Foreclosure in the United States today is in fact a classic example. Over the last thirty years, we have faced a phenomenon we never had before in the history of the United States. We have had rising real wages in America, roughly from the beginning of our history, up until the 1970s. If you worked hard, you got more money in your wage envelope at the end of the week. That was true for 150 years, that was really amazing, and no other country did that.
It stopped in the 1970s, because of computers replacing people, because of American companies moving abroad so they could pay lower wages, because of a mass movement of women into the labor force, immigration, and we went from a country with a chronic labor shortage to a country with a chronic labor oversupply. Employers no longer had to raise wages to keep workers working, to keep them happy, and keep them employed.
And as result, the American working people went into a kind of prolonged psyhic shock. Their wages weren’t rising any more. And so what they did was they turned to another source of money to realize the American Dream that they had been culturally developed to hope for, to expect, to promise to their kids.
They borrowed money like crazy. And the business community of the United States saw in the borrowing of the American working class a fantastic market to go after. You know in the 1970s, in the beginning, the only people who had a credit card were wealthy people or folks on business expense accounts. Starting in the 1970s, we gave credit to the mass of Americans. Everybody gets a credit card, and everybody can go to the bank to borrow to buy a home. Mortgage debt, credit card debt explodes.
It was a money-making extravaganza. We saw all the wealthy come together and get involved in this money. Bulding houses, lending workers at huge interest rates the money with which to buy the new and expensively built homes. Wealthy people poured their money in to companies that built these homes, furnished these homes, decorated these homes, and you had a literal explosion of profitability.
But of course. You can’t keep lending to working people if their underlying economic situation isn’t improving. So it was only a matter of time until the extra borrowing reached the limit of the underlying frozen, stagnant wages.
That was hit in 2007. Millions of Americans could no longer afford the houses that they had borrowed to buy. The foreclosure crisis represents the rage and anger of the wealthy class. If the underlying people they lent money to can’t pay for them, they’re going to take those houses back, throw those people out of their homes, and try to find another way to make money. Here’s a perfect example of the profit motive creating a housing boom that becomes a bust, and that now to recoup the money of the minority who invested in it, requires millions of people, the majority, to literally lose their homes, producing in the United States in 2010 and 2011, a society that has millions of empty homes, side by side with millions of homeless people. [++]
It is a virtual certainty professional liberals and progressives were sitting behind their office desks only last year when the NYPD (New York Police Department) and Oakland police were beating the crap out of Occupy, firing projectiles into faces at point blank range and parking their motorcycles on the legs of NLG (National Lawyers Guild) observers for daring to protest the ‘liberal’ state / plutocrat nexus. This was in marked contrast to Federal and local police respect for the ‘rights’ of Tea Partiers to carry loaded weapons at rallies for their political ‘opposition.’ FBI and local police infiltration of Occupy, including illegal ‘pre-emptive’ kidnappings and all manner of dirty tricks, was immediate, intense and had the desired effect of creating paranoia and mistrust. And those efforts tie historically to the COINTELPRO facilitated murders of black leaders and radical disruption of the legal and constitutionally ‘protected’ rights of (real) leftist and anti-war organizations trying to affect substantive political change in the 1960s and early 1970s. But the grassroots Tea Partiers aren’t responsible for the different treatment they received– the institutions of the radical right in Federal and state government working in the interests of their ruling class patrons are.
On the one hand gun control advocates argue the fear of growing state power is lunatic paranoia while on the other there is no apparent interest on their part in disarming the increasingly militarized state against who the claims of outsized power are being made. This contradiction, combined with the articulated fear of an ideological right accompanied by implicit acceptance of the institutional right, points to the class basis for liberal fears. While ideological right-wing reactionaries are the perceived threat to bourgeois liberals, the facts of daily existence posed by institutional racism, the ‘legal status’ machinations used to exploit the manufactured immigrant underclass, and the rapidly and visibly growing class divide supported by state policies and enforced with state power, affect the lives of more people far more dramatically. … Put another way, it is the reaction of the growing underclass bourgeois liberals fear, not the diminishing material conditions faced by it. But the diminishing conditions are not fact of nature, but of policy.
Rob Urie, The Radical Center and Armed Revolution
Let there be no doubt about it: we live in the era of Financial Empire. Unlike the military conquests that drove the territorial expansions of the empires of old, contemporary Financial Empire consists not in the highly visible exercise of a Big Stick ideology (although military imperialism undoubtedly continues today), but rather takes the shape of an Invisible Hand. Where in the late 19th and early 20th centuries the logic of domination was driven by the instrumental power of imperial states, the Empire of the 21st century no longer needs any sticks to enforce the submission of sovereign states: through the global enforcement mechanisms of market discipline and IMF conditionality, the structural power of finance capital now ensures that all shall bow before the money markets.
In The Accumulation of Capital (1913), Rosa Luxemburg noted that, “though foreign loans are indispensable for the emancipation of rising capitalist states, they are yet the surest ties by which the old capitalist states maintain their influence, exercise financial control and exert pressure on the customs, foreign and commercial policy of the young capitalist states.” So great was this financial control that in the First Wave of Globalization, which ran from 1870 until the onset of WWI in 1914, defaulting countries faced a 40 percent chance of being invaded, subjected to gunboat diplomacy, or having foreign control imposed on their domestic finances under threat of a naval blockade. In a telling and ironic sign of the times, even the Hague Peace Conference of 1906 recognized the legitimacy of the use of force in settling sovereign debt disputes.
[…] Today, the imperial era of gunboat diplomacy may have come to an ignominious end, but the era of Financial Empire is still in full swing. What the ongoing European debt crisis confirms once more is that financial capitalism, once fully developed and globalized, has no need for debtors’ prisons, gunboat diplomacy or US marines to enforce debtor discipline. The iron bars of the debtors’ prison are replaced with the global flows of finance capital; the gunboats have long since made way for what Warren Buffet called the financial weapons of mass destruction; and the foreign administrators of tax and customs offices no longer wear military suits but carry IMF suitcases. Through its control over capital flows and its ability to withhold much-needed credit, the global bankers’ alliance (made up of the big banks and institutional investors, along with international financial institutions and the financial and monetary authorities of the dominant capitalist states) has obtained a form of structural power that allows it to discipline the behavior of indebted countries without having to resort to military coercion. It is this discipline enforced by global capital markets and financial institutions that forms the backbone of Financial Empire. [++]
In my periodic discussions of contemporary capitalism and its potential transition into a rentier-dominated economy, I have emphasized the point that an economy based on private property depends upon the state to define and enforce just what counts as property, and what rights come with owning that property. Just as capitalism required that the commons in land be enclosed and transformed into the property of individuals, so what I’ve called “rentism” requires the extension of intellectual property: the right to control the copying and modification of patterns, and not just of physical objects.
But the development of rentism entails not just a change in the laws, but in the way the economy itself is measured and defined. Since capitalism is rooted in the quantitative reduction of human action to the accumulation of money, the way in which it quantifies itself has great economic and political significance. To relate this back to my last post: much was made of the empirical and conceptual worthiness of Reinhart and Rogoff’s link between government debt and economic growth, but all such disputations presume agreement about the measurement of economic growth itself. [continue]
If, on the other hand, we stop taking world leaders at their word and instead think of neoliberalism as a political project, it suddenly looks spectacularly effective. The politicians, CEOs, trade bureaucrats, and so forth who regularly meet at summits like Davos or the G20 may have done a miserable job in creating a world capitalist economy that meets the needs of a majority of the world’s inhabitants (let alone produces hope, happiness, security, or meaning), but they have succeeded magnificently in convincing the world that capitalism—and not just capitalism, but exactly the financialized, semifeudal capitalism we happen to have right now—is the only viable economic system. If you think about it, this is a remarkable accomplishment.
David Graeber, “A Practical Utopian’s Guide to the Coming Collapse” in the latest issue of The Baffler (via youthisastateofmind)
On the same topic (the political triumph of neoliberalism), read Philip Mader’s Buying Time and Running Out
Actually, unregulated globalization—shorn of human sympathy and oblivious to persistent cruelties—is the road backwards. The creative tumult of our era, with its fantastic inventions and globalizing production, has reverted to ancient injustices—forms of exploitation that originated three centuries ago with the English industrial revolution. When new machines like textile looms displaced human labor, the seasoned workers were dismissed, their skills no longer valued. They were replaced in the factory by children and women—cheaper laborers without power or influence who toiled in ‘the dark satanic mills’ first described by the English poet William Blake. In our time, industrial capitalism has profitably employed the same exploitative routine but with an essential difference. Thanks to global supply chains, contemporary sweatshops with dismal wages and sordid working conditions are located on the other side of the world. The people are exploited in various ways but their cruel conditions cannot easily be seen by the American consumers who benefit from afar.
William Greider (via azspot)
The crossing of the Rubicon into the confiscation of depositor funds was not a one-off emergency measure limited to Cyprus. Similar “bail-in” policies are now appearing in multiple countries. (See my earlier articles here.) What triggered the new rules may have been a series of game-changing events including the refusal of Iceland to bail out its banks and their depositors; Bank of America’s commingling of its ominously risky derivatives arm with its depository arm over the objections of the FDIC; and the fact that most EU banks are now insolvent. A crisis in a major nation such as Spain or Italy could lead to a chain of defaults beyond anyone’s control, and beyond the ability of federal deposit insurance schemes to reimburse depositors.
The new rules for keeping the too-big-to-fail banks alive: use creditor funds, including uninsured deposits, to recapitalize failing banks.
But isn’t that theft?
Perhaps, but it’s “legal” theft.
… [U]nder the Bankruptcy Reform Act of 2005, derivatives counter-parties are given preference over all other creditors and customers of the bankrupt financial institution, including FDIC insured depositors. Normally, the FDIC would have the powers as trustee in receivership to protect the failed bank’s collateral for payments made to depositors. But the FDIC’s powers are overridden by the special status of derivatives. (Remember MF Global? The reason its customers lost their segregated customer funds to the derivatives claimants was that derivatives have super-priority in bankruptcy.)
… An interesting series of commentaries starts with one on the website of Sprott Asset Management Inc. titled “Caveat Depositor,” in which Eric Sprott and Shree Kargutkar note that the US, UK, EU, and Canada have all built the new “bail in” template to avoid imposing risk on their governments and taxpayers. They write:
[M]ost depositors naively assume that their deposits are 100% safe in their banks and trust them to safeguard their savings. Under the new “template” all lenders (including depositors) to the bank can be forced to “bail in” their respective banks.
Dave of Denver then followed up on the Sprott commentary in an April 3 entry on his blog The Golden Truth, in which he pointed out that the new template has long been agreed to by the G20 countries:
Because the use of taxpayer-funded bailouts would likely no longer be tolerated by the public, a new bank rescue plan was needed. As it turns out, this new “bail-in” model is based on an agreement that was the result of a bank bail-out model that was drafted by a sub-committee of the BIS (Bank for International Settlement) and endorsed at a G20 summit in 2011. For those of you who don’t know, the BIS is the global “Central Bank” of Central Banks. As such it is the world’s most powerful financial institution.
The links are in Dave’s April 1 article, which states:
The new approach has been agreed at the highest levels … It has been a topic under consideration since the publication by the Financial Stability Board (a BIS committee) of a paper, Key Attributes of Effective Resolution Regimes for Financial Institutions in October 2011, which was endorsed at the Cannes G20 summit the following month. This was followed by a consultative document in November 2012, Recovery and Resolution Planning: Making the Key Attributes Requirements Operational.
Dave goes on:
[W]hat is commonly referred to as a “bail-in” in Cyprus is actually a global bank rescue model that was derived and ratified nearly two years ago… . [B]ank deposits in excess of Government insured amount in any bank in any country will be treated like unsecured debt if the bank goes belly-up and is restructured in some form.
Jesse at Jesse’s Café Americain then picked up the thread and pointed out that it is not just direct deposits that are at risk. The too-big-to-fail banks have commingled accounts in a web of debt that spreads globally. Stock brokerages keep their money market funds in overnight sweeps in TBTF banks, and many credit unions do their banking at large TBTF correspondent banks:
You say you have money in a pension fund and an IRA at XYZ bank? Oops, it is really on deposit in you-know-who’s bank. You say you have money in a brokerage account? Oops, it is really being held overnight in their TBTF bank. Remember MF Global? Who can say how far the entanglements go? The current financial system and market structure is crazy with hidden risk, insider dealings, control frauds, and subtle dangers.
… Robert Teitelbaum wrote in a May 2011 article titled “The Case Against Favored Treatment of Derivatives”:
… Dodd-Frank did not touch favored status [of derivatives] and despite all the sound and fury, … there are very few signs from either party that anyone with any clout is suddenly about to revisit that decision and simplify bankruptcy treatment. Why? Because for all its relative straightforwardness compared to more difficult fixes, derivatives remains a mysterious black box to most Americans … . [A]s the sense of urgency to reform passes … we return to a situation of technical interest to only a few, most of whom have their own particular self-interest in mind.
But that was in 2011, before the Cyprus alarm bells went off. It is time to pry open the black box, get educated, and get organized.
New figures show inequality has sharply widened in the two-year recovery following the period known as the Great Recession. According to the Pew Research Center, the top 7 percent of U.S. households saw their income jump 28 percent, while that of the remaining 93 percent declined. The wealth gap separating the top 7 percent from the rest jumped from a ratio of 18-to-1 in 2009 to 24-to-1 in 2011.
Inequality Widened During Post-Recession Period
American children are on average worse off than children in Western Europe and barely better off than their counterparts in the Baltic states and the former Yugoslavia, according to a recent report from United Nation’s Children’s Fund (UNICEF) on the welfare of children in developed countries.
The report, which compares kids in 29 Western countries, measures well-being across five metrics: material well-being, health and safety, behaviors and risks, housing and environment, as well as education. It ranks the United States in the bottom third on all five measures of well-being and particularly low on education and poverty. The United States is joined at the bottom by “emerging” European economies, while the Scandinavian countries and the Netherlands come out on top. The report notes that this latter group of countries tends to spend far more per capita on social welfare programs.
Since 2001 our Armed Forces have been totally engaged in two major, unjustified wars and various minor “peace actions”. A child born in 1990 in the U.S. grew up in a world where there has been constant warfare and warfare’s necessary companion glorification of military service. The admixture of America’s warlike behavior and the faux glorification of the nobility of our military has become a constant in that young persons mind, only to better make them future cannon fodder for our dominant Corporate/Military Industrial Complex. Sadly, the less educated that young person is the more they are gullible to the siren call of that propaganda of military glorification. As the Great U.S. General Smedley Butler said so long ago: “War is a racket”.
In truth we honor our soldiers far more in words than in deeds. “America’s Greatest Generation” as establishment mouthpiece Tom Brokaw put it, was also the one generation of military personnel that was actually very well treated in the aftermath of their service. The World War II returning troops were educated via the generous G.I. Bill, had their homes financed through special discount programs and entered the marketplace at a time of phenomenal growth of the U.S. economy due to our country’s new position as the World’s dominant power. Every generation of returning veterans before and after World War II was treated rather shabbily in comparisons, despite the lavish praise given them for their service. The huge backlog in receiving benefits and medical treatment for our latest generation of returning veterans is masked by our presumed “honoring of the troops”, which is constantly accomplished merely in words, with a paucity of actual services delivered.
The reality is that the only real bi-partisanship that exists in our politicians today is that the overwhelming majority of both Democrats and Republicans are enthusiastic supporters of American military hegemony and bought stooges of the Corporate/Military Industrial Complex. That many beyond their corporate donors are indeed true believers in American military supremacy is no doubt true. The fact is that if you were born after let’s say 1960, your view of the world was shaped by American interventionism and American military supremacy. Barack Obama was born in 1961 and one can count him as one of those who for the most part supports America’s military interventionism. The proofs of my assertions are simple. In this time of supposed budgetary crisis, there is barely minimal support for cutting anything out of our Military and Intelligence budget. I lump Military and Intelligence together because there has been such a blurring of the lines between these two formerly discrete government entities, that today it is impossible to distinguish boundaries.
When it comes to my premise for this piece which is that this country will soon be involved in its “next” war, let me explain my reasoning. First of all there is the eight hundred pound gorilla in the room of American politics that almost no one that I’m aware of talks about. We are mired in a recession with countless American unemployed. If we bring our troops home and cut our defense budget we will add hundreds of thousands, if not millions, of people to our jobless rolls. Truly, the military has been the escape for many with otherwise poor employment prospects into obtaining a respectable job and the semblance of a future career. By cutting the military/intelligence budget, as things now stand economically in this country, we will recede from “recession” into “depression”. However, without something to justify the existence of our military budget, the U.S. spends more on our military budget than the next thirteen countries combined military expenditures, the truth that we are squandering the riches of this country to support the profits of private corporations becomes obvious. Therefore we need something to justify this unnecessary expense and that is another war. [++]
We have to grasp, as Marx and Adam Smith did, that corporations are not concerned with the common good. They exploit, pollute, impoverish, repress, kill, and lie to make money. They throw poor people out of homes, let the uninsured die, wage useless wars for profit, poison and pollute the ecosystem, slash social assistance programs, gut public education, trash the global economy, plunder the U.S. Treasury and crush all popular movements that seek justice for working men and women. They worship money and power.
Chris Hedges (via azspot)
Book review of Wolfgang Streeck’s “Gekaufte Zeit: Die vertagte Krise des demokratischen Kapitalismus”. Berlin: Suhrkamp, 2013.
By Philip Mader
On the tenacity of late-stage capitalism (i.e, why it won’t fucking die):
The book begins with a critical appraisal of how useful the Frankfurt School’s crisis theories from the 1960s and 1970s still are for explaining today’s crises. While their works are by no means invalidated, Streeck contends that yesteryear’s crisis theorists could scarcely imagine how long capitalist societies would be able to “buy time with money” and thereby continually escape the contradictions and tensions diagnosed by their theories of late capitalism. He explains the developments in Western capitalism since the 1970s as “a revolt by capital against the mixed economy of the postwar era”; the disembedding of the economy being a prolonged act of
successful resistance by the owners and managers of capital – the “profit-dependent” class – against the conditions which capitalism had had to accept after 1945 in order to remain politically acceptable in a rivalry of economic systems. (p. 26)*
By the 1970s, Streeck argues, capitalism had encountered severe problems of legitimacy, but less among the masses (as Adorno and Horkheimer had expected) than among the capitalist class. Referring to Kalecki, he suggests that theories of crises have to refocus on the side of capital, understanding modern economic crises as capital “going on strike” by denying society its powers of investment and growth-generation. The 1970s crisis, and the pathways that led out of it, thus were the result of capital’s unwillingness to become a mere beast of burden for the production process – which many Frankfurt theorists had tacitly assumed would happen. Capital’s reaction to its impending domestication set in motion a process of “de-democratising capitalism by de-economising democracy” (Entdemokratisierung des Kapitalismus vermittelsEntökonomisierung der Demokratie). This ultimately brought about the specific and novel form of today’s crisis and its pseudo-remedies.
The rest, as they say, is history. In the second part, Steeck outlines how public debt rose with the neoliberal revolution, something mainstream economics and public choice quickly and falsely explained away as an instance of the “tragedy of the commons” with voters demanding too much from the state. However, the rise in debt came in fact with a curtailment of the power of democracy over the state and the economy. First, the good old “tax state” was ideologically restrained – starving the beast – and gradually found itself rendered a meek “debtor state” increasingly impervious to any remaining calls for redistribution by virtue of its objective impotence. Then, the resulting power shift to what Streeck calls the state’s “second constituency” – the creditor class, which asserts control over its stake in public debt and demands “bondholder value” – generated a standoff which Streeck observes between the conflicting demands of Staatsvolk und Marktvolk. The fact that the debtor state owes its subsistence less to contributions from the taxpaying “state people” and more to the trust of its creditor “market people” leads to a situation in which debtor states must continually credibly signal their prioritisation of creditors’ demands, even if it harms growth and welfare. Creditors, in their conflict with citizens, aim to secure fulfilment of their claims in the face of (potential) crises. The ultimate power balance remains unclear, but the “market people’s” trump card is that they can mobilise other states to fulfil their demands, leading to a kind of international financial diplomacy in their interest.
The archetype of such a transnational financial diplomacy, Streeck contends in the third and final part, is Europe under the Euro, where we encounter an even more wretched type: the “consolidation state”. Consolidation, Streeck argues, is a process of state re-structuring to better match the expectations of financial markets, and the consolidation state is a sort of perverse antithesis to the Keynesian state, acting in vain appeasement of the financial markets in hope of one day again being permitted to grow its economy. …