Friday, October 24, 2008
Friday, October 17, 2008
The Price of Free Trade (Part Two)
Lori Wallach,
Free Trade—The Price Paid
April 13, 2005, © Big Picture TV
Summary
Lori Wallach discusses the impact of unfair trade rules such as those of NAFTA and the WTO, established in 1994 and 1995 respectively. She gives examples of how biased trade regulations can affect the interests of different member states, including such instances as baby food sold in Guatemala, foreign-owned patents in India and hormone-treated meat in Europe. Any multi-national corporation can effectively challenge any country in which it operates at a WTO court. Countries are forced to comply by the threat of trade sanctions. As a result, government authority is weakened and corporations are empowered.
Transcript
Now the implications of these agreements, which again aren’t about trade, are so broad that the i
mplications are very different in different countries. So for instance, in India where the Constitution explicitly forbid the patenting of life forms or medicines or seeds, they’ve been required to implement the WTO agreements to basically change in the world’s largest democracy and put into place patent laws that basically violate what the Constitution says, or the country of Guatemala, which was one of the countries that had done one of the best jobs implementing the so called UNICEF Nestlé’s Code, this was the code that was developed after lots of citizen campaigning that had to do with the plain marketing of breast milk substitutes, so baby formula, there used to be very tricky labeling of fat babies so that illiterate mothers would be tricked into thinking it was better to use the formula instead of breast milk, and then after a couple of weeks, their milk would dry up, they’d be hooked on having to buy this stuff, and then they killed their baby, because when you mix dirty water with formula, the baby dies from infant diarrhoea. So this was like a catastrophe, a global, just catastrophe of unneeded child deaths, and there was this huge campaign, and Guatemala implemented this health treaty, World Health Organization UNICEF treaty, into the domestic law, and they were a poster child for decreasing infant mortality.
In comes the US saying, excuse me, we’re here representing Gerber Baby Foods, and under the WTO’s intellectual property agreement, they have a trademark on the fat baby face, and we’re so sorry, but you’ll have to allow them to violate your domestic law implementing your health treaty because your WTO obligations require you to allow the fat trademark baby face even though it violates your health treaty and your domestic law, so you can either do this now in advance and we will save you the million dollars you’re trying to defend your law to WTO, or else we’ll take a formal challenge and make you do it.
Well, unfortunately, as is the case now, ten years into the WTO, almost any time a company gets a country to file one of these attacks, because in fact, that’s how it works, a country can challenge another country’s laws as not conforming, and then the country that loses has to change their law or faces permanent trade sanctions. Now when there is a threat basically, particularly in poor countries, the country just says, I give up, I’ll change my law.
And not just poor countries, I mean there’s a classic European Union one like that where the US basically threatened to challenge of the ban on a particularly inhumane kind of fur trap that was banned all across Europe, it’s allowed in some US States, they’re just like a dreadful torture device, and in this instance, the European Union, after the thing had gone through the union, through the commission, the parliament approved it, it was ready for implementation, and like inches before it was actually going to be published, the US and the EU negotiated for a one year delay, then a three year delay, and now it just basically died in the cradle, and this humane trapping law directive EUI had gone through everything, has never gone into a fact because of a WTO threat.
Similarly, Korea basically threw out two important food safety laws after the US threatened to challenge them. They said, don’t even bother, we’re not even going to defend. Meanwhile, there have been 90 formal cases of trade challenges where one country goes after another at the WTO, and in that record, there is only one case when environmental health, a public interest protection was ever saved.
In every other instance, they were struck down. So the US implementation of the CITES Treaty on endangered species through our Endangered Species Act was struck down. Our Clean Air Act regulations and the cleanliness of gasoline were struck down with the WTO.
The European ban on artificial growth hormones in meat was struck down as a WTO violation. These are all non-discriminatory things where a country just said, in Europe they said, we’re not eating meat containing artificial growth hormones. Our farmers can’t use it, you can’t import meat that has it, we’re just not eating it. It’s not discriminatory, just doesn’t, we’re not treating foreign goods differently. It’s just we’re not eating that stuff. We’re not sure what it does to you and we don’t want to find out the hard way, so keep it out.
Well, you can’t do that under the WTO. The US won that case on behalf of the Beef Cattlemen’s Association. Same thing, the Caribbean banana trade system that had been negotiated with the European Union was struck down in the WTO, basically saying, no, you can’t have a development agenda, you have to follow exactly the trade rules word for word.
So law after law, country after country. India’s basically law saying no patenting of life forms, drugs and seeds, struck down. So all of these different important laws and policies, and in fact any time there’s a leading edge policy, right now Europe is rewriting chemical, a chemical regulation through a program called REACH, which will basically require the registration of every chemical that’s used in a certain volume.
WAbout Lori Wallach Director, Global Trade Watch Lori Wallach is one of the best known and most vocal critics of many of the trade agreements associated with corporate globalization. She is the Director of Public Citizen’s Global Trade Watch, a non-profit organization founded in 1995 to promote government and corporate accountability in the globalization and trade arena. By profession a trade lawyer, she has written a number of books and articles on trade and her comments have been widely broadcast on CNN, ABC, CNBC and CSPAN.hat most people don’t realize is that all of our countries’ chemical regulations went to effect basically only going
Well, the European industry, chemical industry has gotten in cahoots with the US chemical industry and the US trade representative to basically blow up this law by claiming to WTO violation before it ever gets implemented. Well, this is the law that should set the forward pattern for all the rest of the world. The US needs to update our laws. Our laws are totally backwards. You guys actually in Europe are going to do it right first, and then we should follow. Instead, the US industry is using the WTO to kill it. So this gives you some idea of the so called free trade regime, and it has very little to do with trade, and it’s certainly not free.
— Lori Wallach
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Thursday, October 16, 2008
The Price of Free Trade (Part One)
Lori Wallach,
Free Trade—The Price Paid
April 13, 2005, © Big Picture TV
Summary
In the first part of this two-part series, Lori Wallach explains how the name of free trade was usurped by multinational corporations and right-wing think-tanks in the early 1990s. In 1995 the post-war trade agreement known as GATT was incorporated into the WTO at the Uruguay Round. This endorsed a much wider neo-liberal corporate agenda that stretched far beyond trade issues. It imposed radical new obligations on trading partners and in particular the developing world.
Free Trade was a beautiful Trojan horse because in parliaments around the world, nobody had any idea what they were getting themselves into. . .
Basically, the good name of trade was used as a Trojan horse. If you can imagine that the original trade rules which came under a thing called the General Agreement on Tariffs and Trade in 1947 dealt only about trading goods between countries, and those rules focused on tariffs and quotas, traditional trade measures. A tariff is a tax charged when a good crosses a border, and a quota is a quantitative limit about how much of an import you’ll take. And so in the past, trade agreement said for instance, we all the countries signing this agreement agree we’ll only charge a 3% tariff tax and blah, blah coming over the border, and we’ll all allow 1,000 pairs of shoes or whatever the quota is, it’s actually in tonnes or in millions of pieces, and those limits were then negotiated and traded and swapped and set over time.
Only starting in the early 1990s did the WTO and NAFTA explode the boundaries of what was in a legitimate trade agreement. And there is a back story to this, which is, that the Reagan and Thatcher so called revolutions, the neoliberal world view which involves trying to have worldwide an entire package of policies, the goal of which is to basically get people and their governments out of the markets, that the markets know the best, if you can just totally deregulate and liberalize everything, we’ll all be happier for that kind and gentle hand at the market. And so this world view involves a whole package of policies to implement it. Trade liberalization, finance liberalization, which means liberalization of currency trading and of a varie
ty of instruments of trading, of investment liberalization, who can own what, who can sell and buy things, from land to different properties, new protections for property, both for investors but also for intellectual property, deregulation of social standards or harmonization of regulatory standards to one global environmental or worker safety or food safety standards that you can work on a global single unified market level with a multinational corporation, the commodification of new tradable units by patenting things and allowing you to trade things that were seen as, my own genes for instance, or to have commodification of things with human rights, basic services like the right to drinkable water and creating all these new units, and also getting the government out of the business of actually having a role in the marketplace, so getting privatization of any kind of factories and companies but also of services, so the things in many of our countries, the phone systems, the energy utilities, the water utilities that are government run or heavily regulated private not for profits are regulated monopolies, all of that needs to be gotten rid off through privatization and deregulation of services.
That mix of policies was being pushed back by parliaments throughout the world including by the US Congressmen. Reagan was trying to shove it down their throats. And so, very cleverly, the right wing think tanks and the big multinational companies who jointly sought for different purposes, one ideological, one for profit motives, to implement this world view into real policies, came up with the idea of using the obscure trade negotiations, the GATT, because ever since 1947, the GATT would have periodic negotiations every seven to ten years where it would sort of add some new issues or cut some more tariffs. And so one of those negotiations had started in Uruguay, and everyone in the world thought it was another of those snoozerama situations where they basically are in there cutting tariffs on socks, woohoo, no one’s paying attention to that. But really what was done is the entire agenda was rewritten, and the Reagan and Thatcher guys basically said, hey, let’s have a different kind of trade agreement. Let’s make the GATT just part of what’s implemented, and they created the World Trade Organization, a freestanding inte
rnational body which would implement 17 different agreements, only one of which is really about trade, the GATT. It’s now submerged under the WTO. The other 16 agreements have to do with, there’s a whole agreement limiting what kind of domestic environmental standards you can have, a whole agreement limiting what kind of domestic food safety standards you can have, a whole agreement limiting how you can spend your tax dollars in procurement policy. Can you have green procurement? Can you try and not do business with companies that are human rights violators? So a whole agreement on privatization and deregulation of services, there’s a whole agreement on intellectual property protections, new patent protectionism, new copyright rights. There’s a whole agreement on how you can treat foreign investors inside your country, the trade related investment measures. All of these are non-trade related issues, but they’re now enforced through these different trade agreements like NAFTA and WTO. It was a beautiful Trojan horse because in parliaments around the world, nobody had any idea what they were getting themselves into.
— Lori Wallach
Thursday, October 09, 2008
Adam Smith was even better than you: market fundamentalists!!
Adam Smith's works is often regarded as key source of neoliberalism. But he has been oversimplified by his critics. One fact should not be left alone: he is a professor not of economics but of moral 
philosophy; and he offers a vision of how to advance the social good, not through self-interest, as he would later argue in his magnum opus The Wealth of Nations, but through systematic social benevolence; and in this sense, he was morally better than today's greedy neoliberals or market fundamentalists:
…Merchants and master manufacturers are … the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration. As during their whole lives they are engaged in plans and projects, they have frequently more acuteness of understanding than the greater part of country gentlemen. As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business, than about that of the society, their judgment, even when given with the greatest candour (which it has not been upon every occasion) is much more to be depended upon with regard to the former of those two objects than with regard to the latter. Their superiority over the country gentleman is not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it (Adam Smith, The Wealth of Nations, Book I, Everyman’s Library, Sixth Printing, 1991; pp. 87-88, 231-232)
Tuesday, October 07, 2008
Global Neoliberalism Crisis 2008
The global financial crisis, brewing for a while, really started to show its effects in the middle of 2008. Around the world stock markets have fallen, large financial 
institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. On the one hand many people are concerned that those responsible for the financial problems are the ones being bailed out, while on the other hand, a global financial meltdown will affect the livelihoods of almost everyone in an increasingly inter-connected world. The problem could have been avoided, if ideologues supporting the current economics models weren’t so vocal, influential and inconsiderate of others’ viewpoints and concerns.
This article provides an overview of the crisis with links for further, more detailed, coverage at the end.
Global Financial Crisis 2008
by Anup Shah
Sunday, October 05, 2008
http://www.globalissues.org/article/768/global-financial-crisis.
Crisis so severe, the world financial system is affected
Following a period of economic boom, a financial bubble—global in scope—has now burst.
A collapse of the US sub-prime mortgage market and the reversal of the housing boom in other industrialized economies have had a ripple effect around the world. Furthermore, other weaknesses in the global financial system have surfaced. Some financial products and instruments have become so complex and twisted, that as things start to unravel, trust in the whole system started is failing.
The extent of this problem has been so severe that some of the
world’s largest financial institutions have collapsed. Others have been bought out by their competition at low prices and in other cases, the governments of the wealthiest nations in the world have resorted to extensive bail-out and rescue packages for the remaining large banks and financial institutions.
The effect of this, the United Nation’s Conference on Trade and Development says in its Trade and Development Report 2008 is, as summarized by the Third World Network, that
". . . the global economy is teetering on the brink of recession. The downturn after four years of relatively fast growth is due to a number of factors: the global fallout from the financial crisis in the United States, the bursting of the housing bubbles in the US and in other large economies, soaring commodity prices, increasingly restrictive monetary policies in a number of countries, and stock market volatility … the fallout from the collapse of the US mortgage market and the reversal of the housing boom in various important countries has turned out to be more profound and persistent than expected in 2007 and beginning of 2008. As more and more evidence is gathered and as the lag effects are showing up, we are seeing more and more countries around the world being affected by this rather profound and persistent negative effects from the reversal of housing booms in various countries."
— Kanaga Raja, Economic Outlook Gloomy, Risks to South, say UNCTAD, Third World Network, September 4, 2008
A crisis so severe, those responsible are bailed out
Some of the bail-outs have also been accompanied with charges of hypocrisy due to the appearance of “socializing the costs while privatizing the profits.” The bail-outs appear to help the financial institutions that got into trouble (many of whom pushed for the kind of lax policies that allowed this to happen in the first place).
Some governments have moved to make it harder to manipulate the markets by shorting during the financial crisis blaming them for worsening an already bad situation.
(It should be noted that during the debilitating Asian financial crisis in the late 1990s, Asian nations affected by short-selling complained, without success that currency speculators—operating through hedge funds or through the currency operations of commercial banks and other financial institutions—were attacking their currencies through short selling and in doing so, bringing the rates of the local currencies far below their real economic levels. However, when they complained to the Western governments and IMF, they dismissed the claims of the Asian governments, blaming it on their own economic mismanagement instead.)
Other governments have moved to try and reassure investors and savers that their money is safe. In a number of European countries, for example, governments have tried to increase or fully guarantee depositors’ savings. In other cases, banks have been nationalized (socializing profits as well as costs, potentially.)
In the meanwhile, smaller businesses and poorer people rarely have such options for bail out and rescue when they find themselves in crisis.
There seems to be a growing resentment and little sympathy for those working in the financial sector that appeared to have gambled with people’s money, and hence their lives, while even getting fat bonuses and pay rises for it in the past. Although in raw dollar terms the huge pay rises and bonuses are small compared to the magnitude of the problem, the encouragement such practices have given in the past, as well as the type of culture it creates is what has angered so many people.
Side note on those taking on risky loans in the subprime market»
In the case of subprime mortgages, it is also argued that those who took on the risky loans are to blame; they should not have borrowed so much money when they knew they would not have the means to repay. While there is truth to this, and our culture of expecting easy money, consuming beyond our means, etc is something that needs urgent attention, in the case of subprime mortgages, it seems easy to forget the predicament of people living in poverty. Financial advisors that irresponsibly pushed these loans (with no interest or care of the borrower in mind) were generally aggressive as they had a lot to gain from these loans.
For people living in poverty even in wealthy countries life can be desperate and miserable. Concerns will range from crime in the neighborhood, to good schooling, to getting by week by week on very little, and ensuring a job lasts. The hope of being able to escape it for a while was, in effect, exploited. When in poverty, long term thinking is not always going to enter the realm of immediate concern.
Furthermore, it is likely that those lower down the social strata are not going to be as financially savvy as those further up. Hence there is usually more trust placed in a bank or financial advisor. It is often forgotten these days that banks and financial institutions have changed in nature; there is less concern about the people they serve, but more about how they can sell products from which they can make profit. While to some extent risky borrowers may bear some responsibility, overall they lost out while the lenders are being bailed out.
Following a period of economic boom, a financial bubble—global in scope—has now burst.
A collapse of the US sub-prime mortgage market and the reversal of the housing boom in other industrialized economies have had a ripple effect around the world. Furthermore, other weaknesses in the global financial system have surfaced. Some financial products and instruments have become so complex and twisted, that as things start to unravel, trust in the whole system started is failing.
The extent of this problem has been so severe that some of the
world’s largest financial institutions have collapsed. Others have been bought out by their competition at low prices and in other cases, the governments of the wealthiest nations in the world have resorted to extensive bail-out and rescue packages for the remaining large banks and financial institutions.The effect of this, the United Nation’s Conference on Trade and Development says in its Trade and Development Report 2008 is, as summarized by the Third World Network, that
". . . the global economy is teetering on the brink of recession. The downturn after four years of relatively fast growth is due to a number of factors: the global fallout from the financial crisis in the United States, the bursting of the housing bubbles in the US and in other large economies, soaring commodity prices, increasingly restrictive monetary policies in a number of countries, and stock market volatility … the fallout from the collapse of the US mortgage market and the reversal of the housing boom in various important countries has turned out to be more profound and persistent than expected in 2007 and beginning of 2008. As more and more evidence is gathered and as the lag effects are showing up, we are seeing more and more countries around the world being affected by this rather profound and persistent negative effects from the reversal of housing booms in various countries."
— Kanaga Raja, Economic Outlook Gloomy, Risks to South, say UNCTAD, Third World Network, September 4, 2008
A crisis so severe, those responsible are bailed out
Some of the bail-outs have also been accompanied with charges of hypocrisy due to the appearance of “socializing the costs while privatizing the profits.” The bail-outs appear to help the financial institutions that got into trouble (many of whom pushed for the kind of lax policies that allowed this to happen in the first place).
Some governments have moved to make it harder to manipulate the markets by shorting during the financial crisis blaming them for worsening an already bad situation.
(It should be noted that during the debilitating Asian financial crisis in the late 1990s, Asian nations affected by short-selling complained, without success that currency speculators—operating through hedge funds or through the currency operations of commercial banks and other financial institutions—were attacking their currencies through short selling and in doing so, bringing the rates of the local currencies far below their real economic levels. However, when they complained to the Western governments and IMF, they dismissed the claims of the Asian governments, blaming it on their own economic mismanagement instead.)
Other governments have moved to try and reassure investors and savers that their money is safe. In a number of European countries, for example, governments have tried to increase or fully guarantee depositors’ savings. In other cases, banks have been nationalized (socializing profits as well as costs, potentially.)In the meanwhile, smaller businesses and poorer people rarely have such options for bail out and rescue when they find themselves in crisis.
There seems to be a growing resentment and little sympathy for those working in the financial sector that appeared to have gambled with people’s money, and hence their lives, while even getting fat bonuses and pay rises for it in the past. Although in raw dollar terms the huge pay rises and bonuses are small compared to the magnitude of the problem, the encouragement such practices have given in the past, as well as the type of culture it creates is what has angered so many people.
Side note on those taking on risky loans in the subprime market»
In the case of subprime mortgages, it is also argued that those who took on the risky loans are to blame; they should not have borrowed so much money when they knew they would not have the means to repay. While there is truth to this, and our culture of expecting easy money, consuming beyond our means, etc is something that needs urgent attention, in the case of subprime mortgages, it seems easy to forget the predicament of people living in poverty. Financial advisors that irresponsibly pushed these loans (with no interest or care of the borrower in mind) were generally aggressive as they had a lot to gain from these loans.
For people living in poverty even in wealthy countries life can be desperate and miserable. Concerns will range from crime in the neighborhood, to good schooling, to getting by week by week on very little, and ensuring a job lasts. The hope of being able to escape it for a while was, in effect, exploited. When in poverty, long term thinking is not always going to enter the realm of immediate concern.
Furthermore, it is likely that those lower down the social strata are not going to be as financially savvy as those further up. Hence there is usually more trust placed in a bank or financial advisor. It is often forgotten these days that banks and financial institutions have changed in nature; there is less concern about the people they serve, but more about how they can sell products from which they can make profit. While to some extent risky borrowers may bear some responsibility, overall they lost out while the lenders are being bailed out.A crisis so severe, the rest suffer too
There is the argument that when the larger banks show signs of crisis, it is not just the wealthy that will suffer, but potentially everyone. With an increasingly inter-connected world, things like a credit crunch can ripple through the entire economy.
For example, people may find their mortgages harder to pay, or remortgaging could become expensive, for any recent homebuyers the value of their homes are likely fall in value leaving them in negative equity, and many sectors may find the credit crunch and higher costs of borrowing will lead to job cuts. As people will cut back on consumption to try and weather this economic storm, yet other businesses will struggle to survive leading to further fears of job losses.
There is the argument that when the larger banks show signs of crisis, it is not just the wealthy that will suffer, but potentially everyone. With an increasingly inter-connected world, things like a credit crunch can ripple through the entire economy.
For example, people may find their mortgages harder to pay, or remortgaging could become expensive, for any recent homebuyers the value of their homes are likely fall in value leaving them in negative equity, and many sectors may find the credit crunch and higher costs of borrowing will lead to job cuts. As people will cut back on consumption to try and weather this economic storm, yet other businesses will struggle to survive leading to further fears of job losses.
The financial crisis and wealthy countries
Many have blamed the greed of Wall Street for causing the problem in the first place because it is in the US that the most influential banks, institutions and ideologues that pushed for the policies that caused the problems are found. The crisis became so severe that after the failure and buyouts of major institutions, the Bush Administration offered a $700 billion bailout plan for the US financial system. Joseph Stiglitz, Nobel Laureate Joseph Stiglitz: Bail Out Wall Street Now, Change Terms Later, Democracy Now!, October 2, 2008
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This bailout package was controversial because it was unpopular with the public, seen as a bailout for the culprits while the ordinary person would be left to pay for their folly. The initial rejection at the US House of Representatives, because of this, sent shock waves around the world.
It took a second attempt to pass the plan, but with add-ons to the bill to get the additional congressmen and women to accept the plan.
However, as former Nobel prize winner for Economics, former Chief Economist of the World Bank and university professor at Columbia University, Joseph Stiglitz, argued, the plan “remains a very bad bill:”
"I think it remains a very bad bill. It is a disappointment, but not a surprise, that the administration came up with a bill that is again based on trickle-down economics. You throw enough money at Wall Street, and some of it will trickle down to the rest of the economy. It’s like a patient suffering from giving a massive blood transfusion while there’s internal bleeding; it doesn’t do anything about the basic source of the hemorrhaging, the foreclosure problem. But that having been said, it is better than doing nothing, and hopefully after the election, we can repair the very many mistakes in it." — Joseph Stiglitz, Nobel Laureate Joseph Stiglitz: Bail Out Wall Street Now, Change Terms Later, Democracy Now!, October 2, 2008
Writing in The Guardian, Stiglitz also added that, "Americans have lost faith not only in the [Bush] administration, but in its economic philosophy: a new corporate welfarism masquerading behind free-market ideology; another version of trickle-down economics, where the hundreds of billions to Wall Street that caused the problem were supposed to somehow trickle down to help ordinary Americans. Trickle-down hasn’t been working well in America over the past eight years. The very assumption that the rescue plan has to help is suspect. After all, the IMF and US treasury bail-outs for Wall Street 10 years ago in Korea, Thailand, Indonesia, Brazil, Russia and Argentina didn't work for those countries, although it did enable Wall Street to get back most of its money. The taxpayers in these other poor countries picked up the tab for the financial markets’ mistakes. This time, it is American taxpayers who are being asked to pick up the tab. And that’s the difference. For all the rhetoric about democracy and good governance, the citizens in those countries didn’t really get a chance to vote on the bail-outs . . . In environmental economics, there is a basic concept called the polluter pays principle. It is a matter of fairness, but also of efficiency. Wall Street has polluted our economy with toxic mortgages. It should now pay for the cleanup.
— Joseph Stiglitz, Good day for democracy; Now Congress must draw up a proposal in which costs are borne by those who created the problem, The Guardian, October 1, 2008
Many have blamed the greed of Wall Street for causing the problem in the first place because it is in the US that the most influential banks, institutions and ideologues that pushed for the policies that caused the problems are found. The crisis became so severe that after the failure and buyouts of major institutions, the Bush Administration offered a $700 billion bailout plan for the US financial system. Joseph Stiglitz, Nobel Laureate Joseph Stiglitz: Bail Out Wall Street Now, Change Terms Later, Democracy Now!, October 2, 2008
.jpg)
This bailout package was controversial because it was unpopular with the public, seen as a bailout for the culprits while the ordinary person would be left to pay for their folly. The initial rejection at the US House of Representatives, because of this, sent shock waves around the world.It took a second attempt to pass the plan, but with add-ons to the bill to get the additional congressmen and women to accept the plan.
However, as former Nobel prize winner for Economics, former Chief Economist of the World Bank and university professor at Columbia University, Joseph Stiglitz, argued, the plan “remains a very bad bill:”
"I think it remains a very bad bill. It is a disappointment, but not a surprise, that the administration came up with a bill that is again based on trickle-down economics. You throw enough money at Wall Street, and some of it will trickle down to the rest of the economy. It’s like a patient suffering from giving a massive blood transfusion while there’s internal bleeding; it doesn’t do anything about the basic source of the hemorrhaging, the foreclosure problem. But that having been said, it is better than doing nothing, and hopefully after the election, we can repair the very many mistakes in it." — Joseph Stiglitz, Nobel Laureate Joseph Stiglitz: Bail Out Wall Street Now, Change Terms Later, Democracy Now!, October 2, 2008
Writing in The Guardian, Stiglitz also added that, "Americans have lost faith not only in the [Bush] administration, but in its economic philosophy: a new corporate welfarism masquerading behind free-market ideology; another version of trickle-down economics, where the hundreds of billions to Wall Street that caused the problem were supposed to somehow trickle down to help ordinary Americans. Trickle-down hasn’t been working well in America over the past eight years. The very assumption that the rescue plan has to help is suspect. After all, the IMF and US treasury bail-outs for Wall Street 10 years ago in Korea, Thailand, Indonesia, Brazil, Russia and Argentina didn't work for those countries, although it did enable Wall Street to get back most of its money. The taxpayers in these other poor countries picked up the tab for the financial markets’ mistakes. This time, it is American taxpayers who are being asked to pick up the tab. And that’s the difference. For all the rhetoric about democracy and good governance, the citizens in those countries didn’t really get a chance to vote on the bail-outs . . . In environmental economics, there is a basic concept called the polluter pays principle. It is a matter of fairness, but also of efficiency. Wall Street has polluted our economy with toxic mortgages. It should now pay for the cleanup.
— Joseph Stiglitz, Good day for democracy; Now Congress must draw up a proposal in which costs are borne by those who created the problem, The Guardian, October 1, 2008
A crisis signaling the decline of US’s superpower status?
Some commentators have been writing even before the global financial crisis took hold that the US was in decline, as evidenced by its challenges in Iraq and Afghanistan, and its declining image in Europe, Asia and elsewhere.
The BBC also asked if the US’s superpower status was shaken by this financial crisis:
The financial crisis is likely to diminish the status of the United States as the world’s only superpower. On the practical level, the US is already stretched militarily, in Afghanistan and Iraq, and is now stretched financially. On the philosophical level, it will be harder for it to argue in favor of its free market ideas, if its own markets have collapsed.
… Some see this as a pivotal moment.
The political philosopher John Gray, who recently retired as a professor at the London School of Economics, wrote in the London paper The Observer: “Here is a historic geopolitical shift, in which the balance of power in the world is being altered irrevocably. “The era of American global leadership, reaching back to the Second World War, is over… The American free-market creed has self-destructed while countries that retained overall control of markets have been vindicated . . . How symbolic that Chinese astronauts take a spacewalk while the US Treasury Secretary is on his knees.” — Paul Reynolds, US superpower status is shaken, BBC, October 1, 2008
Yet, others argue that it may be too early to write of the US:
The director of a leading British think-tank Chatham House, Dr Robin Niblett … argues that we should wait a bit before coming to a judgment and that structurally the United States is still strong. “America is still immensely attractive to skilled immigrants and is still capable of producing a Microsoft or a Google,” he went on. “Even its debt can be overcome. It has enormous resilience economically at a local and entrepreneurial level. “And one must ask, decline relative to who? China is in a desperate race for growth to feed its population and avert unrest in 15 to 20 years. Russia is not exactly a paper tiger but it is stretching its own limits with a new strategy built on a flimsy base. India has huge internal contradictions. Europe has usually proved unable to jump out of the doldrums as dynamically as the US.
“But the US must regain its financial footing and the extent to which it does so will also determine its military capacity. If it has less money, it will have fewer forces.” — Paul Reynolds, US superpower status is shaken, BBC, October 1, 2008
Some commentators have been writing even before the global financial crisis took hold that the US was in decline, as evidenced by its challenges in Iraq and Afghanistan, and its declining image in Europe, Asia and elsewhere.
The BBC also asked if the US’s superpower status was shaken by this financial crisis:The financial crisis is likely to diminish the status of the United States as the world’s only superpower. On the practical level, the US is already stretched militarily, in Afghanistan and Iraq, and is now stretched financially. On the philosophical level, it will be harder for it to argue in favor of its free market ideas, if its own markets have collapsed.
… Some see this as a pivotal moment.
The political philosopher John Gray, who recently retired as a professor at the London School of Economics, wrote in the London paper The Observer: “Here is a historic geopolitical shift, in which the balance of power in the world is being altered irrevocably. “The era of American global leadership, reaching back to the Second World War, is over… The American free-market creed has self-destructed while countries that retained overall control of markets have been vindicated . . . How symbolic that Chinese astronauts take a spacewalk while the US Treasury Secretary is on his knees.” — Paul Reynolds, US superpower status is shaken, BBC, October 1, 2008
Yet, others argue that it may be too early to write of the US:
The director of a leading British think-tank Chatham House, Dr Robin Niblett … argues that we should wait a bit before coming to a judgment and that structurally the United States is still strong. “America is still immensely attractive to skilled immigrants and is still capable of producing a Microsoft or a Google,” he went on. “Even its debt can be overcome. It has enormous resilience economically at a local and entrepreneurial level. “And one must ask, decline relative to who? China is in a desperate race for growth to feed its population and avert unrest in 15 to 20 years. Russia is not exactly a paper tiger but it is stretching its own limits with a new strategy built on a flimsy base. India has huge internal contradictions. Europe has usually proved unable to jump out of the doldrums as dynamically as the US.
“But the US must regain its financial footing and the extent to which it does so will also determine its military capacity. If it has less money, it will have fewer forces.” — Paul Reynolds, US superpower status is shaken, BBC, October 1, 2008
Europe and the financial crisis
In Europe, a number of major financial institutions have failed, or needed rescuing.
A number of European countries are attempting different measures (as they seemed to have failed to come up with a united response).
For example, some nations have stepped in to nationalize or in some way attempt to provide assurance for people. This may include guaranteeing 100% of people’s savings or helping broker deals between large banks to ensure there isn’t a failure.
The financial crisis and the developing world
For the developing world, the rise in food prices as well as the knock-on effects from the financial i
nstability and uncertainty in industrialized nations are having a compounding effect. High fuel prices, soaring commodity prices together with fears of global recession are worrying many developing country analysts.
Summarizing a United Nations Conference on Trade and Development report, the Third World Network notes the impacts the crisis could have around the world, especially on developing countries that are dependent on commodities for import or export:
Uncertainty and instability in international financial, currency and commodity markets, coupled with doubts about the direction of monetary policy in some major developed countries, are contributing to a gloomy outlook for the world economy and could present considerable risks for the developing world, the UN Conference on Trade and Development (UNCTAD) said Thursday.
… Commodity-dependent economies are exposed to considerable external shocks stemming from price booms and busts in international commodity markets.
Market liberalization and privatization in the commodity sector have not resulted in greater stability of international commodity prices. There is widespread dissatisfaction with the outcomes of unregulated financial and commodity markets, which fail to transmit reliable price signals for commodity producers. In recent years, the global economic policy environment seems to have become more favorable to fresh thinking about the need for multilateral actions against the negative impacts of large commodity price fluctuations on development and macroeconomic stability in the world economy.
— Kanaga Raja, Economic Outlook Gloomy, Risks to South, say UNCTAD, Third World Network, September 4, 2008
In Europe, a number of major financial institutions have failed, or needed rescuing.
A number of European countries are attempting different measures (as they seemed to have failed to come up with a united response).
For example, some nations have stepped in to nationalize or in some way attempt to provide assurance for people. This may include guaranteeing 100% of people’s savings or helping broker deals between large banks to ensure there isn’t a failure.
The financial crisis and the developing world
For the developing world, the rise in food prices as well as the knock-on effects from the financial i
nstability and uncertainty in industrialized nations are having a compounding effect. High fuel prices, soaring commodity prices together with fears of global recession are worrying many developing country analysts.Summarizing a United Nations Conference on Trade and Development report, the Third World Network notes the impacts the crisis could have around the world, especially on developing countries that are dependent on commodities for import or export:
Uncertainty and instability in international financial, currency and commodity markets, coupled with doubts about the direction of monetary policy in some major developed countries, are contributing to a gloomy outlook for the world economy and could present considerable risks for the developing world, the UN Conference on Trade and Development (UNCTAD) said Thursday.
… Commodity-dependent economies are exposed to considerable external shocks stemming from price booms and busts in international commodity markets.
Market liberalization and privatization in the commodity sector have not resulted in greater stability of international commodity prices. There is widespread dissatisfaction with the outcomes of unregulated financial and commodity markets, which fail to transmit reliable price signals for commodity producers. In recent years, the global economic policy environment seems to have become more favorable to fresh thinking about the need for multilateral actions against the negative impacts of large commodity price fluctuations on development and macroeconomic stability in the world economy.
— Kanaga Raja, Economic Outlook Gloomy, Risks to South, say UNCTAD, Third World Network, September 4, 2008
Asia and the financial crisis
Countries in Asia are increasingly worried about what is happening in the West. A number of nations urged the US to provide meaningful assurances and bailout packages for the US economy, as that would have a knock-on effect of reassuring foreign investors and helping ease concerns in other parts of the world.
Many believe Asia was sufficiently de-coupled from the Western financial systems, but this crisis has shown that this is not the case, at least not yet.
Many Asian countries have seen their stock markets suffer and currency values going on a downward trend. As many nations in the region are seeing rapid growth and wealth creation, there is enormous investment in Western countries, and therefore, a lot of exposure to problems, too.
In addition, there is increased foreign investment, mostly from the West in Asia. Asian products and services are also global, and a slowdown in wealthy countries means increased chances of a slowdown in Asia and the risk of job losses.
Asia has not had a subprime mortgage crisis like many nations in the West, but the increasingly inter-connected world means there are always knock-on effects.
Countries in Asia are increasingly worried about what is happening in the West. A number of nations urged the US to provide meaningful assurances and bailout packages for the US economy, as that would have a knock-on effect of reassuring foreign investors and helping ease concerns in other parts of the world.
Many believe Asia was sufficiently de-coupled from the Western financial systems, but this crisis has shown that this is not the case, at least not yet.
Many Asian countries have seen their stock markets suffer and currency values going on a downward trend. As many nations in the region are seeing rapid growth and wealth creation, there is enormous investment in Western countries, and therefore, a lot of exposure to problems, too.
In addition, there is increased foreign investment, mostly from the West in Asia. Asian products and services are also global, and a slowdown in wealthy countries means increased chances of a slowdown in Asia and the risk of job losses.Asia has not had a subprime mortgage crisis like many nations in the West, but the increasingly inter-connected world means there are always knock-on effects.
A crisis in context
While much mainstream media attention is on the details of the financial crisis, and some of its causes, it also needs to be put into context (though not diminishing its severity).
Almost daily, some half of humanity or more, suffer a daily financial crisis of poverty. In poorer countries, poverty is not always the fault of the individual alone, but a combination of personal, regional, national, and importantly international influences. There is little in the way of bail out for these people, many of whom are not to blame for their own predicament, unlike with the financial crisis.
The poorer countries do get foreign aid from richer nations, but it cannot be expected that current levels of aid (low as they actually are) can be maintained as donor nations themselves go through financial crisis. As such the Millennium Development Goals to address many concerns such as halving poverty and hunger around the world, will be affected.
While the media’s attention is on the global financial crisis (which predominantly affects the wealthy and middle classes), the effects of the global food crisis, which predominantly affects the poorer and working classes) seems to have fallen off the radar. The two are in fact inter-related issues, both have their causes rooted in the fundamental problems associated with a neoliberal, one-size-fits-all, economic agenda imposed on virtually the entire world.
A crisis that need not have happened
This problem could have been averted (in theory) as people had been pointing to these issues for d
ecades. Yet, of course, during periods of boom no-one (let alone the financial institutions and their supporting ideologues and politicians largely believed to be responsible for the bulk of the problems) would want to hear of caution and even thoughts of the kind of regulation that many are now advocating. To suggest anything would be anti-capitalism or socialism or some other label that could effectively shut up even the most prominent of economists raising concerns.
Of course, the irony that those same institutions would now themselves agree that those “anti-capitalist” regulations are required is of course barely noted. Such options now being considered are not anti-capitalist or whatever. It reveals how we are used to a black and white picture of our economy, not the grey-areas; that there are various forms of capitalism, the most extreme of which leads to the biggest bubbles and the biggest busts. Quoting Stiglitz again, he captures the sentiments of a number of people:
We had become accustomed to the hypocrisy. The banks reject any suggestion they should face regulation, rebuff any move towards anti-trust measures — yet when trouble strikes, all of a sudden they demand state intervention: they must be bailed out; they are too big, too important to be allowed to fail . . . America’s financial system failed in its two crucial responsibilities: managing risk and allocating capital. The industry as a whole has not been doing what it should be doing … and it must now face change in its regulatory structures. Regrettably, many of the worst elements of the US financial system … were exported to the rest of the world.
It was all done in the name of innovation, and any regulatory initiative was fought away with claims that it would suppress that innovation. They were innovating, all right, but not in ways that made the economy stronger. Some of America's best and brightest were devoting their talents to getting around standards and regulations designed to ensure the efficiency of the economy and the safety of the banking system. Unfortunately, they were far too successful, and we are all — homeowners, workers, investors, taxpayers — paying the price.
— Joseph Stiglitz, The fruit of hypocrisy; Dishonesty in the finance sector dragged us here, and Washington looks ill-equipped to guide us out, The Guardian, September 16, 2008
Rethinking economics?
During periods of boom, people do not want to hear of criticisms of the forms of economics they benefit from, especially when it brings immense wealth and power, regardless of whether it is
good for everyone or not. It may be that during periods of crisis such as now, the time comes to rethink economics in some way. Even mainstream media, usually quite supportive of the dominant neoliberal economic ideology entertains thoughts that economic policies and ideas need rethinking. Stephen Marglin, Rethinking Economics, May 21, 2007, © Big Picture TV
Harvard professor of economics, Stephen Marglin, for example, notes how throughout recent decades, the political spectrum and thinking on economics has narrowed, limiting the ideas and policy options available. Some have been writing for many years that while the current economic ideology is flawed, it only needs minor tweaking to correct it and make it work for everyone; a more compassionate capitalism, but capitalism nonetheless.
While much mainstream media attention is on the details of the financial crisis, and some of its causes, it also needs to be put into context (though not diminishing its severity).
Almost daily, some half of humanity or more, suffer a daily financial crisis of poverty. In poorer countries, poverty is not always the fault of the individual alone, but a combination of personal, regional, national, and importantly international influences. There is little in the way of bail out for these people, many of whom are not to blame for their own predicament, unlike with the financial crisis.
The poorer countries do get foreign aid from richer nations, but it cannot be expected that current levels of aid (low as they actually are) can be maintained as donor nations themselves go through financial crisis. As such the Millennium Development Goals to address many concerns such as halving poverty and hunger around the world, will be affected.
While the media’s attention is on the global financial crisis (which predominantly affects the wealthy and middle classes), the effects of the global food crisis, which predominantly affects the poorer and working classes) seems to have fallen off the radar. The two are in fact inter-related issues, both have their causes rooted in the fundamental problems associated with a neoliberal, one-size-fits-all, economic agenda imposed on virtually the entire world.
A crisis that need not have happened
This problem could have been averted (in theory) as people had been pointing to these issues for d
ecades. Yet, of course, during periods of boom no-one (let alone the financial institutions and their supporting ideologues and politicians largely believed to be responsible for the bulk of the problems) would want to hear of caution and even thoughts of the kind of regulation that many are now advocating. To suggest anything would be anti-capitalism or socialism or some other label that could effectively shut up even the most prominent of economists raising concerns.Of course, the irony that those same institutions would now themselves agree that those “anti-capitalist” regulations are required is of course barely noted. Such options now being considered are not anti-capitalist or whatever. It reveals how we are used to a black and white picture of our economy, not the grey-areas; that there are various forms of capitalism, the most extreme of which leads to the biggest bubbles and the biggest busts. Quoting Stiglitz again, he captures the sentiments of a number of people:
We had become accustomed to the hypocrisy. The banks reject any suggestion they should face regulation, rebuff any move towards anti-trust measures — yet when trouble strikes, all of a sudden they demand state intervention: they must be bailed out; they are too big, too important to be allowed to fail . . . America’s financial system failed in its two crucial responsibilities: managing risk and allocating capital. The industry as a whole has not been doing what it should be doing … and it must now face change in its regulatory structures. Regrettably, many of the worst elements of the US financial system … were exported to the rest of the world.
It was all done in the name of innovation, and any regulatory initiative was fought away with claims that it would suppress that innovation. They were innovating, all right, but not in ways that made the economy stronger. Some of America's best and brightest were devoting their talents to getting around standards and regulations designed to ensure the efficiency of the economy and the safety of the banking system. Unfortunately, they were far too successful, and we are all — homeowners, workers, investors, taxpayers — paying the price.
— Joseph Stiglitz, The fruit of hypocrisy; Dishonesty in the finance sector dragged us here, and Washington looks ill-equipped to guide us out, The Guardian, September 16, 2008
Rethinking economics?
During periods of boom, people do not want to hear of criticisms of the forms of economics they benefit from, especially when it brings immense wealth and power, regardless of whether it is
good for everyone or not. It may be that during periods of crisis such as now, the time comes to rethink economics in some way. Even mainstream media, usually quite supportive of the dominant neoliberal economic ideology entertains thoughts that economic policies and ideas need rethinking. Stephen Marglin, Rethinking Economics, May 21, 2007, © Big Picture TVHarvard professor of economics, Stephen Marglin, for example, notes how throughout recent decades, the political spectrum and thinking on economics has narrowed, limiting the ideas and policy options available. Some have been writing for many years that while the current economic ideology is flawed, it only needs minor tweaking to correct it and make it work for everyone; a more compassionate capitalism, but capitalism nonetheless.
Others argue that capitalism is so flawed it needs complete doing away with.
Others may yet argue that the bailouts by large government will distort the markets even more (encouraging bad practices by the big institutions) and rather than more regulation, an even freer form of capitalism is needed.
What seems clear is that at least for a while, debate will increase in the mainstream.
This will also attract ideologues of different shades, leading to both wider discussion but also more entrenched views. Those with power and money are less likely to agree to a radical change in economics where their power and influence are going to diminish, and will be able to lobby governments, produce compelling ads and do whatever it takes to maintain options that ensure they benefit. It is perhaps ironic to quote, at length, a warning from Adam Smith, given he is held up as the leading figure of the economic ideology they promote:
Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their good both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.
…
Merchants and master manufacturers are … the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration. As during their whole lives they are engaged in plans and projects, they have frequently more acuteness of understanding than the greater part of country gentlemen. As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business, than about that of the society, their judgment, even when given with the greatest candour (which it has not been upon every occasion) is much more to be depended upon with regard to the former of those two objects than with regard to the latter. Their superiority over the country gentleman is not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it. (Emphasis Added)
— Adam Smith, The Wealth of Nations, Book I, (Everyman’s Library, Sixth Printing, 1991), pp. 87-88, 231-232
What seems clear is that at least for a while, debate will increase in the mainstream.
This will also attract ideologues of different shades, leading to both wider discussion but also more entrenched views. Those with power and money are less likely to agree to a radical change in economics where their power and influence are going to diminish, and will be able to lobby governments, produce compelling ads and do whatever it takes to maintain options that ensure they benefit. It is perhaps ironic to quote, at length, a warning from Adam Smith, given he is held up as the leading figure of the economic ideology they promote:
Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their good both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.
…
Merchants and master manufacturers are … the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration. As during their whole lives they are engaged in plans and projects, they have frequently more acuteness of understanding than the greater part of country gentlemen. As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business, than about that of the society, their judgment, even when given with the greatest candour (which it has not been upon every occasion) is much more to be depended upon with regard to the former of those two objects than with regard to the latter. Their superiority over the country gentleman is not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it. (Emphasis Added)— Adam Smith, The Wealth of Nations, Book I, (Everyman’s Library, Sixth Printing, 1991), pp. 87-88, 231-232
With the mainstream media often representing such entrenched interests, true democratic participation will be very critical.
Sunday, October 05, 2008
The Problem with too much freedom for money
The problem with too much money and too much freedom for money amidst poverty. This year marks the 160th anniversary of The Communist Manifesto and capitalism--a k a "free enterprise"--seems willing 
to observe the occasion by dropping dead. On Monday night, some pundits were warning that the ATMs might run dry and hinting that the only safe investment left is canned beans. Apocalypse or extortion? No one seems to know, though the populist part of the populace has been leaning toward the latter. An e-mail whipping around the web this morning has the subject line "Sign on Wall Street yesterday," and shows a hand-lettered cardboard sign saying, "JUMP! You Fuckers!" . Share this article
The Communist Manifesto Turns 160
October 1, 2008
the_nation242:http://www.thenation.com/doc/20081013/ehrenreich
As Karl Marx's opus marks a big birthday, capitalism seems willing to mark the occasion by dropping dead. The Manifesto makes for quaint reading today. All that talk about "production," for example: Did they actually make things in those days? Did the proletariat really slave away in factories instead of call centers? But on one point Marx and Engels proved right: within capitalist societies, or at least the kind of wildly unregulated capitalism America has had, the rich got richer, the workers got poorer, and the erstwhile middle class has been sliding toward ruin. The last two outcomes are what Marx called "immiseration," which, in translation, is the process you're undergoing when you have cancer and no health insurance or a mortgage payment due and no paycheck coming in.
Marx predicted that capitalism would fall in a spirited, proactive, fashion: the workers, fed up with immiseration, would revolt, seize the "means of production" and insist on running the show themselves, that being the original, pre-Soviet, notion of socialism.
The revolution didn't happen, of course, at least not here. For the past several years, American workers have sweetly acquiesced to declining wages, rising prices, speed-ups at work, disappearing pensions and increasingly threadbare health insurance. While CEO pay escalated to the eight-figure range and above, so-called ordinary Americans took on second jobs and crowded into multi-generational households with uncomfortably long waits for the bathroom.
But all this immiseration--combined with fabulous enrichment at the top--did end up destabilizing the capitalist system, if only because , in the last few years, America's substitute for decent wages has been easy credit. Until about a year ago, we got almost daily messages, by telemarketer and by mail, urging us to consolidate our debts, refinance our homes, transfer our debts from credit card to another and try tasty new mortgages that didn't even require a down payment. All too often, we bit. It sounded so reasonable, for example, not to let our assets just "sit" in our houses but to start spending that money now.
At the other, Learjet, end of the economic spectrum, there was the problem of what to do with too much money. Yes, this can be a problem. Some of the super-rich have to hire consultants to help them spend their money: Where do you get a $20,000 bottle of wine or find a Picasso for the bathroom wall? More seriously, there was the problem of what to invest in. As Chuck Collins of the Working Group on Extreme Inequality has pointed out, huge concentrations of wealth can function like rogue waves, smashing around recklessly in their search for ever higher returns. A lot of these money waves flowed, directly or indirectly, into the dodgy credit schemes that were engulfing the un-rich majority, leaving even the fat cats imperiled by the toxic debts of the subprime class.
Marx's argument was that the coexistence of great wealth for the few and growing poverty for the many is not only morally objectionable, it's also inherently unstable. He may have been wrong about the reasons for the instability, but no one can any longer deny it's there. When the greed of the rich collided with the needs of the poor--for a home, for example--the result was a global credit meltdown.
Obviously, the way to address the crisis is to deal with the poverty and inequality that led to it: bail out people facing foreclosures, increase food stamp allotments, extend unemployment insurance and make a massive job-generating, public investment in infrastructure--and, since medical debts are the number-one cause of personal bankruptcy, enact universal health insurance immediately. But not even Obama, whose lawn sign I still proudly display, seems to have the stomach for such a "trickle upwards" approach. He has announced that he won't bother taking the bailout as an opportunity to change the bankruptcy law so that people facing foreclosure can renegotiate their mortgages.
So happy birthday, Communist Manifesto--although I'm hoping that capitalism survives this one, if only because there's no alternative ready at hand.
the_nation242:http://www.thenation.com/doc/20081013/ehrenreich
As Karl Marx's opus marks a big birthday, capitalism seems willing to mark the occasion by dropping dead. The Manifesto makes for quaint reading today. All that talk about "production," for example: Did they actually make things in those days? Did the proletariat really slave away in factories instead of call centers? But on one point Marx and Engels proved right: within capitalist societies, or at least the kind of wildly unregulated capitalism America has had, the rich got richer, the workers got poorer, and the erstwhile middle class has been sliding toward ruin. The last two outcomes are what Marx called "immiseration," which, in translation, is the process you're undergoing when you have cancer and no health insurance or a mortgage payment due and no paycheck coming in.Marx predicted that capitalism would fall in a spirited, proactive, fashion: the workers, fed up with immiseration, would revolt, seize the "means of production" and insist on running the show themselves, that being the original, pre-Soviet, notion of socialism.
The revolution didn't happen, of course, at least not here. For the past several years, American workers have sweetly acquiesced to declining wages, rising prices, speed-ups at work, disappearing pensions and increasingly threadbare health insurance. While CEO pay escalated to the eight-figure range and above, so-called ordinary Americans took on second jobs and crowded into multi-generational households with uncomfortably long waits for the bathroom.But all this immiseration--combined with fabulous enrichment at the top--did end up destabilizing the capitalist system, if only because , in the last few years, America's substitute for decent wages has been easy credit. Until about a year ago, we got almost daily messages, by telemarketer and by mail, urging us to consolidate our debts, refinance our homes, transfer our debts from credit card to another and try tasty new mortgages that didn't even require a down payment. All too often, we bit. It sounded so reasonable, for example, not to let our assets just "sit" in our houses but to start spending that money now.
At the other, Learjet, end of the economic spectrum, there was the problem of what to do with too much money. Yes, this can be a problem. Some of the super-rich have to hire consultants to help them spend their money: Where do you get a $20,000 bottle of wine or find a Picasso for the bathroom wall? More seriously, there was the problem of what to invest in. As Chuck Collins of the Working Group on Extreme Inequality has pointed out, huge concentrations of wealth can function like rogue waves, smashing around recklessly in their search for ever higher returns. A lot of these money waves flowed, directly or indirectly, into the dodgy credit schemes that were engulfing the un-rich majority, leaving even the fat cats imperiled by the toxic debts of the subprime class.
Marx's argument was that the coexistence of great wealth for the few and growing poverty for the many is not only morally objectionable, it's also inherently unstable. He may have been wrong about the reasons for the instability, but no one can any longer deny it's there. When the greed of the rich collided with the needs of the poor--for a home, for example--the result was a global credit meltdown.Obviously, the way to address the crisis is to deal with the poverty and inequality that led to it: bail out people facing foreclosures, increase food stamp allotments, extend unemployment insurance and make a massive job-generating, public investment in infrastructure--and, since medical debts are the number-one cause of personal bankruptcy, enact universal health insurance immediately. But not even Obama, whose lawn sign I still proudly display, seems to have the stomach for such a "trickle upwards" approach. He has announced that he won't bother taking the bailout as an opportunity to change the bankruptcy law so that people facing foreclosure can renegotiate their mortgages.
So happy birthday, Communist Manifesto--although I'm hoping that capitalism survives this one, if only because there's no alternative ready at hand.
At the very least, we should get some regulation and serious oversight out of any bailout deal, meaning that, yes, the economy will look a little less like "free enterprise." But one thing we should have learned in the last week, if not the last year, is that, when applied to enterprise, "freedom" can be just another word for someone else's pain.
Copyright © 2008 The Nation
Copyright © 2008 The Nation
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