Crisis: The Motor of Capitalism

 Monday 29 March 2010  by: André Orléan   |  Le Monde

"However, today, the mass of liquidities thus produced, associated with the vertiginous growth in public debt, brings the crisis into a new stage in which the question of currency values enters the spotlight. In this matter, the sites for a possible rupture exist: for example, the dollar's hegemony, the unity of the Euro zone, the parity of the yuan - or the weakness of the pound Sterling? Should such a rupture occur, then the cohesion of international neoliberalism would find itself called directly into question.

The forces of shock that surfaced in August 2007 have not yet finished making felt their devastating effects."

CounterPunch Diary

The Soros Syndrome

By ALEXANDER COCKBURN

http://www.counterpunch.org/cockburn10082010.html

Back at the dawn of the twentieth century Lenin and Martov were organizing their international Congresses and looking for grant money to this end. Martov, the Menshevik, told Lenin he must absolutely stop paying for the hotels and halls with money hijacked by Stalin from Georgian banks in Tblisi. Lenin reassured Martov, and then asked Stalin to knock over another bank  which he did, Europe’s record bank heist up till that time. It was one way, perhaps the only way, past the grip of cautious millionaires. Then as now.

James Galbraith on Obama

Whose Side Is the White House On?

by James K. Galbraith

http://www.commondreams.org/view/2010/12/09-7

"Large countries can and do fail, they have done so in our own time. And the consequences are very grave: drastic declines in services, in living standards, in life expectancies, huge increases in social tension, in repression, and in violence. These are the consequences of following through with crackpot ideas such as those embodied in the Bowles-Simpson deficit commission, as Jeff Madrick again outlined, such notions as putting arbitrary limits on the scale of government, or arbitrary limits on the top tax rate affecting the wealthiest Americans.

This isn’t a parlor game. The outcome isn’t destined to be alright. It will not necessarily end in progress whatever happens. What we do, how we proceed, and how we effectively resist what is plainly about to happen, matters very greatly for the future of our country, of our children, and of another generation to come. We need to lose our fear, our hesitation, and our unwillingness to face the facts. If we thereby lose some of our hopes, let’s remember the dictum of William of Orange that “it is not necessary to hope in order to persevere.”

The President should know that, as Lincoln said to the Congress in the dark winter of 1862, he “cannot escape history.” And we are heading now into a very dark time, so let’s face it with eyes open. And if we must, let’s seek leadership that shares our values, fights for our principles, and deserves our trust."

© 2010 New Deal 2.0

James K. Galbraith is a Vice President of Americans for Democratic Action. He is General Editor of "Galbraith: The Affluent Society and Other Writings, 1952-1967," just published by Library of America. He teaches at the University of Texas at Austin.

Economic links

On tax rates and wealth distribution:
http://empirestudies.blogspot.com/2008/11/who-rules-america.html

Michael Hudson on Democracy Now!
http://www.democracynow.org/2010/11/5/new_600b_fed_stimulus_fuels_fears

Michael Whitney on inflation and other things:
http://empirestudies.blogspot.com/search?q=Whitney

Paul Craig Roberts:
http://empirestudies.blogspot.com/search?q=roberts

Game Plan for a Flat Tax, Social Security Cutbacks and Austerity: Obama's Sellout on Taxes
By MICHAEL HUDSON (Dec 8, 2010)
http://www.counterpunch.org/hudson12082010.html

The Endless Thanksgiving: Next Up: a "Flat Tax" for the Rich
By MICHAEL HUDSON (Nov 25, 2010)
http://www.counterpunch.org/hudson11252010.html

David Cay Johnson on Democracy Now!
http://www.democracynow.org/2008/1/18/free_lunch_how_the_wealthiest_americans

Wealth for the Common Good:
 http://wealthforcommongood.org/resources/tax-fact-sheet/

“Shifting Responsibility: How 50 Years of Tax Cuts Benefited the Wealthiest Americans,” Chuck Collins, Alison Goldberg, and Sam Pizzigati (Wealth for the Common Good, April 2010)
www.ips-dc.org/files/1675/ShiftingResponsibility.pdf

Chuck Collins, “Reverse the Great Tax Shift”
http://blogs.alternet.org/speakeasy/2010/04/07/reverse-the-great-tax-shift/

The Black Swan

Roubini and Taleb on the economic crisis

No Longer the "Consumer of Last Resort"?

Asia: The Coming Fury

by Walden Bello

This process [export led growth] depended on the U.S. market. As long as U.S. consumers splurged, the export economies of East Asia could continue in high gear. The low U.S. savings rate was no barrier since credit was available on a grand scale. China and other Asian countries snapped up U.S. treasury bills and loaned massively to U.S. financial institutions, which in turn loaned to consumers and homebuyers. But now the U.S. credit economy has imploded, and the U.S. market is unlikely to serve as the same dynamic source of demand for a long time to come. As a result, Asia's export economies have been marooned....

U.S.-East Asia economic relations today resemble a chain-gang linking not only China and the United States but a host of other satellite economies. They are all linked to debt-financed middle-class spending in the United States, which has collapsed....

In China, about 20 million workers have lost their jobs in the last few months, many of them heading back to the countryside, where they will find little work. The authorities are rightly worried that what they label "mass group incidents," which have been increasing in the last decade, might spin out of control. With the safety valve of foreign demand for Indonesian and Filipino workers shut off, hundreds of thousands of workers are returning home to few jobs and dying farms. Suffering is likely to be accompanied by rising protest, as it already has in Vietnam, where strikes are spreading like wildfire. Korea, with its tradition of militant labor and peasant protest, is a ticking time bomb. Indeed, East Asia may be entering a period of radical protest and social revolution that went out of style when export-oriented industrialization became the fashion three decades ago.

The Pentagon as an Engine of Economic Recovery?

How can a country headed into A State of Depression justify spending a trillion dollars a year on an already grotesque defense establishment? I wonder if a standing army doesn't constitute a violation of the spirit, if not the letter, of the 2d and 3d amendments to the US Constitution.

WINSLOW T. WHEELER, "Why the Pentagon is Not a Jobs Engine: Save the Economy by Cutting the "Defense" [Offense] Budget":

Harvard economist Professor Martin Feldstein has advocated in the Wall Street Journal (‘Defense Spending Would Be Great Stimulus’, 24 December 2008) the addition of USD30 billion or so to the Pentagon’s budget for the purpose of generating 300,000 new jobs. It is my assertion, however, that pushing the DoD as a jobs engine is a mistake....

Even other economists are sceptical about Feldstein’s numbers. An October 2007 paper from the University of Massachusetts-Amherst found that each USD1 billion spent on defence would generate 8,555 jobs, not the 10,000 calculated by Feldstein. Given the problems with the F-22 just discussed and the lack of jobs I believe it will generate, even this lower estimate sounds extremely optimistic.

Chalmers Johnson on the Pentagon:

Each year, we Americans account for nearly half of all global military spending, an amount larger than the next 45 nations together spend on their militaries annually.
...
Our problems are those of a very rich country which has become accustomed over the years to defense budgets that are actually jobs programs and also a major source of pork for the use of politicians in their reelection campaigns.

Given the present major recession, whose depths remain unknown, the United States has better things to spend its money on than Nimitz-class aircraft carriers at a price of $6.2 billion each (the cost of the USS George H. W. Bush, launched in January 2009, our tenth such ship) or aircraft that can cruise at a speed of Mach 2 (1,352 miles per hour).

...

By the time the prototype F-22 had its roll-out on May 11, 1997, the Cold War was nearly a decade in its grave, and it was perfectly apparent that the Soviet aircraft it was intended to match would never be built. Lockheed Martin, the F-22's prime contractor, naturally argued that we needed it anyway and made plans to sell some 438 airplanes for a total tab of $70 billion.

I think we've played this game before...

From Louis Lapham, "By the rivers of Babylon," Harper's Jan 09:

The looting of the U.S. Treasury is never an easy trick, but to carry off more than $1 trillion in broad daylight while the members of Congress stand around applauding the exit strategy as one certain to guarantee the health and happiness of the American people is a wonder of entrepreneurial enterprise that surely deserves some sort of tip of the hat. happiness of the American people is a wonder of entrepreneurial enterprise that surely deserves some sort of tip of the hat. When the James gang robbed the Kansas City Fair in the fall of 1872, the local paper acknowledged the achievement as “so diabolically daring and so utterly in contempt of fear that we are bound to admire it and revere its perpetrators,” and I would have thought that our own easily awestruck news media might have found a few words of respect and esteem for the perps who knocked over the Wall Street fairgrounds last year. How not at least revere the scale of the undertaking—nine banks emptied of more than $500 billion in capital, as much as $8 trillion withdrawn from the Dow Jones Industrial Average, $2 trillion from the country’s pension and retirement accounts.

...

Even more touching than Thomas Friedman’s laying of a wreath on the grave of Cotton Mather was the sight of Alan Greenspan sitting down by the rivers of Babylon, his harp hung upon the willows, silent in a strange land. During his tenure as chairman of the Federal Reserve (1987–2006) Greenspan had believed it his duty to irrigate the fruited plain of the American economy with the flow of easy money, his policy to supply the banks with the abundant credit, at low cost and presumably risk-free, that enabled the floating of both the Internet bubble (1995–2000) and the housing bubble (2003–2006). For his efforts he was accorded the title of “maestro,” his word on the country’s finances trading at parity with the word of God. When it was suggested (as long ago as 1994) that the newborn market in derivatives demanded some sort of government supervision, Greenspan discounted the suggestion as insulting to the integrity of the public-spirited Wall Street gentlemen laboring on behalf of the common good; when on October 23 of last year he appeared before the House Committee on Oversight and Government Reform to explain what had gone wrong with the making of something out of nothing, his tongue cleaved to the roof of his mouth. “Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity, myself included, are in a state of shocked disbelief.”

To think that the Wall Street financial institutions seek to protect the equity of their customers in preference to their own is to think that at the Las Vegas poker tables the dealers seek to protect the chips stacked in front of the sweet old lady in the blue baseball cap playing a system drawn from the book of Revelation.

...

The eighteenth-century New England privateers flew the American flag as a flag of convenience, not as a declaration of their allegiance to a cause but as a license to seize the wealth stored in the hulls of wooden ships. Their twenty-first- century heirs and assigns employ the semblance of a government in Washington as an investment vehicle permitting them to seize the wealth stored in the labor of the American people. The Republican and Democratic parties compete for the brokerage business, between them putting up $2.4 billion for last year’s presidential campaigns—i.e., for the speculative ventures that bundle junk slogans into collateralized-debt obligations, which, when it comes time to off-load the boodle, transform the upside into private property, the downside into the good news that poverty replenishes the soul.

Obama and the War of Position

Brown University Africana scholar C.D.B. Walker draws insights from Gramsci to analyze the current situation:

The broad left often fails to realize that civil society is, as Gramsci reminds us, a “dialectical unity” with political society. That is, political actors and organizations in civil society do not operate absolutely outside of the social, economic, and ideological dictates of political society [eg The Audubon Society's support for Vilsack]. Is there any reason why over the last three decades we have witnessed the delegitimation of the state as well as state initiatives by those forces on the left in concert with the rise of the conservative assault on a nominal American welfare state? [I think he means that within Civil Society the idea of "shrinking the size of government" has enjoyed as much hegemony as within the hallowed halls of the Club For Growth, AEI, Heritage, CATO, etc]

He calls for the decolonization of American political society, and adds:

"a people’s agenda for change catalyzed by the politics of freedom recognizes that US domestic policy cannot undergo a revolutionary transformation without an end to the policies and practices of American empire abroad. Such a political transvaluation is not effected by renewed calls for “American leadership” – a convenient euphemism for the continuation of American dominance – but by a new vision of an interrelated world community that prioritizes the lives of people over power based on the principle of cooperation and not competition.

Tufts historian Gary Leupp skips Gramsci and goes directly to Marx to analyze the situation:

A lot of liberal Democrats---people who believe in the system (although maybe less so day by day, since it isn’t being very good to them)---are echoing the complaint from David Corn of Mother Jones: “This Wasn’t Quite the Change We Pictured.” Perhaps they feel, to put it in Marxian terms, that he exploited their labor power during the election campaign, and now for all their efforts on his behalf he’s slapping them in the face.

maybe what we’re seeing is a war within Obama’s own mindset. Not a war, mind you, about whether or not to champion U.S. imperialism; if he had doubts about that he wouldn’t be a U.S. politician, or at least a highly successful one attracting the money and endorsements that he has. He is plainly a creature of U.S. capitalism and seeks to enhance its geopolitical advantages; that is a big part of his job description.

I think Leupp has tapped something very important below. One of the hallmarks of Empire is its ability to recognize, recruit and retain talent from throughout its diverse realms (that is scribes, artists, architects, etc. of all races and creeds). But what characterizes all would-be Project Managers for Empire drawn from marginal social groups is their deep seated desire to for acceptance from the existing power structure. He elaborates:

Obama’s staff and cabinet picks suggest a deep desire for acceptance by the existing power structure. It’s as though he’s bending over backwards to disabuse anyone of those nasty campaign rumors that he’s a cypto-Muslim, Arabophiliac, quasi-socialist or closet Marxist. It’s as though he’s actively soliciting the Good Housekeeping Seal of Approval from Joe Lieberman, Karl Rove, Henry Kissinger, Lindsay Graham, Michael Goldfarb, Richard Perle and the other extreme reactionaries expressing their delight at his cabinet choices, and viewing such support as recognition of his own special gift as a healer and uniter. But how can he possibly expect to unite his antiwar base with his rightwing foreign policy team?

The question now becomes: which villages will be pummeled by American bombs in the name of "credibility" and "national unity."

Will the real working class please stand up?

"Joe the (asst.) Plumer" as representative of the American working class... Hmmmn, "Corey D. B. Walker, assistant professor of Africana studies at Brown University and the author of A Noble Fight: African American Freemasons and the Struggle for Democracy in America" begs to differ.

Like rats fleeing a sinking ship, Conservatives bail on the Republican Party as a hopelessly compromised vessel and flock to the Obama band wagon.

What?! Something other than neo-liberal orthodoxy on the Farm?

Something exciting happened on campus and I missed it:

Author Naomi Klein Discusses Bailout, Economy at Stanford

A Green Deal?

UCB economist Robert B. Reich on the state of the American economy: "The top 1 percent now takes home about 20 percent of total national income. As recently as 1980, it took home 8 percent."

He calls for a massive investment in a public works/ job-creation program on the model of FDRs New Deal. In this vein, Google CEO Eric Schmidt "calls for a bold move into solar and wind power. It would cost $2.7 trillion through 2030. However, Schmidt says it would generate $2.1 trillion in energy savings. It would also create hundreds of thousands of jobs. And help fight global warming."

He points outs out that many of these jobs would be produced in rural areas where unemployment is highest, and would be in sectors like construction and engineering that are hard hit by the current situation. I personally wouldn't mind a high-speed rail link connecting Medocino County with the Bay Area. Why we don't already have a high-speed rail line running from San Diego to Seattle is beyond me.

Now is as good a time as any to re-engineer our energy systems and redistribute wealth and income in America (and globaly), but the brilliant Mike Davis points to three key reasons why the FDR's New Deal model is not relevant to the current situation: this is not your grand pappy's industrial capitalism - financial captialism is a whole new, and even more predatory (and volitile) beast. More on Davis' analysis to follow.

A View from a Front Line in the Drug War

This new movie looks very interesting: Humboldt County. A review to follow... (as soon as I can get to a theater showing it... funny how much trouble movies lacking a talking Chuwawa have with distribution...)

Takes on the end of American Empire

Howard Zinn on the end of American empire.

Robert Reich on Wall Street extortion: "Give us a trillion dollars or we'll masacre your retirement securities!"

Stan Goff offers the Republicans a bit of advice.

Fatemeh Keshavarz on what "Obama could have said."

Mark Engler reviews Kevin Phillips new book Bad Money: Reckless Finance, Failed Politics, and the Crisis of American Capitalism.

American Bankster: Krugman as Finance Czar?

On Today's Democracy Now! Paul Krugman suggests that as Treasury Secretary he would send shivers down the spine of today's Robber Barrons. Its worth a try...

On a related note: APB, Have you seen this man:









Robert Rubin has gone missing. In the midst of this crisis we have heard a great deal about Phil Gramm and his merry band of market deregulators, but we seem to have overlooked the chief Fox in the Henhouse. It is interesting to note that after Rubin pushed through the repeal of Glass-Steagall- the 1933 law which erected a firewall between commerical and investment banks (ie commerical banks- those which collect deposits) can not invest our savings in the latest Wall Street ponzi scheme (the ponzi scheme in the 1920, or at least one of them, was real estate specualtion in Florida), he went to work for the investment arm of Citigroup (the merger of the commerical bank Citicorp and the investment bank Travelers). ie, he took the job that he had just legalized.

The end of neo-liberalism?

Is this the end of neo-liberalism? Naomi Klein suggests not (also here). In her view, the ideological fantasy (nightmare) of self-regulating markets will rear its ugly head once again as soon as the storm passes, and now is the time to demand structural reform to defend against the predations that it underwrites. In her view the public debt obligation incurred over the course of this crisis will be used as leverage to push through unpopular reforms in the not-too-distant future. As an example, Obama will be under pressure moderate his already rather anemic (or at least stupidly complex) health-care reform proposals. Or similarly, stupid ideas like "Drill Here, Drill Now!" will gain traction, as people in a state of shock have a hard time keeping their critical faculties in tact (ie they might overlook the fact that oil produced in Alaska's northern slope will enter a world market and have no short or long term impact on local prices at Chevron. They might also be induced to overlook the most basic market principle: there are two ways to affect price: increase supply, or decrease demand. It would take 10 years to increase supply by bringing new sources online (the psychological impact of new exploration would be negligible), whereas we could cut demand virtually overnight. The fastest way to bring down the price of a gallon of gasoline is to demand less of it.

Alexander Cockburn reminds us that the " capitalist system is always in crisis. Crisis is integral to the system," and points out the fact that the two key figures behind the repeal of Glass-Steagall/ the Commodity Futures Modernization Act were John McCain money-man Phil Gram, and Obama money-man Robert Rubin. And he adds this:

"Three and a half years after Black Thursday, 1929, Roosevelt’s job was to bail out capitalism, which he did, with his advisers borrowing policies from Europe, both from Italian fascism and the socialist tradition.

If Obama becomes president what advisors will he recruit? Will he keep Rubin at his side along with his passel of Chicago School economists? His left supporters hope that he has a secret plan under wraps, that a populist T-shirt lies under the decorous mask of bipartisanship."

If Obama can manage to overcome the "Bubba vote" (Stanford study), Deibold the electoral college, and the supreme court, he will have indeed proved himself a super-hero.

Eric Margolis reminds us that historically, fiscal and economic crisis combined with military defeat has been a recipe for Revolution.

On the trillion dollar check to Paulson and his gang before they sneak out the door in November, Krugman says: "No Deal." If it was a matter of the state acquiring valuable assets that would be one thing, but subsidizing Wall Street's losses? No Deal.

Krugman on the "paradox of deleveraging." (ie when the selling of assets further depreciates their value).

Let them eat cake?

Here's a blast from the past:

Barbara Bush on Katrina, 5 September 2005 (CNN):

"But I really didn't hear that [criticism of the President] at all today. People came up to me all day long and said 'God bless your son,' people of different races and it was very, very moving and touching and they felt like when he flew over that it made all the difference in their lives so I just don't hear that."

It must have felt so touching to see the Presidents jet soaring overhead...

The Cost of Empire

Economist Joseph Stiglitz on the moral and economic costs of US policy in Iraq.

TINA?

Sociologist Robert Engler on democratic alternatives to corporate globalization.

Klein and Cockburn on Disaster Capitalism

Naomi Klein defends her "shock doctrine" thesis against her Chicago School critics.

Patrick Cockburn assesses the book from a traditional Marxian perpsective and argues that Klein "overstates the the strength and mystery of the enemy" (to borrow Hunter S. Thompson's formulation). vitality of capitalism. For him the system is still doomed.