that “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.”

It is this paradox of accumulation-- two much capital, too few opportunities-- that collapses the already stressed rate of profit and courts structural crisis (or deepening crisis, in our case). It is this paradox of accumulation that drives capital-gorged investors to pursue riskier and more ephemeral schemes.

Risk

Once again a vast pool of capital chases diminishing investment opportunities. Once again, as in the prelude to the crash, yields have shrunk, leading investors into riskier and more speculative investments. Pension funds and hedge funds are moving toward more arcane and less safe bets, hoping that return will outweigh the danger. As Richard Barley perceptively observes in the Wall Street Journal (August 11, 2014):

...there is a dearth of high quality securities. Yet there is still a global glut of capital seeking a home... All this creates incentives for financial engineering. In credit derivatives markets, there are signs investors are delving into esoteric structures. Citigroup reports a “large increase” in trading of products that slice and dice exposure to defaults in credit-default-swap indexes... Precrisis, low yields and seemingly benign market conditions led to the creation of instruments that ultimately few understood. The longer the reach for yield persists, the greater the chance that investors revisit the unhappy past.

For some time, the elusive “reach for yield” has driven a re-vitalized junk-bond market. In the five years after the crash, four of the ten fastest-growing bond funds held substantial quantities of low rated debt, according to WSJ analysts. They note that this “...development underscores the intense demand for investment returns since the 2008 crisis.”

But the flow of cash to the high yield market depressed yields to levels unseen since late 2007. They are rising again as investors sense that global economic turmoil and low yields signal danger.

The mania for mergers and acquisitions has also swung into dangerous, risky territory. Despite Federal guidelines urging the limitation of leverage to six times gross earnings by banks financing acquisitions, forty percent of private-equity takeovers in 2014 have exceeded the 6X rule. This rate is fast approaching the pre-crisis level of 2007.

The Wealth Effect

A seemingly robust stock market and a relatively stable US debt market join to create the illusion of a healthy, prosperous economy. They have, to great effect, masked the serious cracks in US capitalism.

The long anticipated Federal Reserve retreat from QE (Quantitative Easing: the purchase of US and other debt by the Fed) has not brought the disaster that many in the punditry and on Wall Street feared. Seldom noted, however, is the fact that the Peoples Republic of China has escalated its purchase of US treasuries nearly dollar for dollar against the Federal Reserve's retreat.

The “stellar” performance of equities is another matter. One moderately alarming sign is the steady march of equity price-to-earnings ratios to a territory greater than the long-term average and to a level equal to or above that of 2006-2007. Of course this alone does not explain the market's performance.

A puzzling aspect of equity price expansion is the historically low market activity in the post-crash period. What, then, has jacked up stock prices?

Part of the answer lies in corporate repurchases of shares, a practice that elevates the market price by taking stocks off the table. The Wall Street Journal (9-16-14) reports that $338.2 billion of equities were bought back by corporations in the first half of 2014, the most since 2007. The same report noted that corporations in the second quarter of 2014 spent “31% of their cash flow on buybacks.”

Corporations are hoarding cash and amassing debt at unprecedented levels (thanks to low interest rates, corporate bond issuance may approach $1.5 trillion this year, having grown geometrically over the last twenty years). Thus, corporate activity has shifted away from investing in future growth and toward mergers and acquisitions and stock buybacks, activities that bolster share inflation without creating underlying value.

Take Apple, for example. Sitting on vast quantities of cash, Apple nonetheless sold $12 billion worth of corporate bonds this year. At the same time, Apple repurchased $32.9 billion in Apple stocks, effectively driving up the price of those shares remaining in the market place.

Does this really create wealth? Or is it a ruse to keep the party going?

Interestingly, it’s not just the jaundiced Marxist eye that peers through the fog to see rocky shoals ahead. Rob Buckland, a CITIGROUP analyst, perceives the US economy as entering “phase three,” the phase preceding a marked downturn. Business Insider (August 15, 2014) summarizes Buckland's phase three as follows:

Phase 3: This is the tricky part. Stocks are still flying high, but credit spreads are widening as investors become increasingly unwilling to finance further risk. Corporate CEOs have now experienced a lengthy period of gains and become risk-happy. (And we'd note that central banks are already talking about tightening credit by raising interest rates.) Bubbles can form in Phase 3, Buckland says, as the high-flying stock market ignores the early warning signs of the deteriorating credit market.... (http://www.businessinsider.com/citi-economy-phase-3-where-bubbles-form-prior-to-crash-2014-8#ixzz3DcJqF9tH)

It is against this backdrop that worries are surfacing among investors. Some bearish hedge fund managers are investing anxiously in credit-default swaps and retreating from high risk. Discounting the distractions and illusions fostered by the monopoly media, serious students see the intractable crisis in Europe, the slowdown of the emerging market economies, the recent setbacks to Abe-nomics in Japan, and the loss of momentum in the economy of the Peoples Republic of China as adding to the contradictions lurking under the surface of the US economy.

Vladimir Kazakevich expressed fears in his 1940 article cited above that “...powerful interests on both sides of the Atlantic are likely to regard a war economy as an immediate solution for the chronic crisis...” Certainly his fears were well grounded. Militarism did prove able to “solve” the contradictions of global depression, at the enormous, unprecedented human cost of World War Two.

One cannot but wonder today if a similar logic is operating in the minds of US and NATO leaders who seem determined to stir hatred and belligerency. The newly emerged ISIS demons seem almost too perfect of a foe --- almost a caricature of evil that may well bring an unprecedented level of US military might back to the Middle East. The “limited” US air campaign has already cost over a billion dollars, a nasty piece of military “pump priming” for the US economy.

And bear-baiting-- poking Russia with threats, sanctions, and military engagement-- is the new obsession of NATO, even at great economic cost to a prostrate Europe. The actions contemplated by militarists would push the risk level back to some of the worst days of the Cold War.

Is it not more and more apparent that only the “specter” of socialism can offer an answer to the chronic global crisis of capitalism and its attendants, xenophobia and war mongering?

Zoltan Zigedy

zoltanzigedy@gmail.com