To understand the fate facing the people of Greece, you have to imagine an intruder coming to your home, putting a gun to your head and demanding that you turn over your earnings, surrender your savings, and sell off your car, your television, and your refrigerator t. Greek citizens neither benefited from the profit frenzy of international bankers nor encouraged their irresponsible behavior, yet they are being asked – no, forced – to pay the price for the damage incurred in the collapse of the world capitalist system.
Greece – a small corner of the European Union – and its people know little of the exotic instruments concocted in the world’s financial centers to overproduce massive amounts of phantom capital fueling the growth of this rapacious system. They are only indirectly acquainted with the arrogant, irresponsible actions of giant investment banks like Bear Stearns, Lehmann Brothers or Goldman Sachs. Very few Greeks see their future tied to the success of the predatory financial behemoths that roam the global economy. And yet they are being forced, at gun point, to pay for their losses.
When the media fog lifts, this is clearly the plight of Greece’s eleven million citizens.
If home invasion, armed robbery, and extortion are crimes, then surely Greece is a crime victim. And the European Union, the European Central Bank and the International Monetary Fund are the criminals. They are aided and abetted by the bond bandits who prey on debt, pouncing on a country struggling to revive its sinking economy. And their puppets – pathetically willing accessories to the crime – are the PASOK leaders and parliamentarians who attempt to legitimize the crime.
With few exceptions, countries have been obliged to take on additional debt to stimulate economic growth in the face of a severe drop in global investment and broad demand. Capitalist economies have no option other than sinking further in decline. In earlier times, deficit, debt-producing spending produced improved growth and accompanying inflation. Growth and inflation, in turn, increased tax revenues and cheapened debt, allowing the public debt to shrink in proportion to the economic product. This has long been a feature of capitalist recoveries from mild to severe recessions. Conventional economists teach this as though it were a universal law.
But we live in exceptional times and conventional economists are seldom right about anything any more.
Today, two factors have changed this dynamic. First, the near-total domination of neo-liberal ideology has shaped opinion to fear public debt of any degree. What was once the dogma of the fringe right has, thanks to over forty years of focused, class-based intellectual encroachment, spawned a uniformity of thought among the media, politicians, and opinion makers bordering on faith and defying history and facts. What began as the so-called “Washington Consensus” in 1989 has become an international consensus, gaining near-theological obeisance. International capitalist institutions like the International Monetary Fund have eagerly embraced its tenets.
Debt hysteria, like patriotic fervor, induces baseless fears that perversely shape policy decisions. Like contrived patriotism, debt fright masks a hidden agenda – in this case, a hatred of all socially useful public spending.
Secondly, for decades, changes in the global economy ushered in a new dynamic that manipulates and exploits debt far beyond anything we have seen before. With many of the capital-rich countries surrendering their manufacturing to low-wage areas, financial activities – the management, manipulation and creative expansion of capital – took on a greater role in these economies. New techniques, instruments and institutions evolved to accumulate surplus value – profits – in the hands of the few engaged in the financial game.
As capital accumulated – US financial profits accounted for over two-fifths of all profits before the collapse – it became increasingly difficult to maintain the rate of return spurred by financial ascendancy. (In Marxist terms, the tendency for the rate of profit to decline reared its ugly head.) Riskier and riskier speculation sought to find a home for the overproduction of capital until the system collapsed, the scenario that we all know so well.
Fueled by an injection of public funds, the financial sector has returned to speculation with a vengeance. In addition, they are now finding new profits in attacking the debt of the most fiscally vulnerable countries and forcing the conversion of private debt into public debt. The financial sector was neither wounded nor chastened by its folly. Instead, it has roared back, attacking sovereign debt in vulnerable countries like Greece, Ireland, Portugal and Spain. Speculative capital has turned virulently predatory.
The combination of these two elements – one subjective, one objective – has placed Greece in a death spiral. With unemployment soaring over 16%, taxes on the poor enacted, homelessness on the rise, salaries and benefits sliced, and social services eviscerated, Greek workers face a future of decline.
II
If there is one insight central to the science of Marxism, it is that appearances seldom reveal the real social realities; indeed, they most often mask them. The interplay of personalities, the clash of proclaimed interests, or the statements of policy makers conveyed by the corporate media are seldom the actual forces at play in social developments. Instead, material forces evolving from the system’s dynamics are usually the decisive factors in driving change.
In the case of Greece and, soon, the other vulnerable European Union countries, finance capital -- particularly its most predatory elements (hedge funds and private equity firms) -- has exploited the crisis to generate profits by betting against Greece’s ability to manage its debt. These bets have predictably influenced the market, making it even more difficult for Greece to secure and pay off its debts. As selling and redeeming bonds became more costly, Greece lost the ability to generate a recovery from further deficit spending.
Without a boost from public sector spending to jump-start economic activity, tax revenues shrank further, crippling Greece’s ability to meet debt payments and again find favor with the bond profiteers. The painful, tortured route to economic destruction ensued.
The only sensible exit from the vise gripping Greece was to stand up to finance capital and extract a new deal or exercise its sovereignty by voiding its debt – defaulting. But Greece’s “socialist” party, PASOK, instead turned to the eager criminals of the IMF, the EU and the European Central Bank for “help”. Only the Greek Communist Party and the advanced sector of the working class, PAME, advocated swift exit from the financial vise.
III
Where the media presents Greece’s plight as simply one of irresponsible government bringing pain on itself and the attendant economic hardships as the market’s revenge, the truth is far different. The Greek crisis is what an unrestrained, dominant, and predatory financial sector produces. But we must also recognize that the financial monster devouring Greece is itself the product of a capitalist system dependent upon finance to sustain its continued accumulation of surplus value. Those who think that taming the financial behemoth will restore a kinder, gentler capitalism are ignorant of the system’s logic.
By turning to the triumvirate (the EU, IMF and the ECB), the PASOK government surrendered the country’s sovereignty and its economy to three enemies of the Greek people, three enemies with often contradictory agendas.
The European Central Bank is the strong-arm enforcer for European banks. Its goal is simply to ensure that Euro-banks are not damaged by any Greek events, that the banks’ investments and loans are protected. It adamantly opposes any policy that will ask euro-banks to sacrifice. The ECB opposes default at all costs, threatening to not buy Greek bonds if Greece defaults. It supports EU bailouts because they transfer Greek debt from the private sector to the public sector. J.P. Morgan estimates that public sector sovereign debt liabilities against Greece will surpass their private sector counterparts in 2013 as outstanding bonds are paid off. This trend is expected to continue, going forward. The ECB welcomes this exit by private banking since it will leave the banks immune from any negative consequences. They have no interest in the fate of Greece’s working people.
The International Monetary Fund, on the other hand, serves as an active agent for international capital. Through extortionate loans, it imposes the conditions for capitalist exploitation upon countries desperately in need of financial help. Privatization, diminished social securities, and dis-empowered workers constitute its agenda. Clearing a path for US imperialism drives the policies of the IMF, with the interests of the other imperialist powers playing a secondary role.
The details of the austerity package for Greece – privatization, unemployment (to discipline workers), destruction of social services, etc. – are the work of the IMF. It was with glee that international capital welcomed the demand for a $71 billion privatization of Greek public assets, including Athens Airport and Greek railways. The Wall Street Journal cynically dubbed it a “National Tag Sale.” The IMF, too, has no interest in the fate of Greece’s working people.
The European Union, a political body, reflects the political will of the dominant governments of the EU: Germany and France. Both countries’ governments subscribe wholeheartedly to the neo-liberal dogmas, prescribing austerity for growing public debt. In this respect, they endorse and lead the EU to support the IMF regimen. But they have political reservations about the terms of the extortionate deals crafted to impose austerity. They resist committing their own public funds to buy the Greek government's collaboration in selling out the Greek people. So-called “bailouts” come at the expense of public funds provided by the EU constituent governments. They prefer to find another weapon to hold to the head of the Greek people. But the EU, as well, has no interest in the fate of Greece’s working people.
Like all criminal syndicates, the unity of the triumvirate is threatened by selfish interests. The German government recently proposed a restructuring of privately held Greek debt (largely euro-banks), but the ECB slammed the door on this since it would call on European banks to sacrifice. France is now proposing similar actions with the ECB similarly in opposition. Neither government wants to commit its own public funds to the sustenance of Greek government debt. While they agree on the crime, they cannot agree on the weapon.
IV
It would be a profound mistake to see the mugging of Greece as an isolated, inconsequential event. Rather, it is a template for the way ahead for international capital.
In the days before the betrayal of the Greek people by the 155 PASOK representatives, stock markets world-wide were falling, in fear that the massive strike and demonstrations of the Greek people might frighten these spineless politicians into rejecting the extortionate deal demanded by the IMF, the ECB and the EU. The mere possibility that resistance would derail the program shook the foundations of capital. In the days following, the markets leaped forward more than they had in months.
Greece is neither isolated nor inconsequential.
The pattern established in Greece is being repeated in other countries, like Portugal, Ireland and Spain. Italy and the UK are next in line, with others to follow. The game plan will undoubtedly be tailored to different circumstances and different balances of forces, but capital will relentlessly strive to squeeze profit from the living standards of working people and expropriate the public wealth held socially. The weapon in this assault is debt manipulation.
Some on the left sounded the death knell of neo-liberal capitalism in the depths of the crisis. Clearly, that was a profound mistake. Neo-liberalism, financial predation and global capital have mounted a vigorous counter-attack, leaving those illusions dashed.
We can, however, draw important lessons from the Greek struggle. While the Greek people, led in this conflict by Communists and class-conscious workers, failed to stop the mugging, they are not defeated. They will have much to say about the next chapter in this unfolding story.
For us in the US, the assault on the Greek people should remind us of what we face. While we should be inspired by the resistance in Wisconsin, Ohio and other states, we must recognize what a daunting, difficult struggle lays ahead. And we should not be seduced by phony political allies like the Democratic Party, the US counterpart to PASOK, in this fight.
With all respect to our many causes, this is the central battle of our times.
Zoltan Zigedy
zoltanzigedy@gmail.com
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Wednesday, July 6, 2011
Tuesday, June 21, 2011
Summing Up: Three Essays on Where We Are
Reliving 1937?
Though Ben Bernanke, the head of the Federal Reserve, prides himself on his extensive research and expertise on the Great Depression, he is strangely quiet on the glaring parallels between this moment and a similar moment four years into the New Deal “recovery” from that earlier economic catastrophe. I wrote in February, 2008:
Balancing the budget in 1937 is exactly the same thinking as the beliefs behind the debt hysteria rampant with the media and the legislators of both parties today. And in both cases, it is the interests of capital that stand to benefit from the policies. As recent economic reports prove, we are in danger of driving off the same cliff that the New Deal economy encountered in 1937. Radical budget constraints and the consequent austerity will, if history means anything, quickly find that cliff.
Oddly, few commentators reference this historical lesson – or few other historical lessons, for that matter – except notably Paul Krugman, columnist for The New York Times, who has warned of a repeat of 1937.
Another, far more curious, reference to the parallel comes from the extreme right, the pen of the best-selling author, Amity Shlaes. Shlaes is celebrated for the publication of a bizarre historical narrative of the Great Depression that crudely recasts the period as confirmation of the economic philosophy of Milton Friedman.
As an unvarnished apologist for unfettered capitalism, Shlaes recognizes the power of the historical precedent in potentially crafting a counter-argument to the shrill, ubiquitous argument for government austerity. Even though liberals are unwilling to challenge or even tepidly object to debt-fright, she hopes to head them off at the pass should they find some spine. In a Pittsburgh Tribune-Review commentary, Is ’11 the New ’37?, Shlaes argues that the wrong lessons are conventionally drawn from the 1937 economic relapse. The Yale University English major, elevated by the media into a serious economic historian, argues that rising taxes, Social Security payments, bank regulation, and, most importantly, the cost of labor, caused the relapse of 1937. Ominously, she contends, these same moves threaten the economy in 2011.
This is utterly ridiculous, yet Shlaes passes as a serious voice in public discussion of economic policy. More and more, that discussion is conducted in the realm of fantasy.
Consider the data: Federal tax receipts did grow between 1936 and 1937, but only by an absolute amount less than the growth of tax receipts between 1933 and 1934. Moreover, during the war years, a time of great expansion, tax revenues nearly doubled every year between 1941 and 1944. Clearly, there is no defensible simple relationship between rising taxes and economic decline – a fact that even a celebrity English major should acknowledge. High taxes or Social Security payments did not cause the 1937 collapse.
As for banks, credit grew between 1936 and 1937, as it did every year going forward from 1933. While its expansion slowed in 1937, it was not enough to account for the deep decline of 1937 that began in the summer. Indeed, the Board of Governors of the Federal Reserve tightened the reserve requirements for banks concurrent with this slackening, which only made matters worse. At the end of the summer, the economy collapsed.
To cite the rise in the cost of labor as a cause of the 1937 collapse purposely violates the truth. While the powerful unionization drive in manufacturing brought many into the protective umbrella of the CIO, earnings in manufacturing, mining, construction, transportation, communications, and public utilities grew at roughly the same pace as the prior two years going into 1937. The exception was a notable increase in earnings in the agriculture, forestry and fisheries sector, which was notoriously underpaid and of little impact upon the overall economy.
But what does stand out in the data is the pronounced decline in federal government expenditure which dropped in 1937 and even more rapidly in 1938.
By April of 1938, the Roosevelt Administration realized that its balanced budget “olive branch” to big business had failed and returned to New Deal pump priming:
With this return to stimulative programs, the economy began to recover again in 1939. A similar fireside chat from President Obama would be welcome now.
Shlaes blatantly distorts this history with a zeal driven only by ideological dogma and fealty to the celebrity easily won from our modern-day philistines.
But on one point, Shlaes approaches the truth. She correctly notes that military spending overwhelmed the tepid stimulus for popular programs offered by the Roosevelt Administration and invigorated the US economy going forward. After 1939, the major stimulus for growth came from rapidly expanding war-driven public expenditures. Only when the economy was established on a war-time footing -- in 1941 -- did GDP and per capita GDP surpass the level of 1929. For liberals like Paul Krugman, this glaring fact challenges the mythology of the New Deal. Can capitalism survive without massive military spending? With the US committed to a perpetual war economy since World War II, is it possible for capitalism to offer economic growth and peace with the rest of the world? History suggests that it cannot.
Today, we get war without economic growth or social justice.
*************
Disintegration of the Old Order
I wrote in November of 2008:
I returned to this theme on several occasions in subsequent posts. Today, the European Union is indeed unraveling. While Germany’s export economy has recovered, the stark difference between Germany’s momentary prosperity and the fate of much of the rest of the EU has only exacerbated the tensions wracking Europe. Nor did I anticipate that Greece, Portugal, and Ireland would prove to be the focal point of EU dissolution. Nonetheless, the projection stands up. The EU faces numerous contradictory policy choices, all of which threaten to unwind the Union.
But the larger point should not be lost. Those who foolishly saw a new era of the decline of the nation-state, the global dominance of transnational corporations, and the emerging rule of international organizations in the wake of the collapse of the Soviet Union profoundly misread the logic of capitalism and the resiliency of nation-state imperialism. This view proved quite popular with neo-Marxists, especially in the nineties. In its essence, it was a rejection of Lenin’s theory of imperialism.
Today, events have demolished this view, with its adherents retreating into the academy or moving on to a new “re-thinking” of Marxism or Leninism, the game that sustains the intellectual left.
Instead, we are left with the crumbling of the institutions thought to be cornerstones of international integration and globalization.
Consider some of the elements that were thought to be the secure foundation and cement of a new transnational, global world order: the International Monetary Fund, free-trade agreements, NATO, the Organization of Petroleum Exporting Countries, bi- and multi-lateral coalitions, etc.
In the case of the IMF, contradictions abound between the advanced capitalist countries and the formerly compliant or subservient emerging economies. Intense frictions arose around IMF policy allowing unrestricted capital flows, with the entrenched representatives from developed economies reluctantly conceding some control to the emerging economies like Brazil. The recent jockeying over a new IMF Director only underscores these differences and tensions.
US free-trade agreements between Colombia, Panama and the Republic of Korea languish without ratification. Formerly, these agreements were rammed through in the face of any and all opposition. However, confidence in the virtues of free-market dogma is now lessened and ruling class unity is impaired over the “advantages” of these agreements.
NATO is experiencing deep divisions. In an unprecedented public admission, outgoing US Secretary of Defense, Robert Gates, expressed severe criticism of the US’s NATO allies, questioning their commitment to provide resources and manpower in support of NATO’s objectives. Most often, these objectives are dictated by the US and coincide with US interests. Members are less than happy with this arrangement, affording the US with less cover for its imperial designs.
The imperialist venture in Libya currently demonstrates the contradictions in NATO. Enthusiastic supporters of aggression have their eye on their own interests in and dependency on Libyan energy resources while other members have their eye on the impact of the aggression on the outcome of the so-called “Arab Spring.” The escalation of this naked aggression, with no success in sight, has only brought these contradictions to the fore.
Similarly, the uprisings in several North African and Middle Eastern states has shaken the alliances between conservative governments and their international sponsors, the US and Israel. Imperialists are scrambling to contain the damage through contradictory policies: propping up some conservative governments with aid and even military intervention, while reluctantly discarding others with the hope that money and covert operations will cobble together a friendly alternative. The recent decision by the G-8 pledging $40 billion towards the “Arab Spring” is the bank roll for both projects. In these impoverished countries, $40 billion will go a long way toward buying public opinion, feeding corruption, and directing policy, just as it did in Eastern Europe after the fall of the Soviet Union. Nonetheless, forces are unleashed that promise to disrupt the balance of power in the regions.
OPEC, long led by close US ally, Saudi Arabia, has recently concluded an acrimonious meeting with members agreeing not to agree on a policy going forward. Where OPEC formerly linked its policies to the needs and wishes of the most advanced capitalist countries, the relationship has soured with many member states.
Further east, the long-standing alliance between the US and Pakistan is under great stress, with hostility growing daily.
Relations between the US and China are similarly frayed.
Other examples of divisions and tensions wracking global cooperation and integration abound. The global economic crisis has exposed inter-imperialist rivalries and differing national interests long simmering during the decade of “globalization” and capitalist triumphalism. As these rivalries intensify, it will be increasingly difficult for policy makers to contain the damage inflicted by a sinking global economy.
The collapse of the old order offers left forces, progressives, and especially advocates of socialism, an opportunity to plant the seeds of a new order based on social justice and equality. While the road is difficult, the opportunity should not be lost.
************
The Joke’s on Us!
If nothing else sours the last remaining liberal, it should be President Obama’s Jobs Council. Faced with massive and sustained levels of unemployment (with signs that more is coming), the “hopey, changey” President created a council to address the most serious threat facing his country.
Presidents create councils when they have no policy ideas of their own and they hope that the public will be fooled into thinking that they intend to seriously address an issue.
In Obama’s case, he doomed the project to failure and contempt from the beginning by appointing Jeffrey Immelt as chairman of the Council. Immelt is CEO of GE, notorious for its anti-labor policies, off-shoring, and plant closing – actions that destroyed tens of thousands of jobs. Appointing Immelt to the key position is like asking a convicted rapist to lead the discussion on sexual harassment.
In addition, Obama loaded the Council with CEOs, none of whom has a distinguished record on hiring in the face of the crisis. Consider, for example, council member Jim McNerney of Boeing. His company is currently charged by the National Labor Relations Board with moving a plant to the non-union South to punish union workers who exercised their right to strike, a unique qualification for improving the lot of working people.
The biographies of this bizarre collection of tycoons on the President’s Job Council website tout their many awards and success in generating a return on investment. In other words, they are proven masters of lowering costs – including labor costs – for the sake of corporate profits.
To add credibility to this collection of wolves guarding the hen house, Obama appointed Richard Trumka, head of the AFL-CIO. With all his bluster about corporate greed and Democratic Party betrayal, he will have to live with his conscience over breaking bread with these corporate predators.
Last week, this august group offered the President and the public its initial proposals. Even the business community recoiled against its timid initiatives: The Wall Street Journal headlined: Surprise! Interim Jobs Advice From Panel Lands With Thud. They went on: “The yawn-o-meter spiked into the red zone in part because these ideas aren’t that new.”
They were not only old ideas, but ineffective and irrelevant to job creation; they were a joke.
Leading the way was the tired old bromide of job training, matching skills to available jobs. Apparently, no one bothered to notice that the private sector has not created sufficient jobs to offer to trained employees. Hopefully, the President knows better. Certainly Trumka does.
In addition, they implore the government to make it easier for firms to get construction permits, as though the permits – and not the availability of projects – stand in the way of job creation. Charged with finding jobs, the CEOs divert their attention to greasing the skids for contractors.
They see expediting foreign visas as a route to boosting travel and tourism. It’s hard to imagine anything further down a list of initiatives for effectively stimulating new jobs. Are there potential foreign visitors clamoring to have their visas approved to flood the US with euros or yen? If there were, would it put a dent in unemployment?
Extending credit to small businesses through the Small Business Administration is offered by the Council as a job-generator. Overlooked, of course, is the massive bail-out the public has made to banks so that they could continue to extend credit to worthy small businesses. Are they not fulfilling this function? Should they not bear this responsibility? And where are the businesses confident enough of the recovery that would use the loans to take on new employees?
Finally, the Council invokes the obvious by calling for an effort to employ construction workers, particularly in reconstructing public and private structures more energy efficiently. No doubt this is particularly appealing to the CEO of General Electric, whose firm, no doubt, has a hand in offering products and services in this sector. But invocation, like prayer, will not create jobs.
Like an obedient lap dog and vulgar careerist, the great labor traitor, Andy Stern, hailed the proposals, saying that the Administration has “the validation of the business community to get this done.”
When has there been as much insincerity and hypocrisy collected in one meeting place? When has a President offered a more absurd approach to the most pressing problem facing the economy and feared by the public?
Everything stinks about this sham “initiative.” There isn’t enough shame to lay before the initiators and participants in this tasteless joke on the US people. Obviously, no solution to unemployment is forthcoming from this Administration.
Zoltan Zigedy
zoltanzigedy@gmail.com
Though Ben Bernanke, the head of the Federal Reserve, prides himself on his extensive research and expertise on the Great Depression, he is strangely quiet on the glaring parallels between this moment and a similar moment four years into the New Deal “recovery” from that earlier economic catastrophe. I wrote in February, 2008:
The [Roosevelt] Administration lost further steam by aggressively attempting to balance the budget in 1937. With the economy sharply rebounding, administration officials began to sound the fear of inflation, urging budgetary restraint. Federal spending was cut drastically, with the WPA nearly shut down. Consequently, the economy quickly sank into decline. Industrial production fell drastically (35% in 9 months), prices fell and unemployment jumped dramatically.
Through the first months of 1938, Roosevelt stayed firmly with the policy of fiscal restraint urged by capital. This appeasement of business only deepened the crisis. In April, Roosevelt reversed his policies, reviving WPA with $1.25 billion for employment and further funding other programs to the tune of $3 billion. The Congress overwhelming approved these moves.
The turnabout of policy led to a turnabout in economic activity. Almost immediately, industrial production, employment, prices, and payrolls begin to climb. Nonetheless, the US economy never reached pre-Depression levels of employment and industrial production until 1939, seven years after their lows. By then, the mandate of 1936 was gone, eroded and crippled by the retreat of 1937 and the fresh economic slump of 1937-1938. The momentum of New Deal progressive legislation was lost without achieving the goals of full recovery or social justice.
Balancing the budget in 1937 is exactly the same thinking as the beliefs behind the debt hysteria rampant with the media and the legislators of both parties today. And in both cases, it is the interests of capital that stand to benefit from the policies. As recent economic reports prove, we are in danger of driving off the same cliff that the New Deal economy encountered in 1937. Radical budget constraints and the consequent austerity will, if history means anything, quickly find that cliff.
Oddly, few commentators reference this historical lesson – or few other historical lessons, for that matter – except notably Paul Krugman, columnist for The New York Times, who has warned of a repeat of 1937.
Another, far more curious, reference to the parallel comes from the extreme right, the pen of the best-selling author, Amity Shlaes. Shlaes is celebrated for the publication of a bizarre historical narrative of the Great Depression that crudely recasts the period as confirmation of the economic philosophy of Milton Friedman.
As an unvarnished apologist for unfettered capitalism, Shlaes recognizes the power of the historical precedent in potentially crafting a counter-argument to the shrill, ubiquitous argument for government austerity. Even though liberals are unwilling to challenge or even tepidly object to debt-fright, she hopes to head them off at the pass should they find some spine. In a Pittsburgh Tribune-Review commentary, Is ’11 the New ’37?, Shlaes argues that the wrong lessons are conventionally drawn from the 1937 economic relapse. The Yale University English major, elevated by the media into a serious economic historian, argues that rising taxes, Social Security payments, bank regulation, and, most importantly, the cost of labor, caused the relapse of 1937. Ominously, she contends, these same moves threaten the economy in 2011.
This is utterly ridiculous, yet Shlaes passes as a serious voice in public discussion of economic policy. More and more, that discussion is conducted in the realm of fantasy.
Consider the data: Federal tax receipts did grow between 1936 and 1937, but only by an absolute amount less than the growth of tax receipts between 1933 and 1934. Moreover, during the war years, a time of great expansion, tax revenues nearly doubled every year between 1941 and 1944. Clearly, there is no defensible simple relationship between rising taxes and economic decline – a fact that even a celebrity English major should acknowledge. High taxes or Social Security payments did not cause the 1937 collapse.
As for banks, credit grew between 1936 and 1937, as it did every year going forward from 1933. While its expansion slowed in 1937, it was not enough to account for the deep decline of 1937 that began in the summer. Indeed, the Board of Governors of the Federal Reserve tightened the reserve requirements for banks concurrent with this slackening, which only made matters worse. At the end of the summer, the economy collapsed.
To cite the rise in the cost of labor as a cause of the 1937 collapse purposely violates the truth. While the powerful unionization drive in manufacturing brought many into the protective umbrella of the CIO, earnings in manufacturing, mining, construction, transportation, communications, and public utilities grew at roughly the same pace as the prior two years going into 1937. The exception was a notable increase in earnings in the agriculture, forestry and fisheries sector, which was notoriously underpaid and of little impact upon the overall economy.
But what does stand out in the data is the pronounced decline in federal government expenditure which dropped in 1937 and even more rapidly in 1938.
By April of 1938, the Roosevelt Administration realized that its balanced budget “olive branch” to big business had failed and returned to New Deal pump priming:
Therefore, on April 14, the President sent a special message to Congress and addressed the nation in a fireside chat which announced the revival of the policies which had brought recovery in 1935, and had been reversed just prior to the recession [of 1937]. A new appropriation of $1,250,000,000 for the expansion of WPA employment was proposed… Additional appropriations for the PWA, PSA, CCC, NYA, USHA… brought the total recommendations… to slightly more than $3,000,000,000… (The History of the New Deal, Basil Rauch, p. 300).
With this return to stimulative programs, the economy began to recover again in 1939. A similar fireside chat from President Obama would be welcome now.
Shlaes blatantly distorts this history with a zeal driven only by ideological dogma and fealty to the celebrity easily won from our modern-day philistines.
But on one point, Shlaes approaches the truth. She correctly notes that military spending overwhelmed the tepid stimulus for popular programs offered by the Roosevelt Administration and invigorated the US economy going forward. After 1939, the major stimulus for growth came from rapidly expanding war-driven public expenditures. Only when the economy was established on a war-time footing -- in 1941 -- did GDP and per capita GDP surpass the level of 1929. For liberals like Paul Krugman, this glaring fact challenges the mythology of the New Deal. Can capitalism survive without massive military spending? With the US committed to a perpetual war economy since World War II, is it possible for capitalism to offer economic growth and peace with the rest of the world? History suggests that it cannot.
Today, we get war without economic growth or social justice.
*************
Disintegration of the Old Order
I wrote in November of 2008:
The economic crisis has reversed the post-Soviet process of international integration -- so-called "globalization." As with the Great Depression, the economic crisis strikes different economies in different ways. Despite efforts to integrate the world economies, the international division of labor and the differing levels of development foreclose a unified solution to economic distress. The weak efforts at joint action, the conferences, the summits, etc., cannot succeed---for the simple reason that every nation has different interests and problems, a condition that will only become more acute as the crisis mounts. In the past, the most economically powerful country, the US, could impose a solution to regional problems as it had before in Asia and South America. With the US economy the most seriously wounded, this is now highly unlikely.
We see great stress on the European Union. Germany's export-driven economy is collapsing. France, on the other hand, has yet to feel the full force of the crisis. Italy maintains staggering debt and an already stagnant economy. Spain's real estate and building boom is rapidly contracting. In the face of these disparate, but debilitating expressions of the world economic crisis, it is highly unlikely that the Union will come up with common solutions. Indeed, the unraveling of the EU is a possibility.
I returned to this theme on several occasions in subsequent posts. Today, the European Union is indeed unraveling. While Germany’s export economy has recovered, the stark difference between Germany’s momentary prosperity and the fate of much of the rest of the EU has only exacerbated the tensions wracking Europe. Nor did I anticipate that Greece, Portugal, and Ireland would prove to be the focal point of EU dissolution. Nonetheless, the projection stands up. The EU faces numerous contradictory policy choices, all of which threaten to unwind the Union.
But the larger point should not be lost. Those who foolishly saw a new era of the decline of the nation-state, the global dominance of transnational corporations, and the emerging rule of international organizations in the wake of the collapse of the Soviet Union profoundly misread the logic of capitalism and the resiliency of nation-state imperialism. This view proved quite popular with neo-Marxists, especially in the nineties. In its essence, it was a rejection of Lenin’s theory of imperialism.
Today, events have demolished this view, with its adherents retreating into the academy or moving on to a new “re-thinking” of Marxism or Leninism, the game that sustains the intellectual left.
Instead, we are left with the crumbling of the institutions thought to be cornerstones of international integration and globalization.
Consider some of the elements that were thought to be the secure foundation and cement of a new transnational, global world order: the International Monetary Fund, free-trade agreements, NATO, the Organization of Petroleum Exporting Countries, bi- and multi-lateral coalitions, etc.
In the case of the IMF, contradictions abound between the advanced capitalist countries and the formerly compliant or subservient emerging economies. Intense frictions arose around IMF policy allowing unrestricted capital flows, with the entrenched representatives from developed economies reluctantly conceding some control to the emerging economies like Brazil. The recent jockeying over a new IMF Director only underscores these differences and tensions.
US free-trade agreements between Colombia, Panama and the Republic of Korea languish without ratification. Formerly, these agreements were rammed through in the face of any and all opposition. However, confidence in the virtues of free-market dogma is now lessened and ruling class unity is impaired over the “advantages” of these agreements.
NATO is experiencing deep divisions. In an unprecedented public admission, outgoing US Secretary of Defense, Robert Gates, expressed severe criticism of the US’s NATO allies, questioning their commitment to provide resources and manpower in support of NATO’s objectives. Most often, these objectives are dictated by the US and coincide with US interests. Members are less than happy with this arrangement, affording the US with less cover for its imperial designs.
The imperialist venture in Libya currently demonstrates the contradictions in NATO. Enthusiastic supporters of aggression have their eye on their own interests in and dependency on Libyan energy resources while other members have their eye on the impact of the aggression on the outcome of the so-called “Arab Spring.” The escalation of this naked aggression, with no success in sight, has only brought these contradictions to the fore.
Similarly, the uprisings in several North African and Middle Eastern states has shaken the alliances between conservative governments and their international sponsors, the US and Israel. Imperialists are scrambling to contain the damage through contradictory policies: propping up some conservative governments with aid and even military intervention, while reluctantly discarding others with the hope that money and covert operations will cobble together a friendly alternative. The recent decision by the G-8 pledging $40 billion towards the “Arab Spring” is the bank roll for both projects. In these impoverished countries, $40 billion will go a long way toward buying public opinion, feeding corruption, and directing policy, just as it did in Eastern Europe after the fall of the Soviet Union. Nonetheless, forces are unleashed that promise to disrupt the balance of power in the regions.
OPEC, long led by close US ally, Saudi Arabia, has recently concluded an acrimonious meeting with members agreeing not to agree on a policy going forward. Where OPEC formerly linked its policies to the needs and wishes of the most advanced capitalist countries, the relationship has soured with many member states.
Further east, the long-standing alliance between the US and Pakistan is under great stress, with hostility growing daily.
Relations between the US and China are similarly frayed.
Other examples of divisions and tensions wracking global cooperation and integration abound. The global economic crisis has exposed inter-imperialist rivalries and differing national interests long simmering during the decade of “globalization” and capitalist triumphalism. As these rivalries intensify, it will be increasingly difficult for policy makers to contain the damage inflicted by a sinking global economy.
The collapse of the old order offers left forces, progressives, and especially advocates of socialism, an opportunity to plant the seeds of a new order based on social justice and equality. While the road is difficult, the opportunity should not be lost.
************
The Joke’s on Us!
If nothing else sours the last remaining liberal, it should be President Obama’s Jobs Council. Faced with massive and sustained levels of unemployment (with signs that more is coming), the “hopey, changey” President created a council to address the most serious threat facing his country.
Presidents create councils when they have no policy ideas of their own and they hope that the public will be fooled into thinking that they intend to seriously address an issue.
In Obama’s case, he doomed the project to failure and contempt from the beginning by appointing Jeffrey Immelt as chairman of the Council. Immelt is CEO of GE, notorious for its anti-labor policies, off-shoring, and plant closing – actions that destroyed tens of thousands of jobs. Appointing Immelt to the key position is like asking a convicted rapist to lead the discussion on sexual harassment.
In addition, Obama loaded the Council with CEOs, none of whom has a distinguished record on hiring in the face of the crisis. Consider, for example, council member Jim McNerney of Boeing. His company is currently charged by the National Labor Relations Board with moving a plant to the non-union South to punish union workers who exercised their right to strike, a unique qualification for improving the lot of working people.
The biographies of this bizarre collection of tycoons on the President’s Job Council website tout their many awards and success in generating a return on investment. In other words, they are proven masters of lowering costs – including labor costs – for the sake of corporate profits.
To add credibility to this collection of wolves guarding the hen house, Obama appointed Richard Trumka, head of the AFL-CIO. With all his bluster about corporate greed and Democratic Party betrayal, he will have to live with his conscience over breaking bread with these corporate predators.
Last week, this august group offered the President and the public its initial proposals. Even the business community recoiled against its timid initiatives: The Wall Street Journal headlined: Surprise! Interim Jobs Advice From Panel Lands With Thud. They went on: “The yawn-o-meter spiked into the red zone in part because these ideas aren’t that new.”
They were not only old ideas, but ineffective and irrelevant to job creation; they were a joke.
Leading the way was the tired old bromide of job training, matching skills to available jobs. Apparently, no one bothered to notice that the private sector has not created sufficient jobs to offer to trained employees. Hopefully, the President knows better. Certainly Trumka does.
In addition, they implore the government to make it easier for firms to get construction permits, as though the permits – and not the availability of projects – stand in the way of job creation. Charged with finding jobs, the CEOs divert their attention to greasing the skids for contractors.
They see expediting foreign visas as a route to boosting travel and tourism. It’s hard to imagine anything further down a list of initiatives for effectively stimulating new jobs. Are there potential foreign visitors clamoring to have their visas approved to flood the US with euros or yen? If there were, would it put a dent in unemployment?
Extending credit to small businesses through the Small Business Administration is offered by the Council as a job-generator. Overlooked, of course, is the massive bail-out the public has made to banks so that they could continue to extend credit to worthy small businesses. Are they not fulfilling this function? Should they not bear this responsibility? And where are the businesses confident enough of the recovery that would use the loans to take on new employees?
Finally, the Council invokes the obvious by calling for an effort to employ construction workers, particularly in reconstructing public and private structures more energy efficiently. No doubt this is particularly appealing to the CEO of General Electric, whose firm, no doubt, has a hand in offering products and services in this sector. But invocation, like prayer, will not create jobs.
Like an obedient lap dog and vulgar careerist, the great labor traitor, Andy Stern, hailed the proposals, saying that the Administration has “the validation of the business community to get this done.”
When has there been as much insincerity and hypocrisy collected in one meeting place? When has a President offered a more absurd approach to the most pressing problem facing the economy and feared by the public?
Everything stinks about this sham “initiative.” There isn’t enough shame to lay before the initiators and participants in this tasteless joke on the US people. Obviously, no solution to unemployment is forthcoming from this Administration.
Zoltan Zigedy
zoltanzigedy@gmail.com
Wednesday, June 1, 2011
Captive Nations
Nearly thirty-five years ago, in a rare moment of truth-speak, President Gerald Ford, participating in a televised pre-election debate with future President Jimmy Carter, denied that the socialist countries of Eastern Europe were “captive nations” under Soviet domination. Ford, not known for his political acumen, violated one of the cardinal rules of national political campaigns: thou shall not deviate from “truths” held closely by the US ruling class. The media came down on Ford like a ton of bricks; some say his indelicate comment cost him the election.
It is likely that the bumbling Ford misread his cues or suffered a brain lock since he had earlier signed a proclamation designating the week beginning July 13, 1975 as “Captive Nations Week.” Breaking with the unity of thought that ruling elites fight so hard to establish is not easily forgiven, even if it is inadvertent.
Despite the end of the Cold War, sacred and unassailable truths still are a fixture of US political discourse: politicians are not allowed to mention that the Cuban people overwhelmingly support their government; the plight of the Palestinian people – their suffering and hardships – must remain unspoken at all costs; the charge of terrorism must include and be confined to acts against imperialism; and private ownership of assets is always to be preferred over public ownership. These are theological commandments in a country that trumpets its commitment to freedom of thought.
The Real Captive Nations
Though the notion of “captive nations” was one of those ridiculous ideas born from the malignant minds of Cold Warriors, there is no better time than today to find it a precise and appropriate application. Its aptness is one of those sublime ironies that would make the old master, Karl Marx, smile.
In the wake of the most destructive waves of the economic crisis, most nations were left with extraordinary public debt. Bailouts, stimulative spending, and substantially reduced revenues pushed public debt loads dramatically higher, excepting those few countries with sufficient reserves. In a real sense, the assumption of debt was the prescription – the only prescription – for surviving an accelerating mortal spiral of the capitalist system.
But in a capitalist country in the web of a global capitalist system, debt is shorthand for an intimate relationship between borrowers and lenders, a relationship that is easy prey for international banks, hedge funds, and the global enforcers of capitalism, the International Monetary Fund and the World Bank.
The group of weaker, less developed countries of the European Union was one of the most vulnerable targets of financial predation. When the Union was formed in 1993 from the European Economic Community, Ireland, Spain, Portugal, and Greece were late comers and poor sisters to the more highly developed countries of the EU like West Germany, France, Italy and the other northern neighbors that founded the EEC. There was enormous pressure for these countries to achieve a “European” level of development and living standards. By membership, they gained open markets and access to capital. Their relatively low wages gave them somewhat of a competitive advantage within the Union. Despite this “advantage,” they remained the underachievers of Europe – more the quaint vacation destinations for the rich than economic titans.
With the creation of a single currency, the euro, in 1999, and the establishment of the European Central Bank, economic relations between members were reordered. The common currency forced the surrender of individual sovereignty over monetary policy, eliminating an individual state’s ability to adjust exchange rates against other currencies. Further, euro-zone participation was predicated on a strict set of economic (neo-liberal) parameters established by the Treaty of Maastricht. Regulatory constraints were imposed as well. In effect, countries surrendered a great measure of their sovereignty to be a part of the super-state, the EU, the weaker economies surrendering their fate to the economic super-powers of Northern Europe.
For the less developed, membership in the euro-zone was an opportunity for conservative governments to impose neo-liberal changes, justified by the promised prosperity enjoyed by the wealthier member states.
Ireland granted subsidies, lowered corporate taxes and taxes on the wealthy to draw multi-nationals to exploit an educated, but low wage working class. Greece sold off public assets to the tune of 11.1% of GDP between 1998 and 2003. Both were hailed as exemplary team players.
Only Communists and the anti-capitalist left foresaw danger in surrendering sovereignty to the dominant powers in the EU.
With the full blast of economic crisis in 2008, all of the EU-based hopes were dashed. Catching up was off the table and survival was the business at hand. Ireland’s unregulated banks had piled up huge debts, necessitating massive government-funded bailing. The Iberian construction boom fizzled, leaving mountains of debt and massive unemployment.
But Greece was the special case. When the newly elected PASOK government revealed in 2009 that the budget deficit was twice what the previous government had claimed – no doubt for political reasons – the financial predators descended upon the country. Like a pack of wolves attacking the weakest, most vulnerable of the herd, international bankers, equity firms and hedge funds began to bet against Greek debt management, driving the cost of borrowing sky high. They speculated with credit default swaps and against credit default swaps, establishing an upward swing in the costs of financing and re-financing debt and a downward swing in credit ratings. These swings invited further speculation and a further worsening of Greece’s debt position.
Financial writers purposefully overlook these waves of aggression, lest they reveal the continued existence of rampant speculative capital, the very element that brought the global economy down. Instead, they write of Greek corruption, profligacy and financial irresponsibility.
In truth, Greece was the victim of international banks, equity firms and hedge funds - a financial mugging that brought the country to the brink of debt default in May of 2010. And under the guidance of a social democratic government, a government wedded to neo-liberal policies, Greece surrendered unconditionally to the rule of the EU, the ECB and the IMF, accepting a bailout of €110 billion. Greece became a captive nation.
As a condition of EU and IMF servitude, Greece was forced to accept an austerity program that, apart from incalculable human misery, brought the economy down, sinking into depression. Greece is, indeed, a captive nation.
The New York Times reported on May 16 that unemployment in Greece is approaching 15%, cement production is down 60% since 2006, steel production is down in the last two years, Athens has experienced a 25% increase in homelessness, and food kitchens are flourishing. Public sector jobs, wages and benefits have been slashed deeply. The human costs of this austerity program are only beginning to set in, while the cuts promise to retard Greece’s ability to raise tax revenue for both human services and debt repayment. The Greek government announced in April that it will seek an additional €3 billion in cuts. Currently, 6.7% of the declining Greek GDP goes to debt service, a figure inevitably growing as the economy shrinks and the cost of debt increases. These are the consequences facing a nation captured in the web of the EU, ECB and the IMF.
This is not merely extortion, but a wholesale commandeering of the Greek economy, and consequently, its political and social life. Recently, EU leaders demanded that the two predominant bourgeois parties of Greece meet and agree to continuing EU policy after the October, 2013 end of the PASOK government’s term. Dutifully, they met, though they could reach no agreement. Nonetheless, PASOK offered another €22 billion in cuts and tax increases to appease the EU lords of the manor.
But the EU game plan is not merely to bring Greece to its knees, but to steal its physical assets. The EU is demanding a fire sale of public assets, a massive privatization of the shared wealth of Greek society. So far, the appeasing PASOK government has entertained a €71 billion sell-off, with ports, airports, transport, power, water, motorways, gambling companies and telecommunications under consideration for heavily discounted sale to foreign investors. While this might momentarily appease the financial vultures, the massive loss of future revenue to the Greek government will only further cripple the Greek economy.
With glee, the IMF has noted that there is additionally a potential €200-300 billion of Greek property available for pillage, including the Olympic facilities and military properties. Will the Parthenon be next?
Greece has not known such domination by foreign powers since the Nazi occupation. As then, the only option is resistance.
Like a Nazi “Reichsbevollmächtigter,” the plenipotentiary of the EU is currently debating Greece’s fate. Understanding that Greece will be unable to pay or refinance the €66 billion in loans that will come due in 2012 (foreign bank lending to Greece declined 19% in 2010), the leaders are debating the best way to pick over the bones of the Greek economy. On one hand, the ECB threatens to cut off Greek banks (they borrowed €88 billion from the ECB in March) if the government attempts to modify its debt in any way. On the other hand, the euro-powerhouses, Germany and France, endorse loan restructuring in lieu of an additional bailout as requested by the Greek government. Neither option treats Greece as other than a satrapy.
The Other Captive Nations?
For the mainstream media, the enslavement of Greece is simply an aberration, a condition invited by Greek irresponsibility or a tragedy loosed by the gods of mythology. In reality, Greece’s plight is clearly the model for the other weak sisters in the EU. Ireland accepted a bailout that came with austerity provisos that mirrored Greece’s package and resulted in a dramatic decline in Irish living standards. With over a hundred billion euros in non-performing loans, a total that grew substantially from 2009, Irish banks continue to hang by a thread, inviting further extortionate intervention by the EU. They borrow even more than Greek banks from the ECB. And the yield on Irish bonds is 7.5% - a record level – above comparable German bonds. More austerity looms.
Portugal’s economy is reeling with at least a 2% annual decline in GDP projected for this and next year thanks to a severe austerity program. A €78 billion EU bailout is forthcoming, assuredly with further austerity and privatization demands from the EU lords. At the same time, Portugal is in the midst of a severe political crisis.
Spain, the next country in the sights of international financial predators, is also politically shaky with recent municipal elections rocking the ruling party. Spain’s 21% unemployment and stagnant economy thwart the country’s ability to contain and reduce its debt. While Spanish national debt trails the other three countries as a percentage of GDP, it is widely known that much Spanish regional and municipal debt has been hidden, unreported in official figures. The ruling “Socialist” Party has embarked on a severe preemptive program of budget cuts, layoffs, flexible work rules and other austerity measures that will only hasten the EU wolves to Spain’s door.
Even Italy, one of the old-guard members of the EU, may prove to be a candidate for captive-nation status. On May 20, Standard and Poor’s lowered the Italian public debt - $1.9 trillion – to negative status.
Resistance, not Collaboration
Facing captive nation or neo-colonial status imposed by their northern neighbors and the EU administration, the southern European countries have no option but to resist. Social democratic and conservative parties offer no road but collaboration. Like their Nazi-era predecessors, these Vichy-like leaders attempt to appease their masters while quelling the rising of the people. Trapped in the neo-liberal bubble and with no alternative vision, they enable the developed European powers to achieve the domination that the fascists of the last century sought through military means.
Resistance, however, means refusing the terms and conditions imposed by great powers. It means ignoring the debt – placing it aside, isolated from national accounts, as the “too big to fail” international banks did at the height of the crisis. It means threatening default if national sovereignty is not respected.
Resistance means rejecting the undemocratic nature of the EU and its institutions. If this means leaving the euro-zone and the imperious rule of the ECB, then captive nations should well entertain this option.
Resistance means formulating a new vision of a democratic, peoples’ Europe free from the domination of capital and elite rule. Of course this is a vision that projects socialism as the ultimate goal of rational, humane social relationships.
In Greece, this project is borne by the peoples’ movement of PAME and the militants of the Greek Communist Party. They, like their counterparts in the resistance to Nazi occupation, stand resolutely against the EU political and economic “occupiers,” rallying the masses to fight collaboration.
In Portugal and Spain, mass movements of workers and youth have taken to the streets in defiance of the bankruptcy of social democracy and the pain of EU-imposed austerity bringing joblessness and poverty. Hopefully, class-based organizations and Communists will continue to struggle to provide a visionary focus to their anger.
Those of us who stand in solidarity with the emerging European resistance should heed their experience. The wolves of financial predation are at our doors, too. The debt scam – the principal weapon of ruling class warfare today – threatens all of us.
Zoltan Zigedy
zoltanzigedy@gmail.com
It is likely that the bumbling Ford misread his cues or suffered a brain lock since he had earlier signed a proclamation designating the week beginning July 13, 1975 as “Captive Nations Week.” Breaking with the unity of thought that ruling elites fight so hard to establish is not easily forgiven, even if it is inadvertent.
Despite the end of the Cold War, sacred and unassailable truths still are a fixture of US political discourse: politicians are not allowed to mention that the Cuban people overwhelmingly support their government; the plight of the Palestinian people – their suffering and hardships – must remain unspoken at all costs; the charge of terrorism must include and be confined to acts against imperialism; and private ownership of assets is always to be preferred over public ownership. These are theological commandments in a country that trumpets its commitment to freedom of thought.
The Real Captive Nations
Though the notion of “captive nations” was one of those ridiculous ideas born from the malignant minds of Cold Warriors, there is no better time than today to find it a precise and appropriate application. Its aptness is one of those sublime ironies that would make the old master, Karl Marx, smile.
In the wake of the most destructive waves of the economic crisis, most nations were left with extraordinary public debt. Bailouts, stimulative spending, and substantially reduced revenues pushed public debt loads dramatically higher, excepting those few countries with sufficient reserves. In a real sense, the assumption of debt was the prescription – the only prescription – for surviving an accelerating mortal spiral of the capitalist system.
But in a capitalist country in the web of a global capitalist system, debt is shorthand for an intimate relationship between borrowers and lenders, a relationship that is easy prey for international banks, hedge funds, and the global enforcers of capitalism, the International Monetary Fund and the World Bank.
The group of weaker, less developed countries of the European Union was one of the most vulnerable targets of financial predation. When the Union was formed in 1993 from the European Economic Community, Ireland, Spain, Portugal, and Greece were late comers and poor sisters to the more highly developed countries of the EU like West Germany, France, Italy and the other northern neighbors that founded the EEC. There was enormous pressure for these countries to achieve a “European” level of development and living standards. By membership, they gained open markets and access to capital. Their relatively low wages gave them somewhat of a competitive advantage within the Union. Despite this “advantage,” they remained the underachievers of Europe – more the quaint vacation destinations for the rich than economic titans.
With the creation of a single currency, the euro, in 1999, and the establishment of the European Central Bank, economic relations between members were reordered. The common currency forced the surrender of individual sovereignty over monetary policy, eliminating an individual state’s ability to adjust exchange rates against other currencies. Further, euro-zone participation was predicated on a strict set of economic (neo-liberal) parameters established by the Treaty of Maastricht. Regulatory constraints were imposed as well. In effect, countries surrendered a great measure of their sovereignty to be a part of the super-state, the EU, the weaker economies surrendering their fate to the economic super-powers of Northern Europe.
For the less developed, membership in the euro-zone was an opportunity for conservative governments to impose neo-liberal changes, justified by the promised prosperity enjoyed by the wealthier member states.
Ireland granted subsidies, lowered corporate taxes and taxes on the wealthy to draw multi-nationals to exploit an educated, but low wage working class. Greece sold off public assets to the tune of 11.1% of GDP between 1998 and 2003. Both were hailed as exemplary team players.
Only Communists and the anti-capitalist left foresaw danger in surrendering sovereignty to the dominant powers in the EU.
With the full blast of economic crisis in 2008, all of the EU-based hopes were dashed. Catching up was off the table and survival was the business at hand. Ireland’s unregulated banks had piled up huge debts, necessitating massive government-funded bailing. The Iberian construction boom fizzled, leaving mountains of debt and massive unemployment.
But Greece was the special case. When the newly elected PASOK government revealed in 2009 that the budget deficit was twice what the previous government had claimed – no doubt for political reasons – the financial predators descended upon the country. Like a pack of wolves attacking the weakest, most vulnerable of the herd, international bankers, equity firms and hedge funds began to bet against Greek debt management, driving the cost of borrowing sky high. They speculated with credit default swaps and against credit default swaps, establishing an upward swing in the costs of financing and re-financing debt and a downward swing in credit ratings. These swings invited further speculation and a further worsening of Greece’s debt position.
Financial writers purposefully overlook these waves of aggression, lest they reveal the continued existence of rampant speculative capital, the very element that brought the global economy down. Instead, they write of Greek corruption, profligacy and financial irresponsibility.
In truth, Greece was the victim of international banks, equity firms and hedge funds - a financial mugging that brought the country to the brink of debt default in May of 2010. And under the guidance of a social democratic government, a government wedded to neo-liberal policies, Greece surrendered unconditionally to the rule of the EU, the ECB and the IMF, accepting a bailout of €110 billion. Greece became a captive nation.
As a condition of EU and IMF servitude, Greece was forced to accept an austerity program that, apart from incalculable human misery, brought the economy down, sinking into depression. Greece is, indeed, a captive nation.
The New York Times reported on May 16 that unemployment in Greece is approaching 15%, cement production is down 60% since 2006, steel production is down in the last two years, Athens has experienced a 25% increase in homelessness, and food kitchens are flourishing. Public sector jobs, wages and benefits have been slashed deeply. The human costs of this austerity program are only beginning to set in, while the cuts promise to retard Greece’s ability to raise tax revenue for both human services and debt repayment. The Greek government announced in April that it will seek an additional €3 billion in cuts. Currently, 6.7% of the declining Greek GDP goes to debt service, a figure inevitably growing as the economy shrinks and the cost of debt increases. These are the consequences facing a nation captured in the web of the EU, ECB and the IMF.
This is not merely extortion, but a wholesale commandeering of the Greek economy, and consequently, its political and social life. Recently, EU leaders demanded that the two predominant bourgeois parties of Greece meet and agree to continuing EU policy after the October, 2013 end of the PASOK government’s term. Dutifully, they met, though they could reach no agreement. Nonetheless, PASOK offered another €22 billion in cuts and tax increases to appease the EU lords of the manor.
But the EU game plan is not merely to bring Greece to its knees, but to steal its physical assets. The EU is demanding a fire sale of public assets, a massive privatization of the shared wealth of Greek society. So far, the appeasing PASOK government has entertained a €71 billion sell-off, with ports, airports, transport, power, water, motorways, gambling companies and telecommunications under consideration for heavily discounted sale to foreign investors. While this might momentarily appease the financial vultures, the massive loss of future revenue to the Greek government will only further cripple the Greek economy.
With glee, the IMF has noted that there is additionally a potential €200-300 billion of Greek property available for pillage, including the Olympic facilities and military properties. Will the Parthenon be next?
Greece has not known such domination by foreign powers since the Nazi occupation. As then, the only option is resistance.
Like a Nazi “Reichsbevollmächtigter,” the plenipotentiary of the EU is currently debating Greece’s fate. Understanding that Greece will be unable to pay or refinance the €66 billion in loans that will come due in 2012 (foreign bank lending to Greece declined 19% in 2010), the leaders are debating the best way to pick over the bones of the Greek economy. On one hand, the ECB threatens to cut off Greek banks (they borrowed €88 billion from the ECB in March) if the government attempts to modify its debt in any way. On the other hand, the euro-powerhouses, Germany and France, endorse loan restructuring in lieu of an additional bailout as requested by the Greek government. Neither option treats Greece as other than a satrapy.
The Other Captive Nations?
For the mainstream media, the enslavement of Greece is simply an aberration, a condition invited by Greek irresponsibility or a tragedy loosed by the gods of mythology. In reality, Greece’s plight is clearly the model for the other weak sisters in the EU. Ireland accepted a bailout that came with austerity provisos that mirrored Greece’s package and resulted in a dramatic decline in Irish living standards. With over a hundred billion euros in non-performing loans, a total that grew substantially from 2009, Irish banks continue to hang by a thread, inviting further extortionate intervention by the EU. They borrow even more than Greek banks from the ECB. And the yield on Irish bonds is 7.5% - a record level – above comparable German bonds. More austerity looms.
Portugal’s economy is reeling with at least a 2% annual decline in GDP projected for this and next year thanks to a severe austerity program. A €78 billion EU bailout is forthcoming, assuredly with further austerity and privatization demands from the EU lords. At the same time, Portugal is in the midst of a severe political crisis.
Spain, the next country in the sights of international financial predators, is also politically shaky with recent municipal elections rocking the ruling party. Spain’s 21% unemployment and stagnant economy thwart the country’s ability to contain and reduce its debt. While Spanish national debt trails the other three countries as a percentage of GDP, it is widely known that much Spanish regional and municipal debt has been hidden, unreported in official figures. The ruling “Socialist” Party has embarked on a severe preemptive program of budget cuts, layoffs, flexible work rules and other austerity measures that will only hasten the EU wolves to Spain’s door.
Even Italy, one of the old-guard members of the EU, may prove to be a candidate for captive-nation status. On May 20, Standard and Poor’s lowered the Italian public debt - $1.9 trillion – to negative status.
Resistance, not Collaboration
Facing captive nation or neo-colonial status imposed by their northern neighbors and the EU administration, the southern European countries have no option but to resist. Social democratic and conservative parties offer no road but collaboration. Like their Nazi-era predecessors, these Vichy-like leaders attempt to appease their masters while quelling the rising of the people. Trapped in the neo-liberal bubble and with no alternative vision, they enable the developed European powers to achieve the domination that the fascists of the last century sought through military means.
Resistance, however, means refusing the terms and conditions imposed by great powers. It means ignoring the debt – placing it aside, isolated from national accounts, as the “too big to fail” international banks did at the height of the crisis. It means threatening default if national sovereignty is not respected.
Resistance means rejecting the undemocratic nature of the EU and its institutions. If this means leaving the euro-zone and the imperious rule of the ECB, then captive nations should well entertain this option.
Resistance means formulating a new vision of a democratic, peoples’ Europe free from the domination of capital and elite rule. Of course this is a vision that projects socialism as the ultimate goal of rational, humane social relationships.
In Greece, this project is borne by the peoples’ movement of PAME and the militants of the Greek Communist Party. They, like their counterparts in the resistance to Nazi occupation, stand resolutely against the EU political and economic “occupiers,” rallying the masses to fight collaboration.
In Portugal and Spain, mass movements of workers and youth have taken to the streets in defiance of the bankruptcy of social democracy and the pain of EU-imposed austerity bringing joblessness and poverty. Hopefully, class-based organizations and Communists will continue to struggle to provide a visionary focus to their anger.
Those of us who stand in solidarity with the emerging European resistance should heed their experience. The wolves of financial predation are at our doors, too. The debt scam – the principal weapon of ruling class warfare today – threatens all of us.
Zoltan Zigedy
zoltanzigedy@gmail.com
Tuesday, May 24, 2011
The Clash of Egos
What the voters wanted was unquestionably significant change. What they were promised was change. Whether change will come from the Obama administration is - at best - questionable….
And every indication is that the Obama administration will continue down the path of advancing imperial interests and privileging corporate America.” ZZ’s Blog, 11-06-08
"Has Obama betrayed his progressive promise? Obama never made a progressive promise. The idea of Obama as a water-bearer for liberal or progressive reform came not from Obama's mouth, but from the sheer wishes and dreams of the left…"
In fairness, Obama has betrayed no one. His vast centrist following and the Democratic Party old-guard have shown no fear of Obama's perceived "progressive" agenda, an agenda that appears to be more and more in the minds of a self-deluding left. ZZ’s Blog, 12-09-08
Liberals and the celebrity left are in a catfight over their relationship to the Obama Administration and it’s not a pretty thing. Chris Hedges stirred the pot recently with an interview of Cornel West on Truthdig, augmented with his own angry voice, denouncing Obama: The Obama Deception: Why Cornel West Went Ballistic. The interview circulated widely on the internet, generating discussion and controversy like few other internet commentaries.
Hedges postures the Obama “deception” as a Shakespearean tragedy and West depicts it as a personal affront. While many of my left brothers and sisters have hailed this personal mea culpa and attack on Obama as welcome, joining those sending the interview far and wide, they have only added to the tiresome finger pointing that advances our struggles very little.
West earns no thanks for placing the character flaws of the current President, as he reveals them, at the center of the political universe. It is especially embarrassing that he cites the personal slights – the absence of inaugural tickets, missing handshakes, unreturned phone calls, official jabs – as the fulcrum of his argument.
It really is not about Cornel West.
At one point, Hedges senses that the interview has gotten too personal. He writes: “But there was also the betrayal on the political and ideological level.” Yet a few lines later, he returns to the personal: “Obama and West’s last personal contact took place a year ago at a gathering of the Urban League when, he says, Obama ‘cussed me out.’”
In its essence, the interview is an indulgence in Cornel West’s personal pique -- a People magazine-style profile breathlessly hanging on the words of one of our “stars.” If Obama had proved to be everything that the “hopey-changey” left had forecast, West’s complaints would now be viewed as they are: an irrelevant exercise in self-indulgence. This interview is unbecoming of Chris Hedges, who has shown a deep understanding of the issues and has put his own body on the line to stop the war and fight corporate power.
Predictably, The Nation magazine – the most prominent periodical on the left and an early champion of the Obama-as-savior perspective – unleashed its star TV-commentator upon the Hedges/West interview (Cornel West v. Barack Obama, The Nation blog). Melissa Harris-Perry grasped the opportunity afforded by West’s “ballistic” personal tirade and lunched on West’s celebration of self-worth. She wrote: “I can tell the difference between a substantive criticism and a personal attack. It is clear to me that West’s ego, not the health of American democracy, is the wounded creature in this story.”
While establishing her own modest, tepid criticisms of the Obama administration, she further charges West with an unholy alliance with TV personality Tavis Smiley, a counter-charge of the same irrelevance as West’s outburst.
What do we ask of those who promoted the mistaken view that Barack Obama was the second-coming of FDR? Do we want a public tirade denouncing Obama? Do we expect a period of self-flagellation or contrition? Should those who eagerly signed onto “Progressives for Obama” be taken to the woodshed?
None of these options shows even a measure of political maturity. The battle then, and the battle now, is a battle of ideas and not personalities. Revealingly, the exchange between Hedges/West and Harris-Perry says little about the way forward. Absorbed in a clash of celebrity egos, they are more intent on settling scores than mapping a way to mount a counter-offensive to the relentless advances of monopoly capital.
A left constructed on wishful thinking and opportunistic campaign promises is little better than a right based upon fantasy and eighteenth-century dogma. But it is not helpful to promote the cult of personality that has become so prevalent in our culture.
In today’s climate, charges of “betrayal” or “deception” are hollow. They reflect a misreading of the history and social role of monopoly capital and its bankrupt two-party system; they obscure the deep mechanisms that sustain the capitalist system. We desperately need acts of resistance and not web battles between our luminaries.
For those who want to go beyond the trivial, beyond the wars on the web, the road is clear: look at what our brothers and sisters are at this moment doing in Greece, Portugal and Spain. Faced with the austerity that will soon visit the US, they are in the streets, anchored by militant labor movements that understand the stakes and confront the enemy: capital. It’s time for our own labor movement to go beyond electoral maneuvers and bring the fight to the streets in the US. We should help them figure out how to get there.
Zoltan Zigedy
zoltanzigedy@gmail.com
And every indication is that the Obama administration will continue down the path of advancing imperial interests and privileging corporate America.” ZZ’s Blog, 11-06-08
"Has Obama betrayed his progressive promise? Obama never made a progressive promise. The idea of Obama as a water-bearer for liberal or progressive reform came not from Obama's mouth, but from the sheer wishes and dreams of the left…"
In fairness, Obama has betrayed no one. His vast centrist following and the Democratic Party old-guard have shown no fear of Obama's perceived "progressive" agenda, an agenda that appears to be more and more in the minds of a self-deluding left. ZZ’s Blog, 12-09-08
Liberals and the celebrity left are in a catfight over their relationship to the Obama Administration and it’s not a pretty thing. Chris Hedges stirred the pot recently with an interview of Cornel West on Truthdig, augmented with his own angry voice, denouncing Obama: The Obama Deception: Why Cornel West Went Ballistic. The interview circulated widely on the internet, generating discussion and controversy like few other internet commentaries.
Hedges postures the Obama “deception” as a Shakespearean tragedy and West depicts it as a personal affront. While many of my left brothers and sisters have hailed this personal mea culpa and attack on Obama as welcome, joining those sending the interview far and wide, they have only added to the tiresome finger pointing that advances our struggles very little.
West earns no thanks for placing the character flaws of the current President, as he reveals them, at the center of the political universe. It is especially embarrassing that he cites the personal slights – the absence of inaugural tickets, missing handshakes, unreturned phone calls, official jabs – as the fulcrum of his argument.
It really is not about Cornel West.
At one point, Hedges senses that the interview has gotten too personal. He writes: “But there was also the betrayal on the political and ideological level.” Yet a few lines later, he returns to the personal: “Obama and West’s last personal contact took place a year ago at a gathering of the Urban League when, he says, Obama ‘cussed me out.’”
In its essence, the interview is an indulgence in Cornel West’s personal pique -- a People magazine-style profile breathlessly hanging on the words of one of our “stars.” If Obama had proved to be everything that the “hopey-changey” left had forecast, West’s complaints would now be viewed as they are: an irrelevant exercise in self-indulgence. This interview is unbecoming of Chris Hedges, who has shown a deep understanding of the issues and has put his own body on the line to stop the war and fight corporate power.
Predictably, The Nation magazine – the most prominent periodical on the left and an early champion of the Obama-as-savior perspective – unleashed its star TV-commentator upon the Hedges/West interview (Cornel West v. Barack Obama, The Nation blog). Melissa Harris-Perry grasped the opportunity afforded by West’s “ballistic” personal tirade and lunched on West’s celebration of self-worth. She wrote: “I can tell the difference between a substantive criticism and a personal attack. It is clear to me that West’s ego, not the health of American democracy, is the wounded creature in this story.”
While establishing her own modest, tepid criticisms of the Obama administration, she further charges West with an unholy alliance with TV personality Tavis Smiley, a counter-charge of the same irrelevance as West’s outburst.
What do we ask of those who promoted the mistaken view that Barack Obama was the second-coming of FDR? Do we want a public tirade denouncing Obama? Do we expect a period of self-flagellation or contrition? Should those who eagerly signed onto “Progressives for Obama” be taken to the woodshed?
None of these options shows even a measure of political maturity. The battle then, and the battle now, is a battle of ideas and not personalities. Revealingly, the exchange between Hedges/West and Harris-Perry says little about the way forward. Absorbed in a clash of celebrity egos, they are more intent on settling scores than mapping a way to mount a counter-offensive to the relentless advances of monopoly capital.
A left constructed on wishful thinking and opportunistic campaign promises is little better than a right based upon fantasy and eighteenth-century dogma. But it is not helpful to promote the cult of personality that has become so prevalent in our culture.
In today’s climate, charges of “betrayal” or “deception” are hollow. They reflect a misreading of the history and social role of monopoly capital and its bankrupt two-party system; they obscure the deep mechanisms that sustain the capitalist system. We desperately need acts of resistance and not web battles between our luminaries.
For those who want to go beyond the trivial, beyond the wars on the web, the road is clear: look at what our brothers and sisters are at this moment doing in Greece, Portugal and Spain. Faced with the austerity that will soon visit the US, they are in the streets, anchored by militant labor movements that understand the stakes and confront the enemy: capital. It’s time for our own labor movement to go beyond electoral maneuvers and bring the fight to the streets in the US. We should help them figure out how to get there.
Zoltan Zigedy
zoltanzigedy@gmail.com
Tuesday, May 17, 2011
A Phony Anti-War Movement?
In a recent radio commentary, Glen Ford, executive editor of the Black Agenda Report, lashed out at what he calls the “The Phony Anti-War Movement” (BAR, 5-3-11). Based on a comprehensive study conducted by two academic writers, Michael Heaney, of the University of Michigan, and Fabio Rojas, of Indiana University, Ford charges that “many of the folks that turned out in such large numbers to demonstrate against America’s wars when George Bush was president, were really only opposed to Republican wars. Thus, when Barack Obama captured the White House, the so-called anti-war movement largely collapsed.” The study, as well as Ford’s commentary, gives voice to what many of us on the left have felt for some time. In the US, during the Bush administration and prior to the 2008 election, the anti-war movement surfaced, grew, and gathered momentum. Subsequent to the election, the movement appeared to hesitate and immobilize.
Ford, one of the most incisive, principled, and uncompromising commentators on the left, adds that “United for Peace and Justice, UFPJ, the anti-war umbrella group during the height of protest, was behaving more as an arm of the Democratic Party than as principled peace activists. The shallowness of these phony anti-warriors was so obvious, UFPJ was widely derided as United for Peanut Butter and Jelly.” Thus, Ford paints both the leadership and many of the activists associated with the movement as “a cynical gathering of partisan Democrats.”
But are matters quite that simple? Should we cast the anti-war leadership and thousands of activists into the same barrel? Are there more complex reasons for the “sell-out” of the anti-war movement?
Surely many remember the dissolution of the anti-war movement of the sixties and seventies. Contrary to our recent experience, that movement grew massively during the tenure of a Democratic President and dissipated during the rule of the hated Nixon. Many attribute that “collapse” to the elimination of the draft, the winding down of direct US military involvement, and the shrinking of US casualty figures.
We might argue that in both cases – the Vietnam war and today’s endless twenty-first-century wars – the decline of anti-war activity was a victim of personalized, narrow commitment and shallow ideology. The earlier anti-war movement lost young people when their fate decoupled from the prosecution of the war and lost liberals when US surrogates took over combat and the US death toll dropped dramatically. The lessons of this period were not lost on the ruling class; the many wars preceding the “War on Terror” were fought with puppet fighters or the massing of vastly overwhelming power exercised by a volunteer military. The use of unmanned drones and other remote weaponry – favored by the Obama administration - draws on these lessons.
Similarly, our era’s anti-war movement reflected growing military setbacks and rising casualty figures. More than the organizing skills of the official leadership, the imagery of a solitary mother of a dead soldier stalking George Bush energized the movement. Cindy Sheehan was effectively the inspirational leader of the movement. Other family members of US casualties added their voices, dramatizing the horrors of war inflicted upon US families.
Cindy Sheehan, through her activism, grew to understand the role of the US in world affairs, especially the effects of US aggression upon its victims and the interests served by these attacks. She began to see the historical patterns and connections that reveal the real nature of US foreign policy. In short, she acquired an anti-imperialist consciousness.
Sadly, this understanding has not sunk deep roots in the US peace movement since the wholesale destruction of the left in the McCarthy era. Consequently, the bulwark of anti-imperialist resistance has been the distant victims of US intervention and not the folks on the imperialist home front. They have risen when things went badly, when aggression proved costly, when the consequences of US imperialism began to touch people personally. It is only then that opposition to war becomes a mass movement. Undoubtedly this sentiment, when it arises, plays a key role in stopping US predatory wars, but it should not be confused with anti-imperialism.
Without anti-imperialism at its core, anti-war movements in the US are destined to only activate masses when the horrors of war are brought home. “Successful” assaults on the interests, lives, and dignity of other peoples will likely be met with passivity, even applause, when they are wrapped in the cause of “democracy” or deposing a demonized “tyrant.” We saw this in Angola, Grenada and Yugoslavia. And we see this today in Cuba, Venezuela, Bolivia, Syria, Libya, Peoples Democratic Republic of Korea, Iran and many other countries.
Of course the ultimate source of this profound weakness is a political system – a two-party charade - that resolutely denies that the US is an imperialist power. Indeed, both parties actively and openly advocate for US imperialism. They make no concession to those standing in the way of US corporate interests or seeking their own path of development. While progressives may have hopefully thought they heard Obama and the Democrats say they were anti-war, they really heard that Obama and the Democrats were determined to drop direct and risky military involvement in the costly Iraq occupation and re-direct it to Afghanistan. It was undisguised in the campaign speeches and clearly stated in the Democratic platform. In other words, the Democrats resolved to deliver imperialism at a cost more agreeable to the US public.
With the presumptive “people’s” party fully committed to the imperialist agenda and a corporate media slavishly cheerleading for the same, it is only independent progressives and the left – the political outliers - who can lead the US public away from complicity with imperial aggression. They – and they alone – can provide the leadership that will educate and organize the US peace movement to be more than a response to mounting US casualties, military setbacks, and a useful tool for Democratic Party politicians.
Glen Ford’s scathing condemnation of much of the prominent recent leadership of the peace movement is well deserved. They failed to elevate the anti-war program to include a deeper understanding of imperialist aggression. In the interest of “breadth” and “unity,” they assiduously excluded many causes associated with US intervention or complicity, arguing that these issues might offend feckless liberals and middle class sensibilities. Principles were sacrificed for an elusive broad appeal. Whether the leaders were web warriors masking Democratic Party partisanship or struggle-in-the-streets “radicals” seeking some kind of soulless popular front is irrelevant. They allowed electoral politics to trump resistance; they bet everything on the 2008 election. The “success” of this effort was the creation of a movement shallow in commitment and thin in ideology, a movement easily hijacked by the Democratic Party.
Fortunately, there are organizations, like the United National Antiwar Committee (UNAC) and many national, regional and local committees, which are continuing the battle to end, not just Bush’s wars, but Obama’s wars as well. They share an independence of the two parties as well as a core understanding of the imperialist character of US foreign policy. While others wait for the Administration to have a change of heart, they continue to organize and agitate against policies that are costing thousands of lives to project US capitalism throughout the world. No one is excluded from these organizations or actions, but no one’s resolve against imperialism is muffled, either. When the imperial program is again perceived by the public as failing – which it will – they will be there to build a more militant, principled mass movement. Hopefully, next time will be different.
Zoltan Zigedy
zoltanzigedy@gmail.com
Ford, one of the most incisive, principled, and uncompromising commentators on the left, adds that “United for Peace and Justice, UFPJ, the anti-war umbrella group during the height of protest, was behaving more as an arm of the Democratic Party than as principled peace activists. The shallowness of these phony anti-warriors was so obvious, UFPJ was widely derided as United for Peanut Butter and Jelly.” Thus, Ford paints both the leadership and many of the activists associated with the movement as “a cynical gathering of partisan Democrats.”
But are matters quite that simple? Should we cast the anti-war leadership and thousands of activists into the same barrel? Are there more complex reasons for the “sell-out” of the anti-war movement?
Surely many remember the dissolution of the anti-war movement of the sixties and seventies. Contrary to our recent experience, that movement grew massively during the tenure of a Democratic President and dissipated during the rule of the hated Nixon. Many attribute that “collapse” to the elimination of the draft, the winding down of direct US military involvement, and the shrinking of US casualty figures.
We might argue that in both cases – the Vietnam war and today’s endless twenty-first-century wars – the decline of anti-war activity was a victim of personalized, narrow commitment and shallow ideology. The earlier anti-war movement lost young people when their fate decoupled from the prosecution of the war and lost liberals when US surrogates took over combat and the US death toll dropped dramatically. The lessons of this period were not lost on the ruling class; the many wars preceding the “War on Terror” were fought with puppet fighters or the massing of vastly overwhelming power exercised by a volunteer military. The use of unmanned drones and other remote weaponry – favored by the Obama administration - draws on these lessons.
Similarly, our era’s anti-war movement reflected growing military setbacks and rising casualty figures. More than the organizing skills of the official leadership, the imagery of a solitary mother of a dead soldier stalking George Bush energized the movement. Cindy Sheehan was effectively the inspirational leader of the movement. Other family members of US casualties added their voices, dramatizing the horrors of war inflicted upon US families.
Cindy Sheehan, through her activism, grew to understand the role of the US in world affairs, especially the effects of US aggression upon its victims and the interests served by these attacks. She began to see the historical patterns and connections that reveal the real nature of US foreign policy. In short, she acquired an anti-imperialist consciousness.
Sadly, this understanding has not sunk deep roots in the US peace movement since the wholesale destruction of the left in the McCarthy era. Consequently, the bulwark of anti-imperialist resistance has been the distant victims of US intervention and not the folks on the imperialist home front. They have risen when things went badly, when aggression proved costly, when the consequences of US imperialism began to touch people personally. It is only then that opposition to war becomes a mass movement. Undoubtedly this sentiment, when it arises, plays a key role in stopping US predatory wars, but it should not be confused with anti-imperialism.
Without anti-imperialism at its core, anti-war movements in the US are destined to only activate masses when the horrors of war are brought home. “Successful” assaults on the interests, lives, and dignity of other peoples will likely be met with passivity, even applause, when they are wrapped in the cause of “democracy” or deposing a demonized “tyrant.” We saw this in Angola, Grenada and Yugoslavia. And we see this today in Cuba, Venezuela, Bolivia, Syria, Libya, Peoples Democratic Republic of Korea, Iran and many other countries.
Of course the ultimate source of this profound weakness is a political system – a two-party charade - that resolutely denies that the US is an imperialist power. Indeed, both parties actively and openly advocate for US imperialism. They make no concession to those standing in the way of US corporate interests or seeking their own path of development. While progressives may have hopefully thought they heard Obama and the Democrats say they were anti-war, they really heard that Obama and the Democrats were determined to drop direct and risky military involvement in the costly Iraq occupation and re-direct it to Afghanistan. It was undisguised in the campaign speeches and clearly stated in the Democratic platform. In other words, the Democrats resolved to deliver imperialism at a cost more agreeable to the US public.
With the presumptive “people’s” party fully committed to the imperialist agenda and a corporate media slavishly cheerleading for the same, it is only independent progressives and the left – the political outliers - who can lead the US public away from complicity with imperial aggression. They – and they alone – can provide the leadership that will educate and organize the US peace movement to be more than a response to mounting US casualties, military setbacks, and a useful tool for Democratic Party politicians.
Glen Ford’s scathing condemnation of much of the prominent recent leadership of the peace movement is well deserved. They failed to elevate the anti-war program to include a deeper understanding of imperialist aggression. In the interest of “breadth” and “unity,” they assiduously excluded many causes associated with US intervention or complicity, arguing that these issues might offend feckless liberals and middle class sensibilities. Principles were sacrificed for an elusive broad appeal. Whether the leaders were web warriors masking Democratic Party partisanship or struggle-in-the-streets “radicals” seeking some kind of soulless popular front is irrelevant. They allowed electoral politics to trump resistance; they bet everything on the 2008 election. The “success” of this effort was the creation of a movement shallow in commitment and thin in ideology, a movement easily hijacked by the Democratic Party.
Fortunately, there are organizations, like the United National Antiwar Committee (UNAC) and many national, regional and local committees, which are continuing the battle to end, not just Bush’s wars, but Obama’s wars as well. They share an independence of the two parties as well as a core understanding of the imperialist character of US foreign policy. While others wait for the Administration to have a change of heart, they continue to organize and agitate against policies that are costing thousands of lives to project US capitalism throughout the world. No one is excluded from these organizations or actions, but no one’s resolve against imperialism is muffled, either. When the imperial program is again perceived by the public as failing – which it will – they will be there to build a more militant, principled mass movement. Hopefully, next time will be different.
Zoltan Zigedy
zoltanzigedy@gmail.com
Wednesday, May 4, 2011
Crisis of Capitalism: Act II
When, in the last few weeks, insiders and economists like Jeffrey Sachs and David Stockman – not noted for their radical postures – decry the state of the economy and the direction of policies, all of us should take note.
Sachs, one of the fathers of neo-liberal “shock therapy,” recently cited decades-long stagnant wages and obscene levels of inequality: “We’ve reached the greatest income [and] wealth inequality in history… This is a new ‘Robber Baron’ era, of course.” He went on to say “…the people at the top buy the politicians… All of them – all parties. Everyone is in the hands of the super wealthy.” (Interviewed by Aaron Task, Tech Ticker, Yahoo! Finance).
In a similar vein, David Stockman, former director of the Office of Management and Budget under the Reagan Presidency, ripped the “crony capitalism” that has changed “capital markets into a rip-roaring casino that really is not productive for the real main street economy and is generating windfall gains for a very limited number of people to no good purpose…” He sees ordinary folks trying to save in this environment as “savaged” by Federal Reserve and government policies. (Interviewed by Peter Gorenstein, Daily Ticker, Yahoo! Finance).
These gloomy, critical views stand in stark contrast to the generally up-beat, optimistic reports and forecasts that usually flow from policy makers and dominate the media today. For the experts and pundits, the crisis has passed and we are on the way – though, they concede, tentatively – to recovery.
In truth, our modern-day Pollyannas mistake the first act for the entire play. While our economy may not be on the edge of a precipice, the problems that placed the world economy near collapse have only been displaced, pushed forward or swept aside. Even an arch advocate of capitalism such as Vincent Reinhard, senior fellow at the conservative American Enterprise Institute, understands this: “After a severe financial crisis, we [tend to] get a severe recession, slower recovery and subpar expansion… Denial is a standard feature of financial crises…" (Interviewed by Stacy Curtin, Daily Ticker, Yahoo! Finance).
A closer look at the economy – an up-to-date report card from a Marxist perspective – is surely in order.
Gross Domestic Product
The broadest conventional measure of national and international economic performance remains GDP growth. Laden with the assumptions fundamental to the continued functioning of the capitalist economic engine, it valorizes all that is considered important to the ownership class and its continued accumulation of capital. Conversely, if an enormous human asset, such as the addition of one year of life span, were added to every person in the US, that value would not show up in the annual GDP figures except insofar as it generated commercial economic activity. Yet, as biased as the GDP growth figures are, their trend does reflect something real – the prospect of capitalism’s sustainability.
The first quarter figures for 2011 show a tepid US annual GDP growth of 1.8% from January through March. Pundits posture this as an aberration, a momentary stumble; but the trend line from the last quarter of 2009 is decidedly downward, in step with the drying up of stimulus funds. Nonresidential fixed investment has followed the same downward trajectory since its highpoint in the second quarter of 2010, even with spending on equipment and software leaping 11.6% this past quarter.
Likewise, export growth rates – touted by the experts as a leading force of recovery -- show the same downward trend from the level reached in the last quarter of 2009. Despite the Federal Reserve’s shrinking-dollar policy to sustain the rate of export growth, it is now falling below earlier levels of growth. Given that refined oil-based products account for the second largest component of export value and that the dollar value of these exports is highly inflated by the rising cost of oil, export growth calculated in dollars is exaggerated in the official numbers.
Further suggestive of foul weather ahead, the February GDP report for Canada – the US’s leading export destination by far – demonstrated an actual decline of .2%. It is hard to imagine robust export growth ahead, with a stagnant Canadian economy.
The growth rate of government spending – the sole factor preventing the economy from falling over the cliff at the height of the crisis – is now in negative territory and falling rapidly. The debt hysteria gripping local, state and federal officials produced budget cuts that are only now beginning to affect the GDP and other key economic indicators. Their influence on key factors – employment, incomes, consumer spending, etc. – will be felt more dramatically and negatively in the months and years to come.
Consumer spending continues its modest growth from its decline in the depths of the crisis. Its sustainability is in question, however, given that wages failed to keep up with inflation in the first quarter of 2011. This suggests that consumer debt and shrinking savings will again be the source of consumption growth, a condition ominously reminiscent of the pre-crisis period.
Internationally, GDP growth shows the same downward trend in nearly all the developed capitalist world, particularly the European Union. For those countries that have surrendered their sovereignty to the International Monetary Fund and the European Union – Greece, Ireland, and Portugal – the decline is far more dramatic. In the case of Greece, compliance with the austerity hawks has been catastrophic, with four successive quarters of losses greater than an annualized rate of 5%. PRChina and many emerging markets, on the other hand, have sustained high growth rates for diverse reasons, ranging from rational planning to irrational investment bubbles.
Profits, Productivity and Employment
Profit growth in the US – the fuel for a capitalist economy – has sprung back sharply from its nadir in the last quarter of 2008. Accelerating rapidly from that point, growth has stabilized over the last year at a rate commensurate with the pre-crisis period. Pundits hail the growth of profits in the manufacturing sector, a factor that has now reached about 90% of its pre-crisis level of production. But they fail to ask how profit growth can be so strong with less production and capacity utilization well below pre-crisis levels. The answer lies in a sharp increase in the rate of labor exploitation, expressed as intensified labor productivity. Labor productivity drove the explosion of profits after the 2008 collapse, settling at a level above historic averages. Put bluntly, the restoration of profitability came at the expense of an increasingly sweated, shrunken workforce.
Two factors opened the door to profit restoration: a weak, class-collaborationist labor movement, unwilling to confront capital, and the high rate of unemployment sowing fear throughout the workforce – what Marx called “the reserve army of labor.” With little organized fight for a larger share of the surplus and generalized fear of job loss among the working class, intensified exploitation was readily available to the capitalist class.
Nonetheless, the trend in labor productivity, like the trend in profitability, is downward, suggesting strongly that the crisis has failed to wring from the economy the long-term tendency for the rate of profit to decline–the theoretical basis for the Marxist theory of crisis.
With private sector labor productivity losing momentum, capital has turned to the service sector, primarily public goods and services, as a target for countering slowing profitability and surplus accumulation. The current attack on public employees’ rights, wages, salaries and benefits marks this tactical shift. With weak unions, disunity and nearly non-existent class consciousness, the private labor market is virtually elastic – capitalism can dictate the terms and conditions of labor. State-monopoly capital cannot tolerate a relatively inelastic public sector labor market with high union density, firm contracts and stable standards of living alongside a nearly enslaved private sector. Hence, it has launched an all-out assault on public sector workers, organized by capital’s minions in both political parties. While they cannot outsource police, firemen, and other face-to-face employees, they can break their unions. Of course, this initiative is done under the transparent ruse of debt reduction.
Another alarming sign emerging from the profit picture is the return of financials as the leading force in US profit growth. While non-financial profits lost steam at the end of 2010, profits from the financial sector jumped dramatically. By the end of 2010, financial profits achieved the same percentage of total domestic profits as they did in 2005. Clearly, speculation and financial maneuvers have ominously returned to the main stage in the US economy. For example, hedge funds have been increasing their CDS bets against Japanese debt, doubling the notional value of swaps made over the last year. Millions were made with the recent natural disaster and nuclear crisis. Debt speculation is an active agent in amplifying the volatility of European debt.
While supporters and critics of Administration policies wring their hands over the persistently high rate of unemployment, massive layoffs -- reducing the labor force dramatically faster than economic activity – was the key factor in restoring profitability and increasing asset value as expressed by equity markets. It would be naïve not to see unemployment as a capitalist tool of capitalist recovery, a tool that the ownership class is reluctant to surrender.
Much has been made of recent drops in the official monthly unemployment rates. Critics are quick to correctly note that these declines also reflect people who have left the workforce, people who are “discouraged” and statistically disappeared.
Perhaps a more realistic measure of the employment consequences of the crisis comes from examining the employment-to-population ratios and the labor participation rates compiled by the Bureau of Labor Statistics. The ratio of US employed to the total population has lost 4.5 points from its pre-crisis peak – a workforce loss of 13 to 14 million workers. When we add back those displaced but receiving unemployment compensation, we find a loss of 1.9 points in the labor participation rate, revealing 5 to 6 million workers officially disappeared – left without jobs or unemployment benefits. For these casualties of the crisis, savings, family support, food banks, social security, meager government aid, or the street are their only means of support. Unlike the politically biased official unemployment rates that obscure as much as they reveal, these grim BLS calculations offer little to celebrate.
Nor does the future of US employment appear bright. Over the last decade, US based multi-national corporations have added over two million jobs overseas while eliminating nearly 3 million here, a trend that will likely continue.
Running on Empty
Since the depths of the crisis over two and a half years ago, US policy makers have sought to stabilize and revive the critically wounded capitalist system. First, they offered a transfusion to the financial sector by injecting trillions of publicly obligated dollars into its lifeless body. Secondly, federal authorities cut away the gangrenous tissue infected by financial speculation – over a trillion dollars’ worth of fetid securities -- and placed it in the vaults of the Federal Reserve and Treasury, where it rests to this day. Thirdly, lawmakers agreed to an $800 billion stimulus package meant to restart the economy’s feeble heartbeat. After all these treatments, the economy remains in critical condition.
In mid-2010, the Federal Reserve recognized that these efforts to resuscitate a sickly economy were failing. Despite offering financial institutions and corporations virtually cost-free loans, the economy continued to respond sluggishly. The authorities acknowledged that the huge accumulated federal debt would eventually require higher interest rates to entice purchases of treasury securities to offset that debt. They understood that higher interest rates to secure the purchase of government debt would rebound through our financial institutions, driving all interest rates up and slowing borrowing. With lending drying up, they anticipated that the economy would slow down.
Thus, they sought to backstop this potential setback to recovery by embarking on a massive purchase of US treasury securities to maintain extremely low interest rates and ease any barriers to borrowers – essentially a rear-guard action dubbed Quantitative Easing II. As with the gangrenous financial securities, they purchased nearly $600 billion in government debt and locked it in the Federal Reserve vault, where it joins the garbage accumulated in the speculative frenzy that gave birth to the crisis. They hope to determine what they will do with it and the other “assets” at a later date.
Like most of the moves that flow from economic theories corrupted by wishful thinking and iron-clad confidence in capitalism, the Federal Reserve strategy produced consequences undesired. The huge infusion of dollars to purchase treasury securities cheapened the value of the dollar against other currencies. Imports, which outstrip the value of our exports to other countries, grew more costly to the US consumer; and inflation raised its ugly head, chewing away the living standards of working people. Further, many commodities, like oil, are traded internationally in dollars. With the value of dollars declining, pressure drove suppliers to raise prices to offset the falling buying power of the dollar, creating more inflationary pressure internationally. Moreover, rising interest rates in several countries inflated their currencies against the dollar as well, further affecting the costs of imported goods. These inflationary forces amplify the costs of other products, feeding an inflationary spiral. Despite unfounded optimism purveyed by the authorities and the media, inflation poses a serious threat to the economy and, especially, working class living standards. Those elements of the Consumer Price Index most relevant to working and poor people – fuel, health care, food, childcare, school fees, rent, etc – are those showing the most dramatic increase.
In addition, Federal Reserve policies failed in their mission. Though the cost of funding the US government debt is relatively stable, the cost of borrowing in the consumer arena continues to grow. Interest rates on mortgages, student loans, auto loans, etc. are on the rise. Again, QE II offered little relief to working people.
Prospects
Rather than a recovery, we are in Act II of a severe crisis of capitalism. It is not merely a financial crisis, a severe business-cycle trough or a radical imbalance, but a profound crisis of the capitalist system. Yes, there are imbalances, especially in the global economy. However, they are the effects and not the causes of this deep crisis. The advanced economies are scrambling to find solutions – individually – to the intractable problems of stagnation or decline, inflation, debt, intensified competition and failing economic institutions. These problems have fostered equally intractable political crises. Economic blocs, like the European Union, are under great stress from the diverse interests of the member states.
The emerging economies, on the other hand, are super-heated and threatened by the influx of speculative capital boiling over into severe eruptions of inflation and over-production.
As I argued some years ago, early in the crisis, the ephemeral era of capitalist cooperation – once called “globalization” – is over. Nation-states are going it alone, trying to find solutions to their immediate life-and-death issues, often at the expense of their global “partners.” Where they do find areas of limited cooperation, for example, in the aggression against Libya, their differences surface as well.
Years from now, when sober heads look back on the global crisis, they will recognize that the stability of PRChina, with its publicly owned banks and rational planning, did more to save the global economy from the brink than all of the bankrupt policy antics of the major capitalist powers. But there are more acts to come before the global capitalist economy finds firm ground.
What is missing from the maelstrom is for the working classes of all nations to move to center stage and demand solutions benefiting the vast majority. The Economist magazine, the voice of free markets since Marx’s time, reports that confidence in free markets has sunk by 21 percentage points internationally since 2002. Similarly, the Gallop Poll shows the confidence in banks and Congress is now at an all time low in the US. Only 23% of respondents have “a great deal of” or “a lot of” confidence in banks. The Congress scores even lower: a meager 11% share “a great deal of” or “a lot of” confidence in the US legislative branch. The crisis opens great opportunity to shape the world in a new direction, a direction that would not merely tame capitalism, but remove its destructive forces forever.
Zoltan Zigedy
zoltanzigedy@gmail.com
Sachs, one of the fathers of neo-liberal “shock therapy,” recently cited decades-long stagnant wages and obscene levels of inequality: “We’ve reached the greatest income [and] wealth inequality in history… This is a new ‘Robber Baron’ era, of course.” He went on to say “…the people at the top buy the politicians… All of them – all parties. Everyone is in the hands of the super wealthy.” (Interviewed by Aaron Task, Tech Ticker, Yahoo! Finance).
In a similar vein, David Stockman, former director of the Office of Management and Budget under the Reagan Presidency, ripped the “crony capitalism” that has changed “capital markets into a rip-roaring casino that really is not productive for the real main street economy and is generating windfall gains for a very limited number of people to no good purpose…” He sees ordinary folks trying to save in this environment as “savaged” by Federal Reserve and government policies. (Interviewed by Peter Gorenstein, Daily Ticker, Yahoo! Finance).
These gloomy, critical views stand in stark contrast to the generally up-beat, optimistic reports and forecasts that usually flow from policy makers and dominate the media today. For the experts and pundits, the crisis has passed and we are on the way – though, they concede, tentatively – to recovery.
In truth, our modern-day Pollyannas mistake the first act for the entire play. While our economy may not be on the edge of a precipice, the problems that placed the world economy near collapse have only been displaced, pushed forward or swept aside. Even an arch advocate of capitalism such as Vincent Reinhard, senior fellow at the conservative American Enterprise Institute, understands this: “After a severe financial crisis, we [tend to] get a severe recession, slower recovery and subpar expansion… Denial is a standard feature of financial crises…" (Interviewed by Stacy Curtin, Daily Ticker, Yahoo! Finance).
A closer look at the economy – an up-to-date report card from a Marxist perspective – is surely in order.
Gross Domestic Product
The broadest conventional measure of national and international economic performance remains GDP growth. Laden with the assumptions fundamental to the continued functioning of the capitalist economic engine, it valorizes all that is considered important to the ownership class and its continued accumulation of capital. Conversely, if an enormous human asset, such as the addition of one year of life span, were added to every person in the US, that value would not show up in the annual GDP figures except insofar as it generated commercial economic activity. Yet, as biased as the GDP growth figures are, their trend does reflect something real – the prospect of capitalism’s sustainability.
The first quarter figures for 2011 show a tepid US annual GDP growth of 1.8% from January through March. Pundits posture this as an aberration, a momentary stumble; but the trend line from the last quarter of 2009 is decidedly downward, in step with the drying up of stimulus funds. Nonresidential fixed investment has followed the same downward trajectory since its highpoint in the second quarter of 2010, even with spending on equipment and software leaping 11.6% this past quarter.
Likewise, export growth rates – touted by the experts as a leading force of recovery -- show the same downward trend from the level reached in the last quarter of 2009. Despite the Federal Reserve’s shrinking-dollar policy to sustain the rate of export growth, it is now falling below earlier levels of growth. Given that refined oil-based products account for the second largest component of export value and that the dollar value of these exports is highly inflated by the rising cost of oil, export growth calculated in dollars is exaggerated in the official numbers.
Further suggestive of foul weather ahead, the February GDP report for Canada – the US’s leading export destination by far – demonstrated an actual decline of .2%. It is hard to imagine robust export growth ahead, with a stagnant Canadian economy.
The growth rate of government spending – the sole factor preventing the economy from falling over the cliff at the height of the crisis – is now in negative territory and falling rapidly. The debt hysteria gripping local, state and federal officials produced budget cuts that are only now beginning to affect the GDP and other key economic indicators. Their influence on key factors – employment, incomes, consumer spending, etc. – will be felt more dramatically and negatively in the months and years to come.
Consumer spending continues its modest growth from its decline in the depths of the crisis. Its sustainability is in question, however, given that wages failed to keep up with inflation in the first quarter of 2011. This suggests that consumer debt and shrinking savings will again be the source of consumption growth, a condition ominously reminiscent of the pre-crisis period.
Internationally, GDP growth shows the same downward trend in nearly all the developed capitalist world, particularly the European Union. For those countries that have surrendered their sovereignty to the International Monetary Fund and the European Union – Greece, Ireland, and Portugal – the decline is far more dramatic. In the case of Greece, compliance with the austerity hawks has been catastrophic, with four successive quarters of losses greater than an annualized rate of 5%. PRChina and many emerging markets, on the other hand, have sustained high growth rates for diverse reasons, ranging from rational planning to irrational investment bubbles.
Profits, Productivity and Employment
Profit growth in the US – the fuel for a capitalist economy – has sprung back sharply from its nadir in the last quarter of 2008. Accelerating rapidly from that point, growth has stabilized over the last year at a rate commensurate with the pre-crisis period. Pundits hail the growth of profits in the manufacturing sector, a factor that has now reached about 90% of its pre-crisis level of production. But they fail to ask how profit growth can be so strong with less production and capacity utilization well below pre-crisis levels. The answer lies in a sharp increase in the rate of labor exploitation, expressed as intensified labor productivity. Labor productivity drove the explosion of profits after the 2008 collapse, settling at a level above historic averages. Put bluntly, the restoration of profitability came at the expense of an increasingly sweated, shrunken workforce.
Two factors opened the door to profit restoration: a weak, class-collaborationist labor movement, unwilling to confront capital, and the high rate of unemployment sowing fear throughout the workforce – what Marx called “the reserve army of labor.” With little organized fight for a larger share of the surplus and generalized fear of job loss among the working class, intensified exploitation was readily available to the capitalist class.
Nonetheless, the trend in labor productivity, like the trend in profitability, is downward, suggesting strongly that the crisis has failed to wring from the economy the long-term tendency for the rate of profit to decline–the theoretical basis for the Marxist theory of crisis.
With private sector labor productivity losing momentum, capital has turned to the service sector, primarily public goods and services, as a target for countering slowing profitability and surplus accumulation. The current attack on public employees’ rights, wages, salaries and benefits marks this tactical shift. With weak unions, disunity and nearly non-existent class consciousness, the private labor market is virtually elastic – capitalism can dictate the terms and conditions of labor. State-monopoly capital cannot tolerate a relatively inelastic public sector labor market with high union density, firm contracts and stable standards of living alongside a nearly enslaved private sector. Hence, it has launched an all-out assault on public sector workers, organized by capital’s minions in both political parties. While they cannot outsource police, firemen, and other face-to-face employees, they can break their unions. Of course, this initiative is done under the transparent ruse of debt reduction.
Another alarming sign emerging from the profit picture is the return of financials as the leading force in US profit growth. While non-financial profits lost steam at the end of 2010, profits from the financial sector jumped dramatically. By the end of 2010, financial profits achieved the same percentage of total domestic profits as they did in 2005. Clearly, speculation and financial maneuvers have ominously returned to the main stage in the US economy. For example, hedge funds have been increasing their CDS bets against Japanese debt, doubling the notional value of swaps made over the last year. Millions were made with the recent natural disaster and nuclear crisis. Debt speculation is an active agent in amplifying the volatility of European debt.
While supporters and critics of Administration policies wring their hands over the persistently high rate of unemployment, massive layoffs -- reducing the labor force dramatically faster than economic activity – was the key factor in restoring profitability and increasing asset value as expressed by equity markets. It would be naïve not to see unemployment as a capitalist tool of capitalist recovery, a tool that the ownership class is reluctant to surrender.
Much has been made of recent drops in the official monthly unemployment rates. Critics are quick to correctly note that these declines also reflect people who have left the workforce, people who are “discouraged” and statistically disappeared.
Perhaps a more realistic measure of the employment consequences of the crisis comes from examining the employment-to-population ratios and the labor participation rates compiled by the Bureau of Labor Statistics. The ratio of US employed to the total population has lost 4.5 points from its pre-crisis peak – a workforce loss of 13 to 14 million workers. When we add back those displaced but receiving unemployment compensation, we find a loss of 1.9 points in the labor participation rate, revealing 5 to 6 million workers officially disappeared – left without jobs or unemployment benefits. For these casualties of the crisis, savings, family support, food banks, social security, meager government aid, or the street are their only means of support. Unlike the politically biased official unemployment rates that obscure as much as they reveal, these grim BLS calculations offer little to celebrate.
Nor does the future of US employment appear bright. Over the last decade, US based multi-national corporations have added over two million jobs overseas while eliminating nearly 3 million here, a trend that will likely continue.
Running on Empty
Since the depths of the crisis over two and a half years ago, US policy makers have sought to stabilize and revive the critically wounded capitalist system. First, they offered a transfusion to the financial sector by injecting trillions of publicly obligated dollars into its lifeless body. Secondly, federal authorities cut away the gangrenous tissue infected by financial speculation – over a trillion dollars’ worth of fetid securities -- and placed it in the vaults of the Federal Reserve and Treasury, where it rests to this day. Thirdly, lawmakers agreed to an $800 billion stimulus package meant to restart the economy’s feeble heartbeat. After all these treatments, the economy remains in critical condition.
In mid-2010, the Federal Reserve recognized that these efforts to resuscitate a sickly economy were failing. Despite offering financial institutions and corporations virtually cost-free loans, the economy continued to respond sluggishly. The authorities acknowledged that the huge accumulated federal debt would eventually require higher interest rates to entice purchases of treasury securities to offset that debt. They understood that higher interest rates to secure the purchase of government debt would rebound through our financial institutions, driving all interest rates up and slowing borrowing. With lending drying up, they anticipated that the economy would slow down.
Thus, they sought to backstop this potential setback to recovery by embarking on a massive purchase of US treasury securities to maintain extremely low interest rates and ease any barriers to borrowers – essentially a rear-guard action dubbed Quantitative Easing II. As with the gangrenous financial securities, they purchased nearly $600 billion in government debt and locked it in the Federal Reserve vault, where it joins the garbage accumulated in the speculative frenzy that gave birth to the crisis. They hope to determine what they will do with it and the other “assets” at a later date.
Like most of the moves that flow from economic theories corrupted by wishful thinking and iron-clad confidence in capitalism, the Federal Reserve strategy produced consequences undesired. The huge infusion of dollars to purchase treasury securities cheapened the value of the dollar against other currencies. Imports, which outstrip the value of our exports to other countries, grew more costly to the US consumer; and inflation raised its ugly head, chewing away the living standards of working people. Further, many commodities, like oil, are traded internationally in dollars. With the value of dollars declining, pressure drove suppliers to raise prices to offset the falling buying power of the dollar, creating more inflationary pressure internationally. Moreover, rising interest rates in several countries inflated their currencies against the dollar as well, further affecting the costs of imported goods. These inflationary forces amplify the costs of other products, feeding an inflationary spiral. Despite unfounded optimism purveyed by the authorities and the media, inflation poses a serious threat to the economy and, especially, working class living standards. Those elements of the Consumer Price Index most relevant to working and poor people – fuel, health care, food, childcare, school fees, rent, etc – are those showing the most dramatic increase.
In addition, Federal Reserve policies failed in their mission. Though the cost of funding the US government debt is relatively stable, the cost of borrowing in the consumer arena continues to grow. Interest rates on mortgages, student loans, auto loans, etc. are on the rise. Again, QE II offered little relief to working people.
Prospects
Rather than a recovery, we are in Act II of a severe crisis of capitalism. It is not merely a financial crisis, a severe business-cycle trough or a radical imbalance, but a profound crisis of the capitalist system. Yes, there are imbalances, especially in the global economy. However, they are the effects and not the causes of this deep crisis. The advanced economies are scrambling to find solutions – individually – to the intractable problems of stagnation or decline, inflation, debt, intensified competition and failing economic institutions. These problems have fostered equally intractable political crises. Economic blocs, like the European Union, are under great stress from the diverse interests of the member states.
The emerging economies, on the other hand, are super-heated and threatened by the influx of speculative capital boiling over into severe eruptions of inflation and over-production.
As I argued some years ago, early in the crisis, the ephemeral era of capitalist cooperation – once called “globalization” – is over. Nation-states are going it alone, trying to find solutions to their immediate life-and-death issues, often at the expense of their global “partners.” Where they do find areas of limited cooperation, for example, in the aggression against Libya, their differences surface as well.
Years from now, when sober heads look back on the global crisis, they will recognize that the stability of PRChina, with its publicly owned banks and rational planning, did more to save the global economy from the brink than all of the bankrupt policy antics of the major capitalist powers. But there are more acts to come before the global capitalist economy finds firm ground.
What is missing from the maelstrom is for the working classes of all nations to move to center stage and demand solutions benefiting the vast majority. The Economist magazine, the voice of free markets since Marx’s time, reports that confidence in free markets has sunk by 21 percentage points internationally since 2002. Similarly, the Gallop Poll shows the confidence in banks and Congress is now at an all time low in the US. Only 23% of respondents have “a great deal of” or “a lot of” confidence in banks. The Congress scores even lower: a meager 11% share “a great deal of” or “a lot of” confidence in the US legislative branch. The crisis opens great opportunity to shape the world in a new direction, a direction that would not merely tame capitalism, but remove its destructive forces forever.
Zoltan Zigedy
zoltanzigedy@gmail.com
Thursday, April 21, 2011
The 16th Congress of the World Federation of Trade Unions Athens, Greece, April 6-10, 2011
For ZZ's report on the historic 16th World Federation of Trade Union's Congress, please follow the following links:
World Federation of Trade Unions:
http://www.wftucentral.org/?p=3695&language=en
Marxism-Leninism Today:
http://mltoday.com/subject-areas/labor-movement/the-16th-congress-of-the-world-federation-of-trade-unions-athens-greece-april-6-10-2011-1134-2.html
For a video of the proceedings, please access this link:
http://www.wftucentral.org/?p=3692&language=en
World Federation of Trade Unions:
http://www.wftucentral.org/?p=3695&language=en
Marxism-Leninism Today:
http://mltoday.com/subject-areas/labor-movement/the-16th-congress-of-the-world-federation-of-trade-unions-athens-greece-april-6-10-2011-1134-2.html
For a video of the proceedings, please access this link:
http://www.wftucentral.org/?p=3692&language=en
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