Grand Bargains, Friedman, and the Problem with Moderates

Thomas Friedman, I suppose, thinks of himself as a moderate.  Maybe like Matt Miller from KCRW’s Left,Right, and Center who advocates for “radcial centricism” (or something like that).  This species of thinking imagines that the “left” and “right” can only be correct up to a point.  Hence, the one good path towards progress must, by definition, be some thing “in between.”  Friedman, especially, excels at taking what seem like irreconcilable differences and with his wise words, turn them into new consensuses that if only the irrationally passionate partisans of left and right would accept would lead us into a shiny tomorrow.

Friedman’s recent op-ed in the New York Times is a classic.  He argues that the great debate of our times is over “which capitalism?” instead of “which -ism?” Fair enough.  In this context, he defines “American Capitalism” as- that’s right- the perfectly moderate mix of opposites, of public and private.  I suppose that European “safety-net” socialism is unbalanced by inference from his argument.

To regain our American mojo we need to rebalance public and private. Hence, he calls for a series of “grand compromises.”  Between cutting the federal budget and raising taxes.  Between paying  for “nursery schools and nursing homes.” (Nice line).  Between labor and management.  Between environmentalists and extractive industries.  And so on.  Between Dogs and Cats.  Yankees and Red Sox.  No, not the last two.

I find this seductive.  Yes, let us come together and find common ground.  What a story: can we not have politicians who can use language, influence, guile, and all their dark arts to bring these differing parties to Friedman’s round table of Grand Compromises?  I want to be in that story!

But I am afraid it is a fairy tale.  Continue reading

Europe’s Debt Crisis Deepens

by Richard D. Wolff
Over the weekend, Fitch — the major rating company that, with its fellow majors, Moody’s and Standard and Poor’s, dominate the business of assessing the riskiness of debt instruments — took a highly publicized step.  It downgraded the credit-worthiness of the sovereign debts of many European countries.  What a spectacle!  These rating companies were distinguished by their laughably inaccurate (to be extremely polite) assessments of the risks associated with asset-backed securities.  Those assessments contributed to the economic crisis we are living through.  Now the world is supposed to hang on — rather than laugh at — their credit reports.
Europe’s debts — and social tensions swirling around them — are clearly problems.  Governments collapsing in Greece, Italy, and Spain show that, among other signs of the obvious.  The rating companies’ downgrades of European debt are rather like downgrading the likelihood of good weather while the rest of us are already rushing to close the windows against pouring rain.
Still worse are the usual media reports and discussions of the Fitch action.  They are once again full of eerie references to steps European governments must take “to satisfy the markets.”  This strange metaphorical abstraction — “the markets” — is portrayed as some sort of Frankenstein monster threatening to eat Europe’s children unless the parents support government austerity programs.  Those austerity programs are, of course, already making those parents and their children suffer.
Let’s take a momentary step back from what is an ideological — or better said, propagandistic — usage of the term.  “The markets” is a conceptual device that serves to hide and disguise those particular corporations that stand behind and work those markets to pursue their interests.  The politicians’ and mass media’s language makes it seem as if self-interested pursuit by those corporations were the machine-like operations of some unalterable, fixed institution.  We need to remember that markets, like all other institutions, are human inventions filled with a mix of positive and negative aspects and open to change.  After all, the mixed effects of markets have made them objects of deep suspicion and skepticism at least since Plato and Aristotle profoundly criticized markets as enemies of community thousands of years ago.
The chief creditors of European governments today are banks, insurance companies, large corporations, pension funds, some other (mostly non-European) governments, and wealthy individuals.  When politicians and media speak of the need for European governments to “satisfy the markets,” what they mean is to satisfy those creditors.  The chief influences among those creditors are the major banks that represent and/or advise all or most of the rest of them.  The major European banks were and are the chief recipients of the costly bailouts by those European governments since 2008.  Indeed, those bailouts sharply increased the indebtedness of European governments because the latter paid for those bailouts by borrowing.
The bailouts worked in Europe much as they did in the US.  Banks had speculated badly in asset-backed securities and their associated derivatives leading up to late 2008.  When borrowers (e.g., mortgagors in the US) increasingly defaulted on the loans comprising those asset-backed securities, the values of the latter collapsed.  Banks stopped trusting one another to repay loans between them — central to the global credit system — because all banks knew that they all held huge amounts of asset-backed securities whose values had collapsed.  Each major bank feared that others — like itself – might have to default on its debts.
Bank transactions with one another stopped and thereby produced a credit “freeze” or “crunch.”  In modern capitalist economies, businesses, governments, and consumers have all become more credit-dependent than ever.  Such a freeze or crunch therefore threatened wholesale economic non-functioning (collapse).

The solution was for governments to intervene massively to unfreeze the credit system.  They did this on multiple fronts simultaneously, so serious was the crisis.  First, governments lent freely to the major banks that could not borrow from each other.  Second, governments guaranteed various sorts of loans and debts so banks that had feared to lend would resume lending.  Thirdly, governments borrowed massively so private lenders — especially banks — would have a safe and profitable outlet for their loanable funds.  In these ways, as agent of the people, European governments unfroze and rebooted a collapsed private credit system at enormous public expense.  They thereby enabled the survival and continued profitability of the banks and their major clients.
Over the last year or so, those banks and their clients — freed by government bailouts from worrying about loans to one another — have begun to worry about their loans to European governments.  They fear one thing: aroused and angry publics.  People in the streets may not permit their governments to impose “austerity.”  The people may not accept government cuts in basic public employment and services to save money and to pay off creditors that were bailed out at public expense just a short while ago.
So the creditors are now pressing governments to ensure the safety of the national debt (to themselves).  The Fitch downgrade is part of that pressure.  The references to “satisfying the markets” simply disguise the whole outrageous process.  The crisis drama deepens: creditors’ pressure on governments increases austerity policies that increase mass opposition that frightens creditors who increase their pressure on governments. . . .
The contradictions driving this vicious cycle agitate all of European society and the global economy interlinked with Europe.  European governments fear the creditors and fear their rising domestic oppositions to austerity.  They express irritation against Fitch and the other rating companies for making their dilemma worse.  They have no solution, bend toward “satisfying the markets,” and thus pursue austerity in fits, starts, and retreats.  Like animals frozen in the headlights of oncoming disaster, the players in this absurd European drama issue redundant credit reports (Fitch), hold endless and fruitless conferences and summits (Sarkozy, Merkel, et al.), and twitch with anxiety as general strikes proliferate and governments teeter and fall.  Meanwhile, phantoms like “the markets” haunt the media analyses and politicians’ statements, serving mostly to fragment and obscure what is happening.

Richard D. Wolff is Professor Emeritus at the University of Massachusetts in Amherst and also a Visiting Professor at the Graduate Program in International Affairs of the New School University in New York.   He is the author of New Departures in Marxian Theory (Routledge, 2006) among many other publications.  Check out Richard D. Wolff’s documentary film on the current economic crisis, Capitalism Hits the Fan, atwww.capitalismhitsthefan.com.  Visit Wolff’s Web site at www.rdwolff.com, and order a copy of his new book Capitalism Hits the Fan: The Global Economic Meltdown and What to Do about It.  His weekly radio program, “Economic Update,” broadcasts on WBAI, 99.5 FM in New York City every Saturday at noon for an hour; it can also be heard live and in podcast archive on wbai.org.

Capitalism is the Enemy of Democracy

Originally published at Truthout.org

Perhaps the most significant accomplishment for #OWS to date is that the occupiers have managed to poke a hole in the legitimacy of neoliberal capitalism and its central claim that unregulated markets provide opportunity and freedom.   They have accomplish this feat in a surprising way, with their persistent presence, and with home made signs, signs that say things like, “If I had a lobbyist, I wouldn’t need this sign.” Occupy Wall St. has poked this hole by having the audacity simply to gather in public, in bold defiance of the police and to demonstrate, by their solidarity and cooperation, that a different world is possible.

 

Phil Rockstroh puts it this way: “the walls of the neoliberal prison are cracking…We are no longer isolated, enclosed in our alienation, imprisoned by a concretized sense of powerlessness; daylight is beginning to pierce the darkness of our desolate cells.”

At the core of this neoliberal ideology is a simple assertion – economic exchanges promote freedom because they are voluntary, and thus they only occur if both parties believe they will benefit.  Unregulated market exchanges thus allow individuals to engage with others in complex social arrangements without coercion, without impinging on individual liberty.  Government is needed, but only to define and enforce property rights, and to create and regulate the currency individuals need to undertake market exchanges.

 

Liberals, who argue for expanding government in order to regulate or oversee individual exchange, necessarily interrupt these free and voluntary agreements and therefore undermine individual liberty.  This view of markets underlies Reagan’s famous dictum: “Government is not the solution to the problem; Government is the problem.”  In this extreme libertarian view, capitalism is the champion of democracy, the champion of freedom.

 

The flaw in this neoliberal reasoning is not hard to see.  Ownership of wealth obviously confers power; it gives some individuals an upper hand in the ‘voluntary’ exchanges they make with others.  Lacking the means otherwise to support ourselves, most of us must hire out our ability to do work in exchange for wages.  We might do quite well if we are educated and talented, lucky or white, but even so, we ultimately produce more value than we are paid – that is, after all, the reason we are hired.  Wealth ownership thus gives an upper hand to employers in these voluntary exchanges.  The extra value we create flows steadily into the hands of wealth holders, and we don’t have a say over what it is used for.

 

This upper hand in these so-called voluntary exchanges provides an ongoing and increasing source of wealth accumulation that is self-reinforcing.  Money begets money.  That is after all what capital is, money advanced for the purpose of making more money.   Excluding people from having a say over what happens to the wealth we create is the first, and the most fundamental, way that any capitalist system undermines democracy.  We are fundamentally disenfranchised in the places we work.  Wealth owners control the levers of investment and thus the “needs” of capital trump those of workers when it comes to making decisions about what gets produced, how and for whom.

 

Beyond this, neoliberal capitalism goes further – it uses the value you and I create to enforce a virtual dictatorship-by-wealth in the political sphere.   The most obvious manifestation of this dictatorship-by-wealth is the unlimited corporate financing of our elected representatives.  But this financing is only the tip of the iceberg.  Not only must candidates pander to corporate interests to successfully raise the funds needed to run for office, once they are in office they are plied and courted with unrelenting advances designed to ensure that they do not do lose their focus and begin to think about something other that promoting a favorable business climate.

 

Even deeper in the subsoil of this treasonous takeover of our democracy is the ownership and influence over the main vehicle of public discourse, the news media.  The manufacture of consent is accomplished by narrowing the acceptable range of debate to the question of how best to support economic growth (read profits) and American imperialism (read war).   Where do the millions, or billions, that candidates raise end up?  Primarily this money ends up in the coffers of the corporate media – campaign advertising is the single most important source of revenue for the corporate media.

 

So it is an odd fact of American life, that capitalism is equated with democracy while at the same time acting as democracy’s most corrosive force.  But think about it, if capitalism really supported democracy, if it really welcomed open, honest, wide-ranging debate about the values and practices of corporations and their elected representatives, why would they be sending their police in with bats and pepper spray to prevent the free open exchange of ideas?  Why would they not be handing out microphones, providing open access to the airwaves, organizing televised debates?  If capitalism really were the champion of democracy, the Occupiers and their many allies would be celebrated.  Instead we are disdained.

 

The corporate elites fear and resist any questioning of their core beliefs because their ideas do not hold up to scrutiny and reasoned debate.  That’s how we all know – capitalism is the enemy of democracy.

 

But is there any alternative?  It is tempting to think that if we can only regulate capitalism effectively, we can harness its virtues and contain its vices.  In fact, there is some evidence to support this view.  The 99% were much better served in the post-war era in the United States and they continue to benefit from efforts to reign in capitalism’s excesses in Scandinavia and Northern Europe.  But these efforts to regulate are under constant attack, and a return to regulations is ultimately a brief inconvenience to the corporate elites.

 

As Richard Wolff and others have noted, as long as the value you and I create is credited to the owners of capital, these owners have both the means and, given their distorted values, the incentive to undermine and neutralize any effective regulation and oversight we attempt to impose.  Capital will continue to corrode democracy, as certainly as oxygen corrodes iron, as long as a few hold sway over investment and jobs and are committed to using the wealth that we generate to undermine the will of the people.  In the words of Supreme Court Justice Louis Brandeis, “You can have wealth concentrated in the hands of a few, or you can have democracy; you cannot have both.”

 

Fortunately, a proven alternative to corporate capitalism already exists.  For over fifty years it has provided a practical example of how we can extend democracy to the workplace as a means of preserving democracy in our political lives.  The basic idea of this experiment is to address the root of the problem, to uncover the means by which capitalism undermines democracy, and to provide new institutional rules governing how we organize our economic lives.

 

Over fifty years ago, the Mondragon Cooperatives in northern Spain developed their poverty-stricken regional economy by developing worker-owned and managed cooperatives.  Co-ops place the ownership of wealth and the decisions concerning how wealth is invested in the hands of the people who produce the wealth.   These institutions recognize that the wealth generated by an enterprise is the result of the collective efforts of all, and that those most affected by the decisions of the enterprise, workers and community members, ought to have the principle say in what happens to the wealth, how it is distributed and the purposes to which it is put.

 

Many people argue that co-ops are impractical but this simple democratic principle rests at the heart of this highly successful, internationally competitive, stable and flourishing regional economy.  It is an economy based on democratic management, worker ownership and democratic oversight and it faces its own challenges, yes, but has certainly proven the lie that there is no alternative to corporate capitalism.  It shows that people, acting together, can use democratic principles to imbue their economic lives and their political lives with agency and meaning.

 

And this effort is spreading to America’s heartland.  The Evergreen cooperatives in Cleveland have successfully applied the principles of the Mondragon experiment to develop a successful urban development project.   As Gar Alperovitz argues, the linking of large anchor institutions with worker-owned enterprises offers a practical economic development strategy that is politically feasible in the context of our current economic crisis.

 

Many people are uncomfortable with the idea that working people can do without their corporate bosses.  Quite a bit of time and energy has been spent trying to convince us that the idea that workers can manage themselves is preposterous.

Occupy Wall St. has provided the opening for us to consider, debate and discuss what has previously been off the table.  Economic democracy is not only possible, it is essential if we are to realize that peculiar American Dream of a government of, by and for the people.

So let’s not overlook the significance of what Occupy Wall St. is doing.  We need to step through the hole they have opened in the shiny façade of our glad-handled, Madison Avenue, faux democracy and take up the challenge of creating the real thing, right here and now, in this unlikely place we call America, as a means of reclaiming our own dignity, our own liberty and a livable world for those who come next.

 

 

Occupy Cherry Alley Interview with Mark Lawrence and Robin Jarrell

This interview highlights the importance of worker participation in corporate decision-making and the connection between Occupy Wall St. core principles and Christian values.  Robin Jarrell is rector at the Diocese of Central Pennsylvania.

http://www.wkok.com/1070_WKOK/OTM.htm

 

Let’s get the Government off our Backs

The government interferes with free enterprise by creating red tape, wasting hard-earned tax- payer money and undermining market incentives.  The solution is to shrink government.  Fortunately we have managed to elect a number of representatives to Congress to ensure that we get the government off our backs.  It is important to support their efforts in order to achieve maximum prosperity.  Here are three reasons to support their efforts and what you can do to help.

 

First, we must keep in mind that there are two ways to make money.  One is by building new and better products that meet real social needs and generate much needed work for citizens.  The other is by taking advantage of people by developing financial instruments that generate wealth through speculation and the drain resources and eliminate jobs in the those parts of our economy that are productive.  Lately the latter types of investments have been much more profitable.  Eliminating government oversight makes it much easier to develop fraudulent financial instruments and to generate the fast money associated with speculative investment.

 

Second, all production generates waste and stresses the environment.  Profits are enhanced when the social costs of production are borne by others and the private gains are concentrated in the hands of a few.  Government oversight of the environmental impact of business makes it much more difficult to avoid paying the social costs associated with production.  By shrinking the EPA and by gutting State and local environmental regulations, we can more easily pass off the environmental cost of production while enhancing the corporate bottom line.

 

Third.  We all know competition is bad for business.  When we compete for markets we inevitably drive prices down, bid up wages and are forced to innovate to create better products.  All of this activity reduces profits.  Our bottom line is enhanced when we can erect obstacles to prevent competitors from entering markets.   Fortunately, once monopoly conditions are created, our monopolies create profits, profits that enable us to establish effective barriers to entry in industry, permitting us to gouge consumers and use the obscene profits to underwrite public relations, “think” tanks and journalists that celebrate the invisible hand of the market.  Governments are the main means by which monopolies are undermined and so government efforts to destroy monopoly need to be nipped in the bud.

 

What can you do to support our efforts?  Just keep buying the line that we are doing this for your benefit.  Keep voting for congress people we are financing – representatives that will help us to disassemble and disable government oversight of business.  After all, our interests are your interests, are they not?  Let’s all work together to get the government off of our backs.

Occupy Wall St.: Getting to know you

Occupy Wall St. befuddles the corporate media but that’s only because the message is so simple, so reasonable, and so unwelcome to corporate interests.  We want our democracy back; we want economic justice.  By occupying public space in approximately 350 cities and towns across the country, Occupy Wall St. is creating a dialogue about what has happened to our economy and democracy, how we can act to restore integrity to our democratic institutions and how we can restore fairness to our economic lives.

 

The occupations are making it possible for this debate to occur but they are doing more.  The occupiers themselves are also demonstrating, by their internal organization, what real democracy looks like.  The occupiers are taking their responsibilities as citizens seriously.  They are informing themselves, discussing issues, formulating tactics and engaging in non-violent civil disobedience in an effort, as Mahatma Gandhi recommended, to “be the change they want to see in the world.”

 

If we believe their two key messages – that our democracy is not working and that we need to restore economic justice – then we have a civic responsibility to take heed of the example of these, our fellow citizens.  We have a responsibility to inform ourselves of the arguments and evidence concerning our economic and political institutions, to decide what we believe to be true, and to then take what actions we deem to be appropriate.

 

We cannot rely on corporate media sources to uncover the message and meaning of Occupy Wall St.  To paraphrase Ronald Reagan, the corporate media is not the solution to the problem; the corporate media is the problem.  By all means, examine what these folks are saying about this movement, but then check this version of the facts with other sources, sources not beholden to shareholders or corporate money.

 

Here is a short list of a few sources that will provide you with a powerful antidote to what the corporate media has been selling, sources that will help you to determine, for yourself what is true, and what is to be done.

 

For an overview of the causes and consequences of the financial crisis that began in 2008, see the documentary Inside Job, produced and directed by Charles Ferguson.  You can purchase this film inexpensively on-line and it is well worth the small investment, or you can borrow the film from Netflix or a local library.

 

http://www.sonyclassics.com/insidejob/

 

For ideas concerning how ordinary citizens can act to restore control of government regulation and insist that elected representative represent the will of the people:

 

1. Learn about how Iceland is responding to the crisis by using referenda to wrest control of the economic lives from the corporate financial elites.

 

http://www.commondreams.org/view/2011/11/15-3

 

2. Learn about how Maine has passed electoral reform to support public financing of elections.

 

http://www.newrules.org/governance/rules/campaign-finance-reform/campaign-finance-reform-maine

 

For news and editorial coverage that is supportive of the aims of the Occupy Wall St. movement :

 

http://www.commondreams.org

http://www.truth-out.org/

http://www.democracynow.org/

 

For economic facts, figures, humor and analysis:

 

http://anticap.wordpress.com/

 

For local information on Occupy Wall St. actions.

 

http://www.facebook.com/groups/132952800139539/

 

http://spillingink.net

 

If you support the value of democratic participation, inform yourself by confronting information in both corporate and non-corporate forms of media.  You find some surprising information and points of view.  And you will come to hold your beliefs with the secure foundation of having grappled with others who think differently.

 

 

 

Let’s Occupy Together

I’m not sure why the media are having such trouble figuring out the demands of Occupy Wall St.  Recently, a seven-year-old girl, Celia Cooley, went down to Zuccotti Park and, posing as a reporter, she asked people why they were there (http://www.youtube.com/watch?v=x12iOQYY0w8).  What they said was quite consistent and quite reasonable and quite comprehensible to this young girl.  They said: We want our democracy back.

Anyone who is confused about what the protesters want has probably been listening to too much corporate news.  Corporate news stations present themselves as trustworthy and unbiased, but they are owned by large multinational corporations like General Electric and Westinghouse, and these are the folks that are benefitting from the policies that the protesters decry.

These news outlets don’t want the message of Occupy Wall St. to be heard.  They don’t want the protesters portrayed as ordinary Americans who have been bilked of their savings and booted out of the middle class and who are justifiably demanding that things change. If you’ve been watching corporate news and you are confused, the first thing to do is to broaden your sources of information.  Go to the non-commercial news sites on the Internet and listen to the chorus of ordinary Americans who are saying very clearly what’s wrong and who are making sensible suggestions about how to go about fixing it.

Here is some of what you will learn.

The economic crisis did not start because suddenly poor people started taking out mortgages on homes they couldn’t afford to pay for.  It didn’t start because of some corporate bad apples. Think about it.  The job of a lender is to determine if a person is credit worthy.  The reason loans were given to people who couldn’t afford them was simply that banks no longer had an incentive to find out if people were credit worthy.  Why?  Because banks were permitted to sell the mortgages to other companies for a profit, rather than waiting to collect on the loan.  The big banks pushed loans on people because they were making profit, hand over fist, from selling these loans to investors.

Why were the investors buying bad mortgages? Because they were permitted to bundle them together with other loans to look like safe investments.  Why did these investments look safe, because the folks in the rating agencies, who were supposed to rate these investments, were not sufficiently regulated and worked in cahoots with the big banks.

The problem, in short, was not individual behavior; the problem was that the system was jury-rigged.  Corporate lobbyists took over Congress and rewrote the banking laws in their favor.  As long as home prices went up, banks made a killing.  When the music stopped, instead of taking their consequences, big banks got their insiders at the Fed and the Treasury Department in D.C. to bail them out.  Then they got their friends their in corporate media affiliates to point their fingers at the borrowers ( the ones who are now homeless) and at big government (for wasting taxpayer money).  Meanwhile, Wall St. banks go on their merry way, paying out bonus, rewarding failure, avoiding the consequences of their actions, and continuing to use our Congress as their personal playground.

That’s just wrong.  That’s why folks are on the streets.

If you are in the Tea Party, you probably believe many of the same things that Occupy Wall St. supporters believe.  People should play by the rules.  People should be punished when they do something wrong.  If you reward people for cheating, they are likely to continue to misbehave.  Like supporters of OWS, you probably believe that our government should be accountable to us, we the people, and that the government should not collude with powerful elites to deprive people of the right to a livelihood, or to kick them out of their homes.  You probably believe that government shouldn’t write laws that favor powerful interests in order to raise enough money to get re-elected.

I support Occupy Wall St.  You and I may have our differences, but I think we share a commitment to restoring the integrity of this democracy.  I think we can agree that when a government no longer is responsive to the desires of the citizens, that it is the responsibility of citizens to act together.  The government itself is not the problem; the problem is that the government has been taken over by wealthy elites who do not have our interests at heart.  It is time for us to stand together, shoulder-to-shoulder, Republican and Democrat, on the streets of this great country and take our democracy back.

Turn off the corporate news, talk to your fellow Americans, one by one, until you decide for yourself whether what I am saying is true.  That’s what Celia is doing.  There is no other test in a democracy but that of the ability of ideas to stand the test of evidence and reason.  The values that our forbearers fought and died for are at stake.  Nothing less.