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Saturday, December 25, 2010

Obama and the Left: Crossroads

In the fall of 2008, I wrote the following (2008: A Reprise of 1976?). It seems timely to reproduce it today:

Upon taking office, the Carter administration began a steady drift to the right. Following the lead of Democratic Party strategist, Patrick Caddell, Carter chose a business-friendly approach that placed the battle against inflation at the center of domestic policy. His personal opposition to the Humphrey-Hawkins bill led to the passage of a bill unsatisfactory to organized labor. National health care was shelved and tax reform was never achieved. Carter vetoed public works legislation as inflationary. The neo-liberal deregulation agenda generally attributed to the ultra-right actually began with Carter’s deregulation of the airline industry in 1978. He also started the process of deregulation of other industries, such as communications, oil and finance.

Little was advanced to improve either the status of African Americans or race relations, though Carter appointed more minorities to posts in his administration than any previous President.

Despite his platform promise to reduce military spending, Carter expanded the military budget, reversing the trend of the prior ten years. With Carter’s assent, the US began to send military equipment to the Afghan mujahadeen even before the Soviet occupation. Support for these feudal warlords harnessed to US Cold War aims soon reached $600 million per year. Ironically, they are the cadres now fighting the US occupation of Afghanistan. Carter instituted the so-called Carter Doctrine pledged to oppose any but US influences in the Persian Gulf area. This oil-driven version of the previous Monroe and Truman Doctrines has remained US policy to this day and justifies the use of military force in the region when US “interests” are claimed.

To his credit, Carter negotiated nuclear weapons reductions (SALT II) and a Panama Canal treaty, and also secured a minor reduction of US occupation troops in the Republic of Korea.

Carter’s retreat from the Democratic platform produced a number of oppositional blocs, including the labor/liberal-supported Democratic Agenda in late 1977 and the Progressive Alliance in 1978. The Democratic Party base of labor, African Americans and liberals was stung by the growing conservatism of the Carter Administration, a rebuff that led to Ted Kennedy’s campaign against the incumbent in the 1980 primary elections.

With Carter’s failure to steer a new, progressive course, the electorate, with the limited choice offered by the two-party system, opted for a different direction in 1980.

The promise of 1976 was squandered by the Carter Administration. Will the opportunities for change afforded by Republican failure be wasted again in 2008?

After much hesitancy, a growing segment of the broadly conceived left – Communists, Socialists, radical democrats, and New Deal Democrats – has come to recognize that the Obama Administration operates much like the previous Democratic administrations over the last thirty-five years. Carter shared self-righteousness and cultivated civility with the current President, along with a ready willingness to sell out campaign promises and platform statements. Clinton exhibited a cunning slipperiness and lack of even superficial principle that is often revealed in Obama’s public statements.

But these are merely features of their political personality, features that occupy the pundits at The Nation and other liberal publications. The common thread that binds Democratic administrations, top national Democratic elected officials, and their attendants is that they are members of an elite club and bound to place the interests of the club first- they are part of and employed by the rich and powerful. While this is readily apparent to many of us, there are still many waiting for a public confession.

Some temper their disappointment by arguing that the Obama Administration stands between us and a far worse fate at the hands of the extreme-right. Therefore, we must support it or permit the pain of a more onerous administration. This is, of course, an iteration of the old “lesser-of-two-evils” position. But that position was meant only to be a tactical retreat - a temporary, uncomfortable affair followed by an embarrassed exit – and not a life-long marriage. Instead, it is the constant refrain, election after election, of many prominent leftists and “progressive” Democratic Party apologists.

While there may be nothing wrong with this stance for those solidly – and happily – wedded to the Democratic Party and its self-limiting goals, the “lesser-of-two-evils” concession is poison to anyone with greater aspirations for the country and partisanship for its majority of people who work for a living. For the left, it is simply disastrous.

The “lesser-of-two-evils” left suffers two pathologies: the first, a delusion of grandeur, and the second, an allergy to the principles of oppositional politics.

It is illusory to think that the US left yet matters in national or even state-wide bourgeois politics, especially within the most advanced form of bourgeois politics: the two-party system. When pundits and the media refer to the Democratic Party base, some take that to be the “left.” It is not. It is actually the bureaucracy-led labor movement, urban liberals, and African American and Latino voters. They matter in supporting the Democrats, but less and less in the policies pursued by elected officials. They are not, as a whole, the left, but constitute the natural constituency for left-led movements. They are potentially a left base, should the left organize and agitate among these groups.

But to believe that the left matters within the two-party system is delusional. Come election time in the national or statewide arena, the efforts or absence of the left on behalf of the Democrats is never decisive and is usually not even marginally influential. Nor does the left’s cheerleading make a difference. Some leaders and pundits rally the ranks at election time as though a squad of infantry would decide the clash of armies.

Of course there is always the Nader example that liberals dredge up whenever pressed on the folly of supporting weak, ineffectual candidates. Left votes for Nader, they assert, cost Al Gore the 2000 election. They conveniently ignore the dozens of reasons - most importantly, Gore’s lack luster campaign – for the defeat. And they arrogantly presume that Nader votes really belong to the Democratic Party. Such a presumption underlines the contempt that Democrats show to their base. Their votes, too, are owned by the Democrats, a condition of electoral slavery.

Secondly, the “lesser-of-two-evils” strategy constitutes a complete and catastrophic misreading of oppositional politics. A left political organization – too small to actually contest elections – serves nonetheless as a material force for influencing elections by projecting advanced demands. Those demands may, in turn, shift electoral discourse away from the usually overwhelming pressure of wealth, media access and power. Of course, it may not, but it will draw adherents to the side of truth and justice. And in the longer view, it will strengthen and build the left. Thus, the left grows in times of strong independent movements for social change. And contra the “lesser-of-two-evils” philosophy, it provides the spine for those rare occasions when the Democratic Party actually advances the peoples’ interests such as with the New Deal or racial desegregation.

Therefore, the role of the left is a critical role - a role to challenge and provoke social institutions to move away from their tendency to accept and expand the privileges of the few.

Since the diffusion and loss of focus of the anti-capitalist left, this critical role has been lost in US politics. Reinforced by the handful of left publications that obsess over the maneuvers and deals of bourgeois politicians, the broad left has accepted electoral politics as its touchstone, waiting patiently for an establishment candidate who can revisit the myths attached to the great liberal icons: Roosevelt and Kennedy. This is a tragic misreading of history and a shameless neglect of the historic mission of left movements.

But even more shameless is the posture of elements of the anti-capitalist left who speak and write of a grand coalition against the ultra- or extreme right. They posture as though there is a supra-organization joined around the sole goal of burying the foul creatures inhabiting a corner of US politics since the country’s founding. There is no such coalition. Instead, there are many groups with varied interests that latch onto the Democratic Party because they see nowhere else to turn. Historically, it has been the goal of the left to nurture a broader vision that could tie these interests together into a real coalition, not to merely halt the influence of the most backward political forces, but to improve the lot of the majority.

Miguel Figueroa, leader of the Communist Party of Canada, spoke well when he addressed a recent gathering of Communist Parties in South Africa:

It is equally if not more impermissible however for the Communists to enter into alliances in a self-effacing way, making unprincipled political and ideological concessions for the sake of maintaining unity, and jettisoning the independent role of the Communist Party in the process.

But in the case of the US, there is only an imaginary alliance that makes one concessionary demand upon its members: vote and support Democratic Party candidates. When all the rhetoric is cast off, the “alliance” is merely a fig leaf for unconditional loyalty to the Democratic Party and its agenda. And “unity” is never in jeopardy when there is only a one-way conversation between the Democratic Party leadership and those who dutifully follow.

The “Marxists” who contrive this fictional alliance, in moments of ideological nostalgia, appeal to the United Front tactics offered by the Communist movement in the struggle against fascism. But even a casual read of the documents endorsed by the Communist International demonstrate that these “Marxists” neither understand the tactic nor know when and how to apply it.

But suppose Obama had delivered on many of his campaign promises. Would that have earned our uncritical support? Respect, sure. Critical support, perhaps. But not the fawning idolatry that much of the left demonstrated after the election. Nor should it have brought a virtual collapse of the peace and justice movement. For the left, the task of constantly prodding and pushing the political goal forward should not be compromised in victory or defeat.

And now it’s time to get beyond wringing our hands over what Obama promised, what he did, and what he will or will not do, and focus on what we will do – a stance that promises to bring life back to the left.

Zoltan Zigedy

Thursday, December 16, 2010

Through the Looking Glass

Debt hysteria is undoubtedly the most disgusting, lie-infested scam since George W. Bush launched his propaganda blitz leading up to the unprovoked invasion of Iraq. Like the Bush offensive, the debt scam has drawn public attention away from the critical issues facing the world - especially working people - at this critical moment. Unlike the Bush-era deceptions, debt hysteria has thoroughly infected policy throughout the world.

It is a supreme irony that the debt fears now provoked by government deficits are construed as excessive, while the decades of growth of personal debt and speculative debt in the private sector were seen as benign. Where all government debt grew roughly 8.5 times from 1978 to 2008, US mortgage debt grew 11.5 times, non-financial business debt grew by over 10 times, and debt in the financial sector by nearly 50 times! (Estimates from Epic Recession: Prelude to Global Depression, Jack Rasmus, p. 33) Yet few alarms were triggered as these vast sums of debt served to sustain and grow the profit margins of monopoly corporations. As long as the debt energized profit taking, the level of indebtedness was of no consequence. All of this changed – or should have changed – after the mountains of debt accumulated in the financial sector collapsed, bringing the global economy to its knees two years ago.

It is equally ironic that a quasi-governmental body – the Federal Reserve – pumped, with no transparency, $9 trillion in loans into the private sector to rescue corporations from the consequences of their collapsing debt load, as recent revelations have shown. We now know that the private sector, primarily the financial industry, hung by a slender thread thanks to years of promiscuous borrowing to fuel scandalously risky speculation.

Despite this indictment of private sector abuse of debt, policy makers have offered few guarantees that private sector debt will not again paralyze the global economy. Nor is there any hysterical concern over private debt with the opinion makers who protest so loudly over public sector debt.

US Debt: A Dose of Terrorism

With the federal deficit reaching $1.5 trillion in 2010, it is understandable that some would react to the figure with alarm. It is formidable figure, but what does it mean?

Actually, it means very little. There have been Federal budgets that have shown more percentage growth of the deficit or more growth against other measures such as GDP. Some of these budgets have correlated with good times, some with bad times. There is no strict relationship between budgetary frugality or generosity and prosperity.

Some deficits have resulted from reduced tax revenues, some from leaps in government spending. Interestingly, some of the biggest recent boosts in government spending – the great sin of debt scolds – have occurred under the Presidential stewardship of professed archenemies of deficits (Reagan, Bush I, Bush II).

Without exploring the details of government spending, there is no factual basis for alarm with the absolute or relative size of a Federal deficit. In the case of the current deficit, there are good reasons to examine why the US deficit is growing. As Jeff Madrick points out (NY Review of Books, 12-23-10), “…almost all of the projected deficit through 2020 will be the result of three factors: the recession, the tax cuts of the early 2000s under George W. Bush, and the hundreds of billions of dollars of war spending.” I would add that the continued growth of the costs of private medical services passed on to the public sector also adds substantially to these projections. All are social evils worthy of attacking, but not because they add to the deficit.

Other liberal economists, like Dean Baker and James K. Galbraith, have demonstrated loudly and conclusively why there are no theoretical reasons to fear an expanding Federal deficit or higher levels of public debt (apart from state and municipal budgets that are limited statutorily to balancing revenues and expenditures). They vigorously dispute the inappropriate parallel with family budgets and the catastrophic consequences of individuals spending more than they make. The Federal government does not endure the pain of the profligate neighbor who runs the credit card to the limit. Instead, the Federal government can borrow extensively through the sales of Treasury securities, particularly at a time when interest rates are at an historic low. Moreover, the Federal Reserve’s QE2 program is currently attempting to drive those interest rates down further through $600 billion in Treasury purchases, but with a different goal in mind.

Sane people will find no plausible explanation for the intensifying debt scare in the US, beyond political manipulation. And crude political manipulation it is: a ruse akin to the hysteria generated by the “war on terrorism.” With fear piled upon fear, politicians and policy makers are exploiting the ensuing panic to vigorously attack both the already inadequate safety net and working class living standards.

Political elites and their minions have taken to heart the slogan “every crisis presents an opportunity” by turning it on its head through a campaign of disinformation and fear mongering. Instead of taking up the cause of the twenty-five million unemployed and underemployed, they have seized the moment to impose even greater hardships on the vast majority of US citizens.

It took very little to rouse President Obama and his Administration to join the baying dogs of debt hysteria. With the creation of the Bowles-Simpson Debt Commission, he embraced the hypocrisy of debt terrorism. And his recent freezing of the wages and salaries of Federal workers justified by deficit concerns only underlines both his dishonesty and his callousness. His sharp right turn from his already right leanings should chasten those still star-struck with “change that you can believe in…” And those who still posture Obama as a progressive champion should be boiled in oil. His recent agreement to establish a NAFTA-clone trade pact with Korea has stirred great anger in the upper echelons of the AFL-CIO, the same labor leaders who hailed his pledge to revisit NAFTA and make it more labor-friendly.

The plain and simple truth is that the debt hysteria has no sound basis in economic theory or experience. Instead, it is a political ploy to raise fears to justify imposing austerity on workers, youth, minorities and the elderly. Its quick and ready acceptance by opinion makers demonstrates a callous dishonesty.

European Debt: Plundering the Weak

The European debt fears that have brought panic to the EU leaders and a wave of austere budget cuts has a real villain, but it’s not the profligate spending and big deficits that the media shrilly reports. Instead, it is hedge fund managers and a motley crew of other powerful financial pirates – Barron’s magazine cleverly calls them “bond vigilantes” -who understand the dynamics of international debt markets and prey on the weakest players. The wondrous thing about the new financial instruments devised in the late-twentieth century is that they allow and invite as much or more money to be made betting on failure as betting on success. Moreover, the financial predators have the weight in the market to force panic and reap profit from the chaos they produce.

These vultures ply on the fact that the weaker economies in the European Union are caught in a deadly vise: they owe much of their debt to foreign banks and they have surrendered monetary powers by replacing their sovereign currencies with the euro. First, Greece came under fire beginning in the fall of 2009 with a massive campaign driving the cost of insuring debt and acquiring loans. Of course these pessimistic bets further stressed Greece’s ability to muster funds, leading to even further aggression on the part of vulture capitalism through even more pessimistic bets against Greece’s ability to repay debt. And thus the noose tightened around the Greek economy.

As a result, Greece was forced to surrender its sovereignty and economy to the leaders of the European Union and the International Monetary Fund. In return for loans and guarantees that dispersed the vultures, the EU and IMF dictated an austerity program that drastically lowered the standard of living of the Greek people. Only the most militant sector of the Greek working class – the Communist Party and PAME – offered any real alternative to this devastating aggression.

The debt vultures turned next to Ireland later in 2010: same process, same result. With the EU and IMF now effectively ruling Ireland, the already shrunken Irish public sector is further squeezed with a drastic cut in jobs and public services piled onto an existing unemployment rate of 14%.

With the Greek and Irish carcasses picked clean, the aggressors are turning to Portugal, another country carrying debt and hamstrung by the acceptance of the euro as its national currency. And Spain - perhaps even Italy – is vulnerable to future attack.

In an unusually candid admission, The Wall Street Journal wrote of this insidious process in late November (Traders’ Targets: Portugal and Spain). Author Cassell Bryan-Low concedes that “hedge-fund managers are cautiously setting their sights on potential problems in countries such as Portugal and Spain…[T]hey are expecting more bad news to come, predicting that borrowing costs elsewhere will become prohibitive, potentially forcing other countries to also seek a bailout or restructure their debt.” Bryan-Low notes that some traders are a bit gun-shy because “the notion of betting against Europe’s peripheral economies has… become an emotional topic amid debate whether such moves have contributed to those countries financial woes…” Some officials “have called for the banning of certain instruments, such as derivatives…” Several fund managers are cited who confirm “bearish bets” on Spanish debt, with one stating ominously, “I don’t think those issues are going to go away, which is why the euro is going to stay under pressure.” The carnage continues…

Vulture capitalism preys on countries outside of the euro-zone as well. As I have shown previously (IMF Debt Hypocrisy: Sticking it to the Hungarians, the game is really not about reducing deficits or debt levels, but about imposing the will of international capital on vulnerable countries and hammering the conditions of life for working people. When the Hungarian government proposed raising taxes on banks to reduce the deficit, their international overseers became hysterical - threatening repercussions - despite the fact that Hungary would meet the targets set by the IMF. It was not defiance of debt-reduction goals that brought on censure, but the refusal to put the burden on the Hungarian people.

Since the article, the defiant Hungarian government has pledged to lower personal taxes and boost welfare spending while increasing taxes on banks, telecommunications, retail businesses and energy companies, to raise revenue by $2 billion. This defiance has brought on a severe downgrading of Hungary’s credit rating to near junk status by Moody’s credit rating service. The prime minister’s office bluntly, but accurately, characterized this move as a response to “measures that hurt the interests of international capital in the short term” as reported in the back pages of the WSJ (12-7-10). So there is another path to debt management, but one would never know it from the actions of the cowardly governments that rule in the rest of Europe. Instead, they surrender their national sovereignty with a whimper.

Today, the capitalist class leads with the debt card in its efforts to discipline and dominate the working class. The failure to understand this strategy disarms working people caught in the throes of a new offensive in the class struggle. Just as we exposed the hypocrisy of George W. Bush’s contrived invasion of Iraq, we must bring light on the hypocrisy and deceit of the debt scare.

Zoltan Zigedy

Sunday, December 12, 2010

International Finance’s Raid and Occupation of Ireland

Ireland is a young country, established only 88 years ago after centuries of domination by its powerful neighbor the United Kingdom. After liberation, the country remained largely in the shadow of its former colonial master, serving as a source of cheap immigrant labor. Irish youth would leave their homeland, portrayed in popular lore as a quaint land of small villages and crude agricultural economies, for work in London or other UK cities. The more ambitious would venture to the US, where the earlier successes of millions of Irish immigrants elevated a few to the upper echelons of wealth and power.

But with the emergence of a new era of intense capitalist growth spurred by unfettered and ever-expanding markets, technological advances, and financial daring, Irish policy makers decided to join the race to success promised by this developmental model.

Enthusiastically, successive Irish governments followed the scriptures of neo-liberal dogma. Possessing an educated, but low-wage work force, they enticed transnational corporations to locate in Ireland by offering them an obscenely low corporate tax rate, the lowest in the euro-zone except for Bulgaria. Tax rates for the wealthy were lowered, including a constantly shrinking capital-gains tax.

Given domestic growth, the financial sector was encouraged to exploit the newly found prosperity with an orgy of lending and investment in housing, commercial real estate, and the new, exotic instruments common to the financial sector over the last thirty years.

As a result, Ireland and the Irish economy were heralded by opinion makers, politicians, and the gatekeepers of capitalism, the World Bank and the IMF. With a public relations flourish, they dubbed Ireland the “Celtic Tiger” of the world economy.

Today, the tiger is on its deathbed.

Slammed by the global economic downturn, Ireland now stands as an example of all that is rotten in the global economy, all that is misguided in the neo-liberal program, and all that is painful in an unfounded faith in capitalist social relations.

With the pace of economic activity decelerating rapidly in 2008, the Irish government recognized that declining tax revenues placed stress on its budget. Where some governments sought to use public funds to stimulate growth, Ireland began a process of government austerity that would please the financial world and hew to the most dogmatic of neo-liberal principles – the budget was substantially in balance at the end of 2007.

But overlooked by Irish officials, the banks were carrying enormous debt with little prospect of realization. As in the US, the Irish financial industry had supported an orgy of real estate development that could only prove of value if the “Tiger” kept its furious pace of growth. Foreign banks, principally in the UK, France and Belgium, added their capital to stoke the fires of speculation. When this growth collapsed, the prospect of recovering these loans also collapsed. In addition, Irish banks, like their US and Icelandic counterparts, engaged in a risky speculative game with the flashy, but risky financial instruments invented in recent years. The potential losses were staggering. The banks tried to hide their losses. Officials pretended they didn’t exist.

As late as May 2008, Irish regulators assured the public that the banks were “sound and robust.” But early the next year, the government injected around 7 billion euros of public funds into the banking industry. And for the next two years, the Irish government denied that the banks were collapsing while adding billions more of public funds to rescue them.

In the fall of 2010, the Irish finance minister called for a final, honest accounting of the costs to the public for the bankers’ folly. The figure – undoubtedly an underestimation – totaled 50 billion euros or roughly US$ 50,000 per household.

While it is true that the collapse of the Celtic road to prosperity is an indictment of the policy choice of free market “cowboy” capitalism - the zealous faith in the dogmas of neo-liberalism - there is more to this tragedy. Unspoken in accounts of the Irish developmental debacle is the role of international finance capital in exploiting the crisis and driving Ireland into the hands of the European Central Bank and the IMF with a painful loss of national sovereignty.

Over the last thirty years, the financial industry has constructed and employed new, sophisticated methods of garnering profit from betting on negative outcomes as well as success. Hedge funds, private-equity firms, as well as big banks gain as much or more from exploiting weakness and economic vulnerability as they once did from supporting strength and growth. Consequently, they pounce on wounded economies, driving up borrowing rates and risk assessments while betting on default. This financial attack creates a disastrous, unending escalation of the costs of financing and refinancing debt that chokes off a government’s ability to fund even its most critical functions.

We saw this process in Greece last fall and winter. And we saw it again in Ireland this summer and fall: since the summer of 2010 the spread between the yield necessary to sell Irish government bonds and the yield of stable German bonds has jumped four-fold. This is an instance of financial aggression, pure and simple, with the next target undoubtedly the economic sovereignty of Portugal.

Inevitably, a country under this withering attack from the financial sector must turn to others for debt relief. In the case of Ireland, the European Union and IMF are staving off the assault with an 85-billion euro loan. In return, the Irish people surrender their sovereignty and submit to a severe further dose of austerity: the minimum wage is to be slashed by 12.5%, welfare benefits will be cut, pensions reduced, health care denied, public workers’ jobs eliminated, and the costs of education increased. This comes on top of an existing 14% unemployment rate. Once again, Irish youth are leaving in droves.

Ireland and its economy are effectively under the stewardship of the European Union and the IMF.

It is common, especially on the Left, to blame the Irish tragedy on the foolish belief that markets and business-friendly policies will bring prosperity to a poor country competing in a world of rapacious corporations and more advanced economies. While this is true, it misses the important point that the predatory international financial sector looms over a country’s effort, ever ready to pick the bones should that country falter. There is capitalism and then there is vulture capitalism.

Zoltan Zigedy