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Monday, July 20, 2015

The Greek Tragedy


They were young, attractive, well-educated, and the darlings of the non-Communist left (and even some Communists!). The leaders of the Greek party, SYRIZA, promised the Greek people an escape from the jaws of the European Central Bank, the International Monetary Fund, and the European Commission. Instead, they delivered the humiliating surrender of a people who only a week earlier had demonstrated a clear rejection of accommodation to the EU ruling classes.
The Financial Times headlined: “Greek PM likely to rely on opposition to pass most intrusive programme ever mounted by EU.” (My emphasis)
Regarding the SYRIZA surrender, The Real News commentator, Dmitri Lascaris, declared that “this is one of the worst political debacles in modern European history.”
Journalist and award-winning documentarian, John Pilger acidly commented: “An historic betrayal has consumed Greece. Having set aside the mandate of the Greek electorate, the Syriza government has willfully ignored last week’s landslide “No” vote and secretly agreed [to] a raft of repressive, impoverishing measures in return for a ‘bailout’ that means sinister foreign control and a warning to the world.”
Predictably, the non-revolutionary left scrambled to put an apologetic spin on the embarrassing collapse of the SYRIZA program. Before the draconian deal, the entire spectrum of the US left—from “progressive” Democrats to neo-Marxists and other hyphenated pseudo-Marxists---were swept into a love fest for SYRIZA unlike any since the orgy of Obama-mania. Typical of the post-referendum SYRIZA craze was the statement by the loquacious “Marxist” economist Richard Wolff on Democracy Now!
...And if Syriza can pull that off, the message sent to the comparable groups in every other European country is a staggering reconception of what the future of Europe may look like, where the words "anti-capitalism" become a unifying slogan for people across that continent...
You cannot impose economic structural reforms on a population that has voted 60 percent against them, with the television blaring out propaganda for them, every TV station and every newspaper, virtually, doing that. You just can’t do it. It’s not a question of argument; it’s a question of fact. (7-7-15)
Well, Professor Wolff, the Troika did it, thanks to the capitulation of SYRIZA.
Rather than heap deserved blame on the SYRIZA leadership, it is surely more useful to draw lessons from a fiasco that will have disastrous consequences for the Greek people. Of the many possible lessons, I offer the following three:
1. Social democracy offers no answer to the crisis of capitalism in its many manifestations. Whether it is the untenable strategy of overturning the neo-liberal model of capitalism and returning to the “golden age” of welfare statist policies, the once popular doctrine that “a rising tide raises all boats,” or the contradictory notion of democratizing capitalism, reformist programs that accommodate the bourgeois state and capitalist relations of production will fail to deliver the people from increasing immiseration and degradation. The European experience teaches nothing if not that.
Europeans have understandably lost patience with the evolution of their parliamentary systems toward two poles: tyranny of markets and tyranny of markets with a human face. They are turning instead to “radical” parties of the right and left. SYRIZA is an example of a “radical” party of the left that occupies the untenable space of defying the logic of capitalism while accepting its legitimacy. This is akin to diagnosing cancer while refusing treatment.
Clearly, the newly minted Euro-left parties that hide social democratic accommodation of capitalism behind the mask of “anti-capitalism” promise no more success than SYRIZA.
2. The Greek Communists (KKE) won a moral and ideological victory with their steadfast position that the SYRIZA program would end in disaster. They argued consistently that SYRIZA's attempt to “manage” capitalism would end badly. Speaking before a July 2 rally in Athens, General Secretary Dimitris Koutsoumpas stated emphatically:
Both the YES and the NO mean the acceptance of a new memorandum of anti-people measures, perhaps the worst that we have seen up to now.
Both the YES and NO will lead the people to new torments and tragedies. •Both the YES and the No mean anti-worker, anti-people measures. •The referendum is an alibi for a new memorandum-agreement at the expense of the Greek people.
The KKE calls on the Greek people to reject all the blackmail, to cast its proposal into the ballot box and say:
WE DO NOT CHOOSE ANTI-PEOPLE MEASURES-WE DO NOT CHOOSE A NEW MEMORANDUM-WE CANCEL OUT THE FALSE DILEMMAS.
Nearly 6% of the voters-- a remarkable write-in result-- complied with Koutsoumpas' call.
Not surprisingly, the bourgeois media ignored KKE's campaign against the maneuvers and manipulations of the SYRIZA-ANEL government; one would expect no less from the mouthpieces of the capitalist ruling classes. However, the nearly total disregard of the KKE critique and counter-program by the broad left is indefensible. Apart from a few Leninist organizations, KKE's position was either ignored or subjected to derision. Particularly in the US, intense anti-Communism and ideological conformity led to an almost complete misreading of the Greek tragedy, a development that could have been avoided with a measure of non-sectarian tolerance toward the KKE analysis.
With the collapse of SYRIZA as a left oppositional party, only KKE holds the banner of left resistance. Let's see if our “left” friends will support its struggle.
3. For those of us living in the US, those of us destined to suffer through a tortuous, sensationalized, but ultimately disappointingly predictable Federal electoral campaign, the SYRIZA debacle holds some interesting parallels. As a friend and comrade so astutely points out, the Bernie Sanders campaign is a similar Trojan horse channeling dissatisfaction with capitalist institutions away from truly radical, effective solutions.
Instead of mounting a truly independent campaign outside of the two-party black hole, Sanders chose to run in the Democratic primary while promising neither to bolt the Party nor to withhold support from the primary victor regardless of the outcome. Thus, when he falls in the primaries to Hilary Clinton's corporate coffers-- as every serious commentator acknowledges he will, Sanders will dutifully urge the Party's progressive wing to accept defeat and climb aboard Clinton's juggernaut.
Apologists for this quixotic campaign will argue that Sanders will at least move the campaign conversation leftward. Of course this flies in the face of every primary campaign in any voter’s memory. Every Democratic Party primary season swings leftward in deference to the hard-core base, only to swing even further rightward to accommodate the “centrists” that strategists hope to cultivate. More often than not this strategy backfires; yet it remains an irreproachable axiom in the age of television and the Internet.
Sanders says in his campaign literature: “...the billionaire class is spending huge amounts of money to buy candidates and elections. We are now witnessing the undermining of American democracy and the rapid movement towards oligarchy where a handful of very wealthy families and their Super PACs will control our government.”
Does he think this process will be suspended for the 2016 primary season? Does he not count the Clinton family, its foundation, and its massive fund-raising machine as part of that “oligarchy”?
If Senator Sanders believes his words, he would support a movement away from this trap and not lend his name to legitimizing a corrupted, bankrupt process.
Zoltan Zigedy

Tuesday, July 7, 2015

Racism: Hidden in Full View

How Pundits and the Media Deflect Attention from the Cancer


The June 18 murder of nine African Americans in Charleston, South Carolina was a racist act, a calculated political statement, an assassination, another instance of the pervasive racism that has seeped into everyday life.
It was not an act of derangement or a flag-inspired event. It was not a crime directed against religious practitioners or as an attention-getter. It was not caused by gun-mania. Nor was it terror-driven. It was not the inexplicable act of a lone, desperate gunman. Politicians, “experts,” and the media want you to believe it was any and all of these things.
They do not want you to see it for what it was: a deliberate, racist murder that springs from the politics, institutions, and culture of the United States.
For days, talk radio, NPR, network news, and the commentariat debated a civil war battle flag, as though racism would be extinguished if all the symbols associated with the losing side in a civil war concluded one hundred-fifty years ago were expunged from public display. Liberals talked of removing street signs and statues. Symbol watch dogs now ceaselessly scrutinize everything from Civil War re-enactors to license plates, as if a world absent these reminders of slavery would eradicate racism. The stench of racism is being taken for its fetid substance.
Gun control advocates reached out to remind us of the damage that a .45 caliber Glock pistol can do. They spin the assassination as enabled by the availability of lethal firearms, conveniently ignoring the ugly legacy of racist violence through lynchings, bombings, and burnings. In the minds of many commentators, the Charleston event was little different from unfortunate, everyday violence perpetrated with guns. Racism is swept under the rug.
And then there are the hair-splitters who want to press the description of “terrorist” on the young racist assassin, correctly noting the hypocrisy of applying it selectively for some acts and not others. But the word “terrorism” has no legitimate use. It is dishonestly stretched to include virtually every national liberation movement from the Algerian FLN, the Palestinian PLO, to the South African ANC, earning Nelson Mandela the dubious distinction of being labeled a terrorist. On the other hand, the term has been opportunistically shrunk to exclude the death squads in US-friendly nations and the death-dealing, genocidal invasions and aggressions of the US military and its NATO allies. “Terrorist” has become the emotive expletive reserved for the victims of the bullies of the world. Does it enlighten to include the racist killer in the corrupted category of terrorist?
Talk show hosts think so. They consult experts to debate the question. And the question of racism is again evaded.
Politicians speak earnestly of a conversation or a dialogue on race. They want no such discussion unless it skirts the question of societal, institutional racism. They do no want to raise the matter of African American joblessness or African American poverty. They do not want to acknowledge the fact that many if not most Northern Blacks live in urban ghettos akin to Apartheid Bantustans. While African Americans are not required to carry internal passports, their skin color serves the same purpose in modern-day North America.
The media windbags will not revisit the betrayal of school desegregation in the 1974 Supreme Court decision Milliken v Bradley which effectively eviscerated Brown v Board of Education. The Burger Court stopped the desegregation process at the city limits, stoking white flight, accelerating the neglect of urban schools, and stifling the opportunity for urban African Americans to get a decent, equal education.
No leader dares shed light on the mass incarceration of Blacks, a process that has left millions of African American males socially ostracized, disenfranchised, and removed from life-opportunities. The passing of draconian laws and the simultaneous militarization of the police forces have been enforced with a Nazi-like brutality, only now marginally recognized by a justice-impaired media.
Pundits and policy makers willfully ignore the extreme and asymmetrical effects of radical deindustrialization upon the Black working class in Midwestern cities since the 1980's. Once vital, neighborhoods are now in shambles. And throughout the United States the near absence of Black faces on building sites can only be overlooked by those choosing to ignore it.
Public spaces for candid discussion and debate are dominated by shrill voices of fear. Before there was a Red scare in the US, before there was hysterical fear of Islam, there was fear of Black people. Birth of a Nation and Willie Horton book-end a century of scurrilous demonization of African Americans. Like anti-Communism and Muslim-hating, the consciously contrived fear of Blacks distracts the majority from its own grievances, its own abuse at the hands of the rich and powerful.
It is a bitter irony that these fears once enriched realtors who used the Black scare to herd whites to the suburbs and exurbs. Their children are now “gentrifying” cities, forcing Blacks from formerly affordable housing and out of these same cities, a not-too-subtle form of ethnic cleansing worthy of the Israeli settler-colonists in Palestine.
And when Black people rise up, as they did in Ferguson, Baltimore, and hundreds of places earlier, they are labeled “thugs,” “looters,” and “rioters.” The same press that delivers only invective in response to African American insurgency hypocritically labels Nazis in Ukraine “freedom fighters.” The same press that celebrates US-instigated coups against elected governments in Honduras and Ukraine finds nothing noteworthy in the institutional disenfranchisement of Black people through electoral maneuvers.
It is not merely hypocrisy that infects our media and culture, but the malignancy of racism. Mass culture-- television, film, etc-- and news media almost universally depict urban African Americans as gangsters, drug dealers, addicts, and other purveyors of violence and vulgarity. True, mass culture occasionally portrays Blacks sympathetically, but as the exceptional character escaping dysfunctionality.
The example of a dramatic shift in popular acceptance of gay marriage demonstrates the power of a cultural shift, a mainstreaming of a minority. As the Wall Street Journal/NBC News poll shows, in only six years-- from 2009 to 2015-- support for gay marriage grew by 20 points, from 40% to 60%. This remarkable turn-around surely shows the effects of depicting gays as sympathetic figures in movies, sitcoms, news print, etc.
While the media should be applauded for helping secure this welcome change, it must be roundly condemned for persisting in demonizing African Americans. No similar effort has been made to mainstream Blacks. Instead, the powers owning and controlling our news and entertainment corporations fuel the fear, disdain, and even hatred directed at African Americans. They depict a minority alien to the values of hard work, civility, and respect. By portraying Blacks (and Hispanics as well as other minorities) as unworthy, they support their ruling class brothers and sisters and sow disunity in order to guarantee low wages and benefits, a ravaged social safety net, and social and political stability. There is nothing that ruling class elites fear more than the dissolving of the divisions, prejudices, and ignorance that preclude a unified, clear-sighted working class.
The corporate cultural and news complex, more than a shabby Civil War symbol, is responsible for the tragic event of June 18.
Given centuries of oppression and exploitation, along with a relentless campaign of social rejection, it is no wonder that Blacks are the only social group in the US with a more positive view of socialism than capitalism (Pew Research Center, May 4, 2010). One would hope that this wisdom garnered from the harsh lash of capitalism will be welcomed by others who are appalled by our country's treatment of their fellow citizens.
Zoltan Zigedy

Monday, June 29, 2015

The “New Feudalism”?


At the dawn of the era of capitalism, when commodity production remained embedded in feudalism, many merchants established networks of disconnected peasant households desirous of extra incomes and possessing modest handiwork skills. They supplied these networks with raw materials and tools (capital), paid for the work, secured the products, and brought them to market, reaping a profit. This system of “cottage” or “putting out” commodity production was a factor in accumulating capital necessary for the later system of collecting workers under one roof, what we came to know as manufactory, a more efficient means of commodity production. In turn, primitive manufactory, with the further accumulation of capital and revolutionary changes in the productive forces, gave rise to an even more efficient system of production by joining human labor with machinery and seemingly inexhaustible and ever-available sources of power.
Just as the modern CEO and his or her corporate courtiers have inherited the role of the early merchant-entrepreneur, today's workers are the offspring of the peasant selling labor to the incipient capitalist.
Centuries after the proto-capitalism of putting out “jobs” to small, independent producers, the idea has returned. Ironically, twenty-first century capitalism is reviving the idea thanks to the ubiquitous technology of the smart phone and the computer. Modern entrepreneurs link services from isolated, unrelated providers with customers via the Internet. Arrangements and payments are made through the intermediary of an entrepreneurial organization that risks little and gains much. While the services have taken on tech-sounding brand names like Uber, Airbnb, Instacart, or TaskRabbit, advocates have dubbed the new enterprises “the sharing economy,” an expression that conjures the image of a utopian New Harmony of idealistic cooperators.
That would be a false image, however.
The “sharing economy” is nothing more than a new phase of monopoly capitalism in the service sector, a new mode of exploitation enabled by advances in the productive forces. As with the evolution of the factory system, higher forms of organization have concentrated industries and afforded higher rates of profit. Advances in technology have allowed a company like Uber to spread its corporate net both nationally and internationally, creating an enterprise much broader and more flexible than existing taxicab or other vehicle livery services. In a short time, the new wave of service start-ups have rivaled or surpassed in revenue or usage the long-standing traditionally organized business competitors. While their services rely upon dissociated, heterogeneous service providers, they are interlocked and dispatched with an efficiency only possible with the latest technological advances.
But even with these technological advances, it is the competitive edge won by lower prices that account for the explosive growth of the “sharing economy.” Customers are, first and foremost, flocking to Uber, Airbnb, etc. because they perceive a value. This has been especially appealing to those upper, upper-middle or want-to-be-upper stratum consumers who have been damaged by the economic crisis. The “sharing economy” thrives in the economic space between limousines (and taxis) and public transportation, between the Ritz-Carlton and Motel Six.
Lower prices are garnered in two very old-fashioned ways common to the history of capitalism: exploitation and side-stepping regulation.
By relying on informal employment and minimalist contracts, the “sharing economy” sidesteps the historically accumulated regulatory protections that have shaped the relevant industries (vehicle livery, hospitality, etc.) over many decades of practice. Without these protections, countless losses or injuries would have been suffered by both consumers and employees. Of course regulation comes at a price. Safety guarantees, training, maintaining humane working conditions, catastrophic insurance etc., all add to the costs of the final product. But billion-dollar corporations like Uber, hiding behind the “sharing” mantra, ignore or deny these regulations. And so far, corporate-friendly state and federal regulatory agencies have put up only meek resistance. Utility commissions and consumer protection agencies, always hesitant to step on corporate toes, have ignored the potential for abuse or negligence. Things will change dramatically when damages and legal actions begin to pile up.
But the “sharing” employment model adds even more to the bottom line. By using “free-lance” employees and selling the notion that they are independent contractors, “sharing economy” corporate moguls evade labor standards of any kind, depress payments on a whim, and allocate work on a totally capricious basis. As independent contractors, employees have virtually no supplemental workplace rights; the terms and conditions of employment are completely dictated by the boss. Wall Street Journal commentator Christopher Mims remarks how some have come to see the “sharing economy” as the “new feudalism” (How Everyone Misjudges the “Sharing” Economy, 5-24-2015). Given its commonalities with the 15th and 16th century putting-out system, one can appreciate the comparison.
In a Philadelphia study cited by Mims, Uber drivers, after expenses, averaged about ten dollars an hour. That figure will only go down when off-warranty repairs and damages and insurance liabilities catch up with extended usage. Moreover, Uber concedes that 51% of its drivers work less than 15 hours a week. And since Uber hires 20,000 new drivers a month internationally, per capita hours can only go down.
While Airbnb doesn't directly exploit workers, it does (or soon will) take jobs from the hospitality industry. Housekeepers, janitors, desk personnel, concierge, etc. are not part of the expenses associated with the Airbnb business model. Consequently, Airbnb enjoys a price competitive advantage (though the customers never really are assured of what he or she will get for the price). But like any competitive advantage, vultures are attracted. In many cities, speculators are purchasing properties explicitly to use for short-term Airbnb rentals. Others are counting on rentals to finance home purchases. Both practices are driving property values higher and higher, further feeding the ethnic and class cleansing of our major cities for the urban gentry.
As with the other elements of the “sharing economy,” the avoidance of regulatory protections, customary amenities, and consistent service will eventually challenge the business model. “Accidents,” sub-standard performance, and disputes are coming. When the aura of newness wears off, the attraction of lower costs will lose much of its glitz.
The workplace may change, but exploitation remains the same. How the labor movement responds will say a lot about the future of organized labor. Depressed labor costs, whether it nests in the fast-food industry or in the new “sharing economy,” imperils all of labor, organized or unorganized.
If labor leaders think that the Democrats will stem the dampening of wages and benefits, they should think again. David Plouffe, President Obama's former campaign manager now works for Uber and serves on its board of directors. Bill Clinton's long-time spokesperson, Matt McKenna, has also joined Uber. And then there is Jim Messina, head of Priorities USA Action, a super PAC associated with Hillary Clinton's Presidential aspirations. Messina works with both Uber and Airbnb to smooth the way with Democratic Party legislators. Fat chance Democratic leaders will stand in the way of the “sharing economy” juggernaut.
Let's hope organized labor has the foresight to tackle this emerging threat to working class living standards.

Zoltan Zigedy

Friday, June 12, 2015

THE US ECONOMY: A MID-YEAR REPORT CARD


It's no secret that investors are frightened. A fog of uncertainty hangs over US equity markets, with Wall Street mavens reassuring each other that the course ahead is promising. Activity is down and performance volatile, with institutional investors and fast traders catching small waves at the end of trading days. Fear over Greek negotiations and a possible Federal Reserve increase in interest rates haunt the investment banks, fund managers, and other institutional investors.
US commentators hopefully hail any modestly positive economic news-- an encouraging employment gain here, a small spike in consumer spending there. At the same time, they are deathly afraid of a dampening interest rate hike. Frequent bad news -- like the first-quarter drop in GDP in three of the last five years -- is either dismissed as weather related or conveniently attributed to other non-systemic factors.

Cautious, wary signals crop up in newspaper headlines: “Postcrisis Financial-System Risk Casts a Darkening Shadow” (WSJ, 4-9-15), “A World Awash in Almost Everything” (WSJ. 4-25/26-15), “Tech Investors See the Froth, but None Dare Call It a Bubble” (NYT, 5-25-15). Warnings about “bloated” stocks by the Fed chairman, and alarm over declines in business investment, industrial production and worker productivity, all cast a shadow over the cheer leading of stock purchase evangelists and other financial hucksters.
And then there is the eccentric David Stockman-- President Reagan's former budget director-- who makes a convincing case regularly that the sky is falling. He forewarns:
What is coming, therefore, is not their father’s inflationary spiral, but an unprecedented and epochal global deflation...
What ultimately stops today’s new style central bank credit cycle, therefore, is bursting financial bubbles.
That has already happened twice this century. A third proof of the case looks to be just around the corner. (4-5-15)
Where Are We Headed?
Despite riding a lucky hunch before the 2008 crash, I believe Marxists should avoid the speculative temptation of announcing impending crashes. The fashionable practice of revealing a “tipping point” is just that: a fashion, and not science. One should follow the sage advise of Marxist political economist, Alfred Evenitsky: “...if one is a Marxist intent on understanding the underlying forces which move and shape the capitalist economy, the ‘trigger,’ while not insignificant, is of less importance than the underlying economic configuration which is being ‘triggered.’ This is a difference in emphasis and point of view, but it is more than that. It is also a difference in the depth of analysis, for ‘triggers’ are in their nature surface phenomena and provide few clues to the subterranean forces they release.”
So what are the subterranean forces shaping the US economy (and the global economy) in mid-year 2015?
Comparisons with earlier downturns-- 1980, 1983, 1991, 2002-- show that the post-2009 “recovery” is by far the most tepid and problematic. Significantly, each successive decline has delivered a successively weaker rebound, culminating in the tentative, stumbling growth after 2009.
Clearly, the enormous boost that global capitalism (and especially US capitalism) received from a several-decades-long tonic of classical and state-monopoly policies (deregulation, privatization, the easy substitution of workers from cheap labor markets, and state intervention on behalf of the monopolies), along with the demise of the economic community of European socialism and the concurrent expansion of global markets, is reaching exhaustion. The historically unprecedented oddity of roughly one-third of the world's population joining or re-joining the global market economy in little more than a decade provided a powerful thrust to a struggling capitalism mired in a toxic swamp of high inflation and slow growth. Neo-liberal ideology fit the moment well, bringing a seductive world view to potential elites throughout the formerly socialist world and to other countries with a tempered stance towards capitalism.
But that unique moment is passing and those who were convinced that “there is no alternative” are surely having second thoughts. The triumphant capitalism of several decades earlier now seems far less sure-footed.
From the perspective of working people, the post-2009 “recovery” is no recovery at all. Change in average hourly earnings is trending below its generally pathetic long-term performance over the last thirty-five years; non-farm payrolls, disposable personal income, and consumer spending growth largely trail previous expansions; and total household debt is marching steadily toward the previous high of the third quarter of 2008.
Both the harsh discipline of unemployment and the lack of effective representation (no mass political voice, frail class-based organizations) batter the US working class. The growth of employment since 2009 exists largely in the low-wage, temporary, and contingent sectors, exerting little pressure on employers to raise wages and benefits. Chastened by the financial crisis, workers have been hesitant to take on mortgage and credit card debt. But this cautious posture has been more than offset by exploding student loan and automobile loan debt. Consequently, household debt has skyrocketed to levels unseen since 2007 (only 6.5% below its 2008 peak).
For those on the other side of the class divide, the post-2009 period has been most generous, thanks to high profits, low interest rates, exploding equity prices, improving home prices, and friendly government policies. The Dow Jones Industrial Average has recovered smartly from its February, 2009 low of around 7,000 to over 18,000 in May of this year-- an increase of well over 150%!
How can the stock market grow so explosively when Gross Domestic Product-- an, at best, exaggerated measure of real value generation-- grew by only 21% in constant dollars in the same period? What magic lies behind the good fortune befalling the ownership class?
The explanation of explosive stock market inflation begins with the enormous concentration of wealth in the hands of those buying and selling equities. The capitalist imperative to invest, to pursue a return, drives money back into a market filled with “bargains.” And “free” money, available through virtually interest-free loans, amplifies the surge in stock purchases. Publicly traded firms, flush with cash and able to fund investments with “free” money, buy back caches of their own stocks, inflating the price of stocks remaining in the market. Firms also pump up their dividends with their bloated cash reserves. And most significantly, the Federal Reserve's policy of quantitative easing-- gobbling up financial instruments and depressing the yield on bonds (and driving up their prices!)-- effectively herds investors seeking attractive returns into equity markets.
That equity prices have departed dramatically from economic reality is easily shown. Traditionally, investors grow suspect of equity prices when they exceed historical relationships of price-to-earnings (the p/e ratio). The p/e of the Standard and Poor's 500 has reached 17.5, well above its 10-year average of 15.8 and sufficient to strike alarm bells.
For comparative purposes, another gauge of the sustainability of equity pricing is the so-called Buffet indicator, the ratio of the Federal Reserve's estimate of corporate capitalization over the concurrent gross domestic product. In 2015, the ratio topped 1.32 (corporate capitalization 132+% of GDP). Immediately before the 2008 crash, the ratio was approaching 1.15. Before the 2000 “dot com bubble” burst, the ratio was 1.53, a level easily within reach in the next year or two given the current trend. Clearly, equity inflation has taken the stock market into a danger zone associated with the last two downturns.
Do the apparent dangers signal economic speed bumps or serious systemic issues?
Policy makers-- limited by ideology and class loyalty-- sought to escape the jaws of the 2008 crisis by pumping up the prospects of corporations and the ownership class. The corporate bail-outs (too often conditional upon downsizing and layoffs), the near-zero interest-rate policies, and a host of other corporate-friendly moves paved the way for the consequent surge in profits and the stock market frenzy.
These policy makers were counting on corporate coddling and painless credit to encourage firms to invest vigorously. They were determined to create a climate with investors and corporations choking on cash, with ready access to interest-free loans, and anxious to make even more money through hiring and expansion.
Indeed, with massive layoffs, labor productivity jumped as production continued and the hours worked declined (raising the rate of exploitation), fixed business investment grew at a satisfactory rate, and profits exploded (S&P 500 companies' earnings soared 30% in 2010).
But this jump-start was not sustained. Federal Reserve policies (low interest-rate policies and quantitative easing) encouraged corporations to satisfy stockholders through mergers and acquisitions, stock buy-backs, and dividends rather than invest in plants or hiring. Consequently, corporations successfully decoupled market capitalization from earnings performance. Since 2011, corporate capital returns (to investors) have exceeded capital expenditures. As profit growth declined since the 2010 explosion, stock values nonetheless continued to climb, leaving investors overjoyed.
Broadly speaking, the three key factors of fixed business investment, productivity and, corporate profits have been trending downward for three to four years. First-quarter 2015 fixed investments fell 3.4%, not surprisingly, output per hour (productivity) fell by 3.1%, and earnings were expected to barely move. These three interdependent and fundamental indicators underscore the critical weaknesses in the US economy. Capitalism has wrung as much sweat as it can from workers, managers are reluctant to invest in new or advanced means of production, and US corporations are experiencing a decline in the rate of profit.
Are the problems besetting the US economy and confounding bourgeois economists fleeting or deeply embedded in the 21st century capitalist system?
A recent Wall Street Journal (World Awash in Almost Everything, 4-25/26-15) makes some interesting, relevant observations. Authors Josh Zumbrun and Carolyn Cui note: “The current state of plenty is confounding on many fronts... Global wealth-- estimated by Credit Suisse at around $263 trillion, more than double the $117 trillion in 2000-- represents a vast supply of savings and capital, helping to hold down interest rates, undermining the power of monetary policy.”
They might add that this extreme accumulation of capital also overflows existing channels of profitable investment, exerting downward pressure on profit growth and encouraging ever riskier investment choices. Capital will not remain idle. In an environment of over-abundance, conventional profit opportunities become scarcer and investors reach desperately for yield.
As with pigs foraging for truffles, too many foraging pigs reduce the chances of any individual pig finding the treasured fungus. Profit-seekers -- like truffle-seekers -- will go to any length and take any risk to secure their goal. Today, there are 65 venture capital investments of over $1 billion each (CB Insights says there are 107), drawing funds from yield-hungry retirement funds, mutual funds, and hedge funds. Whatever the number, all agree that the total capitalization of these investments in firms that are little more than start-ups approaches or exceeds the capitalization of the similar “dot com” firms that blew up in 2000. Like the “dot com” fiasco, capital is flowing freely to almost any garage enterprise with little more than a rough business plan and a clever idea. The search for yield is that intense.
As New York Times writer Conor Dougherty (Tech Investors See the Froth, but None Dare Call It a Bubble, 4-25-15) comments:
But the tech industry's venture capitalists - the financiers who bet on companies when they are little more than an idea - are going out of their way to avoid the one word that could describe what is happening around them.
Bubble.
Once again, the US economy suffers from a case of hyper-accumulation coupled with a declining rate of profit, seducing investors into riskier and riskier bets. As with the lead-up to the 2000 downturn and the 2007 crash, too much capital is pursuing too few attractive investment opportunities. Consequently, rampant speculation follows, risk intensifies, and the profit-making engine runs off the rails.
From time to time, we all need to be reminded that the capitalist system runs on profit and the confidence that profit-making opportunities will be available tomorrow. Even Marxists need to be reminded that Karl Marx placed the process of accumulation and its tendencies at the center of his analysis. Careful study shows that the challenges to continued profit growth have not been wrung from the US economy. As investors have emigrated from traditional productive sectors or service areas of the economy in search of further investment opportunities, they have shaken the system's foundations with risk and insecurity. But given the dynamics of 21st century capitalism, given the enormous concentration of wealth that relentlessly and necessarily seeks to grow ever larger, investors must accept more risk and insecurity. There is no alternative, to steal a quote from the enemy. Therefore, they must continuously put the capitalist system in harm’s way.
For those who-- like the popular social democratic thinker, Thomas Piketty-- think that we can redistribute the obscene concentration of global wealth through tax policies and set capitalism merrily on its way... think again. Should, by some miracle, the ownership class surrender their grip on the state, capitalism would, in time, reproduce the inequalities that lead to the concentration of capital and crises. That's its nature. As the great song writer Oscar Brown Jr. reminds us:
Take me in, tender woman," sighed the snake
"Now I saved you," cried the woman
And you've bit me, even why?
And you know your bite is poisonous and now I'm going to die"
"Ah shut up, silly woman," said that reptile with a grin
Now you knew darn well I was a snake before you brought me in...”

Zoltan Zigedy

Thursday, May 14, 2015

History Lessons

Remember in 2009, when the then White house chief of staff, Rahm Emanuel, labeled the “progressive” wing of the Democratic Party “f**king retards”? Without Emanuel's notoriously crude bluster, President Obama expressed a similar sentiment on April 23 in public remarks on the Trans-Pacific Partnership (TPP) trade agreement.

According to MSNBC, President Obama said: “Some of these folks [opponents of the TPP] are friends of mine. I love them to death. But in the same way that when I was arguing for health care reform I asked people to look at the facts – somebody comes up with a slogan like ‘death panel,’ doesn’t mean it’s true. Look at the facts. The same thing is true on this. Look at the facts. Don’t just throw a bunch of stuff out there and see if it sticks...”

Obama's comparison referencing the “death panels” concocted by the lunatic right did not go unnoticed by his critics from labor and the left. Most objected that comparing their opposition to TPP to the ravings of crazies hardly suggests the sentiments of a friend.

Of course this is an old story. Since the defeat of Walter Mondale in 1984, the founding of the Democratic Leadership Council and numerous associated think-tanks, the Democratic Party has moved smartly and steadily rightward, shedding any semblance of New Deal or Great Society progressivism. During the Obama years, the process has reached a point where the Democratic Party's meager left wing pretends to represent the Party's soul while the leadership pretends to welcome its views. On occasions like the TPP incident, the leadership fumbles the script and reveals its true feelings.

Sadly, few lessons are drawn from this experience or the pattern of contempt and derision demonstrated by the party's corporate coddling leadership.
Flashback

As we enter the Silly Season-- the 18 months of lies, bluster, and empty promises preceding the Presidential election-- I am reminded of the last great moment of self-induced, liberal/left self-deception. In the lead-up to the 2008 presidential election, all but a few unrepentant Marxist-Leninists, Green Party hardliners, and assorted outliers joined hands in a mad orgy of Obama-mania. For those who need reminding, Obama was actually the corporate choice preferred by the ruling class to clean up the mess left by a failed, embarrassing Bush administration that destabilized the Middle East, antagonized allies, blemished the image of the US, and stood clueless before an economic crisis unprecedented since the Great Depression. A fresh face was needed, a politician unstained by the Bush era, untainted by the “insider” label.

Barack Obama fit the bill, just as Jimmy Carter, a Georgia peanut farmer and home-spun governor did nearly four decades earlier after the Nixon crimes and indignities. In both cases, an “outsider” promised to restore confidence in a tarnished office. I wrote in 2008:
There are some striking and illuminating parallels between this election season and the Presidential election campaign of 1976. Like the eight years of the Bush administration, the eight years of Nixon/Ford produced an unparalleled collapse of support for the Republican Party. The Watergate scandal coupled with the failure of the US military in Vietnam and an economic crisis left the Republican Party wounded and regrouping. The interim elections of 1974 produced gains for the Democrats, especially in former suburban Republican strongholds.
Most citizens looked to the then forthcoming elections with a profound desire for a new course. The Democrats chose a political outsider, Governor Jimmy Carter of Georgia. Carter promised to make the government “as good as the people.” Pundits hailed Carter as a departure from the old politics and a fresh, honest voice for change (e.g. The Miracle of Jimmy Carter, Howard Norton and Bob Slosser, 1976).
Similar to 1976 and the Presidential candidate J. Carter, his presumptive 2008 counterpart, Barack Obama, is viewed as a Washington “outsider.” He has campaigned as a candidate of change. Pundits hail him as a fresh voice untainted by the vices of the establishment. (2008: a Reprise of 1976?)

Was Obama really the corporate choice? Or is this just baseless cynicism of a sectarian old leftist? I observed in 2008:
Wall Street has strongly supported the Democratic candidates over the Republicans. Through the end of 2007, seven of the big 8 financial firms (Goldman Sachs, Citigroup, Morgan Stanley, Lehman Brothers, JP Morgan Chase, UBS, and Credit Suisse) showed a decided preference towards the Democrats. Only Merrill Lynch gave more to Republicans, though they gave the single most to Clinton. The Wall Street Journal (2-3/4-08), while noting that Obama receives a notable number of contributions from small donors, pointed out that “…even for Sen. Obama, the finance industry was still the richest source of cash overall…”
Through February, Obama leads the other candidates in contributions from the pharmaceutical industry and was in a virtual dead heat with Clinton with respect to the energy sector.
These numbers strongly suggest that candidates, especially Democratic Party candidates, are unlikely to challenge their corporate sponsors in any meaningful way. (The Political Economy of the Elections)

To underscore the meaning of these campaign contributions, I ventured:
This election cycle has revealed something new: Democrats are raising more money from corporate interests for their campaigns than the traditionally dominant Republicans. This process began before the 2006 elections, accelerated sharply in the Presidential elections, strengthened in the early primaries and continued into 2008. In March, 2008, McCain gained somewhat on his Democratic rivals, but still fell well below the total raised by the two Democrats.
Within the Democratic camp, Clinton dominated most corporate contributions until 2008, when Obama enjoyed big gains, pushing ahead through March especially in the key industries of finance, lawyers/lobbyists, communications and health.

Would it be far-fetched to say that the corporate choice was there for all to see? Is it difficult to imagine from these facts that unlimited, unconditional bail-outs were ahead for the financial industry in 2009? Or health care “reform” structured around the wishes of insurance companies, the health care industry, and pharmaceuticals?

Yes, it was there for all to see.

Of course many were willfully blind to the facts, embracing self-delusion instead. I wrote of one left pundit so struck with Obama-mania that he reported the Obama victory with wild hyperbole and messianic verve:
"...hundreds of millions-Black, Latino, Asian, Native-American and white, men and women, young and old, literally danced in the streets and wept with joy, celebrating an achievement of a dramatic milestone in a 400-year struggle, and anticipating a new period of hope and possibility." (Quoted in Getting beyond Euphoria)

That pundit has today found a new messiah in Bernie Sanders.

Two days after the 2008 election, weighing the new administration's chief players, their backgrounds, and political records, along with stressing the limitations deeply embedded in the national political institutions, I cautioned that Obama would not and could not deliver the goods expected by the broad left. I summarized the election as follows:
The 2008 US Presidential election is behind us. A fair estimation of the results might be as follows: A clear, significant statement of the US electorate; a hollow, likely disappointing result for the people. After the euphoria of the Obama victory, it is vital that we separate these two assessments and avoid the cynicism of leftist isolationism and the self-deception of hopeful idealism. 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. (The Presidential Election: A Victory for the People?)

I concluded the essay with the following remarks:
It's time for the left to put aside the comforting illusions and rebuild an independent, oppositional front that is not dependent upon the good will of the corrupted Democratic Party. We desperately need that left to forge a true people-saving agenda from the destructive gorilla.

Unfortunately, we (the left) have yet to construct the independent, oppositional front needed. Nor has the opposition to the Democratic Party steamroller advanced much beyond the motley group of “a few unrepentant Marxist-Leninists, Green Party hardliners, and assorted outliers” present in 2008. Accordingly, the new political season very likely will reproduce many of the same inanities and fantasies inflicted seven years ago.
 Hillary?
 With the ability and expectations of raising well over a billion dollars for the forthcoming presidential campaign, Hillary Clinton will likely be the Democratic nominee and very probably the next President. Unlike the 2008 Obama-moment, the ruling class is opting for “insiders” in the period ahead. Even with polls showing a twenty-five year low in confidence that the country is going in the right direction, even with barely double-digit approval of congress, and even with decidedly negative images of both parties by poll respondents, the masters of our fate are favoring old dynastic names: Clinton and Bush.

Chastened by its encounter with “hopey-changey,” the electorate appears to be looking for “experience” as the most important attribute of a candidate this election cycle (Washington Post/ABC News poll). Of course this is precisely the image Clinton has been carefully cultivating since her Senate tenure. Like her husband, the former President, Ms. Clinton seems untouched by her publicized failings. Neither the abuse of her internal communications while in government service nor her slimy horse trading with foreign and domestic wealthy donors to her billion-dollar family foundation has shaken her campaign. The Clintons know no shame, the media show no indignation, and Democratic Party loyalists own no principles.

While there is much talk that the Democratic Party's liberals need some red meat to keep them in the game, there is little evidence that it is forthcoming or needed. Elizabeth Warren likely pledged loyal opposition in her meeting with Ms. Clinton last year.

Even a recent dust-up between Warren and Obama over the secretive, corporate-friendly TPP never moved the compass leftward. Warren timidly and opportunistically raised fears that “foreign” corporations might use the TPP enforcement function to influence US regulation of financial institutions (instead of exposing it as a license for any corporation to violate the sovereignty of all participating nations). Obama shot back artfully: “...The notion that I had this massive fight with Wall Street to make sure that we don't repeat what happened in 2007, 2008 [the recession], and then I sign a provision that would unravel it? ... I'd have to be pretty stupid." Readers may be unacquainted with events occurring exactly as Obama recalls them. They may search their memories in vain for a “massive fight” with Wall Street. Instead, they may remember the massive bailout of Wall Street on his watch, vivid memories that should make one suspicious of Obama's defense of TPP.

Missing from the spat is any effort to call out Hillary Clinton on the TPP. Presumably, her stand on this controversial subject is of great importance for those wishing to make an informed choice in the 2016 election. But the Clinton campaign does not want informed opinion. Her campaign chief reportedly said of the issue: “Can you make it go away?”

Another anti-Clinton “populist,” former Maryland Gov. Martin O’Malley, has cast aside his hard-line image while serving as Baltimore's mayor. Then, he was a Giuliani clone; his administration terrorized marginalized people to ethnically and class-cleanse the new Baltimore, a Baltimore that has made the murderous rough ride in police custody globally infamous. Today, he has been reborn as an ardent enemy of Wall Street.

But Democratic Party leaders need not fear. Opportunism has become so deeply embedded in liberal politics that 87% of liberal poll respondents “could see themselves supporting Mrs. Clinton” (Wall Street Journal/NBC News poll).

To corral the rest, Democrats have Bernie Sanders. Writing in BlackAgenda Report, Bruce Dixon astutely labels Sanders the “shepherd” for the Democratic Party:
...we have seen the Bernie Sanders show before, and we know exactly how it ends. Bernie has zero likelihood of winning the Democratic nomination for president over Hillary Clinton. Bernie will lose, Hillary will win. When Bernie folds his tent in the summer of 2016, the money, the hopes and prayers, the year of activist zeal that folks put behind Bernie Sanders' either vanishes into thin air, or directly benefits the Hillary Clinton campaign.

As Dixon understands and history shows, Democratic Party insurgencies end by sapping the energy and zeal of its idealistic fighters while herding them back into the fold for the ensuing center-right campaign. Before Sanders, Howard Dean and Dennis Kucinich were the standard bearers for the futile Children's Crusades against the Party's bosses. Sanders' motives are irrelevant here. Whether or not he sincerely believes he can change the trajectory of politics within the two-party system, the Democratic Party has morphed into an institution irredeemably in the clutches of the rich and powerful. Only forces outside of the Party are capable of directing matters leftward.

Voters seem resigned to mediocrity and the parties seem anxious to comply. In a recent Wall Street Journal/NBC News poll, respondents' net positive feelings (positive minus negative) were graphed. Five Republicans scored in negative territory. Only Hillary Clinton managed a net zero to lead the pack. Despite rating quite poor on honesty and straightforwardness, Ms. Clinton is polling ahead of the early Republican candidates.

The Republicans face added obstacles with conflict between their corporate-coddling economic royalists and their ideologically extremist wing, especially the Tea Party. Republican leaders embrace the ideologues as foot soldiers, but recognize that they are a liability with voters in the general election and shun them as candidates. While most Republicans currently prefer Jeb Bush over the rest of the pack, the ideologues-- especially the Tea Party-- question his bona fides (among Tea Party loyalists, he is only the first choice of about 6%). Republican leaders know they must keep the Tea Party in the game (would any Republican leader dare call the Tea Party a bunch of f**king retards?) At the same time, they desperately want to minimize the Tea Party agenda. In 2012, they succeeded by securing the nomination for a corporate shill, Mitt Romney.

Undoubtedly, many dollars will be spent, speeches made, and articles written to convince the electorate that there are real differences between the parties and their candidates. But the differences that surface will not be with goals: the two parties share a common goal of US dominance in foreign policy; the two parties share a common goal of protecting and promoting capitalism in domestic policy.

The differences will be in contrasting assessments on how to achieve these goals. Some politicians believe that the empire is crumbling because the country has turned away from traditional values; others believe the empire is crumbling because we have acted rashly and highhandedly; and still others believe that the empire is doing just fine! But all but a very few fully support the empire. If you don't believe it, ask yourself how many elected officials show up at your anti-drone demonstration, your protest of Israeli outrages, or your solidarity march with Venezuela.

And on the domestic front, our political options are determined by which policies best promote the smooth operation of capitalism; some politicians see unions and welfare as obstacles to the optimal operation of the market; others see inequality and poverty as obstacles to the optimal operation of the market; and still others think that the economy is going swimmingly. But all pay obeisance to capitalism. And do politicians show up at picket lines; have they joined the fight against police brutality; are they leading the fight for a new minimum wage?

Rarely.

The silly season conjures frustration and anger. But as I wrote elsewhere, “...it is vital that we...avoid the cynicism of leftist isolationism and the self-deception of hopeful idealism.” We must not drink the dubious lesser-of-two-evils kool-aid, nor should we leave the electoral field to the hypocrites and liars. Many former loyalists now speak of Obama as a traitor or back-stabber. He is neither. He never was on our side.

I learned (Labor Notes, May 2015) that Vermont Governor Shumlin has rejected the Vermont health care program and has set out with fellow Democratic legislators to go after other programs through steep budget cuts. Author, Traven Leyshon, notes that “The sense of betrayal runs as deep among state workers and teachers as it does among health care campaigners.” But Governor Shumlin did not betray the workers; he was never on their side. This is the important lesson that we must continue to share if we are to move beyond the two-party trap.

Happily, Leyshon reports that “Unions here are drawing the conclusion that we need to run our own candidates. The existing Vermont Progressive Party, which now has nine legislators, could become the vehicle.” This, too, is the lesson that we must spread. If we are to fight the hopelessness and impotency of two-party politics, we must tackle the difficult task of mounting independent and third-party campaigns. Can we afford to wait on another election cycle?

Zoltan Zigedy