USA – Radical Notes

Obama’s potent symbolism

November 5, 2008 by Radical Notes Leave a Comment

The fact of Democrat Barack Obama being the clear favourite in the US presidential race has been the source of a range of progressive expectations. But beyond the immense symbolic import of the moment, it is debatable whether an Obama win will radically alter US paradigms, more so abroad than at home.

That said, even the purely symbolic significance of the event is truly momentous. In a country where racial segregation is still within living memory, and deprivation for ethnic minorities still a reality, having the first black President would still send out a clear signal of change within the US.

Indeed, the Democratic Party, on the face of it, seemed to represent sweeping change in this election, what with Obama’s intense fight for the nomination being with the first-ever female candidate, Hilary Clinton.

There will certainly be a welcome move away from the George Bush legacy, with many Americans seeing it has having endangered their constitutional rights and battering the image and prestige of the US abroad.

Obama has been able to project a transformative aura, giving rise to hopes of a break with the neocon tradition of trampling over international institutions and increasing global strife.

However, even as an Obama presidency might rethink some foreign policy issues like Iraq and relations with Latin American nations, there is unlikely to be any structural readjustment in Washington’s policies. India can hardly get a President as keen as George Bush was on cementing strategic partnerships.

And there is hardly any variation between the Democrat and Republican positions on critical, and deeply divisive, issues like the larger West Asian policy. Indeed, Obama has had to singularly disavow any possibility of change here.

It is also indicative of the more disturbing aspects of the public consensus in the US that Obama had to repeatedly insist that he was, indeed, not a Muslim. Breaking away from the lobbyism that so deeply shapes US politics, as well as from the hold of the military-industrial complex, would need much more than Democratic symbolism.

Courtesy: The Economic Times

Filed Under: DIARIES Tagged With: Politics, USA

Global Economic Crisis-II

November 5, 2008 by Radical Notes 2 Comments

Deepankar Basu

Link to “Global Economic Crisis-I”

Short-term: The Sequence of Events

Even though the credit crisis attained dangerous proportions only in mid-September, it had already announced itself in the early part of the year with the collapse of Bear Stearns, one of the five famed investment banks that defined Wall Street; today none of those five investment banks – Bear Stearns, Goldman Sachs, Lehmann Brothers, Merril Lynch and Morgan Stanley – exist, an indication of the depth of the crisis. Faced with a fierce run on it’s dwindling reserves and it’s stock plummeting, Bears Stearns was forced to sell itself off to J P Morgan Chase (one of the largest commercial banks in the US) on March 16, 2008. The next three months could be best described in terms that the police often use in India: tense but under control. On July 01, the next piece of bad news emerged and shattered the uneasy calm: Country Wide Financials, the largest mortgage seller in the US, collapsed and was acquired by Bank of America (one of the largest commercial banks in the US). Following closely on the heels of this event, IndyMac bank failed – the second largest bank failure in US history – and was taken over by the Federal Deposit Insurance Corporation (FDIC), one of the institutions responsible for monitoring the health of the banking system in the US. IndyMac was, unsurprisingly perhaps, part of the Country Wide financial family.

Things started speeding up in September. On September 08, Freddie Mac and Fannie Mae, the two government supported enterprises (GSE) operating in the mortgage market was nationalized, with assets of the two entities totalling to more than $ 5 trillion. On September 15 another of the five famed investment banks, Lehmann Brothers, filed for bankruptcy; Lehmann’s assets were a little over $ 600 billion and this made it’s bankruptcy filing the largest in US history. Next day, the Fed stepped in with a $ 85 billion loan to prevent American International Group (AIG), the largest insurance firm in the US from going under. These two events, Lehmann’s bankruptcy filing and AIG’s rescue, sent shock waves through the world financial system. The result was a rapid erosion of faith in the financial system leading to a veritable credit freeze: financial institutions stopped lending, to other financial institutions, to businesses and to consumers.

The next thirty six hours, from the morning of September 17 to the evening of September 18, accelerated the credit crisis to extremely dangerous proportions and convinced the US Treasury and the Federal Reserve that government intervention of unheard magnitudes (at least since the Great Depression) would be necessary to prevent total financial collapse. Ben Bernanke, the chairman of the Federal Reserve (the US Central Bank), was famously reported as saying, at one point during this 36 hours, that if the government did not save the (financial) markets now there might not be any financial markets in the future. So, what happened during those crucial 36 hours?

The crucial 36 hours

The first indication of a severe stress in the financial system was a shooting up of credit default swap (CDS) rates, especially on Morgan Stanley and Goldman Sachs (two of the famed five Wall Street investment banks) debt, during the early hours of September 17. Credit default swaps are insurance contracts that can protect bondholders against the possibility of default. For example if an investor has bought bonds worth $ 1 million issued by firm A, then the investor can also buy CDS – typically issued by financial institutions like large commercial banks, investment banks or insurance companies – to protect herself against a possible loss resulting from firm A defaulting on it’s bonds; the premium that the investor pays for the CDS is called the “rate” or “spread” and it is typically around 2% of the amount insured (the “notional value”). So, in the case of this example, the investor would pay $ 20,000 to buy CDS and if firm A were to go under, then the “counterparty” to the CDS contract (i.e., the financial institution that issued the CDS to the investor) would step in to pay the investor $ 1 million and the interest on that amount.

CDS rates (i.e., the premiums that are paid on the insurance contracts) are, thus, an indication of the market’s belief about the possibility of default of some institutions; CDS rates on bonds issued by firms are typically low when the market thinks the probability of default of those firms are low and high when the market thinks the probability of default are high. Thus, on the morning of September 17, when CDS rates went through the roof, this provided evidence of severe loss of faith in the financial system.

When investors lose faith in the financial instruments issued by private parties, they turn back to those issued by the government and that is what happened when CDS rates multiplied by close to a factor of five. Investors let go of private financial instruments like hot bricks and rushed into US government securities, a phenomenon often described as “flight to safety”. The US government, i.e., the US Treasury department, issues three primary kinds of securities: T-bills, T-notes and T-bonds (where the “T” stands for Treasury), where bills mature in less than a year, notes mature between one and ten years and bonds are of longer maturities than a decade. When investors lost faith in the private financial system, they rushed in to US T-bills, the short-run heavily-traded ultra-safe US government securities. This huge rush into T-bills pushed up the price of T-bills and drove the yield (i.e., interest rate) on T-bills down. At one point in time, during this 36 hour period, the yield on T-bills was pushed down all the way to zero (the lowest it can ever go to) implying that investors were willing to hold T-bills even though the nominal return was zero and real returns were negative (because the inflation rate was positive).

As private investors were madly rushing into the safety of US T-bills, another important event was unfolding in the mutual funds market. Money market mutual funds (MMMF) are financial institutions that have become popular over the last three decades, especially in the US. They typically work as follows: investors put their money in MMMF’s by purchasing shares in the MMMF’s stock; thus the MMMF becomes a mechanism for pooling huge amounts of money and then using those large sums for investing in a very diversified portfolio of financial assets, thereby making the investments extremely safe. Thus MMMF’s were, till September 17, thought to be as safe as a deposit account in a commercial bank, and the added advantage was that the money invested in MMMF shares would give a positive rate of return as opposed to a deposit account which is usually non-interest bearing. On September 17, one of the oldest and largest MMMF’s, Reserve Primary Fund, “broke the buck”, i.e., it made losses on it’s investments such that it could not guarantee a positive return to it’s shareholders. Every dollar invested in Reserve Primary was now, by it’s own admission, worth less than a dollar. This was an unheard of event and as news of Reserve Primary Fund’s losses spread, investors started pulling money out of MMMFs.

This had a very negative consequence for the real economy because of the serious involvement of MMMFs in the commercial paper (CP) market. Businesses typically need to constantly borrow short-term funds to keep their operations going; these borrowed funds go towards funding payroll, paying suppliers, maintaining inventory, etc. Firms, at least the big ones, usually borrow short-term funds in the US by issuing commercial paper (which is essentially a bond with a short maturity of about a week or a month). Who buys commercial papers? The most active institutional investors in the CP market are the MMMFs; some of the largest chunks of commercial papers are bought by the MMMFs. So when the MMMFs faced an increasing spate of withdrawal, in the wake of Reserve Primary Fund’s breaking the buck, they stopped buying commercial paper. This, essentially, meant that the CP market ground to a halt. Thus businesses were no longer able to borrow the short-term funds that they need to keep operating. The economy, by all means, shut down.

Adding to and going hand-in-hand with these processes were the growing problems in the interbank (lending) market. Commercial banks typically lend and borrow banking system reserves (roughly the sum of currency in the banks’ vaults and the amount they hold in their account with the Central Bank) among themselves for very short periods, usually overnight periods. The interbank lending market that is most closely watched is the London interbank market and the rate at which loans are made in this market is the London Inter Bank Offered Rate (LIBOR). The most important characteristic of loans in the interbank market is that they are unsecured, i.e., they are not backed by collateral. Thus, a bank can get a loan in the interbank market only if other banks consider it financially sound; thus when the LIBOR jumps up suddenly it provides evidence that the largest and the best banks in the world have lost faith on each other. On September 17, the LIBOR shot up giving indication of increasing strain in the interbank market.

It was these sets of events – CDS rates shooting up, closing down of the CP market, increasing strain in the interbank market – that spooked the US administration and convinced them of the necessity of the most extensive government intervention in the financial markets since the Great Depression. These crucial sets of events were precipitated by the string of big financial failures that the US economy had witnessed over the first two weeks of September: the failure of Fannie and Freddie, the bankruptcy of Lehmann and the near-collapse of AIG. It was these failures that led to a rapid loss of faith in the financial system and heralded a full-blown credit crisis. And why did Fannie and Freddie and Lehmann and AIG fail? All these financial institutions failed because at crucial points in time they could no longer raise money from the market to finance their assets, i.e., they could not borrow money or roll over their short-term debt; financing, for these institutions, had dried up. And why did financing dry up for these big and reputed financial institutions? Because each of these, in their own ways, were exposed to the subprime mortgage market and took huge losses when the subprime mortgage market started unravelling. As news of these failures spread, investors, fearing losses, became increasingly unwilling to lend money to these institutions.

(To be continued.)

Filed Under: DIARIES Tagged With: Economic Notes, Economy, Imperialism, USA

Global Economic Crisis-I

November 1, 2008 by Radical Notes 9 Comments

Deepankar Basu

The global economic crisis currently underway is, by all accounts, the deepest economic crisis of world capitalism since the Great Depression. It is necessary for the international working class to understand various aspects of this crisis: how it developed, who were the players involved, what were the instruments used during the build-up and what are it’s consequences for the working people of the world. This understanding is necessary to formulate a socialist, i.e., working class, response to these earth shaking events. In a series of posts here on Radical Notes, I will share my understanding of the on-going crisis as part of the larger collective attempt to come to grips with the current conjuncture from a socialist perspective, to understand both the problems and the possibilities that it opens up.

The Big Story

The current crisis can possibly be fruitfully understood if measured against different time scales: the short-term, i.e., in terms of days and weeks; the medium-term, i.e., in terms of months and years; and the long-term, i.e., in terms of decades. This analytical compartmentalization into three different time periods is useful because it demonstrates how long-term trends silently but inexorably created the conditions for the medium-term problem to explode into the short-term problem that has buffeted the economy since mid-September, 2008.

In the short-term, the current financial meltdown is a severe credit crisis, a situation whereby financial institutions have become unwilling or unable to lend and borrow among themselves thereby freezing the flow of credit in the entire economic system; this credit freeze is largely fuelled by a serious loss of faith in financial institutions and in the financial system as such and came to the fore most forcefully in the middle of September, 2008. It is also possible that the credit freeze, and the underlying loss of faith, might explode into a full-blown banking crisis: banking panic leading to run on even healthy and solvent banks.

In the medium-term, the crisis is the unravelling of a stupendously leveraged speculative bubble on real estate that built itself up for about seven years from the beginning of this decade (and century); this speculative bubble was mediated by fancy financial instruments fashioned by Wall Street, running all the way from sub-prime mortgages, asset backed securities (ABS) and mortgage backed securities (MBS), collateralized debt obligations (CDO) to credit default swaps (CDS); this speculative bubble led up to and culminated, when it finally burst in the middle of 2007, in the credit crisis that the US, and gradually the global, economy finds itself in.

From a long-term perspective the present crisis is, of course, more than just about Wall Street and finance and banking; it is a full-blown crisis of the neoliberal turn in capitalism inaugurated the 1970s. Neoliberalism (or the neoliberal counterrevolution) was a response to the structural crisis of capitalism that emerged in the late 1960s. It was a response from the point of view of the upper fraction of the capitalist class, a fraction especially dominated by financial interests. The neoliberal counterrevolution ushered in a capitalism firmly under the sway of finance capital; the neoliberal policy turn was geared towards breaking the power of labour vis-a-vis capital that had gradually built up during the two decades after World War II. The result was stagnant real wages, slow but growing productivity, and hence growing profit incomes especially of the financial sector, increasing financialization and a deregulated economy for finance to operate in.

Stagnant wages created the demand for debt from a working class used to growing consumption spending; huge profit incomes and the shredding of all regulation on finance created the supply. The result was a growing role of debt in the lives of the working class which, over time, led to a huge debt overhang on the entire economy. As the ratio of outstanding debt to income rose, with stagnant incomes for the majority, the financial fragility of the entire system increased; and it is this systemically fragile financial architecture that finally cracked under the weight of the bursting housing bubble. Thus, the long-term build-up of debt in the US economy resulting from the neoliberal counterrevolution, which increased the financial fragility of the system, created the conditions in which the bursting of various asset price bubbles could lead to a severe credit crisis and loss of faith in the entire financial system.

Impact on the Real Economy

Real GDP figures released by the US Bureau of Economic Analysis (BEA) on October 30 indicated that the US economy was in the midst of a slowdown even before the financial storm hit the world economy in the middle of September. Real GDP in the US contracted at an annual rate of 0.3 percent for the third quarter (i.e., for the months of July, August and September), led by a sharp fall in consumer spending. The financial storm, comprising a severe credit crisis and even a possible banking crisis, will only deepen the slowdown and might even push the US and the rest of the world into a prolonged and painful recession, possibly even a decade long L-shaped recession like the one that Japan witnessed during the lost decade of the 1990s. In such a scenario, fixing the financial mess, dealing with the credit freeze, averting a possible run on the commercial banking system and restoring confidence in the financial system will not be enough to prevent a plunge into a deep, prolonged and painful recession; addressing the credit crisis is necessary but not sufficient to deal with the grave crisis in the real sector. An aggressive fiscal intervention by the US government and other governments around the world, in terms of direct expenditure on goods and services, will be necessary to prevent the slide into a prolonged recession. It is in the interests of the working class to push for such intervention even as it works towards re-building it’s political, social and economic institutions.

(To be continued.)

Filed Under: DIARIES Tagged With: Economic Notes, Economy, Finance, USA, Working Class

Perspectives on the US Financial Crisis

July 11, 2008 by Radical Notes 2 Comments

Sam Gindin and Leo Panitch

It is time to take stock. The centrality of the American economy to the capitalist world – which now literally does encompass the whole world – has spread the financial crisis that began in the U.S. housing market around the globe. And the emerging economic recession triggered in the U.S. by that financial crisis now threatens to spread globally as well.

Capitalism has had an incredible run – politically and culturally as well as economically – since the stagflation crisis of the 1970s. The resolution of that crisis required, as economists put it at the time, ‘reducing expectations’ of the kind nurtured by the trade union militancy and welfare state gains of the 1960s. This was accomplished via the defeats suffered by trade unionism and the welfare state since the 1980s at the hands of what might properly be called capitalist militancy. This was accompanied by dramatic technological change, massive industrial restructuring alongside labour market flexibility and the over – all discipline provided by ‘competitiveness.’

That discipline brought with it an enormous increase in economic inequality, the spread of permanent working class insecurity and the subsumption of democratic possibilities to profitable accumulation. But this did not mean capitalism was no longer able to integrate the bulk of the population. On the contrary, this was now achieved through the private pension funds that mobilized workers savings, on the one hand, and through the mortgage and credit markets that loaned them the money to sustain high levels of consumer spending on the other. At the centre of this were the private banking institutions that, after their collapse in the Great Depression, had been nurtured back to health in the postwar decades and then unleashed the explosion of global financial innovation that has defined our era.

The question begged by the current crisis is whether capitalism’s capacity to integrate the mass of people through their incorporation in financial markets has run out of steam. That the fault line should have appeared in ‘sub-prime’ mortgage loans to African-Americans is hardly surprising – this has always been the Achilles’ heel of working class incorporation into the American capitalist dream. But an economic earthquake will actually only result if there is a devaluation of working class assets in general through a collapse of housing prices and the stock and bonds in which their retirement savings are invested.

The state and financial crises

We are by no means there yet. The role being played to prevent just this by the Federal Reserve, very much acting as the world central bank in light of the global implications of a U.S. recession, should once and for all dispel the illusion that capitalist markets thrive without state intervention. It was through the types of policies that promoted free capital movements, international property rights and labour market flexibility that the era of free trade and globalization was unleashed. And this era has been kept going as long as it has by the repeated coordinated interventions undertaken by central banks and finance ministries to contain the periodic crises to which such a volatile system of global finance inevitably gives rise.

The Fed has repeatedly poured liquidity into its financial system at the first sign of trouble. The question is whether the capacity of the system to go on integrating ordinary Americans though the expansion of investor and credit markets in this way has reached its limit. This was indeed suggested by the Bush administration’s sudden (non-military) Keynesian turn with a $150 billion fiscal stimulus. However, that fiscal stimulus at the federal level may be undone at the state level, especially with municipal government cutbacks, given their massive dependence on property taxes. The way financial institutions that specialized in selling risk insurance on municipal bonds were enveloped in the credit crisis has further compounded the problem. This indeed brings to mind the extent to which it was municipal governments that were on the front lines of the Great Depression.

But while the U.S. may very well move into a recession, which even when it ends may mark the beginning of a new era of slower growth, this is very different from a Depression. While there is no doubt that mortgages in black communities and for the working poor more generally will be tightened, it seems most likely that banks, competing for markets, will continue to extend credit to working families more generally. we need to remember that the top twenty per cent and their families are extravagant consumers. While growing inequalities are grotesque, the left has consistently underestimated the extent to which the rich can sustain overall spending. The ‘correction’ in the dollar (alongside the strength of U.S. manufacturing in the higher-tech sectors) has already led to offsetting growth in markets abroad; U.S. exports have been growing at double-digit rates over the past few years.

Finally, the U.S. state may revive its capacities for substantive infrastructural spending, if only to stimulate the construction industry now that the housing boom is over. Indeed, even from the perspective of competitiveness and accumulation there is a long-neglected need to rebuild U.S. infrastructure – as the collapsed levies of New Orleans and the collapsed bridges of Minneapolis dramatically showed. The type of state intervention that brought us financial globalization is not well suited to this, but this crisis may finally force some renewal of state capacities in this respect, even within the overall framework of neoliberalism.

Finance and Neoliberalism

There is an understandable tendency on the left to take hope in capitalism’s current dilemmas. The extreme liberalization of finance (and along with it the era of neoliberalism) seems discredited. Finance today appears as no more than high-flying speculation – absurdly wasteful and ultimately not sustainable. U.S. corporations remain profitable, but with the credit crunch, who will buy the goods? Discredited as well, it therefore appears, is the U.S. capacity to keep its own house in order, never mind lead the process of globalization. Yet before we assume that the openings created by this crisis place us on the verge of a matching new oppositional politics, we need a more careful reading of our times. While the new openings provide the space for a new politics, we need to soberly appreciate the problematic link between such openings and a radical response.

To begin with, as immoral and irrational as finance might seem, financialization has been absolutely essential to the making and reproduction of global capitalism. Second, the growing consensus that finance must be re-regulated is hardly an attack on finance or neoliberalism more generally. Rather, it is about the engineering of finance so it can continue to be ‘innovative’ in the service of both itself and non-financial capital. Third, whatever problems the U.S. currently faces, its dominance will not fade because of a crisis in housing or a lower exchange rate; it does us no good to underestimate the staying power of the American capitalist empire.

It is not only finance but capitalism in general that rests on speculation. Behind a new firm or a new product rests the ‘speculation’ that it can be sold at a cost and price that generates profit. Behind the distinction between finance and the ‘productive sector’ is therefore something else: the notion that finance speculates in pieces of paper, not in providing goods or real services; it is a parasitic drain on the economy, not a constructive addition to it.

The problem with this line of thinking is that it mistakes what is rational from the perspective of certain moral criteria with what is rational within capitalism. The financial system is necessary to capitalism’s functioning. The discipline finance has imposed in the neoliberal era on particular capitalists and workers has forced an increase in U.S. productivity rates by way of increased exploitation, the more efficient use of each unit of capital, and the reallocation of capital to sectors that are most promising – all from the standpoint of profits, of course.

The penetration by American finance of foreign countries and the inflow of foreign capital into the U.S. has given the U.S. access to global savings, shored up its role as the greatest global consumer and reinforced the U.S. state’s power and options. Especially important, financial markets have come to provide non-financial corporations with mechanisms for managing their risks, and comparing and evaluating diverse investment opportunities in a highly complex global economy. Absent this role, globalization – at least to the extent we have experienced it – would not have been possible. Finally, as emphasized earlier, the ‘democratization’ of American finance has given workers access to finance as savers and debtors, thereby contributing to their integration into, and dependence on, each of capitalism and finance.

This does not mean that the explosion of finance is not a highly contradictory process. Highly volatile financial markets inevitably generate financial crises. Rather, it shifts the question from whether financialization is irrational to whether its contradictions can be managed insofar as the crises can be contained. What working classes do in this context will be crucial to answering this question.

The Dialectics of Regulation

Finance cannot exist without regulation and the U.S. financial sector, even before the latest crisis, was the most heavily regulated of any section of the U.S. economy. In fact, the dynamics of finance cannot be understood apart from how regulation shapes financial competition, how banks and other financial institutions try to escape or reshape that regulation, and the state’s subsequent counter-responses. The current dilemma for American regulatory institutions lies in how to re-regulate finance so as to overcome its costly and dangerous volatility without undermining finance’s needed innovative capacity.

We need to be clear that this is about re-engineering finance to strengthen capital accumulation, not control it in the name of a larger public interest. To place democratic regulation of finance on the agenda would require asking: ‘regulation for what purpose?’ and so would mean going far beyond finance itself. It would mean raising the fundamental question of social control over investment and therefore get to the heart of power in a capitalist society.

In the context of the failed promises of the past quarter century and the current crisis, to see the above issue go completely unmentioned in the Democratic primary debate may not be surprising given the absence of even a trade union campaign around this, but it bespeaks an impoverishment of American politics that in fact goes all the way back to the New Deal. The issue of economic democracy that had been placed on the political agenda alongside the New Deal’s public infrastructure projects was set aside for the remainder of the century after the FDR administration’s self-described ‘grand truce with capital’ in the late 1930s.

It will, therefore, not do to resort to the abstractions and obfuscations of calling for ‘re-regulation’ or a ‘new, new deal.’ It is the undemocratic power of private control over investment that needs to be put on the agenda.

American Empire in Crisis

Four particular aspects of the limited fall-out from the present crisis demand more serious reflection on the left. First, the fact that this crisis surfaced in the context of strong profits and low debt loads in the non-financial sector is important, and this accounts for the limited damage thus far.

Second, it is notable that despite the IMF calling this the most serious banking crisis since the Great Depression, we have not seen a series of banks failures. This is certainly linked to the interventions of the U.S. Fed, but it also speaks to the strength of private U.S. financial institutions. In no other country could such a crisis have unfolded without massive financial bankruptcies.

Third, it is especially worthy of note that no major state saw an opportunity in the crisis to challenge or undermine the American state. Rather, their integration into global capitalism meant that they identified this crisis as their crisis as well. They effectively recognized the U.S. central bank as the world’s central bank and cooperated with it in coordinating internationally repeated provision of liquidity to the banks. As in the previous instances of financial crises during the 1980s and 1990s, this reproduced and extended the American state’s leading role in managing global capitalism.

The fourth, and most important factor is the remarkable ‘imperial flexibility’ the U.S. has by virtue of the weakness of its working class. Had, for example, U.S. workers insisted on higher wages to compensate for rising food and oil prices and the devaluation of their homes and taken advantage of the competitive space offered by a falling dollar, the Fed would have had to cope with the fear of inflation and this might have meant higher rather than lower interest rates. And that could very well have aggravated the crisis and risked a financial meltdown. But rather than the working class demanding more, it in fact showed restraint or, in the case of the autoworkers, accepted the greatest concessions the union has ever made.

The more important question is, therefore, not the economics of crisis but its politics. How will the working class respond to the crisis? If credit continues but becomes more costly; if the loss of private pensions, negotiated health care, and the devaluation of homes force people into having to reduce consumption to shore up their savings; if food and oil prices leave less discretionary spending – if this is the near-term future, will workers rebel? Or will workers once again tighten their belts to preserve what is left from their past gains? And if frustrations are expressed politically, will the politics be limited to a longing for the good-old days before the crisis or before Bush?

Absent what Alan Sears, at the recent Great Lakes Graduate Students Conference at York, called ‘an infrastructure of resistance’, any opposition that does surface is most likely to be localized and contained rather than built on. A coherent alternative is no just a set of economic policy proposals but a political movement that can develop the popular appreciation and capacities for radical democratic control over investment. There should be no illusion that a recession, or even a depression, will necessarily bring the issue of economic democracy back onto the U.S. political agenda. It would require a transformation of American politics to do so – and that, like the current economic crisis, would as well have global implications.

Sam Gindin teaches political economy at York University.
Leo Panitch teaches political economy at York University and is editor of The Socialist Register.

Courtesy: The Bullet

Filed Under: DIARIES Tagged With: Economic Notes, Economy, Finance, Imperialism, USA

Political Economy of American Colacracy

May 19, 2008 by Saswat Pattanayak Leave a Comment

Saswat Pattanayak

The high moral ground for American democracy rests on the presumptions of healthy, competitive and fair elections. And holding these traits to be self-evident, the elections are held with utmost pomp and show. The grandeurs associated with US polls are unparalleled and are generally considered as reaffirming symbols of multiparty viabilities in the world.

Countries that do not boast of a multi-party system are considered to be autocratic, and consequently despotic. Whether or not it is important to analyze the rationale behind such a forgone conclusion where fairness is associated with competitive party system is a separate matter. Considering the timeliness of the upcoming polls, it will be prudent to conduct a reality check on the core features that sustain electoral system of American democracy itself.

The Election Farce:

Some people say we need a third party. I wish we had a second one – Jim Hightower, national radio commentator

America does not need two Republican Parties – John Kerry, former Presidential nominee for the Democratic Party

What Hightower and Kerry are expressing are concerns addressing the larger American choice-freedom fetishism. They do not question whether having two (or three, four, five) parties by itself will solve the current political crisis arising out of a tradition of lackluster world leadership, but they have at least admitted to the fact that the political map of the US does not reflect either heterogeneity, or healthy competition.

What the opinion leaders are concerned about is the lack of strong ideological differences between Republicans or Democrats regarding policy issues, rendering their separation as merely symbolic. For the most part, both parties totally agree on core issues such as nationalism/patriotic exhibitionism, neocolonialism, foreign affairs, warfare policies, health sector, concerns over the illegal immigrants, employment guarantees, among many other crucial questions. If there exist any differences, they are more in degrees than in types.

If both the parties do not have clearly outlined differences that are crucially significant when it comes to national economy, security and foreign affairs, then what is the single most important difference that exists, albeit in shades, between them, or among the candidates within them?

Money.

Political Economy of US Polls:

Characteristic of a capitalistic economy, people with more money have more access to power, and utilizing the tools of power, they eventually gain to control the power. Hence, the American polls concentrate on the most basic principle of its brand of democracy: raising funds. The candidate who raises more funds is the candidate that is certain to win nomination from his/her own party. In a recent interview to NPR, Democratic consultant Tad Devine, suggested that the election process costs between $750 million to $1 billion annually during the primaries alone!

Where do the millions go? In 2004 US elections, even after the primaries were over, between just the two leading candidates, they spent more than $500 million. Majority were spent on media publicity (Bush spent $132 million and Kerry spent $94 million). Buying TV spots and multimedia “bracketing”, the candidates make sure that the ads appear on TV morning shows, strategically can be heard while people are driving to work, they are replayed on internet news channels in afternoon, played back in evening news on television and while watching programs during late nights. In addition, thousands of paid volunteers are recruited all over the country and trained for months and paid for by the campaign money. In addition, costs are incurred for travel and events, payroll and consultants, fundraising-mail, and overhead- rent, utilities, insurance, equipment.

With the stakes so high, it is only natural that the richest lot or the candidates with access to the richest lot actually join the mainstream politics – so that in return, as history is witness every year, they can serve the military-industrial interests. 2008 is no different. On one hand we have Hillary Clinton, a woman who has amassed wealth to the tune of more than $109 million dollars during last eight years along with her husband. And far from being a result of the great “American Dream” that afflicted the protagonist of “In Pursuit of Happiness”, Hillary has always had the privilege of growing up in affluent Chicago suburbs, of being a high profile lawyer who has no knowledge of the price of gasoline in her country. Not only does she still parrot the price to be $63 for half a tank (whereas it has actually gone beyond $100 now), she also entirely fabricates the story about how she went to be part of the armed forces and faced targeted attacks by the enemies (an account which has been later regretted by her as being false). Positioning her as the representative of the white working class, she excludes discussing about her own backgrounds that are more distinctly memorable for being on vacation with Oscar de la Renta than for walking the extra mile to unionize the workers. Positioning herself as a potential world leader she talks of teaching lessons to people of Iran and China. Blatant lies, and exclusive privileges as an elitist characterize her during her several addresses where attacking her fellow Democrat Obama has been the single largest ideology she has to offer.

On the other hand, Barack Obama leads the race of the Democrats. Of course it will be too naïve to imagine him as a Black presidential candidate considering that he has been winning the majority of support in a white majoritarian country, voicing the religious sentiments and threatening to bomb Pakistan. While that sounds just stupid, what is not so noble is his clearly elitist background that speaks less of experience (which, contrary to Clinton’s claims, is of no significance for a potential leader), and more of a lack genuine intentions to represent the very people he claims to be leading. Making tall claims of not buying into the Wall Street lobbyists like both Clinton and Republican contender John McCain have, Obama himself has been raising funds worth more than both Clinton and McCain put together. As of March 2008, Obama had raised $234, 745,081, Clinton had raised $189,097,053 and McCain had raised $76,691,826, leading Clinton to take a recent “loan” of additional $5million. On personal front, Obama and his wife reported an annual income of $4.2million in 2007 alone. Of course it is nowhere closer to what the Clintons earned in 2007: $20.4millions!

In the competition among the millionaires to be the world leaders, John McCain, the Republican candidate who has already spent enough to earn his nomination tops them all. True to the hypocritical nature of the Republican fabric, McCain has not persuaded his wife from letting their incomes be public. Cindy McCain who is chair of Hensley & Co controls the family riches of McCains which runs into $36.6million to $53.4million. Additionally, they have several stocks and ownerships in businesses and partnerships.

The Colacracy:

Apart from the obvious differences in the flag colors (blue and red), both parties have nothing unique to offer as truly distinguishable. The differences seem as acutely competitive as the different colors that adorn Coca Cola and Pepsi Cola billboards.

As silly as it may sound, there is nothing historic about the “woman” candidate who runs for the post using her husband’s speech royalties and lobby money. There is nothing historic about the “black” candidate who hobnobs with the rich and amasses the majority “white” money. And there is nothing to look forward to about a “conservative” candidate who is not even liberal about disclosing his family incomes to the people whom he and his wife intend to represent as President and First Lady. Its not surprising that the media have been harping on the “race”, “gender” and “experience” factors while overlooking the most obvious social location: “class”, because the American Empire has been built upon the assurance that it is not a class society and intrinsic to this self-denial is the assertions that new revolutionary measures are unnecessary and illegal. All these candidates coming from the same “class” location would rather play by other means to make appeals, hideously suppressing the facts of their being agents of the same system of exploitation that they apparently are challenging.

For the millions of working class American tax-payers who have become so pathetic with their finances that even the Bush Government is sending them Stimulus Check to spend tax-free money, for the 2 million homeless who search for public spaces that are closed after evening, for the 36.5 million people (12.3% of population) below poverty line, and 46 million people without health insurance, a country of working have-nots class who are debt ridden for generations, such farcical superfluous billion-dollars extravaganza wasted on elections every four years should ideally cause them to feel sick to the stomach. But with the same country where Chevrolet is advertised as the American Revolution and freedom is equated with using remote control to watch television channels competing to reach higher standards of absurdities, it is rather natural that even a Coca-Cola and Pepsi battle would seem to be the only form defining “democracy” in the world. Or did I say,Colacracy?

Filed Under: COMMENTARIES Tagged With: Saswat Pattanayak, USA

Should the Financial System under Capitalism be Regulated?

July 5, 2007 by Radical Notes 1 Comment

Deepankar Basu

A view that is very popular among the votaries of capitalism rests on the alleged efficiency of the financial markets of a “well functioning” capitalist economy. Financial markets, it is claimed, provide the prime mechanisms for channeling funds from savers to the most efficient investment projects, thereby increasing the overall efficiency of the economy. Lack of well-developed financial markets are often interpreted as markers of underdevelopment and economic stagnation. That this is not always the case, that financial markets are unusually prone to “irrational exuberance”, that financial booms and busts are part of the regular functioning of financial markets if often forgotten by this fundamentalist viewpoint.

A more nuanced version of this view is marked by a more measured view towards financial markets. Proponents of this view start by asserting that the financial system is composed of two parts: financial markets and the web of interdependent financial institutions. They recognize the fact that financial markets, by themselves, are often unable or unwilling to perform several important functions (like collecting, processing and disseminating reliable information about borrowers; providing liquidity services; offering deposit and check-writing facilities) required for the smooth functioning of an advanced capitalist economy. Hence, they recognize the important role of institutions, especially financial institutions (like commercial banks, insurance companies, mutual funds, etc.), within the architecture of advanced capitalism. But very often they also go on to assert that the financial system works best if left to itself; that government intervention in the financial system creates unnecessary inefficiencies. When confronted with the evidence of endemic instability of the financial system, they argue that crises and problems have led, over the years, to the development of a host of institutions that are capable of dealing with such episodes; it is both unnecessary and undesirable for the State to regulate the financial system, they claim.

A closer look at the history of the financial system in the US – the leading capitalist nation today – will demonstrate that such a view is seriously misleading; the government has always had to intervene to put the financial house in order. In fact one can go further and assert that the financial system cannot properly function without supervision at crucial moments by the State, if not constant supervision. Let me illustrate this with three well-known historical instances when the State had to step in to deal with the endemic instability of the financial system in the US. These historical instances are important, apart from illustrative purposes of this article, for at least two more reasons. One, they are the defining interventions in the financial system of the US; the financial system as we know it today has been largely shaped by these interventions and the institutions created at those moments. Two, they destroy the facile opposition that is often constructed, both by the Right and even some on the Left, between private capital and the State; the State is an institution created to protect the interests of capital as a whole even though, on occasion, it has to act against some capitals (some firms or industries or even some sectors of the economy). These instance demonstrate clearly that even when the State acted against some financial firms or sectors it was doing so to save and strengthen the capitalist system.

The first major instance of government intervention stands at the very foundational moment of the modern financial system in the US. The unregulated banking industry in the US led to massive bank failures in the late 19th century: waves after waves of bank failures where savers lost their deposits and lenders could not borrow to meet their needs; this led the Congress to create the Federal Reserve System (the Central Bank of the US) in 1913.

Within less than two decades we come to the second major intervention: creation of the FDIC. In the late 1920’s, the US economy was into the biggest downturn it had ever faced: the Great Depression. During this traumatic period, there were thousands of bank failures again (along with a huge stock market crash) and confidence in the whole financial system was greatly eroded. The Congress again stepped in to create the FDIC (Federal Deposit Insurance Corporation) which was meant to deal with the problems that the unregulated banking industry could not handle: bank runs.

The third major intervention (also made around the time of the Great Depression) had been to restrict competition in the banking industry (i.e., to force some form of branching restrictions across geographical regions) and also to restrict the areas into which a commercial bank could enter (basically to separate commercial and investment banking to prevent conflict of interest).

The last instance of government intervention is important because over the last few decades, these laws and the supporting institutions have been generally nibbled away at. For instance, the Glass-Steagall Act of 1933 had created a “wall” separating commercial and investment banking; from the 1970s onwards the growing power of finance has been continuously trying to attack and change this very important law. Finally in 1999, the Gramm-Leach-Bliley Financial Services Modernization Act repealed the Glass-Steagall Act!

The effects are already coming to the fore in the form of major banks’ (like J P Morgan Chase’s) involvement in financial frauds and other irregularities (see the Spring 2007 issue of Dollars & Sense). For instance, Chase was one of the banks which had systematically assisted Enron in its accounting frauds. It had also, in its role as an underwriting agent – one of the main functions of an investment bank – sold Enron stocks to the public knowing full well that Enron was in bad shape. This is precisely the kind of “conflict of interest” that the Glass-Steagall Act was meant to take care of. Now that it has been thrown out, we can expect many more instances of such irregularities.

The bottom line is that I do not share in the optimism about the US financial system (which many people seem to harbour), nor do I think that there is any evidence for such optimism. To suggest that the US financial system has managed to take care of the problems of instability is to willfully ignore well-known empirical evidence. Here are a few: the Savings and Loan (S&L) crises through the 1980’s, the wave of bank failures in the late 1980’s, the stock market crash of 1987, the LTCM scandal in 1998 (when the Fed had to step in to bail out a major financial firm), the dotcom bubble and bust, the imminent meltdown in the sub-prime mortgage market …one could go on and on; but let us look a bit more closely at only two of these well-known episodes of financial trouble: the LTCM fiasco and the sub-prime mortgage meltdown currently underway in the US.

LTCM (Long Term Capital Management), a very famous financial firm of the late 1990s in the US had been feted by Wall Street as one of most technologically sophisticated financial firms in existence; after all it had offered close to 40% annual returns for two years in a row and had towering figures from theoretical finance among its founding members. It was a “hedge fund” formed in 1994 and had, among its founder member two Nobel laureates in Economics: Myron Scholes and Robert Merton. Within four years LTCM was on the verge of collapse! More details about the the rise and fall of LTCM can be found here (there are lots of useful references at the end of this article; among others, there is a very nice PBS documentary on the whole episode which is worth watching.)

A little note about “hedge funds” might not be inappropriate at this point. A “hedge fund” is, to be brief and simple, a financial institution which pools the money of a few very rich individuals and then invests it around the world to make huge profits. Membership to hedge funds is not open; it’s stocks don’t trade in the financial markets; it is always very secretive about how it invests and also about who its investors are. Usually the smallest amount of money that is required by an individual to become part of a hedge fund (i.e., an investor who is one of the many whose money has been pooled into the hedge fund) is $1 million. In most cases, it is much higher. If we look at hedge funds from the point of view of ordinary citizens, we cannot escape the well-known (and increasingly well-recognized) fact that they are notorious for creating instability in financial markets, especially in the low and middle income economies. Their huge size and ability to move funds very rapidly gives them undue power and influence over small and medium economies (now even large economies are facing the music of hedge funds), whose macroeconomic stability is severely jeopardized by their investment strategies.

Coming back to the stunning LTCM collapse, it is important to remember that the Federal Reserve Bank of New York had to step in to arrange credit for its bailout. If the Fed had not intervened to bail out the tottering giant, it might have led to a asset price deflationary spiral leading to a string of failing firms and lost jobs and lost output and macroeconomic instability. For the purposes of this essay, it is merely necessary to note that the financial system could not deal with this problem on its own!

Let us now move on to the second story, a story that is still unfolding: the sub-prime mortgage lending crisis in the US. Referring to the sub-prime mortgage meltdown that is currently underway in the US, a recent report by the Centre for Responsible Lending has estimated that more than 1 million low-income families have lost their homes on net (i.e., after accounting for those who have gained home ownership) over the past nine years. Have the banks and financial firms that created this crisis lost much? It is doubtful whether the banks originating the mortgages, the focus of all the attention in the mainstream press, have really lost anything.

Let me remind readers that the “sub-prime” mortgage meltdown refers to the market for mortgage loans (i.e., loans for buying real estate) supposedly for low-income households without good credit histories. The rule of the game, as it evolved over the last decade, was that the house that is bought with the mortgage loan is used as collateral for the loan so that whenever a family fails to make a single monthly payment (there might be a little variation on this), it leads to “foreclosure” and the bank that had made the loan takes possession of the house to recoup its losses.

But why the term “sub-prime”? The attribute of “sub-prime” comes from the fact that most of these loans made on this market are at above-average (much above the market interest rate for mortgages) interest rates and at very onerous terms; the term contrasts this market with the “prime” mortgage market where loans are available at much lower interest rates. In most cases, these “sub-prime” loans are made in bad faith because the concerned families are “convinced” of the suitability of high-interest rate and “coaxed” into the loans at unreasonable terms. More often than not big banks use various kinds of methods to consciously keep out low-income families from the “prime” mortgage market (where they might have got loans at reasonable rates and terms); most of these families, needless to say, are either African-American or Latinos. Once, in this way, these families have been pushed out of the “prime” mortgage market and into the “sub-prime” market, the same banks turn into loan sharks and strip the low-income families to their bones. It is, therefore, hardly surprising that many families are unable to meet the monthly payments of the mortgage and lose their house and most of their life’s savings. That is what has been documented by the Centre for Responsible Lending and that is what is creating havoc in the lives of many working-class Americans.

These are but two small instances of the operation of financial system under advanced capitalism; one can very easily multiply them ad nauseum. The evidence, if one cares to look, strongly suggests that the US (or any other capitalist economy for that matter) will have to learn to live with inescapable instability; these episodes are as much part of life under capitalism as are economy-wide business cycles. Of course, under capitalism, the overwhelming cost of these episodes of financial and other forms of instability will be always borne by the working people. Hence, all political formations claiming to represent the interests of the working people must vociferously argue for the regulation of the financial system without taking recourse to the false opposition between the State and capital.

Filed Under: DIARIES Tagged With: Economic Notes, Economy, Finance, USA

The EFCA: What the Fuss is all about

June 4, 2007 by Radical Notes Leave a Comment

Arindam Mandal

The proposed Employee Free Choice Act (EFCA) is considered as an important milestones for the trade union movement in the U.S. Though the bill has been passed in the U.S. House of Representatives with an overwhelming majority of 241 to 185 votes, its fate in the Senate is still uncertain. Even if it is passed in the Senate, it has been mentioned time and again that President George Bush will veto it.

If the EFCA becomes a law, it will be a landmark victory for the unionized labor in the U.S. because it will allow workers to form unions by simple card check rather than going through the time consuming electoral process. Under the current law, the process of unionization is rather cumbersome. The typical way in which workers show interest in unionization is by signing the union authorization cards; and these state that each worker authorizes the union to represent them for the purpose of collective bargaining. The union can petition the NLRB for an election once 30 percent of the members of a bargaining unit have signed the cards. The board notifies the employer. At this point, the employer is free to recognize the union or consent to an election. If employer consents to an election, then the board will set a date for election. In the meantime, the employer is free to try vigorously to get the workers to vote against the union. This whole process of going through election is a time consuming process and it gives ample time to the employers to go for union busting techniques which includes both semi-legal and illegal tactics.

According to the proposed EFCA, it would enable working people to bargain for better wages, benefits and working conditions by restoring workers’ freedom to choose for themselves whether to join a union. It would:

* Establish stronger penalties for violation of employee rights when workers seek to form a union and during first-contract negotiations.
* Provide mediation and arbitration for first-contract disputes.
* Allow employees to form unions by signing cards authorizing union representation.

Under the proposed EFCA bill, if it becomes law, the Act would require the NLRB to certify a union as the exclusive representative of employees without an election where “a majority of the employees in a unit appropriate for bargaining has signed valid authorizations.” This is where the major criticism against the bill has been lodged. According to the so-called neoliberal proponents of freedom and choice, getting away with secret ballot will mean taking away the voting rights of the workers. They argue that changing the current system of voting to card checking will mean possibilities of foul treatment of the workers who are not supportive of the union by the union. Definitely, lots of hypothetical situations can be created, but perhaps the proponents of this line of view are incompetent to grasp the fact that formation of unions is not an individual decision, rather it is a collective decision based upon a strong sense of solidarity. If this is the case, it is very unlikely that the union will threaten or coerce the anti-union employees. In reality facts are other way round. Often employers resort to anti-union practices to stop the process of unionization. These facts can be made clearer by the study carried out by Cornell University scholar Kate Bronfenbrenner. She found that

* Ninety-two percent of private-sector employers, when faced with employees who want to join together in a union, force employees to attend closed-door meetings to hear anti-union propaganda; 80 percent require supervisors to attend training sessions on attacking unions; and 78 percent require that supervisors deliver anti-union messages to workers they oversee.
* Seventy-five percent hire outside consultants to run anti-union campaigns, often based on mass psychology and distorting the law.
* Half of the employers threaten to shut down partially or totally if employees join together in a union.
* In 25 percent of organizing campaigns, private-sector employers illegally fire workers because they want to form a union.
* Even after workers successfully form a union, in one-third of the instances, employers do not negotiate a contract.

Source: http://www.aflcio.org/joinaunion/voiceatwork/efca/brokensystem.cfm

Given the above scenarios, it seems clear that the arguments for opposing the EFCA based upon delimiting freedom and choice are not only misplaced, but also mischievous. The Act will ensure that the workers can express their choice more easily under the protection of law. Not only this, the Act will also ensure proper penalties against any violation of the employee rights when workers seek to form a union and during first-contract negotiations. No doubt the EFCA will go a long way in ensuring these desirable changes.

Filed Under: DIARIES Tagged With: Labour, USA

Saddam, Ford: One killed, one pardoned

December 31, 2006 by Saswat Pattanayak Leave a Comment

Saswat Pattanayak

Call me superstitious, but somehow I always tend to hope for the maxim that speaks: All’s well that ends well. And hence, certainly in the last week of this month, I had not imagined the year 2006 would leave such bitter memories behind.

It all started with one death: Gerald Ford’s. And ended with one execution: Saddam Hussein’s.
What has Ford got to do with Hussein? I would probably have not wondered aloud such an analogy on another occasion. After all, one was the celebrated president of world’s oldest democracy, and the other was the disgraced president of a dictatorial regime.

For celebration of Ford’s legacies, there are museums, schools, world leaders and history books. For Hussein, only condemnations follow from all above quarters. We are observing memorial services cherishing the memories of Ford beginning Friday, whereas the global condemnation ceremonies to mark the former Iraqi head have started from Saturday. New York Times while pouring in rich tributes for Ford churned out a news story out of an obituary, headlined its editorial as “Gerald R Ford” to portray the legend on Thursday. And yet on Saturday, the liberal paper had made an editorial out of a hard news piece, and headlined its lead story of the day thus: Dictator Who Ruled Iraq With Violence Is Hanged for Crimes Against Humanity. Yes, that’s the headline from world’s most ‘respected’ newspaper, not a sentence from some kangaroo court.

And yet, amidst the word-games of the colonial language that accentuates the stark differences perpetuated by its mainstream media masters, I am struck by few similarities between the two dead former leaders.

Both climbed the ladders of politics not through legitimate elections, but by assuming power. Ford quietly succeeded a corrupt tax evader Spiro Agnew to become the vice president, and with a lot of pomp and show, inherited a corrupt war criminal Richard Nixon’s throne to become the president. Similar “corrupt bargains” were made in Iraq for Saddam to remain in power. Hussein quickly ascended Ba’ath Party ladders without the credentials, political, military, or otherwise. And earned his fame and glory in his attempt to assassinate the then Iraqi head Abdul Qassim. Ironically, just like Ford who rose to power without any mandate except merely with approval from the US Congress, Saddam’s claim to fame was reached through the American interventions in Iraq to fund the Ba’athists to get rid of left-leaning Qassim. In a sure manner well recorded, but seldom quoted, the US war machine created both Saddam, and Ford.

A New York Times columnist in an editorial piece (March 14, 2003) had done some elaboration, at least about Saddam, a few years back:

“The Iraqi leader seen as a grave threat in 1963 was Abdel Karim Kassem, a general who five years earlier had deposed the Western-allied Iraqi monarchy. Washington’s role in the coup went unreported at the time and has been little noted since. America’s anti-Kassem intrigue has been widely substantiated, however, in disclosures by the Senate Committee on Intelligence and in the work of journalists and historians like David Wise, an authority on the C.I.A.

From 1958 to 1960, despite Kassem’s harsh repression, the Eisenhower administration abided him as a counter to Washington’s Arab nemesis of the era, Gamal Abdel Nasser of Egypt — much as Ronald Reagan and George H. W. Bush would aid Saddam Hussein in the 1980’s against the common foe of Iran.

Then, on Feb. 8, 1963, the conspirators staged a coup in Baghdad. For a time the government held out, but eventually Kassem gave up, and after a swift trial was shot; his body was later shown on Baghdad television. Washington immediately befriended the successor regime. ”Almost certainly a gain for our side,” Robert Komer, a National Security Council aide, wrote to Kennedy the day of the takeover.

As its instrument the C.I.A. had chosen the authoritarian and anti-Communist Baath Party, in 1963 still a relatively small political faction influential in the Iraqi Army. According to the former Baathist leader Hani Fkaiki, among party members colluding with the C.I.A. in 1962 and 1963 was Saddam Hussein, then a 25-year-old who had fled to Cairo after taking part in a failed assassination of Kassem in 1958.

According to Western scholars, as well as Iraqi refugees and a British human rights organization, the 1963 coup was accompanied by a bloodbath. Using lists of suspected Communists and other leftists provided by the C.I.A., the Baathists systematically murdered untold numbers of Iraq’s educated elite — killings in which Saddam Hussein himself is said to have participated. No one knows the exact toll, but accounts agree that the victims included hundreds of doctors, teachers, technicians, lawyers and other professionals as well as military and political figures.”

The US war mongers funded the Iraqi despot to continue murdering communists and innocent civilians. At the same time, back home, they got Ford to continue the same legacy. Not surprisingly, Ford became not just the only unelected president, but even the most unpopular one at his time. He pardoned without any conditions whatsoever the biggest war criminal of recent times: Richard Nixon, the officially recognized disgraced president. Like Hussein, Nixon was a zealot anti-communist, a massive war and hate proponent. And Gerald Ford whose six day national mourning continues with half-mast flags, was the greatest supporter of Nixon. He provided all the support that Nixon required to save face, and his life. And no, all thanks to Ford, Nixon was not hanged.

Times have changed. But times do not change philosophically on their own tunes. They change just the way the ruling classes decide. And as predicted, after an initial hue and cry by the marketplace of ideas, Ford continued to be cherished for having pardoned Nixon and saved America’s image. Saddam, soon after the demise of communist powers, was brushed off as forgotten legacy that could have otherwise tarnished America’s image.

Today, alas, if we recall history accurately in its sequence and reasoning and ruling class motives and working peoples resentments, there is just one fallen guy between the two. And not surprisingly, Ford has been pardoned.

But there is worse in store. Now that Saddam is not there anymore, perhaps true to the nature of obituaries, true to the nature of support lent to Ford’s legacies after his death, many of us would invariably see light in Saddam as well. In the battle of ideologies, perhaps it would seem as though Saddam fought a different battle than that of American power elites. And after much accentuation of these differences, the corporate media would have succeeded in establishing a hyper reality of virtues and vices. And the reification of historical insanities may again begin when we either pay rich tributes to Saddam to posit him against America or vice versa. Or like the European allies in the war, when we take the moralist positions against capital punishment in order to oppose Saddam’s death.

Saddam’s death should have been quite predictable. After all, those that stop serving the masters, are condemned to harsh course. It’s the masters that we need to be beware of. The masters that enslaved Africa, colonized Asia, and impoverished majority of world population through global capitalism. If they kill their disobedient agents, that’s not a bother. We didn’t ask for the agent anyway. The point is we need not take the masters any longer either.

And neither do we want any more of their agents. Some of them may rally behind the masters, like Pinochet who died a natural honorable death recently. And some may yet go pose a challenge, like Bin Laden who may end up in Saddam’s shoes one day soon. But any indulgence in positing the agents against the masters is well playing into the plans. It’s like supporting the European leaderships today who are their virtuous best in the criticism of American punishment degrees. Or listening to New York Times declaring how the criminal against humanity is our man no more.

Either way, we would miss the boat. The issue is not in differences between two such elements borne out of greed, competition and oppressions. Not the difference between Ford and Hussein. It’s the similarities among them that should make us shiver.

Brother Malcolm X used to open his address with: “Friends, brothers and enemies…” If we succeeded in identifying the categories, we hopefully would have left the worst of times behind as we start marking a new year tomorrow.

Filed Under: COMMENTARIES Tagged With: Imperialism, Iraq, Saddam Hussain, Saswat Pattanayak, USA

Why Condemning Israel and the Zionist Lobby is so Important

December 27, 2006 by Radical Notes Leave a Comment

James Petras

“It’s no great secret why the Jewish agencies continue to trumpet support for the discredited policies of this failed administration. They see defense of Israel as their number-one goal, trumping all other items on the agenda. That single-mindedness binds them ever closer to a White House that has made combating Islamic terrorism its signature campaign. The campaign’s effects on the world have been catastrophic. But that is no concern of the Jewish agencies.” – December 8, 2006 statement by JJ Goldberg, editor of Forward (the leading Jewish weekly in the United States)

Introduction

Many Jewish writers, including those who are somewhat critical of Israel, have raised pointed questions about our critique of the Zionist power configuration (ZPC) in the United States and what they wrongly claim are our singular harsh critique of the state of Israel. Some of these accusers claim to see signs of ‘latent anti-Semitism’, others, of a more ‘leftist’ coloration, deny the influential role of the ZPC arguing that US foreign policy is a product of geo-politics or the interests of big oil. With the recent publication of several widely circulated texts, highly critical of the power of the Zionist ‘lobby’, several liberal pro-Israel publicists generously conceded that it is a topic that should be debated (and not automatically stigmatized and dismissed) and perhaps be ‘taken into account.’

ZPC Deniers: Phony Arguments for Fake Claims

The main claims of ZPC deniers take several tacks: Some claim that the ZPC is just ‘another lobby’ like the Chamber of Commerce, the Sierra Club or the Society for the Protection of Goldfish. Others claim that by focusing mainly on Israel and by inference the ‘Lobby’, the critics of Zionism ignore the equally violent abuses of rulers, regimes and states elsewhere. This ‘exclusive focus’ on Israel, the deniers of ZPC argue, reveals a latent or overt anti-Semitism. They propose that human rights advocates condemn all human rights abusers everywhere (at the same time and with the same emphasis?). Others still argue that Israel is a democracy – at least outside of the Occupied Territories (OT) – and therefore is not as condemnable as other human rights violators and should be ‘credited’ for its civic virtues along with its human rights failings. Finally others still claim that, because of the Holocaust and ‘History-of-Two-Thousand-Years-of-Persecution’, criticism of Jewish-funded and led pro-Israel lobbies should be handled with great prudence, making it clear that one criticizes only specific abuses, investigates all charges – especially those from Arab/Palestinian/United Nations/European/Human Rights sources – and recognizes that Israeli public opinion, the press and even the Courts or sectors of them may also be critical of regime policies.

These objections to treating the Israeli-Palestinian-Arab conflict and the activities of Zionist Lobbies as central to peace and war serve to dilute, dissipate and deflate criticism and organized political activity directed at the ZPC and its directors in Israel.

The response of the critics of Israel and the ZPC to these attacks has been weak at best and cowardly at worst. Some critics have responded that their criticism is only directed toward a specific policy or leader, or to Israeli policies in the OT and that they recognize Israel is a democracy, that it requires secure borders, and that it is in the interests of the Israeli ‘people’ to lower their security barriers. Others argue that their criticism is directed at securing Israeli interests, influencing the Zionist Lobby or to opening a debate. They claim that the views of ‘most’ Jews in the US are not represented by the 52 organizations that make up the Presidents of the Major Jewish Organizations of America, or the thousands of PACs, local federations, professional associations and weekly publications which speak with one voice as unconditional supporters of every twist and turn in the policy of the Zionist State.

There are numerous similar lines of criticism, which basically avoid the fundamental issues raised by the Israeli state and the ZPC, and which we are obliged to address. The reason that criticism and action directed against Israel and the ZPC is of central importance today in any discussion of US foreign policy, especially (but not exclusively) of Middle East policy and US domestic policymaking is that they play a decisive role and have a world-historic impact on the present and future of world peace and social justice. We turn now to examine the ‘big questions’ facing Americans as a result of the power of Israel in the United States.

The Big Questions Raised by the ZPC and Israeli Power in the USA
War or Peace

Critical study of the lead up to the US invasion of Iraq, US involvement in providing arms to Israel (cluster bombs, two-ton bunker buster bombs and satellite surveillance intelligence) prior to, during and after Israel’s abortive invasion of Lebanon, Washington’s backing of the starvation blockade of the Palestinian people and the White House and Congress’ demands for sanctions and war against Iran are directly linked to Israeli state policy and its Zionist policy-makers in the Executive branch and US Congress. One needs to look no further than the documents, testimony and reports of AIPAC and the Presidents of the Major American Jewish Organizations to observe their claims of success in authoring legislation, providing (falsified) intelligence, engaging in espionage (AIPAC) and turning documents over to Israeli intelligence (now dubbed ‘free speech’ by liberal Zionists).

If, as the overwhelming evidence indicates, the ZPC played a major role in the major wars of our time, wars capable of igniting new armed conflicts, then it ill behooves us to dilute the role of the Zionist/Jewish Lobby in promoting future US wars. Given Israel’s militarist-theocratic approach to territorial aggrandizement and its announced plans for future wars with Iran and Syria, and given the fact that the ZPC acts as an unquestioning and highly disciplined transmission belt for the Israeli state, then US citizens opposed to present and future US engagement in Middle East wars must confront the ZPC and its Israeli mentors. Moreover, given the extended links among the Islamic nations, the Israel/ZPC proposed ‘new wars’ with Iran will result in Global wars. Hence what is at stake in confronting the ZPC are questions which go beyond the Israeli-Palestine peace process, or even regional Middle East conflicts: it involves the big question of World Peace or War.

Democracy or Authoritarianism

Without the bluster and public hearings of former Senator Joseph McCarthy, the Jewish Lobby has systematically undermined the principal pillars of our fragile democracy. While the US Congress, media, academics, retired military and public figures are free to criticize the President, any criticism of Israel, much less the Jewish Lobby, is met with vicious attacks in all the op-ed pages of major newspapers by an army of pro-Israeli ‘expert’ propagandists, demands for firings, purges and expulsions of the critics from their positions or denial of promotions or new appointments. In the face of any prominent critic calling into question the Lobby’s role in shaping US policy to suit Israel’s interests, the entire apparatus (from local Jewish federations, AIPAC, the Presidents of Major American Jewish Organizations etc) go into action – smearing, insulting and stigmatizing the critics as ‘anti-Semites’. By denying free speech and public debate through campaigns of calumny and real and threatened repercussions the Jewish Lobby has denied Americans one of their more basic freedoms and constitutional rights.

The massive, sustained and well-financed hate campaigns directed at any congressional candidate critical of Israel effectively eliminates free speech among the political elite. The overwhelming influence of wealthy Jewish contributors to both parties – but especially the Democrats – results in the effective screening out of any candidate who might question any part of the Lobby’s Israel agenda. The takeover of Democratic campaign finance by two ultra-Zionist zealots, Senator Charles Schumer and Israeli-American Congressman Rahm Emanuel ensured that every candidate was totally subordinated to the Lobby’s unconditional support of Israel. The result is that there is no Congressional debate, let alone investigation, over the key role of prominent Zionists in the Pentagon involved in fabricating reports on Iraq’s ‘weapons of mass destruction’, and in designing and executing the war and the disastrous occupation policy. The Lobby’s ideologues posing as Middle East ‘experts’ dominate the op-ed and editorial pages of all the major newspapers (Wall Street Journal, New York Times, Los Angeles Times, Washington Post). In their pose as Middle East experts, they propagandize the Israeli line on the major television networks (CBS, NBC,ABC, Fox, and CNN) and their radio affiliates. The Lobby has played a prominent role in supporting and implementing highly repressive legislation like the Patriot Act and the Military Commission Act as well as modifying anti-corruption legislation to allow the Lobby to finance congressional ‘educational’ junkets to Israel. The head of Homeland Security with its over 150,000 functionaries and multi-billion dollar budget is none other than Zionist fanatic Michael Chertoff, head persecutor of Islamic charity organizations, Palestinian relief organizations and other ethnic Middle Eastern or Moslem constituencies in the US, which potentially might challenge the Lobby’s pro-Israel agenda.

The biggest threat to democracy in its fullest sense of the word – the right to debate, to elect, to legislate free of coercion – is found in the organized efforts of the Zionist lobby, to repress public debate, control candidate selection and campaigning, direct repressive legislation and security agencies against electoral constituencies opposing the Lobby’s agenda for Israel. No other lobby or political action group has as much sustained and direct influence over the political process – including the media, congressional debate and voting, candidate selection and financing of congressional allocation of foreign aid and Middle East agendas as the organized Zionist Power Configuration (ZPC) and its indirect spokespeople heading key Congressional positions. A first step toward reversing the erosion of our democratic freedoms is recognizing and publicly exposing the ZPC’s nefarious organizational and financial activities and moving forward toward neutralizing their efforts.

Their Foreign Policy or Ours?

Intimately and directly related to the loss of democratic freedoms and a direct consequence of the Jewish lobby’s influence over the political process is the making of US Middle East policy and who benefits from it. The entire political effort of the Lobby (its spending, ethnic baiting, censorship and travel junkets) is directed toward controlling US foreign policy and, through US power, to influence the policy of US allies, clients and adversaries in Europe, Asia and the Middle East. The Lobby’s systematic curtailment of our democratic freedoms is intimately related to our own inability to influence our nation’s foreign policy. Our majoritarian position against the Iraq War, the repudiation of the main executioner of the War (the White House) and our horror in the face of the Israeli invasion of Lebanon and destruction of Gaza are totally neutralized by Zionist influence over Congressional and White House policymakers. The recently victorious Congressional Democrats repudiate their electorate and follow the advice and dictates of the pro-Zionist leadership (Nancy Pelosi, Harry Reid, Rahm Emmanuel, Stephan Israel and others) by backing an escalation of troops and an increase in military spending for the war in Iraq. Bush follows the war policy against Iran proposed by the zealous Zionist fanatics in the American Enterprise Institute, repudiating the diplomatic proposals of the bi-partisan Baker Commission. Congress quadruples US arms stored in Israel (supposedly for dual use) in the aftermath of Israel’s bombing of Southern Lebanon with one million anti-personnel bomblets from cluster bombs in direct defiance of US electoral opinion. While hundreds of millions of undernourished women and children suffer and die in Africa, Latin America and Asia, the Lobby ensures that over half of US foreign aid goes to Israeli Jews with per capita incomes of over $22,000 USD.

No other organized political action group or public relations firm acting on behalf of the Cuban and Venezuelan exiles or Arab, African, Chinese or European Union states comes remotely near the influence of the Zionist lobby in shaping US policy to serve the interest of Israel.

While the Lobby speaks for less than 2% of the US electorate, its influence on foreign policy far exceeds the great majority who have neither comparable organizational nor financial muscle to impose their views.

Never in the history of the US republic or empire has a powerful but tiny minority been able to wield so much influence in using out nation’s military and economic power and diplomatic arm-twisting in the service of a foreign government. Neither the Francophiles during the American Revolution, the Anglophiles in the Civil War and the German Bund in the run-up to World War Two, nor the (anti-China) Nationalist Taiwan Lobby possessed the organizational power and sustained political influence that the ZPC has on US foreign and domestic policy at the service of the State of Israel.

Confronting the Lobby Matters

The question of the power of the Lobby over US policies of war or peace, authoritarianism or democracy and over who defines the interests served by US foreign policy obviously go far beyond the politics of the Middle East, the Israeli-colonial land grabs in Palestine and even the savage occupation of Iraq. The playing out of Zionist influence over the greatest military power in the world, with the most far-reaching set of client states, military bases, deadly weapons and decisive voice in international bodies (IMF/World Bank/United Nations Security Council) means that the Lobby has a means to leverage its reach in most regions of the world. This leverage power extends over a range of issues, from defending the fortunes of murderous Russian-Jewish gangster oligarchs, to bludgeoning European allies of the US to complicity with Israel’s ethnic cleansing of Palestine.

The ZPC represents a basic threat to our existence as a sovereign state and our ability to influence whom we elect and what agendas and interests our representatives will pursue. Even worse, by serving Israeli interests, we are becoming complicit with a State whose Supreme Court legalizes political assassinations across national boundaries, torture, systematic violations of international law and a regime which repudiates United Nations resolutions and unilaterally invades and bombs its neighbors and practices military colonist expansionism. In a word Israel resonates and feeds into the most retrograde tendencies and brutal practices of contemporary American politics. In this sense the Lobby through its media, Congressional influence and think tanks is creating an Israeli look-alike. Like Israel, the US has established its own Pentagon assassination teams; like Israel, it invades and colonizes Iraq; like Israel, it violates and rejects any constitutional or international legal restraints and systematically tortures accused but untried prisoners.

Because of these fundamental considerations, we cannot oblige our Jewish ‘progressive’ colleagues and compatriots and refrain from confronting the Zionist Lobby with force and urgency. Too many of our freedoms are at stake; too little time is left before they succeed in securing a greater military escalation; too little of our sovereignty remains in the face of the concerted effort by the Lobby and its Middle Eastern ‘expert-ideologues’ to push and shove us into a new and more devastating war with Iran at the behest of Israel’s pursuit of Middle East dominance.

No other country, abuser or not, of human rights, with or without electoral systems, has the influence over our domestic and foreign policy as does the state of Israel. No other Lobby has the kind of financial power and organizational reach as the Jewish Lobby in eroding our domestic political freedoms or our war-making powers. For those reasons alone, it stands to reason, that we American have a necessity to put our fight against Israel and its Lobby at the very top of our political agenda. It is not because Israel has the worst human rights agenda in the world – other states have even worst democratic credentials – but because of its role in promoting its US supporters to degrade our democratic principles, robbing us of our freedom to debate and our sovereignty to decide our own interests. The Lobby puts the military and budgetary resources of the Empire at the service of Greater Israel – and that results in the worst human rights in the world.

Democratic, just and peaceful responses to the Big Questions that face Americans, Europeans, Muslims, Jews and other peoples of the world passes through the defeat and dismantlement of the Israeli-directed Zionist Power Configuration in America. Nothing less will allow us to engage in an open debate on the alternatives to repression at home and imperialism abroad.

James Petras is a Bartle Professor (Emeritus) of Sociology at Binghamton University, New York, USA. He is one of the most respected Marxists among the radical circles around the globe. His works on imperialism and new rural movements of the landless and poor peasantry have greatly influenced political activists and analysts in Africa, Asia and Latin America. He has worked with the Brazilian landless workers’ movement and the unemployed workers’ movement in Argentina. His latest work is The Power of Israel in the United States (Clarity Press, 2006)

Filed Under: COMMENTARIES Tagged With: Israel, James Petras, USA

Obama’s potent symbolism

Global Economic Crisis-II

Global Economic Crisis-I

Perspectives on the US Financial Crisis

Political Economy of American Colacracy

Should the Financial System under Capitalism be Regulated?

The EFCA: What the Fuss is all about

Saddam, Ford: One killed, one pardoned

Why Condemning Israel and the Zionist Lobby is so Important

Follow Radical Notes

Like Radical Notes

Copyright 2005-2012 Radical Notes