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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


Tuesday, April 21, 2015

Labor at the Crossroads?

Does the labor movement in the US have a pulse? Given the unrelenting drop in union density (the percentage of workers organized into unions), many have concluded that labor is in decline both as an effective weapon for workers and as a social force in US politics.
It is easy to forget that some of the largest industrial unions arose from small, but determined organizing committees that faced brutal company resistance. Despite these obstacles, they grew into powerful forces shaping the political and social agenda both in industrial cities and on the national scene within little more than a decade. Unions birthed by the modest Committee for Industrial Organization in the mid-1930s sprung into powerful instruments for social change. It was a long standing tenet of labor advocacy that workers could not be organized and gains made during a period of high unemployment and diminished profits. And yet some of the US’s most militant unions came into being and won in the throes of the Great Depression. In the period immediately after World War II, labor was often the decisive factor in approving and electing officials, largely through its pervasive influence on the Democratic Party.
Today, the labor movement remains yet the most resource-laden, influential element in a progressive movement itself relatively powerless and adrift owing to the failing strength and near-dormant militancy of labor.
The United Autoworkers Union (UAW), one of the pillars of the industrial union movement of the 1930s, dramatically reflects this failing. Autoworkers today at one of Detroit's big-three auto companies can start at a wage as low as $14 an hour, an hourly rate conceded in 2007. At that time, the UAW agreed to a two-tier wage and benefit system that left new employees with roughly half of the package earned by existing workers. Today, over 30,000 UAW big-three employees are stuck in low wage hell (tier 2) out of a unionized work force of roughly 80,000 unionized employees (Bloomberg Businessweek). At Chrysler, a new hire makes a bit more ($15.78/hour), but more than half the workers are stuck at tier 2. At the same time, Bloomberg reports that Chrysler earned an adjusted net profit of $2.4 billion in 2014 and GM and Ford are expected to earn $7 billion and $6 billion this year, respectively. Profits are robust, but wages are dismal.
But matters are even worse with the UAW-represented auto parts companies. According to the Wall Street Journal, new hires at American Axle and Manufacturing Holdings Inc make as little as $10/hour, reportedly comparable to what a local Wal-Mart pays in Three Rivers, Michigan. It is not uncommon for UAW workers at parts manufacturers to make in the $11-12/hour range.
In the last decade, the average hourly wage for parts-manufacture workers was down 23%; the average hourly wage for auto-manufacture workers was down 22%.
For the most part, UAW workers' compensation is on a par or little better than non-union auto workers in the US.
Given this bleak recounting of the UAW's failure to deliver for workers, two questions rush to mind:
1. How did a once militant, democratic, independent, and socially engaged union-- a model of class awareness and struggle-- reach a point where it can deliver a contract leaving workers with little more income than workers at the local Wal-Mart?
2. How will such a union maintain and grow in size and influence if it can promise to achieve no more than declining wages and benefits and parity with non-union shops?
For those of us who see a strong, fighting labor movement as necessary for developing any kind of vibrant and effective progressive movement, answering these questions is unpleasant, but essential.
The decline of militancy began with the purges, the legal restraint, and the raiding of the most powerful industrial unions, a blow inflicted in the early Cold War. And the UAW was at the cutting edge of class collaboration, redbaiting, and the expulsion and raiding of militant unions, beginning with the election of the social-democrat, Walter Reuther as president in 1946.
The vanguard of the trade union movement lost its most militant, class-conscious leaders to anti-Communist inquisitions, at the same time it was battered by the constraints of Taft-Hartley legislation, and met corporate power with a fragmented movement.
In its place, a careerist, bureaucratic leadership faced the future with an historic compromise: a Cold War compact that traded labor peace and support of imperialism for wage and benefit increases roughly commensurate with the rise in productivity. The US ruling class gladly conceded this policy in order to receive US labor's blessings in its brutal assault on class-oriented workers' organizations throughout the rest of the world. The crass, opportunistic labor leaders guiding much of organized labor enthusiastically retired the strike weapon and replaced it with a lame notion of “bargaining” that appropriately fit the naive embrace of labor-management collaboration. Accordingly, be-suited labor negotiators sat across tables from be-suited corporate negotiators in a friendly ritual of trading minor concessions and counter-concessions.
Into the last quarter of the twentieth century, US corporations faced dramatic challenges to profitability. Unsuccessful military adventures and rampant inflation from profligate military spending and competition from lower wage rivals employing cutting-edge technologies drove the ruling class to sever its unspoken deal with US labor leaders. The rulers unilaterally reneged on their commitment to “sharing” the fruits of labor. Instead, they launched an all-out war on labor while insisting that labor must surrender its previous gains to improve US competitiveness. Even today, few labor leaders will acknowledge that they have been betrayed by their former partners. With no imagination, no ideology, US labor leaders continue to plead with their “partners” for some accommodation, some willingness to return to benign bargaining.
The excellent labor historian, Roger Keeran, explains this development in the UAW as follows:

The peak of the red-baiting assault on labor occurred in 1947 with Taft-Hartley and the 1948-49 CIO expulsion of the so-called red unions.   So, what happened between then and the first significant concessions by the UAW at the bargaining table in the 1980s? Of course the losses of the Cold War expulsions and anticommunism was the main explanation, but there were a couple of other things.  For nearly 30 years, the Big Three did not face serious competition, and thus could raise wages and increase benefits by passing the cost to consumers.  This changed with the rise of competition from Japanese and European auto makers, who by the late 70s had rebuilt their factories devastated by World War II and were beginning to make inroads in the American market.  Secondly, for years the UAW and others were able to live on the reputation and the gains produced by the militant years. But the earlier militants, even the non-Communist ones, were eventually superseded by leaders with no experience and no stomach for struggle.  For awhile, these leaders were able to pull some rabbits out of hats by trading previous gains in some areas for small wage gains.  
Soon they ran out of hats.
Many commentators acknowledge this one-sided class war, but few place its cause in the sell-out of class struggle prompted by Cold War perfidy.
The Other Side of the Coin
The class collaboration spawned by the McCarthyite purges created another toxic byproduct: the unrequited fealty of the labor movement to the Democratic Party. Before the purges, the left core of industrial unionism had a close, but critical relationship with the Democratic Party. The new born industrial unions played a large role in revitalizing the Democratic Party in urban areas, providing the troops and organization for Democrats to return to power given an opportunity afforded under the banner of the New Deal. To some extent, New Deal Democrats recognized the debt owed to organized labor and very often responded with a generally pro-labor agenda.
But with the ruling class betrayal of the unspoken post-war pact came a similar betrayal of labor on the part of the Democratic Party. By the election of Barack Obama only a handful in the Democratic Party leadership carried forward the New Deal perspective. Nor does the Party pay more than lip service to labor and its agenda.
Yet top labor leaders continue the charade of a partnership with capital and the Democratic Party. They defend the imperative of corporate “competitiveness” by generously sacrificing the membership's wages and benefits; they donate millions of the membership's collective resources to re-elect Democrats who scorn labor's needs.
We desperately need a fighting union movement, larger and more militant than what we have inherited. Clearly the “partnerships” that have been fostered only result in a toothless, shrinking, and aimless movement. Without a new direction, there will be no need for a union like the UAW that can promise workers no more than what comparable workers make in the non-union sector, that forge no radical alliances, that provide no independent leadership, that offer no hope for real change.
But history shows that there are alternatives. The history of the UAW, the CIO and its predecessors show what a few dedicated organizers and leaders can accomplish. And history shows what a militant, class-conscious, class-partisan union movement can mean to the fight for change.
Many thanks to Roger Keeran for his helpful comments on an earlier draft.

Zoltan Zigedy
zoltanzigedy@gmail.com

Tuesday, March 31, 2015

Capitalism, Environmental Crisis, and Socialism



A hundred years from now, humans may remember 2014 as the year that we first learned that we may have irreversibly destabilized the great ice sheet of West Antarctica, and thus set in motion more than 10 feet of sea-level rise.

Meanwhile, 2015 could be the year of the double whammy — when we learned the same about one gigantic glacier of East Antarctica, which could set in motion roughly the same amount all over again. Northern Hemisphere residents and Americans in particular should take note — when the bottom of the world loses vast amounts of ice, those of us living closer to its top get more sea level rise than the rest of the planet, thanks to the law of gravity... (Washington Post, March 16)


The latest findings on climate change reported by the Washington Post mark another step on the path toward environmental catastrophe. Apart from philistines, apocalyptists, and other celebrants of ignorance, people understand that the growing degradation of our planet promises pain in the short run and disaster beyond. When humans first emerged on the planet, the environment, the climate, and other features of the natural world presented seemingly insurmountable obstacles to survival. The pre-history and early history of humankind was a tenuous struggle to construct bulwarks against natural calumny and a desperate effort to exploit nature's meager offerings.

Nearly two hundred thousand years after the appearance of homo sapiens, circumstances have turned full circle. Humanity has found the means to dominate nature (though far from in a humanitarian way), but with seemingly little regard for the sustainability of the human project. Today, the formerly vulnerable species threatens to render the earth inhospitable to itself, a kind of mindless suicide by the only species that genuinely claims to own a mind.

For those determined to avoid this suicidal path, locating the cause and finding solutions is an urgent task.

Is “Progress” or “Growth” the Enemy?

It is fashionable in some quarters to locate the cause of the environmental crisis in the insatiable lust for “progress,” a term as elusive as it is imprecise. Harking back to the sixties and the “counter-culture” era, many envision a world where consumerism and the fetish for the new are banished in favor of a simpler life style and intellectual, spiritual, or artistic values. There is much to admire in a commitment to modest consumption and arrested acquisitiveness.

However admirable this may be as a personal choice, it is extremely short-sighted social policy. Certainly, the upper-middle classes of the developed countries could benefit the environment by exiting the insane competition for larger houses, more luxurious cars, and the latest techno-gizmo. Unquestionably, the mindless quest for more and better is neither admirable nor sustainable. But before we condemn progress or growth, we must recognize that more is at stake in rejecting progress or growth than thwarting rampant consumerism in the US and Europe or the vulgar excesses of the upper classes.

Apart from consumption madness, billions of the world's population lack even the basics of sustainable life. They barely survive in the midst of poverty, disease, and inadequate shelter, food and water. Until the material means to rectify the sorry, inhuman plight of billions is available, progress and growth must be an imperative. To callously deny them a future out of scorn for hyper-consumerism is petty and, paradoxically, selfish. They cannot be made the scapegoat for Western privileged waste and excess. Those who so easily condemn progress or growth are shamefully blind to the inequities of class, race, and nationality.

Solutions

Prospective solutions come in many forms and many shades. Individual solutions are useful and defensible provided that they do no deny the disadvantaged the opportunity to achieve standards of living reasonably commensurate with the standards of the more privileged. For example, asking people without access to modern appliances to curtail usage of inefficient technologies is both irrational and unjust. Equality of sacrifice in the face of vast economic inequities cannot be the solution to environmental degradation. While recycling, re-use, and other personal conservation projects are necessary and meaningful, they are incapable of sufficiently slowing the global expansion and exhaustion of resources. Nor do individual, personal solutions offset the major sources of environmental destruction: corporations and governments.

Conventional policy solutions cluster around market-based and regulatory approaches to the environmental crisis.

Most environmental activists see the failure of either market-based or regulatory measures as a failure of political will. They believe that politicians and political movements have yet to recognize the dire consequences we face by ignoring the environmental crisis. While this may be true, it fails to recognize the acute limitations of market-based and regulatory solutions and the impossibility of their effectiveness in a global capitalist economy.

The political will is not absent because of ignorance, but because the political system is owned and nourished by the capitalists. Moreover, the global economy-- overwhelmingly a capitalist economy-- is fueled by profits and profits alone. And profits are sustained and expanded by turning everything material or immaterial into a commodity. As a commodity, nature's resources hold no value other than what can be attached to the pursuit of profit.

It is the exploitation of human and natural resources-- labor and nature's bounty-- that is the grist for profit's mill. And capitalism puts profits ahead of nature as well as ahead of people. Both history and the logic of capitalist accumulation and expansion demonstrate the inevitability of waste and destruction. Only when environmental degradation impedes the process of accumulation and profit expansion will the capitalist system respond to the crisis; environmental scientists tell us that will be too late.

And that is precisely the point acknowledged by Naomi Klein in her recent book, This Changes Everything: Capitalism vs. the Climate. Klein's anti-capitalism, like so many versions associated with the social democratic, soft-left, has been somewhat fuzzy, vacillating between rejecting the neo-liberal incarnation of capitalism and something elusive, but more daring. But her current thinking is sharper, though still short of an endorsement of a coherent vision of socialism. She concedes: “But because we have waited as long as we have, and we now need to cut our emissions as deeply as we need to, we now have a conflict not just with neoliberalism, but a conflict with capitalism because it challenges the growth imperative.” (quoted in Monthly Review, Notes from the Editors, March, 2015). For this, Klein has been criticized widely by her liberal readers still anchored in fealty to capitalism.

The editors of Monthly Review perceptively point out that “Klein’s argument here is irrefutable. To be sure, in criticizing neoliberalism for removing the tools needed to address climate change she deftly avoids the issue of whether capital as a system could ever have seriously mitigated the problem.” (op. Cit.)

Capital cannot mitigate the problem.

The MR editors go on to persuasively argue:
Klein is realistic and radical enough to realize that her recognition of this necessity, together with her readiness to act on it, puts her and the entire left climate movement that she represents in conflict with capital as a system—and not just with its most virulent form of neoliberalism. It is, as she says, a “two stage argument,” and we are now in the second stage. There is no avoiding the fact that the logic of capital accumulation must give way if we are to have a reasonable chance of saving civilization and humanity. (op. Cit.)

For “the entire left climate movement” to move beyond individual solutions, market-based answers, regulation, rejection of neo-liberalism, and even capitalism, the movement must define and embrace another goal. What would it be?

Only a system that will replace the logic of profit-before-all with the broad interests of humanity can answer the question. Only a system that can supplant the anarchy of production and distribution with rational planning could count as an answer. Only a system that can substitute forward-looking public ownership for individual short-term self-interest will cope with the crisis. And only a system that erases the existing extreme inequalities associated with capitalism and imperialism can meet our need to bring social justice to the disadvantaged.

As reluctant as much of the left is to utter the word, the answer is quite simply: socialism.

The Unseen Elephant in the Room
Lost on most of the environmental movement, including the “left climate movement,” is the role of imperialism in stoking the environmental crisis. According to Wikipedia:
The United States Department of Defense is one of the largest single consumers of energy in the world, responsible for 93% of all US government fuel consumption in 2007... In FY 2006, the DoD used almost 30,000 gigawatt hours (GWH) of electricity, at a cost of almost $2.2 billion. The DoD's electricity use would supply enough electricity to power more than 2.6 million average American homes. In electricity consumption, if it were a country, the DoD would rank 58th in the world, using slightly less than Denmark and slightly more than Syria (CIA World Factbook, 2006). The Department of Defense uses 4,600,000,000 US gallons... of fuel annually, an average of 12,600,000 US gallons... of fuel per day.

Add to this total the electricity and fuel usage of the rest of NATO, Japan, Russia, The Peoples Republic of China as well as those belligerents constantly at war with imperialism and you have uncountable and socially unnecessary waste of natural resources as well as ecological destruction.

Count the hundreds of military bases-- outposts for imperialism-- that devour resources better employed in a war to protect the environment.

Add to this total the unceasing pollution, the destruction of natural and man-made structures, the spoilage of land and water, etc. that accompany the endless use of devastating weapons.

The full effects of militarism and imperial aggression stagger the imagination.

Pentagon estimates of the production and maintenance of one weapons system alone-- the F-35-- have been reduced to over three-quarters of a trillion dollars-- an enormous unmentioned cost to the environment.

Unfortunately, far too many environmentalists are more cognizant of the environmental damage of littering than they are aware of the enormous threat to the environment of imperial design and endless war. Joining the anti-imperialist, anti-war movement, fighting for an end to militarism, is potentially a far more effective way to reverse the ecological wounds that threaten the planet than the entire bundle of liberal and social democratic panaceas that currently dominate the discussion in the environmental movement: Prius, yes, but Predator drones, no.

As the environmental movement matures, it must embrace the socialist option. It must stand resolutely against militarism and its threat to the environment. No other stance will deflect “civilization” from its determined march toward self destruction. Authentic, militant environmentalism comes with partisanship for socialism and anti-imperialism.

Zoltan Zigedy

zoltanzigedy@gmail.com



Tuesday, March 17, 2015

Imperialism's Trusted Governess


Her face is on the cover of Bloomberg Businessweek (3/9-3/15/2015) next to a dramatic headline: Putin vs. the Accountant. Her name is Natalie Jaresko. And, if Bloomberg's Brett Forrest is to be believed, she and some of her colleagues may hold the fate of Western Ukraine in their hands. As the Minister of Finance, she must find a way to salvage an economy that is in free fall.
Forrest paints a flattering, sympathetic picture of a feisty expatriate determined to rescue Ukraine economically and from the clutches of the evil Putin. Jaresko is encountered visiting hospitalized Ukrainian troops wounded while attacking the resistance fighters in Eastern Ukraine or, as Forrest prefers: consoling “convalescing veterans of recent battles against Russian forces and their proxies in the Ukrainian East. 'When did you serve?' she asks, moving slowly from room to room.'How were you wounded?'”
Apart from recounting Jaresko's mimicking of the obsequious and opportunistic condescension of veterans displayed universally by Western politicians, Forrest offers a calculated adulation of the Minister that conjures many less laudatory questions and suspicions.
For someone who holds the fate of Ukraine in her hands, Jaresko appears to be somewhat of a carpetbagger. Her appointment to lead the Finance Ministry came before she was granted Ukrainian citizenship, a fact that would only be curious outside of a government where two other cabinet members were also not citizens when appointed: her counterpart in the Ministry of Economy and Trade, Lithuanian Aivaras Abromavicius, and Minister of Health, Georgian Alexander Kvitashvili. Jaresko, a US citizen, has two years to renounce her US citizenship. She and her other imported colleagues were appointed by Prime Minister Arseniy Yatsunyuk, the infamous “Yats” vetted by foul-mouthed US Assistant Secretary of State for European and Eurasian Affairs, Victoria Nuland.
Obviously the US and the EU had to scramble after they encouraged and supported the coup deposing the elected President in February of 2014. They had to reach outside Ukraine to find reliable clients to support the hastily elected candy baron, Petro Pershenko. The story of the clumsy construction of the post-coup government from non-nationals, careerists, and unstable rightists would make for an entertaining episode of House of Cards if Western journalists had the spine to tell it.
So what has Jaresko done to deserve a phone call from Nuland? Er, Pershenko?
Her credentials begin with a master's degree from the Kennedy School at Harvard, a training ground for those tasked with delivering the US ruling class message to friends and foes alike. Doors opened immediately at the State Department's Soviet Affairs division. She coordinated her work at the State Department with all of the big national and international trade and economic organizations. When Ukraine left the Soviet Union, Jaresko was perfectly suited to operate on the US State Department's behalf at the newly installed US Embassy. Her position-- Chief of the Economic Section-- was a trusted position of a type often calling for close collaboration with covert agencies.
She parlayed that experience into the creation of an “investment“ vehicle for Ukrainian businesses funded by USAID, again a position of great trust and associated in many countries with US influence peddling. Documentation of the modest seed capital from USAID-- $150 million-- can be found here. One would expect that a 30-year-old entrusted with this task surely had the confidence of highly placed officials in the US government.
Her 1995 venture was absorbed by a new investment management firm, Horizon Capital, which she founded in 2006. Journalist John Helmer documents the consistent losses of Horizon Capital in his detailed report on Dances with Bears (12-03-2014). Despite his discovering only two years of modest gains in a decade, both Bloomberg and Forbes laud the success of Horizon Capital.
Helmer also discovers the fallout from Jaresko's divorce from her spouse and business partner. Her former husband, Ihor Figlus, has accused her of saddling him with debt from “improper” loans. Their contentious relationship continues. Helmer comments: “It hasn’t been rare for American spouses to go into the asset management business in the former Soviet Union, and make profits underwritten by the US Government with information supplied from their US Government positions or contacts. It is exceptional for them to fall out over the loot.”
Jaresko's own account of her recruitment bears telling: “...representatives from a headhunting firm hired by the new government, WE partners, visited Jaresko at the Horizon Capital offices. They discussed candidates for various government posts before asking her if she would be willing to serve...” (Bloomberg Businessweek)
While some may find it odd that an independent, sovereign state would engage a US-based (parent company: Korn Ferry) headhunting firm to fill top political posts, Jaresko explains: “I think the president and prime minister wanted me to bring [my] experience.”
Within a week, she was vetted and appointed.
Anticipating skepticism, Bloomberg's reporter, Brett Forrest, notes that “Jaresko's appointment... provides fuel to conspiracy theorists...”
Indeed.
His apologetics continue: “No matter their origin, these ministers-- and the numerous Poles, Germans, Canadians, and other foreigners who've joined the government in senior and mid-level positions-- are pulling the same oar.” Forrest joins a host of Western journalists and commentators who find no contradiction in a rabidly nationalistic government staffed with foreigners.
Despite generous aid from the US, the EU, and the IMF, Ukraine has experienced a 21% loss of industrial production, a 69% drop in the value of the currency against the dollar and a 6.9% decline in GDP in the last year.
Estimates of Ukraine debt go as high as $40 billion. Recently, Jaresko announced that investors should expect a “haircut” which “...will probably involve a combination of maturity extensions, coupon reductions and principal reductions.”
Compare the matter-of-fact reporting of this announcement in papers like The Financial Times or The Wall Street Journal to the hysterical media response to the faintest hint of a possible reduction in Greek sovereign debt. Clearly assuming client status, selling your sovereignty to imperialism, earns generous debt forgiveness.
Despite the media-spun fairy tales about Ukraine's struggle for democracy and independence, the facts challenge that narrative. Behind the curtain of deceit and fabrication is a motley crew of foreign agents, corrupted officials, oligarchs, and neo-Nazis. But one would never know it from the Western media.
Zoltan Zigedy