In this paper we would like to contribute towards turning this around—to resurrect the socialist project; to do so by deconstructing the discourse on “neoliberal globalization” and reconstructing the actual contemporary dynamics of capitalist development.

This is a major task requiring a closer look at the issues. The modest contribution of this paper is to bring into focus the imperialist dynamics of capitalist development in Latin America. To this end, we present an analytical framework for an analysis of the dynamics of capitalist development and imperialism. We then summarize these dynamics in the Latin American context. Our argument is that the dynamics of capitalist development and imperialism have both an objective-structural and a subjective-political dimension and that a class analysis of these dynamics should include both. This means that it is not enough to establish the workings of capitalism and imperialism in terms of their objectively given conditions that affect people and countries according to their class location in this system. We need to establish the political dynamics of popular and working class responses to these conditions—to neoliberal policies of structural adjustment to the purported requirements of the new world order. The politics of the Left might so be better informed.

The Neoliberal Era of Capitalist Development and Imperialism

Capitalist development in Latin America can be periodized as follows: (1) an initial phase of primitive accumulation and national development dating more or less from the Independence Movement in the 1860s and crystallizing in the Porfiriato, an extended dictatorship of the big landowners and incipient bourgeoisie in Mexico; (2) a period of modernization, incipient industrialization (in the form of “Fordism”) and social reform, dating from the Mexican Revolution in the second decade of the twentieth century; (3) a period of state-led capitalist development with “international cooperation” (technical and financial assistance) dating from the end of the Second World War and the construction of the Bretton Woods world order (1945-70); (4) a period of transition (1971-82) characterized by an extended crisis in the global system of capitalist production and diverse efforts to restructure the system; and (iv) the construction of a new world order designed so as to free the “forces of freedom” from the constraints on capital accumulation imposed by the system of sovereign nation states. This phase, which can be dated from the onset of a region-wide debt and an ensuing “development” crisis, is characterized by dynamic processes of neoliberal globalization and imperialism – the institution of a neoliberal policy framework (the structural adjustment program, as it was termed at the time), a renewed imperial offensive, and the decline but then partial recovery of the capital accumulation process and the self-styled “forces of economic and political freedom”.

The latest period of capitalist development has two dimensions (globalization in theory / imperialism in practice, forces of opposition and resistance), both of which can also be broken down into four phases.
Neoliberalism and Imperialism in Practice: A Framework of Analysis

Phase I (1975-82) of the neoliberal project is associated with the bloody Pinochet regime in Chile constituted with a military coup in 1973. The “bold reforms” implemented by this regime and extended into Argentina and Uruguay were subsequently implemented by Margaret Thatcher and Ronald Reagan, and used by economists at the World Bank as a model for the structural reforms set as the price of admission into the new (neoliberal) world order.

Phase II (1983-90) of neoliberalism (imperialism masked as globalization) includes the foundation stones of renewed process of capital accumulation on a global scale; setting the parameters for a new configuration of economic and political power; implementation of a second round of neoliberal “structural reform”; launch of an ideology (globalization) designed to legitimate this reform process, and the first wave of privatizations as part of this reform process; and a process of redemocratization designed as a means of securing the political conditions of structural adjustment—a marriage of strategic convenience between capitalism /economic liberalism and democracy / political liberalism (Dominguez and Lowenthal, 1996).

Phase III (1990-2000) entails what might be viewed as a “golden age” of massive transfers of public property to the “private sector” (capitalists and their enterprises); an enormous net outflow of capital (“international resource transfers”) in the form of profits on investments, debt payments and royalty charges; virtually no economic growth—less than one percent per capita over the decade and a growing divide in the distribution of society’s wealth and income; huge bailouts of the banks and investors in corporate stock in a situation of financial crisis; and another round of neoliberal policy reform (“structural reform”), this time with a “human face” (adding to the reform process a “new social policy” targeted at the poor,); a second wave of privatizations and an associated denationalization of the banks and strategic economic enterprises; and a post-Washingron Consensus on the need for a more inclusive form of neoliberalism designed to empower the poor (Craig and Porter, 2006; Ocampo, 1998; Van Waeyenberge, 2006).

Phase IV (2000-09) begins with an involution in the system of capitalist production and the collapse of foreign direct investment inflows; and the onset of political crisis viz. widespread disenchantment with neoliberalism, and a process of regime change (Argentina, Bolivia, Ecuador, Brazil, Uruguay, Venezuela—a coup against and the restoration of Chávez to power—and Uruguay. In 2003, the production crisis gives way to a mild economic recovery for a number of countries in the region and a sweeping realignment of political forces into four blocs. The basis of this process of economic and political development is a realignment of global production—a primary commodities boom fueled by the growing demand in China and India for new sources of energy, natural resource industrial inputs and consumption goods for a rapidly growing middle class.

Opposition to Imperialism, Class Rule and Neoliberalism: Forces of Resistance

Phase 1 (1973-82) of the anti-neoliberal project includes a major counter-offensive of the landed proprietors and big capital against the incremental advance of the workers and peasants; a double-offensive of the state against the rural poor and landless peasants in the form of the “Alliance for Progress” (“rural development”) and use of the state’s repressive apparatus against the guerrilla armies of national liberation; the counter-offensive of capital, with the support of the state, against the working class, resulting in a disarticulation of the labor movement, cooptation of its leadership and a weakening in its capacity to negotiate for higher wages and better working conditions; and, with the agency and support of U.S. imperialism, the institution of military coups and the institution of military rule and a war against “subversives” under the aegis of a Washington-designed “Doctrine of National Security”.

Phase II (1983-99) was characterized by a reorganization of the popular movement, particularly in the countryside—in the indigenous communities and among the masses of dispossessed, landless workers and peasant producers; the mobilization of the forces of popular opposition and resistance against the neoliberal policies of the governments of the day; various uprisings of indigenous peasants in Ecuador, Chiapas and Bolivia, resulting in the ouster of several presidents if not regime change, and in the blocking of governments efforts to extend the neoliberal agenda; the division of the indigenous movement (in Bolivia and Ecuador) into a social and political movement, allowing it to contest elections as well as mobilize the forces of resistance in direct action against the state; a general advance in the popular movement with the growth of new offensive and defensive class struggles.

Phase III (2000-03), corresponding to a crisis in production and ideology vis-à-vis neoliberalism, was characterized by the emergence of various offensive struggles and social mobilizations that led to the overthrow of regimes in Argentina, Bolivia, Ecuador. In Venezuela, Hugo Chávez came to power, inciting the complex dynamics of a class struggle characterized by a series of counter-offensives by the ruling class (attempted coups, referendums), growing demands for radical reforms and the institution of the “Bolivarian Revolution” based on an anti-imperialist strategy designed to take the country along a socialist path.

As for Phase IV (2003-09) it saw the rise of a bloc of pragmatic neoliberal, quasi-populist democratic socialist regimes oriented towards the post-Washington Consensus, an ebb in the flow of the popular movements, the radicalization of Chávez’s project of “21st Century Socialism” and the reflux of the popular movement.

Four Cycles of Neoliberalism

“Neoliberalism” in this historic context denotes a national policy—or rather, reform of the then-existing policy of state-led development (“structural reform” or “structural adjustment”)—justified with a neoclassical theory of economic growth and development and an ideology of globalization. In this context, we can identify four cycles of neoliberal “structural reform”. The first cycle, initiated by the Chicago Boys in Chile under Pinochet . After this first round of neoliberal experiments in policy reform, extended to Argentina and Uruguay, crashed in the early 1980s, a second round of neoliberal policy reforms was implemented under conditions of redemocratization, an external debt crisis and the political leverage that this crisis provided the World Bank and the IMF, the agencies that assumed primary responsibility for implementing the Washington Consensus on needed policy reform.

The third cycle of neoliberal policies was implemented in the 1990s. At the outset only four major regimes had failed to fully embrace the “discipline” of structural adjustment. But serious concerns had surfaced as to the sustainability of the neoliberal model and the associated Washington Consensus. For one thing, neoliberalism had utterly failed to deliver on the promise of economic prosperity and mutual benefits to countries north and south of the global development divide. For another, structural reforms had not only released the “forces of freedom” but also forces of resistance that threatened the survival not only the viability of the neoliberal model but the survival of the state itself. To avert an impending crisis the ideologues of globalization and neoliberal architects of policy reform came up with a revised model: structural adjustment with a human face (UNICEF, 1989) in one formulation, productive transformation with equity (ECLAC, 1990) in another, and “sustainable human development” (UNDP, 1996) in yet another. The common feature of these and other such models was a continuing commitment to a neoliberal program of “structural reform” at the level of national policy, the design and adoption of a “new social policy” that “targeted” social investment funds at the poor and their communities, and specific policies that helped shelter the most vulnerable groups from the admittedly high “transitional” social costs of structural adjustment.

Policy Dynamics of Neoliberal Structural Reform

The discourse on “globalization” emerged in the 1980s in the context of efforts in policymaking circles to renovate the ailing Bretton Woods world order—to create a “new world order”. Under widespread systemic conditions of a capitalist production crisis and an associated fiscal crisis, economists at the World Bank and its sister “international financial institutions”, all adjuncts of the U.S. imperial state, formulated a program of policy reforms designed to open up the economies of the developing world to the forces of “economic freedom”, to integrate these societies and economies into the new world order. These policy reforms included various IMF stabilization measures such as currency devaluation and import restrictions, and policies of structural adjustment: (1) privatization of the means of social production and associated economic enterprises (reverting thereby the nationalization policies of the earlier model of state-led development); (2) deregulation of diverse product, capital and labor markets; (3) liberalization of capital flows and trade in products and services; and (4) and administrative decentralization, attempting to “democratize” thereby the relation of civil society to the state, transferring to local governments in partnership with civil society responsibility for economic and social development; that is, privatizing “development” (allowing the poor to “own” and be responsible for improving their lives, changing themselves rather than the system.

By the end of the 1980s, this package of policy reforms had transformed the economic and social system of many Latin American societies. The state-led reforms of the 1960s and 1970s (nationalization, regulation of capitalist enterprise and capital inflows, protection of domestic producers, rural credit schemes, land and income redistribution market-generated incomes, etc.) had been reverted, effectively halting, where not reversing, the process of development and incremental change.

The outcome and social impacts of this social transformation were all too visible and apparent, especially to those groups and classes that bore the brunt of the adjustment and globalization process. With a significant reduction in the share of labor (and households) in society’s wealth and national income, and an equally significant concentration of asset-based incomes and its conversion into capital, Latin American society became increasingly class divided and polarized between a small minority of individuals capacitated and able to appropriate the lion’s share of the new wealth and a large mass of producers and workers who had to bear the costs of this “structural adjustment” and excluded from its benefits. The economic and political landscape of Latin American society was, and is, littered with the detritus of this development process. The objectively given conditions of this process are not only reflected in the all too evident deterioration in living and working conditions of the mass of the urban and rural population. They are also reflected in the evidence of a process of massive outmigration, the export of labor as it were, and an equally massive process of capital export—a net outflow or transfer of “financial resources” estimated by Saxe-Fernandez and Núñez (2001) to amount to over USD 100 million for the entire decade of the 1990s. Recent studies suggest that if anything the process, fuelled by the financialization of development and policies of privatization, liberalization and deregulation, has continued to accelerate, putting an end to any talk, and much writing, about a purported “economic recovery” based on a program of “bold reforms” and “sound economics.” Neoliberalism is in decline if not dead.

Globalization or Global Class War?

It is commonplace among many intellectuals, pundits and policy makers both in Latin America as elsewhere to discuss “globalization” as of it were a process unfolding with an air of inevitability, the result of forces beyond anyone’s control—at worst allowing policymakers to manage the process and at best to push it in a more ethical direction; that is, allow the presumed benefits of globalization to be spread somewhat more equitably. This is, in fact, the project shared by the antiglobalization movement in their search for “another world” and the pragmatic centre-left politicians currently in power in their search for “another development”.

In this discourse, globalization appears as a behemoth whose appetites must be satisfied and whose thirst must be quenched at all costs—costs borne, as it happens but not fortuitously, by the working class. In this context to write, as do so many on the Left today, of the “corporate agenda” and “national interests”, etc. is to obfuscate the class realities of globalization—the existence and machinations of the global ruling class (Petras, 2007) and what Jeffrey Faux (2006) terms a “global class war.”

Faux’s book allows us to view in a different way the globalizing economy, the politics and economics of free trade, and soaring corporate profits on the one hand, and, on the other hand, deteriorating standards of living and the continuing (and deepening) poverty of most of the world’s people. What is behind this reality? A dynamic objective process, working like the invisible hand of providence through the free market to bring about mutual benefits and general prosperity? Or a class of people who in their collective interest have launched a global war with diverse features and theaters. One feature of this class war, one of many (on its manifestation in the European theater, see Davis, 1984; and Crouch and Pizzorno, 1978) entails ripping up the social contract that had allowed the benefits of capitalism to be broadly shared with other social classes. Another feature was the use of the state apparatus to reduce the share of labor in national income waken its organizational and negotiating capacity, and repress any movement for substantive social change.

The globalization discourse hides the class realities behind it. The press, for example, consistently talks about national interests without defining whom exactly is getting what and how, under what policy or decision-making conditions. Thus, American workers are told that the Chinese are taking their jobs. But the China threat, in fact, is but another global business partnership, in this case between Chinese commissars who supply global capital cheap labor and the U.S. and other foreign capitalists who supply the technology and much of the capital used to finance China’s exports. Workers in Latin America are told that it is their inflexibility and intransigence, and government interference in the free market, that hold them back from engaging meaningfully or at all in the many benefits of globalization. Many, including on the Left, view “globalization” in this way. However, it would be better to see it for what it is: a class project vis-à-vis the accumulation of capital on a global scale; and as “imperialism” vis-à-vis the project of world domination, a source and means of ideological hegemony over the system.

Neoliberalism is the reigning ideology of the global elite, a transnational capitalist class that holds its annual meeting in the plush mountain resort of Davos, Switzerland. Hosted by the multinational corporations that dominate the world economy (Citigroup, Siemens, Microsoft, Nestlé, Shell, Chevron, BP Amoco, Repsol-YPF, Texaco, Occidental, Halliburton, etc.), some 2000 CEOs, prominent politicians (including former and the current presidents of Mexico), this and other such meetings allow this elite to network with pundits and international bureaucrats, discuss policy briefs and position papers on the state of the global economy, and to strategize abut the world’s future – all over the best food, fine wine, good skiing and cozy evenings by the fire among friends and associates – fellow self-appointed and nominated members and guardians of the imperial world order.

Davos is not a secret cabal, although it is surrounded by meetings and workings of a host of groupings, meetings and committees and extended networks that is. Journalists issue daily reports to the world on the wit and informal charm of these unelected, self-appointed or nominated members of the class that runs and manages the global economy. In this sense it is a political convention of what Fauz dubs “the Davos Party” that includes solid representation from the economic and political elite in Latin America. The mechanism and dynamics of class membership are unclear; as far as we know it has not been systemically studied. But it likely involves “people” like Henrique Fernando Cardoso, former dependency theorist and later neoliberal president of Brazil, upon or before completion of his term in office, being invited to give a “talk” or address members of the imperial brain trust, the global elite, at one of its diverse foundations and “policy forums”, such as the Council on Foreign Relations (CFR), a critical linchpin of the imperial brain trust and its system of thinktanks, policy forums and geopolitical planning centers. Certainly this is how former Mexican presidents Carlos Salinas and Ernesto Zedillo were appointed and assigned specific responsibilities on diverse working “committees” designed to identify and redress fissures in and threats to the system. It is evident that listing in Forbes’ listing of the world’s biggest billionaire family fortunes, such as Bill Gates, George Soros and Carlos Slim, is sufficient in itself to ensure automatic membership in the club.

The New World Order system easily identifies those members of the global elite in each country that, as Salbuchi (2000) notes, are “malleable, controllable and willing to subordinate themselves to the system’s objectives”. Their careers are then launched so that they may rise to become presidents of their countries or ministers of finance and central bank governors. This was the case, for example, for Argentina’s Domingo Cavallo, Chile’s Alejandro Foxley and Brazil’s Henrique Cardoso, each of whom received suitable local and international press coverage; were honored with “prestige-generating” reviews, interviews, conferences and dinners, etc.; and then invited to address the Council on Foreign Relations, the Americas Society and Council of the Americas, so that the key New World Order players in New York and Washington could evaluate them. If and when they pass muster their election campaigns are generously financed by the corporate, banking and media infrastructure of the “establishment” that has the resources and means to bring them to power legally and democratically—to do the bidding of their masters and colleagues.2 Some are even invited to join elite circles and organizations such as Trilateral Commission and the Carnegie Endowment for International Peace), or one of the CRC’s working committees.

The Left Responds to the Crisis of Neoliberalism

Throughout the 1990s the dominant popular response to neoliberal globalization and associated regimes and policies was in the form of social movements that represented and advanced most effectively the struggle against what Ron Chilcote (1990) called a “plurality of resistances to inequality and oppression”. These movements placed growing pressure from below on the regime and the “political class”. However, by mid-decade, well into the left’s general retreat from class politics, a number of these movements followed Brazil’s labor movement (The PT or Workers’ party) in establishing a party apparatus to allow them to contest both national and local elections—to pursue an electoral strategy. This political development did not require or mean an abandonment of the social movement strategy of social mobilizations, etc. but it did open up a broader opportunity to participate in the electoral process, allowing the populace to participate in party politics.

Local Politics and Community Development

The mobilization of the electorate via the institutional trappings of liberal democracy provided a new impetus to the political left—the segment that opted for party politics over social mobilization as a strategy for achieving state power: influencing government policy from within rather than outside the system. However, a large swath of the Left seem to have heeded Jorge Casteñeda’s call for the Left to switch its electoral ambitions to the municipality, local politics and community development. His argument, advanced in Utopia Unarmed, was that “municipal politics should be the centre-piece of the left’s democratic agenda…because it typifies the kind of change that is viable…a stepping stone for the future” (1994: 244). Engagement in local politics, he argued –and much of the left seemed to have followed this line—would provide the basis for a consolidation of the Left after the so-called “democratic transition” from 1979 (Bolivia, Ecuador) to 1989 (Chile). In addition it would help re-articulate the civil society-local state nexus and restore legitimacy to the Left’s relationship with the popular sector (Lievesley, 2005: 8).

An example of the approach proposed by Casteñeda, and in fact widely pursued by the Left even before his book (the World Bank’s strategy in this regard was already quite advanced) had already is the PT’s experience with municipal government in Porto Alegre, the capital city of Brazil’s state of Rio Grande do Sul (1989-2004). The PT administration opened up municipal institutions with a stated commitment to accountability and transparency, as well as citizen participation in the budget planning process via the mechanism of public meetings (Orçamento Participativa).

The Porto Alegre experience with participatory budgeting was hailed by the World Bank and the International Development “community” of multilateral institutions and liberal academics as a good example of collective decision-making for the common good, a model of grassroots participatory development and politics, and it continues to serve as a guide to similar practices and experiences elsewhere (Abers, 1997). Other examples of this “participatory” approach towards local politics and community development, widely adopted by the Left in the 1990s in its retreat from class, can be found in Bolivia and Ecuador, both countries a laboratory for diverse experiments to convert the municipality into a “productive agent” (the “productive municipality”)3 and exertions by the Left to bring about social change via local politics (North and Cameron, 2003). On the left this shift from macro-politics and development (national elections versus social movements) to micro-politics and development (local politics, participatory development) was viewed as a salutary retreat from a form of analysis and politics whose time had come and gone. Within academe the dynamics of this process has been viewed in some circles as the harbinger of a “new tyranny” (Cooke and Kothari, 2001).

The World Social Forum Process: Is Another World Possible?

On January 3, 2007, Caracas, the capital city of an epicenter of social and political transformation in the region was concerted into the Mecca of the international left. Thousands of activists (100, 00 according to the organizers) arrived in Caracas from some 170 countries to participate in the sixth edition of the World Social Forum (WSF), a process initiated in Porto Alegre, Brazil, six years earlier. It was the first of a then thereafter annual event, extended to and replicated in other regional settings from India, Europe and most recently Nairobi, Kenya in the African subcontinent. In each place and in each annual event, the organizers would bring together hundreds of nongovernmental and civil organizations committed to the search for a more ethical form of globalization, a more human form of capitalism. The process brings together diverse representatives of a self-defined new left committed to the belief in the necessity and possibility of a “new world”, an alternative to globalization in its neoliberal form.

There are, of course, defined limits to this new political process: participants are invited and expected to explore diverse proposals for bringing about “another world” but to limit this search to reforms to the existing system, reforms that no matter how “radical” are expected to leave the pillars of the system intact. This liberal reform orientation to the process is ensured by explicit exclusions—any political organizations that include armed struggle or violent confrontation and class struggle in its repertoire, that are oriented towards revolutionary change.

ATTAC, a Paris-based social democratic organization is the most visible representative of this approach towards social change, but the World Social Forum from its inception morphed into and became a significant expression of what emerged as the “antiglobalization movement”. This movement had its origins in the encounter of diverse forces of resistance formed in middleclass organizations in the “global north” and mounted against the symbols of neoliberal globalization such as the World Trade Organization and the G-7/8 annual summit. A defining moment in this movement, rooted in the organizations of the urban middle class—NGOs, unions, students, etc.–in both Europe and North America, included the successful mobilization against the MAI in Seattle. This mobilization was the first of a number of serialized events scheduled to unfold at important gatherings of the representatives of global capital—Genoa, Quebec, Melbourne, Dakar….

In Latin America the World Social Forum process, is the basic form taken by the “antiglobalization movement” in the search for “another world” (the latest event in this process was hosted by Lula, taking place in Bélem towards the end of January 2009). Apart from the absence of an internal division between the advocates of moderate reform (ethical globalization) and more radical change the antiglobalization process is designed to define and maintain the outer limits of permitted change; that is, controlled dissent from the prevailing model of global capitalist development. Not anti-globalization but a more ethical form. Not anti-capitalism but a more humane form of capitalism, a more sustainable human form of development. Not anti-imperialism because imperialism is not at issue.

The New Left and the Politics of No-Power

In the shape and form of class struggle the path towards social change in the 1960s and 1970s was paved with state power. That is, the forces of resistance, at the time based in the countryside, in the organizations and movements of the landless and near landless peasants, and in the urban-based organized labor movement; and for the most part led by petit-bourgeois middle class intellectuals, were concerned with the capture of state power. In the 1990s, in a very different context—neoliberal globalization—and in the wake of the Zapatista uprising in January 1994, there emerged on the left a postmodern twist to the struggle for social change: “social change without taking state power” (Holloway, 2002).

In the discourse of Subcomandante Marcos, the Zapatismo came to symbolically—or theoretically, in the writings of Holloway and others (for example, Burbach, 1994)—represent a “new way of doing politics”: to bring about social change without resort to class struggle or the quest for state power (Holloway, 2002). However, much of the Latin American Left appeared all o ready to retreat from class politics and engage the new way of “doing politics”. Some of the Left joined the struggle for change at the level of local politics and community development–to bring about social change by building on the assets of the poor, their “social capital” (Portes, 1998, 2000; Ocampo, 2004). Another part joined the “situationists” and other militants of “radical praxis” in an intellectual engagement with the forces of social and political disenchantment in the popular barrios of unemployed workers—in Gran Buenos Aires and elsewhere (Besayag and Sztulwark. 2000; Colectivo Situaciónes, 2001, 2002). This was in the early years of the new millennium. In the specific conjuncture of economic and political crisis, a generalized rejection of the “old way” of doing politics (“que se vayan todos”), the search for redemption and relevance left a large part of the left without a political project, without a social base for their politics.

Dynamics of Electoral Politics: What’s Left of the Left

With the advent of the new millennium, it was clear that the neoliberal model even in its revamped form, had failed to deliver on its promise of economic growth and general prosperity. Instead it had deepened existing class and global divides in wealth and income, and regime after regime was pushed towards its limits of endurance by the forces of popular mobilization. In this context, the political class in each country turned to the left, opening up new opportunities for groups that had hitherto concentrated their efforts on local politics and community development. Governments of the day, many of them neoliberal client regimes of the US, fell to the forces of resistance and opposition.

Political developments in the region regarding this regime change led to a concern in the US, and widespread hopes and expectations on the Left, about a tilt to the left in national politics and what the press (Globe & Mail) has termed a “disheartening” triumph of politics over “sound economics”. A lot of this concern revolves around Hugo Chávez, who appears (to the press and U.S. policymakers) to be taking Venezuela down a decidedly anti-US, anti-imperialist and seemingly socialist path–and taking other governments in the region with him.

Chávez’s electoral victory was seen by many as the moment when a red tide began to wash over the region’s political landscape. In the summer of 2002, the Movement to Socialism (MAS) in Bolivia, led by militant coca growers’ leader Evo Morales, became the second largest party in the Congress while in December it achieved huge victories in municipal elections—in what was billed by the MAS itself as “la toma de los municipios”. The election to state power of Lula da Silva in Brazil (October 2002) wa followed by Nestor Kirchner in Argentina (May 2003), Tabaré Vasquez in Uruguay (November 2004), Evo Morales (December 2005), (December 2006) Rafael Correa in Ecuador (December 2006) and most recently Lucas Longo in Paraguay. The tide was checked in Mexico in the summer of 2006 when Lopez Obrador, presidential candidate of the PRD, fell just short of victory, and in Peru, where the nationalist Humala lost out to Alan Garcia, the once disgraced social democrat but reborn neoliberal. But it appeared to swell again with Daniel Ortega’s victory in Nicaragua—although, given his opportunism and religious rebirth, Ortega could hardly be viewed as on the Left notwithstanding his friendship with Chávez and Fidel Castro—and Rafael Correa.

Thus it appeared that Latin America had turned against the US-inspired—and dictated—neoliberal policies of structural adjustment and globalization by electing to state power a number of parties on the political left—although “moderate” or “pragmatic”. Centre-left regimes, some of which cherish their links with Cuba and relish throwing it in the face of the U.S. administration, which has shown itself to be extraordinarily ideological and non-pragmatic, now outnumber right-of-centre governments in the region. The days of the US-supported and instigated right-wing dictatorships and military rule are over, having long disappeared in the dustbins of history and replaced by a new breed of neoliberal regimes.

Latin America turns left?

These regimes in appearance (that is, as constructed in the rhetoric of public discourse) have changed or are changing economic course, ostensibly moving away from the neoliberal policies pushed by the US. This was the case in Argentina, for example where the Kirchner administration was compelled by the most serious economic and political crisis in its history to confront the IMF and the World Bank, and the US, by halting payments on the country’s external debt, redirecting import revenues towards productive and social investments, including short-term work projects demanded by the mass of unemployed workers that at the time constituted over 25% of the laborforce and who had taken to the streets, picketing highways in protest. The result: some three years later is an annual growth rate of 8%, the highest in the region.

Another example of apparent regime change was in Brazil, where and when in October 2002 the electorate after his third attempt voted Ignacio [Lula] da Silva, leader of the PT, into power, re-electing him in 2006 to a second term in office. The first President on the “left” voted into power since Allende in 1970, Lula is nevertheless (and for good reason, it turns out) very well received by Wall Street, if not Washington, which tends to view him as a thorn in the U.S. side. Indeed Lula played a major role in defeating the White House plan for a hemispheric free trade zone, and continues to annoy the U.S. with his support of Chávez-Morales-Correa axis in Latin American politics. In this context, the intellectual Left associated with the antiglobalization movement choose to see Lula as an opponent of neoliberal globalization. In fact, Lula, on behalf of Brazil’s agribusiness and other capitalist producers simply has been playing and continues to play hardball in negotiations over access to the U.S. market.

Elections of centre-left governments followed in Uruguay (2004), Chile (2005), Ecuador (2006) where the electorate was polarized between a business magnate, Alvaro Noboa, the richest man in the country and a committed neoliberal ideologue; and Rafael Correa, head of a centre-left coalition that appears to be taking Ecuador down the same path as Evo Morales is taking Bolivia, particularly in regard to a constituent assembly that might well, or is expected to, change the economic and social system as well as the correlation of class forces in the country’s politics. In this regard, elements of the political left in Ecuador, especially those associated with the “Coordinadora de Movimientos Sociales” (CMS), see a political opportunity to build a “radical bloc” on the basis of combined action “from above” (the government) and “from below” (the indigenous and popular movement). Whether this will happen (see Saltos, 2006)4 remains to be seen. For one thing, it hinges on the capacity of the popular movement for active mobilization – to pressure the Correa government from below towards the left. On this the historic record is fairly clear. As observed by Pedro Stedile, leader of the MST, “without active mobilization the government gives nothing”.

With the election of Rafael Correa over Alvaro Noboa the popular and indigenous movement in Ecuador at least placed on the agenda of government action issues such as national sovereignty, nationalization of the country’s natural resources, agrarian reform, indigenous rights, subordination of payment on the external debt to social programs, renegotiation of oil contracts will the multinationals, the ending of the military bases in Manta, and Latin American (vs. continental) integration. Whether the government will act on these issues remains to be seen.

The conflict that ensued over the Constituent Assembly (CA) in Ecuador and Bolivia, where the CA was finally approved) is symptomatic of the profound legitimation crisis in the system of class domination in these and other countries (Saltos, 2006). Earlier and other forms of hegemony, such as “globalization” and the trappings of representative “democracy”, have lost their hold over people, having been totally undermined by the all too tangible and visible signs of the negative effects of neoliberal policies. The reign of Washington in the region appears to be in serious decline. Nor can Washington, in its efforts to preserve the status quo or the status quo ante, revert to the use of force—to bring back the Armed Forces to restore order. Its only recourse is to engage “civil society” in the project of “good governance”—to restore political order by means of a broad social consensus that reaches well beyond the state and the political class (Blair, 1997; OECD, 1997; UNDP, 1996; World Bank, 1994b).

What we saw in Quito and La Paz in regard to the Constituent Assembly went beyond a conflict between two branches of government. At issue was that those who elected Correa and Morales had come to the point of refusing to be subordinated to a state controlled by the dominant class and servile to Washington and the interests of global capital. On achieving political representation with the election of Morales and Correa, and Chávez for that matter, the forces in the popular movement were all too aware that the legislature was dominated by the “oligarchy” (the ruling class is understood in Bolivia and Ecuador). In this situation, Morales and Correa were compelled to construct a multi-class alliance and mobilize the forces of resistance to class rule and the neoliberal agenda of previous governments under the post-Washington Consensus. The result is the construction of a multi-ethnic or pluri-national state oriented towards what the Vice-President of Bolivia, Alvaro Garcia, conceives of as an Andean form of capitalism, and a new anti-american axis of regional politics and trade.

These and other such political developments in Bolivia and Ecuador are illustrative of what appears to be a regional trend. For example, in neighboring Colombia in October 2003 the voters elected a former union leader Luis Garzón as mayor of Bogotá. The election marked a swing to the left in Colombia’s second most important elective office, a clear challenge to the pro-US, scandal-ridden right-wing government of Alvaro Uribe. If we take these and other such developments together, especially in Venezuela, Bolivia and Ecuador, there does indeed seem to be a leftward swing in the political winds of change, leading …to declare that democratic elections are not enough: governments in the region also have to “govern democratically”, i.e. place no constrictions on the forces of opposition to the new agenda in national and regional politics.

Whither Socialism in a Sea of Crisis and Neoliberal Decline?

A serious discussion of the prospects for socialism in Latin America today must take into account world economic conditions in the current conjuncture, the state of US-Latin American relations relative to the project of world domination and imperialism, the specific impact on Latin American countries of these conditions and relations, the conditions deriving from the correlation of class forces within these countries, and the class nature and agency of the state relative to these forces.

World Economic Conditions and Their Impact on Latin America

Latin America’s “restructured” capitalist economy emerged from the financial crisis of the 1990s and the recession of the early years of the new millennium with its axis of growth anchored in the primary sector of agro-mineral exports (Cypher, 2007; Ocampo, 2007). From 2003 to 2008 all Latin American economies, regardless of their ideological orientation or political complexion, based their economic growth strategy on the “re-primarization” of their export production, to take advantage thereby of the expanding markets for oil, energy and natural resources and the general increase in the price of primary commodities on the world market. The driving force of capitalist development in this period was agribusiness and mineral exports, export-oriented production of primary commodities leading to an increased dependence on diversified overseas markets and a change in the correlation of class forces, strengthening the right and, notwithstanding a generalized tilt to the Left at the level of the state, a weakening of the Left. Ironically, the primarization of exports led to the revival and strengthening of neoliberalism via the reconfiguration of state policy to favor agro-mineral exporters and accommodate the poorest section through populist clientelistic “poverty programs”. In the context of a primary commodities boom and the emergence of a range of democratically elected centre-left regimes, trade union leaders were coopted and the social movements that had mobilized the forces of resistance to neoliberalism in the 1990s were forced to beat a retreat from the class struggle (Petras and Veltmeyer, 2009).

The link between U.S. finance capital, the growth of industry and the domestic market in Asia, and the primary commodities boom, was responsible for the period of high growth in Latin America from 2003 to 2008, when the boom went bust and most economies in the region succumbed to a financial crisis of global proportions and a system-wide deep recession that threatened to push the U.S. economy, at the centre of the gravitational force of this crisis, towards collapse. With the U.S. empire’s “over-extension” and the exceedingly high costs of prosecuting imperialist war in Iraq and maintaining its enormous military apparatus—military expenditures on the Iraq war alone increasing by millions each minute (as of February 17, 2009 US$ 597.7 billion) and likely to cost well over a trillion dollars before it is over—the capacity of the U.S. to weather the storm of financial crisis and a deepening recession has been seriously diminished. Given the absorption of the U.S. state in the Iraq war, governments in Latin America in the latest phase of capitalist development managed to achieve a measure of “independence” and “relative autonomy” in their relations with the United States. And this has given leaders like Hugo Chavez a free hand in his efforts to push Venezuela in a socialist direction.
Impact of World Recession and U.S. Imperial Revivalism in Latin America

Latin America is feeling the full brunt of the world recession. Every country in the region, without exception, is experiencing a major decline in trade, domestic production, investment, employment, state revenues and income. The projected growth of Latin America’s GDP in 2009 has declined from 3.6% in September 2008 to 1.4% in December 2008 (Financial Times, January 9, 2009). More recent projections estimate Latin America’s GDP per capita as falling to minus two percent (-2%).5 As a result state spending on social services will undoubtedly be reduced. State credit and subsidies to big banks and businesses will increase; unemployment will expand, especially in the agro-mineral and transport (automobile) export sectors. Public employees will be let go and experience a sharp decline in salaries. Latin America’s balance of payments will deteriorate as the inflow of billions of dollars and euros in remittances from overseas workers, a major source of “international financial resource” for many countries in the region, declines. Foreign speculators are already withdrawing tens of billions of investment dollars to cover their losses in the U.S. and Europe. A process of foreign disinvestment has replaced the substantial inflow of “foreign investment” in recent years, eliminating a major source of financing for major “joint ventures”. The precipitous decline in commodity prices in 2008, reflecting an abrupt drop in world demand, has sharply reduced government revenues dependent on export taxes. Foreign reserves in Latin America can only cushion the fall in export revenues for a limited time and extent.

The recession also means that the economic and social structure, the entire socioeconomic class configuration on which Latin America’s growth dynamic in recent years (2003-2008) was based, is headed for a major transformation. The entire spectrum of political parties linked to the primary commodity export model and that dominate the electoral process will be adversely affected. The trade unions and social movements oriented toward an improvement in their socioeconomic conditions and wages, social reforms and increased expenditures of fiscal resources and social spending within the primary commodity export model will be forced to take direct action or lose influence and relevance.

The initial response of the left of center regimes that came to power in the context of a primary commodities boom and neoliberalism in its demise has largely focused on: (i) financial support for the banking sector (Lula) and lower taxes for the agro-mineral export elite (Kirchner/Lula); (ii) cheap credit for consumers to stimulate domestic consumption (Kirchner); and (iii) temporary unemployment benefits for workers laid off from closed small and medium size mines (Morales). The response of the Latin American regimes to date (up to the beginning of 2009) could be characterized as delusional, the belief that their economies would not be affected. This response was followed by an attempt to minimize the crisis, with the claim that the recession would not be severe and that most countries would experience a rapid recovery in “late 2009”. It is argued in this context that the existing foreign reserves would protect their countries from a more severe decline.

According to the IMF, 40% of Latin America’s financial wealth ($2.200 billion dollars) was lost in 2008 because of the decline of the stock market and other asset markets and currency depreciation. This decline is estimated to reduce domestic spending by 5% in 2009. The terms of trade for Latin America have deteriorated sharply as commodity prices have fallen sharply, making imports more expensive and raising the specter of growing trade deficits (Financial Times, January 9, 2009, p. 7).

The impact of these “developments” can be traced out not only in regime politics but on the class structure and the correlation of forces associated with this structure. Thus, the fall in the demand and price of primary commodities is resulting in a sharp decline in income, the power and the solvency of the agromineral exporters that dominated state policy in recent years. Much of their expansion during the “boom years” was debt-financed, in some cases with dollar and euro-denominated loans (Financial Times, January 9, 2009, p.7). But many of the highly indebted “export elite” now face bankruptcy and are pressuring their governments to relieve them of immediate debt obligations. And in the course of the recession/depression there will be a further concentration and centralization of agro-mineral capital as many medium and large miners and capitalist farmers are foreclosed or forced to sell. The relative decline of the contribution of the agro-mineral sector to the GDP and state revenues means they will have less leverage over the government and economic decision making. The collapse of their overseas markets and their dependence on the state to subsidize their debts and intervene in the market means that the “neoliberal” free market ideology is dead – for the duration of the recession. Weakened economically, the agro-mineral elite are turning to the state as its instrument of survival, recovery and refinancing.

In this new context, the “new statism” in formation has absolutely nothing “progressive” about it, let alone any claim to “socialism”. The state under the influence of the primary sector elites assumes the primary task of imposing the entire burden of the recession on the backs of the workers, employees, small farmers and business operators. In other words, the state is charged with indebting the mass of people in order to subsidize the debts of the elite export sector and provide zero cost loans to capital. Massive cuts in social services (health, pensions and education), and salaries will be backed by state repression. In the final analysis the increased role of the state will be primarily directed to financing the debt and subsidizing loans to the ruling class.

The State of U.S. Relations in Latin America in the Current Conjuncture

If the U.S. suffered a severe loss of influence in the first half decade of the early 2000s due to mass mobilization and popular movements ousting its clients, during the subsequent four years the U.S. retained political influence among the most reactionary regimes in the region, especially Mexico, Peru and Colombia. Despite the decline of mass mobilizations after 2004, the after-effects continued to ripple through regional relations and blocked efforts by Washington to return to relations that had existed during the “golden decade” of pillage (1990-1999).

While internal political dynamics put the brakes on any return to the 1990s, several other factors undermined Washington’s assertion of full scale dominance: (i) The U.S. turned all of its attention, resources and military efforts toward multiple wars in South Asia (Afghanistan), Iraq and Somalia and to war preparations against Iran while backing Israel”s aggression against Palestine, Lebanon and Syria. Because of the prolonged and losing character of these wars, Washington remained relatively immobilized as far as South America was concerned. Equally important Washington’s declaration of a intensified worldwide counter-insurgency offensive (the “War on Terror”) diverted resources toward other regions. With the U.S. empire builders occupied elsewhere, Latin America was relatively free to pursue a more autonomous political agenda, including greater regional integrations, to the point of rejecting the U.S. proposed “Free Trade Agreement.”

In this new context the spectrum of international relations between the U.S. and Latin America runs the gamut from “independence” (Venezuela), “relative autonomy” within competitive capitalism (Brazil), relative autonomy and critical opposition (Bolivia) to selective collaboration (Chile) and deep collaboration within a neoliberal framework (Mexico, Peru and Colombia). Venezuela constructed its leadership of the alternative nationalist pole in Latin America, in reaction to U.S. intervention. Chávez has sustained its independent position through nationalist social welfare measures, which has garnered mass support. A policy of “independence” was made possible, and financed as it were, by the commodity boom and the jump in oil prices. The “dialectic” of the US-Venezuelan conflict evolved in the context of U.S. economic weakness and over-extended warfare in the Middle East on the one hand and economic prosperity in Venezuela, which allowed it to gain regional and even international allies, on the other.

The autonomous-competitive tendency in Latin America is embodied by Brazil. Aided by the expansive agro-mineral export boom, Brazil projected itself on the world trade and investment scene, while deepening its economic expansion among its smaller and weaker neighbors like Paraguay, Bolivia, Uruguay and Ecuador. Brazil, like the other BRIC countries, which include Russia, India and China, forms part of newly emerging expansionist power center intent on competing and sharing with the U.S. control over the region’s abundant resources and the smaller countries in Latin America. Brazil under Lula shares Washington’s economic imperial vision (backed by its armed forces) even as it competes with the U.S. for supremacy. In this context, Brazil seeks extra-regional imperial allies in Europe (mainly France) and it uses the “regional” forums and bilateral agreements with the nationalist regimes to “balance” its powerful economic links with Euro-US financial and multi-national capital.

At the opposite end of the spectrum are the “imperial collaborator” regimes of Colombia, Mexico and Peru, which remain steadfast in their pro-imperial loyalties. They are Washington’s reliable supporters against the nationalist Chávez government and staunch backers of bilateral free trade agreements with the U.S.

The other countries in the region, including Chile and Argentina, continue to oscillate and improvise their policies in relation to and among these three blocs. But what should be absolutely clear is that all the countries, whether radical nationalist or imperial collaborators operate within a capitalist economy and class system in which market relations and the capitalist classes are still the central players.

Socialism and the Latin American State in the Current Conjuncture of the Class Struggle

Control of the state is an essential condition for establishing socialism. But it is evident that a more critical factor is the composition of the social forces that have managed to achieve state power by one means or the other. From 2003 to 2008, in the context of a primary commodities boom and a serious decline in the mobilizing power of neoliberal globalization, one state after the other in Latin America has tilted to the Left in establishing a nominally anti-neoliberal regime. However, the only regime in the region with a socialist project is that of Chávez, who has used the additional fiscal resources derived from the sale of oil and the primary commodities boom—specifically the growing world demand for oil – to turn the state in a socialist direction under the ideological banner of the “Bolivarian Revolution”. All of the other center-left regimes formed in this conjuncture for one reason or the other, and regardless of their national sovereignty concerns vis-à-vis U.S. imperialism, have retained an essential commitment to neoliberalism, albeit in a more socially inclusive and pragmatic form as prescribed by the post-Washington Consensus (Ocampo, 1998). A surprising feature of these centre-left regimes is that not one of them—again Venezuela (and of course Cuba) the exception—use their additional fiscal revenues derived from the primary commodities boom to reorient the state in a socialist direction, i.e. to share the wealth or, at least, in the absence of any attempt to flatten or eliminate the class structure to redirect fiscal revenues toward programs designed to improve the lot of the subordinate classes and the poor. Again, Chávez” is the exception in the use of windfall fiscal revenues derived from the primary commodities boom (oil revenues in the case of Venezuela) to improve conditions for the working class and the popular classes. The statistics regarding this “development” (see Weisbrot, 2009) are startling. Over the entire decade of Chávez rule, social spending per capita has tripled and the number of social security beneficiaries more than doubled; the percentage of households in poverty has been reduced by 39%, and extreme poverty by more than half. During the primary commodities boom (2003-2008), the poverty rate in Venezuela was cut by more than half, from 54% of households in the first half of 2003 to 26% at the end of 2008. Extreme poverty fell even more (by 72%). And these poverty rates measure only cash income, and do not take into account increased access to health care or education. However, in the other countries in the region governed by a centre-of-left regimes, not one of which is oriented towards socialism, conditions were and are very different. In a few cases (Chile, Brazil) the rate of extreme poverty was cut, but in all cases, despite recourse to an anti-poverty program following the PWC, government spending was relatively regressive. In only one case (Venezuela) is per capita PSE greater today than it was in 2000 in the vortex of a widespread crisis and a zero growth (Clements, Faircloth and Verhoeven, 2007). In many cases social programs and government spending was allocated so as to distribute more benefits to the richest stratum of households and the well to do than to the working class and the poor.6 Even in the case of Bolivia, where the Morales-Garcia Lineres regime has a clearly defined anti-neoliberal and anti-US imperialist orientation, not only has the government not expanded social program expenditures relative to investments and expenditures designed to alleviate the concerns of foreign investors but the richest stratum of households benefited more from fiscal expenditures on social programs than the poorest (Petras and Veltmeyer, 2009). All of the centre-left regimes that have came to power in this millennium, especially Brazil and Chile, elaborated anti-poverty programs with reference to the PWC. In the case of Bolivia fiscal expenditures on social programs defined by the “new social policy” of the post-Washington Consensus have been supplemented by a populist program of bonuses and handouts, and popular programs in health and education, but these have been almost entirely financed by Cuba and Venezuela. As for the fiscal resources derived from Bolivia’s participation in the primary commodities boom they have been allocated with a greater sensitivity to the concerns of foreign investors than the demands of the working class and the indigenous poor.

In this situation what is needed is not only access to state power, which the social movements managed to ostensibly achieve via the election of Evo Morales, but an ideological commitment of the government to socialism – to turn the state in a socialist direction. In this connection the Chávez regime is unique among Latin American heads of state. Even so the road ahead for the Bolivarian revolution in bringing about socialism of the twenty-first century promises to be long and “rocky”, as in the case of Cuba littered with numerous pitfalls but unlike Cuba with the likely growth in the forces of opposition.

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President Barack Obama plans to announce in next year’s State of the Union address that he wants to focus extensively on cutting the federal deficit in 2010 – and will downplay other new domestic spending beyond jobs programs, according to top aides involved in the planning.

The president’s plan, which the officials said was under discussion before this month’s Democratic election setbacks, represents both a practical and a political calculation by this White House.¹

Er, now who exactly is telling Obama that raising taxes or cutting spending in the middle of a severe economic contraction is a good idea?

This clip from Politico tells us more about the people surrounding Obama, than it tells us about Obama himself. Clearly, his chief lieutenants are just as committed to savaging Medicare, Medicaid and Social Security as their GOP counterparts. This is obvious by the way they’ve handled the fiscal stimulus. Where are the jobs programs, the boost to Green Technology, the massive infrastructure rebuild?

Nowhere. Because the industry-reps and bank lobbyists who fill out the Obama roster adhere to the same pro-business credo as the members of Team Bush, that is, that all public assets and resources should be strip-mined from their rightful owners and transferred to the robber barons at the top of the economic food-chain. There’s no way that Geithner, Summers and the rest of the Wall Street insiders would ever dream of rebuilding the public safety net they’ve been trying to destroy for the last decade or more. That’s not in their interests at all.

The administration’s announcement is tantamount to a stealth-attack on Social Security in the name of “fiscal responsibility”. It’s another public relations ploy intended to enrich the parasite class by stealing crusts of bread from penniless retirees. Surely, there must have been a quid pro quo between the two-year Illinois senator and his political backers about how they planned to deal with “entitlements problem”. In other words, Obama must have given the green light to the party bosses who wanted to purloin the last few farthings in the Social Security trust fund.

So, how will Obama’a attack on Social Security etc. effect the so-called “jobless recovery”?

For one thing, it makes a double-dip recession unavoidable. After all, (according to Goldman Sachs) last quarter’s surge in GDP to 3.5% was entirely a result of government stimulus. Take away the stimulus, and the economy slips right back into to recession. Is that what Obama wants, another stretch of negative growth, plunging economic activity, lower demand and higher unemployment? Why? To satisfy the GOP “deficit hawks”?

All the hand-wringing over deficits is just more gibberish from the same people who brought us the Iraq War. The deficits are about as big a problem as the fictional WMD, maybe less. Here’s a clip from an article by Marshall Auerback which sheds a bit of light on the deficit fiasco:

Large deficits are not the problem…. Let’s all take a deep breath here: Whilst the dollar index has fallen some 15% from the high sustained earlier this year, it is still above the lows sustained at the height of the credit crisis reached about a year ago. Secondly, there seems to be a fear that the current fall in the dollar could well engender inflation, and create a panicked response from policy makers where the Fed actually does raise rates and the Treasury begins to reduce government spending. Given high prevailing debt levels and the weak state of the consumer’s personal balance sheet, this would be an unmitigated disaster.

It is true that excessive government deficit spending can be inflationary, and could therefore cause some impact on exchange value of dollar. But this can’t be viewed in some sort of vacuum. The size of the deficit is irrelevant in itself. There is no meaning in the terms ‘large deficit’ or ’small deficit.’ You have to relate them to the extent of labor and capital underutilization, which is a human measure of the aggregate demand deficiency. The fact that labor underutilization is now in excess of 16 per cent in the US (combined unemployment, underemployment and hidden unemployment) and capacity utilization is in the 60-65 per cent range rather than 90 per cent range sends one very clear message — the deficit is not large enough.

So the correct policy response is to spend until we get to full employment. That is the only consequence of excessive deficits — insolvency is not possible. Your social security check will never bounce in a country issuing debt in its own freely floating non-convertible currency.²

The best way to restore economic well-being is to increase the fiscal stimulus, expand the deficits and put the country back to work. There’s no chance of inflation until unemployment drops to roughly 5%, which could be a decade away. And don’t believe the doomsayers about the dollar either. It’s a bunch of malarkey. Check this out:

As I have shown in two recent papers, even very large currency depreciations in developed economies have no effect on inflation unless they are caused by policies that attempt to hold an economy’s unemployment rate below its equilibrium level. With US unemployment currently at 10 percent, there is no chance that inflation will rise in the near term. Whether inflation rises in the longer run will depend on whether US monetary and fiscal policy stimulus is withdrawn appropriately as the economy recovers (and tighter macroeconomic policies would tend to support the dollar).³

The dollar is dropping because the Fed is doing everything in its power to push it downwards. “It’s the policy, stupid.” A falling dollar increases exports and speeds up recovery. But once the Fed stops printing money via quantitative easing, (which is set for the end of 1st Q 2010) watch out. The dollar will rebound. Here’s an excerpt from an article in the Economist:

This dollar declinism is overblown. It exaggerates the scale of the slide and misunderstands its cause. Much of the recent weakness simply reverses the earlier safe-haven flight to dollars, a sign of investors’ optimism about riskier assets rather than their fears about America’s currency. On a trade-weighted basis the dollar today is close to where it was before Lehman failed. Yields on Treasuries have not risen and spreads on riskier dollar assets continue to shrink. If investors were growing leerier of dollars, the opposite should have occurred.⁴

When the financial crisis broke out two years ago, investors around the world flocked to the dollar for safety. Now that the crisis has (somewhat) abated, those same investors are less risk-adverse, which means they are putting that money in other assets (stocks, bonds, commodities). Naturally, that is weakening the dollar, but it is not a sign of impending collapse. And while it is true that the greenback faces stiff headwinds in the long-term–due to the US’s deteriorating fiscal situation–the dollar is in no immediate danger of losing its position as the world’s reserve currency. That will take a decade or more.

The growing fear about the dollar and the deficits is understandable given the amount of money that is being hurled at the financial system. But that shouldn’t dissuade reasonable people from doing what needs to be done. The dollar and the deficits are NOT the issue. The issue is jobs, jobs, jobs. Here’s an excerpt from an article by Henry Liu which sums it up perfectly:

An economy that has collapsed under the burden of excessive debt cannot recover until such debt has been extinguished. And debt can only be extinguished by wealth creation, not by creating more debt with easy credit. And wealth can only be created by employment and not by financial manipulation.⁵

Bingo. The Fed is bailing out unproductive speculators, while tossing the “creators of the nation’s wealth,” the workers, a few table scraps. That’s why we need a different policy which focuses on jobs programs, fiscal stimulus, and more deficit spending so households can rebuild their tattered balance sheets and the “engine of global growth” (the US middle class) can be re-energized. We don’t need more belt-tightening, as Obama seems to think. That is precisely the wrong approach.

Henry Liu again: “Thus we have financial profit inflation with price deflation in a shrinking economy. What we will have going forward is not Weimar Republic type price hyperinflation, but a financial profit inflation in which zombie financial institutions turning nominally profitable in a collapsing economy.”

Right again. The soaring stocks and commodities prices prove that central bank policies can create asset bubbles even during periods of severe deflation. (like now) Fed chair Ben Bernanke’s policies have had no material effect on households, consumers or workers. This is why credit contraction is in its 8th straight month and jobless claims continue to mushroom.

Bernanke–a disciple of Milton Friedman–has taken the monetarist “trickle down” approach throughout, which is why stocks are surging even though the broader economy is still flat on its back. The Fed chief is doing what he’s always done, stimulate demand by creating more bubbles. Only this time it’s not working because liquidity is unable to flow through the clogged credit system. The administration needs to bypass the credit system altogether and provide direct relief via state aid, tax cuts and jobs programs to jump-start the economy and reduce the widening output gap. What’s needed is more stimulus and an aggressive reform agenda aimed at putting the country back to work. Here’s Paul Krugman:

“It’s truly amazing, and depressing, how completely deficit-phobia has swept the field in Washington. The economy remains in deeply dire straits… Yet the respectable thing, all of a sudden, is to claim that we can’t possibly afford to spend any more money on job creation.

History says differently… Other advanced countries have been substantially deeper in debt without either defaulting or having runaway inflation…

I’d be a little more forgiving of the nonsense if all the people screaming about the deficit were sincere. And some are. But many, if not most, are perfectly happy to incur huge unfunded liabilities for the wars they want to fight, and/or to eliminate inheritance taxes for the heirs of multimillionaires. It’s only deficits incurred to help working Americans that get them all moralistic.

The point is that the economy desperately needs more help — and yes, we can afford to provide it.”⁶

Yes, we can afford it. We just need to shrug off the deficit hawks and the dollar demagogues and provide the necessary resources to get the job done. It’s that simple.

Here’s more from Marshall Auerback:

The Administration … must free themselves from the discredited dogmas of neo-liberalism and channel the spirit of FDR’s bold experimentation. We need less deficit terrorism. Fiscal policy must be much more oriented to personal balance sheets, not bank balance sheets. We need to turn around the private sector and begin to produce more tax revenue, so that the large deficits would be short-lived.

If we continue down the current path, we slow recovery and court large budget deficits for many years to come. Far better to spend now to create jobs and get the private sector growing again.⁷

Economists know what it will take to put the country back to work; debt relief, loan modifications, wage growth and full employment. But it will require a fundamental shift in ideology; a rejection of neoliberalism and a strong commitment to rebuild the middle class. Obama can either help in that process or follow the beggarly path to early retirement. So far, there’s no reason to be hopeful.

1. politico.com.
2. Marshall Auerback, “The US Dollar – Don’t just do something, stand there!” newdeal2.0.
3. Joseph Gagnon, “Who’s Afraid of a Falling Dollar,” Baseline Scenario.
4. ”The Diminishing Dollar,” The Economist.
5. Federal Reserve Power Unsupported by Credibility; part 1 “No Exit” Henry Liu.
6. Paul Krugman, “Fiscal Perspective,” New York Times.
7. Marshall Auerback, “New Agenda for America: How to Start Anew,” newdeal 2.0.

Taxpayer bailouts saved Wall Street from choking on its own greed. Now, as the Wall Street Journal reports, “Major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year — a record high.”

$140 billion is more than the combined budgets of the U.S. Departments of Commerce, Education, Energy, Housing and Urban Development, the National Science Foundation and the Environmental Protection Agency.

Typical workers, meanwhile, make less today adjusting for inflation than they did in the 1970s. Wall Street rewarded CEOs who cut employee wages and benefits and offshored manufacturing, services, and research and development; feasted on Bush’s tax cuts; turned mortgages into loan sharking; and vacuumed up home equity, college funds, retirement funds and other private and public investments into their rigged casino.

Goldman Sachs, for example, “peddled billions of dollars in shaky securities tied to subprime mortgages on unsuspecting pension funds, insurance companies and other investors when it concluded that the housing bubble would burst,” McClatchy reports in a new investigative series.

The Great Depression gave way to the New Deal. The Great Recession has become the Great Ripoff.

The TARP inspector general’s latest report to Congress says, “The firms that were ‘too big to fail’ … are in many cases bigger still, many as a result of Government-supported and -sponsored mergers and acquisitions; the inherently conflicted rating agencies that failed to warn of the risks leading up to the financial crisis are still just as conflicted; and the recent rebound in big bank stock prices risks removing the urgency of dealing with the system’s fundamental problems.”

Enabled by the Bush and Obama administrations, the megabanks are lending less and gambling more — using taxpayer money to pay bonuses, float a new stock market bubble and make even riskier bets.

The U.S. Treasury and Federal Reserve have become Wall Street’s ATMs, while unemployment, foreclosures and homelessness rise, states slash public services, and small businesses are starved of credit.

Outside the TARP, trillions of dollars are flowing to the banksters in the form of near-zero interest loans, bond guarantees and extreme leverage for toxic assets. You can follow the money at www.nomiprins.com. Nomi Prins, a former managing director at Goldman Sachs, is author of It Takes a Pillage.

The megabanks are not too big to fail. They’re too big and irresponsible to exist.

Just months after taking office in 1933, President Roosevelt signed into law the Glass-Steagall Act, which separated the commercial banking of savings, checking and loans from investment banks doing underwriting and speculative trading. The former got depositor insurance, not the latter.

Glass-Steagall lasted until Citigroup and other power players killed it in 1999 through the Financial Services Modernization Act, taking us back to the pre-New Deal casino economy on steroids. Now former Citigroup CEO John Reed has joined the growing call to split commercial banking and investment.

In 2000, Congress passed the Commodity Futures Modernization Act, ignoring the warnings of Commodity Futures Trading Commission head Brooksley Born who said that unregulated trading in derivatives could “threaten our regulated markets or, indeed, our economy.”

By 2002, the four largest bank holding companies — Bank of America, JP Morgan Chase, Wells Fargo and Citigroup — had 27 percent of FDIC-insured bank assets. Now, reports the Economic Policy Institute, they have nearly half. They overlap with the biggest derivatives dealers — JP Morgan, Goldman Sachs, Bank of America, Morgan Stanley and Citigroup.

The government heavily subsidizes the megabanks, but it’s the small banks that provide higher savings interest, lower fees, lower loan and credit card rates, and do much of the lending to small business, who in turn create most new jobs.

Behind their Main Street rhetoric, Congress and the Obama administration have so far been the change Wall Street can believe in. The administration and Federal Reserve are loaded with revolving door Wall Streeters and their proteges. Campaign donors and lobbyists are working Congress to minimize and distort reform.

Make your voices heard. We need to enact tough regulations and bust the banks who busted our economy — before they do it again.

Laird begins each section with an anecdotal tale about some aspect of capitalism’s globalization process and those it affects. From the big box shoppers in North America and Europe to the manufacturing centers of China and from the massive ports of Los Angeles to the homeless individual displaced by the corporate race to the bottom, the narrative describes the nature of these phenomena. The reader is introduced to the health problems suffered by those near the factories producing cheap goods and the increase in the incidence of asthma in the ports cities of Los Angeles county. All of this is backed up with statistics and reportage that proves over and over again that the situation Laird describes is not isolated, but the norm. The economic fallout is presented as well. Laird is spot on in his description of the collusion between capitalist and government to lower wages, purchase materials on the cheap, create an economy based on debt and the transfer of debt and ignore the consequences. He describes how that collusion puts people out of work, moving the responsibility for their welfare onto the taxpayer while the government simultaneously undoes whatever safety nets designed precisely for the purpose of helping capitalism’s castoffs. Although he never comes out and says it directly, Laird’s book provides the reader with clear and familiar examples of the shortcomings of monopoly capitalism. He describes a paradox where most national economies depend on low-cost consumerism at the exact moment that such consumerism is stumbling. Why? Because it is dependent on unsustainable factors like cheap labor, cheap transport, trade imbalances, consumer debt and cheap oil.

In addition, he describes how the very construction of the discount marketplace virtually ensures its own destruction. After all, he writes, prices can only go so low before there is no longer any profit in their selling. More importantly, as regards the current economic situation is the fact of energy resources and their consumption. In a chapter titled “All is Plastic” Laird breaks down the essential link between the price and availability of fossil fuels and the price and availability of bargain goods. From the plastic most of the goods are made from to the cheap fuel used to transport them around the globe, cheap and available hydrocarbons are essential. This means that eventually the consumer will have to accept higher prices to compensate for fuel costs or the corporation will have to decrease its rate of profit even further–something difficult to accomplish since lower rates of profits require more sales to compensate. Laird suggests that this explains why Wal-Mart and other major discounters are looking for new customers in Asia and looking to move some of their manufacturing operations closer to the source of fuel. When one considers this latter fact, the claims that the wars and occupations of Iraq and Afghanistan are about oil and natural gas don’t seem far fetched at all. After all, if those military exercises succeed in the way Washington wants them to, then the way will be open for anything Wall Street wants in that region.

Laird’s book is a fine piece of reportage on a world where the economy’s collateral damage includes oil spills and the poisoning of China’s (and other developing nations) working poor; the low wages and illegal labor practices of Wal-Mart leading to the ultimate collapse of a system based on minimizing costs, high volume sales and low profit margins; and a world where debt is the cornerstone of the economy. It is, to paraphrase Laird, a system that represents capitalism in its ultimate creative and destructive capacity. Most likely, it is also our future.

Greed has certainly been good for executives and directors of Canada’s largest media conglomerate who have been looking after themselves while ordinary workers get screwed as the company restructures.

When Canwest filed for court protection against creditors for the TV portion of the company on Oct. 6, 2009, dozens of recently laid-off employees learned they would lose promised severance pay. For Pat Vanderburg, who has worked for CHBC TV in Kelowna, B.C. for the past 23 years, this will amount to a loss of over $95,000.

About 80 non-union retirees will lose promised Canwest-paid medical, dental and life insurance benefits. In addition, 120 former employees are facing reduced pensions.

Current shareholders, whose stock was worth $20 a few years ago (25 cents when trading was halted Oct. 6), will receive just 2.3 per cent of the new company when it emerges from the Companies’ Creditors Arrangement Act [CCAA] process.

Hundreds of suppliers, including Twentieth Century Fox (owed $8,524,006.05), Maple Leaf Sports & Entertainment ($485,803.70), CBC ($35,809.46), Mark Steyn Enterprises (US) Inc., ($428.04), Toronto Star ($95,627.64), Van Press ($55,877.77), Calgary Flames Foundation ($42,465.32), Adbusters Media Foundation ($9,060) and Pete’s Pest Control in Saskatoon ($54.60) will go into a line-up of unsecured creditors and receive a few cents on the dollar at best.

But three directors, four top executives and 13 other senior members of Canwest management will share $9.8 million in Key Employee Retention Plan (KERP) bonuses, in addition to their already substantial salaries, simply to keep working.

Of course this defies common sense, which tells all but those soaked in “business logic” that he who destroys a business should not be rewarded for it.

But the bonuses are but one manifestation of the ways in which the Canwest rich get richer through the power our economic and legal systems offer a corporate aristocracy. In addition to the bonuses:

• Certain “current and former management employees” who were participants in the Canwest Global Communication Corp. and Related Companies Retirement Compensation Arrangement Plan were paid out, on Sept. 4, 2009, the approximately $47 million promised to them. (Part of the payment will be made later, after a tax refund from Revenue Canada.)
• Certain unnamed Canwest senior executives will continue to receive their current benefits until at least one year after the company emerges from CCAA and then retirement benefits for life. (The cost per year of these benefits is blacked out on documents.)
• Canwest directors will be protected against any financial liability, up to $20 million. This protection receives priority over almost every other debt the company owes.

Incredibly, when the newspaper side of the business also enters CCAA, more such examples of Canwest executives helping themselves to the last tasty remnants of a corporate carcass will likely be revealed.

Those with the power to look after themselves have done so and it is all deemed perfectly legal. In fact, the “insolvency system” seems designed to allow a select few to have one more big slurp from the bowl of gravy, along with the lawyers and other bankruptcy specialists. How else to explain the KERPs that are an ordinary part of the insolvency process in Canada?

Of course, would you expect anything different from an economic system that proudly trumpets: “Greed is good!” Or from a legal system designed, shaped and paid for by those with the most wealth to protect?

In fact, greed seems to be the one constant as corporate empires are built and then destroyed.

The problem is that the logic of greed means they’ll stop only when nothing is left. If we don’t soon rein in the greedy, they’ll take everything: Our wealth, our health, even our planet.

It’s at moments like this, while light is shone on the unfairness of the system and its excesses and absurdities, that we need to consider our core principles.

Perhaps need should replace greed as the foundation of our economy. Perhaps equity and one-person-one-vote should replace wealth and one-dollar-one-vote as our way of governing the essential institutions that we call corporations. Perhaps a half measure of common sense could replace “business logic.”

Michael Yates: Corporate America began to wage what turned out to be a one-sided war against working people in the mid-to late-1970s, when it became apparent that the post-World War Two “Golden Age” of U.S. capitalism was over. As profit rates fell, businesses began to develop a strategy for restoring them. This strategy had many prongs, and one of them was ideological, that is, a struggle for “hearts and minds,” to use a military term now being applied to Afghanistan. The presumed failure of Keynesian economics, marked by the simultaneous existence of escalating inflation and unemployment, gave the ideological struggle its foundation. Maybe there had been too many restrictions placed on the market, and these restrictions (minimum wages, health and safety regulations, laws facilitating union organizing in labor markets; public assistance in the form of money grants, housing subsidies, and the like; restrictions on the flow of money internationally) had led to results opposite those that liberal Keynesians had thought most likely. If these complex arguments could be tied to simple cliches, like “get the government off our backs,” “the unions have gotten too powerful” (with always a hint that they are too radical thrown into the argument), and “welfare queens” (with that always popular whiff of racism), they could provide ideological cover for what was really a matter of corporate economics, namely the making of money.

This ideological attack bore fruit quickly. President Carter appointed Paul Volcker to chair the Federal Reserve Board of Governors, and Volcker, under the guise of fighting inflation, immediately began to snuff the life out of working class communities by forcing interest rates up to nearly 20 percent. Today, Volcker is treated like a hero by Democrats and above reproach (though ignored by President Obama’s more right-wing economic advisors), which shows just how far to the right economic discourse has moved. What Carter began, Reagan completed, firing the Air Traffic Controllers and putting the nail in labor’s coffin. Behind the scenes in all of this and growing in strength for the next twenty years (funded by wealthy business leaders) or so were the right-wing think tanks you mention. Just as retired generals go to work for military contractors and defeated politicians become lobbyists, government economic advisors get jobs at Heritage or the American Enterprise Institute or the Cato Institute. The staffs of these ideological centers churn out endless position papers and studies, which find their way into our newspapers and the offices of our congresspersons. A gigantic network of professors, journalists, politicians, lobbyists, and, today, a television network (Fox) bombard us with right-wing propaganda. That all of this has been successful is seen by the fact that the shibboleths of neoliberalism—such as the needs for privatization of public entities, the free reign of markets, the obviousness of the success of welfare reform, the evils of raising the minimum wage—are all commonplaces today.

While the public now knows that something is rotten, I am not sure that neoliberal ideas are so under attack that they will lose their sway. I think that the tenacity of these ideas owes something to the lack of an ideological alternative, which, in turn, is due to the abject failure of organized labor to provide one. For example, we need universal health care. Labor, however, has not consistently argued in favor of this or supported it at all. Now Congress is poised to enact healthcare legislation that might well be worse than the profit-driven system we have all come to hate. Labor should refuse to support this legislation, but I doubt it will. Then, when the new healthcare plans fail to deliver the goods, the right-wing will be lying in wait, ready to pounce and say, “See, we told you so. The government always makes things worse.” In other words, until there is a radical ideology to replace right-wing thinking, the latter is unlikely to lose its drawing power.

Fred Magdoff: Although these institutions were very successful, along with a number of other forces, in shaping public attitudes toward the economy, the reality of the current severe economic conditions are causing many, including some economists, to rethink their views of how “efficiently” markets function in the real world (as opposed to their ideological make-believe world) and that some different approaches may be needed. People seem to understand that the “big players” played a major role in the crisis, but most of the anger has been placed on the outrageous salaries of the top echelon. Of course, this is just “chump change” compared to the massive amounts at that are transferred to the wealthy through the speculative casino that our economy has become.

　
MW: Socialism has a huge public relations problem. Wouldn’t you agree that socialism has been effectively discredited in the U.S. media and that, even now–with unemployment soaring at 10 percent and more than 300,000 foreclosures per month–the average American worker still believes in the virtues of capitalism? How do you explain this phenomenon?

Michael Yates: Part of my answer here can be seen in my response to your first question. Socialism has, indeed, been discredited here, partly due to its rejection by its natural supporter, namely the labor movement. The CIO expelled in the late 1940s and early 1950s the left-wing forces who built the great industrial unions. When it did this, it abandoned the worker-centered ideology that might have laid the basis for support here for at least the kind of social democracy we find in the Scandinavian nations. This left the ideological field to the enemies of social democracy and socialism. Of course, we cannot ignore the long and inglorious history of police-state repression of those persons and organizations that championed socialism. Our government has never hesitated to arrest, imprison, and even kill the enemies of capitalism. So it has been dangerous to be a radical here, though not so much today when radical ideas aren’t taken seriously and there are no powerful radical organizations left. Suppose that after the Second World War, the left in the labor movement had grown, and the left-led unions had continued to successfully organize workers and win good collective bargaining agreements. Suppose that they had built upon their impressive worker education programs, made inroads in the South, and fought hard against U.S. imperialism and the Cold War. We might have a much different political terrain on which to fight today.

Two other factors that must be considered in the attachment of the working class to capitalism are racism and imperialism. In the past, employers routinely pitted white workers against black, and one weapon they used was to associate black workers (and the civil rights movement) with communism (It was interesting to note in this connection the attempts to make Obama out to be a radical socialist). The claim that black union supporters were reds helped to solidify white support for capitalism. By the same token, anti-imperialist struggles in the poor nations of the world (often former colonies of the rich countries) were typically led by political radicals. These could be made out to be anti-American, and then those in the United States who allied themselves with these struggles could also be labeled anti-American, despite the fact that they might also be supportive of policies that would benefit working people. The schools and the media could be counted out not to try to set anyone straight on any of this.

Now, having said this, I must also say that to the extent that left forces in the United States identified themselves uncritically with the former Soviet Union and its extremely undemocratic political system, they sometimes played into the hands of those opposed to socialism. And I must also admit that socialist forces were, at their strongest, never powerful enough here to force their best ideals permanently into the consciousness of the working class majority. Finally, in the past, the success of capitalism in the United States allowed for some sharing of the wealth with workers, and this, too, made people less willing to entertain radical ideas.

Old and deeply ingrained ideas die hard, and unless there are forces at work to develop new ones and unless there is at least widespread experimentation with new ways to organize production and distribution, little is likely to change, even in the face of economic catastrophe, such as so may working men and women are facing right now. Quite the contrary, workers might be persuaded that actions detrimental to their long-term self-interest need to be taken, such as, for example, draconian measures against immigrants.

Fred Magdoff: There is no question that the term socialism has a public relations problem. But while it’s true that most people don’t fully understand the basic workings of the capitalist system nor what socialism is, there are indications that many people are ready to talk about alternatives—and that includes socialism. The positive public response to Michael Moore’s movie, Capitalism, is one indication. But a Rasmussen poll last spring found that only 58% of American’s say that capitalism is better than socialism. For adults under 30, 37% preferred capitalism and 33% preferred socialism. It’s not clear what the poll results really mean. But it does indicate that people are willing to hear about and talk about alternatives to capitalism.
　
MW: In a chapter titled “Neoliberlism” you focus on the disparity of wealth in the US today. Here’s an excerpt:

By 2006 the top 1 percent of households received close to a quarter of all income and the top 10 percent got 50 percent of the income pie. In 2006, the 400 richest Americans had a collective net wealth of $1.6 trillion, more than the combined wealth of the bottom 150 million people. This degree of income and wealth inequality was last seen just before the beginning of the Great Depression. (pg 50)

Let’s ignore the moral issue for now, and focus on the supply/demand question. Is it possible for an economy to produce sufficient demand when more and more of the wealth and income goes to the upper 5 or 10 percent of the population? (isn’t this proof that capitalism is inherently crisis-prone?)

Michael Yates: If a certain amount of output is produced, an equal amount of income is generated. So, conceptually, there could be enough demand to buy the output, no matter that the incomes generated are getting more unequally distributed. It certainly has been the case that the rich people now getting such a large share of the pie spend gobs of money. And rich foreigners spend a great deal of money in the United States as well. However, the rich also save a lot of money (the more they get, the more they save), and this money does not enter immediately into the spending flow. Working people, on the other hand, can be counted on, by virtue of the limited income that they command, to spend all of their income. Therefore, the more income the rich have, the more savings there will be, and, unless some way is found to convert all this saving into spending on newly-produced goods and services, the more likely it is that there will be a crisis caused by not enough spending (and its corollaries of unsold goods and services and unemployed labor). If we understand that growing inequality is the normal trajectory of capitalist economies, a trajectory only mitigated by the power of organized working people to win a bigger share of the pie for themselves and to compel the government to intervene in the marketplace on their behalf, then it is correct to say that capitalist economies are crisis-prone for this reason alone.

Growing inequality also creates other potential problems for the system. Sometimes it can generate a political crisis, a crisis of legitimacy so to speak. The rich exert tremendous political power, and this power grows as those at the top command a larger and larger share of a society’s income. To the rest of us, the game looks increasingly rigged, with us having little chance to improve our circumstances through individual efforts. More inequality also has harmful social and economic consequences that we don’t normally think of. Recent research has shown that if we compare two entities (two states in the United States, for example) with equal average incomes but different degrees of inequality, then the place with more unequal incomes will also have higher rates of infant mortality, arrest and imprisonment, school dropouts, low infant birth weights, and many other measures of social well-being. Growing inequality actually kills some of us, makes some of us sicker, and puts some of us in jail.

I want to add an important point. To say that capitalist economies are crisis-prone, because of a tendency toward income inequality or whatever other reason, is not the same as saying that these economies are on their deathbeds, no matter how severe a crisis may be. It is possible for an economy to exist in a crisis or a prolonged period of slow growth (stagnation) without it being ready to collapse. In the end, it is political struggle, that is, class struggle, that truly destabilizes an economy and generates conditions in which it is possible to imagine the birth of a new system.

Fred Magdoff: It is one of the many contradictions of the system. If ordinary folk are paid well they can buy a lot of stuff and help keep the system going. So from the point of view of the system as a whole, higher paid workers would help the economy. However, there is only one driving force for individual capitalists–and that’s to make as much money as possible. What might be better for the overall economy can be of no concern to the individual trying to maximize profits. For an analogy, let’s take a look at ocean fishing. Almost every fish species is being fished to the point at which the population crashes. It would make sense for all of the companies operating the large trawlers to cooperate and fish less in order to preserve the resource on which they depend. So what’s good for their long-term future is sacrificed as each individually tries to maximize their catch and therefore profits.

MW: Here’s another excerpt from the book: “In 2006, the financial sector employed about 6 percent of the workers but ‘produced’ 40 percent of the profits of all domestic firms.”(pg 56) A few paragraphs later you add that, “Making money without actually making something turned out to be the largest growth sector of the U.S. economy from the early 1980s to the present crisis.”

This seems to imply that as manufacturing and other parts of the “real” economy have become less lucrative, the trading of paper assets has become Wall Street’s new profit-center, the Golden Goose. What impact has the “financialization” of the economy had on ordinary working people?

Michael Yates: I think that an answer here has two parts. First, it was the neoliberal “revolution” begun in the 1970s that did immense harm to working people. For example, unionization rates began to fall dramatically in the 1980s, as Reagan began his “magic of the marketplace” assault on the working class. Real wages (the purchasing power of our paychecks) began to stagnate in the 1970s and are not much higher today than then. Relatively high-wage public employment began to endure a long period of privatization, which also damaged working class living standards. The move toward “free trade” did workers here no good, as manufacturing began to flee our shores for low-wage havens abroad. None of these things had to do with financialization per se.

Second, however, once the neoliberal attack on working class living standards took hold and incomes began to flow upward, those with a great deal more money began to look for ways to put this money to work. The corporations that they owned also had higher profits, and they did the same. The United States has always had a robust financial sector, though in the past, it was not the tail that wagged the dog as far as our system of production and distribution was concerned. Neoliberalism brought with it a deregulation of international movements of money and goods and services. [It is important to note that we see neoliberalism as a political response to capital’s quest for restored profits beginning in the mid-1970s when the post-Second World War two economic boom ended and the slow growth (stagnation) common to mature capitalist economies reasserted itself.] These, in turn, required a certain amount of financial innovation, to reduce, for example, the risks of fluctuations in currency exchange rates and sharp changes in political conditions that could threaten investments. From these innovations came still more, until finance began to take on a life of its own. And while neoliberalism and direct corporate actions inside workplaces did reduce costs and raise profits, they did not create nearly enough capital spending opportunities (investment) to absorb the growing individual savings and business profits. Finance of one kind or another then began to be seen as a place to dispose of surplus and make still more money. Leveraged buyouts, stock market speculations, real estate “investments,” all took off from the 1980s on, absorbing money that could not find enough opportunities in the real economy of production. As these things happened, financial “innovation” exploded, with all of the alphabet soup of financial instruments we describe in our book.

This explosion of finance proved detrimental to working people in a number of ways. Leveraged buyouts inevitably resulted in the hollowing out of what were often perfectly viable businesses. Companies were saddled with debt, assets were stripped and sold, and workers were furloughed by the tens of thousands. The inflation of asset values gave rise to the notion that it was the job of managers to increase the share price of their businesses—in any way possible. Businesses came to be thought of as mere collections of assets rather than entities that produced things. Asset inflation gave rise to asset speculation and the development of ever more complex financial instruments, all leading sooner or later to financial bubbles and the inevitable bursting of the bubbles. As we have seen, the bursting of financial bubbles has had tremendously negative impacts on working people: shuttered workplaces and unemployment to name but the primary ones. The last bubble, in real estate markets, was harmful to workers not only after it burst but also as it was developing. In the aftermath of the dot.com bubble, Alan Greenspan, former Chairman of the Fed Board of Governors, directed Fed policy to pressure interest rates down to very low levels. This helped to push loose money into real estate. As house prices began to rise, banks and brokers started to encourage working people to do two things: borrow money against the appreciated value of their homes and buy homes, either as first-time buyers or as purchasers of more expensive homes (after selling old ones). Working people were eager to do both because they saw houses as sources of cash to compensate for stagnating household incomes and as a form of wealth that could help secure them against the hazards of ill health, lost pensions, or college-age children needing money for school. Working class households began to take on large amounts of debt, making themselves more vulnerable, even as they thought they were making wise financial decisions. Ironically, those who saw their incomes rise so high because of neoliberalism were now, in effect, loaning money to those who didn’t fare so well. As banks accumulated mortgages, farsighted Wall Street swindlers saw golden opportunities to develop a slew of new financial instruments based upon the packaging and repackaging of mortgages into new and exotic instruments. Greenspan played their shill, arguing that they had uncovered the secret of hedging infallibly against risk. From here it was but a short step to the criminal schemes of Countrywide and a host of other financial institutions. The billions of dollars made were used not only to finance a new gilded age of revoltingly lavish consumption but to corral the most tractable politicians money could buy.

Fred Magdoff: Financialization of the economy created the possibilities for people to take on more and more debt—credit cards, new cars, 2nd mortgages, etc. It was the selling of a lifestyle way beyond people’s ability to pay for it plus the easy access of loans that created the bind that many people find themselves in today. In essence, it allowed people to live beyond their means. They were encouraged to take on debt as their house values seemed headed up forever, and the great rise in foreclosures and bankruptcies is the unfortunate result of the financialization of the economy. Also, those people who had retirement money in individual accounts or with pension systems and thought that they had become very wealthy, now found themselves with much less to rely upon.

MW: In the last couple of decades, consumer debt has skyrocketed, as you note, “doubling from 1975 to 2005, to 127 percent of disposable income.” (pg 60) Have we gone as far as we can without deleveraging and paying down debts? What happens to a credit-dependent economy when the consumer can no longer increase his/her debt-load? Is this just the beginning of a decades-long down-cycle?

Michael Yates: Certainly no entity—not a person, a family, a business, even a government— can take on rising levels of debt (relative to income) indefinitely. Sooner or later, the piper has to be paid. Working-class consumers took on large amounts of debt, to compensate in part for stagnating wages and incomes, and, it is important to note, to pay for health problems and other household traumas. This meant that the burden of the debt rose, since income wasn’t rising as fast as the debt, and also because the interest rates charged on credit cards and subprime mortgages were so high. We at Monthly Review have been decrying the rise of consumer debt for many years, and we said that the debt chickens would come home to roost sooner of later. I must say that I was surprised that debt could be broadened and deepened for so long. The ingenuity of creditors in extending loan periods and devising so many new forms of debt has to be admired for its audacity. Then, the ways in which these debts were packaged and sold so that more debt could be extended was truly breathtaking. Unfortunately, consumers ultimately couldn’t pay and all hell broke loose. Now, with so much unemployment, workers are truly strapped. They will not be borrowing so much or spending so much anytime soon. [One interesting recent development is that, as some households have defaulted on debts or simply stopped making payments, consumer spending has showed a bit of an upward tick!] So the question arises: what spending will fuel a sustained recovery? It won’t likely be consumer spending. Capital spending was stagnating to begin with and was the root cause of the crisis. There are no new “epoch-making” innovations on the horizon that would generate the amounts of investment that were brought forth by the automobile. U.S. exports seem a very unlikely demand support. That leaves the government. In a capitalist economy, especially one like the United States with its lack of a history of generally accepted public spending, it seems very unlikely that public spending will make up for shortfalls in aggregate demand. Already, there are widespread entreaties (and not just from the far right) urging the federal government to wind down in spending programs—well before, I might add, the economy has recovered. As we see it, the United States is, indeed, in for a long period of stagnation, a “down cycle” as you put it.

Fred Magdoff: This is one of the major constraints on the system. The economy is in a process that economists call “deleveraging,” which is just another way of referring to somehow getting rid of debt. Some are able to pay off what they owe, a few are able to renegotiate down some of their debt, many are losing their homes, and some are going bankrupt. Until this works its way out, and a lot of debt is shed one way or another, there will be a drag on the “consumer” portion of the purchases. This is particularly significant to the U.S. economy because it is so dependent on consumer purchases—in 2007, these absorbed approximately 70% of the goods and services produced.

MW: The ABCs of the Economic Crisis: What Working People Need to Know is as lucid and compelling summary of the financial crisis as any I have read. In the closing chapter you state that capitalism is undergoing a “crisis of legitimacy” and that “the system can never deliver what is needed for us to realize our capacities and enjoy our lives… That “instead of private gain” the purpose of society and the economy is “to serve the needs of people, by providing the necessities of life for all, without promoting excessive consumption (consumerism) while protecting earth’s life support systems.”

All of the things that which kept capitalism in check–progressive taxation, crucial regulations, and the power of unions–have either been reversed, repealed or greatly eroded. More and more people are beginning to see the greed which governs the system, and it scares them. But is the country really ready for structural change or will the vision of an economy which “serves the needs of its people” be dismissed as “pie-in-the-sky” Utopianism?

Michael Yates: Well, first thank you Mike for the kind words. They are much appreciated. Typically, the best we have been able to hope for from the public in the United States has been an amorphous populism; people are willing to say that the system is corrupt and that it is biased in favor of the rich. But proposals for change, much less a radical transformation of the economic system, are rare commodities. I think things would be different, however, if we had a real labor movement, one that was rooted in communities, broad in its composition, and not afraid to have principles and stand by them come hell or high water. This should be the lesson that progressives learned from the right-wing. The talking heads of Fox may seem insane to us, but they and their intellectual gurus almost never deviate from the set of reactionary principles with which they began to transform the “common sense” of the nation. We suggest at the end of our book that we ought to ask ourselves if a return to the pre-economic crisis status quo is what we want. In the best of times, there is plenty of unutilized labor, a degraded environment, poverty, dead-end jobs, and much more that is not so desirable. So we chose a number of alternative outcomes to what we have now that we think have mass appeal, from universal healthcare to basic food guarantees. However, as you say, these might well, and I think will cause people to react with a pie-in-the-sky indifference. What might make working men and women stand up and take notice would be for these goals to have a mass-based advocate, one that would make these goals matters of rigid principle and begin to fight for them through mass actions. We might think that the right-wing ideologues we see on television are insane. Yet, come hell or high water, they stick to their guns. Their political and economic adherents have wielded tremendous power for a long period of time, and even today when they seem to be losing their grip on the national “common sense,” they can still mobilize the faithful. The left needs to take a lesson from this. More particularly, the labor movement must take a firm and rigid stand on issues like national health care, food security, environmental degradation, full employment, good and cheap housing, U.S. war-making and imperialis, racism, and a host of others. Then it must educate members rigorously and constantly about such principles. Most importantly, it must begin to actively fight to achieve them, activating its millions of members and allies, wherever it can find them. It is through action, bold and unafraid, that people’s minds will get changed and a new “common sense” developed.

Having said this, I think it is clear that the labor movement, as currently constituted, is not up to the tasks at hand. Too many unions are moribund, stuck in the failed labor-management cooperation mind set of the past and run by people too old and infirm to do much of anything. So, not only will we have to have a worker-led opposition to the status quo, fighting to change it radically, but this opposition will have to be built on a new basis. There are some hopeful signs, such as the development of community-based worker centers, mainly in immigrant communities. These may be models for the labor movement of the future.

Fred Magdoff: Just getting what should be the most reasonable reforms through Congress is a major effort, which usually fails or is corrupted in the process. Look what’s happening with health care “reform.” Even if a “public option” is finally part of the bill, it will be a bill that helps some people, but is primarily a boon to the health care industry, which will get a lot of new revenue. It’s not a bill designed with the single purpose in mind: how can we supply medical care for everyone at reasonable cost. Rather it’s a bill designed with significant input from the for-profit sector that will end up supplying them with extra profits. It is clear that government-run systems (and there are a variety of ways to do this) are far cheaper and more efficient and can actually cover everyone. SO, it seems as though piecemeal reform is a) very difficult to obtain and b) can be reversed as the power of the wealthy increases. A system is needed that can break the power of the wealthy and create a real political and economic democracy in order to be able to meet the basic needs for all the people.

This is appeasement not peace. Yet, the Nobel Peace Prize was awarded to US President Barrack Obama for reasons which are baffling. Recipients of the same prize, namely the Dalai Lama and Barrack Hussein Obama, ironically cannot meet as it might discombobulate a delicate international order. Perhaps the Norwegian Nobel Prize committee was rewarding Obama for not launching a war under false pretexts the way his predecessor George W. Bush did just nine months into office. Otherwise, Obama has achieved nothing except for an exaggerated engagement with the Islamic world.

According to the Daily Telegraph, an “Obamameter” run by the political accountability organization PolitiFact lists “seven broken promises, a dozen stalled initiatives and 117 pet projects still ‘in the works.’”

The Nobel award is symptomatic of all that is wrong with our system.

Our standards are literally being shortened. There is a duality of metrics that separates the rulers from the ruled. When the ruler fails to deliver, a prestigious award provides the fix.

One class sports a long list of titles, awards, “achievements” and those meaningless two-, three-lettered acronyms on ponderous coattails while the other class desperately cling on to the hems for their daily crumbs.

We live in an SMS world defined by abbreviated value-added jargons (VAJ) like ROIs, ERPs, KPIs and thousands of other acronyms that favour paper credentials over knowledge, Ponzi schemes over gold and venality over industry.

One class throws out such jargons, titles and acronyms as yardsticks that others should live by. When ruination knocks at the door, it is the agenda setters and the main culprits who walk away with the fat bonus.

It is not easy to shake off the power of acronyms. If they were alive today, Sigmund Freud and his nephew Edward Bernays may have used them in case studies of population control.

There is power in stilted vocabularies. In a corporate meeting, jargons are routinely resorted by one clueless group to beat the senses of another. Statistics and glossy power points are shoved down your throat. Few seek clarity. No one wants to be seen as a hick. Resolutions are finally passed. Over time, it leads to pseudo-sciences within the once respectable socio-economic fields of study.

Abbreviated terms of reference (TOR) are great trinkets for a self-delusional professional rabble. They revel in the mass-manufactured credentials available at schools, universities and e-bay.

In the end, we have an acute global talent shortage in a world brimming with paper qualifications.

Ever heard of the search consultant who slogged more than a year to find a suitable vice president for an international bank? Standards were high; the two-, three-lettered credentials required would fill up a page, including the never advertised GF – Good Family. (If you applied these standards to the military, a field medic is not allowed to man the 20-mm gun at a crucial point in battle).

Six months later, the bank collapsed! Few four-flushers at this bank knew what was going on. Their tasks were neatly delineated. Yet, armed with their vaunted acronyms, they are free to peddle their rattlesnake oil elsewhere. They are in demand as, like Obama, they can promise the world and con the common man into parting with their future.

Welcome to the real world. Like the financial world, “notional” and “fiat” flips into “real.”

War becomes peace! Fiction becomes fact. The worrying signs are there. A startling number of Britons actually consider Winston Churchill and Mahatma Gandhi to be fictional characters while they vouch for the authenticity of Baker Street’s Sherlock Homes!

The Daily Mail hypothesizes that such ignorance “could well have something to do with the TV insurance adverts inviting viewers to ‘challenge Churchill’ and featuring a lugubrious talking dog.”

That’s the power to sell. The power of fictional imagery! According to a Wall Street Journal report, an astonishing 61% of sub-prime loans were palmed off to those who actually qualified for a conventional loan. The problem lies not with greed per se, but with Key Performance Indexes (KPIs) governing the Job Descriptions (JDs) of bank executives. To meet such metrics, they have to inveigle large quantities of loans in the shortest possible time to achieve maximum profit.

A computerized database of such performances sifts out the “high achievers” from the “underperformers,” the conmen from the common men and, in some instances, the barely literate from the educated. Your worth is spelt out in stats and acronyms. Every trick is employed under the veneer of letters to cheat the uninitiated.

These charlatans set the universal discourse for civilized behaviour, educational standards and career achievements.

The most pressing task for the CEO of America Inc is a financial one. How will he deal with a one quadrillion dollar plus (more than 1,000 trillion) derivatives market that is waiting to explode? It is largely an American creation. The Chinese are threatening to default on a fraction of them and a few trillion in defaults is enough to sink the Western Economy.

Nobel Economics laureates will tell you it is all business as usual, and the bulls are being warmed up for the mother of all matador markets (MOAMM). It is only matter of time…

Time, however, is revealing a disturbing reality.

The Obama Record

Has Obama brought peace to Afghanistan or is he building up troops there? Read the news. The Taliban writ runs throughout half of Afghanistan and slowly, across the western half of Pakistan. Has Muqtada Al-Sadr kissed the cheeks of his Sunni and Kurdish brethren in Iraq with a salam? Isn’t Pakistan’s Jihad Inc. run with US-supplied weaponry?

Why are the entities known as Osama bin Laden and Al Qaeda still free to thread the terror mill? Why hasn’t the United States sued for peace and diplomatic ties with neighbouring, little Cuba when it can tolerate every gross human rights violation in China?

If Obama is afraid of Turkish sensitivities over a century-old Armenian genocide, can he be expected to stand up for international justice today?

Has Obama brought universal healthcare to millions of Americans who can’t afford it? How are the deteriorating manufacturing and employment sectors measuring up to reality? Do the marginalized need another sound bite or another lying statistic to reassure them that things are shaping up?

Will the deteriorating value of the US dollar prompt Washington to embark on another Persian Gulf adventure? Every major war in history was fuelled by the re-liquidation needs of an empty treasury. Like the psychology of acronyms, the casus belli is buried under jargons, lies and patriotic grunts.

ROI, ERP, KPI, T-Bill …CIC, Rah, Rah Rah!¹ Sieg Heil, Sieg Heil, Sieg Heil!

The historical progression is time-tested. When financial systems collapse under the weight of fraudulent practice, it is time for a Fuhrer to step in with catchphrases. They will be earthy and populist and will be addressed to a horde of the disenchanted.

And the clueless!

Let’s face it. This is the first modern generation not to have produced a Nikola Tesla, an Albert Einstein, or a financial whiz who can match the genius of Nikolai Kondratieff. Or how about a Mahatma Gandhi who was rejected five times for the Nobel Peace Prize? Maybe things were not rigid then. Einstein could not fix his hair right, Gandhi wore a loincloth. People could think!

Obama sets Gandhi as his standard. It is a clichéd fashion statement. The contrast cannot be depicted with sufficient brevity. One was born to privilege but “came down” to his true roots. The other was fast-tracked out of a ghetto possibility to the presidency of the United States. It was something unreal and remains so, much like Obama’s tinsel-tinged predecessors.

Mahatma Gandhi eschewed violence. He brought down the greatest empire ever through non-cooperation, by boycotting the financial foundations of Imperial rule. His actions triggered self-rule and independence for many nations. He fought for the poor and wanted them to live in dignity.

Obama the Nobel Peace laureate may turn out to be the anti-Gandhi. Out of the crumbling foundations of our financial system, he and his cohorts must do something. The metrics of today leave him little choice. There is no thinking outside the box.

Instead of fortifying the nation-state, Obama may dissolve them for a borderless commune. Force will be met by force, violence will increase and the foundations of a New World Order will be built on the ashes of the faceless poor.

The Norwegians must have given that award to prevent this spectre.

1. It was this American cheerleading phrase which Adolph Hitler adopted into his Sieg Heil (Hail Victory) Nazi rallies.

With regard to a contemporary program, for instance (neo)-Malthusian measures, to solve the “population problem,” such propositional theory put into wholesale praxis would essentially expand and accelerate the genocidal effects of the civilizing process. Sure that sounds like a loaded allegation and indictment upon an archaic Western archetype and his immoral conjectures, but it is true. Not only did Malthus believe that inequality was natural and good, or “at least necessary for avoiding the problem of massive overpopulation and hence starvation;” he also “denounced soup kitchens and early marriages while defending smallpox, slavery, and child murder [sic].”¹

Malthus believed that social inequality and poverty was natural, expunging from the historical record centuries, if not millennia, of social engineering, construction and stratification of a system that manifests inequality and penury by virtue of its own design. In other words, abject poverty, famine and, social stratification that unjustly engenders inequality, are tangents of social arrangements configured by sovereign powers themselves.

These same sovereign powers set up and normalized the city-state lifestyle/culture (i.e., civilization) as a way to enhance and, make more efficient, production at the expense of human and nonhuman resources in order to enhance the luxuries of those positioned at the top of the hierarchy. Surfeit resources, profits and assets, enjoyed by few, are commensurate with expanded efficiency in production and, in turn, so will a population that is organized around growing and perpetuating said social arrangements grow geometrically. In other words, “population growth correlates with economic prosperity.”² Therefore, overpopulation of humans on this planet is not necessarily a natural phenomenon as much as it is a direct result of the dominant social construct, i.e., overpopulation is moreso anthropogenic than it is organic. So, for starters, Malthus had conveniently designed the theoretical framework for the dominant culture so to fix a problem induced by the dominant culture.

Second on the list of excoriations directed toward Thomas Malthus and his legacy of villainous schemes and those who propound and argue in defense of such machinations, is the hunger fallacy. Despite the fact that the world population is, at the very least, six fold from what it was in 1800, there is still more than enough food produced the world over to support the population.³ Africa alone produces 25 percent of the world’s cereals, but yet it is the most immiserated continent on the planet. This is a direct result of global trade, orchestrated by the world’s richest coterie of individuals (i.e., the WTO, World Bank and IMF, et al.). Africa grows enough food to feed itself, but because its countries have been co-opted, if not coerced at the barrel of a gun by Western trade agents over the centuries, it has to export its very own solution to famine. Those countries who spurn compliance with Western trade agreements are subject to reprehensible sanctions that Arundhati Roy refers to as “New Genocide,” meaning the creation of “conditions [through economic sanctions] that lead to mass death without actually going out and killing people.”⁴ Digression aside, what is transpiring in Africa is not an isolated occurrence. In India, where millions are the victims of starvation and malnutrition, there have been incidences, time and again, in which the government allows immorally imbalanced disbursement of food. One example that Arundhati Roy presents in her book, An Ordinary Person’s Guide to Empire, reports the Indian government allowing 63 million tons of grain to rot in its granaries.⁵ Meanwhile, twelve million tons were exported and put on sale at a subsidized price the Indian government refused to offer its country’s impoverished peoples.⁶ There is more than enough food to feed people – bottom line.

When exploring the implications of a (neo)-Malthusian program, one must ask, as Richard Robbins advises, “what social interests or purposes might be advanced by their acceptances?” Clearly, Malthus envisioned a world where the elite and upper class decide and act upon population control by advancing measures that materialized from within the very former and latter statuses. It should also be noted that Malthus was not concerned with population growth, he was concerned with the rising number of poor in England at the time and, why they should or should not exist and, “what should be done about them.”⁷ Malthus erroneously, and egregiously – might I add, saw poverty not as a consequence of “expanding industrialism, enclosure laws… or the need of manufacturers for a source of inexpensive labor…” but rather as a phenomenon that emerged from “the laws of nature…”⁷

The Malthusian premise is one that presumes poverty exists by virtue of overpopulation, which is often postulated as the fault of fundamentally flawed human beings – which is dehumanizing to say the least. And, his theory (and any other theoretical fledglings of similarity) exempts the privileged elite from any accountability for fomenting and perpetuating the framing conditions and social arrangements that engender overpopulation and poverty in the first place.

If there really were something inherently poor and laggard in large populations, then affluent places like London or Manhattan would elicit fear of overpopulation. But the truth is, such sentiment is not directed internally toward ‘civilized’ regions of high densities of people, but rather it is directed externally toward areas and regions that are sought after for resources – areas that need to be ‘managed’ and ‘civilized.’ These are areas that, unlike densely populated areas of developed countries, are impoverished and immiserated on account of sanctions, development projects, foreign debt, illicit purloining of resources, and more, perpetrated and/or effected by foreign institutions – the very institutions that not only wreak tremendous social and ecological havoc, but also castigate such ‘victim’ countries as being ‘poor’ and ‘problematic’ and as ‘jeopardizing’ the globe with overpopulation. This is pathologically depraved behavior.

Furthermore, in today’s economic climate, one who recognizes the limits of economics within an ecological context of invariable finite materials is often referred to as a ‘neo–Malthusian.’ But because one recognizes the intrinsic limits to growth does not also mean that such a realization is concomitant with Malthusian theory, or rather: Just because one recognizes the limits to growth does not mean they are a neo-Malthusian.

The crux is, there are limits to growth. The planet is comprised of finite resources. Any intelligent creature is aware of this unalterable truth. However, these facts do not warrant one group of people to assume a higher positioning over another as a means to decide who lives, who is ‘useful,’ who gets what and when and where. The truth is, as many maintain, the whole carrying capacity discussion is either a.) not discussed honestly, or at all, or b.) it is approached with a narrow set of ‘solutions,’ all of which intend to perpetuate the status quo – which translates into either not solving shit or, solving the problem in a way that keeps those in power in power to enjoy their luxuries and privileges.

More importantly, owing to the fact that overpopulation is commensurate with economic growth (which confers tremendous power and wealth upon economic architects and directors i.e., the state and financial and corporate institutions) – we should, as Derrick Jensen suggests, honestly acknowledge how different our discourse and theoretical solutions would be if we changed the language from ‘overpopulation’ problems to ‘overconsumption’ problems? Here is where we find the fundamental flaws inhered within the ‘panaceas’ that are prescribed to fix this entire conundrum. We can’t address this issue as an ‘overconsumption’ problem because mitigating consumption growth would destroy the capitalist economy. So, unforgivably, we go with ‘overpopulation.’ Does anyone see the fundamental flaw yet? Does anyone else see what’s wrong here?

According to Jensen, “The United States constitutes less than 5 percent of the world’s population yet uses more than one-fourth of the world’s resources and produces one-fourth of the world’s pollution and waste.” And, if you “compare the average U.S. citizen to the average citizen of India, you find that the American uses fifty times more steel, fifty-six times more energy, one hundred and seventy times more synthetic rubber, two hundred and fifty times more motor fuel, and three hundred times more plastic.” Nonetheless, our concepts of overpopulation are usually not comprised of “those who do the most damage, the primary perpetrators (there can’t be too many [middle-class] Americans, can there?), but instead their primary (human) victims.”⁸

There is much absurdity and arrogance, as Jensen asserts, in the call for the poor to stop having children but not minding the rich driving around in SUVs, watching plasma-screen TVs while living sedentary lives in 3500 square foot homes, etc. ad nauseam. Also, to quote Jensen in depth:

…there are those who claim—equally absurdly, and equally arrogantly—that all talk of carrying capacity is racist and classist. To even use the phrase carrying capacity in this crowd is to invite hisses and catcalls, as well as spat epithets of Neo-Malthusian. I suppose the argument is that because some of those who want to protect this exploitative way of living use carrying capacity as a means of social control against the poor—as an American Indian activist friend said to me, “The only problem I have with population control is that you and I both know who is going to do the controlling”—then the notion of carrying capacity itself must be racist and classist. This seems similar to me to suggesting that because Hitler claimed (falsely) that Germany was being attacked by Poland, and that therefore the Germans needed to attack, and that because this same argument has routinely been used (just as falsely) by the United States as well as other imperial powers, that anyone who claims self-defense is lying. These people seem to forget that the misuse of an argument does not invalidate the argument itself. Worse, this argument, that the very concept of carrying capacity is a fabrication designed for social control, as opposed to a simple statement of limits, serves those in power as effectively as does ignoring or de-emphasizing resource consumption when speaking of overshooting carrying capacity, because it goes along with the refusal to acknowledge physical limits (and limits to exploitation) that characterize this culture. What would it take, I’ve heard peace and social justice activists ask, to bring the poor of the world to the fiscal standard of living of the rich? Well, another thirty planets, for one thing. It’s a dangerous—and stupid— question. Within this culture wealth is measured by one’s ability to consume and destroy. This means that attempts to industrialize the poor will further harm the planet. Because industrial production requires the exploitation of resources, the wealth of one group is always based on the impoverishment of another’s landbase, meaning that on a finite planet, the creation of one person’s (fiscal) wealth always comes at the cost of many others’ poverty. Those reasons are why the question is stupid. It’s dangerous because it serves as propaganda to keep both activists and the poor playing a game that doesn’t serve them well, and which they can never win, instead of quitting this game and working to take down the system.”⁹

There is a term called lactational amenorrhea, which is the absence of menstruation due to lactation. As long as a mother is nursing her neonate (i.e., infant) each and every time the child wants to feed, fertility is postponed. Basically, the female body temporarily shuts off its procreational facilities because the body is taxed to its limits regarding nutrient allocation for not only the infant but the mother as well. In other words, “If you continue with exclusive breast feeding for your baby’s first six months, your risk of becoming pregnant is less then 2 percent.”¹⁰

Many indigenous mothers would sleep with their infants through the night so that their child would be able to nurse even during sleep. This beautiful communion between mother and child was practiced nightly for upwards of six months, if not more.¹¹ This practice, which is being forever lost in the dominant culture, in tandem with sustainable living practices, conduced to a natural, safe, sane and non-exploitative program of population control.

One must ask, what sort of culture would replace such population control measures with something like the Malthusian model. The answers tell us that only an exploitative culture, hell-bent on production by means of degradation of another’s landbase, thence elevating one’s luxuries on account of another’s impoverishment, would discard sane and sustainable ways of living to achieve prosperous ends.

1. R.L. Heilbroner, The Worldly Philosophers, (New York: Simon & Schuster, 1999).
2. Richard H. Robbins, Global Problems and the Culture of Capitalism (4th Ed.), (Boston: Pearson, 2008), p. 153
3. Robbins, p. 150.
4. Arundhati Roy, An Ordinary Person’s Guide to Empire, (Cambridge: South End Press, 2004), p. 88.
5. N.A. Mujumdar, “Eliminate hunger now, poverty later,” Business Line, 8 January 2003.
6. “Foodgrain exports may slow down this fiscal [year],” India Business Insight, 2 June 2003; “India: Agriculture sector: Paradox of plenty,” Business Line, 26 June 2001; Ranjit Devraj, “Farmers protest against globalization,” Inter Press Service, 25 January 2001.
7. R.H. Robbins, p. 156.
8. Derrick Jensen, Endgame Volume I: The Problem of Civilization, (New York: Seven Stories Press, 2006), p. 115.
9. D. Jensen, p. 115-116.
10. Katie Singer, The Garden of Fertility: A Guide to Charting Your Fertility Signals to Prevent or Achieve Pregnancy – Naturally – and to Gauge Your Reproductive Health, (New York: Avery, 2004), p.68.
11. K. Singer, p. 67-70.

No wonder Obama has refused to reveal the list of his visitors in the White House. His two broken promises would be obvious if he fully disclosed the identity of his Oval Office guests.

How and why has this happened? One answer — perhaps the primary one — is that Obama has actually turned the Oval Office into a University of Chicago graduate seminar classroom. Obama is the professor and the American public is the entire student body, some of whom (mostly lobbyists, it seems) have access to his classroom. Whenever business-suited advocates for a conservative cause at the expense of the American people — say, in defense of retaining the prohibitive cost of pharmaceuticals — are ushered into his presence, it is as if they are a throng of lively graduate students who respectfully disagree with his liberal assumptions. Obama hears them out as an obliging hierophant and in response comes up with a brilliant compromise that somewhat diminishes their expectations but gives them a substantial portion of what they have requested — in fact, as much as they had been hoping for. They leave the Oval Office fully satisfied with their gain, and he in turn sits back in his leather swivel chair delighted that he has once again whittled down their demands so effectively. Next in line comes a team of advocates insistent on Wall Street deregulation, or insistent on escalation in Afghanistan, or insistent on putting the screws on Iran. Time and again through the day — nay, through the week, the month, perhaps his entire presidency — he wins countless partial victories against respectful requesters. However, the stack of dispensations steadily mounts favorable to the conservative agenda, and, like so many professors since the beginning of time, he himself seems to miss the point. Some niggling critics might complain that he has given away too much prematurely, but what else is possible? Everybody present seems the winner — at least at the time. Of course not all of his Oval Office sessions fit the pattern, but enough of them to make a difference.

Try to imagine an alternative agenda. The gaggle of talented pharmaceutical lobbyists, for example, crowd into the Oval Office, only to find Obama in the presence of lean and mean experts hostile to their cause and with ample documentation to back up their arguments. And, of crucial importance, the number of critical experts be roughly equivalent to that of the lobbyists. Suddenly the lobbyists find themselves up against a tide of information antithetical to their perspective, so the gentleman’s handshake they are hoping for turns out to be far less generous than otherwise. This arrangement would put Obama in pretty much the situation of a judge or a strike negotiator instead of an obliging professor. Hard decisions would occur, and a different outcome could be expected after meticulous debate. Obama’s presidency could actually begin to bear credible results. As yet, however, such is not the case, so that many of the electorate enthusiastic about Obama’s election last November now feel cheated by his current performance.

How, then, has Obama’s professorial diffidence betrayed our nation? Let me count the ways.

Right now Obama is favoring all the health insurance corporations in providing national care at the expense of the American public. What started out as a grand design to protect the American public from health insurance profiteers is turning into exactly the opposite — a plan to augment their profits that much further at the expense of the American public.

Right now Obama is favoring all the Wall Street bankers who have benefitted from extraordinary federal generosity well enough to get back on their feet. What they demand at this point is to be able to resume the same extravagant financial manipulation that threw them into what should have been bankruptcy in the first place.

Right now Obama is favoring all the federal agencies that have exploited the task of homeland security to the limit under President Bush and want to perpetuate the arrangement into the indefinite future, of course because our nation is supposedly under the threat or dire imminent attack. At this point these agencies are big and persuasive enough to be included in the same category as bankers and health insurance providers.

Right now Obama is favoring all Pentagon interests that want to shift our nation’s military juggernaut from Iraq to Afghanistan, a state whose military Keynesian potential now exceeds that of Iraq, especially if portions of Pakistan can be thrown in as well.

Right now Obama is selling out in favor of Israel, which wants our nation to impose an embargo on Iran, setting the stage for a potential military attack at the same time as any kind of a two-state solution with Palestinians continues to be perpetuated into the indefinite future.

And so on.

Additional disappointments in foreign policy are listed in Garry Wills’ article, “Entangled Giant,” in the latest issue of the New York Review of Books. Obama has fallen short, for example, in his use of signing statements, in his retention of the state secrets privilege, and in the indefinite detention of Gitmo prisoners, military tribunals, and extraordinary rendition. He also seems to be trying to perpetuate the denial of habeas corpus, the unilateral cancellation of treaties, and the existence countless military bases abroad (many with their own golf courses). In most, if not all, these instances, one can imagine Oval Office consultations with supposed experts, most of whom are defending their jobs or former jobs as well as those of others who have worked with them as subordinates. Inevitably, these individuals turn out to be knowledgeable advocates of policies involving exactly what they themselves did for a living for a couple decades. Their jobs too often necessitated their deliberate ignorance relevant to the questions that matter the most (e.g., should we truly be invading any particular nation?), but they escape being challenged about this ignorance while presenting their case to the president. Later on they or their families can admit, “Oh yes, too bad about Vietnam.” or “Oh yes, too bad about Iraq.” Or “Oh yes, too bad about the collapse of Wall Street,” neglecting to acknowledge that these huge mistakes were the product of very bad judgment by themselves and others like them.

As Wills explains, our nation’s current imbroglio of layered crises has grown worse from one generation to the next since World War II. Our last president severely escalated the trend, and now Obama seems to be holding his own without sufficient incentive to reverse it. As of yet, we have had no dramatic increments beneficial to the genuine needs of the American public during his presidency. What President Obama has provided instead is effectively an administrative plateau whereby too many of Bush’s gains seem in the process of being consolidated. And of course both Iran and Afghanistan loom as potential future wars equivalent to Vietnam and Iraq in guaranteeing the ruination of his term in office.

One can appreciate how Obama advertised himself with the electorate last year as both a Chicago legislator and community organizer. It sounded promising. But he was also a University of Chicago law school professor who spent plenty of time teaching seminars and having lunch with colleagues dedicated to Milton Friedman’s assumptions. These assumptions have been discredited since then, but far more important has been his sense of personal identity as a thoughtful professor willing and eager to accommodate the needs of all involved. And what site in America can better serve this end right now than the Oval Office itself in the White House — the most impressive classroom of all. Let the espousers of profitable ventures make their arguments at the expense of the American public, whatever they might consist of, and our brilliant president can bestow them what seems their appropriate share. This genteel flexibility can be harmless enough in an academic setting, but its consequences might well be disastrous in running the nation. Unfortunately, Professor Obama just doesn’t seem to get it.

The historical and political background of the right to food concerns the development of the notion of access to adequate food as a right. Lack of access to food can be due to two reasons: scarcity of food, or problem of access to available food. The issue of world hunger has been characterized as shortage of food. Guaranteeing the right to food has, therefore, been linked to food production to overcome shortage.

However, hunger and malnutrition persist even if food is abundant. For many years the website of the Indian Embassy in Washington, D.C. has described India’s agriculture and rural development as “a saga of success”. It boasts, “From a nation dependent on food imports to feed its population, India today is not only self-sufficient in grain production, but also has a substantial reserve.”¹ It is true that the country now produces enough food to feed its entire population. Despite agricultural successes, India still has a huge number of malnourished people, more than any other country.

The greater cause for hunger and malnutrition, therefore, is the problem of access to adequate food. Poor and marginalized segments of the population lack purchasing power to buy minimum amount of food they need to prevent hunger. Food insecurity exists even if there is food in abundance. Trading more food will not help the poor and the marginalized, if they are excluded from production and have no means to buy the food which arrives on the markets. Producing more food will not assist them in purchasing food, if their incomes remain too low. The problem is one of accessibility of food for the poor and the marginalized. So a focus solely on increasing the supply of food could lead to policy choices that make hunger worse.² Policy makers should address the problem of access to adequate food and make changes in income distribution and trade policies that are needed to ensure that the human right to adequate food is realized in practice.

Access to adequate food is fundamental for the right to adequate food. Accessed food must be adequate in terms of quality, quantity and cultural acceptability. Access to adequate food has been defined in terms of intake of nutrients, calories and proteins. Malnutrition need not be lack of quantity of food intake, but could also be due to lack of quality food. Both are often the results of poverty and discrimination.

Right to adequate food sets obligations on the state. It also helps empower those vulnerable to food insecurity and malnutrition to hold government accountable. Poor and marginalized are not mere passive beneficiaries of government programs or private charities, but participate in the democratic process of policy formation and implementation.

State Obligation to Right to Adequate Food

Given the crucial importance of access to adequate food in a world of plenty where massive hunger persists, it is not surprising that the right to adequate food has received attention in the community of states. More appropriately, it is a reminder to the states of their commitment to ensure that the fundamental right of everyone to be free from hunger and the right to adequate food is safeguarded.

For sixty years, the legal, political and cultural concept of the human right to food has been evolving as a set of universal norms for the United Nations community, its member states, and civil society. Paragraph 25 of the Universal Declaration of Human Rights (1948) declares: “…everyone has the right to a standard of living adequate for health and well-being of himself [sic] and his family, including food…” Article 11 of the International Covenant on Economic, Social and Cultural Rights adds: “State parties to the present Covenant recognize the fundamental right of everyone to be free from hunger…” and agree “to take steps to the maximum of available resources, with a view to achieving progressively the full realization of the rights recognized, including “adequate food.” Some two hundred additional UN instruments and declarations address the right to adequate food and nutrition within civil-political, economic-social-cultural, development, indigenous, women’s, and children’s rights constructions.

Under Article 11 of the International Covenant on Economic, Social and Cultural Rights, “the right to adequate food is realized when every man, woman and child, alone or in community with others, has physical and economic access at all times to adequate food or means for its procurement.”³ The core content of the right to adequate food implies the availability of food in a quantity and quality sufficient to satisfy the dietary needs of individuals, free from adverse substances, and acceptable within a given culture. The right to adequate food is “indivisibly linked to the inherent dignity of the human person and is indispensable for the fulfillment of other human rights enshrined in the International Bill of Human Rights. It is also inseparable from social justice, requiring the adoption of appropriate economic, environmental and social policies, at both the national and international levels, oriented to the eradication of poverty and the fulfillment of all human rights for all.”³

The right to adequate food imposes threefold obligation on States: to respect, protect and fulfill the human right to adequate food. The State is obliged to refrain from taking any measures that result in preventing existing access to adequate food (respect); to ensure that private actors or individuals do not deprive individuals of their access to adequate food (protect); and pro-actively engage in activities intended to strengthen people’s access to and utilization of resources and means to ensure their livelihood, including food security (fulfill as facilitate). Finally, whenever an individual or group is unable, for reasons beyond their control, to enjoy the right to adequate food by the means at their disposal, States have the obligation to fulfill (as provide) that right directly. This obligation also applies for persons who are victims of natural or other disasters.³

States have committed themselves to implement policies aimed at eradicating poverty and hunger, and improving physical and economic access to sufficient, nutritionally adequate and safe food.⁴ In 1996 in their Rome Declaration on World Food Security, world leaders and their representatives stated: “We consider it intolerable that more than 800 million people throughout the world, and particularly in developing countries, do not have enough food to meet their basic nutritional needs. This situation is unacceptable.”⁴

Reality of Poverty and Malnutrition

In spite of growing recognition and solemn commitments made by world leaders, the stark reality is that there are more hungry people today. The number of hungry people has increased from approximately 840 million in 1996 to 967 million in 2008.⁴ More than 2 billion people worldwide suffer from “hidden hunger”, or micronutrient malnutrition. Majority of the hungry are in rural areas, as around 70% of the world’s poor people live in rural areas and are dependent on agriculture for their income, food supply and livelihoods. According to a UN-Hunger Task Force report, three out of five small farmers suffer from hunger.⁵

Action Aid International has identified the following groups as the most affected by hunger and malnutrition: agricultural laborers, landless, poor farmers, ethnic minorities, indigenous peoples, informal sector workers, unemployed people, street children, the homeless, people living in areas of conflict or at risk from conflict,⁶ refugees, migrant workers, settlers and the internally displaced. Within these groups, women, children, especially girls, disabled people, the elderly and female-headed households are the most vulnerable.⁷ 125 million people die each year from malnutrition related causes. Children and adults are left mentally and physically stunted, deformed or blind, condemning them to a marginal existence. Hunger repeats itself through the generations, as undernourished mothers give birth to children who will never fully develop.⁸

In India it is evident that, although the 1990s saw a period of sustained economic growth as the country moved towards a more market-oriented economy, this economic growth did not benefit all Indians equally. Middle and upper classes in urban areas have benefited under “India Shining”, but the poor have suffered a decline in living standards and rising food insecurity. Poverty⁹ and malnutrition, especially among women, children, and people who belong to scheduled castes and tribes, remain very high. About 2 million children die every year as a result of serious malnutrition and preventable diseases. Nearly half suffer from moderate or severe malnutrition. This is one of the highest levels of child malnutrition in the world. Nearly a third of children (30%) are born underweight, which means that their mothers are themselves underweight and undernourished.¹⁰

Hunger and malnourishment is predominant in rural areas of India. 70% of Indians still live in rural areas and depend on agriculture for their livelihoods (65%). Very low agricultural wages (minimum wages are not always enforced), landlessness, lack of work during the agricultural lean season, and the impacts of trade liberalization have contributed to food insecurity.

Right to Adequate Food and Agricultural Trade

As noted above, the majority of hungry and malnourished live in rural areas and are dependent on agriculture for their income, food supply and livelihoods. They are food producers, such as landless laborers or small farm holders. Among the factors that contribute to this paradox of hungry farmers is the agricultural trading system, according to Olivier De Schutter, UN Special Rapporteur on the Right to Food.

The dominant trend in market-oriented globalization is “to expand the global reach for investments and to broaden market for profit.”¹¹ Investments in agriculture, food processing and marketing are on the rise. International trade in food has increased due to reduced trade barriers. Relentless pressure for unrestricted international trade and investment has not only constrained the policy space of governments, but also resulted in national and local governments and economies ceding some sovereignty over their markets.

Today, agricultural trade is far from being free or fair. Many developed countries continue to protect agriculture as a question of national security and food security, while persuading developing countries into unilaterally liberalizing their agricultural sectors, often under the programs of the International Monetary Fund and the World Bank. In his address to the Future Farmers of America in Washington on July 27, 2001George W. Bush, then President, stated, “It’s important for our nation to build – to grow foodstuffs, to feed our people. Can you imagine a country that was unable to grow enough food to feed the people? It would be a nation subject to international pressure. It would be a nation at risk. And so when we’re talking about American agriculture, we’re really talking about a national security issue.”¹² In the same speech, Bush argued against “the trade barriers, the protectionist tendencies around the world that prevent our products from getting into markets.”¹²

Despite preaching the “benefits” of “free” trade in agriculture, US, EU, Japan and other industrialized countries continue to skew their farm subsidies so heavily in favor of their biggest agricultural producers. From 1995 to 2006 USDA provided $177 billion in subsidy to its farmers. Top 10% of the agricultural producers received 74% of the total amount. During this period US government provided nearly one billion dollar subsidy to just three American rice growers. Rice is staple food for nearly 3.7 billion Asians. Nobel Prize winner in economics Joseph Stiglitz described the United States Farm Bill as “the perfect illustration of the Bush administration’s hypocrisy on trade liberalization.”

In 2004 EU paid its biggest 2,460 farmers on average $667,000 each, or $1.7 billion in total. In Germany, 14% of the biggest farm producers got 65% of all payments; in France, 29% of the biggest farm producers got 72% of all payments; in UK, 31% of the biggest farm producers got 84% of all payments; and in Italy, 1.6% of the biggest farm producers got 34% of all payments.¹³ These figures make a mockery of claims that the US Farm Bill and EU’s Common Agricultural Policy (CAP) are geared toward small farmers and rural development. This huge subsidy allows food cartel to sell rice, wheat and other staple foods at very low price to dominate global food market. This displaces local production of basic foodstuffs and farming livelihoods in developing countries. “These subsidies continue to promote over-production and dumping, hurting poor farmers in developing countries,” said Luis Morago, Oxfam’s Make Trade Fair spokesperson. He further said, “Europe’s common agricultural policy and the US Farm Bill continue to ignore small farmers at home and cripple poorer farmers abroad.”¹³

While developed countries pay huge subsidies to their biggest food producers to dominate the production of staple foods like rice, corn/maize and wheat, and milk, developing countries are left at a severe disadvantage, as they cannot afford to subsidize their agriculture, but must reduce tariffs and open up to unfair competition from subsidized products of the developed countries. Measures to help smallholders such as farm subsidies and cheap credit policies has been opposed by international financial institutions and has fallen out of favor at the national level of many developing countries because it does not serve the interests of those who influence the government. In most developing countries small farm holders do not have the strength to either compete in or resist the pressures of market globalization.

Right to Adequate Food and Agribusiness Companies

The agricultural trade liberalization has benefited big farms and agribusiness companies of the developed countries. It benefited 1% of farms larger than 100 hectares, while harming 85% of farms with less than 2 hectares.² The globalization of agriculture has been accompanied by concentration of market power into the hands of a limited number of large-scale trade and retail agribusiness companies. International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD) notes,

One of the more striking features of industry changes…has been the convergence of ownership between agrochemical and seed/genomic firms. This strategy has worked well to sell proprietary bundled lines of chemicals, genetic technologies and seeds, which can be attractive to farmers as a purchased management tool. However, such bundles can increase reliance on expensive inputs, increase farmers’ costs, and reduce flexibility of on-farm management strategies for pests and weeds, as well as implementation of novel consumer-driven production systems.¹⁴

Transnational corporations have monopolized the food chain, from the production, trade, processing, to the marketing and retailing of food. Globally, the seed industry is increasingly driven by US and Europe based transnational agribusiness companies. Just 10 companies, which include Aventis, Monsanto, Pioneer and Syngenta, control one-third of the $23 billion commercial seed market and 80 per cent of the $28 billion global pesticide market. Monsanto alone controls 91 per cent of the global market for genetically modified seed. Another 10 companies, including Cargill, control 57 per cent of the total sales of the world’s leading 30 retailers.¹⁵

With the trade deal between India and the United States, known as the Knowledge Initiative on Agriculture (KIA), the Indian markets and agricultural policies are increasingly coming under the influence of transnational companies such as Monsanto, Archer Daniels Midland Company, a US grain purchaser and trader and is, with Cargill, one of the companies that maintains “oligopolistic control of the American food-manufacturing and food-processing markets”, and Wal-Mart, the world’s largest retailer.¹⁶ These three companies are members on the KIA Board, which implements the KIA. The Board has decided to focus initially on four core areas: agricultural education, food processing and marketing, biotechnology and water management.¹⁷ “The KIA is part of the US comprehensive strategy on revitalizing the bilateral relationship in agriculture with India,” said Susan Owens, director of the FAS Research and Scientific Exchanges Division. Owen stated: “We want to broaden the scope of the AKI (or KIA) beyond just research…We want to use the AKI (or KIA) to increase agricultural production in India….”¹⁸

Monsanto owns the patent on Bt cotton. In 2005 approximately 1.26 million hectares, and in 2006 nearly 3.28 million hectares of land in India was under Bt cotton cultivation. Farmers who buy GM seeds enter into a licensing agreement with Monsanto for the use of that particular gene and the company prescribed fertilizer. They are forbidden from saving seeds for the next season. They must buy new seed from the company each season. This denies farmers’ right to save seed. The implications of this are huge for poor farmers. Saved seed is the one resource that the poor farmers depend upon to carry them through the year. Denial of this right will greatly impact them economically. For they have to pay more each season to buy new seed. Monsanto is now charging 1850 Indian rupees per 450 gram pack of Bt cotton seeds as compared to 38 Indian rupees charged in China for the same quantity. In India, the price for non-Bt cotton variety is at 450 to 500 Indian rupees. India has recently allowed field trials of GM varieties of rice, brinjal and groundnut.

In many regions of the world, transnational corporations now have unprecedented control over food, and there is no coherent system of accountability to ensure that they do not abuse this power. Global food companies have become too powerful and are undermining the right to adequate food in developing countries.

Intellectual Property Rights (IPRs)

Introduction of the Intellectual Property Rights (IPRs) has become an increasingly important source of competitive advantage and accumulation in the production and trade of agricultural goods. This has resulted in the increasing concentration of control over seeds and other resources in a few transnational companies. The IPR owners, usually transnational companies, can prevent others from producing or selling the seeds or plant varieties over which they own the rights. They can set prices or royalties on the seeds, and terms and conditions for use of the seeds and inputs. This not only denies the right of farmers to save seeds for the next season, but also forces them to depend on transnational companies for seeds and inputs. With raising prices of seeds and inputs, coupled with prevention of saving seeds, small scale farmers become vulnerable whether there is bumper crop, or failure or low yield. In times of bumper crop, they get lower price for their produce, and in times of failure or low yield they incur loss. But the farming costs keep rising.

Because of their sheer size and assurance of huge financial returns due to IPRs, transnational companies are increasingly engaged in agro-biotechnology research. As the goal of companies is profit, their research and production efforts tend to focus on only a few crops, thus weakening biodiversity and sustainability caused by expanding monoculture in food production. The consequences are terrible on “minor crops”, which are commercially not profitable for the companies.

With the trends towards strengthening IPR systems worldwide (and in India), there is an increasing ability of agribusiness companies privatizing genetic resources and agricultural knowledge. The tendency will be to focus on research on lucrative developing country markets, rather than developing country needs. Therefore, IPRs are not designed to respond to socio-economic concerns such as food security of developing countries, or to protect the livelihoods of landless and small scale farmers, but to promote the greed of agribusiness companies at the expense of landless and small scale famers in these countries. Thus, IPRs can impede progress towards sustainability, food security and distributive justice.

Right to Adequate Food — the Guiding Framework for Policies and Action

The present liberalized agricultural trade system excludes millions of landless and small scale farmers, and undermines the ability of developing countries to protect their farmers. What is very clear is that in the long run hundreds of millions will die from hunger, while the markets expand.

Therefore, an approach to international trade based on human rights, particularly the right to adequate food, shifts the focus not only to the impacts of trade and its policies on the most vulnerable and food insecure, but also to enhance the welfare of the vulnerable people. The right to adequate food can only be fully realized by States within a multilateral trading system which enables them to pursue policies aimed at realizing the right to adequate food. Trading system should not only refrain from imposing obligations which directly infringe upon the right to adequate food, but also ensure that all States have the policy space they require to take measures which contribute to the progressive realization of the right to adequate food under their jurisdiction.¹⁹) State, as part of its obligation to protect people’s resource base for food, should take appropriate steps to ensure that activities of the private business companies are in conformity with the right to adequate food.

The report of The International Assessment of Agricultural Science, Knowledge and Technology for Development (IAASTD) provides valuable insights and recommendations recognizing the need for complementary and diversified approaches to sustainable agriculture, pointing out that agricultural models based on small farming can present alternatives appropriate for a human rights based food security. While the report was strongly welcomed by NGOs for its calls for immediate radical changes in international agriculture, there was a strong opposition from countries such as US, UK, Canada and Australia.²⁰ A few months before the launch of the report, major private sector stakeholders, such as Monsanto and Syngenta, resigned altogether from the IAASTD project in October 2007 as the conclusions were clearly against their interests.

Some of IAASTD’s observations and suggestions are²⁰ :

• modern agriculture has brought significant increases in food production. But the benefits have been spread unevenly and have come at an increasingly intolerable price, paid by small-scale farmers, workers, rural communities and the environment;
• the way the world grows its food will have to change radically to better serve the poor and hungry if the world is to cope with a growing population and climate change while avoiding social breakdown and environmental collapse;
• prioritize the promotion of small farmer agriculture and the livelihood of indigenous peoples, giving special attention to the role and situation of women in food production;
• take measures to promote and protect the security of land tenure, especially with respect to women and vulnerable groups, with special attention to equitable land distribution, with agrarian reform if necessary, as mentioned in Article 11(2) of the International Covenant on Economic, Social and Cultural Rights in the Voluntary Guidelines for the progressive realization of the right to adequate food;
• take measures to strengthen local markets, shortening the chain from food production to food consumption;
• promote small scale agriculture as important source of employment and livelihood.
• All national and international policies should be guided by a human rights based approach, to guarantee that they respect, protect and fulfill the progressive realization of the right to adequate food;
• develop mechanisms to monitor private companies in order to ensure that they respect the right to adequate food, consistent with the obligation of States to protect this right.

The formulation and implementation of national strategies for the right to food requires full compliance with the principles of accountability, transparency, people’s participation, decentralization, legislative capacity and the independence of the judiciary. Good governance is essential to the realization of all human rights, including right to adequate food.³ When political elites recognize that promotion of human rights, including economic and social rights such as the right to adequate food, actually enhances sustainable economic growth, we can start to expect that freedom from hunger will become a matter of the past.

1. George Kent, Swaraj against Hunger, University of Hawaii, August 9, 2009.
2. “The Right to Food and the WTO,” (April 8, 2009).
3. The Right to Adequate Food (Art. 11): 12/05/99. E/C. 12/1999/5. (General Comments).
4. The Cordoba Declaration on the Right to Food, December 12, 2008.
5. Arun Shrivastava, “Poverty and Food Insecurity in the Developing World: For Us, Tolls the Bell,” in Global Research (May 7, 2009).
6. “U.S. weapons sales are likely to continue to fuel conflict and abet human rights abuses. During the two Bush terms, the majority of U.S. arms sales to the developing world went to countries that our own State Department defined as undemocratic regimes and/or major human rights abusers. And over two-thirds of the world’s active conflicts involved weapons that had been supplied by the United States.” Frida Berrigan, “Weapons: Our No#1 Export?” in Foreign Policy In Focus (July 1, 2009).
7. Annual Report 2005-Right to Food, Action Aid International.
8. ECONOMIC, SOCIAL AND CULTURAL RIGHTS: The Right to Food. Report submitted by the Special Rapporteur on the right to food, Jean Ziegler, in accordance with Commission on Human Rights resolution 2003/25, E/CN.4/2004/10, 9 February 2004.
9. According to the World Bank poverty line of $1.25 (Rs. 56.13) per day, the number of poor in India during 2004-2005 was 456 million, that is, 41.6% of the population.
10. ECONOMIC, SOCIAL AND CULTURAL RIGHTS: The right to food. Report of the Special Rapporteur on the Right to Food, Jean Ziegler, Addendum MISSION TO INDIA (20 August-2 September 2005), E/CN.4/2006/44/Add.2, 20 March 2006.
11. Asbjorn Eide, “The Human Right to Food and Contemporary Globalization.”
12. See Whitehouse.
13. See Oxfam.
14. “Food Security in a Volatile World,” International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD).
15. “ECONOMIC, SOCIAL AND CULTURAL RIGHTS: The right to food,” Report submitted by the Special Rapporteur on the right to food, Jean Ziegler, in accordance with Commission on Human Rights resolution 2003/25. E/CN.4/2004/10, 9 February 2004.
16. Kamalakar Duvvuru, “Monsanto, a Contemporary East India Company, and Corporate Knowledge in India,” in Dissident Voice (July 25, 2009).
17. Dinesh C. Sharma, “Preparing for New Challenges,” in Span (March/April 2007).
18. Julia Debes, “U.S.-India Agricultural Cooperation: A New Beginning,” in FAS Worldwide (September 2006).
19. Background Document Prepared by the UN Special Rapporteur on the Right to Food, Mr. Olivier De Schutter, on His Mission to the World Trade Organization (WTO), presented to the Human Rights Council in March 2009 (background study to UN doc. A/HRC/10/005/Add.2
20. Wenche Barth Eide and Uwe Kracht, “Official Responses to the World Food Crisis in Light of the Human Right to Food,” (February 11, 2009).

Out of fear of the possibility of a terrorist attack, authorities militarize our towns, scare our people away, stop daily life and quash our constitutional rights.

For days, downtown Pittsburgh, home to the G20, was a turned into a militarized people-free ghost town. Sirens screamed day and night. Helicopters crisscrossed the skies. Gunboats sat in the rivers. The skies were defended by Air Force jets. Streets were barricaded by huge cement blocks and fencing. Bridges were closed with National Guard across the entrances. Public transportation was stopped downtown. Amtrak train service was suspended for days.

In many areas, there were armed police every 100 feet. Businesses closed. Schools closed. Tens of thousands were unable to work.

Four thousand police were on duty plus 2500 National Guard plus Coast Guard and Air Force and dozens of other security agencies. A thousand volunteers from other police forces were sworn in to help out.

Police were dressed in battle gear, bulky black ninja turtle outfits: helmets with clear visors, strapped on body armor, shin guards, big boots, batons, and long guns.

In addition to helicopters, the police had hundreds of cars and motorcycles , armored vehicles, monster trucks, small electric go-karts. There were even passenger vans screaming through town so stuffed with heavily armed ninja turtles that the side and rear doors remained open.

No terrorists showed up at the G20.

Since no terrorists showed up, those in charge of the heavily armed security forces chose to deploy their forces around those who were protesting.

Not everyone is delighted that 20 countries control 80% of the world’s resources. Several thousand of them chose to express their displeasure by protesting.

Unfortunately, the officials in charge thought that it was more important to create a militarized people-free zone around the G20 people than to allow freedom of speech, freedom of assembly or the freedom to protest.

It took a lawsuit by the Center for Constitutional Rights and the ACLU to get any major protest permitted anywhere near downtown Pittsburgh. Even then, the police “forgot” what was permitted and turned people away from areas of town. Hundreds of police also harassed a bus of people who were giving away free food — repeatedly detaining the bus and searching it and its passengers without warrants.

Then a group of young people decided that they did not need a permit to express their human and constitutional rights to freedom. They announced they were going to hold their own gathering at a city park and go down the deserted city streets to protest the G20. Maybe 200 of these young people were self-described anarchists, dressed in black, many with bandanas across their faces. The police warned everyone these people were very scary. My cab driver said the anarchist spokesperson looked like Harry Potter in a black hoodie. The anarchists were joined in the park by hundreds of other activists of all ages, ultimately one thousand strong, all insisting on exercising their right to protest.

This drove the authorities crazy.

Battle dressed ninja turtles showed up at the park and formed a line across one entrance. Helicopters buzzed overhead. Armored vehicles gathered.

The crowd surged out of the park and up a side street yelling, chanting, drumming, and holding signs. As they exited the park, everyone passed an ice cream truck that was playing “It’s a small world after all.” Indeed.

Any remaining doubts about the militarization of the police were dispelled shortly after the crowd left the park. A few blocks away the police unveiled their latest high tech anti-protestor toy. It was mounted on the back of a huge black truck. The Pittsburgh-Gazette described it as Long Range Acoustic Device designed to break up crowds with piercing noise. Similar devices have been used in Fallujah, Mosul and Basra Iraq. The police backed the truck up, told people not to go any further down the street and then blasted them with piercing noise.

The crowd then moved to other streets. Now they were being tracked by helicopters. The police repeatedly tried to block them from re-grouping ultimately firing tear gas into the crowd injuring hundreds including people in the residential neighborhood where the police decided to confront the marchers. I was treated to some of the tear gas myself and I found the Pittsburgh brand to be spiced with a hint of kelbasa. Fortunately, I was handed some paper towels soaked in apple cider vinegar which helped fight the tears and cough a bit. Who would have thought?

After the large group broke and ran from the tear gas, smaller groups went into commercial neighborhoods and broke glass at a bank and a couple of other businesses. The police chased and the glass breakers ran. And the police chased and the people ran. For a few hours.

By day the police were menacing, but at night they lost their cool. Around a park by the University of Pittsburgh the ninja turtles pushed and shoved and beat and arrested not just protestors but people passing by. One young woman reported she and her friend watched Grey’s Anatomy and were on their way back to their dorm when they were cornered by police. One was bruised by police baton and her friend was arrested. Police shot tear gas, pepper spray, smoke canisters, and rubber bullets. They pushed with big plastic shields and struck with batons.

The biggest march was Friday. Thousands of people from Pittsburgh and other places protested the G20. Since the court had ruled on this march, the police did not confront the marchers. Ninja turtled police showed up in formation sometimes and the helicopters hovered but no confrontations occurred.

Again Friday night, riot clad police fought with students outside of the University of Pittsburgh. To what end was just as unclear as the night before.

Ultimately about 200 were arrested, mostly in clashes with the police around the University.

The G20 leaders left by helicopter and limousine.

Pittsburgh now belongs again to the people of Pittsburgh. The cement barricades were removed, the fences were taken down, the bridges and roads were opened. The gunboats packed up and left. The police packed away their ninja turtle outfits and tear gas and rubber bullets. They don’t look like military commandos anymore. No more gunboats on the river. No more sirens all the time. No more armored vehicles and ear splitting machines used in Iraq. On Monday the businesses will open and kids will have to go back to school. Civil society has returned.

It is now probably even safe to exercise constitutional rights in Pittsburgh once again.

The USA really showed those terrorists didn’t we?

The liberty of a democracy is not safe if the people tolerate the growth of private power to the point where it becomes stronger than the democratic state itself. That in its essence is fascism — ownership of government by an individual, by a group or any controlling private power.

Franklin D. Roosevelt (1882-1945), 32nd and longest-serving US president

This great and powerful force—the accumulated wealth of the United States—has taken over all the functions of Government, Congress, the issue of money, and banking and the army and navy in order to have a band of mercenaries to do their bidding and protect their stolen property.

Senator Richard Pettigrew, Triumphant Plutocracy, 1922

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.

Thomas Jefferson, (1743-1826), 3rd US President, 1802

The U.S. national debt clock is clicking and it is fast approaching the $12 trillion mark, all the while the Fed (less a central bank than the banks’ Bank) is printing new money like crazy and lending it to its client banks at close to zero interest rates (i.e. at negative interest rates). What is wrong with this picture? It simply means that most Americans are losing big at this game, but a handful of mega-banks and their affiliates are raking in tremendous amounts of money in easily made profits.

Indeed, the Federal Reserve’s balance sheet has more than doubled since August 2007, going from $870 billion to more than $2 trillion. It is expected to keep growing as banks avail themselves of the cheap funds the Fed made available to them. The Fed, indeed, has the unique ability to create new dollars (paper currency) for the accounts of assets (good or bad) that it buys from banks, the Treasury, or other entities. This increases the monetary base (the sum of currency plus total banking reserves), and banks through their lending can expand this money supply even further.

And the Fed has been extraordinarily generous to the banks, the largest of them are in fact owners of the twelve regional Fed banks.

In fact, the Fed has broken practically every central banking rule in order to provide cheap funds to the banks. First, it has pushed the fed funds rate to close to zero so banks could have credit at close to zero cost to them. Second, it has expanded the range and quality of assets it stood ready to accept as collateral for its loans to the banks, so much so that it can be said that the U.S. Fed is presently creating new money backed by the shakiest of assets, some being called “toxic waste.” This is reminiscent of the eighteenth century (beginning in 1789) practice of the French revolutionary government of creating new money (the assignats) backed by the seized properties of the Catholic Church.

Let’s summarize quickly the numerous ways the Fed (and to a certain extent, the U.S. Treasury) have found to channel cheap funds to the banks and to brokers. In September 2008, some investment banks, such as Goldman Sachs and J.P. Morgan, officially became commercial banks in order to profit from the Fed’s new generosity.

• The Term Auction Facility (TAF);
• The Primary Dealer Credit Facility (PDCF);
• The Foreign Exchange Swap programs (the currency swap lines);
• The Commercial Paper Funding Facility (CPFF);
• The Term Asset-Backed Securities Loan Facility (TALF);
• The Agency debt, Agency mortgage-backed securities (MBS) and Treasury purchase programs;
• The Treasury’s $700 billion Troubled Asset Relief Program (TARP);
• The payment of interest on the banks’ excess reserves at the Fed.

The last disposition is worthy of attention. Because of the easy and cheap lending to the banks, the latter piled up tremendous amounts of excess reserves at the Fed, reaching more than $700 billion. Normally, banks would quickly lend these non-interest paying excess reserves to the economy. But, in October 2008, the Fed got imaginative and obtained the authority to pay interest on the banks’ reserves, including excess reserves, at a risk-free rate (the IOER rate). Since then, the banks have been earning interest on their excess reserve holdings, and therefore had little inclination to lend those reserves out to creditworthy but nevertheless risky borrowers in the rest of the economy. With this practice, the circle has been closed, and the Fed was able to provide needed funds to the banks, at close to zero cost, and enable them to rid themselves of their bad investments, without risking creating inflation. That’s quite a banking salvage operation that will be studied by economists in detail in the future.

Indeed, it was well understood after the onset of the financial crisis in August 2007, that public capital would be needed to refinance the American banking system. Private capital was too risk adverse to do that. What was less understood was the fact that the Bush administration, and now the Obama administration that continues this policy, intended to provide this capital at close to no cost to the banks and with very scant conditions.

But who really paid and has continued to pay for this imaginative recapitalization of American banks, and who profits the most?

First of all, of course, bank profits, specially those profits by big international banks, have exploded. Bank stocks have followed suit with tremendous gains. That’s why I say the stock market rally since March 5 (2009) has been a liquidity-driven rally, engineered by the Fed.

And it is easy to see why banks raked in so much money: They have been borrowing funds at close to zero cost to themselves and either were paid by the Fed to leave these funds unused or they have used them, with leverage through their hedge fund like activities, to buy interest-paying assets in the U.S. or abroad. In essence, the large “too big to fail” have been allowed to make various trading bets with the cheap public capital provided by the Fed. They gorged themselves with near free public money and used it to enrich themselves, and very little to finance the real economy.

One profitable trade, among others, that large international banks and other operators are found to embrace is a form of arbitrage: They borrow and sell the currency of the country that has the lowest possible short-term funding costs and invest the proceeds in countries whose currency and asset markets yield the most. This has the consequence of depreciating further the currency with low interest rates and of appreciating the other currencies.

During the 1990s, the Japanese economy was in the doldrums. Its short-term interest rates, just as in the U.S. today, were close to zero. International banks and hedge funds would then borrow yens in Japan, sell them for dollars or euros and invest the proceeds in high-yielding financial assets in the U.S. or in Europe. Provided the interest rate environment does not change suddenly, this sort of “carry trade” is an easy way to make money. The result, however, is a more depressed currency than necessary for the low interest rate country and more imported inflation as the price of imported goods (oil, food, commodities…) increases.

The U.S. is presently in that predicament. The U.S. Fed and Treasury have abandoned the U.S. dollar and the large international banks have depressed it further at the same time they fill their coffers. That is why we can say that, besides the profitable carry currency trade that banks and other operators employ to dump the U.S. dollar on foreign exchange markets, this currency will remain under pressure for as long as the spread of short-term interest rates favors other currencies and as long as the spread of expected inflation rates and of expected economic growth remain stable. Paradoxically, longer-term interest rates have only increased marginally. This is because banks and other Fed borrowers, when they do not leave their low interest-paying excess reserves dormant at the Fed, can buy risk-free Treasury bonds. This has the consequence of depressing longer-term interest rates and of boosting stock market prices, even as inflation expectations are on the rise.

What is to be understood is that the weak dollar is the direct consequence of the Fed’s extraordinary cheap money policy. To summarize, the average American household is being hit from all sides with this policy. First, if it is a net creditor (as most retirees are), its savings are earning paltry returns (most likely negative after inflation and taxes). Second, the U.S. dollar keeps falling in value, raising the cost of traveling abroad and of everything that is imported. Third, real incomes fall with rising prices as the purchasing power of stable or declining money incomes contracts. Fourth, the exploding public debt will translate sooner or later into higher taxes, thus reducing private disposable incomes. All in all, the standard of living of most people falls.

Don’t get me wrong. I do not question the need to inject liquidity into the banking system after the onset of the financial crisis in August 2007. What I question is the way this was done and how the public interest was sacrificed in favor of narrow private interests. Indeed it was done in the worst possible social way, with private gains and social costs. They (the Bush and Obama administrations) recapitalized the banks to the benefit of a small class of bankers, while taxing the entire population in a multitude of ways to finance the public subsidy.

There were other ways to attain the same end without taxing the many for the benefit of a few. The U.S. Treasury and the U.S. Fed, both under the Bush administration and the Obama administration discarded these solutions. That’s where the scandal lies. But since it is likely that only a handful of senators and congressmen understand what has happened, I would not be too confident in expecting that there would ever be a public investigation of the scandal, beginning with Congress auditing the Federal Reserve’s subsidized banking loans to large banks and its lack of needed regulatory activities. Kudos, however, to the Manhattan Chief U.S. District Court Judge who has ordered the Fed to make public its lending records.

Similarly, at least, some timid steps are being taken in the U.S. and in Europe to impose some limits or restrictions on the discretionary and exorbitant bankers’ bonuses. This comes a bit late, and we shall see if this is merely some political window-dressing to deflect criticism or if it is a structural step to curb oligopolistic and abusive banking practices.

Interviewed on NBC’s Today show Friday the 14th of August, Gingrich and Sharpton spoke of bi-partisanship and “putting everyone’s hands on the table.” It might be a good idea to require that they be placed palms up, just to be safe. Gingrich even went so far as to call education a “civil rights issue” and echoed the familiar themes often heard about the need to prepare students for competition in a global capitalist world. Gingrich on civil rights? Education Secretary Arne Duncan is also joining forces with the dynamic duo to bankroll the new charters (he’s got ten billion to play with from various and sundry federal programs) and encourage and push cities to fix failing schools, or so he says. As if the cities had the money to even fix sidewalks, let alone schools. After almost thirty years of neglect, the cities, not to mention their mostly urban schools, centers of obedience training and tethered as they are to the carpet loom of rigid standardized testing, are literally falling apart. But don’t tell that to the Rat Pack. According to NewsMax:

The trio will visit Philadelphia, New Orleans and Baltimore later this year. They plan to add more stops as their tour progresses.

“These are cities that have real challenges but also tremendous hope and opportunity,” Duncan told reporters on a conference call Thursday.

Maybe Duncan will get the opportunity to meet with the FBI when he’s in Philly, where at least five Philadelphia-area charter schools are under investigation, their control of public funds, handling of financial accounting and managerial oversight have been criminally called into question. Federal authorities are right now adding investigative and legal resources to the criminal probe as this is being written. School Matters notes that:

People familiar with the matter say the list includes New Media Technology Charter School, with campuses in Germantown and Stenton; Germantown Settlement Charter School in Germantown; Northwood Academy in the Northeast; and Agora Cyber Charter School in Devon, which provides online instruction to 4,400 students statewide (School Matters, August 27, 2009).

The trio will eventually burrow its way into New Orleans, another pit stop on the whistle tour. There, disaster capitalism is boosting charter school CEO pay after decimating the teachers union, the way the ‘reform’ was designed. In New Orleans, disaster capitalism’s first educational reform experiment, corporate school mercenaries under the direction of autocrats Paul Pastorak and Paul Vallas (Arne’s old boss in Chicago), operate with little or no oversight and little community participation. CEO Principals hire and fire at will without any protections for teachers. Similar pay boosts for administrative personnel were just announced in Los Angeles where the school board handed over 250 charter schools to the “new providers”, in face of opposition from teachers and parents.

While the kids are uniformed and uninformed and the teacher’s shackled and harnessed to the inauthentic tests, according to the Times-Picayune CEO pay is rising:

At the top of the pay range sits veteran Kathy Riedlinger, head of Lusher Charter School, who earns $203,556, including a $5,000 yearly car allowance. Lafayette Charter School’s Mickey Landry, recruited from a prep school in a national search, is No.A2 at $186,000

At Ben Franklin High School, Principal Timothy Rusnak, also recruited nationally, earns $150,000 annually. And Jay Altman, chief executive of FirstLine Schools, earns $132,000 to oversee both S.J. Green and Arthur Ashe charter schools (Times Picayune, May 17, 2009).

This is the Wal Mart model of education, where teachers become ‘associates’ student become ‘consumers’, unions are despised and any effort to organize them immediately thwarted, and it unfortunately this reform seems to be spreading to almost every major city in the country and at incredible speed. Thanks to Arne Duncan.

There is little doubt that the gang will be chauffeured to various charter schools and then scattered amongst rehearsed classrooms. Images of the three patting eight year old student heads while a smiling administrator and grinning teacher stand in the background will be cast to the public and perhaps one or all of the three ‘reformers’ can inquire of little Johnny or Maria or Shareka how they feel about the need to get an education in the rush to compete with China and India. The group might also take the opportunity to meet with some of the ‘strong players’ in the business of turning around schools, like Green Dot Public Schools in LA or Alliance Schools. We also mustn’t forget about the meetings with unions and their members in an effort to convince them they are drafting a future that includes the beleaguered teachers while the true intent of the Sicarios remains hidden under their garments.

Overshadowed by two wars, a corporate financed health care debate, economic crisis and swelling unemployment, social unrest and reality TV, a discussion of educational policy is virtually impossible under the current corporate media command. Unacceptable to most American citizens the current educational system is being radically disassembled like Legos in a pre-school play room. In its stead is being built a new corporate educational model. The water bag has burst, the EMO’s are like kids scrambling for candy under a broken piñata. It is truly astounding.

Duncan, of course, is spearheading the campaign to sell the charter school snake oil to the public. It’s like an old traveling medicine show equipped with elixirs and potions for every ailment but Duncan’s the guy with the bankroll, the go to guy. He has close ties to billionaires: Eli Broad, Gates, the Walton family and other philanthropic interests who have for years looked forward to this moment to step in and control the design and organizational structure of American education. Maybe while he’s in Los Angeles, where 250 schools were simply given over to “outside operators” he’ll find a little time away from his soap box tour to spend a few minutes at the Eli Broad Superintendents Academy that prepares non-educators like Duncan for Superintendent positions in urban schools while the Broad Foundation trains works side by side with ‘associates’ of skilled executives in various fields for leading urban school systems (School Administrator, August 2007). There, he can listen to the voices of experienced, proven leaders from business, military, civic and government sectors sharing ideas with their non-educator counterparts on how to privatize and reform education. Even Newt and Sharpton might enjoy the challenge.

The hyperbole and hypocrisy of Arne Duncan

Secretary of Education Arne Duncan is asking America to hand over its public school system to outside providers and non profit and for profit educational maintenance organizations (EMO’s) in an attempt to regiment education, clean up management and tie the whole mess to performance outcomes on NCLB under the euphemism Race to the Top. What about Duncan’s education successes in Chicago where he was CEO of schools. Shouldn’t we critically examine them to see if Arne is on the right track? It sure doesn’t seem like it; in Chicago Arne created more like a race to the bottom and the statistics are dismal.

In a report released in July of this year Titled “Still Left Behind,” and put out by Duncan’s former bosses, the Civic Committee of the Commercial Club, in Chicago public schools:

Half of the students drop out by high school, and of those who remain until 11th grade, 70% fail to meet state standards, the report says. In fact, “In the regular (non-magnet) neighborhood high schools, which serve the vast preponderance of students, almost no students are prepared to succeed in college.” The report directly challenges widespread claims by current and former CPS officials that local students have shown substantial progress over the last decade on standardized tests. For instance, it notes a 2006 letter from then schools CEO Arne Duncan, now U.S. secretary of education, stating that the share of CPS students meeting or exceeding state standards had leapt 15 points in one year (”Still Left Behind: Student Learning in Chicago Public Schools”).

Purporting to be gloomy and indeed it was, the Chicago Civic Committee actually seemed to relish the poor test results. It seems that even though Arne’s seven year tenure as CEO of Chicago schools did nothing for students even if you accept NCLB and the state mandated tests, the committee spokesman, Mr. Martin, did not hesitate to say he would not call the entire school-reform process a failure. Why? Largely because the ‘reform’ also sparked the formation of more charter and ‘innovative schools’, schools that according to the report perform better than CPS schools. Ah, and there we have it, the report is evidence of Arne’s success; Arne did do his job and he did it well, traditional schools fail in Chicago and charter schools gain fame. The public schools become secondary providers that struggle to compete with philanthropic and taxpayer subsidized charter schools, now the primary providers. The game isn’t even fair, the schools are being set up for failure by NCLB and its absurd assessment; they have no chance to compete with the new EMO’s anxious to kick down the barn door and register as many ‘subprime’ kids as they can for the monies they get. Take a look at the set-up and how it is supposed to work according to the conservative Hudson Institute.

In their Winter 2008 issue of Education Next, the publication laid out in no uncertain terms the ‘game plan’ charter advocates are employing to takeover public education nationwide:

Here, in short, is one roadmap for chartering’s way forward: First, commit to drastically increasing the charter market share in a few select communities until it is the dominant system and the district is reduced to a secondary provider. The target should be 75%. Second, choose the target communities wisely. Each should begin with a solid charter base (at least 5 percent market share), a policy environment that will enable growth (fair funding, non-district authorizers, and no legislated caps), and a favorable political climate (friendly elected officials and editorial boards, a positive experience with charters to date, and unorganized opposition)… The solution is not an improved traditional district; it’s an entirely different delivery system… Charter advocates should strive to have every urban public school be a charter (Smarick, 2008).

Sure, and there are all kinds of players and gamers just giddy with glee for the chance to burst into the burgeoning privatization of a $750 billion dollar educational industry as many call it. Take Entertainment Properties Inc., for example; this is a company known mostly for sinking its money into movie theaters and wineries. Guess what? They recently bought 22 locations from charter school operator Imagine Schools for about $170 million. The real estate investment trust acts as landlord, while Imagine operates the schools and is using the investment to expand its chain of 74 locations. As School Matters recently noted, Barry Sharp, chief financial officer for Arlington, Va.-based Imagine was quoted as saying:

They really are an effective source of long-term financing that we can rely on and enables us to do what we’re best at, which is running schools, and do what they’re best at, which is long-term real estate ownership. It’s a good fit. Focusing on large players who know how to operate schools, hire teachers and develop a curriculum provides the company a more dependable return (School Matters, September 12, 2009).

That’s what Arne, Sharpton and Gingrich will be really trying to accomplish as odd-bedfellows. When scrutinized under the financial lens of profits to be made and power to be had they aren’t really that odd at all. What these three men represent are public relation warriors in the final march to completely revolutionize public education by creating a new class of primary for-profit and non-profit providers beholden largely to mayoral control of cities and corporate control by Wall Street.

When you think about charter schools you are supposed to assume they are community based ‘small schools’ designed by committed parents and teachers. For the most part they are not. They are large institutional players with briefcases full of cash and a rolodex that would make a Hollywood agent blush with envy. The mom and pop charter schools that come to the public mind will never be able to compete with the large non-profit and for-profit driven EMOs. The focus is on large players, remember, the ‘made guys’?

Yet when the rubber hits the road and the trio finally makes their way across the expansive nation of ‘American exceptionalism’ and you tune into the rancid rhetoric of the trolips and strumpets, that’s not what you’ll hear. They’ll be in rare form to be sure, utilizing towering and lofty rhetoric clothed in the need to boost inauthentic test scores and how education is failing America in the 21st century. The language will resonate with themes about how “competition being good for raising all boats” is the answer to drop-out rates and underachievement and you’ll be treated to the hostile rhetoric that “teacher unions are greedy and their pay and performance must be tied to the NCLB state-based testing regime” — all in the name of the kids.

This was all confirmed when NPR had Gingrich and Sharpton on the air on September 12th and the puppeteering was as palpable as the reporting was pitiful. It’s the word ‘reform’; nobody bothers to ask what it means and what it would look like so sophists like Gingrich, Duncan and Sharpton don’t have to get into the muck of providing any details.

Never mind the facts, according to NewsMax the idea for the dog and pony show came from a meeting the three musketeers had with President Barack Obama in May 2009, while at the White House. How nice! If you think bipartisanship is working with the national health debate just wait until you see this new level of courtesanship in the name of our nation’s kids. And this ‘debate’ hasn’t really even started, if one was to watch the national news. Lost in the headlines of ‘deathers’, ‘tenthers’, ‘tea-baggers’ and ‘birthers’ are our nation’s urban children, usually Black and Latino whom are forced to attend dilapidated schools in ghettos dimmed by poverty and drop-out rates that call the whole notion of ‘schooling’ into question.

But don’t worry, Arnie, Al and Newt will provide the needed answers and the suckling private sector will count the body bags of kids and do the math and accounting and set up an entire new non-profit, quasi profitized educational system – a national retail chain of charter schools started by noble entrepreneurs, free market fundamentalists, philanthro-capitalists and valiant non-profiteers who wish to assure the ‘kids’ are prepared for the challenges of global capitalism and the need to compete with India and China, as new economic engines of competition. Ask Bill Gates, he’s got his billions in play to “reform” education (see Tough Choices or Tough Times); so does the Walton Family and the Eli Broad Foundation, among other philanthropists looking to leverage their pirated loot to destroy teacher unions, impose merit pay on teachers and administrators, contract out good paying public jobs, lengthen the working day and entice starry eyed Teach for America recruits to be the new ‘associates’ in the whole new business arrangement where the average teacher lasts three years before leaving the profession.

Who pays for it all? You as the taxpayer will pay for the new retail educational chains with your tax monies that will be transferred from traditional public schools to the new EMO’s and the charters they will manage, many of the schools gussied up and going by such blue-blooded names as Academies or Preparatory Schools. This, we are told will help the traditional schools ‘compete’ – sound familiar? Only the words are false, the real idea as the Hudson Institute stated is to make the traditional public schools the secondary providers of education reducing the public sphere and turning over the primary provider role to the new ‘turnaround artists’, the business school grads like Arnie who never taught in a classroom or designed a lesson plan. Neo-liberalism is the economic theory and privatization is one of the first orders of the day, that and deregulation, concentration of power, surveillance and authoritarianism.

Sharpton the Sharpee

So what do the three stooges bring to the debate over education? Nothing, really. Sharpton commented on NBC:

The parents need to be challenged with the message of `no excuses (NewsMax, August 14, 2009).

No excuses for what, Al? As if poverty, Wall Street theft, deregulation of the ‘free market’, the privatization of almost every sphere of life, a lack of affordable and reliable health care, decimated public transportation, lack of a living wages, infant mortality rates creeping close to third world countries, devastated urban areas with increased incarceration rates, gentrification, foreclosures and jobs shipped overseas for cheap labor are working people’s fault? Kevin Phillips writes in his book Bad Money that after tax income per year for the lowest 20% of the population at the end of the 1970’s was $9,300, adjusted for inflation. At the end of the 1990’s it fell to $8,700 in inflation adjusted dollars. The middle class did no better, during the same period of time and using the same criteria they saw their income rise from $31,800 at the end of the 1970’s to $33,200 at the end of the 1990’s. Meanwhile during the same period and using the same after tax, inflation driven number, the highest 1% of the population saw their earnings rise from $256,000 to a whopping $644,000 during the same period (Bad Money). It is this top one percent that now wants to control, manage and design education for all the other Americans.

Foaming at the mouth about individualism and personal responsibility as the system grinds slowly to a halt and new tent cities are constructed weekly seems to sit well with the Reverend who reportedly earns $750,000 a year hosting a syndicated radio talk show and collects anywhere from $15,000 to $20,000 per lecture and $2,000 per church sermon. On top of that, Sharpton does “consulting” work for corporations. Business is good, very good and now, bound to get even better with his new-found courtship and oath of Omerta.

Yet it’s important to remember that Sharpton recently had his own little “teachable moment” when it comes to ‘excuses’ and personal responsibility; last July the feds went after him for not paying his taxes. No-excuses, pull em’ up by your boot straps, Sharpton cut a deal with federal prosecutors in Brooklyn to end a longstanding criminal probe of his finances that reportedly encompassed his personal fortune, his opportunistic and self-aggrandizing 2004 presidential campaign spending and the National Action Network, his so-called ‘advocacy’ group. Sharpton quickly cut the deal whining that he’d personally pay back $1 million, including $500,000 upfront, as part of the settlement. However that didn’t get him out of all the hot water. In March of this year, according to the New York Post, Sharpton also owed $884,669 to the New York State Department of Taxation and Finance, which was not part of the July settlement; this according to two liens covering years 2002 through 2006. $500,000 up front is a lot of money for a guy under criminal investigation for tax fraud; where would he get that kind of cash?

Sharpton Gets the Cash!

As I reported in a three part series in Counterpunch and as was also reported in the New York Daily News by award winning investigative journalist, Juan Gonzalez in an article, entitled “Rev. Al Sharpton’s 500G link to education reform” Sharpton’s involvement in the new bipartisan march to charterized our nation’s schools could have been a script from a Hollywood movie – with its attention to financial wheeling and dealing, skilled manipulation, personal gain, payoffs through third party intermediaries, front groups, cronyism and rigged public relations campaigns and events designed to influence and manipulate public sentiment on matters of educational policy.

What Gonzalez was able to uncover is that Sharpton’s own organization, The National Action Network, was immediately paid $500,000 for Sharpton’s consent to endorse, involve and partner himself with Joel Klein to launch the new Education Equality Project, a group favoring New York charterization. The cash no doubt was timely as Sharpton had promised the government $500,000 down in the tax settlement deal, quite handy and timely to cut the deal with the prosecutors pursing the good Reverend. However, the story gets even more bizarre.

It appears that to avoid any publicity over the ‘pay for play’ payment that Sharpton received for his alliance with Joel Klein in erecting the new Education Equality Project (EEP), the $500,000 intended for Sharpton’s group was covertly funneled to Sharpton’s National Action Network by Plainfield Asset Management, LLC, a Connecticut hedge fund. As the story progressed, I asked myself: ‘Why was an asset management company chosen to make a payoff to Al Sharpton’s group?’ Perhaps the best motivation could be found in the fact that the former Chancellor of New York Schools, Harold Levy, is currently the managing director of Plainfield Asset Management and a registered lobbyist for the firm. If there are any students reading, “Have you learned anything yet?” The whole sordid affair is malodorous, but it is not surprising. It is all about public relations now, sophistry and propaganda of the first order and who best to convince the poor, Black and Latino working families that the new charter schools will be good for their kids?

Gingrich the predator

What’s the role of Gingrich in all this, you might ask? Besides his character as a throne sniffer and his proclivity for self-aggrandizement and self-promotion, Gingrich has a significant role in the whole scenario. To begin with he represents the Wall Street business interests and the entrepreneurs and philanthropists who pay him. William Gates Sr., for example, worked for Preston Gates, a big law firm and lobbying group that hired Jack Abramoff as a lobbyist. Abramoff is known to have had strong ties to Gingrich. At this point we do not have any idea if Gates Sr. or Bill Gates for that matter has any ties to Newt. But Gingrich brings more than just political and financial ties from his disgraceful see-saw days in Washington where he oversaw the gutting of educational funds. He also brings the managerial doublespeak that so charms the business community. He’ll invoke Peter Drucker rhetoric and speak to organizational inefficiencies and he’ll talk about cutting costs in education, managerial efficiencies, cost containment, outsourcing, measured outcomes, and the need for No Child Left Behind to assess the future of our nation’s children and of course, he’ll highlight the theory of failing teachers and their unions. Gingrich will be posing for the FOX news listeners, Ruppert Murdoch’s little curmudgeons and he’ll do a fine job of convincing them that the road is being paved with gold and the future of our children is bright with new competitive spirit.

Newt calls public schools a “monopoly of failure,” pinning the blame for the decline of public education at “departments of education, schools of education, and unionized bureaucracy.” He argues that people from any of his three culpable camps are inherently corrupted by their stake in the failed system, and that they will blindly defend that system to protect themselves at the expense of our nation’s children (”Newt Gingrich and Me: A Charged Moment at an Education Blogger Summit Dan Brown,” May 16, 2008 Huffington Post).

But wait, there are more concerns swelling in the neo-cortex of Gingrich. Newt has always been concerned about the liberalism inherent in teaching and the ‘liberal’ curriculum in general. He’s not alone for the Texas State Education Board is set to vote on the first draft of the proposed standards in “United States History Studies Since Reconstruction,” which removes any and all references to liberal politics, according to Chron.com an online news service. The new standards require students “to identify significant conservative organizations and individuals, such as Newt Gingrich, Phyllis Schlafly and the Moral Majority.” The standards are expected to be adopted along party lines with all 10 Republicans voting in favor of the curriculum. But there’s more: One expert, David Barton, president of Wall Builders, recommended that “…the proper adjective for identifying U.S. values and processes should be “republican” rather than “democratic,” in the state’s textbooks (Chron.com “History’s first draft: Newt Gingrich but no liberals: Textbooks being written for Texas students appear to lean to the right,” Gary Scharrer, August 20, 2009). Newt will be on hand to rail against the brainwashing of our kids and their ‘civil rights’ to an ‘objective’ education as all part of the big reform.

The Skilled Manipulators and the Hyperbole of Hypocrisy

When thinking about propaganda and its perpetrators, like Gingrich, Sharpton and Arne Duncan, it is important to understand that it is a specific type of message presentation aimed at serving a particular agenda; even if the message conveys true information it still may be partisan and fail to paint a complete picture of an issue or controversy. In their book Propaganda and Persuasion, Dr. Garth S. Jowett and Victoria O’Donnell define propaganda as:

The deliberate, systematic attempt to shape perceptions, manipulate cognitions, and direct behavior to achieve a response that furthers the desired intent of the propagandist.

It is clear that people skilled in the art of Machiavellianism, manipulation and propaganda want to influence the beliefs and behavior of others and they will resort to all kinds of mechanisms to do so. Understanding psychology people like Gingrich, Sharpton and Duncan have insight into what makes people vulnerable to manipulation and they use language and images to manage perceptions. As a result, they strive to appear before others in a way that associates themselves with power, authority, expertise and conventional morality. That’s why they’ll parade into communities and grab media headlines.

Key actors in the march towards educational privatization are well aware of this need to control information so when advocating sweeping educational changes such as charter schools or for-profit EMOs, they use ‘rational’ means only when such means can be used to create the appearance of objectivity and reasonability. The key, here, is to understand that the skilled manipulators are always trying to keep some information and some points of view from being given a fair hearing while at the same time promoting their own storyline for dissemination through the corporate dominated press. It is the same tired, shameless behavior we’ve seen when we focus on health care.

None for all and all for none: Ginning up the anti teacher anti public parent base

For those witnessing the health care or health insurance reform issue as it is playing out on the national landscape, they will not be surprised when they begin to see the ‘astro turf’ groups assembled around charter schools emerge, if they haven’t already. This is another reason Arne and the gang are riveted on visiting major cities for they want to be on hand to applaud and cheer on the ‘grass root’ efforts aimed at charterizing a way forward. They need to work on the talking points developed by think tanks and right wing pundits for dissemination to the hoi polloi.

In the case of educational policy analysis, one way to begin to think critically on issues such as charter schools is to rightly focus on the highly vocal educational think tanks that purport to be non-partisan and objective, but in reality are supported by huge economic interests. Within the corridors of these think tanks walk the researchers, scholars and intellectuals that produce research to justify neo-liberal public policies that support charter schools, vouchers and other privatization schemes. Thus, one critical task in the debate over charter schools today is undoubtedly to help people recognize how the wealthy and powerful often prey on the credulity, gullibility, and vulnerability of the poor or poorly schooled in advocating public policies that favor their interests while at the same time avoiding critical public scrutiny. This of course is disconcerting for advocates of public disclosure, public transparency and political democracy in general and surely unacceptable for informed decision making and democratic oversight and governance. Yet this ghastly governance goes on seemingly unabated each and every day; non-disclosure and non-transparency are now more norm than aberration, the media more stenographers than journalists. One of the most insidious and popular efforts in arranging consent generating activities is to start ‘grassroots front groups’, as we’ve seen in the health car town hall fiascos.

Take the group ‘Parent Union’. Steve Barr, the originator of Green Dot Public Schools, a non-profit EMO out of LA, started Parent Union in Los Angeles a few years ago and it’s now spread its reach to Oregon. Although it’s still too premature to conclude, The Parent Union, from what I can understand is not entirely separate from the Parent Revolution, another ‘reform education’ group. In fact, plausible inferences suggest that the Parent Revolution is just the Parent Union’s driving force. Ben Austin, who brought EMO Green Dot Public Schools in for the Locke High School “turnaround,” started the Parent Revolution (Austin, conveniently, is also a city attorney for Los Angeles). The organization seeks to dismantle traditional Los Angeles public schools by getting parents to organize petition drives to have the schools ‘decertified’. The organization boasts at its website:

watch our video and find out how you can transform your child’s school. If 51% of the parents at your school sign the petition demanding a better school, we will guarantee your child a great school, in your neighborhood within three years (Parent Revolution)

This is how Green Dot managed to pull off a hostile takeover of Locke High School in Los Angeles, where Duncan and the crew can view the dismal test scores that came out last week, one year after the takeover by Green Dot. Chapters of Parent Revolution are popping up all over the state of California and in the Northwest. Some parents are concerned about what happens after getting the 51%, but what to worry, with the plethora of EMO’s like Barr’s and the candied promises of the managerial elite the gullible have found their answers. The Revolution is funded at least in part by billionaire Eli Broad, but Service Employee International Uunion (SEIU) is also chipping in, making for another set of interesting bedfellows and a discouraging platform for the future. Los Angeles is a mess and doesn’t promise to get better any time soon.

Marco Petruzzi, the President and Chief Executive Officer of Green Dot, is also the head of the Venice chapter of the Parent Union and although there is nothing to indicate he’s getting paid for his work with the parent organization, he’s certainly getting paid by Green Dot. How much? Hard to say for he became CEO in 2008 and the IRS 990 forms for Green Dot only run through 2007. Prior to joining Green Dot, according to their website, Marco founded ‘r3 school solutions’, an organization that provided management and administrative services to charter management organizations, another burgeoning business. Prior to founding r3 school solutions, he was a Partner at Bain & Company, a global management consulting firm. Marco has fifteen years of consulting experience working with top management of major international groups in corporate and product-market strategy, channel management, pricing strategy, commercial organization, operations, R&D management and supply chain management assignments, in the USA, South America, and Europe. Marco also worked at McKinsey & Co. and for Enichem Americas, a petrochemical trading company based in New York (Green Dot Website).

When the LA takeover of 250 schools was passed by a 6-1 vote on the resolution on August 25, 2009, Austin told the Parent Revolution afterwards:

We made history today. All of us are living together in a revolutionary moment. Big, scary, good, revolutionary change is happening right now, and we get to be part of it. We have parents standing together alongside the President of the United States calling for a revolution. That’s exciting. But there are two reasons for us to temper our joy, just a little bit.

First, because we haven’t done anything yet. This resolution — and all the great Parent Revolution organizing in East Los Angeles, Venice, and elsewhere — won’t mean a thing until we transform our first school, and begin the process of giving our children the education they need and the future they deserve. Until we transform that first school and help that first student, we have done nothing. The defenders of the status quo didn’t expect us to move so quickly. Maybe they underestimated us and were caught a little flat-footed. But they aren’t anymore. They now know what we can do, so we must do more. We have to work even harder to actually implement this resolution with parents all across Los Angeles.

Second, we need to be gracious winners. Because our opponents aren’t bad people. They care about kids too. I’ve consumed a tremendous amount of wine with A.J. Duffy and know him to be a smart, funny, nice person. The problem isn’t the people, it’s the system itself. More often than not, if we can change the system, we can work with the people. Even though major elements of organized labor opposed us today, there isn’t any reason why we shouldn’t ultimately be on the same side (Parent Revolution, September 9, 2009 http://www.parentrevolution.org/).

The Gingrich, Sharpton and Duncan show is certainly aimed at influencing and providing gravitas to the new parent insurgents intent on turning their children’s futures over to Wall Street CEO’s and concerned philanthropists and entrepreneurs. They’ll be egged on by the grey-haired and grotesque Gingrich, the lithe and goofy Arne Duncan and the ‘people’s champion and advocate, the Reverend Al Sharpton. Expect to see the three stage managers thronged by eager and justly frustrated parents talking about the platform for education as a ‘civil rights issue’ while fist bumping with the disillusioned and those devastated by more than thirty years of extinction economics.

Detecting the disinformation and dissembling the diatribe

Those of us interested in a democratic debate regarding charter schools, educational reform, privatization, teacher unions, authentic assessment, creative and relevant curriculum and the host of concerns that are currently considered ‘hot bed’ issues within the arena of education want and deserve a public discussion that includes equal coverage of dissenting as well as dominant points of view as they pertain to these controversies. We also do not wish to be seen as feckless fools who can be dominated by verbal rhetoric and propagandists. However, in our current hyper-media environment, controlled as it is by powerful corporate interests bundled up into think tanks, people now need to learn how to detect when some one is trying to manipulate them into believing or doing what they would not believe or do had they access to more information or further reasoning from dissenting points of view. Therefore, in order to assure a healthy debate on issues such as charter schools and educational policy, it is necessary to publicly disclose situations wherein people of wealth and power are manipulating people with little wealth and power, and specifically how the use of language and imagery is used to accomplish these ends. But don’t tell that to Duncan and his conspiratorial counterparts.

In the case of educational policy, one way to begin to think critically on issues such as charter schools is to focus on the highly vocal educational think tanks that purport to be non-partisan and objective, but in reality are supported by huge economic interests. Within the corridors of these think tanks walk the researchers, scholars and intellectuals that produce research to justify neo-liberal public policies that support charter schools, vouchers and other privatization schemes. Thus, one critical task in the debate over charter schools today is undoubtedly to help people recognize how the wealthy and powerful often prey on the credulity, gullibility, and vulnerability of the poor or poorly schooled in advocating public policies that favor their interests while at the same time avoiding critical public scrutiny. This of course is disconcerting for advocates of public disclosure, public transparency and political democracy in general and surely unacceptable for informed decision making and democratic oversight and governance. Yet it goes on seemingly unabated each and every day; non-disclosure and non-transparency are now more norm than aberration.

The Duncan, Gingrich and Sharpton alliance is only the latest in what can only be called disinformation and therefore really a callous disregard for democracy, working people, their communities and the disasters they face. For it is the economic disasters of the last thirty years of neoliberal economic theory and practice that has allowed the Chicago Boys to seize the national debate on everything from health care to education. And although President Obama has stated his opposition to dummied down standardized testing, his advisors and oafs like Duncan, Sharpton and Gingrich continue to forge policy and occupy the geographical debate over education. They have something very different in mind. They need No Child Left Behind not just for the fact that more and more schools are scheduled to fail under the rubric of its testing gallows, but because no NCLB will be one of the chief standards used to measure the performance of the new charter schools, and after all, isn’t that the point?

‘Duncan donuts’ with Arne will prove to be a memorable experience for all concerned with education, from the carpeted cubicles of Wall Street to the disastrous reality of main-street. The only real issue is whether the national media coverage will give a fair hearing to those who have other ideas for preserving and reforming America’s troubled educational systems, ideas that embrace education, participatory democracy and schooling as a moral value, not simply as factories for the manufacture of human products to compete with China. But if the health care debacle is any indication of what may lie in store for the public, look for the skilled manipulators like Duncan, Sharpton and Gingrich to weave tall tales even Paul Bunyan couldn’t hold a candle to and look for the corporate sock puppet press to be the willing stenographers for power they were hired to speak for.

Maybe it’s just me.

Then again, maybe not. Everywhere I go, the sense of impending doom about what’s happening in (and to) our country is palpable. ‘Course, there’s hope: just look at how the country’s come together over the national healthcare issue. With fellowship like that, how long can it be before we’re all debating excitedly ‘round city-sized bonfires, our animated dialogue punctuated by periodic AK47 bursts designed to drive (hollow) points home?

You know we’re firmly ensconced in bizarro world when America’s rulers can prosecute illegal warfare, torture people, shred the Constitution, steal us blind, out secret agents, strong-arm massive corporate welfare and let an entire city drown, yet it’s not until affordable universal healthcare is (ostensibly) proposed that that is the moment herds of screaming, puerile, manipulated-to-the-max neo-brownshirts decide their beloved America — the one that’s only truly ever existed in John Wayne movies, by the way — is under socialistic siege, subsequently demonstrating their suddenly-uncontainable umbrage by throwing big-time, small-minded pissy fits at faux town hall meetings.

The brandishing of firearms outside such events is an especially nice touch. I can only guess what would have happened at an anti-war march had any of us toted an assault rifle. Prior to a U.S. government-sponsored Frankenfoods conference here in Sacramento six years back, our scared witless shitty council (“Remember Seattle!” they were warned constantly by cops and funds-bearing feds) hastily passed a raft of anti-constitutional local ordinances, one of which authorized the arrest of any persons in town (like, say, dissenters, maybe?) found with dirtballs in their pockets.

That’s what I said: dirtballs in people’s pockets.

Speaking of Congress, I’m now convinced a poll could show 137% of Americans strongly favoring something and yet if their desire didn’t happen to coincide with the wishes of Big Business (as, you know, it so often does), then once again out would pop the corporatocracy’s jump-puppets — also known in some circles as “representatives” and “senators” — to engage in so many contortions explaining why they couldn’t give us what we wanted they’d make Russian gymnasts proud. My suggestion? Replace them with Russian gymnasts. We still wouldn’t get what we wanted but at least the back flips would be more expertly done.

Impotence is another thing that’s got me, uh, down. (No, not that kind of impotence — not that I would even know what that’s like. Ever. OK, mostly. All right, then, fine, but at least I still have my memories. Er…what was I saying?) And not that you’ve ever asked yourself this question, but: Just what the hell are we supposed to do to change things?

Vote? (For those who deem this a viable solution, please see jump-puppets reference.)

Protest? Please don’t tell my longtime activist girlfriend this, but while she and I are out there standing on the street corner with seventeen other diehards holding signs and hooting and hollering against the latest outrage, I often feel like the powers-that-be are laughing at us, mocking us. Ignoring us. (Imagine how much worse it would be if they really were!) Actually, I’m not sure which is more deflating: Bush declaring us a focus group, or Obama proving it.

Another bummer is seeing the classic tactics of misdirection and scapegoating being employed to perfection. Sure, the great unwashed (and unemployed) expressed righteous anger when the corporatists in charge tanked the global economy only to be given no-strings-attached trillions more, but their nastiest vitriol has nonetheless been loosed on folks who are blameless (but far more accessible): those fortunate enough to still have jobs and/or houses, including relatives, neighbors and (former) friends.

I should know: I work for California’s teacher licensing agency (no doubt created by Marxist infiltrators who decided our state’s educators should be, well, educated; can you imagine?). Collectively, my fellow (unionized) government employees and I are now public enemy numero uno, personally responsible for everything from massive budget deficits to women with loose morals (actually, that’s one I wouldn’t mind taking credit for… if only I could remember how to go about it). We’re being furloughed three days monthly at fourteen percent less pay but that still isn’t enough: our pitchfork-bearing detractors want all of our heads, regardless the disastrous impact on public services.

That cackling you hear is from the über-corporatists who know full well that envy is a terrible thing to waste and thus play on this natural human frailty to convince millions that if their houses have burned down, the solution is not to go after who set them afire in the first place but demand that others run out and torch theirs, too.

Normally, I’d wrap things up here with some pithy suggestion, but I’m afraid I’m plain pithed off, uh, out. However, I will say, upon further reflection, there actually may be some merit to that whole setting-things-ablaze idea.

Especially if the flash point were centered, you know, somewhere on Wall Street.

But two key words seem to have survived the attrition and withstood the test of time: imperialism and financialism.¹

Talk of imperialism and financialism – and particularly of the nexus between them – remains as catchy as ever. Marxists of different colours – from classical, to neo to post – find the two terms expedient, if not indispensable. Radical anarchists, conservative Stalinists and distinguished academics of various denominations all continue to use and debate them.

The views of course differ greatly, but there is a common thread: for most Marxists, imperialism and financialism are prime causes of our worldly ills. Their nexus is said to explain capitalist development and underdevelopment; it underlies capitalist power and contradictions; and it drives capitalist globalization, its regional realignment and local dynamics. It is a fit-all logo for street demonstrators and a generic battle cry for armchair analysts.

The secret behind this staying power is flexibility. Over the years, the concepts of imperialism and financialism have changed more or less beyond recognition, as a result of which the link between them nowadays connotes something totally different from what it meant a century ago.

The purpose of this article is to outline this chameleon-like transformation, to assess what is left of the nexus and to ask whether this nexus is still worth keeping.

Empire and Finance

The twin notions of imperialism and financialism emerged at the turn of the twentieth century. The backdrop is familiar enough. During the latter part of the nineteenth century, the leading European powers were busy taking over large tracts of non-capitalist territory around the world. At the same time, their own political economies were being fundamentally transformed. Since the two developments unfolded hand in hand, it was only natural for theorists to ask whether they were related – and if so, how and why.

The most influential explanation came from a British left liberal, John Hobson, whose work on the subject was later extended and modified by Marxists such as Rosa Luxemburg, Rudolf Hilferding, Vladimir Lenin and Karl Kautsky, among others.²

Framed in a nutshell, the basic argument rested on the belief that capitalism had changed: originally ‘industrial’ and ‘competitive’, the system had become ‘financial’ and ‘monopolistic’.

This transformation, said the theorists, had two crucial effects. First, the process of monopolization and the centralization of capital in the hands of the large financiers made the distribution of income far more unequal, and that greater inequality restricted the purchasing power of workers relative to the productive potential of the system. As a result of this imbalance, there emerged the spectre of ‘surplus capital’, excess funds that could not be invested profitably in the home market. And since this ‘surplus capital’ could not be disposed of domestically, it forced capitalists to look for foreign outlets, particularly in pristine, pre-capitalist regions.

Second, the centralization of capital altered the political landscape. Instead of the night-watchman government of the laissez-faire epoch, there emerged a strong, active state. The laissez-faire capitalists of the earlier era saw little reason to share their profits with the state and therefore glorified the frugality of a small central administration and minimal taxation. But the new state was no longer run by hands-off liberals. Instead, it was dominated and manipulated by an aggressive oligarchy of ‘finance capital’ – a coalition of large bankers, leading industrialists, war mongers and speculators who needed a strong state that would crack down on domestic opposition and embark on foreign military adventures.

And so emerged the nexus between imperialism and financialism. The concentrated financialized economy, went the argument, requires pre-capitalist colonies where surplus capital can be invested profitably; and the cabal of finance capital, now in the political driver’s seat, is able to push the state into an international imperialist struggle to obtain those colonies.

At the time, this thesis was not only totally new and highly sophisticated; it also fit closely with the unfolding of events. It gave an elegant explanation for the imperial bellicosity of the late nineteenth century, and it neatly accounted for the circumstances leading to the great imperial conflict of the first ‘World War’. There were of course other explanations for that war – from realist/statist, to liberal, to geopolitical, to psychological.³ But for most intellectuals, these alternative explications seemed too partial or instrumental compared to the sweeping inevitability offered by the nexus of empire and finance.

History, though, kept changing, and soon enough both the theory and its basic concepts had to be altered.

Monopoly Capital

The end of the Second World War brought three major transformations. First, the nature of international conflict changed completely. Instead of a violent inter-capitalist struggle, there emerged a Cold War between the former imperial powers on the one hand and the (very imperial) Soviet bloc on the other (with plenty of hot proxy conflicts flaring up in the outlying areas). Second, the relationship between core and periphery was radically altered. Outright conquest and territorial imperialism gave way to decolonization, while tax-collecting navies were replaced by the more sophisticated tools of foreign aid and foreign direct investment (FDI). Third and finally, the political economies of the core countries themselves were reorganized. Instead of the volatile laissez-faire regime, there arose a large welfare-warfare state whose ‘interventionist’ ideologies and counter-cyclical policies managed to reduce instability and boost domestic growth.

On the face of it, this new constellation made talk of finance-driven imperialism seem outdated if not totally irrelevant. But the theorists didn’t give up the nexus. Instead, they gave it a new meaning.

The revised link was articulated most fully by the Monopoly Capital School associated with the New York journal Monthly Review.⁴ Capitalism, argued the writers of this school, remains haunted by a lack of profitable investment outlets. And that problem, along with its solution, can no longer be explained in classical Marxist terms.

The shift from competition to oligopoly that began in the late nineteenth century, these writers claimed, was now complete. And that shift meant that Marx’s ‘labour theory of value’ and his notion of ‘surplus value’ had become more or less irrelevant to capitalist pricing.

In the brave new world of oligopolies, the emphasis on non-price competition speeds up the pace of technical change and efficiency gains, making commodities cheaper and cheaper to produce. But unlike in a competitive system, these rapid cost reductions do not translate into falling prices. The prevalence of oligopolies creates a built-in inflationary bias which, despite falling costs, makes prices move up and sometimes sideways, but rarely if ever down.

This growing divergence between falling costs and rising prices increases the income share of capitalists, and that increase reverses the underlying course of capitalism. Marx believed that the combination of ever-growing mechanization and ruthless competition creates a ‘tendency of the rate of profit to fall’. But the substitution of monopoly capitalism for free competition inverts the trajectory. The new system is ruled by an opposite ‘tendency of the surplus to rise’.

The early theorists of imperialism, although using a different vocabulary, understood the gist of this transformation. And even though they did not provide a full theory to explain it, they realized that the consequence of that transformation was to shift the problem of capitalism from production to circulation (or in later Keynesian parlance, from ‘aggregate supply’ to ‘aggregate demand’). The new capitalism, they pointed out, suffered not from insufficient surplus, but from too much surplus, and its key challenge now was how to ‘offset’ and ‘absorb’ this ever-growing excess so that accumulation could keep going instead of coming to a halt.

That much was already understood at the turn of the twentieth century. But this is where the similarity between the early theorists of imperialism and the new analysts of Monopoly Capital ends.

Black Hole: The Role of Institutionalized Waste

Until the early twentieth century, it seemed that the only way to offset the growing excess was productive and external: the surplus of goods and capital had to be exported to and invested in pre-capitalist colonies. But as it turned out, there was another solution, one that the early theorists hadn’t foreseen and that the analysts of Monopoly Capital now emphasized. The surplus could also be disposed off unproductively and internally: it could be wasted at home.

For the theorists of Monopoly Capital, ‘waste’ denoted expenditures that are necessary neither for producing the surplus nor for reproducing the population, and that are, in that sense, totally unproductive and therefore wasteful. These expenditures absorb existing surplus without ever creating any new surplus, and this double feature enables them to mitigate without ever aggravating the ‘tendency of the surplus to rise’.

The absorptive role of wasteful spending wasn’t entirely new, having already been identified at the turn of the twentieth century by Thorstein Veblen.⁵ But it was only after the Second Word War, with the entrenchment of the Fordist model of mass production and consumption and the parallel rise of the welfare-warfare state, that the process was fully and conscientiously institutionalized as a salient feature of monopoly capitalism.

By the end of the war, the U.S. ruling class grew fearful that demobilization would trigger another severe depression; and having accepted and internalized the stimulating role of large-scale government spending, it supported the creation of a new ‘Keynesian Coalition’ that brought together the interests of big business, the large labour unions and various state agencies. The hallmark of this coalition was immortalized in a secret U.S. National Security Council document (NSC-62), whose writers explicitly called on the government to use high military spending as a way of securing the internal stability of U.S. capitalism.⁶

According to its theorists, monopoly capitalism gave rise to many forms of institutionalized waste – including a bloated sales effort, the creation of new ‘desires’ for useless goods and services and the acceleration of product obsolescence, among other strategies. But the two most significant types of waste were spending on the military and on the financial sector.

The importance of these latter expenditures, went the argument, lies in their seemingly limitless size. The magnitude of military expenditures has no obvious ceiling: it depends solely on the ability of the ruling class to justify the expenditures on grounds of national security. Similarly with the size of the financial sector: its magnitude expands with the potentially limitless inflation of credit. This convenient expandability turns military spending and financial intermediation into a giant ‘black hole’ (our term): they suck in large chunks of the excess surplus without ever generating any excess surplus of their own.⁷

Now, on the face of it, the efficacy of this domestic black hole should have made imperialism less necessary if not wholly redundant. According to the theorists of Monopoly Capital, though, this would be the wrong conclusion to draw. It is certainly true that, unlike the old imperial system, monopoly capitalism no longer needs colonies. But the absence of formal colonies is largely a matter of appearance. Remove this appearance and you’ll see the imperial impulse pretty much intact: the core continues to exploit, dominate and violate the periphery for its own capitalist ends.⁸

Spearheaded by U.S.-based multinationals and no longer hindered by inter-capitalist wars, argued the theorists, the new order of monopoly capitalism has become increasingly global and ever more integrated. And this global integration, they continued, has come to depend on an international division of labour, free access to strategic raw materials and political regimes that are ideologically open for business. However, these conditions do not develop automatically and peacefully. They have to be actively promoted and enforced – often against stiff domestic opposition – and they have to be safeguarded against external threats (the Soviet bloc before its collapse, Islamic fundamentalism and rogue states since then, etc.). And because such promotion and enforcement hinge on the threat and frequent use of violence, there is an obvious justification if not outright need for a large, well-equipped army sustained by large military budgets.

In this context, military spending comes to serve a dual role: together with the financial sector and other forms of waste, it propels the accumulation of capital by black-holing a large chunk of the economic surplus; and it helps secure a more sophisticated and effective neo-imperial order that no longer needs colonial territories but is every bit as expansionary, exploitative and violent as its crude imperial predecessor.

Dependency

The notion of neo-imperialism boosted and gave credence to a subsidiary theory of dependency.⁹ This support was somewhat paradoxical, since the lineage between the two theories was weak if not contradictory. Recall that, by emphasizing the role of domestic waste, the theory of Monopoly Capital served to deemphasize if not totally negate the absorptive importance of the periphery. But the analysts of dependency put their own emphasis elsewhere. The persistence of (neo) imperialism, they claimed, showed that, regardless of its own internal dynamics, the core still needs to keep the periphery chronically subjugated and underdeveloped.

This dependency, went the argument, is the outcome of five hundred years of colonial destruction. During that period, the imperial powers systematically undermined the socio-economic fabric of the periphery, making it totally dependent on the core. In this way, when decolonization finally started, the periphery found itself unable to take off while the capitalist core prospered. There was no longer any need for core states to openly colonize and export capital to the periphery. Using their disproportionate economic and state power, the former imperialist countries were now able to hold the postcolonial periphery in a state of debilitating economic monoculture, political submissiveness and cultural backwardness – and, wherever they could, to impose on it a system of unequal exchange.

Unequal exchange can take different forms. It may involve a wage gap between the ‘less exploited’ labour aristocracy of the core and the ‘more exploited’ simple labour of the periphery. Or the core can compel the periphery to buy its exports at ‘high’ prices (relative to their ‘true’ value), while importing the periphery’s products at ‘low’ prices (relative to their ‘true’ value). As a result of this latter difference, the terms of trade get ‘distorted’, surplus is constantly siphoned into the core (rather than exported from or domestically absorbed by the core), and the eviscerated periphery remains chronically underdeveloped.¹⁰

This logic of dependent underdevelopment was first articulated during the 1950s and 1960s as an antidote to the liberal modernization thesis and its Rostowian promise of an imminent takeoff.¹¹ And at the time, that antidote certainly seemed to be in line with the chronic stagnation of peripheral countries.

But what started as a partial theory soon expanded into a sweeping history of world capitalism. According to this broader narrative, capitalism was and remained imperial from the word go: it didn’t simply start with conquest; it started because of conquest. Its very inception was predicated on geographical exploitation and domination – a process in which the financial-commercial metropolis (say England) used the surplus extracted from a productive periphery (say India) to kick-start its own economic growth. And once started, the only way for this growth to be sustained is for the metropolis to continue to eviscerate the periphery around it. The development of the emperor depends on and necessitates the underdevelopment of its subjects.

The next theoretical step was to fit this template into an even broader concept of a World System – an all-encompassing global approach that seeks to map the hierarchical political relationships, division of labour and flow of commodities and surplus between the peripheral countries at the bottom, the semi-peripheral satellites in the middle and the financial core at the apex. From the viewpoint of this larger retrofit, capitalism is no longer the outcome of a specific class struggle, a conflict that developed in Western Europe during the twilight of feudalism and later spread to and reproduced itself in the rest of the world. Instead, capitalism – to the extent that this term can still be meaningfully used – is merely the outer appearance of Europe’s imperial expedition to rob and loot the rest of the world.

This view reflected a fundamental change in emphasis. Whereas earlier Marxist theorists of imperialism accentuated the centrality of exploitation in production, dependency and World System analysts shifted the focus to trade and unequal exchange. And while previous theories concentrated on the global class struggle, dependency and World System analyses spoke of a conflict between states and geographical regions. The new framework, although nominally ‘Marxist’ on the outside, has little Marxism left on the inside.¹²

And if we are to believe the postists who quickly jumped on the dependency bandwagon, there is nothing particularly surprising about this particular theoretical bent. After all, ‘history’ is no more than an ethno-cultural clash of civilizations, a never-ending cycle of imperial ‘hegemonies’ in which the winners (ego) impose their ‘culture’ on the losers (alter).¹³ To the naked eye, the totalizing capitalization of our contemporary world may seem like a unique historical process. But don’t be deceived. This apparent uniqueness is a flash in the pan. Deconstruct it and what you are left with is yet another imperial imposition – in this case, the imposition of a Euro-American ‘financialized discourse’ on the rest of the world.

Red Giant: An Empire Imploded

The dependency version of the nexus, though, didn’t hold for long, and in the 1970s the cards again got shuffled. The core stumbled into a multifaceted crisis: the United States suffered a humiliating defeat in Vietnam, stagflation decelerated and destabilized the major capitalist countries and political unrest seemed to undermine the legitimacy of the capitalist regime itself. In the meantime, the periphery confounded the theorists: on the one hand, import substitution, the prescribed antidote to dependency, pushed developing countries, primarily in Latin America, into a debt trap; on the other hand, the inverse policy of privatization and export promotion, implemented mostly in East Asia, triggered an apparent ‘economic miracle’. Taken together, these developments didn’t seem to sit well with the notion of Western financial imperialism. And so, once more the nexus had to be revised.

According to the new script, ‘financialization’ is no longer a panacea for the imperial power. In fact, it is prime evidence of imperial decline.

The reasoning here goes back to the basic Marxist distinction between ‘industrial’ activity on the one hand and ‘commercial’ and ‘financial’ activities on the other. The former activity is considered ‘productive’ in that it generates surplus value and leads to the accumulation of ‘actual’ capital. The latter activities, by contrast, are deemed ‘unproductive’; they don’t generate any new surplus value and therefore, in and of themselves, do not create any ‘actual’ capital.

This distinction – which most Marxists accept as sacrosanct – has important implications for the nexus of imperialism and financialism. It is true, say the advocates of the new script, that finance (along with other forms of waste) helps the imperial core absorb its rising surplus – and in so doing prevents stagnation and keeps accumulation going. But there is a price to pay. The addiction to financial waste ends up consuming the very fuel that sustains the core’s imperial position: it hollows out the core’s industrial sector, it undermines its productive vitality, and, eventually, it limits its military capabilities. The financial sector itself continues to expand absolutely and relatively, but this is the expansion of a ‘red giant’ (our term) – the final inflation of a star ready to implode.

The process leading to this implosion is emphasized by theories of hegemonic transition.¹⁴ The analyses here come in different versions, but they all seem to agree on the same basic template. According to this template, the maturation of a hegemonic power – be it Holland in the seventeenth century, Britain in the nineteenth century or the United States presently – coincides with the ‘over-accumulation’ of capital (i.e. the absence of sufficiently profitable investment outlets). This over-accumulation – along with growing international rivalries, challenges and conflicts – triggers a system-wide financial expansion, marked by soaring capital flows, a rise in market speculation and a general inflation of debt and equity values. The financial expansion itself is led by the hegemonic state in an attempt to arrest its own decline, but the reprieve it offers can only be temporary. Relying on finance drains the core of its energy, causes productive investment to flow elsewhere and eventually sets in motion the imminent process of hegemonic transition.

Although the narrative here is universal, its inspiration is clearly drawn from the apparent ‘financialized decline’ of U.S. hegemony. Since the 1970s, many argue, the country has been ‘depleted’: it has grown overburdened by military spending; it has gotten itself entangled in unwinnable armed conflicts, and it has witnessed its industrial-productive base sucked dry by a Wall Street-Washington Complex that prospers on the back of rising debt and bloated financial intermediation.¹⁵

In order to compensate for its growing weakness, these observers continue, the United States has imposed its own model of ‘financialization’ on the rest of the world, hoping to scoop the resulting expansion of liquidity. Some states have been compelled to replicate the model in their own countries, others states have been tempted to finance it by buying U.S. assets, and pretty much all states have been pulled into an unprecedented global whirlpool of capital flow.

The spread of ‘financialization’, though, has only been party successful. For a while, the United States benefited from being able to control, manipulate and leverage this expansion for its own ends. But in the opinion of many, the growing severity of recent financial, economic and military crises suggests that this ability has been greatly reduced and that U.S. hegemony is now coming to an end.

Capital Flow and Transnational Ownership

The highly publicized nature of these imperial misgivings makes this latest version of the nexus seems persuasive. But when we look more closely at the facts, the theoretical surface no longer seems smooth; and as we get even closer to the evidence, cracks begin to appear.

Start with the cross-border flow of capital, the international manifestation of ‘financialization’. This process is often misunderstood, even by high theorists, so a brief clarification is in order. Contrary to popular belief, the flow of capital is financial, and only financial. It consists of legal transactions, whereby investors in one country buy or sell assets in another – and that is it. There is no flow of material or immaterial resources, productive or otherwise. The only things that move are ownership titles.¹⁶

These changes in ownership, of course, are of great importance. If the flow of capital is large enough, the stock of foreign owned assets will grow relative to domestically owned assets. And as the ratio rises, the ownership of capital becomes increasingly transnational.

The history of this process, from 1870 to the present, is sketched in Figure 1, where we plot the total value of all foreign assets as a percent of global GDP (both denominated in dollars). The underling numbers, admittedly, are not very accurate. The raw data on foreign ownership are scarce; often they are of questionable quality; rarely if ever are they available on a consistent basis; and almost always they require painstaking research to collate and heroic assumptions to calibrate. There are also huge problems in estimating global GDP, particularly for earlier periods. But even if we take these severe limitations into consideration, the overall picture seems fairly unambiguous.¹⁷

The figure shows three clear periods: 1870-1900, 1900-1960 and 1960-2003. The late nineteenth century, marked by the imperial expansion of ‘finance capital’, saw the ratio of global foreign assets to global GDP more than double – from 7% in 1870 to 19% in 1900. This upswing was reversed during the first half of the twentieth century. The mayhem created by two world wars and the Great Depression on the one hand and the emergence of domestic ‘institutionalized waste’ on the other undermined the flow of capital and caused the share of foreign ownership to recede. By 1945, with the onset of decolonization under U.S. ‘hegemony’ and the beginning of the Cold War, the ratio of foreign assets to global GDP hit a record low of 5%. This was the nadir. The next half century brought a massive reversal. In the early 1980s, when Ronald Reagan and Margaret Thatcher announced the beginning of neoliberalism, the ratio of foreign assets to GDP was already higher than in 1900; and, by 2003, after a quarter century of exponential growth, it reached an all time high of 122%.

This final number represents a significant level of transnational ownership. According to recent research by the McKinsey Global Institute, between 1990 and 2006 the global proportion of foreign-owned assets has nearly tripled, from 9% to 26% of all world assets (both foreign and domestically-owned). The increase was broadly based: foreign ownership of corporate bonds rose from 7% to 21% of the world total, foreign ownership of government bonds rose from 11% to 31% and foreign ownership of corporate stocks rose from 9% to 27%.¹⁸

The next step is to break the aggregate front and examine the distribution of ownership. This is what we do in Figure 2, which compares the foreign asset shares of British and U.S. owners from 1825 to the present. The chart shows two important differences between the earlier era of ‘classical imperialism’ dominated by Britain and the more recent ‘neo-imperial’ period led by the United States.

First, there is the pattern of decline. British owners saw their share of global assets fall from the mid-nineteenth century onward, but until the end of the century their primacy remained intact. The real challenge came only in the twentieth century, when capital flow decelerated sharply and foreign asset positions were unwound; and it was only in the interwar period, when foreign investment gave way to capital flight, that the share of British owners fell below 50%.

The U.S. experience was very different. U.S. owners achieved their primacy right after the Second World War, when capital flow had already been reduced to a trickle – and that position was undermined the moment capital flow started to pick up. In 1980, when U.S. ‘financialization’ started in earnest, U.S. owners accounted for only 28% of global foreign assets. And by 2003, when record capital flow and the U.S. invasion of Afghanistan and Iraq prompted many Marxists to pronounce the dawn of an ‘American Empire’, the asset share of U.S. owners was reduced to a mere 18%.

Second, there is the identity of the leading owners. In the previous transition, power shifted from owners in one core country (Britain) to those in another (the United States). By contrast, in the current transition (assuming one indeed is underway) the contenders are often from the periphery. In recent years, owners from China, OPEC, Russia, Brazil, Korea and India, among others, have become major foreign investors with significant international positions – including large stakes in America’s ‘imperial’ debt.

Does this shift of foreign ownership represent the rising hegemony of countries such as China – or is what we are witnessing here yet another mutation of imperialism? Perhaps, as some observers seem to imply, we’ve entered a (neo) neo-imperial order in which the ‘Empire’ actually boosts its power by selling off its assets to the periphery?

The Global Distribution of Profit

Surprising as it may sound, such a sell-off is not inconsistent with the basic theory of hegemonic transition. To reiterate, according to this theory, hegemonic transitions are always marked by a financial explosion which is triggered, led and leveraged by the core in a vain attempt to arrest its imminent decline. Supposedly, this explosion enables the hegemonic power to amplify its financial supremacy in order to (temporarily) retain its core status and power. And if retaining that power requires the devolution of foreign assets and the sell-off of domestic ones, so be it.

The question is how to assess this power. How do we know whether the core’s attempt to leverage global ‘financialization’ is actually working? Is there a meaningful benchmark for power, and how should this benchmark be used and understood?

Unfortunately, most theorists of hegemonic transitions tend to avoid the nitty gritty data, so it’s often unclear how they themselves gauge the shifting trajectories of global power. But given the hyper-capitalist nature of our epoch, it seems pretty safe to begin with the bottom line: net profit.

Net profit is the pivotal magnitude in capitalism. It determines the health of corporations, it tells investors how to capitalize assets, it sets limits on what government officials feel they can and cannot do. It is the ultimate yardstick of capitalist power, the category that subjugates the social individual and makes the whole system tick. It is the one magnitude than no researcher of capitalism can afford to ignore.

With this obvious rationale in mind, consider Figure 3, which traces the distribution of global net profit earned by publicly-traded corporations. The chart, covering the period from 1974 to the present, shows three profit series, each denoting the profit share of a distinct corporate aggregate: (1) firms listed in the United States; (2) firms listed in developed markets excluding the United States; and (3) firms listed in the rest of the world – i.e., in ‘emerging markets’.

The data demonstrate a sharp reversal of fortune. Until the mid-1980s, U.S.-listed firms dominated: they scooped roughly 60% of all net profits, leaving firms listed in other developed markets 35% of the total and those listed in ‘emerging market’ less than 5%.

But then the tables turned. During the second half of the 1980s, the net profit share of U.S.-listed firms plummeted, falling to 36% in less than a decade. The 1990s seemed to have stabilized the decline, but in the early 2000s the downward drift resumed. By the end of the decade, U.S. firms saw their net profit fall to 29% of the world total.

The other two aggregates moved in the opposite direction. By 2009, the profits of firms listed in developed countries other than the U.S. reached 53% of the total, while the share of ‘emerging market’ firms quadrupled to 18%.

These numbers, of course, should be interpreted with care. First, note that our profit data here cover only publicly traded firms; they don’t include unlisted, private firms. This fact means that variations in profit shares reflect two very different processes: (1) changes in the amount of profit earned by listed firms, and (2) the pace of listing and delisting of firms. The latter factor became important during the late 1980s and 1990s, when Europe and the ‘emerging markets’ saw their stock market listings swell with many private corporations going public – this at a time when the number of listed firms in the United States remained flat.

Second, the location of a firm’s listing says nothing about its operations and owners. Many firms whose shares are traded in the financial centres of the United States and Europe in fact operate elsewhere. And then there is the issue of ultimate ownership. Recall that currently one third of all global assets are owned by foreigners. This proportion is already large enough to make it difficult to determine the ‘nationality of capital’, and if it were to rise further the whole endeavour would become an exercise in futility.

The theoretical implications of these caveats have received little or no attention from students of hegemonic transitions, and their quantitative implications remain unclear. But even if we take the ‘nationality of capital’ at face value and consider the numbers in Figure 3 as accurate, it remains obvious that ‘financialization’ has not worked for the hegemonic power: despite the alleged omnipotence of its Wall Street-Washington Complex, despite its control over key international organizations, despite having imposed neoliberalism on the rest of the world, and despite its seemingly limitless ability to borrow funds and suck in global liquidity – the bottom line is that the net profit share of U.S. listed corporations has kept falling and falling.

The Engine of ‘Financialization’

Now, in and of itself, the collapse of the U.S. profit share – much like the sell-off of U.S. assets – isn’t at odds with the theory of hegemonic transition. To repeat, this theory suggests that the hegemonic/imperial power, having been weakened by its prior financial excesses (among other ills), will kick-start, promote and sustain a system-wide process of ‘financialization’. According to the theory, the latent purpose is to leverage this process in order to slow down the hegemon’s own decline – but nowhere does the theory say that this ‘strategy’, whether conscious or not, has to succeed.

Presented in this way, the story sounds historically compelling, logically consistent and empirically convincing – but only if we can first establish one basic fact. We need to show that the global process of ‘financialization’ indeed has been led by the United States. This is the starting point. Only if U.S. ‘financialization’ preceded, was bigger than and propelled ‘financialization’ in the rest of the world can we speak of the U.S. leveraging this process for its own ends. And only then can we assess whether that leveraging succeeded or failed.

So let’s look at the evidence.

Concepts and Methods

The initial step in this sequence is to measure ‘financialization’. Conceptually, the task may seem simple. All we need to do is calculate the share of financial activity in overall economic activity and then trace the trajectory of the resulting ratio. When this ratio goes up, we can say that the economy is being ‘financialized’; when it comes down we would conclude that it is being ‘de-financialized’.

But that’s easier said than done.¹⁹

The basic difficulty is that capitalism is mediated through money, and that fact makes every mediated activity both ‘economic’ and ‘financial’ at the same time. As we have already seen, heterodox economists bypass the problem by defining ‘finance’ more narrowly to denote activities that merely shuffle money and credit without producing ‘real’ goods and services (and obviously without generating any surplus value and ‘actual capital’). Unfortunately, though, this yardstick isn’t very practical. In order to use it, the economist needs to know which activity is ‘productive’ and which is not; and yet, strange as it may sound, this is something that economists do not – and indeed cannot – know. Despite hundreds of years of theorizing and endless claims to the contrary, they remain unable to actually measure ‘productivity’. They cannot quantify the productivity of the CEO of a large bank – or of an auto mechanic for that matter. In fact, they don’t even have the units with which to measure such productivity.

The only thing they can do is to assume. Mainstream economists assume that productivity is ‘revealed’ by income, so if the CEO earns 1,000 times more than the mechanic, he must be 1,000 more productive. Marxists reject this arbitrary assumption; instead, they stipulate, also arbitrarily, that financiers are unproductive while mechanics are productive – although this claim still leaves them unsure of how to treat actual corporations, where ‘unproductive’ and ‘productive’ activities are always inextricably intertwined.

The net result is that we don’t have a clear theoretical definition for ‘finance’ and therefore no objective way to assess the extent of ‘financialization’.

But not all is lost.

We certainly can stick with conventions – and the convention, at least among capitalists and investors, is to treat ‘finance’ as synonymous with the FIRE sector; i.e., with firms whose primary activities involve financial intermediation (banking, trust funds, brokerages, etc.), insurance or real estate.

Based on this conventional (albeit theoretically loose) definition of finance, and given our specific concern here with capitalist power, it seems appropriate to proxy the extent and trajectory of ‘financialization’ by looking at the share of total net profit accounted for by FIRE corporations. The magnitude of this share would indicate the extent to which FIRE firms have been able to leverage ‘financialization’ for their own end, and the way this share changes over time would tell us whether their leverage has increased or decreased.

The Inconvenient Facts

This distributional measure of ‘financialization’ is depicted by the two series in Figure 4. The first series shows the net profit of FIRE corporations as a percent of the net profit of all U.S.-listed firms. The second series computes the same ratio for firms listed outside the United States.

And here we run into a little surprise.

According to the theory of hegemonic transition, the engine of ‘financialization’ is the United States. This is the black hole of the World System. It is the site where finance has been used most extensively to absorb the system’s surplus. It is the seat of the all-powerful Wall Street-Washington Complex. It is where neoliberal ideology first took command and from where it was later imposed with force and temptation on the rest of the world. It is the engine that led, pulled and pushed the entire process.

But the facts in Figure 4 seem to tell a different story. According to the chart, the United Sates has not been leading the process. If anything, it seems to have been ‘dragged’ into the process by the rest of the world. …

During the early 1970s, before the onset of systemic ‘financialization’, the U.S. FIRE sector accounted for 6% of the total net profit of U.S.-listed firms. At the time, the comparable figure for the rest of the world was 18% – three times as high! From then on, the United States was merely playing catch-up. Its pace of ‘financialization’ was faster than in the rest of the world; but with the sole exception of a brief period in the late 1990s, its level of ‘financialization’ was always lower. In other words, if we wish to stick with the theory of a finance-fuelled red giant that is slowly imploding as its peripheral liquidly runs out, we should apply that theory not to the United States, but to the rest of the world!

Indeed, even the most recent period of crisis seems at odds with the theory. According to the conventional creed, both left and right, the current crisis is payback for the sins of excessive ‘financialization’ and improper bubble blowing.²⁰ In this Galtonean theory, deviations and distortions always revert to mean, ensuring that the biggest sinners end up suffering the most. And since the U.S. FIRE sector was supposedly the main culprit, it was also the hardest hit.

The only problem is that, according to Figure 4, the U.S. wasn’t the main culprit. On the eve of the crisis, the extent of ‘financialization’ was greater in the rest of the world than in the U.S. And yet, although the world’s financiers committed the greater sin, it was their U.S. counterparts who paid the heftier price. The former saw their profit share decline mildly from 37% to 25% of the total, while the latter watched their own share crash from 32% to 10%.

The gods of finance must have their own sense of justice.

The End of a Nexus?

Of course, this isn’t the first time that a monkey wrench has been thrown into the wheels of the ever-changing nexus of imperialism and financialism. As we have seen, over the past century the nexus had to be repeatedly altered and transformed to match the changing reality. Its first incarnation explained the imperialist scramble for colonies to which finance capital could export its ‘excessive’ surplus. The next version talked of a neo-imperial world of monopoly capitalism where the core’s surplus is absorbed domestically, sucked into a ‘black hole’ of military spending and financial intermediation. The third script postulated a World System where surplus is imported from the dependent periphery into the financial core. And the most recent edition explains the hollowing out of the U.S. core, a ‘red giant’ that had already burned much of its own productive fuel and is now trying to ‘financialize’ the rest of the world in order to use the system’s external liquidity.

Yet, here, too, the facts refuse to cooperate: contrary to the theory, they suggest that U.S. ‘Empire’ has followed rather than led the global process of ‘financialization’ and that U.S. capitalists have been less dependent on finance than their peers elsewhere.

Of course, this inconvenient evidence could be dismissed as cursory – or, better still, neutralized by again adjusting the meaning of imperialism and financialism to fit the new reality. But maybe it’s time to stop the carousel and cease the repeated retrofits. Perhaps we need to admit that, after a century of transmutations, the nexus of imperialism and financialism has run its course, and that we need a new framework altogether.

1. The precise terms are rather loose and their use varies across theorists and over time. Imperialism, empire and colonialism are used interchangeably, as are finance, fictitious capital finance capital, financialization and financialism. Here we use imperialism and financialism simply because they rhyme.
2. John. A. Hobson, Imperialism: A Study (Ann Arbor: University of Michigan Press, 1902 [1965]); Rosa Luxemburg, The Accumulation of Capital, with an introduction by Joan Robinson, translated by A. Schwarzschild (New Haven: Yale University Press, 1913 [1951]); Rudolf Hilferding, Finance Capital: A Study of the Latest Phase of Capitalist Development, edited with an introduction by Tom Bottomore, from a translation by Morris Watnick and Sam Gordon (London: Routledge & Kegan Paul, 1910 [1981]); Vladimir I. Lenin, ‘Imperialism, The Highest State of Capitalism’, in Essential Works of Lenin. ‘What Is to Be Done?’ and Other Writings (New York: Dover Publications, Inc., 1917 [1987]), p. 177-270; Karl Kautsky, ‘Ultra-Imperialism’, New Left Review, 1970, No. 59 (Jan/Feb), p. 41-46 (original German version published in 1914).
3. See, for example, Joseph A. Schumpeter, Imperialism and Social Classes, with an introduction by Bert Hoselitz, translated by Heinz Norden (New York: Meridian Books, 1919; 1927 [1955]); Barbara Wertheim Tuchman, The Guns of August (New York: Macmillan, 1962) and The Proud Tower: A Portrait of the World Before the War, 1890-1914 (New York: Macmillan, 1966); and Paul M. Kennedy, The Rise and Fall of the Great Powers (New York: Random House, 1987), Ch. 5.
4. Some of the important contributions to this literature include Josef Steindl, Maturity and Stagnation in American Capitalism (New York: Monthly Review Press, 1952 [1976]); Shigeto Tsuru, ‘Has Capitalism Changed?’ in Has Capitalism Changed? An International Symposium on the Nature of Contemporary Capitalism, edited by S. Tsuru (Tokyo: Iwanami Shoten, 1956), p. 1-66. Paul A. Baran and Paul M. Sweezy, Monopoly Capital: An Essay on the American Economic and Social Order (New York: Modern Reader Paperbacks, 1966); and Harry Magdoff, The Age of Imperialism: The Economics of U.S. Foreign Policy, 1st Modern Reader ed. (New York: Monthly Review Press, 1969).
5. Veblen’s early analysis is articulated in The Theory of Business Enterprise (Clifton, New Jersey: Augustus M. Kelley, Reprints of Economics Classics, 1904 [1975]).
6. See U.S. National Security Council, NSC 68: United States Objectives and Programs for National Security. A Report to the President Pursuant to the President’s Directive of January 31, 1950. Top Secret (Washington DC, 1950); David A. Gold, ‘The Rise and Fall of the Keynesian Coalition’, Kapitalistate, 1977, Vol. 6, No. 1, p. 129-161; and Jonathan Nitzan and Shimshon Bichler, ‘Cheap Wars’, Tikkun, August 9, 2006.
7. Classical Marxists interpret the role of waste rather differently. In their account, wasteful spending withdraws surplus from the accumulation process; this withdrawal reduces the pace at which constant capital accumulates; and that reduction lessens the tendency of the rate of profit to fall. See for example Michael Kidron, Capitalism and Theory (London: Pluto Press, 1974).
8. Perhaps the clearest advocate of this argument was the late Harry Magdoff, a writer whose empirical and theoretical studies stand as a beacon of scientific research; for a summary, see his Imperialism Without Colonies (New York: Monthly Review Press, 2003). Similar claims (minus the research) are offered by Ellen Meiksins Wood, Empire of Capital (London and New York: Verso, 2003).
9. Some of the important texts here include Raúl Prebisch, The Economic Development of Latin America and its Principal Problems (New York: United Nations, 1950); Paul A. Baran, The Political Economy of Growth (New York and London: Modern Reader Paperbacks, 1957); Andre Gunder Frank, Capitalism and Underdevelopment in Latin America: Historical studies of Chile and Brazil (New York: Monthly Review Press, 1967); Arghiri Emmanuel, Unequal Exchange. A Study of the Imperialism of Trade (New York: Monthly Review Press, 1972); Eduardo H. Galeano, Open Veins of Latin America: Five Centuries of the Pillage of a Continent (New York: Monthly Review Press, 1973). Samir Amin, Accumulation on a World Scale: A Critique of the Theory of Underdevelopment. 2 vols. (New York: Monthly Review Press. 1974); Immanuel Maurice Wallerstein, The Modern World-System. Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century (New York: Academic Press, 1974) and The Modern World-System II: Mercantilism and the Consolidation of the European World-Economy, 1600-1750 (New York: Academic Press, 1980); and Fernando Henrique Cardoso and Enzo Faletto, Dependency and Development in Latin America (Berkeley: University of California Press, 1979).
10. The inverted commas in this paragraph highlight concepts that the theory of unequal exchange can neither define nor measure. Since nobody knows the correct value of labour power, it is impossible to determine the extent of ‘exploitation’ in the two regions. Similarly, since no one knows the ‘true’ value of commodities, there is no way to assess the extent to which export and import prices are ‘high’ or ‘low’. This latter ignorance makes it impossible to gauge the degree to which the terms of trade are ‘distorted’ and, indeed, in whose favour; and given that we don’t know the magnitude or even the direction of the ‘distortion’, it is impossible to tell whether surplus flows from the periphery to the core or vice versa, and how large the flow might be.
11. W.W. Rostow, The Stages of Economic Growth: A Non-Communist Manifesto (Cambridge, England: Cambridge University Press, 1960).
12. The question of what constitutes a ‘proper’ Marxist framework is highlighted in the debates over the transition from feudalism to capitalism. Important contributions to these debates are Maurice Dobb, Studies in the Development of Capitalism. London: Routledge & Kegan Paul Ltd., 1946. [1963]); Paul M. Sweezy ‘A Critique’, in The Transition from Feudalism to Capitalism, Introduction by Rodney Hilton, edited by R. Hilton (London: Verso, 1950 [1978]); Robert Brenner, ‘The Origins of Capitalist Development: A Critique of Neo-Smithian Marxism’, New Left Review, 1977, No. 104 (July-August), p. 25-92; and Robert Brenner, ‘Dobb on the Transition from Feudalism to Capitalism’, Cambridge Journal of Economics, 1978, Vol. 2, No. 2 (June), p. 121-140. For edited volumes on this issue, see Rodney Hilton, ed., The Transition from Feudalism to Capitalism, Introduction by Rodney Hilton (London: Verso, 1978); and T. H. Aston and C. H. E. Philpin, eds., The Brenner Debate: Agrarian Class Structure and Economic Development in Pre-Industrial Europe (Cambridge and New York: Cambridge University Press, 1985).
13. For a typical narrative, see John M. Hobson, The Eastern Origins of Western Civilisation. (Cambridge, UK and New York: Cambridge University Press. 2004).
14. See for example, Fernand Braudel, Civilization & Capitalism, 15th-18th Century, translated from the French and revised by Sian Reynolds, 3 vols. (New York: Harper & Row, Publishers, 1985); Immanuel Maurice Wallerstein, The Politics of the World-Economy: The States, the Movements, and the Civilizations (Cambridge, New York and Paris: Cambridge University Press and Editions de la Maison des sciences de l’homme, 1984); and Giovanni Arrighi, The Long Twentieth Century: Money, Power, and the Origins of Our Times. London: Verso, 1994.
15. For the ‘depletion thesis’, see for example Seymour Melman, Pentagon Capitalism: The Political Economy of War, 1st ed. (New York: McGraw-Hill, 1970) and The Permanent War Economy: American Capitalism in Decline (New York: Simon and Schuster, 1974). A broader historical application is given in Paul M. Kennedy, The Rise and Fall of the Great Powers (New York, NY: Random House: 1987).
16. The generalization here applies to portfolio as well as direct foreign investment. Both are financial transactions, pure and simple. The only difference between them is their relative size: typically, investments that account for less than 10% of the acquired property are considered portfolio, whereas larger investments are classified as direct. The flow of capital, whether portfolio or direct, may or may not be followed by the creation of new productive capacity. But the creation of such capacity, if and when it happens, is conceptually distinct, temporally separate and causally independent from the mere act of foreign investment.
17. The early data on foreign assets are incomplete in that they do not cover all countries (especially smaller ones). As a result, the measured ratio of foreign assets to global GDP in the earlier years of the chart may be somewhat understated (see Maurice Obstfeld and Alan. M. Taylor, Global Capital Markets: Integration, Crisis and Growth [Cambridge: Cambridge University Press, 2004], p. 51-57).
18. See Diana Farrell, Susan Lund, Christian Fölster, Raphael Bick, Moira Pierce, and Charles Atkins, Mapping Global Capital Markets. Fourth Annual Report (San Francisco: McKinsey Global Institute, January 2008), p. 73, Exhibit 3.10.
19. For a detailed analysis of the associated difficulties and impossibilities that we discuss here only in passing, see Jonathan Nitzan and Shimshon Bichler, Capital as Power: A Study of Order and Creorder (New York and London: Routledge, 2009), Chs. 6-8 and 10; and Shimshon Bichler and Jonathan Nitzan, ‘Contours of Crisis II: Fiction and Reality’, Dollars & Sense, April 28, 2009.
20. See Shimshon Bichler and Jonathan Nitzan, ‘Contours of Crisis: Plus ça change, plus c’est pareil?’ Dollars & Sense, December 29, 2008; and ‘Contours of Crisis II: Fiction and Reality’, Dollars & Sense, April 28, 2009.

It is not difficult to come up with methods to solve today’s economic crisis through monetary reform. Many of us are doing it. The key, as I have been writing for the past several years, is to treat credit as a public utility, not the private property of the world’s financial elite.

If we truly adhered to this concept, we would be able to see that a debt-based monetary system, where money only comes into existence through bank lending, can succeed only in isolated circumstances when a growth bubble outpaces the ability of the public to pay interest charges for the privilege of having money to spend and thereby to survive.

Whenever the growth bubble fails, as we have seen over the last three years, the system crashes, the financiers pick up assets for pennies on the dollar, and the cycle starts again. It seems haphazard and unpredictable, but we all know that the system was designed this way and that only the wealthy profit in the long run.

The rich use governments, through which they control politicians, bureaucrats, and covert operatives, to protect and enhance their power. Democracy is subverted. Once the rich have their host country firmly under control, they branch out to the rest of the world. The key then becomes the use of financial power to control the world’s resources through trade and currency manipulation and the management of legal codes and institutional rulemaking.

If social classes within the host country or foreign nations victimized by financial hegemony should happen to rebel, police and military forces are deployed to crush the rebellion. Educational systems and the mass media are employed to brainwash civilian populations by keeping them docile and compliant. A host of methods are employed, including false-flag terrorist events, to instill fear in the population and keep them beholden to the authorities for protection. Because the financial elite are parasites who kill their hosts, they must constantly ensnare new victims.

The foregoing is a complete picture of the present world situation. The last two hundred years have been marked by the march toward world conquest by the money-masters through the Anglo-American military-financial-intelligence colossus, combined with their bought-and-sold allies from the privileged classes of subservient nations.

The outcome was in some doubt during the 1970s in the aftermath of the Vietnam War. But beginning with the Reagan Doctrine in the 1980s, where a decision was made to gobble up the world one small country at a time, the march forward resumed. The 1990-91 Persian Gulf War, the carving up of Yugoslavia later in the 1990s, and the conquest of Iraq and Afghanistan most recently have brought the Western alliance to the borders of Russia. The attack now continues through the Caucasus region, even as Iran and Pakistan are being isolated.

It may be controversial to say that Russia is the target. Why might this be so? It’s because the financial takeover by the West in the 1990s didn’t work. An independent Russia has made a comeback. They have a lot of nuclear weapons and know how to use them. The collapse of the Soviet Union, leaving the U.S. “the world’s only superpower,” created a far more perilous imbalance than most people are aware of. It’s an imbalance that has caused Western military planners—for instance with NATO—to dangerously overreach.

The big question geopolitically is whether China can be induced to stand with the West. This was the objective of the effort beginning around 1971 under President Richard Nixon’s “Opening to China” to incorporate China into the Western financial system. But today China increasingly seems to be standing alone, with the makings of a self-sufficient banking and industrial complex—and a stable currency—that is defying Western attempts at control.

Will there be an “oriental surprise?” Will China reach a point where it makes an irreversible decision to side with Russia or stand against the West? No one knows. Henry Kissinger wrote in the Washington Post on August 19, 2009, that keeping China as a friend to the West is essential for the “New World Order.” And yes, he used those words—this is not a big secret. The winds of change are also blowing in Japan, where the pro-American ruling party has just been voted out.

Personally, I find this struggle for world domination repugnant—the complete triumph of the rule of materialism and violence. As Rodney King said, “People, I just want to say, you know, can we all get along?” Indeed, why can’t we see that life on earth, as Pope Benedict XVI recently pointed out in his encyclical Caritas In Veritate, is a gift from God to man, a gift that bestows on all of us the duty to treat each other fairly and with compassion?

So, in the face of the current world horror, what chance do monetary reformers have to be heard?

The answer, I believe, is that we are being heard. My mind goes back to 2003, only six years ago, when Stephen Zarlenga came to my office at the U.S. Treasury Department in Washington, D.C., where I had booked him to give a presentation based on his book, The Lost Science of Money. Later I worked with Steve on his first draft of the American Monetary Act. The time came when Steve began to meet with Congressman Dennis Kucinich, briefing him and others in Washington on monetary ideas.

So much has happened since then. So many more people have become aware of the evils of the debt-based monetary system. We have seen Congressman Ron Paul ignite a national storm of revulsion against the Federal Reserve System. There is now even hope that the American Monetary Act might be introduced on the floor of Congress.

But it is also perfectly obvious that this is only a start. The start, however, has been made, though there’s a long way to go.

We’ve had promising starts before. Back in the latter part of the 19th century, the American public were far more attuned to ideas of monetary reform than at any time since. There was then a Greenback Party that elected members of Congress and ran candidates for president. The Populist Party understood monetary issues and the importance of a flexible and expansive currency. Henry George became the leading author of the day with his reformist ideas based on the principle that the earth was a commons from which all have a right to benefit.

But then, when the international bankers finally succeeded in taking over the country through the passage of the Federal Reserve Act of 1913, the curtain fell. It wasn’t an iron curtain; it was a red velvet curtain, such as graced the windows of the rich financiers of the age who benefited. These financiers started two world wars to consolidate their dominion. They may yet start a third. The Reagan Doctrine may have made it inevitable.

But I do not believe the warmongers will have the last say. Even if they bring down upon us another world catastrophe, those who believe in the better side of humanity will eventually win, because our cause is just and our ideas are based upon truth. Without monetary reform there can never be economic democracy. But with it perhaps the chief cause of war can be eliminated: the unjust distribution of wealth among people and nations, where some get far too much and many get nothing.

I strongly support the American Monetary Act, the movement for a basic income guarantee, and proposals supporting citizens’ dividends such as those of the Social Credit movement or the ones already in place through programs like the Alaska Permanent Fund. Even if such measures are not immediately implemented, the effort to promote them serves the purpose of educating millions of people.

Our present responsibility is getting the word out that there is indeed a far better way to do things and that real change is possible. That money and credit can empower people, not just enslave them. That debt is unnecessary when credit is viewed as a public utility. That technology when properly distributed can free people for higher intellectual and spiritual pursuits, not just eliminate jobs and force millions of people into bankruptcy and starvation. That, as Henry George and his successors have made clear, resources are for everyone, not just a few.

I have come up with my own proposal for immediate relief that I call “The Cook Plan.” One of the worst myths of our time is that for government to spend money it can only collect that money ahead of time through taxes or by borrowing. “The Cook Plan,” instead, would have the government print and distribute vouchers in the amount of $1,000 a month to any adult resident who applied.

The vouchers could be spent on necessities of life such as food, housing, clothing, transportation, or communication. They would then be deposited in a series of community savings banks and used to capitalize low-interest lending to individuals, students, small businesses, and family farms. The backing for the vouchers would be the new economic production they would engender at the grassroots level of every community.

This measure alone would take a giant step toward bringing about a healthy U.S. and world economy at the level of “We the People,” rather than the fruitless and hypocritical attempt to create “recovery” through bank lending and government deficit spending. “The Cook Plan” has met a positive response from around the world during the several months since I proposed it.

My views, while economically sound, have a spiritual basis. I believe in God, and I believe that man was created in the image of God. I believe that a world where we love our neighbor as ourselves and implement this love through social and economic policy is not just a dream, that it is the only practical way to live.

I believe in the family of man and the responsibility of man to be a good steward of the earth and the environment. I believe financial tyranny has done its best to destroy these values. But I see an upsurge of desire and commitment among people for a new day, a truly democratic society, and a life on earth that is organized and conducted sanely, compassionately, and wisely.

Those who attend such events as the American Monetary Institute’s 2009 conference understand all this. Together we will continue to work toward our ideals, no matter what disasters may intervene. It will take time and hard work, but we and those who come after us shall prevail.

As the largest recipient of US military aid in the hemisphere, Colombia has long been the US’ most important ally in Latin America. Simultaneously, Colombia has also become the hemisphere’s worst human rights violator, with Colombia’s numerous paramilitary organizations recently taking center stage, as they’ve gradually become directly responsible for more human rights atrocities than the formal military and police. In the name of fighting “narco-terrorism,” poor people and dissidents are massacred, assassinated, tortured, and disappeared, among other atrocities—done to eliminate particular individuals and to “set an example” by intimidating others in the community. 97 percent of human rights abuses remain unpunished.

In recent years, a variety of human rights organizations, as well as mainstream academics and journalists have found it impossible to ignore the astronomical human rights violations. However, even though these groups have accurately reported on the actual atrocities, Jasmin Hristov argues that in their reports, the atrocities are largely de-contextualized from the powerful forces in Colombia and the US that directly benefit from this repression. According to Hristov, this mainstream presentation serves to mask the fact that US and Colombian elites directly support (via funding, training, supervising, and providing legal immunity for) state repression carried out by the police and military, as well as illegal paramilitary groups that are unofficially sanctioned by the government. Whether it is murdering labor organizers or displacing an indigenous community because a US corporation wants to drill for oil on their land, Hristov passionately asserts that death squad violence is purposefully directed towards sectors of society that stand in the way of the ruling class’ efforts to maintain economic dominance and acquire more resources to make even more profit.

In her book, Hristov does make a convincing argument that Colombia’s notorious death squads are inherently linked to maintenance of the country’s extreme economic inequality. Particularly since the neoliberal reforms of the 1990s that have increased poverty, Colombia’s poor continue to resist their oppression in many different ways. In response, state repression on a variety of levels is needed to terrorize unarmed social movements and other community groups and activists.

Throughout Blood & Capital, Hristov seeks to expose the rational motivations behind state violence for capitalism’s economic elites in the US and Colombia. In meticulous detail, Hristov shows how the super-rich benefit from state repression and how the violators of human rights have essentially become immune from any consequences for their actions. If death squads are truly to be abolished in Colombia, we must look honestly at how and why they exist today. Hristov’s new book is a powerful tool for exposing who truly calls the shots.

Neoliberalism or Neopoverty?

Hristov asserts that “it is not a mere coincidence that during the era of accelerated neoliberal restructuring, the deterioration in the living conditions of the working majority has been accompanied by an increase in the capabilities and activities of military, police, and paramilitary groups, as well as the portrayal of social movements as forces that must be monitored, silenced, and eventually dismantled.” The scandalous epidemic of poverty in Colombia is key to understanding Colombian politics, and why the upper classes so fear political organizing among the poor, who could mount a formidable opposition to the status quo if allowed to organize unrestrained by state repression.

When neoliberal policies were adopted by the Colombian government in the 1990s, it dramatically increased poverty, and made an already terrible situation worse. Hristov writes that the “essential components of neoliberalism are trade liberalization, privatization, deregulation, and austerity. Trade liberalization entails the removal of any trade barriers, such as tariffs and quotas. Privatization requires the sale of public enterprises and assets to private owners. Through the removal of government restrictions and interventions on capital, deregulation allows market forces to act as a self-regulating mechanism… Austerity requires the drastic reduction or elimination of expenditures for social programs and services.”

She argues that the “main cause that led to the official adoption of neoliberal policies by the developing countries in Latin America and elsewhere was the pressure to service their external debts in the late 1970s. In order to receive loans from the World Bank (WB), or the International Monetary Fund (IMF), nations had to agree to a program of structural adjustment that included drastically reducing public spending in health, education, and welfare,” and much more.

Because Colombia had less debt than other Latin American countries, “major neoliberal restructuring did not begin until 1990, under President Cesar Gaviria Trujillo (1990-94), when the country began to receive massive amounts of US military aid…In addition to the significant social damage wrought by these policies, by the mid-1990s Colombia had to almost double its borrowing from the IMF because of the economic crisis brought on by the market liberalization,” writes Hristov.

These drastic reforms have intensified since current President Alvaro Uribe came to power in 2002. After the IMF loaned $2.1 billion in 2003 on the condition that the reforms be accelerated, Uribe “privatized one of the country’s largest banks (BANCAFE), restructured the pension program, and reduced the number of public-sector workers in order to cut budget deficits, as required by the international lending institution. Uribe also closed down some of the country’s biggest public hospitals, eliminating over four thousand medical jobs, and denationalized companies in the telecommunications, oil, and mining sectors,” reports Hristov.

These are a few of the statistics compiled by Hristov, who writes that “in a country of 45 million, around 11 million people are unable to afford even one nutritious meal a day. According to statistics from 2005, 65 percent of Colombians are unable to regularly satisfy basic subsistence needs. In rural areas, the poverty rate is as high as 85 percent… In 2000 it was estimated that half a million children suffer from malnutrition and close to 2.5 million children between the ages of six and seventeen are forced to work… Furthermore, there has been a notable decline in school attendance, literacy, and life expectancy as well as access to child care and education over the past couple of years.”

Blood, Capital, and the State Coercive Apparatus

Throughout Blood & Capital, Hristov details many horrifying ways in which the rich are empowered by violence from what she identifies as the “state’s coercive apparatus” (SCA). She argues that “two intertwining motifs run throughout Colombia’s history: (1) social relations marked by inequality, exploitation, and exclusion and (2) violence employed by those with economic and political power over the working majority and the poor in order to acquire control over resources, forcibly recruit labor, and suppress or eliminate dissent.”

Dating back to the European conquest of the Americas, Hristov asserts that violence has been central to the creation of modern-day Colombia’s government and economy. She writes that “starting in the late 1500s, the conquerors began clearing the indigenous population from territories with desirable characteristics—mineral deposits, fertile soil, access to water, transportation routes, and so on. The separation of the indigenous from their means of subsistence allowed the formation of a local colonial elite who transformed what used to be the native inhabitants communal lands into large estates or haciendas. The creation of landless peasants facilitated the supply of labor for the Spaniards’ ventures, such as mining and agriculture.”

State violence supporting the economic elite continued, but became much worse in the 1960s under the direction of the US military. Alfredo Vasquez Carrizosa, President of the Colombian Permanent Committee for Human Rights reports that in the 1960s, “during the Kennedy administration,” the US “took great pains to transform our regular armies into counterinsurgency brigades, accepting the new strategy of the death squads.” This “ushered in what is known in Latin America as the National Security Doctrine… not defense against an external enemy, but a way to make the military establishment the masters of the game… the right to combat the internal enemy… this could mean anyone, including human rights activists such as myself.”

As Edward Herman, co-author of The Washington Connection and Third World Fascism explained in a previous interview with Upside Down World, US support for repressive governments in Colombia and throughout Latin America was, and still is, part of a general policy towards third world populations. Focusing largely on US support for the Latin American “National Security States,” Herman and co-author Noam Chomsky argue that U.S. corporations purposefully support (and in many instances create) fascist terror states in order to create a favorable investment climate. In exchange for a cut of the action, local military police-states brutally repress their population when it attempts to assert basic human rights.

In the 1960s, the US and Colombian governments launched Plan Lazo, designed to target the “internal enemy.” Hristov writes that “the military aid that was part of Plan Lazo (and all subsequent programs, including those in place today, such as the Patriot Plan) were given on the condition that Colombian forces would use terror and violence, since these formed a legitimate part of the overall anticommunist offensive. In 1966 the field manual US Army Counterinsurgency Forces specified that while antiguerrilla should not employ mass terror, selective terror against civilians was acceptable and was justified as a necessary response to the alleged terrorism committed by rebel forces.”

Hristov asserts that while the US handled the “financial and ideological aspects” of building and strengthening the SCA, locally the Colombian elites also played a key role. “It implemented many of the policies suggested by the US counterinsurgency manual in order to discipline the civilian population through measures such as press censorship, the suspension of civil rights (to permit arrest on mere suspicion), and the forced relocation of entire villages. President Guillermo Leon Valencia (1962-66) boosted the anticommunist campaign by declaring a state of siege whereby judicial and political powers were transferred to the military while the latter was freed from accountability to civilian authorities for its conduct.”

With US financing and supervision, the Colombian armed forces have since become one of the most renowned human rights violators in the world. This despicable conduct eventually created significant local and international opposition, and under this pressure the SCA has been forced to adjust. In response, the responsibility for repression has shifted more towards paramilitaries, whose activities are officially independent of the government. In this situation, when paramilitaries target the “internal enemy,” the same goal is accomplished as if the government itself did it, yet the government cannot be officially linked to the violence.

The Paramilitarization of Colombia

The size and strength of paramilitary death squads in Colombia has steadily increased since they were first established in the 1960s. According to Hristov, the paramilitaries are now responsible for about 80 percent of human rights violations in Colombia, compared to 16 percent by the rebel guerrillas. The paramilitaries’ evolution, Hristov argues, is the result of “perhaps the most creative and intelligent effort by an elite-dominated state to counteract revolutionary processes… The Colombian parastatal system represents neither a traditional centralized authoritarian regime, as those that existed in Argentina, Chile, and Brazil, nor merely a collection of autonomous armed bands dispersed over rural areas, each ruling locally, as in Mexico. What we see in Colombia is a mutated SCA that has assumed a nonstate appearance.”

The function of the paramilitaries in Colombia was explained well by Captain Gilberto Cardenas, former captain of the national police and former director of the Judicial Police Investigative and Intelligence Unit in the Uraba region. In 2002, testifying against the commander of the Seventeenth Brigade of the Colombian armed forces, Cardenas told representatives of the United Nations and Colombian authorities, “The paramilitaries were created by the Colombian government itself to do the dirty work, in other words, in order to kill all individuals who, according to the state and the police, are guerrillas. But in order to do that, the [the government] had to create illegal groups so that no one would suspect the government of Colombia and its military forces…members of the army and the police even patrol side by side with the paramilitaries.”

The paramilitary system first began in the mid-1960s when the Colombian government passed legislation that authorized citizens to carry arms and assist the military in repression. Hristov argues that “paramilitary forces entered the scene to perform two main functions.” The first was to participate in combat at a local level, as described by the 1966 US Army Counterinsurgency Forces field manual, which stated: “paramilitary units can support the national army in the conduct of counterinsurgency operations when the latter are being conducted in their own province or political subdivision.” Second, Hristov writes that paramilitaries “were intended to monitor and gather intelligence on the rebels, their civilian supporters, and social organizations by establishing networks throughout the country.”

While these early paramilitaries did play some role in state repression, it would not be until the 1980s that they really began to increase in size and influence. Hristov writes that “the 1980s were the golden age of paramilitary development, as many new groups formed, expanded, and rapidly acquired financial and military strength… This second wave of creation enacted by large-scale landowners, cattle ranchers, mining entrepreneurs (particularly those in the emerald business) and narco-lords took place in a particular context, characterized by five main features: a shift in the state’s (unofficial) policy toward the partial privatization of coercion; the state’s fusion with the elite; a legal framework that had set the ground for the design, training, equipping, and administration by the state military of armed bodies outside its institution; a prevailing anticommunist ideology; and militarized patches of the country that served as models to emulate.”

This second wave was given another boost in 1994 with the creation of the Community Rural Surveillance Associations (CONVIVIR) by current President Alvaro Uribe Velez, who was the governor of the department of Antioquia at that time. Hristov writes that Uribe made CONVIVIR into “a replica of the original paramilitary bodies designed in the 1960s. As it had thirty years ago, now the civilian counterpart of the SCA was to take on a central role in the Dirty War under a legal mantle. By the time CONVIVIR was outlawed, in 1999, most of the numerous paramilitary self defense bodies had united, attaining an organizational and military capacity unsurpassed by paramilitary forces in any other Latin American country.”

In August, 1998, just before the legislation supporting CONVIVIR was abolished, hundreds of members publicly announced that they would be joining the AUC paramilitary network, which became the most prominent paramilitary network in Colombia. The AUC had been created in 1997, mostly under the leadership of Carlos Castano and his paramilitary group, the ACCU, which became the largest group in the AUC federation. Others that operated in this loose confederation of paramilitary groups included Bloque Cacique Nutibara, the Bloque Central Bolivar, and the Bloque de Magdalena Medio.

Following official “peace negotiations” between the AUC and the Colombian government which began in 2002 with an official AUC ceasefire agreement, the AUC officially disbanded in February 2006, as part of an overall public disarmament of many paramilitaries throughout Colombia. However Hristov argues that “there are many factors challenging the legitimacy of the peace process. First, during the entire period of the cease-fire announced by the AUC, its groups regularly engaged in military actions against civilians, thereby committing human rights violations (and such activities continue to take place). Second, often those who claimed to be demobilizing were not the real paramilitary combatants but hired criminals, or drug dealers who had bought the AUC franchise. Third, large quantities of arms that should have been turned over were not. Fourth, fighters who are officially considered demobilized are in reality already active militarily in new organizations, where their skills of terrorizing the civilian population for economic gains are necessary and valued.”

Since 2006, there have been several government initiatives that give the formal appearance of the Colombian government working to combat paramilitaries. Hristov explains that “early in 2007 the Supreme Court began investigating numerous connections between paramilitaries and important state actors, such as senators, representatives, deputies, councilors, and mayors. As time went by, the public learned of more and more cases in which the legal (state officials with their political authority and legitimacy) and the illegal (paramilitary groups with their economic and military power) had entered into alliances to advance their mutual interests. Through mid-2008, 38 percent of members of Congress have been implicated in this parapolitica scandal.”

While Hristov recognizes some importance in these recent investigations, she feels that their real impact has been extremely limited. She argues that “despite all the cases that have been exposed, parapolitica is not likely to be eradicated from the Colombian political system. On the contrary, the flood of revelations about politicians’ connections to the paramilitary actually allows serious crimes, such as complicity in massacres, to get buried under waves of minor offenses, and eventually the entire issue becomes just another corruption scandal.”

In their 2009 report on Colombia, Human Rights Watch concluded that there are many “threats to accountability for paramilitaries’ accomplices,” reporting that “the Uribe administration has repeatedly taken actions that could sabotage the investigations. Administration officials have issued public personal attacks on the Supreme Court and its members, in some cases making accusations that have turned out to be baseless, in what increasingly looks like a campaign to discredit the court. In mid-2008 the administration proposed a series of constitutional amendments that would have removed what are known as the ‘parapolitics’ investigations from the Supreme Court’s jurisdiction, but it withdrew the proposal in November. The administration also blocked what is known as the ‘empty chair’ bill, which would have reformed the Congress to sanction parties that had backed politicians linked to paramilitaries.”

Hristov concludes that the centrality of paramilitaries to Colombian politics will not be disappearing anytime soon, mostly because repression has been necessary to enforce the country’s stark social/political/economic injustice. Hristov argues that the paramilitaries have become an essential tool of repression, and because Colombia’s poor majority will continue to resist this outrageous poverty, the paramilitaries’ repression will continue. Seen in this context, the recent demobilization process is only a tactical restructuring of paramilitaries and the SCA, similar to their restructurings in the 1980s and 1990s. Hristov sees this restructuring as an “adaptation response” to “assure its future survival” in the face of “the reality of resistance and opposition by numerous sectors of society against further dispossession,” with the state’s ultimate goal being “the institutionalization of paramilitarism and the legalization of capital accumulation through violence.”

War on Narco-terrorists?

Since the official end of the Cold War in 1989, US rhetorical justification for allying itself with and providing military aid to the Colombian government has shifted from fighting “communism” to fighting “narco-terrorism.” Hristov argues that official rhetoric may have changed but it’s still easy to expose this fraudulent war on narco-terrorism as actually being a war against poor people. Concerning the so-called war on terrorism, how can the hemisphere’s worst human rights violator fight terrorism? Then, similar to the absurd notion of a terrorist fighting terrorism, how can a government heavily complicit in the drug trade claim that it is fighting a war on drugs?

The Colombian government’s multi-faceted complicity in drug trafficking extends all the way to current President Uribe, who was listed by the Pentagon itself, as one of the most wanted international drug traffickers. A declassified National Security Archives report dated September 23, 1991, explicitly accused Uribe of being a collaborator of the Medellin cartel and a personal friend of Pablo Escobar. This report states further that Uribe was one of the “more important Colombian narco-terrorists contracted by the Colombian narcotics cartels for security, transportation, distribution, collection, and enforcement of narcotics operations in both the US and Colombia. These individuals are also contracted as ‘HIT MEN’ to assassinate individuals targeted by the ‘extraditables,’ or individual ‘narcotic leaders,’ and to perform terrorist acts against Colombian officials, other government officials, law enforcement agencies, and groups of other political persuasions.”

It’s not just the Colombian government! Hristov argues that the US government’s Drug Enforcement Agency (DEA) “has in reality been converted largely to an instrument of drug traffickers and paramilitaries.” To support this assertion, she cites a 2004 memorandum issued by a lawyer at the US Department of Justice named Thomas M. Kent, which accused the DEA of extreme misconduct. Kent states that strong evidence of misconduct is routinely ignored by the control agencies of the Department of Justice. Hristov summarizes key points made in Kent’s memorandum, including “to supplement their $7,000 monthly salary, some DEA agents have managed to negotiate with Colombian drug dealers… DEA personnel have been implicated in the killing of informants… Members of the AUC [paramilitaries] have been assisted by DEA agents in money laundering… DEA agents have participated in the extortion of drug traffickers awaiting extradition.”

On another note, Hristov makes the important point that drug trafficking and the rise of paramilitaries have both fed each other in two key ways. “First, the groups involved in trafficking needed to protect their laboratories, illegal cultivation, and clandestine airstrips in rural areas stimulated the emergence of local armed groups outside the state. Second, many drug dealers had begun to invest their capital in millions of hectares of the best agricultural land in the country… and they needed armed forces to protect their lands.” Hristov adds further that “the preexisting concentration of land ownership in the hands of the elite and the displacement of impoverished peasants was aggravated dramatically by this trend.”

To further expose this fraudulent “war on drugs,” it should be noted that the US government has a long history of complicity in drug trafficking, particularly in Latin America. While author William Blum has written the definitive short article on the topic, Alfred McCoy has written the most comprehensive book, titled The Politics of Heroin, documenting the CIA’s relationships with drug traffickers around the world, including in France, Italy, China, Laos, Afghanistan, Haiti, and throughout Latin America. In 1989, a Senatorial Committee chaired by Senator John Kerry documented that during the 1980s, while working with the anti-Sandinista “Contras,” the CIA and other branches of the US government were complicit in trafficking cocaine into the US from Latin America. The Kerry Committee concluded a three year investigation by stating in their report that “there was substantial evidence of drug smuggling through the war zones on the part of individual Contras, Contra suppliers, Contra pilots, mercenaries who worked with the Contras, and Contra supporters throughout the region… US officials involved in Central America failed to address the drug issue for fear of jeopardizing the war efforts against Nicaragua… In each case, one or another agency of the US government had information regarding the involvement either while it was occurring, or immediately thereafter.”

The Kerry Committee’s report and the story behind it has been analyzed well by authors Peter Dale Scott and Jonathan Marshall in their book Cocaine Politics. In 1996, investigative journalist Gary Webb wrote a series of articles for the San Jose Mercury News (later expanded and made into a book in 1999) which directly tied Contra cocaine traffickers Danilo Blandon and Norwin Meneses (both protected by the US government) to Los Angeles drug kingpin “Freeway” Rick Ross, who played a key role in starting the crack-cocaine epidemic of the 1980s. The mainstream media launched a smear campaign attacking Webb’s story that eventually caused even the Mercury News to denounce Webb. However, several prominent journalists came to Webb’s defense and challenged the mainstream media’s smear campaign, including Norman Solomon, Robert Parry, and Counterpunch co-editors Alexander Cockburn and Jeffrey St. Clair.

Unmasking The Unholy Alliance

The relationship between the US and Colombian elite is truly an unholy alliance. With US President Barack Obama praising the Colombian government and attempting to build several new military bases in Colombia, it is more important than ever to expose the truth about who supports death squads and why. Hopefully Blood & Capital will receive the attention that it deserves, and Hristov’s meticulous research can be used to truly disarm the state coercive apparatus in Colombia.

The report illustrates that global inequalities in healthcare are much greater than they were 30 years ago. While people in the West can expect to live until their late 70s, people living in poor countries, such as Burkina Faso or Chad, are unlikely to live beyond 46 or 47 years of age. In Africa, half the population lives on less than US$1.25 a day with little or no access to safe water. According to the UN, 12 million people die of preventable diseases every year, often caused by water-born parasitic diseases like dysentery, insect-born parasitic diseases such as malaria, or from other factors related to wider economic and social problems such as malnutrition and lack of medical care.

Poverty Leads to Poor Health

Rather than climatic conditions or complex epidemiology, specialists note that the major causes of ill health for people in developing countries relate to poverty and underlying political and social conditions. This direct causal link between poverty and ill health has long been recognised by many civil society organisations that highlight poverty as the "biggest epidemic" facing the global health community, thereby emphasising the importance of economic policy as a health issue.

According to the most recent World Bank development indicators, 1.4 billion people were living on less than US$1.25 a day in 2005. A further 2.5 billion people were living on less than US$2 dollars a day, meaning that at least 45 percent of the world's population exist in a state of absolute or relative poverty, including half of the world's children. In contrast, the world's 497
billionaires (approximately 0.000008% of the world's population) have an estimated wealth of US$3.5 trillion (over 7 percent of world GDP).

The WHO's Commission on Social Determinants of Health has also recently acknowledged that the high burden of illness responsible for premature loss of life arises in large part because of the poor and unequal conditions in which people live and work. The appalling living environment for millions of people is, in turn, the consequence of deeper structural conditions — what the Commission calls the ‘structural drivers' of global health inequality.

The promotion of social and economic equity, which the WHO and many civil society organisations maintain is central to respecting human rights obligations in health, therefore depends upon "narrowing the gap" between the worst off and best off over time. This process involves "a progressive flattening of the health gradient", says the WHO Commission, by improving the health of all social groups to a level closer to that of the most advantaged. Put simply, the unacceptable discrepancy in living standards between the developed and developing countries, with almost half the world — some 2.5 billion people — living on less than US$2 a day, is a fundamental factor in the global crisis of ill health.

Access to Basic Medical Care

But why does poverty mean that people are more likely to suffer from ill health or serious illness? In simple terms, poverty often means people lack access to medical services. Even where healthcare is available, poor people cannot afford to pay for it or it is prohibitively expensive. As the World Health Statistics 2009 reveal, people in the poorest countries paid 85 percent ‘out of pocket' for their healthcare costs in 2006. More than 60 percent of medication in low-income countries is only available through the private sector, where the cost is more than six times the international market price. The poorest people suffering from the worst health outcomes due to poverty, in other words, are forced to pay the highest
proportionate costs for healthcare.

Access to Clean Water

The lack of access to clean water and sanitation is also part of a state of poverty that has both direct and indirect health consequences for the poor. An estimated 2.6 billion people — about 40 percent of humanity — lack adequate sanitation, and over 1 billion lack access to adequate water sources. Consequently, 5,000 children die each day because of a lack of safe, clean water. For millions of others, the daily grind of searching for and collecting water remains an aspect of poverty that transcends the notion of ‘basic' needs. In northern Ghana, for example, girls can spend up to five hours a day fetching water, whereas women may have to wait for hours at a standpipe in a city each day.

Medically, the ingestion of contaminated water can lead to a variety of preventable illnesses, such as cholera, typhoid and dysentery. There were 131,943 cases of cholera infection alone in 2005, resulting in the death of 2,272 people across 52 countries – most of them in Africa. Once the cause of death for thousands in Europe during the nineteenth century before its spread was understood, the disease has since been eliminated from most Western countries.

Cholera, like most waterborne diseases, is completely preventable and could be eliminated through the provision of clean water and adequate sanitation. According to the WHO, however, it is spreading again in many developing
countries, especially across South America and Africa. Aid agencies estimate that the return of Cholera to Zimbabwe during 2008 killed 4,000 people and inflected close to 100,000 others.

Access to Education and Knowledge

Over one billion people, the majority of them women, lack the basic education needed to understand the causes of ill health and take appropriate preventive action. As widely recognised by UN agencies including the WHO, World Bank, UNAIDS and UNESCO, education dramatically affects health outcomes. With better knowledge about HIV/AIDS, for example, many individuals can be directed towards safe sexual behaviour and reduced HIV infection rates.

Educated women are more likely to use health services and health-related information, with a particular impact on child and maternal mortality rates. According to UNICEF, each extra year in maternal education in low-income countries reduces under-five child mortality by up to 10 percent. By enabling more secure employment and better access to economic assets, education
also improves health outcomes in providing some protection from such shocks as ill health, disability or natural disasters.

The current distribution of education, however, is heavily skewed against girls, those people living in rural areas and the poor. Despite the pledge of signatories of the Millennium Development Goals to achieve universal primary education by 2015, children still have to pay for primary schooling (through either user fees or other charges) in 92 countries.

Such discrepancies in education can also be seen in the control of medical knowledge. Health specialists in the North know how to control most of the infectious diseases that afflict low-income countries. Rich nations should be sharing this knowledge and helping with the alleviation of preventable diseases by ensuring that public health and sanitation be provided for all, together with clean water, adequate housing, education, adequate food and health education. These measures would go a long way towards the elimination of diseases that currently afflict people in developing countries, just as they were successful in improving the health of European and American citizens in the nineteenth century.

Structural Causes of Poverty and Ill Health

It is clear that the crisis of global health is intimately related to the crisis of global poverty. However, whilst the direct causes of ill health in the developing world can be attributed to a lack of resources and poverty, if we delve deeper, we can state that a major source of poverty itself is the current structure of the global economic system. This understanding — that improving global health is impossible without addressing the wider political and economic causes of poverty — is central to an agenda for human development and social justice.

Debt and Structural Adjustment

Structural adjustment policies and high levels of debt owed by Southern countries to institutions in the North remain a key reason for worsening health outcomes in many developing countries. Following the oil crisis in the 1970s, Southern debt suddenly soared due to interest rate hikes and the devaluation of the US dollar. Many economies in the 1980s, collapsing under an unmanageable debt burden, were forced to enter into loan agreements with institutions such as the International Monetary Fund (IMF) and the World Bank.

These loans were contingent upon the adoption of fiscal austerity measures and economic reforms, later commonly known as ‘structural adjustment programs’ (SAPS). Under the rationale of attracting foreign investment through market liberalisation and downsizing the public sector, adjustment measures included the rapid privatisation of state industries, the removal of ‘barriers to trade’ such as tariffs and quotas, and often led to social spending cuts in essential services such as education, health, housing, water and sanitation.

The human impact of structural adjustment has since become legendary; real wages fell by as much as 70 percent in some African countries in the 1980s, while the introduction of user fees for healthcare led to a catastrophic drop in usage of health services. Poverty and hunger rates considerably worsened in many indebted nations, health systems collapsed, children left school, and government-provided social services and safety nets were seriously undermined.

Structural adjustment also did little to curb the Southern debt crisis, which spiralled upwards by 400 percent to reach a level of US$3,000bn by the late 1990s. The devastating human consequences of SAPs have since led to their abandonment, although their replacement with Poverty Reduction Strategy Papers (PRSPs) in 1999 has resulted in policies little different from SAPs. Even today, the IMF promotes an expansion of private-sector healthcare delivery in poor countries, with the same market-led approach to development leaving little scope for ambitious public health programs.

Unfair Trade Rules

Unfair trade rules also negatively influence health outcomes in poorer countries by exacerbating conditions of poverty and food insecurity. The World Trade Organisation (WTO) members meet to set the rules of world trade, almost always in favour of the rich countries, to the detriment of the poor. Whilst more economically powerful countries continue to subsidize their agro-export corporate farmers, the same countries insist that developing nations reduce their own subsidies and lower tariffs and quotas on the import of foreign goods.

Similar to the requirements of market liberalisation under structural adjustment policies, the WTO’s Agreement on Agriculture commits member countries to remove tariffs and subsidies for farmers and food exporters. The current terms of trade, however, remain grossly unjust. While Southern countries are expected to do away with agricultural subsidies, remove trade barriers and open their markets to foreign goods, farmers in the North continue to be supported by huge government handouts. In 2005, for example, the US subsidised its agricultural products to the tune of US$19bn. These heavily subsidized products flooded the Asian rice markets, the African cotton markets and the Latin American soya markets, undermining local markets, and driving millions of Third World farmers and peasants into bankruptcy. As India’s Trade Minister said at the Doha world trade talks in 2005; “Indian farmers can compete with US farmers but not with the US Treasury.”

A major consequence of massive subsidies in the North is the overproduction of agricultural commodities, leading to the ‘dumping' of food at below production costs in developing countries. Subsidies in the United States, for example, have allowed US businesses to sell wheat on international markets at 43 percent below the cost of production, rice by 35 percent and cotton by over 60 percent. The effect of such dumping on farmers in the South can be devastating; not only are millions of smallholder farmers displaced from their livelihoods, but billions of dollars are lost each year in agricultural income for developing countries.

Agricultural and rural investment has also dramatically declined in poor countries over recent decades. According to the World Bank, agricultural productivity per worker has fallen by about 12 percent in Africa since the early 1980s, while yields of the most important staple food grains have not increased over the same period — a situation repeated across the developing world. Following the liberalisation of the agricultural sector, these factors have led to a collapse in rural employment and farm incomes in many poorer countries.

Increasing imbalances in the division of land ownership are a further obstacle to economic development in the South. In poor countries, a small number of large landowners possess most of the arable land, while vast numbers of small owners and tenants farm the remaining soils, which is often of inferior quality or on marginal lands where environmental degradation threatens agricultural production. Fewer and fewer households are able to subsist on herding, forestry or fishing. Commercial fishing reduces the catches of poor fishers, and foresters lose their rights to logging companies working under government concessions. The globalised food system has therefore created a perverse and paradoxical dynamic; the use of land for export production may reduce food costs in countries with advanced economies, but it can have tragic consequences for most of the families who live from farming in the developing world.

Global trading rules are also biased in favour of large agro-industrial businesses that grow crops for export, thereby penalising small farmers who grow food for local consumption. The average land holding per head among rural farmers in developing countries declined from 3.6 hectares in 1972, to 0.26 hectares in 1992 — and continues to fall. Unfavourable market conditions can also cause these families to fall into debt, forcing them to sell their land and migrate to urban areas. Estimates by the UN in 2000 suggested that up to 30 million people had been driven from rural areas as a result of agricultural liberalisation policies.

With a vast number of hungry people living in farm households, these structural conditions are a major cause of food insecurity and increasing poverty — leading to the social and environmental settings that are a major cause of ill health. WTO rules and free trade agreements encourage governments to prioritise trade concerns and business needs over public health needs and social spending, in effect trumping the right to health with the priorities of ‘export-led growth,’ positive terms of trade and the shareholders right to maximise profit.

The Power of Transnational Corporations

The process of economic globalisation has led to the concentration of power in the hands of a small number of transnational corporations, resulting in the accumulation of huge profits in the midst of chronic food insecurity and poverty for millions of people. As markets were liberalised and the role of governments scaled back over the past few decades, private property rights were strengthened through trade agreements, in particular the Trade-Related Aspects of Intellectual Property Rights (TRIPS). Simultaneously, regional and bilateral trade agreements — signed at a rate of 15 per year in the 1990s — handed more power to large corporations, resulting in dramatically increased volumes of world trade.

The rapid growth of foreign direct investment (FDI) since the early 1990s, generally involving a company from one country making a physical investment into building a factory in another country, has also led to the immense influence of transnational corporations (TNCs). This trend is most notable in the food industry where large corporations dominate the whole supply chain, from the seeds planted in fields through to the production, processing, manufacture, marketing and selling of food to consumers. By 1990, for example, companies from OECD countries controlled 90 percent of the global seed market. Between 1990 and 2001, the foreign sales of the world’s largest food-related TNCs rose from US$88.8bn to US$234bn, with total foreign assets rising from US$34bn to a spectacular US$257bn.

The result is a global trading regime subjugated to control by Northern-based TNCs, and a so-called ‘race to the bottom’ for workers in developing countries. The liberalisation of capital and trade markets has made it easier for TNCs to operate wherever the conditions are best suited to maximising the return on investments, allowing them to quickly move into countries with cheaper labour or more natural resources to exploit. Entire operations are often transferred into low wage and low tax countries with less environmental or labour protections, or ‘special economic zones’ (SEZs) are set up in poorer countries that allow TNCs to operate with exemptions from certain taxes and business regulations. In 2004, 5,000 SEZs worldwide employed around 50 million workers. For many jobseekers in the South, poverty and unemployment force them to accept unhealthy working conditions and insufficient wages, in turn exacerbating the social determinants that lead to ill health. The employment trend in Northern countries is also towards downsized workforces, casual contract labour with less social protection, and increased job insecurity.

The privatisation of health and other essential services, which has gone hand in hand with the neoliberal ideology that still defines the macro-economic system, has also increased the power of transnational corporations based in the North. In most developing countries, market-driven health sector reforms intensified in the late 1990s under policies dubbed the ‘Washington Consensus’ (led by the World Bank, IMF, WTO and United States), based on the assumption that government-run services were uneconomical and inefficient. Health insurance schemes flourished alongside a mix of public and private options for healthcare, often producing a two-tiered health system in low- and middle-income countries as a result of packages designed by the World Bank — meaning one for the rich who could afford choice, and a deficient version for the poor.

The effect for those who could not afford user fees or the Bank’s ‘best buy’ health interventions was often disastrous. In sub-Saharan Africa, primary education levels fell by as much as half between the 1960s and the 1990s, while many diseases of poverty once thought ‘conquered’ made a sudden return such as tuberculosis and dengue fever. The public sector, far from being supported by unregulated privatised health services, was increasingly eroded. And the international trend towards a privatised world has effectively redefined the concept of health from an inalienable human right, to a commodity to be bought and sold on the market. Even in the traditionally welfare states of Europe, hard-won gains of publicly accountable services are being gradually eroded by a market-driven health sector.

This strong intellectual property regime, pushed by the US, EU and Japan at the WTO on behalf of their pharmaceutical companies, has also limited access to medicine for the poorest in the developing world. Under TRIPS agreements, governments grant patents to give a company monopoly power to manufacture and sell a medicine free of competition from any other manufacturer in that particular country, usually for a period of ten years. Such an imposed monopoly significantly increases the price of essential drugs, such as antiretroviral medicine for HIV/AIDS, as well as legally restricts the ability to produce ‘copy-cat’ drugs that provide a lifeline for many of the world’s poor.

Furthermore, the intellectual property regime and the vast profits that can be secured from patented drugs has skewed the incentives for research and development of drugs away from the needs of the poor in the developing world towards ‘lifestyle medicines’ that service the desires of the richer members of society.

An unfettered global economic market that disproportionately empowers large corporations, increases wealth inequality both within and between nations, and fails to eradicate poverty and food insecurity is clearly incompatible with public health objectives. The globalised market system has not worked for the poorest people who lack the resources to fulfil the human right to “a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services.” Only a new model for development can meet this vision as enshrined in Article 25 of the Universal Declaration of Human Rights, based on a rehabilitation of the public sector and public services, a reinvigorated notion of the government role in providing essential public services, and a transformed economic system that specifically prioritises health and social welfare.

The Need to Implement the Principle of Sharing

In 1978, the World Health Organisation held an international conference at Alma Ata in Kazakhstan to discuss the importance of Primary Health Care. Out of this conference came the Alma Ata Declaration signed by 134 countries, which stated that Primary Health Care (PHC), rather than expensive high-tech medical interventions, could provide the solution to the problems of world health. The radical concept of PHC went entirely beyond traditional healthcare delivery models to incorporate a spirit of social justice and universal equality, as embodied in the slogan ‘health for all by the year 2000.’ Health is “not merely the absence of disease or infirmity,” stated the Declaration, but a “fundamental human right” and a “world-wide social goal whose realisation requires the action of many other social and economic sectors in addition to the health sector.”

The Alma Ata Declaration also embraced the proposals for a new international economic order, put forward by the United Nations in the 1970s, to reform the global economy to promote equality for Third World countries as well as replace the Bretton Woods system. The aim of ‘health for all’ therefore had explicitly political implications based on “sustained economic and social development” in order to reduce the gap between the health status of the developing and developed countries. For the first time, two complementary understandings of healthcare were forged together; both the clinical determinants of health, as well as the social, political and economic determinants of health that are largely beyond the control of health ministries. Most importantly, PHC as the declared model for global health policy called for a more equitable distribution of resources between rich and poor — in other words, a fairer sharing of wealth and power that would soon become anathema to the advocates of neoliberal policies.

The idealism of equality and sharing that brought the world together in Alma Ata obviously did not last for long, almost immediately replaced by the World Bank’s focus on ‘selective primary health care’ that had the less ambitious goal of fighting specific diseases based on ‘cost-effective’ medical interventions. This approach, characterised by a disease-focused and vertical model that only targeted a limited range of illnesses and health needs, ignored the broader context of development and the principles of social justice and equity. The lofty goals set at Alma Ata were soon overshadowed by the structural adjustment programs led by the International Monetary Fund and World Bank, which incorporated competition into the provision of social services and led to the slashing of health budgets in many poor countries.

The World Health Organisation, that previously pioneered the concept of PHC in the 1970s, also remained conspicuously silent during the years of market-driven health sector reforms. A UN report summed up the state of health in 2003 in calling for a re-examination of current strategies to meet targets on reducing poverty, hunger and illness: 54 countries had become poorer than they were in 1990, it reported, and life expectancy had regressed in 34 countries, mostly in Africa.

Yet the spirit and vision of Alma Ata was never entirely forgotten. In 2000, when governments were originally scheduled to meet the goal of “the attainment by all peoples of the world… of a level of health that will permit them to lead a socially and economically productive life,” a civil society gathering called the People’s Health Assembly took place in Bangladesh and called for a renewed international commitment to primary health care.

The People’s Charter for Health that was formulated and endorsed at the five-day gathering soon became the common tool of a worldwide citizen’s movement committed to making the Alma-Ata dream a reality. On the thirtieth anniversary of the Declaration of Alma-Ata in 2008, the People’s Health Movement again reiterated its call for ‘Health for All Now!’, while the Ouagadougou Declaration on Primary Health Care was issued in Africa in April 2008, also calling for a renewal of the Principles of Primary Health Care and its implementation in developing countries by the international community.

A further impetus was given to the concept of PHC by the publication of three prominent reports in 2008; the WHO’s World Health Report 2008 (titled: ‘Primary Health Care: Now More Than Ever’), the WHO’s Commission on the Social Determinants of Health (CSDH) (titled ‘Closing the Gap in a Generation’), and the Global Health Watch II (written by a collective of civil society and health professionals that analyse the structural causes of ill health).

Of these, the previously mentioned CSDH report is of particular note. Although media coverage of the report was minimal, some health policy analysts described the findings as little short of revolutionary. The Commission — set up in 2005 by the WHO to address the social factors leading to ill health — stated that “deep inequities in the distribution of power and economic arrangements, globally, are of key relevance to health equity.” In an entire section headed “Tackle the Inequitable Distribution of Power, Money, and Resources,” the final report identified these factors as the key “structural drivers of the conditions of daily life.” The fact that a majority of people in the world do not enjoy the good health that is biologically possible, it states, is by no means inevitable but the result of a “toxic combination of bad policies, economics, and politics.” A fairer sharing of world resources is thus, in no uncertain terms, taken as the starting point for addressing inequities in health as well as all other aspects of human development.

In a stinging critique of globalisation, trade liberalisation, market integration, and multilateral organisations such as the IMF, World Bank and WTO, the CSDH report goes a long way towards defining a new international economic order – despite specifically stating that such a task was beyond its remit. Significantly, the report in its final chapter recognises that its ambitious agenda is dependent upon a “global movement for change,” involving not only the World Health Organisation, global leaders and country partners, but also civil society as “powerful protagonists in the global health equity agenda.”

While the issue of healthcare again grabs news headlines with the national reforms proposed by President Barack Obama in the United States, demand for a renewal of primary health care based on equality is silently gaining renewed attention amongst policymakers. For the WHO to fulfil its mandate and live up to the bold analysis in its CSDH report, civil society organisations must play a central role in pushing through a policy platform based on the principles of PHC. The next step, as the People’s Health Movement has long recognised through its global campaign on the Right to Health, is for popular public support to mobilise attention around the issue of ‘health for all’ — recognising the central role of the state and public health systems, and the ultimate responsibility of the United Nations in holding governments to account for universal human rights norms. When the principle of sharing is accepted as fundamental to the provision of adequate food, shelter, health care and education, then the fine words of the UN’s many declarations can finally be translated into a concrete programme of action.

Diseases in the Developing World

Many of the diseases in the developing world should be entirely preventable with modern medical knowledge and an understanding of the structural causes of poverty.

The examples below illustrate some of the diseases that commonly afflict the developing world, and how a fairer sharing of world resources could help to alleviate them.

Bilharzia and Hookworms

Two billion people worldwide suffer from Bilharzia (schistomiasis) and soil-transmitted parasitic worms, mainly hookworms. Over the past few decades, incidents of schistosomiasis and hookworm have increased and continue to spread, especially in African countries such as Ghana, Senegal, Ethiopia and Mali. Estimates suggest that Bilharzia and soil-transmitted parasitic worms account for more than 40 percent of all tropical diseases, excluding malaria.

A fluke or schistosome parasite causes Bilharzia or Schistosomiasis, which spends part of its life cycle in a water snail and develops in humans. Infected people and their livestock, urinating in water where snails are not yet infected often spread the disease to new areas. Several scientists, including Brinkmann, have found a high incidence of schistosomiasis in areas near imposed infrastructure projects such as artificial lakes and irrigation projects.

Strong government intervention can play a critical role in addressing these diseases. For example, the Chinese government managed to reduce the number of people infected in its country from 12 to 1.3 million, through an integrated control programme involving the ministries of Public Health, Agriculture and Water Conservancy. The Chinese authorities also realised the importance of health education in the control of the spread of the disease, so health agencies taught local populations how to prevent its transmission, how to treat it and the importance of cooperation with medical workers for diagnostic screening and treatment. Local people provided the labour, money and material for snail control.

Improved water supply and sanitation, according to the World Health Organisation, could also help to prevent the spread of Bilharzia or Schistosomiasis.

Just as schistosomiasis has spread over the past few decades in poorer countries, so has the incidence of hookworm. Hookworms live in damp earth and enter people through the soles of their feet, travelling through the bloodstream to the intestines, where they live indefinitely.

Irrigation projects worldwide again appear to contribute to the spread of the disease. According to the World Health Organisation “intensified irrigation, dams and other water related projects contribute importantly to this disease burden.”

If the principle of sharing was implemented, governments in the North could aid the World Health Organisation to alleviate incidents of schistosomiasis and hookworm.

• Both schistosomiasis and hookworm are eminently treatable with cheap drugs, meaning that more wealthy governments should provide drugs required to treat all the people suffering from schistosomiasis and hookworm
• Educational projects should also be put in place in poorer countries to teach people how to prevent the spread of these diseases
• Adequate sanitation facilities should be provided, to prevent the spread of these diseases
• People in danger of contracting the diseases should be supplied with footwear, to protect their feet

Filariasis

Lymphatic filariasis (also known as elephantiasis), dracunculiasis, onchocerciasis and malaria, are also spread by water borne parasites. One billion people in 80 countries are at risk of infection by elephantiasis, so called because the legs of people infected with the disease swell up to the size of an elephant. Furthermore, 120 million people globally are infected with this disfiguring disease, which is caused by a parasite that lives in mosquitoes. Doctors can now treat the disease with albendazole, a drug developed by GlaxoSmithKline and Merck.

Lymphatic filariasis could be adequately treated if governments helped to integrate participatory programmes for the elimination of this disease, both by treating infected people and preventing the spread of the disease through the provision of adequate housing and bed nets.

Malaria

Malaria, caused by the plasmodium parasite, remains endemic in many Third World countries. 1,600 million people are at risk of infection with malaria worldwide, whilst 396 million people (of which 275 million in Africa) suffer from the disease. The World Health Organisation estimates that 1.4-2.8 million people, most of whom are children under five, die from the disease every year.

To control Malaria, both early prevention and direct treatment are important. In the West, many governments have largely eradicated Malaria, where it previously affected millions. Although it may be impossible to eradicate mosquitoes totally, with modern medical knowledge and global financial resources, it could be easily achievable to treat all those people that are infected. In addition, a strong government role in healthcare provision would help to alleviate malaria. By using organised quarantine methods, infected patients could be isolated to remove the threat of contamination to other mosquitoes and humans.

Donors should provide money for integrated malaria control programmes, combining participatory mosquito control with screening and treatment of infected people in all the countries affected. Every source of stagnant water, where mosquitoes can breed, should be removed and natural methods of eradication could be enhanced to eliminate the remaining mosquitoes (harmless biolarvicides developed in Cuba and currently produced in Argentina by Rosenbush laboratories provide one example).

Dracunculiasis

Dracunculiasis is caused by a parasitic worm, the Guinea worm (Drancunculus medinensis), which spends part of its life cycle in a water flea, and develops in the human body. People catch guinea worms from unclean water in the poorest parts of sub-Saharan Africa, especially in Sudan. The worm migrates under the victim’s skin causing severe pain, especially when insertion occurs in the joints. It eventually emerges from the feet, making them swell, blister and ulcerate, accompanied by fever, nausea and vomiting. Although no drug treatment is available, the disease should be completely preventable. In the 1970s, there were several million cases. The World Health Organisation made a serious effort to eradicate the disease and there are now 75,223 cases, most of which are in the Sudan.

Through cooperation and an effective sharing of resources, the Guinea worm could be completely eradicated through the implementation of a proposed World Health Organisation programme by:

• Case containment in all endemic villages
• Community-based surveillance systems in endemic villages
• Providing safe water, health education and water filters
• Mapping all endemic villages and maintaining data bases
• Certifying guinea worm eradication country by country worldwide.

River Blindness

Half a million poor people living in Africa have lost their sight due to river blindness, or onchocerciasis, an insect-borne disease caused by the parasite Onchocerca volvulus and transmitted by blackflies that live on the banks of fast flowing water. Adult worms of the parasite live in nodules in a human body where the female worms produce high numbers of larvae called microfiliariae. These worms then break out of the nodules and find their way to the surface of the skin. Eventually they make their way to the eyes, causing blindness. If caught in time the disease can be treated with the drug ivermectin, or mectizan, a drug developed by GlaxoSmithKline and Merck.

Since 1996, the African Programme for Onchocerciasis Control has introduced mass community-based ivermectin treatment control programmes. A similar programme was set up in South America by the Onchocerciasis Elimination Programme in the Americas. The World Health Organisation formed a Nongovernmental Development Organization Coordination Group for Onchocerciasis Control to promote worldwide interest and support for the use of ivermectin in countries where people suffer from river blindness. So far, the programme has been successful and points the way forward towards the importance of sharing responsibility for the control of some of the world’s most debilitating diseases.

Sleeping Sickness

Sleeping sickness is another disease that seriously affects the poor, with at least 50 million people in 36 African countries exposed to the risk of contracting this disease. A parasite, the African trypanosome that lives in the tsetse fly, transmits this disease by biting humans. The parasite lives in the blood of the infected person for a few days, then travels into the brain, where it begins to cause sleep disturbances, eventually killing the infected person.

Colonial powers in Africa in the 1940s and 1950s were almost successful in bringing sleeping sickness under control. They trained local Africans to recognise the relevant parasites under the microscope, took blood samples from every man, woman and child, then treated everyone that had trypanosomes in their blood. The treatment was harsh. People suffering from the early stages of the disease were treated with suramin and pentamidine, both of which have severe side effects, and people already suffering from the late stages of the disease were treated with the arsenic-based drug, melarsoprol, which kills more than ten percent of those treated.

However, there are more effective and humane ways of preventing sleeping sickness, by the eradication of tsetse flies. Experiments in certain African countries proved that tsetse flies could easily be caught in traps that are cheap to make using sticks and cow-urine-impregnated cloth. Such natural solutions and participatory projects should be implemented in all 36 African countries affected.

Leishmaniasis and Chagas Disease

An estimated 200 million poor people in Africa, the Americas and Asia are at risk of infection with the Leishmania parasite. Leishmaniasis is transmitted by phlebotomine sandflies. This disease can either affect the skin, causing sores, or the internal organs, causing Kala Azar, which is fatal if not treated. Drugs used to treat leishmaniasis are based on antimony (a toxic heavy metal), have to be administered by injection under medical supervision and can cause severe side effects. The Leishmania parasite has become increasingly resistant to these drugs.

In South and Central America the poor are also at risk of infection with Chagas disease, caused by the American Trypanosome parasite, (Trypanosoma cruzi), which lives in the assassin bug. An estimated 649,000 people are infected with this disease. Assassin bugs, which live in the cracks and crevices of poor people’s homes, usually in rural areas, come out at night to bite and ingest blood from sleeping humans.

Assassin bugs transmit parasites through their faeces, which then enter the bloodstream of a sleeping human, causing fever and swollen lymph glands. This initial acute phase is sometimes fatal, especially in young children, but most adults survive and the parasite then invades the organs of the body, including the heart, gradually debilitating the person over time. Two drugs, which have severe side effects, Nifurtimox and Benznizadol, can be used to treat the early stage of the disease, but once the parasite is established, it cannot be cured.

Both of these diseases could be prevented by the provision of adequate housing with nets over windows and bed nets to prevent people from being bitten by the sandflies, as well as providing the screening of blood destined for transfusions. Even plastering the cracks in existing houses and substituting metal roofs for thatch could prevent the spread of the disease.

Taenia solium

The pork tapeworm, Taenia solium, is the most common parasitic infection of the central nervous system. Although the pork tapeworm usually lives in the intestine of the people it infects, the eggs from the tapeworm can hatch out and migrate into the muscles, heart, eyes, brain and spinal cord, where they form cysts, sometimes causing epilepsy. This disease is associated with poverty and affects people in South America, Brazil, Central America, Mexico, China, India, SE Asia and sub-Saharan Africa.

It is possible to cure people of the pork tapeworm by dosing them with praziquantel. Clean water and adequate sanitation are also essential for the elimination of the disease, since if tapeworm eggs pass into water sources then the parasite can infect the human population.

In 1993, an international task force for disease eradication declared that governments and health authorities could eradicate Taenia solium because:

• The parasite requires the human to complete its life cycle
• Tapeworms in humans are the only source of infection for pigs
• Authorities can control transmission from pigs to humans
• There is no reservoir of infection in wildlife

Therefore, governments and agencies could control these diseases by providing through adequate water and sanitation and other ‘up-stream’ interventions to prevent the spread of infected parasites to humans.

According to its website, the Group of 20 was created in the late 1990s as a response to the financial crisis that hit the capitalist world during that period. It was convened under the notion that so-called emerging economies should be provided a greater say in the control of the capitalist world that was then dominated by the Group of 7 (G-7( which in turn is dominated by Washington and London.) In other words, the primary purpose of the G-20 is to coordinate plans among capitalist nations that will ensure the continued existence of capitalism and, more precisely, the continued domination of that system by Western economies, especially Washington. In the current economic climate, the G-20 sees its role as one that requires “send(ing) a strong signal that it is prepared to take whatever further actions are necessary to stabilise the financial system and to provide further macroeconomic support. At the same time, the G-20 must commit to maintaining open trade and investment, to avoid a retreat to protectionism, and direct necessary additional support to emerging markets and developing countries.” In short, the G-20 must do whatever it takes to keep the current system of free trade and financial speculation going, no matter what the cost to the working and poor people on the planet.

It is quite fitting that this summit is taking place in Pittsburgh. If there is one US city that epitomizes the failure of late-twentieth century capitalism to provide for its working people, then Pittsburgh certainly fits the bill. If there is one US city that demonstrates capitalism’s need to pursue cheap labor in order to maximize profits, Pittsburgh certainly fits the bill. If there is one US city that forecasts the future of regular people under the domain of capitalism’s latest stage–a stage that has taken decent-paying unionized jobs away and replaced them with lower paying service positions for those lucky enough to have another job, Pittsburgh fits the bill. Like Richard Fox, a resident and shop owner in Pittsburgh who supports the intention of many of the protests, wrote to me in an email: “When the steel industry died, easily 1/2 of the city’s population as well as huge numbers of citizens of small mill towns (remember “the deer hunter” settings?) simply picked up and left. South or southwest. In some ways, the city has never recovered from the loss. When I was growing up here, the mills stretched, literally, for miles on both sides of the Monongahela river. employing tens of thousands. Three shifts all day everyday. It was quite a sight. Chicago the city of the big shoulders, had nothing on us…. How do you re-build a local economy and infrastructure after that sort of disaster? It is appropriate to mention something about the development of Pittsburgh as an important center for medical arts and the computer/hi-tech industry, but that fact in no way refutes or undermines the argument that the city was devastated by the loss of tens of thousands of industrial jobs. The balance between blue collar and professional jobs has swung in favor of the latter with predictable results. ” Those predictable results Fox refers to include not only a disparity in income but also in education and other social factors.

As any astute working person can tell you, the fate of Pittsburgh is slowly becoming the fate of hundreds, if not thousands, of other towns and cities around the world. The total domination of the capitalist giants of Wall Street in collusion with the sycophantic politicians in Washington and other capitols has drained the financial life from municipalities and their citizens at an astonishingly rapid rate. Behind the statistics showing rising unemployment and mortgage foreclosures lies the breakup of families in the western nations, while in the developing nations, the most recent crisis of the capitalist system means an even further deepening of the health and other human crises already in existence. In another metaphor for the greater economic havoc wreaked upon the world’s working and poor, those good-paying union jobs at the steel mils also impacted the African-American community in Pittsburgh. Such jobs were held by black men and women, too. Not only did this create stability and hope in that community, it also ensured a cultural vibrancy. Since the removal of those jobs from Pittsburgh, it has arguably been the communities of color that have been hurt the most.

This reality is repeated on a considerably larger scale throughout the world in the wake of the globalization of modern capital. Yet, the leaders of the capitalist world, as represented by the G-20 and other such organizations, prescribe more of the same. If it wasn’t clear before it should be now–these organizations are not interested in the welfare of those they consider their subjects. They exist only to ensure the continued existence of their profit making machine. Furthermore, they will do whatever it takes to ensure that that machine continues to run.

This is why it is necessary to protest the Pittsburgh Summit. The protests will begin several days before the summit itself. Much of the legal and organizing work for the week of protests is being coordinated by Pittsburgh’s Thomas Merton Center. According to a press release from the Center dated August 16, 2009, there will be a mass march on September 25, 2009 that is endorsed by all of the organizations planning to protest in Pittsburgh that week. As Jessica Banner of the Center’s Antiwar Committee eloquently stated: “Anyone who has lost a job, a home, a loved one to war, lost value to a retirement plan, gotten sick from environmental pollution, or lived without adequate healthcare, water, or food has been directly affected by policies set by the G20 and should join us on Sept. 25th.”

Several tent cities are being planned, among them a Music Camp beginning September 18th that will be situated at the South Side Riverfront Park near 18th Street and another encampment that will begin September 20th with a National March for Jobs on September 20th. This march and tent city is being facilitated by the Bail Out the People Movement (BOTM) and is but one part of the organization’s plans for the week. According to a spokesperson for the Pittsburgh branch of the BOTM, there is a struggle brewing over the permits which are being denied for sites in the downtown area. This is but one of the actions awaiting permits. According to the city of Pittsburgh, no permits have been issued yet because the city is waiting for the Secret Service to determine the so-called security perimeter it considers its right to impose whenever officials under Secret Service protection are present. Protest organizers have told the press that they hope they will get the necessary permits and continue to insure the public that there are no plans for violence among any of the protest groups.

There is also a women’s tent city being planned, a People’s Summit featuring speakers and debate regarding the nature of the G-20 and popular alternatives to these types of organizations, a direct action on the afternoon of the summit, a religious procession calling for social justice and a concert. Although the city continues to debate whether or not to grant these exercises in democracy permits, they have notified the public that there will be 4000 extra police on hand during the G-20 meeting. It seems that, once again, the state wants to portray ordinary citizens who are planning to peacefully assemble as potential criminals. We must not allow that to happen. If you can be in Pittsburgh while the capitalists are gathering hoping to determine the future according to their needs (which are not usually the same as ours), please be there. If you are a citizen who believes in the First Amendment, heed the suggestion of Anne Peterman of the Global Justice Ecology Project and call the White House to encourage Barack Obama to “tell the Secret Service to obey the Constitution and respect the First Amendment-protected rights of protesters.” (White House phone number is 202-456-1111). If you live or work in Pittsburgh, encourage the city council and other officials to grant the permits being requested. Most importantly, if you support the purpose of the protests let the organizers know, especially if you live in the Pittsburgh region. If you can afford the time, please attend.