The American Bear


The tendency of we in ‘the West’ has been to draw a circle around the visible political-economic relations—those close at hand, and to exclude from our realm of concern the broader impact of Western policies. However, neo-liberalism as both ideology and imposed political economy is now fact in the West. With quiet acceptance any pretense of ‘democracy’ has been replaced with the admonition that if we behave ourselves we can remain on the ‘winning’ side of political economic restructuring according to neo-liberal dogma. Left unsaid is that rapidly declining circumstance, in terms of both the increasing economic marginalization of most citizens and the imposition of the technologies of totalitarianism, is wholly the product of four decades of near-silent neo-liberal coup. What Mr. Obama’s insistence on continuing to push neo-liberal policies indicates is that no economic debacle will cause neo-liberalism to be re-thought by its proponents. What historical trajectory suggests is that the imposed political economies and failed policies of neo-liberalism will only result in their greater imposition until the world says ‘no more.’ Rob Urie

Emergency manager throws Detroit into bankruptcy | WSWS

The emergency manager overseeing the financial restructuring of Detroit filed a petition in federal court Thursday afternoon throwing the devastated industrial city of 700,000 residents into Chapter 9 bankruptcy. Republican Governor Rick Snyder, who appointed Wall Street bankruptcy attorney Kevyn Orr as the city’s emergency manager last March, immediately approved the filing.

The largest municipal bankruptcy in US history paves the way for an unprecedented attack on the pensions and health care benefits of city workers, the further slashing of essential services, and the sell-off of public assets to pay the banks and bondholders who hold the city’s debt.

Announcing the filing, Emergency Manager Kevyn Orr stood side-by-side with the city’s Democratic mayor, David Bing, a multi-millionaire who has slashed the city workforce by 20 percent since taking office in 2009. Both cynically claimed that the bankruptcy would have little effect on daily life and would lead to improved services for city residents.

The Obama administration signaled its support for the bankruptcy filing, issuing a statement Thursday declaring: “While leaders on the ground in Michigan and the city’s creditors understand that they must find a solution to Detroit’s serious financial challenge, we remain committed to continuing our strong partnership with Detroit as it works to recover and revitalize and maintain its status as one of America’s great cities.”

Orr has already approved a corporate-backed plan to shut off services to neighborhoods deemed too poor or under-populated for profitable private investment, while handing over public lighting, transportation, garbage collection and other services to for-profit companies. His “turnaround” team has appraised everything from the city’s water treatment plant and masterpieces at the Detroit Institute of Arts to Belle Isle Park and the animals at the Detroit Zoo for possible sale to private investors.

Above all, the bankruptcy filing clears the way to gut the pensions and health care benefits of the city’s 31,000 current and retired employees. By throwing the city into the bankruptcy courts, Orr intends to circumvent Michigan’s constitution, which declares public pensions to be a “contractual obligation” that “shall not be diminished or impaired.”

Orr rushed the bankruptcy filing to preempt lawsuits filed by pension trustees and public-sector unions seeking to block bankruptcy on the grounds that it would lead to unconstitutional pension cuts. Attorneys for Snyder reportedly asked the lawyers representing the pension funds for a five-minute delay before they sought a temporary restraining order to block the bankruptcy filing. During those five minutes, Orr’s attorneys filed the bankruptcy petition in Detroit.

At Thursday’s press conference, Orr gloated that the bankruptcy filing put an “automatic stay on all litigations,” adding, “We don’t have any time for more delaying tactics.”

Under a plan Orr previously outlined, pension trust funds would receive as little as 10 cents for every dollar owed to 21,000 retirees for a lifetime of labor. Orr wants to eliminate cost-of-living adjustments for retirees who receive as little as $500 to $1,000 a month, with no additional Social Security payments. He also intends to impose an immediate freeze on future pension payments and shift retirees to Medicare or privately controlled health care exchanges set to begin next year under the Obama administration’s Affordable Care Act. The city’s current 9,700 workers will also see a huge reduction in health benefits and the loss of employer-paid pensions.

[…] The only contractual obligations that will be honored by Orr are the billions of dollars in principal and interest demanded by the major Wall Street banks and bondholders. Orr has already made a settlement with UBS, Bank of America and Merrill Lynch Capital Services on $340 million in credit default swaps, giving them 75 cents on the dollar.

[…] “Officials in other financially troubled cities may feel encouraged to follow Detroit’s path, some experts say,” the New York Times wrote Thursday, citing Karol K. Denniston, a lawyer involved in the bankruptcy of Stockton, California. “If you end up with precedent that allows the restructuring of retirement benefits in bankruptcy court, that will make it an attractive option for cities. Detroit is going to be a huge test kitchen.”

[…] While Orr insists there is no money for pensions or essential services, hundreds of millions in public dollars will be used to subsidize the development of an upscale housing, commercial and entertainment district covering about 7.2 out of the city’s 139 square miles. This includes $286 million in public funds for a new sports arena for the owner of Little Caesar’s Pizza and the Detroit Red Wings hockey franchise, Mike Ilitch, whose net worth is estimated at $2.7 billion. To make room for the arena, hundreds of low-income workers and seniors are being evicted from their downtown apartments.

The bankruptcy will bring devastation to the working class, but it will mean a huge windfall for Ilitch, Quicken Loan billionaire Dan Gilbert, and the gangs of bankruptcy lawyers, hedge fund operators and private speculators who will descend on Detroit to cash in on the carve-up of the former Motor City. [++]

Trans Pacific Partnership is a Threat To National Sovereignty | Dr. Chandra Muzaffar

The proponents of the Trans Pacific Partnership argue that the TPP would bring huge benefits to Malaysia “with as much as US $ 40 billion (RM 128.4 billion) in annual export gains and US $ 25 billion in annual income gains by 2025.” Small and medium enterprises (SMEs) in particular will reap a bonanza. The TPP, it is said, will also “give Malaysia preferential access to a US $ 15 trillion economy, which means access to the US $ 500 billion in US government tenders.” As against these projections, there are issues of tremendous significance pertaining to the TPP that have been raised by a variety of citizen groups in almost all the 12 countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam) that are currently part of the negotiation process. These issues have emerged as a result of leaks since no officially sanctioned draft has been placed before the public.

The negotiations — the 18th round of which will commence in Kota Kinabalu (Malaysia) on the 15th of July 2013 — are shrouded in secrecy though representatives of major corporations such as Monsanto, Walmart, Bank of America, JP Morgan, Cargill, Exxon-Mobil, and Chevron, among others, it is alleged, have had full access to the draft and have been “suggesting amendments.” One of the issues that has caused grave concern is a set of rules in the TPP which apparently would empower foreign corporations to bypass domestic laws and courts and challenge government policies and regulations aimed at protecting the public interest via tribunals linked to the World Bank and the UN. If this is true, it would be an affront to national sovereignty.

[…] The TPP … prohibits governments and central banks from imposing capital controls or banning risky financial products. Central banks would have diminished capacity to regulate the entry and exit of speculative capital. Countries that are part of the TPP would be compelled to create an even more conducive environment for casino capitalism.

[…] The TPP … allows pharmaceutical corporations to increase the price of medicines and to limit consumer access to cheaper generic drugs. Monopoly patents would be better protected and the purchase of generic drugs would be made more difficult. At the same time, by designating a whole spectrum of policies, regulations and practices as “trade barriers” the proposed agreement undermines some of the people oriented measures associated with different TPP countries.

While some of the provisions of the TPP may be set aside at the behest of individual countries, it is obvious that the US which is the driving force behind the pact is determined to use it as its vehicle to strengthen its economic position in the Pacific region in the face of the rise of China. It explains why China itself — economically the most dynamic nation in the region — has not been invited to join the TPP. This is why it would be naïve to view the TPP as a mere economic and trade arrangement. Its underlying motive is clearly political. It is a critical weapon in the US arsenal for curbing and containing the emergence of a power which has the potential of shaping the future of the entire Pacific in the decades to come.

The US will not allow this to happen. It knows that in order to remain as the world’s sole superpower it has to ensure that it is at the helm of that one region with the greatest economic viability and vitality. The US already has 320,000 troops in the Pacific region. That is the military arm of Pacific Power. The TPP is designed to secure the economic dimension of Pacific Power.

The New Scramble for Africa and the War On Terror | Counterfire

The current scramble for Africa is not simply about the ongoing scramble for resources on the part of imperialist powers. The eurocrisis is an extra motivating factor. The crisis of neoliberalism which began in America in 2008 and then spread to Southern Europe and elsewhere threatens to spread much further still. This crisis has lit a fire under the US imperialists who are experiencing an economy in dire straits which is heading towards the ‘cliff edge’ we keep hearing about with no solutions in view and both government debt and the deficit increasing.

By way of contrast the old 19th Century scramble for Africa was motivated by a period of rapid industrial expansion fuelled by the industrial revolution. Expansion within Europe had hit a wall with the unification of Italy and Germany and so on. So the European powers turned their focus outwards towards the untapped continent of Africa at the end of the century. This involved both an imperialist scramble between imperialist rivals but also involved partial agreements and marriages of convenience in order to carve up African resources whilst attempting to minimalise inter-imperialist conflict.

Today we have a eurocrisis instead of an industrial revolution. Where previously rapid industrial growth pushed the west into Africa in order to open up new markets, now we have an economic crisis forcing imperialists to try and monetise Africa in an attempt to get some kind of purchase in a tanking economy.

When talking about the New Scramble for Africa it’s worth noting that it’s not just the left using the phrase, however convenient it may be for the left to bring up the imperialist past in the context of our current liberal democracy. In fact we don’t have to look any further than the head of Meryll Lynch Bank of America, a man by the name of Richard Gush, who said that ‘a new scramble for Africa is underway’ in the economic sphere in terms of the competition for markets and resources in Africa.

We also saw US Secretary of State John Kerry almost putting his foot in it at his inauguration hearing when he said that ‘China is all over Africa and we’ve got to get in the game here, folks, because if we get in the game we can win’. Presumably realising that he wasn’t just talking to his mates, he was also being broadcast on TV as well, Kerry tried to cover up this gaff by quickly adding that ‘when I say “win” I don’t mean win in the cold war sense, I mean win in an economic sense in terms of creating jobs for Americans’.

So the new scramble for Africa is a very real question we need to address. It’s important that we don’t just seek to understand the significance of the New Scramble For Africa but that we actually oppose any interventions into the continent and also oppose proxy wars and drone wars. Drones and proxies are in a way a partial response to the fact that the anti-war movement stopped conventional wars from being politically viable, at least in the West, forcing the imperial powers to find new ways to be horrendous and new ways of killing people.

It showed that a mass movement did actually force the imperialist powers onto a new track. Of course it’s still a nasty and dangerous situation we find ourselves in. This means that it is vital that we don’t just try to understand this new phase in the War on Terror but that we organise to effectively oppose this imperialist project as well.

Summing up a huge part of the problem | Notes from the Underground

David Harvey:

Neoliberal rhetoric, with its foundational emphasis upon individual freedoms, has the power to split off libertarianism, identity politics, multi-culturalism, and eventually narcissistic consumerism from the social forces ranged in pursuit of social justice through the conquest of state power. It has long proved extremely difficult within the US left, for example, to forge the collective discipline required for political action to achieve social justice without offending the desire of political actors for individual freedom and for full recognition and expression of particular identities. Neoliberalism did not create these distinctions, but it could easily exploit, if not foment, them.

… Civil rights were an issue, and questions of sexuality and of reproductive rights were very much in play. For almost everyone involved in the movement of ‘68, the intrusive state was the enemy and it had to be reformed. And on that, the neoliberals could easily agree. But capitalist corporations, business, and the market system were also seen as primary enemies requiring redress if not revolutionary transformation; hence the threat to capitalist class power. By capturing ideals of individual freedom and turning them against the interventionist and regulatory practices of the state, capitalist class interest could hope to protect and even restore their position. Neoliberalism was well suited to this ideological task. But it had to be backed up by a practical strategy that emphasized the liberty of consumer choice, not only with respect to particular products but also with respect to lifestyles, modes of expression, and a wide range of cultural practices. Neoliberalization required both politically and economically the construction of a neoliberal market-based populist culture of differentiated consumerism and individual libertarianism. As such it proved more than a little compatible with that cultural impulse called ‘post-modernism’ which had long been lurking in the wings but could now emerge full-blown as a both a cultural and an intellectual dominant. This was the challenge that corporations and class elites set out to finesse in the 1980s.

Don Durito:

We have been dealing with the fallout for decades - not only in the US, but in Europe, and all across vast swaths of the Global South. The language has changed, as well. One no longer speaks of solidarity or unity. Terms like “liberation” (one that I recall distinctly being important in the civil rights movements, among feminists, gay rights activists, etc. as late as the 1970s) have been replaced with “empowerment.” We’re good individual consumers, but we are so badly fragmented. A generation of Americans have sneered their way through life in the meantime.

… Like a lot of leftists (and again, I use leftist strictly in the predominantly Marxian anticapitalist sense, as opposed to the pseudo-left/liberal/progressive capitalist partisan Democrat or Green sense), Harvey is short on solutions, but rather adept at describing the problems currently plaguing us. Then again, recognizing that there is, indeed, a problem or set of problems, is a necessary first step in rebuilding a left that is worthy of the name. 

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

(via robotmonastery-deactivated)

Time for Some Publicly-Owned Banks | Ellen Brown

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.

Detroit emergency manager proclaims power to end collective bargaining | WSWS

Detroit Emergency Manager Kevyn Orr stated in letters to the Michigan Employee Relations Commission (MERC) that it is within his power to end collective bargaining in the city. Specifically, Orr claimed he is under no legal obligation to participate in bargaining or compulsory arbitration with public safety employees, including police, firefighters and emergency medical responders.

Just last week, Orr declared a new contract would be imposed on 900 firefighters effective July 1. Although no specifics were released about the contract, Orr intends to impose deep cuts on both the employees of the city and the population as a whole in order to pay off the wealthy bondholders and banks that hold Detroit’s debt and derivative contracts.

While the unions have repeatedly demonstrated their willingness to impose concessions on their members, Orr and the political establishment are well aware of workers’ anger and opposition to additional cuts.

The significance of the latest communication to MERC is to preempt any legal appeals by the unions. It is in line with the notice sent by Mayor Dave Bing earlier in the month to the same agency demanding the revocation of the authority of state arbitration panels to hold hearings or issue rulings on appeals made by Detroit police unions and those of emergency medical technicians.

Outlining his contempt for state laws, Orr declared that because Detroit is in receivership, he is not subject to Michigan’s Public Employment Relations Act, a 1947 law that legalized collective bargaining between unions and local governments and school districts. He claimed that the city under his management is “authorized to advance this position and seek…any and all relief available by law.” This reference to the law is specifically to the emergency manager law, which he claims to supersede any other laws in existence.

This EM law, Public Act (PA) 436, was pushed through by the Republican-controlled state legislature after voters defeated a similar measure in November. The law—which received bipartisan support from state treasurer Andy Dillon—is being used by Wall Street to run roughshod over any state laws or city charters, which in any way present an obstacle to gutting pensions, privatization and selling off of public assets.

The installation of an emergency manager in Detroit is a thoroughly reactionary measure, which is incompatible with any democratic norms. The same dictatorial measures are being imposed by the global banks in Greece, where the IMF, the European Union and the European Central Bank are seeking to abolish the right to public education, which is currently enshrined in the Greek constitution.

The measures to be taken under Orr’s authority include the slashing of budgets, reopening of labor agreements to unilaterally impose concessions and shutting down or privatizing city departments and services. They have one purpose: to enhance and enrich the wealthy speculators and bondholders. The financial elite has already made hundreds of millions from the crushing level of debt the city incurred as a result of decades of industrial downsizing, federal and state cuts and the loss of tax revenue following the crash of 2008. [++]

Life and Death Squads in the World’s Homicide Capital | Belén Fernández

In a 2002 report on Honduras to the fifty-ninth session of the Commission on Human Rights, United Nations Special Rapporteur Asma Jahangir called attention to the strategic mentality of social cleansing as espoused by politicians, business leaders, and journalists “who deliberately incite public sentiment against street children.” Her conclusion: “In the end, every child with a tattoo and street child is stigmatized as a criminal who is creating an unfriendly climate for investment and tourism in the country.”

By pinning the blame for Honduras’ violence on gangs, leaders have obscured the state’s role in creating a climate where extrajudicial police execution of tattooed people and other alleged potential gang members is relatively common. Also obscured is the state’s role in overseeing the socioeconomic deprivation that boosts gang membership.

In a country ruled by a ten-family oligarchy, where a president was recently overthrown for raising the monthly minimum wage to $290 in certain sectors and attempting to hold a referendum to rewrite a constitution that sanctifies elite interests, it’s unsurprising that some citizens turn to alternate support networks.


During my own time in Honduras, I started looking for safety in one of the very causes of my insecurity. In the aftermath of the intruder’s appearance in my room, I would catch myself attempting to coordinate my outdoor movements with those of military and police deployments — except, obviously, when they were firing tear gas, water-cannon-propelled pepper spray, and other items at peaceful anti-coup protesters.

A decade after Jahangir’s report mentioning the allegedly detrimental impact on investment and tourism of the ugly surplus of street children in Honduras, the coup has paved the way for the establishment of aseptic neoliberal enclaves called “special development regions” or charter cities. These city-states will be severed from Honduran territory without the consultation of the nation’s citizens and will be unaccountable to Honduran law, governed instead by foreign corporate interests. Extricated from the violent trauma of Honduras proper and from any pretenses to democracy, capital will thus be free to flourish in fulfillment of Lobo’s pledge: “Honduras is open for business.”

A bit of additional trauma is probably required to get the ball rolling, perhaps involving the forced displacement of Afro-indigenous communities living in supposedly uninhabited zones. The 2012 DEA-assisted murder of four Afro-indigenous civilian canoe passengers — including a pregnant woman and a fourteen-year-old boy — in the Mosquitia region underscores the danger of increased US militarization of the country under the guise of fighting narcotrafficking. A review of past US-Honduran partnerships such as the Contra War–era alliance between the CIA and top Honduran drug lord Juan Ramón Matta Ballesteros further calls into question US qualifications for such projects.

The charter city concept, hailed as a visionary solution to poverty, has meanwhile been greeted with such euphoria — at the New York Times, the Economist, the Wall Street Journal, and Foreign Policy magazine — that one might forget the whole sweatshop phenomenon and the fact that Honduras has already functioned as a free-market oasis for quite some time.

Expanding on the utility of violence to the neoliberal adventure in the country, Pine emphasizes that structural adjustment programs have amounted to an assault on the population’s security, ensuring corporate enrichment at the expense of public education, healthcare, and government oversight. “At the same time,” she argues, “people have been distracted by the extremely high levels of violent crime, often carried out by agents of the state and private industry. Thus, many call for a different kind of security than that offered by education and healthcare.” [read]

Obama Honors Thatcher with TVA “Privitization” Plan, Kicks Ordinary People in the Stomach Again | naked capitalism

President Obama adopted a reflective tone to mark the passing of Maggie Thatcher. Commenting on her death, he stated “the world has lost one of the great champions of freedom and liberty.” In Obama’s proposed budget, we found out what the terms “freedom” and “liberty” mean: the freedom for the old to go hungry and the freedom of the poor to go cold.

The headline issue, cutting Social Security benefits by changing the measurement of inflation (the “chained CPI”), is something that writers on Naked Capitalism have been predicting for a long time. What has come as a shocking (but not surprising) twist is a bombshell buried in Obama’s budget: the proposed privatization of the Tennessee Valley Association. At this point I think it’s important to quote a part of this section of the budget at length:

TVA is a self-financing Government corporation, funding operations through electricity sales and bond financing. In order to meet its future capacity needs, fulfill its environmental responsibilities, and modernize its aging generation system, TVA’s current capital investment plan includes more than $25 billion of expenditures over the next 10 years. However, TVA’s anticipated capital needs are likely to quickly exceed the agency’s $30 billion statutory cap on indebtedness. Reducing or eliminating the Federal Government’s role in programs such as TVA, which have achieved their original objectives and no longer require Federal participation, can help put the Nation on a sustainable fiscal path. Given TVA’s debt constraints and the impact to the Federal deficit of its increasing capital expenditures, the Administration intends to undertake a strategic review of options for addressing TVA’s financial situation, including the possible divestiture of TVA, in part or as a whole.

Notice how nonsensical the justification for the “divestiture of TVA” is. The authors clearly acknowledge that the Tennessee Valley Authority is a “self-financing Government corporation”. The TVA issues its own debt and also has income from electricity sales. Yet because its capital expenditures are counted as part of the federal deficit for accounting purposes, privatizing the TVA supposedly counts as a “spending cut”. This is the willful blindness of orthodox thought taken to extreme levels. Privatizing the TVA doesn’t shrink the amount of debt in the economy one cent; all it does is bring that debt onto private balance sheets. In fact, private investors will buy the Authority on mainly on credit, increasing the amount of private debt.

Additionally, these capital expenditures are being made to modernize the TVA, or in other words, increase the amount and value of government assets. Even from an orthodox perspective, what’s important isn’t just the liabilities of the federal government, but also its assets. Businesses account for capital expenditures, transfers and expenditures very differently, but since “the deficit” is the headline number Washington is obsessed with, Obama and congress are obsessed with shrinking that headline number rather then doing things that make sense economically for the federal government.

What this will change is the lives of over nine million people across seven states. It is impossible to underestimate the explosive impact of this policy. Approximately one out of every thirty-five people in the United States get their utilities from the Tennessee Valley Authority. If the past is any guide, an Obama success in privatizing the Authority will lead to explosive price increases that will increase the cost of living all across these states. The devastating effect of this can’t be underestimated. Take Tennessee for example: according to the Census, Tennessee median household income is nearly $9000 below the national median. One of the things that partially offsets this is that the cost of living in Tennessee is 14% below the national average according to the ACCRA cost of living index. Utilities are a major part of that both by directly lowering the cost of utilities for consumers and lowering costs for the businesses they purchase from.

What’s possibly even more frightening is the environmental implications. The Authority is responsible for all sorts of land management, river management and other environmental responsibilities in the region. A complete privatization of the TVA could conceivably eradicate environmental management in the area. Even in a better scenario, another agency would still have to take over those responsibilities, which would involve enormous investment and cost to set up such a large operation. This area has already had to deal with Mountain top removal for many years; it is unclear whether or not it could take another environmental disaster of this sort.

Buying time and running out | the current moment

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. …

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Thatcher's Mean Legacy: The Queen Mother of Global Austerity and Financialization

When Mrs. Thatcher took power, 1 in 7 of the England’s children lived in poverty. By the end of her reforms that number had risen to 1 in 3. She polarized the country in a ‘divide & conquer’ strategy that foreshadowed that of Ronald Reagan and more recent American politicians such as Wisconsin Governor Scott Walker. The effect of her policy was to foreclose on the economic mobility into the middle class that ironically she believed her policies were promoting.

Pundits the world over are chirping about her role in “saving” Britain, not as indebting it – destroyed an economy in order to save it. Her rule was historic mainly by posing the conundrum that has shaped neoliberal politics since 1980: How can governments nurture and endow financial kleptocrats in the context of rule by popular consent?

This can be achieved only by violating the Prime Assumption of classical liberal political philosophy: voters must be sufficiently informed to understand the consequences of their actions. This means that governments must take a long-term perspective.

But finance always has lived in the short run, and nowhere in the world is banking more short-term than in Britain. Nobody better exemplified this narrow-minded perspective than Lady Thatcher. Her simplistic rhetoric helped inspire an inordinate share of simpletons conflating supposed common sense with wisdom.

Not altogether simple, perhaps, but simply opportunistic. As the uncredited patron saint of New Labour, Mrs. Thatcher became the intellectual force inspiring her successor and emulator Tony Blair to complete the transformation of British electoral politics to mobilize popular consent to permit the financial sector to privatize and carve up Britain’s public infrastructure into a set of monopolies. In so doing, the United Kingdom’s was transformed from a real economy of production to one that scavenged the world for rents through its offshore banks. In the end, not only was great damage inflicted on England, but on the entire world as capital fled developing countries for safe harbors in London’s banks. Meanwhile, governments throughout the world today are declaring “We’re broke,” as their oligarchs grow ever more rich.

Who Will Save Social Security and Medicare? | Shamus Cooke

Before Social Security and Medicare existed, the elderly were either completely dependent on their children or were left to beg in the streets. These programs thus remain sacred to the vast majority of Americans. They allow the elderly dignity and independence instead of poverty and insecurity.

Attacking these programs has always been political suicide for the assailant; not even the smoothest talking politician would squirm into an aggressive stance.

But now the gloves are off. Obama and the Democrats are aligning with Republicans to strike the first major blows against Social Security and Medicare. This long hidden agenda is finally in full view of the public. The decades-long political agreement to save these programs is dead, and the foundation of American politics is shifting beneath everyone’s feet.

The New York Times reports:

“President Obama next week will take the political risk of formally proposing cuts to Social Security and Medicare in his annual budget…”

Many liberals are scratching their heads in astonishment, asking “How could this happen?”

The truth is that every liberal and labor leader knew this was in the works for years; they just kept their mouths shut in the hope that Obama could successfully push the blame entirely on the Republicans.

Throughout the summer of 2011 Obama worked with Republicans in the first attempt at a ‘Grand Bargain’ that included cuts to Social Security and Medicare. The Washington Post published an article entitled “Obama’sEvolution” about that summer:

“…the major elements of a [Grand] bargain seemed to be falling into place: $1.2 trillion in [national programs] agency cuts, smaller cost-of-living increases [cuts] for Social Security recipients [cuts by dollar inflation], nearly $250 billion in Medicare savings [cuts] achieved in part by raising the eligibility age [of Medicare]. And $800 billion in new taxes.”

Labor and liberal leaders kept quiet about this so they could push their members to vote for Obama in 2012. They also kept quite in the fall of 2011 when Obama released his budget proposal that included hundreds of billions of dollars worth of cuts to Medicare and Medicaid.

But hiding the most recent betrayal was next to impossible, and every liberal group is now suddenly “shocked” to see Obama officially and publicly on record to pursue the cuts.

The most craven of the liberal groups will continue to spew rotten rhetoric that only blames Republicans for the cuts while making excuses for Obama’s behavior, claiming that he merely buckled under intense Republican pressure and felt the need to “compromise.”

But it’s all nonsense. [++]