Externalities

Posted on April 8, 2015 by camelotkidd

Powerful US corporations socialize the costs of doing business and privatize the profits. In economic speak, this socialization of costs is described as an externality. If such things as exploitation of labor, income inequality, and environmental destruction were forced to be internalized by these corporations, the costs would be prohibitively high and they would not be so incredibly profitable and able to pay their executives sky high salaries and bonuses. Stock valuations would not be in the stratosphere.

That these powerful elites and the corporations they own are allowed to externalize their costs on to society and the environment says a lot about the power structure in the US. I’ve said this before but it bears repeating. Political-economy offers the best way to understand our milieu and political-economy at the most basic is–who gets what, and who bears the costs.

John Michael Greer is a wonderful writer and a joy to read. His topics, however, are not for the squeamish. He writes quite compellingly about the end of the industrial world and how society can go forward at a much reduced state. As such, he’s an apostate to the ultimate religion in the US–technological progress. In that process he’s also a trenchant critic of our present economic activity. Here, he describes how externalities, or the shifting of costs, is actually the basis of our modern technological world that we take for granted.

“Economic life in the industrial world these days can be described, without too much inaccuracy, as an arrangement set up to allow a privileged minority to externalize nearly all their costs onto the rest of society while pocketing as much as possible the benefits themselves.”

  1. a) Every increase in technological complexity tends also to increase the opportunities for externalizing the costs of economic activity;
  1. b) Market forces make the externalization of costs mandatory rather than optional, since economic actors that fail to externalize costs will tend to be outcompeted by those that do;
  1. c) In a market economy, as all economic actors attempt to externalize as many costs as possible, externalized costs will tend to be passed on preferentially and progressively to whole systems such as the economy, society, and the biosphere, which provide necessary support for economic activity but have no voice in economic decisions;
  1. d) Given unlimited increases in technological complexity, there is no necessary limit to the loading of externalized costs onto whole systems short of systemic collapse;
  1. e) Unlimited increases in technological complexity in a market economy thus necessarily lead to the progressive degradation of the whole systems that support economic activity;
  1. f) Technological progress in a market economy  is therefore self-terminating, and ends in collapse”

If you stop for a moment and look around there are glimpses of this collapse. Global warming is the ultimate manifestation of externalities run amuck and the potential for catastrophic upheaval is quite real.

Nevertheless, it’s quite illuminating to watch conservatives and libertarians, who worship private property, attempt to grapple with the implications of this externality.

Environmental writer George Monbiot well describes the libertarian dilemma:

“So here we have a simple and coherent explanation of why libertarianism is so often associated with climate change denial and the playing down or dismissal of other environmental issues. It would be impossible for the owner of a power station, steel plant, quarry, farm or any large enterprise to obtain consent for all the trespasses he commits against other people’s property – including their bodies.

“This is the point at which libertarianism smacks into the wall of gritty reality and crumples like a Coke can. Any honest and thorough application of this philosophy would run counter to its aim: which is to allow the owners of capital to expand their interests without taxation, regulation or recognition of the rights of other people. Libertarianism becomes self-defeating as soon as it recognises the existence of environmental issues. So they must be denied.

Denial seems to be winning the day. While the US fails to address global warming or environmental devastation, the Obama administration is pushing the Trans-Pacific-Partnership (TPP), free trade pact, codifying multi-national corporations ability to externalize costs onto others. The TPP allows corporations to sue countries for costs they must bear if environmental regulations impinge on their bottom line.

I’m not kidding. In fact, externalizing costs seems to be a large component of free trade pacts  negotiated by the US. It wasn’t just labor costs, but also the ability to evade US environmental regulations, that sent US corporations to Mexico then China.

Here’s John Michael Greer with the last word on where this obsession with externalizing costs will lead to.

“…you can see the chasm opening up under the foundations of industrial society. Externalized costs don’t just go away; one way or another, they’re going to be paid, and costs that don’t appear on a company’s balance sheet still affect the economy. That’s the argument of The Limits to Growth, still the most accurate(and thus inevitably the most reviled) of the studies that tried unavailingly to turn industrial society away from its suicidal path: on a finite planet, once an inflection point is passed, the costs of economic growth rise faster than growth does, and sooner or later force the global economy to its knees.”

 

 

 

 

 

 

 

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Confidential Informants

Posted on March 25, 2015 by camelotkidd

The banks and the financial industry have an outsized role in US economic and political affairs. Yet, they’ve also been accused of engaging in an ongoing crime spree. Rigging markets, hoarding commodities, hiding massive amounts of plundered loot, evading taxes, laundering drug money from some of the most heinous drug cartels, the list goes on and on. Yet, not one banker has been charged with a crime or done any jail time.

In the last few posts–here and here–I’ve explored why.

However, maybe I’ve been looking at this the wrong way.

The intrepid and indefatigable Marcy Wheeler at the blog emptywheel.net, has an interesting thesis on why there’ve been no prosecutions of the banksters.

“To what extent have banks won themselves immunity by serving as intelligence partners for the federal government?

Wow. So, in addition to the wealth, power and class thing they have going for them, maybe the banks have been enlisted in the war-on-drugs and war-on-terror as confidential informants for the US government. Think about it: any sort of intelligence operation involves confidential informants, who are promised a pass for their own criminal conduct in exchange for information.

After I stopped laughing, I remembered the case of Whitey Bulger, the Boston-Irish mob kingpin and hit-man who served as an confidential informant for the FBI and was shielded from justice, free to carry out his own criminal activities including murder, robbery, extortion and racketeering. In 2013, to the eternal embarrassment of the FBI, he was found guilty on 31 counts, including racketeering, and was found to have been involved in 11 murders.

In a way, enlisting the banksters as intelligence partners and confidential informants makes perfect sense in our present milieu, where everything has been privatized and it’s hard to tell where government ends and corporate America begins.

Update: Marcy finds more criminality among confidential informants. I guess it’s not just banks committing all those crimes.

“The FBI gave its informants permission to break the law at least 5,658 times in a single year, according to newly disclosed documents that show just how often the nation’s top law enforcement agency enlists criminals to help it battle crime.”

 

 

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Out of Thin Air

Posted on March 12, 2015 by camelotkidd

The US has a fiat currency, where money is created out of thin air with a stroke of the keyboard. For political reasons, we allow banks to enjoy the advantage of money creation rather than having the US Treasury issue it directly.

“Financial institutions are able to borrow funds through the interbank lending market as well as the discount window and both rates charged to the bank will be below the rate that a bank imposes upon a customer therefore the bank is not constrained by the amount of reserves entered in their accounting ledgers.  The most important aspect regarding the methods that banks employ to accumulate funds to maintain solvency is that connections are established between households, firms, banks and the government.  Financial institutions therefore do not lend from reserves but create money by issuing liabilities, within this system the bank is only monetarily constrained by the amount of credit worthy borrowers wherein the solvency of the loans made rely on the ability of the initial debtor to make good on the loan.”

Ellen Brown, author of Web of Debt, argues provocatively that the ability to create money allows a cartel of international bankers to control our country.

“Today, Federal Reserve Notes and U.S. dollar loans dominate the economy of the world; but this international currency is not money issued by the American people or their government. It is money created and lent by a private cartel of international bankers, and this cartel has the United States itself hopelessly entangled in a web of debt.”

We discussed the immense power and reach of banking and finance in the last post. However, the ability to create money goes a long ways toward explaining why the, too big to fail, too big to jail, banks appear omnipotent. As Amschell Rothschild is claimed to have declared–“Give me control of a nations money supply, and I care not who makes it’s laws.”

Many Americans seem to have forgotten that President Nixon took the country off the gold standard in 1971. To be blunt, the conventional wisdom concerning money is incredibly fucked-up. Even otherwise smart and sophisticated Americans seem baffled by the idea of a fiat currency that is created out of thin air, and still falsely believe that our country is like a household, with the threat of default forever hanging over us. If you don’t believe me, examine all the wailing and rending of garments by the fiscal scolds who warn darkly of a descent into economic Armageddon, like Greece. What were the Tea Baggers so exercised about? Oh yeah, government debt.

That our executive and legislative branches make statements regularly that belie the understanding of how money is created is not an accident. I’m enough of a cynic to think that much of this misdirection on monetary policy is deliberate, in pursuit of neoliberal goals of advancing capital at labors expense.

Here’s the Congressional Budget Office (CBO) fear mongering about how the evil deficit is going to end life as we know it.

“Less National Saving and Future Income–Large federal budget deficits over the long term would reduce investment, resulting in lower national income and higher interest rates than would otherwise occur. Increased government borrowing would cause a larger share of the savings potentially available for investment to be used for purchasing government securities, such as Treasury bonds. Those purchases would crowd out investment in capital goods—factories and computers, for example—which makes workers more productive.”

And, President Obama gravely intones that, “small businesses and families are tightening their belts. Their government should, too.”

This is completely wrong but it sounds right to all the serious people who believe that people like you and I should suffer. Basically, it’s all just a fucking morality play.

The US government is not like a household, there is no threat to funding available for private investment in capital goods, and no threat to the growth rate of future national income.  The President’s and the CBO’s analysis is completely inconsistent with how the modern financial system actually works.

Speaking slowly–the only way that the US government can default on debt in its own currency is to willfully refuse to pay the debt.

There is a method to the madness, politically speaking, in articulating over and over the falsehood that the US government is funded solely through tax receipts to fund government programs and commitments. After all, this fictional fiscal constraint prevents us from funding any sort of progressive spending on healthcare or education, or even repairing our infrastructure.

Modern Monetary Theory–MMT, articulates a novel way of understanding how money is created, as well as defining a framework for progressive policy, going forward. According to MMT, the debates over the deficit and spending are political not economic problems. The fact that government can spend an unlimited amount of money does not mean it should, and ultimately the choice of how much a government should spend is a political question. MMT aims at promoting political processes that allow the will of the people to be expressed as well as possible, free of unnecessary financial constraints.

And, this is where we the people are supposed to step in and demand that our leaders discuss our economic and monetary policies in good faith without all the bullshit about deficits and balanced budget acts.

Recent history demonstrates just how dishonest and craven our leaders, Republican and Democrats, have been. The Bush, and Obama administrations shoveled trillions of dollars into Wall Street banks in the aftermath of the Wall Street crash of 2008. Where did that money come from? Did we borrow it from the Chinese? And, what about quantitative easing? Where does that money come from?

You get the idea. These are political decisions–to give money to banks but not American citizens. Not because they don’t have the money. The truth is, our leaders just don’t want to spend money on progressive policies that would help the vast majority of Americans at the expense of their banker friends.

The ultimate expression of this attitude was expressed by Obama’s Treasury Secretary Tim Geithner, who thought his job was to foam the runway for crashing banks using the money appropriated to help homeowners.

There is another choice.

The US government could use our fiat currency to carry out direct sovereign spending—the issuing of sovereign fiat dollars to pay for collective goods and services.

There is much that needs to be done. Repairing our infrastructure, educating our students, providing healthcare to all Americans, are all good and worthy goals.

The money is there, waiting.

Update: Economist, Michael Hudson, explains how quantitative easing works.

“So the Fed was pretty open in what quantitative easing is supposed to do since 2008. It’s supposed to lower the interest rates, which raises bond prices, and it inflates the stock market. And since 2008, they’ve had the largest monetary inflation history–$4 trillion of quantitative easing by the Fed. But it’s all gone into the stock market and the bond market.

So what has this done? Well, it’s helped stock and bond holders get richer. And who are the stock and bond holders? They’re the 1 percent and they’re the 10 percent. And people are wringing their hands and saying, why isn’t the economy getting richer? Why is it since 2008 economic inequality and the distribution of wealth have worsened instead of gotten closer together? Well, it’s because of quantitative easing. It’s because quantitative easing has increased the value of the stocks and the bonds that the 1 percent or the 10 percent hold, and it hasn’t helped the economy at all, because the Fed is really concerned with its constituency, which are the banks.”

 

 

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They Own the Place

Posted on March 5, 2015 by camelotkidd

The banks and financial industry have a lock on our political and economic systems, directly contributing to the growing economic inequality and bifurcated rule of law. Since Senator Dick Durbin blurted out to a radio host the power that the banking and financial industries have over the US Senate–“they frankly own the place”–the too big to fail, too big to jail banks have only become more brazen.

Rigging markets, hoarding commodities, hiding massive amounts of plundered loot, evading taxes, laundering drug money from some of the most heinous drug cartels, the list goes on and on. Yet, not one banker has been charged with a crime or done any jail time.

Well, maybe Bernie Madoff. He was sent to jail, but he fleeced rich people, and we can’t have that can we?

That the banks feel so immune to the laws that govern us points to the much larger problem of power asymmetry in this country, contributing to what I like to call: neo-feudalism.

Wikipedia has this helpful explanation of neo-feudalism:

“… a theorized contemporary rebirth of policies of governance, economy and public life reminiscent of those present in many feudal societies, such as unequal rights and legal protections for common people and for nobility.”

Does anyone else notice this two tiered justice system? I’m pretty sure I can’t go around laundering drug money and not wind up in the stir with a new and menacing roommate. The bankers, however, can pretty much do what they want.

Matt Taibbi, at Rolling Stone, is the best current financial muckraker, and his stories of banksters gone wild and Vampire Squid, are so humorous you almost forget your outrage. Almost. Here’s one of his most colorful descriptions of the bailout of the banks in the aftermath of the 2008 stock market crash:

“It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.”

How have banks and the financial sector become so powerful?

Examining the money the banking and financial industry have contributed, it’s clear that given the enormous amounts spent the banks and financial industry have received a pretty sweet return on their investment: the deregulation of financial derivatives and credit default swaps, the elimination of the line between investment banks and commercial banks, the increased hardship for those filing for bankruptcy, just for starters.

The Sunlight Foundation tracks corruption in the US. Here’s what they had to say about the banks and financial spending.

“Since 1997, the financial sector has spent a combined total of $3.6 billion on lobbying the federal government. The total lobbying expenses have increased by 260% since 1997. Over that same time financial sector corporate profits have gone through the roof, with the financial sector reporting up to 40% of corporate profits in recent years.”

And, there are the 3000 financial and banking lobbyists calling, e-mailing and meeting with Congress and the White House, promoting their interests, 24/7.

Taibbi, describes this lobbyist power imbalance.

“Members of Congress, when they talk about having to vote on issues like derivative reform, express frustration about the political dynamics of this debate. When they go back to their districts, nobody is standing up at town halls and shaking fists about relaxing rules at Swap Execution Facilities. On the other hand, when they return to Washington, they’re inundated with bank lobbyists who offer extensive financial backing if they play ball on these votes, while simultaneously threatening to run primary candidates if they don’t.”

It’s not just money and lobbyists. There’s a mutual ideology that says–whatever is good for the bankers is good for the country–that permeates recent Republican and Democratic administrations. This mutual ideology is cemented into place by a veritable revolving door between finance and government.

Taibbi complains how the revolving door is spinning at 78 rpm.

“…couldn’t they have found someone who isn’t a perfect symbol of the revolving-door culture under which regulators go soft on suspected Wall Street criminals, knowing they have million-dollar jobs waiting for them at hotshot defense firms as long as they play nice with the banks while still in office?”

While banks have become too big to fail, too big to jail, the evidence continues to mount that they are a drag on the productive economy.

In a properly functioning economy, a financial sector efficiently allocates capital to the productive sector of the economy that makes things and employs workers. Unfortunately, that’s not the scenario we have. Presently, the US economy is dominated by a extractive financial sector. As a new study by the Bank of International Settlements shows, this is terrible for the real economy.

The BIS has released an important paper, embedded at the end of this post, which has created quite a stir, even leading the orthodoxy-touting Economist to take note. Titled, Why does financial sector growth crowd out real economic growth?, its analysis of why too much finance is a bad thing is robust and compelling. This article is a follow up to a 2012 paper by the same authors, Stephen Cecchetti and Enisse Kharroubi, which found that when finance sectors exceeded a certain size, specifically when private sector debt topped 100% of GDP or when financial services industry professions were more than 3.9% of the work force, it became a drag on growth. Notice that this finding alone is damning as far as policy in the US is concerned, where cheaper debt, deregulation, more access to financial markets, and “financial deepening” are all seen as virtuous.

The paper starts by looking empirically at the fact that larger financial sectors are correlated with lower growth rates:

Again, to reiterate, the purpose of finance is to efficiently allocate capital for the productive economy that makes things and employees workers. An economy that works for the majority of Americans is not one of speculation in stocks and bonds, or the manipulation of exotic financial instruments such as derivatives. An economy that works for Americans is one that produces goods and services which have value for human beings.

We should be aghast at the control of our government by banks and finance and the way that there’s a different justice system for them than there is for us. This not healthy development for a democratic republic, if that term still applies. A plutocracy is probably more like it.

The infuriating thing about this state of affairs, is that we’ve been here before, back in the Gilded Age of the 1890’s, where inequality was the norm and both political parties bought and paid for by the bankers. Just like then, we desperately need a progressive movement to challenge our present banking and financial cabal.

Update: Bill Black asks the obvious question.

“So I have to ask our class of criminal bankers: “Have you no sense of decency sir, at long last?” Is there any crime so depraved that you would refuse to commit it or aid and abet its commission if it would increase your bonus?”

 

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On a fast track to the bottom

Posted on February 25, 2015 by camelotkidd

The Trans-Pacific Partnership (TPP) is a massive new trade pact that is being pushed by the Obama Administration at the behest of multi-national corporations. The TPP is fundamentally undemocratic and horrible for most Americans where it counts–in their pocketbook. Contrary to the hope and change rhetoric of the Obama candidacy, the TPP offers neither change or hope. It’s just more neoliberalism.

President Obama’s push for fast track authority to pass the TPP belies his recent progressive head fake and demonstrates beyond a shadow of a doubt that he is a corporate Democrat through and through. That the TPP is part of Obama’s pivot to Asia–China containment policy–just makes it more odious.

Trade pacts, like war authorization, expose partisanship in Washington for what it is–Kabuki theatre. Obama will find that Republicans, while professing to despise him, will still find the wherewithal to vote as their corporate sponsors insist, and support the passage of the TPP.

We’ve been discussing corporate power vis-a-vis democracy, examining who benefits from recent neoliberal economic policies. Trade pacts have been a huge part of neoliberalism, as neoliberals have insisted that new technologies of communication and transportation make free trade inevitable and desirable. However, it’s pretty clear who free trade has benefitted. Trade policies have given multi-national corporations the ability to move their operations to Mexico or China, where they can pay pennies on the dollar in labor costs, then export their products as if American made. Corporations can then pit city against city, worker against worker, with the power to go elsewhere if their demands are not met.

Examining the history of trade pacts bears this out. Trade pacts have been horrendous for American workers, whose pay has stagnated since the 1970’s, even as productivity has soared. Trade pacts have enabled American corporations to move offshore to take advantage of super low cost labor. This has led to a staggering loss of jobs and a lowering of the wages paid to surviving American workers. Millions of middle-class manufacturing and service industry jobs have been taken away from Americans and given to workers in Mexico and Asia, all to benefit American corporations. In this way, trade pacts have contributed to the soaring inequality so visible in the US today.

Trade pacts, like the TPP, come with secretive free trade courts that make a mockery of democracy and sovereignty. In fact, these free trade agreements basically enable corporate predation. For example, if a country attempts to ban smoking or mandate clean air a corporation can sue them for damages. These free trade courts are the corporate weapon of choice when faced with a democratically decided outcome that goes against their ability to plunder.

Most of what we know about the TPP has been leaked because the transcripts of the pact have not been made available, not even to our erstwhile Congressional representatives. Of course, the lobbyists, representing the most powerful corporations in the world, have not been so inconvenienced.

Luckily, there are groups that have made some of the secret negotiating details available. The Citizens Trade Campaign has identified what exactly corporations want from the TPP, and why they’re so desperate to keep the details secret.

  • Cheaper Labor Costs. Many corporations are looking for ways reduce labor costs and undercut worker power in the United States, China and throughout the world. The TPP would grant corporations easier access to labor markets in countries such as Vietnam where workers are paid even less than Chinese sweatshop workers. Whether or not corporations decide to move their production to these lower-paid countries, the threat of moving there (or of being undercut by competitors who have already done so) can be used suppress employee compensation virtually anywhere in the world.
  • New Tools for Dismantling Environmental Laws. A wide range of transnational corporations, including those in extractive industries, have pushed for investment provisions in the TPP that would enable them to challenge virtually any new law, regulation or even court decision that adversely affects their expected profits as a “regulatory taking” through international tribunals that circumvent domestic judicial systems. Similar provisions under past trade pacts have already been used to weaken portions of theClean Air Act, Endangered Species Act and Marine Mammal Protection Act in the United States, as well as the environmental and consumer safety protections of developing countries throughout the world.
  • Longer Drug Patents. The leaked U.S. proposal for an intellectual property chapter within the TPP would have the effect of extending drug patents for big pharmaceutical companies, making it harder for countries to produce or procure low-cost generic medications for people with HIV, tuberculosis and other life- threatening diseases.
  • Further Financial Deregulation. Wall Street banks, insurance companies and hedge funds want the financial services provisions of the Trans-Pacific Partnership to handcuff the steps governments can take to: protect against “too big to fail,” regulate trade in toxic assets, erect firewalls between different financial service firms and control the flow of short-term capital into and out of economies.
  • Caps on Food Safety Protections. So- called “life sciences” corporations that produce pesticides, food additives and genetically-modified organisms use trade pacts to erect barriers making it harder for countries to adopt and maintain strong food safety regulations based on the precautionary principle.
  • Concentration of Global Food Supplies. Big agribusiness middlemen want the TPP to enable them to “buy low” and “sell high” throughout the Pacific Rim, a practice that increasingly concentrates global food supplies in their hands, undercutting family farmers and often leading to wild fluctuations in food prices for consumers.
  • Greater Access to Government Contracts. A range of corporations want the TPP’s public procurement provisions to prevent governments from instituting public purchasing preferences designed to keep taxpayer dollars circulating in local economies. They also want to prevent government contracts from being used to advance a variety of other environmental, social and human rights goals.
  • Lower Taxes. Corporations that have already offshored their production to countries throughout the Pacific Rim are also looking to avoid tariffs on merchandise they’ve been importing back to the United States.

In The Great Transformation, Karl Polanyi, offers a forceful argument against a neoliberal market economy with free trade pacts and ruthless capitalism. He argues that creating a neoliberal market economy mandates that humans and the environment be transformed into commodities, which will lead to the destruction of society and the environment.

“Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness.”

Looking around, it’s apparent what Polanyi was warning against. Our neoliberal leaders seem determined to destroy our society and our environment with schemes like the TPP. Polanyi does offer hope, saying that, historically, when the consequences of unrestrained markets becomes apparent, people revolt and insist that the market is not simply a means to itself, but that the market needs to be subordinated to democracy.

It’s time to revolt. Call President Obama and your representatives and senators and give them hell!

It’s your choice. We can have representative democracy and national sovereignty or we can have a corporate race to the bottom.

Update: Be creative and use their propaganda against them. We can do the divide and conquer thing too. Also, it doesn’t have to be entirely accurate, but the rage is important. Here what I said when I called my right-wing congressional representative. (I know. Is there any other kind?)

Dear Congressman Stewart;

Please oppose Fast Track authority for the Trans-Pacific Partnership trade pact. President Obama seems hell bent on passing this horrible piece of legislation. He obviously hates America! This trade pact takes away from American sovereignty and gives it to some pointy-headed corporate bureaucrat at the UN. We elected you to go to Washington and oppose everything Obama proposes. Get with it.

 

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“Corporations are people, my friend,”

Posted on February 12, 2015 by camelotkidd

Political/economy is who gets what, and who pays the price. We forget this adage at our own peril.

The wealthy and the corporations they own have captured our government and are imposing on us the policies that benefit them. Contrary to free market ideologues, markets aren’t organic, they’re created by governments. The important question is how they’re organized and who they benefit.

The US economy is organized under the auspices of neoliberalism, resulting in the unchecked reach of huge multinational corporations into every aspect of our lives. We’ve already discussed how privatization of the commons has helped create this new semi-feudal economy.

Another front in the neoliberal assault on the US economy has been the evisceration of antitrust laws. New Deal reforms brought about antitrust laws to force corporations to act in the public interest. Antitrust laws were a political solution to the corporate monopolies that made life so pernicious for Americans prior to the 1930’s. But, the wealthy hated any sort of check on their power and it was only a matter of time before these laws were subverted.

Matt Stoller, former Senior Policy Advisor to Congressman Alan Grayson, lays out the grisly details.

“In the 1980s, an intellectual revolution took hold. Corporations were no longer private governments. They became property.  They weren’t political entities, but economic entities pursuing ‘efficiency’. Corporations exist only for shareholder benefit.  This idea was radical. Prior to this, few thought large shareholders were the only stakeholders, or even the most important ones.  Eliminating all other interests – workers, managers, customers, communities, national security, small shareholders – was truly radical.”

These were political decisions carried out by neoliberal ideologues and the transformation of American economic life has been truly radical. Maximizing shareholder value and focusing on corporate efficiency led directly to the rampant inequality, layoffs, offshoring, monopolies and oligopolies that are such a part of modern America economic life.

Before the neoliberal intellectual revolution, corporations were forced to compete in a regulated environment where they had to spend money on research and development, rather than just acquire smaller competitors, then lay off their workers.

If all we care about is economic efficiency and shareholder value then monopolies are inevitable because monopolies are efficient and they’re profitable for shareholders. They are not, however, beneficial to we-the-people. Examining the ownership of stock in the US illustrates which class benefits from the ideology of shareholder value.

It’s frustrating that Americans seem to have forgotten economic realities their grandparents understood implicitly. New Deal reforms that included antitrust statutes were achieved only after a ferocious struggle, including labor strife and political tumult. Antitrust efforts were accompanied by labor reforms that allowed workers to organize and bargain collectively, as a way of balancing corporate power.

And yet, here we are, the next Gilded Age hard upon us. Corporations have more rights than we do. You know it and I know it. As Mittens explained to us in that infamous rebuke to a heckler, corporations really are people. Except, they’re extra-special, super-powerful people who can never die. Yeah, except for that, just like you and I.

At one point in American history, corporations were chartered to perform specific tasks. Of course, we’re not going back to that reality, but corporations require regulations, including antitrust laws to protect us from them.

We are bombarded daily with horror stories of government overreach. Despite this non-stop propaganda, its pretty clear that corporations, not government, maintains the whip hand.

But I gotta ask. Is our new economy dominated by powerful corporations really what we want?

If not, then we better get busy. A good place to start is antitrust. Matt Stoller explains that antitrust laws are still there, waiting to be dusted off and deployed.

“Most of the laws that forced this state of affairs are still on the books. The were just reinterpreted by Reagan.  Any President can simply go back to the pre-1981 model through executive action. Every merger is still reviewed by DOJ.”

 

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Back to the Future

Posted on February 7, 2015 by camelotkidd

Ideologies that serve elite interests never really go away, they just reconstitute in new guises.

In A Brief History of Neoliberalism, author David Harvey argues provocatively that neoliberalism is a continuation of early capitalism, whereby modern corporations are busy re-privitizing the commons.

“Accumulation by dispossession is the main mechanism whereby neoliberalism achieved this redistribution of wealth. Also, accumulation by dispossession is an extension of the Marxian concept of primitive accumulation whereby during the onset of capitalism, common lands were privatized, labour was commodified, and exchange was monetized and financialized.”

At this point, it’s probably a good idea to examine the origins of capitalism. Early capitalism in Great Britain necessitated the enclosure laws, where peasants where driven off the land by government force at the behest of the factory owners who required a large desperate workforce to slave away in their dangerous factories. Before the enclosure laws, peasants could hunt, gather and maintain a small garden plot, enabling them to make a living and enjoy some measure of autonomy.

In The Invention of Capitalism: Classical Political Economy and the Secret History of Primitive Accumulation, Michael Perelman examines early capitalism and reminds us that economic writers such as Adam Smith portrayed early capitalism as “a natural system of voluntary market relations, which are devoid of conflict, and benefitted all of mankind.”

What really happened was the violent seizure of other people’s means of production– primitive accumulation.

As Perelman articulates, the peasants were “forced into the factories with the active support of the same economists who were making theoretical claims for capitalism as a self-correcting mechanism that thrived without needing government intervention.”

In reality, capitalism absolutely necessitated government intervention. Violent intervention. The peasants were forced off their land by the British government who attacked the economic independence of the rural peasantry through a series of Enclosure Acts.

“Some enclosures had to be carried out by force and many sparked resistance from users of the common land, including the tearing down of fences used to enclose the land. As a historically significant process of land privatization, the Enclosure Acts are sometimes seen as one or both of building blocks of capitalism and theft by major landowners from the peasantry.”

Silly peasants. How are capitalists supposed to make their fortune without a vast pool of workers willing to perform any number of hazardous jobs to stay alive? The great thing about early capitalism, at least from the perspective of the owners, was that the early capitalist didn’t have to take care of their workers. This was a new development unlike centuries past where the feudal lord owed some measure of care to the serfs.

Wealth in America was acquired much the same way as in Great Britain, through primitive accumulation. British colonialism of North America was simply the next stage. Capitalism requires new markets, raw materials, and workers to grow, which it must. Having a new world to plunder was essential.

In A Peoples History of the United States, Howard Zinn makes this abundantly clear. ” …the frenzy in the early capitalist states of Europe for gold, for slaves, for products of the soil, to pay the bondholders and stockholders of the expeditions, to finance the monarchical bureaucracies rising in Western Europe, to spur the growth of the new money economy rising out of feudalism, to participate in what Karl Marx would later call the ‘primitive accumulation of capital’.”

OK, so the British colonists used primitive accumulation to acquire wealth. Didn’t we have a glorious American revolution to overthrow the redcoats and end this plunder?

Not exactly.

The new American elite quickly used the success in the revolt against Great Britain for primitive accumulation of their own. The American revolution was an elite revolution, after all. This salient fact helps explain the differing response from the aristocrats of Europe to the French Revolution versus their response to the American Revolution. One was deeply threatening because of the proletariat nature of the revolutionaries whereas the other was just swapping one set of elite for another.

Certainly we’ve moved past that now, right?

Progress, while uneven, does happen. Decades of struggle combined with the shock of the Great Depression brought New Deal reforms to the US.

However, by the 1970’s the liberal regulatory state just wasn’t working out for the wealthy. They didn’t have all the money and there was a real lack of bowing and scraping going on. Under neoliberalism, the privatization of previously publicly owned parts of the mixed economy was instituted as a means to reconstitute class power.

In essence, neoliberals re-privitized the commons.

The conservative architects of the neoliberal economic transformation were clever. To enact their agenda they needed to do what rulers have done for centuries–divide and rule. As writer Rick Perlstein, makes abundantly clear in his seminal work Nixonland, conservatives bent on overturning New Deal reforms set about employing a Southern strategy to convince poor whites to vote against their own economic self interests as a backlash against the Civil Rights laws passed by the Johnson Administration.

The Christian right was also deployed to further neoliberal economic and political goals. These conservative Christians viewed the liberal state as providing special privileges to groups such as gays and lesbians (same sex marriage), and women (abortion), which they morally disagreed with. That these ruinous economic policies hurt these denizens of the Christian right who came from the poorest part of the United States and stood to lose the most from an adoption of neoliberal economic reforms was a bonus. Instead of casting blame on the real villains, these Christian conservatives just doubled down in their hatred of government.

Wash, rinse, repeat.

What has this corporate seizure of the commons brought us? Crumbling infrastructure, schools and roads. And, with corporations keeping profits offshore to prevent taxation, and opposition in government to public spending, the only solution offered is more privatization. The corporations that presently sit astride the commons, keep jacking up the price of living with their rent gauging and contractual rip-offs. Examples are everywhere–Monsanto, Tyson, Goldman Sachs, Comcast, Verizon, AT&T, Wal-Mart, etc. Especially pernicious are the payday loan and check cashing services.

The privatization of roads, utilities, schools and water have returned us to a semi-feudal state, and made it near impossible to exist outside the corporate universe. How much better would it be if we had public infrastructure to allow us to make a living as a small businessman or craftsman? Or, being able to live your life on your own terms, without a ton of dough? And, what about having time and space to create a vibrant society, where moms or dads have the time to take care of kids and or parents, volunteer for community service, coach Little League, or mentor a Scout troop?

These are the questions we ought to be asking of our government officials.

Political/economy is who gets what, and who pays the price. By re-privatizing the commons, corporations are enriching themselves and impoverishing the rest of us.

There is another way available to us. Progressive era economist, Simon Patten believed that keeping infrastructure in the public domain would reduce the overall price structure and allow small businesses to flourish. What Patten referred to as the forth factor of production, would help foster an economy where all could participate. 

Simon Patten (1852–1922) argued that “…freeing markets from one source of economic rent (by taxing land rent) would merely leave the surplus to be taken by other monopolists and rent extractors (railroads, Wall Street trusts, and basic privatized utilities). To prevent unearned income (economic rent) from adding to the economy’s cost of living and doing business, potentially rent-yielding infrastructure should be kept in the public domain as a “fourth factor of production.” Instead of rentiers making a profit by charging access fees and user fees, the return to public investment should take the form of reducing the economy’s overall price structure.”

Here’s a great example of how it can be done, with the FCC chairman proposing that we treat the internet as a public utility.

“In an op-ed to Wired magazine posted online, Federal Communications Commission Chairman Tom Wheeler said his plan would regulate Internet service much like phone service or any other public utility by applying Title II of the 1934 Communications Act.”

 

 

 

 

 

 

 

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The Market is the Master

Posted on January 21, 2015 by camelotkidd

There is a vague sense of a new order growing up around us. Sometimes there’s a brief glimpse of it. Sometimes late at night there’s a whisper of it on the wind.

I’m referring to neofeudalism–a confluence of neoliberalism and neoconservatism that is forging a new kind of political/economy that represents a fundamental break with previous American ideas about citizenship, self governance, and economic security.

We now live in world of savage inequality cemented into place by a bifurcated system of justice and governance. There are two sets of laws: one set for the elite and the corporations they control, and another set for us. Our government, though nominally a democratic republic, acts to enforce this perverse dynamic.

Neoliberalism + neoconsevatism = neofeudalism.

“The most recent analysis of U.S. wealth inequality finds the top 1 percent of U.S. wealth holders have 39.8 percent of the country’s individual wealth. The top 10 percent have 74.4 percent, which leaves 25.6 percent for the bottom 90 percent.”

A large part of neofeudalism is the reliance on the market as the master. Having overseers to watch the serfs was so Dark-Ages. Now, with the relentless drive to privatize every aspect of modern day life, Americans are oppressed by market strictures.

Don’t want to be part of the marketplace?

Too bad.

The Affordable Care Act is the most immediate example of the government coercing a market based outcome, but the privatization of education, pensions, prisons, roads, utilities and water, promises more of the same.

Lambert at Naked Capitalism, has long been on the neofeudalism beat. Here he is describing how the Obama’s Affordable Care Act is forcing Americans into a market for healthcare leading to neofeudalism.

“One of the things I hate most about ObamaCare is the vicious and relentless way that it creates first- and second-class citizens. ObamaCare does this by construction, of course: ObamaCare’s central concept of eligibility — the outright denial that health care is a human right, but is instead just another pigfest of rental extraction — necessarily implies that those who are “eligible” and those who are not eligible are granted different levels of access to care.

By design, ObamaCare doesn’t treat health care as a right, and does not give all citizens equal access to health insurance, let alone to health care. By design, ObamaCare preserves private health insurance as a rental extraction mechanism, along with its complex and bug-prone system of eligibility determination by past (and projected) income, age, existing insurance coverage, jurisdiction, family structure, and market segment.”

The idea of a market based culture is not new. Thomas Frank, in what was his best book, One Market Under God, makes this point forcefully. Since then the relentless subordination to the market has only accelerated.

It’s not just any market that I’m referring to. It’s the monopoly/oligopoly, state subsidized, neoliberal regime that we have now in the US. I think the poster child for this system would probably have to be Comcast. As in, really, really Comcastic! Economist Michael Hudson pithily describes this extractive phenomenon as–rent seeking as far as the eye can see.

So how did we get to this point where the rich have all the money and power, while everyone else is fighting over the scraps? Class warfare, as Mike Whitney says:

 “If you can’t keep your tycoons in check, you’d might as well throw in the towel and accept a life of indentured servitude now, because that’s where you’re headed anyway. A key element in explaining this whole dynamic is to be found in the falling ratio of wages and salaries as a percentage of national income in the United States. Stagnation in the 1970s led capital to launch an accelerated class war against workers to raise profits by pushing labor costs down. The result was decades of increasing inequality.” (Financial Implosion and Stagnation, John Bellamy Foster and Fred Magdoff, Monthly Review)”

As Les Leopold writes, there was a plan all along to make this all-American neofeudalism a reality.

“The Better Business Climate model had two key components: cutting taxes on corporations and the super-rich, and reducing regulations, especially on Wall Street. This potent combination was to encourage the rich to invest, which in turn would lead to more jobs and increasing incomes for all.”

Of course, it didn’t turn out that way but it was a nice cover story.

There are important reasons to keep tax rates on the wealthy high that have nothing to do with economics. The political rational for high taxes, is that it keeps the wealthy in check and makes it impossible for them to create our present system of neofeudalism. Cutting taxes of the wealthy allowed them to dominate our political process through campaign contributions, which led to further tax cuts for the rich. Alas, the government still requires taxes to fund operations, so the loss of tax revenue from the wealthy resulted in a rise in taxes for everyone else.

As Leopold explains, this tax increase on the 99% created a perverse dynamic that plays straight into the hands of our new overlords.

  • “As we feel like we are getting less and less for our tax dollars, anti-government sentiment increases.
  • As we experience declining services, the pressure mounts for more tax cuts, which further erodes government services.
  • As we see our wages stagnate and our benefits deteriorate, we turn against public sector workers who seem to have it better.
  • Corporations then swoop in with privatization plans for public services which often cost us more and give us fewer services.”

Wash, rinse, repeat.

We can create a shared society if we desire. It’s that simple. Just one teensy little problem. First, we have to depose our new master–the market–and, of course, the elite architects of this dystopian market-based neofeudal system.

Journalist Chris Hedges, one of the few voices to speak against the corporate-state, who has put himself on the line by making a legal challenge to the President’s authority to indefinitely detain American citizens, summarizes the situation at hand:

 “Our passivity has resulted… in much more than imperial adventurism and a permanent underclass. A slow-motion coup by a corporate state has cemented into place a neofeudalism in which there are only masters and serfs. And the process is one that cannot be reversed through the traditional mechanisms of electoral politic”

Lewis Carroll captured much of the present day power inequality in his classic work: Through the Looking-Glass.

“When I use a word, Humpty Dumpty said, in rather a scornful tone, it means just what I choose it to mean — neither more nor less.

The question is, said Alice, whether you can make words mean so many different things.

The question is, said Humpty Dumpty, which is to be master — that’s all.”

 

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Terror Theatre

Posted on January 13, 2015 by camelotkidd

That didn’t take long.

Almost on cue we get another terrorist attack in Paris by gunmen claiming to be al-Qaeda.

In the US, the reaction was predictable, with liberals being demonized for encouraging terrorism through their political correctness.

Left largely unmentioned is the real history of Sunni extremism, with the role of US training and support. Of course, this inconvenient fact would interfere with the 24/7 terror, terror, terror, that so animates our present milieu. There’s also the role of the two killers who traveled to Syria to fight in NATO’s proxy war against the government in Damascus, as writer Tony Cartalucci, explains.

“The implications of yet another case of Western-radicalized terrorists, first exported to fight NATO’s proxy war in Syria, then imported and well-known to Western intelligence agencies, being able to carry out a highly organized, well-executed attack, is that the attack itself was sanctioned and engineered by Western intelligence agencies themselves.”

Once again, I find myself in awe of the sheer cunning of the war on terror architects. The more terrorists they create in the pursuit of US foreign policy who, predictably, run amuck and blow back into western countries, the more money, power and control this deep state accrues. It’s a grotesque, yet strangely compelling spectacle.

Journalist Andre Vltchek examines more of the history of the use of ultra-conservative Sunni terrorists in pursuit of an empire the US inherited from Britain. History, that western commentators would be happy to disappear down the memory hole.

“It is very clear from the historical record that without British help neither Wahhabism nor the House of Saud would be in existence today. Wahhabism is a British-inspired fundamentalist movement in Islam. Through its defense of the House of Saud, the US also supports Wahhabism directly and indirectly regardless of the terrorist attacks of September 11, 2001. Wahhabism is violent, right wing, ultra-conservative, rigid, extremist, reactionary, sexist, and intolerant…

The West gave full support to the Wahhabis in the 1980s. They were employed, financed and armed, after the Soviet Union was dragged into Afghanistan and into a bitter war that lasted from 1979 to 1989. As a result of this war, the Soviet Union collapsed, exhausted both economically and psychologically.”

Vltchek goes on to explain why right-wing Sunni terrorism is so useful for the US.

“For the Empire, the existence and popularity of progressive, Marxist, Muslim rulers governing the Middle East or resource-rich Indonesia, was something clearly unacceptable. If they were to use the natural wealth to improve the lives of their people, what was to be left for the Empire and its corporations? It had to be stopped by all means. Islam had to be divided, and infiltrated with radicals and anti-Communist cadres, and by those who couldn’t care less about the welfare of their people.”

The US security state wants to have it both ways. The unfettered ability to employ terror against our enemies through terrorists proxies that we secretly train and support, alongside the ability to employ the inevitable terrorist blowback for maximum psychological warfare against the American populace.

It’s terror theatre.

I’m alternately horrified/fascinated by the thought of the crazy reaction to another massive terror attack here in the US, when the inevitable blowback results.

We are so going to lose our shit. Senator Lindsey Graham may actually poop himself on live TV.

Wow.

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Public Diplomacy

Posted on January 7, 2015 by camelotkidd

Neoliberalism and neoconservatism are not an accident of history. They are the ideological components of a sophisticated and largely successful counterattack on the New Deal, that commenced within seconds of the signing of the progressive legislation by President Franklin D. Roosevelt. At the time, FDR recognized the hostility of Americas ruling elite and understood that they would never stand for these reforms. In 2015, it’s unfortunate that too many Americans have lost sight of this essential political calculation.

This successful counterattack on the political and economic reforms of the New Deal has had a deleterious effect on the non-wealthy American populace. This counterattack has also brought about a new political and economic reality where America is not so much a democratic republic, but a plutocracy–a government controlled by the wealthy and the corporations and banks they control, all protected by the intelligence agencies, military and police.

The long term counterattack against New Deal reforms has been aided enormously by manipulative advertising, public relations and outright propaganda. Investigative reporter Robert Parry has been reporting on these efforts to manage public perceptions since the 1980’s. For his efforts, he can’t work in the mainstream news media, but now writes at Consortiumnews.com, where he provides an invaluable service in the pursuit of accurate information.

In a recent article entitled The Victory of Perception Management, Parry discusses newly discovered documents pertaining to the Iran/Contra scandal that demonstrate that the US government under President Reagan waged a widespread perception management campaign against the American public.

“From documents declassified or leaked over the past several decades, including an unpublished draft chapter of the congressional Iran-Contra investigation, we now know a great deal about how this remarkable project was undertaken and who the key players were.

Perhaps not surprisingly much of the initiative came from the Central Intelligence Agency, which housed the expertise for manipulating target populations through propaganda and disinformation. The only difference this time would be that the American people would be the target population.

For this project, Ronald Reagan’s CIA Director William J. Casey sent his top propaganda specialist Walter Raymond Jr. to the National Security Council staff to manage the inter-agency task forces that would brainstorm and coordinate this “public diplomacy” strategy.”

Essentially, the US elite believe that the American public must never be allowed to look critically at what they are doing. If that means outright propaganda, so be it. Any critical observer can see this ongoing effort on a daily basis, especially in regard to Putin and Russia–I’m looking at you–New York Times.

While Parry won’t say it, I will–The Cold War against communism was and is a key component in the ongoing counterattack against the New Deal reforms. Examining US foreign policy historically reveals that domestic concerns frequently trump strategic considerations. With this idea in mind, I believe that the Cold War, while a real life struggle between the Soviet Union and the US, was also used cynically for domestic ends–largely as a lethal weapon deployed by capital against labor. Communism, as an ideology was just too convenient as a boogyman used to scare Americans into supporting an All-American system of capitalism that disadvantaged them over the long run, resulting in the widespread inequality so visible today.

However, all good things come to an end. Communism was an especially effective boogyman, but the evil terrorist has been dragooned into playing the new scary super-villain quite successfully. Recall the run up to the election in November 2014, with the 24/7 fear mongering about ISIS terrorist, who were infected with ebola, coming to murder us all in our beds?

Good times.

Our elite need an external enemy to be able to continue these ruinous economic policies. Luckily for them the American public has the attention span of a gnat and this ongoing creation of scary monsters can proceed. It does tend to get slightly ludicrous at times, as the latest fable of North Korea hacking Sony’s The Interview, with concerned Americans flocking to see a shitty movie just to show those dastardly North Korean terrorists.

The whole affaire reminds me of a South Park episode, and reinforces the old adage–what starts out as a tragedy segues into a farce.

Welcome to America, where you can’t make this shit up.

Happy New Year!

 

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