Syrian “Intervention”: Making The World Safe For Banksters

Oldspeak: “D’oh! U.S. Secretary of State John Kerry may have royally screwed the pooch on the war plan by saying”that Bashar al-Assad, the Syrian president, could avoid strikes by agreeing to give up his chemical weapons. “He could turn over every single bit of his chemical weapons to the international community in the next week — turn it over, all of it, without delay and allow the full and total accounting,” . He inadvertently gave the Syrians an out! The Russians, eager to protect one of their last remaining client states in the middle east, jumped on the opportunity to avoid regime change, by making the Syrians agree to give up their chemical weapons ASAP and the Syrians have “welcomed it”. So now the warmongers have to pump their brakes and possibly halt the escalation of their proxy war with the Russians. One has to wonder why the Nobel Peace Prize winner has been soooo hot to go to war on flimsy intelligence and amidst reports that both sides are guilty of war crimes? All for bombing, with detailed, documented, technically compliant & publicly available reports of atrocities committed by Syrian rebels, including releases of chemical weapons?! Why is bombing Syria an option after an alleged, unconfirmed and still being investigated Syrian government chemical weapons release, but not after a confirmed report of rebel chemical weapons release, known of since APRIL!? Greg Palast and Ellen Hodges Brown may have uncovered the answer:

“Greg Palast posted evidence of a secret late-1990s plan devised by Wall Street and U.S. Treasury officials to open banking to the lucrative derivatives business. To pull this off required the relaxation of banking regulations not just in the US but globally. The vehicle to be used was the Financial Services Agreement of the World Trade Organization. The “end-game” would require not just coercing support among WTO members but taking down those countries refusing to join. Some key countries remained holdouts from the WTO, including Iraq, Libya, Iran and Syria. In these Islamic countries, banks are largely state-owned; and “usury” – charging rent for the “use” of money – is viewed as a sin, if not a crime. That puts them at odds with the Western model of rent extraction by private middlemen. Publicly-owned banks are also a threat to the mushrooming derivatives business, since governments with their own banks don’t need interest rate swaps, credit default swaps, or investment-grade ratings by private rating agencies in order to finance their operations….

Countries laboring under the yoke of an extractive private banking system are being forced into “structural adjustment” and austerity by their unrepayable debt. But some countries have managed to escape. In the Middle East, these are the targeted “rogue nations.” Their state-owned banks can issue the credit of the state on behalf of the state, leveraging public funds for public use without paying a massive tribute to private middlemen. Generous state funding allows them to provide generously for their people.

Like Libya and Iraq before they were embroiled in war, Syria provides free education at all levels and free medical care. It also provides subsidized housing for everyone (although some of this has been compromised by adoption of an IMF structural adjustment program in 2006 and the presence of about 2 million Iraqi and Palestinian refugees). Iran too provides nearly free higher education and primary health care.

Like Libya and Iraq before takedown, Syria and Iran have state-owned central banks that issue the national currency and are under government control. Whether these countries will succeed in maintaining their financial sovereignty in the face of enormous economic, political and military pressure remains to be seen.” –Ellen Hodges Brown

So no, this war is not about preventing the use of chemical weapons by the Syrian government. It’s about money. Specifically unregulated  and private gambling with other people’s money, then forcing them to pay when the gamble goes bad. It’s about aggressively continuing the relentless march of  Really Existing Capitalist Democracy around the world. Everything privatized. All under corprocratic control and surveillance. A globally controlled debt creation & extraction system, that no one can avoid paying tribute to; religion be damned. Oh, and securing Syria’s oil and routes for gas pipelines. -OSJ

By Ellen Hodges Brown @ Web Of Debt:

The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.

— Prof. Caroll Quigley, Georgetown University, Tragedy and Hope (1966)

Iraq and Libya have been taken out, and Iran has been heavily boycotted. Syria is now in the cross-hairs. Why? Here is one overlooked scenario. 

In an August 2013 article titled “Larry Summers and the Secret ‘End-game’ Memo,” Greg Palast posted evidence of a secret late-1990s plan devised by Wall Street and U.S. Treasury officials to open banking to the lucrative derivatives business. To pull this off required the relaxation of banking regulations not just in the US but globally. The vehicle to be used was the Financial Services Agreement of the World Trade Organization.

The “end-game” would require not just coercing support among WTO members but taking down those countries refusing to join. Some key countries remained holdouts from the WTO, including Iraq, Libya, Iran and Syria. In these Islamic countries, banks are largely state-owned; and “usury” – charging rent for the “use” of money – is viewed as a sin, if not a crime. That puts them at odds with the Western model of rent extraction by private middlemen. Publicly-owned banks are also a threat to the mushrooming derivatives business, since governments with their own banks don’t need interest rate swaps, credit default swaps, or investment-grade ratings by private rating agencies in order to finance their operations.

Bank deregulation proceeded according to plan, and the government-sanctioned and -nurtured derivatives business mushroomed into a $700-plus trillion pyramid scheme. Highly leveraged, completely unregulated, and dangerously unsustainable, it collapsed in 2008 when investment bank Lehman Brothers went bankrupt, taking a large segment of the global economy with it. The countries that managed to escape were those sustained by public banking models outside the international banking net.

These countries were not all Islamic. Forty percent of banks globally are publicly-owned. They are largely in the BRIC countries—Brazil, Russia, India and China—which house forty percent of the global population. They also escaped the 2008 credit crisis, but they at least made a show of conforming to Western banking rules. This was not true of the “rogue” Islamic nations, where usury was forbidden by Islamic teaching. To make the world safe for usury, these rogue states had to be silenced by other means. Having failed to succumb to economic coercion, they wound up in the crosshairs of the powerful US military.

Here is some data in support of that thesis.

The End-game Memo

In his August 22nd article, Greg Palast posted a screenshot of a 1997 memo from Timothy Geithner, then Assistant Secretary of International Affairs under Robert Rubin, to Larry Summers, then Deputy Secretary of the Treasury. Geithner referred in the memo to the “end-game of WTO financial services negotiations” and urged Summers to touch base with the CEOs of Goldman Sachs, Merrill Lynch, Bank of America, Citibank, and Chase Manhattan Bank, for whom private phone numbers were provided.

The game then in play was the deregulation of banks so that they could gamble in the lucrative new field of derivatives. To pull this off required, first, the repeal of Glass-Steagall, the 1933 Act that imposed a firewall between investment banking and depository banking in order to protect depositors’ funds from bank gambling. But the plan required more than just deregulating US banks. Banking controls had to be eliminated globally so that money would not flee to nations with safer banking laws. The “endgame” was to achieve this global deregulation through an obscure addendum to the international trade agreements policed by the World Trade Organization, called the Financial Services Agreement. Palast wrote:

Until the bankers began their play, the WTO agreements dealt simply with trade in goods–that is, my cars for your bananas.  The new rules ginned-up by Summers and the banks would force all nations to accept trade in “bads” – toxic assets like financial derivatives.

Until the bankers’ re-draft of the FSA, each nation controlled and chartered the banks within their own borders.  The new rules of the game would force every nation to open their markets to Citibank, JP Morgan and their derivatives “products.”

And all 156 nations in the WTO would have to smash down their own Glass-Steagall divisions between commercial savings banks and the investment banks that gamble with derivatives.

The job of turning the FSA into the bankers’ battering ram was given to Geithner, who was named Ambassador to the World Trade Organization.

WTO members were induced to sign the agreement by threatening their access to global markets if they refused; and they all did sign, except Brazil. Brazil was then threatened with an embargo; but its resistance paid off, since it alone among Western nations survived and thrived during the 2007-2009 crisis. As for the others:

The new FSA pulled the lid off the Pandora’s box of worldwide derivatives trade.  Among the notorious transactions legalized: Goldman Sachs (where Treasury Secretary Rubin had been Co-Chairman) worked a secret euro-derivatives swap with Greece which, ultimately, destroyed that nation.  Ecuador, its own banking sector de-regulated and demolished, exploded into riots.  Argentina had to sell off its oil companies (to the Spanish) and water systems (to Enron) while its teachers hunted for food in garbage cans.  Then, Bankers Gone Wild in the Eurozone dove head-first into derivatives pools without knowing how to swim–and the continent is now being sold off in tiny, cheap pieces to Germany.

The Holdouts

That was the fate of countries in the WTO, but Palast did not discuss those that were not in that organization at all, including Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran. These seven countries were named by U.S. General Wesley Clark (Ret.) in a 2007 “Democracy Now” interview as the new “rogue states” being targeted for take down after September 11, 2001. He said that about 10 days after 9-11, he was told by a general that the decision had been made to go to war with Iraq. Later, the same general said they planned to take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran.

What did these countries have in common? Besides being Islamic, they were not members either of the WTO or of the Bank for International Settlements (BIS). That left them outside the long regulatory arm of the central bankers’ central bank in Switzerland. Other countries later identified as “rogue states” that were also not members of the BIS included North Korea, Cuba, and Afghanistan.

The body regulating banks today is called the Financial Stability Board (FSB), and it is housed in the BIS in Switzerland. In 2009, the heads of the G20 nations agreed to be bound by rules imposed by the FSB, ostensibly to prevent another global banking crisis. Its regulations are not merely advisory but are binding, and they can make or break not just banks but whole nations. This was first demonstrated in 1989, when the Basel I Accord raised capital requirements a mere 2%, from 6% to 8%. The result was to force a drastic reduction in lending by major Japanese banks, which were then the world’s largest and most powerful creditors. They were undercapitalized, however, relative to other banks. The Japanese economy sank along with its banks and has yet to fully recover.

Among other game-changing regulations in play under the FSB are Basel III and the new bail-in rules. Basel III is slated to impose crippling capital requirements on public, cooperative and community banks, coercing their sale to large multinational banks.

The “bail-in” template was first tested in Cyprus and follows regulations imposed by the FSB in 2011. Too-big-to-fail banks are required to draft “living wills” setting forth how they will avoid insolvency in the absence of government bailouts. The FSB solution is to “bail in” creditors – including depositors – turning deposits into bank stock, effectively confiscating them.

The Public Bank Alternative

Countries laboring under the yoke of an extractive private banking system are being forced into “structural adjustment” and austerity by their unrepayable debt. But some countries have managed to escape. In the Middle East, these are the targeted “rogue nations.” Their state-owned banks can issue the credit of the state on behalf of the state, leveraging public funds for public use without paying a massive tribute to private middlemen. Generous state funding allows them to provide generously for their people.

Like Libya and Iraq before they were embroiled in war, Syria provides free education at all levels and free medical care. It also provides subsidized housing for everyone (although some of this has been compromised by adoption of an IMF structural adjustment program in 2006 and the presence of about 2 million Iraqi and Palestinian refugees). Iran too provides nearly free higher education and primary health care.

Like Libya and Iraq before takedown, Syria and Iran have state-owned central banks that issue the national currency and are under government control. Whether these countries will succeed in maintaining their financial sovereignty in the face of enormous economic, political and military pressure remains to be seen.

As for Larry Summers, after proceeding through the revolving door to head Citigroup, he became State Senator Barack Obama’s key campaign benefactor. He played a key role in the banking deregulation that brought on the current crisis, causing millions of US citizens to lose their jobs and their homes. Yet Summers is President Obama’s first choice to replace Ben Bernanke as Federal Reserve Chairman. Why? He has proven he can manipulate the system to make the world safe for Wall Street; and in an upside-down world in which bankers rule, that seems to be the name of the game.

Ellen Brown is an attorney in Los Angeles and the author of 11 books. In Web of Debt: The Shocking Truth about Our Money System and How We Can Break Free, she shows how a private banking cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Read other articles by Ellen, or visit Ellen’s website.

 

 

 

“As Nation-States Falter, Capitalism Shines”

Oldspeak: ” It’s not a question of enough, pal. It’s a Zero Sum game – somebody wins, somebody loses. Money itself isn’t lost or made, it’s simply transferred – from one perception to another. Like magic. This painting here? I bought it ten years ago for sixty thousand dollars. I could sell it today for six hundred. The illusion has become real, and the more real it becomes, the more desperately they want it. Capitalism at its finest.” –Gordon Gekko, in “Wall Street”

‘The point to be made is this: Capitalism’s prime beneficiaries now control every aspect of economic power from political office to the tax code as well as unhindered blatant avoidance of taxes. As it follows, individual citizens of the nation states are left holding the bag and nation states are going broke. How long can this continue? The answer is: As long as nation-states can manage to carry more, and more, and more, and more debt, but Greece has already demonstrated a day of reckoning lurks around the corner… unless the trend of transnational omnipotence, which is capitalism on steroids, is broken, it is probable that the legacy nation-states, like the U.S., will continue to limp along into an ever-deeper pit of indebtedness as social services are slowly disassembled. This trend is accentuated by continuing weak economic behavior within the nation-state, but paradoxically, and regardless, capitalism thrives and shines!” –Robert Hunziker

“The Supra-national control grid continues to take shape. Fear mongering and the illusions of  “safety” and “security” have brought us to this damnable point.  Increased structural violence. Decreased empathy. Societal atomization. Runaway inequality. Perpetual war. Hyper-consumption. Constant surveillance of electronic communications and activities. Privatization of the commons. Cutting of social and public services. Exploding debt. Increasingly militarized and brutalizing “law enforcement” for the smallest infractions among  proles, and little to none for the titanic crimes of those in the  inner party. Dumbed down education. Fewer rights for the proles. The planned bankruptcies and liquidations of nation-states are in progress. With the elites continued secret negotiations of “trade agreements” like the Trans-Pacific Partnership, rendering nation states powerless to hold corporations accountable when they repeatedly and flagrantly violate laws, standards and protections, while giving corporations the power to sue nation states for having their laws, standards and protections which cost them “lost profits”, it seems that the transnational corporate networks’ omnipotence is growing  every day. It is the nature of vampire capitalism. Drain the victim to within an inch of it’s life, but keep it alive enough to keep feeding on indefinitely. Extract indefinitely. “Externalities” be damned. Greed fueled capitalists don’t know the meaning of the word “enough”. “More” is their perpetual objective. There’s only one way that story ends on a diseased & dying planet with only so much blood to extract. Bad. How long will citizens hold the bag?”

By Robert Hunziker @ Dissident Voice:

The world has been ruled by nation-states throughout modern history, ever since kings and queens were put out to pasture, but nation-states may be on the brink of extinction, similar to monarchies over the past 50-200 years.

Nation-states are not meeting the basic needs and requirements of the people, and, in particular, the legacy nation-states are bleeding through the gills. They’re taking on historic levels of debt while prospectively cutting social services wherever possible. This is a prescription for failure. The main problem is a shortage of revenues for the treasury.

But, capitalism, embodied within transnational corporations, does not require upbeat nation-states to thrive. They’re doing beautifully regardless of the drag of some of the world’s biggest countries. Worldwide, several major stock markets have recently set new records; meanwhile, nation-states sustain abnormally high unemployment levels and badly deteriorating finances. The contrast between the two is breathtaking. For example, the Eurozone unemployment rate is now over 12%; meanwhile, the major European bourses have recorded new highs over the past month.

It’s all about power and money. As such, “capitalism,” which is a nickname for global corporate interests, has all of the power and the money. For example, Apple has enough cash on hand to eliminate Cyprus’s debt with plenty of change left over. And, just the five largest NASDAQ high tech listed companies have combined revenues equal to the 30th largest country (Venezuela) in the world. Moreover, corporate balance sheets make most of the world’s leading countries look like financial dolts.

In point of fact, society is witnessing one of the biggest socio-economic disruptions in history as capitalism, consisting of transnational entities, overwhelms, and cripples, the capabilities of nation-states to function.

The inchoate corporate state is a reality, and it knows no borders or allegiances beyond other corporate interests. This is transnationalism at work, and it is feverishly conquering the planet, pushing aside weakened nation-states, which are powerless in the face of rampant, unchecked capitalism.

Twenty years ago, Gus Tyler (1911-2011), the ubiquitous radio commentator and author, conjectured as follows: “The rise of transnational companies has undermined a nation’s ability to manage its private economy. How can national political institutions cope with a global economy that dissolves national boundaries?”¹

And, furthering his point, Tyler quoted Keynes, circa 1930: “The outstanding faults of the economic society in which we live is its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.”

It now appears both Keynes’ and Tyler’s forebodings were on the mark. Although, they would likely be surprised by how emphatically their words are ringing true as capitalism’s transnationalistic rise to power is unrivaled. In this pursuit of unrivaled power and influence, corporate interests unabashedly toss high-priced labor into the dustbin of nation-state unemployment rolls in favor or low wage/low regulatory jurisdictions even as these same transnational corporations shirk their responsibilities of paying a fair share of the obligations of the nation-states. And, they get away with it!

For example, Google’s UK subsidiary may have sales of over $3 billion in the UK, but they only pay the UK $6 million in corporate taxes, or 0.002%, somewhat similar to Amazon, Starbucks, and the list goes on. Major multinational corporations sell products in high tax counties but book the same sales in low tax countries.

According to Google’s Executive Chairman Eric Schmidt, “I don’t think companies should decide what tax policies should be. I think governments should… All of us are operating in a very, very longstanding tax regime that was set up for various reasons that don’t necessarily make sense to me or anyone else. But they are the way the global tax regime works.”²

In short, everybody else is doing it, so why not Google?

And, isn’t Mr. Schmidt really stretching the credibility quotient when he states tax policy doesn’t make sense to “me or anyone else.”

The “longstanding tax regime,” referenced by Mr. Schmidt, is all about who has power over the purse. More precisely, the “long-standing tax regime” is the result of supply-side economic theory and globalization embraced by politicians who are beholden to global corporate interests. Over the past 40 years, corporate interests lobbied and supported political operatives to pass the very regulations, and loopholes, criticized by Mr. Schmidt. As it goes, Mr. Schmidt’s statement is an example of the fox lambasting the fox in the henhouse.

Recently, Robert Reich, Chancellor’s Professor of Public Policy, University of California at Berkeley elegantly summarized the issue, as follows: “As global capital becomes ever more powerful, giant corporations are holding governments and citizens up for ransom – eliciting subsidies and tax breaks from countries concerned about their nation’s ‘competitiveness’ – while sheltering their profits in the lowest-tax jurisdictions they can find.”³

As it goes, “who pays how much” to the U.S. federal government tells a big story: According to the U.S. Budget Office, “Tax Receipts By Source As Percentages of GDP: 1934-2015,” since 1950 and up to, and including, 2010: Individual tax payer contributions to the U.S. Treasury as a percentage of the country’s Gross Domestic Product (“GDP”) have rocketed upwards by 60% while corporate tax payments as a percentage of GDP, over the same time frame, have plummeted by 70%.

All the same, if a corporate CEO is confronted with this fact, he/she will explain how the top corporate tax rate is 35%, the same as individuals, but they omit to say that average individual taxpayers cannot conveniently move assets offshore to avoid taxes altogether (although, as for the wealthy, Mitt Romney, who has numerous offshore accounts nestled in prototypical tax havens, proved otherwise, and everybody knows he only pays a tax rate of 15% on the portion of his income that he ‘declares’ for taxes), and individual taxpayers, compared to multinationals, cannot declare taxes in low tax jurisdictions outside of the country where their income originates. This is the domain for corporation interests, not individuals.

Additionally, corporate interests have discovered fascinating ploys whereby corporate officers are enriched at the expense of all individual taxpayers. Here’s how it works, as only one example of many other tax dodges: The companies pay top executives a hefty amount in “stock options,” for which the tax code allows corporations to deduct the appreciated value of the stock. This means corporations eliminate some taxes by enriching executives. This is a win-win for corporations and their officers, and it is a lose-lose for individual taxpayers and the U.S. Treasury.

Indeed, this tinkering with the tax code provides a skillful and surreptitious methodology for grossly rich corporate executives to make tons more money, and allegedly, the “trickle down theory” claims they will invest these funds to create more jobs. This supply-side theory has worked wonders these past several years… correct?

The point to be made is this: Capitalism’s prime beneficiaries now control every aspect of economic power from political office to the tax code as well as unhindered blatant avoidance of taxes. As it follows, individual citizens of the nation states are left holding the bag and nation states are going broke. How long can this continue? The answer is: As long as nation-states can manage to carry more, and more, and more, and more debt, but Greece has already demonstrated a day of reckoning lurks around the corner.

Is it possible that one of the big time legacy nation-states might be next?

Japan: Case Study of a failing Nation-State

Japan, the world’s third largest economy, is a dead ringer for economic free-fall, but nobody knows for sure when it will happen. Japan’s government debt/GDP is double Greece’s.

Japan’s debt level is approximately 25 times tax revenue. Japan’s tax revenues are 43 trillion Yen (¥) of which 10 trillion ¥ pays for annual interest on outstanding debt. And, this inordinate complexity is with interest rates below one percent (1%). Imagine what will happen to Japan’s interest expenses when rates go up!

Furthermore, the country’s tax revenues are 43 trillion ¥, but they spend 102 trillion ¥, more than double tax collections. It is no wonder the country has had 10 finance ministers over the past 5 years!

As a result, large Japanese corporations are acquiring or merging businesses outside of Japan, and in typical transnational fashion, they’re looking to get out while the getting is good.

One respected U.S. economic newsletter says of Japan’s economic situation: “It’s a bug in search of a windshield.”

Market economies historically implode when public debt levels exceed five-to-seven times tax revenues for an extended period of time. In Japan’s case, their debt level is more than one quadrillion ¥ or a ‘billion billion’ ¥, which represents twenty-five times revenues of 43 trillion ¥. Along these lines, the ‘bug’ analogy is more than fitting.

Transnationalism Reigns Supreme

In turn, some Japanese multinationals are exiting stage left in order not to get caught in Japan’s continual deflationary anti-bubble. “So far this year, Japanese firms have made more than $52.5 billion in global acquisitions, compared with $34.34 billion in all of 2010. Overall, Japanese companies are the second-largest acquirers in the world this year… according to Dealogic, a deal-tracking firm… It’s a trend that analysts expect to continue, and possible accelerate, as Japanese companies diversify their operations away from Japan’s stagnant economy….”⁴

Meanwhile, as a short-term preventative measure, and grasping for straws whilst in a quiescent panic mode, the government of Prime Minister Shinzo Abe has opened up the monetary spigots like Niagara Falls during the high season. This rapid devaluation of the yen, i.e., printing money like its going out of style, reminiscent of 1920s Germany, is jacking up Japan, Inc.’s worldwide competitiveness over the short term, as Japanese goods become cheaper versus the world because of intentional devaluation of the yen, but this damages economic interests with other countries, including the U.S., not to mention negative consequences for Japan down the line.

As an example, Toyota will book an extra 35 billion ¥, or 352 million USD, for every one Yen devaluation against the dollar. Regardless, Toyota announced plans to start building Lexus sedans in Kentucky as part of its plan to “become free of currency risk.” Hence, even though Toyota appreciates the short-term pop in earnings because of a rapidly depreciating yen, they continue to move operations offshore.

The Japan-Toyota scenario demonstrates the flexibility of transnationals. They can see a precipice on the horizon even though they do not know how imminently it will arrive. So, on a cautionary note, they move some operations to other countries. But, Japan cannot move the country’s governmental operations, infrastructure, schools, power plants, etc. Along these lines, as transnationals seek greener pastures overseas, Japan increasingly loses its tax base as its aging population over 60 grows to 30% versus a worldwide average of only 8% of the population over 60. To say this is a daunting problem is only too obvious.

At the end of the day, the country of Japan is left with an aging population and enormously high debts. Who’s going to care for the aging society? Not transnationals… they hire overseas workers where operations are relocated. Plus, they adroitly maneuver sales to where taxes are lowest. Thus, and increasingly, nation-states are left with the baggage, i.e., costs of infrastructure, unemployed, and medical expenses for the aging as well as depleting tax bases, meanwhile transnationals move on to new frontiers.

In this fashion, nation-states stagnate whilst multinational corporations thrive because of the flexibility to move wherever taxes and labor costs are most favorable. But, by definition, the legacy nation-states like Japan do not meet the criteria necessary for transnationals looking to move operations into their country because they provide too many costly social services and high wages!

The Trend for Nation-States

Over the past 40 years, with the onset of globalization in combination with transnational interests as dictated by the WTO, NAFTA, the World Bank, the IMF, the EU, the U.S. and other extra-international organizations long-standing policies and tax regimes have become embedded such that many of the policies required to maintain nation-states are flippantly at risk to the whims of transnationals. The complexity behind this favorable arrangement for tansnationals vis-à-vis nation-states is beyond the reach of average voting citizens and beyond the power of nation-states.

As it happens, unless the trend of transnational omnipotence, which is capitalism on steroids, is broken, it is probable that the legacy nation-states, like the U.S., will continue to limp along into an ever-deeper pit of indebtedness as social services are slowly disassembled. This trend is accentuated by continuing weak economic behavior within the nation-state, but paradoxically, and regardless, capitalism thrives and shines!

The upshot of this Gordian knot is destined to result in increasing enforcement via police state tactics while the crumbling apparatuses of nation-states threatens outbreaks of civil disobedience. Then, one has to wonder which frontier transnational elites will conquer next.

As follows, it may be in the best interests of the capital class to avoid this pitfall by calling for a return to an equitable distribution of taxes paid to the treasuries of the nation-states. Otherwise, they may run out of frontiers.

1. Gus Tyler, The Nation-State vs. the Global Economy, Challenge, March-April, 1993.
   
2. Cameron Hails Tax ‘Turning Point’ After Google Criticisms, BBC News, May 22, 2013.
   
3. robertreich.org, Global Capital and the Nation State, May 20, 2013.
   
4. Kathy Chu, Japanese Companies Look Outside for Expansion Opportunities, USA Today, Sept. 28, 2011. 

Robert Hunziker (MA in economic history at DePaul University, Chicago) is a former hedge fund manager and now a professional independent negotiator for worldwide commodity actual transactions and a freelance writer for progressive publications as well as business journals. He can be contacted at: rlhunziker@gmail.com. Read other articles by Robert.

The Struggle To Save Our Planet Heats Up

Oldspeak: “To get to the root of the issue, it becomes necessary to analyze the whole economic system of production and exchange of goods and services—that is, capitalism. Only by doing this can we hope to formulate an effective strategy to combat climate change and thereby recognize that ecological and social justice are inseparably connected to each other, via an organized, grassroots and global challenge to the capitalist social order…

One doesn’t need to be an anti-capitalist to take part in this struggle, but one does need to recognize that unless the pendulum of social power swings back toward the working people in the U.S. and around the world, and that limits and regulations are placed on the activities of corporate power, we have no hope of saving our world. This struggle is not really about technology or which renewable energy models should be deployed or whether this or that politician or this corporation or that CEO is more or less evil than the other. It’s not about things or people at all—it’s about relationships. It’s about democracy, which is itself about social power, and the relationships it presumes.

The power of the oceans, the power of scientific rationality, the power of the tides and hurricane-force winds are self-evidently not enough to persuade capitalists to act. The only force strong enough to do that is the organized force of the people. We must take the place of gravity to pull the pendulum of contending class forces—wrenched rightward by 30 years of neoliberalism—back toward our side.” –Chris Williams.

YES! The root of the issue is capitalism. We have to stop nibbling around the edges. We have to recognize that capitalism in its current globalized and unrestrained form is fundamentally at odds with Democracy, human and natural rights. We have to have an honest critical discussion about global capital and how it’s destroying our planet. We must reassert our sacred commitment, as our ancestors did for millennia, to be custodians of our earth mother, not her rapists. We must recognize that infinite growth is impossible on a finite planet. The global capitalist enterprise is collapsing and blowing up all around us, one need only look to texas and Bangladesh and the explosion in unemployment and poverty, the collapse of ecosystems, to see what’s happening.  We cannot keep dumping wasteful trillions into failing, obsolete, toxic, fossil and nuclear fuel based infrastructure that is destroying and poisoning our planet. We have to fundamentally rethink how we organize our civilization and economy. The systems we have are not working.

By Chris Williams @ Z Magazine:

Capitalism stands as a death sentinel over planetary life. Recent reports from institutions, such as the World Bank, detail how, as a result of human activity, we are on track for a 4° Celsius increase in average global temperatures. Should this come to pass, the Earth would be hotter than at any time in the last 30 million years; an absolutely devastating prognosis that will wipe out countless species as ecosystems destabilize and climate becomes a vortex of erratic, wild weather events.

Despite this Americans, suffered through an election campaign in which climate change literally wasn’t mentioned—at least until the final weeks, when a hurricane forced the presidential candidates to acknowledge it.

Even as the World Bank published its report—with the conclusion that avoiding a 4° temperature increase was “vital for the health and welfare of communities around the world”—bank officials were nevertheless still handing out loans to construct more than two dozen coal-fired power plants to the tune of $5 billion.

In direct contrast to politicians and the media, fully 80 percent of Americans believe that climate change will be a serious problem for the United States unless the government does something about it—with 57 percent saying the government should do a “great deal” or “quite a bit.”

Even for the 1 in 3 Americans who say they are wary of science and distrust scientists, 61 percent now agree that temperatures have risen over the last 100 years. Commenting on the new poll, Stanford University social psychologist and pollster Jon Crosskick wrote, “They don’t believe what the scientists say, they believe what the thermometers say…. Events are helping these people see what scientists thought they had been seeing all along.”

This background of overwhelming public concern helped situate the national demonstration in Washington, DC on February 17, against the building of the Keystone XL tar sands pipeline from Canada to Texas. If built, the pipeline will carry 800,000 barrels a day of highly-polluting tar sands oil, effectively dealing a death blow to hopes of preventing rampant climate change. The demonstration added significance as activists attempted to draw a line in the sand and pose the first big litmus test for the second term of Barack Obama.

Given that an overwhelming majority of Americans, and even most people hostile to climate science, are in favor of action, why is it that the overwhelming majority of politicians—who presumably are subject to the same weather as the rest of us—can’t seem to see the need? Why aren’t our elected representatives proposing serious measures to prevent it from getting worse?

How one answers this question is not one of semantics. Rather, it is of decisive importance because it determines how one should fight and with whom one should forge alliances. Unfortunately, it is a question that Bill McKibben, cofounder of 350.org and a key organizer of the February 17 demonstration, has struggled with, but not conclusively resolved. His confusion is evidenced by the title of an article he wrote in January: “Our Protest Must Short-Circuit the Fossil Fuel Interests Blocking Barack Obama”—implying that Obama would do something if he could.

The momentum generated from this demonstration may serve as the launching pad for a sustained campaign that begins to stitch together the myriad forces fighting locally around the country, transforming previously isolated or single-issue initiatives and groups into a broad united front for climate justice that draws in other forces, such as unions.

This was the position of Big Green groups like the Sierra Club. Even as it pledged for the first time to take part in civil disobedience, its executive director, Michael Brune, declared that the new strategy was part of “a larger plan to support the president in realizing his vision and make sure his ambition meets the scale of the challenge.”

The first thing Obama and his new Secretary of State John Kerry could do is say no to the construction of the Keystone XL pipeline. That would be inordinately easy, as Obama has the final say and doesn’t require Congress’ support to shut it down. After 53 senators from both parties signed a letter urging him to green-light the pipeline, Obama is running out of ways to further delay his decision.

In spite of the rhetoric of his inaugural address, the pivotal question remains: Is Barack Obama—or any Democratic leader, for that matter—really on our side? Is it just a question of persuading a reluctant friend, hamstrung by a right-wing, dysfunctional Congress and stymied by powerful corporate interests, to act by demonstrating outside his house to let him know we’re there for him? Or should we be surrounding his house, knowing full well that he won’t give in to our demands without a social movement that acts independently of his wishes and control.

To understand the reasons for Obama’s “lack of desire” to address climate change—a microcosm of the larger inability of global leaders and institutions to do likewise amid two decades of futile climate negotiations—it’s necessary to go beneath the surface appearance of things; to examine the structure and ideology of the system of capitalism.

Systemic Causes

When their financial system was threatened by the crisis that began in 2008, political leaders didn’t sit around for 20 years arguing that they had to wait until all the facts were in and attempting to reach consensus on a solution. No, in a heartbeat, they threw trillions of dollars at the banks.

But when a far larger crisis, one that threatens the basic stability of the planetary biosphere, unfurls as a result of the same policies of reckless growth, waste and warfare, they spend their time trashing scientists and ignoring the unraveling weather outside their windows. Therefore, to get to the root of the issue, it becomes necessary to analyze the whole economic system of production and exchange of goods and services—that is, capitalism. Only by doing this can we hope to formulate an effective strategy to combat climate change and thereby recognize that ecological and social justice are inseparably connected to each other, via an organized, grassroots and global challenge to the capitalist social order.

One doesn’t need to be an anti-capitalist to take part in this struggle, but one does need to recognize that unless the pendulum of social power swings back toward the working people in the U.S. and around the world, and that limits and regulations are placed on the activities of corporate power, we have no hope of saving our world. This struggle is not really about technology or which renewable energy models should be deployed or whether this or that politician or this corporation or that CEO is more or less evil than the other. It’s not about things or people at all—it’s about relationships. It’s about democracy, which is itself about social power, and the relationships it presumes.

The power of the oceans, the power of scientific rationality, the power of the tides and hurricane-force winds are self-evidently not enough to persuade capitalists to act. The only force strong enough to do that is the organized force of the people. We must take the place of gravity to pull the pendulum of contending class forces—wrenched rightward by 30 years of neoliberalism—back toward our side.

Ultimately, as a socialist, I would argue that we need to live in a world where there are no classes with diametrically opposed interests, in perpetual conflict over social and political power. Only in such a socially just and ecologically sustainable world will there be any long-term hope for humanity to live in peace with itself, other species, and the planet on which we depend. The stepping-stones of the revolutionary road are the acts of struggle needed to create it.

In contrast to his inaugural speech, Obama’s first press conference after re-election gave a more accurate insight into the priorities of his second term. Unlike four out of five Americans who want the government to do something to address climate change, Obama made it clear that this wouldn’t be a priority for his administration: “Understandably, I think the American people right now have been so focused and will continue to be focused on our economy and jobs and growth that, you know, if the message is somehow we’re going to ignore jobs and growth simply to address climate change, I don’t think anybody’s going to go for that. I won’t go for that.”

With two mentions of the need for “growth” in a single sentence, Obama faithfully echoed the declaration of the Earth Summit, Rio+20, held in June 2012, where the representatives of 190 countries, while dismally avoiding any commitment to new targets or limits on greenhouse gas emissions, did commit—16 times in all—to “sustained growth,” a phrase taken to be synonymous, rather than in fundamental conflict, with another term: “sustainability.”

The obligation to promote growth underlines why the root of the climate problem is systemic. If capitalism is not growing, it is in crisis. Growth must occur continuously and in all sectors. If the sector in question is highly profitable, it will grow even faster, regardless of any social considerations.

Like, for example, the fossil-fuel sector. Oil production, rather than declining, as is desperately needed to stop climate change, is predicted to increase from the current 93 million barrels per day to 110 million by 2020—with some of the biggest increases worldwide occurring in the U.S. The Holy Grail of all administrations since Richard Nixon —energy independence—is being made possible by the policies of the Obama administration, as the New York Times reported in a special feature: “National oil production, which declined steadily to 4.95 million barrels a day in 2008 from 9.6 million in 1970, has risen over the last four years to nearly 5.7 million barrels a day. The Energy Department projects that daily output could reach nearly 7 million barrels by 2020. Some experts think it could eventually hit 10 million barrels—which would put the United States in the same league as Saudi Arabia.”

As the climate blogger and former Clinton administration official Joseph Romm put it, Obama is “basically pushing a moderate Republican agenda. It’s just that there aren’t any moderate Republicans left, much as we don’t have any ‘below average temperature’ years any more.”

Again, if we examine the roots of the issue, we find that the pathetic response of an administration purporting to be concerned with environmental questions has much less to do with individual personnel than with the dynamics of capitalism.

In 1992, when George H.W. Bush flew to Rio for the first Earth Summit, all things seemed possible. The “evil empire”—as Ronald Reagan liked to call the tyrannical dictatorships of the USSR and Eastern Europe, which operated falsely in the name of socialism—had collapsed under the weight of its own economic, social, and ecological contradictions. Politicians in the West were euphoric. They had seen off what they perceived to be an existential threat to their system.

In today’s world of enforced austerity, it’s difficult to recapture the sense of optimism that pervaded Western ruling class circles in the early 1990s. The atmosphere of triumphalism was so great even Republican presidents like Bush could make promises about protecting the environment. A few years later, when the 1997 Kyoto Protocol was written, Western governments were still willing to pledge that they would do the heavy lifting with regard to reducing emissions, while developing countries would be free from such limits.

Hence, the seeming “lack of will” at Rio+20 last year can be much better explained by the onset of a huge structural crisis of capitalism, rather than the “lack of vision” of individual politicians.

Instead of optimism about acting on climate change, the real optimism these days among capitalists is about the profits they can make from the oil and gas bonanza. Oil giant and planet-wrecker par excellence BP is predicting that by 2030, the entire Western Hemisphere will be energy independent, due to the expansion of new techniques for oil and gas exploration, such as fracking in shale deposits and horizontal and deep-water drilling. Fossil fuels are expected to remain at 81 percent of the energy mix in an energy economy that will be 39 percent larger than today.

Naturally, oil executives such as Scott D. Sheffield, chief executive of Texas-based Pioneer Natural Resources—headquartered in an area of the world that received only two inches of rain for the whole of 2011 and spent most of the year with large parts of the state on fire—are nevertheless overjoyed: “To not be concerned with where our oil is going to come from is probably the biggest home run for the country in a hundred years… It sort of reminds me of the industrial revolution in coal, which allowed us to have some of the cheapest energy in the world and drove our economy in the late 1800s and 1900s.”

Depending on who you are, the outlook for natural gas is even rosier. The International Energy Agency recently released a report that asked in its title “Are We Entering a Golden Age of Gas?” The answer was a resounding “yes,” due to the North American shale gas boom and a “strong post-crisis recovery.”

The other side to this “golden age,” as the report makes clear, is that future economic expansion based on natural gas “alone will not put the world on a carbon emissions path consistent with an average global temperature rise of no more than 2° Celsius,” but on a “trajectory consistent with stabilizing the concentration of greenhouse gases in the atmosphere at around 650 parts per million CO2 equivalent, suggesting a long-term temperature rise of over 3.5°  Celsius.”

Insane Logic

In the insane capitalist “logic” of the 21st century, short-term profit-taking must be maximized at all costs. In a little-reported phenomenon, the energy companies have figured out that they can find oil in shale deposits previously considered marginal in the same way that they “frack” for natural gas. With the price of oil over $80 a barrel, it’s profitable to seek oil in this way, regardless of the environmental cost.

Hence, not only is there a natural gas boom in the U.S., but there’s also an enormous, though much less publicized, oil boom. In fact, the oil boom from previously untapped shale deposits is so large that its effects can be seen from space. The Bakken Field in North Dakota, all 15,000 square miles of it, is one of the largest contiguous oil fields in the world, with output doubling every 18 months. In Texas, production from the Eagle Field increased 30-fold between 2010 and 2012. The reason that the remote and sparsely populated Bakken Field rivals Chicago in light pollution, making it visible to orbiting satellites, is because the natural gas that comes up with the oil, rather than being collected and sold, is set on fire in a process called “flaring.” This senseless act of vandalism and waste is the result of the fact that companies are in a rush to make money from oil that they can’t be bothered to develop the infrastructure necessary to cope with associated natural gas.

As Stanford University academic Adam Brandt, who analyzes greenhouse gas emissions from fossil fuels, explains: “Companies are in a race with their competitors to develop the resource, which means there is little incentive to delay production to reduce flaring.” In Texas, the natural gas flared in 2012 could have provided electricity to 400,000 homes.

So while one set of capitalists is fracking for natural gas on the East Coast—thanks to political leaders like Governor Andrew Cuomo in New York, who appears to be ready to open up the state to fracking—in other parts of the country, a different set of capitalists is setting fire to the exact same gas because it’s a nuisance that slows down production of the different fossil fuel they’re after.

Nothing could exemplify the utter waste and anarchic insanity of capitalism than this fact. One of the government regulatory bodies supposedly in charge of overseeing the oil corporations, North Dakota’s Industrial Commission, gave their logic for refusing to take action against this senselessness: “If we restricted oil production to reduce flaring, we would reduce the cash flow from oil wells fivefold…. As well as cutting waste, we are mandated to increase production, which we would not be doing.”

As for the third and dirtiest arm of the triumvirate of fossil fuels, the world is predicted to be burning 1.2 billion tons more coal per year in 2017. Coal has actually declined in use in the U.S. due to companies switching electricity production to cheaper natural gas, which has reduced U.S. carbon emissions.

One might think this is a good thing. However, capitalism is a global system, so any coal not sold here finds a market overseas. The Chinese population is literally choking to death on grotesque amounts of air pollution in cities such as Beijing. And who’s to blame? The U.S. government says China is building too many coal plants, but increasing amounts of the coal in Asia is coming from mines in the U.S. According to a report in ClimateWire: “Although Chinese coal is largely sourced from domestic mines, EIA figures show that U.S. coal shipments to China have dramatically risen in recent years, punctuated by a 107 percent jump from 2011 to 2012. Chinese imports of U.S. coal surged from 4 million tons in 2011 to 8.3 million tons last year.”

This brings us to the international dimension—and the economic and military competition between countries that makes it impossible for effective international agreements on climate change and emissions reduction to be negotiated. If Barack Obama really wanted to do something about reducing energy consumption in America—and killing a lot fewer people around the world—he could start with a massive reduction in military spending. The U.S. military is the single biggest user of energy in the United States, with the Department of Defense responsible for 80 percent of government energy requirements. Just the cost of the war in Iraq would have paid, from now until 2030, for all the investment in renewable energies necessary to stay below 2° Celsius of warming.

These examples illustrate two things. First, we are in a do-or-die battle with the economic system because capitalism is in fundamental conflict with the biosphere. And second, only a committed alliance of social and ecological justice activists that is clear about the nature of the enemy and prepared to confront the political and economic architects of the crisis stands a hope of winning.

This is why fighting the XL pipeline is about much more than stopping a single pipeline or the first test of Obama’s second term. It’s about building a movement for social and ecological justice and making it clear that we are going to organize to prevent any more infrastructure being built that will drive us over the ecological cliff.

As energy analyst Chris Nelder has put it, we face a choice between keeping the old fossil-fuel based infrastructure that is burning up the planet, and adding to it at an annual cost of $1.6 trillion just to keep it running—or transitioning, at much lower economic, let alone environmental, cost, to a new energy paradigm. His figures and argument are worthy of a lengthy quote: “Instead of incremental spending on an effectively dead transportation regime, we should be thinking about one that can survive the challenges ahead, and deliver more economic benefits than costs. We should be setting an ambitious target, like replacing all commercial passenger air flights with high speed rail for trips under 1,000 miles, replacing 90 percent of our city street traffic with light rail, and moving all long-haul freight traffic to rail. Even if the cost of all that rail infrastructure were in the range of $3 trillion, it would be a fantastic investment.

“Against $6 trillion (minimum) in sunk costs and $1.6 trillion per year in maintenance, the $1.2 trillion per year, plus building the high speed rail network at a generous estimate of $1 trillion, looks very reasonable.

“Put another way: Would you rather spend another $32 trillion over the next 20 years just to maintain a outmoded, unscaleable, aged, unhealthy system, plus another $2.8 trillion in lost productivity due to delays and gridlock, only to wind up out of gas? Or would you rather spend $25 trillion to repair our infrastructure, transition transportation to rail, transition the power grid to renewables, upgrade the entire grid, and solve the carbon problem, to have free fuel forever.”

Of course, whether we travel that road or not—and whether we leave a world to our descendants as beautiful as the one we were born into—will depend on our own independent, organized self-activity to wrench control away from a ruling elite that is quite happy to continue making money from a system that must be overturned.

Chris Williams is an environmental activist, professor of physics and chemistry at Pace University, and the author of Ecology and Socialism.

Wall Street’s Climate Finance Bonanza

Oldspeak: “Washington is at it again, hijacking the debate about how to support the global transition to a low-carbon, climate-resilient economy — and keeping the public, the press, and even developing countries out of the conversation. They’re repeating the same tired story that rich governments are broke and thus have to call in the private sector to finance climate change solutions… In this corporate-oriented approach, countries would provide generous loan guarantees and export subsidies that sweeten investments for private firms and give them the chance to net big profits while leaving governments (and the taxpayers they represent) to cover the losses if investors’ bets don’t pay off. In today’s economy, mobilizing private finance means going to the capital markets to raise money. But relying on financial markets for funding to support renewable, clean energy or to resettle climate refugees would subordinate climate action to the speculative whims of bankers.” –By Janet Redman and Antonio Tricarico. That last sentence is the key point of this piece. The biosphere IS NOT subordinate to financial markets or the speculative whims of bankers. This all-encompassing life support system has existed and renewed itself for millennia. These artificially created and virulent systems are destroying our planetary life support system.  Bankers, financial markets and their speculative whims don’t matter on a dead planet.  Any “market-based” solution to climate change is doomed to failure, simply because “the market” regards the climate and the biosphere as mere externalities. You’d be wise to be wary of anyone touting market based solutions to climate change (“Cap and Trade”, “Clean Development Mechanisms”, “Reducing Emissions from Deforestation and Degradation“). There is only one market that matters. Our planet. Wall Street has demonstrated time and time again that it does not care about our planet. Why would we leave any plans to sustain it to wall street?!

 By Janet Redman and Antonio Tricarico @ The Huffington Post:

Government officials from an elite group of developed countries meeting in Washington, D.C. at the invitation of U.S. climate envoy Todd Stern appear to be on the brink of instigating yet another corporate handout and big bank giveaway — this time in the name of fighting climate change.

If it follows a recently leaked agenda, the meeting will focus on using capital markets to raise money for climate finance. The goal is to fill the void left by the United States and other developed nations that have failed to meet their legal obligations to deliver funding to poorer countries for climate programs.

In this corporate-oriented approach, countries would provide generous loan guarantees and export subsidies that sweeten investments for private firms and give them the chance to net big profits while leaving governments (and the taxpayers they represent) to cover the losses if investors’ bets don’t pay off. Wealthy countries would then be able to claim that they had moved billions of dollars of new climate investments.

Unfortunately, the projects best placed to benefit from large-scale private investment and market mechanisms — like mega-infrastructure projects and fossil fuel-powered ventures that hide behind a “low-carbon” label — are likely to be those that have fewest sustainable development benefits. In many cases, the funding will channel windfall profits to corporations that would have invested profitably even without these new channels of support.

The sad fact is that this has happened before. Nations spent five years negotiating the Kyoto Protocol — the only multilateral treaty to regulate emissions of greenhouse gasses and spell out binding targets for reducing climate pollution. But before the treaty was finalized in 1997, the United States led a push to replace the enforcement mechanism — a fine for missing reduction targets paid into a clean development fund — with a market mechanism meant to lower the cost of compliance for polluting companies. The accompanying clean development mechanism (CDM) was born so that companies in the industrialized world could purchase ultra-cheap carbon pollution credits from developing nations to offset their continued pollution at home.

In the end the United States pulled out of the Kyoto treaty. But by shifting a global regulatory regime into a market-based regime centered on enticing private-sector investment with promises of profitability, Washington left its mark.

A decade and half later, carbon markets have collapsed, developing countries are awash with carbon credits for which there is no demand, and the planet keeps getting warmer.

Meanwhile, the clean development mechanism has led to private sector investment in spurious projects like mega-hydropower dams and coal-fired power plants that have delivered little in the way of sustainable development outcomes — and in some cases have further harmed the environment and human health.

Passing the Buck

And now Washington is at it again, hijacking the debate about how to support the global transition to a low-carbon, climate-resilient economy — and keeping the public, the press, and even developing countries out of the conversation. They’re repeating the same tired story that rich governments are broke and thus have to call in the private sector to finance climate change solutions.

In today’s economy, mobilizing private finance means going to the capital markets to raise money. But relying on financial markets for funding to support renewable, clean energy or to resettle climate refugees would subordinate climate action to the speculative whims of bankers.

Americans have visceral reminders of the consequences of leaving decisions about critical needs to the market — the more than 1.6 million families locked out of their homes and the $2.5 trillion in taxpayer dollars handed over to bail out Wall Street and U.S. car companies are just two. Europeans can point to the recent bailout after the carbon bubble burst. If a global climate finance bubble were to burst, we wouldn’t just lose our houses; we might have lost our chance at averting catastrophic global warming.

Governments in the developed world shouldn’t pass the buck to the private sector. They must act now. They can start by cutting subsidies for fossil fuels, including for natural gas “fracking” in the United States, and set binding regulation for reducing climate change pollution. Then governments can adopt innovative ways to raise public money, like taxing pollution from shipping or financial transactions. Indeed, even a very low financial transactions tax would generate substantial revenue and deleverage capital markets.

And of course, if there is any hope of creating a new paradigm of climate-sound development, there will have to be a role for the private sector. But the micro, small, and medium enterprises of the developing world would be preferable partners to the multinational firms that have been responsible for sucking wealth and resources out of countries for decades, leaving pollution and poverty in their wake.

At some point — and for the sake of the future generations who will bear the results of our decisions, we hope it’s sooner rather than later — the government officials who place their bets on private finance will have to learn that putting corporate profits over the needs of climate-impacted people is a risk the rest of us are not willing to take.

Antonio Tricarico is director of the New Public Finance program of the Italian organization Re:Common based in Rome and a former economic correspondent at the Italian newspaper Il Manifesto.

Janet Redman is the co-director of the Sustainable Energy and Economy Network at the Institute for Policy Studies in Washington, DC.

Editorial support by Peter Certo and Oscar Reyes of the Institute for Policy Studies.

Billionaires For Austerity: With Cuts Looming, Wall Street Roots of “Fix the Debt” Campaign Exposed

Oldspeak: “The tried and true Problem Reaction Solution method is being used to attempt to manufacture consent for austerity measures favored only by the fabulously wealthy. The problem is the across the board government spending cuts soon to take effect and the major political parties inability to compromise to avoid them. The reaction courtesy of corporate controlled media broadcasting certain doom is a panicked populace, fearful of job losses, insecurity and instability in their daily lives. The solution is cutting spending on social programs, public services  and the military while preserving tax breaks for wealthy individuals and corporations that pay negative tax rates.  We are told that entitlements are the biggest drivers of our deficits (when in fact social security is solvent, and medicaid/aid has been shown to be less costly that privatized heath care) The reality is deficits are being driven by massive waste, fraud in government and the private sector, particularly banking  & the many trillions of  taxpayer dollars dollars being printed by Federal Reserve and shipped to banksters, foreign and domestic to keep up the illusion of a functioning financial system. The oligarchy that pay our government are controlling the range of “the sequester” debate.  It’s just as The Oracle Dr. Chomsky said : “The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow a very lively debate within that spectrum“.

Related Stories:

• “Sequestration Is Austerity, But Not Enough for Simpson and Bowles.” By John Nichols (The Nation)
• PetersonPyramid.org
• “To Beat Austerity, Obama Must Campaign for Democracy.” By John Nichols (The Nation)
• Center for Media and Democracy
• “Inside Job” Director Charles Ferguson: Wall Street Has Turned the U.S. into a “Predatory Nation”

By Amy Goodman @ Democracy Now:

AARON MATÉ: We begin with the Capitol Hill showdown over the $85 billion across-the-board budget cuts taking effect this Friday. The White House and analysts fear the so-called “sequester” could jeopardize hundreds of thousands of jobs. While Republicans and Democrats largely agree the cuts are ill-advised, they are far from reaching any sort of agreement. President Obama wants Republicans to end tax breaks, mostly for the wealthy; Republicans are insisting government spending be cut first. This is House Speaker John Boehner.

SPEAKER JOHN BOEHNER: The president says we have to have another tax increase in order to avoid the sequester. Well, Mr. President, you got your tax increase. It’s time to cut spending here in Washington. Instead of using our military men and women as campaign props, if the president was serious, he’d sit down with Harry Reid and begin to address our problems. The House has acted twice. We shouldn’t have to act a third time before the Senate begins to do their work.

AMY GOODMAN: Today President Obama plans to travel to a major military community in Newport News, Virginia, to highlight the impact of Pentagon cuts on a shipbuilding facility. On Monday, Obama urged a gathering of governors to push Congress into action to avert the looming sequester showdown.

PRESIDENT BARACK OBAMA: Now, these impacts will not all be felt on day one, but rest assured, the uncertainty is already having an effect. Companies are preparing layoff notices. Families are preparing to cut back on expenses. And the longer these cuts are in place, the bigger the impact will become. So, while you are in town, I hope that you speak with your congressional delegation and remind them, in no uncertain terms, exactly what is at stake and exactly who is at risk, because here’s the thing: These cuts do not have to happen. Congress can turn them off any time with just a little bit of compromise.

AMY GOODMAN: Well, joining us now are two guests who have uncovered how billionaire investors such as Pete Peterson have helped reshape the national debate on economy, the debt and social spending. Between 2007 and 2011, Peterson personally contributed nearly $500 million to his Peter G. Peterson Foundation to push for Congress to cut Social Security, Medicare and Medicaid, while providing tax breaks for corporations and the wealthy. Peterson served as secretary of commerce under Richard Nixon and went on to serve as chair and CEO of Lehman Brothers. He co-founded the private equity firm The Blackstone Group.

Joining us from Madison, Wisconsin, is John Nichols, The Nation magazine’s political correspondent. His latest piece is “The Austerity Agenda: An Electoral Loser.” It’s part of a major exposé based on a new website called “Pete Peterson Pyramid.” Lisa Graves of the Center for Media and Democracy is editor of the site, which links billionaires like Peterson to the Campaign to Fix the Debt.

We welcome you both to Democracy Now! John Nichols, why don’t you lay out who Pete Peterson is and how he fits into this picture of sequester that we look like we’re about to see by the end of the week?

JOHN NICHOLS: Sure. Pete Peterson is an old-school moderate Republican. He’s not some sort of hard-line conservative. He’s a very expensive suit, private jet, mineral water kind of guy. And he has been obsessed, for a number of years, with restructuring the U.S. economy, and particularly restructuring U.S. fiscal policy. This is an important thing to understand. Pete Peterson and the people around him do not want—or aren’t, I would suggest, particularly interested in fixing the debt or dealing with deficits. What they’re really interested in is taking advantage of a moment when the United States is looking at these issues to establish a very different approach to a host of issues. And at the core of this is changing the way that we look at retirement in this country, definitely undermining Social Security, Medicare and Medicaid, changing those earned benefit programs into something very different than what they’ve been and something far less reliable, but also making an awfully lot of other cuts in programs that serve the great mass of Americans, while at the same time continuing and even advancing the tax breaks for billionaires and corporations that have helped to make Pete Peterson a very, very wealthy man.

He sold this idea to around 125 other CEOs and very wealthy people. They’ve all chipped in a whole bunch of money, millions and millions, perhaps as much as $60 million for the current campaign, to this “Fix the Debt” group. And this Fix the Debt group is the primary proponent in the United States today of austerity. They want to, quote-unquote, “cut our way to progress,” as President Obama suggested, but in reality, it’s cutting the way toward progress for them and cutting the way toward a real hard hit for the average working American and potentially a slowing of the economy that begins with the sequester but does not end there.

AARON MATÉ: Well, let’s turn to Pete Peterson in his own words. This is from a video posted on the YouTube page of his foundation.

PETE PETERSON: We live in a society of special interests of various kinds. The organizations that are lobbying for expanding benefits and making the problems worse are unbelievably powerful. But who’s representing you? And why don’t you then get organized in young organizations? And I’ve had a dream. And my little dream is that one day there’d be 100,000 young people and their parents parading in Washington, saying, “I’m madder than hell, and I don’t intend to take it anymore.”

AARON MATÉ: That’s billionaire Pete Peterson talking about his dream of a revolt in favor of austerity. Lisa Graves, you’ve come up with the Peterson Pyramid.

LISA GRAVES: That’s right. We—our team at the Center for Media and Democracy has worked hard to expose the conflicts of interest by a number of the people who are leaders of the Fix the Debt operation. When Pete Peterson talks about the bevy of special interests in Washington, he’s one of them, and he has helped—he’s helped seed an organization that’s filled with special interests. And so, what we’ve done at PetersonPyramid.org is document that. So we talk about how Erskine Bowles, who’s famous for the Bowles-Simpson plan, which is the—another version of the austerity plan, how he’s on the board of Morgan Stanley and gets paid over $300,000 a year for a couple hours of work on that board, how he’s been paid over $600,000 on the board of Facebook, which recently had a huge tax giveaway. And so, that’s just one example that’s the tip of the iceberg, and we document it on our site because the people of the United States need to know that this is sort of a Pied Piper operation by Pete Peterson and his buddies to try to claim that the real crisis is the debt, when in fact the real crisis is our economy and the lack of focus on jobs. And as Dean Baker, the great economist, said, you can’t cut your way to prosperity. And, in fact, it’s like saying, when a house is on fire, stop putting so much water on the fire to put it out.

AMY GOODMAN: Tell us more about who Pete Peterson is, Lisa Graves. And also, have they responded? Has he or his organization responded to Peterson’s Pyramid, what you have just laid out?

LISA GRAVES: Well, I think Pete Peterson has an unhealthy obsession with Social Security—and, you know, as a man who’s never actually going to really need it. But most Americans in fact do need Social Security. One of the things you see with the Pete Peterson organizations that he has seeded or created over time is this obsession with Social Security. In fact, Social Security is solvent. It’s solvent for at least the next 20 years. It’s more solvent than you or I or probably anyone who’s watching this show. And yet they want to make sure that cuts to Social Security, changes to Social Security, the retirement age and the benefits, having those decrease over time as people age, is part of a so-called balanced deal or a package. That’s a terrible idea. And that’s part of the Pete Peterson legacy.

He’s also seeding these groups to have this sort of youth group element to it, which is really—it would be funny if it weren’t so worrisome, where they have put a lot of money into this notion that the youth of America are having this uprising, the dream that he said in that video, when in fact most American students are deeply concerned about the jobs in this country. And cutting our—cutting our government budget in the ways that Peterson and his buddies propose will make that job climate even worse for those students. Those students are far more concerned about their own personal debt and student loans than the debt that is supposedly being levied on them by Social Security, which does not actually contribute to the debt.

AMY GOODMAN: Has Peterson responded, Lisa, to Peterson’s Pyramid?

LISA GRAVES: Fix the Debt’s communications director has responded. He called our office to claim that their organization never claimed that they were trying to raise $60 million, he said. Their vice president of communications said that they were trying to raise any amount, not just $60 million. I pointed out we had it on their letterhead, in fact, that they were marking out a campaign worth $60 million to push these issues this year. He basically said that wasn’t true. We’ve got it on paper. You know, I said, you know, that’s why we don’t really quote the press secretaries, because they’re not obligated to tell the truth. We’ve got the documentary evidence.

And so, they pushed back a little, but, quite frankly, we have them—we have the goods on them. And that’s why this material is just streaming through the Internet, to show these conflicts of interest; to show the Democrats who are former members of Congress who have left and cashed out and work as lobbyists for some of these big firms; to show the Republicans that continue to do the bidding of some of the big firms that they’ve joined since leaving office; to show the conflicts of some of these huge firms that are part of Fix the Debt who have a negative tax rate—who have a negative tax rate—not 35 percent like you or me, not 20 percent, not 10 percent, not 5 percent, but a negative tax rate. And on top of that—

AMY GOODMAN: Like which ones?

LISA GRAVES: —we show how many of these firms are underfunding their pension programs.

AMY GOODMAN: Like which ones?

LISA GRAVES: Oh, sure. So we have documented how General Electric is one of those firms that has had a negative—a negative tax rate. A number of the firms that are part of the Fix the Debt operation have negative tax rates. We’ve got about a dozen of them that we document on the site, including, you know, major defense contractor General Electric. We have other firms that, we have documented, are underfunding their pension programs. And we also show how much they’re—how well they’re funding their CEO pensions, while underfunding their worker pensions, and pushing this operation of Fix the Debt, which is trying to underfund every other Americans retirement, basically, pension programs through Social Security.

AMY GOODMAN: Isn’t the head of GE President Obama’s job czar?

LISA GRAVES: Yes, that is in fact the case. And so, you know, we do think that this is a huge, important part of this exposé, is to show how this bipartisan—this bipartisan pitch from these guys, from these CEOs, and from Democrats and Republicans, is unfortunately not a grand bargain, but really a grand swindle.

AARON MATÉ: Well, Lisa, speaking of bipartisan, of course, we had the Simpson-Bowles Commission. In December, former Wyoming Senator Alan Simpson went on The Daily Show with Jon Stewart to discuss his budget proposal.

SEN. ALAN SIMPSON: Our corporate tax rate is the highest in the world. And so—

JON STEWART: But not actually.

SEN. ALAN SIMPSON: Well, 36 percent is where we’re at. What we did, we took away all of these tax expenditures, all of these deductions, all of this stuff. This is just earmarks by any other name, and it’s spending by any name, and it’s at one trillion one hundred billion bucks a year. And only 20 percent of the American people use 80 percent of the stuff in that tax code. Does that give you the wake-up call of who’s gimme-ing the system?

JON STEWART: Right.

SEN. ALAN SIMPSON: OK.

JON STEWART: But see, that brings up an interesting point.

SEN. ALAN SIMPSON: And so we got rid of all of that—

JON STEWART: Yeah, mm-hmm.

SEN. ALAN SIMPSON: —and we say now give the American people from zero to 70 grand, they pay 8 percent; from 70 grand to $210,000, they pay 14; anything over that, 23. Take the corporate rate to 26 from 36 and not tax them twice when they bring it back. And when they bring it back, the Democrats, as Erskine says, a Democrat, the Democrats will say, “Well, they’ll just use it for dividends and to buy stock.” And he said, “Well, hell, at least they’ll be using it in the United States of America instead of sticking it over there and leaving it.”

AARON MATÉ: That was former Senator Alan Simpson of the Simpson-Bowles Commission speaking on The Daily Show in December. John Nichols, if you could talk about Alan Simpson and the Simpson-Bowles Commission and how they fit into this Campaign to Fix the Debt.

JOHN NICHOLS: Sure. I think the best way for folks to understand the Simpson-Bowles Commission is that it is a classic example of how, if you have wealthy people behind you, you can fail miserably and still continue to be at the center of the debate. The Simpson-Bowles Commission was established by President Obama with the purpose of coming up with some debt and deficit solution ideas. I think it was a bad idea from the start, and I think it was an example of President Obama bowing to arguments of the austerity caucus, if you will, in Washington, which includes both Democrats and Republicans.

But they were put in charge of this. They came up with a plan. It was such an unpopular and unappealing plan that the commission itself did not recommend its report. Only Simpson and Bowles came out with their proposal. Then they tried to peddle it in Congress. They could only find 38 members of the House who would actually vote for their ideas. Then they went out into the November elections. They actually started endorsing candidates. The candidates that Simpson and Bowles endorsed, not only did they lose, but often you could tie the defeats of the candidates they endorsed to the fact that they were linked to Simpson and Bowles. So, if you want to see an example of two figures in American politics, career political types, who have been absolutely rejected by the American people, it’s Simpson and Bowles. And yet, interestingly enough, they’re back at the center of the debate, getting huge amounts of media coverage now. And one of the reasons for it is they’re tied to Fix the Debt.

When Fix the Debt was launched last summer, it wasn’t launched at a kitchen table of some working family or in an abandoned factory; it was launched in Sun Valley, Idaho, at a retreat for CEOs and billionaires. And Simpson and Bowles said, “We’re going to go out and launch a grassroots campaign to get the American people to force Congress to act on the ideas that we’ve put forward,” which are an American austerity agenda. And they said they were going to get 10 million signatures on petitions to do this. Amazingly enough, for this big grassroots campaign, all this millions and millions in spending, they still only got about 300,000 signatures. And most of those signatures appear to be tied to either bought lists or people who work for companies allied with the Fix the Debt operation. So the bottom line is, Simpson and Bowles are arguing for austerity and being held up by much of the media as legitimate players, when in fact they are advocating for zombie ideas, ideas that have been slain by the voters and, frankly, even by Congress, and yet they walk among us.

AMY GOODMAN: Let’s go to another clip, this one uploaded to YouTube by a new group called “The Can Kicks Back.” It features Alan Simpson addressing, quote, “the youth.”

SEN. ALAN SIMPSON: Stop Instagraming your breakfast and tweeting your first-world problems and getting on YouTube so you can see “Gangnam Style.” And start using those precious social media skills and go out and sign people up on this, baby. Three people a week. Let it grow. And don’t forget: Take part or get taken apart. Boy, these old coots will clean out the Treasury before you get there.

AMY GOODMAN: That was Alan Simpson of the Simpson-Bowles Commission. Lisa Graves, what is this Can Kicks Back group?

LISA GRAVES: Well, it’s interesting. Simpson has talked about the Can Kicks Back as if it was some sort of grassroots operation that emerged on college campuses nationwide. In fact, it operates out of the Fix the Debt offices in Washington, and it is another arm of their operation. Internally, in essence, they call it the “millennial” part of their operation. This is a well-funded, very slick, glossy campaign with T-shirts and videos, featuring people like Simpson and others, claiming that your grandparents are ruining your future. It’s quite an audacious set of claims by these guys, especially when Social Security actually isn’t contributing to the debt currently and could easily be fixed 20 years from now by cutting out the loophole for all—for Social Security taxes on income above $110,000. And so, it’s quite a scam. It’s a gimmick. It’s part of the gimmick of their campaign. And it’s something that I think people ought to be very wary of.

AARON MATÉ: And quickly, John Nichols, the cuts are supposed to take effect on Friday. Their potential effect on working people?

JOHN NICHOLS: Their potential effect on working people is severe. First off, there are the direct effects. You have an across-the-board austerity cut in federal programs, and that will have service impacts right away, things like flying, just traveling in this country. Also, there are very credible estimates that this will lead to at a base line of 700,000 job losses. And so we’re talking, over the coming months, if this sequester goes forward, of a significant slowing of the U.S. economy.

This is classic austerity: cuts at a time when the economy is weak, followed by job losses. And the tragedy of it, the really significant thing to be conscious of, is that Simpson and Bowles and Fix the Debt are waiting on the sidelines here to jump in and say, “Well, this is so disorderly. You know, we don’t want to have across-the-board cuts.” And what they are really arguing for is a systematized austerity, one where you have very, very wealthy people deciding what sort of fixes we will have for our economy. And at the end of the day, invariably, the fix will be to lower their tax rates while at the same time taking deep cuts out of the earned benefit programs that Americans desperately need.

AMY GOODMAN: We’re going to leave it there, but we’re going to continue to follow this, of course. John Nichols, political writer for The Nation; his latest piece for The Nation is “The Austerity Agenda: An Electoral Loser.” And thanks to Lisa Graves, executive director of the Center for Media and Democracy and editor of “Pete Peterson Pyramid,” a new website that connects the dots between billionaire Pete Peterson and the Campaign to Fix the Debt campaign. The website is PetersonPyramid.org.

 

 

 

 

 

There’s a Violent World War Going On, With Millions of Casualties – Oligarchs vs. Everyone Else

Oldspeak: “We have become, in the United States, and increasingly all over the world, a society with only two classes: Those who own, and those who owe.” –Thom Hartmann When one generally thinks of world wars, the most easily identifiable examples that come to mind are World War I, World War II, and “The Cold War”. These wars were characterized by physical violence perpetrated by various nations armies engaging in armed combat. The World War being currently waged is also characterized by physical violence perpetrated by nations armies in armed combat, via more numerous small wars and regional wars. But what’s different about this war, is nations are gradually seceding their sovereignty to the transnational corporate network via various “trade agreements”, treaties, privatization and “austerity” measures.  Also different, vitally important, less apparent, vastly increased & near completely globalized is structural violence.

“Johan Galtung originally framed the term “structural violence” to mean any constraint on human potential caused by economic and political structures (1969). Unequal accesses to resources, to political power, to education, to health care, or to legal standing, are forms of structural violence.  

It refers to a form of violence based on the systematic ways in which a given social structure or social institution “kills people” by preventing them from meeting their basic needs. Institutionalized elitism, ethnocentrism, classism, racism, sexism, adultism, nationalism, heterosexism and ageism are just some examples of structural violence. Life spans are reduced when people are socially dominated, politically oppressed, or economically exploited. Structural violence and direct violence are highly interdependent. Structural violence inevitably produces conflict and often direct violence, including family violence, racial violence, hate crimes, terrorism, genocide, and war.

Structural violence, however, is almost always invisible, embedded in ubiquitous social structures, normalized by stable institutions and regular experience. Structural violence occurs whenever people are disadvantaged by political, legal, economic, or cultural traditions. But structural violence produces suffering and death as often as direct violence does, though damage is slower, more subtle, more common, and more difficult to repair. Structural violence is problematic in and of itself, but it is also dangerous because frequently leads to direct violence. The chronically oppressed are often, for logical the world is easily traced to structured inequalities.

Galtung’s general definition of violence forms the foundation of his typology of violence. He identifies three ‘types’ of violence — direct, structural and cultural. These concepts clarify ‘violence’ by broadening its definition, and creating categories that help us to study violence more systematically and deeply. The basic distinction between direct and structural violence is that direct violence involves an identifiable actor causing intentional harm, while structural violence does not structural violence is an indirect and, arguably, unintentional violence. In reference to structural violence, Galtung states that ‘violence is built into structures and shows up as unequal power and consequently as unequal life chances’. Structural violence is both an accompanier to and underlying cause of direct violence.  Structural violence is found in most, if not all, structures in society — social, political and economic. It is not an accident, but rather the outcome of human action which generates these systems in the first instance.  Structural violence is present as exploitation, poverty, misery, denial of basic needs and marginalisation  all are types of inequality. In other words, inequality can be seen as structural violence.” –Dr.N.V.S.SURYANARAYANA

Structural violence is pervasive in all aspects our civilization at present. Oligarchy, Plutocracy, Polyarchy, Inverted Totalitarian Kleptocracy, all these systems around which we’ve organized our civilizations are built on structural violence. Global capitalism cannot exist without it. While wars of the past were called world wars, they were really only large regional conflicts. It’s sort of how Americans declare themselves “World Champions” in sports having only played teams in America. The whole world is not involved, just as the whole world was not at war. This current war, though it may not seem like it, is the only true World War. Casualties are global and cross untold species of life. The entire biosphere is under assault. Its weapons are far more devastating than bullets and bombs. Chemicals, Patents, Bribery, Corruption, Money, Laws, Knowledge Sequestration, Money, Politics, Influence peddling, Growth, Development are the weapons of choice in this war. With these weapons, the Transnational Corporate Network has extracted untold trillions from the earth and most of her inhabitants, destroying life, air, land and sea all along the way. Eradication of structural violence requires fundamental change in our civilizations.  Gandhi’s “Constructive Programme” would be a great template on which to build. Society civilization based on truth and non-violence. Cooperational governance  instead of corporate governance. Giving selflessly instead of gratuitous greed. Unity instead of competition. Actualization instead of illusion… What a wonderful world that would be. The change must begin within us.

By Thom Hartmann @ Alter Net:

History is littered with the corpses of those who thought they could conquer the world, or at least the “known” or “important” world, through force of arms.  Many come immediately to mind: Alexander the Great; Caesar; Hitler; the Celts, Ottomans, and Catholics; various European, Asian, and American empires from the 17th Century Dutch to the 18th Century French, to the 19th Century British and the 20th Century Soviets and Americans.  Others, like the Aztecs, are less well known to westerners, Europeans, and Asians, but no less ambitious.

All used some variation on war, the force of military power, to accomplish their goal. All won, over the short-term, and then collapsed over the long term (making the relatively safe assumption that the American Empire is in the process of collapse right now).

So, who’s next?

While the rising economies of the world, like the BRIC (Brazil, Russia, India, China) nations, all have the potential, particularly the Chinese, all also are pretty focused on regionalism.  But there is one group that has declared war on us – all of us, all over the world – and already won some significant victories.  And that’s the creditor class, what economist Henry George called the “rentiers,” and we generally today refer to as “the billionaires.”

The top story on the Sunday, January 6 2013 online edition of the Financial Times, [3] was headlined, “Banks win more flexible Basel rules” by Brooke Masters.  The lead paragraph noted that “International banks received a new year fillip” or gift, when the new regulations out of the Basel bank regulators meeting “announced that the first ever global liquidity standards would be less onerous than expected and not be fully enforced until 2019, four years later than expected.”  Perhaps the single most relevant sentence in the article started: “The results are largely good news for bank profits…”

We have become, in the United States, and increasingly all over the world, a society with only two classes: Those who own, and those who owe.

The owners (or “Takers”) own vast wealth, and loan it out at interest to everybody from students to governments.  They’re continually receiving that interest back in ways that are either tax-free or taxed at very low levels.  (Here in the US we call it “capital gains,” “Interest,” “dividends,” and “carried interest.”  While a working person will pay as much as 39% in federal income taxes, the federal income tax to the Mitt Romneys, Paris Hiltons, and Lloyd Blankfeins of the world is now capped at 20%.  As Leona Helmsley famously said, “Only little people pay taxes.”)

The owe-ers – the indebted – find themselves trapped on a lifelong treadmill paying interest and fees to the Takers.  The owe-ers are also mostly the workers, the people who make things (from manufactured goods to hamburgers), and so are rightly called the “Makers.”

For a brief period of American history, the rapaciousness and greed of the Takers  was kept in check by the Makers – mostly through the actions of their unions and elected officials like FDR, Truman, Eisenhower, Kennedy, Johnson, Nixon, Ford, and Carter.  Glass-Steagal prevented banksters from gambling with your savings account or pension.  The Sherman Anti-Trust Act and its heirs prevented the big fish from swallowing all the medium-sized and smaller fish, so cities and malls were filled with locally-owned businesses.  Social and economic mobility were higher in the United States than in most other countries of the world.

But with the election of Ronald Reagan, the Takers – whose favorite way of taking is through putting the Makers into debt – won a huge victory.  They killed or weakened democratic institutions, like unions and politicians not dependent on them.  They moved the Middle Class from prosperity into, first, credit card debt, then into second-mortgage debt, and finally into student loan debt.  And then, in the final Coup de grâce, they made the formerly democratic governments of Western Europe and the United States indebted to them.

They knew from the beginning it was war.  But a softer and more silent form of war than the world was used to.  Not since the ascendency of the British East India Company in the 1700s had the world seen an economic, rather than sovereign, force so dominate the world.

And now they’re in the final stages of their war.  Having taken most all the resources of the West’s Middle Classes and thrown them and their children into debt bondage, they’ve moved onto taking over entire nations.

This is what Republicans mean when they talk about “making government smaller” here in the United States, or “the austerity agenda” in Europe, Canada, and Australia.  It’s all the same thing – transfer even more wealth and political power from those in debt (be they individuals, cities, states, or nations) to those who made the loans.  From the middle-class Makers to the billionaire Takers.

And God forbid a politician should stand up to the Takers.  From Republicans refusing to raise taxes on billionaires, to international banking institutions leading the charge, via their captive governments, on “renegade” states [4] like Bolivia.

Longer work weeks in France.  Indexing the Inheritance Tax to inflation in the United States, but not the minimum wage.  Cutting Greeks off their national health-care system after a year of unemployment.  Slashing government support to schools, police, and health-care in Canada.  Banks committing crimes and getting slap-on-the-wrist fines.  Fossil Fuel corporations, the world’s most profitable, not only getting taxpayer subsidies but never, ever paying for the cancers, pollution, and global warming they cause.  The list goes on and on.

It’s war.  Rob, plunder, and pillage.  Take what little is left from those with a little, and give it all to those who have a lot.  Turn the Makers into slaves, while the Takers get an Inheritance Tax cut so their great-grandchildren can live the lives of the landed gentry.

When Ronald Reagan came into office, America was one of the most socially- and economically- mobile nations in the developed world.  Today it is among the least.

Democracy is being replaced by plutocracy.  Modern oligarchs are richer than the kings of old.  And, still not content, they’re amping up the war with a coming July 4th attempt to amend the US Constitution so the wealthy need never again fear tax increases.  It’s being led by the Goldwater Institute [5] with its “Compact For America.”

Look out.  We’re moving from trench warfare to aerial bombardment.  And when they’re done, Western Democracies will look far more like Italy in the 1930s…

“The Super Bowl Of Disasters”: Disaster Capitalists Profiting From Crisis In Post-Earthquake Haiti

US taxpayers are underwriting sweatshop expansion in Haiti. Here, textile workers protest for better rights and working conditions. Photo: Ansel Herz.

Oldspeak:”Many a corporation, lobbyist, and consultant has seen Haiti’s losses as their gain, leveraging humanitarianism for profit. Plenty of the $1.1 billion in disaster aid has gone not to desperate Haitians but to inside-the-Beltway contractors. Often the very same corporations have wrested financial and political gain from the wars in Iraq and Afghanistan, the countries hit by the 2004 tsunami in the Indian Ocean, the Gulf Coast after Hurricane Katrina, New Orleans after the ensuing flood of 2005, and lots of other places.” Disaster capitalism is being practiced all around the world. Review the 4 steps of the Disaster Capitalism and Cycle and consider the implications.  Haiti is at step 2.  The United States is at step 3.

The Disaster Capitalism Cycle

1. The shock of war, torture, disaster, or political upheaval distracts or deconstructs the popular identity, precluding or minimizing protest against free market reform and privatisation, which are usually unwanted by the masses.

2. First World interests, multinational capitalist firms, and a cooperative and corrupt elite benefit the most from these changes, while for the general population wages drop, the cost of living increases, and social services like welfare and healthcare decrease.

3. The privatisation of important sectors, from mining to healthcare to homeland security, takes away citizen power and control over policy making in these areas, as the government limits its own power through the free market legislation and de-regulation. It becomes difficult to undo these reforms.

4. A feedback loop of international scale emerges, the wealthy and powerful becoming more so. Certain sectors and private hands have an interest in maintaining instability, as they learn to profit more and more from war and disaster – as the cycle returns to step 1.

By Deepa Panchang, Beverly Bell and Tory Field, Other Worlds Are Possible:

As Americans were gearing up for last week’s Super Bowl championship, Haiti’s president Michel Martelly was on a plane to the World Economic Forum to recruit players interested in what one businessman dubbed “the Super Bowl of Disasters” – Haiti’s devastating 2010 earthquake.[1] The Irish-owned cell phone company Digicel footed his trip there, and hosted a regional business tour complete with a gala ball before his return to a country still reeling from crisis conditions in housing, jobs, and basic rights.[2]

Haiti’s status as prime-time jostling space for prospective investors is not new. Many a corporation, lobbyist, and consultant has seen Haiti’s losses as their gain, leveraging humanitarianism for profit. Plenty of the $1.1 billion in disaster aid has gone not to desperate Haitians but to inside-the-Beltway contractors. Often the very same corporations have wrested financial and political gain from the wars in Iraq and Afghanistan, the countries hit by the 2004 tsunami in the Indian Ocean, the Gulf Coast after Hurricane Katrina, New Orleans after the ensuing flood of 2005, and lots of other places. The same deals have been cut over Haiti in the past, too, particularly during periods of political instability.

The earthquake has provided a fresh wave of opportunity. In the first year after the earthquake, the US government awarded more than 1,500 contracts worth $267 million. All went to US firms except 20, worth $4.3 million, which went to Haitian businesses.[3] Among the American corporations that received contracts, we’ve seen everything: many millions going to companies that had had previous contracts cancelled for bad practices, that had paid out as much as eight-figure settlements for violence happening under their watch, that had been investigated by Congress for gaming the system, or that had been the subject of federal reports accusing wastage of funds.[4] We’ve seen corporate executives and members of Congress going through a revolving door and leveraging both sides for contracts. We’ve seen public funds given without any competition or transparency, quite a few to friends of the Clintons and other well-placed insiders.

Local labor and production, which are critical elements in economic recovery, have been trumped for American business profits. According to federal procurement data, among contracts which provide products (as opposed to services), 77% were for products manufactured in the US. They don’t list which, if any, of the remaining 23% involve any Haitian materials or labor.[5]

Two months after the earthquake, companies gathered in a luxury hotel in Miami for a “Haiti Summit” to discuss post-earthquake contracting possibilities. The meeting was sponsored by the International Peace Operations Association (IPOA), but these were no peaceniks. Their members are predominantly private mercenary companies that enforce ‘security’ in war and disaster zones for the US government because, unlike elected entities, they can completely avoid public scrutiny and accountability. They included such companies as Triple Canopy, which took over Blackwater’s contract in Iraq.[6] One of the corporate representatives at the Summit described the outlook: “Their infrastructure is pretty much destroyed, communications are destroyed, there’s a lot of opportunities there for companies, particularly US countries [sic] because of the close proximity.”[7] The Summit was apparently worthwhile, as US government paid out more than $10 million to the industry for “guard services,” and almost $20,000 for riot shields and suits.[8]

Below are a few examples of post-earthquake contracts and grants, selected to show just some of the problems at play. They offer a small glimpse into a much larger, secretive world of disaster deals. We’re grateful to our investigative journalist colleagues who, alongside us, have kept heavy on the scent of these corporations and brought buried information to light.

^^^^^^

“American corporations and their stakeholders must understand how helping Haiti over the long term also helps them,” said the non-profit CHF International in its March 2010 board report. “By contributing to Haiti’s reconstruction in a lasting, meaningful way, companies will be helping to build a new, more vibrant Caribbean market for their own goods and services.”[9]

CHF’s involvement demonstrates how even non-profits can drive development that props up American business interests on the backs of poor Haitians. What CHF refers to as “helping Haiti” has meant using US tax dollars to underwrite textile sweatshops, making it easier and more profitable to score the cheapest source of labor in the hemisphere. In 2006, USAID gave CHF a $104 million, 4-year contract to help “existing industries to increase their capacity, efficiency and reach new markets,” primarily through the export textile industry. The money subsidized CHF’s creation of infrastructure such as roads around industrial areas and training of factory workers on skills such as “how to work in a formal work environment.”[10] Bolstered by additional USAID funding, this project continued after the earthquake.

CHF’s post-earthquake USAID contract, for $20.9 million, went to clean-up projects, including cash-for-work.[11] Cash-for-work meant camp residents engaging in hired-hand projects such as digging drainage ditches and clearing debris, for a period of a few weeks. The scheme has come under fire by camp residents and human rights groups, with even a USAID evaluation raising some serious critiques.[12] The jobs are unpredictable, workers have said, and while the short duration can palliate personal crisis for the moment, the program quickly returns the worker’s family to its desperate state. Those hired are paid officially at the unlivable minimum daily wage of 200 gourdes, or US$5, though unofficially they often earn less. A Haiti Grassroots Watch exposé found, furthermore, that cash-for-work hiring is often based on corruption, with many workers having to pay a ‘kickback,’ negotiate sex (in the case of women) for a job, or affiliate with political parties or candidates.[13] USAID also noted that cash-for-work programs it funded increased risks of “serious and avoidable” accidents on the job “by failing to develop and enforce consistent workplace safety rules and accident procedures.”[14]

CHF’s projects, based on factory jobs and cash-for-work, have given neither livable incomes to employees nor offered development opportunities to the nation. Meanwhile, CHF has gained humanitarian clout and an influx of funding, and its garment industry partners sit happily with the perks.

^^^^^^

Using tried-and-true strategies of political manipulation, some corporations have been able to edge their way into post-earthquake contracts despite histories of fraud and corruption.

AshBritt Environmental, for instance, has a record of disaster response elsewhere that spells trouble for Haiti. The company had received $900 million in contracts for Hurricane Katrina clean-up, after hiring lobbyists formerly involved in state government.[15] An MSNBC investigation later brought to light complaints by local contractors, a mayor, and local legislators that the company’s work was too slow, that it overcharged, and that it was not hiring local contractors.[16] The extent of “layer cake” contracting was so extreme that in one case, AshBritt was paid $23 per cubic yard of debris removed but subcontracted through three middleman companies so that the company that actually removed the rubble received $3 per cubic yard.[17]) Even a 2006 federal report accused the company of wasting money in this subcontractor layering after Katrina.[18]

Given its experience, AshBritt wasted no time unleashing its skills in lobbying and political pressure to get in on the Haiti game. Early in 2010, the company paid $90,000 to a lobbying firm to pressure the government for Haiti contracts, according to disclosure records described in the press.[19] In a prime instance of revolving door between public and private sectors, one of the lobbyists working on the case was the former chief of staff for Senator John Kerry.[20] Kerry, in turn, was the senator who co-sponsored the legislation for Haiti relief funding.

With influential people circulating between the givers and receivers of funds, AshBritt was confident enough about future contracts that it spent an initial $25 million setting up for anticipated operations in Haiti with a soccer field-sized base camp and services to house future project managers.[21] In July 2010, AshBritt won a $500,000 US government contract for debris removal, the first of what the company anticipated would be many contracts to come their way.[22] Continuing the revolving door trend, another lobbyist for the firm was the former USAID Mission Director in Iraq, Lewis Lucke, who was paid $30,000 per month to help win contracts via a partnership venture AshBritt set up.[23] Lucke claimed he “played an integral role” in obtaining three contracts for the company, including $10 million from the World Bank and about $10 million more from the Haitian government (one of the first major government contracts for debris removal).[24] As of this writing, not even the company’s website contains an update on what work it has or has not completed in Haiti.

^^^^^^

Like AshBritt, CH2M Hill, a large engineering and construction firm, should have raised warning signals as a company to be hired on the taxpayer dollar. A government database that monitors federal contracts reveals a track record of corruption, listing nine instances of misconduct for the company since 1995.[25] In one case, the company was paid $4.1 million for a contract in Iraq though no work was actually completed. [26] On the Gulf Coast, a US government investigation of $45 million paid to CH2M and the three other companies in no-bid contracts for Katrina response was declared wasteful spending. [27] CH2M was also accused in a congressional investigation in 1992 of misusing money during its cleanup of toxic waste sites in the U.S. More than two million dollars of this contract were allegedly used for “unallowable and questionable costs,” such as $11,379 for a Christmas party and $2750 for specialty chocolates.[28] The company is listed in the top 50 of U.S.-based contractors and has been a major player in wartime contracting in Iraq and Afghanistan.[29]

The track record was nothing that some strategic lobbying efforts couldn’t mitigate, however. The lobbyist who headed up CH2M Hill’s efforts to win contracts in Haiti was Larry LaRocco, a former congressman from Idaho who now runs his own lobbying firm.[30] And unsurprisingly, the company spent half a million dollars in political contributions in 2010. [31] Thus equipped with politicians in its pocket, CH2M was well-positioned to compete in the latest contract game. It received its first post-earthquake contract just days after the disaster, and was given a joint contract with KBR Global Service (itself notorious due to its Iraq and Afghanistan activities) for facilities operations support at the end of 2010.[32]

^^^^^^

In the case of a few other contracts that we know to be operating in Haiti, we’ve spent hour after hour on the scent. We’ve scoured internet resources, news articles, and company websites to track companies we know received post-earthquake contracts in Haiti. Nothing. Not even a mention, sometimes, in the 100-plus-page 2010 annual reports.

What we have been unable to uncover is at least as alarming as what we have learned about some of the firms receiving millions from the US government, and what they have done with those millions. We wonder whether the US government has had any more knowledge or oversight of the corporate actions than have the corporation’s investors. As for the American people, they have no way to know how their money has been spent or what has been done in their names. The lack of transparency has also given a green light to profiteers to neglect standards, quality, and honesty.

There is one group for whom the secrecy, foul play, taking of power that should never be taken, giving away of what should never be given away, matters most of all: Haitians, the ones whose country is being treated like a Monopoly game. They alone will have to live with the long-term outcome of what foreign companies build, demolish, restructure, or steal in their country.

Copyleft Other Worlds. You may reprint this article in whole or in part.  Please credit any text or original research you use to Deepa Panchang, Beverly Bell, and Tory Field, Other Worlds.

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[1] Mike Clary, “Broward Rivals Battle for Work in Post-Quake Haiti,” Sun-Sentinel.com, July 14, 2010.
[2] Paul Cullen, “Attracting trade now focus for Haiti’s president,” The Irish Times, http://www.irishtimes.com/newspaper/world/2012/0130/1224310943929.html
[3] Alex Dupuy, “One Year after the Earthquake, Foreign Help is Actually Hurting Haiti,” Washington Post, January 7, 2011.
[4] Emma Perez-Trevino, “Beating Death Lawsuit Ends in Settlement,” The Brownsville Herald online, January 7, 2010, http://www.brownsvilleherald.com/articles/rosa-107144-settlement-beating…. Martha Brannigan and Jacqueline Charles, “U.S. Firms Want Part in Haiti Cleanup,” Miami Herald, February 9, 2010.
[5] “Haiti Earthquake Report,” Federal Procurement Data System, data updated as of 9/15/2011, https://www.fpds.gov/downloads/top_requests/Haiti_Earthquake_Report.xls.
[6] See, for example, Jeremy Scahill, Blackwater: The Rise of the World’s Most Powerful Mercenary Army (New York: Nation Books, 2007); Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism (New York: Picador, 2007); Jeremy Scahill, “US Mercenaries Set Sights on Haiti,” TheNation.com, February 1, 2010; and Anthony Fenton, “Private Contractors ‘Like Vultures Coming to Grab the Loot,” IPSNews.net, February 19, 2010.
[7] “Al Jazeera Reports on the Haiti ‘Summit’ for Private Contractors,” YouTube video, 3:32, Al Jazeera reporting, posted by “WebofDem,” May 6, 2010, http://youtu.be/kkNCdy0GXyc.
[8] “Haiti Earthquake Report,” Federal Procurement Data System, data updated as of 9/15/2011, https://www.fpds.gov/downloads/top_requests/Haiti_Earthquake_Report.xls.
[9] Jane Madden, “Corporations Must Consider Haiti’s Long Term Needs,” Philanthropy News Digest online, March 10, 2010, http://foundationcenter.org/pnd/commentary/co_item.jhtml?id=287300002.
[10] “New USAID-Funded Haiti Apparel Center to Provide Training to Thousands of Haitians in the Garment Industry,” press release by USAID, August 11, 2010, http://www.usaid.gov/press/releases/2010/pr100811_1.html.
[11] USAID, Haiti Earthquake: Fact Sheet #48, April 2, 2010,
http://www.usaid.gov/our_work/humanitarian_assistance/disaster_assistance/countries/haiti/template/fs_sr/fy2010/haiti_eq_fs48_04-02-2010.pdf.
[12]Center for Economic and Policy Research, “USAID/OTI’s Politicized, Problematic, Cash-for-Work Programs,” December 21, 2010, http://www.cepr.net/index.php/blogs/cepr-blog/usaidotis-politicized-problematic-cash-for-work-programs; Antèn Ouvriye, Submission to the United Nations Universal Periodic Review: Labor Rights (Transnational Legal Clinic, University of Pennsylvania Law School, 2011), http://ijdh.org/archives/17948; and Office of Inspector General, Audit of USAID’s Cash-for-Work Activities in Haiti (San Salvador: September 24, 2010), http://www.usaid.gov/oig/public/fy10rpts/1-521-10-009-p.pdf.
[13] Haiti Grassroots Watch, “Is Cash-for-work Working?”, http://www.ayitikaleje.org/Dossier2Story2. Haiti Grassroots Watch, “Cash for Work – At What Cost,” http://www.ayitikaleje.org/haiti-grassroots-watch-engli/2011/7/18/cash-for-work-at-what-cost.html.
[14] Office of Inspector General, Audit of USAID’s Cash-for-Work Activities in Haiti, September 24, 2010, http://www.usaid.gov/oig/public/fy10rpts/1-521-10-009-p.pdf.
[15] Jordon Flaherty, “One year after Haiti earthquake, corporations profit while people suffer,” Monthly Review Magazine, January 12, 2010. “It’s who you know,” CorpWatch, August 16th, 2006, http://www.corpwatch.org/article.php?id=14008
[16] Mike Brunker, “Dust flies over Katrina’s debris,” MSNBC, January 29, 20006, http://risingfromruin.msnbc.com/2006/01/fighting_over_t.html
[17] Rita King, “Layers and Layers,” CorpWatch, August 16, 2006, http://www.corpwatch.org/article.php?id=14011.
[18] Martha Brannigan and Jacqueline Charles, “U.S. Firms Want Part in Haiti Cleanup,” Miami Herald, February 9, 2010.
[19] Kevin Bogardus, “Haiti’s recovery aided by U.S. lobbyists,” The Hill, October 11, 2010.
[20] Ibid.
[21] Ben Fox, “Masters of disaster: Foreign firms set up shop in Haiti and wait for construction boom,” Associated Press, June 7, 2010.
[22] Mike Clary, “Broward rivals battle for work in post-quake Haiti,” Sun Sentinel, July 14, 2010, http://articles.sun-sentinel.com/2010-07-14/news/fl-haiti-recovery-rivals-20100714_1_ashbritt-post-earthquake-haiti-debris.
[23] Ben Fox, “Ex-US official sues contractor in Haiti for fees,” Associated Press, December 31, 2010.
[24] Mark Weisbrot, “Haiti and the international aid scam,” The Guardian, April 22, 2011, http://www.guardian.co.uk/commentisfree/cifamerica/2011/apr/22/haiti-aid.
[25] Project on Government Oversight, http://www.contractormisconduct.org/
[26] Matt Kelley, “Canceled Iraq contracts cost U.S. $600 million,” USA Today, November, 17, 2008.
[27] Center for Economic and Policy Research, “Impatient to Profit from Disaster,” October 14, 2010, http://www.cepr.net/index.php/blogs/relief-and-reconstruction-watch/impatient-to-profit-from-disaster
[28] Keith Schneider, “Company Accused of Bilking U.S. on Waste Sites,” New York Times, March 20,1992.
[29] Top 400 Contractors Sourcebook cited on http://newsroom.ch2mhill.com/pr/ch2m/industry-rankings.aspx. Statement of Mr. Fred M. Brune, President, Government Facilities and Infrastructure Business Group, CH2M Hill Constructors, Inc. before the Commission on Wartime Contracting in Iraq and Afghanistan, July 26, 2010, http://www.wartimecontracting.gov/…/hearing2010-07-26_testimony_Brune_(CH2M%20Hill).pdf.
[30] Kevin Bogardus, “Haiti’s recovery aided by U.S. lobbyists,” The Hill, October 11, 2010. http://thehill.com/business-a-lobbying/123565-haitis-recovery-aided-by-lobbyists
[31] CH2M Hill Expenditures, Center for Responsive Politics, http://www.opensecrets.org/pacs/expenditures.php?cycle=2010&cmte=C00143305
[32] “Haiti Earthquake Report,” Federal Procurement Data System, data updated as of 9/15/2011, https://www.fpds.gov/downloads/top_requests/Haiti_Earthquake_Report.xls.

Using Debt To Crush Democracy: How Financiers Are Waging Economic Warfare Against Nations

Oldspeak:”Everything is version of something else”. The eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history. Financial oligarchy has happened before. Many times throughout history. This recent debt protests from Iceland to Greece and Spain suggest that creditors are shifting their support away from democracies and crushing national self-determination” As they have in the past.  It will be interesting to see if an aristocracy is coming in our future. Highly recommend reading John Perkins’ “Confessions Of An Economic Hit Man” to understand what is going on.

By Michael Hudson @ Michael Hudson’s Blog:

Book V of Aristotle’s Politics describes the eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history.

Debt has been the main dynamic driving these shifts – always with new twists and turns. It polarizes wealth to create a creditor class, whose oligarchic rule is ended as new leaders (“tyrants” to Aristotle) win popular support by canceling the debts and redistributing property or taking its usufruct for the state.

Since the Renaissance, however, bankers have shifted their political support to democracies. This did not reflect egalitarian or liberal political convictions as such, but rather a desire for better security for their loans. As James Steuart explained in 1767, royal borrowings remained private affairs rather than truly public debts [1]. For a sovereign’s debts to become binding upon the entire nation, elected representatives had to enact the taxes to pay their interest charges.

By giving taxpayers this voice in government, the Dutch and British democracies provided creditors with much safer claims for payment than did kings and princes whose debts died with them. But the recent debt protests from Iceland to Greece and Spain suggest that creditors are shifting their support away from democracies. They are demanding fiscal austerity and even privatization sell-offs.

This is turning international finance into a new mode of warfare. Its objective is the same as military conquest in times past: to appropriate land and mineral resources, communal infrastructure and extract tribute. In response, democracies are demanding referendums over whether to pay creditors by selling off the public domain and raising taxes to impose unemployment, falling wages and economic depression. The alternative is to write down debts or even annul them, and to re-assert regulatory control over the financial sector.

Near Eastern rulers proclaimed Clean Slates to preserve economic balance
Charging interest on advances of goods or money was not originally intended to polarize economies. First administered early in the third millennium BC as a contractual arrangement by Sumer’s temples and palaces with merchants and entrepreneurs who typically worked in the royal bureaucracy, interest at 20% (doubling the principal in five years) was supposed to approximate a fair share of the returns from long-distance trade or leasing land and other public assets such as workshops, boats and ale houses.

As the practice was privatized by royal collectors of user fees and rents, “divine kingship” protected agrarian debtors. Hammurabi’s laws (c. 1750 BC) cancelled their debts in times of flood or drought. All the rulers of his Babylonian dynasty began their first full year on the throne by cancelling agrarian debts so as to clear out payment arrears by proclaiming a clean slate. Bondservants, land or crop rights and other pledges were returned to the debtors to “restore order” in an idealized “original” condition of balance. This practice survived in the Jubilee Year of Mosaic Law in Leviticus 25.

The logic was clear enough. Ancient societies needed to field armies to defend their land, and this required liberating indebted citizens from bondage. Hammurabi’s laws protected charioteers and other fighters from being reduced to debt bondage, and blocked creditors from taking the crops of tenants on royal and other public lands and on communal land that owed manpower and military service to the palace.

In Egypt, the pharaoh Bakenranef (c. 720-715 BC, “Bocchoris” in Greek) proclaimed a debt amnesty and abolished debt-servitude when faced with a military threat from Ethiopia. According to Diodorus of Sicily (I, 79, writing in 40-30 BC), he ruled that if a debtor contested the claim, the debt was nullified if the creditor could not back up his claim by producing a written contract. (It seems that creditors always have been prone to exaggerate the balances due.) The pharaoh reasoned that “the bodies of citizens should belong to the state, to the end that it might avail itself of the services which its citizens owed it, in times of both war and peace. For he felt that it would be absurd for a soldier … to be haled to prison by his creditor for an unpaid loan, and that the greed of private citizens should in this way endanger the safety of all.”

The fact that the main Near Eastern creditors were the palace, temples and their collectors made it politically easy to cancel the debts. It always is easy to annul debts owed to oneself. Even Roman emperors burned the tax records to prevent a crisis. But it was much harder to cancel debts owed to private creditors as the practice of charging interest spread westward to Mediterranean chiefdoms after about 750 BC. Instead of enabling families to bridge gaps between income and outgo, debt became the major lever of land expropriation, polarizing communities between creditor oligarchies and indebted clients. In Judah, the prophet Isaiah (5:8-9) decried foreclosing creditors who “add house to house and join field to field till no space is left and you live alone in the land.”

Creditor power and stable growth rarely have gone together. Most personal debts in this classical period were the product of small amounts of money lent to individuals living on the edge of subsistence and who could not make ends meet. Forfeiture of land and assets – and personal liberty – forced debtors into bondage that became irreversible. By the 7th century BC, “tyrants” (popular leaders) emerged to overthrow the aristocracies in Corinth and other wealthy Greek cities, gaining support by canceling the debts. In a less tyrannical manner, Solon founded the Athenian democracy in 594 BC by banning debt bondage.

But oligarchies re-emerged and called in Rome when Sparta’s kings Agis, Cleomenes and their successor Nabis sought to cancel debts late in the third century BC. They were killed and their supporters driven out. It has been a political constant of history since antiquity that creditor interests opposed both popular democracy and royal power able to limit the financial conquest of society – a conquest aimed at attaching interest-bearing debt claims for payment on as much of the economic surplus as possible.

When the Gracchi brothers and their followers tried to reform the credit laws in 133 BC, the dominant Senatorial class acted with violence, killing them and inaugurating a century of Social War, resolved by the ascension of Augustus as emperor in 29 BC.

Rome’s creditor oligarchy wins the Social War, enserfs the population and brings on a Dark Age
Matters were more bloody abroad. Aristotle did not mention empire building as part of his political schema, but foreign conquest always has been a major factor in imposing debts, and war debts have been the major cause of public debt in modern times. Antiquity’s harshest debt levy was by Rome, whose creditors spread out to plague Asia Minor, its most prosperous province. The rule of law all but disappeared when the publican creditor “knights” arrived. Mithridates of Pontus led three popular revolts, and local populations in Ephesus and other cities rose up and killed a reported 80,000 Romans in 88 BC. The Roman army retaliated, and Sulla imposed war tribute of 20,000 talents in 84 BC. Charges for back interest multiplied this sum six-fold by 70 BC.

Among Rome’s leading historians, Livy, Plutarch and Diodorus blamed the fall of the Republic on creditor intransigence in waging the century-long Social War marked by political murder from 133 to 29 BC. Populist leaders sought to gain a following by advocating debt cancellations (e.g., the Catiline conspiracy in 63-62 BC). They were killed. By the second century AD about a quarter of the population was reduced to bondage. By the fifth century Rome’s economy collapsed, stripped of money. Subsistence life reverted to the countryside as a Dark Age descended.

Creditors find a legalistic reason to support parliamentary democracy
When banking recovered after the Crusades looted Byzantium and infused silver and gold to review Western European commerce, Christian opposition to charging interest was overcome by the combination of prestigious lenders (the Knights Templars and Hospitallers providing credit during the Crusades) and their major clients – kings, at first to pay the Church and increasingly to wage war. But royal debts went bad when kings died. The Bardi and Peruzzi went bankrupt in 1345 when Edward III repudiated his war debts. Banking families lost more on loans to the Habsburg and Bourbon despots on the thrones of Spain, Austria and France.
  
Matters changed with the Dutch democracy, seeking to win and secure its liberty from Habsburg Spain. The fact that their parliament was to contract permanent public debts on behalf of the state enabled the Low Countries to raise loans to employ mercenaries in an epoch when money and credit were the sinews of war. Access to credit “was accordingly their most powerful weapon in the struggle for their freedom,” notes Ehrenberg: “Anyone who gave credit to a prince knew that the repayment of the debt depended only on his debtor’s capacity and will to pay. The case was very different for the cities, which had power as overlords, but were also corporations, associations of individuals held in common bond. According to the generally accepted law each individual burgher was liable for the debts of the city both with his person and his property.”[2]

The financial achievement of parliamentary government was thus to establish debts that were not merely the personal obligations of princes, but were truly public and binding regardless of who occupied the throne. This is why the first two democratic nations, the Netherlands and Britain after its 1688 revolution, developed the most active capital markets and proceeded to become leading military powers. What is ironic is that it was the need for war financing that promoted democracy, forming a symbiotic trinity between war making, credit and parliamentary democracy in an epoch when money was still the sinews of war.

At this time “the legal position of the King qua borrower was obscure, and it was still doubtful whether his creditors had any remedy against him in case of default.”[3] The more despotic Spain, Austria and France became, the greater the difficulty they found in financing their military adventures. By the end of the eighteenth century Austria was left “without credit, and consequently without much debt” the least credit-worthy and worst armed country in Europe (as Steuart 1767:373 noted), fully dependent on British subsidies and loan guarantees by the time of the Napoleonic Wars.

Finance accommodates itself to democracy, but then pushes for oligarchy
While the nineteenth century’s democratic reforms reduced the power of landed aristocracies to control parliaments, bankers moved flexibly to achieve a symbiotic relationship with nearly every form of government. In France, followers of Saint-Simon promoted the idea of banks acting like mutual funds, extending credit against equity shares in profit. The German state made an alliance with large banking and heavy industry. Marx wrote optimistically about how socialism would make finance productive rather than parasitic. In the United States, regulation of public utilities went hand in hand with guaranteed returns. In China, Sun-Yat-Sen wrote in 1922: “I intend to make all the national industries of China into a Great Trust owned by the Chinese people, and financed with international capital for mutual benefit.”[4]

World War I saw the United States replace Britain as the major creditor nation, and by the end of World War II it had cornered some 80 percent of the world’s monetary gold. Its diplomats shaped the IMF and World Bank along creditor-oriented lines that financed trade dependency, mainly on the United States. Loans to finance trade and payments deficits were subject to “conditionalities” that shifted economic planning to client oligarchies and military dictatorships. The democratic response to resulting austerity plans squeezing out debt service was unable to go much beyond “IMF riots,” until Argentina rejected its foreign debt.

A similar creditor-oriented austerity is now being imposed on Europe by the European Central Bank (ECB) and EU bureaucracy. Ostensibly social democratic governments have been directed to save the banks rather than reviving economic growth and employment. Losses on bad bank loans and speculations are taken onto the public balance sheet while scaling back public spending and even selling off infrastructure. The response of taxpayers stuck with the resulting debt has been to mount popular protests starting in Iceland and Latvia in January 2009, and more widespread demonstrations in Greece and Spain this autumn to protest their governments’ refusal to hold referendums on these fateful bailouts of foreign bondholders.

Shifting planning away from elected public representatives to bankers
Every economy is planned. This traditionally has been the function of government. Relinquishing this role under the slogan of “free markets” leaves it in the hands of banks. Yet the planning privilege of credit creation and allocation turns out to be even more centralized than that of elected public officials. And to make matters worse, the financial time frame is short-term hit-and-run, ending up as asset stripping. By seeking their own gains, the banks tend to destroy the economy. The surplus ends up being consumed by interest and other financial charges, leaving no revenue for new capital investment or basic social spending.

This is why relinquishing policy control to a creditor class rarely has gone together with economic growth and rising living standards. The tendency for debts to grow faster than the population’s ability to pay has been a basic constant throughout all recorded history. Debts mount up exponentially, absorbing the surplus and reducing much of the population to the equivalent of debt peonage. To restore economic balance, antiquity’s cry for debt cancellation sought what the Bronze Age Near East achieved by royal fiat: to cancel the overgrowth of debts.

In more modern times, democracies have urged a strong state to tax rentier income and wealth, and when called for, to write down debts. This is done most readily when the state itself creates money and credit. It is done least easily when banks translate their gains into political power. When banks are permitted to be self-regulating and given veto power over government regulators, the economy is distorted to permit creditors to indulge in the speculative gambles and outright fraud that have marked the past decade. The fall of the Roman Empire demonstrates what happens when creditor demands are unchecked. Under these conditions the alternative to government planning and regulation of the financial sector becomes a road to debt peonage.

Finance vs. government; oligarchy vs. democracy
Democracy involves subordinating financial dynamics to serve economic balance and growth – and taxing rentier income or keeping basic monopolies in the public domain. Untaxing or privatizing property income “frees” it to be pledged to the banks, to be capitalized into larger loans. Financed by debt leveraging, asset-price inflation increases rentier wealth while indebting the economy at large. The economy shrinks, falling into negative equity.

The financial sector has gained sufficient influence to use such emergencies as an opportunity to convince governments that that the economy will collapse they it do not “save the banks.” In practice this means consolidating their control over policy, which they use in ways that further polarize economies. The basic model is what occurred in ancient Rome, moving from democracy to oligarchy. In fact, giving priority to bankers and leaving economic planning to be dictated by the EU, ECB and IMF threatens to strip the nation-state of the power to coin or print money and levy taxes.

The resulting conflict is pitting financial interests against national self-determination. The idea of an independent central bank being “the hallmark of democracy” is a euphemism for relinquishing the most important policy decision – the ability to create money and credit – to the financial sector. Rather than leaving the policy choice to popular referendums, the rescue of banks organized by the EU and ECB now represents the largest category of rising national debt. The private bank debts taken onto government balance sheets in Ireland and Greece have been turned into taxpayer obligations. The same is true for America’s $13 trillion added since September 2008 (including $5.3 trillion in Fannie Mae and Freddie Mac bad mortgages taken onto the government’s balance sheet, and $2 trillion of Federal Reserve “cash-for-trash” swaps).

This is being dictated by financial proxies euphemized as technocrats. Designated by creditor lobbyists, their role is to calculate just how much unemployment and depression is needed to squeeze out a surplus to pay creditors for debts now on the books. What makes this calculation self-defeating is the fact that economic shrinkage – debt deflation – makes the debt burden even more unpayable.

Neither banks nor public authorities (or mainstream academics, for that matter) calculated the economy’s realistic ability to pay – that is, to pay without shrinking the economy. Through their media and think tanks, they have convinced populations that the way to get rich most rapidly is to borrow money to buy real estate, stocks and bonds rising in price – being inflated by bank credit – and to reverse the past century’s progressive taxation of wealth.

To put matters bluntly, the result has been junk economics. Its aim is to disable public checks and balances, shifting planning power into the hands of high finance on the claim that this is more efficient than public regulation. Government planning and taxation is accused of being “the road to serfdom,” as if “free markets” controlled by bankers given leeway to act recklessly is not planned by special interests in ways that are oligarchic, not democratic. Governments are told to pay bailout debts taken on not to defend countries in military warfare as in times past, but to benefit the wealthiest layer of the population by shifting its losses onto taxpayers.

The failure to take the wishes of voters into consideration leaves the resulting national debts on shaky ground politically and even legally. Debts imposed by fiat, by governments or foreign financial agencies in the face of strong popular opposition may be as tenuous as those of the Habsburgs and other despots in past epochs. Lacking popular validation, they may die with the regime that contracted them. New governments may act democratically to subordinate the banking and financial sector to serve the economy, not the other way around.

At the very least, they may seek to pay by re-introducing progressive taxation of wealth and income, shifting the fiscal burden onto rentier wealth and property. Re-regulation of banking and providing a public option for credit and banking services would renew the social democratic program that seemed well underway a century ago.

Iceland and Argentina are most recent examples, but one may look back to the moratorium on Inter-Ally arms debts and German reparations in 1931.A basic mathematical as well as political principle is at work: Debts that can’t be paid, won’t be.

Footnotes:

[1] James Steuart, Principles of Political Oeconomy (1767), p. 353.

[2] Richard Ehrenberg, Capital and Finance in the Age of the Renaissance (1928):44f., 33.

[3] Charles Wilson, England’s Apprenticeship: 1603-1763 (London: 1965):89.

[4] Sun Yat-Sen, The International Development of China (1922):231ff.

 

Michael Hudson, a former Wall Street Journal reporter, is a staff writer at the Center for Public Integrity (http://www.publicintegrity.org), a nonprofit journalist organization. He is the author of “THE MONSTER: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America – And Spawned a Global Crisis” (2010, Times Books)

© 2011 Michael Hudson’s blog All rights reserved.
View this story online at: http://www.alternet.org/story/153338/

 

High Stakes Testing In Public Schools: Who’s Cheating Whom?

Oldspeak:”Corporate school privatizers feign disgust with teachers that cheat standardized tests. But Big Business theft of  public education is by far the greater sin. High stakes testing was designed as a Trojan Horse for a corporate educational takeover, but packaged as a public good. This is the substance of education “reform” in the Age of Obama. The real cheats are those that pushed high stakes testing under the false pretexts of reform, when the actual goal was union busting and privatization” –Glen Ford. Rather than deal with the entrenched, institutionalized, centuries old social and structural problems which are driving many of the problems we see today with public education (poverty, inequality, racism, “banking system of eduction“), many “reformers” would rather privatize the system, automate it via ‘standardized testing’ and turn it into a perpetual revenue stream, with little regard for actual effective learning. Churning out widgets to plug into private corporations who in turn “sponsor” education “reform” and further increase their profits. A self perpetuating meat-grinder, with children being the meat.  A less educated, less competent, less critically thinking society of all-consuming “happiness machines” with no love of learning. Who see education as a means to an end (more education = more money = more consumption = more prescribed ‘happiness’) not as means of personal growth and development.  Sucesssive generations will be less and less equipped to critiscize and question the system which is failing them. Alas yet again, in then end, ‘We the People’ loseand the corporatocracy wins. “Freedom Is Slavery”

By Glen Ford @ Black Agenda Report:

The school privatizers now headquartered in the Obama administration are all pitching a morality fit over teachers that cheat by altering answers on standardized tests. Corporate privatizers, of course, have no real sense of morality beyond profit and loss: their own profit, and to hell with those that lose. But, when attacking institutions so historically revered as public education and the teaching profession, one must play dirty. You’ve got to get them on a morals charge.

The assault on public schools began with the blanket assertion that teachers – or, more precisely, teachers unions – are out for themselves; that they are sinfully selfish. Strange words, from the lips of corporate executives and free marketeers who preach that the highest virtues are revealed in the cutthroat corridors of commerce. Then again, pots and kettles are always calling everybody else black.

So, they slimed the teachers as the root of all that ails public education, teachers whose moral deficits could be corrected by rigorous competition regulated by standardized testing of students. If the students failed the tests, then the teachers would fail and be discharged, and the schools they worked in would also fail, and be replaced by privatized charters. High stakes testing was designed as a Trojan Horse for a corporate educational takeover, but packaged as a public good. Bad teachers and bad schools would come to a well-deserved bad end.

This morality play was always based on a lie. The standardized tests were bombs, designed to explode the public schools and the teaching profession. Everyone involved knew that inner city kids would fail the tests in huge numbers, setting the infernal machine in motion for the closing of schools and the wholesale firing of teachers. In their place would be recruited a new workforce that would either view teaching as a temporary job or cut every other teacher’s throat in order to stay – neither of which redounds to the benefit of students or anyone else but the bosses. This is the substance of education “reform” in the Age of Obama.

Faced with extinction of their jobs and their very profession, and with a teacher’s learned certainty that many of their students would be pushed into marginality by the testing juggernaut, teachers turned to cheating the test. They have been caught and shamed and may face prosecution in Atlanta and Philadelphia and elsewhere, but cheating the test surely occurs in virtually every inner city. I don’t think it’s cheating, in a moral sense, at all. The cheats are those that pushed high stakes testing under the false pretexts of reform, when the actual goal was union busting and privatization. Teachers are fighting for their lives, and all of us would cheat death, if we could.

The school privatizers are determined, not just to bust the teachers unions, but to remake teachers as corporate citizens. A schools superintendent in New Jersey said part of the difficulty for teachers under the new order is that they “are more concerned about relationships than about achieving more than one another.” When he gives teachers awards, he says, they won’t display them because “they don’t want to outshine one another.” His teachers would rather collaborate and cooperate to achieve a common goal. And that’s why they’ve got to change, or go.

© 2011 Black Agenda Report

Back Agenda Report executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.

 

Chomsky: Public Education Under Massive Corporate Assault — What’s Next?

Oldspeak: “Converting schools and universities into facilities that produce commodities for the job market, privatizing them, slashing their budgets — do we really want this future? People who are in a debt trap have very few options. That is true of social control generally. In a corporate-run culture, the traditional ideal of free and independent thought may be given lip service, but other values tend to rank higher. Defending authentic (academic) institutional freedom is no small task. However, it is not hopeless by any means.” –Noam Chomsky Unfortunately  “The era of affordable four-year public universities heavily subsidized by the state may be over.” When access to free, high quality, education is eliminated and is replaced with pay for the privilege corporate controlled education democracy dies. “Ignorance is Strength”

By Noam Chomsky @ Alter Net:

The following is a partial transcript of a recent speech delivered by Noam Chomsky at the University of Toronto at Scarborough on the rapid privatization process of public higher education in the United States.

A couple of months ago, I went to Mexico to give talks at the National University in Mexico, UNAM. It’s quite an impressive university — hundreds of thousands of students, high-quality and engaged students, excellent faculty. It’s free. And the city — Mexico City — actually, the government ten years ago did try to add a little tuition, but there was a national student strike, and the government backed off. And, in fact, there’s still an administrative building on campus that is still occupied by students and used as a center for activism throughout the city. There’s also, in the city itself, another university, which is not only free but has open admissions. It has compensatory options for those who need them. I was there, too; it’s also quite an impressive level, students, faculty, and so on. That’s Mexico, a poor country.

Right after that I happened to go to California, maybe the richest place in the world. I was giving talks at the universities there. In California, the main universities — Berkeley and UCLA — they’re essentially Ivy League private universities — colossal tuition, tens of thousands of dollars, huge endowment. General assumption is they are pretty soon going to be privatized, and the rest of the system will be, which was a very good system — best public system in the world — that’s probably going to be reduced to technical training or something like that. The privatization, of course, means privatization for the rich [and a] lower level of mostly technical training for the rest. And that is happening across the country. Next year, for the first time ever, the California system, which was a really great system, best anywhere, is getting more funding from tuition than from the state of California. And that is happening across the country. In most states, tuition covers more than half of the college budget. It’s also most of the public research universities. Pretty soon only the community colleges — you know, the lowest level of the system — will be state-financed in any serious sense. And even they’re under attack. And analysts generally agree, I’m quoting, “The era of affordable four-year public universities heavily subsidized by the state may be over.”

Now that’s one important way to implement the policy of indoctrination of the young. People who are in a debt trap have very few options. Now that is true of social control generally; that is also a regular feature of international policy — those of you who study the IMF and the World Bank and others are well aware. As the Mexico-California example illustrates, the reasons for conscious destruction of the greatest public education system in the world are not economic. Economist Doug Henwood points out that it would be quite easy to make higher education completely free. In the U.S., it accounts for less than 2 percent of gross domestic product. The personal share of about 1 percent of gross domestic product is a third of the income of the richest 10,000 households. That’s the same as three months of Pentagon spending. It’s less than four months of wasted administrative costs of the privatized healthcare system, which is an international scandal.

It’s about twice the per capita cost of comparable countries, has some of the worst outcomes, and in fact it’s the basis for the famous deficit. If the U.S. had the same kind of healthcare system as other industrial countries, not only would there be no deficit, but there would be a surplus. However, to introduce these facts into an electoral campaign would be suicidally insane, Henwood points out. Now he’s correct. In a democracy where elections are essentially bought by concentrations of private capital, it doesn’t matter what the public wants. The public has actually been in favor of that for a long of time, but they are irrelevant in a properly run democracy.

We should recall that the great growth period in the economy — the U.S. economy — was in the several decades after WWII, commonly called the “Golden Age” by economists. It was substantially fueled by affordable public education and by university research. Affordable public education includes the GI Bill, which provided free education for veterans — and remember, that was a much poorer country than today. Extremely low tuition was found even at private colleges. Actually, I went to an Ivy League college, and it cost $100 a year; that’s more now, but it’s not that high, it’s not 30 or 40,000, you know?

What about university-based research? Well, as I mentioned, that is the core of the modern high-tech economy. That includes computers, the Internet — in fact, the whole IT revolution — and a whole lot more. The dismantling of this system since the 1970s is among the many moves toward a very sharply two-tiered society, a very narrow concentration of wealth and stagnation for most everyone else. It also has direct economic consequences. Take, say, California. What they are doing to the public education system is going to undermine the economy that relies on a skilled work force and creative innovation, Silicon Valley and so on. Well, apart from the enormous human cost of depriving most people of decent educational opportunities, these policies undermine the U.S. competitive capacity. That’s very harmful to the mass of the population, but it doesn’t matter to the tiny percent of concentrated wealth and power. In fact, in the years since the Pell Memorandum, we’ve entered into a new stage in state capitalism in which the future just doesn’t amount to much. Profit comes increasingly from financial manipulations. The corporate policies are geared toward the short-term profit, and that reduces the concern for loyalty to a firm over a longer stretch. We’ll talk about this more tomorrow, but right now let me talk about the consequences for education, which are quite significant.

Suppose, as is increasingly happening not only in the United States, incidentally, that universities are not funded by the state, meaning the general community. So how are the universities going to survive? Universities are parasitic institutions; they don’t produce commodities for profit, thankfully. They may one of these days. The funding issue raises many troubling questions, which would not arise if fostering independent thought and inquiry were regarded as a public good, having intrinsic value. That’s the traditional ideal of the universities, although there are major efforts to change that. Take Britain. According to the British press, the Arts and Humanities Research Council was just ordered to spend a significant amount of funding on the prime minister’s vision for the country. His so-called “Big Society,” which means big corporate profits, and the rest look out for themselves. The government produced what they call a clarification of the famous Haldane Principle. That’s the century-old principle that barred such government intrusion into academic research. If this stands, which I think is kind of hard to believe, but if it stands, the hand of Big Brother will rest quite heavily on inquiry and innovation in the arts and humanities as the masters of mankind follow the advice of the Pell Memorandum. Of course, defending academic freedom in ways that would receive nods of approval from Those-Who-Must-Not-Be-Named, borrowing my grandchildren’s rhetoric. Cameron’s Britain is seeking to take the lead on the assault on public education. The rest of the Western world is not very far behind. In some ways the U.S. is ahead.

More generally, in a corporate-run culture, the traditional ideal of free and independent thought may be given lip service, but other values tend to rank higher. Defending authentic institutional freedom is no small task. However, it is not hopeless by any means. I’ll talk about the case I know best, at my own university. It is a very striking case, because of the nature of its funding. Technically, it’s a private university, but it has vast state funding, overwhelming, particularly since the Second World War. When I adjoined the faculty over 55 years ago, there were military labs. Since then, they’ve been technically severed. The academic programs, too, at that time, the 1950s, were almost entirely funded by the Pentagon. Under student pressure in the time of troubles, the 1960s, there were protests about this and calls for investigation. A faculty-student commission was formed in 1969 to investigate the matter. I was a member, thanks to student pressure. The commission was interesting. It found that despite the funding source, the Pentagon, almost the entire academic program, there was no military-related work on campus, except in the sense that virtually anything can have some military application. Actually, there was an exception to this, the political science department, [which] was deeply engaged in the Vietnam War under the guise of peace research. Since that time, Pentagon funding has been declining, and funding from health-related state institutions — National Institute of Health and so on — that’s been increasing. There’s a reason for that. It’s reflecting changes in the economy.

In the 1950s and 1960s the cutting edge of the economy was electronics-based. The Pentagon was a natural way to steal money from the taxpayers, making them think they’re being protected from the Russians or somebody, and to direct it to eventual corporate profits. That was done very effectively. It includes computers, the Internet, the IT revolution. In fact most of the modern economy comes from that. In more recent years, the economy is becoming more biology based. Therefore state funding is shifting. Fifty years ago, if you looked around MIT, you found small electronics startups from the faculty. They were drawing on Pentagon funding for research, and if they were successful, they were bought up by major corporations. Those of you who know something about the high-tech economy will know that that’s the famous Route 128. That was 50 years ago. Now, if you go around the campus, the startups are biology based, and the same process continues. The genetic engineering, biotechnology, pharmaceuticals and the big buildings going up are Novartis and so on. That’s the way the so-called free enterprise economy works. There’s also been a shift to more short-term applied work. The Pentagon and the National Institutes of Health are concerned with the long-term future of the advanced economy. In contrast to a business firm, it typically wants something that it can use — it can use and not its competitors, and tomorrow. I don’t actually know of a careful study, but it seems pretty clear that the shift toward corporate funding is leading towards more short-term applied research and less exploration of what might turn out to be interesting and important down the road.

Another consequence of corporate funding is more secrecy. This surprises a lot of people, but during the period of Pentagon funding, there was no secrecy. There was also no security on campus. You may remember this. You walk into the Pentagon-funded labs 24 hours a day, and no cards to stick into things and so on. No secrecy; it was all entirely open. There is secrecy today. A corporation can’t compel secrecy, but they can make it very clear that you’re not going to get your contract renewed if your work leaks to others. That has happened. In fact, it’s lead to some scandals, some big enough to appear on the front page of the Wall Street Journal.

Outside funding has other effects on the university, unless it’s free and unconstrained, observing the Haldane Principle. Indeed, it has been true to a significant degree by funding from the Pentagon and the other national institutions. However, any kind of outside funding [has effects], even keeping to the Haldane Principle, supposing it establishes a teaching or research facility. That kind of automatically shifts the balance of academic activity, and that can threaten the independence and integrity of the institution. And in the case of corporate funding, quite severely.

Corporatization can have considerable influence in other ways. Corporate managers have a duty. They have to focus on profit making and seeking to convert as much of life as possible into commodities. It’s not because they’re bad people; it’s their task. Under Anglo-American law, it’s their legal obligation as well. There’s a lot to say about this topic, but one element of it concerns the universities and much else. One particular consequence is the focus on what’s called efficiency. It’s an interesting concept. It’s not strictly an economic concept. It has crucial ideological dimensions. If a business reduces personnel, it might become more efficient by standard measures with lower costs. Typically, that shifts the burden to the public, a very familiar phenomenon we see all the time. Costs to the public are not counted, and they’re colossal. That’s a choice that’s not based on economic theory. That’s based on an ideological decision, which applies directly to the “business models,” as they’re called, of the universities. Increasing class-size or employing cheap temporary labor, say graduate students instead of full-time faculty, may look good on a university budget, but there are significant costs. They’re transferred and not measured. They’re transferred to students and to the society generally as the quality of education, the quality of instruction is lowered.

There’s, furthermore, no way to measure the human and social costs of converting schools and universities into facilities that produce commodities for the job market, abandoning the traditional ideal of the universities. Creating creative and independent thought and inquiry, challenging perceived beliefs, exploring new horizons and forgetting external constraints. That’s an ideal that’s no doubt been flawed in practice, but to the extent that it’s realized is a good measure of the level of civilization achieved.

That idea is being challenged very openly by Adam Smith’s Principal Architects of Policy in the State Corporate Complex, the direct attack on the Haldane Principle in Britain. That’s an extreme case; in fact so extreme I assume it may be beaten back. There are less blatant examples. Many of them are just inherent in the reliance on outside funding, state or private. These are two sources that are not easy to distinguish given the control of the state by private interest. So what’s the right reaction to outside funding that threatens the ideal of a free university? Well one choice is just to reject it in principle, in which case the university would go down the tubes. It’s a parasitic institution. Another choice is just to recognize it as a fact of life that when I’m at work, I have to walk past the Lockheed Martin Lecture Hall, and I have to look out my office window at the Koch building, which is named after the multibillionaires who are the major funders of the Tea Party and a leading force in ongoing campaigns to wipe out the remnants of the labor movement and to institute a kind-of corporate tyranny.

Now, if that outside funding seeks to [influence] teaching, research and other activities, then there’s a strong argument that it should simply be resisted or rejected outright no matter what the costs. Such influences are not inevitable, and that’s worth bearing in mind.