Friday, April 15, 2016

The Grapes Of Wrath - Ready For The Harvest

“and in the eyes of the people there is the failure; and in the eyes of the hungry there is a growing wrath.
In the souls of the people the grapes of wrath are filling
and growing heavy,
growing heavy for the vintage.”

~John Steinbeck, The Grapes of Wrath

    John Steinbeck's brilliant novel "The Grapes Of Wrath" was published on April 14th  in 1939.
He documents how society is divided into the dominant  and the dominated and how people in the dominant roles in a society act viciously to preserve their dominance. The novel identifies that division as the primary source of evil and suffering in the world.

So Where Is Tom Joad Today?

   “And the great owners, who must lose their land in an upheaval, the great owners with access to history, with eyes to read history and to know the great fact: when property accumulates in too few hands it is taken away. And that companion fact: when a majority of the people are hungry and cold they will take by force what they need. And the little screaming fact that sounds through all history: repression works only to strengthen and knit the repressed. The great owners ignored the three cries of history. The land fell into fewer hands, the number of the dispossessed increased, and every effort of the great owners was directed at repression. The money was spent for arms, for gas to protect the great holdings, and spies were sent to catch the murmuring of revolt so that it might be stamped out. The changing economy was ignored, plans for the change ignored; and only means to destroy revolt were considered, while the causes of revolt went on.”~ John Steinbeck, The Grapes Of Wrath

   What have we learned? Where are we today in terms of combating the obvious evil that arises when any group of people assemble themselves as a force to dominate others? Whether it is politically or economically, the lesson history teaches us is ignored time and again.
Indeed what is the true nature of capitalism in today's world?
 Is it some grand national adventure, as politicians and textbooks preached when I was growing up? Is it some benign system in which markets provide framework for amiable competition, from which emerges the greatest good for the greatest number of people? Or is it merely the domain of class struggle, a “global class war,” as Jeff Faux’s book of the same title would have it, in which the “party of Davos” outmaneuvers the remnants of the organized working class and beats them down?

The doctrines of the “law and economics” movement, now ascendant in our courts ["law & economics" is the theoretical analysis of law focusing on efficiency. Basically a legal situation is said to be efficient if a right is given to the party who would be willing to pay the most for it.],  suggest that firms will adhere on their own to honorable conduct. That any public presence in the economy undermines this. Even insurance—whether deposit insurance or Social Security—is perverse in this belief system, for it encourages irresponsible risk taking. Banks will lend to bad clients, companies will speculate with their pension funds, etc. This movement has even argued that seat belts foster reckless driving. To adherents insurance creates a “moral hazard” for which “market discipline” is the cure-all.  It’s a strange vision, and if we weren’t governed by people like John Roberts and Sam Alito, who pretend to believe it, it would hardly be worth wasting our attention on.

“ Class struggle is the history of all hitherto existing society”-~ Karl Marx

  The idea of class struggle goes back a long way; it really is “the history of all hitherto existing society,” as Marx and Engels had declared. But if the world is ruled by a handful of monied elite, What role does the middle-class working citizen have today in the global society, or even in his or her own nation state?   None. It's a shell game, a hoax.  The political decline of the left flows in part from rhetoric that no longer matches experience; generally speaking, people in the developed nations do not feel they are living on the edge of a Malthusian catastrophe. Dollars mostly, but Euros and Pounds as well, command most of the world's goods...rupees not so much. So workers, as members in the "dollar" economy have been assimilated and in  today's world; are made complicit in sustaining and ever expanding the influence of the capitalist class.

 I grew up in the mixed-economy America. Yes, there existed a post-capitalist, post-Marxian vision of middle-class identity and indeed pride. It consisted of shared burdens, assets and entitlements.
The cornerstone of which was public education. Along with access to college, decent housing, full employment at living wages, Medicare, and Social Security.
    These programs, were publicly provided, financed, or guaranteed, and had softened the sharp edges of Great Depression capitalism, rewarding the sacrifices that won the Second World War. They also showcased America, demonstrating to those behind the Iron Curtain that regulated capitalism could yield prosperity far beyond the capacities of state planning. (This, and not the arms race, are what really ended the Soviet empire.) These middle-class institutions survive in America today, but they are weakened, diluted, frayed and tattered from constant attack. The division between those included and those excluded is large and growing larger exponentially with each year. This is frightfully obvious.

   The main feature today of modern American capitalism is certainly neither benign competition, nor class struggle, nor an inclusive middle-class utopia. No the main feature is predation. It has become a system where the rich come to feast on decaying systems built for the middle class.
I concede of course, that the predatory class is not the whole of the wealthy; it may be opposed by many others of similar wealth. But it is sadly the defining feature and the leading force in today's world. The agents of this bloodfeast are in full control of the governments under which we live.
Our rulers deliver favors to their clients.They have no interest in representing us, there's not enough cash in that. In the U.S. the predators range from Native American casino operators, to Appalachian coal companies, to 3rd world sweatshop operators, to the oil field operators of Iraq. They include the misanthropes who led the campaign to abolish the estate tax; Charles Schwab, who suggested the dividend tax cut of 2003; the “Benedict Arnold” companies who move their taxable income offshore; and the financial institutions behind the crash of 2007. Everywhere you look in the U.S or the U.K., you find public decisions yield gains to very specific private entities. We have become a predatory regime, and nothing is done for public reasons ever. Those in charge do not recognize that “public purposes” even exist at all. They have friends, and enemies, and as for the rest—we’re simply their prey.
    Remember what happened in New Orleans? Hurricane Katrina illustrated this perfectly, as Halliburton scooped up contracts and Bush hamstrung Kathleen Blanco, the Democratic governor of Louisiana. He stuck a guy who had organized a dog show in charge of the relief and rescue operations. The population of New Orleans was, at best, an afterthought; and once dispersed, it was quickly forgotten. In this predator-prey model, growth among the prey stimulates predation.
The two populations grow together at first, but when the balance of power shifts toward the predators
they swoop in and take everything they prey has accumulated. They have all sorts of tools for doing this; rising interest rates, utility rates, oil prices, crashing home prices by flooding the market with worthless mortgages, buying off the government, or outright embezzlement to name a few).
When any catastrophe occurs, from the 9-11 attacks to Hurricane Sandy,  the predators swoop in and use the catastrophe to enrich themselves. Yes, the Iraq war was nothing more than just that, vulture capitalism at it's worst, an excuse to loot the treasury and funnel money to the capitalist class. No one in government had concern for the suffering of the 1st responders, who sought to have their medical bills paid...14 years later the few who hadn't died from cancers as a result of exposure to toxins in the burning buildings they walked into on that day to save as many lives as they could, were still begging congress for a bill that would help with their medical bills. Gov. Chris Christie and Rudy Giuliani like to cite the attacks as some sort of personal badge of honor, but politically they forgot entirely about the actual people who suffered loss and or disease in those attacks, they were largely discarded except for the occasional photo op. Christie thanks the first responders by not funding the states portion of their pensions, and has sought to bust the public employees unions, roll back healthcare & pay for them. 9-11 was little more than a cash cow to the predators. An excuse to undo the Magna Carta, to stick their bloated friends in cushy 'homeland security' positions, and to loot Iraqi oil fields.
Everything that happens is an excuse to prey.
Predator Capitalism Is The Enemy 
Of Honest Business As Well As Workers
    In a world where the "winners" are all connected, it’s not only the prey who lose out. It’s everyone who hasn’t licked the required boots. Predatory regimes are nothing more than protection rackets. They may be powerful and feared, but never loved nor respected. They do not enjoy a broad political base. In a predatory economy, the rules imagined by the law and economics crowd don’t apply. There’s no market discipline. Predators compete not by following the rules but by breaking them. They take the business-school view of law: Rules are not designed to guide behavior but laid down to define the limits of unpunished conduct. Once one gets close to the line, stepping over it is easy. A predatory economy fosters and rewards criminal behavior.

The Best Way to Rob a Bank Is To Own One
    Remember the Savings and Loan and Keating Five scandals?
  obvious examples where the leader of an organization uses his company as a “weapon” of fraud and a “shield” against prosecution.  Look at Enron, Tyco, and WorldCom, The Neil Bush S&L looting.  All examples of controlled fraud which was protected by clean audits from respected accountants. The large frauds were nearly all committed in institutions taken over for that purpose by criminal networks, often by big players like Charles Keating, Michael Milken,Bernie Madoff, and Don Dixon. There’s another reason people need to be concerned about predatory institutions. They invariably fail in the end. They fail because they are meant to fail. Predators suck the life from the businesses they command, concealing the fact for as long as possible behind fraudulent accounting and hugely complex transactions; and that’s the looter’s point.

     We have governments run by people rooted in this culture.
To expect that they should not also be predatory is lunacy.
The link between George H.W. Bush, who led the deregulation of the S&Ls, his son Neil, who ran a corrupt S&L, and Neil’s brother George, for whom Ken Lay sent thugs to Florida in 2000 on the Enron plane, could hardly be any closer. But aside from occasional references to “kleptocracy” in other countries, economic opinion has been slow to recognize this. Thinking wistfully, we assume that government wants to do good, and its failure to do so is a matter of incompetence.
This is not so. You can't complain if your wine is sour when you choose a liar to select the brew he pours you.

    One would think if our governments are also predatory, or at least controlled by predators, then they too will fail: not merely politically, but in every substantial way. Government will not cope with global warming, or Hurricane Katrina, or Iraq—not because it is incompetent but because it is willfully indifferent to the problem of competence.
    What mechanisms survive for calling the predators to account?
Unfortunately, at the highest levels, one cannot rely on the justice system, thanks to the power of the pardon. It’s politics or nothing, recognizing that in a world of predators, all established parties are corrupted in at least part.  So, how can the political system reform itself? How can we reestablish checks, balances, countervailing power, and a sense of public purpose? How can we get modern economic predation back under control, restoring the possibilities not only for progressive social action but also—just as important—for honest private economic activity? Until we can answer those questions, the predators will continue to rape and pillage. We can say Steinbeck's powerful observations are just as true today as in 1939. All the gains of our father's generation, and ours as well are now being looted.  Being taken back.  The question is, what will we do about it?
What has happened in the past when peoples are made necessitous?
When they hunger?
When they have been robbed?

“Whenever they's a fight so hungry people can eat, I'll be there. Whenever they's a cop beatin' up a guy, I'll be there . . . . I'll be in the way guys yell when they're mad an'-I'll be in the way kids laugh when they're hungry an' they know supper's ready. An' when our folks eat the stuff they raise an' live in the houses they build-why, I'll be there." 
~Tom Joad in John Steinbeck's "The Grapes of Wrath"

John Steinbeck

Tuesday, April 12, 2016

Good Economic Policy vs. Bad Economic Policy

I see myself as an F.D.R. Democrat and since the 1980s I've watched the Democratic party leadership morph from progressive classic liberal policies into what we now call "New Democrats" which essentially is a wing of neoliberalism. New Democrats signed on to the "Washington Consensus"which was (and is) the doctrine of globalization. A creed of faith in unregulated markets operating in an ethical and efficient manner if the state does not interfere.
A misguided faith in believing the poor and the rich have no conflicting interests.
That privatization, deregulation, and open capital markets promote fairness & economic development for all, that governments should balance budgets and fight inflation and do didly squat beyond that.
We all have observed this is complete bullshit.
The Washington Consensus is clearly just another Trojan horse "gift" that attacks the middle class. Not unlike Trickle Down economics.
(Take from the poor and give to the rich). The absurdity of believing unrestrained capitalism, if allowed to do what it will, free from any oversight or regulation, free from the shackles of environmental protection or labor laws, somehow will behave ethically and benefit everyone is simply beyond the pale. But many people buy it.
We know why it's sold...but consumer beware...this doctrine is toxic, it is a cancer.
Conservatives of course embrace this sort of thinking, and neither you nor I should be the least bit surprised by that. After all the main premise of conservatism is to maintain or increase the existing social hierarchy.
The truth is that people with power and wealth very often believe that alone gives them "divine" rights to control or dominate  society.

  When politicians who claim to be acting on behalf of social or economic fairness embrace this toxic policy; we should not only be surprised, but outraged. This is the problem, largely created as a result of the huge importance of money in politics. The larger the role of money in political campaigns & the general machinery of the state; the more policy is defaced to resemble what those who supply the money want it to be. This is not anything like Democracy. It is Fascism, or Oligarchy. But it is not Democracy.
Look, as a nation, as a people, the bottom line of economics is that people need to eat and be sheltered every day. This is a constant. As the brilliant economist Jamie Galbraith has said "Policies that guarantee that they can do so{eat & afford shelter}, and with steadily improving diets and housing and health and other material conditions of life over long time spans, are good policies. Policies that foster instability directly or indirectly, that prevent people from eating in the name of efficiency or liberalism or even in the name of freedom, are not good policies. And it is possible to distinguish policies that meet this minimum standard from policies that do not."

Let's take four major financial securities: stocks, bonds, derivatives, and foreign currency purchases (forex). A European study a few years ago involving just 11 countries, whose collective economies are about two-thirds the size of the U.S. economy, concluded that a miniscule financial tax of 0.1 percent on stocks and bonds plus a virtually negligible 0.01 percent tax on derivatives results in an annual tax revenue of US$47 billion. In an equivalent size U.S economy that would be about US$70 billion in revenue a year.
Wealthy investors buying of stocks and bonds is essentially no different than average folks buying food, clothing or other real "goods and services." Why shouldn't investors pay a sales tax on financial securities purchases? In the U.S., average households pay a sales tax of 5 percent to 10 percent for retail purchases of goods and many services. (Many of which are necessities for existence).
So why shouldn't wealthy investors pay a similar sales tax rate for their retail financial securities' purchases? Why not indeed?
(The answer is simple, it's because they have bought influence to insure very favorable tax treatment compared to everyone else).

Now imagine for a second, a 10 percent "sales tax" on stock and bond buying and a 1 percent tax on derivatives. This would generate 100x larger tax revenue than estimated by the European study. This  tax yields US$7 trillion in tax revenue with a 10 percent and 1 percent tax on stocks and bonds and derivatives in the U.S.
Well some may argue that wealthy stock and bond buyers should not have to pay that much. It would stifle raising capital for companies. Okay. So let's lower that to half the amount, to  a meager 5 percent tax on stocks and bonds and 0.5 percent on derivatives. That reduces the US$7 trillion tax revenue to a still humongous US$3.5 trillion annually!
China is about to propose a tax on currency trading (Forex). If the U.S. imposed such a tax. on currency, or forex, trades which is about US$400 billion each day! (Not all trading is U.S. currency trading, of course. However, the U.S. dollar is involved in 87 percent of the trading.)  A meager 1 percent tax on U.S. currency trades conservatively yields approximately US$3 billion a day. Assuming a conservative 220 trading days in a year, US$3 billion a day produces US$660 billion in financial tax revenue from U.S. currency financial transactions in a single year.

Nearly every civilized country in the world except the U.S. provides a version of single payer medical care for it's citizens. (it costs about half as much as the private insurance we require in the U.S. for the same coverage). Ask yourself how much of this US $3.5666 trillion a year tax revenue would be needed to fund a single payer-Medicare for All program in the U.S.?
 No country has higher health care costs than the U.S.
The U.K. spends 9 percent of  it's GDP, Japan about 10 percent, France and Germany 11 percent, for example. The U.S., in contrast, pays 17 percent plus of its GDP on health care.
The most recent U.S. GDP is about US$18 trillion a year, 17 percent of US$18 trillion equals just over US$3 trillion a year.
If the U.S. spent, like other advanced economies with single payer, about 10 percent of its GDP a year on health care, it would cost US$1.8 trillion instead of US$3 trillion a year. The U.S. citizens would save US$1.2 trillion dollars.
Where does that  US$1.2 trillion go in the current system?  Not for health services for its citizens. It goes to health insurance companies and other "middlemen," who don't deliver one iota of health care services. They are the "paper pushers" who skim off US$1.2 trillion a year in profits that average returns of 20 percent a year and more. They are frankly just. irrelevant economic parasites. What economists refer to as "rentier capitalists".

What are rentier capitalists? 
People who don't produce anything but suck profits and wages from those who do actually produce something.
A true financial transactions tax, that is still quite reasonable at tax rates of 0.25 percent to 2.5 percent, can pay for all of a single-payer health care program in the U.S. and still have hundreds of billions left over -- US$641 billion to be exact (US$2.41 minus US$1.8 trillion).
That US$641 billion residual could then be used to better fund current Medicare programs. It could eliminate the current 20 percent charge for Medicare Part B physicians services and provide totally free Part D prescription drugs for everyone over 65 years. The savings for seniors over 65 years from this, and the tens of thousands of dollars saved every year by working families who now have to pay that amount for private company health insurance, would now be freed up with a single payer system, to be spent on other real goods and services. Everyone, literally everyone would be far better off.
(Except the renteirs themselves, who would be forced to find more honest work).
A financial transaction tax and single payer program would consequently have the added positive effect of creating the greatest boost in real wages and household income, and therefore consumption, in U.S. economic history.

More consumer demand would ultimately mean more real investment.
Everyone would enjoy some degree of prosperity.

Yes, there would be naysayers claiming  the wealth speculating in stocks, bonds, derivatives, forex and other financial securities would decline if the profits were taxed. . But so what? If rich and wealthy investors don't like that, well as Marie Antoinette allegedly said :  "Let them eat cake"  (or some other four letter word).
This is good policy. It would, in the long run benefit everyone. Even those 1%ers who don't want their securities purchases taxed, it would benefit them too because more capital in the hands of the consumers means higher demands. The capital would flow to them eventually anyway, it just would pass through a lot of hands along the way.