Friday, November 28, 2014

World Economy: The seven-year itch

by Michael Roberts

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC (http://www.deanbaker.net/index.html#about). He is frequently cited in economics reporting in major media outlets. He writes a weekly column for the Guardian Unlimited (UK), the Huffington Post, TruthOut, and his blog, Beat the Press, features commentary on economic reporting. Dean was cited by the Real Economics Review as one of the few economists that predicted the global financial crash of 2008, as he had been warning about the credit-fuelled housing bubble in the US. He often speaks at trade union and labour seminars presenting a Keynesian-style analysis and policy solutions to the current crisis.

Baker has just written a blog post in which he reminds us that it is now seven years since the Great Recession started across the major economies (http://www.truth-out.org/opinion/item/27614-seven-years-after-why-this-recovery-is-still-a-turkey). Looking at the US, he points out: “usually an economy would be fully recovered from the impact of a recession seven years after its onset. Unfortunately, this is not close to being the case now….It would still take another 7-8 million jobs to bring the percentage of the population employed back to its pre-recession level.” He continues: “it would take us more than four years to get back to pre-recession employment rates.” And “the economy is still operating close to 4% points. This translates into roughly $700 billion a year being thrown in the garbage because we don’t have enough demand in the economy. That comes to more than $2,000 per year for every person in the country”. And “If the economy sustains a 3% annual growth rate, it would take us close to four years to close the demand gap. And next to no one thinks the economy will be able to sustain a 3% growth rate for the next four years”.

It is a damning indictment. We could add to Baker’s list that, outside the US (an economy that has done better than most since the Great Recession ended in mid-2009), unemployment rates have hardly fallen from high levels in most of Europe, where GDP is still below the level of 2007 in many countries and GDP per person is even lower. Above all, real incomes for the average households have stagnated or fallen significantly in most counties including the US and the UK. So this is not a normal ‘recovery; it is not ‘a return to normal’ (see my post, http://thenextrecession.wordpress.com/2014/08/14/the-myth-of-the-return-to-normal/).

The question is: why has the Great Recession morphed into what I call a Long Depression? Baker reckons that it is “weak demand”. Baker: “The basic problem since the collapse of the bubble is finding a way to replace the demand that it had been generating.” Well, that is not entirely true if we mean weak consumer demand. As I have shown in many previous posts, household consumption did not fall hugely in the Great Recession and in most countries it has returned, as share of GDP to levels of 2005 as the OECD pointed out recently (http://thenextrecession.wordpress.com/2014/11/08/the-world-economy-in-low-gear/).
G7 demand
The other part of ‘demand’ is investment demand. Investment (both private and public) plummeted during the Great Recession – indeed, it is my argument that investment fell before and that led to the laying off of labour, the closure of old technology and the collapse of incomes and the slump. Investment remains seriously down from seven years ago. A new study by the Institute of International Finance, an international banking research group, provides new evidence for that (http://www.voxeu.org/article/causes-g7-fixed-investment-doldrums).

The IIF study shows that total investment relative to GDP in the G7 economies stood at 19.3% in 2013 – a decline of 2.6 percentage points relative to 2007. Business investment (i.e. investment in machinery, equipment, transport, structures, and intangible assets) has been especially weak. In the second quarter of 2014, G7 private non-residential investment amounted to 12.4% of GDP, compared to the peak of 13.3% in 2008.

G7 private non-residential fixed investment

G7 investment
The question is: why did investment fall and why has it failed to recover and so get the major capitalist economies back up to previous levels and potential trend growth? Dean Baker says investment demand is weak because the economy is weak: “Firms don’t go on investment splurges in a weak economy.” But this is tautological. There is no explanation in this of why things are worse this time. Investment is the issue, as Baker says. But why?

It has been my argument that the major capitalist economies have been suffering from low profitability of capital plus a huge build-up in debt (household, corporate and public) that weighs down on the ability or willingness of capitalists to step up investment.

This is despite that fact that capital in all the major economies has been squeezing wages and reducing employment to get profit margins and the mass of profit up to record levels (ie raising the rate of surplus value as the main counteracting factor to low or falling profitability).
Deleveraging of debt (fictitious capital) has been minimal, indeed to the contrary, as central banks pump in more money to get interest rates down and stock markets booming in an attempt to stop economies slipping back into slump.

In a future post, I shall try to analyse the latest position on the US rate of profit now that we have the latest key data for 2013 and see if my proposition holds that profitability has failed to return to pre-crisis levels even in the US and is still below levels seen in the late 1990s. This is certainly the case for the UK and of course in most of the Eurozone and Japan.  But what is significant is that the mass of profits in the US has nearly stopped rising (see my post,
http://thenextrecession.wordpress.com/2014/11/25/us-gdp-up-but-profits-down/).

And indeed, according to the IIF, the huge cash hoards that the largest companies in the G7 economies built up by squeezing wages and jobs and not investing is also beginning to decline as companies buy back their own shares and pay out dividends to their shareholders.

G7 non-financial corporations’ net cash flows

G7 cash
Marxist economist Michael Burke has pointed out before that business investment has been falling in the major economies since the late 1990s (see http://thenextrecession.wordpress.com/2014/06/22/investing-in-finance-but-not-in-people/.). And the IIF shows that, investment relative to GDP has exhibited a downward trend since the 1990s in Germany, UK, Japan, and Italy.
G7 total investment rates
G7 investment gdp
In my view, this is because the profitability of capital has fallen in the major economies since the peak of the late 1990s (see my post, http://thenextrecession.wordpress.com/2014/04/23/a-world-rate-of-profit-revisited-with-maito-and-piketty/).

A proxy for falling profitability is the capital-output ratio. This measures the growth of new value compared to new investment. This ratio has been rising in most major economies since the 1990s, according to the IIF – in other words the value returned from investment has been falling. Compared to 2000, all the major economies (including the US but excepting Japan which has had a huge rising ratio for decades) now have higher capital output ratios.
G7 capital–output ratio
G7 capital output
Dean Baker in his post goes on about the need for ‘more demand’ which he sees coming from government spending “We can spend more on infrastructure, on education, on retrofitting buildings to make them more energy efficient and reduce greenhouse gas emissions.” Or through work-sharing to get unemployment down: “increased family leave, sick days, and vacation. This is the secret to Germany’s low unemployment rate. The average work year there is more than 20% shorter than in the US.” But he admits this won’t happen. No government is planning to boost government spending, on the contrary; or introduce work sharing.

Actually that is not entirely true. The IMF, the OECD and others are calling for programmes of infrastructure spending to replace the failure of business to invest. And the EU leaders have announced a new Europe-wide investment plan. The EU projects claims to create 1.3m new jobs over three years, by ‘seeding’ €21bn in public money to ‘spark’ €307bn ($383bn) of additional private investment. This is nonsense, of course. The public money had already been earmarked for projects in previous EU budgets so it is not new money but merely a transfer to this scheme. And it is very unlikely to inspire businesses to join in a public-private initiative. The EU Commission itself estimates that the annual investment gap in Europe stands between €230-370bn, while the plan only offers €€100bn a year for three years.

Anyway, the question is whether even a Keynesian-style government spending programme, either directly through public works or through subsidies to the capitalist sector, would deliver faster growth or full employment. It is a Keynesian illusion that it would. Such projects may boost the profits of those companies that get the contracts to build, but at the expense of the rest as they face the cost of higher government borrowing and taxes that will be needed to pay for it (see my post http://thenextrecession.wordpress.com/2013/01/13/multiplying-multipliers/). More likely what is ahead is another slump in the major economies rather than a sustained recovery and a new period of expansion.

Thursday, November 27, 2014

Cops take 12-year old out without hesitation

Doesn't take but two seconds for the cops to shoot dead this twelve year old playing with a BB gun.

Wednesday, November 26, 2014

Stephanopoulos' interview with Darren Wilson a well scripted sham

By Richard Mellor Afscme Local 444, retired

Watching the George Stephanopoulos interview of Darren Wilson (below) the cop that killed the unarmed Michael Brown in Ferguson Missouri, it is clearly a carefully crafted 45 minutes designed to portray Wilson as the victim. Conservatives, right-wingers and outright racists will praise it of course. The idea is to show that Wilson had no choice; he was defending his life, and who in America doesn’t think someone has a right to kill to defend one’s life?

But working class people of all backgrounds, those who are troubled by this, should not be fooled by this attempt to show that Wilson, who describes himself in the video as a “simple guy” had no choice but to kill Brown.

Stephanopoulos asks the right questions, makes sure we are told early of Wilson’s recent marriage and his new baby and how on the very day he confronted two black youth for walking in the street, he went to help a little baby that was having some problem. Wilson just loves where he works. Ferguson is a “great community” he tells his interviewer. Not “great” enough for him to want to move there mind you. It would make sense if one loves a community so much and works in it to protect its occupants one would want to live among them; in fact, they would want you there. Wilson is very hurt by the burning and looting in this community he loves so much.

Stephanopoulos’ intention in his interview as a media representative of the 1%, is to show beyond a reasonable doubt that Wilson had no choice that day but to kill Michael Brown and he gives Wilson numerous opportunities to emphasize the point. The police have to be defended. But Wilson had the opportunity to diffuse the situation from the beginning. He took the time to stop and reproach two youth for walking in the street in what really is their community. Take a look at the street in the interview with Dorian Johnson, in the video above. It’s not a freeway; it’s like any residential area street. Why would Wilson bother? Two young people were skateboarding down my street yesterday, it happens all the time. Contrast the Wilson interview with Dorian Johnson’s. The liberal newscasters NBC interview with Johnson just happened to point out when Johnson said Brown’s hands were not inside the car contradicting Wilson’s account, that “Some forensic evidence suggests that they were in there.” Very subtle, you see, Johnson can’t be believed can he?

Dorian Johnson told Wilson that they were almost at their destination but that didn’t satisfy Wilson either. In the Stephanopoulos interview Wilson claims he was very polite. Johnson agrees that he asked them to move to the sidewalk but it was not in the manner Wilson claims, rather a “Get the fuck on the sidewalk”. Just look at the way Stephanopoulos responds when Wilson says the two youth were “walking in the middle of the street”. He responds, “Middle of the street!!” He is surprised--he emphasizes the point. He does this not because he doesn’t get it, he does it because he wants the viewer to have an image in our head that this is a major artery, that cars are whizzing by, traffic is everywhere and lives are in danger. Wilson is making sure the members of his “great” community are safe.

Wilson admits he never had his car in park; it was in drive. So when his suggestion, no matter how it was delivered, was not received well and things started to escalate, why didn’t he just press the gas pedal and leave? There was no crime committed but jaywalking.

And here is why working class people should not be fooled by the Wilson interview, not be conned or distracted by the image we get of Wilson and that of Brown or his partner Johnson. How can we believe Johnson, look at him, he has dreads and tattoos on his neck. He is a black male that lives in the hood; he’s guilty right away, can’t be trusted. We must not concentrate on the details of this interaction because that is not what’s at stake here. But even if we do, Wilson could have easily prevented it, even as a cop. There was no reason to approach them in the first place and he could have easily driven off. He had no reason to suspect them he admits it. Only after the confrontation got nasty, did he see the stolen cigarillos. It could have all been avoided had Brown “complied” Wilson says. I know through experience that black youth in these communities put up with harassment and disrespect from cops every single day.

Stephanopoulos talks of the fabric of Ferguson being torn apart. What does he care about Ferguson? This man is a major political figure from one of the main Wall Street Parties. He is a dominant representative of the ruling class in this country as is Elizabeth Warren and Robert Reich and others who are whining about inequality in response to the growing anger they see in society and the potential for social unrest. They are part of the forces that are waging a war against American workers and youth and a violent one against workers abroad. Stephanopoulos was a leading figure in a government that kicked working class women off welfare. And remember Nafta?

I used to live in a community not unlike Ferguson. “I help people, that’s my job” Wilson, the “simple” guy, tells his boss, because that’s really what Stephanopoulos is, Wilson’s boss. “I help people, that’s my job.”. Wilson tells him, and we know which people he helps and its not workers or the folks in Ferguson.

If the police were there to “help” people in these extremely depressed communities or society as a whole, they wouldn’t evict families from their homes at the behest of the bankers and moneylenders. They wouldn’t ensure scabs can get through picket lines when workers are on strike to maintain our standard of living or improve it. They are not in Ferguson to protect people; they are there to suppress revolt. This does not mean we never call the police. But the issue of public safety, how we can self organize and provide it in our communities and how we can make that transition is a matter for further discussion.

Stephanopoulos never talked of the terrible conditions among the poor in places like Ferguson and throughout the US, not just blacks in the inner cities, but places like West Virginia which is like a third world country. He never asked Wilson if he felt any sympathy for the young people with no jobs, no future, poor housing, poor amenities. Wilson chose to be a cop, he chose to be a policeman for the 1%, for the bankers and the billionaires and other thugs who run the country. He is not a “normal” guy. He has a “sector” to patrol and it doesn’t include Wall Street or the Hamptons.

Wilson told Stephanopoulos the area he stopped Brown and Johnson is an “anti-police” neighborhood. There’s crime, drugs, robberies etc. To be a policeman in this situation you have chosen to ensure that one of the most victimized and oppressed sections of the working class remains in that condition and in particular don’t organize to change it. If Brown and Johnson organized mass occupations of vacant commercial property or the property of absentee landlords, while calling for decent houses and jobs, in other words, if they took action politically, Wilson’s job would be to arrest them for that. When you choose to be a cop that’s what you are agreeing to do.

This killing occurred because Wilson chose that route. He chose to be a cop. He chose to stop two youth doing nothing but walking down the street in their own neighborhood that Wilson wouldn’t live in if you paid him to. When he says it’s a great community he’s a liar. He really believes the people in it are shit. The Israeli soldiers that patrol the occupied territories say they treat Palestinians like they are non-persons, like they don’t exist as people. It’s very similar with the police occupation of the inner cities.*

I feel compelled to write this commentary because watching the Stephanopoulos interview drove home to me that we must not get sidetracked around a debate about an individual cop and events that took place, the actual specific details we know very little about. This is about the role of the police in society, as a social force. It is about the mass media in society and whose interests it serves.

The retired police captain Ray Lewis, who has come out in support of the protesters has attacked the system as corrupt, has stated that the police are there to oppress “not only the black community but also the whites”. He is correct about that. We have stated many times on this blog that the US ruling class is forced by the system to place the US workers and middle class on rations. Globalization has intensified this war at home. What the black and poor communities face on a regular basis will be seen more often in white working class communities and in labor management disputes as people are forced to fight back against the capitalist offensive, against the 1%’s attempts to drive us back to conditions that existed prior to the two great uprisings that shook US society to its foundations; the Civil Rights Movement and the factory occupations and rise of industrial unionism and the CIO in the thirties.

It should come as no surprise that Wilson is a free man. It’s not about how he felt at the time.The state cannot undermine its own immediate defense forces. Who would become a cop? How reliable would they be? Since the Occupy Movement, the state has beefed up its internal police forces. The 1% has not militarized the police, taken steps to militarize the schools and stocked up on all sorts of military weaponry and vehicles to let them sit idle. They are preparing for the battles that are ahead as the US working class is forced to confront this capitalist offensive. Apart from such brutality as slavery, read some labor history, it will remind you of the violence that has been committed against workers, throughout this country’s history. Working class people fought ferociously and frequently paid with their lives providing us with the rights and social advantages we have today.

The elephant in the room here is the right wing bureaucracy that sits atop organized Labor. Where are they? Why is any movement of this type led by the Sharpton's and co, or at least why do they have the influence they do in it? The bureaucracy and its huge army of staff that acts to suppress any militant movement from below that threatens the relationship they have built based on labor peace are silent on all these major issues. One Ferguson worker last time said that he approached his union and they said it was, "not their fight." If they were worth anything at all, the entire executive board of the AFL-CIO would leave their comfortable offices in Washington and lead the protests in Ferguson. The unchecked anger that leads to damage and destruction would find another outlet were there a clear alternative and the potential power of organized labor could provide it. I know it’s a no brainer as they won’t even defend the members that pay their salaries and that is why we have to build a united direct action movement that can lead an offensive of our own.

Obama has already made the governments position very clear, there’s “no excuse” for rioting----what hypocrisy. He has said that the US is a country of laws.  He wouldn't have been able to eat in restaurants in the South is people hadn't broken laws. The 1% and their media cares nothing about these communities until the anger boils over and then they condemn them for it. So I stress that the real power, the state and its representatives are off the hook if we only focus on individuals, that’s what Stephanopoulos’ interview is all about. But if we do choose to make a decision on this issue based on a comment here or a there or a difference of opinion about what actually took place between Wilson and Brown. Or if we want to believe that Johnson is a liar and Wilson isn’t. We might consider what Wilson said when his buddy George Stephanopoulos asked him about racism:

“You can’t perform the duties of a police officer and have racism in you.”, Wilson replied.

If you believe that I have a good deal on a bridge for sale.

* You can find out more about the Israeli's who are speaking out about the abuses in the Occupied Territories at their Breaking the Silence Facebook Page

Tuesday, November 25, 2014

The USPS is a Public Service Not a Business

Megan J Brennan. Source: WSJ
By Richard Mellor
Afscme Local 444, retired

I used to get so infuriated with some of the right wing, Rush Limbaugh loving folks at work.  There weren’t too many of them fortunately but what pissed me off most about them was that we were in the public sector. We had what they would call a “socialist” type job.  But mimicking the Limbaugh’s, Hannity’s and O’Reilly’s they praised the virtues of the free market and private sector as the way to go. They attacked the poor, immigrants, people on welfare and other “lazy” people.  A bit hypocritical I would say having a job in the public sector with all the security, wages and benefits the public sector provides.  They denied to others what the struggles of others handed to them.

I see the new Postmaster General, Megan J Brennan is on track to whip the USPS in to shape. She is the first woman to hold this position so we know the pressure is on her not to weaken. The USPS, a public service we can be proud of, is not viewed as a public service by the 1%’s politicians and the hedge fund managers and other investors who want to get their grubby little hands on what they hope will be a lucrative business venture. Brennan’s entire family have benefitted from the USPS. Brennan’s father worked for the agency, she was a letter carrier as were two of her brothers. She aims to put a stop to wasteful practices. She wants to deny to future generations what to her was a gift that gave her entire family a decent life.

Unfortunately, the USPS is too efficient for the private sector’s liking, delivering mail to practically every address in the US six days a week.  Private industry simply can’t compete with a service like that and make profit,  “Nearly every house, every day” the Wall Street Journal whines. Brennan has the answer, hard work and competition.  I guess her and her family were slackers. “We’ve got to compete for business every day, and clearly we have to develop products and services that consumers want,”, she tells the WSJ.  The private sector, citing the need to compete and be profitable, suggests 4000 or so post offices be closed. This will affect those in poor rural communities in particular where the Post Office can become like a community center keeping people in the loop.

The Postal Service can operate more like a private business Brennan argues echoing many of her civil servant colleagues at the top. According to the Wall Street Journal she became convinced of this while in a one year MBA program at MIT. Funny how a year at a business school had more influence on her than her entire family’s life at the Postal Service. Brennan told the WSJ that she understands about hard work and competition “…from her upbringing as one of seven children in an Irish Catholic family.”. Did she now.  What sort of family was that?  A dysfunctional one I would say. In most of our families our parents learned not to create situations that caused siblings to fight each other. They understood that if there were three pieces of candy and two kids they either didn’t bring the candy out or they cut it in to three equal pieces. My family was not the healthiest in the sense that my father was an alcoholic and a former Japanese prisoner of war, something that affected him all his life.  But my parents taught me that to share was good.

The dominant ideas of any society are the ideas of the class that governs that society, the ruling class.  We are inundated with the ideology of the 1%, the bankers, speculators, Wall Street crooks and industrialists who claim the market is the answer to all things, that public services and decent public sector jobs are hurting the economy.  Our pensions, wages, benefits---------they all have to go.  We must compete. We must join with our employer to help them gain “market share” over their rivals.  How can workers build solidarity with that strategy? 

The USPS is a highly efficient public service. It receives no direct taxpayer subsidies. By Congressional mandate it has to pre-pay some $5 billion a year for retiree health benefits.  So what! Leaving aside the fact that we should have a fully paid national health care system available on demand, that’s a socially useful expenditure and also a public service, a service that all workers should have access to. For the 1%, a retirement is not a right, it is money out and they want you working until you drop.  That $5 billion that pays for a worker’s health benefits after serving the public (most likely in combat as well) for 30 or more years is about one third of the wealth of those two parasites, the Hamms that I wrote about earlier.

The predatory, never ending military ventures of a decaying and debt ridden empire cost us plenty, not just in terms of lives and suicides and the mental and physical repair of those involved, but trillions in weaponry. The arms business is very profitable. Obama has just called for another $6 billion to fight yet another terrorist group. In fact, the US taxpayer is sending arms and money to two (US government labeled) terrorist groups in order to fight a third (US government labeled) terrorist group. A foreign policy to be proud of.

And as far as subsidies go, US corporations receive plenty.  Here are just a few:

1.  $870 for Direct Subsidies and Grants to Companies.  The Cato Institute estimates that the U.S. federal government spends $100 billion a year on corporate welfare. That’s an average of $870 for each one of America’s 115 million families.

2.  $696 for Business Incentives at the State, County, and City Levels.  A New York Times investigation found that states, counties and cities give up over $80 billion each year to companies… $696 for every U.S. family…… this is actually one area in which state competition harms taxpayers, as politicians from different states compete with each other to woo corporations by offering them buckets of other people’s money.

6.  $870 for Corporate Tax Subsidies….  [T]he Tax Foundation has concluded that their ‘special tax provisions’ cost taxpayers over $100 billion per year, or $870 per family. Corporate benefits include items such as Graduated Corporate Income, Inventory Property Sales, Research and Experimentation Tax Credit, Accelerated Depreciation, and Deferred taxes. Source:  Scott Lincicome Cato Inst.

Also, as Good Jobs First points out, State and local governments have awarded at least $110 billion in taxpayer subsidies to business. Boeing heads that list with $13.2 billion, followed by Alcoa at $5.6 billion, Intel at $3.9 billion, General Motors at $3.5 billion and Ford Motor at $2.5 billion. Warren Buffet’s holding company received a nice $1.1 billion.

The Good Jobs First Report (
as reported on Al Jazeera in 2014) adds that “Boeing’s $13.2 billion is a bit more than its pretax profits for the last two years. It is also equals a stunning 70 percent of the $18.2 billion of equity owned by Boeing shareholders. Measured against the number of commercial jetliners sold — 648 last year,(2103) at an average of nearly $79 million per plane — these subsidies come to more than $20 million per aircraft.”

One might wonder why Warren Buffet might need any public subsidies at all him being the free market guru and all.  But the point is that the private sector receives plenty of taxpayer funds.  What we see here is simply the tip of the iceberg.

The main obstacle we have to overcome is our own consciousness.  We must reject the idea that a service like mail delivery should be a business as we should with health care, transportation, energy, water, and other vital social needs. Profit shouldn’t enter in to our thinking on these issues.


What can enter our thinking is capital allocation of course and how we invest the wealth our collective labor produces, but that is different to profit.  Things change all the time as new technology is developed and as what was once useful becomes obsolete. I am sure the USPS can do with many changes.  But such changes cannot be left to profit minded free market lapdogs at the top.  As new technology reduces the labor hours necessary in any given industry to produce the same amount or even more goods or services, it should lead to a reduced workweek and more leisure time, and in a collectively owned and planned system more time for all to plan the organization of work and distribution of the products of our labor.


As it is, changes that increase profits increase worker exploitation, lead to increased poverty, lower wages and a decrease in actual services or social needs.


Monday, November 24, 2014

Water charges Ireland: Could a Revolutionary Situation be Developed


by John Throne

Tens and tens of thousands of Irish workers and youth have taken to the streets and confronted the government and the state. What is the nature of this movement and what is its potential? Should it just be seen as a movement to bring down this government and replace it with another government?  Or should it be seen as having the potential to bring down the system and replace it with another system?

I support enthusiastically the militant stand of the Socialist Party in the water charges struggle. In doing so I would also like to say that I think that it would be important that the Socialist Party from its position of increased influence, take the lead in building a united front of mass direct action as has been emerging on the ground with the protests all over the country. Part of this is to put aside old conflicts and sectarianism and seek to unite the revolutionary left, such as the SP itself, the United Left, People Before Profit, Clare Daly, Joan Collins and other left and activist groups, into a revolutionary socialist current that can put forward its ideas in the movement as it develops.

What is the objective situation in Ireland now? In the CWI/SP when I was in it, we used to try and analyze the objective situation and from that decide on program, strategy and tactics. So I would like to ask this question: Is there a revolutionary situation in Southern Ireland now? This would be where the ruling class is split, the working class is showing it is prepared to fight for power, the middle class is vacillating and there exists a mass revolutionary force prepared to lead. I do not think this exists. I think it would be a mistake to think it does. However this is not the end of the story.

Elements of this situation do exist. There are splits within the capitalist class and its parties. The working class is confronting the government and the state if not yet confronting capitalism consciously. Sections of the middle layers are vacillating. The question I would like to pose is: Can progress be made to strengthen and develop these elements which could lead to a revolutionary situation?

One element that could certainly be strengthened in the building of a revolutionary force is if the revolutionary left groups could get over their sectarianism and come together.  There are many many thousands of workers and youth in an out of left groups which could be brought together. There are many who have been through the left groups and been disgusted by their sectarianism. There are many who would join a revolutionary left force if they could see one which this sectarianism didn't exist.

If these forces could be brought together, if such a force could be built, the working class could then be assisted in moving to confront the system. Such an influential revolutionary left could win to its ranks the most combative and conscious workers and youth. This force could then orient to the mass of the working class on the following strategy and program: Build committees of workers and youth against the water charges in every workplace, union local, district and trades councils, communities, schools and colleges, all decisions to be taken by these committees by democratic vote.

These committees can fight against the water charges but also fight for the cancellation of all debts to the banks and finance houses and for the taking into democratic public ownership of the banks, finance houses and all oil and gas wealth and all major industry.  From this, a fund could be  established for rebuilding and solving the problems the country faces. Such a lead by a non sectarian left force would see its influence grow dramatically. It could win over the most active and combative working class forces, orient these to the mass of the working class and build a revolutionary working class movement that could change things fundamentally.

This movement could also be given a direction that would extend outside the South of Ireland. Similar struggles are threatening in the North. Similar struggles are threatening in England, Scotland and Wales and throughout Europe. This movement can be developed into an international movement.

The only questions I have about the statement from the SP are these. First: What does it say about and what does it suggest it will do, about bringing together the many revolutionary socialists both in and out of organizations into a mass revolutionary force which can give leadership and seek to challenge the capitalist system and its austerity program?  Second: While raising the issue of the next election is correct, I do not think it is sufficient. I think that there is the possibility of building a movement to challenge capitalism in the present situation, but this will not be done if we confine our strategy and tactics and program within the limits of reforming the capitalist system, or winning a majority in the Dail, (This is where the building of the committees comes in, they already exist in embryo form in the anti water charges committees) and within the borders of the South of Ireland. It will not be done if we set our sights only on the next election and how many seats the left can win. It is a very serious mistake not to develop the committees to be the base of the struggle and that all decisions be taken democratically by these committees.

Finally the same question again: Could a revolutionary situation be developed if the left forces got over their sectarianism, came together and sought to win the most combative and thinking workers and youth and oriented these to the mass of the workers and to the middle layers around a democratic anti capitalist socialist program and internationalism? I think it can; it certainly cannot be ruled out.

Saturday, November 22, 2014

Society's leeches: Harold and Sue Ann Hamm

The Hamms
by Richard Mellor
Afscme Local 444, retired

Poor old Harold Hamm.  An Oklahoma Judge has ordered him to pay his ex wife $1 billion to settle the divorce proceedings that this poor couple have had to endure for the last two and a half years.

Harold is the chairman of Continental Resources the oil drilling giant that is the largest producer in North Dakota's Bakken Field and was the senior energy adviser to Mitt Romney.  Hamm has paid Sue Ann Hamm $22.8 million already so he owes her another $972.7 million according to reports. And get this, the poor old bugger has to come up with $300 million by the end of the year.

Mr. Hamm thinks it's a pretty fair deal and wants to put the divorce behind him. He will still have 250 million shares in the company leaving him as 70% owner worth about $14 billion.

It's not that Ms Hamm doesn't deserve her rightful share of a company she worked for as a lawyer.  She got the court to force Continental to produce some 600,000 documents proving her expertise and decision making contributed to the increased stock market value of the company.  The judge determined that there was "no evidence that she needed additional support" according to the Wall Street Journal.

The larger issues are whether any of them have the right to that money at all, after all, they never earned it and more importantly, whether the production and distribution of such social necessities as energy should be in private hands at all. Obviously they should not.  The recent oil boom from hydraulic fracking which does extreme environmental damage has brought gold rush type conditions to North Dakota.  The massive and infusion of capital and rapacious thirst for profits has brought wealth for some and havoc to others as market booms like this and the social need for energy has no rational planning to it, left as it is to private individuals who could just as well be producing T-shirts.  A similar destructive situation is occurring in California as capital has swarmed in to the production of Almonds.  The environmental damage caused by such anarchistic methods of social production is extensive.

That two individuals can haggle over such stratospheric sums as more and more people find themselves living on the edge is obscene to say the least.  Some moron on FB the other day said with confidence in his own superficial, individualistic view of the world that the teachers in my community "don't need a raise" providing no other evidence than him asserting it.   He believes in freedom he says. The freedom for capital to plunder the world's resources no matter what the consequences as profit is king.  He, like the rest of us, will be buried amid the rubble of the decaying system he champions if it persists much longer.  He is of no consequence personally just an example of humanity at its worst.

When the so-called free market has finished with North Dakota, it too, like Detroit will revert to third world status until some profit thirsty budding Donald Trump will build a new casino or entertainment complex where workers can be fleeced of more cash, with government help of course.  The public/private partnership is a great deal for the entrepreneur, profits privatized losses socialized.  It is disgusting that people like the Hamms are portrayed as hard working and the epitome of success, what all young people should aspire to become.  It is not success, but one's failure as a human being that takes them to this point.

I can only wonder what the Hamm's more than $14 billion would do for society as a whole (society as a whole generated it) if its social allocation was democratically decided by those whose labor produced it and by those communities that would benefit from it.  I'm sure the reader can come up with some examples.

Ireland: Clare Daly on the Irish Water Reforms (video)

I’m a celebrity – get me out of here!

Myleene Klaas
Two in a row from Michael Roberts but there's a lot of useful information in this piece and some good recommended reading. (images not in the original)
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by Michael Roberts

Myleene Klass is a sort of B-list celebrity in Britain (http://en.wikipedia.org/wiki/Myleene_Klass). She comes from a family of musicians, quite well-off, went to private school, studied at the UK’s prestigious Royal Academy of Music, became a professional musician and pianist, eventually joined a successful pop band and is now a model for various food and clothing brands. She has appeared on B-class TV programmes like I’m a celebrity – get me out of here!, where you are parked in a jungle for several weeks with other celebrities and have to undergo various humiliating tests. She is apparently worth about £11m ($18m) in net worth and no doubt earns at least six figures a year.

She has attacked the proposed introduction of a wealth tax on British homes worth more than £2m that the current opposition Labour leader Ed Miliband wants to introduce. This so-called ‘mansion tax’ would mean around an annual payment of about £3000 a year by those who have such properties. In the UK, given the huge property boom of the last 20 years, these homes are mainly in central London. On a second rate TV show, Klass railed against Miliband, that this was attacking ‘poor grannies’ who may have big houses but no income.

Miliband was non-plussed, but could easily have answered this charge. First, most of these £2m houses are owned not by poor grannies but by very well off people, 40% don’t live in them and a sizeable number are owned by rich foreigners who have bought them in order to get a windfall from the London property boom (prices rising at 12% a year currently) and rent them out or leave them empty. Second, under the planned tax, those with £2m plus homes and low incomes would not have to pay each year, as the tax would be rolled up until that person kicked the bucket. Indeed, if a £2m house increases in value by 10% a year, that would add £200,000.  A mansion tax of £3000 is just 1.5% of that boost to wealth.

Klass’s attack (and the whining of other ‘celebrities’ like Griff Rhys-Jones, who says he will leave the country – although he lives in a big ranch in Wales and only uses his huge mansion in London on visits) is not to protect ‘grannies’. Klass has not complained about another tax, the so-called ‘bedroom tax’ that is actually being applied by the government, which reduces the benefits received by ‘poor grannies’ and other single people who have a ‘spare bedroom’ in their flats. These grannies are being forced to move into smaller accommodation or be even poorer. Klass had nothing to say about them.

Of course, Klass and Rhys-Jones are really complaining about paying any tax at all. The rich see paying tax as almost immoral – it takes away what they have ‘earned’ through hard work, talent and being clever – although usually it is just luck or being born rich. Anyway, I’m not sure that a 50% increase in the value of a home has anything to do with hard work or talent. But tax is immoral – or so says British PM David Cameron when recently announcing that the ruling Conservatives will cut taxes after the next election
(http://www.thetimes.co.uk/tto/news/politics/article4252216.ece).

Actually, if you think about it, taxes are the most moral social thing you can do – paying your contribution to the social good and to help others. The problem is that the spending by governments that kow-tow to the rich is often on military hardware, subsidies to large companies to invest and handouts to rich landowners and farmers – and of course taxes on the rich (like a mansion tax) are kept to the minimum.

And wealth may bring ‘happiness’ but it certainly does not bring morality and a ‘help thy neighbour’ philosophy. There are often well-publicised stories about rich philanthropists who set up trusts for the sick, for the arts etc. Actually, trusts are good tax havens for money that rich people don’t know what to do with. And there is way more money that goes to financing lobby organisations and politicians who aim to protect the interests or the rich and the super-rich.

In a great new book, Billionaires: reflections on the upper crust,  (http://www.newrepublic.com/article/120092/billionaires-book-review-money-cant-buy-happiness), Darrel M West outlined various social surveys that show the richer a person is, the less likely they are to redistribute some of their wealth and earnings to those less lucky or ‘talented’.  A University of California study found that people driving expensive cars were four times more likely to cut in front of other drivers or ignore pedestrians right of way than those in cheap cars. They considered themselves kings of the highways. In another study, the richer the person, the more likely they were to take candy from a jar left outside a laboratory, despite a sign saying that it was for children only! The New York State Psychiatric Institute surveyed 43,000 Americans and found that, by some wide margin, the rich were more likely to shoplift than the poor. Independent Sector found that people with incomes on an average of $25,000 a year gave away 4.2% of their income while those on over $150,000 a year gave away only 2.7%.

As a UCLA neuroscientist put it: “As you move up the class ladder, you are more likely to violate the rules of road, to lie, to cheat, to take candy from kids, to shoplift, and be tightfisted in giving to others”. Apparently, the richer you get the more you want and the less you want to give. Mike Norton at the Harvard Business School found that, when asked, rich people still felt that they were two or three times short of the money they needed to be really happy!
Carl Icahn. The wise thoughts of the superficial male

But so it goes on. There is never too much for some. For example, the world’s most famous bond trader is Bill Gross. He was head of the largest bond fund company in the world for years, PIMCO. But recently, he had been making some bad investment decisions and PIMCO started to lose money for its clients (banks, insurance companies etc). The clients started to withdraw their money and Gross was sacked for failure. But failure came nicely wrapped up in a going away present. He was paid $290m to leave! Bill Gross’ take-home pay was huge but he is not the wealthiest bond fund manager in the world. He is worth only $2bn, while the far less well known David Tepper is worth $11bn and Carl Icahn is worth over $20bn.

Indeed, there are more super-rich people in the world today than ever before. According to a new survey from Wealth-X and UBS (http://www.billionairecensus.com/home.php), the number of people with more than $30m in assets jumped 6% to hit a new record of 211,275 in 2014). Among them, they hold a staggering $30trn, or nearly twice the size of the US GDP. Those 211,275 people account for just .004% of the world’s population but hold 13% of the world’s wealth.   Most of these uber-rich hold their wealth in the companies and properties they own and the income they make they hoard up in cash. North America remains number one when it comes to population and wealth. 74,865 people in North America hold some $10bn between them. 69,560 of the ultra wealthy call the US home and hold $9.6bn. Europe has the second-largest concentration of ultra high net worth individuals, followed by Asia, but Asia will overtake Europe by 2027. The ultra wealthy are overwhelmingly male, 87%.

A mansion tax would not be even noticed by these people – although if it were brought to their attention, they would still complain about it being unfair.

Friday, November 21, 2014

The hidden crime of capitalism

by Michael Roberts

A recent estimate was made of the economic cost of varied human action globally. The annual economic burden of smoking on health services, shortened life expectancy and illness was found to be the greatest at $2.1trn a year, closely followed by the losses from wars and armed violence around the world and by obesity.

Global economic burdens
These burdens are not just from ‘human action’ but really come from the crimes and waste of capitalism: tobacco companies promoting cigarette smoking, wars provoked by imperialism and nationalism; food companies selling ‘affordable’ junk food with high concentrations of sugar, salt and fats – and of course global warming and climate change.

But one economic burden not recorded in this list is the waste from economic recessions and depressions. The loss of jobs, incomes and assets like homes is no small beer. And the longer the slump, the greater the loss.  This is a hidden crime of capitalism.

The current ‘recovery’ from the Great Recession of 2008-9 has been so weak and so drawn out that the overall loss of value compared with potential output if there had been no slump and/or a quick recovery is huge – probably close to $10trn over five years for the US alone. That ‘damage’ easily matches the damage from smoking over the last five years.

|This crime of capitalism is ignored by mainstream economics. For example, Robert Lucas is a Nobel prize winner and leading exponent of the view that modern capitalism is an efficient manager of human resources and the output of labour. He is infamously quoted as saying in 2003, that the problem of depressions had been solved by modern mainstream economics (http://thenextrecession.wordpress.com/2010/05/28/vulgar-economics-in-despond/). In 2010, he argued that there can be ‘shocks’ to the steady equilibrium growth path of capital investment, but they would usually be temporary. Very quickly, growth would return to its previous trend (http://danieljmitchell.wordpress.com/2011/06/16/nobel-prize-winner-analyzes-the-obama-growth-gap/).

Lucas presented the following chart of US economic growth over the last 140 years.  The red line represents trend economic growth and the blue line shows the actual growth rate. In this bird’s eye view, growth has been inexorable and mostly pretty much along the equilibrium trend path.
US real gdp
Or has it? The Great Depression of the 1930s stands out a huge deviation from this scenario, even at this height of observation. Also what is subtly missing from view is the gradual slowdown in trend growth especially since the 1980s. And a closer inspection of the blue line in the last six years reveals a distinct gap from the red line. And there appears to be no quick ‘return to normal’ (see my posts, http://thenextrecession.wordpress.com/2014/05/17/us-is-not-closing-the-gap-and-neither-is-the-uk/
and
http://thenextrecession.wordpress.com/2014/08/29/the-us-recovery-the-long-depression-and-pax-americana/).

Lucas noted this gap too.  For him, the problem this time was that “government is doing too much,” and he specifically highlighted the “likelihood of much higher taxes, focused on ‘the rich’” and a “large increase in the role of government”.  Well, none of those things happened except for the government bailing out the banks and the US economy still has not made up time from those ‘shocks’.

Recent research by economists Robert F. Martin, Teyanna Munyan and Beth Anne Wilson of the US Federal Reserve examined the experience of 23 countries since 1970 (http://www.federalreserve.gov/econresdata/notes/ifdp-notes/2014/potential-output-and-recessions-are-we-fooling-ourselves-20141112.html). They found that economic output doesn’t return to normal following a recession, especially a major one like the Great Recession.

Indeed, the gap between potential growth and actual output just gets wider. As a result, the trend growth rate also falls as a consequence. As the chart below shows, a deep slump followed by a weak recovery steadily lowers the long-term growth rate in each successive year.
gaps
So there is no return to normal and there has been a permanent loss of value and output for the American people as a result of the housing bust, the global banking crash and the subsequent collapse in investment, incomes and employment.

According the Fed economists research, on average, GDP remains well below its previous trend, even for short and shallow recessions.  On average, there is a permanent loss of output equivalent to nearly 15% of potential GDP growth in deep recessions more seven years later.
recessions

As the economists sum it up: “that recessions tend to depress the long-run level of output may imply that demand shocks have permanent effects. The sustained deviation of the level of output from pre-crisis trend points to flaws in the way the economics profession models the recovery of output to economic shocks and raises further doubts about the reliance on measures of output gaps to determine economic slack. For policymakers, the results also point to the cost of recessions, especially deep and long ones”.

So much for Robert Lucas’ confidence in recovery as long as governments don’t interfere. Slumps anyway have lasting damage: incomes, jobs and homes that can never be recovered. And right now that damage is still rising.  It is another economic crime of capitalism.