Thursday, October 06, 2011
The concentration of capital posted by Richard Seymour
Labels: banks, capital, capitalism, finance capital, monopoly
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Tuesday, February 16, 2010
Robin Hood Tax posted by Richard Seymour
I've been following this developing campaign, uniting charities, NGOs and trade unions, with interest. Politically, it taps into a very good instinct. The bankers got rich pursuing speculative profits through various intricate schemes that placed national economies in tremendous danger (example of which), and have been rewarded with bail-outs. If there is going to be a shortfall in funding for public services, they should pay for it. This isn't the only justification for imposing such a tax. A letter signed by 320 economists addressed to the G20 argued that the tax would "calm excessive speculation". Joseph Stiglitz maintains that it is an excellent idea to tax what is a socially useless and sometimes harmful activity.
The proposed level of taxation, at 0.05% on all speculative financial transactions, seems to be very small. (Though it seems it is larger than the micro-tax [pdf] proposed by the TUC and the Tax Justice Movement). Perhaps that extreme modesty of ambition is one reason why the basic idea has been able to get the support of right-wing governments in France and Germany, by New Labour, by former CBI head Lord Adair Turner, by Nancy Pelosi, Jeffrey Sachs and Warren Buffet. Then there's the pay-off. Supposedly, the tax would raise £250bn each year, with "tens of billions" of that available for public services in the UK. If that could be counted on, and if the measure was likely to be passed over the objections of the Obama-Geithner treasury (not a chance in hell), then there's an extremely seductive riposte to those who say we have no choice but to make deep and painful cuts in the public sector. Nonsense - it's easy! We can raise tens of billions for public services with a minute tax on, not to put too fine a point upon it, a wunch of bankers. That would more than cover the cuts proposed by both New Labour and the Tories.
There are some objections to the tax that are superficially appealling, but don't appear to withstand scrutiny. For example, the banks will only pass on the costs to consumers, some say, thus vitiating the distributive argument for the tax. Well, aside from the fact the consumers of such services are disproportionately wealthy, any form of corporate taxation can potentially be passed on to consumers, assuming that consumers are able and willing to bear the cost. That isn't a case against taxing corporate profits. Put simply, the wages of workers which enables them to be consumers are substantially determined by market forces: higher prices tend to drive up wage claims. Hence, the aggregate effect would be the same: the tax would impact on profits, not consumers. Of course, there's the aspect of class struggle that it seems vulgar to even notice, and it is true that in general companies will try to take every opportunity to externalise their costs onto workers and consumers, but that applies with any cost, not just taxes. That's not an argument against taxes, it's an argument - at the minumum - for having an organised and combative labour force which can use its bargaining power to resist such efforts.
Another objection I have seen, from a liberal economist, is that the tax is actually not as small as it appears to be. He maintains that a 0.05% tax on currency speculations would be about six times the current broker's fee. "No industry survives that," he suggests, comparing it to a sudden increase in the cost of a cinema ticket to about £50. But this is a ridiculous, illogical comparison. The booking fee isn't the cost of the product to be consumed in this case. The product is currency, for which you pay with your own commensurate currency. And when you trade in currency, you expect to both consume the purchased product and gain a premium - the profit. A cinema ticket, in contrast to a booking fee for currency transactions, just is the cost of the product. And no cinema-goer expects to both consume the product and get a cash bonus at the end of it. (Unless they stick the place up, which might make the comparison slightly more apt). Currency transactions levied at 0.05% are thus expected to pay a fee that is proportionate to an expected return, so they would still have a motive for engaging in speculation.
He goes on to add, however, that it could wipe out all transactions where the anticipated profit is smaller than the transaction tax, thus eradicating the proposed income that would be gained from it. It's a very intimidating argument, with graphs and talk of pips and spread and so on. This is difficult for those with no specialist knowledge to assess, but let us not succumb to our natural phobia of numbers and argot. We are mere autodidacts, but we have a duty to struggle on, you and I, and try to understand what is at stake here. Perhaps one way to approach this is to consider known examples of similar practises already taking place. It has been noted that the UK already imposes a 0.5% stamp duty on share trading, which gathers £7bn in revenues and could be extended to other transactions. It doesn't seem to have had a catastrophic effect. A number of countries have already imposed a financial transaction tax. Brazil has imposed it since 1993, at an initial rate of 0.38% (this was reduced in 2008), much higher than the proposed rate of the 'Robin Hood' tax. It didn't result in a collapse in currency trading or speculation, but it did result in significant additional revenue to cover the costs of maintaining the country's healthcare system. Moreover, the information gleaned from imposing it enabled the government to prevent other forms of tax evasion. There are also a number of financial transaction taxes already imposed in Australia, India, South Korea and elsewhere. These examples don't appear to bear out the idea that a financial transaction tax would be a sufficient, sudden shock to the system to wipe out most speculative activity. The burden of evidence suggests that such taxes are actually very bad at constraining speculative activity, but quite good at raising money.
There is a problem, though. The aims of the tax are apparently contradictory. One is to throw a bit of grit in the wheels of speculation, thus reducing the chances of harmful high-risk transactions taking place. The other is to raise a lot of money with a relatively insignificant tax that wouldn't really make any difference to the scale of speculation. If it does affect the scale of speculation, then the anticipated revenue would have to be revised down in precise proportion to its effifacy in doing so. If, on the other hand, the main aim is to raise and redistribute money, then the idea of damping down speculation can be dispensed with. But that would leave an apparently progressive tax complicit in what we are agreed is an often dangerous speculative system, and one that we ought to be discouraging or dismantling. But this comes back to the objection that the tax lacks ambition. It does. But that doesn't mean it wouldn't be a good start, and there's no reason why the government could not extend existing taxes on financial transactions to help fund public services.
The proposed level of taxation, at 0.05% on all speculative financial transactions, seems to be very small. (Though it seems it is larger than the micro-tax [pdf] proposed by the TUC and the Tax Justice Movement). Perhaps that extreme modesty of ambition is one reason why the basic idea has been able to get the support of right-wing governments in France and Germany, by New Labour, by former CBI head Lord Adair Turner, by Nancy Pelosi, Jeffrey Sachs and Warren Buffet. Then there's the pay-off. Supposedly, the tax would raise £250bn each year, with "tens of billions" of that available for public services in the UK. If that could be counted on, and if the measure was likely to be passed over the objections of the Obama-Geithner treasury (not a chance in hell), then there's an extremely seductive riposte to those who say we have no choice but to make deep and painful cuts in the public sector. Nonsense - it's easy! We can raise tens of billions for public services with a minute tax on, not to put too fine a point upon it, a wunch of bankers. That would more than cover the cuts proposed by both New Labour and the Tories.
There are some objections to the tax that are superficially appealling, but don't appear to withstand scrutiny. For example, the banks will only pass on the costs to consumers, some say, thus vitiating the distributive argument for the tax. Well, aside from the fact the consumers of such services are disproportionately wealthy, any form of corporate taxation can potentially be passed on to consumers, assuming that consumers are able and willing to bear the cost. That isn't a case against taxing corporate profits. Put simply, the wages of workers which enables them to be consumers are substantially determined by market forces: higher prices tend to drive up wage claims. Hence, the aggregate effect would be the same: the tax would impact on profits, not consumers. Of course, there's the aspect of class struggle that it seems vulgar to even notice, and it is true that in general companies will try to take every opportunity to externalise their costs onto workers and consumers, but that applies with any cost, not just taxes. That's not an argument against taxes, it's an argument - at the minumum - for having an organised and combative labour force which can use its bargaining power to resist such efforts.
Another objection I have seen, from a liberal economist, is that the tax is actually not as small as it appears to be. He maintains that a 0.05% tax on currency speculations would be about six times the current broker's fee. "No industry survives that," he suggests, comparing it to a sudden increase in the cost of a cinema ticket to about £50. But this is a ridiculous, illogical comparison. The booking fee isn't the cost of the product to be consumed in this case. The product is currency, for which you pay with your own commensurate currency. And when you trade in currency, you expect to both consume the purchased product and gain a premium - the profit. A cinema ticket, in contrast to a booking fee for currency transactions, just is the cost of the product. And no cinema-goer expects to both consume the product and get a cash bonus at the end of it. (Unless they stick the place up, which might make the comparison slightly more apt). Currency transactions levied at 0.05% are thus expected to pay a fee that is proportionate to an expected return, so they would still have a motive for engaging in speculation.
He goes on to add, however, that it could wipe out all transactions where the anticipated profit is smaller than the transaction tax, thus eradicating the proposed income that would be gained from it. It's a very intimidating argument, with graphs and talk of pips and spread and so on. This is difficult for those with no specialist knowledge to assess, but let us not succumb to our natural phobia of numbers and argot. We are mere autodidacts, but we have a duty to struggle on, you and I, and try to understand what is at stake here. Perhaps one way to approach this is to consider known examples of similar practises already taking place. It has been noted that the UK already imposes a 0.5% stamp duty on share trading, which gathers £7bn in revenues and could be extended to other transactions. It doesn't seem to have had a catastrophic effect. A number of countries have already imposed a financial transaction tax. Brazil has imposed it since 1993, at an initial rate of 0.38% (this was reduced in 2008), much higher than the proposed rate of the 'Robin Hood' tax. It didn't result in a collapse in currency trading or speculation, but it did result in significant additional revenue to cover the costs of maintaining the country's healthcare system. Moreover, the information gleaned from imposing it enabled the government to prevent other forms of tax evasion. There are also a number of financial transaction taxes already imposed in Australia, India, South Korea and elsewhere. These examples don't appear to bear out the idea that a financial transaction tax would be a sufficient, sudden shock to the system to wipe out most speculative activity. The burden of evidence suggests that such taxes are actually very bad at constraining speculative activity, but quite good at raising money.
There is a problem, though. The aims of the tax are apparently contradictory. One is to throw a bit of grit in the wheels of speculation, thus reducing the chances of harmful high-risk transactions taking place. The other is to raise a lot of money with a relatively insignificant tax that wouldn't really make any difference to the scale of speculation. If it does affect the scale of speculation, then the anticipated revenue would have to be revised down in precise proportion to its effifacy in doing so. If, on the other hand, the main aim is to raise and redistribute money, then the idea of damping down speculation can be dispensed with. But that would leave an apparently progressive tax complicit in what we are agreed is an often dangerous speculative system, and one that we ought to be discouraging or dismantling. But this comes back to the objection that the tax lacks ambition. It does. But that doesn't mean it wouldn't be a good start, and there's no reason why the government could not extend existing taxes on financial transactions to help fund public services.
Labels: banks, class, finance capital, taxation
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Friday, January 22, 2010
Obama: the dream dies posted by Richard Seymour
A year after the ecstatic spectacle of Obama's nomination, and more than a year after the Republicans were overthrown in some surprising new places, the Democrats have lost the previously safe senatorial seat of Massachusetts, lately the fiefdom of the late Ted Kennedy. This spells the end of Obama's 'healthcare reform' in its current, pathetic, version. Nancy Pelosi has made this clear: "I just don't see the votes," she has said. Her Democratic confederates largely agree. It looks as if, predictably, the massive public consensus in favour of healthcare reform, has once more been squandered. This was the Republicans' hope when it became clear that candidate Scott Brown was leading the polls. He told his suburban voting base that if they wanted to scupper this socialistic abomination, he would be the vital 41st vote for Republican filibusters.
The 'debate', if I may speak loosely, over healthcare reform was one that acted as a lightning rod for right-wing hysteria about high government spending and taxes. Relatively rich GOP voters identified their class interests in terms of lower taxes, a smaller state, and less handouts for the lazy bums. (Didn't those irresponsible, impoverished, often black folks cause this crisis through their subprime borrowing? Isn't it time to reintroduce red-lining and free up the police to deal with the inevitable crime spree among this hapless bunch, rather than lining their pockets with other people's hard-earned cash?) Scott Brown knew this, and evidently recognised that the best way to package some dog-whistling over the issue would be to give it an impeccably liberal imprimatur. His campaign crafted the successful 'JFK ad', which segued JFK spelling out his Keynesian tax cuts programme from 1962 into Scott Brown explaining that lower taxes would equal more jobs - he even delivered a concise account of the 'multiplier effect', though I suspect this was a coded appeal to 'trickle down' economics. The great majority of polls taken after the ad was aired put Brown ahead. Notably, Brown won in some of the areas with highest unemployment. One thirty-second slot would by no means have been enough to do the job. What really mattered was the disillusionment of Democratic voters. The turnout, though reasonable for a 'special' election, was way down on 2008, and fell most dramatically in the most Democratic areas:
The Democratic base, in other words, was just not mobilised. Lance Selfa, author of a critical history of the Democrats, asks why this was. It is easy to blame the lousy performance of Croakley, or whatever her name was. Her campaign treated the race as a coronation, at a time when voters are angry. But if right-wing voters are exercised by 'socialism', liberal voters had little to be excited about. In November 2008, they voted for a healthcare programme with a public option, lower insurance premiums, and universal coverage. What they were offered was a system that provided government enforced subsidies to the insurance and healthcare companies, lacked a public option, compelled people who might not be able to afford it to buy insurance policies, and didn't offer universal coverage. The healthcare industry, which had co-drafted the legislation, saw its stocks soar on Wall Street as soon as the legislation was finalised.
The unpopularity of Obama's proposals cannot be reduced to right-wing hysteria, which is only persuasive for about a fifth of Americans and two-thirds of Republicans. Such shrill nonsense motivates a right-wing base and, for that reason, cannot be dismissed - but let's get some perspective here. For a start, Americans hate the current healthcare system. The majority in poll after poll favours something like a single-payer or national insurance health system. That isn't reflected in every poll, of course, but the overwhelming trend is for Americans to prefer a government-run health system to the private, heavily subsidised, system. Secondly, this is Massachusetts we're talking about here. This is a state where a powerful majority voted 'yes' on a ballot initiative favouring a single payer system in 2008. The vote against the Democrats in their heartland was not a vote against socialised medicine, because that is not what was on offer. And despite the slavishly positive spin put on the proposed legislation by Democratic congresspersons, even many of the pro-Obama progressives hated it, and were deeply disillusioned by it. Even Arianna Huffington, bless her Coca-Cola advertising slots, has declared the end of hope.
The current polling status of congressional Democrats is pitiful, hovering at about the same level of popularity as the Bush administration in its lowest ebb. Obama's popularity has also sank, if not to the same lows. This rapid dissipation, after only 12 months, reflects a class anger. As Selfa points out, the president who won on the basis of a claim to represent Main Street rather than Wall Street (ho ho!) is widely understood to represent his major backers:
Obama knows this perfectly well, which is why he was blustering some while back about not running for office to serve a bunch of fat cat Wall Street bankers, and may also explain some of his tentative moves to lightly tax and regulate the parasites. Indeed, in the wake of the loss of Massachusetts, Obama has talked up his reforms yesterday, promising a 'fight' with Wall Street firms who tried to sink his proposals. These are not radical reforms - if the multi-millionaire Tory shadow chancellor George Osborne approves of them, they aren't that radical. But the president's combative language at least suggests that he is aware of where his weakness lies. This electoral pressure is important, though it is nothing compared to a mass movement. And I would contrast the miserable healthcare reforms with the surprisingly good proposals for immigrant rights reform, which comes on the back of pressure from a well-organised campaign rooted in labour and the migrants themselves, despite the latter's difficulties with organising under the ICE jackboot. This tells us that the Democrats are susceptible, if only at some remove and with considerable reluctance, to pressure from the left. In that light, the best thing that could happen to the electoral coalition that swept Obama to power is that they stop hoping, and start fighting.
The 'debate', if I may speak loosely, over healthcare reform was one that acted as a lightning rod for right-wing hysteria about high government spending and taxes. Relatively rich GOP voters identified their class interests in terms of lower taxes, a smaller state, and less handouts for the lazy bums. (Didn't those irresponsible, impoverished, often black folks cause this crisis through their subprime borrowing? Isn't it time to reintroduce red-lining and free up the police to deal with the inevitable crime spree among this hapless bunch, rather than lining their pockets with other people's hard-earned cash?) Scott Brown knew this, and evidently recognised that the best way to package some dog-whistling over the issue would be to give it an impeccably liberal imprimatur. His campaign crafted the successful 'JFK ad', which segued JFK spelling out his Keynesian tax cuts programme from 1962 into Scott Brown explaining that lower taxes would equal more jobs - he even delivered a concise account of the 'multiplier effect', though I suspect this was a coded appeal to 'trickle down' economics. The great majority of polls taken after the ad was aired put Brown ahead. Notably, Brown won in some of the areas with highest unemployment. One thirty-second slot would by no means have been enough to do the job. What really mattered was the disillusionment of Democratic voters. The turnout, though reasonable for a 'special' election, was way down on 2008, and fell most dramatically in the most Democratic areas:
In President Obama’s strongest areas — towns where he received more than 60 percent of the vote — the number of voters was about 30 percent below 2008 levels. In the rest of the state, the number of voters was down just 25 percent. In Boston — one of the strongest areas for Democrats — the number voting fell 35 percent.
The Democratic base, in other words, was just not mobilised. Lance Selfa, author of a critical history of the Democrats, asks why this was. It is easy to blame the lousy performance of Croakley, or whatever her name was. Her campaign treated the race as a coronation, at a time when voters are angry. But if right-wing voters are exercised by 'socialism', liberal voters had little to be excited about. In November 2008, they voted for a healthcare programme with a public option, lower insurance premiums, and universal coverage. What they were offered was a system that provided government enforced subsidies to the insurance and healthcare companies, lacked a public option, compelled people who might not be able to afford it to buy insurance policies, and didn't offer universal coverage. The healthcare industry, which had co-drafted the legislation, saw its stocks soar on Wall Street as soon as the legislation was finalised.
The unpopularity of Obama's proposals cannot be reduced to right-wing hysteria, which is only persuasive for about a fifth of Americans and two-thirds of Republicans. Such shrill nonsense motivates a right-wing base and, for that reason, cannot be dismissed - but let's get some perspective here. For a start, Americans hate the current healthcare system. The majority in poll after poll favours something like a single-payer or national insurance health system. That isn't reflected in every poll, of course, but the overwhelming trend is for Americans to prefer a government-run health system to the private, heavily subsidised, system. Secondly, this is Massachusetts we're talking about here. This is a state where a powerful majority voted 'yes' on a ballot initiative favouring a single payer system in 2008. The vote against the Democrats in their heartland was not a vote against socialised medicine, because that is not what was on offer. And despite the slavishly positive spin put on the proposed legislation by Democratic congresspersons, even many of the pro-Obama progressives hated it, and were deeply disillusioned by it. Even Arianna Huffington, bless her Coca-Cola advertising slots, has declared the end of hope.
The current polling status of congressional Democrats is pitiful, hovering at about the same level of popularity as the Bush administration in its lowest ebb. Obama's popularity has also sank, if not to the same lows. This rapid dissipation, after only 12 months, reflects a class anger. As Selfa points out, the president who won on the basis of a claim to represent Main Street rather than Wall Street (ho ho!) is widely understood to represent his major backers:
A September 2009 Economic Policy Institute poll asked a national sample of registered voters to say who they thought had "been helped a lot or some" from the policies the administration enacted. The result: 13 percent said the "average working person," 64 percent identified "large banks," and 54 percent said "Wall Street investment companies."
Obama knows this perfectly well, which is why he was blustering some while back about not running for office to serve a bunch of fat cat Wall Street bankers, and may also explain some of his tentative moves to lightly tax and regulate the parasites. Indeed, in the wake of the loss of Massachusetts, Obama has talked up his reforms yesterday, promising a 'fight' with Wall Street firms who tried to sink his proposals. These are not radical reforms - if the multi-millionaire Tory shadow chancellor George Osborne approves of them, they aren't that radical. But the president's combative language at least suggests that he is aware of where his weakness lies. This electoral pressure is important, though it is nothing compared to a mass movement. And I would contrast the miserable healthcare reforms with the surprisingly good proposals for immigrant rights reform, which comes on the back of pressure from a well-organised campaign rooted in labour and the migrants themselves, despite the latter's difficulties with organising under the ICE jackboot. This tells us that the Democrats are susceptible, if only at some remove and with considerable reluctance, to pressure from the left. In that light, the best thing that could happen to the electoral coalition that swept Obama to power is that they stop hoping, and start fighting.
Labels: banks, obama, us politics, us working class, wall street
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Tuesday, December 15, 2009
Ever wonder where that bank bailout money came from? posted by Richard Seymour
Guest post by redbedhead:
According to the United Nations Office on Drugs and Crime, some of it came from the Afghan opium trade. Foreign Policy in Focus has a fascinating article analyzing the recent UNODC study on the drug trade, entitled "Addiction, Crime, and Insurgency: The Transnational Threat of Afghan Opium." While the original study headlines the role of the Taliban in the Afghan opium trade, the FPF article notes that buried deep in the study is the admission that the Taliban receives less than 15% of its funding from drugs and that it likely only benefits from 4% of the Afghan drug trade. Poppy farmers, for instance, take about 21% of the drug trade's earnings. And the rest?
Besides "our" allies being the main beneficiaries - not surprising since many of the people NATO and the USA put into power in 2001 were widely recognized to be warlords with large stakes in the drug trade. In comparison, the Taliban had outlawed poppy cultivation in 2000 based upon a promise from UNODC to provide aid to offset the revenue losses that would result from the ban. That aid never arrived:
It is likely that the UN backed off on the aid under direction from the US which was in secret negotiations with the Taliban until five weeks before September 11 to build gas and oil pipelines from Central Asia, through Afghanistan, to a Pakistani port. The Taliban were resisting the US conditions and US negotiators were at turns offering threats and rewards to them. According to the French author of the widely read book "Bin Laden: the forbidden truth", US negotiators told the Taliban that "either you accept our offer of a carpet of gold, or we bury you under a carpet of bombs." However, Colin Powell, US Secretary of State at the time, did provide a Drug Enforcement Agency (DEA) grant of US$43 million - a drop in the bucket - to aid Afghan farmers who lost significant revenue from their traditional cash crop. One is tempted to see this as an incentive to submit to the conditions offered to win the release of further aid. As a result of the Taliban ban on poppy cultivation, Afghanistan went from providing 75% of global opium to zero almost overnight - a drop of 4,000 metric tons. Besides demonstrating just how much the US/NATO invasion has transformed Afghanistan into a "narco-state", to use DEA parlance, it also demonstrates, once more, just how craven and dishonest was UK Prime Minister Tony Blair. Blair is now all over the media saying that if the WMD justification hadn't worked he would have invaded Iraq in any case. The same dishonest - and deadly - method of international relations applied to Afghanistan. Blair stated that they would "bomb their poppy fields" even though there were none. And Downing street backed up this fiction:
But if the Taliban have never been the major beneficiaries of the Afghandrug trade, there have certainly been others. In particular, western banks have used drug money to lubricate the interbank credit system during the 2008 credit crisis. According to the UNODC report, somewhere between US$400-$500 billion in drug money has found its way into the banking system.
While the UNODC report may have attempted to provide a cover to further justify the war in Afghanistan, their use of stats that counter the report's headline claim actually reveals one more sordid truth about the war in Afghanistan. In addition to the death, destruction and destabilization of the region, the war has facilitated a massive growth in the Afghan poppy trade. From 200 tons in 1980, Afghanistan last year produced 6,900 tons and now controls 90% of the global opium trade. Upwards of 1.5 million Afghans are employed in poppy cultivation. And it reveals an irresolvable contradiction for the US: the more they attack the drug trade, the more they attack their own allies, some of whom - like Hamid Karzai's brother - are on the US' payroll. And most of all it hurts poor Afghan farmers who rely on the poppy trade to sustain their livelihood. It is they who will fill the ranks of the insurgency.
According to the United Nations Office on Drugs and Crime, some of it came from the Afghan opium trade. Foreign Policy in Focus has a fascinating article analyzing the recent UNODC study on the drug trade, entitled "Addiction, Crime, and Insurgency: The Transnational Threat of Afghan Opium." While the original study headlines the role of the Taliban in the Afghan opium trade, the FPF article notes that buried deep in the study is the admission that the Taliban receives less than 15% of its funding from drugs and that it likely only benefits from 4% of the Afghan drug trade. Poppy farmers, for instance, take about 21% of the drug trade's earnings. And the rest?
"... the remaining 75% is captured by government officials, the police, local and regional power brokers and traffickers ‹ in short, many of the groups now supported (or tolerated) by the United States and NATO are important actors in the drug trade."
Besides "our" allies being the main beneficiaries - not surprising since many of the people NATO and the USA put into power in 2001 were widely recognized to be warlords with large stakes in the drug trade. In comparison, the Taliban had outlawed poppy cultivation in 2000 based upon a promise from UNODC to provide aid to offset the revenue losses that would result from the ban. That aid never arrived:
That basic logic prompted UNODC to open negotiations with the Taliban once they had gained control over much of Afghan territory, using Executive Director Pino Arlacchi's hollow offer of USD 250 million as bait and raising unrealistic expectations about international recognition. In September 2000, two months after Mullah Omar's decree, Arlacchi announced that, instead of compensation, UNODC would close down all operational activities in Afghanistan. The decision took even UNODC staff in the country by surprise. They learned about it from a BBC broadcast. The Taliban were understandably angry: "We have fulfilled our obligations. We demand that the agreement we made should be fulfilled up to the end," said Abdel Hamid Akhundzada, director of the Taliban's High Commission for Drug Control. "We have done what needed to be done, putting our people and our farmers through immense difficulties. We expected to be rewarded for our actions, but instead were punished with additional sanctions" (Transnational Institute, 2001).
It is likely that the UN backed off on the aid under direction from the US which was in secret negotiations with the Taliban until five weeks before September 11 to build gas and oil pipelines from Central Asia, through Afghanistan, to a Pakistani port. The Taliban were resisting the US conditions and US negotiators were at turns offering threats and rewards to them. According to the French author of the widely read book "Bin Laden: the forbidden truth", US negotiators told the Taliban that "either you accept our offer of a carpet of gold, or we bury you under a carpet of bombs." However, Colin Powell, US Secretary of State at the time, did provide a Drug Enforcement Agency (DEA) grant of US$43 million - a drop in the bucket - to aid Afghan farmers who lost significant revenue from their traditional cash crop. One is tempted to see this as an incentive to submit to the conditions offered to win the release of further aid. As a result of the Taliban ban on poppy cultivation, Afghanistan went from providing 75% of global opium to zero almost overnight - a drop of 4,000 metric tons. Besides demonstrating just how much the US/NATO invasion has transformed Afghanistan into a "narco-state", to use DEA parlance, it also demonstrates, once more, just how craven and dishonest was UK Prime Minister Tony Blair. Blair is now all over the media saying that if the WMD justification hadn't worked he would have invaded Iraq in any case. The same dishonest - and deadly - method of international relations applied to Afghanistan. Blair stated that they would "bomb their poppy fields" even though there were none. And Downing street backed up this fiction:
"A senior Downing street aide said: 'We have reliable information that theTaliban are planning to use money from drugs to finance military action, anthat bin Laden has ordered farmers to step up production'"
But if the Taliban have never been the major beneficiaries of the Afghandrug trade, there have certainly been others. In particular, western banks have used drug money to lubricate the interbank credit system during the 2008 credit crisis. According to the UNODC report, somewhere between US$400-$500 billion in drug money has found its way into the banking system.
In fact, Antonio Maria Costa [UNODC exec. director] was quoted as saying that drug money may have recently rescued some failing banks: "interbank loans were funded by money that originated from drug trade and other illegal activities," and there were "signs that some banks were rescued in that way." "At a time of major bank failures, money doesn't smell, bankers seem to believe," he wrote in UNODC's 2009 World Drug Report (emphasis in original).
While the UNODC report may have attempted to provide a cover to further justify the war in Afghanistan, their use of stats that counter the report's headline claim actually reveals one more sordid truth about the war in Afghanistan. In addition to the death, destruction and destabilization of the region, the war has facilitated a massive growth in the Afghan poppy trade. From 200 tons in 1980, Afghanistan last year produced 6,900 tons and now controls 90% of the global opium trade. Upwards of 1.5 million Afghans are employed in poppy cultivation. And it reveals an irresolvable contradiction for the US: the more they attack the drug trade, the more they attack their own allies, some of whom - like Hamid Karzai's brother - are on the US' payroll. And most of all it hurts poor Afghan farmers who rely on the poppy trade to sustain their livelihood. It is they who will fill the ranks of the insurgency.
Labels: 'war on drugs', afghanistan, banks, finance capital, opium, US imperialism
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Wednesday, November 25, 2009
This is a stick up posted by Richard Seymour
So, the banks have won again. They've expropriated billions from the public treasury to cover their dodgy dealings, insisted that the public have to pay for it, and now they've got the official benediction of the supreme court. They don't have to worry about the OFT ruling out their excessive charges, and millions of people who might have expected some refund from their banks will now be met with hard-faced refusal. This is not just a consumer issue (as if there is ever such a thing as 'just a consumer issue'). Unfair bank charges are a significant part of the means by which the banks extract a levy from workers' wages, as is interest on loans and mortgage repayments. These charges necessarily affect the poorest most, as it is they who are most likely to go into the red without being able to anticipate or prevent it. As to the scale of this overcharging, up to a billion pounds had already been repaid to a number of customers by UK banks, and some headlines suggest that they may have had to pay up to £20bn back to 8m customers, plus they would have lost £2.6bn a year they make in profits from the practise. Now they will be able to continue - in the short run at least - to appropriate this particular form of rent from working class wages.
So, here I am on this same old hobby horse again: nationalise the banks already. Take them over. They are public utilities. Debt is a public utility. It should be disbursed on the basis of need, and no one should make any profit from it. At the very least, the banks already partially nationalised should be converted into a socialised banking service (PostBank, The People's Bank, the Woolworths Comeback Tour, you pick the name). I am betting that the costs of running such a system would be so low, and the improvements to service sufficiently great, that millions of customers would switch to it immediately. It could be like the 'public option' of banking, forcing down costs in the short term, and leaving open the possibility of a Kenyan-born Islamofascist turning the country communist in the long run. In the meantime, if you'd like to continue lobbying your bank for some of your money back, check this site out.
So, here I am on this same old hobby horse again: nationalise the banks already. Take them over. They are public utilities. Debt is a public utility. It should be disbursed on the basis of need, and no one should make any profit from it. At the very least, the banks already partially nationalised should be converted into a socialised banking service (PostBank, The People's Bank, the Woolworths Comeback Tour, you pick the name). I am betting that the costs of running such a system would be so low, and the improvements to service sufficiently great, that millions of customers would switch to it immediately. It could be like the 'public option' of banking, forcing down costs in the short term, and leaving open the possibility of a Kenyan-born Islamofascist turning the country communist in the long run. In the meantime, if you'd like to continue lobbying your bank for some of your money back, check this site out.
Labels: bankers, banks, capitalism, finance capital, profits, recession, wages, working class
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Thursday, October 15, 2009
Another Wall Street bubble, thanks to the bailout posted by Richard Seymour
Guest post by redbedhead:
I suppose it shouldn¹t come as a surprise that the biggest of the big banks in America that sucked up tens of billions in government aid are now rolling in profits. That¹s how this game works. Thus, JPMorgan has just reported a 580% profit increase over last year to a whopping $3.6 billion third-quarter profit. The reason is, purely and simply, that the money that the US government pumped into the banking and financial sector has created a new Wall St. bubble with stock prices rising by nearly 50% to top the psychological benchmark of 10,000.
The actual meaning of that number is a mystery to most of us not initiated into the occult world of the stock market. But the basic gist is that there's a lot of cash floating around and people are doing to the stock market what they did to the housing market bidding it up, out of relation to the value of the assets that they represent. The trouble is, in the real world, the shithouse is still burning. Community banks in the US, which make their profit by loaning money to people to buy houses, finance small businesses, other consumer loans, etc. are tanking badly. These 7,000 banks have collectively lost about $2.7 billion. And many are outright failing:
The reasons why are straightforward, with loan delinquencies sitting at a record 4.35 percent and climbing and real estate development loans have rocketed to 16 percent. Amongst homeowners, 7.35 percent were delinquent - another record. In previously frothy markets like south Florida the freefall is continuing. According to one real estate agent foreclosures have risen by 25 percent compared to last year and the trend is higher. It is certainly possible that the present round of profit reporting including a positive report from Intel Corp. boosting share earnings and projecting an extra $1 billion in revenue for the fourth quarter could in fact herald a recovery. But it¹s also the case that, like previous recessions going back to the Reagan arms boom this one will have been ended by laying the basis for the next one.
In particular, what we have seen in recent decades is a game of debt ping pong, with debts being shunted back and forth between governments, private individuals and the corporate sector (including banks). Until that debt can be dealt with it will act as a drag upon the economy and create other problems that will increasingly limit the ability of governments (in particular the US government) to act. My own view is that in the short to medium term, once the present round of "irrational exuberance" wears off and I don¹t think it will last long once stockbrokers remember that there¹s a real world will see us return to an extended period of stagnation. Some of the weaker centres of the system - droopy old Britain, for instance may experience Icelandic types of crashes. As Nouriel Roubini might say, this ride ain't half over yet.
I suppose it shouldn¹t come as a surprise that the biggest of the big banks in America that sucked up tens of billions in government aid are now rolling in profits. That¹s how this game works. Thus, JPMorgan has just reported a 580% profit increase over last year to a whopping $3.6 billion third-quarter profit. The reason is, purely and simply, that the money that the US government pumped into the banking and financial sector has created a new Wall St. bubble with stock prices rising by nearly 50% to top the psychological benchmark of 10,000.
The actual meaning of that number is a mystery to most of us not initiated into the occult world of the stock market. But the basic gist is that there's a lot of cash floating around and people are doing to the stock market what they did to the housing market bidding it up, out of relation to the value of the assets that they represent. The trouble is, in the real world, the shithouse is still burning. Community banks in the US, which make their profit by loaning money to people to buy houses, finance small businesses, other consumer loans, etc. are tanking badly. These 7,000 banks have collectively lost about $2.7 billion. And many are outright failing:
"Ninety-eight banks, mostly small, have failed so far this year, and regulators predict the harvest from the current recession is less than halfway complete."
The reasons why are straightforward, with loan delinquencies sitting at a record 4.35 percent and climbing and real estate development loans have rocketed to 16 percent. Amongst homeowners, 7.35 percent were delinquent - another record. In previously frothy markets like south Florida the freefall is continuing. According to one real estate agent foreclosures have risen by 25 percent compared to last year and the trend is higher. It is certainly possible that the present round of profit reporting including a positive report from Intel Corp. boosting share earnings and projecting an extra $1 billion in revenue for the fourth quarter could in fact herald a recovery. But it¹s also the case that, like previous recessions going back to the Reagan arms boom this one will have been ended by laying the basis for the next one.
In particular, what we have seen in recent decades is a game of debt ping pong, with debts being shunted back and forth between governments, private individuals and the corporate sector (including banks). Until that debt can be dealt with it will act as a drag upon the economy and create other problems that will increasingly limit the ability of governments (in particular the US government) to act. My own view is that in the short to medium term, once the present round of "irrational exuberance" wears off and I don¹t think it will last long once stockbrokers remember that there¹s a real world will see us return to an extended period of stagnation. Some of the weaker centres of the system - droopy old Britain, for instance may experience Icelandic types of crashes. As Nouriel Roubini might say, this ride ain't half over yet.
Labels: banks, bubble, capitalism, federal bail-out, profits, recession, us economy, wall street
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Wednesday, September 02, 2009
Capital is a weapon of mass destruction posted by Richard Seymour
Consider this. There is a staggering amount of spare capacity in the economy. Existing productive resources lie unused, while social needs are unmet, because there is no profitable means by which such resources might be used. Companies are not investing, and are not hiring. The banks are still not lending, preferring to hoard funds against future shocks, because their managers do not believe there are sufficient profitable investment opportunities in the economy. This situation is actually absurd. We have, collectively, all the means we require to house, feed, educate and employ the population, but we may not dispose of those means because there is no profit in doing so.
The approach of governments in response to this has first been to defend the financial sector at all costs - or rather at the cost of a trillion dollars in bailouts and stimulus, and $5 trillion in quantitative easing programmes. This has been branded 'socialism', but it is a staple of neoliberal ideology that the banking system is so central to the system's ability to reproduce itself that the state must spare no means in protecting it. It is no surprise either - the financial sector has been the single biggest source of corporate profits in both the US and UK economies in recent years. In 2006, Wall Street accounted for 40% of all corporate profits in the US economy. Obama has therefore faithfully cleaved to neoliberal doctrine, not just with TARP and its sequels, but by orchestrating a system of lending to the banks that actually results in the additional expropriation of the treasury to the tune of $33bn per year. The result is a massive transfer of wealth from the majority to the major owners of shares and assets.
The left-Keynesian solution to such absurdities is to socialise that spare capacity, use deficit-financing to fund jobs, boost incomes and stimulate demand, and boost the bargaining power of labour so that consumption is supported by reasonable wages rather than debt - all of which would be a good start. However, to the extent that governments have engaged in job creation, income-boosting and stimulus, they have been timid and reverential as regards existing property arrangements. Even moderate moves to cap bonuses are being resisted by the UK government at G20, and they have sternly chastised the FSA head Adair Turner for calling the banks bloated and socially useless, and advocating a Tobin Tax. (Bear in mind that Turner is a former head of the CBI, not a radical reformer). This refusal to socialise assets and make meaningful efforts to redistribute wealth is one reason why employment continues to fall, and why demand remains weak - and this is in turn a large part of the reason for Nouriel Roubini's cheerlessness as regards the 'recovery'. The effects of the stimulus will exhaust themselves by next year at this rate, but private sector demand is unlikely to have recovered by that point.
Another reason for cheerlessness is what David Harvey has called the "capital surplus absorption problem". In the best of times, he has pointed out, the system is always going to come up against limits to its ability to find profitable investment opportunities for trillions of dollars - he pointed out that about $1.5tn of new investments need to be found every year just to maintain the average growth rate of approx. 3%. A healthy growth rate has to be maintained because otherwise capitalism isn't doing what it's supposed to do. It is an inherently expansionist system, and if it isn't expanding that means that capitalists aren't competing for market share, aren't investing, and aren't obeying the basic imperative of capital accumulation: they aren't being capitalists, in other words. Finding such investment opportunities becomes more and more of a daunting prospect, though - notwithstanding the ecological catastrophe that awaits us if we can't find a new paradigm of economic well-being, the fact is that the total sum of new investment required rises each year, and by 2029, the sum needed will be double what it is now. Capital's ability to overcome these limits depends upon usurious capital, or what would now be called finance capital. However, one result of financialisation is a long-term problem of surplus liquidity: this is when the banking system is so loaded with money that it will throw dough at any project that a capitalist can dream up. This is what is usually referred to as 'venture capitalism'. New financial devices of slicing and tranching debts and assets have to be invented. That's called innovation. New bubbles emerge, whether in the dot.conomy or in the housing market. That's called a bull market. This is usually resolved, temporarily, through a financial crash. In 2001, the system lost $7tn in stock market value. Last year, $55tn of asset values were wiped out, which is equivalent to the total GDP for the whole planet - one year's work by several billion people, completely obliterated. (You know that feeling when you build a tower out of playing cards, and just as you add the last storey the whole thing collapses? Well, this is 55 trillion times worse.) By means of such mass destruction, the system reboots itself, but the basic problem of finding profitable avenues for speculation etc. remains.
So, this is the dilemma that capital presents us with. There is spare capacity, there is abundant labour, and there is money ready to enter into circulation as capital. And there are real, pressing social needs that these resources could theoretically be put to work to meet. But there are few profitable investment opportunities in any of that. Furthermore, unless a key source of our current miserable condition is renewed and protected (the financial system) there will not even be enough profit in the system to maintain below-par growth rates. One way out of this is what Harvey has termed 'accumulation by dispossession' (see The New Imperialism, Oxford University Press, 2003, pp 152-169 for detail). This is an elaboration on Marx's account of the 'primitive accumulation of capital', which referred to a violent process of expropriation and enclosure that was necessary to establish capitalist property relations between a new capitalist owning class, and a new propertyless (largely rural) proletariat. Harvey maintains, following Luxemburg, that such a manner of accumulation continues to be central today. Capitalism must always "have something 'outside of itself'", as Harvey says (p 140), in order to stabilise itself. This exterior can take the form of the public sector, the commons, the hitherto uncommodified, wherever it exists.
The enclosure of certain public assets is obviously on the agenda, and a transfer of public wealth is already occurring de facto, as indicated above. Social Security is certainly a prized item for finance capital, and Obama might have more success in delivering that to private capital than in delivering meaningful healthcare reform. However, the real opportunities for such divestment may lie overseas. The lack of domestic investment opportunity is fuels authoritarian imperialism and is arguably what - more than anything else - drove the adventurism and extremism of the Bush era. If US capitalism cannot be successfully reproduced and expanded on the basis of current relations, then a new wave of violent expansionism - perhaps smarter under Obama, but still very brutal - is a realistic scenario.
The approach of governments in response to this has first been to defend the financial sector at all costs - or rather at the cost of a trillion dollars in bailouts and stimulus, and $5 trillion in quantitative easing programmes. This has been branded 'socialism', but it is a staple of neoliberal ideology that the banking system is so central to the system's ability to reproduce itself that the state must spare no means in protecting it. It is no surprise either - the financial sector has been the single biggest source of corporate profits in both the US and UK economies in recent years. In 2006, Wall Street accounted for 40% of all corporate profits in the US economy. Obama has therefore faithfully cleaved to neoliberal doctrine, not just with TARP and its sequels, but by orchestrating a system of lending to the banks that actually results in the additional expropriation of the treasury to the tune of $33bn per year. The result is a massive transfer of wealth from the majority to the major owners of shares and assets.
The left-Keynesian solution to such absurdities is to socialise that spare capacity, use deficit-financing to fund jobs, boost incomes and stimulate demand, and boost the bargaining power of labour so that consumption is supported by reasonable wages rather than debt - all of which would be a good start. However, to the extent that governments have engaged in job creation, income-boosting and stimulus, they have been timid and reverential as regards existing property arrangements. Even moderate moves to cap bonuses are being resisted by the UK government at G20, and they have sternly chastised the FSA head Adair Turner for calling the banks bloated and socially useless, and advocating a Tobin Tax. (Bear in mind that Turner is a former head of the CBI, not a radical reformer). This refusal to socialise assets and make meaningful efforts to redistribute wealth is one reason why employment continues to fall, and why demand remains weak - and this is in turn a large part of the reason for Nouriel Roubini's cheerlessness as regards the 'recovery'. The effects of the stimulus will exhaust themselves by next year at this rate, but private sector demand is unlikely to have recovered by that point.
Another reason for cheerlessness is what David Harvey has called the "capital surplus absorption problem". In the best of times, he has pointed out, the system is always going to come up against limits to its ability to find profitable investment opportunities for trillions of dollars - he pointed out that about $1.5tn of new investments need to be found every year just to maintain the average growth rate of approx. 3%. A healthy growth rate has to be maintained because otherwise capitalism isn't doing what it's supposed to do. It is an inherently expansionist system, and if it isn't expanding that means that capitalists aren't competing for market share, aren't investing, and aren't obeying the basic imperative of capital accumulation: they aren't being capitalists, in other words. Finding such investment opportunities becomes more and more of a daunting prospect, though - notwithstanding the ecological catastrophe that awaits us if we can't find a new paradigm of economic well-being, the fact is that the total sum of new investment required rises each year, and by 2029, the sum needed will be double what it is now. Capital's ability to overcome these limits depends upon usurious capital, or what would now be called finance capital. However, one result of financialisation is a long-term problem of surplus liquidity: this is when the banking system is so loaded with money that it will throw dough at any project that a capitalist can dream up. This is what is usually referred to as 'venture capitalism'. New financial devices of slicing and tranching debts and assets have to be invented. That's called innovation. New bubbles emerge, whether in the dot.conomy or in the housing market. That's called a bull market. This is usually resolved, temporarily, through a financial crash. In 2001, the system lost $7tn in stock market value. Last year, $55tn of asset values were wiped out, which is equivalent to the total GDP for the whole planet - one year's work by several billion people, completely obliterated. (You know that feeling when you build a tower out of playing cards, and just as you add the last storey the whole thing collapses? Well, this is 55 trillion times worse.) By means of such mass destruction, the system reboots itself, but the basic problem of finding profitable avenues for speculation etc. remains.
So, this is the dilemma that capital presents us with. There is spare capacity, there is abundant labour, and there is money ready to enter into circulation as capital. And there are real, pressing social needs that these resources could theoretically be put to work to meet. But there are few profitable investment opportunities in any of that. Furthermore, unless a key source of our current miserable condition is renewed and protected (the financial system) there will not even be enough profit in the system to maintain below-par growth rates. One way out of this is what Harvey has termed 'accumulation by dispossession' (see The New Imperialism, Oxford University Press, 2003, pp 152-169 for detail). This is an elaboration on Marx's account of the 'primitive accumulation of capital', which referred to a violent process of expropriation and enclosure that was necessary to establish capitalist property relations between a new capitalist owning class, and a new propertyless (largely rural) proletariat. Harvey maintains, following Luxemburg, that such a manner of accumulation continues to be central today. Capitalism must always "have something 'outside of itself'", as Harvey says (p 140), in order to stabilise itself. This exterior can take the form of the public sector, the commons, the hitherto uncommodified, wherever it exists.
The enclosure of certain public assets is obviously on the agenda, and a transfer of public wealth is already occurring de facto, as indicated above. Social Security is certainly a prized item for finance capital, and Obama might have more success in delivering that to private capital than in delivering meaningful healthcare reform. However, the real opportunities for such divestment may lie overseas. The lack of domestic investment opportunity is fuels authoritarian imperialism and is arguably what - more than anything else - drove the adventurism and extremism of the Bush era. If US capitalism cannot be successfully reproduced and expanded on the basis of current relations, then a new wave of violent expansionism - perhaps smarter under Obama, but still very brutal - is a realistic scenario.
Labels: accumulation, banks, capital, capitalism, finance capital, imperialism, profits, rate of profit
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Monday, August 24, 2009
It's all over, bar the firing posted by Richard Seymour
The crisis is over, and you may resume the seatedness of your posture. After all, you will have heard that Germany and France have officially pulled out of recession. Even Japan, which has been in terrible shape, is managing a recovery. Well, what else could Britain do but join in? Somehow it must be shown that the UK, too, is surging back to rude health. Today, a survey of business professionals reveals a sudden leap in 'confidence', thus proving that Britain's recession is "at an end". While there can be no doubt that various stimulus packages have pulled national economies back from the brink of outright catastrophe, it is difficult to take this air-punching, air-kissing jubilance seriously. Simon Basketter gives some good reasons to be sceptical of this optimism, pointing out much of the statistical boost arises because the collapse in exports was slower than the collapse in imports, thus boosting national income. Further, he notes, unemployment continues to rise and wages are still falling, (particularly in Japan).
Nouriel Roubini gives even more reasons to be cheerless:
Nouriel Roubini gives even more reasons to be cheerless:
Employment is still falling sharply in the US and elsewhere – in advanced economies, unemployment will be above 10 per cent by 2010. This is bad news for demand and bank losses, but also for workers’ skills, a key factor behind long-term labour productivity growth.Second, this is a crisis of solvency, not just liquidity, but true deleveraging has not begun yet because the losses of financial institutions have been socialised and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest.
Third, in countries running current account deficits, consumers need to cut spending and save much more, yet debt-burdened consumers face a wealth shock from falling home prices and stock markets and shrinking incomes and employment.
Fourth, the financial system – despite the policy support – is still severely damaged. Most of the shadow banking system has disappeared, and traditional banks are saddled with trillions of dollars in expected losses on loans and securities while still being seriously undercapitalised.
Fifth, weak profitability – owing to high debts and default risks, low growth and persistent deflationary pressures on corporate margins – will constrain companies’ willingness to produce, hire workers and invest.
Sixth, the releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending. The effects of the policy stimulus, moreover, will fizzle out by early next year, requiring greater private demand to support continued growth.
Seventh, the reduction of global imbalances implies that the current account deficits of profligate economies, such as the US, will narrow the surpluses of countries that over-save (China and other emerging markets, Germany and Japan). But if domestic demand does not grow fast enough in surplus countries, this will lead to a weaker recovery in global growth.
As for the UK, the Bank of England has pumped £175bn into the economy, and kept interest rates at historic lows of 0.5%. The total amount of money released into the economy under the policy of 'quantitative easing' is equivalent to about 12% of the UK GDP. The total spent on fighting the recession, including bail-outs, is £350bn, or approximately 25% of the UK GDP. Even with that, it is expected that they won't keep to the target inflation rate of 2% - prices will remain low because demand will remain weak. Despite an uptick in spending, borrowing has hardly increased. The reason for this is that banks are hoarding the money dished out by the Bank of England to protect themselves against future losses, rather than increasing lending. As Paul Mason points out, to save the City, economic recovery has been delayed. And when the recovery does come, it will be weak and fragile. (The Left Banker has a really splendid analysis of the figures).
There is also the additional complication of elections. The current state of UK public finances is, thanks to the bail-outs, very poor. The Tories propose, in the very likely event that they win the elections, to immediately embark on public spending cuts of at least 10%. Their more 'radical' councils are leading the way in this, with Barnet council slashing spending on sheltered housing, parks, libraries, welfare advice, etc. Both New Labour and the Liberal Democrats are also committed to cuts, even if the government faces some limited pressure from the unions on this point. But the Tories want to be very aggressive about this once in office. They want to start the cuts much earlier, go much deeper, and I suspect that they want to take on the public sector unions in a major way. To attack public spending at a time in which unemployment continues to rise, and in which demand remains weak is, as the MPC's David Blanchflower argued, a sure way to scupper any potential recovery. But it wouldn't be the first time that the Conservatives have preferred a deep and painful recession in order to weaken and attack the labour movement.
Labels: banks, capitalism, crash, economy, liberal democrats, new labour, public spending, recession, socialism, tories
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Tuesday, February 24, 2009
The more things change, the more New Labour stays the same posted by Richard Seymour
The government, you will be heartened to learn, has something else on its mind aside from prominently displaying its mean streak toward the disabled and single mothers. The cabinet has been sick with worry about your welfare in this recession. For this reason, the nationalised bank Northern Rock, having slashed jobs and shed mortgages from its books for months on end, is now offering some first-time buyers mortgages on 10% deposits. And the government has also persuaded Lloyds to expand its lending to consumers and small businesses, on pain of full nationalisation. Wonderful. Orgasmically peachy. The trouble is that in the current climate, no one wants to borrow, given the real knowledge that they won't be able to pay it back. Who would be a first-time buyer today, when 1.2m households are in negative equity? Who would borrow money for an expensive consumer item that didn't have to? As for small businesses, forget it. Business investment has shrunk by 7.7% across the economy over the last year. Demand is plummetting, there is tons of spare capacity, and businesses are more likely to sell assets and cut jobs than borrow more to invest more.
But before you go drawing the conclusion that senior ministers think in terms of amusing demographoids such as ‘Vauxhall Man’ and ‘Bognor Regis Woman’, and designs policies on the basis of flattering said specimens’ alleged ‘aspirational’ propensities, please consider the stimulus. Because, after all, a giant middle finger aimed in your direction can be quite stimulating. Aside from the fact that the supposed spending increases comprise cash that was already in the pipeline, brought forward a couple of years, don't forget that the Chancellor is still intending to cut public spending by £5bn this year. Schools and hospitals, the latter already suffering from the burden of soaring PFI costs, are expected to fare the worst. There’s your stimulus – do you feel that? So, with unemployment expected to reach 3 million next year, and with the government pushing through cuts in public services and welfare, where are these millions of confident, spendy consumers going to come from to bail out the economy and get investment flowing again? It seems that the government is essentially committed to restoring the City of London and the housing market to their prior importance after the recession. They still think they can rely on the financial sector to generate jobs, and a strong housing market to give people collateral to borrow against. This is the only explanation that I can think of as to why they are still committed to keeping even the worst banks alive as profitable enterprises while refusing to do anything substantial about the massive housing crisis that the country faces.
And even as the government rushes to repeatedly inject billions into the financial system and (temporarily) nationalises failing banks, the rush to privatise existing (and comparatively well-functioning) public services continues. 30% of Royal Mail is to be sold off, following up on the pre-Xmas orders of the latte-moustached Secretary of State for Business Peter Mandelson. This is ostensibly to help recoup sufficient funds to make up for the pensions deficit and introduce modernising measures. The trouble is, the government has already pledged to fund the deficit, and all it is doing is handing over a profitable part of the enterprise to a private company. Taxpayer still gets milked, private capital gets the cream. It has absolutely nothing to do with pensions. This is a move that the government is by no means obliged to undertake. It is not politically popular, it will split the Labour Party, and it has galvanised serious opposition even among ordinarily spineless backbenchers. 125 Labour MPs have signed motions against the policy, and even that former left cheek of Blairism John Prescott is opposed to the plans. The government will have to rely on Tory votes to push the policy through. So, the government's slogan come election 2010 will be: "If you value it, vote for it; then we'll smash it up and sell the parts."
Still, at least you can rely on the government, having alienated voters on the left, to pander to voters on the right who are going to vote Tory anyway. Thus, even as the flow of migrant workers decreases sharply under the impact of recession, the Home Secretary still wants to ban thousands of them. That 'British jobs for British workers' bollocks has a lot to answer for. Meanwhile, Hazel Blears, having been taken to pieces by George Monbiot, is preparing her comeback as an archnemesis of political-correctness-gone-mad, in a madcap re-enactment of Margaret Hodge's campaign to give half of her constituency over to the BNP. When this bizarre mix of haughtiness, arrogance, elitism and pseudo-populism leads to electoral annihilation, Blears will be the first one to blame it on the government's refusal to use her purloined Jimmy Carr jokes in the campaign.
But before you go drawing the conclusion that senior ministers think in terms of amusing demographoids such as ‘Vauxhall Man’ and ‘Bognor Regis Woman’, and designs policies on the basis of flattering said specimens’ alleged ‘aspirational’ propensities, please consider the stimulus. Because, after all, a giant middle finger aimed in your direction can be quite stimulating. Aside from the fact that the supposed spending increases comprise cash that was already in the pipeline, brought forward a couple of years, don't forget that the Chancellor is still intending to cut public spending by £5bn this year. Schools and hospitals, the latter already suffering from the burden of soaring PFI costs, are expected to fare the worst. There’s your stimulus – do you feel that? So, with unemployment expected to reach 3 million next year, and with the government pushing through cuts in public services and welfare, where are these millions of confident, spendy consumers going to come from to bail out the economy and get investment flowing again? It seems that the government is essentially committed to restoring the City of London and the housing market to their prior importance after the recession. They still think they can rely on the financial sector to generate jobs, and a strong housing market to give people collateral to borrow against. This is the only explanation that I can think of as to why they are still committed to keeping even the worst banks alive as profitable enterprises while refusing to do anything substantial about the massive housing crisis that the country faces.
And even as the government rushes to repeatedly inject billions into the financial system and (temporarily) nationalises failing banks, the rush to privatise existing (and comparatively well-functioning) public services continues. 30% of Royal Mail is to be sold off, following up on the pre-Xmas orders of the latte-moustached Secretary of State for Business Peter Mandelson. This is ostensibly to help recoup sufficient funds to make up for the pensions deficit and introduce modernising measures. The trouble is, the government has already pledged to fund the deficit, and all it is doing is handing over a profitable part of the enterprise to a private company. Taxpayer still gets milked, private capital gets the cream. It has absolutely nothing to do with pensions. This is a move that the government is by no means obliged to undertake. It is not politically popular, it will split the Labour Party, and it has galvanised serious opposition even among ordinarily spineless backbenchers. 125 Labour MPs have signed motions against the policy, and even that former left cheek of Blairism John Prescott is opposed to the plans. The government will have to rely on Tory votes to push the policy through. So, the government's slogan come election 2010 will be: "If you value it, vote for it; then we'll smash it up and sell the parts."
Still, at least you can rely on the government, having alienated voters on the left, to pander to voters on the right who are going to vote Tory anyway. Thus, even as the flow of migrant workers decreases sharply under the impact of recession, the Home Secretary still wants to ban thousands of them. That 'British jobs for British workers' bollocks has a lot to answer for. Meanwhile, Hazel Blears, having been taken to pieces by George Monbiot, is preparing her comeback as an archnemesis of political-correctness-gone-mad, in a madcap re-enactment of Margaret Hodge's campaign to give half of her constituency over to the BNP. When this bizarre mix of haughtiness, arrogance, elitism and pseudo-populism leads to electoral annihilation, Blears will be the first one to blame it on the government's refusal to use her purloined Jimmy Carr jokes in the campaign.
Labels: bankers, banks, financial sector, new labour, postal workers, privatisation, royal mail
1:50:00 pm |
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Thursday, November 27, 2008
Mega bailout posted by Richard Seymour
I missed this. They've got a lot of what it takes to get along. The first column in the chart below represents the figure proposed to bail-out banks and credit institutions in TARP. The second represents the total amount that the US government is now committed to supplying to the same institutions.
Labels: banks, capitalism, credit, federal bail-out, tarp, us ruling class
7:05:00 pm |
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Tuesday, October 14, 2008
Cue titles posted by Richard Seymour
The concerted intervention by global states into the financial markets has, for the time being, restored 'confidence' to the banking system, lowering inter-bank rates and stimulating an increase in share values. As a televisual drama, we can now consider it concluded for the time being. The climax has been reached, and the iconic freeze-frame image (left) should now usher in the titles: Executive Producers, George W Bush, Henry 'Hank' Paulson, Ben Bernanke... Everything else that matters - foreclosures and growing resistance, pay cuts and strikes, job losses, potential political realignment - were really sub-plots of the master-narrative. These other problems will work themselves out, while the euphoria of the good guys defeating the disrupting alien presence will keep us going through the adverts, so we can start buying stuff again. But what with?
Labels: banks, government bail-outs, neoliberalism, stock market, television
7:14:00 am |
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Friday, October 10, 2008
Anticapitalista in the City posted by Richard Seymour
I could not, for various reasons, stay too long, but here are some pics (and footage shortly) from the protest. At one point, a group of demonstrators managed to get into the Stock Exchange building, and - despite the best efforts of some burly and aggressive City Police - the crowd of perhaps a couple of thousand people successfully broke through the blockades they kept trying to create. You can see there's a great deal of struggling with the police knocking people about a bit, but if the effort was to undermine the protest it didn't bloody work. They seemed to like grabbing people by the shoulder and tossing them about, for no obvious reason. I had one donut-munching oaf do it to me while I was filming, and it was dreadfully annoying. They clearly had a bit of aggression and frustration to get out.
Also, see the reports from today's solid London-wide bus strike.
Labels: anticapitalism, banks, capitalism, city of london, neoliberalism, protest, spoilt city brats
5:55:00 pm |
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Just how bad can it get? posted by Richard Seymour
There has been nothing like this in the whole history of capitalism: the level of state intervention to shore up the financial markets is astonishing. Equally astonishing is the fact that it has had no effect whatsoever. After a steep fall on the stock markets yesterday, global equities have plunged this morning, with the FTSE 100 losing a tenth of its value in a few hours. And while it has so far been true, as Andrew Kliman points out, that the 'real' economy has contracted a lot slower than in the previous, relatively mild recession of 2001-2, the signs are that it may in fact be much worse. House prices are plummeting far more rapidly than they did in the early 1990s. For those of you who are - like me - in rented accomodation, this is actually very bad news, because it makes buy-to-let mortgages more expensive to obtain as well as driving many homeowners back into the renting market, thus driving up prices. Because the UK has, like the US, rested its economic performance to a great extent on its housing markets, the sudden decline makes the UK worse placed than other EU states to cope with the recession according to the OECD. Like the US, we are up to our eyeballs in debt and have no savings to match, and many people have relied on mortgages as collateral for credit. And like the US, in fact much more than the US, our economic growth has been driven by the financial sector while manufacturing has been allowed to implode. I mention all this because Gordon Brown is still telling anyone who will listen that this is a problem that really swept in from America, without acknowledging that his government deliberately imported the specific structural imbalances of the American economy. And I would be willing to be that the OECD's estimate, made at the beginning of last month, would be on the optimistic end of expectations today.
The coordinated interest rate cut has, reportedly, not been reflected in the Libor rates (the rate of interest on the London interbank money market). In fact, the cost of borrowing in dollars seems to have increased. So, banks are still severely restricting their lending to one another, despite unprecedented funds made available by the government. Even the weaker pound hasn't boosted exports, because global demand is falling. Falling oil prices should boost consumption, but it won't be enough to stop the slide in domestic demand - in fact, the main reason for oil prices falling is the slump in demand. Corporate profitability in the non-financial sector remains relatively high according to the most recently available statistics. But it has been inflated by strong performance in the energy sector. Even the first quarter of this year saw rates in both service and manufacturing fall in the UK. We have yet to see what impact the contracting of lending and thus investment, as well as falling demand, has had in recent months. And while it was easy to pretend for a while that the problem was just in the financial markets, notwithstanding the fact that the financial bubble originated in weaknesses in the 'real economy', one has to ask how leveraged the 'real economy' is? How dependent has consumer spending been on debt? How dependent has investment been on companies being able to get credit? We know the answer to both questions: corporate and consumer debt hit record highs in the last eight years. The 'real economy' has been, to use an irritating term, living beyond its means.
The next question that follows from all this is how bad can it get for the government? The worsening of the crisis has improved Brown's stature in the administration, and even in some of the polls (not by enough to save the government, though). Many people perhaps suspect that, however bad it is with the government, the Tory plan to cut taxes for the rich and slash public spending is no way out of the crisis. To that extent, I would expect the government to benefit in the short-term even if its bail-out plans are likely to become more unpopular as their basic inability to save jobs and prop up the economy becomes obvious. On the other hand, the growing deficit (set to be between 3 and 6% of GDP by 2010) will be used by the Tories to say that the government has overspent. Moreover, the Tories' inheritance tax and council tax plans will galvanise middle and upper income earners in the key marginals. Business will get over the mean things that George Osborne has been saying about money men (they know he's just teasing), and they appear to be moving back to the fold. And while Osborne is likely to have to raise taxes somehow, despite his 'populist' noises about the 10p tax, he will try to find a way of doing it that doesn't offend the Tories core constituencies. (An aside: one hears from some more schematically minded marxists that we shouldn't be too concerned about taxes on lower income earners and particularly services taxes like the VAT, on the grounds that workers, actually, don't pay any tax. For, in the aggregate analysis, the wage rate is set by the market, and the real wage rate is net take-home pay not gross pay - therefore, all taxes are essentially taxes on profits. Leaving aside the fact that many don't receive wages set by the market, but wages and deferred wages paid by the government, this assumes that wages in the private sector are paid at their actual market value - if this automatically took place, there would be no need for unions. Class struggle would have no bearing on wages - a preposterous idea. Tax increases on lower income earners at a time when the rhythms of class struggle are contained by an unfriendly political climate and the absence of a serious antisystemic movement are not necessarily transferred to the rich.)
The Tory lead was halved when the crisis started to get worse in mid-September, but they remain in the lead in part because as Yougov [pdf] finds, enough people think the party has changed and aren't as wary of them as they ought to be. The most recent polls [pdf] suggest that the Tory lead has risen by 4%, but the biggest squeeze is on the frankly hopeless Liberal Democrats (whose main economic spokesperson is also mooting public spending cuts). Meanwhile, even Labour Party members still think little of Brown [pdf], with half of them saying he's doing badly and 66% saying he isn't radical enough. It has come to something when they can say that Blair, arguably the most despise Prime Minister in living memory whose ratings at times dipped below those of Thatcher, is seen as having been a better bet. So much for the hopes invested in the 'secret socialist'.
The political impact of this crisis is still wide open. People expect the ideas of the radical left to gain currency, but some of the rush back to Labourism in light of the Tory resurgence has also been reinforced. Moreover, if ideological radicalisation is not matched by effective collective resistance to job cuts, then it can collapse alarmingly rapidly into despair or, worse, support for the far right. But given that the government is so bloody eager to help the bankers, it ought to be a pushover to say they should be protecting jobs - don't just part nationalise and throw money at the banks, take the whole banking system into public ownership and run it in the interests of full employment and strong wages. As it is, they seem to be allowing a sort of social Darwinism to operate in the banking system such that - rumour has it - HSBC employees are now joking that their advertising slogan "The world's local bank" should be changed to "The world's only bank". (Next to Goldman Sachs, that is). And if we can run up a debt to fund the banking system, there is no reason to accept cuts to the public services with wage cuts for public sector workers. And ultimately, if the bosses suddenly find capitalism so fucking inconvenient for them, why should we accept it?
Labels: banks, capitalism, economy, financial sector, neoliberalism, new labour, socialism, tories
8:43:00 am |
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