US Indymedia Global Indymedia Publish About us
Printed from Boston IMC : http://boston.indymedia.org/
Boston.Indymedia
IVAW Winter Soldier

Winter Soldier
Testimonies
Brad Presente

Other Local News

Spare Change News
Open Media Boston
Somerville Voices
Cradle of Liberty
The Sword and Shield

Local Radio Shows

WMBR 88.1 FM
What's Left
WEDS at 8:00 pm
Local Edition
FRI (alt) at 5:30 pm

WMFO 91.5 FM
Socialist Alternative
SUN 11:00 am

WZBC 90.3 FM
Sounds of Dissent
SAT at 11:00 am
Truth and Justice Radio
SUN at 6:00 am

Create account Log in
Comment on this article | View comments | Email this article | Printer-friendly version
News :: Politics
Capitalism Doesn't Work - A revealing speech by US Fed chief Yellen
04 Jul 2014
Yellen.jpg
The US Federal Reserve will continue to pump ultra-cheap money into the financial system and boost the speculative activities of banks and finance houses, despite the risk that this policy is creating financial bubbles that could burst and cause even more damage than the crash of 2008.

That was the essential content of the message delivered in a speech by Fed chairwoman Janet Yellen to an International Monetary Fund (IMF) forum on Wednesday and in a subsequent question and answer session conducted with IMF managing director Christine Lagarde.

While she did not mention either by name, Yellen’s speech constituted a reply to two recent criticisms of the Fed. The Bank for International Settlements annual report, issued last Sunday, pointed to the disconnect between booming financial markets and the underlying economy. And former Fed governor Jeremy Stein argued that higher interest rates should be considered to help deflate potential asset bubbles.

Describing monetary policy as a “blunt instrument,” Yellen said the “primary role” in preventing financial instability had to be so-called macro prudential regulation and supervision.

She insisted that if the Fed had used interest rates to try to head off the US housing bubble in the mid-2000s—the immediate cause of the 2008 crisis—there would have been serious damage to the US economy. “A very significant tightening, with large increases in unemployment, would have been necessary to halt the housing bubble,” she said.

“Macro prudential policies, such as regulatory limits on leverage and short-term funding, as well as stronger underwriting standards, represent far more direct and likely more effective methods to address … vulnerabilities.”

Consequently, Yellen saw no need for the Fed to deviate from its primary focus on price stability and maximum employment—the rationale for the present policies of boosting financial markets.

The fundamental flaw in Yellen’s attempted assurances that the Fed could contain financial turbulence by regulatory means was quickly apparent in the question and answer session with Lagarde.

“You’ve beautifully demonstrated the efforts that have been undertaken from a macro prudential point of view in terms of the universe that you have under your jurisdiction,” Lagarde told Yellen. “But this universe, being restricted and well supervised at it is, has generated the creation of parallel universes.”

The response of the financial markets to regulation had been to create a shadow banking system, “outside the realm of central bankers,” Lagarde said. “What can be done about them in order to make sure that there is no creation of significant risk threats out there which are not covered by macro prudential tools?” she asked.

Yellen’s reply was highly revealing.

“I think you’re pointing to something that is an enormous challenge,” she told Lagarde. “And we simply have to expect that when we draw regulatory boundaries and supervise intensely within them, that there is a prospect that activities will move outside those boundaries and we won’t be able to detect them.”

In other words, the financial system is out of the control of those who are supposed to regulate it.

Responding to Yellen’s assertion of the need to look outside the perimeter of supervision “to see where threats are emerging,” Lagarde said she was “obsessed” by what was not known from history “and that will be the risk of tomorrow.”

The issue, however, is not simple ignorance, important as that is. There is also the wilful ignorance of growing problems, because to deal with them would mean confronting powerful financial interests.

Yellen claimed she and others did not recognise that risks to financial stability had risen to “dangerous levels” in the mid-2000s, and, while there was concern about rising house prices, there was no appreciation of how serious the fallout would be for the financial system and the economy as a whole.

In fact, there were warnings about the danger of rising debt levels, but these were simply shoved aside because hundreds of billions of dollars were still being accumulated on Wall Street. As the saying goes, there were none so blind as those who did not want to see.

Yellen’s discussion with Lagarde also showed how the impossibility of any rational control of the financial system is rooted in the very structure of the capitalist nation-state system.

As IMF managing director, with nominal responsibilities for the global capitalist system, Lagarde pointed to the problems of “spillover” effects flowing from the policies adopted by the Fed.

The continued lowering of interest rates and the policy of quantitative easing has caused major problems for central bankers in countries around the world as they try to control the pressures generated by an inflow of dollars from the US financial system seeking higher rates of return. This has led to property bubbles as well as the appreciation of currencies, creating problems in export markets and industries that compete with imports, such as manufacturing.

In the past year, movements on the downside have also shown their destructive potential. Fears of the consequences of “tapering”—the winding back of the quantitative easing program—and the prospect of even marginal increases in US interest rates have seen significant outflows of volatile finance capital from “emerging markets” around the globe.

Asked whether the Fed was conscious of spillover effects, Yellen said it certainly paid attention to them but, as with other central banks, “the mandates that we’re given by our Congresses or the relevant legislatures tend to focus on domestic goals.”

In other words, while the financial system is globally integrated, each of the central banks, and above all the Fed, carries out policies in the interests of its own national state and the dominant financial interests in that state. Whatever the expressions of concern for global stability, they all operate according to the maxim, each for their own and the devil takes the hindmost.

The issue, which was neither addressed in Yellen’s remarks nor in the question and answer session, was how the situation had been arrived at where the world’s major economic and financial authorities have increasingly lost control of the system they are supposed to regulate.

No accounting was given of past decisions. But they have played a decisive role. The decision by then Fed chairman Alan Greenspan to open the financial spigots following the October 1987 stock market crash, determined the policy response to every financial problem and crisis that followed, leading to the collapse of 2008. Now a new disaster is being prepared.

Yellen’s speech and her conversation with Lagarde bring to mind the acute observation made by Karl Marx in the Communist Manifesto.

“Modern bourgeois society with its relations of production, exchange and of property, a society that has conjured up such gigantic means of production and exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells.”

http://www.wsws.org/en/articles/2014/07/04/yell-j04.html

This work is in the public domain
Add a quick comment
Title
Your name Your email

Comment

Text Format
Anti-spam Enter the following number into the box:
To add more detailed comments, or to upload files, see the full comment form.

Comments

US jobs report shows growth in part-time, low-wage work
04 Jul 2014
Obama to rich.jpg
4 July 2014

The US economy added 288,000 jobs in June, while the unemployment rate fell to 6.1 percent, according to the latest jobs report issued Thursday by the Labor Department. While the number of new jobs created was higher than in recent months, the new jobs were largely part-time and in low-wage sectors, continuing the trend of replacing better-paid workers laid off during the 2008 crash with lower-paid, more highly exploited employees.

A large share of the growth in employed people was, according to the report, attributable to an increase in workers employed part-time for economic reasons, whose numbers grew by 275,000. These workers, “who were working part time because their hours had been cut back or because they were unable to find a full-time job,” hit 7.5 million. The number of people employed full-time actually dropped.

The Obama administration seized on the jobs report to once again proclaim an economic turnaround. “This is one of the strongest reports we’ve seen since the end of the recession,” said Labor Secretary Thomas E. Perez. “There was good job creation in high-wage, mid-wage and low-wage positions. It was broad-based.”

In reality, jobs growth was again led by low-wage industries. The retail trade sector added 40,000 jobs, while the leisure and hospitality sector, which pays an average of $13.83 per hour, added 39,000. The health care sector added 34,000 jobs. Relatively higher paying sectors lagged behind. The manufacturing sector added only 16,000 jobs, while construction added only 6,000.

As a result, wages have remained stagnant. The average hourly wage for private sector workers increased by just six cents last month, and has increased only 2 percent over the past 12 months, less than the rate of inflation.

In fact, a disproportionate number of jobs created during the economic “recovery” pay less than $13 per hour, according to a report issued earlier this year by the National Employment Law Project. While US businesses have on the whole added 1.85 million low-wage jobs over the past six years, they have eliminated 1.83 million medium-wage (paying between $13 and $20 per hour) and high-wage (between $20 and $32) jobs, according to the report.

The report found that low-wage industries accounted for just 22 percent of job losses during the 2008 recession, but 44 percent of jobs gained since 2008. By contrast, mid-wage jobs accounted for 37 percent of job losses and just 26 percent of jobs gained, while high-wage jobs accounted for 41 percent of job losses but only 30 percent of new jobs.

The number of workers at temporary employment agencies grew by 10,000 last month. The percentage of workers employed by temp agencies has nearly doubled, from 1.3 percent of all employees in 2009 to 2.1 percent of all employees last month. There are now 2.9 million workers in such jobs. They are employed not by the companies that exploit their labor, but rather by labor contractors. “Once known as a source of stopgap labor used primarily for routine clerical assignments, temp help services now play an important role in the US economy,” the Bureau of Labor Statistics wrote earlier this year.

The latest jobs report comes a week after the Commerce Department said the US economy contracted at a 2.9 percent annual rate in the first three months of this year, the sharpest quarterly fall in output since 2009. The figure was the second revision to the gross domestic product (GDP) estimate released in late April and is the biggest such revision on record.

For the 49th time in 50 months, the percentage of unemployed people who left the labor force was larger than the number of those who found a job. If these “missing workers” were counted in the employment figures, the unemployment rate would be 9.6 percent, according to figures from the Economic Policy Institute.

The labor force participation rate, meanwhile, remains at its lowest level in almost three decades, before the mass entry of women into the labor force. The share of adults in the labor force rate has remained at 62.8 percent, down from more than 67 percent at the turn of the 20th century.

The combination of falling wages and mass unemployment has had a devastating impact on workers’ incomes. The median household income in the US plummeted by 8.3 percent between 2007 and 2012. Meanwhile, the net worth of America’s billionaires reached $1.2 trillion last year, more than double what it was in 2009.

The jobs report came as the cutoff of extended federal jobless benefits for those unemployed for more than 27 weeks entered its seventh month and the number of people whose benefits have been cut off hit more than 3 million. While the Democrats had earlier this year pledged to wage a major campaign to extend long-term jobless benefits, they have now dropped the issue for all practical purposes.

http://www.wsws.org/en/articles/2014/07/04/econ-j04.html
Capitalism Doesn't Work
04 Jul 2014
wall st.jpg
When Profits Trump Logic - Does Capitalism Inevitably Produce Inequalities? by ANN ROBERTSON and BILL LEUMER

In a recent New York Times op-ed article, Nobel Prize-winning economist Joseph Stiglitz theorized that capitalism does not inevitably produce inequalities in wealth. Instead, he argued, today’s inequalities result from policy decisions made by politicians on all sorts of matters that affect people’s income: the tax structure that favors the rich, the bailout of the banks during the Great Recession, subsidies for rich farmers, cutting of food stamps, etc. In fact, he concluded, today there are no “truly fundamental laws of capitalism.” Thanks to democracy, people can steer the economy in a variety of directions and no single outcome is inevitable.

In their 2010 book, “Winner-Take-All Politics: How Washington Made the Rich Richer – and Turned Its Back on the Middle Class,” Yale Professor Jacob Hacker and U.C. Berkeley Professor Paul Pierson would seem to add additional support to Stiglitz’s conclusion. As reported by Bob Herbert in The New York Times, they argued that “the economic struggles of the middle and working classes in the U.S. since the late-1970s were not primarily the result of globalization and technological changes but rather a long series of policy changes in government that overwhelmingly favored the rich.”

Although there is certainly significant substance to Stiglitz’s argument – policy decisions can have profound impacts on economic outcomes – nevertheless capitalism is far more responsible for economic inequality because of its inherent nature and its extended reach in the area of policy decisions than Stiglitz is willing to concede.

To begin with, in capitalist society it is much easier to make money if you already have money, and much more difficult if you are poor. So, for example, a rich person can buy up a number of foreclosed houses and rent them out to desperate tenants at ridiculously high rates. Then, each time rent is paid, the landlord becomes richer and the tenant becomes poorer, and inequalities in wealth grow.

More importantly, at the very heart of capitalism lies an incentive that leads to the increase of inequalities. Capitalism is based on the principle of competition, and businesses must compete with one another in order to survive. Each company, therefore, strives to maximize its profits in order to achieve a competitive advantage. For example, they can use extra profits to offset lowering the price of their product, undersell their opponents, and push them out of the market.

But in order to maximize profits, businesses must keep productive costs to a minimum. And a major portion of productive costs includes labor. Consequently, as a general rule, in order for a business to survive, it must push labor costs to a minimum. And that is why, of course, so many businesses migrate from the U.S. and relocate in countries like China, Viet Nam, Mexico, and Bangladesh where wages are a mere pittance.

This inherent tendency to maximize profits while minimizing the cost of labor directly results in growing inequalities. Stiglitz himself mentions that C.E.O’s today “enjoy incomes that are on average 295 times that of the typical worker, a much higher ratio than in the past.” In fact, in 1970, the ratio was roughly 40 times. C.E.O.s who succeed in suppressing wages are routinely rewarded for their efforts. Hence, not only is there an incentive to keep wages low for the survival of the business, there is a personal incentive in play as well.

While Stiglitz is correct in arguing that politicians can influence economic outcomes by policy decisions, what he fails to acknowledge is that these policy decisions themselves are heavily influenced by the economic relations established by capitalism. There is no firewall between the economy and politics. Those who have acquired money from the economic sector can then put this money to work in the political sector by lobbying and showering politicians with campaign contributions. Although politicians religiously deny that these contributions have any influence on their decisions, it is inconceivable that businesses – always obsessed with their “bottom line” – would continue these contributions without a “return on their investment.”

Study after study has confirmed the influence of money on political decisions. The San Francisco Chronicle reported, for example: “In a state with nearly 38 million people, few have more influence than the top 100 donors to California campaigns – a powerful club that has contributed overwhelmingly to Democrats and spent $1.25 billion to influence voters over the past dozen years. These big spenders represent a tiny fraction of the hundreds of thousands of individuals and groups that donated to California campaigns from 2001 through 2011. But they supplied about one-third of the $3.67 billion given to state campaigns during that time, campaign records show. With a few exceptions, these campaign elites have gotten their money’s worth, according to California Watch’s analysis of campaign data from state finance records and the nonpartisan National Institute on Money in State Politics, which tracks the influence of campaign money on state elections.”

Even beyond campaign contributions, political decisions are not crafted in a vacuum, remote from capitalism. Capitalism is a way of life, and for that reason it generates its own peculiar culture and world view that envelopes every other social sphere, a culture that includes competition, individualism, materialism in the form of consumerism, operating in one’s self-interest without consideration for the needs of others, and so on. This culture infects everyone to one degree or another; it is like an ether that all those in its proximity inhale. It encourages people to evaluate one another according to their degree of wealth and power. It rewards those who doggedly pursue their narrow self-interests at the expense of others.

The culture of capitalism, because of its hyper individualism, also produces an extraordinarily narrow vision of the world. Viewing the world from an isolated standpoint, individuals tend to assume that they are self-made persons, not the products of their surrounding culture and social relations. So the rich assume that their wealth has been acquired through their personal talents alone, while they see those mired in poverty as lacking the ambition and willingness to work hard. People are unable to see the complexities underlying human behavior because of the atomization of social life. But the disciplines of psychology, sociology, and anthropology all concur that individuals are overwhelmingly a product of their social environment to their very core.

In 1947, for example, the American Anthropological Association argued in its Statement on Human Rights: “If we begin, as we must, with the individual, we find that from the moment of his birth not only his behavior, but his very thought, his hopes, aspirations, the moral values which direct his action and justify and give meaning to his life in his own eyes and those of his fellow, are shaped by the body of custom of the group of which he becomes a member.”

It is in this more subtle way that capitalism induces growing income inequalities. Because of their intensely competitive environment, politicians are more vulnerable to this capitalist culture than most. Capitalist culture engenders a mindset among politicians that leads them to craft public policies in favor of the good people, the rich and powerful, and turn their backs on the poor or punish them with mass incarceration. They think it entirely natural to accept money from the wealthy in order to fund their re-election campaigns. And the more the inequalities in wealth grow, the more this mindset blinds politicians to the destructive implications of these “natural” decisions.

In 2011, Stiglitz wrote a compelling article, “Of the 1%, by the 1%, for the 1%,” in which he argued forcefully that large inequalities in wealth are in no one’s interest. But since then the politicians have continued to accept campaign contributions from the rich, socialize with them, and do their bidding. They ritually denounce the shamelessly low taxes on the 1%, but have done nothing to alter them. The culture of capitalism trumps logical arguments, and thus the inequalities in wealth continue to expand. Capitalism has an iron grip on the political process.

Stiglitz concluded his article with this prophetic statement: “The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.”

While Stiglitz’s arguments have had no impact on growing inequalities, thanks to the power of capitalism, nevertheless capitalism gets credit for producing the one force that can put a stop to these destructive trends: the working class. As Karl Marx argued, capitalism produces its own “gravediggers.” In the 1930s workers massively organized unions and fought militant battles to defend their right to unionize and their right to fair compensation. These unions, which Stiglitz fails to mention, played a decisive role in reining in inequalities and unleashing a period in which the ranks of “the middle class” grew.

As Marx noted in his “Contribution to a Critique of Hegel’s Philosophy of Right,” “The weapon of criticism cannot, of course, replace criticism of the weapon, material force must be overthrown by material force; but theory also becomes a material force as soon as it has gripped the masses.”

Stiglitz’s criticisms of growing inequality will have little impact on policy decisions until they are embraced by the masses, the working class, those that capitalism cruelly exploits and who are so easily dismissed by politicians and academics. At that point the working class will finally stand up and collectively declare enough is enough.


http://www.counterpunch.org/2014/07/04/does-capitalism-inevitably-produc/
Global totalitarianism: Change not forbidden, change is impossible
08 Jul 2014
Click on image for a larger version

bull-wall-street.jpg
My apparently weird thesis is: the neoliberal system ruling directly or indirectly the greater part of the world is producing a disastrous anthropological mutation that is leading to a kind of planetary totalitarianism.

First let’s clarify the lexis. Neoliberalism is generally an economic philosophy established in the 20th century by figures like Friedrich Hayek and Milton Friedman. Typical of that thought is the belief that the only unifying feature of society is the individual, together with the faith that the free market can regulate society better by itself than any external regulation. Neoliberals are always in favor of any deregulation and privatization.

Historically the market’s auto-regulation is known as the classical liberal theory of the invisible hand. Usually it is attributed to Adam Smith, although the Scottish economist used it very rarely and apparently with a more restricted meaning. Anyway, the invisible hand is now forming an integral part of the neoliberal theory, which considers any public intervention in the economy to be the work of the devil.

The magic power of the invisible hand needs a society of pure individuals to work: everyone pursuing their best interest, the healthy egoism of society’s atoms. Alchemically, this composite of egoisms will result in maximized benefit for the entire society. It is a machine that never stops, a “perpetuum mobile” [perpetual motion] in which unlimited production goes with unlimited desire. There are literally no limits.

Beyond Smith, the dark father of neoliberalism is the uber-modern Bernard Mandeville. In his Fable of the Bees he praised greed and every vice in general as the true driving force of economy. It was not the case that Hayek openly appreciated him. The frankness of Mandeville is not typical of liberalism, which from the beginning is inclined to present itself as beyond moral; even before publishing ‘The Wealth of Nations’, Smith was coping with the study of moral sentiments. As René Dumont puts it, the economic action in Smith is “escaping morality without adversing [sic] it.”

Jean Claude Michea has explained quite convincingly that this suspicion against morality is contained in liberalism’s DNA: it is a reaction to the bloody European religious wars of the 16th and 17th centuries. The memories of those horrible conflicts, full of religious and political passions and hates, forged the habit of liberal neutrality.

This is a very interesting passage because neoliberalism still presents itself under the ideology of neutrality: the ideology of the end of ideology. Not a political system among others, historically and socially determined, but a natural immemorial fact. The auto-regulating market becomes ideologically a kind of universal category that was present in human history from the beginning. Many critics, following mainly the anthropological studies of Marcel Mauss, have stressed that the more ancient form of economy was rather pivoted on the obligation to give, to receive and to reciprocate.

If the core of neoliberalism is a natural fact, as suggested by the ideology already embedded deep within our collective psyche, who can change it? Can you live without breathing, or stop the succession of days and nights? This is why Western democracy chooses among the many masks behind which is essentially the same liberal party. Change is not forbidden, change is impossible. Some consider this feature to be an insidious form of invisible totalitarianism.

At this point I am waiting for someone to start up the old litany about the difference between liberalism (the good one) and neoliberalism (the bad one), between political liberalism and economic liberalism, and between liberalism and liberism. From an analytical point of view many of these differences are real: the liberalism of Benjamin Constant was very different from the economic theory of Milton Friedman, and many battles for freedom in 19th century liberalism were highly commendable. But historically it seems that neoliberalism is no more than what liberalism has currently become. Do you remember the 1960-70 Marxists who said that the Soviet Union was not real communism? It was a kind of degeneration, of course, but where was true communism? Triumphant neoliberalism is liberalism as it reveals itself in history just as Soviet communism (or the even worst Asiatic versions) was communism inside history.

In neoliberal society there is no one who really manages political power. The economy regulates itself and government is organized by technicians who apply some rational choices. This is obviously an ideological façade. To maintain this façade, making people believe that it is reality, is exactly the political problem of neoliberalism. The main instrument to reach this goal is propaganda. Modern propaganda’s masterminds quickly rediscovered an old idea well-known by every ancient mystic: images are more powerful than words. Guy Debord genially recognized this process in his hermetic 1967 “The Society of Spectacle”.

In his book Hidden Persuaders, Packard denounced colored billboards and subliminal messages. As Noam Chomsky puts it about corporations: "The goal is to maximize profit and market share. And they also have a goal for their target, namely the population. They have to be turned into completely mindless consumers of goods that they do not want. (…) The ideal is to have individuals who are totally disassociated from one another.”

And here comes the brain. The idea that, at the specific social and political level, you need to implement the very structure of the brain that is usually oriented to a practical and verbal rationality (where, for example, the relation of cause and effect is crucial for good evolutionary reasons) should still remain valid. While in nature there is nothing like a free will, at the limited social level you may conceive the concept of freedom. This narrow space is the house of our precious rationality.
For a few decades, this attitude, written in our physiology, is becoming rapidly outdated. The brain is one of our more flexible organs that has been constantly adapting itself through history. Now the big difference is that it is adapting to a cognitive change made by men to control other men: the result of the mutation could be a more submissive and controllable kind of person not at all a fit individual in evolutionary terms. Think of Pasolini’s “anthropological mutation” .

Our neoliberal society is building a breed to adapt to the new globalized totalitarianism. An author like Francis Fukuyama spread a somewhat similar alarm in his 2002 “Our Posthuman Future”, although quite less radically and, above all, not linking the structure of the dominant political system with those mutations.

To operate in our i-Society, we don’t need so much a rational attitude but a capacity to combine images by analogy. It is a world in which the old non-contradiction principle is useless because the images spring one from another with a non-logical dynamic. Bauman called it the liquid world. To live in the liquid world we are inclined to develop cerebral activities that may yield to a fast replay of a continuous succession of images and emotions. In this world a rational structure is pure archeology.

The law of our society is velocity and in the mind images are faster than thoughts. It may seems a little abstract but let’s think of our everyday life. Have you noticed that the current thriller movies are full of inconsistency, much more so than the older ones. This is because the coherence of the picture is no longer important; the climax of the plot may be an emotion or a sentiment that we gladly filter through some cerebral patterns in which rationality is not important. Rationality has never been the main trait of the human world; this is obvious, but it was always considered to be at the top of the social cognitive pyramid as the limited instrument of our political freedom. But the capacity to make rational connection was never less useful than in our society today.

I am certain that in the glass skyscrapers and penthouse where the famous one percent of obscenely rich people live, old Machiavelli never went out of fashion. To manage their wealth and their power they need the ancient categories of cause and effect and so on. Simplifying, the liquid world is the ideology that subjugates the other 99 percent in a kind of totalitarianism where everyone swears they are free.

http://rt.com/op-edge/171240-global-totalitarianism-change-neoliberalism/