Friday, July 10, 2009

"Crisis and Hope: Theirs and Ours"part3

Transcribed by Scott Senn

"Crisis and Hope: Theirs and Ours"part3

12 June 2009
Harlem, NY

Also at:

Well, there's a far more severe crisis, even for the rich and powerful. It happens to be discussed in the same issue of the New York Review that I mentioned, [an] article by Bill McKibben [("Can Obama Change the Climage?", 11 June 2009)]. He's been warning for years about the dire impact of global warming. His current article – worth reading – relies on the British Stern Report, which is sort of the gold standard now. On this basis, he concludes, not unrealistically, that "2009 may well turn out to be the decisive year in the human relationship with our home planet." The reason is that there's a conference in December in Copenhagen which is supposed to set up a new global accord on global warming; and he says it'll tell us "whether or not our political systems are up to the unprecedented challenge that climate change represents." He thinks that "the signals are mixed". To me, that seems kind of optimistic unless there's really a massive public campaign to overcome the insistence of the managers of the state-corporate sector on privileging short term gain for the few over the hope that their grandchildren might have a decent future.

Well, the picture could be a lot more grim even than the Stern Report predicts, and that's grim enough. A couple days ago, a group of MIT scientists released the results of what they describe as "[t]he most comprehensive modeling yet carried out on the likelihood of how much hotter the earth's climate will get in this century" which "shows that without rapid and massive action, the problem will be about twice as severe as previously estimated [a couple of] years ago - and [it] could be even worse than that", because their model does not fully incorporate positive feedbacks that can occur: for example, the increased temperature that is causing a melting of permafrost in the arctic regions which is going to release huge amounts of methane (that's worse than CO2). The leader of the project says, "There's no way the world can or should take these risks." He says, "The least-cost option to lower the risk is to start now and steadily transform the global energy system over the coming decades to low or zero greenhouse gas-emitting technologies" [("Climate Change Odds Much Worse than Thought", 19 May 2009)]. And there's very little sign of that.

Well, furthermore, while new technologies are essential, the problems go well beyond on that. And, in fact, they go beyond the current technical debates about just how to work out cap-and-trade devices, being discussed in Congress. We have to face something much more far-reaching: we have to face up to the need to reverse the huge state-corporate social engineering projects of the post Second World War period which very consciously promoted an energy-wasting and environmentally destructive fossil fuel economy. It didn't happen by accident. That's the whole massive project of suburbanization, then destruction and later gentrification of inner cities. The state-corporate program began with a conspiracy by General Motors, Firestone Rubber, Standard Oil of California to buy up and destroy efficient, electric transportation systems in Los Angeles and dozens of other cities. They were actually convicted of criminal conspiracy and given a tap on the wrist: I think, a $5,000 fine. The federal government then took over; it relocated infrastructure and capital stock to support suburban areas and also created a huge interstate highway system under the usual pretext of "defense". Railroads were displaced by government-financed motor and air transport. The public played almost no role, apart from choosing within the narrowly structured framework of options that are designed by state-corporate managers. They are supported by vast campaigns to "fabricate consumers" with "created wants" (borrowing [Thorstein] Veblen's terms). One result is the atomization of the society and the entrapment of isolated individuals with huge debts. These efforts grew out of the recognition (that I mentioned) a century ago that democratic achievements have to be curtailed by shaping attitudes and beliefs – as the business press put it, directing people to "superficial things of life" like "fashionable consumption". All of that's necessary to insure that the "opulent minority" are protected from "ignorant and meddlesome outsiders" (namely, the population).

[I'll] just add a personal note on that: I came down here this afternoon by the Acela – you know, the "jewel in the crown" of the new high-speed railroad technology. The first time I came from Boston to New York was sixty years ago, and there was improvement since then: it was five minutes faster today than it was sixty years ago.

While state-corporate power was vigorously promoting privatization of life and maximal waste of energy, it was also undermining the efficient choices that the market doesn't and can't provide. That's another highly destructive, build-in market-inefficiency. So to put it simply, if I want to get home from work, you know, in the evening, the market does allow me a choice between (say) a Ford and a Toyota, but it doesn't allow me a choice between a car and a subway, which would be much more inefficient, and maybe everybody wants it, but the market doesn't allow that choice. That's a social decision, and in a democratic society, it would be the decision of an organized public. But that's just what the elite attack on democracy seeks to undermine.

Now these consequences are right before our eyes in ways that are sometimes surreal. A couple of weeks ago, the Wall Street Journal had an article reporting that the US Transportation [Department] chief is in Spain. He's meeting with high-speed rail suppliers: "Europe's engineering and rail companies are lining up for some potentially lucrative US contracts for high-speed rail projects. At stake is $13 billion in stimulus funds that the Obama administration is allocating to upgrade existing rail lines and build new ones that could one day rival Europe's..." [("Europe Listens for U.S. Train Whistle", 29 May 2009)]. So think what's happening: Spain and other European countries are hoping to get US taxpayer funding for high-speed rail and related infrastructure. And, at the very same time, Washington is busy dismantling leading sectors of US industry, ruining the lives of workers and communities, who could easily do it themselves. It's pretty hard to conjure up a more damning indictment of the economic system that's been constructed by state-corporate managers. Surely the auto industry could be reconstructed to produce what the country needs, using its highly skilled workforce. But that's not even on the agenda; it's not even being discussed. Rather, we'll go to Spain and we'll give them taxpayer money for them to do it, while we destroy the capacity to do it here.

It's been done before: So, during World War II, it was kind of a semi-command economy – government-organized economy. That's what happened: industry was reconstructed for the purposes of war, dramatically. It not only ended the Depression but it initiated the most spectacular period of growth in economic history. In four years, US industrial production just about quadrupled, as the economy was retooled for war. And that laid the basis for the golden age that followed. Well, warnings about the purposeful destruction of US productive capacity have been familiar for decades, maybe most prominently by the late Seymour Melman, whom many of us knew well. Melman was also one of those who pointed the way to a sensible way to reverse the process. The state-corporate leadership, of course, has other commitments. But there's no reason for passivity on the part of the public, the so-called stakeholders (workers and community). I mean, with enough popular support, they could just take over the plants and carry out the task of reconstruction themselves. It's not a very exotic proposal. One of the standard texts on corporations in economics literature points out that "[n] it written in stone that the short-term interests of corporate shareholders in the United States deserve a higher priority than...all other corporate stakeholders" (workers and community) [(W. Keller & L. Pauly, "Globalization at Bay", Current History, November 1997)]. That's a state-corporate decision; it has nothing to do with economic theory.

It's also important to remind ourselves that the notion of workers' control is as American as apple pie. It's kind of been suppressed; but it's there. In the early days of the Industrial Revolution in New England, working people just took it for granted that those who work in the mills should own them. And they also regarded wage labor as different from slavery only in that it was temporary (also Abraham Lincoln's view). There have been immense efforts to drive these thoughts out of people's heads, to win what the business world calls "the everlasting battle for the minds of men". On the surface, they may appear to have succeeded; but I don't think you have to dig too deeply to find out that they're latent and they can be revived. And there have been some important concrete efforts. One of them was undertaken thirty years ago in Youngstown, Ohio, where US Steel was going to shut down a major facility that was at the heart of this steel town. And there were substantial protests by the workforce and by the community. Then there was an effort, led by Staughton Lynd, to bring to the courts the principle that stakeholders should have the highest priority. Well, the effort failed that time; but, with enough popular support, it could succeed. And right now is a propitious time to revive such efforts, although it would be necessary – and we have to do this – to overcome the effects of this concentrated campaign to drive our own history and culture out of our minds.

There was a very dramatic illustration of the success of this campaign just a few months ago: In February, President Obama decided to show his solidarity with working people. He went to Illinois to give a talk at a factory. The factory he chose was the Caterpillar corporation. Now that was over the strong objections of church groups, peace groups, human rights groups, who were protesting Caterpillar's role in providing what amount to weapons of mass destruction in the Israeli-Occupied Territories. Apparently forgotten, however, was something else: In the 1980s, after Reagan had dismantled the air traffic controllers' union, the Caterpillar managers decided to rescind their labor contract with the United Auto Workers and to destroy the union by bringing in scabs to break a strike. That was the first time that had happened in generations. Now that practice is illegal in other industrial countries, apart from South Africa at the time (not now; now the United States is in splendid isolation, as far as I'm aware). Well, at that time, Obama was a civil rights lawyer in Chicago, and he certainly read the Chicago Tribune which ran quite a good, very careful study of these events [("Caterpillar Strikers Face the Bitter Truth", 9 September 1992)]. They reported that the union was "stunned" to find that unemployed workers crossed the picket line with no remorse, while Caterpillar workers found little "moral support" in their community. This is one of the many communities where the union had "lifted the standard of living for entire communities".

Wiping out these memories is another victory in the relentless campaign to destroy workers' rights and democracy, which is constantly waged by the highly class-conscious business classes. Now the union leadership had refused to understand. It was only in 1978 that UAW president Doug Fraser recognized what was happening and criticized the "leaders of the business community" – I'm quoting him – for waging "a one-sided class war in this country – a war against working people, the unemployed, the poor, the minorities, the very young and the very old, and even many in the middle class of our society," and for having "broken and discarded the fragile, unwritten compact previously existing during a period of growth and progress." That was 1979. And, in fact, placing one's faith in a compact with owners and managers is a suicide pact. The UAW is discovering that right now, as the state-corporate leadership proceeds to eliminate the hard-fought gains of working people while dismantling the productive core of the economy and sending the Transportation Secretary to Spain to get them to do what American workers could do, at taxpayer expense of course.

Well, that's only a fragment of what's underway, and it highlights the importance of short- and long-term strategies to build – in part, resurrect – the foundations of a functioning democratic society. One short-term goal is to revive a strong independent labor movement. In its heyday, it was a critical base for advancing democracy and human and civil rights. It's a primary reason why it's been subjected to such unremitting attack in policy and propaganda. An immediate goal right now is to pressure Congress to permit organizing rights: the Employee Free Choice Act legislation. That was promised but now seems to be languishing. And a longer-term goal is to win the educational and cultural battle that's been waged with such bitterness in the one-sided class war that the UAW president perceived far too late. That means tearing apart an enormous edifice of delusions about markets, free trade, and democracy that's been assiduously constructed over many years and to overcome the marginalization and atomization of the public.
Now, of all the crises that afflict us, I think – my own feeling is that this growing democratic deficit may be the most severe. Unless it's reversed, Arundhati Roy's forecast might prove accurate, and not in the distant future. The conversion of democracy to a performance in which the public are only spectators might well lead to – inexorably to what she calls "the endgame for the human race". Thanks.

Thursday, July 09, 2009

"Crisis and Hope: Theirs and Ours" part2

Transcribed by Scott Senn

"Crisis and Hope: Theirs and Ours" part2

Also at:

After World War II, Americans were told that their taxes were going to support defense against monsters about to overcome us; that's why it was under a Pentagon cover. So, for example, in the mid-'60s, when LBJ warned that there are only 150 million of us and that there are 3 billion of them, and if might makes right, they're going to "sweep over" us and "take what we have", so we have to stop them in Vietnam [("Remarks to American and Korean Servicemen at Camp Stanley", 1 Nov 1966, )]. And if that sounds familiar, it's because it is. For those who are concerned to understand the realities of the whole Cold War system of controlling the public, there's a very obvious moment to inspect carefully: that's just twenty years ago, at the time of the fall of the Berlin Wall and what followed later. Now the celebration of the 20th anniversary (this November) – it's already begun with ample coverage, and it's surely going to increase as the date approaches. But the very revealing policy-implications of what followed have been ignored, as in the past, and probably this coming November, except on Democracy Now ! What happened after the Berlin Wall fell? Well, the Bush I administration reacted immediately: it issued a new National Security Strategy and a budget proposal which laid out what our new course will be after the collapse of what the Kennedy called the "monolithic and ruthless conspiracy" to conquer the world, Reagan's "evil empire". It was gone. And now that it was gone, the whole framework of propaganda collapsed. So what was the response of the planners in the Bush administration? Very straightforward: in brief, everything will go on exactly as before, but with new pretexts. So we still need [the] same huge military system, but for a new reason: literally because of the "technological sophistication of Third World" powers [(National Security Strategy of the United States, March 1990)]. (Nobody laughed!) We have to maintain what they called "the Defense Industrial Base"; it's a standard euphemism for high-tech industry: the system whereby the public pays the costs and takes the risks and, you know, high-tech industry gets the profits. We also, they said, have to maintain intervention forces, directed mostly at the Middle East. And then comes this interesting phrase: ...directed at the Middle East, where the "threats to [our] interests" that required military intervention "could not be laid at the Kremlin's door". In other words: "Sorry, folks, we've been lying to you for fifty years; but now the clouds have lifted, so you can see, if you choose to." And few chose to.

Actually, the fate of NATO is very instructive and highly pertinent right now. Prior to Gorbachev, NATO's announced purposed was to deter a Russian invasion of Europe. That was often a little hard to take seriously, for example, in 1945. In May 1945, Winston Churchill ordered war plans to be drawn up for what they called Operation Unthinkable; it was aimed at (quote) "the elimination of Russia". The plans, which were declassified ten years ago, (I'll quote it) called for "a surprise attack" by "hundreds of thousands of British and American troops, [joined] by 100,000 rearmed German soldiers", while "the RAF" – the British air force – "would attack Soviet cities from bases in Northern Europe" [(Richard Aldrich, The Hidden Hand)]. And pretty soon nuclear weapons were added to the mix. All of this was declassified ten years ago.

The official stand also wasn't very easy to take about ten years later, when Khrushchev took over in Russia. And he very soon proposed a very sharp mutual reduction in offensive military weaponry. He understood very well that the much weaker Soviet economy couldn't possibly sustain an arms race with the Untied States and still hope to develop. Well, when the US dismissed the offer, as it did, he carried out the reduction unilaterally. And Kennedy did react to that: he reacted with a very sharp increase in military spending, which the Russian military later tried to match. That's tanking the economy, as Khrushchev had anticipated. Actually, that was the crucial moment in the Soviet collapse; the economy stagnated since then.

Well, whatever one thinks of the defensive pretext for NATO, it at least had some credibility. But what happens when the Soviet Union is gone and the pretext disappears? Well, it got more extreme. Gorbachev made an astonishing concession: he permitted a unified Germany to join a hostile military alliance run by the global superpower. (That is astonishing, in the light of history. Germany alone had practically destroyed Russia twice in the century.) Now there was a quid pro quo. This is Bush #1 and James Baker. It had been thought up until a couple of months ago that Bush and Baker promised not to expand NATO to the eastern European, former Soviet satellites. But there was the first careful study of the original documents – just came out by Mark Kramer, a Cold War historian [("The Myth of a No-NATO-Enlargement Pledge to Russia", )]. He believes that he's refuting charges of US duplicity; but in fact what he shows is that it's much more cynical than what had been assumed. It turns out that Bush and Baker promised Gorbachev that NATO wouldn't even fully extend to East Germany. I'll quote them: they told Gorbachev, "... no NATO forces would ever be deployed on the territory of the former [German] GDR [or East Germany]." "... NATO's jurisdiction or forces would not move eastward." They also assured Gorbachev that "...NATO would be transforming itself into a more political organization...." Well, there's no need to comment on that promise; but what follows tells a lot more about the Cold War and its aftermath. Right after that, Clinton came into office, and one of the first things he did was to begin the expansion of NATO to the east, in violation – radical violation of the commitment. The process accelerated, with Bush's general aggressive militarism. These are a severe security threat to Russia. It naturally reacted by developing more offensive military capacity. All of this is a serious threat to human survival.

Obama's National Security Advisor James Jones – he has a still more expansive conception: he calls for expanding NATO further to the east and the south, becoming in effect a US-run global intervention force, as it is today in Afghanistan. The Secretary General of NATO, Dutch officer, de Hoop Scheffer – he informed a NATO meeting that "NATO troops have to guard pipelines that transport oil and gas that is directed for the West", and more generally NATO has to protect sea routes used by tankers and other "crucial infrastructure" of the global energy system. All of that just opens up a new phase of Western imperial domination. Actually, the polite term for it is "bringing stability and peace". That's what's happening now.

In "AfPak" – Afghanistan-Pakistan – as the region is now called, Obama is building enormous new embassies and other facilities, on the model of the "city within a city" in Baghdad. These are like no embassies anywhere in the world. And they are signs of an intention to be there for a long time. Right now in Iraq, something interesting is happening. Obama's pressing the Iraqi government not to permit the referendum that's required by the Status of Forces Agreement. That's an agreement that was forced down the throats of the Bush administration, which had to formally renounce its primary war aims in the face of massive Iraqi resistance. Washington's current objection to the referendum was explained two days ago by New York Times correspondent Alissa Rubin [("Iraq Moves Ahead With Vote on U.S. Security Pact", 9 June 2009)]: Obama fears that the Iraqi population might reject the provision that delays US troop withdrawal to 2012; they might insist on immediate departure of US forces. [An] Iraqi analysis in London.- head of the Iraqi Foundation for Democracy and Development in London (it's quite pro-Western) – He explained: "This is an election year for Iraq; no one wants to appear that he is appeasing the Americans. Anti-Americanism is popular now in Iraq", as indeed it's been throughout – facts that are familiar to anyone who's read the Western-run polls, including Pentagon-run polls. Well, the current US-efforts to prevent the legally required referendum are extremely revealing; sometimes they're called "democracy promotion". Well, while Obama is signaling pretty clearly his intention to establish a firm and large-scale presence in the region, he's also, as you know, sharply escalating the AfPak war, following Petraeus' strategy to drive the Taliban into Pakistan, with potentially awful results for this extremely dangerous and unstable state, which is facing insurrections throughout its territory. These are the most extreme in the tribal areas, which cross the AfPak border. It's an artificial line imposed by the British, called the "Durand Line"; and the same people live on both sides of it: Pashtun tribes; and they've never accepted it; and in fact, the Afghanistan government never accepted it either, as long as it was independent. Well, that's where most of the fighting is going on. One of the leading specialists on the region – Selig Harrison – he recently wrote [("Pakistan's Ethnic Fault Line", Washington Post, 11 May 2009)] that the outcome of Washington's current policies (Obama's policies) might well be what he calls an "Islamic Pashtunistan" (Pashtun-based, separate, kind of quasi-state). The Pakistani ambassador had warned that if the Pashtun and Taliban nationalism merge, "we've had it, and we're on the verge of that." The prospects become still more ominous with the escalation of drone attacks that embitter the population with their huge civilian toll, and more recently (just a couple of days ago in fact) with the unprecedented authority that has just been granted to General Stanley McCrystal. He's taking charge. He's a kind of a wild-eyed Special Forces assassin. He's been put in charge of heading the operations. Petraeus' own counterinsurgency advisor in Iraq, General David Kilcullen – [correction:] Colonel, I think – He describes the Obama-Petraeus-McCrystal policy as a fundamental "strategic error" which may lead to "the collapse of Pakistan"; he says, it's a calamity that would "dwarf" all other current issues, given the country's size, strategic location, and nuclear stockpile [("Death From Above, Outrage Down Below", New York Times, 16 May 2009; "A Conversation With David Kilcullen", Washington Post, 22 March 2009)].

It's also not too encouraging that Pakistan and India are now rapidly expanding their nuclear arsenals. Pakistan's nuclear arsenals were developed with Reagan's crucial aid. And India's nuclear weapons programs just got a major shot in the arm with the recent US-India nuclear agreement; it's also a sharp blow to the Non-Proliferation Treaty. [The] two countries have twice come close to nuclear war over Kashmir, and they're also engaged in kind of a proxy war in Afghanistan. These developments pose a very serious threat to world peace, even to human survival. Well, [there's] a lot to say about this crisis, but no time here.

Coming back home: whether the deceit here about the monstrous enemy was sincere or not (in Johnson's case, it might well have been sincere), suppose that (say) fifty years ago Americans had been given a choice of directing their tax money to development of information technology so that their grandchildren could have iPods and the internet, or else putting the same funds into developing a livable and sustainable socio-economic order. Well, they might very well have made the latter choice; but they had no choice. That's standard. There's a striking gap between public opinion and public policy on a host of major issues, domestic and foreign. And, at least in my judgment, public opinion is often a lot more sane. It also tends to be fairly consistent over time, which is pretty astonishing, because public concerns and aspirations, if they're even mentioned, are marginalized and ridiculed. That's one very significant feature of the yawning democratic deficit, as we call it in other countries. That's the failure of formal democratic institutions to function properly, and that's no trivial matter. Arundhati Roy has a book, soon to come out, in which she asks whether the evolution of formal democracy in India and the United States (in fact, not only there) (in her words) "might turn out to be the end game of the human race" [(Listening to Grasshoppers: Field Notes on Democracy)]. And that's not an idle question.

It should be recalled that the American republic was founded on the principle that there should be a democracy deficit. James Madison, the main framer of the Constitutional order – His view was that power should be in the hands of "the wealth of the nation", the more responsible set of men who have sympathy for property owners and their rights [(Rufus King's Notes of the Constitutional Convention of 1787; Records of the Federal Convention of 1787)]. And Madison sought to construct a system of government that would (in his words) "protect the minority of the opulent from the majority" [(Records of the Federal Convention of 1787)]. That's why the Constitutional system that he framed did not have coequal branches: the executive was supposed to be an administrator, and the legislature was supposed to be dominant, but not the House of Representatives, rather the Senate, where power was vested and protected from the public in many ways; that's where "the wealth of the nation" would be concentrated. This is not overlooked by historians. Gordon Wood, for example, summarizes the thoughts of the Founders, saying that "[t]he Constitution was intrinsically an aristocratic document designed to check the democratic tendencies of the period", delivering power to a "better sort of people" and excluding "those who are not rich, well-born, or prominent from exercising political power" [(Creation of the American Republic)]. Well, all through American history there's been a constant struggle over this constrained version of democracy, and popular struggles have won a great many rights. Nevertheless, concentrated power and privilege clings to the Madisonian conception. It changes form as circumstances change.

By World War II, there was a significant change: Business leaders and elite intellectuals recognized that the public had won enough rights so that they can't be controlled by force; so it would be necessary to do something else: namely, to turn to control of attitudes and opinions. These were the days when the huge public relations industry emerged, in the freest countries in the world: Britain and the United States, where the problem was most severe. The public relations industry was devoted to what Walter Lippmann approvingly called a "new art" in "the practice of democracy": "the manufacture of consent" [(Public Opinion)]; it's called "the engineering of consent", in the phrase of his contemporary Edward Bernays, one of the founders of the PR industry. Both Lippmann and Bernays had taken part in Woodrow Wilson's state propaganda agency; "Committee on Public Information" was its Orwellian term. It was created kind of to try to drive a pacifist population to jingoist fanaticism and hatred of all things German. And it succeeded, brilliantly in fact. And it was hoped that the same techniques could insure that what are called "the intelligent minorities" would rule and that the general public, who Lippmann called "ignorant and meddlesome outsiders", would serve their function as spectators, not participants. These are all very highly respected progressive essays on democracy by a man who was the leading public intellectual of the 20th century and was a Wilson/Roosevelt/Kennedy progressive, as Bernays was. And they capture the thinking of progressive opinion. So President Wilson – he held an elite of gentlemen with "elevated ideals" must be empowered to preserve "stability and righteousness": essentially the prospective of the Founding Fathers. In more recent years, the gentlemen are transmuted into the technocratic elite and the "action intellectuals" of Camelot, Straussian neocons, other configurations. But, throughout, one or another variant of the doctrine prevails. (The quote from Samuel Huntington that you heard is an example.)

And, on a more hopeful note, popular struggle continues to clip its wings, quite impressively in the wake of 1960s activism, which had quite a substantial effect on civilizing the society and raised the prospects for further progress to a much higher plane. It's one of the reasons why it's called the "time of troubles" and bitterly denounced: too much of a civilizing effect.

Well, what the West sees as "the crisis" – namely, the financial crisis – that'll presumably be patched up somehow or other, but leaving the institutions that created it pretty much in place. A couple of days ago, the Treasury Department, as you read, permitted early TARP repayments, which actually reduce capacity. I mean, it was touted as "giving money back to the public"; in fact, as was pointed out right away, it reduces the capacity of the banks to lend, although it does allow them to pour money into the pockets of the few who matter. And the mood on Wall Street was captured by two Bank of New York employees who "predicted that their lives – and pay – would improve even if the broader economy did not" [("10 Large Banks Allowed to Exit U.S. Aid Program", New York Times, 9 June 2009)]. That's paraphrasing Adam Smith's observation that the architects of policy protect their own interests, no matter how grievous the effect on others. And they are the architects of policy: Obama made sure to staff his economic advisors from that sector, which has been pointed out too: the former chief economist of the IMF Samuel Johnson pointed out [("The Quiet Coup", The Atlantic, May 2009)] that the Obama administration is just in the pocket of Wall Street. As he put it, "Throughout the crisis, the government has taken extreme care not to upset the interests of the financial institutions, or to question the basic outlines of the system that got us here", and " elite business interests" who "played a central role in creating the crisis...with the implicit backing of the government" – they are still there, and " they are now using their influence to prevent precisely the [set] of reforms that are needed, and fast, to pull the economy out of its nosedive." He says, "The government seems helpless, or unwilling, to act against them" – which is no surprise, considering who constitutes and who backs the government.


Tuesday, July 07, 2009

"Crisis and Hope: Theirs and Ours" part1

Transcribed by Scott Senn

This is a very informative and important lecture.

Scott Senn transcribed the entire talk. I appreciate his hard work.

"Crisis and Hope: Theirs and Ours"

12 June 2009
Harlem, NY

Also at:

(16:04) Thanks. It was really exciting to watch Amy [Goodman] a couple of days ago when she was interviewing Judy [Brown Chomsky] . It's quite an amazing achievement. I won't go into the whole story, but she took a lot of courage and effort to win a completely unprecedented case. I don't think there's ever been a case of a settlement like that, where the evidence – which she had in fact gathered in Nigeria – was so strong that the corporation [Shell Dutch Oil] not only settled but even allowed the settlement to be public, indicating their concern that they might be exposed in trial.

Well, let me say a couple of words about the title ["Crisis and Hope: Theirs and Ours"] which as always is shorthand. There's too much nuance and variety to make any sharp distinction between "us" and "them". And of course neither I nor anyone else can presume to speak for us. But I'll pretend it's possible. There's also a problem about the word "crisis". Which one do we have in mind? There are numerous very severe crises. Many of them will be under discussion here in a couple of weeks at the United Nations in their Conference on the World Financial and Economic Crisis. And these crises are interwoven in very complex ways which preclude any sharp separation. But again I'll pretend otherwise for simplicity.

Well, one way to enter this morass was helpfully provided by a current issue of the New York Review, dated yesterday. The front cover headline reads "How to Deal with the Crisis" [("The Crisis and How to Deal with It", 11 June 2009)]. It features a symposium of specialists. And it's worth reading, but with attention to the definite article: "THE crisis". For the West, the phrase "THE crisis" has a clear enough meaning: it's the financial crisis that hit the rich countries, and therefore is of "supreme importance". But in fact, even for the rich and privileged, that's by no means the only crisis or even the most severe of those they face. And others see the world quite differently: for example, the newspaper New Nation in Bangladesh. There, we read: "It's very telling that trillions have already been spent to patch up leading world financial institutions, while out of the comparatively small sum of $12 billion pledged in Rome earlier this year, to offset the food crisis, only $1 billion has been delivered. The hope that at least extreme poverty can be eradicated by the end of 2015, as stipulated in the UN's Millennium Development Goals, seems as unrealistic as ever, not due to lack of resources but to a lack of true concern for the world's poor." They're talking about approximately a billion people facing starvation, severe malnutrition, even thirty/forty million of them in the richest country in the world. That's a real crisis, and it's getting much worse. In this morning's Financial Times, the British business press, it's reported that the World Food Program just announced that they're cutting food aid and rations and also closing operations. The reason is that the donor countries have been cutting back the funding because of the fiscal crunch, and they're slashing contributions. So [there's] a very close connection between the horrendous food crisis and poverty crisis and the significant – but less significant – fiscal crisis. They're ending up closing down operations in Rwanda, Uganda, Ethiopia, many others. They have a twenty to twenty-five percent cut in budget, while food prices are rising and the financial crisis – the general economic crisis – is bringing unemployment and cutting back remittances. That's a major crisis.

We might, incidentally, remember that when the British landed in what's now Bangladesh, they were stunned by its wealth and splendor. And it didn't take long for it to be on its way to become the very symbol of misery, not by an act of God. Well, the fate of Bangladesh should remind us that the terrible food crisis is not just a result of Western lack of concern; in large part, it results from very definite and clear concerns of the global managers: namely, for their own welfare. It's always well to keep in mind an astute observation by Adam Smith about policy formation in England. He recognized [(Wealth of Nations, Book 4, chap 8)] that what he called "the principle architects" of policy – in his day, the "merchants and manufacturers" – make sure that their own interests are "most peculiarly attended to", however grievous the impact on others, including the people of England but far more so those who were subjected to what he called "the savage injustice of the Europeans", particularly in conquered India (his own prime concern). We can easily think of analogues today. His observation in fact is one of the few solid and enduring principles of international and domestic affairs; [it is] well to keep in mind. And the food crisis is a case in point.

It erupted first and most dramatically in Haiti in early 2008. Like Bangladesh, Haiti is a symbol of utter misery. And, like Bangladesh, when the European explorers arrived, they were stunned because it was so remarkably rich in resources. Later it became the source of much of France's wealth. I'm not going to run through the sorted history; it's worth knowing. But the current food crisis traces back directly to Woodrow Wilson's invasion of Haiti, which was murderous and brutal and destructive. Among Wilson's many crimes was to dissolve the Haitian parliament at gunpoint, because it refused to pass what was called "progressive" legislation, which would allow US businesses to take over Haitian lands. Wilson's marines then ran a "free election" in which the legislation was passed by 99.9% of the vote; now that's of the five percent of the population permitted to vote. All of this comes down to us as what's called "Wilsonian idealism". Later, USAID instituted programs in Haiti under the slogan of turning Haiti into "the Taiwan of the Caribbean", by adhering to the sacred principle of "comparative advantage": that is, they should import from the United States, while working people – mostly women – slaved under miserable conditions in US-owned assembly plants. Haiti's first free election in 1990 threatened these economically "rational" programs. The poor majority made the mistake of entering the political arena and electing their own candidate: Jean-Bertrand Aristide, a populist priest. And Washington instantly adopted standard operating procedures, moving at once to undermine the regime. A couple months later came the military coup, instituting a horrible reign of terror, which was backed by Bush I and even more so by Clinton. By 1994, Clinton decided that the population was sufficiently intimidated, and he sent US forces to restore the elected president (that's now called a "humanitarian intervention"), but on very strict conditions: namely, that the president accept a very harsh neo-liberal regime – in particular, no protection for the economy. Haitian rice farmers are quite efficient, but they can't compete with US agribusiness that relies on a huge government subsidy, thanks to Ronald Reagan's "free market" enthusiasms. Well, there's nothing at all surprising about what followed next. In 1995, USAID wrote a report pointing out (I'm quoting it) that the "export-driven trade and investment policy" that Washington mandated will "relentlessly squeeze the domestic rice farmer." In fact, the neo-liberal policies rammed down Haiti's throat destroyed, dismantled what was left of economic sovereignty, drove the country into chaos. That was accelerated by Bush #2's banning of international aid on totally cynical grounds. In February 2004, the two traditional torturers of Haiti, France and the United States, combined to back a military coup and send President Aristide off to Africa. The US denies him permission to return to the entire region. Haiti had by then lost the capacity to feed itself, making it highly vulnerable to food-price fluctuation. That was the immediate cause of the 2008 food crisis which led to riots and enormous protests, but not getting food.

The story is familiar, in fact quite similar in much of the world. So, going back to the Bangladesh newspaper, it's true enough that the food crisis results from Western lack of concern (a pittance, by our standards, would overcome its worst immediate effects); but more fundamentally, it results from the dedication to Adam Smith's principles of business-run state policy. These are all matters that we too easily evade; they happen daily, along with the fact that bailing out banks is not uppermost in the minds of the billion people now facing starvation, not forgetting the tens of millions enduring hunger in the richest country in the world.

Well, also sidelined is an easy way to make a significant dent in the financial and the food crises. It's suggested by the publication a couple of days ago of the authoritative annual report on military spending by SIPRI, the Swedish Peace Research Institute . The scale of military spending is phenomenal, regularly increasing, this last year as well. The US is responsible for almost as much as the rest of the world combined, seven times as much as its nearest rival China. No need to waste time commenting.

This distribution of concerns reflects another crisis here, kind of a cultural crisis: that is, the tendency to focus on short-term parochial gains. That's a core element of our socio-economic institutions and the ideological support system on which they rest. One example, now prominent, is the array of perverse incentives that are devised for corporate managers to enrich themselves: for example, what's called the "too big to fail" insurance policies that are provided by the unwitting public, and deeper ones that are just inherent in market inefficiencies. One such inefficiency, now recognized to be one of the roots of the financial crisis, is the under-pricing of systemic risk: the risk that affects the whole system. And that's general. Like, if you and I make a transaction – say, you sell me a car, we may make a good deal for ourselves, but we don't price into that transaction the cost to others. And there's a cost: pollution, congestion, raising the price of gas, all sorts of other things, killing people in Nigeria because we're getting the gas from them. That doesn't count; we don't count that in. That's an inherent market inefficiency, one of the reason why markets can't work. And when you turn to the financial institutions, it can get quite serious. So it means that if (say) Goldman Sachs – if they're managed properly – if they make a risky loan, they calculate the potential cost to themselves if the loan goes bad; but they simply don't calculate the impact on the whole financial system. And we now see how severe that can be, not that it's anything new. In fact, this inherent deficiency of markets – this inefficiency of markets is perfectly well known. Ten years ago, at the height of the euphoria about "efficient markets", two prominent economists John Eatwell and Lance Taylor – they wrote an important book called Global Finance at Risk in which they spelled out the consequences of these market inefficiencies (which we now see), and they outlined the means to deal with them. These proposals were exactly contrary to the deregulatory rage that was then being carried forward by the Clinton administration under the leadership of those who Obama has now called upon to put band-aids on the disaster that they helped create.

Well, in substantial measure, the food crisis plaguing much of the South and the financial crisis of the North have common roots: namely, the shift towards neo-liberalism since the 1970s. That brought to an end the post Second World War Bretton Woods system that was instituted by the United States and Britain right after World War II. It had two architects: John Maynard Keynes of Britain and Harry Dexter White in the United States. And they anticipated that its core principles – which included capital controls and regulated currencies – They anticipated that these principles would lead to relatively balanced economic growth and would also free governments to institute the social-democratic programs – welfare-state programs – that had enormous public support around the world. And to a large extent, they were vindicated on both counts. In fact, many economists call the years that followed – until the 1970s – the "golden age" of capitalism. That golden age led not only to unprecedented and relatively egalitarian growth, but also the introduction of welfare-state measures. Keynes and White were perfectly well aware that free capital movement and speculation inhibit these options. Professional economics literature points out – what should be obvious – that the free flow of capital creates what they sometimes call a "virtual Senate" of lenders and investors who carry out a "moment-by-moment referendum" on government policies, and if they find that they're "irrational" – meaning they help people instead of profits – then they vote against them, by capital flight, by tax on the country, and so on. So the "democratic" governments have a "dual constituency": their own population and the virtual Senate, who typically prevail. And for the poor, that means regular disaster. In fact, one of the reasons for the radical difference between Latin America and East Asian in the last half century is that Latin America didn't control capital flight. In fact, in general, the rich in Latin America don't have responsibilities. Capital flight approximated the crushing debt. In contrast, during South Korea's remarkable growth period, capital flight was not only banned, but could bring the death penalty, one of many factors that led to the surprising divergence. Latin America has much richer resources; you'd expect it to be far more advanced than East Asian. But it had the disadvantage of being under imperialist wings.

From the 1970s, the "golden age" faded. When neo-liberal rules were observed – insofar as they've been observed, economic performance deteriorated and social-democratic programs have been substantially weakened. We see that right here. The United States partially accepted these rules. And for the past 30 years real wages for the majority of the population have stagnated; up till then, they essentially tracked growth. Work hours have increased – now well beyond Europe. Benefits, which have always lagged, have declined. Social indicators – kind of general measure of the health of a society – they also tracked growth, until the mid-1970s when they began to decline, reaching the 1960-level by the end of the millennium. Well, there has been economic growth; but it's finding its way into very few pockets, increasingly into the financial industries, which have grown enormously, while productive industry has significantly declined. And we're seeing it right now. And with the decline of productive industry of course that means decline in living standards – in fact, even opportunities to survive – for much of the work force. The economy has also been punctuated by bubbles, or financial crises, and public bailouts. So the huge bailout of Citigroup right now is nothing new; something quite similar happened in the early '80s to its predecessor Citibank, thanks to the US taxpayer.

These results were described, all through this period, and explained by a few really outstanding international economists (David Felix is one). But the mythology about "efficient markets" and "rational choice" prevailed. And that's not at all surprising. These myths were highly beneficial to very narrow sectors of privilege and power – what Adam Smith called "the principle architects" of policy. That's another very severe institutional and cultural crisis which persists.

Actually, the phrase "golden age of capitalism" is a little misleading. It might more accurately be called "state capitalism". It's worth bearing in mind that the dynamic state sector was and remains a primary factor in development and innovation, through a variety of measures: research and development, procurement – government procurement, public subsidy, regular bailouts, and other means. It's particularly true in the United States. It was done here under a Pentagon cover, as long as the cutting edge of high-tech industry –advanced economy – was electronics-based. For that, the Pentagon served as a good cover. (In recent years, if you look at government spending, it's shifting more towards the health-oriented institutions of the government. That's a reflection of the fact that the cutting edge of the economy is becoming more biology-based.) That includes computers, the internet, satellites, most of the rest of the IT revolution that finally exploded in the late '90s in a tech-bubble, but also much else: civilian aircraft, advanced machine tools, pharmaceuticals, biotechnology, and a lot more. The crucial role of the state in economic development should be kept in mind, when we read these days dire warnings about government intervention in the financial system, after private management has once again driven it to ruins, this time an unusually severe crisis and one that harms the rich not just the poor, so it merits special concern. It's also worth recalling that large-scale state intervention in the economy is nothing new. On the contrary, it's always been a central factor in economic development. (It's a matter I wish I had time – There's no time to review it here, but the history, which I'll skip, is quite instructive.) These state-guided modes of economic development require considerable deceit in a society where the public can't be controlled by force. So people can't be told that the advanced economy relies heavily on the principle that the population pays the costs and takes the risks and that the profit is eventually privatized. And the eventual can be a long time, sometimes decades, as in the case of computers and the internet, for example.