October 23, 2008

Hidden culprit

The widespread belief that the financial meltdown and consequent global crisis is not systemic but was caused by the insatiable greed of financial CEOs reinforces another myth: that government--or the state--can hardly be blamed for the crisis.

The state’s responsibility in this mess is considered to be merely one of omission--its failure to regulate the profiteering activities of big banking and investment houses that are based on sheer speculation. And now, fortunately, governments are undertaking extraordinary measures to bring the whole house back in order for the common good. Government is seen in this light as the savior and not one of the culprits.

The notion that government did not have a major hand in bringing about this severe financial crisis can be traced to the general perception, propagated by policymakers, experts and the mass media, that "neoliberal globalization" means freeing market forces from government regulation and intervention.

Indeed, neoliberalism supplanted Keynesianism which advocated active government intervention through public works projects and fiscal and monetary policies to ensure economic stability and growth.

The impression created is that government thereafter stood aside disinterestedly while market forces operated freely. Thus, even when “neoliberal globalization” started wreaking greater havoc on weak economies rather than globalize progress and prosperity, some of its most vocal critics concentrated their ire and fire on the irresponsible and profit-hungry transnationals and corporate empires.

But, in fact, the neoliberal policies of deregulation, liberalization, privatization and denationalization could not have been implemented without governments adopting and enforcing these as national policy.

The World Trade Organization (WTO) treaty needed to be ratified by states. Many developing and dependent countries have had to amend their constitutions in order to reconcile their laws with the terms of the WTO.

The lowering or removal of tariffs and foreign exchange controls, liberalization of trade and investments, deregulation of labor, removal of government subsidies, privatization of public utilities, etc. were all enforced by governments and could not have been done by the multinationals by themselves.

Even in the US and other centers of monopoly capital government was the instrument by which public funds could be diverted from social services and welfare benefits for use by the finance-industrial capitalists and wages could be suppressed in order to maximize profits.

In the 1990s, legislation was passed to deregulate the flow of speculative capital, including the repeal of laws such as the Glass-Steagall Act that was designed to prevent a repeat of the Great Depression. The Act strictly regulated and oversaw the activities of commercial banks.

The latter were usually insured by the FDIC (Federal Deposit Insurance Corporation ) and had access to advances from the Federal Reserve in emergencies. Thus they were not allowed to engage in speculative activity unlike investment banks.

But in the 80s, regulators allowed explicit waivers of some aspects of Glass-Steagall or pretended that there was nothing wrong when commercial banks and investment banks became more and more indistinguishable.

On the surface, the determined, if frantic efforts of the US government as well as those of other big capitalist centers - England, Germany, France, Japan etc. -- reinforce the perception that Government is employing everything in its power to douse the fire and rescue the entire system.

But one need not look too deep to see whose interests these governments are really protecting and upholding. The US$700 billion bailout proposal crafted by US Treasury Secretary Paulson, former top executive of investment house Goldman-Sachs, clearly reveals that the Bush government was rescuing the errant bankers at the ordinary taxpayers’ expense.

The rationale given is that some big banks (read financial monopolies) have become "too big to fail" or "what is bad for the big banks (e.g. JP Morgan, Goldman-Sachs, et. al.) is bad for America". The truth of the matter is that the system not only allows big financial-industrial monopolies to become "too big to fail", it ensures that this is the case.

How did this come about?

With all their resources and economic power, financial-industrial giants-- monopoly capitalists-- were able to dominate governments soon after they were able to dominate national economies in the early 1900s, combining their financial-economic power with the power of the state.

These monopoly capitalists utilized their respective governments to advance their interests in their rivalry for territory, markets and dumping ground for excess capital as well as in conniving among themselves to extract greater profits from the less-developed countries in Asia, Africa and Latin America.

In the US, the Morgans and Rockefellers (who controlled such monopolies as Standard Oil and Chase Manhattan Bank) set up the Council on Foreign Relations (CFR) at the end of WWI. In 1973, the Trilateral Commission (TLC) was set up as a global version of the CFR.

Initially consisting of 180 top leaders from the US, Western Europe and Japan (later, Pacific-Asia),the membership now runs up to 300-350 from the three regions, each individual screened by David Rockefeller, acknowledged godfather of his family’s corporate empire.

Political analysts of various persuasions–including conservatives like Sen. Barry Goldwater–are agreed that the TLC aims to be a shadow world government that would shape national policies worldwide to suit the interests of big monopoly capital.

Holly Sklar wrote in Trilateralism: the Trilateral Commission and Elite Planning for World Management, "The Commission's purpose is to engineer an enduring partnership among the ruling classes of North America, Western Europe and Japan… to safeguard the interests of Western capitalism in an explosive world.”

US Presidents Carter, George HW Bush and Clinton and Vice-Presidents Mondale and Cheney were all TLC members with the Commission as their biggest campaign contributor.

Democrat or Republican, post-WWII and post-1973 governments had CFR and TLC members, respectively, in the most sensitive posts (State Department -- Dulles, Rusk, Kissinger, Vance, Haig; Defense -- Weinberger, Cheney; National Security – Brzezinski; Treasury – Rubin; Federal Reserve --Volcker, Greenspan).

Dean Rusk and Paul Wolfowitz (Defense Undersecretary under Bush Jr.) eventually became presidents of the World Bank.

Alan Greenspan, was a TLC member appointed by Reagan in 1987 as chairman of the Federal Reserve and served through Clinton’s and Bush’s terms up to 2006.

Greenspan is held responsible by many economists and analysts for causing the current financial crisis by keeping interest rates low, tolerating the subprime loans and allowing the derivatives market to run unregulated far too long.

Notably, the TLC counts among its former members prominent neoconservatives such as Cheney and Wolfowitz.

While they are known to be strong advocates of US “unilateralism” more than the TLC’s “multilateralism”, the fundamental objective of consolidating global US political and economic hegemony is shared.

Besides, global political realities and financial constraints have forced the neocon Bush government to adopt a more multilateralist foreign policy despite its unilateralist rhetoric.

It is little wonder that national and even global policies (such as "neoliberal globalization") ultimately serve the interests of this small group of monopolists.

These are of course attractively packaged to be for the interest of the greater majority, global peace, etc.

But when crisis strikes, the masks are torn away and the ugly face of monopoly is revealed. Imperialist states are ruled by the same economic and socio-political elite that run Wall Street and Main Street. #

*Published in Business World
24-25 October 2008

October 16, 2008

Greed at the heart of capitalism

Most mainstream media critiques of the US and world financial crisis point to greed as the underlying culprit. The implication is that if the financial CEOs were not so greedy, the meltdown would not have occurred. This kind of analysis however entirely misses the point about the nature of capitalism, especially monopoly capitalism.

Capitalism is built and thrives on, in fact requires and rewards greed-- the more excessive the better. By greed we mean the relentless drive for the most profit--wealth appropriated from the labor of others --with the least scruples, in order to reinvest and gain even more profit in a continuing spiral of thievery and rapacity or, plainly put, exploitation and oppression.

In the 80s, the proponents of the “free market” dogma and “neoliberal globalization” as a policy framework dug up and bannered the argument of laissez faire capitalism that greed ought not be considered a negative attribute since it is a necessary and powerful force for driving social progress. Greed was presented as the crucial motor of the capitalist system.

Of course, it wasn’t called greed then; it was decked out as individuals simply motivated by self-interest. Adam Smith’s theory of the “invisible hand” of the market provided the rationale that the individual drive for self-gain magically self-regulates and transforms itself into the common good.

Certainly in its free competition stage, the capitalist system rewarded those who were most "efficient" and productive; that is, bottom-line, those who could produce the most with the least labor power (read: wages paid). The boom-bust cycle was the system's way--the proverbial "invisible hand" of the market--not only of solving the problem of overproduction resulting from the anarchic rush to produce the most where the profit was highest; it was also a way of getting rid of the scrupulous and rewarding the greedy.

With the rise of monopolies and their dominance over national governments, free competition capitalism became a thing of the past, but not the drive for maximum profit. Monopolies controlled not only their particular lines of industry but government itself, and thereby the entire economy. But controlling the government and the entire economy did not solve the problem of overproduction which continued to be the result of increasing productivity while constricting the market by minimizing wages.

Simply put, when workers' and other toiling people's wages are kept to the minimum while production is pushed to the limit, then a point is reached where the economy stops growing, with more and new products out that can not be bought and no new capital created, because consumers do not have the money to buy the things they make. Manufacturing thus becomes less and less profitable, and capital, like water that has nowhere to go, tends to stagnate and putrefy. Capitalism reached its lowest and deepest slump during the Depression Years of the 30s.

In the 50s, Keynesianism was designed to save capitalism from its internal contradictions. The wealthy allowed government to tax the rich and use the revenue to pump-prime the economy, e.g. spending big on public infrastructure, thus creating jobs, and providing improved access to social services and state welfare benefits. Banks were regulated to keep the financial markets from spinning out of control. Labor unions were encouraged in order to pacify the working class, giving them a stake in the status quo while immunizing them from embracing socialism as an alternative system.

In the 1970s, the capitalist crisis of overproduction reached a new nodal point when partial recovery resulted not in the usual "boom" but in an entirely new phenomenon, and thus a new addition to the English language—“stagflation"--stagnation accompanied by inflation.

By the 80s Keynesianism was discarded and replaced by neoliberalism as the favored economic doctrine. It was resorted to in order to (1) break down the national barriers and regulations that restrict the flow of goods, allowing the expansion of markets and the exploitation of cheap labor, (2) make more funds available to finance capitalists from social service funds, subsidies and other government social expenditures, and (3) remove the barriers and regulations that restrict the flow of capital, especially speculative capital, thereby allowing finance capitalists to reap immense profits from non-productive investments.

“Neoliberal globalization” was pushed by the economic gurus of universities and think tanks, international multilateral bodies like the World Bank/IMF and the World Trade Organization, multinational corporations, the governments of the advanced capitalist countries and their dependent and client states. Neoliberalism became conventional wisdom and was reified as the free flow of goods, information, money as well as democratic ideals and practices that would lead to global peace and prosperity.

By the 90s “globalization” was exposed by the dramatically catastrophic train of events such as the Asian financial crisis that reverberated on to Russia, Brazil and recoiled as well on Europe and the US causing further misery for developing countries and the world’s peoples. This was followed closely by the bursting of the Japanese bubble and stagnation in Europe, while the US was flaunting its "New Economy". But by 2000, the US could not escape the crisis of overproduction, with its manufacturing sector slowing down, unemployment and household debt rising, national debt, trade and budget deficits soaring.

The US resorted to the "war on terror" to stimulate production and pump-prime the flagging economy. The illusion of recovery was thus conjured, the basic problem of overproduction papered over. Finance capitalists made a killing with mortgage and investment schemes that added to the illusion of prosperity and growth. The profit-making schemes were so lucrative, because unregulated and frenzied, that the biggest investment houses and banks worldwide cut into the action. Until the bubble burst.

In conclusion, the capitalist dilemma cannot be resolved by mere enlightenment on the part of capitalists, i.e. how they moderate their greed. As a system, capitalism is founded on the appropriation by an elite few of the major part of the wealth created by the mass of working people.

Ever wondered how come the pioneering captains of industry and the new financial oligarchy ended up gorging on the feast at the table while the rest of society must make do with their leftovers? Ever wondered why the advanced capitalist countries especially the US appeared to be on an endless road to superprofits and superpower domination while the rest of the world seemed doomed to poverty, misery and abject dependence?

It’s not just greed but the way the system works!

*Published in Business World
16-17 October 2008

October 09, 2008

Capitalism’s unsoundness

Mike Whitney, in “Economic Depression in America” (June, 2008) writes: “The real origin of the problem is…in the prevailing ‘trickle down’ orthodoxy which opposes any increases in wages or benefits for working people… (T)oday's captains of industry and finance refuse to accept … that if workers aren't adequately paid for their labor--and wages do not keep pace with production--then the economy cannot grow because consumers do not have the money to buy the things they make.

“Greenspan and his ilk believed that they could prosecute the class war and make up the difference by relaxing lending standards, changing bankruptcy laws, and by creating a nearly endless array of exotic financial products that expanded credit… By crushing the worker the Friedmanites have killed the golden goose. The world's most prosperous consumer society is in terminal distress and no amount of ‘free market’ gibberish will keep it from crashing.”

That capitalist orthodoxy of profit maximization at the expense of workers and producers in general, has been swallowed hook, line and sinker by the crop of Philippine economic policymakers/managers in a succession of governments post independence. The “sound economic fundamentals” that they crow about is nothing more than this backward feudal (not just agricultural) economy tied to and almost completely dependent on foreign, especially the US, capital and economy.

The remittances of Filipino migrants, foreign loans, foreign investments (direct and speculative) are what keep the Philippine economy afloat, albeit floundering, in the rough seas of debt and deficit. All this time, the economy has been in a state of chronic distress, even as the ruling elite and the government continue to give standard assurances that it can weather any external shocks such as soaring oil and food prices as well as economic downturns in the economies of its biggest trading partners and a slew of host countries for Filipino migrant labor.

Capitalism’s, or more precisely, monopoly capitalism’s latest doctrinal expression is the so-called neoliberal or “free market” policy framework with its regime of liberalization, deregulation and privatization under the popular signboard of “globalization”. In the Philippines, this dogmatic mindset-- passed of as conventional wisdom--has wrought record levels of joblessness and intensifying/expanding hunger, poverty and misery; persistent macroeconomic fragility with periodic acute economic/financial crises; intractable social unrest and armed conflicts; the inevitable escalation of military/police crackdowns; and an overall climate of political instability and state repression.

The US and world financial meltdown and economic recession is generating waves of destruction that can engulf the hapless economies of dependent/semicolonial countries such as ours. The Filipino people, especially the masses of the poor, exploited and oppressed, have long been suffering from the economic crunch. With the latest financial turmoil hitting the centers of global capital, the situation is bound to get worse. There can be no easy way out.

If anything can be salvaged from this catastrophic situation, not seen since the Great Depression of the 30s, perhaps it would be by treating it as a wake-up call. This most destructive crisis of finance capitalism should cast serious doubt on, if not shatter, the myth of "sound fundamentals" intoned by our thoroughly brainwashed and/or untruthful economic and political leaders.

We need to break our overweening dependence on foreign capital and economies. Instead we should strive for greater self-reliance and economic as well as political sovereignty so that we can chart an independent course to genuine agrarian reform, national industrialization, economic prosperity, egalitarianism and social justice.

Rough seas are ahead not only for Philippines and other under/maldeveloped countries, but for peoples all over the world. The crisis will not only be in the sphere of the economy but in geopolitics as well.

Grave economic crises have always been followed closely by war, because war has always been a way out of crisis, albeit temporarily, for the monopoly capitalists, imperialist states and their client regimes. This has been the case from the turn of the century, when capitalism qualitatively changed from its free enterprise to monopoly character, to include the Spanish-American War, the two World Wars, the "Cold War" between the US and the Soviet Union and the US-led "war on terror".

The grounds for the so-called “war on terror” were actually being laid when the economic crisis (slowdown, unemployment, runaway household and federal debt, etc) started. As revealed by US geo-political strategy documents and policy papers of the neoconservative block controlling the White House, this was long before the putative “terrorist attacks” of September 11, 2001 on the US mainland.

Thus the wars in Afghanistan, Iraq, the Balkans, Sudan, Georgia (South Ossetia) and the war being threatened against Iran are all about oil supply, pipelines and their strategic control. We must not forget that in our part of the world as well, that is, with regard to the country conflict over the Spratley Islands, it’s all about oil and other natural resources plus critical ship lanes too.

The crisis of global capitalism will surely intensify political maneuverings and military intervention and aggression as imperialist powers scramble to retain and extend spheres of influence, dumping grounds for goods and capital and sources of vital energy supplies and other resources.

The war of terror will intensify: the US and other countries have started to use other pretexts (natural and man-made calamities, human rights, ethnic struggles, etc) to intervene militarily and eventually invade sovereign countries. This is already happening right here in the Philippines, overtly in Mindanao but more surreptitiously in other parts of the country where armed anti-imperialist revolutionary forces have taken root.

The up side of all this is that conditions are ever more favorable for arousing, organizing and mobilizing the toiling peoples of the world against their exploiters and oppressors and the system that grinds them down and eventually kills them and their dreams.

People everywhere are struggling to survive and to break free from the unjust and inhuman system of global monopoly capitalism that has kept them in shackles, in order to build a social system that promotes their basic interests, assures them of a life free from want, upholds the dignity of honest labor and ushers in a truly liberating future.

There is a large measure of truth to the observation of an increasing number of analysts that the fundamental reasons for the meltdown we are witnessing today--the fundamental and fatal "unsoundness" of the capitalist system--had long been rigorously and scientifically analyzed 120 years ago, just as it was about to enter its monopoly stage.

The logical conclusion: Capitalism creates its own gravediggers.

*Published in Business World
10-11 October 2008