Trouble Ahead! Detour!

There is little good news to digest in the US. 

We are deep in the midst of an epidemiological crisis, with the US leading the world in infections and deaths. The daily totals have grown to 65,000 or more infections and over 1,100 deaths. To give context to the numbers, the total number of US Covid-19 deaths so far this year amounts to over 22% of all the US battle deaths since 1775. In the worst year of the Vietnam War (1968), combat deaths averaged over 1,400 per month. Those monthly totals are surpassed today in a day and a half, with the virus killing the most vulnerable, especially the elderly, African Americans, Latinos y Latinas, and the poor.

The US is losing the war against the coronavirus.

US infections account for as much as one-fourth of all infections globally, an embarrassing number for the supposed wealthiest country in the world, the self-styled beacon of democracy. How can a state claim to be democratic that cannot minimally guarantee the health and safety of its most vulnerable citizens? How can a state lecture, even intervene in other states to bring them the bounty to be won by emulating the US?

If democracy has anything at all to do with delivering the will of the people, then it must answer to the poor US showing against the coronavirus. A robust democracy would deliver a robust public health service, a universal and comprehensive system available to all, and not a broken, overwhelmed, profit-infected, catch-as-catch-can, class-privileged monstrosity. A real democracy would recall the failed career politicians, deny the soulless lobbyists, and sweep away the preening consultants who pollute our political system.

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The failed response to the coronavirus is only one aspect of the acute political crisis sweeping the US. With a little over three months to the national election, the two-party circus is reaching new lows. What has been a bi-partisan fiasco in response to the virus, has been politicized into universal finger-pointing. Democrats overlook the disastrous earlier outcomes in New York, much of New England, and now in California, while witlessly blaming Trump. Republicans refuse ownership of the deadly results coming from states suffering Republican governance, while boasting of mindless allegiance to Trump. And President Trump stumbles through contradiction after contradiction, while candidate Biden wins support through reticence, with a shamefully inadequate answer to the coronavirus.

When not blaming each other, the two parties blame The People's Republic of China (PRC).

With the compliance of the media, the two parties are ginning up a new Cold War hysteria against PRC and Russia unlike any seen since the missile-gap panic of the early 1960s. Trump and Biden are sparring over who can produce the tougher policy against PRC. This senseless conflict can only end in disaster for the world. 

It’s increasingly clear that the anti-PRC project reflects the growing consensus among US elites that the PRC economy is dynamic and resilient and the US economy is declining, posing a threat to US global dominance. Nor is it a secret that previously secure ties to international “friends” are fraying. While the UK remains supplicant, Germany, France, and many other allies are reluctant to turn on PRC or Russia, and resent the US’s demands for conformity. A stronger PRC and a weaker US will only accelerate this trend. The US is an empire in decline.

Trump’s previous renegacy-- rapprochement with Russia, the DPRK, and PRC, deserting NATO, leaving Syria and Afghanistan, etc.-- has been tempered or extinguished by the security services, the military, and the political Old Guard, leaving him an unconventional, conventional politician. Domestically, his tax policies won the allegiance of Wall Street and the super-rich, dispelling the illusion that the ruling class could not live with him, his vulgarity, and his ill-manners. 

While it may be understandable that sectors of the working class would have viewed him as representing an alternative to the unfriendly globalist, corporate vision offered by the Democratic Party, that illusion should now be crushed as well. And as his poll numbers shrink, his “wilding”-- his erratic behavior-- only intensifies. In conventional times, Trump would be a dead fish.

But this is not a conventional time. The Democrats have attributed their past failures to intervention and subversion. The last refuge for a decadent political party is to place the blame elsewhere: Julian Assange, Wikileaks, dirty tricks, RussiaGate, the Chinese, etc. etc. The Democrats have no electoral strategy other than to ridicule and demonize Trump. Their pre-convention set of issues is unremarkable. It will be further diluted when it becomes a platform. And it will be turned into tepid dishwater when it becomes policy, should Biden be elected. This is a pattern repeated election after election, and Democratic Party loyalists learn nothing from it.

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Looming over the election like an ominous storm cloud is a US economic crisis of unprecedented potential. Despite the stock market’s seeming independence from any reality, the collapse of employment and economic activity is real. 

Just as pundits think they see a flash of light from amongst the billowing clouds, the coronavirus strangles any tentative economic recovery. In the US, the great contradiction of 2020 is between a sinking economy and the deeply ingrained, wide-spread ideology of immediate satisfaction and narrow, individual self-interest that produces and reproduces tens of thousands defying the virus protocols. Decades of voracious, immoderate consumerism and the demagoguery of unqualified, personal rights have produced an allergy to selfless collective action. 

But the coronavirus is ideologically biased: it retreats before rational collective action and advances against self-centered, self-serving choices. Thus, the dogma of liberty as action without restraint, reason, or responsibility so widely preached in the US since the country’s birth comes face-to-face with a danger that devours its true believers.

Since the 1980s, finance capital has accounted for a greater and greater share of putative US economic activity. The character of that activity is further and further removed from productive activity and more and more engaged in accumulating and valorizing the chits of future and potential economic activity (speculation). Obviously, the viability of this process rests on thin subjective factors: public confidence. In a moment, economic disruptions can wash away the necessary confidence, resulting in a collapse as occurred in 2000-2001 and 2007-2009. We are there again.

Of course capitalism is resilient. But the disruptions of 2020 are far more dangerous than in the past, unleashing enormous, latent deflationary pressures. As investor and consumer confidence recedes, speculative “values” come into question, further eroding confidence and perceived value. A deflationary spiral ensues. And the tools available to Central Banks and Treasuries are depleted and less effective today. 

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If there is an encouraging development in the US, it is the remarkable burst of anti-racism activism that has spread from major urban areas to small Midwestern towns.

Impressively, white people in large numbers have joined, even organized these actions which began as outrage at police violence against Black people and enlarged to tackle the systemic racism of US society. This may well be the most significant counter to the crisis of racial justice since the Civil Rights Movement of the last century.

As a result of these actions, US public opinion has undergone a striking shift. A recent Wall Street Journal/NBC poll (July 9-12) shows that 56% of the US people “hold the view that American society is racist”! 

Significantly, the most popular explanation for US racism with respondents was: “People of color experience discrimination because it is built into our society, including into our policies and institutions.”

In addition, 57% of the people surveyed “totally” support the “protests and demonstrations” that emerged after George Floyd’s murder.

Other significant findings of the survey include: 

● 75% of respondents “are encouraged that America is finally addressing long standing issues about racism in our society and working to ensure that all Americans are treated equally.”

● 71% of respondents “feel angry because our political system seems to only be working for the insiders with money and power, like those on Wall Street or in Washington, rather than it working for everyday people to get ahead.” [This number has only slightly changed since 2015].

● 50% of respondents “feel concerned that the protests on racial issues are creating social unrest and bringing too much change to the country, including erasing America’s history and significant figures in the country’s story.”

Arguably, there has never been a time in US history when a majority deemed US society to be racist and supported street action to oppose the injustices associated with racial injustice.

Surely this moment offers great opportunity and should not be wasted.

Fundamental to seizing this moment is clarity about the essence of racism, avoiding false steps, dead ends, and foolishness. Too many of today’s anti-racism warriors scratch away at the margins, confusing language, symbols, and postures with racial inequality. They attack straw men, words, statues, and buildings rather than the many barriers to equality. They fail to grasp that jobs, homes, security, and health are the substance of racial equality, and not the attitudes and interactions that spring from inequality. In the immortal words of the great Nina Simone: “You don’t have to live next to me, just give me my equality.”

Sensitivity training, street drama, and verbal hand-wringing will not remove the burden of low income, the absence of wealth, decaying neighborhoods, poor schools, and inadequate health care. They require political and economic solutions, redistributive solutions. The polls show that the US people are ready for a modern version of “forty acres and a mule,” a dedicated and effective round of economic affirmative action. Are the politicians? The leaders? The pundits? 

If this potentially historic moment is not to be lost, it must not be appropriated by Democratic Party politicians bent on using it as a bludgeon against the Republicans and subsequently cast aside. It must not serve as a frivolous expression of youthful rebelliousness, only to offend the forces now supportive of fundamental change.

The interdependence of these four crises--- epidemiological, political, economic, and racial-- offer a unique opportunity to enact fundamental change in the US. Does anyone believe that either Biden or Trump is up to the task?

The challenge requires a mature, committed, and ideologically sound Left to drive it. It is hard to disagree with BAR’s Glen Ford: “...the U.S. Left is so weak, it has been unable to put forward a narrative that explains the multiple crises that have been so devastating to the American people, or to even minimally fulfill our obligations in solidarity with victims of U.S. imperialism around the world.”

But that doesn’t change the urgent need to now forge a Left that understands the severity of the crisis, a Left that has a vision beyond capitalism, a Left that has a well formed notion of a socialist future, and a Left that has a proposal on how to get there. That is the job before us.

Greg Godels

zzsbloml@gmail.com

A Reckoning?

To understand the global economic chaos endured over the last few weeks, it is essential to separate the proximate from the ultimate cause. 

The immediate or proximate cause is the often fatal, expanding contagion of the coronavirus (Covid-19). The collapse of worldwide equity markets has been an immediate and widely noted effect of this proximate cause. The virus’s carnage in PRChina triggered a rapid and effective response, but one that dampened economic activity in a country already dealing with a slowing economy battered by economic sanctions and tariffs. Institutional investors, hedge fund managers, and their ilk took note of the carnage and contagion and, anticipating its effects on global activity, withdrew their assets from equities and moved them to safer havens, like US Treasury bonds. The panic initially shook the bond markets, lowering yields dramatically.

The rapid spread of the virus brought even greater economic disruption in its wake.

However, the ultimate cause of the current worldwide economic turbulence is the fragility and vulnerability of the global capitalist system. That statement is neither trivial nor self-evident. Since the severe crisis of 2007-2009, capitalism has been limping along, thanks to extraordinary central bank measures, tax cuts, military spending, and expansive credit-driven consumer demand. The casualties of the previous crisis survive on low-paying, casual service jobs while the rich engorge themselves on stocks inflated by mergers and acquisitions and stock buybacks. Every tentative growth spurt falters, returning the capitalist economy into stagnation. The increasing irrelevance of centrist political parties is one manifestation of the mass dissatisfaction with the growing inequality and impoverishment suffered by many. The question was not whether this course is sustainable, but when it would fail.

The ominous threat of the Coronavirus to international economic activity-- work, leisure, travel, all forms of social life-- has triggered a market meltdown based on a fear that the capitalist system may spiral out of control. Investors know that the system’s weaknesses, the lack of adequate preparations, the political stasis, and ineffective governing foretell a frightening outcome. 

Unlike the rapid and thorough Chinese response which has largely arrested the virus’s spread, complacency in the Western capitalist countries is shocking. Today, seven times more people per millions of population  have been infected by the virus in Italy than in PRChina, where the illness first broke. New cases in Italy are 3,497 against only 11 in PRC on March 14. Chinese deaths fell to 13 on March 14, while 175 Italians, 97 Iranians, and 60 Spaniards died from the virus. All the Western media hand wringing about Chinese “authoritarianism” will not deflect the incredible failures of public health preparedness in the Western capitalist countries.

The lack of a universal, equitable, and comprehensive healthcare system (like Medicare for All!) and a robust public health sector put the US especially at risk. Couple the unevenness and unfairness of healthcare with the historical obsession with personal autonomy, and disaster is on the horizon.

An exogenous trigger of economic turmoil is not unprecedented in recent times. The attack by al Qaeda on US civilians on September 11, 2001 produced a 7+% drop in the stock market, deepened the dotcom downturn, and fueled a stock market retreat and growing unemployment for the next year or so. As with the Coronavirus in 2020, an unexpected, non-economic factor jolted a shaky economy in 2001, then also plagued by overvalued “assets.” This instance promises to be far worse.

Much of the economic history of the twenty-first century has been a battle by policy makers against deflation, a battle to prop up artificially inflated, often virtual, assets. From the turn of the new century and the dotcom bubble until today, toxic assets have infected the productive economy. Ironically, a seemingly random “toxic” virus is now threatening the weakened global economic organism, destroying “value” by the trillions.  

Of course the danger still lies ahead. Markets are only anticipating the lost work-hours, the layoffs, the healthcare costs, the business closures, the slowed production, the inverse “wealth” effect, the reluctant consumer, the slackening investment, and a host of other economic shocks that could feed a deflationary spiral. The financial sector is stunned by this as well because asset values are collapsing in a 

low-interest environment. 

Though some are calling this a financial crisis, it is not spurred by financial factors; nor is it confined to the financial sector. Nor is it a crisis of overproduction, under-consumption, or profitability, though it is quickly morphing into all of the above and, inevitably, where all economic crises arrive, a crisis of accumulation. The global economy was rocking on a precipice; the Coronavirus pushed it over.

The virus couldn’t have come at a worse time. The war between the economic globalists and nationalists, waged with tariffs and sanctions, was taking a heavy toll on many countries and remains unsettled. Despite equity market euphoria (disconnected from all reality), commodity markets were slack or declining. International trade had slipped below historic growth levels.

Saddled with the unspoken duty to stabilize the US economy for an incumbent in a Presidential election cycle, the Federal Reserve shot its monetary wad prematurely, lowering interest rates in anticipation of limited economic slippage from the “Chinese problem.” They are now left with only radical measures to meet the crisis (a program injecting a trillion and a half in liquidity into the banking sector and expanding deflation-fighting asset purchases was announced on March 12).

The Russians exacerbated the crisis by shunning the Saudi plan to bolster oil markets. On Friday, March 6, they refused to join the Saudis in curtailing oil production to stabilize prices. Irresponsibly, the Saudi leadership-- under severe political pressure from budgetary shortfalls and a disappointing IPO-- announced a price war (and arrested oppositional members of the Royal family).

As oil prices collapsed, the Russian ruble collapsed as well, forcing the Russian central bank to halt foreign purchases temporarily.

According to Russian insiders, the withdrawal from price maintenance was aimed at US frackers who cannot produce profitably when prices are low. Alexander Dynkin is quoted as saying: "The Kremlin has decided to sacrifice OPEC+ to stop U.S. shale producers and punish the U.S. for messing with Nord Stream 2." [my emphasis] The Russians surely knew that the US fracking industry was already on the verge of collapse because of massive, unmanageable debt (over $120 billion maturing over the next 2 years!). Thus, Russia risked a profound oil-price deflation in revenge for US subversion of its European gas pipeline project-- a capitalist tit-or-tat. 

I have written about energy imperialism frequently over the last two years (especially, the US’s extortionate use of war-mongering, sanctions, and threats in order to garner market share) . Given the ugly effects of a price-war race to the bottom on vulnerable oil production-dependent countries like Venezuela, those who see Russia as something more than another capitalist country pressing its own interests may find a reason to reconsider.

A nasty virus, incompetent and delayed responses, ill-conceived economic policies, an irresponsible price war, all contribute to a fear-driven market collapse as the opening act of a possible drama featuring an unprecedented deflationary spiral. 

Does anyone believe that the leaders of the capitalist world can manage this challenge?

Greg Godels

zzsblogml@gmail.com