I admire Bill Gate's attempt to put a human face on capitalism and make it work for the social good. But to the extent the project requires that capitalists sacrifice profits, it's doomed -- as it should be in a democratic society.
In recent years, "corporate social responsibility" has become the supposed answer to the paradox of democratic capitalism. It is now a hot topic in business schools, which proudly avow the importance of it. As of 2006, more than half of all master of business administration curricula required students to take at least one course on it. Over 80 percent of corporate recruiters say business school graduates should display an awareness and knowledge of the subject. Hundreds of corporate conferences are held on it annually. Tens of thousands of corporate executives listen attentively to consultants who specialize in it explain its importance and how companies can evince it. The world's top CEOs and officials, gathering annually at the World Economic Forum in Davos, Switzerland, solemnly discuss it and proclaim their commitment to it.
Most of this is in earnest. Much is sincere. Some of it has had a positive impact. But almost all has occurred outside of the democratic process. To view it as a new form of democratic capitalism is to fail to understand the logic of supercapitalism. As a result, the commitment to corporate social responsibility also diverts attention from the more difficult but more important job of establishing laws that protect and advance the common good.
Since the late 1970s, a fundamental change has occurred in democratic capitalism in America, and that change has rippled outward to the rest of the world. Capitalism has triumphed, and not simply as an ideology. The structure of the American - and much of the world's - economy has shifted toward far more competitive markets. Power has shifted to consumers and investors.
Meanwhile, the democratic aspects of capitalism have declined. The institutions that undertook formal and informal negotiations to spread the wealth, stabilize jobs and communities, and establish equitable rules of the game - giant oligopolies, large labor unions, regulatory agencies, and legislatures responsive to local Main Streets and communities - have been eclipsed. Corporations now have little choice but to relentlessly pursue profits. Corporate statesmen have vanished. In this way, the triumph of capitalism and the decline of democracy have been connected. Democratic capitalism has been replaced by supercapitalism.
1. Cynicism about politics and false hope in the private sector
The upsurge of interest in "corporate social responsibility" is related to the decreasing confidence in democracy. These days, reformers often say they find it easier to lobby corporate executives than to lobby politicians; they contend they can be more effective pushing certain large corporations to change their ways than altering public policy. "Government is failing to provide leadership on environmental concerns, and industry has grown more willing to address them," says Jonathan Lash, president of World Resources Institute.
Cynicism about politics is perfectly understandable, but this is a curious proposition. A major reason why government is failing to provide leadership is because, as we have seen, big corporations have become so effective in recent years at preventing government from doing much about the environment or any other issue that may require corporations to change in ways they'd prefer not to. Why would industry have grown more willing to address the very concerns it has worked to block government from addressing? Of course, the specific people in a corporation most committed to making it more socially responsible are not likely to be the same people who are lobbying effectively against laws and regulations requiring the firm to be so, but this doesn't change the overriding reality: In supercapitalism, the corporation as a whole must, for competitive reasons, resist doing anything that hurts - and will place a very low priority on anything that doesn't help - the bottom line.
It is easy to understand why big business has embraced corporate social responsibility with such verve. It makes for good press and reassures the public. A declaration of corporate commitment to social virtue may also forestall government legislation or regulation in an area of public concern where one or more companies have behaved badly, such as transporting oil carelessly and causing a major spill or flagrantly failing to respect human rights abroad. The soothing promise of responsibility can deflect public attention from the need for stricter laws and regulations or convince the public that there's no real problem to begin with. Corporations that have signed codes of conduct promising good behavior appear to have taken important steps toward social responsibility, but the pressures operating on them to lure and keep consumers and investors haven't eased one bit. In supercapitalism, they cannot be socially responsible, at least not to any significant extent.
Politicians are simultaneously let off the hook. They can applaud some seeming act of corporate virtue - they may even take credit for pushing corporations to sign pledges or promise change - while not having to take any action that might cause negative reaction in board rooms or among corporate fundraisers. They don't have to take sides, or take a stand, while appearing to be in favor of virtuous corporate behavior.
Commitments to corporate social responsibility are also conveniently reassuring to talented or privileged young people who want both the sky-high financial rewards of fast-track executive careers and the psychological rewards of doing some good in the world. They can thereby do well and do good at the same time, or so they tell themselves.
But viewed this way, "corporate social responsibility" is as meaningful as cotton candy. The more you try to bite into it the faster it dissolves. One popular argument is that "socially responsible" companies do better by their consumers and investors. Dow Chemical reduces its carbon emissions so it can lower its energy costs. McDonald's employs more humane slaughtering techniques, which prevent costly worker injuries and yields more meat. Wal-Mart has adopted "green" packaging for its fresh produce - transparent plastics from corn sugars - because it's cheaper than petroleum-based packaging. Starbucks gives its part time employees health insurance because that reduces employee turnover and helps its bottom line. Alcoa estimates annual savings of about $100 million from reduced energy use and related environmental improvements.
All these steps may be worthwhile but they are not undertaken because they are socially responsible. They're done to reduce costs. To credit these corporations with being "socially responsible" is to stretch the term to mean anything a company might do to increase profits if, in doing so, it also happens to have some beneficent impact on the rest of society. Taken to the logical extreme is the textbook economics argument that whenever a company increases its profits it has a positive effect on society because it thereby utilizes assets more efficiently, releasing those that are no longer needed to be used more efficiently elsewhere. In this sense, all profitable companies are socially responsible.
For many years I have preached that social responsibility and profitability converge over the long term. That's because a firm that respects and values employees, the community, and the environment eventually earns the respect and gratitude of employees, the community, and the larger society - which eventually helps the bottom line. But I've never been able to prove this proposition nor find a study that confirms it. More important from the standpoint of the modern firm, the long term may be irrelevant. Under supercapitalism, the "long term" is the present value of future earnings. There is no better measure of this than share price.
Logically, when the extra benefits of some product accrue to consumers individually, they may be willing to pay more for it. This doesn't make the product "socially responsible," either. …. Similarly, companies that pay good wages and offer good benefits in order to attract and retain high-caliber employees are not being "socially responsible"; they are merely practicing good management. … In general, corporate initiatives that improve the quality of products without increasing their price, or increase efficiency and productivity so that prices can be lowered, or otherwise generate higher profits and higher returns for investors, are not socially virtuous. They're just good management practices that should -- and, given the competitive pressures of supercapitalism will -- be undertaken regardless of how much or how little they benefit society.
Economist Milton Friedman argued several decades ago that the business of business is to make a profit, not to engage in socially beneficial acts. Friedman made his argument at a time when many companies still had sufficient discretion to be socially responsible. As noted, big companies tended to be oligopolies with some power over their prices and markets. His point was companies should not seek to accomplish social ends because companies are not the appropriate vehicles for social benevolence. Whether or not you agree with Friedman, companies under supercapitalism no longer have the discretion to be virtuous. Competition is so intense that most corporations cannot accomplish social ends at a cost to their consumers or investors, who will otherwise seek and find better deals elsewhere. Even if individual consumers or investors believed in the virtuousness of a particular sacrifice, absent laws requiring all companies and therefore all other consumers and investors to forebear as well, the individual's action would have to effect.
2. Consumer Indifference
As the economy has moved toward supercapitalism, companies that in Friedman's day were known to be the most socially virtuous have been punished by investors. Cummins Engine, one of the pioneers of the corporate social responsibility movement, had to abandon its paternalistic employment policies and its generous contributions to its communities when its investors demanded higher returns. Dayton-Hudson, another notably socially responsible company, came close to being swallowed up in a hostile takeover during the 1980s, and has since then paid exclusive attention to its customers and investors. Levi Strauss, also once on everyone's list of America's most socially responsible companies in part because of its commitment to source its clothing from domestic manufacturers, faced plummeting sales in the 1990s and had to eliminate its remaining domestic production.
By the same token, investors don't punish profitable companies or industries notably lacking in social virtue. In the early and mid-2000s, Exxon Mobil had the highest return on equity of any oil company. Shareholders flocked to it despite its being named an "outlaw" by environmental groups for its highly visible campaigns against non-fossil-based fuels and the reality of global warming. Wall Street analysts and investment bankers concern themselves only with the bottom line, as do most of those whose retirement savings they manage. "I don't see investors refusing to buy because they think the chief executive is overpaid, and I don't see union members boycotting nonunion stores that sell attractively priced foreign goods," says Anthony M. Maramarco, a managing director at Babson Capital Management.
Social offensiveness is not necessarily financially offputting. … It is of course possible that noxious firms must outperform the norm in order to attract capital. Perhaps there is a sleaze premium analogous to a risk premium. But it seems more likely that investors don't know or care. They have instructed the managers of their pension or mutual funds to maximize the value of their savings, regardless. Insulation from the social effects of our market decisions is, again, an essential aspect of supercapitalism.
Investors deeply concerned about corporate morality can park their savings in what are called "socially responsible investment" funds, which screen out certain offensive industries. But few investors do. In 2004, total shares under the management of such funds comprised less than 2 percent of mutual fund shares outstanding in the U.S. stock market. In Europe, socially responsible mutual funds account for an even lower portion - about a third of one percent. If such funds outperformed regular mutual funds more investors would be drawn to them, but their record is decidedly mixed. Besides, most "socially responsible" fund portfolios include just about every large company featured in a typical mutual fund portfolio. In 2004, thirty-three socially-responsible funds held the stock of Wal-Mart, twenty-three held Halliburton's, forty held Exxon Mobil's, and almost all held Microsoft's, its antitrust peccadillos notwithstanding. At the start of the 2000s, many held Enron, WorldCom, and Adelphia stock, and none of these companies went on to distinguish themselves for public service.
Yes, investors are interested in better corporate governance. But better governance makes a firm more responsive to its investors -- not to its employees, communities, or society as a whole. …. When shareholders have more say in electing company directors, when top executives have to sign off personally on company audits, and when executive compensation is more fully disclosed, executives presumably will have more incentive to do what they have a fiduciary responsibility to do in the first place.
These initiatives will not make CEOs more responsible to society, however. To the contrary, as we have seen, the more beholden CEOs and other top executives are to investors, the more likely they are to slash payrolls in pursuit of higher profits, uproot themselves from their traditional communities and rely on global supply chains instead, pander to whatever vulgar desires their customers may harbor, subject workers in developing nations to unsafe or unhealthy conditions, and pillage the environment - if these and other such anti-social techniques increase profits and share prices.
Evidence suggests consumers, like investors, do not care enough about social responsibility to make financial sacrifices for it. After an exhaustive review of the data, my colleague, Professor David Vogel, of the Haas Business School at the University of California at Berkeley, concluded that "the social and environmental practices of the vast majority of companies have not had any demonstrated effects on their sales."
3. “Corporate social responsibility” can mean anything
Social reformers have long exposed abusive corporate practices as means of mobilizing political support for new legislation or regulation aimed at curbing them. Progressive-era muckraker Ida Tarbell's History of the Standard Oil Company, published in 1904, inspired the antitrust case that broke up the company. Upton Sinclair's 1906 classic The Jungle, exposed the meatpacking industry and generated the nation's first health and safety regulations. Ralph Nader's 1966 book Unsafe at Any Speed, revealed the automobile industry's indifference to safety, leading to the creation of the National Highway Safety Administration. The purpose of these and other exposes was not to pressure individual companies to change their ways but to incite political action so all companies would have to. These efforts were not substitutes for political action but preconditions for it.
These campaigns were designed to change the rules of the game. Consumers or investors as a whole may have ended up paying slightly more for, say, gold since it was no longer available from South African mines when Congress imposed economic sanctions, or North Sea oil that had to be disposed of more expensively. But these small price increases were presumably worth the overall social gains, as determined in the democratic process. Labor organizers also pressure large companies to permit votes on whether workers should form a union - but here, too, the goal is specific and political in the sense of altering the balance of power between owners and employees.
Without a specific political goal, "corporate social responsibility" is simply a function of a group's organizing heft relative to a particular company or industry - and therefore can mean anything. Should a socially responsible investment fund screen out companies engaged in nuclear energy, as some anti-nuclear advocates urge? Environmentalists who think nuclear energy is the best alternative to fossil-based fuels would disagree. … Absent any political process for deciding questions like [this], the answers are completely arbitrary. Electoral democracy is messy and difficult at best. As has been noted, it's now so dominated by large companies that citizen values can barely be heard. Yet there is no means for determining the social obligations of the private sector other than through the democratic process. Making companies more "socially responsible" is a worthy goal, but it would be better served by making democracy work better.
Pressuring companies to be more virtuous is an unaccountable mechanism for deciding complex social issues better left to legislators. Consider America's gut-wrenching controversies over gay rights, abortion, and guns. Congress and state legislatures have struggled over them for years; some battles have been waged in state and federal courts over them. But even if no consensus is possible, the democratic process and courts at least provides means for weighing and balancing claims. Not so in the private sector.
In 2006, the American Family Association, a non profit advocacy group based in Tupelo, Mississippi, attacked Wal-Mart for joining the National Gay and Lesbian Chamber of Commerce, and urged a boycott of the company. Wal-Mart apparently held fast and resisted the boycott. But when other religious groups urged Wal-Mart's pharmacies not to sell the emergency contraceptive commonly referred to as the "morning-after" pill, Wal-Mart caved. When several women's groups then demanded the company offer the pill, Wal-Mart partly reversed itself - stocking the pill but excusing any pharmacist who objected for personal reasons to dispense it. Women's groups continued to push Wal-Mart to require its pharmacists to fill prescriptions for the pill. What is the socially responsible position for Wal-Mart to take? It has no means for weighing and balancing claims, except by assessing which hurt Wal-Mart's bottom line least.
In these and many similar instances, companies get caught in a crossfire. Because these battles take place outside normal political channels and are aimed at specific firms, they cast corporate executives in the unenviable roles of politicians seeking to broker compromises among competing visions of the common good. Yet executives have no special expertise for doing this. They were hired to give consumers and investors better deals.
That's why, no matter how intense or irritating the advocates for one side or the other may be, in the end the corporation must do whatever is necessary to minimize its costs. If a company were to cave in to a demand that imposed an extra cost on the firm, a rival that isn't party to the agreement could profitably step into the breach. …
Finally, not only are corporations unfit to decide what is socially virtuous, but under supercapitalism they are often unable to deliver services that are inherently public. Pushing them to do so begs the question of whether the responsibilities would be better undertaken by the public sector. The campaign against Wal-Mart charged in full-page advertisements that "Wal-Mart's low pay and meager employee benefits force tens of thousands of employees to resort to Medicaid, food stamps, and housing assistance. Call it the 'Wal-Mart Tax.'And it costs you $1.5 billion in federal tax dollars every year." The problem with this logic is that America had already decided to provide Medicaid, food stamps, and housing assistance to the poor - even if the poor are also working. It seemed more efficient for these benefits to flow from government, and for employers to alert their low-income employees of the availability of them, than for the private sector to provide them as conditions of employment. If we wish to change the rules and require private employers to pay wages and provide health benefits sufficiently high that no employee has to rely on government largesse, we should seek to do that through the democratic process. But it makes little sense to chastise one employer - even one as large as Wal-Mart - for playing by the rules.
Should the rules be altered as Wal-Mart's critics advocate? That would be a worthy political debate, but we're not having it. I, for one, think the minimum wage should be raised to be about half of the average worker's hourly pay. That was the ratio in the Not Quite Golden Age -- the period when, between 1945 and 1975, America struck a remarkable accommodation between capitalism and democracy by combining a hugely productive economic system with a broadly responsive and widely admired political system -- and it still seems to me a reasonable compromise. But Wal-Mart's critics also want Wal-Mart to provide employees with good health insurance coverage, which, in my opinion, is no longer a responsibility employers should take on.
4. Ersatz politics vs. democratic conflict and deliberation
Although public relations wars over a particular company's virtue may utilize all the paraphernalia of political campaigns, their outcomes are not at all political. No one is elected or deposed, no programs or platforms are put into place, no laws or regulations are changed. The issue in such wars is not what is the best policy overall, but whether a particular company is morally good. It is an ersatz politics - a massive diversion from the real thing.
Participants in the campaign against Wal-Mart have described the battle in lofty terms. "This is an assault on a business model," said Carl Pope, a long-standing leader of the environmental movement who signed on in 2005. "We're not trying to shut Wal-Mart down." Andrew Grossman, executive director of the coalition, explained "[w]e're focusing on Wal-Mart because of the huge impact it has on each of the different parts of American life it touches." Grossman conceded Wal-Mart does provide many goods at the lowest price, but pointed out that this "sometimes comes at a high cost to society." The goal of the campaign was for Wal-Mart to "make more money, but responsibly." What precisely did this mean? What exactly were the organizers seeking?
The campaign has been run by people with direct experience in real politics. Paul Blank, one of its organizers, had been the political director of Howard Dean's presidential campaign…. In response, Wal-Mart has spent millions of dollars on a counter-campaign designed to depict the firm as worker friendly, environmentally conscious, and socially responsible The group was advised by Terry Nelson, who had been national political director of George Bush's 2004 campaign.
It has rolled out commercials showing black, Hispanic, and female employees touting their benefits and career opportunities. It ran Asian-language advertisements targeted to Asian shoppers, others to Hispanics, full-page advertisements in more than a hundred mainstream newspapers, and large ads in select elite media, accusing its critics of distorting its image. "When critics pervert the facts to serve their financial and potential interests, it's our duty to speak up," H. Lee Scott, Jr., is quoted as saying in an advertisement running across two pages of the New York Review of Books. Wal-Mart also ran ads bearing a striking resemblance to Bill Clinton's "A Place Called Hope" message during the 1992 presidential campaign, starting with a homey image of Sam Walton's first five-and-dime store. "It all began with a big dream in a small town," says a sonorous narrator. "Sam Walton's dream."
Has Wal-Mart, as a result of all this, been born again as a socially responsible company? Immediately after the devastation caused by Hurricane Katrina, Wal-Mart pledged $15 million in cash to the Bush-Clinton Katrina Fund, and also gave a million dollars each to the Salvation Army and the American Red Cross. …. The company has also set out to be - or appear to be - a better employer and citizen in the communities where it does business. It has set up an office of diversity, and expanded health insurance to children of part time workers. It has announced a plan to help local businesses near its proposed urban stores. And it has become - or appeared to become - a dedicated environmentalist. It has launched a program to recycle shrink wraps, shopping bags, and other plastic items that its consumers normally sent to landfills; it has begun testing the use of trees and grasses in parking lots to absorb carbon dioxide emissions and tainted water; it has committed itself to wind and solar energy to generate electricity, and recycled materials to make its outdoor pavements. CEO Scott declared in 2006 that the firm would rely on 100 percent renewable energy sources "that sustain our resources and environment."
All these efforts are commendable, but even when added together, their costs still constitute a tiny fraction of Wal-Mart's yearly revenues. Some, like the firm's new-found commitment to renewable energy, have come without a timetable; even Scott admits he is "not sure how to achieve" them. And it remains unclear to what extent the firm will continue to strive for "social responsibility" if and when the heat is off and the anti-Wal-Mart campaign has ended - as, presumably, it will end, someday. …. To the extent the firm has been pushed to be more virtuous, it seems doubtful the tactics for achieving this result are transferable to most other firms.
The fact that a modern corporation can spend its way out of most public relations problems suggests that campaigns to make companies more "socially responsible" are unlikely to establish new norms of corporate conduct. This is true even if the standard they are seeking is precisely drawn, and even if rivals don't jump into whatever lower-cost breach opens up. Political techniques may be employed by both sides, and some candidates for public office may even criticize a company for its irresponsible ways. But in such contests real politics - the stuff of democratic conflict and deliberation - is nowhere to be seen.
5. The preemption of politics
The eagerness with which corporations themselves have embraced social responsibility can dull the public's sense that there exist troublesome issues deserving of public attention. Vivid displays of corporate goodness can mask problems a democracy should grapple with - would grapple with - if the public understood their true dimensions. And because public attention spans are short, such temporary displays can preempt permanent solutions.
In light of rumblings from the Federal Communications Commission and from conservative legislators concerned about the sex and violence cable companies were pumping out to their subscribers, cable operators in early 2006 announced plans to offer packages of family-friendly channels so parents could shield their children. "There's no need for legislation now," said Senator Ted Stevens (R-Alaska), chairman of the Senate Commerce Committee, after being reassured of the cable companies' plans. "We have to give it a chance to work." But cable companies had made similar promises before that had never been fulfilled. Presumably, cable companies will continue to pump out sex and violence until Congress or the FCC stops them, because sex and violence makes money.
Displays of corporate virtue can also obscure conditions that would otherwise generate political heat for reform. Recall the flurry of media attention directed at sweatshop abuses during the mid-1990s. Apparel manufacturers and big retailers avoided any new laws or regulations by promising they would voluntarily clean up their acts. They developed voluntary codes of conduct and began monitoring their overseas factories, especially in China where most were located. But according to an investigation of internal industry documents by Business Week in late 2006, the codes are being widely violated. Many Chinese factories keep double sets of books to fool auditors and distribute scripts for employees to recite if they are questioned. Factory managers in China complained in interviews that pressure from American firms to cut prices creates a powerful incentive to cheat. Yet American companies continue to tout the codes as evidence of their social responsibility. And, according to Business Week, the codes "have been important to maintaining political support in the U.S. for growing trade ties with China."
The preemption of politics often works because the public's memory - and the attention span of the media - is conspicuously short, as I said earlier. The public forgives because it so easily forgets. It can even be persuaded by a clever media campaign that a company once disdained for disregarding the common good is heroically achieving it. Recently, GE has been hailed as an environmental leader for its self-imposed restrictions on greenhouse gases. But the public - and the media - seem to have forgotten GE's role in polluting the Hudson River and its related tributaries with PCB, the company's tenacious fight with federal regulators against cleaning up the mess, and its insistent lobbying against regulation that would force it to foot more of the bill.
The U.S. government has not increased automobile fuel-economy standards in several decades, nor made any major move to increase gas taxes to better reflect the true social cost of oil. Part of the reason is every time the public shows any broad interest in more fuel-efficient cars, major automakers declare themselves born-again environmentalists and commit themselves to fuel efficiency - until the public's interest flags. In 2000, Ford was the largest producer of SUVs and light trucks in North America, and they were among the nation's most notorious gas guzzlers. (When the Sierra Club sponsored a contest to give a name and advertising slogan to Ford's newest SUV - which used one gallon of gas for every twelve miles it traveled - the winner was "The Ford Valdez -- Have You Driven a Tanker Lately?" ) But that year Ford effectively preempted political pressure to force it and other automakers to do more by promising to voluntarily increase the fuel economy of its SUVs by 25 percent. Two years later, when Ford's profits began to drop and consumers still wanted big gas guzzlers that were highly profitable to the company, Ford revoked its pledge. It even went so far as to initiate an intense lobbying and advertising effort that successfully defeated a Senate proposal to raise fuel-economy standards. In 2005, when oil prices shot upward and consumer interest in gas-guzzling SUVs and pickups began to wane, Ford with great fanfare announced its newfound interest in fuel efficiency. It pledged to voluntarily increase production of hybrid vehicles ten-fold by 2010.
6. Disappointments from government
In recent years, politicians have got into something of a habit of publicly shaming companies that have acted badly in some way. Offending executives are typically hauled before congressional committees, where members of Congress berate them. But little legislation emerges to force the companies to behave any differently in the future.
The notion that such public scoldings and the temporarily unflattering publicity that accompany them will alter corporate practices is another diversion from the work of creating rules that balance the interests of consumers and investors with broader interest of the public. It also, conveniently, allows politicians to maintain good relations with the same companies and industries - collecting campaign donations, enjoying rounds of golf with their executives, tapping their corporate lobbyists for miscellaneous favors - while showing the public they're being "tough" on the wrongdoers. Here again, the public is led to believe that democracy is working when all that's really working is public relations.
When oil prices soared in 2005 and early 2006, oil companies reaped extraordinary profits while millions of Americans had to pay more to fuel their cars and heat their homes. This prompted calls for Congress to enact a "windfall profits tax" on the oil companies, but not even a debate took place. Instead, Congress simply scolded oil company executives and publicly berated the companies. As oil prices and profits approached record levels, Senator Charles Grassley, an Iowa Republican, and chairman of the Senate Finance Committee, issued a public letter reprimanding the oil and gas industry and instructing its companies to make charitable donations - 10 percent of that quarter's profits - to help poor people pay their heating bills that winter. "You have a responsibility to help less fortunate Americans cope with the high cost of heating fuels," Grassley said.
Grassley's admonition made the headlines but obviously had no effect. Why would the oil companies voluntarily give away their profits? The only practical effects of the public scolding were to make Grassley and his colleagues seem compassionate, and to reassure some portion of the public that Congress was "doing something" about record oil prices and profits. But because any real debate about a tax on their windfall profits was deflected by Grassley's moves, the public never had an opportunity to decide whether using the resulting revenues to help low-income oil consumers was worth the risk that oil companies, forced to disgorge some of their profits, might do less exploration and development - leading to higher prices in the future.
Corporate executives are not authorized by anyone - least of all by their consumers or investors - to balance profits against the public good. Nor do they have any expertise in making such moral calculations. That's why we live in a democracy, which is supposed to represent the public in drawing such lines.
Consider Yahoo's decision in 2005 when it surrendered to Chinese authorities the names of Chinese dissidents who had used Yahoo email, thinking their email addresses would shield their anonymity. One, a journalist, was sentenced to ten years in prison for sharing with foreigners a message his newspaper had received from Chinese authorities, urging it not to overplay the fifteenth anniversary of the Tiananmen Square disturbances. Another whom Yahoo helped Chinese authorities trace down was sentenced to eight years, and a third, to four years. It remains unclear how many more dissidents are in Chinese prisons because of Yahoo's cooperation with Chinese authorities.
Yahoo's decision ignited a firestorm. Its executives explained the firm had no choice but to comply with Chinese law if it wanted access to China's huge and growing market - and Yahoo said it needed to be in China to move China toward democracy. "I've always taken the attitude that you're better off playing by the government's rules and getting there," Yahoo's chairman told attendees at a Web conference in San Francisco. "Part of our role in any form of media is to get whatever we can into those countries and to show and enable people, slowly, to see the Western way and what our culture is like, and to learn." Yahoo's role? The firm was never anointed the vessel of Western culture, nor the arbiter of how best to present it to China. That's not the business of any global company. Indeed, most global companies do everything in their power to avoid the appearance of representing any particular culture, nationality, or ideology - unless such representation helps them sell their products.
Yahoo is not a moral entity, and no one authorized it to undertake any ethical balancing between sending dissidents to prison and exposing the Chinese to American culture and democracy. Yahoo's executives have only one responsibility under supercapitalism - to make money for their shareholders and, along the way, satisfy their consumers. In this instance, one of Yahoo's key "consumers" was the Chinese government, because it was the gateway to all other Chinese consumers. Unless barred by legislation in the United States, Yahoo will continue to do whatever the Chinese government demands of it because the competitive stakes are too high and the potential profits too great to do otherwise. China is the second-largest Internet market in the world after the United States. As of 2006, more than one hundred million Chinese had already logged on. At the rate Internet usage is growing there, within a few years there will be more Chinese on the Internet than Americans.
Any decision about Yahoo's … "social responsibility" was and is best left to the democratic process in the United States, where the firms are headquartered and whose citizens have a presumed stake in human rights around the world. Hence, one appropriate forum for sorting out these firms' duties is Congress, before whom their executives were summoned to appear. The question that body needed to address was whether American high-tech companies should be barred from cooperating with dictatorial governments to abridge human rights, even if this means losing business. That didn't happen, however.
If the U.S. government wanted to make Chinese human rights a priority, it could pass a law tomorrow barring American companies from helping the Chinese government hobble the free speech of its citizens - just as it once barred trade with South Africa and still bans commerce with countries like Cuba and Burma, and has managed to force most of the world's major banks to eschew business with North Korea. Don't hold your breath. Despite all the self-righteous indignation emanating from Congress, and despite all the talk by the Bush administration about spreading democracy around the world, international human rights don't rank very high in Congress or the White House. First and foremost, American business wants access to China's huge market without interference.
All the while, as expected, consumers and shareholders of these firms remained unconcerned. A consumer boycott was threatened (booyahoo.blogspot.com urged "freedom-loving citizens of the Internet to discontinue their use of Yahoo services as a result of their oppressive policies") but nothing came of it.
None of these companies broke American law when they helped Chinese authorities suppress human rights in China. All obeyed the prevailing rules of the game. In supercapitalism, that's all we can and should expect companies to do. Framing the issue in moral terms -- citing the shameless behavior of these companies and their executives -- diverted attention from the harder but more important question of whether the rules of the game should be altered.
7. “Voluntary” responsibility?
Politics is also diverted when politicians ask corporations to take some action voluntarily in the public interest, as Senator Grassley asked the oil companies to do. Early in the Bush administration, the White House embarked on an initiative dubbed "Climate Leaders," in which the President, with great fanfare, asked the nation's major industrial polluters to commit to reducing their greenhouse gas emissions by at least 10 percent within the decade. The event suggested the Administration was taking action on global warming, but it was doing no such thing. By January 2004, only fifty of the thousands of American firms with major greenhouse gas emissions had agreed to become Climate Leaders and reduce their emissions, and of these only fourteen announced specific goals. Although energy utilities are the nation's major polluters, only six of these fifty were utilities. Within a few years the Climate Leaders initiative had died a quiet death. A 2004 report by the World Economic Forum at Davos applauded the efforts of some forward-looking multinational companies to reduce greenhouse gas emissions but concluded that voluntary actions were inadequate to counter effects of climate change.
Of course they're inadequate. Supercapitalism does not permit acts of corporate virtue that erode the bottom line. No company can "voluntarily" take on an extra cost that its competitors don't also take on - which is why, under supercapitalism, regulations are the only means of getting companies to do things that hurt their bottom lines. As Professor David Vogel concluded after surveying so-called "voluntary" corporate environmental initiatives in the United States and Europe, few companies undertake them in the absence of regulations or the impending threat of them. To suggest that a vast, untapped reservoir of corporate benevolence is available for the asking is to seriously mislead the public - and once again divert attention from the important job of deciding what such regulations should be. In fact, the outpouring of "voluntary" corporate initiatives on global climate change is deflecting public attention from the necessary work of enacting tough laws and regulations to deal with it.
It is much the same with what passes for corporate charity. Companies donate money to the extent - and only to the extent - it has public relations value, and thereby helps the bottom line. Shareholders do not entrust their money to corporate executives for them to give it away, unless the return is greater. When the 2005 tsunami devastated Indonesia and other parts of coastal Southeast Asia, President Bush asked American corporations to come to the aid of victims. After several companies contributed millions of dollars, Bush extolled CEOs for their generosity. "One of the less reported aspects of the U.S. business community is the tremendous amount of good they do, giving back to the communities in which they operate," he said. "[T]he tsunami has presented the private sector here in America with a genuine watershed moment. I believe it's ushered in a new era of corporate social responsibility." His words were greeted with loud applause, but they made no sense. The assembled CEOs had not been generous - they had not contributed their own money. They had donated their shareholders' money. Presumably they had done so in the belief their shareholders would benefit from the public relations value such contributions added to the firms' bottom lines. Otherwise, these CEOs would have violated their fiduciary duties and risked having their shareholders switch to other companies that didn't give away their money. Shareholders did not invest in their firms expecting the money would be used for charitable purposes. They invested to earn high returns. Shareholders who wished to be charitable would, presumably, make donations to charities of their own choosing in amounts they decided for themselves.
The larger danger is that these conspicuous displays of corporate beneficence hoodwink the public into believing corporations have charitable impulses that can be relied on in a pinch. An earthquake that hit Pakistan in October 2005 killed more than 87,000 people and displaced three times as many as those affected by the Indian Ocean tsunami. Yet the Bush administration initially pledged only $500,000 in aid - a sum so small as to be derided by many Pakistanis. Bush then pledged more, and also asked five prominent CEOs to mount a major fundraising effort from American corporations. General Electric contributed more than $5 million in cash and health care and energy equipment; Pfizer, $1 million to relief agencies and $5 million in medicines and health care products; Xerox, $1 million in cash; Citigroup, $3 million. In total, the CEOs raised about $100 million, moving the President to another effusive outpouring of gratitude. "If the international community had not stepped in," he told the assembled executives, "the door might have been opened for more radical Islamic influences."
Actually, the "international community" failed to step in as much as it should have. Pakistan needed billions of dollars, not hundreds of millions - and needed it quickly. While more than $3 billion in aid had been distributed to areas hit by the tsunami within two weeks of that disaster, a total of only $17 million had been distributed to Pakistan as late as six weeks after the quake. And according to the United Nations, total pledges to Pakistan still amounted to only a quarter of what was needed to cope with the devastation. The void was partly filled by radical Islamist groups. The Pakistani interior minister acknowledged that the radicals were "the lifeline of our rescue and relief work."
Corporations are not set up to be public charities. The world's biggest philanthropists, Bill and Melinda Gates, do not draw on Microsoft's profits; they draw on their own vast fortune. The only legitimate reason for a corporation to be generous with its shareholders' money is to burnish its brand image, and such a rationale will go only so far.
Corporations do some good deeds but corporate thank you rituals mislead the public into believing companies do these things out of selflessness - indeed, that there is a "self" there deserving commendation in the first place. But there is no corporate selflessness, and there is no corporate self. In supercapitalism, companies exist only to serve consumers and thereby make money for investors. This is how they serve the public.
8. Faux democracy on two levels
Democracy and capitalism have been turned upside down. As we have seen, capitalism has invaded democracy. Legislation is enacted with public rationales that bear little or no relation to the real motives of the corporations and their lobbyists who pushed for them and legislators who voted for them. Regulations, subsidies, taxes, and tax breaks are justified as being in the public interest but are most often the products of fierce lobbying by businesses or industries seeking competitive advantage. The broader public is not involved. Citizen voices are drowned out. The public rationales mask what's really going on - which companies and industries gain and which lose.
At the same time, a kind of faux democracy has invaded capitalism. Politicians and advocates praise companies for acting responsibly or condemn them for not doing so. Yet the praise and blame are disconnected from any laws and rules defining responsible behavior. The message that companies are moral beings with social responsibilities diverts public attention from the task of establishing such laws and rules in the first place. The praise or blame is soon forgotten, and barely affects the behavior of consumers or investors. Meanwhile, the real democratic process is left to companies and industries seeking competitive advantage.
The first step in turning democracy and capitalism right side up is to understand what's really happening.
http://creativecapitalism.typepad.com/creative_capitalism/2008/06/bill-gates-an-1.html
lørdag den 11. oktober 2008
tirsdag den 7. oktober 2008
A Crisis Made in the Oval Office
This is the first time in the history of the United States that the president has sought to provoke a financial panic to get legislation passed through Congress. While this has proven to be a successful political strategy - after the House of Representatives finally passed the bank bail-out plan today - it marks yet another low point in American politics.
It was incredibly irresponsible for George Bush to tell the American people on national television that the country could be facing another Great Depression. By contrast, when we actually were in the Great Depression, President Roosevelt said: "We have nothing to fear, but fear itself."
It was even more irresponsible for President Bush to seize on the decline in the stock market five days later as evidence that his bailout was needed for the economy. President Bush must surely understand, as all economists know, that the daily swings in the stock market are driven by mass psychology and have almost nothing to do with the underlying strength in the economy.
The scare tactics of President Bush, Henry Paulson, the Treasury secretary, and Ben Bernanke, chairman of the Federal Reserve, created sufficient panic, so that by the time of the first vote on the emergency package in Congress, much of the public believed that the defeat of the bail-out may actually have had serious consequences for the economy. Millions of people have changed their behaviour because of this fear, with many pulling money out of bank and money market accounts, and adjusting their financial plans in other ways.
This effort to promote panic is especially striking since the country's dire economic situation is almost entirely the result of the Bush administration's policy failures. First and foremost, the decision of Paulson and Bernanke (and previously Alan Greenspan) to ignore the housing bubble, allowed for the growth of an $8tn bubble, which is now collapsing.
It is the collapse of this bubble - which has already destroyed more than $4tn in housing wealth, and is likely to destroy another $4tn over the next year - that is at the root of the economy's problems. While competent economists were warning of the bubble and the dire consequences of its collapse, the top officials in the Bush administration were celebrating the rise in homeownership rates.
The Bush administration made the crisis even worse by deregulating Wall Street. This led to the huge over-leveraging of financial institutions, which has vastly complicated the country's economic policies. It is especially disturbing that Secretary Paulson personally profited from these policies, earning millions of dollars in compensation from Goldman Sachs during his years there as its chief executive.
The collapse of the housing bubble, while falling short of the magnitude of the Great Depression, is likely to lead to the worst recession since the second world war. Repairing the damage caused by this bubble will be a long and difficult process. Cleaning up the damage to the political system from President Bush's unprecedented fear campaign may prove to be even more difficult.
07/10/08 © Guardian News and Media Limited 2008
It was incredibly irresponsible for George Bush to tell the American people on national television that the country could be facing another Great Depression. By contrast, when we actually were in the Great Depression, President Roosevelt said: "We have nothing to fear, but fear itself."
It was even more irresponsible for President Bush to seize on the decline in the stock market five days later as evidence that his bailout was needed for the economy. President Bush must surely understand, as all economists know, that the daily swings in the stock market are driven by mass psychology and have almost nothing to do with the underlying strength in the economy.
The scare tactics of President Bush, Henry Paulson, the Treasury secretary, and Ben Bernanke, chairman of the Federal Reserve, created sufficient panic, so that by the time of the first vote on the emergency package in Congress, much of the public believed that the defeat of the bail-out may actually have had serious consequences for the economy. Millions of people have changed their behaviour because of this fear, with many pulling money out of bank and money market accounts, and adjusting their financial plans in other ways.
This effort to promote panic is especially striking since the country's dire economic situation is almost entirely the result of the Bush administration's policy failures. First and foremost, the decision of Paulson and Bernanke (and previously Alan Greenspan) to ignore the housing bubble, allowed for the growth of an $8tn bubble, which is now collapsing.
It is the collapse of this bubble - which has already destroyed more than $4tn in housing wealth, and is likely to destroy another $4tn over the next year - that is at the root of the economy's problems. While competent economists were warning of the bubble and the dire consequences of its collapse, the top officials in the Bush administration were celebrating the rise in homeownership rates.
The Bush administration made the crisis even worse by deregulating Wall Street. This led to the huge over-leveraging of financial institutions, which has vastly complicated the country's economic policies. It is especially disturbing that Secretary Paulson personally profited from these policies, earning millions of dollars in compensation from Goldman Sachs during his years there as its chief executive.
The collapse of the housing bubble, while falling short of the magnitude of the Great Depression, is likely to lead to the worst recession since the second world war. Repairing the damage caused by this bubble will be a long and difficult process. Cleaning up the damage to the political system from President Bush's unprecedented fear campaign may prove to be even more difficult.
07/10/08 © Guardian News and Media Limited 2008
Environment: Twisted As Unnaturally as the Banks by Julio Godoy
BARCELONA - The financial meltdown in most of the industrialised world presents an opportunity for a new economic model that would end short-sighted search for high returns, according to leading economists attending the IUCN World Conservation Congress here.
"Right now, the most conservative leaders in the industrialised world, such as George W. Bush of the U.S. and Angela Merkel of Germany are allocating public money to save the banks from bankruptcy," Alejandro Nadal, a Mexican economist attending the congress told IPS.
"This rediscovery of the role of the state as a major actor in economic affairs, and the perspective of a new regulation of international financial transactions opens a window of opportunity to rethink neoliberalism in the developing world," Nadal said.
"This is not only an academic question, it is an extreme political matter," he said. And it can have an environmental dimension, he said. Nadal urged the IUCN to coordinate a global effort among civil society organisations to rethink the role of the state in linking macro-economic and environmental policies.
The IUCN (International Union for Conservation of Nature), organiser of the Barcelona congress that continues until Oct. 15, is the oldest and largest global environmental network, with a membership of more than 1,000 governments and NGOs, and almost 11,000 volunteer scientists in more than 160 countries.
"It is time for civil society and environmental organisations to take the world," Pavan Sukhdev, an Indian economist and co-author of 'The Economics of Ecosystems and Sustainability' told IPS.
Unlike earlier crises such as the stock exchange crash of 1987, or the currency crisis of the 1990s in Latin America, South East Asia and Russia, the present crisis has come amidst a new awareness of the dramatic environmental costs of neo-liberalism, Sukhdev said.
"Back then, most of us had no idea of the environmental crisis lurking in nature. But now we are aware that we cannot go on with this economic model based on the destruction of biodiversity and the abuse of most of humankind.
"Now we have the wind on our backs. And when you have wind in your sails, you sail. Let's sail towards a new economic model, one that respects both nature and humanity, instead of this one that destroys them."
Joan Martínez Alier, professor of economics and economic history at the Autonomous University of Barcelona, said the present economic crisis "will mean a welcome change to the totally unsustainable increase of carbon dioxide (CO2) emissions in the last few years."
Carbon dioxide is considered by scientists to be the principal greenhouse gas arising from the combustion of fossil fuels. Greenhouse gases are thought to cause global warming, and consequently climate change and the decimation of biodiversity.
Alier believes the economic crisis, by reducing industrial and transport activities, offers an opportunity to put the economy on a different trajectory regarding material and energy consumption, and could therefore help reduce greenhouse gas emissions.
"The crisis might also offer an opportunity for restructuring social institutions in industrialised countries, with the objective of living well without the imperative of economic growth," Alier said. "Happiness is not necessarily a function of economic growth, above a certain level of income."
But in developing countries, the economic crisis could damage the environment for the converse reason. Since below a certain income level wellbeing is dependent on economic growth, governments may push economic activity regardless of its environmental costs in order to overcome the economic crisis.
"The global economy could suffer a deep and protracted recession as a consequence of the financial crisis," Argentine economist Alain Cibils told IPS. "As the crisis unfolds, priorities will be put on recovery for growth and employment, and controlling inflation, instead of forestalling climate change. Protecting biodiversity, aquifers and soil erosion may be seen as non-priorities."
Cibils said that the neoliberal economic model applied in Argentina, Brazil, Mexico, and other Latin American countries since the late 1980s has given priority to macroeconomic policies aimed at reducing inflation and fiscal deficits, and increasing export, regardless of social and environmental costs.
"These policies are epitomised in Argentina by intensive year-round agriculture concentrated on a couple of crops such as soybean and maize, and priority to short-term high-returns, very much as in financial globalisation," Cibils said.
The land area cultivated with soybean has more than doubled in Argentina from seven million hectares in 1997 to 16 million hectares in 2008. The land for wheat cultivation has remained constant.
"Soybean growing has taken place in Argentina at the expense of native forests," Cibils said. "Year-round agriculture has produced severe soil nutrient depletion and soil degradation, and a substantial loss of biodiversity."
"Right now, the most conservative leaders in the industrialised world, such as George W. Bush of the U.S. and Angela Merkel of Germany are allocating public money to save the banks from bankruptcy," Alejandro Nadal, a Mexican economist attending the congress told IPS.
"This rediscovery of the role of the state as a major actor in economic affairs, and the perspective of a new regulation of international financial transactions opens a window of opportunity to rethink neoliberalism in the developing world," Nadal said.
"This is not only an academic question, it is an extreme political matter," he said. And it can have an environmental dimension, he said. Nadal urged the IUCN to coordinate a global effort among civil society organisations to rethink the role of the state in linking macro-economic and environmental policies.
The IUCN (International Union for Conservation of Nature), organiser of the Barcelona congress that continues until Oct. 15, is the oldest and largest global environmental network, with a membership of more than 1,000 governments and NGOs, and almost 11,000 volunteer scientists in more than 160 countries.
"It is time for civil society and environmental organisations to take the world," Pavan Sukhdev, an Indian economist and co-author of 'The Economics of Ecosystems and Sustainability' told IPS.
Unlike earlier crises such as the stock exchange crash of 1987, or the currency crisis of the 1990s in Latin America, South East Asia and Russia, the present crisis has come amidst a new awareness of the dramatic environmental costs of neo-liberalism, Sukhdev said.
"Back then, most of us had no idea of the environmental crisis lurking in nature. But now we are aware that we cannot go on with this economic model based on the destruction of biodiversity and the abuse of most of humankind.
"Now we have the wind on our backs. And when you have wind in your sails, you sail. Let's sail towards a new economic model, one that respects both nature and humanity, instead of this one that destroys them."
Joan Martínez Alier, professor of economics and economic history at the Autonomous University of Barcelona, said the present economic crisis "will mean a welcome change to the totally unsustainable increase of carbon dioxide (CO2) emissions in the last few years."
Carbon dioxide is considered by scientists to be the principal greenhouse gas arising from the combustion of fossil fuels. Greenhouse gases are thought to cause global warming, and consequently climate change and the decimation of biodiversity.
Alier believes the economic crisis, by reducing industrial and transport activities, offers an opportunity to put the economy on a different trajectory regarding material and energy consumption, and could therefore help reduce greenhouse gas emissions.
"The crisis might also offer an opportunity for restructuring social institutions in industrialised countries, with the objective of living well without the imperative of economic growth," Alier said. "Happiness is not necessarily a function of economic growth, above a certain level of income."
But in developing countries, the economic crisis could damage the environment for the converse reason. Since below a certain income level wellbeing is dependent on economic growth, governments may push economic activity regardless of its environmental costs in order to overcome the economic crisis.
"The global economy could suffer a deep and protracted recession as a consequence of the financial crisis," Argentine economist Alain Cibils told IPS. "As the crisis unfolds, priorities will be put on recovery for growth and employment, and controlling inflation, instead of forestalling climate change. Protecting biodiversity, aquifers and soil erosion may be seen as non-priorities."
Cibils said that the neoliberal economic model applied in Argentina, Brazil, Mexico, and other Latin American countries since the late 1980s has given priority to macroeconomic policies aimed at reducing inflation and fiscal deficits, and increasing export, regardless of social and environmental costs.
"These policies are epitomised in Argentina by intensive year-round agriculture concentrated on a couple of crops such as soybean and maize, and priority to short-term high-returns, very much as in financial globalisation," Cibils said.
The land area cultivated with soybean has more than doubled in Argentina from seven million hectares in 1997 to 16 million hectares in 2008. The land for wheat cultivation has remained constant.
"Soybean growing has taken place in Argentina at the expense of native forests," Cibils said. "Year-round agriculture has produced severe soil nutrient depletion and soil degradation, and a substantial loss of biodiversity."
Why America's Problem Is Cultural, Not Political by Stephen Gabow
Here are some questions that ask the same thing in different ways. How can McCain/Palin even stand a chance in this election, given the state of the country? Why hasn't "conservative" become a dirty word, given the results of the last 8 (or is it 30) years of conservative rule? How come the Republicans get away with lies, dirty tricks, thievery and gross hypocrisy, over and over again? Why are congressional Democrats so spineless, so deferential around Republicans?
I think the answer is that conservatives and Republicans are more attuned to the American people and to the roots of American culture. I cringe to say this, but somehow deep in our values, hopes and dreams we are primed to be conservative. And the Democrats, being politicians, can sense it; they know it in their heart of hearts.
To begin with, America has been soaked in poisonous homegrown racism for three hundred years. It affects every American child. Yet even aside from that elephant-in-the-room, we have to fight our native culture to maintain a leftist perspective.
Citizens of other countries can draw on their own revered cultural icons to promote rebellion or revolution, or the notion of a social community. In 2004 Canadians voted for "The Greatest Canadian." Tommy Douglas, a socialist and reformer known as Canada's 'father of Medicare,' won the honor. The English have Robert Owen, the French have Emile Zola, the Germans Karl Marx, among many others.
What about the USA, home of revolutionary democracy? Who do we have? Franklin Roosevelt? Joe Hill and Eugene Debs? Martin Luther King? The freedom riders? Elizabeth Staunton and Susan B. Anthony? Mario Savio? Malcolm X? John Brown? Tom Paine? Emma Goldman? With the exception of King and FDR we remember these people only vaguely, if at all. Our founding father heroes have been stripped of their revolutionary content, to emerge in our times as staunch Christian conservatives. Whether Thomas Jefferson was actually an agnostic social revolutionary is not the point; he is perceived as something else.
We love stories about poor boys making it big. Who of us has not dreamt of being a millionaire? We admire and love Bill Gates and Henry Ford by making their lives into stories of good men working hard and earning their wealth and freedom, and by excising anything negative from their stories. Our high school students know that Henry Ford built the first mass-produced automobiles, and that he offered a living wage to his workers. We don't recall, though, that Ford advocated for Hitler and published anti-Semitic crap in his Dearborn Independent.
On TV and radio we are deluged by endless get-rich-quick commercials; one salesman after another hawking his easier, faster way to make "life-changing" money. Or we peek into millionaire mansions, the "cribs" of the rich and famous, the garages full of Ferraris and Rollses. Or we watch the parade of new luxury products. Is greed really good, we wonder? Haven't too many Americans come to believe that making money in itself is a goal worthy of a lifetime's pursuit? In Thailand they talk of "suspiciously wealthy" individuals--people so rich one should be suspicious of how they got it. We have no similar concept.
Who can count the American heroes dispensing justice from their fists or from the barrel of a gun? From John Wayne to Charles Bronson, Dirty Harry to Rambo and the young Vito Corleone, we thrill to our heroes walking tall, carrying a big stick (but preferably a gun, which is much more practical) to right the wrongs of society. They do it pretty much alone. No social action to achieve social justice here.
Rambo invades Vietnam to free American prisoners. Bronson's character fights and kills the evil inner city gangs. They both avoid the incompetent government and corrupt police force. A despicable judicial bureaucracy wrongly stops Dirty Harry from dispensing real justice.
Here we have a righteous vigilante who fights for freedom, and also, of course, his beloved family. The young Michael Corleone does what is necessary to "protect his family." We want to forget he is a gangster and murderer. We want to forget Bronson's character is killing, because he is right to fight evil in any way he can.
In all this there is a strong flavor of the virtuous ends justifying the means. If you have to lie, cheat and kill to achieve the Kingdom of God on earth (the true America), so be it. Sound familiar?
When Rambo blows up a hundred Vietnamese to rescue American prisoners, we know he's only killing bad guys. Bronson's character kills and the bad guys' blood runs in the streets. No innocent victims here!
We can't cheer Rambo in the real world, but we can swear our undying love for our soldiers, somehow forgetting that their messy job involves killing innocents. And when our fighters come up with slogans straight from Rambo, like "killing is our business, and business is good," we shrug.
Americans don't vote for eggheads. I remember Adlai Stevenson running against Eisenhower. Stevenson didn't stand a chance, not least because he was pegged as too intellectual to be President. We prefer our leaders to be plain spoken, practical men who don't think or read too much. A cowboy, maybe. It is hard to think of an American icon, fictional or real, who is an intellectual. Who comes closest? Albert Einstein, Benjamin Franklin, Mark Twain?
I bet John Wayne would be a strong supporter of the Bush administration. He would cheer us on to "victory" in Iraq and Afghanistan. We'd have to respect the opinion of such an American hero. But then we forget that John Wayne was born Marion Morrison, and it is documented that he was a draft dodger during World War II.
Stephen Gabow has been an activist since the Free Speech Movement and is a physical anthropologist, and Professor Emeritus of Anthropology at San Francisco State University.
I think the answer is that conservatives and Republicans are more attuned to the American people and to the roots of American culture. I cringe to say this, but somehow deep in our values, hopes and dreams we are primed to be conservative. And the Democrats, being politicians, can sense it; they know it in their heart of hearts.
To begin with, America has been soaked in poisonous homegrown racism for three hundred years. It affects every American child. Yet even aside from that elephant-in-the-room, we have to fight our native culture to maintain a leftist perspective.
Citizens of other countries can draw on their own revered cultural icons to promote rebellion or revolution, or the notion of a social community. In 2004 Canadians voted for "The Greatest Canadian." Tommy Douglas, a socialist and reformer known as Canada's 'father of Medicare,' won the honor. The English have Robert Owen, the French have Emile Zola, the Germans Karl Marx, among many others.
What about the USA, home of revolutionary democracy? Who do we have? Franklin Roosevelt? Joe Hill and Eugene Debs? Martin Luther King? The freedom riders? Elizabeth Staunton and Susan B. Anthony? Mario Savio? Malcolm X? John Brown? Tom Paine? Emma Goldman? With the exception of King and FDR we remember these people only vaguely, if at all. Our founding father heroes have been stripped of their revolutionary content, to emerge in our times as staunch Christian conservatives. Whether Thomas Jefferson was actually an agnostic social revolutionary is not the point; he is perceived as something else.
We love stories about poor boys making it big. Who of us has not dreamt of being a millionaire? We admire and love Bill Gates and Henry Ford by making their lives into stories of good men working hard and earning their wealth and freedom, and by excising anything negative from their stories. Our high school students know that Henry Ford built the first mass-produced automobiles, and that he offered a living wage to his workers. We don't recall, though, that Ford advocated for Hitler and published anti-Semitic crap in his Dearborn Independent.
On TV and radio we are deluged by endless get-rich-quick commercials; one salesman after another hawking his easier, faster way to make "life-changing" money. Or we peek into millionaire mansions, the "cribs" of the rich and famous, the garages full of Ferraris and Rollses. Or we watch the parade of new luxury products. Is greed really good, we wonder? Haven't too many Americans come to believe that making money in itself is a goal worthy of a lifetime's pursuit? In Thailand they talk of "suspiciously wealthy" individuals--people so rich one should be suspicious of how they got it. We have no similar concept.
Who can count the American heroes dispensing justice from their fists or from the barrel of a gun? From John Wayne to Charles Bronson, Dirty Harry to Rambo and the young Vito Corleone, we thrill to our heroes walking tall, carrying a big stick (but preferably a gun, which is much more practical) to right the wrongs of society. They do it pretty much alone. No social action to achieve social justice here.
Rambo invades Vietnam to free American prisoners. Bronson's character fights and kills the evil inner city gangs. They both avoid the incompetent government and corrupt police force. A despicable judicial bureaucracy wrongly stops Dirty Harry from dispensing real justice.
Here we have a righteous vigilante who fights for freedom, and also, of course, his beloved family. The young Michael Corleone does what is necessary to "protect his family." We want to forget he is a gangster and murderer. We want to forget Bronson's character is killing, because he is right to fight evil in any way he can.
In all this there is a strong flavor of the virtuous ends justifying the means. If you have to lie, cheat and kill to achieve the Kingdom of God on earth (the true America), so be it. Sound familiar?
When Rambo blows up a hundred Vietnamese to rescue American prisoners, we know he's only killing bad guys. Bronson's character kills and the bad guys' blood runs in the streets. No innocent victims here!
We can't cheer Rambo in the real world, but we can swear our undying love for our soldiers, somehow forgetting that their messy job involves killing innocents. And when our fighters come up with slogans straight from Rambo, like "killing is our business, and business is good," we shrug.
Americans don't vote for eggheads. I remember Adlai Stevenson running against Eisenhower. Stevenson didn't stand a chance, not least because he was pegged as too intellectual to be President. We prefer our leaders to be plain spoken, practical men who don't think or read too much. A cowboy, maybe. It is hard to think of an American icon, fictional or real, who is an intellectual. Who comes closest? Albert Einstein, Benjamin Franklin, Mark Twain?
I bet John Wayne would be a strong supporter of the Bush administration. He would cheer us on to "victory" in Iraq and Afghanistan. We'd have to respect the opinion of such an American hero. But then we forget that John Wayne was born Marion Morrison, and it is documented that he was a draft dodger during World War II.
Stephen Gabow has been an activist since the Free Speech Movement and is a physical anthropologist, and Professor Emeritus of Anthropology at San Francisco State University.
This Green Subsidy for Car Makers Is Just a Disguised Corporate Bailout
Having long sabotaged eco-innovations, the motor industry is now demanding billions to cut its carbon emissions
by George Monbiot
While all eyes were fixed on the banking bail-out, a bucketload of public money was quietly sloshed into the pockets of another undeserving cause. Last week, George Bush agreed to lend $25bn to US car manufacturers. It's a soft loan, which will cost the government $7.5bn. Few people noticed; fewer fought it. The House of Representatives approved the measure by 370 votes to 58. The great corporate bail-out is spreading like the plague.
It has already crossed the Atlantic. Yesterday European car makers demanded that the EU hand them €40bn ($54bn) in cheap loans to match the US subsidy. Where will the public spending spree end?
The motor companies in both Europe and the US claim they need these loans to help them go green. They will invest the money in a new generation of environmental technologies, which will allow them to meet the efficiency standards their governments are setting. There is more joy in heaven over one sinner who repents ... but how strange this green enthusiasm seems, now that there's the smell of public money in the air. For the past 10 years the car manufacturers have driven every useful green initiative into the wall.
In 1998 European car makers promised to show that they could cut their greenhouse gases voluntarily. By the end of 2008, they pledged, they would reduce the average emissions produced by their cars from 190 grams of carbon dioxide per kilometre to 140. How well have they done? By the end of last year they had cut average pollution to 158g/km across Europe and 165g/km in the UK: they will miss their target by some 40%.
Discerning, only 10 years too late, that lobby groups' promises are worth as much as a share in Lehman Brothers, in 2006 the European commission announced that it would set compulsory standards: by 2012 all manufacturers would have to reduce their average CO2 emissions to 120g/km. It looked like progress, until you remembered that 120g was the target proposed by the EU in 1994, to be met by 2005. It was repeatedly delayed by industry lobbying.
Last year the 2012 target fell to the same forces. Angela Merkel, lobbying on behalf of companies such as DaimlerChrysler and BMW, demanded that the European commission put the brakes on. (Ironically it was Merkel, as the idealistic young German environment minister, who had first proposed the target of 120g/km by 2005.) The commission agreed to revise the figure to 130g, and to cover the gap by raising the contribution from biofuels. Since then we've seen hard evidence that most biofuels, as well as spreading starvation, produce more greenhouse gases than petrol; but the policy remains unchanged.
Now the pollutocrats are whingeing that they can't meet the 130g target either. A month ago they persuaded the European parliament's industry committee to take up their case: it proposed postponing the target until 2015, reducing the fines if they don't comply, and allowing manufacturers to offset eco-innovations against the target even if these don't actually reduce emissions. These invertebrates, in other words, proposed to grant official approval to industry greenwash. Fortunately this scam was rejected two weeks ago by the parliament's environment committee.
In the US, manufacturers have still not reached the standard (an average of 27.5 miles per gallon) that they were supposed to have met, under the Energy Policy Conservation Act, by 1985. The average car sold in the States today is less efficient than the 1908 Model T Ford.
What makes this dithering so frustrating is that to be talking, in 2008, about targets of 130 or 120g/km is a bit like discussing whether modern computers should have 10 rows of sliding beads or 100. In 1974 a stripped-down 1959 Opel T-1 managed 377 miles to the US gallon (160km/l), which equates to 15 grams of CO2 per kilometre. There is no technical reason why the maximum limit for mass-produced cars shouldn't be 50g/km.
Nor is there a good commercial reason. A poll by the Newspaper Marketing Agency shows that 80% of car buyers say economy is now more important to them than performance. The car industry's technological failure results entirely from lobbying by the companies now demanding public money to go green. They want to squeeze every last drop from existing technologies before switching to better models.
Their sabotage of green technology has been both subtle and comprehensive. The film Who Killed The Electric Car? shows how the manufacturers, working with oil companies and corrupt officials, sank California's attempt to change vehicle technologies. Having bumped off battery power, they persuaded the federal government to pour money instead into hydrogen vehicles, aware that the technological hurdles are so high that a cheap, mass-produced model might never be possible. Electric cars, by contrast, have been ready for the mass market for almost a century. The $1.2bn that the US government is spending on research and development for hydrogen cars - like the €2bn pledged to the same quest by the European Union - is a subsidy for avoiding technological change.
Now, after so much procrastination, the car makers have the flaming cheek to demand public money to pursue the policies they have spent 50 years and millions of dollars crushing. Of course, the "green loans" they are soliciting are nothing of the kind. Funding better environmental performance is simply an excuse for bailing out another failing industry. As a result of the credit crunch and high oil prices, new car registrations in the UK fell by 21% last month. In the US, sales by the major manufacturers have declined this year by between 20 and 35%.
There is no need to spend a penny of public money on greening the motor industry. As a recent report by the House of Commons environmental audit committee shows, you could achieve the same outcome by creating a bigger differential between vehicle tax bands: it proposes that people buying the least efficient cars should pay around £2,000 more per year than those buying the most efficient. This would kill the market for gas guzzlers and force the industry to make the changes it has long resisted.
But the government has taken all the flak a good tax policy would have generated for very little gain. Its controversial new vehicle tax banding will save a mere 0.16 million tonnes of CO2 per year: a drop in the acidifying ocean. At scarcely greater political cost it could have hammered emissions and generated much of the money it needs to revolutionise public transport. Again there has been a great historical slide: between 1920 and 1948 cars were taxed at £1 per horsepower: in real terms (and in some cases in nominal terms) a far higher rate for gas guzzlers than today's.
But subsidies are what governments pay when regulation doesn't happen. If you don't have the guts to force companies to do something, you must bribe them instead. It's a fair guess that European car makers will still fail to meet their environmental targets, even if they get the money they're demanding. The greenest thing governments could do is to allow these foot-dragging, planet-eating spongers to go under.
by George Monbiot
While all eyes were fixed on the banking bail-out, a bucketload of public money was quietly sloshed into the pockets of another undeserving cause. Last week, George Bush agreed to lend $25bn to US car manufacturers. It's a soft loan, which will cost the government $7.5bn. Few people noticed; fewer fought it. The House of Representatives approved the measure by 370 votes to 58. The great corporate bail-out is spreading like the plague.
It has already crossed the Atlantic. Yesterday European car makers demanded that the EU hand them €40bn ($54bn) in cheap loans to match the US subsidy. Where will the public spending spree end?
The motor companies in both Europe and the US claim they need these loans to help them go green. They will invest the money in a new generation of environmental technologies, which will allow them to meet the efficiency standards their governments are setting. There is more joy in heaven over one sinner who repents ... but how strange this green enthusiasm seems, now that there's the smell of public money in the air. For the past 10 years the car manufacturers have driven every useful green initiative into the wall.
In 1998 European car makers promised to show that they could cut their greenhouse gases voluntarily. By the end of 2008, they pledged, they would reduce the average emissions produced by their cars from 190 grams of carbon dioxide per kilometre to 140. How well have they done? By the end of last year they had cut average pollution to 158g/km across Europe and 165g/km in the UK: they will miss their target by some 40%.
Discerning, only 10 years too late, that lobby groups' promises are worth as much as a share in Lehman Brothers, in 2006 the European commission announced that it would set compulsory standards: by 2012 all manufacturers would have to reduce their average CO2 emissions to 120g/km. It looked like progress, until you remembered that 120g was the target proposed by the EU in 1994, to be met by 2005. It was repeatedly delayed by industry lobbying.
Last year the 2012 target fell to the same forces. Angela Merkel, lobbying on behalf of companies such as DaimlerChrysler and BMW, demanded that the European commission put the brakes on. (Ironically it was Merkel, as the idealistic young German environment minister, who had first proposed the target of 120g/km by 2005.) The commission agreed to revise the figure to 130g, and to cover the gap by raising the contribution from biofuels. Since then we've seen hard evidence that most biofuels, as well as spreading starvation, produce more greenhouse gases than petrol; but the policy remains unchanged.
Now the pollutocrats are whingeing that they can't meet the 130g target either. A month ago they persuaded the European parliament's industry committee to take up their case: it proposed postponing the target until 2015, reducing the fines if they don't comply, and allowing manufacturers to offset eco-innovations against the target even if these don't actually reduce emissions. These invertebrates, in other words, proposed to grant official approval to industry greenwash. Fortunately this scam was rejected two weeks ago by the parliament's environment committee.
In the US, manufacturers have still not reached the standard (an average of 27.5 miles per gallon) that they were supposed to have met, under the Energy Policy Conservation Act, by 1985. The average car sold in the States today is less efficient than the 1908 Model T Ford.
What makes this dithering so frustrating is that to be talking, in 2008, about targets of 130 or 120g/km is a bit like discussing whether modern computers should have 10 rows of sliding beads or 100. In 1974 a stripped-down 1959 Opel T-1 managed 377 miles to the US gallon (160km/l), which equates to 15 grams of CO2 per kilometre. There is no technical reason why the maximum limit for mass-produced cars shouldn't be 50g/km.
Nor is there a good commercial reason. A poll by the Newspaper Marketing Agency shows that 80% of car buyers say economy is now more important to them than performance. The car industry's technological failure results entirely from lobbying by the companies now demanding public money to go green. They want to squeeze every last drop from existing technologies before switching to better models.
Their sabotage of green technology has been both subtle and comprehensive. The film Who Killed The Electric Car? shows how the manufacturers, working with oil companies and corrupt officials, sank California's attempt to change vehicle technologies. Having bumped off battery power, they persuaded the federal government to pour money instead into hydrogen vehicles, aware that the technological hurdles are so high that a cheap, mass-produced model might never be possible. Electric cars, by contrast, have been ready for the mass market for almost a century. The $1.2bn that the US government is spending on research and development for hydrogen cars - like the €2bn pledged to the same quest by the European Union - is a subsidy for avoiding technological change.
Now, after so much procrastination, the car makers have the flaming cheek to demand public money to pursue the policies they have spent 50 years and millions of dollars crushing. Of course, the "green loans" they are soliciting are nothing of the kind. Funding better environmental performance is simply an excuse for bailing out another failing industry. As a result of the credit crunch and high oil prices, new car registrations in the UK fell by 21% last month. In the US, sales by the major manufacturers have declined this year by between 20 and 35%.
There is no need to spend a penny of public money on greening the motor industry. As a recent report by the House of Commons environmental audit committee shows, you could achieve the same outcome by creating a bigger differential between vehicle tax bands: it proposes that people buying the least efficient cars should pay around £2,000 more per year than those buying the most efficient. This would kill the market for gas guzzlers and force the industry to make the changes it has long resisted.
But the government has taken all the flak a good tax policy would have generated for very little gain. Its controversial new vehicle tax banding will save a mere 0.16 million tonnes of CO2 per year: a drop in the acidifying ocean. At scarcely greater political cost it could have hammered emissions and generated much of the money it needs to revolutionise public transport. Again there has been a great historical slide: between 1920 and 1948 cars were taxed at £1 per horsepower: in real terms (and in some cases in nominal terms) a far higher rate for gas guzzlers than today's.
But subsidies are what governments pay when regulation doesn't happen. If you don't have the guts to force companies to do something, you must bribe them instead. It's a fair guess that European car makers will still fail to meet their environmental targets, even if they get the money they're demanding. The greenest thing governments could do is to allow these foot-dragging, planet-eating spongers to go under.
Howard M. Wachtel: Some lessons from John Maynard Keynes’ treatise on the Great Depression.
In the midst of the Great Depression in 1935, John Maynard Keynes published The General Theory of Employment, Interest, and Money – his monumental contribution to 20th century political economy. However, if you studied at a major American university graduate program in economics in the past two decades you would probably not have even heard of Keynes and certainly would not have studied his General Theory. This is a gross failure of contemporary economics, because Keynes has direct relevance today.
Take one issue – interest rates. The U.S. Federal Reserve’s policy of lowering interest rates, from 5 and 1/4% in August 2007 to 2% in May 2008, was a grave mistake that could have been avoided if Keynes’ analysis had been part of the Fed’s policy making knowledge. The Fed’s error in interest rate policy was compounded when it followed interest rate reductions that did not work with large infusions of new money into the financial system.
Keynes taught us that when banks and other holders of vast sums of capital have what he called a “preference for liquidity” – a desire to hold cash and not invest it – lowering interest rates will not unlock this liquidity for investment. Instead any infusions of new money by the central bank into the system will simply be stashed away for two reasons: first, the mood of the financial market’s psychology is glum and not conducive to investment because rates of return are perceived to be too low. Second, new money injected will be held as cash in anticipation of a better day, so the new money will be seen as an arsenal to be held until markets improve.
Added to this is the character of this most recent bubble – inflated home prices and their accompanying high-risk financial instruments to insure these bad loans. Lowering interest rates simply poured fuel on the fire by keeping loan rates low, encouraging more imprudent lending and borrowing, and furthering the speculative bubble’s chain of bad debts.
This reasoning is counter-intuitive, but it fits the current paradox of lower interest rates and unprecedented chunks of cash interventions without their anticipated impact. The preference to hoard money by banks reinforced a psychological condition that was confirmed by the failure of the lower interest rates to have their intended effect. Credit markets in today’s language have frozen.
Keynes called this the liquidity trap – the most difficult position for an economy, one that characterized the Japanese economy in the 1990s, and threatens to engulf not only the U.S. but the global economy today.
Take one issue – interest rates. The U.S. Federal Reserve’s policy of lowering interest rates, from 5 and 1/4% in August 2007 to 2% in May 2008, was a grave mistake that could have been avoided if Keynes’ analysis had been part of the Fed’s policy making knowledge. The Fed’s error in interest rate policy was compounded when it followed interest rate reductions that did not work with large infusions of new money into the financial system.
Keynes taught us that when banks and other holders of vast sums of capital have what he called a “preference for liquidity” – a desire to hold cash and not invest it – lowering interest rates will not unlock this liquidity for investment. Instead any infusions of new money by the central bank into the system will simply be stashed away for two reasons: first, the mood of the financial market’s psychology is glum and not conducive to investment because rates of return are perceived to be too low. Second, new money injected will be held as cash in anticipation of a better day, so the new money will be seen as an arsenal to be held until markets improve.
Added to this is the character of this most recent bubble – inflated home prices and their accompanying high-risk financial instruments to insure these bad loans. Lowering interest rates simply poured fuel on the fire by keeping loan rates low, encouraging more imprudent lending and borrowing, and furthering the speculative bubble’s chain of bad debts.
This reasoning is counter-intuitive, but it fits the current paradox of lower interest rates and unprecedented chunks of cash interventions without their anticipated impact. The preference to hoard money by banks reinforced a psychological condition that was confirmed by the failure of the lower interest rates to have their intended effect. Credit markets in today’s language have frozen.
Keynes called this the liquidity trap – the most difficult position for an economy, one that characterized the Japanese economy in the 1990s, and threatens to engulf not only the U.S. but the global economy today.
United Nations Conference on Trade and Development: The Crisis of a Century.
As the financial crisis continues its evolution at dizzying speed, the business model underlying a growing share of financial sector activity has been increasingly discredited. This policy brief suggests that a considerable degree of public intervention is required to avoid greater damage to the financial system and the real economy. It is also imperative to strengthen regulation and increase the transparency of financial instruments and institutions. Overall, macroeconomic policy should aim at avoiding a global recession or even depression. Ultimately, deflation and not inflation may be the main economic policy challenge.
The Crisis of a Century
Starbucks Wastes Millions of Litres of Water A Day
Coffee giant's running-tap policy contradicts its claimed green credentials
by Angela Balakrishnan
Environmental campaigners have attacked Starbucks after the discovery that millions of litres of water are wasted in its coffee shops every day, contradicting its much-boasted green credentials.
[Starbucks signs are seen outside one of its stores in New York July 3, 2008. (Chip East/Reuters)]Starbucks signs are seen outside one of its stores in New York July 3, 2008. (Chip East/Reuters)
An investigation by the Sun revealed that over 23.4m litres of water are poured down the drains of 10,000 outlets worldwide due to a policy of keeping a tap running non-stop.
It is enough daily water for the entire 2 million population of Namibia in Africa, which has severe droughts, or to fill an Olympic pool every 83 minutes.
A single Starbucks tap left running for just over three minutes wastes the amount of water one African needs to survive for a day in drought conditions.
Each Starbucks has a cold tap behind the counter that runs into a sink known as a "dipper well" - used to wash utensils.
Under the company's health and safety rules, staff are banned from turning the water off because management claim that a constant flow of water prevents germs breeding in taps.
Water companies joined green activists in criticising the firm for harming the environment and wasting a vital natural resource. Experts said leaving taps running for hygiene reasons was "nonsense".
Water shortage is one of the world's biggest problems. Australia is in the grip of a seven-year drought - the worst in a century.
In the UK, Starbucks has 698 branches, each open for 13 hours a day. Even a slow tap flows three litres of water a minute, meaning Starbucks in the UK is wasting an estimated 1.63m litres a day - enough to supply Matlock village in Derbyshire.
The running water policy was revealed after a Starbucks executive wrote back to a couple who complained about the tap at their local branch.
Lisa Woolfe, 39, of Cuffley, Hertfordshire, said: "I noticed a small sink behind the counter had its tap running. The assistant said the store was told to keep it running as it cleaned the pipes.
"I could not believe it but when we contacted head office, they confirmed the taps were left on and the water was not recycled.
"It is an absolutely astonishing waste of water, especially for a company which prides itself on its green credentials."
Speaking to staff at Starbucks outlets around the world, the Sun found that many did not use the running tap or even know what it was for.
Peter Robinson, of the environmental charity Waste Watch, said: "Leaving taps running all day is a shocking waste of precious water. And to claim you are doing it for health and safety reasons is bonkers.
"Tap water comes from rivers and groundwater and wasting it can cause great harm to the environment and wildlife. Big companies should set an example."
Jacob Tompkins, of the independent water efficiency agency Water Wise, said: "If they are doing all their basic cleaning procedures, I fail to see why they would need to do this. There are a lot of other ways to stop a build-up of bacteria.
"The chance of a build-up in the spout is extremely remote. And if there is one they're not cleaning the tap properly."
Ian Barker, the head of water resources at the Environment Agency, said: "We are already taking too much water from the environment and are seeing reduced river flows."
A spokeswoman for Starbucks said that the company's water use adhered to the World Health Organisation, US and EU environmental directives for in-store water supply standards. But she acknowledged the company could cut its water use.
She defended its dipper well system, saying the technique was common and accepted in the industry.
"Starbucks' challenge is to balance water conservation with the need for customer safety," the spokeswoman said. "The dipper well system currently in use in Starbucks retail stores ensures that we meet or exceed our own and local health standards."
She said the company had tested alternative methods such as the use of an ice bath but it was not successful. It was considering other alternatives and cut its water use per square foot this year.
Starbucks is known for its campaigns and instore advertising boasting how it gives back to communities and the environment.
In the company's latest corporate social responsibility report, it says: "From promoting conservation in coffee-growing countries to in-store 'green teams' and recycling programs, Starbucks has established high standards for environmental responsibility.
"By taking steps to reduce waste from our operations and recycle, we can preserve the Earth's natural resources and enhance the quality of lives around the globe.
"Starbucks actively seeks opportunities to minimise our environmental impact."
This is not the first time the Seattle-based firm has come under fire over its social and environmental credentials. In 2006, the Guardian reported how the US coffee giant has used its muscle to block an attempt by Ethiopia's farmers to copyright their most famous coffee bean types, denying them potential earnings of up to £47m a year.
As a result, Starbucks negotiated an agreement with the Ethiopian government to give the country more ownership and a better price for its coffee beans.
by Angela Balakrishnan
Environmental campaigners have attacked Starbucks after the discovery that millions of litres of water are wasted in its coffee shops every day, contradicting its much-boasted green credentials.
[Starbucks signs are seen outside one of its stores in New York July 3, 2008. (Chip East/Reuters)]Starbucks signs are seen outside one of its stores in New York July 3, 2008. (Chip East/Reuters)
An investigation by the Sun revealed that over 23.4m litres of water are poured down the drains of 10,000 outlets worldwide due to a policy of keeping a tap running non-stop.
It is enough daily water for the entire 2 million population of Namibia in Africa, which has severe droughts, or to fill an Olympic pool every 83 minutes.
A single Starbucks tap left running for just over three minutes wastes the amount of water one African needs to survive for a day in drought conditions.
Each Starbucks has a cold tap behind the counter that runs into a sink known as a "dipper well" - used to wash utensils.
Under the company's health and safety rules, staff are banned from turning the water off because management claim that a constant flow of water prevents germs breeding in taps.
Water companies joined green activists in criticising the firm for harming the environment and wasting a vital natural resource. Experts said leaving taps running for hygiene reasons was "nonsense".
Water shortage is one of the world's biggest problems. Australia is in the grip of a seven-year drought - the worst in a century.
In the UK, Starbucks has 698 branches, each open for 13 hours a day. Even a slow tap flows three litres of water a minute, meaning Starbucks in the UK is wasting an estimated 1.63m litres a day - enough to supply Matlock village in Derbyshire.
The running water policy was revealed after a Starbucks executive wrote back to a couple who complained about the tap at their local branch.
Lisa Woolfe, 39, of Cuffley, Hertfordshire, said: "I noticed a small sink behind the counter had its tap running. The assistant said the store was told to keep it running as it cleaned the pipes.
"I could not believe it but when we contacted head office, they confirmed the taps were left on and the water was not recycled.
"It is an absolutely astonishing waste of water, especially for a company which prides itself on its green credentials."
Speaking to staff at Starbucks outlets around the world, the Sun found that many did not use the running tap or even know what it was for.
Peter Robinson, of the environmental charity Waste Watch, said: "Leaving taps running all day is a shocking waste of precious water. And to claim you are doing it for health and safety reasons is bonkers.
"Tap water comes from rivers and groundwater and wasting it can cause great harm to the environment and wildlife. Big companies should set an example."
Jacob Tompkins, of the independent water efficiency agency Water Wise, said: "If they are doing all their basic cleaning procedures, I fail to see why they would need to do this. There are a lot of other ways to stop a build-up of bacteria.
"The chance of a build-up in the spout is extremely remote. And if there is one they're not cleaning the tap properly."
Ian Barker, the head of water resources at the Environment Agency, said: "We are already taking too much water from the environment and are seeing reduced river flows."
A spokeswoman for Starbucks said that the company's water use adhered to the World Health Organisation, US and EU environmental directives for in-store water supply standards. But she acknowledged the company could cut its water use.
She defended its dipper well system, saying the technique was common and accepted in the industry.
"Starbucks' challenge is to balance water conservation with the need for customer safety," the spokeswoman said. "The dipper well system currently in use in Starbucks retail stores ensures that we meet or exceed our own and local health standards."
She said the company had tested alternative methods such as the use of an ice bath but it was not successful. It was considering other alternatives and cut its water use per square foot this year.
Starbucks is known for its campaigns and instore advertising boasting how it gives back to communities and the environment.
In the company's latest corporate social responsibility report, it says: "From promoting conservation in coffee-growing countries to in-store 'green teams' and recycling programs, Starbucks has established high standards for environmental responsibility.
"By taking steps to reduce waste from our operations and recycle, we can preserve the Earth's natural resources and enhance the quality of lives around the globe.
"Starbucks actively seeks opportunities to minimise our environmental impact."
This is not the first time the Seattle-based firm has come under fire over its social and environmental credentials. In 2006, the Guardian reported how the US coffee giant has used its muscle to block an attempt by Ethiopia's farmers to copyright their most famous coffee bean types, denying them potential earnings of up to £47m a year.
As a result, Starbucks negotiated an agreement with the Ethiopian government to give the country more ownership and a better price for its coffee beans.
Finanskrisen var fuldkommen forudsigelig
Det overrasker, at den nuværende finanskrise kan komme bag på nogen. Den har været forudsagt i 10 år. Og en endnu større krise venter os inden for de næste fem år.
Informations artikel »Alle spørger hvordan kunne det ske?«, som blev bragt 27-28.september fik mig op af stolen, fordi krisen var fuldstændig forudsigelig. Den blev forudsagt af blandt andre undertegnede for ca. 10 år siden. Og jeg var ikke den eneste. Andre, der har forstand på international finans, har også advaret mod udviklingen, bl.a. George Soros og David Korten.
I 25 år har jeg arbejdet med international finans og været rådgiver for en række banker, forsikringsselskaber, pensionsfonde, m.m., som nu er i store vanskeligheder. Mine erfaringer var baggrunden for min advarsel om en kommende økonomisk nedsmeltning. Lad os begynde med årsagen til den nuværende krise i USA.
Den mest almindelige forklaring, som næsten alle iagttagere nævner, er boligmarkedet, specielt udstedelsen af de såkalde ’subprime’ lån af tvivlsom lødighed.
Men at give subprime lånene skylden for krisen i USA svarer til at give en bakterieinfektion skylden for et AIDS offers død. AIDS ødelægger immunsystemet og udsætter kroppen for en række sygdomme, som alle kunne være den direkte dødsårsag.
Flokmentaliteten styrer
Problemet med det globale finansielle system går langt dybere end til subprime lånene. Det er et systemisk problem på linje med svigt af autoimmun systemet hos mennesker. Finanssystemet er simpelhen skrøbeligt, og på vej mod dets endelige død.
I min bog, I fuld gang (Hovedland 1999), definerede jeg hovedproblemet som »aktionær protektionisme«, men i den engelske version af bogen gik jeg mere i dybden da jeg skrev: »Globalisering er en finansiel katastrofe der bare venter på at ske. Det eneste spørgsmål er hvornår. Det grundlæggende problem kan forstås gennem
følgende seks aspekter:
•Frie kapitalbevægelser over grænserne
•Koncentration af hundreder af billioner dollar i hænderne på få store spillere, der leder efter kortsigtet profit.
•Mangel på likviditet på mange af de markeder, der tiltrækker pengene.
•Flokmentaliteten hos disse investorer.
•Markedernes indbyrdes afhængighed
•Et systemisk behov for at øge risikoen i de speculative investeringer efterhånden i trit med at mulighederne for let profit formindskes.«
En større krise på vej
Den aktuelle krise er drevet hovedsageligt af den udbredte ’grådighed er god’-mentalitet hos topledere i finans og industri. De er mere interesserede i deres personlige bundlinje end i deres ansattes, aktionærers og lokalsamfunds. De tager således enorme risici på vegne af andre, som ender med at betale regningerne.
Men en endnu større krise venter os forude, sandsynligvis inden for fem år, men timingen er usikker. Den næste nedtur vil blive udløst af finansmarkedets erkendelse af alvoren i det såkaldte ’peak oil’-problem, det vil sige det tidspunkt, hvor olieproduktionen topper og går permanent ned med omkring tre pct. om året (fra ca. 2011-2012). Efterspørgslen efter olie vil fortsætte med at stige, bl.a. på grund af Indien og Kina, og oliepriserne vil derfor eksplodere på en måde vi ikke har set før.
’Lokalisering’
Nedgangen i olieproduktion er helt forudsigelig ifølge olie-geologer, hvis hidtidige forudsigelser over 30 år har været uangribelige. De forfærdende konsekvenser af dette fænomen for vores daglige liv overalt er endnu ikke trængt ind i politikernes og finansmarkedernes overoptimistiske bevidsthed. (De to er tæt forbundne). Når det begynder at dæmre vil tingene ske meget hurtigt med panikudsalg af alt, når finansspekulanterne alle styrter mod udgangen på samme tid – jvf. flokmentaliteten. Ødelæggelsen af den virkelige økonomi vil blive irreversibel. Vi vil gå ind i en periode med verdensomspændende negativ vækst på grund af udtømmning af den primære drivkraft bag vores økonomiske vækst i de sidste 150 år: billig olie – uden noget sammenligneligt substitut i syne.
Den gode nyhed er, at ud af dette kaos og enorme lidelser over hele jorden vil der opstå en global civilisation, der er mere på linje med menneskers virkelige behov end finansmarkedernes behov – en udvikling som jeg har kaldt: »lokalisering« eller »an ecovillage future«. Men det er en helt anden historie, som jeg også har skrevet en del om, og som mange over hele verden allerede nu er i gang med at forberede.
Ross Jackson er ph.d. i økonomi (operationsanalyse) og forfatter. Han var selvstandig konsulent i international finans og valutamarkedet i mange år. Ross Jackson er medstifter/formand for den almennyttige forening Gaia Trust og hovedaktionær i Urtekram A/S
Informations artikel »Alle spørger hvordan kunne det ske?«, som blev bragt 27-28.september fik mig op af stolen, fordi krisen var fuldstændig forudsigelig. Den blev forudsagt af blandt andre undertegnede for ca. 10 år siden. Og jeg var ikke den eneste. Andre, der har forstand på international finans, har også advaret mod udviklingen, bl.a. George Soros og David Korten.
I 25 år har jeg arbejdet med international finans og været rådgiver for en række banker, forsikringsselskaber, pensionsfonde, m.m., som nu er i store vanskeligheder. Mine erfaringer var baggrunden for min advarsel om en kommende økonomisk nedsmeltning. Lad os begynde med årsagen til den nuværende krise i USA.
Den mest almindelige forklaring, som næsten alle iagttagere nævner, er boligmarkedet, specielt udstedelsen af de såkalde ’subprime’ lån af tvivlsom lødighed.
Men at give subprime lånene skylden for krisen i USA svarer til at give en bakterieinfektion skylden for et AIDS offers død. AIDS ødelægger immunsystemet og udsætter kroppen for en række sygdomme, som alle kunne være den direkte dødsårsag.
Flokmentaliteten styrer
Problemet med det globale finansielle system går langt dybere end til subprime lånene. Det er et systemisk problem på linje med svigt af autoimmun systemet hos mennesker. Finanssystemet er simpelhen skrøbeligt, og på vej mod dets endelige død.
I min bog, I fuld gang (Hovedland 1999), definerede jeg hovedproblemet som »aktionær protektionisme«, men i den engelske version af bogen gik jeg mere i dybden da jeg skrev: »Globalisering er en finansiel katastrofe der bare venter på at ske. Det eneste spørgsmål er hvornår. Det grundlæggende problem kan forstås gennem
følgende seks aspekter:
•Frie kapitalbevægelser over grænserne
•Koncentration af hundreder af billioner dollar i hænderne på få store spillere, der leder efter kortsigtet profit.
•Mangel på likviditet på mange af de markeder, der tiltrækker pengene.
•Flokmentaliteten hos disse investorer.
•Markedernes indbyrdes afhængighed
•Et systemisk behov for at øge risikoen i de speculative investeringer efterhånden i trit med at mulighederne for let profit formindskes.«
En større krise på vej
Den aktuelle krise er drevet hovedsageligt af den udbredte ’grådighed er god’-mentalitet hos topledere i finans og industri. De er mere interesserede i deres personlige bundlinje end i deres ansattes, aktionærers og lokalsamfunds. De tager således enorme risici på vegne af andre, som ender med at betale regningerne.
Men en endnu større krise venter os forude, sandsynligvis inden for fem år, men timingen er usikker. Den næste nedtur vil blive udløst af finansmarkedets erkendelse af alvoren i det såkaldte ’peak oil’-problem, det vil sige det tidspunkt, hvor olieproduktionen topper og går permanent ned med omkring tre pct. om året (fra ca. 2011-2012). Efterspørgslen efter olie vil fortsætte med at stige, bl.a. på grund af Indien og Kina, og oliepriserne vil derfor eksplodere på en måde vi ikke har set før.
’Lokalisering’
Nedgangen i olieproduktion er helt forudsigelig ifølge olie-geologer, hvis hidtidige forudsigelser over 30 år har været uangribelige. De forfærdende konsekvenser af dette fænomen for vores daglige liv overalt er endnu ikke trængt ind i politikernes og finansmarkedernes overoptimistiske bevidsthed. (De to er tæt forbundne). Når det begynder at dæmre vil tingene ske meget hurtigt med panikudsalg af alt, når finansspekulanterne alle styrter mod udgangen på samme tid – jvf. flokmentaliteten. Ødelæggelsen af den virkelige økonomi vil blive irreversibel. Vi vil gå ind i en periode med verdensomspændende negativ vækst på grund af udtømmning af den primære drivkraft bag vores økonomiske vækst i de sidste 150 år: billig olie – uden noget sammenligneligt substitut i syne.
Den gode nyhed er, at ud af dette kaos og enorme lidelser over hele jorden vil der opstå en global civilisation, der er mere på linje med menneskers virkelige behov end finansmarkedernes behov – en udvikling som jeg har kaldt: »lokalisering« eller »an ecovillage future«. Men det er en helt anden historie, som jeg også har skrevet en del om, og som mange over hele verden allerede nu er i gang med at forberede.
Ross Jackson er ph.d. i økonomi (operationsanalyse) og forfatter. Han var selvstandig konsulent i international finans og valutamarkedet i mange år. Ross Jackson er medstifter/formand for den almennyttige forening Gaia Trust og hovedaktionær i Urtekram A/S
Capitalism Reaches a Crossroads
'Even now, someone somewhere is penning a book with a snappy title The End of Capitalism,' columnist Philip Stephens, associate editor of the Financial Times wrote recently. Not to worry, he continued, that's not about to happen. However, eight days earlier Martin Wolf, associate editor and chief economics commentator at the same paper observed that what was 'until recently, the brave new financial system is melting away before our eyes.' On the night of September 18 members of Congress were summoned to a Capitol Hill conference room where they were told that if they did not act quickly to approve a radical revamp of how the government deals with the economy, capitalism might indeed collapse. That's before President George W. Bush said, 'If money isn't loosened up, this sucker could go down.'
Not to worry, cautioned the editor of the conservative German newspaper Die Weit. 'These are all trials and crises, but they will not spell the end of America's distinctiveness.'
'The country will never convert to socialism, nor will it become a mega-state. Faced with similar circumstances, that might be the response of the pessimistic Europeans. America's culture of optimism - which all too often gets on the Europeans' nerves because they consider it to be naïve and superficial - also has the power to identify a setback as exactly that and not the end of the world,' the paper editorialized. That was a few days before the U.S. Treasury took responsibility for the well-being of distressed financial institutions all over the world.
No, the U.S. is not about to become socialist any time too soon. That alternative has not been placed before the public in a way that could be considered preferable to what we've got. Besides, a system ceases to be when it is replaced by something else. But with each passing day, as the crisis has deepened, it has become more and more obvious that 'unfettered' capitalism and 'market fundamentalism' and the neo-liberal policies they produce are discredited. Indeed, most of the world had rejected them before the current crisis began.
'The globalization agenda has been closely linked with the market fundamentalists - the ideology of free markets and financial liberalization,' economist Joseph Stiglitz told Nathan Gardels on the Huffington Post recently. 'In this crisis, we see the most market- oriented institutions in the most market-oriented economy failing and running to the government for help.' Everyone in the world will say now that this is the end of market fundamentalism.
'In this sense, the fall of Wall Street is for market fundamentalism what the fall of the Berlin Wall was for communism - it tells the world that this way of economic organization turns out not to be sustainable,' said Stiglitz. 'In the end, everyone says, that model doesn't work. This moment is a marker that the claims of financial market liberalization were bogus.'
Conservative commentator and political operative, Newt Gingrich, has come up with the terms 'crony capitalism' and 'bureaucratic capitalism,' both of which he says will be the outcome of the Bush Administration's bailout scheme. The former will mean 'a welfare state for rich investors,' he says, the latter 'salary caps and other government regulatory requirements which would drive the `private' out of `private enterprise'.'
There's a lot of talk out there about the bailout being 'socialism for the rich.' That's all so much seemingly clever rhetoric designed to make a political point, but of no substance. Nothing the Bush Administration is pushing (with the help of a Democratic Congress) bears any resemblance to anything that could remotely be called socialism. In fact, it looks far more like Italy under Mussolini than the USSR under Brezhnev. As truthdig.com columnist Robert Sheer noted last week, 'what is proposed is not the nationalization of private corporations but rather a corporate takeover of government. The marriage of highly concentrated corporate power with an authoritarian state that services the politico-economic elite at the expense of the people is more accurately referred to as `financial fascism'.'
The new Treasury Department fund 'will share many characteristics of the expanding government-sponsored pools known as sovereign funds,' wrote Landon Thomas, Jr. in the New York Times September 23.
'The new fund, assuming it is approved by Congress, could pull the United States deeper into a form of capitalism in which the most powerful financial entities are not risk-happy investment banks, but more cautious state-sponsored entities,' wrote Thomas. 'While not necessarily a third economic way, this general approach presumes that the government - in addition to the private sector - plays a crucial role in deciding how best to deploy a nation's investment capital.'
'This gets to the point of state capitalism and defining what the role of the government is in a free- market economy,' Douglas Rediker, a former investment banker at the New America Foundation in Washington, told Thomas.
'The result of the bailout would be that the government would virtually control many of the largest financial institutions in the country,' wrote Dan La Botz in Monthly Review online. 'The U.S. government and the banks of the country would suddenly be fused - or perhaps entangled would be a better word - into one extremely powerful political-economic entity. While the proposal does not envision state control of the economy as a long-term proposition, merely long enough to save the bankers, still the impact of the current proposals now being debated in Congress will be far-reaching. The American government and the people have suddenly found themselves at a turning point which was not foreseen and for which no one was prepared.'
'If you wanted to devise a name for this approach, you might pick the phrase economist Arnold Kling has used: Progressive Corporatism.,' wrote Times columnist David Brooks the same day. 'We're not entering a phase in which government stands back and lets the chips fall. We're not entering an era when the government pounds the powerful on behalf of the people. We're entering an era of the educated establishment, in which government acts to create a stable - and often oligarchic - framework for capitalist endeavor.'
'After a liberal era and then a conservative era, we're getting a glimpse of what comes next,' wrote Brooks
I can hardy wait.
An inevitable consequence of globalization is that many of the critical problems facing the planet today can only be solved through international cooperation and coordination. These include: climate change and other threats to the biosphere, aids and other infectious diseases, human migration and international finance.
The current economic crisis is an international one yet the recourse chosen by Washington to deal with it globally is to 'press' other countries to adopt measures similar to those adopted in the U.S. Under such circumstances the chance of a collective effort to restructure world capitalism would seem remote, if possible. But the demand for such is out there and how our country responds will go a long way in determining the contours of international affairs for decades to come. One has only to grasp the nature of the remarks at the recent opening of the United National General Assembly to appreciate the seriousness of the challenge.
Last week in New York, one after another, heads-of- state rose to the Assembly rostrum to drive home the message: the 'credit crunch' in the U.S. is much more than a crisis in U.S. banking; it reflects a problem threatening economic devastation across the globe. It requires an international cooperative effort in which diktat, posing as 'leadership', cannot be tolerated. Don't even think about handing the problem to the World Bank or the International Monetary Fund. The UN itself should be the arena for countries to discuss a solution for the global financial crisis, said Brazil's President, Luiz Inacio Lula da Silva: 'The global nature of this crisis means that the solutions we adopt must also be global, and decided upon within legitimate, trusted multilateral forum, with no impositions.'
Arguably some of the strongest remarks to the UN came from the leaders of Latin American countries but the most fundamental challenges came from traditional U.S. allies such as France and Germany. These are capitalist countries and for the foreseeable future will remain so. But they have a strikingly different view of how the international economy should function.
German chancellor, Angela Merkel, even revealed that an attempt had been made to enlist Washington in a collective effort to head off the crisis. At last year's meeting of the major industrial powers, she said, she had - in the world of the New York Times - 'strongly urged both the United States and Britain to be more rigorous in supervising financial activities, and even offered specific proposals to be applied to banks and other institutions.' But the U.S. was unresponsive, she said, while seeming 'to express a certain exasperation that the United States was now asking Europe for help, after inflicting damage on the rest of the world that could have been avoided.'
'At the moment, I don't think Japan needs to launch a program similar to that of the United States,' Japanese Vice Finance Minister Kazuyuki Sugimoto told reporters in Tokyo, while the European Union let it be known that its members would not be putting up money to rescue banks. 'This crisis originated in the
US and is mainly hitting the US,' German Finance Minister Steinbeck said last week. In Europe and Germany, such a package would be 'neither sensible nor necessary.'
The U.S. 'has not only turned away from decades of rhetoric about the virtues of the free market and the dangers of government intervention, but it has also probably undercut future American efforts to promote such policies abroad,' wrote the New York Times' Nelson Schwartz from Paris September 18. And most of the other governments are none to happy about it. Japanese commentators were quick to note that the Treasury bailout is precisely what Washington told them not to try when that country faced an economic crisis only a few years ago. (A condition of help for South Korea when it faced an economic crisis in the 90s was that Seoul not bail out banks and other failing enterprises.)
Last Friday, editors of the center-right German newspaper Allegemeine Zeitung compared the U.S. financial crisis to 911 saying 'this time, the attack on all-American doctrines is not the work of some foreign enemy. It comes from within, from the depths of the system. Largely unobstructed by its own state controls, American capitalism has created its own suicide bomber whose explosives - derivatives - have had an even greater effect than the flying bombs of the jihadists. The whole world - and not just New York - has a new ground zero now - Wall Street.'
French political leaders immediately seized on the latest bailout moves to trumpet their own version of 'economic patriotism.' 'We're not going to accept to pay for the broken dishes of a failed regulation' and a 'corruption of capitalism,' said French Prime Minister Francois Fillon. Nicolas Sarkozy has called for a world to 'learn the lessons of the worst financial crisis since the 1930s.' He proposed to 'moralize' capitalism, freeing it from speculators whom he labeled 'the new terrorists.' Last week, as President Bush went on television to admit the crisis is grave, Sarkozy stoutly defended capitalism but observed that 'A certain idea of globalization is drawing to a close with the end of a financial capitalism that had imposed its logic on the whole economy and contributed to perverting it.'
'The crisis is not a crisis of capitalism,' said Sarkozy. 'It is the crisis of a system that is far from the values of capitalism and betrayed capitalism.'
In 2006, long before there was any acknowledgement of the chaos to come (I put it that way because working people in the U.S. were already facing home foreclosures),when the world's elite gathered at Davos, Switzerland, chancellor Merkel had observed that 'What we have is a completely new balance of power in the world today.'
That too was evident in the General Assembly debate. In prior years no one would have expected Latin American governments to openly challenge Washington and Wall Street's conduct in the international economy. However, over a brief recent period, left-leaning political forces have taken power electorally in a number of countries, having in common a rejection of the exploitative policies of the World Bank and IMF, and the influence of the same 'market fundamentalists' that the Asians are repulsing and who have led the U.S., itself, into the present economic cul-de-sac.
No one was surprised that Cuban first vice-president Jose Ramon Machado Ventura would tell the UN that the drive for profits was increasing poverty and that the current crisis threatened the 'existence of mankind.' 'Fabulous fortunes cannot be wasted while millions are starving and dying of curable diseases,' he said. 'For a large part of the non-aligned nations, the situation is becoming unsustainable. Our nations have paid and will continue to pay the cost and consequences of the irrationality, wastefulness and speculation of a few countries in the...north.'
'The prevailing world order, unjust and uncontained, must be replaced,' Machado Ventura said.
'We don't want to conceive of the idea that the rescue of the dignity of the world's poor does not have the same priority or the same urgency of saving the institutions that operate the most powerful financial centre in the world,' said Dominican Republic president Leonel Fernandez. 'We need an international financial plan that is as urgent and as bold as the one to save Freddie Mac, Fannie Mae, Bear Stearns, Merrill Lynch and American International Group.' Fernandez added that while $700 billion is being set aside to rescue U.S. financial institutions, for something like $50 billion millions around the world could be spared a miserable existence.
'We're not going to accept to pay for the broken dishes of a failed regulation' and a 'corruption of capitalism,' said French Prime Minister Francois Fillon. Sarkozy called for a world to 'learn the lessons of the worst financial crisis since the 1930s.' 'Let's create a regulated capitalism,' he said.
On September 24 in Berlin, German Finance Steinbruck repeated Merkel's charge that Washington had, last year, resisted specific calls for regulations in the financial marketplace. 'Crisis management alone will not rebuild the lost confidence,' he said. 'We must civilize financial markets, and not just through moral appeals against excess and speculation. Self-regulation is no longer sufficient.' The US belief in 'laisser- faire capitalism; the notion that markets should be as free as possible from regulation; these arguments were wrong and dangerous,' he said. 'This largely under- regulated system is collapsing today.'
Steinbeck went on to propose new regulations and said that amid the current economic crisis the US is poised to lose its role as a global financial 'superpower.' The new world will become 'multipolar' with the emergence of stronger, better capitalized centers in Asia and Europe, he said.
Meanwhile, Oskar Lafontaine, leader of Germany's fast growing and increasingly influential Left Party, said the world is confronted with more than a banking or economic crisis and - in the words of Der Spiegel - 'but rather one of the entire intellectual and moral direction of Western society.' 'We no longer have a social market economy because of the regimes of the international financial markets,' Lafontaine said the consequence of which is increased privatization of the social services and a threat to the retirement security of millions of people. Lafontaine said the Left party wants the re-creation of a Bretton Woods-style system of foreign exchange controls with fixed trading bands, controls on international capital flows and on financial products.
'We believe that financial products should be forced to get official stamps of approval just like pharmaceutical products,' Lafontaine, the former head of the country's Social Democratic Party, said. 'Because the bitter truth is that many extremely greedy bankers don't even understand themselves what they've done. These are people who started something without knowing what they were doing and it's ended in disaster.'
'When enough banks have been nationalized or gone bust, when the last reputations have been properly shredded, and when prices of Fifth Avenue apartments and Mayfair town houses have fallen finally to earth, politicians are going to have to think hard about the lessons of the financial crash of 2008,' wrote Stephens of the Financial Times. 'Even now, someone somewhere is penning The End of Capitalism. Experience tells us snappy book titles should be treated with caution. The global financial system will never be the same again. But just as history survived the collapse of communism, so the market economy will weather the demise of Bear Stearns, Lehman, Merrill Lynch and HBOS.'
'The credit crunch and the financial firestorm have also provided a neat metaphor for the big shift in economic power in the world,' writes Stephens. He goes on to endorse the call for 'more global governance: credible international rules.'
'Capitalism will survive these financial shocks,' said Stephens. Probably it will; in any case it's good to have faith.
On Monday, the House of Representatives voted down the final draft of the bailout plan hurriedly crafted by the Administration and Congressional leaders from the two major parties. This set the stage for what was certain to be desperate attempts to put together a compromise that could win legislative approval. This takes place against a backdrop of widespread public opposition to the original plan and ever greater turmoil in the foreign money markets and on Wall Street.
Meanwhile, the dangers and challenges over the next few weeks and months are enormous. On the world scene, the U.S. could join in an international - and more democratic - effort at reconstructing capitalism in an effort to save it, or the White House - whoever lives there - and the Congress could lead us along a path of international isolation in which the rest of the world goes about its business, leaving us in economic mire. On the home front, the policymakers could enshrine a new form of corporate and more authoritarian capitalism or enact policies bent toward greater equality, solidarity and social and economic justice (things real socialists have never ceased advocating). The latter is what we should be insisting upon.
Not to worry, cautioned the editor of the conservative German newspaper Die Weit. 'These are all trials and crises, but they will not spell the end of America's distinctiveness.'
'The country will never convert to socialism, nor will it become a mega-state. Faced with similar circumstances, that might be the response of the pessimistic Europeans. America's culture of optimism - which all too often gets on the Europeans' nerves because they consider it to be naïve and superficial - also has the power to identify a setback as exactly that and not the end of the world,' the paper editorialized. That was a few days before the U.S. Treasury took responsibility for the well-being of distressed financial institutions all over the world.
No, the U.S. is not about to become socialist any time too soon. That alternative has not been placed before the public in a way that could be considered preferable to what we've got. Besides, a system ceases to be when it is replaced by something else. But with each passing day, as the crisis has deepened, it has become more and more obvious that 'unfettered' capitalism and 'market fundamentalism' and the neo-liberal policies they produce are discredited. Indeed, most of the world had rejected them before the current crisis began.
'The globalization agenda has been closely linked with the market fundamentalists - the ideology of free markets and financial liberalization,' economist Joseph Stiglitz told Nathan Gardels on the Huffington Post recently. 'In this crisis, we see the most market- oriented institutions in the most market-oriented economy failing and running to the government for help.' Everyone in the world will say now that this is the end of market fundamentalism.
'In this sense, the fall of Wall Street is for market fundamentalism what the fall of the Berlin Wall was for communism - it tells the world that this way of economic organization turns out not to be sustainable,' said Stiglitz. 'In the end, everyone says, that model doesn't work. This moment is a marker that the claims of financial market liberalization were bogus.'
Conservative commentator and political operative, Newt Gingrich, has come up with the terms 'crony capitalism' and 'bureaucratic capitalism,' both of which he says will be the outcome of the Bush Administration's bailout scheme. The former will mean 'a welfare state for rich investors,' he says, the latter 'salary caps and other government regulatory requirements which would drive the `private' out of `private enterprise'.'
There's a lot of talk out there about the bailout being 'socialism for the rich.' That's all so much seemingly clever rhetoric designed to make a political point, but of no substance. Nothing the Bush Administration is pushing (with the help of a Democratic Congress) bears any resemblance to anything that could remotely be called socialism. In fact, it looks far more like Italy under Mussolini than the USSR under Brezhnev. As truthdig.com columnist Robert Sheer noted last week, 'what is proposed is not the nationalization of private corporations but rather a corporate takeover of government. The marriage of highly concentrated corporate power with an authoritarian state that services the politico-economic elite at the expense of the people is more accurately referred to as `financial fascism'.'
The new Treasury Department fund 'will share many characteristics of the expanding government-sponsored pools known as sovereign funds,' wrote Landon Thomas, Jr. in the New York Times September 23.
'The new fund, assuming it is approved by Congress, could pull the United States deeper into a form of capitalism in which the most powerful financial entities are not risk-happy investment banks, but more cautious state-sponsored entities,' wrote Thomas. 'While not necessarily a third economic way, this general approach presumes that the government - in addition to the private sector - plays a crucial role in deciding how best to deploy a nation's investment capital.'
'This gets to the point of state capitalism and defining what the role of the government is in a free- market economy,' Douglas Rediker, a former investment banker at the New America Foundation in Washington, told Thomas.
'The result of the bailout would be that the government would virtually control many of the largest financial institutions in the country,' wrote Dan La Botz in Monthly Review online. 'The U.S. government and the banks of the country would suddenly be fused - or perhaps entangled would be a better word - into one extremely powerful political-economic entity. While the proposal does not envision state control of the economy as a long-term proposition, merely long enough to save the bankers, still the impact of the current proposals now being debated in Congress will be far-reaching. The American government and the people have suddenly found themselves at a turning point which was not foreseen and for which no one was prepared.'
'If you wanted to devise a name for this approach, you might pick the phrase economist Arnold Kling has used: Progressive Corporatism.,' wrote Times columnist David Brooks the same day. 'We're not entering a phase in which government stands back and lets the chips fall. We're not entering an era when the government pounds the powerful on behalf of the people. We're entering an era of the educated establishment, in which government acts to create a stable - and often oligarchic - framework for capitalist endeavor.'
'After a liberal era and then a conservative era, we're getting a glimpse of what comes next,' wrote Brooks
I can hardy wait.
An inevitable consequence of globalization is that many of the critical problems facing the planet today can only be solved through international cooperation and coordination. These include: climate change and other threats to the biosphere, aids and other infectious diseases, human migration and international finance.
The current economic crisis is an international one yet the recourse chosen by Washington to deal with it globally is to 'press' other countries to adopt measures similar to those adopted in the U.S. Under such circumstances the chance of a collective effort to restructure world capitalism would seem remote, if possible. But the demand for such is out there and how our country responds will go a long way in determining the contours of international affairs for decades to come. One has only to grasp the nature of the remarks at the recent opening of the United National General Assembly to appreciate the seriousness of the challenge.
Last week in New York, one after another, heads-of- state rose to the Assembly rostrum to drive home the message: the 'credit crunch' in the U.S. is much more than a crisis in U.S. banking; it reflects a problem threatening economic devastation across the globe. It requires an international cooperative effort in which diktat, posing as 'leadership', cannot be tolerated. Don't even think about handing the problem to the World Bank or the International Monetary Fund. The UN itself should be the arena for countries to discuss a solution for the global financial crisis, said Brazil's President, Luiz Inacio Lula da Silva: 'The global nature of this crisis means that the solutions we adopt must also be global, and decided upon within legitimate, trusted multilateral forum, with no impositions.'
Arguably some of the strongest remarks to the UN came from the leaders of Latin American countries but the most fundamental challenges came from traditional U.S. allies such as France and Germany. These are capitalist countries and for the foreseeable future will remain so. But they have a strikingly different view of how the international economy should function.
German chancellor, Angela Merkel, even revealed that an attempt had been made to enlist Washington in a collective effort to head off the crisis. At last year's meeting of the major industrial powers, she said, she had - in the world of the New York Times - 'strongly urged both the United States and Britain to be more rigorous in supervising financial activities, and even offered specific proposals to be applied to banks and other institutions.' But the U.S. was unresponsive, she said, while seeming 'to express a certain exasperation that the United States was now asking Europe for help, after inflicting damage on the rest of the world that could have been avoided.'
'At the moment, I don't think Japan needs to launch a program similar to that of the United States,' Japanese Vice Finance Minister Kazuyuki Sugimoto told reporters in Tokyo, while the European Union let it be known that its members would not be putting up money to rescue banks. 'This crisis originated in the
US and is mainly hitting the US,' German Finance Minister Steinbeck said last week. In Europe and Germany, such a package would be 'neither sensible nor necessary.'
The U.S. 'has not only turned away from decades of rhetoric about the virtues of the free market and the dangers of government intervention, but it has also probably undercut future American efforts to promote such policies abroad,' wrote the New York Times' Nelson Schwartz from Paris September 18. And most of the other governments are none to happy about it. Japanese commentators were quick to note that the Treasury bailout is precisely what Washington told them not to try when that country faced an economic crisis only a few years ago. (A condition of help for South Korea when it faced an economic crisis in the 90s was that Seoul not bail out banks and other failing enterprises.)
Last Friday, editors of the center-right German newspaper Allegemeine Zeitung compared the U.S. financial crisis to 911 saying 'this time, the attack on all-American doctrines is not the work of some foreign enemy. It comes from within, from the depths of the system. Largely unobstructed by its own state controls, American capitalism has created its own suicide bomber whose explosives - derivatives - have had an even greater effect than the flying bombs of the jihadists. The whole world - and not just New York - has a new ground zero now - Wall Street.'
French political leaders immediately seized on the latest bailout moves to trumpet their own version of 'economic patriotism.' 'We're not going to accept to pay for the broken dishes of a failed regulation' and a 'corruption of capitalism,' said French Prime Minister Francois Fillon. Nicolas Sarkozy has called for a world to 'learn the lessons of the worst financial crisis since the 1930s.' He proposed to 'moralize' capitalism, freeing it from speculators whom he labeled 'the new terrorists.' Last week, as President Bush went on television to admit the crisis is grave, Sarkozy stoutly defended capitalism but observed that 'A certain idea of globalization is drawing to a close with the end of a financial capitalism that had imposed its logic on the whole economy and contributed to perverting it.'
'The crisis is not a crisis of capitalism,' said Sarkozy. 'It is the crisis of a system that is far from the values of capitalism and betrayed capitalism.'
In 2006, long before there was any acknowledgement of the chaos to come (I put it that way because working people in the U.S. were already facing home foreclosures),when the world's elite gathered at Davos, Switzerland, chancellor Merkel had observed that 'What we have is a completely new balance of power in the world today.'
That too was evident in the General Assembly debate. In prior years no one would have expected Latin American governments to openly challenge Washington and Wall Street's conduct in the international economy. However, over a brief recent period, left-leaning political forces have taken power electorally in a number of countries, having in common a rejection of the exploitative policies of the World Bank and IMF, and the influence of the same 'market fundamentalists' that the Asians are repulsing and who have led the U.S., itself, into the present economic cul-de-sac.
No one was surprised that Cuban first vice-president Jose Ramon Machado Ventura would tell the UN that the drive for profits was increasing poverty and that the current crisis threatened the 'existence of mankind.' 'Fabulous fortunes cannot be wasted while millions are starving and dying of curable diseases,' he said. 'For a large part of the non-aligned nations, the situation is becoming unsustainable. Our nations have paid and will continue to pay the cost and consequences of the irrationality, wastefulness and speculation of a few countries in the...north.'
'The prevailing world order, unjust and uncontained, must be replaced,' Machado Ventura said.
'We don't want to conceive of the idea that the rescue of the dignity of the world's poor does not have the same priority or the same urgency of saving the institutions that operate the most powerful financial centre in the world,' said Dominican Republic president Leonel Fernandez. 'We need an international financial plan that is as urgent and as bold as the one to save Freddie Mac, Fannie Mae, Bear Stearns, Merrill Lynch and American International Group.' Fernandez added that while $700 billion is being set aside to rescue U.S. financial institutions, for something like $50 billion millions around the world could be spared a miserable existence.
'We're not going to accept to pay for the broken dishes of a failed regulation' and a 'corruption of capitalism,' said French Prime Minister Francois Fillon. Sarkozy called for a world to 'learn the lessons of the worst financial crisis since the 1930s.' 'Let's create a regulated capitalism,' he said.
On September 24 in Berlin, German Finance Steinbruck repeated Merkel's charge that Washington had, last year, resisted specific calls for regulations in the financial marketplace. 'Crisis management alone will not rebuild the lost confidence,' he said. 'We must civilize financial markets, and not just through moral appeals against excess and speculation. Self-regulation is no longer sufficient.' The US belief in 'laisser- faire capitalism; the notion that markets should be as free as possible from regulation; these arguments were wrong and dangerous,' he said. 'This largely under- regulated system is collapsing today.'
Steinbeck went on to propose new regulations and said that amid the current economic crisis the US is poised to lose its role as a global financial 'superpower.' The new world will become 'multipolar' with the emergence of stronger, better capitalized centers in Asia and Europe, he said.
Meanwhile, Oskar Lafontaine, leader of Germany's fast growing and increasingly influential Left Party, said the world is confronted with more than a banking or economic crisis and - in the words of Der Spiegel - 'but rather one of the entire intellectual and moral direction of Western society.' 'We no longer have a social market economy because of the regimes of the international financial markets,' Lafontaine said the consequence of which is increased privatization of the social services and a threat to the retirement security of millions of people. Lafontaine said the Left party wants the re-creation of a Bretton Woods-style system of foreign exchange controls with fixed trading bands, controls on international capital flows and on financial products.
'We believe that financial products should be forced to get official stamps of approval just like pharmaceutical products,' Lafontaine, the former head of the country's Social Democratic Party, said. 'Because the bitter truth is that many extremely greedy bankers don't even understand themselves what they've done. These are people who started something without knowing what they were doing and it's ended in disaster.'
'When enough banks have been nationalized or gone bust, when the last reputations have been properly shredded, and when prices of Fifth Avenue apartments and Mayfair town houses have fallen finally to earth, politicians are going to have to think hard about the lessons of the financial crash of 2008,' wrote Stephens of the Financial Times. 'Even now, someone somewhere is penning The End of Capitalism. Experience tells us snappy book titles should be treated with caution. The global financial system will never be the same again. But just as history survived the collapse of communism, so the market economy will weather the demise of Bear Stearns, Lehman, Merrill Lynch and HBOS.'
'The credit crunch and the financial firestorm have also provided a neat metaphor for the big shift in economic power in the world,' writes Stephens. He goes on to endorse the call for 'more global governance: credible international rules.'
'Capitalism will survive these financial shocks,' said Stephens. Probably it will; in any case it's good to have faith.
On Monday, the House of Representatives voted down the final draft of the bailout plan hurriedly crafted by the Administration and Congressional leaders from the two major parties. This set the stage for what was certain to be desperate attempts to put together a compromise that could win legislative approval. This takes place against a backdrop of widespread public opposition to the original plan and ever greater turmoil in the foreign money markets and on Wall Street.
Meanwhile, the dangers and challenges over the next few weeks and months are enormous. On the world scene, the U.S. could join in an international - and more democratic - effort at reconstructing capitalism in an effort to save it, or the White House - whoever lives there - and the Congress could lead us along a path of international isolation in which the rest of the world goes about its business, leaving us in economic mire. On the home front, the policymakers could enshrine a new form of corporate and more authoritarian capitalism or enact policies bent toward greater equality, solidarity and social and economic justice (things real socialists have never ceased advocating). The latter is what we should be insisting upon.
Learning from the 1929 recession
Learning from the 1929 recession
October 7th, 2008 · 2 Comments
Barry K Gills
The British economist Alfred Marshall said (apparently to his followers) “Use the mathematics- then burn it!” Advice that has since too often tended to be forgotten by those who pretend to have a ’scientific’ mathematical economics that encompasses economic reality.
Another line of discussion reopened today in the Financial Times- as Tony Jackson commented on his recent reading of Kindleberger’s ‘The World in Depression: 1929-1939′ - where he follows Kindleberger’s ‘explanation’ that ‘the market collapse that began in 1929 was in response to a recession which had already started’. Whereas this time ‘the recession is following the collapse’.
While this begs a ‘chicken and egg’ debate- (and also rehearses Kindleberger’s thesis that the capitalist system requires a single stabiliser- ie a global hegemon- like the US- to set things right) it also goes directly contrary to the explanation given by John Kenneth Galbraith in ‘The Great Crash- 1929.’
He argued that the stock market crash was mainly the result of a previous long and excessive ’speculative orgy’ in the stock markets- which had become a general cultural mentality in America to perhaps an unprecedented degree- ( a super-bubble) and not due to a recession already in train- and that the stock market crash and the inaction by governemnts, treasuries and central banks to take effective remedial actions led to the crash becoming a prolonged and deep depression.
Galbraith also concludes in his chapter on ‘Cause and Consequence’ that the American economy in 1929 was however ‘fundamentally unsound’ and lists ‘five weaknesses’ that had an ‘especially intimate bearing on the ensuing disaster’.
These five weaknesses were:
1. The bad distribution of income (ie extreme polarisation of wealth in US, with a few ever richer rich and a mass of working poor)
2. The bad corporate structure (replete with swindlers frauds, promoters, and a ‘flood tide of corporate larceny’; holding companies and investment trusts
3. The bad banking structure (inherently weak, large number of small units (unlike today- small no of large units). Galbraith notes how falling income and employment fed falling values and this fed bank failures- in a domino effect where the weak brought down both the other weak as well as the strong banks
4. The dubious state of the foreign balance- in this case a US trade surplus and US banking loans to deficit trade partners to cover their payments to the US, and subsequent default on these loans
5. The poor state of economic intelligence- where the economists and ideas in late 20s and early 30s ‘were almost uniquely perverse’ and in the aftermath of the crash ‘the burden of reputable economic advice was invariably on the side of measures that would make things worse (partly out of a historical and misguided fear of inflation)
It seems to me quite apparent that comparisons between the great depression and the present crisis are instructive at miniumum and that there are parallels in several of the key patterns- where we ought to also look to analyse the ’solutions’ - since mere financial reregulation will surely NOT be the complete answer to such ‘fundamentally unsound’ economic foundations. Our research needs to focus on these matters with urgency and seriousness of purpose- as ‘lessons’ from the 30s are useful indeed.
October 7th, 2008 · 2 Comments
Barry K Gills
The British economist Alfred Marshall said (apparently to his followers) “Use the mathematics- then burn it!” Advice that has since too often tended to be forgotten by those who pretend to have a ’scientific’ mathematical economics that encompasses economic reality.
Another line of discussion reopened today in the Financial Times- as Tony Jackson commented on his recent reading of Kindleberger’s ‘The World in Depression: 1929-1939′ - where he follows Kindleberger’s ‘explanation’ that ‘the market collapse that began in 1929 was in response to a recession which had already started’. Whereas this time ‘the recession is following the collapse’.
While this begs a ‘chicken and egg’ debate- (and also rehearses Kindleberger’s thesis that the capitalist system requires a single stabiliser- ie a global hegemon- like the US- to set things right) it also goes directly contrary to the explanation given by John Kenneth Galbraith in ‘The Great Crash- 1929.’
He argued that the stock market crash was mainly the result of a previous long and excessive ’speculative orgy’ in the stock markets- which had become a general cultural mentality in America to perhaps an unprecedented degree- ( a super-bubble) and not due to a recession already in train- and that the stock market crash and the inaction by governemnts, treasuries and central banks to take effective remedial actions led to the crash becoming a prolonged and deep depression.
Galbraith also concludes in his chapter on ‘Cause and Consequence’ that the American economy in 1929 was however ‘fundamentally unsound’ and lists ‘five weaknesses’ that had an ‘especially intimate bearing on the ensuing disaster’.
These five weaknesses were:
1. The bad distribution of income (ie extreme polarisation of wealth in US, with a few ever richer rich and a mass of working poor)
2. The bad corporate structure (replete with swindlers frauds, promoters, and a ‘flood tide of corporate larceny’; holding companies and investment trusts
3. The bad banking structure (inherently weak, large number of small units (unlike today- small no of large units). Galbraith notes how falling income and employment fed falling values and this fed bank failures- in a domino effect where the weak brought down both the other weak as well as the strong banks
4. The dubious state of the foreign balance- in this case a US trade surplus and US banking loans to deficit trade partners to cover their payments to the US, and subsequent default on these loans
5. The poor state of economic intelligence- where the economists and ideas in late 20s and early 30s ‘were almost uniquely perverse’ and in the aftermath of the crash ‘the burden of reputable economic advice was invariably on the side of measures that would make things worse (partly out of a historical and misguided fear of inflation)
It seems to me quite apparent that comparisons between the great depression and the present crisis are instructive at miniumum and that there are parallels in several of the key patterns- where we ought to also look to analyse the ’solutions’ - since mere financial reregulation will surely NOT be the complete answer to such ‘fundamentally unsound’ economic foundations. Our research needs to focus on these matters with urgency and seriousness of purpose- as ‘lessons’ from the 30s are useful indeed.
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