The news about US working behind the scenes with the Karzai regime to strike a deal with Taliban rebels comes as no surprise, given that such contacts have been ongoing for a long time while all along Afghanistan’s lucrative heroin trade that helps finance the rebels. The real news is that Obama, who just a few months ago was demanding NATO commit more resources to that war, wants out of Afghanistan and he is trying to find ways to mold public opinion right before the mid-term elections. Sen. Carl Levin, chairman the Senate Armed Services Committee, has just revealed that US inordinate dependence on private security has helped to strengthen the Taliban at the expense of US troops. In June 2010, a congressional investigation into private contractors discovered that private contractors had been paying tens of millions of dollars to local warlords for “convoy protection,” Carl Levin told reporters. “There is significant evidence that some security contractors even work against our coalition forces, creating the very threat that they are hired to combat.”
The Defense Department has built a heavy dependence on the 26,000 private security personnel operating in Afghanistan and the way out is difficult given that Obama made Afghanistan the core of his war on terror. There are reports that many in the US administration have known for sometime that “the US-led coalition is unlikely to defeat the Taliban militarily” and the concern today is how to deal with Pakistan which wants to be included in the “peace process” and wants a major role after the coalition troops leave. Of course, the American people and those following events around the world may be wondering if the US under Obama is not continuing to help strengthen “Islamic fanaticism” through various means, not just by having taxpayer dollars go to the Taliban. The best example of hypocrisy of US war on terrorism concerns the Libyan Pan Am bomber case, where the US demonstrated that when it comes to corporate interests, a deal with terrorists is acceptable. In July 2010 the press reveal that Libya had indeed reached a deal with UK with US complete agreement that convicted Libyan Pan Am (Lockerbie) Bomber bomber Abdel Baset al-Megrahi must be set free in order to clear the way for British Petroleum (BP) to proceed with offshore oil drilling. Sen. Bob Menendez (D-NJ) of the Senate Foreign Relations Committee suddenly suspended hearings on the release last year of the Lockerbie bomber claiming that witnesses refused to testify. The real reason was to protect the Obama administration that had agreed to the prisoner’s release on the BP deal, and not for humanitarian reasons as the official version stated originally, given that al-Megrahi has not died of cancer, as UK and US claimed, more than a year after his release. What does the beleaguered administration do to prevent Republicans, especially Tea Party candidates like Sharon Angle who told an audience in Nevada that a “militant terrorist situation” has allowed Islamic religious law to take hold in some American cities. Given that hyperbolic rhetoric from Tea Party candidates is generating public interest by hammering Obama and the Democrats for their soft policy toward “terrorism,” and given that the US does not have much to show except immense debt and a chronically weak economy for the wars in Iraq and Afghanistan, what can it do now?
When Obama was running for President, he distracted and placated the American people who ever since the early Cold War have been conditioned to live in fear of the outside world. The president assured the public that the “war on terror” is not over, merely shifting from Iraq to Afghanistan. Just before the elections of 2010, there is about to be another shift to take place from Afghanistan to Iran, a legitimate target because it is the most powerful Islamic country, Israel wants Iran hit as do some of the Arab countries, and nothing would deliver more votes to conservative Democrats and have the public rally around Obama than such a move.
In August Admiral Mike Mullen, chairman of the US Joint Chiefs of Staff, has stated that the military option remains on the table and there is a plan to attack Iran, although a military strike has been described as a bad idea. Against the background of a weak US and EU economic recovery from a very deep recession, against the ominous currency wars, the US has the option of cutting its losses from the Middle East and pressuring Tel Aviv for genuine peace instead of allowing more West Bank settlements. However, like all empires, the US cannot live without an enemy, and it cannot find a better one than Muslims that have been a target since the Iranian Revolution. The bogus “war on terrorism” keeps the military industrial complex healthy and distracts the American people to focus on a foreign enemies instead of looking to their government to fix the decaying economy and declining middle class. Peace is not an option!
Friday, 8 October 2010
Thursday, 7 October 2010
Media: Culture of Image and “Pseudo-Events”
The culture of image is not an invention of the post-Vietnam generation, but has much deeper roots in the age of materialism. From cities like Las Vegas to theme parks like Disney World, from TV soap operas and “reality shows” to virtual reality games on the Internet, modern society is increasingly moving toward “simulation” experiences as a substitute of “natural” experiences. The world of simulation experience is created by the market economy (especially big business globally) because it sells products and services, by political establishments because it sells ideologies operating within the same political economy (from Socialist to right-wing ideologies) and generically promote the same policies with different nuances designed to sustain the market economy of consumerism rooted in the narcissistic “simulation-experience-world”; a world that can best function with hollow and superficial people in charge of leadership positions to promote such culture.
Daniel Boorstin’s A Guide to Pseudo-Events in America (1961) argued that: “America was living in an ‘age of contrivance,’ in which illusions and fabrications had become a dominant force in society. Public life is filled with ‘pseudo-events’–staged and scripted events that were a kind of counterfeit version of actual happenings. Just as there were now counterfeit events, so there were also counterfeit people–celebrities–whose identities were being staged and scripted, to create illusions that often had no relationship to any underlying reality.”
Of course, the critique applied to the US as the world’s center of the market economy could just as easily apply to most modern societies today, even the ones that sociologists label “traditional” like Muslim Turkey and Dubai or Hindu/ Buddhist/Muslim India, which are in fact moving in that direction as Western materialism superimposes its culture of simulation over religious-based traditions that go back centuries and are rooted in spiritual transcendence instead of simulation transcendence; or “hyperreality” (the world of the absolute fake) as Umberto Eco labeled it. As traits of success, hollowness and superficiality over substance are not only confided to the domain of politics today whether it is with right-wing Tea Party Republican Sarah Palin, French (Gucci) Socialists, or British (parading reformers) Liberals.
From business management to college administrations that have assumed the business management model in terms of modality, structure, salaries and of course PR and appearance, the hollow/superficial personality, at least the projection of that non-threatening image to put it in Machiavellian terms, is a catalyst to success; assuming of course all other prerequisite qualifications are fulfilled in theory (on paper). Hollowness and superficiality have deep historical roots and reflect societal values and institutional structures that create and replicate such personality archetypes destined to float to the top largely by the incredible lightness of being, a level inoffensive and thus acceptable to the establishment which then projects it as socially acceptable and morally superior.
The “hollow and superficial” archetype of course is hardly unintelligent. On the contrary, within the “simulation realm,” the individual is crafty and knows how to manipulate the system that gave her/him birth. Sarah Palin is hollow and superficial only to her critics judging her from their criteria, not from the perspective of her “Tea Party” popular base to which she very cleverly appeals in person and through the media. Mass media/entertainment, especially commercial television–and now the web–promotes hollowness and superficiality because they sell products and services, and they are more interested in the intellectually lazy consumer rather than the Kantian notion of individuals “thinking for themselves.”
One could very argue that there is no reality other than image. Therefore, hollowness and superficiality over substance reflects reality human beings create for themselves to cope with life in all its phases from euphoric to tragic. Indeed, with the exception of mathematics that the mind has created and we reach through pure reason that transcend cultural and geographic boundaries, all other scientific theories and models are based on perception (the individual’s personal universe), not “reality of the world.” Jean-Paul Sartre (The Psychology of Imagination), Michel Foucault (Madness & Civilization), Georg Simmel (The Metropolis & Mental Life), R. D. Laing (The Divided Self) and Ernest Schactel (Metamorphosis) have addressed the dichotomy of real v. false self that modern industrial (bouregois) society creates.
In varying degrees, all of them analyzed the hypocrisy of established science clinging to “objectivity” when in fact analysis is socially based (determined). Genuine or real (natural) experiences are repressed by the fantasy world of material civilization, while false experiences based on what the advertising industry, the politician, the teacher, the preacher, all molded by the same social structure promoting material civilization, wants the person to believe about herself/himself are real. As possessions gain in value, the individual is increasingly objectified and reduced in value and can only raise her/his human worth through the acquisition of more possessions or endeavors that have wealth accumulation (invariably associated with power, prestige, honor, etc.) as the ultimate goal.
A professional person’s success is measured not by the qualitative contributions to the field as a goal because the qualitative contributions are quantified and become tangible only by wealth attached to the accomplishment. And because the person’s reputation rests on that tangible ultimate goal of accumulation, in the age of mass advertising, commercialism of everything from religion to personal tragedies for sale to magazines, TV, radio, Internet, etc., the image-geared society compels the “mass professional” to spend enormous energy on image cultivation rather than substance.
Not just the web, through which people have “virtual relationships” as a substitute for personal contact, but technology in general operating under the bourgeois social order has alienated the individual and promoted “simulation experience.” In a plastic surgery narcissistic world that values image, people seek transcendence through simulation experience at the expense of their own humanity deeply buried beneath the abysmal rubble of the hedonistic culture of unreality. Rapidly effacing traditional cultures and anthropocentric value systems around the world through globalization, is the image-based culture best suited for all humanity in its complex needs from material to spiritual and intellectual, or does it simply serve a small percentage of it while the remaining wallow in the vicariousness of simulation illusions?
In today's TV-dominated world that reflects the interests of business culture and shapes public opinion - everything from what people ought to eat to what pills they must take to fall asleep - the question of free will must come into question as much as it did in the Middle Ages when Lords and Bishops determined the lives of serfs and peasants. The ultimate goal of the media is to sell everything from products and services to religion and politics, so that the public is so thoroughly indoctrinated it cannot determine the multiple layers of the individual personality that make up a free thinking human being.
If the media molds the human mind with images so imersed in illusions, what hope is there for systemic change in society? Indeed none, until the image itself becomes distorted by reality in the lives of people who see the blatant inconsistencies and contradictions between what the corporate world and political elites are projecting-propagating, on the one ahnd, and the empirical experiences of the individual's life, on the other. Such contradictions when they become evidence to a growing number of people will then lead to societal change from the grassroots.
Daniel Boorstin’s A Guide to Pseudo-Events in America (1961) argued that: “America was living in an ‘age of contrivance,’ in which illusions and fabrications had become a dominant force in society. Public life is filled with ‘pseudo-events’–staged and scripted events that were a kind of counterfeit version of actual happenings. Just as there were now counterfeit events, so there were also counterfeit people–celebrities–whose identities were being staged and scripted, to create illusions that often had no relationship to any underlying reality.”
Of course, the critique applied to the US as the world’s center of the market economy could just as easily apply to most modern societies today, even the ones that sociologists label “traditional” like Muslim Turkey and Dubai or Hindu/ Buddhist/Muslim India, which are in fact moving in that direction as Western materialism superimposes its culture of simulation over religious-based traditions that go back centuries and are rooted in spiritual transcendence instead of simulation transcendence; or “hyperreality” (the world of the absolute fake) as Umberto Eco labeled it. As traits of success, hollowness and superficiality over substance are not only confided to the domain of politics today whether it is with right-wing Tea Party Republican Sarah Palin, French (Gucci) Socialists, or British (parading reformers) Liberals.
From business management to college administrations that have assumed the business management model in terms of modality, structure, salaries and of course PR and appearance, the hollow/superficial personality, at least the projection of that non-threatening image to put it in Machiavellian terms, is a catalyst to success; assuming of course all other prerequisite qualifications are fulfilled in theory (on paper). Hollowness and superficiality have deep historical roots and reflect societal values and institutional structures that create and replicate such personality archetypes destined to float to the top largely by the incredible lightness of being, a level inoffensive and thus acceptable to the establishment which then projects it as socially acceptable and morally superior.
The “hollow and superficial” archetype of course is hardly unintelligent. On the contrary, within the “simulation realm,” the individual is crafty and knows how to manipulate the system that gave her/him birth. Sarah Palin is hollow and superficial only to her critics judging her from their criteria, not from the perspective of her “Tea Party” popular base to which she very cleverly appeals in person and through the media. Mass media/entertainment, especially commercial television–and now the web–promotes hollowness and superficiality because they sell products and services, and they are more interested in the intellectually lazy consumer rather than the Kantian notion of individuals “thinking for themselves.”
One could very argue that there is no reality other than image. Therefore, hollowness and superficiality over substance reflects reality human beings create for themselves to cope with life in all its phases from euphoric to tragic. Indeed, with the exception of mathematics that the mind has created and we reach through pure reason that transcend cultural and geographic boundaries, all other scientific theories and models are based on perception (the individual’s personal universe), not “reality of the world.” Jean-Paul Sartre (The Psychology of Imagination), Michel Foucault (Madness & Civilization), Georg Simmel (The Metropolis & Mental Life), R. D. Laing (The Divided Self) and Ernest Schactel (Metamorphosis) have addressed the dichotomy of real v. false self that modern industrial (bouregois) society creates.
In varying degrees, all of them analyzed the hypocrisy of established science clinging to “objectivity” when in fact analysis is socially based (determined). Genuine or real (natural) experiences are repressed by the fantasy world of material civilization, while false experiences based on what the advertising industry, the politician, the teacher, the preacher, all molded by the same social structure promoting material civilization, wants the person to believe about herself/himself are real. As possessions gain in value, the individual is increasingly objectified and reduced in value and can only raise her/his human worth through the acquisition of more possessions or endeavors that have wealth accumulation (invariably associated with power, prestige, honor, etc.) as the ultimate goal.
A professional person’s success is measured not by the qualitative contributions to the field as a goal because the qualitative contributions are quantified and become tangible only by wealth attached to the accomplishment. And because the person’s reputation rests on that tangible ultimate goal of accumulation, in the age of mass advertising, commercialism of everything from religion to personal tragedies for sale to magazines, TV, radio, Internet, etc., the image-geared society compels the “mass professional” to spend enormous energy on image cultivation rather than substance.
Not just the web, through which people have “virtual relationships” as a substitute for personal contact, but technology in general operating under the bourgeois social order has alienated the individual and promoted “simulation experience.” In a plastic surgery narcissistic world that values image, people seek transcendence through simulation experience at the expense of their own humanity deeply buried beneath the abysmal rubble of the hedonistic culture of unreality. Rapidly effacing traditional cultures and anthropocentric value systems around the world through globalization, is the image-based culture best suited for all humanity in its complex needs from material to spiritual and intellectual, or does it simply serve a small percentage of it while the remaining wallow in the vicariousness of simulation illusions?
In today's TV-dominated world that reflects the interests of business culture and shapes public opinion - everything from what people ought to eat to what pills they must take to fall asleep - the question of free will must come into question as much as it did in the Middle Ages when Lords and Bishops determined the lives of serfs and peasants. The ultimate goal of the media is to sell everything from products and services to religion and politics, so that the public is so thoroughly indoctrinated it cannot determine the multiple layers of the individual personality that make up a free thinking human being.
If the media molds the human mind with images so imersed in illusions, what hope is there for systemic change in society? Indeed none, until the image itself becomes distorted by reality in the lives of people who see the blatant inconsistencies and contradictions between what the corporate world and political elites are projecting-propagating, on the one ahnd, and the empirical experiences of the individual's life, on the other. Such contradictions when they become evidence to a growing number of people will then lead to societal change from the grassroots.
Wednesday, 6 October 2010
Garbage and Affluence (Jon Kofas, Greece)
Do rich nations and the bourgeoisie value garbage more than people, more than social justice that could make them feel good that they are part of a larger ecosystem crying out for equilibrium? A recent report by a British television station noted that food discarded in London by supermarkets, restaurants, households, etc. can feed anywhere between several hundred thousand to over a million people and that does not even include the pet food industry, where the household pets of affluent societies out-eat the world’s poor. Similar waste is evident in wearing apparel, household furnishings, durable goods, etc. Their beguiling rationalizations aside, their vacuous rhetoric about moral principles of “equality of opportunity,” and of meritocracy in theory notwithstanding, the record shows that rich nations and the bourgeoisie value garbage more than people, more so today than in the era of Charles Dickens and Emile Zola. There is something seriously wrong with the priorities of humanity when the garbage of the 20 wealthiest nations where most of the world’s waste takes place–the same countries that will be gathered in Washington on 15 November 2008 to discuss the global crisis–is sufficient to cover many of the Third World population’s essential needs. Could the Third World’s living standards improve if the First World was not as wasteful and replaced its atomistic-hedonistic-materialist-garbage-first values with the same instincts as many animals that demonstrate greater care for their own species than humans? Unquestionably garbage has greater value to people that generate it than their fellow human beings because just as devout Christians, Muslims and Jews in the Dark Ages were convinced that spiritual salvation was the ultimate goal in life that gave meaning to human existence, modern man is convinced that possessing material things makes him feel safe, secure, powerful, even immortal.
As great as it is to have a resoundingly positive symbol in the White House for America and the world, will the culture of affluence and waste change, will the homeless mother who wants a home for her children, the unemployed autoworker wants a job, the family without health care that wants insurance acquire it?
Because policy is driven by powerful interests rather than principles that contribute to society’s broader welfare, because social justice is relegated to the domain of theoretical treatises by intellectuals, artists, and the occasional clergyman, a change in values toward garbage vs. human beings can only come as a result of deep structural crises in society that invariably results in the use of force to alter the status quo. Just as the current global crisis presents opportunities for re-examining the values of the educational system rooted in the myopic business model that is a disservice to society, similarly the larger issue of bourgeois values rooted in wasteful affluent living (in shopping therapy that has infected the entire population’s garbage values regardless of class), there is an opportunity to address social justice issues. However, because power is mesmerizing to humans aspiring to feeling godlike even ephemerally, because it is rare that anyone surrenders power voluntarily for that means surrendering the godlike feeling, this means that the state must use the fiscal and legal system to engender such humanist values in society. If the state in the rich nations can dish out trillions for banking consolidation, it can easily absorb the surplus capital to foster a more just society that looks beyond garbage as power.
As great as it is to have a resoundingly positive symbol in the White House for America and the world, will the culture of affluence and waste change, will the homeless mother who wants a home for her children, the unemployed autoworker wants a job, the family without health care that wants insurance acquire it?
Because policy is driven by powerful interests rather than principles that contribute to society’s broader welfare, because social justice is relegated to the domain of theoretical treatises by intellectuals, artists, and the occasional clergyman, a change in values toward garbage vs. human beings can only come as a result of deep structural crises in society that invariably results in the use of force to alter the status quo. Just as the current global crisis presents opportunities for re-examining the values of the educational system rooted in the myopic business model that is a disservice to society, similarly the larger issue of bourgeois values rooted in wasteful affluent living (in shopping therapy that has infected the entire population’s garbage values regardless of class), there is an opportunity to address social justice issues. However, because power is mesmerizing to humans aspiring to feeling godlike even ephemerally, because it is rare that anyone surrenders power voluntarily for that means surrendering the godlike feeling, this means that the state must use the fiscal and legal system to engender such humanist values in society. If the state in the rich nations can dish out trillions for banking consolidation, it can easily absorb the surplus capital to foster a more just society that looks beyond garbage as power.
Tuesday, 5 October 2010
China and the Global Currency War (Jon Kofas, Greece)
Posted on October 5th, 2010
The US chose to help China develop economically, and of course China was an anxious participant, by integrating it into the world economy after the Kissinger-Nixon visits in 1972, as part of a Cold War strategy to weaken the USSR at a time that the Vietnam War had weakened the US politically and economically. In 2010, the new US strategy is how to slow down China without hurting US or global economic growth.
On 2 October IMF chief Dominique Strauss-Kahn called on the major powers to coordinate their monetary policies and prevent a global competitive currency devaluations that would precipitate trade imbalances and another recession just as the world economy seems to be recovering. Thanks to G-20 coordinated fiscal stimulus (bank bailouts), monetary policies (central banks keeping interest rates low), the world avoided a bigger crisis than the one it actually experienced in the last three years, according to Strauss-Khan. On 4 October 2010, FED chief Bernanke warned about the US budgetary and balance of payments deficits having a negative impact on growth. On 5 October 2010, Japan’s central bank intervenes to cut the interest rate at between 0% and 0.1%, the later being the same since December 2008, and at the same buying government bonds, corporate debt, and exchange-traded funds, thus lowering the yen’s value. Japan is arguing that China maintains a weak currency regime that hurts Japanese exports, which are slowing amid a deflationary climate. This is tangible proof that indeed the currency war is heating up, as the IMF has been warning. Given that China is the world’s second largest economy and second largest IMF contributor, buying $50 billion worth of bonds to strengthen the IMF in 2009, the IMF chief is only in the position to propose monetary coordination, instead of adopting the US-Japan-EU hard line about China’s need to follow a tight monetary policy and stop taking advantage of its trading partners by keeping the yuan undervalued. China is on record opposing the US bill on foreign currency reform, arguing that China is still a “developing economy.” In late July 2010, the IMF agreed with Washington (EU and Japan) that China’s currency was substantially undervalued. As a “producer-export-oriented” economy striving to industrialize rapidly, China recently has started to stimulate domestic consumption as reflected in its the modest reduction of its balance of payments surplus. Some US economists, journalists, politicians, and of course many American producers are calling for China to devalue its currency and to curb dumping trade practices. Delaying stimulating private consumption is the best way for China to ensure that it will continue to capture market share around the world. It has reached very significant trade deals with Russia, its exposure in Africa and Latin America is increasing, and its latest move to invest heavily in Greece as the gateway to EU is an indication that it is not leaving any market untapped. A large Chinese delegation accompanied premier Wen to Athens, where major commercial agreements and a pledge for China to purchase Greek bonds in the open market was made. China is also increasing its role in Turkey as well as Italy. Positioning itself to increase market share in EU and Russia, China is facing continuous diplomatic and business pressures from around the world to raise the value of the yuan. Besides the US, which of course is looking to China to stimulate its trade and lower its balance of payments that have weakened the dollar, Japan, France, South Korea and Brazil are positioned to drive down their currencies to capture a larger market share. Confirming the contention by Brazil that in fact there is a global currency war, in September 2010 Japan central bank sold $20 in yen to drive down the currency, a move that stimulated the financial markets for a single day before reality sank in that such a band-aid move will not fix the economy. Today, Japan adopted further measures as it sees a difficult road to recovery. South Korea, which is running a balance of payments surplus, has also intervened to keep the value of its currency “competitively low” like China and Japan. The question of surplus countries, mostly China of course, stepping in to help deficit countries by devaluing their currencies is at the heart of the IMF suggestions to avoid the ongoing currency war. At the heart of the problem is the over-consumption and wasteful defense spending of the US economy and the gradual erosion of confidence in the dollar amid the skyrocketing price of gold. In 2005, the dollar as a reserve currency dominated at 66% of the world’s official foreign exchange, while only 25% was in euros. As a result of America’s rising current account deficit in the past five years, central banks reduced dollar holdings. In July 2010 dollar holdings amounted to 61.5% of the world’s official foreign exchange, a drop of 4.5% in the last four years and likely to drop much further and faster in the next ten years. China along with most Asian countries have been reducing dollar holdings, while investing more in the yen and the euro. Premier Wen Jiabao assured Angela Merkel in July that China will be buying more European bonds and he repeated the same point recently in Athens. Although the situation today is not nearly as bad as of the 1920s when there was lack of international cooperation on monetary, fiscal, and trade policies, the strategic alliances formed by trading blocs between EU and China, Russia and China, US and Latin America, Australia and China could lead to the kind of intense trading bloc competition that may retard world trade and result in another recession just as the economic growth prospects look very good for the next two years. There is no such thing as ”free market forces,’ especially when it comes to monetary policy, or trade policy for that matter. The G-20, along with various international organizations as instruments of coordination could help end the currency war. However, China has argued that half of the G-20 are developing countries many with surpluses supplying the growth stimulus for the world economy. The advanced capitalist countries (G-7) are in deficit territory, expecting to lift their economies at the expense of the “developing economies.” There is no shortage of political, journalistic and academic articles defending and blaming China, the EU, Japan, and US for the currency war. The propaganda machines that include politicians, journalists and academics are working feverishly as much in the US as in the rest of the world that is looking increasingly at economic nationalism, degrees of it in monetary and trade policy, as a good option amid a global recession.
The US chose to help China develop economically, and of course China was an anxious participant, by integrating it into the world economy after the Kissinger-Nixon visits in 1972, as part of a Cold War strategy to weaken the USSR at a time that the Vietnam War had weakened the US politically and economically. In 2010, the new US strategy is how to slow down China without hurting US or global economic growth.
On 2 October IMF chief Dominique Strauss-Kahn called on the major powers to coordinate their monetary policies and prevent a global competitive currency devaluations that would precipitate trade imbalances and another recession just as the world economy seems to be recovering. Thanks to G-20 coordinated fiscal stimulus (bank bailouts), monetary policies (central banks keeping interest rates low), the world avoided a bigger crisis than the one it actually experienced in the last three years, according to Strauss-Khan. On 4 October 2010, FED chief Bernanke warned about the US budgetary and balance of payments deficits having a negative impact on growth. On 5 October 2010, Japan’s central bank intervenes to cut the interest rate at between 0% and 0.1%, the later being the same since December 2008, and at the same buying government bonds, corporate debt, and exchange-traded funds, thus lowering the yen’s value. Japan is arguing that China maintains a weak currency regime that hurts Japanese exports, which are slowing amid a deflationary climate. This is tangible proof that indeed the currency war is heating up, as the IMF has been warning. Given that China is the world’s second largest economy and second largest IMF contributor, buying $50 billion worth of bonds to strengthen the IMF in 2009, the IMF chief is only in the position to propose monetary coordination, instead of adopting the US-Japan-EU hard line about China’s need to follow a tight monetary policy and stop taking advantage of its trading partners by keeping the yuan undervalued. China is on record opposing the US bill on foreign currency reform, arguing that China is still a “developing economy.” In late July 2010, the IMF agreed with Washington (EU and Japan) that China’s currency was substantially undervalued. As a “producer-export-oriented” economy striving to industrialize rapidly, China recently has started to stimulate domestic consumption as reflected in its the modest reduction of its balance of payments surplus. Some US economists, journalists, politicians, and of course many American producers are calling for China to devalue its currency and to curb dumping trade practices. Delaying stimulating private consumption is the best way for China to ensure that it will continue to capture market share around the world. It has reached very significant trade deals with Russia, its exposure in Africa and Latin America is increasing, and its latest move to invest heavily in Greece as the gateway to EU is an indication that it is not leaving any market untapped. A large Chinese delegation accompanied premier Wen to Athens, where major commercial agreements and a pledge for China to purchase Greek bonds in the open market was made. China is also increasing its role in Turkey as well as Italy. Positioning itself to increase market share in EU and Russia, China is facing continuous diplomatic and business pressures from around the world to raise the value of the yuan. Besides the US, which of course is looking to China to stimulate its trade and lower its balance of payments that have weakened the dollar, Japan, France, South Korea and Brazil are positioned to drive down their currencies to capture a larger market share. Confirming the contention by Brazil that in fact there is a global currency war, in September 2010 Japan central bank sold $20 in yen to drive down the currency, a move that stimulated the financial markets for a single day before reality sank in that such a band-aid move will not fix the economy. Today, Japan adopted further measures as it sees a difficult road to recovery. South Korea, which is running a balance of payments surplus, has also intervened to keep the value of its currency “competitively low” like China and Japan. The question of surplus countries, mostly China of course, stepping in to help deficit countries by devaluing their currencies is at the heart of the IMF suggestions to avoid the ongoing currency war. At the heart of the problem is the over-consumption and wasteful defense spending of the US economy and the gradual erosion of confidence in the dollar amid the skyrocketing price of gold. In 2005, the dollar as a reserve currency dominated at 66% of the world’s official foreign exchange, while only 25% was in euros. As a result of America’s rising current account deficit in the past five years, central banks reduced dollar holdings. In July 2010 dollar holdings amounted to 61.5% of the world’s official foreign exchange, a drop of 4.5% in the last four years and likely to drop much further and faster in the next ten years. China along with most Asian countries have been reducing dollar holdings, while investing more in the yen and the euro. Premier Wen Jiabao assured Angela Merkel in July that China will be buying more European bonds and he repeated the same point recently in Athens. Although the situation today is not nearly as bad as of the 1920s when there was lack of international cooperation on monetary, fiscal, and trade policies, the strategic alliances formed by trading blocs between EU and China, Russia and China, US and Latin America, Australia and China could lead to the kind of intense trading bloc competition that may retard world trade and result in another recession just as the economic growth prospects look very good for the next two years. There is no such thing as ”free market forces,’ especially when it comes to monetary policy, or trade policy for that matter. The G-20, along with various international organizations as instruments of coordination could help end the currency war. However, China has argued that half of the G-20 are developing countries many with surpluses supplying the growth stimulus for the world economy. The advanced capitalist countries (G-7) are in deficit territory, expecting to lift their economies at the expense of the “developing economies.” There is no shortage of political, journalistic and academic articles defending and blaming China, the EU, Japan, and US for the currency war. The propaganda machines that include politicians, journalists and academics are working feverishly as much in the US as in the rest of the world that is looking increasingly at economic nationalism, degrees of it in monetary and trade policy, as a good option amid a global recession.
Monday, 4 October 2010
GREED: FROM JESUS TO WALL STREET
Oliver Stone’s film Wall Street and the sequel this year made the term greed a part of popular culture and subject to ongoing debate amid a global recession. The term “greed” indicates “desire for excess” and implies abuse of material accumulation. However, the Freudian definition of greed differs from that of a modern economist who follows Adam Smith’s free-market theory, and that definition differs from the one of a Lutheran theologian, and so on with each field having its own definition and nuances of the term. It is also significant to consider that in some cultures like the US “greed” may be an integral part of how to achieve the American Dream, while in others like India before British colonial rule greed (individual or institutional) is identified as the primary source of evil (The Bhagavadgita). Historically, greed does not have the same value in Eastern cultures, especially in China and India, as it does in the West. This is partly because western societies are more individualistic and less collectivist, especially Protestant northwest Europe and the US that emphasize individual achievement more than collective welfare and harmony. In the Orient social status rooted in noble birth, education, the arts, spirituality as well as political power designed to maintain harmony transcended the sheer accumulation of individual wealth associated with merchants and money lenders whose role was not elevated until the Europeans imposed colonial or semi-colonial rule in Asia. In Western Civilization, greed has a long history that in terms of legal measures to contain it goes back to the era of Solon the lawgiver, who accused the Athenian landowners of undermining social harmony and destroying the city-state:
The man whose riches satisfy his greed
Is not more rich for all those heaps and hoards
Than some poor man who has enough to feed
And clothe his corpse with such as God affords.
I have no use for men who steal and cheat;
The fruit of evil poisons those who eat. (Solon Poems)
Athenian greed for wealth, power, and prestige in the fifth century led to the demise of the city-state with the Peloponesian Wars marking beginning of decline for classical Greece. Virgil and Seneca attributed greed (avarice) to the deterioration of Roman society, decay in morals and civil harmony. Drawing largely from the Apostle Paul, the early church fathers (”Primitive Christianity”) recognized greed as one of the seven deadly sins (all of them predating Christianity) and deemed this vice a catalyst to the decline and fall of the Roman Empire. As a transitional figure between the Medieval World and Renaissance, Dante condemned greed not only on the part of the temporal (secular) world but of the spiritual realm as well. In the name of God, the Catholic Church was selling indulgences and becoming the richest institution and largest landowner in Europe.
The Enlightenment’s emphasis on the individual’s intellectual awakening, a process achieved through merit, and the Industrial Revolution held the promise of machine holding humanity’s answers for all its material problems. Enlightenment and Industrial Capitalism provided a further impetus to the bourgeois value system and ultimate goal of creating a material world that would replace the Kingdom of Heaven. Hence, greed, an irrational impulse that ran counter to the Enlightenment’s focus on reason, must be at the center of the new society’s practice. Enlightenment thinker Adam Smith’s contended that self-interest promotes the greater social good because the market’s “invisible hand” determines what has value for the consumer and thus profit for the producer necessarily benefits society. From Industrial capitalism to financial capitalism and the emergence of robber barons of the 19th century, greed worked to polarize society socioeconomically, ethnically, racially, religiously, and in terms of gender. During the Progressive Era, politicians tried moderating the runaway culture of greed. In reality, capitalists prospered more under Progressive presidents from Roosevelt to Wilson than they had before, a fact that resulted in massive capital accumulation during the 1920s and led to the Great Depression. The 1930s convinced many Americans that the culture of rugged individualism and greed of capital concentration during the previous decade had caused economic dislocation and social catastrophe. The era of the “Big Bands” and coming together as a nation, implicit collectivism (Socialism to FDR/New Deal critics) moderated the culture of greed as did the war that followed. However, the Cold War meant a necessary ideological return to the culture of greed as the implicit essence of capitalism in a struggle for dominance against Communism. The value system of greed as an unspoken but practice integral part of the American way of life, a value system and way of life to be exported to the rest of the world, was well on its way. Not that war-ravaged Europe was not anxious to emulate its NATO leader and capture some of the prewar glory associated with the greed of imperialism. In spite of the Civil Rights movement and the cultural revolution of the 1960s that spread beyond urban America to much of the Western World, despite the humbling effect the Vietnam war had on America, greed would remain at the center of the cultural milieu. “You can call it greed, selfishness or enlightened self-interest, but the bottom line is that it’s these human motivations that get wonderful things done. Unfortunately, many people are naive enough to believe that it’s compassion, concern and ‘feeling another’s pain’ that’s the superior human motivation.” This from Walter Williams, African-American academic who became the darling of the white establishment in the 1980s when Reagan-Thatcher neo-liberalism was triumphant and the Communist bloc was about to fall. Yes, free at last to say publicly what was on the minds of most about the virtues of greed, the greed that makes the solipsist feel good, the kind of greed that means life. Greed works because it has defeated the Communist bloc and integrated those countries into “our economic system,” greed is great because it means accumulation of more regardless of endemic poverty for about one-third of the world’s population. Greed never took a rest as globalization was responsible for its diffusion and acceleration during the Clinton decade that laid the foundations for the economic crisis of 2008-2010. And then came Bush to make individual and national greed a revered patriotic duty. Yoshi Tsurumi, former professor at Harvard University wrote on 04/07/05 in the Harvard Crimson: “Thirty years ago, President Bush was my student at Harvard Business School… In those days, Bush belonged to a minority of MBA students who were seriously disconnected from taking the moral and social responsibility for their actions. Today, he would fit in comfortably with an overwhelming majority of business students and teachers whose role models are celebrated captains of piracy.”
Since the 1980s, as neo-conservatives have captured the Republican Party, America’s business education has also increasingly become contaminated by the robber baron culture of the pre-Great Depression era. Yes indeed, the institutional structure which includes colleges and universities have helped to disseminate the value system of greed that Wall Street practices during business hours and always with 100% transparency! The roots of the culture of greed are very deep and complex, and cannot be moderated in a short period or by the political establishment that sees no alternative to acting opportunistically. Cultural revolutions take years if not decades to have an impact, and unless accompanied by events in society that force people to alter their habits and value system, the status quo remains unchanged because it means survival. The failure to begin addressing change in the culture of greed, individual and institutional (public and private), the failure of institutions to teach that greed is not a virtue, will result in the decay of society as it did in the case of societies built on individual and institutional greed.
The man whose riches satisfy his greed
Is not more rich for all those heaps and hoards
Than some poor man who has enough to feed
And clothe his corpse with such as God affords.
I have no use for men who steal and cheat;
The fruit of evil poisons those who eat. (Solon Poems)
Athenian greed for wealth, power, and prestige in the fifth century led to the demise of the city-state with the Peloponesian Wars marking beginning of decline for classical Greece. Virgil and Seneca attributed greed (avarice) to the deterioration of Roman society, decay in morals and civil harmony. Drawing largely from the Apostle Paul, the early church fathers (”Primitive Christianity”) recognized greed as one of the seven deadly sins (all of them predating Christianity) and deemed this vice a catalyst to the decline and fall of the Roman Empire. As a transitional figure between the Medieval World and Renaissance, Dante condemned greed not only on the part of the temporal (secular) world but of the spiritual realm as well. In the name of God, the Catholic Church was selling indulgences and becoming the richest institution and largest landowner in Europe.
The Enlightenment’s emphasis on the individual’s intellectual awakening, a process achieved through merit, and the Industrial Revolution held the promise of machine holding humanity’s answers for all its material problems. Enlightenment and Industrial Capitalism provided a further impetus to the bourgeois value system and ultimate goal of creating a material world that would replace the Kingdom of Heaven. Hence, greed, an irrational impulse that ran counter to the Enlightenment’s focus on reason, must be at the center of the new society’s practice. Enlightenment thinker Adam Smith’s contended that self-interest promotes the greater social good because the market’s “invisible hand” determines what has value for the consumer and thus profit for the producer necessarily benefits society. From Industrial capitalism to financial capitalism and the emergence of robber barons of the 19th century, greed worked to polarize society socioeconomically, ethnically, racially, religiously, and in terms of gender. During the Progressive Era, politicians tried moderating the runaway culture of greed. In reality, capitalists prospered more under Progressive presidents from Roosevelt to Wilson than they had before, a fact that resulted in massive capital accumulation during the 1920s and led to the Great Depression. The 1930s convinced many Americans that the culture of rugged individualism and greed of capital concentration during the previous decade had caused economic dislocation and social catastrophe. The era of the “Big Bands” and coming together as a nation, implicit collectivism (Socialism to FDR/New Deal critics) moderated the culture of greed as did the war that followed. However, the Cold War meant a necessary ideological return to the culture of greed as the implicit essence of capitalism in a struggle for dominance against Communism. The value system of greed as an unspoken but practice integral part of the American way of life, a value system and way of life to be exported to the rest of the world, was well on its way. Not that war-ravaged Europe was not anxious to emulate its NATO leader and capture some of the prewar glory associated with the greed of imperialism. In spite of the Civil Rights movement and the cultural revolution of the 1960s that spread beyond urban America to much of the Western World, despite the humbling effect the Vietnam war had on America, greed would remain at the center of the cultural milieu. “You can call it greed, selfishness or enlightened self-interest, but the bottom line is that it’s these human motivations that get wonderful things done. Unfortunately, many people are naive enough to believe that it’s compassion, concern and ‘feeling another’s pain’ that’s the superior human motivation.” This from Walter Williams, African-American academic who became the darling of the white establishment in the 1980s when Reagan-Thatcher neo-liberalism was triumphant and the Communist bloc was about to fall. Yes, free at last to say publicly what was on the minds of most about the virtues of greed, the greed that makes the solipsist feel good, the kind of greed that means life. Greed works because it has defeated the Communist bloc and integrated those countries into “our economic system,” greed is great because it means accumulation of more regardless of endemic poverty for about one-third of the world’s population. Greed never took a rest as globalization was responsible for its diffusion and acceleration during the Clinton decade that laid the foundations for the economic crisis of 2008-2010. And then came Bush to make individual and national greed a revered patriotic duty. Yoshi Tsurumi, former professor at Harvard University wrote on 04/07/05 in the Harvard Crimson: “Thirty years ago, President Bush was my student at Harvard Business School… In those days, Bush belonged to a minority of MBA students who were seriously disconnected from taking the moral and social responsibility for their actions. Today, he would fit in comfortably with an overwhelming majority of business students and teachers whose role models are celebrated captains of piracy.”
Since the 1980s, as neo-conservatives have captured the Republican Party, America’s business education has also increasingly become contaminated by the robber baron culture of the pre-Great Depression era. Yes indeed, the institutional structure which includes colleges and universities have helped to disseminate the value system of greed that Wall Street practices during business hours and always with 100% transparency! The roots of the culture of greed are very deep and complex, and cannot be moderated in a short period or by the political establishment that sees no alternative to acting opportunistically. Cultural revolutions take years if not decades to have an impact, and unless accompanied by events in society that force people to alter their habits and value system, the status quo remains unchanged because it means survival. The failure to begin addressing change in the culture of greed, individual and institutional (public and private), the failure of institutions to teach that greed is not a virtue, will result in the decay of society as it did in the case of societies built on individual and institutional greed.
Saturday, 2 October 2010
EU DEBT CRISIS: SOUTHERN EUROPE & IRELAND
On 30 September 2010, one day after the strikes and demonstrations across Europe with Brussels at the center, Moody’s Investor Service downgraded Spain’s debt, making it more difficult and costly for the government to borrow. The IMF immediately joined EU to criticize S & P, Fitch and Moody’s for the damage they have inflicted on government financial stability ever since the Greek crisis erupted.
On the same day, the Irish Central Bank announced that an additional 14 billion euros ($19 billion) will be needed to save the Irish banks, bringing the total bill to 50 billion euros ($68 billion at current exchange rate). This at a time that the Irish economy contracted by 1.2% instead of growing by 0.4% as had been expected. The IMF immediately cautioned investors not to draw comparisons between Ireland and Greece, but Ireland was the first EU country to help its banks, yet, it remains at the heart of financial/economic trouble among the PIIGS (Portugal, Ireland, Italy, Greece and Spain). As a result of a budget stalemate in Portugal, bond yields are the highest in 13 years and the center-left government of Jose Socrates introduced higher indirect taxes, pay cuts for public employees, a freeze in public investment and it is about to launch Greek-style austerity measures to achieve fiscal discipline. Like Greece and all the other debtor countries in Europe, Portugal found itself under immense pressure from the EU to undertake austerity measures. On 1 October 2010, the European Commission decided to focus on Ireland, Portugal and Spain in order to contain the damage, primarily by announcing that EU approves of their policies. Italy is also in trouble despite Berlusconi presenting rosy scenarios, as it is projecting lower GDP growth for next year and higher debt. Berlusconi, however, has just received a vote of confidence, thereby postponing the inevitable political instability that would have necessarily translated into further financial and economic instability. Eastern Europe and the Balkans on the periphery of the EU, more as dependencies than equal partners to northwest Europe, are feeling the squeeze of the global crisis, as they are tightening budgets and experiencing economic contraction. At the center of the EU financial and economic troubles remains Greece as the poster child of debtor nations that manages to combine endemic public and private sector corruption, and all this with a Socialist regime that is more neo-liberal and pro-free enterprise as the IMF would have it than any conservative government in Europe. While Greece has managed to avoid default for now, there is the fundamental question of how and if it will be able to service a debt that amounted to 113% of GDP in 2009, rising to 150% of GDP by 2014 during which years the economy is expected to contract. In the absence of default of some rescue plan that involves another EU-IMF bailout package, how will the Greek government be able to find an additional 67 billion euros on top of existing obligations to service the debt after 2015? The government is hoping to avoid default by following the IMF-EU austerity measures. Yet, it is off its target to reduce the deficit because revenue is off by 13% owing to the fact that the economy is shrinking at about 4% and unlikely to grow given that unemployment hovering around 10% will probably rise by at least another 5% in 2011. The government is slashing the reputedly unproductive public sector which will result in higher unemployment and increased poverty, currently at 20%. The result will be lower fiscal revenues and lower private consumption. Greek government is counting on foreign investment to stimulate growth and it has struck some deals with Arab countries and China. However, foreign investment is hard to come by these days of financial retrenchment, and besides, neighboring Turkey along with Eastern Europe and every Balkan country is competing to attract foreign investment and in many cases they are offering more attractive terms than Greece. The Greek government is counting on integrating a portion of the underground economy into the mainstream so that it contributes to the fiscal system. Integration of the “informal economy” into the mainstream is a long-term proposition and unlikely to succeed to the level the authorities are hoping. Meanwhile, every day more and more small businesses are closing, largely owing to the economic contraction which favors large enterprises. At the same time, banks are approving one to two out of ten loan applications, as business growth, especially construction, have come to a standstill. The Greek government is counting on the EU for help. There are a number of analysts that expect Greece to default within the next two years or so, and that would mean at least a 10% drop in the euro, and a scramble by the EU commission to prevent a domino effect from taking place, that is, Portugal, Ireland, and Spain defaulting as well. My own view is that much will depend on the GDP growth of the core (creditor) economies and it is early to predict default, though some type of restructuring may have to take place. Meanwhile, the European Commission is becoming tougher with debtor countries and proposing: a) members must not exceed the 3% budgetary deficit as % of GDP debt limit; b) public spending cannot exceed GDP growth; sanctions against members that surpass the EU’s debt ceiling of 60% of GDP; c) chronic violators would pay penalty of 0.1% of GDP. The EU/IMF Rescue Plan, capitalized at one trillion dollars, is intended not to protect the weaker states like Greece, but the euro as a reserve currency and the stronger members as creditors. As I have written in previous postings for WAIS, the EU creditor nations are determined to create a two-tiered union, especially now that it is expanding and Eastern Europe is integrated or about to join full membership. The German concept of integration is based on a patron-client model where the core remains strong within the bloc in order to compete with other regional bloc dominated by US, Japan, and China. The German political and economic elites remain loyal to the 19th-century Deutscher Zollverein concept that ran its course and died out as nationalism polarized the members. For now, the EU has strong interests beyond economic to stay unified. However, if a series of crises hit the weaker members, the stronger creditor EU countries are establishing mechanisms now to make certain that their national interests are protected in the future.
On the same day, the Irish Central Bank announced that an additional 14 billion euros ($19 billion) will be needed to save the Irish banks, bringing the total bill to 50 billion euros ($68 billion at current exchange rate). This at a time that the Irish economy contracted by 1.2% instead of growing by 0.4% as had been expected. The IMF immediately cautioned investors not to draw comparisons between Ireland and Greece, but Ireland was the first EU country to help its banks, yet, it remains at the heart of financial/economic trouble among the PIIGS (Portugal, Ireland, Italy, Greece and Spain). As a result of a budget stalemate in Portugal, bond yields are the highest in 13 years and the center-left government of Jose Socrates introduced higher indirect taxes, pay cuts for public employees, a freeze in public investment and it is about to launch Greek-style austerity measures to achieve fiscal discipline. Like Greece and all the other debtor countries in Europe, Portugal found itself under immense pressure from the EU to undertake austerity measures. On 1 October 2010, the European Commission decided to focus on Ireland, Portugal and Spain in order to contain the damage, primarily by announcing that EU approves of their policies. Italy is also in trouble despite Berlusconi presenting rosy scenarios, as it is projecting lower GDP growth for next year and higher debt. Berlusconi, however, has just received a vote of confidence, thereby postponing the inevitable political instability that would have necessarily translated into further financial and economic instability. Eastern Europe and the Balkans on the periphery of the EU, more as dependencies than equal partners to northwest Europe, are feeling the squeeze of the global crisis, as they are tightening budgets and experiencing economic contraction. At the center of the EU financial and economic troubles remains Greece as the poster child of debtor nations that manages to combine endemic public and private sector corruption, and all this with a Socialist regime that is more neo-liberal and pro-free enterprise as the IMF would have it than any conservative government in Europe. While Greece has managed to avoid default for now, there is the fundamental question of how and if it will be able to service a debt that amounted to 113% of GDP in 2009, rising to 150% of GDP by 2014 during which years the economy is expected to contract. In the absence of default of some rescue plan that involves another EU-IMF bailout package, how will the Greek government be able to find an additional 67 billion euros on top of existing obligations to service the debt after 2015? The government is hoping to avoid default by following the IMF-EU austerity measures. Yet, it is off its target to reduce the deficit because revenue is off by 13% owing to the fact that the economy is shrinking at about 4% and unlikely to grow given that unemployment hovering around 10% will probably rise by at least another 5% in 2011. The government is slashing the reputedly unproductive public sector which will result in higher unemployment and increased poverty, currently at 20%. The result will be lower fiscal revenues and lower private consumption. Greek government is counting on foreign investment to stimulate growth and it has struck some deals with Arab countries and China. However, foreign investment is hard to come by these days of financial retrenchment, and besides, neighboring Turkey along with Eastern Europe and every Balkan country is competing to attract foreign investment and in many cases they are offering more attractive terms than Greece. The Greek government is counting on integrating a portion of the underground economy into the mainstream so that it contributes to the fiscal system. Integration of the “informal economy” into the mainstream is a long-term proposition and unlikely to succeed to the level the authorities are hoping. Meanwhile, every day more and more small businesses are closing, largely owing to the economic contraction which favors large enterprises. At the same time, banks are approving one to two out of ten loan applications, as business growth, especially construction, have come to a standstill. The Greek government is counting on the EU for help. There are a number of analysts that expect Greece to default within the next two years or so, and that would mean at least a 10% drop in the euro, and a scramble by the EU commission to prevent a domino effect from taking place, that is, Portugal, Ireland, and Spain defaulting as well. My own view is that much will depend on the GDP growth of the core (creditor) economies and it is early to predict default, though some type of restructuring may have to take place. Meanwhile, the European Commission is becoming tougher with debtor countries and proposing: a) members must not exceed the 3% budgetary deficit as % of GDP debt limit; b) public spending cannot exceed GDP growth; sanctions against members that surpass the EU’s debt ceiling of 60% of GDP; c) chronic violators would pay penalty of 0.1% of GDP. The EU/IMF Rescue Plan, capitalized at one trillion dollars, is intended not to protect the weaker states like Greece, but the euro as a reserve currency and the stronger members as creditors. As I have written in previous postings for WAIS, the EU creditor nations are determined to create a two-tiered union, especially now that it is expanding and Eastern Europe is integrated or about to join full membership. The German concept of integration is based on a patron-client model where the core remains strong within the bloc in order to compete with other regional bloc dominated by US, Japan, and China. The German political and economic elites remain loyal to the 19th-century Deutscher Zollverein concept that ran its course and died out as nationalism polarized the members. For now, the EU has strong interests beyond economic to stay unified. However, if a series of crises hit the weaker members, the stronger creditor EU countries are establishing mechanisms now to make certain that their national interests are protected in the future.
Friday, 1 October 2010
US ECONOMY: FALK IN THE WEEK - Jon V. Kofas
On the surface W. Falk’s analysis (see Richard Hancock’s post of 30 September) seems to make sense, largely because it seems from his statistics that the US is a country spending money for an anachronistic welfare state that keeps borrowing from China to keep itself afloat. Let us take each point separately and see if this article is hollow populist rhetoric (rather typical of a mass publication) intended to distract the public that US fiscal imbalances (the same ones most countries in the world are also confronting) are the fault of labor and the middle class.
First, 45% of adults pay no income taxes. If we consider that one in seven Americans lives below the poverty line (14.3% or 43.6 million) and that ten percent (officially, or 14 million) are unemployed and the average weekly paycheck adjusted for inflation has fallen by 13% since 1973, we can see how government revenue should be lower owing to structural economic problems for which the system and not workers and the middle class are to blame. About 20% of income tax revenue dropped in 2009 owing to a sharp rise in unemployment and that entailed higher costs for benefits.
Second, the 45% of Americans not paying federal income taxes are paying sales taxes, Social Security tax (assuming they have jobs to pay into the system), state, and local taxes. In 2009, US collected a mere 7% from corporate taxes (a drop of 50%, the largest in half a century), while social security contributed 42% and individual income tax 43%, a drop of 20% owing to the recession. Defense absorbs 23% of the budget, and categories designated “other mandatory and other discretionary” absorb 29% for a total of 52%, while 19% is for Medicare and Medicaid and 20% for Social Security for a total of 39%. Interest on debt currently absorbs 5% of the budget and total debt to GDP ratio is 80% and will be at or above 100% by 2015, or 15% of the budget. The political question is who pays and where to cut to reduce the deficit. The answer is that both political parties have always have been financed by business and both represent business interests because the national interest has always been identified with business. Therefore, Republicans and Democrats will continue to trim the welfare state that has been downsized since Reagan, they will raise indirect taxes paid by workers and middle class, they will not raise corporate taxes that are a mere 7% of revenue, in spite of the fact that corporate profits have been going up well above the inflation rate in 2010, or income taxes on the top 20% of the wealthiest Americans who own 85% of the wealth. The top 1% own about 35% of the wealth, and the next 19% own 50% of the wealth in a country whose GDP amounts to an estimated $14.5 trillion, and world GDP of about $58 trillion! The question of fairness in tax policy is addressed by both political parties, invariably with the intent to distract so they can squeeze more from the bottom income earners in order to maintain a regime of high defense spending while strengthening the corporate welfare structure.
Ultimately, the issue before the American people is what kind of society do they want? Do they want a two-tiered society that resembles a Third World country? Do they want a society that continues to permit a small minority to own most of the wealth, a process of manipulative accumulation (recall how banks and financial institutions sunk the world economy in the crisis of 2008-2010) responsible for the extreme volatility in the economy, or a society where social justice prevails, at least to some degree that the average citizen can be proud of America’s Jeffersonian democracy roots–”of the people, by the people, for the people”? I have complete confidence in Republicans and Democrats alike:
a) to continue to erode the social welfare state;
b) to continue to weaken the middle class and labor that has been weakening since the end of the Vietnam War (US economists predict that as many as 40 million jobs may be lost in the next 10-20 years to low-wage countries);
c) to continue to strengthen finance capital through bailout plans, subsidies, tax breaks, tariffs, and to strengthen the top 20% at the expense of the 80% of the citizens.
d) to continue to pour more resources into defense;
e) to continue to blame lack of productivity (meaning it is the fault of workers) as the key reason for the economic problems;
f) to continue to use government as the “alleged enemy” that is failing people (implying that business is the solution and on the side of the common man);
g) to continue to blame China and its currency and trade manipulation for lack of American competitiveness; and
h) to continue to demand greater conformity to a system that is not working for the welfare of its people.
First, 45% of adults pay no income taxes. If we consider that one in seven Americans lives below the poverty line (14.3% or 43.6 million) and that ten percent (officially, or 14 million) are unemployed and the average weekly paycheck adjusted for inflation has fallen by 13% since 1973, we can see how government revenue should be lower owing to structural economic problems for which the system and not workers and the middle class are to blame. About 20% of income tax revenue dropped in 2009 owing to a sharp rise in unemployment and that entailed higher costs for benefits.
Second, the 45% of Americans not paying federal income taxes are paying sales taxes, Social Security tax (assuming they have jobs to pay into the system), state, and local taxes. In 2009, US collected a mere 7% from corporate taxes (a drop of 50%, the largest in half a century), while social security contributed 42% and individual income tax 43%, a drop of 20% owing to the recession. Defense absorbs 23% of the budget, and categories designated “other mandatory and other discretionary” absorb 29% for a total of 52%, while 19% is for Medicare and Medicaid and 20% for Social Security for a total of 39%. Interest on debt currently absorbs 5% of the budget and total debt to GDP ratio is 80% and will be at or above 100% by 2015, or 15% of the budget. The political question is who pays and where to cut to reduce the deficit. The answer is that both political parties have always have been financed by business and both represent business interests because the national interest has always been identified with business. Therefore, Republicans and Democrats will continue to trim the welfare state that has been downsized since Reagan, they will raise indirect taxes paid by workers and middle class, they will not raise corporate taxes that are a mere 7% of revenue, in spite of the fact that corporate profits have been going up well above the inflation rate in 2010, or income taxes on the top 20% of the wealthiest Americans who own 85% of the wealth. The top 1% own about 35% of the wealth, and the next 19% own 50% of the wealth in a country whose GDP amounts to an estimated $14.5 trillion, and world GDP of about $58 trillion! The question of fairness in tax policy is addressed by both political parties, invariably with the intent to distract so they can squeeze more from the bottom income earners in order to maintain a regime of high defense spending while strengthening the corporate welfare structure.
Ultimately, the issue before the American people is what kind of society do they want? Do they want a two-tiered society that resembles a Third World country? Do they want a society that continues to permit a small minority to own most of the wealth, a process of manipulative accumulation (recall how banks and financial institutions sunk the world economy in the crisis of 2008-2010) responsible for the extreme volatility in the economy, or a society where social justice prevails, at least to some degree that the average citizen can be proud of America’s Jeffersonian democracy roots–”of the people, by the people, for the people”? I have complete confidence in Republicans and Democrats alike:
a) to continue to erode the social welfare state;
b) to continue to weaken the middle class and labor that has been weakening since the end of the Vietnam War (US economists predict that as many as 40 million jobs may be lost in the next 10-20 years to low-wage countries);
c) to continue to strengthen finance capital through bailout plans, subsidies, tax breaks, tariffs, and to strengthen the top 20% at the expense of the 80% of the citizens.
d) to continue to pour more resources into defense;
e) to continue to blame lack of productivity (meaning it is the fault of workers) as the key reason for the economic problems;
f) to continue to use government as the “alleged enemy” that is failing people (implying that business is the solution and on the side of the common man);
g) to continue to blame China and its currency and trade manipulation for lack of American competitiveness; and
h) to continue to demand greater conformity to a system that is not working for the welfare of its people.
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