Search This Blog

Wednesday, November 24, 2010


As the number of Debt Commissions multiplies and media gasbags generate hurricane-like forces and hysterical fears of government insolvency, I’ve decided to surrender to the madness and propose a fresh, creative approach to debt reduction. My approach has the added value of requiring no budget cuts or tax increases. Instead, the solution will be found in cutting waste and acquiring new revenue sources hitherto unexplored.

And all of these revenues are generated by tapping the hidden potentials of the market place, a solution that will endear this plan to the vast majority of free-market economists and policy jockeys.

In its essence, my program exploits the vast assets currently wasted in our two-party political system. Instead of holding costly primary elections, I propose that we auction off the candidacies for the two parties with all proceeds going to the Federal budget. And instead of holding costly electoral campaigns, we adopt a system based upon cash votes: one vote for every dollar spent. The nine months currently devoted to canned speeches, staged rallies and meaningless debates could serve as an ongoing telethon with the dollars (votes) pouring in with a huge surge near the end. Again, all proceeds would go to the Federal budget. The beauty of this scheme is that the process is totally transparent and the results very likely close to the ones we usually get with the current electoral system.

But there is more: We could sell the naming rights to all of the House and Senate seats. The 18th Congressional District of state X might become the Halliburton or Goldman Sachs seat. The Delaware Senate seats could be sold to Dupont and the credit card industry. The possibilities are endless.

Likewise, the naming rights to departments, public buildings, airports, parks and roads might well generate millions to the Federal government. Admittedly, this might result in some awkward moments – the Richard Nixon Justice Department, the Strom Thurman Equal Rights Commission, etc. – but a small cost for market efficiency!

Instead of all the lobbying money currently wasted on campaign coffers and personal graft, we might consider installing turnstiles in government offices and agencies, charging lobbyists by the hour or earmark.

We might also consider marketizing the judiciary by selling judgeships and auctioning decisions. Undoubtedly, the legal profession would object since there would be little need for private attorneys, but the resultant revenues could go directly to the Federal budget, thus aiding widows and orphans.

The market-based solutions to the widely acclaimed deficit crisis are limited only by our imagination. Instead of slowly choking public education with privatization schemes (charter schools), why not simply construct a government fee schedule that allows youth to buy their way into a future career or profession? Of course, their fees would be refunded if they failed to meet the standards minimally necessary for performance in their fields. Doctors who consistently harm their patients would be asked to purchase a new profession more consistent with public welfare. Surely this would meet the requirements of market rationality.

For those without the funds to bid on prestigious professions, a government lottery could sort out those relegated to low-paying service jobs, those destined for prison, and those unhappily cast out as redundant. As always, the proceeds of this process would go to ease the deficit.

The beauty of this debt-reduction scheme lies in its total transparency. There are no hidden agendas, secret meetings, under-the-table deals; all transactions are in the open. While it produces virtually the same results that current practices deliver, it dispenses with the hypocrisy that infects the present political system. Moreover, the funds currently absorbed by our parasitic class of consultants, political staffers, office holders, campaign professionals, media moguls, etc. are shifted to debt reduction. It is no exaggeration that this market-based approach could produce billions of revenue to bolster the Federal budget.

Some may object, citing the absence of democracy in this approach. But this is a petty complaint, given that the results would most likely be the same as our current way of doing things. Social scientists call this an isomorphism: The processes may appear different, but operate the same and produce the same outcomes. Less kindly, Marxists call our current political system “bourgeois democracy,” a political doctrine that postures as democratic while functioning to produce and reproduce rule by wealth and power.

Undoubtedly, those who persist in defending the current two-party system will be outraged, condemning this proposal as cruelly cynical. Indeed it is. But the option is to reject the vulgar entertainment we accept as democracy and fight for a third peoples’ party or a new democracy. Anything less is rotten with hypocrisy.

Zoltan Zigedy

Tuesday, November 9, 2010

Election Results: Telling the Forest from the Trees

I have slogged through uncountable commentaries on the mid-term elections. Many have offered useful insights on an event that will no doubt shape the political direction of the next two years. Yet, there is little to surprise in the outcome for anyone following recent and long-term developments in the US political system.

Two years ago, I projected that the Obama presidency would likely follow the pattern of the Carter presidency. Both came after a deep crisis of legitimacy: in one case, the Nixon debacle, in the other, the disastrous Bush presidency. The candidates postured as outsiders and in both cases they made impassioned pleas for change with a vague commitment to a “progressive” agenda. But in the end, the two administrations proved to be shaped by and acquiescent to a ruling-class agenda. The election of both candidates energized, protected and promoted a two-party system in need of credibility.

In another contemporaneous post, I drew upon the venerated I. F. Stone, who, groping for understanding of his disappointment with the Kennedy tenure, wrote of the enormous institutional forces that blocked any deviancy from the ruling-class agenda in the unlikely event that any President should truly want to stray.

In all three cases, performance fell far short of public expectations. In all three cases, the left mistook cosmetic adjustment for real change.

With the exception of a brief interlude of New Deal vigor during Lyndon Johnson’s presidency, spawned by a martyred Democratic president, an overwhelming defeat of the Goldwater extreme right and the pressures of a militant Civil Rights Movement, this has been the pattern of Democratic presidencies for the last fifty years.

While many know this history, few see it as a pattern. Since the marginalization of the Marxist left, few find or even look for meaningful connections and continuities linking political events. Instead, the media and establishment punditry portray the US electoral process as a regular contest, fought around carefully crafted personalities, shifting demographics, debate performance and the poll results of the moment disconnected from class and process. They neither look for nor find the deeper structural forces that determine how the game is played and who wins.

A deeper look exposes the internal logic of a two-party electoral system in a class-divided society. Without a radical challenge, such a system inevitably produces rule by wealth and power over the popular will. As money and wealth determine both the candidates and the outcomes, the political leaders become more and more distant from the people, something the Tea Party movement knows and exploits effectively.

Further, the issues raised in electoral campaigns function to establish a space between the candidates, necessary to legitimize the elections in the eyes of voters. But once elected, the differences between candidates prove illusive. Thus, we find more and more commentators referring to the Bush/Obama continuum. On war, immigration, civil liberties, etc, we are all too familiar with the shortcomings of the Democratic Administration and its legislative allies. But the Republicans demonstrate the same cynicism toward their promises: both Reagan and G.W. Bush ran as deficit hawks, but oversaw some of the largest government spending splurges in history, all in the interest of the military-industrial sector of monopoly capital. This cynical manipulation of the electoral process is neither an historical accident, nor an aberration of an otherwise democratic procedure, but a logical development of a two-party system in an increasingly class-divided society.

Some will find this overly deterministic, suggestive of a fatalistic course to US politics. Still others will find this dismally pessimistic. It is neither. It is, instead, a realistic assessment of where our neglect of the structural limitations of the US two-party system has taken us. Any response to the power of money, the corruption, and the cynicism of today must address these structural impediments. It is not enough to live in a fantasy world of marginal reform, incremental change, or slavish faith in a corporate-sponsored party.

Just as careful study reveals the rigid logic of the two-party system, a long look at periods of progressive change expose the genuine alternatives to a system that trivializes public engagement and guarantees results friendly to the wealthy and powerful. All important reversals of the two-party trajectory came with the building of mass movements driven by peoples’ causes – the plight of the rural poor, the exploitation of industrial workers, against imperialist wars, for civil rights for minorities, equality for women, etc. Insofar as these movements maintained a distance from the two parties, along with a dogged commitment sustained regardless of the party in power, they were able to leave an indelible mark on the political landscape. Insofar as they hitched their movement to the Democratic Party or Republican Party, they were quickly absorbed into the electoral campaign machinery, with their cause tacked on to the end of a long list of Party priorities. Again, these are historical constants that must be addressed going forward if we are not to continue down the same ineffective, well-worn path.

Recognizing that in the US today we are accustomed to preferring score cards to theory, I suggest we consider the voting patterns in the mid-term elections. Exit polls show that the groups most supportive of the Democrats in the election were: African-Americans, Hispanics, youth, union households, and urban dwellers. Yet they were the groups that benefited least from two years of a Democratic Executive and Congress. These are the same groups that demonstrated the most enthusiasm for change and have suffered the most from a profound economic crisis. They have witnessed and will pay for the enthusiastic rescue of Wall Street and the corporate sector, while their own interests have been neglected or trampled.

Until we come to grips with this glaring contradiction, we will continue to repeat the same mistakes with the same disappointing results.

Zoltan Zigedy

Thursday, November 4, 2010

Micro-lending Falls on Hard Times

Do I have a grudge against the Nobel Prize committees? A few weeks ago I launched a broadside against the awarding of prizes to three - no doubt well meaning and diligent - academic economists whose work on unemployment was postured as earthshaking contributions to resolving the current crisis. At the same time, I took a pot shot at last year’s Nobel Peace Prize going to the serving US President, an award that likely caused him some embarrassment after his dramatic escalation of the war in Afghanistan. And I couldn’t help noticing that my colleagues at Marxism-Leninism Today posted an article by Stephen Gowans that loosed his acerbic, sharp pen to blast this year’s Nobel Peace award granted to Liu Xiaobo. Gowans’s considerable talents conclusively demonstrate the stealth political agenda behind the committee’s decision. One is staggered by an international award earned by the recipient’s singular achievement of soliciting and attracting a mere 10,000 on-line signatures on a petition that, in effect, calls for the overthrow of the Chinese government.

But let me be clear about this: my quarrel is not with the recipients, at least not in past polemics. Rather, it is with committees that posture as unbiased and speak with the conceit of service to mankind. Instead, it is more and more obvious that the awards serve the ends of Western elites and legitimize their view of the world.

Take, for example, the 2006 Peace prize awarded to Prof. Mohammed Yunus for his pioneering work on what came to be called “micro-lending”. No doubt micro-lending – the idea that tiny loans to impoverished people could or would raise people from poverty – might, in some cases, be effective. Undoubtedly a small loan to a budding entrepreneur could launch a new, successful career in one of the world’s many economically barren areas. Of course informal loans in these areas are already a fact of ordinary life. Some are generously granted by family or friends, some are extended by usurious loan sharks. In any case, while granting that some could be lifted out of poverty with a modest loan, a financial helping hand, only the witless or perhaps a capitalist sensing potential profit would pose micro-lending as a solution to world poverty. Generously, I doubt that even Yunus ever saw the practice as the solution to mass poverty.

Nonetheless, the media, a gaggle of liberals, and many pundits hailed micro-lending as a miraculous answer to grinding poverty. In a striking display of ostentatious compassion, celebrities tossed money at the micro-lenders, puffing with pride over their genuine sympathy for the downtrodden. As the word got around about micro-lending, a groundswell of enthusiasm and a basket of awards and prizes followed, culminating in the Nobel Prize. Even Bill Clinton, the Terminator of the US welfare program, hailed micro-lending as one of the truly great poverty-reducing instruments.

As the micro-lending mania flourished, I thought that this too would pass. Like so many faddish schemes of the past, I saw micro-lending as one more fashionable way to turn liberal eyes away from the true causes of poverty in the developing world. Instead of dealing with the legacy of colonialism and the continuing pillage of imperialism, micro-leading gives comfortable people in the West a guilt-cleanser, a measure of smug acknowledgement – like the once popular “CARE” packages – that poverty was being whipped. It is certainly less costly than repaying the teeming masses for centuries of exploitation, brutal domination, and neglect. And I was well aware of the argument that a mere $200 micro-loan could help a poor villager establish a bicycle shop. But I wondered how the other villagers could rise from poverty by also setting up bicycle shops.

But lurking in all the palaver over micro-loans was the interesting micro-fact: lenders generally charged between 25 to 100% annual interest. Now I don’t know what village loan sharks charge, but my imagination stretches to envision their pushing much beyond these bounds. Granted, their collection methods might be considerably more severe than the beneficent micro-lender. To my mind, the micro-lending mania produced the aura of the pay-day loan shops that prey upon the working poor in the US.

But the micro-lending phenomena proved to be more than a passing fad. Today in India, one of the largest “markets” for micro-loans, there are more than 25 million borrowers and loans total well over 200 billion rupees. Total loans have grown nearly six times in three years. Banks and private equity firms have plowed over $4 billion this year into what has become a significant industry. The largest micro-lending firm recently offered $350 million in shares on the Indian stock market, according to The Wall Street Journal (10-29-10). Capitalism has discovered micro-lending.

Whatever noble intentions may have spurred the micro-lending movement, it was quickly stripped of any such sentiments when the financiers discovered it. Like efforts in the US to encourage low-income home ownership, the financial predators saw only profit. And they leaped at it, pushing the limits as far as the last dollar (or rupee) of profits could be squeezed out. The parallel between this exploitation of the most vulnerable in India and our own tragic exploitation of the poor through sub-prime mortgages is glaringly apparent.

It took a rash of suicides by borrowers to bring these abuses to the attention of Indian government regulators. The headlines in The Wall Street Journal tell it all: India’s Major Crisis in Microlending: Loans Involving Tiny Amounts of Money Were a Good Idea, but the Explosion of Interest Backfires (10-29-10), Backlash in Microlending (10-30-10). All debt payments have been suspended by the authorities and loan agents have been arrested in the Indian state burdened with 30% of the country’s micro-loans, leading WSJ writers to conclude that “the microlending movement… has in recent weeks fallen into chaos.” Once again financial predations result in chaos and crisis, a pattern that only escapes those willfully blind or cornered by self-interest.

The naked truth is that lending, like insuring, is a socially useful function if and only if it is democratically administered and publicly sustained. There is no rational or moral justification for engaging private interests. A disinterested public administrator armed with default data, an available loan fund, and a reasonable sense of social priorities and judgment of character could dispense loans untainted by the distraction of profits. Profits only distort the rationality or efficiency of this necessary social function.

The same could be said of insurance. Armed with actuarial tables (usually assembled from data collected from government agencies), a schedule of costs and benefits can be constructed by a competent statistician. It is an easy step to fairly and equitably distributing these costs and benefits in the most efficient and democratic way. Again there is no justification for introducing private gain into this process. It’s only an invitation to chaos and crisis.

It’s time to drive the money lenders from the temple.

Zoltan Zigedy