Archive for August 2009

Time may have come to bail out of the Obama ship

Has Obama lost the trust of progressives, as Krugman says?

By Glenn Greenwald

salon.com

8/21/09

Obama: Not this time, or ever, apparently.

Obama: Not this time, or ever, apparently.

Paul Krugman has an excellent column [1] today arguing that progressives have backlashed so intensely over the prospect of Obama’s dropping the public option because — for reasons extending far beyond specific health care issues — they no longer trust the President.  Citing Obama’s steadfast continuation of Bush/Cheney Terrorism policies, the administration’s extreme coziness with crisis-causing banks, and the endless retreats on health care, Krugman says that ”a backlash in the progressive base . . . has been building for months” and that “progressives are now in revolt. Mr. Obama took their trust for granted, and in the process lost it.”

Krugman contends that while “the fight over the public option involves real policy substance,” it is at least as much “a proxy for broader questions about the president’s priorities and overall approach.”  That’s the argument I made the other day [2] about why the health care fight is so important regardless of one’s views of the public option.  The central pledges of the Obama campaign were less about specific policy positions and much more about changing the way Washington works — to liberate political outcomes from the dictates of corporate interests; to ensure vast new levels of transparency in government; to separate our national security and terrorism approaches from the politics of fear. With [3] some [4] mild [5] exceptions [6], those have been repeatedly violated.

Negotiating his health care reform plan in total secrecy and converting it into a gigantic gift to the pharmaceutical and insurance industries — which is exactly what a plan with (1) mandates, (2) no public option and (3) a ban on bulk negotiations for drug prices would be [7] — would constitute yet another core violation of those commitments, yet another bolstering (a major one) of the very power dynamic he vowed to subvert.

It is difficult to dispute that there is rising progressive anger over what the administration appears to be doing in the health care realm.  Consider the remarkable, blog-based fund-raising campaign [8] to embolden progressive House members who vowed a NO vote on any health care bill lacking a public option even if that’s the bill returned from conference reconciliation.  If those House progressives adhere to their pledge, that would be an enormous impediment to the White House’s plans — and Kevin Drum astutely notes [9] that the purpose of the fund-raising effort is to force the notoriously hapless, impotent and capitulating House progressives to adhere to their clear commitment (as The Hill [10] put it yesterday:  ”House liberals have a history of getting rolled”).  In just a few days, that campaign has raised more than $300,000 [8].  From what I can recall, that is the most prolific single-issue Internet fund-raising since the fundraising bonanza [11] fueled by anger over the 2008 vote by Democrats (revealingly including Obama) to legalize Bush’s warrantless eavesdropping program and retroactively immunize telecom lawbreakers.

If one were to analyze matters from a purely utilitarian perspective, one could find ways to justify the White House’s attempt to write a health care plan that accommodates the desires of the pharmaceutical and drug industries [mandates (i.e., 50 million forced new customers) plus government subsidies to pay their premiums plus no meaningful cost controls (i.e., no public option)].  All other things being equal, it’s better — from the White House’s political perspective — that those industries not spend vast sums of money trying to defeat Obama’s health care proposal, that they not pour their resources into the GOP’s 2010 midterm effort, that they not unleash their fully army of lobbyists and strategists to sabotage the Democratic Party.  That’s the same calculating mindset that leads the White House to loyally serve the interests of the banking industry that caused the financial crisis (we don’t want to make enemies out of of Goldman Sachs or turn investment bankers into GOP funders).  Indeed, that’s the same mindset that leads the White House to avoid any fights with the Right — and/or with the intelligence community and permanent military establishment — over Terrorism policies (there’s no political benefit to subjecting ourselves to accusations of being Soft on Terror and there’s plenty of reasons to cling to those executive powers of secrecy, detention and war-making).

In essence, this is the mindset of Rahm Emanuel, and its precepts are as toxic as they are familiar:  The only calculation that matters is maximizing political power.  The only “change” that’s meaningful is converting more Republican seats into Democratic ones.  A legislative “win” is determined by whether Democrats can claim victory, not by whether anything constructive was achieved.  The smart approach is to serve and thus curry favor with the most powerful corporate factions, not change the rules to make them less powerful.  The primary tactic of Democrats should be to be more indispensable to corporate interests so as to deny the GOP that money and instead direct it to Democrats.

The overriding strategy is to scorn progressives while keeping them in their place and then expand the party by making it more conservative and more reliant on Blue Dogs.  Democrats should replicate Republican policies on Terrorism and national security — not abandon them — in order to remove that issue as a political weapon.

If those Emanuelian premises are the ones that you accept, if you believe that Obama should be guided by base concerns of political power, then you’re likely to be satisfied with the White House’s approach thus far — both in general and on health care specifically.

That would also likely mean that you’re basically satisfied with the behavior of Democrats during the Bush era, and especially since 2006 when they won a majority in Congress, since that is what has driven them for the last decade: all that matters is that we beat the Republicans and we should do anything to achieve that, including serving corporate donors to ensure they fund Us and not Them and turning ourselves into war-making, civil-liberties-abridging, secrecy-loving GOP clones in the national security realm.

But that isn’t what Obama pledged he would do when he campaigned.  He repeatedly vowed he would do the opposite — that he would reject that thinking and battle aggressively [12] against domination by what he called “the interests of powerful lobbyists or the wealthiest few” who have ”run Washington far too long” –  and he convinced millions of people that he was serious, people who, as a result, became fervent devotees to his cause.  Those are the people who New York Times columnist Frank Rich recently said [13] have been “punked by Obama” because it is precisely that same narrow group which continues to be the prime beneficiaries and masters of Washington behavior during the Obama presidency.

More than any betrayal on a specific issue, it is Obama’s seeming eagerness to serve the interests of those who have “run Washington for far too long” — not as a result of what he has failed to accomplish, but as a result of what he has affirmatively embraced — that is causing what Krugman today describes as a loss of trust in Obama from those who once trusted him most.  This approach is not only producing heinous outcomes, but is politically self-destructive as well.  In a superb post the other day, Digby recounted [14] what fueled the Naderite movement in 2000 and warns, presciently I think, that the willingness of Obama/Emanuel so blatantly to disappoint those to whom they promised so much (especially young and first-time voters who were most vulnerable to Obama’s transformative fairy dust) will lead them either to support a third party or turn off from politics altogether:

Rahm Emanuel believes that the key to Democratic success is a coalition in which Blue Dogs and corporate lackeys mitigate progressive change on behalf of the moneyed interests which he believes the political system must serve. Regardless of his malevolent view of how the political system should work, on a political level, I think he’s living in the past. . . .

But on a political level, the left has been betrayed over and over again on the things that matter to us the most. The village is pleased, I’m sure. But the Democratic party only needs to look back eight short years to see just how destructive it is to constantly tell their left flank to go fuck themselves. . . .

At the time [in 2000] nobody believed that an incumbent Vice President in a roaring economy would have a race so close that the Republicans could steal it. But we know differently now don’t we? And you would think that the Democratic establishment would also know that because of that, it may not be a good idea to alienate the left to the point where they become apathetic or even well… you know. It can happen. It did happen. Why the Democrats persist in believing that it can’t happen again is beyond me. . . .

Obama mobilized a whole lot of young people who have great expectations and disappointing them could lead to all sorts of unpleasant results. Success is about more than simply buying off some congressional liberals or pleasing the village. It’s worth remembering that a third party run from the left is what created the conditions for eight long years of Republican governance that pretty much wrecked this country.

After 2000, what is it going to take for the Democrats to realize that constantly using their base as a doormat is not a good idea? It only takes a few defections or enough people staying home to make a difference.  And there are people on the left who have proven they’re willing to do it.  The Democrats are playing with fire if they think they don’t have to deliver anything at all to their liberal base — and abandoning the public option, particularly in light of what we already know about the bailouts and the side deals, may be what breaks the bond.

It’s really not too much to ask that they deliver at least one thing the left demands, it really isn’t. And it’s not going to take much more of this before their young base starts looking around for someone to deliver the hope and change they were promised.

On most fronts that matter — civil liberties, national security, economic policy, servitude to corporate interests, even rising opposition to Obama’s long-promised escalation of the war in Afghanistan [15] — that defines rather clearly what the Obama/Emanuel approach has been thus far.  Stopping it somewhere — anywhere — is vital, and for many reasons, the health care fight provides an excellent opportunity (at least as good as any) for doing so.  Clearly — as first became conclusively clear when Obama so shamelessly reversed himself on FISA and telecom immunity — the Obama White House will not, on its own, cease following the dictates of Blue Dogs, “centrists” and the corporate interests which own them.  That will only happen if they realize that their political power is threatened by building their power in service of corporate interests and by continuing to ignore the interests of those who elected them.  The signs which Krugman identifies to show that Obama has lost the trust of many progressives is one important step, but preventing a health care bill that is nothing but an ill-gotten gift to the insurance and drug industries is a far more important step still. Whatever else one might want to say, changing who wins in Washington is the most important goal there is.

UPDATE:  The new weekly Research2000/Kos tracking poll was just released and — according to Daily Kos polling analyst Steve Singiser — Obama’s approval ratings have taken a dive [16] (as have the Democratic Party’s) due to increasing dissatisfaction with him on the part of Democrats:

Across the board, the drops among Obama and the Democratic Party have come not from the loyal opposition, nor have they come from dismayed Independents. They have come from Democrats.

A cursory look at the graph for Obama’s favorability, broken down by party, shows that after a long period of relative stability among Democrats, there was a sharp drop this week . . . Anyone who thinks the protracted arguments over health care aren’t frustrating the Democratic base need look no further. A ten-point dip in net favorability, in a single week, is a pretty solid statement.

That speaks for itself.  The Obama/Emanuel approach not only produces awful policy but is also self-destructive politically.

UPDATE II:  On the general question of “trusting Obama,” BTD makes an important point [17]:  ”I am against the idea of trusting any politician, including Obama, Ted Kennedy, Russ Feingold, Bernie Sanders, Nancy Pelosi and Anthony Weiner. Watch what they do, not what they say.”  Indeed, as I’ve written many times, “trust” is appropriate for one’s friends, loved ones, family members and the like — but not for politicians.   That’s what John Adams meant when he said:  ”There is danger from all men. The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty.”  ”All” means “all” and ”none” means “none.”

But that’s not how our political culture works generally.  Our politics have become entirely celebretized.  Political discussions typically resemble junior high chatter about one’s most adored and despised actors:   filled with adolescent declarations of whether someone “likes” and “trusts” this politician or “dislikes” that one.  ”I trust Obama” has long been a common refrain among his most loyal supporters.  The fact that, as Krugman says, that is much less true now is quite significant, even if “trust” is an inappropriate emotion in the first place to feel towards any political official.

UPDATE III:  It’s not just the Research 2000/Kos poll that shows a significant decline in Obama’s approval ratings among Democrats. According to Greg Sargent [18], the ABC News/Washington Post poll [19] released this week shows the same and even worse:

A major factor in President Obama’s slide in today’s big Washington Post/ABC News poll, which is preoccupying the political classes today, is his surprisingly sharp drops among Democrats and even liberals, according to crosstabs that were sent my way.

Much talk today has focused on Obama’s difficulties with independents. But the drop among Dems and liberals is also a key driving factor in the President’s skid, according to WaPo polling analyst Jennifer Agiesta, who graciously provided the additional data.

Even for those of you who are willing to justify anything and everything in the name of “political pragmatism,” betraying clear campaign commitments and constantly exhibiting contempt for core progressive values doesn’t seem to be working very well as a political strategy, to put that mildly.

Copyright ©2009 Salon Media Group, Inc.

Glenn Greenwald was previously a constitutional law and civil rights litigator in New York. He is the author of the New York Times Bestselling bookHow Would a Patriot Act? [20],” a critique of the Bush administration’s use of executive power, released in May 2006. His second book, A Tragic Legacy [21]“, examines the Bush legacy.

Article printed from www.CommonDreams.org

URL to article: http://www.commondreams.org/view/2009/08/21-14

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Stomach fortitude and principles missing

Lessons in Leadership: Why Obama Needs to Brush Up on His FDR

FDR in 1933. He wasn't perfect, but he knew how to fight and stand up for some principles.

FDR in 1933. He wasn't perfect, but he knew how to fight and stand up for some principles.

By Arianna Huffington

Watching the gun-toting, Nazi-sign-holding town hall crazies, the talk radio charlatans, and the Palin-infected politicos, my first instinct has been to rally around President Obama and defend his handling of the health care debate against this Cuckoo’s Nest menagerie.

But my better instinct has prevailed over my protective instinct. It’s time to take a cold, hard look at how the president’s leadership — or, more accurately, his lack of leadership — on health care has helped create the vacuum that allowed these fringe-dwellers and their preposterous claims to dominate the debate.

Recent polls show that while Obama’s personal approval rating remains high (57 percent), only 49 percent of the public has confidence that he will make the right decisions — down 11 percent from April. This means that Americans still like him, but have less faith in his leadership.

Given his incredible skills as a leader, this is deeply ironic. How could someone with a renowned ability to inspire, communicate complex ideas, and connect with voters find himself in this position?

Chalk it up to another of his strengths that seems to have failed him this time around. The president, though a dedicated student of history, has failed to learn the lesson of our nation’s most significant political confrontations: they’ve required single-minded determination and the willingness to battle entrenched opponents until the fight was won.

CROSSPOST WITH THE HUFFINGTON POST

The 19th Amendment, giving women the right to vote, the New Deal, Social Security, Medicare, the Voting Rights Act — each of these required a bloody fight. Only after they were pushed into law, and people saw that they worked, did a consensus grow up around them.

Isaiah Berlin famously laid out two opposing styles of leadership in his essay “The Hedgehog and the Fox.” The hedgehog doggedly and relentlessly pursues one big idea. The fox, on the other hand, flits and floats and tries to advance the way Obama has on health care — by spinning, triangulating, and splitting the difference. And it’s this foxy slicing and dicing of the message that the public is truly sick of, and which has created the vacuum that allowed the debate to devolve into nonsense about death panels and socialized medicine (In June, the public option was essential; in August it was “just one sliver” of reform. In September, not negotiating with PhRMA was called “a profound mistake“; in July, he agreed to do just that. Etc, etc, etc.).

There is no better example of what the hedgehog approach to leadership looks like than the way FDR handled the fight over Social Security. The story of how it passed, succinctly laid out by Prof. Jerome Karabel on HuffPost, shows that FDR faced many of the same obstacles Obama is facing, including stiff opposition from within his own party.

At one point, Sen. Bennett “Champ” Clark, a conservative Democrat from Missouri, introduced an amendment to weaken the bill by allowing employers to opt out of the program. It passed with the majority of Democrats voting for it. But FDR knew this would, as Karabel puts it, “fatally undermine” Social Security and vowed to veto any legislation containing the amendment. As Yale Professor Jacob Hacker sums it up, “Social Security passed not because Congress wanted it but because Roosevelt demanded it.”

Soon after his election in 1932, FDR told a group of labor leaders who were pushing reformist legislation: “I agree with you, I want to do it, now make me do it.” Contrast this with Obama, who has told his most avid supporters to settle down and avoid putting pressure on recalcitrant Democrats.

Of course, even if Obama were to summon his formidable grassroots army, as he attempted to do last week, exactly what is it they would be rallying around when knocking on doors or holding house parties? We’ve heard the mantra that the president wants “choice and competition.” But how does he intend to do that? Specifically. He’s been way too fuzzy — and foxy — on the fundamentals, with his administration delivering mixed messages from the very beginning.

Instead of laying out his vision for reform in unequivocal strokes — drawing clear lines in the sand on what he will and won’t accept in a bill — Obama’s plan is apparently whatever Charles Grassley and Max Baucus and Kent Conrad will accept. The president “guaranteed” he’ll get reform done. But we’re not worried that there will be no bill to which Obama affixes his signature. We’re worried that the bill will be the equivalent of a Social Security bill containing Clark’s poison pill amendment. And we are even more worried that the president will sign it, declare victory, and move on.

This is where Obama the pied piper, who builds consensus by charming and seducing, has to give way to Obama the leader who brings about change by laying down the law. This is not an issue where you are going to be able to get all the stakeholders together and have the health care equivalent of a beer summit, with everyone walking away singing Kumbaya. The president needs to drop the delusional notion that there is some perfect plan that will make everyone happy, from insurance companies to PhRMA to the people who want the government to keep its hands off of Medicare.

The consensus will come later, once reform has taken hold. You don’t see many Republicans these days willing to come out in favor of repealing Social Security and Medicare. But if those programs weren’t already in place, you can bet they’d be fighting against them just as hard are they are fighting against health care reform now. (Back in 1961, Ronald Reagan warned that if we passed Medicare we would “spend our sunset years telling our children and our children’s children what it once was like in America when men were free.”)

Speaking of the entrenched interests arrayed against him, FDR said: “Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me — and I welcome their hatred.” Obama, on the other hand, welcomes these entrenched interests into the Oval Office and invites them to amputate another limb off health care reform and dump it in the garbage on the way out.

Such is the desire for real reform that even the poorly explained — and only fitfully supported by the White House — public option (which, it’s worth noting, is already a half-a-loaf compromise from a Medicare-for-all single-payer plan) still has 77 percent support among the public.

But Kent Conrad is telling us again and again that “there are not the votes” for a public option. And Marc Ambinder reported last week that “privately, White House aides have communicated to the House leadership that the onus on changing minds about the public plan is on Congress, not on the president.”

That is not, to say the least, leadership.

The issue that is, for now, the defining moment of Obama’s presidency is itself at a defining moment.

The president has, rightly — finally — started speaking of health reform as a “moral imperative.” If he really believes that it is a moral imperative, then the time for dealing with those who oppose it needs to come to an end. Martin Luther King, Jr. didn’t march on Selma so Rosa Parks could sit two rows up from the back of the bus.

During the campaign, Obama frequently said that this wasn’t about him, but about all of us. That’s true, but we’re now at a juncture where it actually is about him.

The president has the leadership skills to reclaim this debate and take it directly to the American people, sidestepping — or running over, if need be — those who have decided to stand in the way of real change.

Follow Arianna Huffington on Twitter: www.twitter.com/ariannahuff

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The End of Retirement? Social insecurity increases

Crosspost with http://www.socialistproject.ca/bullet/248.php#continue

The   B u l l e t • Socialist Project • E-Bulletin No. 248 • August 13, 2009

After decades of steady assault on working class gains, the corporate class is winning in North America, and its model of “pauperization” is pushing across continents.

By Sam Gindin

The problem is global. Pensioners at the Flinders-Swanston streets intersection call for an increase to the age pension. The main picture shows Lillian Rosevera,  Shirley Grant and Family First senator Steve Fielding.

The problem is global. Here Australian pensioners at the Flinders-Swanston streets intersection call for an increase to the age pension. The main picture shows Lillian Rosevera, Shirley Grant and Family First senator Steve Fielding.

The attack on private sector pensions is not new; while the process has been uneven across time and sectors, private pensions in the U.S. and Canada have been eroding for over a quarter of a century. In 1980, some 40% of U.S. private sector workers and 35% in Canada had pension plans; today the number is under 20% in the U.S. and about 25% in Canada. At the same time, these pensions have steadily shifted from defined benefit plans (guaranteed pension levels) to defined contribution plans (essentially savings plans that provide indeterminate benefits, shifting the risk to workers). What is new is the self-assured aggressiveness of the corporate elite as they move to accelerate that erosion. The financial crisis – reinforced by the labour movement’s disappointingly weak response – has opened the door to the more assertive corporate attack on the pensions of their employees.

Speaking to a recent gathering of the U.S. corporate elite to address “transformational change at a critical time in our nation’s history” and “define America’s future” (the heads of the Canadian Chamber of Commerce and the Canadian Council of Chief Executives were also present) a prominent U.S. leader offered a straightforward piece of advice: “Eliminate the entitlement mentality that is so pervasive in today’s American culture.” (Ward’s Automotive, June 22, 2009; see also National Summit).

At the same time, but narrowing its focus to pensions, The Economist, and one of global capital’s most prominent and influential magazines, provocatively lead with an editorial entitled ‘The End of Retirement.’ Referring back to Bismarck, the German Chancellor credited with introducing the first pension system in 1889, the London-based editors proclaimed that “Whether we like it or not we are going back to the pre-Bismarckian world where work had no formal stopping point.” (print edition June 25, 2009).

For Bismarck, as for U.S. President Franklin D. Roosevelt during the Great Depression, pensions had been a concession to workers, reluctantly made under pressures from below that were seen to threaten the legitimacy of capitalism (pensions in Canada only came later, after World War Two). The promise of pensions was that, at least in the last years of their lives, workers might receive an income that allowed a degree of dignity that compensated for the dignity denied them during their working years. This is, apparently, another promise that capitalism can ‘no longer afford.’

Beyond Private Pensions

It is hardly surprising that business recognized the current crisis as an opportunity to marginalize or end a benefit they’d come to view as a barrier to future success. With growth expected to remain sluggish even after the economic crisis ends, and with returns on the monies put into pension funds expected to be low and uncertain – and so requiring more current funding to meet future obligations – worker pensions were all the more identified as an expensive ‘diversion’ from future investment and stockholder returns. But more than corporate tactics were involved. As the GM and Chrysler bankruptcies so dramatically highlighted – and business itself now readily admits – private sector pension plans suffer from a definitive contradiction: as an insurance plan, they depend on the survival of specific corporations while the world has changed so that even the viability of the largest corporations can no longer be taken for granted.

Yet crises represent opportunities for labour as well as business. The difference lies in the extent to which the labour movement, unlike business, has (at least so far) failed to seize the opportunities raised by this crisis. Rather than building on the discrediting of the private sector’s ability to meet social needs and moving the arguement for a universal public pension, unions and workers have themselves absorbed the erosion of private pensions, accepting dramatic cutbacks including the exclusion of future workers. And faced with inferior pensions or no pensions at all, workers are increasingly themselves ‘choosing’ to solve the problem individually through, in the U.S., cashing in their 401(k) plans (their equivalent to Canadian Registered Retirement Savings Plans (RRSP)) in order to pay for health insurance when unemployment took that away or, in both the U.S. and Canada, working past 65. By letting business off the hook in this way, this has essentially eased the pressures for reform, made business all the more confident in its demands, and left public sector workers increasingly isolated and vulnerable to seeing their pensions cut as well.

In this regard, it is crucial to emphasize that the prospect of a revised universal pension plan set at adequate levels is not a second-best option but the superior alternative. Unlike the private option, it offers universal coverage and thereby provides a foundation for the larger solidarity we need for all our struggles. The structure and levels of the benefits would depend on the vigour and priorities of the working class as a whole, not the strength or weakness of our separate employers. With pensions not dependent on particular employers, the threat of competiveness and unemployment would not be a vehicle for other concessions to save our pensions (or concessions in pensions themselves so as to not lose them entirely). And the social use of the substantive accumulated pensions funds, being in public hands, would be more open – though not automatically so – to democratic pressures.

Among the questions this raises is that of the transition to a public plan. What happens to private plans in the interim? Do the workers covered by such plans just give up on the possibility of keeping their benefits? Or do they soldier on trying to hang on to what they can?

Neither of these options gets to the heart of the problem – an appropriate economic and political transition to public pensions. This would have to include private sector workers joining – if not leading – the struggle for public pensions while fighting to hold employers to as much account as possible for their pension obligations so that corporations will themselves have some self-interest in socializing pension costs. (Another direction that takes us to a new integration of private and public plans, but may limit the goal of equality, would move corporate contributions into the more reliable existing public pension plan, the Canada Pension Plan. For an elaboration of this idea see Jim Reid, ‘Complicit, Complacent or Committed? Proposals to Build Pension Security for All Workers’, Bullet #203, April 16, 2009).

Choices

One critical point raised by The Economist directly challenges public as well as private plans – the demographic implications of living longer. When the U.S. Social Security Act, providing for retirement at age 65 was passed almost three quarters of a century ago, life expectancy was 62. A good many workers would therefore never see retirement, and of those that did, they would likely get a pension for only a few years. So a public commitment to pensions seemed ‘practical.’ Today, however, with life expectancy in the early 80s, a person retiring at age 60 (after 40 years of work) would draw a pension for a period (20+ years) equal to almost half their working life. Is this still practical? Or is it now necessary to move to both increasing the retirement age substantially and reducing the annual pension income.

This is a real dilemma and it requires choices to be made. But we should not be overwhelmed by the demographics. Alongside the increase in life expectancy since the 1930s has come a remarkable increase in productivity – real output per hour has increased some six-fold. The choices to be made do therefore not revolve around whether we’re rich enough to afford retirement, but the extent to which we value freedom from work over consumption, the form that freedom from work might take, and – above all – how society’s wealth is distributed (i.e. these issues can’t be abstracted from questions of power). In regards to the last point, whatever choices are made, a central principle must be that they do not become another vehicle for reinforcing inequality. A measure of equity should be introduced at least during the last years of people’s lives and this means structuring pensions so that pension levels would be heavily weighted toward a universal guarantee rather than being linked to income.

An example of such an alternative structure – and we stress this is just an example – might build on the current public pension system. Canadian public pensions now consist of two parts: the Canada Pension Plan (CPP) which is based on earnings (25% up to the current national average) and Old Age Security (OAS) which provides an amount independent of income (about 15% of the average income). If the CPP were left as is and the OAS set at ¾ the average income, then:

·         Someone who lived their life in poverty with no income would get a pension of ¾ the average income rather than 15% of that average.

·         Someone who toiled at half the average income would get a pension of some 87% of the average income,

·         Someone who had earned an average income would get a retirement income equal to their pre-retirement income. This would represent the maximum public pension (for a unionized worker who earned 50% above the average, this would mean a pension of two-thirds their former income).

The funding of such a plan would be generated through progressive taxes – including wealth taxes to limit the reproduction of inequalities into future generations but also including taxes on all of us (this could not be financed by only taxing the rich).

It may also be that we might prefer to move toward phased retirement rather than the abrupt change retirement has come to mean. For example, rather than retiring at 65, workers might go on shorter work time at age 60 – a 4 day week for three years then a three day week for two years, the time off partially supplemented by the pension fund – and thereby more gradually adjust themselves to a new life.

A more fundamental question remains: if we are going to take time off equivalent to half our working life, should this be entirely concentrated at the end of our lives or should we take a significant portion of that paid time off during our working years? The case against putting it all into retirement – over and above the possibility of dying and losing the banked time – begins with the fact that to postpone all benefits until retirement is to essentially give up the struggle to change the everyday and greater part of our lives. There is something deeply disconcerting, if not tragic, about not sharing in the productivity of society during our youth and middle age in the hope of compensating for those lost years in old age (a version of suffering on earth for a reward in heaven). Moreover, that very trade-off weakens us collectively and so makes the possibility of decent future pensions less, not more likely. With workers accepting current degradations and families working such long hours, where will the self-respect and collective will – and the time – come from to generate the struggle for better pensions? And doesn’t the present moment warn that decent pensions, even where achieved, can’t be sustained absent struggles around a broad range of immediate issues?

Next Steps

In a recent interview (June, 2009, McKinsey Quarterly), Göran Persson, a former Prime Minister of Sweden, discusses the response of business to his government’s attempts to solve the country’s 1992 financial crisis. He observes how clearly global finance understood that the issue was not primarily that of correcting government deficits or trade imbalances or introducing appropriate financial regulations, but rather confirming power relations. “It wasn’t until we cut unemployment benefits and got into open conflict with the trade unions,” Persson notes, “that market interest rates started coming down.”

The labour movement needs to be as clear about what it is up against as business has been in launching its assault on worker rights and benefits. To that end, it must combine fights for immediate needs with building the collective capacities – the class power – to expand future possibilities. To that end, we might begin by:

1. Moving toward some internal consensus that the redistribution of work-time is a top priority for the labour movement – the next great arena for struggle and gains, and the kind of priority around which our movement can be rebuilt as a social movement.

2. Within that focus, we need to initiate the widest discussions around the relative merits of gaining greater access and flexibility over our work time during our working lives versus at the end of our lives (for many workers – such as part-timers – the problem may, however, be not enough work time and this adds to the importance of thinking in terms of the ‘redistribution’ of work time rather than just ‘fewer hours’).

3. Rather than waiting for the government to come up with some modifications in pensions, the labour movement – in consultation with its base and with other movements – should confidently frame and develop its own detailed alternative pension plan, including the age of retirement, early retirement options, pension levels, flexible options and funding (there is no shortage of progressive people with the skills to help with the technical aspects of such a proposal).

4. On this basis labour and its allies can initiate an educational and mobilizing campaign to ensure that no politician, nor business as a class, can ignore our issues.

The above, we emphasize, would only be a beginning; the issue of pensions is too large to be separated from broader issues of power that will sooner or later emerge. This is particularly the case in regards to the social role of private finance, the issue underlying the current economic crisis. Though moving to a public plan will not eliminate private finance – governments, barring a much more radical socialization of finance, will still continue to operate through financial markets – public pensions will limit the dominance of private finance and its scope for profits (and in the process, leave finance very wary about where this might go next). And so we will ultimately have to confront the question so far avoided in this crisis: How to eliminate the power private finance has over our lives and replace it with finance as a democratic public utility – rather than just trying to technically ‘fix’ it so ‘normal’ life can continue. •

Sam Gindin is the Visiting Packer Chair in Social Justice at York University, Toronto.

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Sorry folks, the end of asskissing is nowhere in sight

Killing Yourself with Kindness

By Robert Kuttner


Will somebody please explain to me why Barack Obama is still on his bipartisan kick?

obamatrailx-largeEver since Obama’s first efforts to reach out to Republicans, with his cabinet appointment of two Republicans, Gates at Defense and LaHood at Transportation, and his appeasement of Republican tax-cutting demands in the stimulus package, the Republican opposition has made it clear that no goodwill gesture, no effort to meet them halfway signals anything other than weakness. They are out to destroy his presidency, pure and simple. Nothing makes this clearer than the battle over health insurance reform.

Even Chuck Grassley, the rank (I mean ranking) Republican on the Senate Finance Committee and the great white hope of bipartisanship for his Democratic buddy Max Baucus, was giving aid and comfort to the Palin “death panel” nonsense. “In House bill there is counseling for end of life,” said Grassley, “And from that standpoint you have every right to fear … we should not have a government program that determines you’re going to pull the plug on grandma.” Maybe it’s time to pull the plug on Grassley.

The White House Chief of Staff, Rahm Emanuel, is said to be a tough guy. And Obama’s top political adviser, David Axelrod, is supposed to be some kind of tactical genius. What do these guys think they are getting by continuing to kiss up to the Republicans?

I don’t buy the claim that making nice got them any more Republican votes for Sonia Sotomayor’s confirmation. The handful of Republicans who supported her were motivated either by demographics of their state or by the fact that a few GOP senators are still willing to approve a highly qualified centrist nominee and didn’t want to alienate women voters. Had Obama been playing hardball on other issues, it would not have fatally damaged Sotomayor.

A recent  op-ed piece “by” Barack Obama in the New York Times was the same old high-minded pabulum. It read as if it had been pureed several times by the speechwriting staff:

The long and vigorous debate about health care that’s been taking place over the past few months is a good thing. It’s what America’s all about.


But let’s make sure that we talk with one another, and not over one another. We are bound to disagree, but let’s disagree over issues that are real, and not wild misrepresentations that bear no resemblance to anything that anyone has actually proposed. This is a complicated and critical issue, and it deserves a serious debate.

That’s great above-politics stuff if you are modeling high school civics, not so great if the other side is going for the jugular — and winning.

Clearly, the administration playbook is to stick to the high road and not take the argument to the other side. But the strategy isn’t working. The approval ratings for both the president and for his health plan are falling. He isn’t even inspiring his own strongest grass roots backers to turn out in numbers at support rallies.

Obama’s own gut instincts seem to be a little better than those of his astonishingly risk-averse advisers. At his own town hall meeting in Portsmouth, New Hampshire August 11, Obama was quite eloquent and detailed on the foolishness of the “death panel” lies, and he also said this:

Every time we come close to passing health insurance reform, the special interests fight back with everything they’ve got. They use their influence. They use their political allies to scare and mislead the American people. They start running ads. This is what they always do.


We can’t let them do it again. Not this time. Not now. (Applause.) Because for all the scare tactics out there, what is truly scary — what is truly risky — is if we do nothing. If we let this moment pass — if we keep the system the way it is right now — we will continue to see 14,000 Americans lose their health insurance every day. Your premiums will continue to skyrocket. They have gone up three times faster than your wages and they will keep on going up.

But, oddly, he didn’t name the “special interests” (like the insurance and drug industry) because they are nominally part of his reform coalition. If anyone is killing somebody with kindness, it’s the insurance industry backing Obama and slyly killing real reform.

Despite the lies, the real insecurity that people feel, and the shameless Republican opportunism, health reform will be a loser for Obama and the Democrats unless this president can shake off his delusion that bipartisanship works. So far, it works mainly to strengthen the far-right and weaken this president and what should be a reform moment.

Robert Kuttner is co-editor of The American Prospect, a senior fellow at Demos, and author of Obama’s Challenge.

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Evolution and Revolution of the Central Banking System

Global Power and Global Government: Evolution and Revolution of the Central Banking System


by Andrew Gavin Marshall

PART ONE

Introduction


bernanke400

Bernanke was just confirmed to go on helming the Fed Reserve. is this man part of the solution or part of the problem?


The global political economy itself is being reorganized into a world government body, consisting of one center of global power where the socio-political-economic power of the world is centralized in one institution. This is not a conspiracy theory; it is a reality. Nor is this a subject confined to the realm of “internet conspiracy theorists,” but in fact, the concept of world government originates and evolves throughout the history of capitalism and the global political economy. Mainstream and critical political-economic theory has addressed the concept of world government for centuries.


The notion of a world government has such a long history, as the forces driving the world into such a structure intertwine with the history of the modern global political economy itself. The purpose of this report is to examine the history of the global political economy in taking steps toward forming a world government, in both theory and practice.


How did we get here and where are we going?


Why Study Theory?


Within the academic realm of Political Science, specifically the field of Global Political Economy (GPE), it is essential to understand the various theoretical perspectives of political economy so as to understand the actions and directions taken within the global political economy, and how capitalism has been and continues to be reorganized and altered. Theory provides the foundation upon which actors are understandable and actions are undertaken. As the political economist Robert Cox once stated, “Theory is always for someone and for some purpose.” It is important to understand and analyze the theoretical leanings of those making changes in the global political economy, in order to understand the changes being made, specifically the theoretical foundations of a world government. As well as this, it is important to examine critical theory in how it interprets both how and why a world government is being constructed.


Mercantilism


The history of political economic theory shows a continued fascination with the concept of constructing such a cosmopolitan or global community. The earliest forms of western Global Political Economy theorists lie in the early mercantilist period, and with the emergence of Liberal theory, following Adam Smith’s Wealth of Nations, mercantilist writers such as Friedrich List and Alexander Hamilton wrote critiques of the underlying Liberal concepts. List wrote in Political and Cosmopolitical Economy that Smith dispersed with the idea of a “national economy” in which nation’s determined economic conditions, and instead advocated replacing the “national” economy with a “cosmopolitical or world-wide economy.” List discusses the perspective of Jean-Baptiste Say (J.B. Say), a French liberal economist, saying that Say “openly demands that we should imagine the existence of a universal republic in order to comprehend the idea of general free trade.”[1]


List states that, “If, as the prevailing school [of political-economic thought] requires, we assume a universal union or confederation of nations as the guarantee for an everlasting peace, the principle of international free trade seems to be perfectly justified,” however, this prevailing thought “assumes the existence of a universal union and a state of perpetual peace, and deduces therefrom the great benefits of free trade. In this manner it confounds effects with causes.” List elaborates in explaining that, “Among the provinces and states which are already politically united, there exists a state of perpetual peace; from this political union originates their commercial union.” Further, “All examples which history can show are those in which the political union has led the way, and the commercial union has followed. Not a single instance can be adduced in which the latter has taken the lead, and the former has grown up from it.”[2]


It must be addressed that List is a mercantilist theorist. This means that he views the realm of the political and economic as an interacting realm in which they are intertwined and merged, however, the political realm remains above the economic, which is subject to the dictates of the political element. Liberal theorists believe that the political and economic realms are separate, and that they should be separated, so that political elements interact separately and without influence over the economic realm, which itself acts independently and separately of the political. This is the foundation for the ideas of the “free market” and the oft-quoted Adam Smith phrase, “the invisible hand of the free market,” which was only mentioned once in his entire volume of the Wealth of Nations. The ascension of liberal theorists marked a separation in the academic and theoretical studies, in which Political Economy was separated as a field, and saw the emergence of Political Science and Economics as separate studies.


As political economist Robert Cox stated, “Theory is always for someone and for some purpose.” The purpose of this separation was to compartmentalize academic thought and separate the realms of politics and economy, so as to better control both – as the banking interests, which dominated both the realms of politics and economics since the late 1600s, continued to view the world in terms of political-economic theory. It was a strategy of “divide and conquer,” in which theory and academia was divided in order to conquer and control thought on both sides. This separation continues to this day, as even the field of Political Economy is placed underneath and subjective to Political Science, whereas it would make more sense that Political Science and Economics would be under the umbrella of Political Economy. Again, compartmentalize thought and then the control of discussion and debate becomes much easier.


What List was arguing in his essay was a critique of the liberal concept of a cosmopolitical society, in which all nations are united in a world federation. Naturally, this was not the case in that era, it was an incorrect and dubious assumption on the part of liberal theorists. List explained that never before had economic or commercial interdependence and union led to a political union. List postulated that history showed that political union had to precede an economic union. However, List was writing in the first half of the 19th century, and history has changed the course of events and Political Economic theory. I would argue that the major banking interests, essentially made up of a dynasty of banking families (the Rothschilds, Warburgs, and later the Morgans and Rockefellers, among many others), decided to chart a different course, in which they would pursue a strategy in which economic union would be incrementally undertaken with the aim of constructing a political union to follow in its footsteps.


Central Banking


Thus, liberal economic theory came to the forefront, championed by the global hegemonic power of the day, Great Britain, which was firmly under the control of the banking dynasties. In 1694, the Bank of England was formed as a private central bank, which would issue the currency of the nation, lending it to the government and industry at interest, which would be paid back to the Bank of England’s shareholders, made up of these private banking dynasties.[3] The 16th to the 19th centuries was the period in which both the nation-state and capitalism emerged, soon followed by central banking in the late 1600s. This is when the origins of what was known as a “world economy” took place. Mercantilist economic theory dominated this period, in which the economy was secondary and submissive to the political structure of nations.


Liberal theorists rose in opposition to this. Adam Smith wrote the Wealth of Nations in 1776, the same year that the American colonies revolted against the British imperial forces in the country, and ultimately gained independence from the British Empire. Among many of the primary motivating factors for the Revolution were the British military presence in the American colonies, acting above the law; a heavy imposition of colonial taxes, particularly on tea and other imports from foreign nations such as France, in an effort to promote the mercantilist assumptions that the colony should only survive and trade with the metropole (imperial hegemon) – which extracts the resources of the nation in trade for material goods to that nation, creating a dependence upon the colonial power. Arguably one of the primary motivations for the Revolution was the control of currency by a foreign imperial power, with the ability to control inflation and devaluation, essentially controlling the entire economic conditions of the colony from abroad. The Founding Fathers of the United States understood the necessity of controlling one’s own currency if one was to preserve sovereignty and independence.


Following Britain’s humiliating defeat, which was aided by the French who supported the American revolt, European banking interests suffered a significant blow against their mercantilist expansion. Capitalism functions in that it constantly needs to expand and consume more. Central banking functions in a very similar, although much more dubious manner, in which it needs to expand its control over industry, nations and people through the expansion of debt, continually needing to bring more individuals, nations and industries under debt bondage. Debt is the source of all power and wealth for the central banking system – as they do not actually produce any tradable good, such as industry; nor do they provide any necessary service, such as government. Interest on debt is the source of income and authority for the central banking system, and thus, it needs to continually advance credit and expand debt. Thus, the loss of the American colonies as a source of expansionary credit and debt was a massive blow to their entrenched interests.


The European banking interests quickly learned their lesson regarding not falling under the imperial hubris of believing people of a given region or nation could never defeat imperial might and armies. Revolution had become a great threat to the entrenched capitalist, and particularly, banking interests.


Within a decade of the American Revolutionary War, which ended in 1783, another nation was going down the road of revolutionary zeal, in part inspired by the American example. However, this nation was no colony, but rather a mercantilist imperial power, and thus, its loss would be too great a loss to allow. In 1788, the French Monarchy was bankrupt, and as tensions grew between the increasingly desperate people of France and the aristocratic and particularly monarchic establishment, European bankers decided to pre-empt and co-opt the revolution. In 1788, prominent French bankers refused “to extend necessary short-term credit to the government,”[4] and they arranged to have shipments of grain and food to Paris “delayed” which triggered the hunger riots of the Parisians.[5] This sparked the Revolution, in which a new ruling class emerged, driven by violent oppression and political and actual terrorism. However, its violence grew, and with that, so too did discontentment with the Revolutionary Regime, and its stability and sustainability was in question. Thus, the bankers threw their weight behind a general in the Revolutionary Army named Napoleon, whom they entrusted to restore order. Napoleon then gave the bankers his support, and in 1800, created the Bank of France, the privately owned central bank of France, and gave the bankers authority over the Bank. The bankers owned its shares, and even Napoleon himself bought shares in the bank.[6]


The bankers thus sought to control commerce and government and restore order to their newly acquired and privately owned and operated empire. However, Napoleon continued with his war policies beyond the patience of the bankers, which had a negative impact upon commercial activities,[7] and Napoleon himself was interfering in the operations of the Bank of France and even declared that the Bank “belongs more to the Emperor than to the shareholders.”[8] With that, the bankers again shifted their influence, and remained through regime change.[9]


The Rothschilds ascended to the throne of international banking with the Battle of Waterloo. After having established banking houses in London, Paris, Frankfurt, Vienna and Naples, they profited off of all sides in the Napoleonic wars.[10] The British patriarch, Nathan Rothschild, was known for being the first with news in London, ahead of even the monarchy and the Parliament, and so everyone watched his moves on the stock market during the Battle of Waterloo. Following the battle, Nathan got the news that the British won over 24 hours before the government itself had news, and he quietly went into the London Stock Exchange and sold everything he had, implying to those watching that the British lost. A panic selling ensued, in which everyone sold stock, stock prices crumbled, and the market crashed. What resulted was that Rothschild then bought up the near-entire British stock market for pennies on the dollar, as when news arrived of the British victory at Waterloo, Rothschild’s newly acquired stocks soared in value, as did his fortune, and his rise as the pre-eminent economic figure in Britain.[11]


As Goergetown University History professor, Carroll Quigley wrote in his monumental Tragedy and Hope, “The merchant bankers of London had already at hand in 1810-1850 the Stock Exchange, the Bank of England, and the London money market,” and that:


In time they brought into their financial network the provincial banking centers, organized as commercial banks and savings banks, as well as insurance companies, to form all of these into a single financial system on an international scale which manipulated the quantity and flow of money so that they were able to influence, if not control, governments on one side and industries on the other.[12]


The period from 1815 to 1914 was known as the British Imperial Century, in which they adopted the liberal economic concepts of Adam Smith, and manipulated and distorted them for their own imperial ambitions. Mercantilism was still strong in practice, but rode under the banner of a liberal economic order, “free markets” and the “invisible hand.” The “invisible hand” was in fact, connected to a body made up of government and industry, molding the “free market” according to its designs, and the body was controlled by the brain, the central bank, the Bank of England. Markets were hardly “free” and the hand was visible to those who could see the rest of the body.


The Liberal Revolution


It was during this British imperial century that other nations, such as Germany and the United States, were pursuing mercantilist economic practices in order to protect their own nations from the British free-trade imperialism. It was in this context that mercantilist theorists such as Alexander Hamilton in the United States, and Friedrich List in Germany were writing in criticism of liberal economic theory.


Mercantilism was dominant in political-economic theory until the mid 19th century when the ‘liberal revolution’ manifested, largely in critical opposition to mercantilism. In liberal economic theory, the economic realm is autonomous and separate from the political realm, and functions according to its own logic. Within this theory, politics and economics, though separate spheres, are still connected, but remain independent of one another. Whereas mercantilists see the state as the primary actor in the global political economy, liberals see the individual (both producer and consumer) as being the major actor.


Mercantilists see the international arena as inherently conflictual, justifying their policies of colonialism and empire building in an international arena in which if one state does not colonize foreign lands and extract resources, another state will, and thus, will deprive the state that does not create an empire of resources and economic growth. In this sense, mercantilists view the world in terms of a zero-sum gain, in which the progress of one state requires the regression of another. Liberal theorists argue that the international arena, made up of individuals, constitutes a positive-sum gain, in which all individuals act according to self-interest, and in doing so, benefit everyone, and foster cooperation and interdependence. In this sense, the international arena is not inherently conflictual, but rather a cooperative and interdependent sphere in which order and stability is upheld by international regimes – such as the British liberal imperial order and the gold standard it instituted.


Where mercantilists view history as an amalgamation of conflicts and decisions made by states, liberal theorists view history as the sum of the unintended consequences of actions made by private individuals and activities. This implies almost an inherently natural progression of history – that it is not shaped by powerful forces in any designed or intended way, but is merely a natural response and reaction to the actions of individuals. This ties into the liberal concept of the natural state of a liberal economic order, bringing in the idea of the “invisible hand of the free market” which will determine economic activities.


Adam Smith’s notion of the “invisible hand” has been used to advance the idea that private individuals who seek personal wealth and gain through self-interest will unintentionally aid the interests of all of society. However, the “invisible hand” was mentioned merely once in Smith’s monumental Wealth of Nations, and was taken out of context. Smith was discussing how “Every individual naturally inclines to employ his capital in the manner in which it is likely to afford the greatest support to domestic industry, and to give revenue and employment to the greatest number of people of his own country.” In addition to employing “his capital in the support of domestic industry,” the private individual would “direct that industry that its produce may be of the greatest value.” Therefore, the individual “neither intends to promote the public interest, nor knows how much he is promoting it.” Smith explains that:

“By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”[13]

Smith had conceptualized the “invisible hand” as the “natural inclination” of an individual to promote domestic interests, yet the phrase has been manipulated to promote the concept of a “self regulating market” in which the less regulation and restrictions there are, the better all society will be, because industry will naturally benefit all people. The manipulation of this phrase has taken the notion of the “invisible hand” away from the actions of individuals and transferred it to promoting non-regulation of economic activities. That is a far cry from Smith’s contention.


Smith even stated in the Wealth of Nations that, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”[14]


In discussing regulation regarding wages for workers and resolving equity issues between the employers, or “masters” and the labour class of “workers,” Smith explained that, “Whenever the legislature attempts to regulate the differences between masters and their workmen, its counselors are always the masters. When the regulation, therefore, is in favour of the workmen, it is always just and equitable; but it is sometimes otherwise when in favour of the masters.” Further, “When masters combine together in order to reduce the wages of their workmen, they commonly enter into a private bond or agreement, not to give more than a certain wage under a certain penalty. Were the workmen to enter into a contrary combination of the same kind, not to accept a certain wage under a certain penalty [such as a union], the law would punish them very severely; and if it dealt impartially, it would treat the masters in the same manner.”[15]


These quotes by Adam Smith tend to fly in the face of the common perceptions and usage of Smith’s ideas, proving that liberal economy in practice is a far cry from the intent of its original theorist.


In the 1870s, the notion of a “liberal economic order” was challenged as the major European empires undertook an incredible extension of their imperial presence across the globe, itself a mercantilist practice – the idea of obtaining colonies in order to extract its resources, create a captive market for the imperial nations manufactured goods, and deprive its economic competitors of access to that market. Between 1878 and 1913, European empires extended their control over much of the world, specifically with the Scramble for Africa, in which all of Africa, save Ethiopia, was colonized by European powers.


This “new imperialism,” as it was known, proliferated throughout Europe following the rapid expansion of banking throughout the continent, and the pre-eminence of international financiers over governments.[16] The growth of the continent-wide banking networks “fed the growth of colonial empires” as it stimulated a system in which “creating debt that then had to be serviced by the purchase of more infrastructure,” and expansion of territory.[17] This led European nations to undertake a massive imperial effort across much of the globe, to find and control foreign markets and expand their capital.


The Emergence of Marxism


In the 19th century, the rise of critical IPE (International/Global Political Economy) theories emerged in opposition to the growing dominance of Liberal IPE. The most profound of these criticisms arose from Karl Marx. Marxism, as Marx’s critical theory came to be known, put an extensive focus on the relations of classes within society, as the class that owns the means of production is the central and most powerful class, subverting the other classes to a submissive position. Marxists also view capitalism as being inherently exploitative. Within this theory, the political and economic realms are not seen as separate spheres of action, but are seen as intertwined and internally related. Within this theory, the purpose of the state is not to serve the interests of the broader population that inhabits it, but to secure, maintain and advance the interests of the capitalist class. Marxist theorists also put emphasis on the nature of war and conflict as being intrinsically related to the expansionary nature of capitalism, which is one of the primary roles of states in advancing the interests of the capitalist ruling class.


Marx defines what he perceives as capitalism: a system which is governed by capital, which is money that has been invested in order to generate more money; production, which is dominant within capitalist society, is designed for sale, not use – in that, it moves beyond subsistence and into what we refer to today as materialism and consumption; labour is commodified, thus people, through their labour, themselves become a tradable commodity; exchange occurs with money; ownership of the means of production is in the hands of the capitalist class; and competition between various capitalist forces is the logic of interaction.


Marx places a large focus on the circuit of capital, in how money transforms into capital. Money (M), is invested in purchasing a Commodity (C), and then into Labour Power (LP) and the Mean of Production (MP), which make up the Production circuit (P), which produces a new Commodity (C1), which is then sold, creating expanding money (M1), or earned profits. Capital, thus, is money that is invested into production. Marx postulates that the inherent exploitative nature of capitalism is most apparent in the Production circuit, specifically with Labour Power.


Diverging From Marx


However, with the exploration and understanding of the central banking system, some of the circuit of capital must be called into question. Central banking functions not on “investment” of capital, but on the expansion and creation of money and debt, which is lent at interest, thus serving as the source of income for the central banking system. This cannot be called productive capital, for its purpose and intent is not to produce a new commodity, there is no labour power or means of production involved, and new money is not produced from the sale of such a new commodity, but rather profit is extracted from interest on the original money. This, for the sake of argument, can be called the Circuit of Debt:


M –> L –> I –> M1 –> LID –> DB

M = Money

L = Loan

I = Interest

M1 = New Money

LID = new money Loaned to debtor to pay Interest on Debt

DB = debtor falls into Debt Bondage; owned by creditor


Through the Marxist perspective of exploitation, there is no labour to exploit within the Circuit of Debt, so where does exploitation come into play? Exploitation comes into the process in that the debt (or loan) issued, is designed to exploit whoever the debtor is, be it an individual, a nation, or a corporation. Within this paradigm, class structure, although playing a significant part of the process of overall exploitation and exercise of power within the capitalist system is not the only, or arguably, even primary target of control and oppression within capitalism, as we know it. The target is the individual, the nation, and industry to the submission of the predatory nature of the central banking system.


The central banking system has, from its inception, acted in ways which monopolize industry (thus negating Adam Smith’s concept of a “free market” and “competition”); militarize nations (financing wars and conquest, imperialism); merging the interests of both the economic and political realms into a holistic ruling class (modeled upon the dual nature of a central bank itself – holding the authority and power of a government body, but representing the interests and submitting to the ownership of private individuals). Thus, the ruling class itself is a social construct which this tiny elite formed, hardly capable of the numbers to be termed a class, especially since class is most often defined in national terms, whereas this elite is international in nature.


The central bank of a nation finances monopoly industry and imperial states, both of which are created out of debt bondage to the central bank. Both the commercial/industrial elites and political elites merge their interests – the state will pursue imperial policies that have the effect of benefiting industry, while industry will support the building of a strong, powerful state (and provide a cozy job for the political elite upon leaving the public sector). This makes up the ruling class of a nation, the capitalists, or owners of the means of production, merging with the political rulers of the nation. One does not represent or overpower the other, but rather, both serve the interests and are owned through interest, by a tiny international elite.


One must ask: What would capitalism look like if it were not for the advent of the central banking system?


Accumulation by Dispossession


In discussing Marxist theory, I am not advocating a total support of its theoretical discussion and perspective. However, it is vital to address, as historically and presently, it has served as a very powerful source of criticism against the capitalist system and its importance cannot be underestimated. Having said that, it is also important to address in that it does, as a theory, identify many accurate and important aspects of how the capitalist system functions. For that reason, many of the critiques have been and are currently prescient and justified.


In Marxist theory, the nature of accumulation plays a very important part, in that it holds a dual character. One is known as accumulation as expanded reproduction, which is concerned with commodity markets and production (the circuit of capital), where money is made through the labour process. The other nature of accumulation is accumulation by dispossession, which is usually framed in terms of relations between capitalist and non-capitalist modes of production. This is accumulation derived from dispossessing someone of something. The Atlantic slave trade was an example of accumulation by dispossession, as Africans were dispossessed of their lives and freedom. Colonialism is another example, where resources are extracted, dispossessing the nation of its own resources.


Perhaps it would be helpful to expand upon Marx’s ideas of accumulation by dispossession in regards to the central banking system. Central banking, not falling into the circuit of capital, and thus, accumulation as expanded reproduction, better represents an example of accumulation by dispossession. Money is given in loans at interest, to which the debtor is never meant to fully repay, and is dispossessed of its freedom and wealth through interest payments and debt bondage. Debt is just another word for slavery, therefore, the central banking system itself, functions through a system of accumulation by dispossession.


However, conventional understanding of accumulation by dispossession describes it as an interaction between capitalist and non-capitalist modes of production, where the capitalist mode will dispossess the non-capitalist mode of production. Central banking, however, is the pinnacle of the capitalist system, and ultimately, the primary source and avenue of its power, so it can hardly be said to be an interaction between capitalist and non-capitalist modes, as it is an interaction between central banks and ALL modes of production which need money – including the entirety of the capitalist system. Thus, industry/commerce, governments/nations, and individuals/people, are dispossessed of their freedom through debt bondage. This cannot simply be predicated in terms of class warfare or class-centric theory, but rather, an assault against all individuals, individuality, and freedom, in any and all forms. It is within this context that class structures are created, so as to play off one against the other – to compartmentalize people into classes, and thus, better control and manipulate the masses. It is a strategy of dividing and conquering people. Class, including the upper capitalist class, is constructed in an effort to conform thought within each class, and thus direct collective action of that class accordingly. The freethinking individual is the target in all cases. Individuality is to be removed from commerce, government, and society as a whole.


The Communist Manifesto


In the Communist Manifesto, published in 1848, Marx proclaims in the opening subtitle that, “The history of all society hitherto is the history of class struggles.” However, if class itself is a construct of powerful individuals, albeit throughout human history, can it not be argued instead that the history of all society is the history of the struggle of the individual against collectivity and control? Class itself is a collective grouping designed to control a mass of people, whether it is upper class or lower class. Individuals are stifled within all classes, and thus, the history of class struggles itself, is a history of the struggle between the free thinking individual and the collective form of control.


Within the Communist Manifesto, Marx (and Engels) outlined an initial program for an “advanced” nation to undertake in order to create a Communist system, with ten major points. (1) Abolition of property in land and application of all rents of land to public purposes; (2) A heavy progressive or graduated income tax; (3) Abolition of all right of inheritance; (4) Confiscation of the property of all emigrants and rebels; (5) Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly; (6) Centralization of the means of communication and transport in the hands of the state; (7) Extension of factories and instruments of production owned by the state – the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan; (8) Equal liability of all to labour – Establishment of industrial armies, especially for agriculture; (9) Combination of agriculture with manufacturing industries – gradual abolition of the distinction between town and country by a more equable distribution of the population over the country; and (10) Free education for all children in public schools – Abolition of children’s factory labour in its present form [and] Combination of education with industrial production.[18]


Of particular importance is number 5, in which a central bank is advocated. If nations have the ability to create and issue a currency through a Treasury department or even on a more regional or local level, why centralize and monopolize creation of a currency to a central bank? It should be noted that the recommendation was to have it centralized “in the hands of the state,” however, central banks are today, still widely perceived as being within the purview of governmental authority, while acting and functioning totally outside of it and above it. Imposing a tax on one’s income (2), also seems to promote the commodification of labour, in that instead of industry exploiting one’s labour and extracting a profit from it, that becomes the job of the state. All property would be owned by the state (1), and virtually the entire economy is subject to the control of the state. Even education, while free, is directed by the state. With the “Confiscation of the property of all emigrants and rebels,” what room is there for dissenting thought in such a society? Dissent would not be encouraged within the “free education” system. In fact, conformity would be enshrined. Is this not a form of “accumulation by dispossession” in which the individual is dispossessed of free thought and action and submitted to the will of and restricted thinking allowed by the state? Within this paradigm the state accumulates power and authority by dispossessing people of individuality in thought and expression.


The Communist Manifesto ends with the declaration of, “Workers of all countries, Unite!” This, in and of itself, promotes class divisions within society, placing focus on the need for an international mobilization of the global working class to rise up against the capitalist class. Marx outlines that any successful workers’ revolution must be international.[19] Thus, this promotes the cosmopolitical notion of an international community, at least in initial terms of a transnational class system. Essentially, Marx argues that as capitalism expands, what we will later term “Globalizes,” so too must the working class of the world “globalize” and “internationalize.” In a sense, this makes Marx, himself, an early globalist theorist, in promoting the concept of an international class uprising against the capitalist class. Ultimately, would this not simply replace the tyranny of one class for the tyranny of another? Throw out the capitalists and bring in the communists! Substituting one form of oppression for another is hardly a change in the right direction. In both systems, the individual suffers and free thought is stifled.


Though much Marxist criticism is extremely pointed in analyzing the functions and structure of the capitalist system, such theory itself, even though critical, must be critically examined.


Retaking America


The history of the United States from its founding through the 19th century to the early 20th century, was marked by a continual political battle revolving around the creation of a central bank of the United States. Mercantilists such as Alexander Hamilton, who was the first Treasury Secretary, were in favour of such a bank, and his advice won over George Washington, much to the dismay of Thomas Jefferson, who was a strong opponent to central banking. However, “[Alexander] Hamilton, believing that government must ally itself with the richest elements of society to make itself strong, proposed to Congress a series of laws, which it enacted, expressing this philosophy,” and that, “A Bank of the United States was set up as a partnership between the government and certain banking interests,”[20] which lasted until the charter expired in 1811.


Again, during the tenure of Andrew Jackson (1829-1837), the primary political struggle was with the entrenched financial interests both domestic and from abroad (namely Western Europe), on the issue of creating a central bank of the US. Andrew Jackson stood in firm opposition to such a bank, saying that, “the bank threatened the emerging order, hoarding too much economic power in too few hands,” and referred to it as “The Monster.”[21] Congress passed the bill allowing for the creation of a Second Bank of the United States, however, Andrew Jackson vetoed the bill, much to the dismay of the banking interests.


It was in the later half of the 1800s that “European financiers were in favor of an American Civil War that would return the United States to its colonial status, they admitted privately that they were not necessarily interested in preserving slavery,” as it had become unprofitable.[22] The Civil War was not based upon the liberation of slaves, it was, as Howard Zinn described it, a clash “of elites,” with the northern elite wanting “economic expansion – free land, free labor, a free market, a high protective tariff for manufacturers, [and] a bank of the United States. [Whereas] The slave interests opposed all that.”[23] The Civil War, which lasted from 1861 until 1865, resulted in hundreds of thousands of deaths, during which, “Congress also set up a national bank, putting the government into partnership with the banking interests, guaranteeing their profits.”[24]


As Lincoln himself stated:


The money powers prey on the nation in times of peace and conspire against it in times of adversity. The banking powers are more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. They denounce as public enemies all who question their methods or throw light upon their crimes.

I have two great enemies, the Southern Army in front of me, and the bankers in the rear. Of the two, the one at my rear is my greatest foe. As a most undesirable consequence of the war, corporations have been enthroned, and an era of corruption in high places will follow. The money power will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in the hands of a few, and the Republic is destroyed.[25]


Throughout much of the 1800s and into the 1900s, the United States suffered several economic crises, one of the most significant of which was the Great Depression of 1873. As Howard Zinn explained:


The crisis was built into a system which was chaotic in its nature, in which only the very rich were secure. It was a system of periodic crises – 1837, 1857, 1873 (and later: 1893, 1907, 1919, 1929) – that wiped out small businesses and brought cold, hunger, and death to working people while the fortunes of the Astors, Vanderbilts, Rockefellers, Morgans, kept growing through war and peace, crisis and recovery. During the 1873 crisis, Carnegie was capturing the steel market, Rockefeller was wiping out his competitors in oil.[26]


Massive industrial consolidation by a few oligarchic elites was the rule of the day, as J.P. Morgan expanded total control over railroad and banking interests, and John D. Rockefeller took control of the oil market, and expanded into banking. Zinn explained that, “The imperial leader of the new oligarchy was the House of Morgan. In its operations it was ably assisted by the First National Bank of New York (directed by George F. Baker) and the National City Bank of New York (presided over by James Stillman, agent of the Rockefeller interests). Among them, these three men and their financial associates occupied 341 directorships in 112 corporations. The total resources of these corporations in 1912 was $22,245,000,000, more than the assessed value of all property in the twenty-two states and territories west of the Mississippi River.”[27]


These banking interests, particularly those of Morgan, were very much allied with European banking interests. On the European side, specifically in Britain, the elite were largely involved in the Scramble for Africa at this time. Infamous among them was Cecil Rhodes, who made his fortune in the diamond and gold mining in Africa, as “With financial support from Lord Rothschild and Alfred Beit, he was able to monopolize the diamond mines of South Africa as De Beers Consolidated Mines and to build up a great gold mining enterprise as Consolidated Gold Fields.”[28] Interestingly, “Rhodes could not have won his near-monopoly over South African diamond production without the assistance of his friends in the City of London: in particular, the Rothschild bank, at that time the biggest concentration of financial capital in the world.”[29] As historian Niall Ferguson explained, “It is usually assumed that Rhodes owned De Beers, but this was not the case. Nathaniel de Rothschild was a bigger shareholder than Rhodes himself; indeed, by 1899 the Rothschilds’ stake was twice that of Rhodes.”[30]


Cecil Rhodes was also known for his radical views regarding America, particularly in that he would “talk with total seriousness of ‘the ultimate recovery of the United States of America as an integral part of the British Empire’.”[31] Rhodes saw himself not simply as a money maker, but primarily as an “empire builder.” As historian Carroll Quigley explained, in 1891, three British elites met with the intent to create a secret society. The three men were Cecil Rhodes, William T. Stead, a prominent journalist of the day, and Reginald Baliol Brett, a “friend and confidant of Queen Victoria, and later to be the most influential adviser of King Edward VII and King George V.” Within this secret society, “real power was to be exercised by the leader, and a ‘Junta of Three.’ The leader was to be Rhodes, and the Junta was to be Stead, Brett, and Alfred Milner.”[32]


In 1901, Rhodes chose Milner as his successor within the society, of which the purpose was, “The extension of British rule throughout the world, the perfecting of a system of emigration from the United Kingdom and of colonization by British subjects of all lands wherein the means of livelihood are attainable by energy, labour, and enterprise . . . [with] the ultimate recovery of the United States of America as an integral part of a British Empire, the consolidation of the whole Empire, the inauguration of a system of Colonial Representation in the Imperial Parliament which may tend to weld together the disjointed members of the Empire, and finally the foundation of so great a power as to hereafter render wars impossible and promote the best interests of humanity.”[33] Essentially, it outlined a British-led cosmopolitical world order, one global system of governance under British hegemony. Among key players within this group were the Rothschilds and other banking interests.[34]


In the early 20th century, European and American banking interests achieved what they had desired for over a century within America, the creation of a privately owned central bank. It was created through collaboration of American and European bankers, primarily the Morgans, Rockefellers, Kuhn, Loebs and Warburgs.[35] After the 1907 banking panic in the US, instigated by JP Morgan, pressure was placed upon the American political establishment to create a “stable” banking system. In 1910, a secret meeting of financiers was held on Jekyll Island, where they planned for the “creation of a National Reserve Association with fifteen major regions, controlled by a board of commercial bankers but empowered by the federal government to act like a central bank – creating money and lending reserves to private banks.”[36] President Woodrow Wilson followed the plan almost exactly as outlined by the Wall Street financiers, and added to it the creation of a Federal Reserve Board in Washington, which the President would appoint.[37] The Federal Reserve, or Fed, “raised its own revenue, drafted its own operating budget and submitted neither to Congress,” while “the seven governors shared power with the presidents of the twelve Reserve Banks, each serving the private banks in its region,” and “the commercial banks held stock shares in each of the twelve Federal Reserve Banks.”[38]


The retaking of the United States by international banking interests was achieved with barely a whimper of opposition. Where the British Empire failed in taking the United States militarily, international bankers succeeded covertly through the banking system. The Federal Reserve also had the effect of cementing an alliance between New York and London bankers.[39]


Notes

[1]        George T. Crane, Abla Amawi, The Theoretical evolution of international political economy. Oxford University Press US, 1997: pages 48-49

[2]        George T. Crane, Abla Amawi, The Theoretical evolution of international political economy. Oxford University Press US, 1997: pages 50-51

[3]        John Kenneth Galbraith, Money: Whence it Came, Where it Went (Boston: Houghton Mifflin Company, 1975), 31

[4]        Donald Kagan, et. al., The Western Heritage. Volume C: Since 1789: Ninth edition: (Pearson Prentice Hall: 2007), 596

[5]        Curtis B. Dall, F.D.R. : My Exploited Father-in-Law. (Institute for Historical Review: 1982), 172

[6]        Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (New York: Macmillan Company, 1966), 515

Robert Elgie and Helen Thompson, ed., The Politics of Central Banks (New York: Routledge, 1998), 97-98

[7]        Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (New York: Macmillan Company, 1966), 516

[8]        Robert Elgie and Helen Thompson, ed., The Politics of Central Banks (New York: Routledge, 1998), 98-99

[9]        Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (New York: Macmillan Company, 1966), 516

[10]      Sylvia Nasar, Masters of the Universe. The New York Times: January 23, 2000: http://query.nytimes.com/gst/fullpage.html?res=9C04E3D6123AF930A15752C0A9669C8B63

BBC News. The Family That Bankrolled Europe. BBC News: July 9, 1999

http://news.bbc.co.uk/1/hi/uk/389053.stm

[11]      New Scientist. Waterloo Windfall. New Scientist Magazine: Issue 2091, July 19, 1997

http://www.newscientist.com/article/mg15520913.300-waterloo-windfall.html

BBC News. The Making of a Dynasty: The Rothschilds. BBC News: January 28, 1998

http://news.bbc.co.uk/2/hi/uk_news/50997.stm

[12]      Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (New York: Macmillan Company, 1966), 51

[13]      Adam Smith, The Wealth of Nations. U. of Chicago Edition, 1976: Vol. IV, ch. 2: 477

[14]      Adam Smith, An inquiry into the nature and causes of the wealth of nations. Regnery Gateway, 1998: page 152

[15]      Adam Smith, An inquiry into the nature and causes of the wealth of nations. Regnery Gateway, 1998: pages 166-167

[16]      Patricia Goldstone, Aaronsohn’s Maps: The Untold Story of the Man who Might Have Created Peace in the Middle East. (Harcourt Trade, 2007), 29-30

[17]      Patricia Goldstone, Aaronsohn’s Maps: The Untold Story of the Man who Might Have Created Peace in the Middle East. (Harcourt Trade, 2007), 31

[18]      Karl Marx, Friedrich Engels, Philip Gasper (ed.), The Communist manifesto: a road map to history’s most important political document. Haymarket Books, 2005: pages 70-71

[19]      Karl Marx, Friedrich Engels, Philip Gasper (ed.), The Communist manifesto: a road map to history’s most important political document. Haymarket Books, 2005: page 67

[20]      Howard Zinn, A People’s History of the United States. Harper Perennial: New York, 2003: page 101

[21]      Michael Waldman, My Fellow Americans: The Most Important Speeches of America’s Presidents, from George Washington to George W. Bush. Longman Publishing Group: 2004: page 25

[22]      Dr. Ellen Brown, Today We’re All Irish: Debt Serfdom Comes to America. Global Research: March 15, 2008: http://www.globalresearch.ca/index.php?context=viewArticle&code=BRO20080315&articleId=8349

[23]      Howard Zinn, A People’s History of the United States. Harper Perennial: New York, 2003: page 189

[24]      Howard Zinn, A People’s History of the United States. Harper Perennial: New York, 2003: page 238

[25]      Steve Bachman, Unheralded Warnings from the Founding Fathers to You. Gather: June 19, 2007: http://www.gather.com/viewArticle.jsp?articleId=281474977031677

[26]      Howard Zinn, A People’s History of the United States. Harper Perennial: New York, 2003: page 242

[27]      Howard Zinn, A People’s History of the United States. Harper Perennial: New York, 2003: page 323

[28]      Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (New York: The Macmillan Company, 1966), 130

[29]      Niall Ferguson, Empire: The Rise and Demise of the British World Order and the Lessons for Global Power (New York: Basic Books, 2004), 186

[30]      Niall Ferguson, Empire: The Rise and Demise of the British World Order and the Lessons for Global Power (New York: Basic Books, 2004), 186-187

[31]      Niall Ferguson, Empire: The Rise and Demise of the British World Order and the Lessons for Global Power (New York: Basic Books, 2004), 190

[32]      Carroll Quigley, The Anglo-American Establishment. GSG & Associates, 1981: page 3

[33]      Carroll Quigley, The Anglo-American Establishment. GSG & Associates, 1981: page 33

[34]      Carroll Quigley, The Anglo-American Establishment. GSG & Associates, 1981: page 34

[35]      Murray N. Rothbard, Wall Street, Banks, and American Foreign Policy. World Market Perspective: 1984: http://www.lewrockwell.com/rothbard/rothbard66.html

[36]      William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country. (New York: Simon and Schuster, 1987), 276

[37]      William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country. (New York: Simon and Schuster, 1987), 277

[38]      William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country. (New York: Simon and Schuster, 1987), 50

[39]      William Engdahl, A Century of War: Anglo-American Oil Politics and the New World Order. (London: Pluto Press, 2004), 51


Andrew Gavin Marshall is a Research Associate with the Centre for Research on Globalization (CRG). He is currently studying Political Economy and History at Simon Fraser University.

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