Saturday, April 19, 2014

Profit from Crisis

Dissident Voice: a radical newsletter in the struggle for peace and social justice

Profit from Crisis

Why capitalists do not want recovery, and what that means for America
This piece was first published online in Frontline on April 16, 2014.
Can it be true that capitalists prefer crisis over growth? On the face of it, the idea sounds silly. According to Economics 101, everyone loves growth, especially capitalists. Profit and growth go hand in hand. When capitalists profit, real investment rises and the economy thrives, and when the economy booms the profits of capitalists soar. Growth is the very lifeline of capitalists.
Or is it?
What motivates capitalists?
The answer depends on what motivates capitalists. Conventional economic theories tell us that capitalists are hedonic creatures. Like all other economic “agents” – from busy managers and hectic workers to active criminals and idle welfare recipients – their ultimate goal is maximum utility. In order for them to achieve this goal, they need to maximize their profit and interest; and this income – like any other income – depends on economic growth. Conclusion: utility-seeking capitalists have every reason to love booms and hate crises.
But, then, are capitalists really motivated by utility? Is it realistic to believe that large American corporations are guided by the hedonic pleasure of their owners – or do we need a different starting point altogether?
So try this: in our day and age, the key goal of leading capitalists and corporations is not absolute utility but relative power. Their real purpose is not to maximize hedonic pleasure, but to “beat the average.” Their ultimate aim is not to consume more goods and services (although that happens too), but to increase their power over others. And the key measure of this power is their distributive share of income and assets.
Note that capitalists have no choice in this matter. “Beating the average” is not a subjective preference but a rigid rule, dictated and enforced by the conflictual nature of the system. Capitalism pits capitalists against other groups in society – as well as against each other. And in this multifaceted struggle for greater power, the yardstick is always relative. Capitalists – and the corporations they operate through – are compelled and conditioned to accumulate differentially; to augment not their personal utility but their relative earnings. Whether they are private owners like Warren Buffet or institutional investors like Bill Gross, they all seek not to perform but to out-perform – and outperformance means re-distribution. Capitalists who beat the average redistribute income and assets in their favor; this redistribution raises their share of the total; and a larger share of the total means greater power stacked against others. In the final analysis, capitalists accumulate not hedonic pleasure but differential power.
Now, if you look at capitalists through the lens of relative power, the notion that they should love growth and yearn for recovery is no longer self-evident. In fact, the very opposite seems to be the case. For any group to increase its relative power in society, that group must be able to strategically sabotage others in that society. This rule derives from the very logic of power relations. It means that capitalists, seeking to augment their income-share-read-power, have to threaten or undermine the rest of society. And one of the key weapons they use in this power struggle –sometimes conscientiously, though usually by default – is unemployment.
Joblessness affects redistribution
Unemployment affects distribution mainly through the impact it has on relative prices and wages. If higher unemployment causes the ratio of price to unit wage cost to decline, capitalists will fall behind in the redistributional struggle, and this retreat is sure to make them eager for recovery. But if the opposite turns out to be the case – that is, if higher unemployment helps raise the price/wage cost ratio – capitalists would have good reason to love crisis and indulge in stagnation.
In principle, both scenarios are possible. But as Figure 1 shows, in America the second prevails: unemployment redistributes income systematically in favor of capitalists. The chart contrasts the share of pretax profit and net interest in domestic income on the one hand with the rate of unemployment on the other (both series are smoothed as 5-year moving averages). Note that the unemployment rate is lagged three years, meaning that every observation shows the situation prevailing three years earlier.
This chart does not sit well with received wisdom. Mainstream economics tells us that the two series should be inversely correlated; that the capitalist income share should rise in the boom when unemployment falls and decline in the bust when unemployment rises. But that is not the case in the United States. In this country, the correlation is positive, not negative. The share of capitalists movescountercyclically: it rises in downturns and falls in booms – exactly the opposite of what economic convention would have us believe. The math is straightforward: for every 1% rise in unemployment, capitalists can expect their income share three years later to jump by 0.8%. Needless to say, this equation is very bad news for most Americans – precisely because it is such good news for the country’s capitalists.
Remarkably, the positive correlation shown in Figure 1 holds not only over the short-term business cycle, but also in the long term. During the booming 1940s, when unemployment was very low, capitalists appropriated a relatively small share of domestic income. But as the boom fizzled, growth decelerated and stagnation started to creep in, the share of capital began to trend upward. The peak power of capital, measured by its overall income share, was recorded in the early 1990s, when unemployment was at post-war highs. The neoliberal globalization that followed brought lower unemployment and a smaller capital share, but not for long. In the late 2000s, the trend reversed again, with unemployment soaring and the distributive share of capital rising in tandem. Looking forward, capitalists have reason to remain crisis-happy: with the rate of unemployment again approaching post-war highs, their income share has more room to rise in the years ahead.
The power of capitalists can also be examined from the viewpoint of the infamous Top 1%. Most commentators stress the “social” and “political” problems created by the disproportional wealth of this group, but this emphasis puts the world on its head. Redistribution is not an unfortunate side-effect of growth and stagnation, but the main force driving them.
Figure 2 shows the century-long relationship between the income share of the Top 1% and the annual growth rate of U.S. employment (with both series smoothed as 10-year moving averages). And as the chart makes clear, the distributional gains of this group have been boosted not by growth, but by stagnation. The overall relationship is clearly negative. When stagnation sets in and employment growth decelerates, the income share of the Top 1% actually rises – and vice versa during a long-term boom.
Historically, this negative relationship can be divided into three distinct periods, indicated by the dashed, freely drawn line going through the employment growth series. The first period, from the turn of the twentieth century till the 1930s, is the so-called Gilded Age. Income inequality is rising and employment growth is plummeting.
The second period, from the Great Depression till the early 1980s, is marked by the Keynesian welfare-warfare state. Higher taxation and public spending make distribution more equal, while employment growth accelerates. Note the massive acceleration of employment growth during the Second World War and its subsequent deceleration brought by post-war demobilization. Obviously these dramatic movements were unrelated to income inequality, but they did not alter the series’ overall upward trend.
The third period, from the early 1980s to the present, is marked by neoliberalism. In this period, monetarism assumes the commanding heights, inequality soars and employment growth plummets. The current rate of employment growth hovers around zero while the Top 1% appropriates 20 per cent of all income – similar to the numbers recorded during Great Depression.
So what do these facts mean for America?
First, they make the fault-lines obvious. The old slogan “what’s good for GM is good for America” now rings hollow. Capitalists seek not utility through consumption but more power through redistribution. And they achieve their goal not by raising investment and fueling growth, but by allowing unemployment to rise and jobs to become scarce. Clearly, we are not “all in the same boat.” There is a distributional struggle for power, and this struggle is not a mere “sociological” issue. It is the center of our political economy, and we need a new theoretical framework to understand it.
Second, macroeconomic policy, whether old or new, cannot offset the aggregate consequences of this distributional struggle. Not by a long shot. Till the late 1970s, the budget deficit was small, yet America boomed. And why? Because progressive taxation, transfer payments and social programs made the distribution of income less unequal. By the early 1980s, this relationship inverted. Although the budget deficit ballooned and interest rates fell, economic growth decelerated. New methods of upward redistribution have caused the share of the Top 1% to zoom, making stagnation the new norm.
Third, and finally, Washington can no longer hide behind the bush. On the one hand, the concentration of America’s income and assets, having been boosted by large post-crisis bailouts and massive quantitative easing, is now at record levels. On the other hand, long-term unemployment remains at post-war highs while job growth is at a standstill. Eventually, this situation will be reversed. The only question is whether it will be reversed through a new policy trajectory or through the calamity of systemic crisis.
Jonathan Nitzan teaches political economy at York University in Canada. Shimshon Bichler teaches political economy at colleges and universities in Israel. All of their publications are available for free on The Bichler & Nitzan Archives. Read other articles by Jonathan Nitzan and Shimshon Bichler, orvisit Jonathan Nitzan and Shimshon Bichler's website.

New Clinton-Era Docs Reveal Insider Push for Wall Street Deregulation


Key members of Bill Clinton's team who championed policies that led to economic disaster still driving agenda in Obama White House

- Jon Queally, staff writer 
Writing in the Guardian newspaper on Saturday, journalist Dan Roberts details how newly released documents from inside the Clinton adminstration reveal how the president's economic advisors at the time downplayed the possible negative impacts of deregulating Wall Street as they pushed for measures that many critics say ultimately led to the financial crash of 2008.


 A Financial Services Modernization Act was passed by Congress in 1999. (Photo: Steve Helber /AP) An additional and troubling aspect of what the documents show is that many of the key players involved with championing the repeal of important laws like the Glass-Steagall Act—passed in the wake of the Great Depression to separate investment services from commercial banking—continue to hold sway and influence inside the Obama White House.

Released by the Clinton Library on Friday as part of a large declassification of presidential documents, Roberts' reporting shows how these specific internal memos reveal how top-level advisors tried to pressure Clinton to follow their advice on Wall Street deregulation. In addition, read carefully, portions of the hand-written notes show the pro-active manner by which the Clinton team kept aspects of their motivations—which included providing preferential treatment to large financial firms like Citigroup—out of the public record.
As Roberts reports:
A Financial Services Modernization Act was passed by Congress in 1999, giving retrospective clearance to the 1998 merger of Citigroup and Travelers Group and unleashing a wave of Wall Street consolidation that was later blamed for forcing taxpayers to spend billions bailing out the enlarged banks after the sub-prime mortgage crisis.
The White House papers show only limited discussion of the risks of such deregulation, but include a private note which reveals that details of a deal with Citigroup to clear its merger in advance of the legislation were deleted from official documents, for fear of it leaking out.
“Please eat this paper after you have read this,” jokes the hand-written 1998 note addressed to Gene Sperling, then director of Clinton's National Economic Council.

(Document: Clinton Library)
Earlier, in February 1995, newly-appointed Treasury secretary Robert Rubin, his deputy Bo Cutter and senior advisers including John Podesta gave the president three days to decide whether to back a repeal of Glass-Steagall.

The reporting goes on to point out the prominent role these Clinton advisors—Rubin, Sperling, and Podesta—played and continue to play in the Obama administration.

"The closeness of Obama's team to the deregulation policies of the late 1990s is well known and has been criticized by campaigners as a reason for the current administration's reluctance to institute more aggressive Wall Street reforms after the banking crash," writes Roberts. "But the new documents cast fresh light on the way the White House was first ushered toward deregulation by the tight group of Rubin allies."

Whether it reflects poorly or favorably on the legacy of Bill Clinton, the nature of some of Rubin's advice on the issue makes it appear that the president was urged to stand aside so that the Treasury Secretary himself could take the lead on the reforms.

“Should you approve our recommendation to move forward, the proposal would be a Treasury initiative, and would not require a significant time commitment from the White House,” writes the Treasury secretary in one memo.
“I and my staff will manage the process of advancing the proposal,” Rubin wrote.

After leaving the White House, Rubin went on to work for Citigroup as advisor and then chairman for which, according to records, he was compensated more than $120 million in cash and stock for his services.


5 Things to Know About How Corporations Block Access to Everything from Miracle Drugs to Science Research



Our system of intellectual property rights is patently ridiculous.


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Should a company be able to patent a breast cancer gene? What about a species of soybean? How about a tool for basic scientific research? Or even a patent for acquiring patents (see: Halliburton)?

Intellectual property rights are supposed to help inventors bring good things to life, but there’s increasing concern that they may be keeping us from getting the things we need.

In this wild and contested jungle of the law, which concerns things like patents and copyrights, questions about the implications of allowing limited monopolies on ideas are making headlines. Do they stifle innovation? Can they cause the public more harm than good? Trillions of dollars are at stake. Companies known as “patent trolls” are gobbling up patents, then going on lawsuit sprees and extracting fees against infringement. Corporations are using intellectual property law to squash competitors and block our access to things as vital as lifesaving drugs, to place restrictions on things as intimate as parts of the human body. Third World countries are kept from accessing essential public goods related to everything from food security to education.

Surely, the producers of new ideas should be able to profit from their creations. But furious debates over what should be protected and who should profit are calling attention to the many things that are going wrong in this area. For example, a recent front-page story in the New York Times detailed how diabetics are being held hostage in America by companies that follow Apple’s playbook to lock patients into buying expensive, patented products that quickly become obsolete. If you don’t buy the product, you don’t miss getting the new iPhone. You may die.

Intellectual property rights have come under intense scrutiny, a trend on display at a recent conference in Toronto on innovation and society, "Human After All", sponsored by the Institute for New Economist Thinking (INET) and the Centre for International Governance Innovation (CIGI), where I moderated a panel on the topic. Let’s take a look at some of the burning questions and issues in play in this debate.

1. Why do we have intellectual property rights?

The notion of giving inventors exclusive rights for a limited time goes back to the medieval era. The first patent in America was granted in 1641 to one Samuel Winslow, who came up with a new way to make salt. Patents could cover both tangible objects and also intangible stuff like methods and ideas. The U.S. Constitution has something to say about patents, namely this:
“The Congress shall have power ... To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries…”
Notice the reasoning: We the People, through our representatives, grant intellectual property rights so that we can move knowledge forward — not enrich a few people at the expense of everyone else.

The question of whether ideas themselves should be protected by patents troubled some of the Founders, who saw the potential for abuse. In an 1813 letter, Thomas Jefferson observed that unlike objects, ideas inherently want to be shared: “He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”

Intellectual property rights have expanded quite a bit since Jefferson's day. The Industrial Revolution saw brutal battles over inventions associated with things like the steam engine where the public good was often sacrificed to individual and corporate profits. In the early nineteen twenties, US patent law was revised to favor corporate interests. In 1930, the U.S. began to allow patents for living organisms with the Plant Patent Act. The Motion Picture Association of America, as it emerged, took a hard line on intellectual property and fought for broad protections. As new industries like biotechnology and nanotechnology popped up, companies and individuals sought additional protections for technology. The growth of the Internet set off a yet another wave of intellectual property rights related to patents and copyrights.

Today, what we have is a giant mess, a system plagued by bad actors and bad faith that has often become a means for corporations to smash competition and block human progress rather than advance knowledge. More time and energy is spent by companies coming up with new ways to sue each other than coming up with new ideas (think: Apple v. Samsung). The public purse is picked as taxpayer-funded investments in research are appropriated by profit-making companies. Our patent system fuels inequality by socializing the risk associated with research and discoveries while privatizing the gains. Meanwhile lawyers, as you might expect, are making out like bandits.

2. Patents have exploded since the 1980s.

If you talk to some of the bright-eyed folks in Silicon Valley, America is on an innovation roll. Since the 1980s, the number of patents sought has soared, and the pace is accelerating. Over the last two decades, businesses have increasingly used patents to sue or threaten to sue other companies to get them to pay licensing fees. 2012 was quite a year for patents: the number of court cases increased 29 percent in that year alone, according to PricewaterhouseCoopers. Costs associated with the litigation come to billions per year.

Michele Boldrin and David Levine, authors of Against Intellectual Monopoly, have noted that in a single four-year period, from 1997 to 2001, patent applications leapt by 50 percent. Meanwhile, the number of lawyers working on intellectual property in America went from 5,500 to nearly 22,000.

But are we really getting so much more creative with all these patents? Boldrin and Levine don’t think so. It appears that the number of patents has grown not because there is more innovation, but simply because the number of things that could be patented grew.

As economists William Lazonick and Oner Tulum have pointed out, changes in the law have allowed certain parties, like venture capitalists, to grow rich on patents at the expense of the public. The Bayh-Dole Act of 1980 made it easier for companies, particularly those in biotech, to profit from the results of government-backed research done in universities. Seen an ad for Botox lately? Lazonick and Tulum point out that Botox is a drug whose medical applications were developed in taxpayer-funded universities in the 1960s. In 1983, something known as the Orphan Drug Act allowed companies like Allergan, which got hold of Botox, to commercialize certain kinds of drugs that were developed for use in a small population when additional properties of the drugs were discovered. In 2013, Botox generated $1982 million in revenues for Allergan, of which 54 percent were for therapeutic uses that your doctor prescribes and 46 percent were for the cosmetic uses that the company advertises.

3. Intellectual property rights can block innovation.

One of the biggest arguments in favor of robust intellectual property rights is that they are supposed to drive innovation, giving big rewards to those who come up with new ideas. But a growing list of experts, such as Boldrin and Levine, counter that this is nonsense. “Intellectual monopoly is not a cause of innovation,” they write, “but it is rather an unwelcome consequence of it.” They argue that in young, dynamic industries, intellectual monopoly doesn’t play a major role — it’s only when the ideas run out that companies become obsessed with having the government protect the old ways of doing business.

In other words, an explosion in patents could be a sign that a country is getting less innovative, not more.

Boldrin and Levine provide numerous examples in their book of how patents shut down innovation, from a steam engine patent that may have delayed the Industrial Revolution by a couple of decades to the Wright brothers American patent on the airplane which forced innovative work in the industry to move to France.

More recently, Heidi Williams examined work done in the area of human genome sequencing by the Human Genome Project (a public entity) and also by Celera (a private company). Williams concluded that Celera’s intellectual property rights claims resulted in a persistent 20-30 percent reduction in subsequent scientific research and product development.

Economist Petra Moser states that if you look at history, intellectual property laws have always had the potential to squelch progress:
 "Overall, the weight of the existing historical evidence suggests that patent policies, which grant strong intellectual property rights to early generations of inventors, may discourage innovation. On the contrary, policies that encourage the diffusion of ideas and modify patent laws to facilitate entry and encourage competition may be an effective mechanism to encourage innovation.”
4. The public is getting harmed and cheated.

It’s increasingly clear that taxpayers are getting ripped off, particularly in areas like in pharmaceuticals. Through entities like the National Institutes of Health, the federal government pays for basic research that gets plundered by corporations that make tremendous profits (and then, of course, lobby to have their taxes reduced). Companies like Apple expect the U.S. government to protect their intellectual property rights all over the world, yet they assiduously avoid paying taxes. Considering the fact that iPhones, for example, would not exist without taxpayer-funded research in everything from touchscreen technology to GPS, this is especially maddening.

Battles between companies and sovereign countries are heating up. Eli Lilly and the Canadian government are gearing up for a showdown since the Canadians took away the company’s rights to two popular new drugs, one for attention-deficit disorder and another for psychotic illness. Despite the fact that countries are supposed to have the right to set their own domestic laws for rules of medicine patents, big corporations are increasingly able to get around them and effectively challenge national policy. Free trade pacts have become a prime vehicle for this. The much-debated Trans-Pacific Partnership, a free-trade pact being negotiated between North American and Asian countries and backed by President Obama, has provoked outrage because it would enhance drug company profits by protecting patents on drugs and medical procedures while blocking less expensive generic drugs. The fear is that powerful corporations will blow right past the laws of individual countries and use patents in ways that pose serious human rights questions.

5. Things don’t have to be this way.

While we certainly want to promote new ideas and to reward creativity, many feel that intellectual property laws aren’t the best way to do this. As Levine has written:
“It is a long and dangerous jump from the assertion that innovators deserve compensation for their efforts to the conclusion that patents and copyrights, that is monopoly, are the best or the only way of providing that reward.”
Several of the economists I spoke to at the INET/CIGI conference, such as Italian economist Giovanni Dosi and Nobel laureate Joseph Stiglitz, have suggested other ways of rewarding inventors, such as prizes. Stiglitz has pointed out that prizes, as opposed to patents, could help reward research that might not be commercially profitable, like developing a cure for AIDs, or other urgent global problems.

Clearly the notion of public benefit has to be vigorously defended in discussions of intellectual property rights. There are many ways the public good get a better deal. The government, for one, could claim rights to revenues for ideas and inventions that were funded with taxpayer money. Or it could force companies like Apple that benefit from such research to pay their share of taxes. So far, the government has not exercised its muscle because there is an imbalance of power between public and private sector.

We need to recognize that science and technology grow by accretion, each new creator building on the works of those who came before. Overprotection blocks exactly what it’s supposed to enhance: ideas that help us live better. The intellectual property system needs to be reevaluated so that social and economic progress aren't hampered by laws that only reward the few, and the public good becomes a top priority.

Lynn Parramore is an AlterNet senior editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of "Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture." She received her Ph.D. in English and cultural theory from NYU. She is the director of AlterNet's New Economic Dialogue Project. Follow her on Twitter @LynnParramore.

Thursday, April 17, 2014

America's New Poverty: The Poverty That Must Be Defeated

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The Blog

America's New Poverty: The Poverty That Must Be Defeated

In this 50th anniversary year of the initiation of the War on Poverty (War), there has been much discussion about the war and its relative success and failure. There has been far too little attention paid, however, to America's new poverty.
That is a poverty of compassion, a poverty of commitment, and a poverty of creativity. Before we examine the nature of those emerging dimensions of poverty, let's reflect on the history of the War on Poverty.

On January 8, 1964, in his State of the Union address President Lyndon Johnson declared "an unconditional war on poverty in America." On January 25, 1988, a mere 24 years later, in his State of the Union address, President Ronald Reagan declared, "the Federal Government declared war on poverty, and poverty won."
Truth be told -- that war was never "unconditional." Nor has "poverty won."

Peter Edelman, Georgetown law professor and author of So Rich, So Poor: Why It's So Hard to End Poverty in America, asserts, "...we never fought an all-out war on poverty." Due to the Vietnam War and other factors, the poverty war was not fully funded even in its early years. John Wofford, one of the first staffers of the Office of Economic Opportunity observes that, "By '65-'66 the budget was cut back extremely. The financial resources to deal with poverty on a broad-based scale were just not there."

Part of the reason for this is undoubtedly attributable to the fact that the Economic Opportunity Act (EOA) resources were originally allocated based upon poverty variables as opposed to political ones. According to economist Martha Bailey, "EOA funds flowed to poor and nonwhite areas, which empowered the poor and African-Americans and angered entrenched interests."
The bottom line is that the War on Poverty was "conditional" from the start and continues to be so to this date. In spite of this, the War has produced substantial results. As with most wars, there have been victories and defeats and the War has not ended poverty as we know it.

Given this, our first question is: Is the United States as a nation and we as a people better off because of the War on Poverty? The answer to this is an unequivocal yes regardless of whose data one is looking at.

In January the White House issued aProgress Report citing accomplishments attributable to the war and identifying key areas where work still needs to be done. The Report highlighted the fact that "poverty has declined by more than one-third since 1967."

Based upon their analysis of consumption data, economists Bruce Meyer, University and Chicago, and James Sullivan, Notre Dame, discovered that the poverty rate went from 32 percent in 1963 to 12 percent in 1979 and stood at 8 percent in 2010. A Columbia University study found that without government benefits, the poverty rate would have gone up to 31 percent in 2012.

This brings us to our second question: What is the biggest challenge confronting us in the War on Poverty today? Our answer to that is also unequivocal. It is "America's new poverty": a poverty of compassion, a poverty of commitment, and a poverty of creativity.

A Poverty of Compassion

The most troubling element of this new poverty is what we label the growing "compassion gap" toward those in need between Democrats and Republicans.
The Pew Research Center through its values survey has been tracking attitudes regarding support for the social safety net every five years since 1987 using responses on three statements. The size of the gap for those who responded affirmatively on those items in 1987 compared to 2012 is highlighted below.
  • It's the government's responsibility to take care of people who can't take care of themselves: (1987 D-R Gap+17. 2012 Gap.+35.)
  • The government should help more needy people even if it means going deeper in debt: (1987 Gap+25. 2012 Gap. +45.)
  • The government should guarantee every citizen enough to eat and a place to sleep: (1987 Gap+27. 2012 Gap +42.)
The D-R gaps stayed relatively similar in size between 1987 and 2002 and then started to expand. The D-R gap on "take care of people who can't take care of themselves" and "help more people even if it means going more in debt" went up by more than 10 points between the responses in 2007 as opposed to those in 2012.

A Poverty of Commitment

These changes in attitudes of the electorate have been reflected in the tone and tenor of the public debate over the past few years and in policy and legislation which reduces resources being dedicated to help those in need. The most recent examples of this are: the cuts to the food stamps or Supplemental Nutritional Assistance Program (SNAP); and, the failure to extend unemployment insurance benefits.

The cuts to food stamps will be about $800 million per year or $8 billion over the next decade. The Congressional Budget Office estimates they will impact about 850,000 households.

The inability to pass an extension of unemployment insurance means that 1.3 million workers have been without jobless benefits since December 28. As Brad Plumer explains in a Washington Post blog, loss of these benefits matter for a variety of reasons including: most of the long term unemployed are having an extremely difficult time in finding jobs; long term unemployment takes an extreme toll on people's health and well being; and, these benefits are a key source of income for millions of people.

A Poverty of Creativity

Fifty years ago, when the War on Poverty was announced and launched there was no lack of creativity. Bold new programs that impacted poverty such as: enhanced social security, job training programs, Medicare, Job Corps, community action programs, and Head Start were designed and developed at the stroke of a pen or a key on an Underwood typewriter. Since then, the leitmotif has been to criticize programs, to highlight problems, to make incremental changes, and to reduce or eliminate funding rather than to find innovative ways to make things better.

Take Head Start as a case in point. There is an ongoing debate regarding Heat Start's effectiveness. Much of the debate revolves around whether gains in a young pre-school learner's ability are maintained into the early grades (one through three).

Critics cite studies that say there is little to no lasting effect. Defenders cite studies that find a substantial continuing effect. This debate has constrained the funding for and activities of Head Start rather than to find a way to improve its performance and extend its impact.

This seems odd to us. If there is a proven program that works, but its effects are not being sustained, wouldn't the logical, business-like approach be to double down and to devote additional resources at the appropriate intervention point(s) to ensure that learning gains are maintained and enhanced? This ensures an appropriate return on investment as opposed to unrewarded expenditures.

And, now our final question: In light of the New Poverty and where things stand today, does it make sense to continue the War on Poverty? Our answer to that is absolutely -- but with a caveat.

That caveat is that we need to find new and better ways to fight the War on Poverty that transcend political and ideological boundaries. The response to the current poverty context and conditions can not be simply to say stay the course from the left or give the money to the states from the right.

We need to search for and find alternative paradigms and programmatic solutions that are research and evidence based and developed through a process of full and open inquiry. Fortunately, the fiftieth year anniversary of this war has brought a renewed focus and fresh thinking to this critical area.

For example, Peter Edelman spells out "Ten Lessons for the Future" such as: "We can't attack poverty without addressing the question of income..." Michael Gerson suggests renaming the war and "new tactics" such as increasing worker skills and rewards and "encouraging the norm of marriage."

David Brooks recommends a "developmental agenda to help poor children move from birth to middle class." Brooks also advocates that the President create "an opportunity coalition" by bringing bipartisan groups together to build "opportunity and social mobility agendas." Writing for the National Catholic Reporter, Michael Sean Winters calls upon the Catholic Church to take a lead in forging solutions through its catholic conferences at the state levels and Catholic Charities directors at the dioceses levels.

The dialogue and discussion has begun. We need to convert this intellectual energy to non-partisan pragmatic plans and the emotional currency required in order to continue to win the battles in the War on Poverty and to vanquish the current poverty of compassion, commitment and creativity. If we do not, America's new poverty will triumph and America and Americans will be much the poorer for it.

Sunday, April 13, 2014

Zero Tolerance and Broken Windows Policing Criminalizes Homeless and Poor People ... and Can Kill Them

  Hard Times USA  


Incarcerating people for being poor and homeless is a tragedy that requires our attention.


Photo Credit: TomoNews US; Screenshot /

The recent death of homeless veteran Jerome Murdough in a Rikers Island cell should be more than a temporary debate in a blink-and-you'll-miss-it New York media cycle that often desensitizes us to tragedies. I know it hit close to home for myself — Mr. Murdough sought refuge the night of his arrest in an East Harlem public housing staircase three blocks from my home and across the street from my where my kids go to school. When sleeping in a staircase, I thought, lands you in a Rikers cell, something is wrong.

Murdough's death laid bare some of our collective disregard for the poor as well as an aggressive police department with an obsession for law and order rivaled only by military dictatorships and science fiction characters (i.e., RoboCop, Judge Dredd). Is it enough to have roundtable discussions lamenting the case of Mr. Murdough as one of someone slipping through the cracks? What happened to him is the not-so unpredictable outcome of a society heavily invested in enforcement by way of zero-tolerance policing and criminal justice system. It's an approach that is neither humane nor sustainable. But as some debate what stop-gap reforms or long term legislation might be crafted, let's not lose sight of how Murdough arrived at the cell he would die in: the NYPD and the low-level crime-focused Broken Windows theory that guides it.

This Thursday marks the 100th day of the Bill Bratton's 2nd stint as NYPD Commissioner. Bratton famously helped to introduce and popularize Broken Windows policing theory — which seeks to crack down on small, low-level crimes as a means to fighting crime overall — into one of the most dominant policing philosophies across the country. A country with a prison population that many recognize as untenable.

My own brushes with the law give me insight. I look back to a late night coming come on the A train when I would spend the night in jail after having my foot up on empty seat in front of me. Another man recently filed a lawsuit against the NYPD after an incident where he was charged with also having his foot on a subway seat. I didn't know it then, but this was my first encounter with Broken Windows policing and how the theory actually plays out in the lives of everyday people — not just hardened criminals or the homeless. I also got a sense of how easy it is to end up in jail.

After a night of hanging out with friends in 2010, I peered through the scratchy subway windows to see how much longer my ride home to the Rockaways would be. The train had been held in the station for a while, it seemed. Out of the corner of a sleepy, blurry eye I saw two cops poking their heads in and out of the train. They were looking for some knuckleheads, I thought. Not my problem. I was a 27-year-old student with a full time job and two kids. Just get this train moving already, the New Yorker in me demanded.

Then they asked me to step out of the train.

In all my years growing up I knew cops were sometimes trouble but I fortunately didn't have much first-hand experience. As the son of a working-class Colombian mother who had kept me out of trouble growing up, I was always reminded to not embarrass her or gain the attention of police. And I knew what cops were capable of. If you're a young man of color, you know. That's what made me shoot up onto my feet and step out as quickly and as politely as possible, even as small part of me was incensed that my train was going to leave and that I'd have to spend eons waiting for the next one.

A cop asked me to show him ID. I didn't have it with me. I had left my bag — with my wallet and phone inside — in my friend's car earlier that night. I knew that it wasn't against the law not to have ID, so I didn't think much of it. As my train left, my politeness gave way to me asking questions about why I was being detained. The initial response was that that I had my foot up on the seat. Then I was told that I "fit the descript" of someone. Since I didn't have ID and I was being detained then they'd have to confirm my identity by calling a family member, they told me. It was about 4:30 a.m. and without my phone the only number I knew offhand was my mother's. No. I refused to put my nervous mother through hell by having a cop call her at 4:30 in the morning about her son. Consequently I soon found my head being pushed down into a cop car for the first time in my life. The moment was now dawning on me and tears of rage filled my eyes, which were fully awake now.

I ended up spending that night and the next morning in a transit jail efficiently located in the back of a subway station in Rockaway Park. It was a tiny, brightly lit cell where it seemed no one could hear you scream. After confirming my identity (which I still haven't figured out how), the cop told me that I was getting a summons for having my foot up on the subway seat. He handed me the summons along with my shoelaces as I walked out wondering how many people had passed through these doors.

While I was lucky enough to walk out and pay a fine, Jerome Murdough's night didn't end so easily. The same might be said of Kalief Browder, the then 16-year-old teen who spent 33 months in Rikers without a conviction or trial. So while horror stories like those of Murdough and Browder force some of us to snap to attention, it's clear that any restructuring of a broken criminal justice system must also include a restructuring of policing. Our court system convicts masses of people — most of them poor and from communities of color — and our jails are a teeming with mentally ill New Yorkers. Sweeping up people for the smallest of crimes will only add water to a sinking ship.

Josmar Trujillo is an activist and organizer with New Yorkers Against Bratton.

Saturday, April 12, 2014

Whitewashing the Ugly Face of Capitalism

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Whitewashing the Ugly Face of Capitalism

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Glossary of Major Distortions Comprising False Equations and Unchallenged Assertions

(NOTE: This essay is a revised version of the original first published in the fall of 1982 in the premiere edition of Cyrano's Journal, America's First Radical Media Review. )

By Patrice Greanville

Capitalism is preferentially identified by its euphemisms: "Free Enterprise," "market system," "private enterprise." "the American Way," etc. Overt and pervasive partisanship in support of capitalism is not regarded by the American media as an ideological bias negating professional "objectivity" but rather comparable to the serene acceptance of natural laws.

1 Capitalism = human nature 
(image by s.fazekas.collages)

This propaganda equation is one of the oldest and most effective ideological weapons utilized in defense of capitalism. It pays off handsomely in a number of important ways. First, if capitalism is congruent with "human nature," then the capitalist system must be the most "natural" and "logical" form of social organization, as people will have a built-in tendency to observe its basic rules. Second, "human nature," as defined in bourgeois terms (which the press of course follows) is characterized by two significant traits: immutability and unalterable egoism.

The first "fact" automatically discourages most efforts at seriously reforming, let alone revolutionizing, society. Why should anyone bother if in the end the stubborn intractability of human nature will render all schemes for change and improvement of social conditions worthless and utopian? It's evident that when sufficient numbers of people are made to believe that an eternal, immutable and invincible "human nature" will time and again scuttle the best-laid plans and the costliest sacrifices for change, then most threats to the status quo will be defanged at the outset.

The second "fact," addressing the supposed individualistic nature of people, provides a convenient justification for the harsh, dog-eat-dog conditions that prevail under the so-called free-enterprise system. In this vision, all human motivation is supposed to flow from the desire for pecuniary gain and self-aggrandisement. Individuals are perceived uni-dimensionally as simple atoms of unrelenting hedonism, constantly pursuing the calculus of profit and loss, pain and pleasure, as they irrepressibly "maximize" their options to fulfill the dictates of hopelessly greedy natures. This is the fabled "homo economicus" of free market literature; the heroic "rugged individualist" so dear to conservatives, and supposedly the creature on which all human progress and wealth depend. But why do the media--and especially the wilier corporate apologists-- embrace this tack with so much fervor? As suggested above, the very possibility of changing things is a highly contested ideological area. Radicals argue that society can and should be drastically changed. Conservatives (and the media, which incorporates the mildly reformist liberal viewpoint) contend that nothing basic can or should be changed because our behavior is rooted in an unchanging human nature true for all epochs, systems, and states of human evolution, and, besides, the system is quite sound as it is. History, however, when properly read, is not very kind to conservative social science. As economists E.K. Hunt and Howard Sherman have pointed out, "human nature" seems quite adept at changing to reflect each new set of prevailing social circumstances.

Thus, "it's no coincidence that the dominant view or ideology under slavery supports slavery; that under serfdom [it] supports serfdom; and that under capitalism [it] supports capitalism. (...) Since our ideology is determined by our social environment, radical economists contend that a change in our socioeconomic structure will eventually change the dominant ideology. Before the Civil War most Southerners (including their social scientists and religious leaders) believed firmly that slavery, an essentially pre-capitalist, agricultural system, was natural and good; but after 100 years of dominance by capitalist socioeconomic institutions, most Southerners (including their social scientists and religious ministers) now declare that capitalism is "natural and good". So the dominant ideas of any epoch are not determined by "human nature" but by socioeconomic relations and can be changed by changes in these underlying relationships. There is thus hope for a completely new and better society with new and better views by most people." (F.K. Hunt and Howard J. Sherman, Economics, Harper & Row, 1978, p. xxviii.)

Further, if "human nature" is inherently greedy, competitive and egoist, how do we explain altruism, sharing, selflessness and social cooperation, which can be readily observed to this day in many human institutions and societies throughout the world? It should be borne in mind that class-divided societies and private property made their appearance barely 10,000 years ago, roughly congruent with the rise of agriculture, food surpluses, sedentarism and animal-domestication, while the bulk of our time on earth as a species has been spent under tribal or primitive communitarianism which stressed familial bonds and a sharing of the commonwealth.

Question for our pro-capitalist theoreticians: Did native Americans have a human nature?

2 Capitalism = Americanness, loyalty to the United States, "the American Way of Life," etc . 

This is the second major fraudulent equation in the conservative arsenal, and one that, as its predecessor, has been deliberately injected into the American political consciousness by the system's mind managers. Noam Chomsky, Michael Parenti, among other leading political scientists, have amply documented that such notions do not materialize out of thin air, that they are deliberately manufactured.

Great political benefits can be reaped from this sleazy piece of political legerdemain. For by successfully equating loyalty to capitalism with loyalty to the motherland, the ruling orders can more easily whip up support and legitimacy for policies which chiefly safeguard their interests.

The ploy has been particularly effective in the area of foreign policy (see below) where the global interests of American business and the native plutocracy have been sold to the public as those of the nation.

This has often served to silence and isolate critics, who have been thus conveniently smeared with the brush of disloyalty, suspicion or even treason. In extreme cases, homespun dissidents have been carted away under charges of "sedition," "intent to subvert the political system of the United States,'' and similarly dubious statutes. There is little doubt that the American ruling class has carried the art of mass deception to truly unprecedented heights. No other western nation would have the audacity of requiring loyalty to capitalism--however camouflaged--as a prerequisite for good citizenship. Only in a nation where political illiteracy is high, and kept that way artificially by the powers that be, can such a fraud be propagated without too much challenge. Indeed, why should a historically transient system such as capitalism be equated with the more enduring essence of the nation, itself an extraordinarily elusive concept?

Questions for capitalism's apologists: Will Americans be less "American" it they choose for themselves another social system? For that matter, were the Russians certifiably less "Russian" after their October Revolution? Did the French revolution deny the French some of their precious "Frenchiness"? Are pro-Castro Cubans demonstrably "less" Cuban than those living in exile?


3   "Capitalism and economic freedom are inseparable from political freedom and democracy, indeed their historical guarantors." 
This claim, so readily bandied about by the media and capitalism's apologists, can also be shown to be a sham. First, as the tragic situation in the Third World illustrates, capitalism simply thrives in many lands where democracy and the most elementary human and labor rights have been ruthlessly stamped out. In fact, in country after country where human rights have been brutally liquidated private investment is on the rise, and so is the support of' the American government. The murderous repression of labor leaders, peasants, students, priests and anyone foolhardy enough to speak for the disenfranchised appears to be necessary to "improve the investment climate," as it is clinically put by our diplomats, journalists and peripatetic businessmen. What is the reality admitted even in the American media? On December 1979, Juan de Onis, the New York Times correspondent in Buenos Aires filed the following report under this headline:

"ARGENTINE POLICIES PLEASE U.S. BUSINESS. Regime, Under fire for Repression, Is Acclaimed by Chamber of Commerce for Restoring Law and Order." 
The piece, a rare occurrence in the New York Times, goes on to explain that, "(A)s in Iran under the Shah, American business generally supports the authoritarian military regime in Argentina, which has violently repressed leftists and welcomed foreign investors." Glossing over the thorny question of why Argentina's conditions give rise to civilian sectors desperate enough to back up armed insurrection against the Army, a nearly suicidal choice in almost any country, de Onis proceeds to inform the reader that, "David Rockefeller, the banker, visited Argentina recently to give his support to the program of the Minister of the Economy, Jose Alfredo Martinez de Hoz. In the closing paragraphs we find that "United States investors are not deterred by the controversv over human rights. The Chamber of Commerce, led by Arthur Perry, a mining promoter, and Stanley Brons, a lawyer specializing in investment law, has conducted a campaign designed to emphasize achievements in law and order by the military regime, which crushed an armed subversive movement of left-wing Peronists and Marxists. In the Chamber's view, publicity given to thousands of cases of people who disappeared after being arrested or kidnapped by security forces is part of an international campaign to weaken a Government that is doing what they believe is best for Argentina."

We have used italics to underscore the totally unsympathetic and incompassionate manner in which de Onis describes the military's victims. Is it an accident that he touches several bases likely to elicit a negative reaction in the thoroughly conditioned American reader? "Subversive," "left-wing," "Marxist," "armed insurrection," these are not exactly endearing terms in the American lexicon, despite the fact that every fourth of July the American nation loudly celebrates its own "armed insurrection." When reinforced by a total lack of historical context, as it happens in this piece, the effect can only be to lead the reader to unwarranted assumptions. Here, the probable thought is: "They (the guerrillas) just got what they deserved." This doesn't hurt the image of the Argentinian junta, but it is a complete falsification and oversimplification of the hard and complex Argentinian struggle.

But what happened to the vaunted "inseparability" of economic freedom and political freedom? The fact is it never existed. "Economic freedom" has been sold in the U.S. as "inseparable from" and "indispensable to" political freedom and democracy because in that manner big business can better protect itself from the popular opinion. This is a high-handed lie worthy of Goebbels. "Economic freedom" is merely a felicitous euphemism of modern coinage for the market freedom of entrepreneurs, speculators and big property owners to do as they please, while the state piously withdraws to the minimalist function of' "maintaining order, protecting private property, and enforcing contracts," which is quite fine as far its the "haves" are concerned.

"Economic freedom " and "political freedom"--at least in the historical epoch of capitalism--are neither inseparable nor indispensable to each other. Indeed, left to their own devices, they tend to move in profoundly antithetical directions. Real political and economic democracy represents a threat to concentrated economic and political power; the interests of the average working citizen simply do not jibe with those of the average oligarch. No amount of' propaganda can deny that basic truth.

4   "Capitalism is the most efficient, rational, and productive system of economic organization.'' 

The immense superiority of the free market over socialist planning is simply taken for granted by the American media. Socialist countries are routinely depicted as economically backward, problem-ridden, and filled with dour-faced citizens eager to defect to the marvelous West. Images of consumer penury are frequently trotted out, while the corresponding historical contexts, which go a long way to explain these scarcities, are carefully expunged. Who hasn't seen photos of barren socialist stores, their empty shelves an eloquent testimony to that system's putative incapacity to "deliver the goods"'?

Comparisons between capitalism and socialism are by definition a complex and slippery matter, informed to say the least, by divergent values. It is therefore not surprising to find that the topic presents rich opportunities for propagandistic manipulation. The following parameters require attention. For example, the "traditional" failure of Soviet agriculture and Russia's desire for western technology serve here as prima facie proof of socialism's unreliable and disappointing performance. Yet several factors are routinely left out or insufficiently noted. Take geography, for instance. Russia is three times the size of the continental U.S., but its topsoil is of much inferior quality, and the arable land scarcely one-third the size of America's, a situation compounded by far less mechanization than in the U.S., the result of a far less mature industrial base, and frequent dislocations caused by war and isolation.

These circumstances are apparently not worthy of mention when shouting about the "failure of communist agriculture." (What about the horrendous failure of agriculture in the underdeveloped capitalist countries?) Then there are grave omissions concerning history. As the capitalist press burrows deep to unearth every possible problem--real or imagined--afflicting the new nations, they systematically fail to mention the incredible burden of poverty and backwardness ("underdevelopment") which the new regimes inherited from the deposed old order--an unholy mixture of superexploitative capitalism, feudalism and colonialism supported to the bitter end by American power.

Further, it is rarely mentioned that the very real hostility of the encircling feudal-capitalist powers has often meant tremendous internal dislocations in the countries attempting to construct socialism, even mildly progressive structures (Cf. Guatemala, 1954-5; Chile, 1973, El Salvador in the 1970s/80s, etc.). Russia herself provides the classical example. By mid-1918, less than a year after the seizure of power by the revolutionists, it was evident that an alliance between the major western powers and the native whiteguard counter-revolutionaries was seeking ways to overthrow the new regime.

Eventually, expeditionary forces from Great Britain, France, Japan, the U.S., and later Poland, made their way to Russian shores, and without even bothering to declare war, proceeded to intervene in that country's civil war. American troops stayed on in Vladivostok until 1923, and the U. S. government refused diplomatic recognition until 1933, almost a decade after the rest of the other western powers had come to terms with the new reality. Cuba and Nicaragua provide more recent examples of all-out capitalist hostility and strategic economic and political warfare. The former has been the target of well-documented maneuvers to strangle its economy including a still-standing blockade; overt attempts at overthrow through military intervention and constant harassment by CIA-financed counter-revolutionary bands in and outside the country.

This policy against Cuba--the product not only of American inveterate anti-communist reflexes, but of allowing US foreign policy to be hijacked by a Frankenstein of their own creation, the rabidly reactionary Cuban exile lobby, has resulted in extraordinary dislocations in the Cuban economy, including a huge amount of money and manpower diverted to defense, serious problems in the healthy development of critical institutions, and a rather problematic dependence on the Soviet Union for sheer survival. For her part, Sandinista Nicaragua is confronted with similarly grave dislocations as the U.S. and its corrupt allies in the region openly threaten "destabilization,'' while waging internal sabotage and even open war to keep her and the rest of Central America in the imperial fold. As usual, Nicaragua's example might spread. It should be noted that capitalism itself never had to confront comparable enemies during its gradual development. First, because in its infancy technological capabilities did not permit rapid and devastating interventions by the feudal powers. Second, because the values of Capitalism were not, after all, so dramatically different from the ancient regime's, and hence did not require the mammoth social and personal transformations necessitated by the socialist revolutions.

Feudalism and capitalism thought private property and its accompanying gross class and economic inequalities ''normal" and just, even though the justifications and the rhetoric differed at points. Both held surprisingly similar visions of human nature, philosophy, the march of history and other subjects. That is why--among other things--bourgeois revolutions failed to enfranchise all citizens, failed to liquidate the social roots of injustice. Moreover, capitalism took several centuries to reach the stage of institutional maturity where distinctly progressive fruits could be observed, and the capitalist record is still quite contradictory in many regions of the world where the economy is continually buffeted by recessions, high inflation, corruption and high unemployment. In fact, the U.S. itself, the citadel of world capitalism, is also a land of pervasive crime and corruption; of huge inequalities in economic and political power, (where poverty had to be "rediscovered," however grudgingly, in the 1960s), and where tens of millions lack essentiall medical insurance, and where, on any given day, up to 18% of the population spend their lifetimes struggling against under- employment and unemployement, not to mention job and social insecurity in older age.

Of course, these flaws, having been long ago imputed to the "inevitable" order of things do not provoke the kind of furor reserved for socialist construction. In the midst of all the chaos and complexities involved in a thorough overhauling of social institutions, constantly besieged by enemies within and without, these hitherto backward countries are supposed to produce overnight perfect societies, with the kinds of economic goods and political graces that would satisfy the most exquisite sensibilities of critics in the capitalist metropolises. The media are thus happy to compare the market system performance with the harsh conditions of the past, or with that of half-asphyxiated socialist models--both of which, as in a game of crooked crapshoot, guarantee a flattering outcome. But what they will not do is to measure the US economy, for example, against its own potential under a much more egalitarian distribution of socioeconomic power.

4A. Capitalism's actual performance in the Third World. 

BUT, even if we assume for a moment that all is well in the industrialized capitalist core (the U.S., Japan Western Europe, where unemployment and underemployment continue to defy solution), how do we explain the fact that the so-called Third World--the capitalist "periphery"--remains perversely bogged down in massive poverty, despair and political repression? Is it not capitalist enough? In reality, a reality the media carefully avoid or deny, this sorry state of affairs flows directly from capitalism's inherent nature as a profoundly inequitable, class-divided system in which most power and wealth are hoarded at the top.

Perhaps inevitably, the same class division that afflicts the capitalist nation pervades the society of capitalist nations. The result is two sets of nations: the rich and the poor, with the latter greatly impeded in their development by lack of technology and political, cultural, and economic dependency or "colonization," now assured by a "neocolonial" relationship that perpetuates unfair terms of trade between the two spheres. As the American media look away from this embarrasing picture, two stratagems are used to cushion whatever bad p.r. might manage to bubble up to the surface.

First--and simplest--is to avert the eyes from anything genuinely positive and encouraging taking place in the socialist world. Thus few Americans are aware that Cuba--despite unrelenting pressure from the world's pre-eminent superpower--has managed to stamp out widespread illiteracy and malnutrition; childhood and adult prostitution (although these days, due to prolonged scarcities induced by the blockade, some women choose to prostitute themselves to complement their normal income. --eds), high infant mortality (it is ahead of the U.S.), rampant political corruption and repression, and dramatically reduced all forms of crime--from petty hooliganism and thievery to the organized variety, while offering its citizens guaranteed employment, free medical care and education at all levels, and the best income and wealth distribution in the hemisphere, certified by the OAS and UNO, not exactly socialists shills.

These impressive facts are simply not sufficiently "newsworthy" to most American editors. The second trick in the media book is to concentrate attention on GNP growth and the adoption of capitalist models of development (about which more later), trotting out, from time to time, the "economic miracles" that have supposedly taken place in Brazil, South Korea, Singapore, Taiwan, Hong Kong, and other capitalist showcases. Leaving aside for a moment the crucial fact that these "success stories" frequently have a pretty shabby underside of political repression and superexploitation, it should be noted that the bottom line is a notoriously inadequate indicator of economic conditions for the majority.

GNP figures, as normally peddled by American journalists, rarely shed light on a crucial aspect of economic performance: the manner in which the national income and wealth are distributed among different sectors of the population, and whether or not the goods and services produced are allocated to internal consumption or export.
As it turns out, while Brazil, for example, has indeed expanded its GNP, it has also concentrated a greater portion of the national wealth among a tiny minority at the top and most of its output is earmarked for exportation. The result: a larger GNP coupled with greater unemployment and misery among the masses, a fact amply documented by a recent UNO report on the Southern Cone countries (Chile, Brazil, Argentina, Uruguay), and a variety of reports published by none other than the Catholic Church's office of social affairs.

4B. The best possible product? 

While the system's propagandists argue that the market system can and will give the consumer as good a product as the state of the art will allow, an essential contradiction of capitalist production is niftily overlooked. The consumers want, by and large, the best, longer-lasting product their money can buy. For instance, they may want to see razor blades capable of lasting 1,000 shaves or more; or cars which do not begin to self-destruct before they are fully paid off. The catch-22 is that the capitalist producer has something else in mind. The capitalist is in business not to meet society's needs and maximize the "end use" of his products but simply to make as much money as possible. As the CEO of US Steel once proclaimed to an approving audience of shareholders, "We're not in the business of making steel; we're in the business of making profits." (Since these frank words were spoken, US Steel has gone on to morph itself into an entirely different kind of company, with steel now only a relatively minor part of the portfolio of assets, all under the name of a new conglomerate rubric, the USX corporation. "In October 2001, USX Corporation shareholders voted to adopt a plan of reorganization.  The plan resulted in the tax-free spin-off of the steel and steel-related businesses of USX into a freestanding, publicly traded company known as United States Steel Corporation -- the name of the corporation when it was established a century earlier. The remaining energy businesses of USX became Marathon Oil Corporation."--eds.)

Thus, in his pursuit of maximum profits, the businessman will promote, as much as circumstances will permit (i. e., consumer knowledge, brand loyalty, competition, government oversight) a product that will insure the highest possible frequency of purchase. The two sides have therefore incompatible agendas. In a capitalist economy, however, the final decision of what to produce, and how, is left to the commercial corporation. Hence, under monopoly conditions, the "better," "longer-lasting" features of products will be more often than not quietly scuttled. Indeed, as GM itself helped pioneer, at times it is necessary to inject "built-in" obsolescence in order to energize demand. It follows that if the capitalists, as a class, are not too sanguine about the introduction of genuinely better, longer-lasting products, they will not be too eager either to finance or introduce technologies that make these very products possible. (The world's costly addiction to petroleum is a prominent example of this, but far from the only one. Humankind could have moved to pocket-friendly, environment-friendly non-petroleum sources of energy a long time ago but the industry's clout has blocked any real moves in that direction.)

The upshot is a very erratic rate of technological innovation and one which is once again left entirely to the whims of profit maximization instead of social and ecological benefit.

4C. Automation vs. jobs 

This is a hugely important topic, and one that holds major clues to the supposed "riddle" of job creation and destruction, in other words, the actual level of employment we find in any society.

Despite the social and historical importance of this topic, the formidable American media continue to cover it for the most part inadequately. The typical treatment is an article that while dwelling on the various aspects that surround the introduction of a new, labor-saving technology, including the resistance and suspicion so often manifested by workers, fails miserably to make the essential connection: that automation need only cause unemployment and social strife under capitalism.

We should recall that machines were invented by humanity for three essential reasons: to liberate mankind from unnecessary, back-breaking toil; to increase social leisure; and to increase the quality and quantity of production (thus permitting improved social consumption). As a rule, however, the introduction of labor-saving devices under capitalism has curious, it not utterly perverse, repercussions.

Consider a new machine destined for shoe-manufacturing. Working with the old technology and a workforce of 100, Super-Capitalist Shoes, Inc. turns out 10,000 pairs of shoes per month. Now enter a new generation of machines. The firm in our example decides to purchase two new totally automatic machines that will increase production to 100,000 pairs, a tenfold increase in output, but will utilize only 60 workers, thereby laying off 40% of its labor force. Here we have a typical capitalist "contradiction." On the one hand we have a much larger output and higher incomes for the very few, the social pyramid apex, chiefly connected with the private ownership and administration of the business enterprise (and the machines). On the other we have unemployment and lower consumption for the many, chiefly the workers' side. This is the result of social relations not some economic law. Such social relations, enforced by the state and its coercive apparatus, create therefore an incurable process of inequality and poverty for the majority issuing from the very core of the sociopolitical engine. Naturally, if the fruits of higher productivity were distributed more fairly, ordinary citizens would have a great deal more of leisure time to develop their other personal dimensions. Under capitalist relations, with the capitalists in the saddle, there is no real leisure time for the majority, unless we are prepared to call unemployment a form of holiday.

For society as a whole the contradiction may bode equally ill. For as automation spreads through the economy, more and more workers will be knocked out of the job market permanently or semi-permanently, depressing consumption precisely as more goods are being turned out! Thus, under capitalism, a fast rate of technological change and aggressive investment in labor-saving machines may actually help trigger recessions.

Question for capitalist purists: What would the corporate overseers do without socialist ideas such as unemployment insurance, federal retraining programs, income maintenance programs and other "built-in economic stabilizers?") And by the way, keep this little fact in mind: No amount of retraining will guarantee a worker a job if the rate of job creation starts falling too far behind population growth.

4D. Whose fruit? Capitalism's or modern industrialism's? 

The rise of the capitalist mode of production is intimately linked to the spread of the industrial revolution and the modern methods of socialized production , but the time may have come to try to separate the fruits of each. Capitalism's defenders are understandably eager to credit capitalism as the major, it not exclusive reason for today's affluence, such as it exists, wherever it may be found. Accordingly they have fetishistically invested private property with magic qualities it doesn't possess. Their position may be boiled down to the notion that society's optimal use of resources can only be secured through the subjection of science and industrialism to the regime of private property. In their eyes, entrepreneurial self-seeking is the best engine for invention, exertion, and abundance. While this may be true of some very specific cases, it is hardly true with respect to the modern mega-corporation, typical of mature capitalism, wherein private ownership is retained by a relatively small circle of speculators or absentee owners, several generations removed from the actual day to day management and production of the firm. In fact, it is obvious that a modern factory or a plot of land can be put to work to maximum benefit under either private or collective ownership, as long as the proper inputs and techniques are observed . (Including the proper ethical and ecological rules to direct industrialism, whose destructive power is enormous.) 

4E. Selling us the rationality and efficiency of "Free Enterprise" 

The American media have never given up singing the praises of the market system's vaunted "efficiency," its "democratic nature" (due, it is argued, to the notion of "consumer sovereignty" or "marketplace balloting") and, above all, rationality. Despite an economy in which corporate giants such as GM, Ford, U.S. Steel, prominent banks and other Fortune 500 firms routinely post losses totalling billions of dollars (Chrysler necessitated a huge government bailout that continues to this date), the carefully-cultivated myth of private enterprise efficiency and superiority over public enterprise dies hard.

Three areas must be de-emphasized to accomplish this feat. First, the eyes must be averted from capitalism's chronic underemployment, mis employment, and unemployment of human and capital resources (workers, land, machines, etc.) as this represents a total waste to society estimated by even mainstream economists at hundreds of billions of dollars per year, not to mention the unquantifiable suffering inflicted on people who must get by with totally inadequate incomes.

Second, the decision to allow the profit motive to control society's production choices in quality, quantity and composition of output introduces further waste through the squandering of resources in luxury, frivolous, or "unnecessary" goods; entire categories of "throwaway" products designed ostensibly for consumer convenience (i.e. cheap cameras); or simply questionable production inherent in capitalism, such as, the paper spent every year on socially useless [and environmentally deleterious] advertising campaigns, glossy fashion magazines, catalogs, etc.

Third, there is a whole host of "social inefficiencies" or "externalities" inherent in the operation of a capitalist economy that go beyond the mere pollution of the air, land, and waterways. Capitalism's selfish ethic and infamous rat race literally pollute people's lives and decompose the social fabric which ought to hold the community together. Indeed, the colossal crime, mental health, and unemployment problems that plague the U.S. demand substantial social outlays everywhere for their mere control, let alone eradication. (Consider for a moment what the U.S. spends annually on prisons, rehabilitation, psychiatric counselling, courts, law-enforcement and welfare. These social costs, by the way, are counted in the GNP as "positive" expenditures). In fact, with alienation and mental dislocation running exceedingly high, the US easily outstrips all other industrialized nations in the incidence of serial and mass killings.

Such inherent social deformations cannot be expected to run for long without some opposition. And it is precisely in anticipation of such reaction by the public that the capitalist-dominated state makes preparations to put out the fires well in advance. Sometimes this takes the form of a beefed up police state, as we see now in practically all "Western democracies," the 9/11 tragedy having given the ruling orders everywhere the ideal pretext to build a massive surveillance and repressive apparatus at the ready.  And should not that suffice to control popular disenchantment, or expressions of real democracy, an even more brutal Frankenstein is already being abetted in many areas of the empire, fascism.

The drift toward authoritarianism and plutocratic tyranny cannot be arrested, only slowed down or momentarily interrupted given the essentially undemocratic nature of the system. As I said in another essay (Understanding American Capitalism) living with capitalism is like living with a sociopath in the room, a murderous maniac who bears constant watching.

Lastly we can argue that there is also a very real, not merely metaphorical, waste of life--the average worker-consumer's life, that is--as a result of deliberately shoddy products, monopolistic prices, and built-in obsolescence, all of which force people to work two, three or more times than necessary for the same standard of living.  This waste and relative overprice, in addition to the already gross underpayment received by ordinary citizens under capitalist social relations, whereby, by design, a disproportionate piece of the pie goes to an ever shrinking minority at the top of the social pyramid.

In the same essay mentioned above (Understanding American Capitalism) I quoted my colleague, Dr Susan Rosenthal,  who summed up the problem of productivity's theft by the capitalists rather brilliantly:

By 2000, U.S. workers took half the time to produce all the goods and services they produced in 1973. If the benefits of this rise in productivity had been shared, most Americans could be enjoying a four-hour work day, or a six-month work year, or they could be taking off every other year from work with no loss of pay. (See, Globalization: Theirs or Ours?)
The lives and money wasted, the fear and alienation, the sense of powerlessness and constant insecurity that characterize a normal existence for a very large segment of the population (have you ever come across one of those insurance ads reminding you how vulnerable you are to this or that in America?)--these are all hidden, unacknowledged, social taxes that we all pay for the privilege of living under capitalism.

Fist trained as an economist, media critic, animal defender, and social justice activist Patrice Greanville is founding editor of Cyrano's Journal Today and The Greanville Post. For further reading on these topics, please go to: CYRANOS JOURNAL--The Premiere Issue.

Media critic and former economist P. Greanville is The Greanville Post's founding editor ( He also serves as publisher for Cyrano's Journal Today. He has a lifelong interest in the triumph of justice and (more...)

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