Chants for bread and social justice didn’t emerge out of the January 25, 2011 revolution. Long before 2011, a strong protest movement existed against the economic policies of former President Mubarak and his regime, which gained momentum in 2006 through the protests and strikes of labor workers in Mahalla al-Kubra.
Nadeem Mansour, director of the Egyptian Center for Economic and Social Rights (ECESR), speaks to Mada Masr about the challenges facing the labor movement in Egypt and the battle for bread and social justice.
Mada Masr: Why do you think demands for social justice were masked by an identity battle post-January 25, 2011?
Nadeem Mansour: My work is still about the struggle for bread, social justice and the minimum wage, but after January 25, political organizations — the Muslim Brotherhood, Salafis and liberal groups — used the media to wage a very public battle over identity politics that masked this fight to some extent. Those who chanted for social rights in 2011 were not able to achieve their aims for numerous reasons — they didn’t have parties to speak for them, nor a media interested in propagating their ideals. Private media in Egypt is owned almost entirely by businessmen, who often have personal interests that are in conflict with labor movements.
At the ECESR, we have a monitor for economic and social protests. We’ve noticed that many protests over the last four years have had economic and social demands, and there have been a lot of them. In 2013, for example, the number of protests exceeded 5000. Our role is to support these demands. Social justice is the key to making any real change, and to all of the problems facing Egyptian society today. For example, terrorism will only be confronted and stability brought about by ensuring structural and social inequalities are addressed.
MM: How has the absence of political support for economic and social rights affected your work at the center?
NM: Support of the poor and marginalized has never received much genuine political interest. Such attention fluctuates according to the political climate. Part of our role as an entity that offers legal, research and media services, and supports syndicates and local communities, is to help people find solutions to their problems on a local level, and then ensuring attention is given to their problems more widely.
Take the case of the minimum wage, as an example. Before we started the campaign and filed the lawsuit, the issue was not even a matter of discussion. The last minimum wage was set in 1982, as far as I remember, and it was around LE34. The campaign — both research and online — was initiated in partnership with workers, as there were no independent trade unions or syndicates at the time. We succeeded in raising the minimum wage from LE34 to LE400, and then to LE700 after the revolution. Now the minimum wage stands at LE1200, and we are still demanding its increase. By setting the minimum wage as a revolutionary demand, it became a public issue, not just one concerning workers.
We are also interested in working more on specific cases, such as the issue of the Misr Shebin al-Kom Spinning and Weaving Company [the country’s largest textile company, based in Mahalla], which was sold to an Indian investor who already owned some of its competitors. He bought it illegally at a cheap price in order to destroy its equipment and decrease production and thus competition. This case prompted the government to issue a law protecting contracts, which we believe is unconstitutional and have challenged in court.
We partnered with a group of workers and farmers in 2012, when the constitution was being revised, to issue a document, “Workers and farmers write the constitution.” While the conflict over the civil or Islamic identity of the state continued, and there were many calls for workers and farmers to be educated about their rights, we decided to go and ask them about what they thought these rights should be. We went to 22 governorates and we talked with thousands of people. We put them together in a legal document and ended up with something similar to the international Covenant on Economic and Social Rights in its relation to health, work and water. This is part of our work, empowering local communities to make decisions that impact on their own lives.
MM: What about the syndicates and unions for workers?
NM: The syndicates and unions are weak because they are part of a nascent movement that is also facing attacks from many directions, and lacks organizational capacity. Additionally, the strength of these organizations is closely related to that of local communities and their capacity to mobilize and sustain action.
The question is, can these problems be solved by uniform state action, or do they require a decentralized approach?
The economic and social crisis in Egypt is partly due to corruption and government bureaucracy. Attempts at reform often happen in a very centralized manner, whereas capacity building has to be conducted locally.
There are between 1500 and 3000 syndicates, and the union’s [Federation of Independent Trade Unions] capacity for representation is limited. Also, there is no legal framework to structure their work, meaning the right to strike is not protected.
The syndicates are weak right now, and consequently so is the union. The ability to mobilize in the public domain is difficult in Egypt currently, and the attention of the public is focused on political parties and activists. But the attack on syndicates is much fiercer.
MM: How would you describe this attack?
NM: Workers face many problems, including: Dismissal, lack of financial rights, penalties against striking workers, threats, jail, physical assaults, torture and death — in extreme cases. The Protest Law also applies to workers, and is often enforced more vigorously. We have workers who are currently being tried for going on strike. Over the last 10 years, Egypt has developed a strong strike movement. The public mobilization on Jan 25 and June 30 were related to strikes over economic and social issues.
The entire movement is not often suppressed, as it is so vast, but smaller attacks are waged. During Morsi’s term in office, workers at the Portland Company in Alexandria were attacked by police dogs, and some were thrown from the second floor of the building, leading to severe injuries.
Just a few days ago, we were able to secure the release of a worker who criticized the administration of his employer on Facebook and is being investigated for it. Such attacks are often arbitrary, so we try to raise the profile of them in the media as much as we can.
Violence and the interference of the security services in the public domain have reached levels we haven’t witnessed in the last 10 years. The general climate is one of fear.
In one incident, a private company ended negotiations with its workers after military intelligence got involved. This is documented in the company’s official records.
MM: How do you deal with legislative obstacles to your work?
NM: We have strong objections to the current law regulating the work of civil society and against various drafts of the newly proposed law. The state is attempting to restrict rights-based work without understanding this will hinder democratic reform.
The Center is registered according to the law. We are not an association, but a legal services company, providing consultancy on legal and economic matters. We are a legal office and as such pay the appropriate taxes and have the required documents. Our work is transparent and open.
We are, however, interested in the law governing non-governmental organizations, because we are interested in the ways people organize and in supporting this locally and nationally. We want a law that supports activities and solidarity work. If I’m a legal firm that wants to provide free services, I should be able to do so. Why am I being dealt with as an association in this case?
MM: When and why did you decide to work in human rights?
NM: I began work as a trainee researcher at the Hisham Mubarak Law Center in 2008. I then started the ECESR with Khalid Ali and two other colleagues in 2009.
My interest in rights stems from my study of political economies, which focused on the relationship between the state, local communities and the labor movement. In human rights centers, there are many opportunities for young researchers to expand and develop their ideas.
Many people benefit from our legal services that wouldn’t have access to them otherwise. This motivates me to continue. Our work builds on that of many other generations and organizations. The public domain expanded dramatically after the revolution, enabling rights work to gain ground and the number of organizations dedicated to it to increase. The scale of such work was much more limited in the 90s, for example.
MM: Do you think the current restrictions on civil society will deter young people from getting involved in rights-based work?
NM: I don’t think this will prevent new generations from joining. There have always been restrictions on rights-related work. Under Mubarak, and even before I started in the 90s and 2000s, we suffered consistent and fierce attacks. The intensity of the attack on the movement has also increased with its ability to make an impact.
As long as people’s rights are violated, there will be a need for such organizations to exist.
—
This is part of a series of interviews with human rights workers in Egypt that will be published in the coming weeks.
April 26, 2015
Posted by aletho |
Civil Liberties, Economics, Solidarity and Activism | Egypt, Human rights |
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Richard Cordray (former Attorney General of Ohio), the head of the Consumer Finance Protection Bureau (CFPG) and Gary Gensler (a former disaster under Bill Clinton and Goldman Sachs) have been the two great appointments by President Obama in the field of finance. Obama’s other appointments at Treasury, the financial regulatory agencies, and the (non) prosecutors who are supposed to specialize in financial prosecutions have been nightmarishly bad.
Gensler was another Rubinite from Goldman Sachs who, under Bill Clinton, helped destroy Brooksley Born’s effort to protect the nation from the financial derivatives that blew up AIG and much of the financial world through passage of the infamous Commodity Futures Modernization Act of 2000. As Obama’s appointee to chair the Commodity Futures Trade Commission (CFTC), however, Gensler justly earned praise for attempting to restore effective regulation. Gensler was a grave disappointment to Obama’s administration, which thought it was sending a reliably pro-finance Rubinite to run a fairly obscure agency he had helped emasculate. When Gensler showed a spine Obama refused to reappoint him and replaced Gensler with Timothy G. Massad, a Timothy Geithner minion noted for his pro-industry views. Massad’s claim to fame was being one of the principal unprincipled architects of the failed homeowner relief programs. As I pointed out in my first Bill Moyers interview, failing (for the right political reasons) proves you are a reliable “team player” and gets you promoted in Washington, D.C. As Geithner found out, succeeding gets you your walking papers. Jesse Eisinger, as his norm, wrote a great piece about Massad when Obama nominated him in November 2013. An alternative view can be found in the American Banker, which gave prominently space to an op ed praising Massad’s nomination written by the head of a firm that trains CFTC staff.
Massad’s tenure represents a regulatory retreat at the CFTC, but in fairness, as bad as Obama is on financial regulation the Republicans are vastly worse. They are trying to force the wholesale repeal the Dodd-Frank protections on financial derivatives and they have waged an unholy war on the CFTC’s budget to try to make it impossible for the agency to protect the public. The GOP also fought hard to prevent Cordray’s appointment because they (more precisely, their donors), rightly, feared his integrity and skills.
One might think that Obama, and Democratic Party candidates for the presidential nomination would be campaigning on the issue of Republicans being in the pocket of the industry and trying to recreate Bush’s anti-regulatory “Wrecking Crew” (as Tom Frank aptly labeled it) that produced the financial crisis. But leaders of the Democratic Leadership Council (DLC) (aka “new Democrats,” which include both Clintons and Obama – by his own words) cannot bring themselves to channel their inner FDR and take on big finance. (The DLC is defunct as a formal organization, but its political leaders and pro-finance and anti-regulatory dogmas remain intact.) Big finance is the DLC’s financial base. Senator Bernie Sanders may run. If he does the Republican Party’s unholy war on regulation will be one of his primary issues.
Hillary Clinton’s Successful Gensler Gambit
The financial media is abuzz today with the leaked news that Hillary Clinton is hiring Gensler as a senior campaign staffer. From H. Clinton’s perspective, the media buzz was perfect. Bloomberg’s article bears this gushing one sentence summary: “Hillary Clinton will bring on one of Wall Street’s fiercest critics to oversee her campaign’s finances.” The article explains the politics.
“For Clinton, who has been fighting her left flank’s concern that she is too cozy with Wall Street, Gensler is a notable hire. He became known as someone with sharp elbows —even during his negotiations within the Obama administration—in his push for tighter regulation.”
In short, H. Clinton’s campaign got the ideal spin from what could have been a very hostile financial media. Hiring, and leaking, Gensler’s hire was a very smart political move.
Just One Little Catch
But here’s the catch. Gensler is being hired for a job that will take 150% of his available time given H. Clinton’s ability to raise money and the obscene rules that make modern campaign finance a sport in which both parties routinely devise “black box” funding devices to allow the wealthy to rule American politics secretly. This has two critical implications. Gensler will not be working to block the power of the secretive wealthy – he will be doing the opposite, at least 16 hours a day. It also means that he was not hired to advise H. Clinton on the crimes of Wall Street banksters and the vital need for vigorous regulation and prosecutions. Even if he had the desire to fill that role he will have no time to do so and he will be busy secretly catering to the needs of the wealthy and politically dominant criminal class.
Gensler Was No Godzilla When He Led the CFTC
Gensler’s stint at the CFTC is a nice story of redemption. He did try to be a vigorous regulator over great opposition from the industry, much of Congress (including many House Democrats), and Treasury. Gensler’s desire to be an effective regulator was unacceptable to Obama, who in another act of “revealed preferences” refused to reappoint Gensler.
But Gensler is not, remotely, “one of Wall Street’s fiercest critics.” Quick: memory association: what’s Gensler’s “fiercest” criticism of Wall Street? You came up blank, didn’t you? I checked the Wall Street Journal and did a more general web search. The WSJ was happy to see that Obama refused to reappoint him (the cover story is that Gensler did not want to serve another term) and it criticized him as harsh – but I could not find a story quoting any harsh denunciation of Wall Street by Gensler. Given that even life-long banking apologists like Geithner’s replacement as President of FRBNY now routinely refer to the corrupt culture of Wall Street, Geithner is not even one of the harsher critics of Wall Street within the none-too-critical Obama administration.
The “sharp elbows” claim is pure invention by Geithner’s worse than useless minions. Anyone who refused to brownnose the finance industry was considered far too aggressive by Geithner. Geithner and his team launched the same smear at Sheila Bair (FDIC chair) and Neil Barofsky (SIGTARP). We (the S&L regulators) were routinely referred to as “Nazis,” the “Gestapo,” and the “KGB.” The political, dirty tricks, and litigation attacks on us were far more severe and consequential because our actions were sending elites to prison and humiliating their political patrons who rushed to return campaign contributions from those we exposed as frauds.
Back in the S&L days under the team assembled by Federal Home Loan Bank Board Chairman Edwin Gray, the Reagan administration detested us precisely because Gensler (in his CFTC incarnation) would have been somewhere in the middle of the distribution of regulatory vigor. The comparison is conjectural because under Gray’s leadership, which generally became so supportive of regulatory vigor, and the tutelage of Joe Selby and Mike Patriarca (the Nation’s consensus choices as the most effective and vigorous financial regulators), Gensler might have developed into a far more effective regulator. Gensler’s mentor, Robert (“Bob”) Rubin, inflicted a severe impediment to regulatory effectiveness that Gensler had to struggle to try to overcome.
Conclusion
Ignore the media crush on Gensler’s appointment. As campaign CFO for H. Clinton his job is the care and feeding of the DLC’s financial base – the finance industry. H. Clinton’s Gensler gambit is smart politics, but if you think it means she is seeking progressive advice you are being played – successfully.
April 26, 2015
Posted by aletho |
Corruption, Deception, Economics, Progressive Hypocrite | Gary Gensler, Goldman Sachs, Hillary Clinton, Robert Rubin, United States |
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A good portion of the money that is supposed to be going to government retirees is being skimmed off by Wall Street as fees, much of them undisclosed, charged by private equity companies.
CEM Benchmarking, which compares costs for various public and private equity funds, says in a report (pdf) that “Less than one‐half of the very substantial [private equity] costs incurred by U.S. pension funds are currently being disclosed.” The difference can be as much as $60 million on a portfolio valued at $3 billion, CEM reported.
Private equity funds say they’re worth the fees they charge because they bring in better returns on investments. However, it’s difficult to verify this claim because long-term returns are mostly self-reported by the equity firms.
Of this country’s $3 trillion in public pension fund assets, roughly 9% ($270 billion) gets invested in private equity firms. The industry’s 2% management fee therefore pays the equity industry about $5.4 billion a year. But if CEM’s calculations apply uniformly, that could mean that in fact more than $10 billion a year, half of that in hidden fees, are being taken from retirees at the same time that governments are trying to cut benefits, according to the International Business Times.
One recent example of this is in New Jersey, where big fees for handling government pensions have gone to fund managers who supported Republican Governor Chris Christie’s election campaigns. In the five years since Christie took office, the International Business Times reported, fees have quadrupled at the same time Christie has said the funds don’t have enough money to pay all the benefits to which retirees are entitled. New Jersey pension trustees have announced an investigation of the funds.
“With billions of public worker and taxpayer dollars put at risk in the highest-cost, most opaque investment schemes ever devised by Wall Street for a decade now, investigations that hold Wall Street profiteers accountable are long, long overdue,” former Securities and Exchange Commission attorney Ted Siedle wrote in Forbes.
Other governments aren’t waiting around. Montgomery County, Pennsylvania, in the Philadelphia suburbs, has switched most of its retirement funds from private equity to low-fee stock index funds. California’s massive retirement system, CalPERS, announced last year that it would be divesting itself of hedge funds because of their high costs.
To Learn More:
Cities and States Paying Massive Secret Fees to Wall Street: Report (International Business Times )
Public Pension Fund Analysis (Private Equity Growth Capital Council) (pdf)
The Time Has Come for Standardized Total Cost for Private Equity (CEM Benchmarking) (pdf)
State Government Revenues Tops Expenditures Thanks to Pension Fund Investments (by Noel Brinkerhoff, AllGov )
California Pensions to Dump $4-Billion Hedge Fund Investments (by Noel Brinkerhoff, Steve Straehley and Ken Broder, AllGov California )
“Vulture” Capitalists Strike Vulnerable Cities and Counties (by Matt Bewig, AllGov )
April 26, 2015
Posted by aletho |
Corruption, Economics | Chris Christie, New Jersey, United States |
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The idea sounds great—provide Internet access for the millions of people in developing areas that don’t have it. But in the process of putting that knowledge at the fingertips of that under-served community, Facebook founder Mark Zuckerberg’s Internet.org has drawn a bright line between the haves and have-nots.
Zuckerberg’s plan, developed with manufacturers such as Nokia, Ericsson, Qualcomm and Samsung, allows free access via mobile phones in developing areas only to certain parts of the Internet. Surprise—Facebook is one of the applications able to be reached by way of the Internet.org app. Wikipedia is also available as are weather and a few other sites. But if you want to go to a site not on the app, you must either pay a fee or you’re out of luck.
Latin American leaders, such as Colombian President Juan Manuel Santos, have applauded the Internet.org strategy, according to the Electronic Frontier Foundation (EFF). But others, including Carolina Botero, executive director of the Karisma Foundation in Bogotá, have reservations. Karisma supports the positive use of technology as it pertains to human rights. Botero said: “We have serious concerns that Internet.org is presented as a public policy strategy for universal access to the Internet. This initiative compromises everyone’s rights and blurs the government’s obligation to reduce the digital divide for its citizens for compromised access to certain applications. No matter how interesting they are, these services are associated with a commercial interest of a multinational which the state is directly supporting.”
Zuckerberg claims that because Internet.org doesn’t specifically block sites or charge sites more to run faster, the app conforms with net neutrality principles. But more businesses are starting to see it the other way and are opting out of the program, among them a group of Indian publishers.
“We support net neutrality because it creates a fair, level playing field for all companies—big and small—to produce the best service and offer it to consumers,” The Times Group, one of the publishers that withdrew from Internet.org, said in a statement. Other Indian companies to opt out of Internet.org are travel website Cleartrip and information site Newshunt. “What started off with providing a simple search service has us now concerned with influencing customer decision-making by forcing options on them, something that is against our core DNA,” Cleartrip said in a statement, according to The Wall Street Journal.
“The problem runs deeper than simply which sites to which poor users should have subsidized access,” wrote EFF’s David Boagado and Katitza Rodriguez. “It lies in the very concept that Facebook and its corporate partners, or governments, should be able to privilege one service or site above another. Despite the good intentions of Facebook and the handful of allied companies, Internet.org effectively leaves its users without a real Internet in the [Latin American] region.”
The result is “having access to only a sliver of what is supposed to be the worldwide web,” wrote Issie Lapowsky at Wired. “As we’ve said before, this creates ‘an Internet for poor people.’”
Zuckerberg’s response, basically, is that half a loaf is better than none. “Arguments about net neutrality shouldn’t be used to prevent the most disadvantaged people in society from gaining access or to deprive people of opportunity,” he wrote April 17 in a Facebook post. “Eliminating programs that bring more people online won’t increase social inclusion or close the digital divide. It will only deprive all of us of the ideas and contributions of the two thirds of the world who are not connected.”
To Learn More:
Does Internet.org Leave Latin Americans Without A Real Internet? (by David Bogado and Katitza Rodriguez, Electronic Frontier Foundation)
Mark Zuckerberg Can’t Have It Both Ways on Net Neutrality (by Issie Lapowsky, Wired )
Indian Companies Pull Out of Internet.org amid Battle over Net Neutrality (by Aditi Malhotra, Wall Street Journal )
Supreme Court Upholds Cyber Freedom in India (by Karan Singh, AllGov India )
April 26, 2015
Posted by aletho |
Economics, Full Spectrum Dominance | Ericsson, Facebook, India, Latin America, Mark Zuckerberg, Nokia, Qualcomm, Samsung |
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Germany’s Federal Intelligence Service has been spying for US intelligence agencies for years. Merkel’s Office should have been informed in 2008 about this practice, but the federal government has not undertaken any corresponding measures, a German magazine wrote.
It became known on Thursday the German Federal Intelligence Service (BND) overheard communications of European companies and politicians for the NSA, according to Deutsche Wirtschafts Nachrichten.
However, Merkel’s Office seems to have done nothing to stop these activities, though it was informed about US espionage attempts in 2008.
According to the available information, the NSA was trying to get information about the multinational arms companies EADS and Eurocopter. This was contrary to German interests, and the BND had rejected the requests at that time.
However, now it has become clear that the BND assisted the US National Security Agency (NSA) in spying on European targets over the last few years.
The revelation was perceived by many German politicians as “scandalous”. They demanded an end to such ‘collaboration’ with the US and argued that the chancellor’s office should probably have been aware of the spy agencies’ cooperation.
April 26, 2015
Posted by aletho |
Corruption, Economics, Illegal Occupation | BND, Germany, National Security Agency, NSA, United States |
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MOSCOW — Metropolitan police have used tear gas against protesters after they have tried stormed into a police station in South London’s Brixton during anti-gentrification demonstrations, local media reported Saturday.
According to ITV, members of the law enforcement removed the protesters who entered the station using tear gas.
Thousands of people have gathered in Brixton’s central square to protest against gentrification earlier in the day, according to media.
The event’s organizers claim they support change and regeneration which would benefit the existing communities in the area, but not gentrification. The local council or associations have sent eviction notices to tenants of at least four council homes to be renewed by private constructions.
“Stop rent rises, stop evictions,” the protesters’ placards read. Other slogans included “People before profit,” “More council homes, not luxury homes,” and “Property developers are vultures.”
One demonstrator held a sign saying “Black communities matter,” protesting against the gentrification of Brixton, which has a large percentage of residents of African and Caribbean descent.
“Social diversity is driven out by lack of truly affordable housing. Local businesses are driven out by increasing rents and redevelopment schemes that benefit national & multinational businesses, siphoning money out of the area,” according to the event’s organizers, who fear only the wealthy would be able to live in Brixton.
Gentrification is affecting more and more regions all over London, with people protesting against urban renewal. Earlier this week, anti-gentrification campaigners disrupted a property developer event in London, according to the local media.
April 25, 2015
Posted by aletho |
Economics, Supremacism, Social Darwinism | Brixton, Human rights, London, UK |
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In the years before he ran for President in 1968, Richard Nixon’s publicists promoted a New Nixon. It was the same old Tricky Dicky with the rough edges smoothed away.
The old Nixon lost the 1960 presidential election to John Kennedy in 1960; then Pat Brown defeated him in 1962, when he ran for the Governorship of California. The hope after that was, as Nixon himself put it, that the press would no longer “have Nixon to kick around anymore.” Nixon had always had trouble with the press.
But this was not to be. You just can’t keep a good scoundrel down.
The Vietnam War was a bipartisan concoction, from its inception to its ignominious end, but, before 1968, liberal Democrats – JFK and Lyndon Johnson, leading figures in their administrations, and Democratic Senators and Representatives — were the ones leading the way. Vietnam was not just an anti-Soviet and anti-Chinese proxy war; it was a liberal’s war.
Republicans were culpable too, and Nixon was hardly an exponent of peace. But neither he nor the party whose ticket he led had yet taken on the now familiar more-bellicose-than-thou persona of the post-Vietnam GOP.
The more unpopular the war became, the happier Republicans were that Lyndon Johnson, not one of their own, was taking the blame. Democrats were still widely considered the more warlike of the two parties. How could they not be – having brought the United States into the First and Second World Wars and into Korea? Vietnam was their thing.
But then, as now, the Democratic Party was where the liberals were, most of them anyway; and so, the part of the anti-war movement that was electorally inclined, the less radical part, gravitated into their ranks, effectively dividing the party into pro- and anti-war camps.
There were Republican liberals too back then, but a cultural divide already separated the anti-war movement from the GOP; and, with only a few exceptions, Republican liberals and moderates were no more peace-friendly than LBJ. The prospect of turning the GOP into an anti-war party never occurred.
As the 1968 election approached, Nixon said that he had a secret plan for ending the war. He was lying, of course; but, at the time, his claim was not implausible; hadn’t Eisenhower said much the same about Korea, and he was telling the truth.
There were even a few anti-war liberals who voted for Nixon to punish the Democrats, and many more who considered doing so.
The Democrats who led the way in Vietnam, LBJ and the cohort he inherited from Kennedy, were decent enough on domestic policy. By today’s standards, they were outstanding.
Nixon wasn’t bad either. Unlike today’s Republicans and Democrats, but like Eisenhower, he had no interest in dismantling New Deal and Fair Deal advances.
And for getting affirmative action going, for launching various “black capitalism” programs, for floating the prospect of a negative income tax and genuine national health insurance, for breathing life into the environmental movement, for pumping money into scientific research and infrastructure development, and much else, his presidency puts Barack Obama’s and Bill Clinton’s to shame.
Between Nixon and what we can expect from Bill Clinton’s even more retrograde wife, there is no comparison at all.
To get his presidential aspirations back on track, there was therefore no need for him to take a liberal or “populist” turn. This was not what the New Nixon was about.
It was about how he presented himself, his public persona. His publicists understood that that had to be changed – fast.
But, you cannot change a public persona without bringing politics in; not if you are running for President. There must be at least the appearance of substantive change.
And so what made the New Nixon new was his adoption of a more statesmanlike veneer.
The New Nixon was, or was made to seem, more thoughtful than the Old. His anti-Communism was toned down a notch — to appear less paranoid and crass. And, under Henry Kissinger’s tutelage, he learned how to present himself before the world as a geopolitical strategist of uncommon insight.
Of the Old Nixon, people would say: “would you buy a used car from that man?” The New Nixon was less flagrantly sleazy.
The mean-spirited, internally tormented figure voters rejected twice was made over to seem avuncular and wise, an Eisenhower in the rough.
As it turned out, the makeover was not entirely smoke and mirrors. Nixon’s personality was what his detractors knew it to be; there was no changing that. But there was some reality behind the statesman-like veneer that his handlers had him project.
No one would have expected the Old Nixon to lead the opening towards China or to advance détente with the USSR; no one thought he had it in him.
Once in office, it became clear that the man was not as void of vision or as incapable of deep thinking as everyone had believed.
It also became clear that there was more villainy in him than even his most ardent detractors had imagined.
* * *
With her campaign for the presidency in 2016 now officially underway, we are witnessing the roll-out of a New Hillary.
The parallels with Nixon’s makeover are striking.
Clinton’s presidential plans had been thwarted by a more glamorous opponent, just as Nixon’s had been; and she too has always had trouble with the press.
And the New Hillary, like the New Nixon, will be very much like the Old.
There are other uncanny parallels: Barack Obama, the rival who did the Old Hillary in, was, at the time, heralded as the next JFK, the man who defeated Nixon forty-eight years before. Even Caroline Kennedy was on board with that.
For a moment too, there was hope, as they vacated the White House, that, in the new century, we wouldn’t have Clintons to kick around anymore.
Of course, there was never any chance of that – not with Bill being, as the quip went, the bride at every wedding and the corpse at every funeral; and not with Hillary being parachuted into New York state to be its Senator.
That arrangement also conjures up memories of the sixties – of Jack’s brother Bobby, RFK. When Johnson wanted him out of Washington, he too was parachuted into New York to become its Senator.
Massachusetts would have been more appropriate, but brother Teddy was already a Massachusetts Senator, and two Kennedys in the Senate from the same state would be unseemly.
More important to RFK and his minions, adding on to the Kennedy power base in Massachusetts would have been a waste or time and effort. New York was a different story.
Hillary was even less a New Yorker than Kennedy was. She was an Illinois girl, born and bred, who went to college and Law School in New England and then spent her adult life in Arkansas and Washington DC. New York City was just a great place to visit; the rest of the state might as well have been on the dark side of the moon.
This is not the only reason why the parallel with RFK is not exact.
Robert Kennedy had at least been his brother’s Attorney General, and also his closest advisor and most trusted friend. He knew about, and participated in, JFK’s intrigues and assignations; he knew about his brother’s poor health. He was the keeper of the family’s skeletons.
While his brother was alive, the whole world knew that when RFK spoke, he was speaking for the President. He was the Kennedy administration’s unchallenged and unchallengeable consigliere. When need be, he was also the enforcer of his brother’s will.
And he was his brother’s heir apparent. As such, RFK was a power to be reckoned with – not just for his hold over the Democratic Party but, more importantly, over the popular imagination.
With Hillary, there was nothing like that. She did play a role in her husband’s administration – a comparatively minor and not very successful one. It was she, for example, who, more than anyone, set the cause of health care reform back a generation.
Though hardly a Queen of Camelot, her role was more or less like Jackie’s. She and her husband had arrived at a modus vivendi — based on necessity, not trust.
When she spoke, it was with her own voice, not his; and she would be the last, not the first, to know about his intrigues and assignations.
Hillary’s only qualification for the office she sought in New York was that she had been a First Lady, an official wife.
Because she was the wife of a philandering husband, she sometimes did get her way. Aggrieved wives often do, especially when their husbands are in the national spotlight and hanging on by the skins of their teeth. The last thing Bill needed was political embarrassment on Hillary’s account.
But she was never the voice of the Clinton administration, and she was never her husband’s administration’s consigliere.
By the time Robert Kennedy was assassinated, the hopes of a generation were riding on his shoulders. No hopes ride on Hillary’s; none ever have and none ever will.
Therefore, it wasn’t just within “the great right-wing conspiracy” Hillary spoke of that, for all the wrong reasons, people looked forward to seeing the back of her. There were many who shared this hope – for reasons that are eminently sound.
But, as it had been with Nixon, those who hoped hoped in vain. She never really retired from public view.
Her operatives think that a makeover now will get her back on track for winning the office she believes her due.
One wonders how much the Nixon precedent figures in their thinking. It is unclear what, if anything, his makeover had to do with it, but a made over Nixon did finally gain the office that he too believed his due.
For this, the country paid dearly; and Vietnam, Cambodia, Chile and much of the rest of the world suffered egregiously.
We can expect outcomes similarly horrendous, if and when the New Hillary calls the shots. This is yet another parallel waiting to happen.
* * *
Old Hillary cannot be made over in quite the way that Old Nixon was. After her tenure as Secretary of State, promoting her diplomatic prowess is out of the question.
Future historians will fault her handling of America’s affairs almost everywhere the empire’s talons reached – not just in the Muslim world. But her clueless fumbling during the Arab Spring is sure to receive special attention.
On this, her Republican detractors are on to something.
But if the past is any guide, to drive the point home, they will focus only on her role in Libya in 2011 and in the months that followed.
She does indeed have much to answer for about that. So do Obama and his other humanitarian interveners. They brought Libya to ruin. The consequences of their clueless bumbling are still unfolding.
Thanks to Secretary Clinton and her posse, Libya became a failed state. In the Mediterranean today, off the Libyan coast, refugees and asylum seekers are drowning because of what Clinton and the people around her helped bring about.
But the Republican way is to tell only part of the story, and to tell it in ways that mainly reflect their own disingenuousness. Where the Clintons are concerned, this is how it has been since Day One.
Therefore expect Republicans to focus narrowly, if not exclusively, on the deaths of American diplomats (or whatever they were) in the consulate in Benghazi.
This was indeed a disaster, but their concerns are disingenuous because they know, as well as anyone, that the Benghazi consulate was, as the Iranians would say, “a nest of spies” that neither Clinton nor anyone else in the Obama administration can talk about honestly.
It was the same with the famous “missile gap” that JFK would bring up every chance he got when he ran against Nixon. There was no such thing, and Kennedy knew it. He also knew that Nixon couldn’t say this without compromising what he – and his boss, President Eisenhower — took to be the national interest.
This time, the shoe will be on the other party’s foot.
Still, the fact remains: Clinton was in way over her head when the Arab Spring erupted, and almost everything she did was wrong. If only for that, she should never be allowed anywhere near the corridors of power again.
Just as surely as Republicans will make the attack on the Benghazi consulate the issue, Democrats will do their best to make Clinton’s failures at the State Department a non-issue.
They will probably succeed too – well enough to fool most liberals.
But, to that end, the less they say about her diplomacy, the better for them. This is why Clinton’s makeover, unlike Nixon’s, will have little, if anything, to do with foreign affairs.
It will be about her likeability instead.
The Old Hillary was imperious; she exuded a sense of entitlement. The New Hillary is downright personable.
When New Hillary campaigns, instead of just flying in and out of major venues for mega-rallies or hobnobs with plutocrats, she will now sometimes also chat one-on-one with (carefully selected) “ordinary” people. She will brandish the common touch.
She will also take what media pundits call a “populist” line, doing her best to appeal to voters who would prefer Elizabeth Warren – or anybody to Hillary’s left.
These changes run together – “populist,” “popular.” Some well-remunerated marketing genius in Hillary’s employ must think that the two are one and the same, or that the target audience can be duped into thinking that they are.
It will be a hard sell, but the sales campaign will probably succeed with the target audience. Everybody knows that what candidates say bears almost no relation to what they will do – think, for example, of Obama’s “I will close Guantanamo” — but the will to believe becomes indomitable around election time.
Who is in the audience that Hillary’s hucksters are targeting? Apparently, it is social liberals – people who would vote for her, or any Democrat, over any imaginable Republican anyway, but who may, from sheer disgust or learned indifference, not vote at all.
In other words, they are preaching to the choir. This might seem a waste of time and effort; it usually is. But with a Hillary Clinton presidency looming, the choir cannot be counted on to show up at the church. They must be made to want to sing.
Hillary’s hucksters understand this; they know that their first order of business is to remind the Democratic “base,” the social liberal part of it, what makes Democrats worth supporting.
There are too few Democrats on Hillary’s right on economic policy issues to worry about, in any case; and her team is evidently counting on Republicans scaring off most “swing voters.” This happened in 2012, and it is likely to happen again in 2016.
And so the idea is to emphasize Hillary’s social liberalism – in the hope of getting potential voters enthused.
Her handlers have an even more compelling reason too: there is no other way to provide her with a more leftish patina that would not upset the donor class.
* * *
As a rule, advertisers like to appeal to the kinds of consumers known in the days when Nixon was starting his makeover, and when Hillary was still a Goldwater Girl, as “the Pepsi Generation,”
The Pepsi Generation was “with it,” whatever “it” was; and they felt good about themselves and about their world. Optimism was in the air they breathed.
The name lingers – it was a triumph of advertising genius – and the idea behind it continues to guide marketing campaigns.
But, in an age of increasing social insecurity, what works for selling soft drinks is no longer directly transferable to advertising campaigns aimed at selling candidates to voters.
Ronald Reagan’s “morning in America” was its last hurrah.
Since then, a succession of Reaganite (neoliberal, aggressively imperialist) Presidents – Reagan himself, the two Bushes, Bill Clinton and Barack Obama – have superintended such a profound diminution in voters’ expectations that it is no longer possible be with it and perky, or even mildly optimistic, in political contexts.
The one brief exception was America’s – and the world’s – brief Obamamania phase. In retrospect, the predictable shattering of the illusions that sprouted up around Obama’s candidacy in 2008 only accelerated the long term, increasingly pessimistic trend.
But even if optimism no longer sells candidates, being with it still counts for something – or so Hillary’s hucksters believe.
If their campaign launch video — featuring single moms, a multi-racial family and a gay couple about to be married — is any indication, Hillary’s minions seem to have decided to cede the religious Right to Ted Cruz or whichever wing-nut strikes the fancy of America’s most benighted, and to appeal instead to voters who are already on board, but who may not turn out for Hillary even so.
She is plainly not a candidate to get the juices flowing the way Obama did once upon a time; she is way too uncool.
But social liberalism is cool – cool enough, Team Hillary hopes, to bring the faithful out on Election Day.
In the Golden Age of the Pepsi Generation, Democrats aspiring to become their party’s nominee would be courting labor leaders and appealing to rank-and-file workers.
But Hillary and the people around her see no percentage in that; not when the union movement is a pale shadow of its former self, a casualty of the neoliberal age; and not when the leaders of what is left of it are as eager as their predecessors were to do Democrats yeoman service.
In the old days, there was at least a quid pro quo. Democrats did the labor movement favors too.
When Obama ran the first time, this tradition had not yet entirely died out. Candidate Obama was not about to come out against Taft Hartley, but he did endorse the Employee Free Choice Act. Had it been enacted, union organizing would have become easier. Obama said that he would make it a priority.
Needless to say, no one has heard anything from him about it since.
And now, true to form, most labor leaders are falling into place — behind Hillary. Her people see no need to chat them up; they have — or think they have — nowhere else to go.
Count on them instead to give their all while expecting nothing in return — beyond keeping the Republicans at bay. They no longer even ask.
* * *
Is pandering to later-day Pepsi Generation types, while ignoring workers and other traditional Democratic constituencies, a good strategy?
Not as a rule, especially in general elections. But, this time, it hardly matters because it is as plain as can be that the Republican candidate in 2016 will be whacky enough to scare off all but the most reactionary voters. The Democrat, whoever she is, will win no matter what strategy she deploys.
Meanwhile, the Clinton makeover strategy is a good one insofar as its point is to ward off competitors in Democratic primaries and caucuses.
Were any candidate to advance even modestly “populist” economic proposals in a way that seems that they mean it, the full weight of the donor class would come down upon them. This is not something Hillary would do in any case; it goes against her nature.
Therefore the only thing she can do, when she and her advisors find it expedient to take a more liberal or populist turn, is display support for costless (to capitalists) social issues. When, like gay marriage, those issues enjoy widespread support in nearly all sectors of the population outside the religious Right, proclaiming support is a no-brainer.
No surprise, then, that the Clinton campaign led with this gambit. Her handlers have positioned her well.
Even so, a real populist could defeat Hillary-style “populism,” provided word gets out to voters in the early caucus and primary states in time to build what the first President Bush called “the big Mo.” Even in today’s America, this could happen without billionaire backing.
This is why I am inclined to support the candidacy of Jim Webb.
If he plays his cards right, later-day Pepsi Generation types could become the ones with nowhere else to go, while the kinds of voters who made the New and Fair Deals possible, and who propelled the Great Society forward, putting the Democratic party on the side of racial and economic justice, could come back into the fold – not grudgingly, but enthusiastically.
Webb could turn the New Nixon’s Southern Strategy around, bringing not just “white ethnics” but also white Southerners back onto the right side of a class war that never ended – though it looked like it had because, in recent decades, one side, the wrong one, has been consistently getting its way.
Jimmy Carter, the best and the most underrated American President in a very long time, kept the Southern Strategy more or less at bay through the latter half of the seventies. He did it just by being a Southerner and being there.
But Carter ceded too much power to Cold War liberals like Zbigniew Brzezinski and to economists intent on reviving old nostrums that the New Deal once seemed to have laid to rest.
He even let Henry Kissinger talk him into letting the Shah of Iran into the United States for medical treatment, unleashing a chain of events that has diminished his reputation to this day.
Had Carter made peace with the Iranian Revolution, the United States and the world might have been spared Ronald Reagan; and we might not now, three and a half decades later, be facing the prospect of a war with Iran.
Carter’s instincts were decent, except when it came to deciding whose advice to trust. This cost him dearly. And, by diminishing his power, it rendered him all but useless for holding back the Republican tide in the South.
Bill Clinton, for all his efforts to come on as a Bubba to the good old boys while remaining presentable to donors in Manhattan and Beverly Hills, never made a dent in what the New Nixon got going. It wasn’t just the good old boys who saw through him, working people did too.
Hillary was not the only albatross around his neck. There was also his unctuous and transparent phoniness. It is as if he took the Eddie Haskell character on “Leave It to Beaver” for a role model.
He did indeed have Southern roots, but his heart was where the money was, and where the sleaze balls who had it congregated.
In the run up to the 2008 election, John Edwards seemed just the one to turn the Southern Strategy around — until the Obama steamroller and his own horn dog disposition did him in. Like Carter, Edwards was a bona fide Southern liberal, not a poseur like Hillary’s better half.
His strategy was to outflank Hillary from the left. Her other rivals, Joe Biden excepted, had the same idea. But Edwards could appeal to white Southerners, as they could not. In 2008, he might even have been able to do what Al Gore, eight years earlier, could not: pry away a few Southern states, along with their Electoral College votes, from the solidly Republican South.
But even had he turned out to be more like he (briefly) seemed to be, his candidacy would have been more like Elizabeth Warren’s might be, were she to run, than like Jim Webb’s.
Like Warren and Bernie Sanders and Martin O’Malley, Edwards was a zero on foreign policy and on military affairs – the areas where, even with money talking as loudly as it does, Presidents can actually make a difference.
These are Webb’s strong points. He has consistently opposed America’s Middle Eastern wars. And, knowing what war is about, he is no fan of gunboat diplomacy or military brinksmanship. He despises chicken hawks and the wars they foist on the people he cares about. In these respects, he is the true anti-Clinton.
* * *
The main thing, though, is that, contrary to what the hucksters selling Hillary seem to believe, the stars are now lining up right for moving social liberal considerations off dead-center and bringing working class issues back in.
This is because even the voters Team Hillary is targeting, functional equivalents of yesterday’s Pepsi Generation, are discovering that working class issues are their issues too.
This is happening all over the developed world.
It is more visible overseas than it is here because it is easier to gain a purchase on what voters are thinking in democracies that are less undemocratic than ours. The UK is a case in point.
There, as almost everywhere else, big money is much less a factor in determining electoral outcomes than it is in the United States, and the political culture is not quite as bent out of shape by the prevailing party system.
For this reason, Team Hillary would be well advised to take a close look at next month’s parliamentary elections.
Less than eight months ago, the Scottish National Party (SNP) suffered a significant defeat in a referendum on Scottish independence, its signature issue. Now, mainly at Labor’s expense, it is poised to become the third largest party in the British parliament.
Because neither the Conservatives nor Labor are likely to win a majority of seats in their own right, the SNP will wield tremendous influence in the next Parliament; it may even enter the government as Labor’s junior partner.
The reason for its sudden change of fortune is plain: voters are fed up with neoliberal austerity politics; and voting for the SNP is the best way to make this sentiment known.
The SNP is the most left leaning, most Social Democratic, of any of the larger political parties in Great Britain. If it were less intent on breaking up the country it may soon help govern, and if it fielded candidates throughout the entire UK, it might even be able to win outright.
There is a lesson in the SNP’s rise that has implications for the 2016 electoral season already unfolding in the United States.
In all developed countries, including our own, voters are less inclined than they used to be to think that it is acceptable, or even necessary, that only a tiny fraction of the population benefits as productive capacities expand at a dizzying rate, and while everyone else becomes, in varying degrees, worse off – the greatest burdens falling on those who are already the least well off of all.
Try as neoliberal ideologues might, it is a lot harder than it was just a few years ago to convince the general public that this is how it must be.
Voters everywhere are way ahead of the political leaders of their respective countries.
Hillary’s single moms and biracial families, and her gay couples, don’t speak to these concerns, though they are of great importance to people who fall under those descriptions and to others who do not, but care about those who do.
Even if her sales force gets her to declare support for a few Elizabeth Warren – Bernie Sanders type reforms, it will make hardly any difference; and not just because everybody knows that, were she to become President, whatever she says now will be yesterday’s lunch.
It will make hardly any difference because the realization is dawning that tinkering here and there is, at best, a palliative, not a solution. There is something rotten in the system itself, and more and more people are beginning to realize it.
No Democrat, including Webb, is likely to propose anything that would seriously address this rot.
But a Democrat can address one of the fundamental conditions of its possibility: the Democratic Party’s malign neglect of the working class and of the white, rural population in so-called “red” states, the South especially.
This is what a Webb candidacy could do. It is unlikely that anyone else with any chance at all of winning the Democratic nomination could do it nearly as well.
And it is certain that, no matter how “populist” the New Hillary’s guise, she will not – and probably cannot – do it at all.
* * *
There is a good chance that Hillary understands this, but doesn’t care – because it is the average donor, not the average citizen, that she aims to please.
That has always been the Clinton way. But the times are changing – more quickly and more profoundly than Hillary Clinton’s makeover team imagines.
The New Hillary is nevertheless likely to win the nomination and, if she does, she will win the race for the presidency, just as the New Nixon did.
She and her people ought to reflect on all the harm that came out of that; all the murder and mayhem, and all the devastation.
They might also reflect on Nixon’s fate. Theirs could be even worse.
April 24, 2015
Posted by aletho |
Deception, Economics, Militarism, Progressive Hypocrite | Democratic Party, Hillary Clinton, Richard Nixon, Scottish National Party, SNP, Social liberalism, UK, United States |
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Germany’s BND intelligence agency spied on European politicians and companies for the NSA for over a decade, Spiegel Online revealed. But an internal probe showed that at least 40,000 of those spying requests were against German and EU interests.
Over the course of 10 years, the NSA sent the BND thousands of so-called ‘selectors,’ which included IP addresses, emails, and phone numbers, Spiegel reported.
Several times a day, the BND downloaded the NSA selectors into their monitoring system and used them to spy on targets. The results were sent to the German agency’s headquarters in Pullach for evaluation, and then to some extent to the NSA, Zeit Online revealed, adding that the NSA sent about 800,000 ‘selectors’ to the BND in total.
Among the selectors were European politicians, whose names were not revealed. It was mentioned that the list included French authorities. Among the companies spied upon were the European Aeronautic Defence and Space Company (EADS) and Eurocopter.
Since at least 2008, BND employees felt that some of the selectors ran contrary to the mission profile of the intelligence agency and the goal of the German Foreign Ministry, as they were not covered by the 2002 Memorandum of Agreement between Germany and the US, aimed at combating global terrorism.
However, it wasn’t until 2013, in the midst of the Edward Snowden revelations, that an investigation into the spying activities took place. That probe revealed that 2,000 of the selectors actually violated German and Western European interests, with many used to spy on politicians. However, those revelations were not reported to the Chancellor’s Office. Instead, one of the BND’s department chiefs simply asked the NSA to stop making such requests.
But upon re-examination following parliamentary request, the BND came to the conclusion that up to 40,000 selectors were actually directed against Western European and German interests. The Chancellor’s Office was notified of the findings in March.
Chancellery Minister Peter Altmaier informed members of the parliamentary oversight committee of the latest developments on Wednesday. BND chief Gerhard Schindler was excluded from the meeting.
Konstantin von Notz, deputy parliamentary leaders of the Greens, told Leipziger Volkszeitung newspaper that he found it “hard to imagine” that the Chancellor’s Office was unaware of the collaboration between the two spy agencies.
“The limit has now been exceeded. The chancellor must explain the situation,” he added.
Left Party leader Gregor Gysi has called the collaboration a “scandal” and demanded an end to “conformism with the US administration,” Deutsche Welle reported.
April 23, 2015
Posted by aletho |
Corruption, Deception, Economics | BND, Germany, National Security Agency, Scandal, USA |
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The US reportedly expects that the ongoing confrontation with Russia would continue until at least 2024 and involve many directions. Washington wants to rally support of its European allies to continue mounting pressure on Moscow.
The expected diplomatic and economic war of attrition is being outlined in a Russia policy review currently prepared by Celeste Wallander, special assistant to President Barack Obama and senior director for Russia and Eurasia on the National Security Council, reports Italian newspaper La Stampa. The publication said it learned details of the upcoming policy change from a preview that Washington sent to the Italian government to coordinate the future effort.
US diplomats say Russia changed the cooperative stance it assumed after the collapse of the Soviet Union and is now using force to defend its national interests, the paper said. The change is attributed to the personality of Russian President Vladimir Putin, who, Washington expects, will remain in power until at least 2024.
The change became apparent with the conflict in Ukraine, but was emerging since at least the 2008 conflict in South Ossetia, when Russia used military force after Georgia sent its army to subdue the rebellious region, killing Russian peacekeepers in the process.
Washington’s solution to the new Russia is keeping sanctions pressure on it while luring its neighbors away with economic aid and investment, La Stampa said. The current round of sanctions, it reports, was designed not to have too much impact on the Russian economy so that a threat of harsher sanctions could be applied.
While the tug of war in Europe continues into the next decade, Washington wants to continue cooperation with Russia in other areas like nuclear non-proliferation and space exploration. However until Putin is out of the picture, the US does not expect for things to go back to where they were, the newspaper said.
The strategy was hardly unnoticed in Moscow, as evidenced by the annual report of the Russian Foreign Ministry published on Wednesday. The document said the US is pursuing “a systematic obstruction to Russia, rallying its allies with the goal to damage domestic economy” through blocking credits, technology transfer and an overall destabilization of the business environment.
The ministry said Washington had some success with the policy that resulted in an almost 8 percent drop of Russia’s trade with EU members in 2014. However some European countries like Austria, Hungary or Slovakia are pragmatically keeping bilateral ties with Russia active. In European heavyweight Germany, whose government is among the leading supporters of the anti-Russian sanctions, there is a strong business resistance to keeping them.
Non-EU members in the region like Serbia and Turkey are among priority partners for Russia in the current environment, the ministry added.
April 22, 2015
Posted by aletho |
Economics | Russia, Sanctions, USA |
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There is a lot of public debate around the rates utilities charge solar customers, but very little of it shows an awareness of the embedded technical and philosophical issues.
This posting will seek to provide a general context to help sort out issues in that ongoing debate. It will focus on transmission for simplicity’s sake, but the concepts can be extended to generation as well.
Part of the problem is that people associate rates with costs. Rates are crude ways to collect costs that work out on average. Early innovators can often take advantage of rate structures to get more than they pay for. But as usage patterns change and as more consumers “game” the system – rates need to be refined and adjusted. For example, for many years many systems did well charging residential customers just a flat energy rate. Based on the average use of their customers over the year they were able to collect their fixed cost and variable costs. However, for example, some areas saw increasing numbers of summer cottages that used only limited amounts of energy. Charging for their limited usage did not accrue enough to cover the fixed cost for providing the meter, the line and their usage. Some utilities corrected by adding a fixed monthly charge. People get irate when they have to pay something they did not before. They rarely realize that perhaps before they were getting below cost service and that as rate structures are exploited they need to change.
Traditionally the costs of transmission service were collected from consumers through their electric energy usage charges. For homes with behind the meter solar the price of the transmission cost can’t effectively be distributed for them across regular usage hours. While transmission costs are driven by peak demand periods, it would be extremely cumbersome and costly to individually monitor and bill residences for their contribution to transmission costs. Rate methods are devised to get approximate appropriate charges from individual customers, but these rate methods need to keep up with changes in how customers use (and “game”) the system.
Customers with their own generation are receiving a different service from the utility than traditional customers and traditional cost structures will not work for them. They are benefiting from back up service that will not be paid for by their use under existing rates in most cases. Extra costs are incurred to provide backup service to residential solar customers from the grid. Utilities can’t collect transmission expenses from them that are spread out across hourly energy costs. To recoup the costs associated with backup, utilities either can have a general charge for backup, charge backup customers’ extremely high costs when it is needed or subsidize them by charging rates designed for higher usage customers. The subsidized approach was acceptable when roof top solar made up a small portion of the customer base. The inequity could be ignored because supporting fledgling renewables did not cost other customers much and was seen as desirable or not worth the trouble to fix. This approach will cause problems with higher penetrations of intermittent renewables.
A digression
To get away from the emotion generated by consideration of renewables here is a short discussion of potential philosophies around cost sharing.
Imagine you are having a contractor do some work in your backyard for a cost of $8,000. You learn that your neighbor is planning a similar smaller project that will cost him $4,000. You talk to your contractor and he can combine both jobs and do it for $10,000. There are multiple ways that the $2,000 savings could be apportioned.
Business Model: You go to your neighbor with an offer that competes with his. Perhaps because you are overseeing all the work, he would prefer to have you do it for $4,000 or perhaps you have to lower the price some to be competitive. But basically you seek to use your capabilities to meet your neighbor’s need and offer him some small benefit, so you can maximally offset your costs.
Subsidy Model: Perhaps you decide to treat your neighbor. If you decide to pay more than $8,000 for the combined project you are subsidizing your neighbor. He could see anywhere from a $2,000 to $4,000 benefit from the combined project from this approach. There likely needs to be some other motivating factor to make you accept this arrangement.
Incremental Cost Model: You pay the $8,000 for your share and charge the neighbor the $2,000 increment. The neighbor gets his project at half of what his cost would be otherwise, as the entire $2,000 saving goes to benefit him. You’ve done your neighbor a favor, but received no benefit.
Shared Savings Model: You and your neighbor each reduce your cost by $1,000 or perhaps you each reduce your cost by 20%. This provides benefits to both parties and encourages cooperation from both sides.
None of the above models are generically right or wrong, but may be more or less applicable in various situations.
Hypothetical renewable example
Imagine a system with a level of solar roof penetration such that the transmission system would cost $10 billion for combined service to traditional and solar rooftop customers. If the system only served traditional customers it would cost $8 billion. A system to serve just the solar rooftop customers would cost $4 billion. Let’s look at the models introduced above in the context of this example.
Business Model: the utility would seek to get as close as possible to $4 billion from the solar customers to provide benefits to their traditional customers. I don’t believe anything approximating such an arrangement has or would occur in the electric utility industry. Such a model would cripple the potential for most self-generating customers who require grid back up as they do not have other feasible alternatives.
Subsidy Model: The traditional full service customers could be responsible for most of the costs. This is the model which dominates the utility industry today. At small penetration levels the costs are not large for the traditional customers, but as costs increase they can get very burdensome increasing the risk of a death spiral. A death spiral would occur if rising costs to traditional customers cause defections to solar customers and the reduced customer base has to continue subsidizing the growing base of solar customers.
Incremental Cost Model: Here the traditional customers are held neutral and the solar customer reaps all the benefits of the combined system. This is a controversial model today because it makes it very difficult to justify solar programs in many areas.
Shared Savings Model: For those familiar with cost accounting, charging renewable customers their fully allocated costs would be one way of doing this. I don’t know anywhere that this approach is currently being seriously and successfully advocated in cost of service studies for renewables, though it is generally common for other classes of service. (I welcome reader input and enlightenment here.) It would greatly reduce the risk of a death spiral but it would also greatly delay the implementation of renewable resources until such time as they were more cost competitive.
Discussion
History, inertia and the desire to support renewables have resulted in significant support for the idea that traditional customers should subsidize renewable customers. Perhaps this is coupled with the idea that traditional customers should be punished while renewable customers should be rewarded. Many of the battles around charges to solar customers are just over what the appropriate degree of the subsidy should be. Moving away from the subsidy model engenders great conflict. I have not read all the details, but I believe the Salt River Project’s controversial pricing plan is just trying to recoup the incremental costs of serving rooftop solar. (Perhaps they are asking for some help with shared/common costs. Any help readers?) In the press Salt River Project has been accused of “penalizing” solar customers, being anti-competitive, sabotaging their customer’s right to choose and far worse.
We need to move the public debate so that it is not just about the level of subsidy utilities should provide to solar. The subsidy model nearly guarantees that if the system transitions to high levels of local renewables there will be a major death spiral collapse as the traditional customer base erodes and the subsidized population increases. While some envision utilities as highly profitable entities with deep pockets that can well afford massive subsidies, in fact, the subsidies come from the ratepayers. Whether utilities pay for their system through money collected from their traditional customers or backup customers, their profits are in the hands of their public service commissions. Unlike the utilities, which will make money if they work with their regulators, ratepayers will be materially impacted by the cost sharing model selected. Indirect taxes placed upon electric utility ratepayers are terribly regressive and in the area of rooftop solar they result in significant wealth transfers from the less affluent to the more affluent.
Renewable subsidies disproportionately impact the poor, impacting their quality of life. To avoid these effects traditional customers should pay no more than incremental costs. If as a society we want to offer subsidies to rooftop solar we should consider funding it through a less regressive and punishing approach. That source will likely be less convenient to target but far more appropriate.
Aside from the appeals to fairness for ratepayers, the other models have further benefits. They send appropriate price signals to encourage more rational choices. They could help provide better flexibility for a transition to a renewable future that avoids price collapses and is open and potentially better able to serve newer and better “clean” energy alternatives.
April 21, 2015
Posted by aletho |
Economics, Environmentalism | Solar energy, United States |
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The money-suck known as the F-35 Joint Strike Fighter will go into service this summer with the Marine Corps with less ground attack capability than the 40-year-old plane it’s meant to replace, Pentagon officials say.
The F-35 has cost nearly $400 billion since the beginning of the program in 2001 and is estimated to cost $1 trillion over its lifetime. However, it won’t have night-vision capability, will be able to carry only two air-to-ground missiles and will be able to stay over a target area for 30 minutes maximum, Michael Gilmore, director of operational test and evaluation at the Defense Department, told the House Armed Services Committee on Tuesday.
“If F-35 aircraft are employed at night for combat, pilots will have no night vision capability available due to the restriction on using the current night vision camera,” Gilmore said in written testimony to the committee. In contrast, the 1970s-era A-10 Thunderbolt, known as the Warthog, can remain over a battlefield for up to 90 minutes and augment its four air-to-ground missiles with fire from a cannon in its nose.
“This [F-35 variant] reminds me of something before the A-10, not something after the A-10,” Rep. Martha McSally, (R-Arizona), a freshman lawmaker and former Warthog pilot, said according to Stars and Stripes.
As Congress decides whether to appropriate money to buy more F-35s from contractor Lockheed Martin, the Government Accountability Office (GAO) released a report (pdf) this month that outlines problems with the program. “[E]ngine reliability is poor and has a long way to go to meet program goals. With nearly 2 years and 40 percent of developmental testing to go, more technical problems are likely,” the report said. It also outlined grounding of the F-35 fleet, the need for additional inspections and software failures.
Air Force brass have long coveted more F-35s, to the point of releasing misleading statistics on the A-10 and telling lower-level officers that talking about the Warthog to members of Congress is “treason.”
How those new planes will be paid for is another question. The program will cost taxpayers from $12 billion to $15 billion a year through 2030. Yet the GAO report points out “It is unlikely that the program will be able to receive and sustain such a high and unprecedented level of funding over this extended period, especially with other significant fiscal demands weighing on the nation.”
Despite the late date and billions flushed into the program, some are calling for the Pentagon to bail out of the F-35. “However, we are past that decision point,” Rep. Loretta Sanchez (D-California) said. “We just need to make this program work.”
To Learn More:
First Version of F-35s Will Not Outdo A-10 in Battlefield Capabilities (by Travis J. Tritten, Stars and Stripes )
GAO Confirms Increased F-35 Production Is a Terrible Idea (by Mandy Smithberger, Project on Government Oversight)
F-35 Joint Strike Fighter: Assessment Needed to Address Affordability Challenges (pdf) (Government Accountability Office)
A Reminder: U.S. Pays One Quarter of Israel’s Defense Budget (by Noel Brinkerhoff and Steve Straehley, AllGov )
Air Force Doctored Statistics about Friendly Fire and Civilian Deaths to Get Rid of A-10 Attack Jet (by Noel Brinkerhoff, AllGov )
Air Force General Says Talking to Congress about A-10 Attack Jet is Treason (by Steve Straehley, AllGov )
Trillion-Dollar F-35 Jet Fighter Has 13 Flaws (by Noel Brinkerhoff and David Wallechinsky, AllGov )
April 20, 2015
Posted by aletho |
Corruption, Deception, Economics, Militarism | F-35 Joint Strike Fighter, Lockheed Martin, United States |
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Karl: Welcome to the Renegade Economists with your host, Karl Fitzgerald. This week we’re stepping back in time, way back some 10,000 years BC into the world of archaeology, Egyptology and Assyriology. Yes, it’s time for another special with Professor Michael Hudson. That’s right, Michael Hudson back on the show, he’s got a new book called Labor in the Ancient World and I asked him to give us a bit of a précis on the background to his very interesting process. Hang on for another riveting conversation here on 3CR’s Renegade Economists.
Michael Hudson: It’s a symposium of a group put together at Harvard University of the leading Assyriologists and Egyptologists and Mycenaean Greek specialists as well as archaeologists on how early societies mobilised the labour force, especially for large public building projects such as temples, city walls and other infrastructure.
Karl: And this is published through whom?
Michael: It’ll be published by ISLET, the Institute for the Study of Long-term Economic Trends. We just finished the type setting actually today and we’re sending it to Amazon to be put on their list, it’ll probably be available in about two weeks.
Karl: “Labor in the Ancient World.”
Michael: Yes.
Karl: And does that have some sort of Harvard connection?
Michael: We founded this project over 20 years ago at the Peabody Museum, which is their archaeology and anthropology department. We wanted to do a series of books on how modern economies and practices began. Our first colloquium was in 1994 on Privatization in the Ancient Near East and Classical Antiquity; our second volume was on Urbanization and Landownership in the Ancient Near East, about how cities were created and how landownership and real estate patterns developed into a market for real estate. The third volume was on Economic Renewal in the Ancient Near East, about how debt cancellations restored the land to its citizen-cultivators to provide a means of self-support for the free citizenry.
These colloquia grew so popular that we added a fourth volume, Creating Economic Order: Record-Keeping, Standardization and the Development of Accounting in the Ancient Near East, on the origins of money and account keeping from Mesopotamia to Mycenaean Greece and Egypt. And then ten years ago we had our fifth colloquium on Labor in the Ancient World. There have been so many revolutions in archaeology and Assyriology and even Egyptology in the last ten years that we’re only publishing this volume now, to be completely up-to-date.
Karl: So the Ancient Near East, how many thousand years ago was it? Just put us in the picture.
Michael: We begin the volume in 10,000 BC in Göbekli Tepe in Turkey where you have very large city-like ceremonial sites, larger than Stonehenge, huge sites that took hundreds of years to build with huge stone megaliths, even in the pre-pottery Neolithic. They didn’t yet have metal to carve these stones. They didn’t even have pottery. But they had in Göbekli all sorts of huge carvings in a seasonal site where people would come together on ceremonial occasions, like midsummer. We researched from Turkey in 10,000 BC to Sumer in the third millennium BC, Babylonia in the second millennium BC, the building of the pyramids, and we have the actual bills and accounting statements for what’s paid to labour to build the pyramids.
We found they were not built by slaves. They were built by well-paid skilled labour. The problem in these early periods was how to get labour to work at hard tasks, if not willingly? For 10,000 years there was a labour shortage. If people didn’t want to work hard, they could just move somewhere else. The labour that built temples and big ceremonial sites had to be at least quasi-voluntary even in the Bronze Age c. 2000 BC. Otherwise, people wouldn’t have gone there.
Karl: Michael, how did you actually track this? What were you reading to get this information?
Michael: Everybody who comes to the colloquium is a specialist in their period. For instance, Carl Lamberg-Karlovsky is the archaeologist dealing with Göbekli Tepe in Turkey. My co-editor for this volume, Piotr Steinkeller, is Babylonian specialist in cuneiform. We have two Egyptian specialists in hieroglyphics, and two Mycenaean Greek specialists for Linear B. Each scholar throughout all of these five volumes was a specialist in each time period and each geographical area on which we’re concentrating.
Karl: Were you reading clay tablets, cuneiform?
Michael: They read the clay tablets if they’re from Mesopotamia. They read the notations and carvings in the Egyptian pyramids on the inside of the big rock blocks that made the pyramids. Teams would carve or write the home town they came from. We also have royal inscriptions.
We found that one reason why people were willing to do building work with hard manual labour was the beer parties. There were huge expenditures on beer. If you’re going to have a lot of people come voluntarily to do something like city building or constructing their own kind of national identity of a palace and walls you’ve got to have plenty of beer. You also need plenty of meat, many animals being sacrificed. Archaeologists have found their bones and reconstructed the diets with fair accuracy.
What they found is that the people doing the manual labour on the pyramids, the Mesopotamian temples and city walls and other sites were given a good high protein diet. There were plenty of festivals. The way of integrating these people was by public feasts. This was like creating a peer group to participate in a ceremonial creation of national identity.
Karl: Back in those times, how would they have realised when this festival was on, how was communication spread that this was the time to come together?
Michael: We discussed this in the second volume of our series, Urbanization & Land Use in the Ancient Near East. They did it by the solar and lunar calendar, by counting the moons leading up to solar solstices or equinoxes. The great ceremonial sites from Stonehenge to Turkey were based on the particular equinox or solstice. Chieftains usually would be the calendar keepers. Going all the way back to the Ice Age around 29,000 BC Alex Marshack, one of our members, published The Roots of Civilization reporting on the carved bones he found with notations for the phases of the moon. The job of the chieftain was to keep the lunar calendar, trace the waxing and waning of the moon to calculate how long the month would be, and to decide that, “Ah, in this month, six months after the equinox, here’s where we have to get together and have everybody come to the gathering and begin working on the big site”.
The pyramids and other ancient monuments were built by free labor, not by slaves
Karl: I’m still trying to grasp this Michael. Would all these labourers come together in a centralised place to build this giant statue or pyramid based on some sort of goodwill?
Michael: Well, to begin with, you would have a beer party to get everybody friendly. You would have big feasts, and also these were the major occasions for socialization. All over the world, communal feasts were the primordial way to integrate societies.
Obviously somebody was in charge of designing these monuments. We don’t know whom, but they would supervise the cutting and carving of the stones. These had to be brought over large distances, just like in Stonehenge. The groups would quarry them and cut them. Maybe the cutters and designers were the same people. And in Göbekli we’re dealing in a time before they’d invented steel or metal. Many of the stones had to be cut and designs carved just by chipping away with other stones. It obviously was a very laborious type of work.
Corvee labor was supplied on the basis of landholdings
Later, by about 2,000 BC, populations were growing more dense. There also was a shift from the temples, which originally organised most of these mega-projects, to the palaces that developed out of them around 2750 BC. Their scribes developed accounting practices to schematise and organise this labour coming together. To coordinate this in an equitable, almost schematic way, land tenure was allocated on the principle that whoever had such-and-such a plot size had to supply a given number of labourers to work on the public infrastructure. So what we found as a by-product of the labour volume is that the origins of land rights were defined by the tax payments – the corvée labor obligation.
To get the right to a given land of a given size, you had to promise on such-and-such dates to provide this much labour for the corvée project. It’s a French word, because a corvée tax in the form of labour instead of money payments lasted all the way down through the 18th Century in France. It was typical in mediaeval Europe before you had a money economy. Everybody who had their own subsistence land or their own land holdings of one form or another, or their grazing lands, would have to supply X number of labourers to the big building project.
Karl: That’s quite some discovery. So you’re saying that labour was provided as an in-kind payment for taxation based around calendars to build these giant monuments?
Michael: Yes. Each of our archaeologists, Assyriologists and Egyptologists has found this for every period of the Bronze Age and the Neolithic.
Karl: And so we’re still rather on a voluntary level, there was no quantifying –
Michael: There weren’t that many people in the world in 10,000 BC, 3000 BC or even 2000 BC. If a government got too oppressive, or when they would raise the contributions or taxes too high, people would just flee to another area. Or if they were too much indebted the debtors would flee, as they did from Babylonia around 1600 BC. We are talking about free labor, not slave labor.
Karl: So they built a social contract around these feasts, around this sense of belonging by being at this public works event. It sounds like a fascinating way to keep society on track and organise labour so that civilisation would develop on some level. Have you found any indication on that managerial class and how they developed through the chieftains?
Michael: First the priesthoods, then the accountants and scribes. The calendar keepers were usually the chiefs (there may have been “sky chiefs” and “war chiefs” separately, or perhaps their roles were combined as dynastic rulers developed). Most of the religions were cosmological. They wanted to create an integrated cosmology of nature and society (“On earth, as it is in heaven”). Administration was based on the astronomical rhythms of the calendar, lunar and solar cycles. For instance, you typically find a society divided into 12 tribes, as you had in Israel and also in Greece with its amphictyonies. In a division of 12 tribes, each could take turns administering the ceremonial centre for one month out of the year.
The physical design of cities also was based on the calendar. Big cities would have 12 gates. Most cities had maybe four gates, representing the four seasons or the four quarters of the Earth. The outline of the land and the Earth was based on a calendrical cosmology, much like a mandala.
Ceremonial sites such as Stonehenge also were calendars in miniature, designed so that the light would fall on the stones in a particular way on a solstice or equinox. We have this going back into the Ice Age around 30,000 BC. Alex Marshak’s article in our volume on urbanisation found that these sites already in the Ice Age were usually sited on waterways, so that everybody could get to them. They often were sited with mountains in the background and in between them the sun would shine in a particular way on the equinox or on the solstice in a particular alignment that occurred just at that calendrical time. They were recreating the cosmos on Earth.
Karl: You’re on 3CR’s Renegade Economists, this week with distinguished Research Professor Michael Hudson from Michael-Hudson.com and we’re discussing his new colloquium book “Labour in the Ancient World”. We’re tracking back some 10,000-odd years, hearing about how civilisation was developed. Michael, this is a fascinating discussion. I’m interested, of course, here on the Renegades, about this role of land tenure, and how that influenced citizens’ role in society. From what I’ve read out of your new book, it sounds like land holdings played a huge role in the status of a participant in one’s society.
Ancient citizenship, voting rights – and social obligations – were based on landholding
Michael: In America down to the time of the Revolution in the 18 th century, and in early Australia I assume also, in order to be a citizen and vote, you had to be a landowner. And all the way back in Rome and earlier times, Mesopotamia, Babylonia, Sumer, citizens had to have their own land. In Rome each citizen’s voting rights were defined by the land area he owned. I say “he” because only the males were citizens. It was a patriarchal society, with voting rights proportional to the size of one’s landholdings.
Much as today, debt was a major factor concentrating landholdings. Finance always has been the great lever to appropriate the land rent and interfere with widespread land ownership. If you owe money on a mortgage and you can’t pay, you can be evicted. That began to happen already around 2000 BC in Babylonia.
But the process was limited and reversed, because when creditors evicted land-tenured citizens, this caused a problem for rulers. The former landholder no longer was a citizen – and if he’s not a citizen, he can’t serve in the army.
One’s rank in the army down through Roman times was defined by how much land one had. If you had just a basic subsistence plot, you were in the infantry. If you had a lot of land, you were able to support yourself in leisure, have a horse and participate in the cavalry, practicing military training and buying your armour and weapons. You find much the same thing in Japan. All over the world, citizenship, landownership and one’s rank in the army were linked together.
Karl: Yes, the English military had the same arrangement. So you can see a point that if you own lots of land, you want to defend it, so these landowners need to be involved to defend their land. How times have changed.
Michael: They weren’t merely defending; they were also aggressive. There was continual warfare. Attacking and defending also had a financial dimension. In Greece a military manual in the 3 rd century BC was written by a man who took the pseudonym of Tacticus – not Tacitus as in Rome, but Tacticus for tactics. He wrote that if a general planned to attack a city, he should promise to cancel the debts and free the slaves, in order to get the debtors to come over to his side. And if you’re defending a city, you also promise to cancel everyone’s debts and free the slaves. That’s how you get people on your side.
Coriolanus did that in Rome, and Zedekiah in Judah. But both rulers went back on their word as soon as the fighting was over. However, in Babylonia we have more or less regular debt cancellations whenever a new ruler would take the throne. This is in our third volume, Debt & Economic Renewal in the Ancient Near East. Babylonian rulers would proclaim andurarum and misharum, their words for a Clean Slate. David Graeber picked up this historical analysis in Debt: The First 4000 Years, discussing it from an anthropological point of view.
These proclamations did three things – the same three things you find in the biblical jubilee year (which used a cognate word, deror): These acts liberated the debt servants and let them return to their family of origin; they canceled all the personal debts that were owed (but not commercial business debts); and they returned the land rights or crop rights to debtors who had pledged them to their creditors. These royal proclamations restored order by making things the way they were in an idealised past. It was a situation where everybody was supposed to own their own self-support land to provide their means of subsistence free of debt. That was their idea of economic balance.
This is the opposite of debt serfdom reducing more and more people to debt peonage, obliged to pay their income to creditors. If they finally lose their job, they lose their home and their house and the banks get to keep it. That practice would have depopulated the ancient world. If that would have happened, debtors would have just got up and left, or they’d go over to the enemy when other armies would attack. You’d have defections. So reversing personal debts preserved widespread landownership and liberty from debt.
Karl: Right, so reiterating, the Clean Slate would build that social contract with the ruler and help continue the goodwill that led to this massive public development that was voluntarily provided tax in-kind, usually in labor. It sounds fascinating that people would just defect and move to another country under another ruler if the debt stayed too high, even back in those times when we weren’t anywhere near as mobile as today.
Michael: We have all sorts of documents around the 14th and 13th centuries, especially about the hapiru, bands of debt fugitives and others, who some people translate as Hebrews. Rome was said to have been founded by exiles and runaways, mainly runaways from debt who created their own society there. Flight from debt goes way back.
Bronze Age “divine kingship” gives way to classical creditor oligarchies
Karl: Given the history of Clean Slates and the jubilee, how did agrarian debt develop? And how did the conflict of interest between creditors and rulers play out?
Michael: It played out differently everywhere. There was a constant tension from the Bronze Age through classical antiquity between rulers trying to maintain a society under their control, and local headmen trying to get power for themselves. The big question was who would run society and draw up its rules. Would it be the priesthood and military rulers at the top of the pyramid, or creditors and warlords grabbing peoples’ land and trying to create their own control? Strong rulers like Hammurabi were able to centralise rule. He proclaimed andurarum upon taking the throne, and numerous times thereafter, down to his 30th year of rule. When he was sick and dying, his son Samsuiluna also proclaimed misharum to restore order to start his own reign in balance. But then you’d have Intermediate Periods with a free-for-all in which local leaders gained autonomy. And they simply disobeyed royal Clean Slates.
From 1200 BC to about 750 BC in the Mediterranean you have a Dark Age. Apparently you had not only very bad weather around 1200 BC – maybe a small Ice Age and drought – but the weather and crop failures led to mass migrations and invasions. The palaces of Mycenaean Greece were burned and syllabic writing disappeared for nearly 500 years. Then, when you have alphabetic writing emerging, the person whose title originally meant “local branch manager” of the palace workshop suddenly appears as the basileus, the ruler. But mostly you have landholding aristocracies holding the population in debt serfdom (like the Athenian hektimoroi, “sixth parters” liberated by Solon in 594 BC). It was much like the post-Soviet kleptocrats when Red Managers gave themselves control of their companies. When central power falls apart, local headmen take over. The dissolution of royal power led to privatization – including the privatization of credit, taking it and its rules out of royal hands. So Clean Slates stopped.
Much the same thing occurred in England. After the Norman invasion you had the Magna Carta when the autocratic King John tried to grab all the economic surplus for himself. The landowning barons wanted to break free. The Magna Carta limited what kings could tax without landlord agreement. The barons said, in effect, “The rent that we formerly paid to support the royal army, we henceforth will keep for ourselves. Also, we won’t pay the debts we owe to the Jews, so that we can keep our land.” The founding constitution or legal documents of almost every nation have to do with the relationship between finance, land tenure and its tax liability, and the relationship between centralised power and local power.
You could say that the progress of civilisation for the last thousand years, since feudal times, has been a dissolution of autocratic feudal power toward more democratised power. The problem is that land has been democratised on credit. So instead of owing money to landlords, homeowners now owe money to their bankers.
Creditor stratagems to evade the law and religious sanctions
Karl: That is the challenge of the ages isn’t it? Looking through these writings of yours, it becomes clear that this battle between credit and the sovereignty of this democratic process has been an ongoing challenge. In antiquity, did the vocabulary distinguish interest from usury?
Michael: No. It was only in the 13th century that Thomas Aquinas and the Schoolmen distinguished between interest and usury. Any taking of interest was considered usury in antiquity. That’s why some people tried to ban it, mainly for consumer interest. When the distinction was made, usury was supposed to refer to consumer loans, and interest was for bona fide commercial loans. These usually involved shipping to foreign buyers or transferring payments from one country to another, for instance when barons left to fight in the Crusades. The Latin word for such foreign exchange fees was agio, a premium.
Bankers managed to get around Christian sanctions against usury by saying, “Okay, it’s not interest, it’s a fee. It’s a foreign exchange fee.” They would pretend to make a foreign exchange transaction, and pay for the currency convertibility. If you’re converting Australian pounds into dollars, you have to give a few percentage points to the banker. In medieval times, interest was concealed as a foreign exchange fee and as interest or, for real estate, as rent – much as in today’s Islamic finance. This was called “dry exchange,” because it occurred on dry land. No sea transport was involved.
Karl: So when we look over the history of this era and its battle between credit and the ruling elite, the challenge was to maintain land ownership within your community and keep your people there, making sure that they had some share in the benefits of working together. This sort of independence of people being able to live off their land seems to have become a battle between democratic principles and creditors.
Michael: That’s basically so. Early common law had blockages against the things that creditors could foreclose on – the widow’s ox, the blacksmith’s anvil and basic tools of one’s trade and self-support. If you were a creditor and wanted to get somebody else’s land, you needed a legal stratagem.
In Babylonia and neighbouring Indo-European speaking communities such as Hurrian-speaking Nuzi, customary land tenure rights were only transmissible within a family or clan. The aim was to enable kinship units to supply their basic needs. The creditor’s stratagem was to get himself adopted by the debtor as number one son, as his heir. When the debtor died, the number one son, the creditor, would inherit most of the land, as if he were part of the kinship-based community. A Babylonian proverb reflects this practice: “A creditor has many relatives.” These subterfuges that creditors used are much like the small print that bank lobbyists write into today’s bankruptcy laws to stack matters in their own favor. Creditors and Wall Street have always been subtle in finding end runs around laws, obeying the letter of the law but changing the spirit of the law.
The U.S. political outlook: the Democrats and Hillary Clinton’s 2016 run
Karl: Changing gears, let’s speed into the current American situation with Elizabeth Warren and the Democratic ticket. I saw this week that she’s come out fighting against banks and their threat to reduce donations to the Democratic Party if she doesn’t tone things down. Did your blood boil when you read that Michael?
Michael: Not at all. The Democratic Party in America is the party of Wall Street. A Republican administration could never get away with turning over power to Wall Street, because as long as they’re in power, the Democratic opposition will block them from doing it. Although the Republican Party is almost entirely funded by lobbyists, the Democratic Party is the one that has the power to unblock the giveaways to Wall Street. Most of this is done under former Clinton Treasury Secretary Robert Rubin who got rid of the Glass-Steagall Act, blocked regulation of bank derivative gambles, and inaugurated the wave of deregulation and outright criminalization of banking.
The Glass-Steagall Act was repealed in 1999, when the Clinton Administration also blocked regulation for bank speculation in derivatives. It took only eight years for the most criminal organisations, Citibank and Bank of America (which bought the junk mortgage writer, Countrywide Finance) to bring down the economy. The head of Citibank was Rubin, after having freed it from regulation. What the press called the Rubino Gang wrote fake mortgages – they’re called “liar’s loans” or “Alt-A,” based on false declarations of income and false property valuations (the liars were the banks and the mortgage brokers) and sold them to gullible investors like German Landesbanks that were naïve enough to believe that Wall Street wouldn’t try to cheat them. The junk mortgage bubble was one of the biggest ripoffs in history.
You can read what my UMKC colleague Bill Black has written recently on Naked Capitalism and the University of Missouri Kansas City site, New Economic Perspectives on the Citibank criminogenic organisation. The Democrats under Obama have blocked any prosecution of financial criminals. Not a single bank crook has been thrown in jail after over $4 trillion had been stolen and bailed out by the Federal Reserve’s wave of Quantitative Easing. The crime wave of Wall Street and real estate in the last decade has endowed an entire ruling class for the next century in America.
They’re as criminal as the Russian kleptocrats, because they’re in total control of the government. They’ve used their power to re-define the meaning of a “free market.” To them, a free market is one completely free of government regulations to control banking, and free of any criminal prosecution, because they have their factotums in the Justice Department. The head of the Justice Department is Eric Holder, whose job is to protect Wall Street. He resigned recently in favour of a successor, Loretta Lynch, who also is a non-prosecutor of Wall Street’s.
So essentially the real estate and mortgage system in America has been criminalised in the way that Bill Black has been describing in four wonderful articles that he’s published in the last week on Naked Capitalism. Hillary is fully on board with the Rubinomics gang.
Finance capitalism is dominating and stifling industrial capitalism with debt deflation
Karl:Excellent Michael, I’ll look forward to reading those. That’s the horror story of banking, but I like the fact that you’ve dug into the archives and found one of the bright spots for the finance industry, and that was the Saint-Simonian banking ethos. Can you remind our listeners what that was all about, and how we hope the finance sector might evolve?
Michael: In the 19th century the Industrial Revolution was really taking off. The great financial question was how to create a banking system that would help industrialise countries to bring them into the modern era. Before the 19th century – ever since antiquity – you don’t find banks lending to build factories or other means of production. Loans were made against property pledged as collateral, or were made largely to export goods once they were produced. But banking before the 19th century did not actually fund tangible capital investment. James Watt wasn’t able to get the money for his steam engine from a bank, except by mortgaging his property and borrowing from friends.
Saint-Simon founded a school of reformers in France that realized that in order to industrialise the nation, catch up with England and overtake it, it had to move banking beyond its medieval stage. Instead of making lending to businesses in exchange for interest payments – which can force them into bankruptcy when sales turn down, bank loans should really be made on the basis of profit sharing. This is how commercial loans were made back in Babylonian times. Saint-Simon’s idea was to make banks more like mutual funds. Their fortunes would rise or fall with those of their business clients.
The main country that adopted this industrial banking principle was Germany as well as other central European countries. Their banks invested in their customers as stock owners as well as acting as creditors. They acted basically as the forward planning arm of industry, working with governments to promote export sales abroad.
Until World War I most futurists, from Karl Marx to regular businessmen, expected banks to take the lead in planning society. But after Germany lost World War I, the world reverted to Anglo-American banking. This was basically short-term hit and run. Banks still don’t make loans for industrial development. They do lend for raiders and mergers to take over companies, and also to ship exports. But they’re not set up to actually fund industrial capital formation. So society has fallen back in the last hundred years to the opposite of what classical economists and what 19th-century futurists expected banking to become.
Although we do have a centrally planned society, it is centrally planned by Wall Street, the City of London, Frankfurt and other financial centres. This planning is extractive, not productive. It seeks to extract interest payments, to profiteer from takeovers and gambles, and to make capital gains on stocks and real estate speculation. But it’s not designed to industrialise economies. That’s why most of the world outside of China is in a period of economic shrinkage and de-industrialisation.
Karl: So to wrap things up Michael, what can we learn from the Ancient Near East? Perhaps you can tell us how you got interested in this historical topic going way back through these cuneiform readings of clay tablets.
Michael: For me, the advantage of studying the ancient Near East is to see how different economies through history have dealt with the phenomenon of debts that are too large to be paid. Right now you’re having in the Eurozone with its arguments against Greece saying that if its government can’t pay its debts to the IMF, European Central Bank and the rest of the troika, it has to submit to austerity, even if its population is forced to emigrate. That is what much of the Greek population is doing. Shrinkage and emigration is what has to be paid for not being able to cancel debts – in this case public debts. The ancient Near East couldn’t afford the Eurozone’s pro-creditor stance, because it would have been depopulated and been conquered by neighbouring countries that didn’t submit to such austerity.
The advantage of studying the ancient Near East is to see a contrast with today. I got into this originally when I was working with the United Nations Institute for Training & Research (UNITAR) in 1978 and ’79. We had a meeting in Mexico and I gave a lecture on what I’d found when I was Chase Manhattan banks’ balance-of-payments economist. The Third World couldn’t pay the foreign debts it had run up. This was a few years before Mexico declared it couldn’t pay in 1982. There was such a fuss and denials by the banks that countries couldn’t pay that I decided to write a history of how societies had dealt with situations where debts couldn’t be paid. I got all the way back to classical antiquity and the Jewish lands, and then found that there wasn’t any economic history of the early Near East. The economic and financial details were scattered through many journals.
In 1984, I went up to Harvard and a decade later we decided to put together a group to study the origins of economic organization, category by category, to trace how ancient economies developed the origins of modern economic civilisation. The five books you cited earlier were the result, as well as many articles you put in my website.
Karl: Well Michael Hudson, thank you very much for joining us here on the Renegade Economists’ radio show yet again, that must be about our fifteenth interview I reckon.
Michael: Good, thank you.
April 20, 2015
Posted by aletho |
Book Review, Economics, Timeless or most popular | Bank of America, Banking, CitiBank, Countrywide Finance, Debt, Robert Rubin |
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