Describing how ideology, special-interest pressure, populist politics, and sheer incompetence have left the U.S. economy on life support, the author puts forth a clear, commonsense plan to reverse the Bush-era follies and regain America’s economic sanity.
by Joseph E. Stiglitz November 2008
When the American economy enters a downturn, you often hear the experts debating whether it is likely to be V-shaped (short and sharp) or U-shaped (longer but milder). Today, the American economy may be entering a downturn that is best described as L-shaped. It is in a very low place indeed, and likely to remain there for some time to come.
Virtually all the indicators look grim. Inflation is running at an annual rate of nearly 6 percent, its highest level in 17 years. Unemployment stands at 6 percent; there has been no net job growth in the private sector for almost a year. Housing prices have fallen faster than at any time in memory—in Florida and California, by 30 percent or more. Banks are reporting record losses, only months after their executives walked off with record bonuses as their reward. President Bush inherited a $128 billion budget surplus from Bill Clinton; this year the federal government announced the second-largest budget deficit ever reported. During the eight years of the Bush administration, the national debt has increased by more than 65 percent, to nearly $10 trillion (to which the debts of Freddie Mac and Fannie Mae should now be added, according to the Congressional Budget Office). Meanwhile, we are saddled with the cost of two wars. The price tag for the one in Iraq alone will, by my estimate, ultimately exceed $3 trillion.
Joseph E. Stiglitz
The $3 Trillion War, April 2008 (with Linda J. Bilmes)
The Economic Consequences of Mr. Bush, December 2007
This tangled knot of problems will be difficult to unravel. Standard prescriptions call for raising interest rates when confronted with inflation, just as standard prescriptions call for lowering interest rates when confronted with an economic downturn. How do you do both at the same time? Not in the way that some politicians have proposed. With gasoline prices at all-time highs, John McCain has called for a rollback of gas taxes. But that would lead to more gas consumption, raise the price of gas further, increase our dependence on foreign oil, and expand our already massive trade deficit. The expanding deficit would in turn force the U.S. to continue borrowing gargantuan sums from abroad, making us even more indebted. At the same time, the higher imports of oil and petroleum-based products would lead to a weaker dollar, fueling inflationary pressures.
Millions of Americans are losing their homes. (Already, some 3.6 million have done so since the subprime-mortgage crisis began.) This social catastrophe has severe economic effects. The banks and other financial institutions that own these mortgages face stunning reverses; a few, such as Bear Stearns, have already gone belly-up. To prevent America’s $5.2 trillion home financiers, Fannie Mae and Freddie Mac, from following suit, Congress authorized a blank check to cover their losses, but even that generosity failed to do the trick. Now the administration has taken over the two entities completely, a stunning feat for a supposedly market-oriented regime. These bailouts contribute to growing deficits in the short run, and to perverse incentives in the long run. Market economies work only when there is a system of accountability, but C.E.O.’s, investors, and creditors are walking away with billions, while American taxpayers are being asked to pick up the tab. (Freddie Mac’s chairman, Richard Syron, earned $14.5 million in 2007. Fannie Mae’s C.E.O., Daniel Mudd, earned $14.2 million that same year.) We’re looking at a new form of public-private partnership, one in which the public shoulders all the risk, and the private sector gets all the profit. While the Bush administration preaches responsibility, the words are addressed only to the less well-off. The administration talks about the impact of “moral hazard” on the poor “speculator” who borrowed money and bought a house beyond his ability to pay. But moral hazard somehow isn’t an issue when it comes to the high-stakes speculators in corporate boardrooms.
How Did We Get into This Mess?
A unique combination of ideology, special-interest pressure, populist politics, bad economics, and sheer incompetence has brought us to our present condition.
Ideology proclaimed that markets were always good and government always bad. While George W. Bush has done as much as he can to ensure that government lives up to that reputation—it is the one area where he has overperformed—the fact is that key problems facing our society cannot be addressed without an effective government, whether it’s maintaining national security or protecting the environment. Our economy rests on public investments in technology, such as the Internet. While Bush’s ideology led him to underestimate the importance of government, it also led him to underestimate the limitations of markets. We learned from the Depression that markets are not self-adjusting—at least, not in a time frame that matters to living people. Today everyone—even the president—accepts the need for macro-economic policy, for government to try to maintain the economy at near-full employment. But in a sleight of hand, free-market economists promoted the idea that, once the economy was restored to full employment, markets would always allocate resources efficiently. The best regulation, in their view, was no regulation at all, and if that didn’t sell, then “self-regulation” was almost as good.
The underlying idea was, on the face of it, absurd: that market failures come only in macro doses, in the form of the recessions and depressions that have periodically plagued capitalist economies for the past several hundred years. Isn’t it more reasonable to assume that these failures are just the tip of the iceberg? That beneath the surface lie a myriad of smaller but harder-to-assess inefficiencies? Let me venture an analogy from biology: A patient arrives at a hospital in serious condition. Now, it may be that the patient has simply fallen victim to one of those debilitating ailments that go around from time to time and can be cured by a massive dose of antibiotics. In this case we have a macro problem with a macro solution. But it could instead be that the patient is suffering from a decade of serious abuse—smoking, drinking, overeating, lack of exercise, a fondness for crystal meth—and that it has not only taken a catastrophic toll but also left him open to opportunistic infections of every kind. In other words, a buildup of micro problems has led to a macro problem, and no cure is possible without addressing the underlying issues. The American economy today is a patient of the second kind.
We are in the midst of micro-economic failure on a grand scale. Financial markets receive generous compensation—in the form of more than 30 percent of all corporate profits—presumably for performing two critical tasks: allocating savings and managing risk. But the financial markets have failed laughably at both. Hundreds of billions of dollars were allocated to home loans beyond Americans’ ability to pay. And rather than managing risk, the financial markets created more risk. The failure of our financial system to do what it is supposed to do matches in destructive grandeur the macro-economic failures of the Great Depression.
Economic theory—and historical experience—long ago proved the need for regulation of financial markets. But ever since the Reagan presidency, deregulation has been the prevailing religion. Never mind that the few times “free banking” has been tried—most recently in Pinochet’s Chile, under the influence of the doctrinaire free-market theorist Milton Friedman—the experiment has ended in disaster. Chile is still paying back the debts from its misadventure. With massive problems in 1987 (remember Black Friday, when stock markets plunged almost 25 percent), 1989 (the savings-and-loan debacle), 1997 (the East Asia financial crisis), 1998 (the bailout of Long Term Capital Management), and 2001–02 (the collapses of Enron and WorldCom), one might think there would be more skepticism about the wisdom of leaving markets to themselves.
The new populist rhetoric of the right—persuading taxpayers that ordinary people always know how to spend money better than the government does, and promising a new world without budget constraints, where every tax cut generates more revenue—hasn’t helped matters. Special interests took advantage of this seductive mixture of populism and free-market ideology. They also bent the rules to suit themselves. Corporations and the wealthy argued that lowering their tax rates would lead to more savings; they got the tax breaks, but America’s household savings rate not only didn’t rise, it dropped to levels not seen in 75 years. The Bush administration extolled the power of the free market, but it was more than willing to provide generous subsidies to farmers and erect tariffs to protect steelmakers. Lately, as we have seen, it seems willing to write blank checks to bail out its friends on Wall Street. In each of these cases there are clear winners. And in each there are clear losers—including the country as a whole.
What Is to Be Done?
As America attempts to work its way out of the present crisis, the danger is that we will listen to the same people on Wall Street and in the economic establishment who got us into it. For them, our current predicament is another opportunity: if they can shape the government response appropriately, they stand to gain, or at least stand to lose less, and they may be willing to sacrifice the well-being of the economy for their own benefit—just as they did in the past.
There are a number of economic tools at the country’s disposal. As noted, they can yield contradictory results. The sad truth is that we have reached the limits of monetary policy. Lowering interest rates will not stimulate the economy much—banks are not going to be willing to lend to strapped consumers, and consumers are not going to be willing to borrow as they see housing prices continue to fall. And raising interest rates, to combat inflation, won’t have the desired impact either, because the prices that are the main sources of our inflation—for food and energy—are determined in international markets; the chief consequence will be distress for ordinary people. The quandaries that we face mean that careful balancing is required. There is no quick and easy fix. But if we take decisive action today, we can shorten the length of the downturn and reduce its magnitude. If at the same time we think about what would be good for the economy in the long run, we can build a durable foundation for economic health.
To go back to that patient in the emergency room: we need to address the underlying causes. Most of the treatment options entail painful choices, but there are a few easy ones. On energy: conservation and research into new technologies will make us less dependent on foreign oil, reduce our trade imbalance, and help the environment. Expanding drilling into environmentally fragile areas, as some propose, would have a negligible effect on the price we pay for oil. Moreover, a policy of “drain America first” will make us more dependent on foreigners in the future. It is shortsighted in every dimension.
Our ethanol policy is also bad for the taxpayer, bad for the environment, bad for the world and our relations with other countries, and bad in terms of inflation. It is good only for the ethanol producers and American corn farmers. It should be scrapped. We currently subsidize corn-based ethanol by almost $1 a gallon, while imposing a 54-cent-a-gallon tariff on Brazilian sugar-based ethanol. It would be hard to invent a worse policy. The ethanol industry tries to sell itself as an infant, needing help to get on its feet, but it has been an infant for more than two decades, refusing to grow up. Our misguided biofuel policy is taking land used for food production and diverting it to energy production for cars; it is the single most important factor contributing to higher grain prices.
Our tax policies need to be changed. There is something deeply peculiar about having rich individuals who make their money speculating on real estate or stocks paying lower taxes than middle-class Americans, whose income is derived from wages and salaries; something peculiar and indeed offensive about having those whose income is derived from inherited stocks paying lower taxes than those who put in a 50-hour workweek. Skewing the tax rates in the other direction would provide better incentives where they count and would more effectively stimulate the economy, with more revenues and lower deficits.
We can have a financial system that is more stable—and even more dynamic—with stronger regulation. Self-regulation is an oxymoron. Financial markets produced loans and other products that were so complex and insidious that even their creators did not fully understand them; these products were so irresponsible that analysts called them “toxic.” Yet financial markets failed to create products that would enable ordinary households to face the risks they confront and stay in their homes. We need a financial-products safety commission and a financial-systems stability commission. And they can’t be run by Wall Street. The Federal Reserve Board shares too much of the mind-set of those it is supposed to regulate. It could and should have known that something was wrong. It had instruments at its disposal to let the air out of the bubble—or at least ensure that the bubble didn’t over-expand. But it chose to do nothing.
Throwing the poor out of their homes because they can’t pay their mortgages is not only tragic—it is pointless. All that happens is that the property deteriorates and the evicted people move somewhere else. The most coldhearted banker ought to understand the basic economics: banks lose money when they foreclose—the vacant homes typically sell for far less than they would if they were lived in and cared for. If banks won’t renegotiate, we should have an expedited special bankruptcy procedure, akin to what we do for corporations in Chapter 11, allowing people to keep their homes and re-structure their finances.
If this sounds too much like coddling the irresponsible, remember that there are two sides to every mortgage—the lender and the borrower. Both enter freely into the deal. One might say that both are, accordingly, equally responsible. But one side—the lender—is supposed to be financially sophisticated. In contrast, the borrowers in the subprime market consist mainly of people who are financially unsophisticated. For many, their home is their only asset, and when they lose it, they lose their life savings. Remember, too, that we already give big homeowner subsidies, through the tax system, to affluent families. With tax deductions, the government is paying in some states almost half of all mortgage interest and real-estate taxes. But many lower-income people, whose deductions are meaningless because their tax bill is too small, get no help. It makes much more sense to convert these tax deductions into cashable tax credits, so that the fraction of housing costs borne by the government for the poor and the rich is the same.
About these matters there should be no debate—but there will be. Already, those on Wall Street are arguing that we have to be careful not to “over-react.” Over-reaction, we are told, might stifle “innovation.” Well, some innovations ought to be stifled. Those toxic mortgages were certainly innovative. Other innovations were simply devices to circumvent regulations—regulations intended to prevent the kinds of problems from which our economy now suffers. Some of the innovations were designed to tart up the bottom line, moving liabilities off the balance sheet—charades designed to blur the information available to investors and regulators. They succeeded: the full extent of the exposure was not clear, and still isn’t. But there is a reason we need reliable accounting. Without good information it is hard to make good economic decisions. In short, some innovations come with very high price tags. Some can actually cause instability.
The free-market fundamentalists—who believe in the miracles of markets—have not been averse to accepting government bailouts. Indeed, they have demanded them, warning that unless they get what they want the whole system may crash. What politician wants to be blamed for the next Great Depression, simply because he stood on principle? I have been critical of weak anti-trust policies that allowed certain institutions to become so dominant that they are “too big to fail.” The harsh reality is that, given how far we’ve come, we will see more bailouts in the days ahead. Now that Fannie Mae and Freddie Mac are in federal receivership, we must insist: not a dime of taxpayer money should be put at risk while shareholders and creditors, who failed to oversee management, are permitted to walk away with anything they please. To do otherwise would invite a recurrence. Moreover, while these institutions may be too big to fail, they’re not too big to be reorganized. And we need to remember why we’re bailing them out: in order to maintain a flow of money into mortgage markets. It’s outrageous that these institutions are responding to their near-monopoly position by raising fees and increasing the costs of mortgages, which will only worsen the housing crisis. They, and the financial markets, have shown little interest in measures that could help millions of existing and potential homeowners out of the bind they’re in.
The hardest puzzles will be in monetary policy (balancing the risks of inflation and the risk of a deeper downturn) and fiscal policy (balancing the risk of a deeper downturn and the risk of an exploding deficit). The standard analysis coming from financial markets these days is that inflation is the greatest threat, and therefore we need to raise interest rates and cut deficits, which will restore confidence and thereby restore the economy. This is the same bad economics that didn’t work in East Asia in 1997 and didn’t work in Russia and Brazil in 1998. Indeed, it is the same recipe prescribed by Herbert Hoover in 1929.
It is a recipe, moreover, that would be particularly hard on working people and the poor. Higher interest rates dampen inflation by cutting back so sharply on aggregate demand that the unemployment rate grows and wages fall. Eventually, prices fall, too. As noted, the cause of our inflation today is largely imported—it comes from global food and energy prices, which are hard to control. To curb inflation therefore means that the price of everything else needs to fall drastically to compensate, which means that unemployment would also have to rise drastically.
In addition, this is not the time to turn to the old-time fiscal religion. Confidence in the economy won’t be restored as long as growth is low, and growth will be low if investment is anemic, consumption weak, and public spending on the wane. Under these circumstances, to mindlessly cut taxes or reduce government expenditures would be folly.
But there are ways of thoughtfully shaping policy that can walk a fine line and help us get out of our current predicament. Spending money on needed investments—infrastructure, education, technology—will yield double dividends. It will increase incomes today while laying the foundations for future employment and economic growth. Investments in energy efficiency will pay triple dividends—yielding environmental benefits in addition to the short- and long-run economic benefits.
Joseph E. Stiglitz
The $3 Trillion War, April 2008 (with Linda J. Bilmes)
The Economic Consequences of Mr. Bush, December 2007
The federal government needs to give a hand to states and localities—their tax revenues are plummeting, and without help they will face costly cutbacks in investment and in basic human services. The poor will suffer today, and growth will suffer tomorrow. The big advantage of a program to make up for the shortfall in the revenues of states and localities is that it would provide money in the amounts needed: if the economy recovers quickly, the shortfall will be small; if the downturn is long, as I fear will be the case, the shortfall will be large.
These measures are the opposite of what the administration—along with the Republican presidential nominee, John McCain—has been urging. It has always believed that tax cuts, especially for the rich, are the solution to the economy’s ills. In fact, the tax cuts in 2001 and 2003 set the stage for the current crisis. They did virtually nothing to stimulate the economy, and they left the burden of keeping the economy on life support to monetary policy alone. America’s problem today is not that households consume too little; on the contrary, with a savings rate barely above zero, it is clear we consume too much. But the administration hopes to encourage our spendthrift ways.
What has happened to the American economy was avoidable. It was not just that those who were entrusted to maintain the economy’s safety and soundness failed to do their job. There were also many who benefited handsomely by ensuring that what needed to be done did not get done. Now we face a choice: whether to let our response to the nation’s woes be shaped by those who got us here, or to seize the opportunity for fundamental reforms, striking a new balance between the market and government.
Joseph E. Stiglitz, a Nobel Prize–winning economist, is a professor at Columbia University.
mandag den 13. oktober 2008
The Economic Consequences of Mr. Bush
The next president will have to deal with yet another crippling legacy of George W. Bush: the economy. A Nobel laureate, Joseph E. Stiglitz, sees a generation-long struggle to recoup.
by Joseph E. Stiglitz December 2007
The American economy can take a lot of abuse, but no economy is invincible. Illustration by Edward Sorel.
When we look back someday at the catastrophe that was the Bush administration, we will think of many things: the tragedy of the Iraq war, the shame of Guantánamo and Abu Ghraib, the erosion of civil liberties. The damage done to the American economy does not make front-page headlines every day, but the repercussions will be felt beyond the lifetime of anyone reading this page.
I can hear an irritated counterthrust already. The president has not driven the United States into a recession during his almost seven years in office. Unemployment stands at a respectable 4.6 percent. Well, fine. But the other side of the ledger groans with distress: a tax code that has become hideously biased in favor of the rich; a national debt that will probably have grown 70 percent by the time this president leaves Washington; a swelling cascade of mortgage defaults; a record near-$850 billion trade deficit; oil prices that are higher than they have ever been; and a dollar so weak that for an American to buy a cup of coffee in London or Paris—or even the Yukon—becomes a venture in high finance.
And it gets worse. After almost seven years of this president, the United States is less prepared than ever to face the future. We have not been educating enough engineers and scientists, people with the skills we will need to compete with China and India. We have not been investing in the kinds of basic research that made us the technological powerhouse of the late 20th century. And although the president now understands—or so he says—that we must begin to wean ourselves from oil and coal, we have on his watch become more deeply dependent on both.
Up to now, the conventional wisdom has been that Herbert Hoover, whose policies aggravated the Great Depression, is the odds-on claimant for the mantle “worst president” when it comes to stewardship of the American economy. Once Franklin Roosevelt assumed office and reversed Hoover’s policies, the country began to recover. The economic effects of Bush’s presidency are more insidious than those of Hoover, harder to reverse, and likely to be longer-lasting. There is no threat of America’s being displaced from its position as the world’s richest economy. But our grandchildren will still be living with, and struggling with, the economic consequences of Mr. Bush.
Remember the Surplus?
The world was a very different place, economically speaking, when George W. Bush took office, in January 2001. During the Roaring 90s, many had believed that the Internet would transform everything. Productivity gains, which had averaged about 1.5 percent a year from the early 1970s through the early 90s, now approached 3 percent. During Bill Clinton’s second term, gains in manufacturing productivity sometimes even surpassed 6 percent. The Federal Reserve chairman, Alan Greenspan, spoke of a New Economy marked by continued productivity gains as the Internet buried the old ways of doing business. Others went so far as to predict an end to the business cycle. Greenspan worried aloud about how he’d ever be able to manage monetary policy once the nation’s debt was fully paid off.
This tremendous confidence took the Dow Jones index higher and higher. The rich did well, but so did the not-so-rich and even the downright poor. The Clinton years were not an economic Nirvana; as chairman of the president’s Council of Economic Advisers during part of this time, I’m all too aware of mistakes and lost opportunities. The global-trade agreements we pushed through were often unfair to developing countries. We should have invested more in infrastructure, tightened regulation of the securities markets, and taken additional steps to promote energy conservation. We fell short because of politics and lack of money—and also, frankly, because special interests sometimes shaped the agenda more than they should have. But these boom years were the first time since Jimmy Carter that the deficit was under control. And they were the first time since the 1970s that incomes at the bottom grew faster than those at the top—a benchmark worth celebrating.
By the time George W. Bush was sworn in, parts of this bright picture had begun to dim. The tech boom was over. The nasdaq fell 15 percent in the single month of April 2000, and no one knew for sure what effect the collapse of the Internet bubble would have on the real economy. It was a moment ripe for Keynesian economics, a time to prime the pump by spending more money on education, technology, and infrastructure—all of which America desperately needed, and still does, but which the Clinton administration had postponed in its relentless drive to eliminate the deficit. Bill Clinton had left President Bush in an ideal position to pursue such policies. Remember the presidential debates in 2000 between Al Gore and George Bush, and how the two men argued over how to spend America’s anticipated $2.2 trillion budget surplus? The country could well have afforded to ramp up domestic investment in key areas. In fact, doing so would have staved off recession in the short run while spurring growth in the long run.
But the Bush administration had its own ideas. The first major economic initiative pursued by the president was a massive tax cut for the rich, enacted in June of 2001. Those with incomes over a million got a tax cut of $18,000—more than 30 times larger than the cut received by the average American. The inequities were compounded by a second tax cut, in 2003, this one skewed even more heavily toward the rich. Together these tax cuts, when fully implemented and if made permanent, mean that in 2012 the average reduction for an American in the bottom 20 percent will be a scant $45, while those with incomes of more than $1 million will see their tax bills reduced by an average of $162,000.
The administration crows that the economy grew—by some 16 percent—during its first six years, but the growth helped mainly people who had no need of any help, and failed to help those who need plenty. A rising tide lifted all yachts. Inequality is now widening in America, and at a rate not seen in three-quarters of a century. A young male in his 30s today has an income, adjusted for inflation, that is 12 percent less than what his father was making 30 years ago. Some 5.3 million more Americans are living in poverty now than were living in poverty when Bush became president. America’s class structure may not have arrived there yet, but it’s heading in the direction of Brazil’s and Mexico’s.
The Bankruptcy Boom
In breathtaking disregard for the most basic rules of fiscal propriety, the administration continued to cut taxes even as it undertook expensive new spending programs and embarked on a financially ruinous “war of choice” in Iraq. A budget surplus of 2.4 percent of gross domestic product (G.D.P.), which greeted Bush as he took office, turned into a deficit of 3.6 percent in the space of four years. The United States had not experienced a turnaround of this magnitude since the global crisis of World War II.
Agricultural subsidies were doubled between 2002 and 2005. Tax expenditures—the vast system of subsidies and preferences hidden in the tax code—increased more than a quarter. Tax breaks for the president’s friends in the oil-and-gas industry increased by billions and billions of dollars. Yes, in the five years after 9/11, defense expenditures did increase (by some 70 percent), though much of the growth wasn’t helping to fight the War on Terror at all, but was being lost or outsourced in failed missions in Iraq. Meanwhile, other funds continued to be spent on the usual high-tech gimcrackery—weapons that don’t work, for enemies we don’t have. In a nutshell, money was being spent everyplace except where it was needed. During these past seven years the percentage of G.D.P. spent on research and development outside defense and health has fallen. Little has been done about our decaying infrastructure—be it levees in New Orleans or bridges in Minneapolis. Coping with most of the damage will fall to the next occupant of the White House.
Although it railed against entitlement programs for the needy, the administration enacted the largest increase in entitlements in four decades—the poorly designed Medicare prescription-drug benefit, intended as both an election-season bribe and a sop to the pharmaceutical industry. As internal documents later revealed, the true cost of the measure was hidden from Congress. Meanwhile, the pharmaceutical companies received special favors. To access the new benefits, elderly patients couldn’t opt to buy cheaper medications from Canada or other countries. The law also prohibited the U.S. government, the largest single buyer of prescription drugs, from negotiating with drug manufacturers to keep costs down. As a result, American consumers pay far more for medications than people elsewhere in the developed world.
You’ll still hear some—and, loudly, the president himself—argue that the administration’s tax cuts were meant to stimulate the economy, but this was never true. The bang for the buck—the amount of stimulus per dollar of deficit—was astonishingly low. Therefore, the job of economic stimulation fell to the Federal Reserve Board, which stepped on the accelerator in a historically unprecedented way, driving interest rates down to 1 percent. In real terms, taking inflation into account, interest rates actually dropped to negative 2 percent. The predictable result was a consumer spending spree. Looked at another way, Bush’s own fiscal irresponsibility fostered irresponsibility in everyone else. Credit was shoveled out the door, and subprime mortgages were made available to anyone this side of life support. Credit-card debt mounted to a whopping $900 billion by the summer of 2007. “Qualified at birth” became the drunken slogan of the Bush era. American households took advantage of the low interest rates, signed up for new mortgages with “teaser” initial rates, and went to town on the proceeds.
All of this spending made the economy look better for a while; the president could (and did) boast about the economic statistics. But the consequences for many families would become apparent within a few years, when interest rates rose and mortgages proved impossible to repay. The president undoubtedly hoped the reckoning would come sometime after 2008. It arrived 18 months early. As many as 1.7 million Americans are expected to lose their homes in the months ahead. For many, this will mean the beginning of a downward spiral into poverty.
Between March 2006 and March 2007 personal-bankruptcy rates soared more than 60 percent. As families went into bankruptcy, more and more of them came to understand who had won and who had lost as a result of the president’s 2005 bankruptcy bill, which made it harder for individuals to discharge their debts in a reasonable way. The lenders that had pressed for “reform” had been the clear winners, gaining added leverage and protections for themselves; people facing financial distress got the shaft.
And Then There’s Iraq
The war in Iraq (along with, to a lesser extent, the war in Afghanistan) has cost the country dearly in blood and treasure. The loss in lives can never be quantified. As for the treasure, it’s worth calling to mind that the administration, in the run-up to the invasion of Iraq, was reluctant to venture an estimate of what the war would cost (and publicly humiliated a White House aide who suggested that it might run as much as $200 billion). When pressed to give a number, the administration suggested $50 billion—what the United States is actually spending every few months. Today, government figures officially acknowledge that more than half a trillion dollars total has been spent by the U.S. “in theater.” But in fact the overall cost of the conflict could be quadruple that amount—as a study I did with Linda Bilmes of Harvard has pointed out—even as the Congressional Budget Office now concedes that total expenditures are likely to be more than double the spending on operations. The official numbers do not include, for instance, other relevant expenditures hidden in the defense budget, such as the soaring costs of recruitment, with re-enlistment bonuses of as much as $100,000. They do not include the lifetime of disability and health-care benefits that will be required by tens of thousands of wounded veterans, as many as 20 percent of whom have suffered devastating brain and spinal injuries. Astonishingly, they do not include much of the cost of the equipment that has been used in the war, and that will have to be replaced. If you also take into account the costs to the economy from higher oil prices and the knock-on effects of the war—for instance, the depressing domino effect that war-fueled uncertainty has on investment, and the difficulties U.S. firms face overseas because America is the most disliked country in the world—the total costs of the Iraq war mount, even by a conservative estimate, to at least $2 trillion. To which one needs to add these words: so far.
It is natural to wonder, What would this money have bought if we had spent it on other things? U.S. aid to all of Africa has been hovering around $5 billion a year, the equivalent of less than two weeks of direct Iraq-war expenditures. The president made a big deal out of the financial problems facing Social Security, but the system could have been repaired for a century with what we have bled into the sands of Iraq. Had even a fraction of that $2 trillion been spent on investments in education and technology, or improving our infrastructure, the country would be in a far better position economically to meet the challenges it faces in the future, including threats from abroad. For a sliver of that $2 trillion we could have provided guaranteed access to higher education for all qualified Americans.
The soaring price of oil is clearly related to the Iraq war. The issue is not whether to blame the war for this but simply how much to blame it. It seems unbelievable now to recall that Bush-administration officials before the invasion suggested not only that Iraq’s oil revenues would pay for the war in its entirety—hadn’t we actually turned a tidy profit from the 1991 Gulf War?—but also that war was the best way to ensure low oil prices. In retrospect, the only big winners from the war have been the oil companies, the defense contractors, and al-Qaeda. Before the war, the oil markets anticipated that the then price range of $20 to $25 a barrel would continue for the next three years or so. Market players expected to see more demand from China and India, sure, but they also anticipated that this greater demand would be met mostly by increased production in the Middle East. The war upset that calculation, not so much by curtailing oil production in Iraq, which it did, but rather by heightening the sense of insecurity everywhere in the region, suppressing future investment.
The continuing reliance on oil, regardless of price, points to one more administration legacy: the failure to diversify America’s energy resources. Leave aside the environmental reasons for weaning the world from hydrocarbons—the president has never convincingly embraced them, anyway. The economic and national-security arguments ought to have been powerful enough. Instead, the administration has pursued a policy of “drain America first”—that is, take as much oil out of America as possible, and as quickly as possible, with as little regard for the environment as one can get away with, leaving the country even more dependent on foreign oil in the future, and hope against hope that nuclear fusion or some other miracle will come to the rescue. So many gifts to the oil industry were included in the president’s 2003 energy bill that John McCain referred to it as the “No Lobbyist Left Behind” bill.
Contempt for the World
America’s budget and trade deficits have grown to record highs under President Bush. To be sure, deficits don’t have to be crippling in and of themselves. If a business borrows to buy a machine, it’s a good thing, not a bad thing. During the past six years, America—its government, its families, the country as a whole—has been borrowing to sustain its consumption. Meanwhile, investment in fixed assets—the plants and equipment that help increase our wealth—has been declining.
What’s the impact of all this down the road? The growth rate in America’s standard of living will almost certainly slow, and there could even be a decline. The American economy can take a lot of abuse, but no economy is invincible, and our vulnerabilities are plain for all to see. As confidence in the American economy has plummeted, so has the value of the dollar—by 40 percent against the euro since 2001.
The disarray in our economic policies at home has parallels in our economic policies abroad. President Bush blamed the Chinese for our huge trade deficit, but an increase in the value of the yuan, which he has pushed, would simply make us buy more textiles and apparel from Bangladesh and Cambodia instead of China; our deficit would remain unchanged. The president claimed to believe in free trade but instituted measures aimed at protecting the American steel industry. The United States pushed hard for a series of bilateral trade agreements and bullied smaller countries into accepting all sorts of bitter conditions, such as extending patent protection on drugs that were desperately needed to fight aids. We pressed for open markets around the world but prevented China from buying Unocal, a small American oil company, most of whose assets lie outside the United States.
Not surprisingly, protests over U.S. trade practices erupted in places such as Thailand and Morocco. But America has refused to compromise—refused, for instance, to take any decisive action to do away with our huge agricultural subsidies, which distort international markets and hurt poor farmers in developing countries. This intransigence led to the collapse of talks designed to open up international markets. As in so many other areas, President Bush worked to undermine multilateralism—the notion that countries around the world need to cooperate—and to replace it with an America-dominated system. In the end, he failed to impose American dominance—but did succeed in weakening cooperation.
The administration’s basic contempt for global institutions was underscored in 2005 when it named Paul Wolfowitz, the former deputy secretary of defense and a chief architect of the Iraq war, as president of the World Bank. Widely distrusted from the outset, and soon caught up in personal controversy, Wolfowitz became an international embarrassment and was forced to resign his position after less than two years on the job.
Globalization means that America’s economy and the rest of the world have become increasingly interwoven. Consider those bad American mortgages. As families default, the owners of the mortgages find themselves holding worthless pieces of paper. The originators of these problem mortgages had already sold them to others, who packaged them, in a non-transparent way, with other assets, and passed them on once again to unidentified others. When the problems became apparent, global financial markets faced real tremors: it was discovered that billions in bad mortgages were hidden in portfolios in Europe, China, and Australia, and even in star American investment banks such as Goldman Sachs and Bear Stearns. Indonesia and other developing countries—innocent bystanders, really—suffered as global risk premiums soared, and investors pulled money out of these emerging markets, looking for safer havens. It will take years to sort out this mess.
Meanwhile, we have become dependent on other nations for the financing of our own debt. Today, China alone holds more than $1 trillion in public and private American I.O.U.’s. Cumulative borrowing from abroad during the six years of the Bush administration amounts to some $5 trillion. Most likely these creditors will not call in their loans—if they ever did, there would be a global financial crisis. But there is something bizarre and troubling about the richest country in the world not being able to live even remotely within its means. Just as Guantánamo and Abu Ghraib have eroded America’s moral authority, so the Bush administration’s fiscal housekeeping has eroded our economic authority.
The Way Forward
Whoever moves into the White House in January 2009 will face an unenviable set of economic circumstances. Extricating the country from Iraq will be the bloodier task, but putting America’s economic house in order will be wrenching and take years.
The most immediate challenge will be simply to get the economy’s metabolism back into the normal range. That will mean moving from a savings rate of zero (or less) to a more typical savings rate of, say, 4 percent. While such an increase would be good for the long-term health of America’s economy, the short-term consequences would be painful. Money saved is money not spent. If people don’t spend money, the economic engine stalls. If households curtail their spending quickly—as they may be forced to do as a result of the meltdown in the mortgage market—this could mean a recession; if done in a more measured way, it would still mean a protracted slowdown. The problems of foreclosure and bankruptcy posed by excessive household debt are likely to get worse before they get better. And the federal government is in a bind: any quick restoration of fiscal sanity will only aggravate both problems.
And in any case there’s more to be done. What is required is in some ways simple to describe: it amounts to ceasing our current behavior and doing exactly the opposite. It means not spending money that we don’t have, increasing taxes on the rich, reducing corporate welfare, strengthening the safety net for the less well off, and making greater investment in education, technology, and infrastructure.
When it comes to taxes, we should be trying to shift the burden away from things we view as good, such as labor and savings, to things we view as bad, such as pollution. With respect to the safety net, we need to remember that the more the government does to help workers improve their skills and get affordable health care the more we free up American businesses to compete in the global economy. Finally, we’ll be a lot better off if we work with other countries to create fair and efficient global trade and financial systems. We’ll have a better chance of getting others to open up their markets if we ourselves act less hypocritically—that is, if we open our own markets to their goods and stop subsidizing American agriculture.
Some portion of the damage done by the Bush administration could be rectified quickly. A large portion will take decades to fix—and that’s assuming the political will to do so exists both in the White House and in Congress. Think of the interest we are paying, year after year, on the almost $4 trillion of increased debt burden—even at 5 percent, that’s an annual payment of $200 billion, two Iraq wars a year forever. Think of the taxes that future governments will have to levy to repay even a fraction of the debt we have accumulated. And think of the widening divide between rich and poor in America, a phenomenon that goes beyond economics and speaks to the very future of the American Dream.
In short, there’s a momentum here that will require a generation to reverse. Decades hence we should take stock, and revisit the conventional wisdom. Will Herbert Hoover still deserve his dubious mantle? I’m guessing that George W. Bush will have earned one more grim superlative.
Anya Schiffrin and Izzet Yildiz assisted with research for this article.
Joseph Stiglitz, a leading economic educator, is a professor at Columbia.
Sickness Unto Debt by Ron Paul
Ron Paul var opstillet som præsidentkandidat for Det Republikanske Parti.
One of the burning questions regarding the recently passed bailout, and the one that almost no one has bothered to answer, is how the government intends to pay for it. Governments have three main methods by which they can raise funds: taxation, printing new money, and debt. As our $10 trillion national debt shows, the federal government has always enjoyed raising money by issuing new debt. Money is gained upfront, while the cost of repaying that debt is pushed onto future generations.
This method is especially favored today, since imposing $700 billion worth of taxes would lead to widespread public dissatisfaction. When the cost of all the recent bailouts plus the cost of all the new lending facilities the Federal Reserve has initiated are added together, we quickly reach a figure in the trillions of dollars. Even with the debt ceiling being raised to $11.3 trillion, the issuance of debt alone cannot begin to cover the cost of all the bailouts in which the government is engaged. Every indication is that the government will use both debt and inflation in its attempt to keep the economy running at full speed.
Debt financing has begun in earnest, as the national debt has increased $600 billion over the past three weeks, and most of that increase came even before the $700 billion bailout bill was passed. I fully expect that trend to continue in the near future and would not be surprised if we see another debt-limit increase slipped into another economic stimulus package that might be passed before the new year. Now that our foreign creditors are less willing to purchase our debt, what debt we cannot sell to foreigners will be monetized through the Federal Reserve, resulting in increased inflation.
In fact, money supply data for the narrowest measure, the adjusted monetary base, show an unprecedented increase, far higher than when Chairman Alan Greenspan attempted to reflate us out of trouble after the dot-com stock bubble burst. That intervention on Greenspan's part, pumping in liquidity and driving interest rates down, led to the real estate bubble, and Chairman Ben Bernanke unfortunately seems to be following the same script as his predecessor in resorting to credit creation and low interest rates. Even were this effort to succeed, it would only delay the inevitable. In order for the economy to return to normal, the Federal Reserve must cease the creation of new credit, overvalued assets must be allowed to fall in price, and malinvested resources must be allowed to liquidate and be put to use in more productive sectors.
The government's reaction to the credit crisis is based on the erroneous belief that the rate of economic growth over the past 10 to 15 years was the result of natural free-market processes, which is not the case. Rates of economic growth during the dot-com and real estate booms were clearly indicative of an overheated economy, and any attempt to try to stimulate the economy to return to such rapid growth will fail. Rather than allowing asset bubbles to pop and malinvested resources to liquidate, Federal Reserve monetary policy has attempted to pump more and more new money and credit into the system to try, in vain, to sustain the economic boom.
The monetary base jumping by such a large margin is an indicator that the Federal Reserve has not learned from its mistakes and is hoping to get out of this economic downturn by creating even more credit out of thin air. With such large increases in the monetary base and with banks legally able to hold zero reserves, the vaunted money multiplier effect could theoretically reach infinity. If our policymakers fail to come to their senses, there is a real danger that we could end up in a hyperinflationary crisis such as the ones that beset Germany in the 1920s and Argentina and Zimbabwe in more recent decades
The common measure of inflation, the consumer price index, has been so manipulated over the years that it cannot be trusted to be an accurate indicator of the true effect of inflation on people's pocketbooks. This is especially true of “core inflation,” which eliminates food and energy prices, the two staples that are most important to every American. When the CPI figure is computed using the original method of calculation, it comes out to more than 10 percent per year, which is a more accurate indicator of the inflation being felt by middle-class Americans.
For years, I pointed to the now-discontinued M3 money supply figure, the broadest measure of the total money supply, and remarked how its rate of growth far outpaced the officially reported rate of inflation. Since inflation is chronically underreported, I continue to view money supply figures as a more accurate indicator of the true direction of prices. Now that the monetary base has spiked so dramatically, the result will be seen over the next few months as this new credit works its way through the system, resulting in significantly higher inflation. Unfortunately, because M3 is no longer reported, the full effect of this inflation on the U.S. economy will go unreported in official statistics.
Our government has lived beyond its means for decades. We now face a crucial juncture, at which we determine whether to continue down the path of debt, inflation, and government intervention or choose to return to the economics of the free market, which have been ignored for almost a century. Increased debt leads to higher taxes on future generations, while increased inflation diminishes the purchasing power of American families and destroys the dollar. No society has ever been achieved prosperity through indebtedness or inflation, and the United States is no exception. We cannot afford to continue our current policies of monetary expansion and unending bailouts. Unless we return to sound monetary policy, sharply reduce government expenditures, and realize that the government cannot act as a lender of last resort, we will drive our economy to ruin.
http://www.thebigmoney.com/print/414
One of the burning questions regarding the recently passed bailout, and the one that almost no one has bothered to answer, is how the government intends to pay for it. Governments have three main methods by which they can raise funds: taxation, printing new money, and debt. As our $10 trillion national debt shows, the federal government has always enjoyed raising money by issuing new debt. Money is gained upfront, while the cost of repaying that debt is pushed onto future generations.
This method is especially favored today, since imposing $700 billion worth of taxes would lead to widespread public dissatisfaction. When the cost of all the recent bailouts plus the cost of all the new lending facilities the Federal Reserve has initiated are added together, we quickly reach a figure in the trillions of dollars. Even with the debt ceiling being raised to $11.3 trillion, the issuance of debt alone cannot begin to cover the cost of all the bailouts in which the government is engaged. Every indication is that the government will use both debt and inflation in its attempt to keep the economy running at full speed.
Debt financing has begun in earnest, as the national debt has increased $600 billion over the past three weeks, and most of that increase came even before the $700 billion bailout bill was passed. I fully expect that trend to continue in the near future and would not be surprised if we see another debt-limit increase slipped into another economic stimulus package that might be passed before the new year. Now that our foreign creditors are less willing to purchase our debt, what debt we cannot sell to foreigners will be monetized through the Federal Reserve, resulting in increased inflation.
In fact, money supply data for the narrowest measure, the adjusted monetary base, show an unprecedented increase, far higher than when Chairman Alan Greenspan attempted to reflate us out of trouble after the dot-com stock bubble burst. That intervention on Greenspan's part, pumping in liquidity and driving interest rates down, led to the real estate bubble, and Chairman Ben Bernanke unfortunately seems to be following the same script as his predecessor in resorting to credit creation and low interest rates. Even were this effort to succeed, it would only delay the inevitable. In order for the economy to return to normal, the Federal Reserve must cease the creation of new credit, overvalued assets must be allowed to fall in price, and malinvested resources must be allowed to liquidate and be put to use in more productive sectors.
The government's reaction to the credit crisis is based on the erroneous belief that the rate of economic growth over the past 10 to 15 years was the result of natural free-market processes, which is not the case. Rates of economic growth during the dot-com and real estate booms were clearly indicative of an overheated economy, and any attempt to try to stimulate the economy to return to such rapid growth will fail. Rather than allowing asset bubbles to pop and malinvested resources to liquidate, Federal Reserve monetary policy has attempted to pump more and more new money and credit into the system to try, in vain, to sustain the economic boom.
The monetary base jumping by such a large margin is an indicator that the Federal Reserve has not learned from its mistakes and is hoping to get out of this economic downturn by creating even more credit out of thin air. With such large increases in the monetary base and with banks legally able to hold zero reserves, the vaunted money multiplier effect could theoretically reach infinity. If our policymakers fail to come to their senses, there is a real danger that we could end up in a hyperinflationary crisis such as the ones that beset Germany in the 1920s and Argentina and Zimbabwe in more recent decades
The common measure of inflation, the consumer price index, has been so manipulated over the years that it cannot be trusted to be an accurate indicator of the true effect of inflation on people's pocketbooks. This is especially true of “core inflation,” which eliminates food and energy prices, the two staples that are most important to every American. When the CPI figure is computed using the original method of calculation, it comes out to more than 10 percent per year, which is a more accurate indicator of the inflation being felt by middle-class Americans.
For years, I pointed to the now-discontinued M3 money supply figure, the broadest measure of the total money supply, and remarked how its rate of growth far outpaced the officially reported rate of inflation. Since inflation is chronically underreported, I continue to view money supply figures as a more accurate indicator of the true direction of prices. Now that the monetary base has spiked so dramatically, the result will be seen over the next few months as this new credit works its way through the system, resulting in significantly higher inflation. Unfortunately, because M3 is no longer reported, the full effect of this inflation on the U.S. economy will go unreported in official statistics.
Our government has lived beyond its means for decades. We now face a crucial juncture, at which we determine whether to continue down the path of debt, inflation, and government intervention or choose to return to the economics of the free market, which have been ignored for almost a century. Increased debt leads to higher taxes on future generations, while increased inflation diminishes the purchasing power of American families and destroys the dollar. No society has ever been achieved prosperity through indebtedness or inflation, and the United States is no exception. We cannot afford to continue our current policies of monetary expansion and unending bailouts. Unless we return to sound monetary policy, sharply reduce government expenditures, and realize that the government cannot act as a lender of last resort, we will drive our economy to ruin.
http://www.thebigmoney.com/print/414
Byen er fremtidens kampplads
Kampen mod nyliberalismen flytter ud i byrummet, hvor fælles værdier skabes og ejes, hævder Antonio Negri og Michael Hardt i deres kommende bog.
Nyliberalismens projekt er at privatisere fællederne [common wealth], de værdier der skabes og ejes i fællesskab. Det siger Michael Hardt, litteraturprofessor ved Duke University i USA.
Sammen med den italienske politiske filosof Antonio Negri har Hardt under en postmoderne fane skabt furore på venstrefløjen med bøgerne »Imperiet« (Empire, udkom i 2000) og videreudviklingen »Multitude: War and Democracy in the Age of Empire« fra 2004. Nu har duoen afleveret manuskriptet til en tredje bog om kapitalismens former og potentialet for modstanden mod disse, med titlen »Common Wealth«. Bogen forventes at udkomme næste år.
»Common Wealth« er sidste del af en trilogi, et 15 år langt projekt, siger Hardt, da vi møder ham under Europas Sociale Forum i Malmö. Projektet har affødt mange studiekredse og har skabt både beundring og irritation i miljøer som definerer sig som del af den globale retfærdighedsbevægelse. Eller alterglobaliseringsbevægelsen, som den også kaldes.
Hardt og Negri er hyppigt blevet kritiseret for ikke at forholde sig til realitetene i »basis« og i stedet drive begrebsgymnastik langt ind i overbygningen. Michael Hardt mener imidlertid, at begreberne om det nye imperium (en serie af nationale og internationale organismer forenet under en dominerende ideologi) og multituden (en sammenhængende pluralitet af sociale subjekter, som ikke kan reduceres til en enhed, et begreb Hardt og Negri sætter i modsætning til ideen om »folket«) blot er blevet styrket af den seneste udvikling på verdensscenen.
JPG - 19.1 kb
Fra nationalstaten til imperiet og fra fabrikken til metropolen. Sådan kan man opsummere forandringen i kapitalismen, hvis man spørger den amerikanske filosof Michael Hardt. Hardt var en af hovedtalerne på det nyligt afholdte European Social Forum i Malmø. Forfatterkollegaen Antonio Negri skulle også have talt, men måtte melde afbud på grund af sygdom.
»Da vi skrev »Imperiet«, så vi en ny global verdensorden, der var i støbeskeen, en orden med nye styringsformer. De nykonservative i Washington har forsøgt at kuppe denne orden: gennem krigen mod terror troede de, at de kunne genskabe den traditionelle imperialisme.«
Mislykket unilateralisme
Det er blevet hævdet, at krigene i Irak og Afghanistan tilbageviste centrale præmisser i »Imperiet«. Du virker fortsat ikke særlig entusiastisk overfor modstanden mod krigen?
»Fjendens fjende er ikke nødvendigvis vores ven, og jeg føler ingen forpligtelse til at hylde krigsmodstanden. Det er muligt jeg er stædig, men jeg har ikke ændret syn efter disse krige. Irak og Afghanistan er klassiske imperalistiske eventyr udført af en idiot [George W. Bush]. Koncepterne vi brugte i »Imperiet« er i virkeligheden blot endnu mere gyldige i og med, at Bush har bevist at denne form for imperalisme er død. Det, vi ser nu, er begravelsen af unilaterialismen.«
Alligevel synes USA at fortsætte på samme måde?
»De har forsøgt, men er mislykkedes. F.eks. vil der ikke blive tale om en invasion af Iran. Måske vil nogen indvende, at det nye blot er, at USA ikke kan, men at Kina kan. Det er diskutabelt, for det ikke blot aktørerne, men selve formen, der er forandret.«
Tre faser
Hardt og Negri har distanceret sig fra klassiske teorier og termer (selv ville de måske sige omfortolket og generobret) og kritiserer modviljen mod teorifornyelse.
»I 2003–05 handlede meget af venstrefløjsanalysen om, at dette var god, gammeldags imperialisme, og folk pustede lettede ud – nu behøvede de jo ikke lede efter nye begreber og modeller«, siger Hardt.
Ifølge ham burde alle kunne se, at USA’s imperialistiske pretentioner har slået fejl, både militært og økonomisk. Han påpeger også, at nationalstaterne fortsat er vigtige, men at de fungerer i et netværk, hvor de må agere sammen med koncerner, finansinstitutioner og massemedier.
De to forfattere deler alterglobaliseringsbevægelsens hidtidige historie ind i tre faser.
»Den første gik omtrent frem til G8-mødet i Genova i 2001, og det specielle var, at man ikke demonstrerede mod for eksempel Det hvide hus, men mod forskellige institutioner. Dette »topmødehopperi« er senere blevet kritiseret, men der var tale om en ekstremt intelligent teoretisering af, hvor magten lå i det nye imperium. Pluralismen i bevægelsen indså og eksperimenterede med magten ved netop at være mangfoldig. En mangel var at bevægelsen ikke blev virkelig global«, siger Hardt.
Han mener, at den anden fase, fra 2003 til 2006, var helt dominert af antikrig og anti-Bush, hvorfor den mistede sin mangfoldighed af agendaer, taktikker og organisationer, en tilbagegang for bevægelsen.
»Nu er vi i den tredje fase, en fase der begyndte efter at Irak-krigen slog fejl. Vi ser mangfoldigheden af grupper, arbejdsformer og agendaer gøre sin re-entre, og en genfødelse af kampen i og om metropolen«.
Ud i byrummet
Netop metropolen er et centralt begreb i »Common Wealth«, og i vanlig stil lancerer Negri og Hardt en snedig hypotese: Metropolen er for multituden, hvad fabrikken var for industriproletariatet.
Hardt forklarer:
»Før forgik produktionen i fabrikkens lukkede rum. Nu foregår den på tværs af åbne rum, og vi har et skifte i den hegemoniske produktionsform.«
Når den industrielle produktionsform tidligere var hegemonisk skyldtes det ikke, at et flertal af samfundsmedlemmerne arbejdede i industrien, men at den industrielle arbejdsmåde blev påført alle andre dele af samfundet.
»Nu er det den biopolitiske produktion, som er hegemonisk. Med det mener vi alt fra at skifte sengetøj og udvikle datakoder til at arbejde i Burger King. Denne produktionsform bygger på og udvikler fælleden (eng. »The Common«), som er de ideer, fælles værdier, sprog og følelser, vi alle sammen producere i fællesskab. Fælleden kan også karakteriseres ved, at den ikke kan underkastes hverken privat eller statsligt eje uden at forringes kvalitativt«, siger Hardt.
Hardt og Negri præsenterer deres forståelse af fælleden i kontrast til dikotomien mellem det private og det offentlige. Hvis man ser det private som udtryk for kapitalismen og det offentlige eller statslige som udtryk for socialismen, mener de, at fælleden er en social og politisk form som udgør basis for kommunismen.
Metropolen er altså den biopolitiske produktions hjemsted og følgelig også det sted, hvor udbytningen finder sted – for eksempel i form af privatisering af fællederne.
»Et eksempel er den udnyttelse af fællederne, der finder sted på boligmarkedet. Tag en gade hvor kunstnere flytter ind. Der sker ting. Det bliver attraktivt at bo dér. Caféer og restauranter flytter efter for at profittere på det, som skabes i fællesskabe. Lidt efter lidt flytter de rige ind. Gentrificeringen af byen er en ekspropriation, og netop det at privatisere fællederne er nyliberalismens projekt. Og i det samme de privatiseres, bliver de mindre produktive«, hævder Hardt.
Men metropolen er samtidig et sted, hvor der kæmpes tilbage. Den er hjemsted for modstand og antagonisme på samme måde som fabrikken var det i sin tid.
»Der er ikke bare tale om en kamp i byen, men en kamp om byen, om dens form og udtryk. Tænk på piqueteroerne i Argentina. De var arbejdsløse og aktivister, uden nogen fabrik at strejke eller aktionere imod. De tog kampen ud i gaderne, til byen. Også 2005-optøjerne i Paris’ forstæder – banlieuerne – rettede sig mod byens eksklusionssymboler, mod biler, busser og skoler.«
Glæden ved at være kommunist
Michael Hardt undrer sig over, hvorfor revolutionsbegrebet er blevet så miskrediteret i bevægelsens egne rækker.
»Der er to måder at tænke revolution på, som står sejlt overfor hinanden. Den ene er at erstatte en styrende elite med en andre – og ofte bedre – styrende elite. Men på den måde skaber man et aristokrati, ikke et demokrati. Den anden måde er når revolutionen giver magten tilbage til folk, troen på at når de undertrykkende strukturer fjernes, så vil folk styre demokratisk – en slags anarkistisk drømmebillede. Jeg synes det er mere frugtbart at se på revolution som en måde at forandre menneskesindet på«, forklarer Hardt og trækker Lenin frem.
»Lenin talte om en overgangsfase, hvor folket skulle sættes i stand til at styre sig selv, om at ændre menneskets natur under proletariatets diktatur. Men man kan ikke træne folk i demokrati ved at indføre diktatur. Menneskenesindene må ændres gennem positiv praksis og deltagende strukturer. Her ligger nøglen til at »rehabilitere« revolutionen.«
Hardt karakteriserer ofte sig selv som marxist – noget mange selverklærede marxister fnyser højlydt af. Han lægger vægt på, at demokrati og kommunisme – i den betydning han bruger ordet, som noget der er intimt knyttet til fællederne – hænger uløseligt sammen.
»Jeg bruger megen energi på at tagebageerobre begge disse begreber, begreber som er blevet både forvrænget og tømt for indhold.«
En af flere vigtige inspirationskilder for Negri og Hardt er den franske filosof Michel Foucault, blandet andet hans »Introduction to the Non-Fascist Life« (Introduktion til det ikke-facistiske liv, Foucaults forord til Deleuze og Guattaris Anti-ødipus, red.). Michael Hardt mener, at forsøget på at gøre det politiske liv attraktivt og ikke så negativt fokuseret er blandt alterglobaliseringsbevægelsens vigtigste resultater.
»Fokus på kreativitet og glæde er måske den bedste vaccine mod facisme. Ja, det er netop dét, der er selve glæden ved at være kommunist«, ler han.
Eline Lønnå og Ali Esbati er begge redaktører på den norske avis Klassekampen, hvor interviewet har været bragt den 27. september 2008.
Oversat fra norsk af Niels Fastrup
Nyliberalismens projekt er at privatisere fællederne [common wealth], de værdier der skabes og ejes i fællesskab. Det siger Michael Hardt, litteraturprofessor ved Duke University i USA.
Sammen med den italienske politiske filosof Antonio Negri har Hardt under en postmoderne fane skabt furore på venstrefløjen med bøgerne »Imperiet« (Empire, udkom i 2000) og videreudviklingen »Multitude: War and Democracy in the Age of Empire« fra 2004. Nu har duoen afleveret manuskriptet til en tredje bog om kapitalismens former og potentialet for modstanden mod disse, med titlen »Common Wealth«. Bogen forventes at udkomme næste år.
»Common Wealth« er sidste del af en trilogi, et 15 år langt projekt, siger Hardt, da vi møder ham under Europas Sociale Forum i Malmö. Projektet har affødt mange studiekredse og har skabt både beundring og irritation i miljøer som definerer sig som del af den globale retfærdighedsbevægelse. Eller alterglobaliseringsbevægelsen, som den også kaldes.
Hardt og Negri er hyppigt blevet kritiseret for ikke at forholde sig til realitetene i »basis« og i stedet drive begrebsgymnastik langt ind i overbygningen. Michael Hardt mener imidlertid, at begreberne om det nye imperium (en serie af nationale og internationale organismer forenet under en dominerende ideologi) og multituden (en sammenhængende pluralitet af sociale subjekter, som ikke kan reduceres til en enhed, et begreb Hardt og Negri sætter i modsætning til ideen om »folket«) blot er blevet styrket af den seneste udvikling på verdensscenen.
JPG - 19.1 kb
Fra nationalstaten til imperiet og fra fabrikken til metropolen. Sådan kan man opsummere forandringen i kapitalismen, hvis man spørger den amerikanske filosof Michael Hardt. Hardt var en af hovedtalerne på det nyligt afholdte European Social Forum i Malmø. Forfatterkollegaen Antonio Negri skulle også have talt, men måtte melde afbud på grund af sygdom.
»Da vi skrev »Imperiet«, så vi en ny global verdensorden, der var i støbeskeen, en orden med nye styringsformer. De nykonservative i Washington har forsøgt at kuppe denne orden: gennem krigen mod terror troede de, at de kunne genskabe den traditionelle imperialisme.«
Mislykket unilateralisme
Det er blevet hævdet, at krigene i Irak og Afghanistan tilbageviste centrale præmisser i »Imperiet«. Du virker fortsat ikke særlig entusiastisk overfor modstanden mod krigen?
»Fjendens fjende er ikke nødvendigvis vores ven, og jeg føler ingen forpligtelse til at hylde krigsmodstanden. Det er muligt jeg er stædig, men jeg har ikke ændret syn efter disse krige. Irak og Afghanistan er klassiske imperalistiske eventyr udført af en idiot [George W. Bush]. Koncepterne vi brugte i »Imperiet« er i virkeligheden blot endnu mere gyldige i og med, at Bush har bevist at denne form for imperalisme er død. Det, vi ser nu, er begravelsen af unilaterialismen.«
Alligevel synes USA at fortsætte på samme måde?
»De har forsøgt, men er mislykkedes. F.eks. vil der ikke blive tale om en invasion af Iran. Måske vil nogen indvende, at det nye blot er, at USA ikke kan, men at Kina kan. Det er diskutabelt, for det ikke blot aktørerne, men selve formen, der er forandret.«
Tre faser
Hardt og Negri har distanceret sig fra klassiske teorier og termer (selv ville de måske sige omfortolket og generobret) og kritiserer modviljen mod teorifornyelse.
»I 2003–05 handlede meget af venstrefløjsanalysen om, at dette var god, gammeldags imperialisme, og folk pustede lettede ud – nu behøvede de jo ikke lede efter nye begreber og modeller«, siger Hardt.
Ifølge ham burde alle kunne se, at USA’s imperialistiske pretentioner har slået fejl, både militært og økonomisk. Han påpeger også, at nationalstaterne fortsat er vigtige, men at de fungerer i et netværk, hvor de må agere sammen med koncerner, finansinstitutioner og massemedier.
De to forfattere deler alterglobaliseringsbevægelsens hidtidige historie ind i tre faser.
»Den første gik omtrent frem til G8-mødet i Genova i 2001, og det specielle var, at man ikke demonstrerede mod for eksempel Det hvide hus, men mod forskellige institutioner. Dette »topmødehopperi« er senere blevet kritiseret, men der var tale om en ekstremt intelligent teoretisering af, hvor magten lå i det nye imperium. Pluralismen i bevægelsen indså og eksperimenterede med magten ved netop at være mangfoldig. En mangel var at bevægelsen ikke blev virkelig global«, siger Hardt.
Han mener, at den anden fase, fra 2003 til 2006, var helt dominert af antikrig og anti-Bush, hvorfor den mistede sin mangfoldighed af agendaer, taktikker og organisationer, en tilbagegang for bevægelsen.
»Nu er vi i den tredje fase, en fase der begyndte efter at Irak-krigen slog fejl. Vi ser mangfoldigheden af grupper, arbejdsformer og agendaer gøre sin re-entre, og en genfødelse af kampen i og om metropolen«.
Ud i byrummet
Netop metropolen er et centralt begreb i »Common Wealth«, og i vanlig stil lancerer Negri og Hardt en snedig hypotese: Metropolen er for multituden, hvad fabrikken var for industriproletariatet.
Hardt forklarer:
»Før forgik produktionen i fabrikkens lukkede rum. Nu foregår den på tværs af åbne rum, og vi har et skifte i den hegemoniske produktionsform.«
Når den industrielle produktionsform tidligere var hegemonisk skyldtes det ikke, at et flertal af samfundsmedlemmerne arbejdede i industrien, men at den industrielle arbejdsmåde blev påført alle andre dele af samfundet.
»Nu er det den biopolitiske produktion, som er hegemonisk. Med det mener vi alt fra at skifte sengetøj og udvikle datakoder til at arbejde i Burger King. Denne produktionsform bygger på og udvikler fælleden (eng. »The Common«), som er de ideer, fælles værdier, sprog og følelser, vi alle sammen producere i fællesskab. Fælleden kan også karakteriseres ved, at den ikke kan underkastes hverken privat eller statsligt eje uden at forringes kvalitativt«, siger Hardt.
Hardt og Negri præsenterer deres forståelse af fælleden i kontrast til dikotomien mellem det private og det offentlige. Hvis man ser det private som udtryk for kapitalismen og det offentlige eller statslige som udtryk for socialismen, mener de, at fælleden er en social og politisk form som udgør basis for kommunismen.
Metropolen er altså den biopolitiske produktions hjemsted og følgelig også det sted, hvor udbytningen finder sted – for eksempel i form af privatisering af fællederne.
»Et eksempel er den udnyttelse af fællederne, der finder sted på boligmarkedet. Tag en gade hvor kunstnere flytter ind. Der sker ting. Det bliver attraktivt at bo dér. Caféer og restauranter flytter efter for at profittere på det, som skabes i fællesskabe. Lidt efter lidt flytter de rige ind. Gentrificeringen af byen er en ekspropriation, og netop det at privatisere fællederne er nyliberalismens projekt. Og i det samme de privatiseres, bliver de mindre produktive«, hævder Hardt.
Men metropolen er samtidig et sted, hvor der kæmpes tilbage. Den er hjemsted for modstand og antagonisme på samme måde som fabrikken var det i sin tid.
»Der er ikke bare tale om en kamp i byen, men en kamp om byen, om dens form og udtryk. Tænk på piqueteroerne i Argentina. De var arbejdsløse og aktivister, uden nogen fabrik at strejke eller aktionere imod. De tog kampen ud i gaderne, til byen. Også 2005-optøjerne i Paris’ forstæder – banlieuerne – rettede sig mod byens eksklusionssymboler, mod biler, busser og skoler.«
Glæden ved at være kommunist
Michael Hardt undrer sig over, hvorfor revolutionsbegrebet er blevet så miskrediteret i bevægelsens egne rækker.
»Der er to måder at tænke revolution på, som står sejlt overfor hinanden. Den ene er at erstatte en styrende elite med en andre – og ofte bedre – styrende elite. Men på den måde skaber man et aristokrati, ikke et demokrati. Den anden måde er når revolutionen giver magten tilbage til folk, troen på at når de undertrykkende strukturer fjernes, så vil folk styre demokratisk – en slags anarkistisk drømmebillede. Jeg synes det er mere frugtbart at se på revolution som en måde at forandre menneskesindet på«, forklarer Hardt og trækker Lenin frem.
»Lenin talte om en overgangsfase, hvor folket skulle sættes i stand til at styre sig selv, om at ændre menneskets natur under proletariatets diktatur. Men man kan ikke træne folk i demokrati ved at indføre diktatur. Menneskenesindene må ændres gennem positiv praksis og deltagende strukturer. Her ligger nøglen til at »rehabilitere« revolutionen.«
Hardt karakteriserer ofte sig selv som marxist – noget mange selverklærede marxister fnyser højlydt af. Han lægger vægt på, at demokrati og kommunisme – i den betydning han bruger ordet, som noget der er intimt knyttet til fællederne – hænger uløseligt sammen.
»Jeg bruger megen energi på at tagebageerobre begge disse begreber, begreber som er blevet både forvrænget og tømt for indhold.«
En af flere vigtige inspirationskilder for Negri og Hardt er den franske filosof Michel Foucault, blandet andet hans »Introduction to the Non-Fascist Life« (Introduktion til det ikke-facistiske liv, Foucaults forord til Deleuze og Guattaris Anti-ødipus, red.). Michael Hardt mener, at forsøget på at gøre det politiske liv attraktivt og ikke så negativt fokuseret er blandt alterglobaliseringsbevægelsens vigtigste resultater.
»Fokus på kreativitet og glæde er måske den bedste vaccine mod facisme. Ja, det er netop dét, der er selve glæden ved at være kommunist«, ler han.
Eline Lønnå og Ali Esbati er begge redaktører på den norske avis Klassekampen, hvor interviewet har været bragt den 27. september 2008.
Oversat fra norsk af Niels Fastrup
Motion får hjernen til at yde sit bedste.
Exercise has always been an important aspect of human life, and many understand its benefits physically. The way it releases our stress, builds our muscle tone and helps us lose excess and unwanted weight. Less often however, do we go to the gym thinking about how the exercise we are about to do will benefit our mind. Agreeing with this theory of exercise improving out cognitive capabilities is Raymond D. Fowler’s review of “ Spark: The Revolutionary New Science of Exercise and the Brain” by John J. Ratey and Eric Hagerman. He explains that the real reason we feel so good when we get our blood pumping is that it makes the brain function at its best, and in his view, this benefit of physical activity is far more significant—and captivating—than what it does for the body.
Ratey’s original approach comprises concepts drawn from various fields such as human evolution, cognitive psychology, and neuroscience. His essential concept is that “the evolutionary success of the human species is rooted in the relationship of physical activity to the learning required to find and store food.” Ratey theorizes, “The relationship between food, physical activity, and learning is hardwired into the brain's circuitry." Fowler believes Ratey’s views on the mental benefit of physical exercise, but points out the problem that Ratey’s explanation is overly simplistic for neuroscientists but may be overly complex for the typical lay reader for whom the book is intended. Using extremely scientific terms with abbreviations for various instruments could turn away the average interested reader.
Fowler does point out that there are however chapters on stress, anxiety, and depression that would be of particular interest to the psychotherapist. Ratey describes the ample evidence that physical exercise ameliorates anxiety and tension, and convincing research reveals that physical exercise is efficient in treating depression. Although I will not go into the statistics here, any positive outlook on the treatment of depression leaves me optimistic. I have personally seen the effect of depression on my friends and family, and now knowing that exercise may increase the chances of alleviating depression is reassuring.
Here are a few statistics that Fowler points out from Ratey’s article that are worth noting:
• In comparison with most women, older women with higher levels of exercise (median: walking 12 hours a week) had a 20 percent lower chance of being cognitively impaired on tests of memory and general intelligence (Weuve et al.'s, 2004 study, as cited in Ratey, p. 221).
• A number of studies show a strong correlation between fitness levels and better performance on tests that target the temporal and frontal lobes (p. 225).
• Studies suggest that older men who exercise maintain a greater blood flow to the brain than inactive men, and MRI studies suggest that improved fitness is associated with an increase in brain volume.
This article really caught my eye because of my interest in the health sciences as well as my psychology background. I fully believe the mind and physical wellbeing are correlated, and that we won’t be able to be 100% complete without one or the other.
Fowler, Raymond D. “Exercise for the brain”. PsycCRITIQUES, Vol 53 (36), 2008
http://johnhawks.net:84/node/425
Ratey’s original approach comprises concepts drawn from various fields such as human evolution, cognitive psychology, and neuroscience. His essential concept is that “the evolutionary success of the human species is rooted in the relationship of physical activity to the learning required to find and store food.” Ratey theorizes, “The relationship between food, physical activity, and learning is hardwired into the brain's circuitry." Fowler believes Ratey’s views on the mental benefit of physical exercise, but points out the problem that Ratey’s explanation is overly simplistic for neuroscientists but may be overly complex for the typical lay reader for whom the book is intended. Using extremely scientific terms with abbreviations for various instruments could turn away the average interested reader.
Fowler does point out that there are however chapters on stress, anxiety, and depression that would be of particular interest to the psychotherapist. Ratey describes the ample evidence that physical exercise ameliorates anxiety and tension, and convincing research reveals that physical exercise is efficient in treating depression. Although I will not go into the statistics here, any positive outlook on the treatment of depression leaves me optimistic. I have personally seen the effect of depression on my friends and family, and now knowing that exercise may increase the chances of alleviating depression is reassuring.
Here are a few statistics that Fowler points out from Ratey’s article that are worth noting:
• In comparison with most women, older women with higher levels of exercise (median: walking 12 hours a week) had a 20 percent lower chance of being cognitively impaired on tests of memory and general intelligence (Weuve et al.'s, 2004 study, as cited in Ratey, p. 221).
• A number of studies show a strong correlation between fitness levels and better performance on tests that target the temporal and frontal lobes (p. 225).
• Studies suggest that older men who exercise maintain a greater blood flow to the brain than inactive men, and MRI studies suggest that improved fitness is associated with an increase in brain volume.
This article really caught my eye because of my interest in the health sciences as well as my psychology background. I fully believe the mind and physical wellbeing are correlated, and that we won’t be able to be 100% complete without one or the other.
Fowler, Raymond D. “Exercise for the brain”. PsycCRITIQUES, Vol 53 (36), 2008
http://johnhawks.net:84/node/425
Vaclav Havel: The Planet is not at risk. We are
Over the past few years the question has been asked ever more forcefully whether global climatic changes occur in natural cycles or not, to what degree we human beings contribute to it, what eventual threats stem from them and what can be done to prevent them.
If we are at the beginning of serious global climatic changes, as scientific studies demonstrate, and if there is a threat of changes to temperature and energy cycles on a planetary scale, it could mean a generalized danger irrespective of the area of civilization people belong to or the continent they live on. It is also obvious from published research that human activity is also one of the causes of change; we just don’t know how big its specific contribution is. Is it really necessary to know it to the last percentage point, though? By waiting for confirmation, for incontrovertible precision, aren’t we simply wasting time when we could be taking measures that are relatively painless compared to the ones we would have to adopt in the event of further delays?
Maybe we should start considering our sojourn on this Earth as a loan. There can be no doubt that for past hundred years at least, the Euro-American world has been running up a debt, and now other parts of the world are joining it and following its example. However, we have entered an era in which nature is issuing us warnings and demanding that we not only stop the debt growing but, on the contrary, start to pay it back. There is little point in asking whether we have borrowed too much or what would happen if we postponed the repayments. Anyone with a mortgage or a bank loan can easily imagine the outcome.
Estimates of the effects of possible climatic changes are hard to gauge. Our planet has never been in a state of balance, from which it could deviate through human or other influence, and then, in time, return to its original state. The planetary organism cannot be regarded as some kind of pendulum that will return to its original position after a certain period. The climatic system has evolved turbulently over billions of years and the energy flows represent a gigantic, complexly interlinked structure of networks, and of networks within networks, where everything is interlinked in diverse ways, one part being dependent on the next. One of its characteristics is that the structures will never return to precisely the same state they were in fifty or maybe five thousand years ago. They will probably evolve into a new state, which need not necessarily mean any threat to existence, so long as the change is only slight. Larger climatic changes, however, could have unforeseeable effects within the global ecosystem. Were that to happen and were the pessimistic forecasts to come true, we must ask ourselves whether human life would be possible in the new conditions. And precisely because so much uncertainty still reigns, a great deal of humility and circumspection is called for. We can’t go on endlessly fooling ourselves that there is nothing wrong and that we can go on cheerfully pursuing our consumer lifestyles, ignoring the climatic threats and postponing a solution. Maybe there is no danger of any major catastrophe in the coming years or decades. Who knows? But that doesn’t relieve us of responsibility toward future generations.
I don’t agree with those whose reaction to the possible threats is to warn against the restrictions on civil freedoms. Were the forecasts of certain climatologists to be fulfilled, our freedoms would be tantamount to the freedom of someone hanging from a twentieth-story parapet.
We live in a world ringed by a single global civilization comprising various areas of civilization. Most of them these days share one thing in common: technocracy. Priority is given to everything that is calculable, quantifiable or ratable. That is a very materialistic concept, however, and one that is drawing us toward an important crossroads for our civilization.
Whenever I reflect on all the various problems of today’s world, whether they concern the economy, society, culture, security, the ecology or civilization in general, I always end up confronting the moral question whether this or that is responsible or acceptable. The moral order and its wellspring, our conscience and responsibility, as well as human rights and the right to human rights, these are the most important issues at the beginning of the third millennium. It is necessary to return again and again to the roots of human existence and confront our sojourn on this planet with the prospects of the centuries to come. We must analyze everything open-mindedly, soberly, unideologically and unobsessively, and project our knowledge into practical policies. Maybe it is no longer a matter of simply promoting energy-saving technologies, but chiefly of introducing ecologically clean technologies that can be incorporated into the natural cycle, of diversifying resources and of not relying on just one single invention as a panacea.
I’m also skeptical about whether such a complex problem can be solved by one single branch of science. We cannot rely on mere technical measures and regulations being able to bypass or take the place of responsibility. Economic instruments and legally stipulated limits are all important of course, and they must be used and implemented. But equally important, however, is support for education, ecological training and ethics, in other words, a consciousness of the commonality of all living beings and an emphasis on shared responsibility.
We will either manage to achieve an awareness of our place as humankind in the living and life-giving organism of our planet, or we will face the threat that our evolutionary journey will be set back thousands or even millions of years. That is why we must take this issue very seriously and see it as a challenge to behave responsibility and not as an anticipation of the end of the world. The end of the world has been anticipated many times in the course of history and has never happened, of course. And it won’t happen this time either. We have no need to have fears for our planet as such. It was here before us and most likely will be here after us. But that doesn’t mean that the existence of the human race might not be at serious risk. As a result of our endeavors and our irresponsibility the climatic system on this Earth could end up in a state in which there would be no place for us. If we drag our feet, the scope for decision making – and hence for our individual freedom – could be considerably reduced.
If we are at the beginning of serious global climatic changes, as scientific studies demonstrate, and if there is a threat of changes to temperature and energy cycles on a planetary scale, it could mean a generalized danger irrespective of the area of civilization people belong to or the continent they live on. It is also obvious from published research that human activity is also one of the causes of change; we just don’t know how big its specific contribution is. Is it really necessary to know it to the last percentage point, though? By waiting for confirmation, for incontrovertible precision, aren’t we simply wasting time when we could be taking measures that are relatively painless compared to the ones we would have to adopt in the event of further delays?
Maybe we should start considering our sojourn on this Earth as a loan. There can be no doubt that for past hundred years at least, the Euro-American world has been running up a debt, and now other parts of the world are joining it and following its example. However, we have entered an era in which nature is issuing us warnings and demanding that we not only stop the debt growing but, on the contrary, start to pay it back. There is little point in asking whether we have borrowed too much or what would happen if we postponed the repayments. Anyone with a mortgage or a bank loan can easily imagine the outcome.
Estimates of the effects of possible climatic changes are hard to gauge. Our planet has never been in a state of balance, from which it could deviate through human or other influence, and then, in time, return to its original state. The planetary organism cannot be regarded as some kind of pendulum that will return to its original position after a certain period. The climatic system has evolved turbulently over billions of years and the energy flows represent a gigantic, complexly interlinked structure of networks, and of networks within networks, where everything is interlinked in diverse ways, one part being dependent on the next. One of its characteristics is that the structures will never return to precisely the same state they were in fifty or maybe five thousand years ago. They will probably evolve into a new state, which need not necessarily mean any threat to existence, so long as the change is only slight. Larger climatic changes, however, could have unforeseeable effects within the global ecosystem. Were that to happen and were the pessimistic forecasts to come true, we must ask ourselves whether human life would be possible in the new conditions. And precisely because so much uncertainty still reigns, a great deal of humility and circumspection is called for. We can’t go on endlessly fooling ourselves that there is nothing wrong and that we can go on cheerfully pursuing our consumer lifestyles, ignoring the climatic threats and postponing a solution. Maybe there is no danger of any major catastrophe in the coming years or decades. Who knows? But that doesn’t relieve us of responsibility toward future generations.
I don’t agree with those whose reaction to the possible threats is to warn against the restrictions on civil freedoms. Were the forecasts of certain climatologists to be fulfilled, our freedoms would be tantamount to the freedom of someone hanging from a twentieth-story parapet.
We live in a world ringed by a single global civilization comprising various areas of civilization. Most of them these days share one thing in common: technocracy. Priority is given to everything that is calculable, quantifiable or ratable. That is a very materialistic concept, however, and one that is drawing us toward an important crossroads for our civilization.
Whenever I reflect on all the various problems of today’s world, whether they concern the economy, society, culture, security, the ecology or civilization in general, I always end up confronting the moral question whether this or that is responsible or acceptable. The moral order and its wellspring, our conscience and responsibility, as well as human rights and the right to human rights, these are the most important issues at the beginning of the third millennium. It is necessary to return again and again to the roots of human existence and confront our sojourn on this planet with the prospects of the centuries to come. We must analyze everything open-mindedly, soberly, unideologically and unobsessively, and project our knowledge into practical policies. Maybe it is no longer a matter of simply promoting energy-saving technologies, but chiefly of introducing ecologically clean technologies that can be incorporated into the natural cycle, of diversifying resources and of not relying on just one single invention as a panacea.
I’m also skeptical about whether such a complex problem can be solved by one single branch of science. We cannot rely on mere technical measures and regulations being able to bypass or take the place of responsibility. Economic instruments and legally stipulated limits are all important of course, and they must be used and implemented. But equally important, however, is support for education, ecological training and ethics, in other words, a consciousness of the commonality of all living beings and an emphasis on shared responsibility.
We will either manage to achieve an awareness of our place as humankind in the living and life-giving organism of our planet, or we will face the threat that our evolutionary journey will be set back thousands or even millions of years. That is why we must take this issue very seriously and see it as a challenge to behave responsibility and not as an anticipation of the end of the world. The end of the world has been anticipated many times in the course of history and has never happened, of course. And it won’t happen this time either. We have no need to have fears for our planet as such. It was here before us and most likely will be here after us. But that doesn’t mean that the existence of the human race might not be at serious risk. As a result of our endeavors and our irresponsibility the climatic system on this Earth could end up in a state in which there would be no place for us. If we drag our feet, the scope for decision making – and hence for our individual freedom – could be considerably reduced.
Databasestaten Af Cory Doctorow
Da jeg flyttede fra mit hjemland Canada til Storbritannien i 2003, fandt jeg det ironisk, at familien Doctorow nu var vendt tilbage til Europa. Min far blev født af polsk-russiske forældre i en flygtningelejr i Aserbajdsjan lige før anden verdenskrigs afslutning. Mine bedsteforældre - deserterende værnepligtige fra den Røde Hær - destruerede deres dokumenter og blev, med tidens egen betegnelse, internt fordrevne.
Ved krigens afslutning drog de atter vestpå, men da de nåede Rusland, fortsatte de. Da de nåede Polen, fortsatte de. De fulgte den store flygtningestrøm ind i Tyskland, til en lejr nær Hamburg (hvor min faster blev født), før de gik ombord i et flygtningeskib og sejlede til havnebyen Halifax, hvor en bureaukrat afkortede deres navne - Doctorowicz blev til Doctorow - og gav dem en togbillet til Toronto, hvor min grandonkel Max og hans familie boede.
Min farmor er stadig i live og så frisk som en havørn. Jeg spurgte hende for nylig, hvorfor de ikke blev i Sovjetunionen. Trods sin modvilje mod militærtjenesten var hun en krigshelt. Hun havde tilbragt sine ungdomsår i civilforsvaret under den hårde tid med belejringen af Leningrad og havde som 12-årig pige gravet skyttegrave og slæbt lig, indtil hun som 15-årig blev evakueret til Sibirien. Hendes familie boede stadig i Leningrad - mor, far, lillebror. Leningrad er en majestætisk by, kosmopolitisk og pulserende selv med krigens ar på sit ansigt. I Toronto kendte hun ingen og talte ikke sproget. Hendes år som flygtning kom til at strække sig over fire hele årtier, før hun endelig for alvor kunne føle sig som canadier.
Jeg spurgte hende, hvorfor hun ikke var blevet, og hun rystede på hovedet, som om jeg havde stillet det dummeste spørgsmål i hele verden. "Det var Sovjetunionen", sagde hun. Hun viftede med hånden, famlede efter svaret. "Papirer," sagde hun til sidst. "Vi skulle gå rundt med papirer. Politiet kunne til hver en tid standse dig og tvinge dig til at vise dine papirer." Sluseportene åbnede sig: De udspionerede dig. De tvang folk til at udspionere hinanden. Din farfar ville ikke have fået lov til at blive - han var polak, og de ville ikke have ladet ham blive hos familien i Rusland, han ville have været nødt til at tage tilbage til Polen.
Mit hoved nikkede ubevidst, mens hun fortalte mig det. Jeg vidste det hele fra hentydninger og vink, der var faldet gennem årene, men jeg havde aldrig hørt hende sige alt sammen på en gang. Jeg havde endda selv set det, da vi besøgte familien i Leningrad i 1984 og vi fik vore samtaler afbrudt, når de strejfede ind på politisk område, med blikke over skulderen efter de spioner, som kunne tænkes at lytte i forventning om at kunne melde min familie til KGB.
Et halvt århundrede senere kom familien Doctorow tilbage til Europa. Jeg slog mig ned i London, hvor jeg arbejdede for Electronic Frontier Foundation, en amerikansk borgerretsbevægelse, og kørte deres europæiske aktiviteter. Jeg var så privilegeret at få status af "højtuddannet indvandrer" (den eneste visumkategori, som jeg kunne kvalificere til givet min mangel på universitetsgrad).
Nogle år senere boede jeg sammen med min kæreste og var blevet far til en britisk datter (da jeg nævnte dette for en britisk indvandringsfunktionær i Heathrow, kaldte han hende hånligt for " en halv britisk statsborger"). Vi var ved at planlægge et kæmpemæssigt bryllup for hele familien i Toronto, da nyheden kom: Indenrigsministeren havde ensidigt og med 24 timers varsel ændret reglerne for højtuddannede indvandrere, så der nu kræves en universitetsgrad. Mine advokater bekræftede: Folk, der havde været bosat i Storbritannien i årevis, som havde skabt virksomheder her og ansat briter i dem, som ejede huse og havde født britiske børn, blev smidt ud af landet og tog deres skattepenge, arbejdspladser og familier med sig.
Min kæreste og jeg gik i panik. Vi blev gift. Vi søgte et ægtefællevisum. Et par uger senere indfandt jeg mig i Indenrigsministeriets immigrationscenter i Croydon for at afgive mine biometriske data og få et visum limet ind i mit canadiske pas. Jeg fik to års pusterum. Min familie kunne blive i Storbritannien.
Så kom sidste uges bekendtgørelse: Indehavere af ægtefællevisum ville (sammen med udenlandske studerende) øjeblikkelig få udstedt obligatoriske, biometriske, radio-aflæselige ID-kort, som vi skal have på os til hver en tid. Og så begyndte jeg at kigge mig over skulderen.
Endnu engang ser det ud til, at familien Doctorow kan blive nødt til at forlade Europa. Det ID-kort, som jeg vil få udstedt, næste gang jeg fornyr mit visum, vil være knyttet til alle mine daglige aktiviteter: Lægebesøg, brug af offentlig transport, bankforretninger, skat - én enkelt identifikator, der for altid vil følge mig gennem tid og rum. Det således indsamlede dossier vil blive administreret af de samme instanser, som alene det seneste år har mistet (bogstaveligt talt) snesevis af millioner af optegnelser om folk i Storbritannien.
Det vil alt sammen være bundet til mine biometriske data, såsom fingeraftryk. Medmindre du hele tiden har handsker på, efterlader du denne identifikation konstant, hvor du end går. Disse mærker er ikke kun til rådighed for staten og den udøvende myndighed, men for alle, der har lyst til at fjerne dem fra en hvilken som helst glat overflade, du tilfældigvis har rørt ved. Hvis denne identifikation først er kompromitteret, er der ingen måde - bortset fra amputation - hvorpå den kan ændres. Tænk på den tyske indenrigsminister Wolfgang Schäuble, som er fortaler for biometrisk ID: Hans fingeraftryk blev kopieret fra et vandglas ved en offentlig debat og offentliggjort på 10.000 stykker acetat af en gruppe provokatører uden budget, som ikke stod til at få nogen økonomisk fordel af deres aktion. Vil velforsynede identitetstyve, der kan bruge de biometriske data til at begå forbrydelser og tømme bankkonti, være mindre opfindsomme?
ID-kortet vil udsende mine personlige oplysninger til personer, som befinder sig på stor afstand fra mig, og det uden mit vidende eller samtykke. RFID-elementerne i kortet er ligesom Oyster-kort [chipbaseret kort til brug i Londons undergrundsbane, o.a.] annonceret som kun læsbare på få centimeters afstand, men ligesom for Oyster-kortet har sikkerhedseksperter påvist, at kortet kan læses på snesevis af meters afstand og kan klones ved hjælp af billigt og lettilgængeligt udstyr.
Så det er heldigt, at jeg fik mit ægtefællevisum netop da jeg gjorde, før disse identitetspapirer blev gjort obligatoriske. Faktisk er det heldigt, at jeg overhovedet fik mit ægtefællevisum, eftersom Labour planlægger at begrænse det årlige antal af nye visa af enhver art til 20.000 mennesker, hvilket betyder, at briter, som gifter sig med udlændinge, ikke længere kan være sikre på at kunne bosætte sig og opfostre deres familier i Storbritannien.
Det nationale ID-kort eksisterer ikke i et tomrum. Det er en del af en enestående og hidtil uset plan om at bruge moderne teknologi til at udspionere og kontrollere menneskers færden i Storbritannien. Vore internetforbindelser bliver censureret og aflyttet af annoncører. Snart vil vore internetudbydere blive tvunget til at registrere og gemme oplysninger om al vores aktivitet online, så regeringer, ansatte med for megen tid eller enhver forbryder, der kan hacke eller bestikke sig ind i overvågningsdatabaserne, kan snage i dem. Vores billede bliver taget hundredevis af gange, hver gang vi går uden for en dør. Vore nummerplader bliver fotograferet hundredevis af gange af trafikkameraer, hvilket skaber et kort over, hvor vi har været henne. Oplysningerne på vore Oyster-kort registreres og stilles til rådighed for politi, spioner, forbrydere og hvem der nu ellers måtte være i stand til at få fat på dem.
Vi kan anholdes og tilbageholdes i ugevis uden sigtelse. Regeringen fortæller akademikere, hvilke frit tilgængelige oplysninger om terrorister, de har lov til at studere, og hvilke, de ikke må se på.
Vi opfordres til at udspionere vore naboer og indberette deres mistænkelige aktiviteter. Vi kan blive standset og visiteret uden særlig mistanke, og under disse visitationer kan og vil politifolk undersøge sådanne ting som de bøger, vi læser, og personlige notater, vi har skrevet.
Hver eneste af disse foranstaltninger blev beta-testet på dårligt stillede grupper, før den blev rullet ud til befolkningen som helhed. Overvågningskameraer var oprindelig forbeholdt bankbokse og fængsler. Aflytning og censur af Internettet begyndte i skolerne, "for at beskytte børnene".
Nu er det så meningen, at vi indvandrere skal være betatestere for Storbritanniens blinde vandring ind i overvågningssamfundet. Vi skal gå med interne pas og pressen vil sige, "Hvis du ikke kan lide det, behøver du ikke bo her - det anstår sig ikke for en gæst at klage over gæstfrihedens vilkår." Men denne beta-test er ikke beregnet på at standse ved indvandrerne. Regeringen indrømmer åbent, at indvandrerne kun er første etape af en universel udbredelse af obligatoriske ID-kort med RFID-chips. Hvad der sker for os nu, vil ske for dig næste gang.
Skønt, ikke for mig. Hvis regeringen den dag i 2010, hvor jeg fornyer mit visum, kræver at jeg går med disse papirer som betingelse for at lade mig bo her, vil familien Doctorow igen forlade sit land og finde et andet, der er mere frit. Min kone - som er født her, opvokset her, med familie her - er med mig. Vi vil ikke opdrage vores datter i databasestaten. Det er ikke sikkert.
oversættelse sakset fra Faklen.dk
Ved krigens afslutning drog de atter vestpå, men da de nåede Rusland, fortsatte de. Da de nåede Polen, fortsatte de. De fulgte den store flygtningestrøm ind i Tyskland, til en lejr nær Hamburg (hvor min faster blev født), før de gik ombord i et flygtningeskib og sejlede til havnebyen Halifax, hvor en bureaukrat afkortede deres navne - Doctorowicz blev til Doctorow - og gav dem en togbillet til Toronto, hvor min grandonkel Max og hans familie boede.
Min farmor er stadig i live og så frisk som en havørn. Jeg spurgte hende for nylig, hvorfor de ikke blev i Sovjetunionen. Trods sin modvilje mod militærtjenesten var hun en krigshelt. Hun havde tilbragt sine ungdomsår i civilforsvaret under den hårde tid med belejringen af Leningrad og havde som 12-årig pige gravet skyttegrave og slæbt lig, indtil hun som 15-årig blev evakueret til Sibirien. Hendes familie boede stadig i Leningrad - mor, far, lillebror. Leningrad er en majestætisk by, kosmopolitisk og pulserende selv med krigens ar på sit ansigt. I Toronto kendte hun ingen og talte ikke sproget. Hendes år som flygtning kom til at strække sig over fire hele årtier, før hun endelig for alvor kunne føle sig som canadier.
Jeg spurgte hende, hvorfor hun ikke var blevet, og hun rystede på hovedet, som om jeg havde stillet det dummeste spørgsmål i hele verden. "Det var Sovjetunionen", sagde hun. Hun viftede med hånden, famlede efter svaret. "Papirer," sagde hun til sidst. "Vi skulle gå rundt med papirer. Politiet kunne til hver en tid standse dig og tvinge dig til at vise dine papirer." Sluseportene åbnede sig: De udspionerede dig. De tvang folk til at udspionere hinanden. Din farfar ville ikke have fået lov til at blive - han var polak, og de ville ikke have ladet ham blive hos familien i Rusland, han ville have været nødt til at tage tilbage til Polen.
Mit hoved nikkede ubevidst, mens hun fortalte mig det. Jeg vidste det hele fra hentydninger og vink, der var faldet gennem årene, men jeg havde aldrig hørt hende sige alt sammen på en gang. Jeg havde endda selv set det, da vi besøgte familien i Leningrad i 1984 og vi fik vore samtaler afbrudt, når de strejfede ind på politisk område, med blikke over skulderen efter de spioner, som kunne tænkes at lytte i forventning om at kunne melde min familie til KGB.
Et halvt århundrede senere kom familien Doctorow tilbage til Europa. Jeg slog mig ned i London, hvor jeg arbejdede for Electronic Frontier Foundation, en amerikansk borgerretsbevægelse, og kørte deres europæiske aktiviteter. Jeg var så privilegeret at få status af "højtuddannet indvandrer" (den eneste visumkategori, som jeg kunne kvalificere til givet min mangel på universitetsgrad).
Nogle år senere boede jeg sammen med min kæreste og var blevet far til en britisk datter (da jeg nævnte dette for en britisk indvandringsfunktionær i Heathrow, kaldte han hende hånligt for " en halv britisk statsborger"). Vi var ved at planlægge et kæmpemæssigt bryllup for hele familien i Toronto, da nyheden kom: Indenrigsministeren havde ensidigt og med 24 timers varsel ændret reglerne for højtuddannede indvandrere, så der nu kræves en universitetsgrad. Mine advokater bekræftede: Folk, der havde været bosat i Storbritannien i årevis, som havde skabt virksomheder her og ansat briter i dem, som ejede huse og havde født britiske børn, blev smidt ud af landet og tog deres skattepenge, arbejdspladser og familier med sig.
Min kæreste og jeg gik i panik. Vi blev gift. Vi søgte et ægtefællevisum. Et par uger senere indfandt jeg mig i Indenrigsministeriets immigrationscenter i Croydon for at afgive mine biometriske data og få et visum limet ind i mit canadiske pas. Jeg fik to års pusterum. Min familie kunne blive i Storbritannien.
Så kom sidste uges bekendtgørelse: Indehavere af ægtefællevisum ville (sammen med udenlandske studerende) øjeblikkelig få udstedt obligatoriske, biometriske, radio-aflæselige ID-kort, som vi skal have på os til hver en tid. Og så begyndte jeg at kigge mig over skulderen.
Endnu engang ser det ud til, at familien Doctorow kan blive nødt til at forlade Europa. Det ID-kort, som jeg vil få udstedt, næste gang jeg fornyr mit visum, vil være knyttet til alle mine daglige aktiviteter: Lægebesøg, brug af offentlig transport, bankforretninger, skat - én enkelt identifikator, der for altid vil følge mig gennem tid og rum. Det således indsamlede dossier vil blive administreret af de samme instanser, som alene det seneste år har mistet (bogstaveligt talt) snesevis af millioner af optegnelser om folk i Storbritannien.
Det vil alt sammen være bundet til mine biometriske data, såsom fingeraftryk. Medmindre du hele tiden har handsker på, efterlader du denne identifikation konstant, hvor du end går. Disse mærker er ikke kun til rådighed for staten og den udøvende myndighed, men for alle, der har lyst til at fjerne dem fra en hvilken som helst glat overflade, du tilfældigvis har rørt ved. Hvis denne identifikation først er kompromitteret, er der ingen måde - bortset fra amputation - hvorpå den kan ændres. Tænk på den tyske indenrigsminister Wolfgang Schäuble, som er fortaler for biometrisk ID: Hans fingeraftryk blev kopieret fra et vandglas ved en offentlig debat og offentliggjort på 10.000 stykker acetat af en gruppe provokatører uden budget, som ikke stod til at få nogen økonomisk fordel af deres aktion. Vil velforsynede identitetstyve, der kan bruge de biometriske data til at begå forbrydelser og tømme bankkonti, være mindre opfindsomme?
ID-kortet vil udsende mine personlige oplysninger til personer, som befinder sig på stor afstand fra mig, og det uden mit vidende eller samtykke. RFID-elementerne i kortet er ligesom Oyster-kort [chipbaseret kort til brug i Londons undergrundsbane, o.a.] annonceret som kun læsbare på få centimeters afstand, men ligesom for Oyster-kortet har sikkerhedseksperter påvist, at kortet kan læses på snesevis af meters afstand og kan klones ved hjælp af billigt og lettilgængeligt udstyr.
Så det er heldigt, at jeg fik mit ægtefællevisum netop da jeg gjorde, før disse identitetspapirer blev gjort obligatoriske. Faktisk er det heldigt, at jeg overhovedet fik mit ægtefællevisum, eftersom Labour planlægger at begrænse det årlige antal af nye visa af enhver art til 20.000 mennesker, hvilket betyder, at briter, som gifter sig med udlændinge, ikke længere kan være sikre på at kunne bosætte sig og opfostre deres familier i Storbritannien.
Det nationale ID-kort eksisterer ikke i et tomrum. Det er en del af en enestående og hidtil uset plan om at bruge moderne teknologi til at udspionere og kontrollere menneskers færden i Storbritannien. Vore internetforbindelser bliver censureret og aflyttet af annoncører. Snart vil vore internetudbydere blive tvunget til at registrere og gemme oplysninger om al vores aktivitet online, så regeringer, ansatte med for megen tid eller enhver forbryder, der kan hacke eller bestikke sig ind i overvågningsdatabaserne, kan snage i dem. Vores billede bliver taget hundredevis af gange, hver gang vi går uden for en dør. Vore nummerplader bliver fotograferet hundredevis af gange af trafikkameraer, hvilket skaber et kort over, hvor vi har været henne. Oplysningerne på vore Oyster-kort registreres og stilles til rådighed for politi, spioner, forbrydere og hvem der nu ellers måtte være i stand til at få fat på dem.
Vi kan anholdes og tilbageholdes i ugevis uden sigtelse. Regeringen fortæller akademikere, hvilke frit tilgængelige oplysninger om terrorister, de har lov til at studere, og hvilke, de ikke må se på.
Vi opfordres til at udspionere vore naboer og indberette deres mistænkelige aktiviteter. Vi kan blive standset og visiteret uden særlig mistanke, og under disse visitationer kan og vil politifolk undersøge sådanne ting som de bøger, vi læser, og personlige notater, vi har skrevet.
Hver eneste af disse foranstaltninger blev beta-testet på dårligt stillede grupper, før den blev rullet ud til befolkningen som helhed. Overvågningskameraer var oprindelig forbeholdt bankbokse og fængsler. Aflytning og censur af Internettet begyndte i skolerne, "for at beskytte børnene".
Nu er det så meningen, at vi indvandrere skal være betatestere for Storbritanniens blinde vandring ind i overvågningssamfundet. Vi skal gå med interne pas og pressen vil sige, "Hvis du ikke kan lide det, behøver du ikke bo her - det anstår sig ikke for en gæst at klage over gæstfrihedens vilkår." Men denne beta-test er ikke beregnet på at standse ved indvandrerne. Regeringen indrømmer åbent, at indvandrerne kun er første etape af en universel udbredelse af obligatoriske ID-kort med RFID-chips. Hvad der sker for os nu, vil ske for dig næste gang.
Skønt, ikke for mig. Hvis regeringen den dag i 2010, hvor jeg fornyer mit visum, kræver at jeg går med disse papirer som betingelse for at lade mig bo her, vil familien Doctorow igen forlade sit land og finde et andet, der er mere frit. Min kone - som er født her, opvokset her, med familie her - er med mig. Vi vil ikke opdrage vores datter i databasestaten. Det er ikke sikkert.
oversættelse sakset fra Faklen.dk
Americas Political Cannibalism
It is no longer our economy but our democracy that is in peril. It was the economic meltdown of Yugoslavia that gave us Slobodan Milosevic. It was the collapse of the Weimar Republic that vomited up Adolf Hitler. And it was the breakdown in czarist Russia that opened the door for Vladimir Lenin and the Bolsheviks. Financial collapses lead to political extremism. The rage bubbling up from our impoverished and disenfranchised working class, glimpsed at John McCain rallies, presages a looming and dangerous right-wing backlash.
As the public begins to grasp the depth of the betrayal and abuse by our ruling class, as the Democratic and Republican parties are exposed as craven tools of our corporate state, as savings accounts, college funds and retirement plans become worthless, as unemployment skyrockets and as home values go up in smoke we must prepare for the political resurgence of a reinvigorated radical Christian right. The engine of this mass movement-as is true for all radical movements-is personal and economic despair. And despair, in an age of increasing shortages, poverty and hopelessness, will be one of our few surplus commodities.
Karl Polanyi in his book "The Great Transformation," written in 1944, laid out the devastating consequences-the depressions, wars and totalitarianism-that grow out of a so-called self-regulated free market. He grasped that "fascism, like socialism, was rooted in a market society that refused to function." He warned that a financial system always devolved, without heavy government control, into a Mafia capitalism-and a Mafia political system-which is a good description of the American government under George W. Bush. Polanyi wrote that a self-regulating market, the kind bequeathed to us since Ronald Reagan, turned human beings and the natural environment into commodities, a situation that ensures the destruction of both society and the natural environment. He decried the free market's belief that nature and human beings are objects whose worth is determined by the market. He reminded us that a society that no longer recognizes that nature and human life have a sacred dimension, an intrinsic worth beyond monetary value, ultimately commits collective suicide. Such societies cannibalize themselves until they die. Speculative excesses and growing inequality, he wrote, always destroy the foundation for a continued prosperity.
We face an environmental meltdown as well as an economic meltdown. This would not have surprised Polanyi, who fled fascist Europe in 1933 and eventually taught at Columbia University. Russia's northern coastline has begun producing huge qualities of toxic methane gas. Scientists with the International Siberian Shelf Study 2008 describe what they saw along the coastline recently as "methane chimneys" reaching from the sea floor to the ocean's surface. Methane, locked in the permafrost of Arctic landmasses, is being released at an alarming rate as average Arctic temperatures rise. Methane is a greenhouse gas 25 times more powerful than carbon dioxide. The release of millions of tons of it will dramatically accelerate the rate of global warming.
Those who run our corporate state have fought environmental regulation as tenaciously as they have fought financial regulation. They are responsible, as Polanyi predicted, for our personal impoverishment and the impoverishment of our ecosystem. We remain addicted, courtesy of the oil, gas and automobile industries and a corporate- controlled government, to fossil fuels. Species are vanishing. Fish stocks are depleted. The great human migration from coastlines and deserts has begun. And as temperatures continue to rise, huge parts of the globe will become uninhabitable. The continued release of large quantities of methane, some scientists have warned, could actually asphyxiate the human species.
The corporate con artists and criminals who have hijacked our state and rigged our financial system still speak to us in the obscure and incomprehensible language coined by specialists at elite business schools. They use terms like securitization, deleveraging, structured investment vehicles and credit default swaps. The reality, once you throw out their obnoxious jargon, is not hard to grasp. Banks lent too much money to people and financial institutions that could not pay it back. These banks are now going broke. The government is frantically giving taxpayer dollars to banks so they can be solvent and again lend money. It is not working. Bank lending remains frozen. There are ominous signs that the government may not be able to hand over enough of our money because the losses incurred by these speculators are too massive. If credit markets remain in a deep freeze, corporations such as AT&T, Ford and General Motors might go bankrupt. The downward spiral could spread like a tidal wave across the country, especially since our corporate elite, including Barack Obama, seem to have no real intention of bailing out families who can no longer pay their mortgages or credit card debts.
Lenin said that the best way to destroy the capitalist system was to debauch its currency. If our financial disaster continues there will be a widespread loss of faith in the mechanisms that regulate society. If our money becomes worthless, so does our government. All traditional standards and beliefs are shattered in a severe economic crisis. The moral order is turned upside down. The honest and industrious are wiped out while the gangsters, profiteers and speculators amass millions. Look at Lehman Brothers CEO Richard Fuld. He walks away from his bankrupt investment house after pocketing $485 million. His investors are wiped out. An economic collapse does not only mean the degradation of trade and commerce, food shortages, bankruptcies and unemployment; it means the systematic dynamiting of the foundations of a society. I watched this happen in Yugoslavia. I fear I am watching it happen here in the United States.
The Patriot Act, the FISA Reform Act, the suspension of habeas corpus, the open use of torture in our offshore penal colonies, the stationing of a combat brigade on American soil, the seas of surveillance cameras, the brutal assaults against activists in Denver and St. Paul are converging to determine our future. Those dark forces arrayed against American democracy are waiting for a moment to strike, a national crisis that will allow them in the name of national security and moral renewal to shred the Constitution. They have the tools. They will use fear, chaos, the hatred for the ruling elites and the specter of left-wing dissent and terrorism to impose draconian controls to extinguish our democracy. And while they do it they will be waving the American flag, singing patriotic slogans and clutching the Christian cross. Fuld, I expect, will be one of many corporatists happy to contribute to the cause.
This is a defining moment in American history. The next few weeks and months will see us stabilize and weather this crisis or descend into a terrifying dystopia. I place no hope in Obama or the Democratic Party. The Democratic Party is a pathetic example of liberal, bourgeois impotence, hypocrisy and complacency. It has been bought off. I will vote, if only as a form of protest against our corporate state and an homage to Polanyi's brilliance, for Ralph Nader. I would like to offer hope, but it is more important to be a realist. No ethic or act of resistance is worth anything if it is not based on the real. And the real, I am afraid, does not look good.
As the public begins to grasp the depth of the betrayal and abuse by our ruling class, as the Democratic and Republican parties are exposed as craven tools of our corporate state, as savings accounts, college funds and retirement plans become worthless, as unemployment skyrockets and as home values go up in smoke we must prepare for the political resurgence of a reinvigorated radical Christian right. The engine of this mass movement-as is true for all radical movements-is personal and economic despair. And despair, in an age of increasing shortages, poverty and hopelessness, will be one of our few surplus commodities.
Karl Polanyi in his book "The Great Transformation," written in 1944, laid out the devastating consequences-the depressions, wars and totalitarianism-that grow out of a so-called self-regulated free market. He grasped that "fascism, like socialism, was rooted in a market society that refused to function." He warned that a financial system always devolved, without heavy government control, into a Mafia capitalism-and a Mafia political system-which is a good description of the American government under George W. Bush. Polanyi wrote that a self-regulating market, the kind bequeathed to us since Ronald Reagan, turned human beings and the natural environment into commodities, a situation that ensures the destruction of both society and the natural environment. He decried the free market's belief that nature and human beings are objects whose worth is determined by the market. He reminded us that a society that no longer recognizes that nature and human life have a sacred dimension, an intrinsic worth beyond monetary value, ultimately commits collective suicide. Such societies cannibalize themselves until they die. Speculative excesses and growing inequality, he wrote, always destroy the foundation for a continued prosperity.
We face an environmental meltdown as well as an economic meltdown. This would not have surprised Polanyi, who fled fascist Europe in 1933 and eventually taught at Columbia University. Russia's northern coastline has begun producing huge qualities of toxic methane gas. Scientists with the International Siberian Shelf Study 2008 describe what they saw along the coastline recently as "methane chimneys" reaching from the sea floor to the ocean's surface. Methane, locked in the permafrost of Arctic landmasses, is being released at an alarming rate as average Arctic temperatures rise. Methane is a greenhouse gas 25 times more powerful than carbon dioxide. The release of millions of tons of it will dramatically accelerate the rate of global warming.
Those who run our corporate state have fought environmental regulation as tenaciously as they have fought financial regulation. They are responsible, as Polanyi predicted, for our personal impoverishment and the impoverishment of our ecosystem. We remain addicted, courtesy of the oil, gas and automobile industries and a corporate- controlled government, to fossil fuels. Species are vanishing. Fish stocks are depleted. The great human migration from coastlines and deserts has begun. And as temperatures continue to rise, huge parts of the globe will become uninhabitable. The continued release of large quantities of methane, some scientists have warned, could actually asphyxiate the human species.
The corporate con artists and criminals who have hijacked our state and rigged our financial system still speak to us in the obscure and incomprehensible language coined by specialists at elite business schools. They use terms like securitization, deleveraging, structured investment vehicles and credit default swaps. The reality, once you throw out their obnoxious jargon, is not hard to grasp. Banks lent too much money to people and financial institutions that could not pay it back. These banks are now going broke. The government is frantically giving taxpayer dollars to banks so they can be solvent and again lend money. It is not working. Bank lending remains frozen. There are ominous signs that the government may not be able to hand over enough of our money because the losses incurred by these speculators are too massive. If credit markets remain in a deep freeze, corporations such as AT&T, Ford and General Motors might go bankrupt. The downward spiral could spread like a tidal wave across the country, especially since our corporate elite, including Barack Obama, seem to have no real intention of bailing out families who can no longer pay their mortgages or credit card debts.
Lenin said that the best way to destroy the capitalist system was to debauch its currency. If our financial disaster continues there will be a widespread loss of faith in the mechanisms that regulate society. If our money becomes worthless, so does our government. All traditional standards and beliefs are shattered in a severe economic crisis. The moral order is turned upside down. The honest and industrious are wiped out while the gangsters, profiteers and speculators amass millions. Look at Lehman Brothers CEO Richard Fuld. He walks away from his bankrupt investment house after pocketing $485 million. His investors are wiped out. An economic collapse does not only mean the degradation of trade and commerce, food shortages, bankruptcies and unemployment; it means the systematic dynamiting of the foundations of a society. I watched this happen in Yugoslavia. I fear I am watching it happen here in the United States.
The Patriot Act, the FISA Reform Act, the suspension of habeas corpus, the open use of torture in our offshore penal colonies, the stationing of a combat brigade on American soil, the seas of surveillance cameras, the brutal assaults against activists in Denver and St. Paul are converging to determine our future. Those dark forces arrayed against American democracy are waiting for a moment to strike, a national crisis that will allow them in the name of national security and moral renewal to shred the Constitution. They have the tools. They will use fear, chaos, the hatred for the ruling elites and the specter of left-wing dissent and terrorism to impose draconian controls to extinguish our democracy. And while they do it they will be waving the American flag, singing patriotic slogans and clutching the Christian cross. Fuld, I expect, will be one of many corporatists happy to contribute to the cause.
This is a defining moment in American history. The next few weeks and months will see us stabilize and weather this crisis or descend into a terrifying dystopia. I place no hope in Obama or the Democratic Party. The Democratic Party is a pathetic example of liberal, bourgeois impotence, hypocrisy and complacency. It has been bought off. I will vote, if only as a form of protest against our corporate state and an homage to Polanyi's brilliance, for Ralph Nader. I would like to offer hope, but it is more important to be a realist. No ethic or act of resistance is worth anything if it is not based on the real. And the real, I am afraid, does not look good.
Få kender til Verdensugen for forældreløse.
October 11 marked the end of World Orphan Week. With 133 million orphans in the world today, most in Africa, Asia and Latin America, and 15 million of them orphaned due to HIV/AIDS (according to SOS Children) we have a moral responsibility to ensure the basic needs orphans around the World. These needs include health, education and welfare. Addressing poverty issues in the various regions particularly populated with high levels of orphaned or abandoned children is being done by various organizations which all need our help.
There are numerous such organizations of which I have chosen to focus on a few. One particular one that is prominent for both addressing needs and informing the public with it's regularly updated website is SOS Children's Villages, www.soschildren.org . They regularly update their website with informative on conditions and events concerning orphans and current situations and events that may effect the wellbeing of children in need. Their website is essential for receiving the latest information as related to this issue. Another organization that I have been following for a few years now is the Christina Noble Children's Foundation based in Vietnam. Christina Noble, an Irish woman who relocated to Vietnam to set up an orphanage in 1989. Her story and the story of the Christina Noble Children's Foundation can be discovered in her excellent book, "Nobody's Child", a must read. She has orphanages established in Vietnam and Mongolia. Her website is www.cncf.org . Another orphanage organization based primarily in India is the Raina Foundation. I know a bit less about them but they have an informative website at www.rainafoundation.com . Unwanted girls in India are in particularly heart breaking situations because of some of the cultural attitudes of some Indians.
Another important organization is Oxfam International. While orphans are not their primary focus their focus on poverty issues directly impacts those most in need that frequently turns out to be orphans. Oxfam says "we believe we can end poverty and injustice as part of a Global movement for change". They combat poverty, hunger, disease and illiteracy. Oxfam is certainly one of the best of the International organizations. Their website is www.oxfam.org . Let me know of organizations you think are particularly good at addressing the issue and needs of orphans.
There are numerous such organizations of which I have chosen to focus on a few. One particular one that is prominent for both addressing needs and informing the public with it's regularly updated website is SOS Children's Villages, www.soschildren.org . They regularly update their website with informative on conditions and events concerning orphans and current situations and events that may effect the wellbeing of children in need. Their website is essential for receiving the latest information as related to this issue. Another organization that I have been following for a few years now is the Christina Noble Children's Foundation based in Vietnam. Christina Noble, an Irish woman who relocated to Vietnam to set up an orphanage in 1989. Her story and the story of the Christina Noble Children's Foundation can be discovered in her excellent book, "Nobody's Child", a must read. She has orphanages established in Vietnam and Mongolia. Her website is www.cncf.org . Another orphanage organization based primarily in India is the Raina Foundation. I know a bit less about them but they have an informative website at www.rainafoundation.com . Unwanted girls in India are in particularly heart breaking situations because of some of the cultural attitudes of some Indians.
Another important organization is Oxfam International. While orphans are not their primary focus their focus on poverty issues directly impacts those most in need that frequently turns out to be orphans. Oxfam says "we believe we can end poverty and injustice as part of a Global movement for change". They combat poverty, hunger, disease and illiteracy. Oxfam is certainly one of the best of the International organizations. Their website is www.oxfam.org . Let me know of organizations you think are particularly good at addressing the issue and needs of orphans.
søndag den 12. oktober 2008
The Financial Tsunami: Sub-Prime Mortgage Debt is but the Tip of the Iceberg
Part 1: Deutsche Bank’s painful lesson
Even experienced banker friends tell me that they think the worst of the US banking troubles are over and that things are slowly getting back to normal. What is lacking in their rosy optimism is the realization of the scale of the ongoing deterioration in credit markets globally, centered in the American asset-backed securities market, and especially in the market for CDO’s—Collateralized Debt Obligations and CMO’s—Collateralized Mortgage Obligations. By now every serious reader has heard the term “It’s a crisis in Sub-Prime US home mortgage debt.” What almost no one I know understands is that the Sub-Prime problem is but the tip of a colossal iceberg that is in a slow meltdown. I offer one recent example to illustrate my point that the “Financial Tsunami” is only beginning.
Deutsche Bank got a hard shock a few days ago when a judge in the state of Ohio in the USA made a ruling that the bank had no legal right to foreclose on 14 homes whose owners had failed to keep current in their monthly mortgage payments. Now this might sound like small beer for Deutsche Bank, one of the world’s largest banks with over €1.1 trillion (Billionen) in assets worldwide. As Hilmar Kopper used to say, “peanuts.” It’s not at all peanuts, however, for the Anglo-Saxon banking world and its European allies like Deutsche Bank, BNP Paribas, Barclays Bank, HSBC or others. Why?
A US Federal Judge, C.A. Boyko in Federal District Court in Cleveland Ohio ruled to dismiss a claim by Deutsche Bank National Trust Company. DB’s US subsidiary was seeking to take possession of 14 homes from Cleveland residents living in them, in order to claim the assets.
Here comes the hair in the soup. The Judge asked DB to show documents proving legal title to the 14 homes. DB could not. All DB attorneys could show was a document showing only an “intent to convey the rights in the mortgages.” They could not produce the actual mortgage, the heart of Western property rights since the Magna Charta of not longer.
Again why could Deutsche Bank not show the 14 mortgages on the 14 homes? Because they live in the exotic new world of “global securitization”, where banks like DB or Citigroup buy tens of thousands of mortgages from small local lending banks, “bundle” them into Jumbo new securities which then are rated by Moody’s or Standard & Poors or Fitch, and sell them as bonds to pension funds or other banks or private investors who naively believed they were buying bonds rated AAA, the highest, and never realized that their “bundle” of say 1,000 different home mortgages, contained maybe 20% or 200 mortgages rated “sub-prime,” i.e. of dubious credit quality.
Indeed the profits being earned in the past seven years by the world’s largest financial players from Goldman Sachs to Morgan Stanley to HSBC, Chase, and yes, Deutsche Bank, were so staggering, few bothered to open the risk models used by the professionals who bundled the mortgages. Certainly not the Big Three rating companies who had a criminal conflict of interest in giving top debt ratings. That changed abruptly last August and since then the major banks have issued one after another report of disastrous “sub-prime” losses.
A new unexpected factor
The Ohio ruling that dismissed DB’s claim to foreclose and take back the 14 homes for non-payment, is far more than bad luck for the bank of Josef Ackermann. It is an earth-shaking precedent for all banks holding what they had thought were collateral in form of real estate property.
How this? Because of the complex structure of asset-backed securities and the widely dispersed ownership of mortgage securities (not actual mortgages but the securities based on same) no one is yet able to identify who precisely holds the physical mortgage document. Oops! A tiny legal detail our Wall Street Rocket Scientist derivatives experts ignored when they were bundling and issuing hundreds of billions of dollars worth of CMO’s in the past six or seven years. As of January 2007 some $6.5 trillion of securitized mortgage debt was outstanding in the United States. That’s a lot by any measure!
In the Ohio case Deutsche Bank is acting as “Trustee” for “securitization pools” or groups of disparate investors who may reside anywhere. But the Trustee never got the legal document known as the mortgage. Judge Boyko ordered DB to prove they were the owners of the mortgages or notes and they could not. DB could only argue that the banks had foreclosed on such cases for years without challenge. The Judge then declared that the banks “seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test,” the Judge concluded, “their weak legal arguments compel the court to stop them at the gate.” Deutsche Bank has refused comment.
What next?
As news of this legal precedent spreads across the USA like a California brushfire, hundreds of thousands of struggling homeowners who took the bait in times of historically low interest rates to buy a home with often, no money paid down, and the first 2 years with extremely low interest rate in what are known as “interest only” Adjustable Rate Mortgages (ARMs), now face exploding mortgage monthly payments at just the point the US economy is sinking into severe recession. (I regret the plethora of abbreviations used here but it is the fault of Wall Street bankers not this author).
The peak period of the US real estate bubble which began in about 2002 when Alan Greenspan began the most aggressive series of rate cuts in Federal Reserve history was 2005-2006. Greenspan’s intent, as he admitted at the time, was to replace the Dot.com internet stock bubble with a real estate home investment and lending bubble. He argued that was the only way to keep the US economy from deep recession. In retrospect a recession in 2002 would have been far milder and less damaging than what we now face.
Of course, Greenspan has since safely retired, written his memoirs and handed the control (and blame) of the mess over to a young ex-Princeton professor, Ben Bernanke. As a Princeton graduate, I can say I would never trust monetary policy for the world’s most powerful central bank in the hands of a Princeton economics professor. Keep them in their ivy-covered towers.
Now the last phase of every speculative bubble is the one where the animal juices get the most excited. This has been the case with every major speculative bubble since the Holland Tulip speculation of the 1630’s to the South Sea Bubble of 1720 to the 1929 Wall Street crash. It was true as well with the US 2002-2007 Real Estate bubble. In the last two years of the boom in selling real estate loans, banks were convinced they could resell the mortgage loans to a Wall Street financial house who would bundle it with thousands of good better and worse quality mortgage loans and resell them as Collateralized Mortgage Obligation bonds. In the flush of greed, banks became increasingly reckless of the credit worthiness of the prospective home owners. In many cases they did not even bother to check if the person was employed. Who cares? It will be resold and securitized and the risk of mortgage default was historically low.
That was in 2005. The most Sub-prime mortgages written with Adjustable Rate Mortgage contracts were written between 2005-2006, the last and most furious phase of the US bubble. Now a whole new wave of mortgage defaults is about to explode onto the scene beginning January 2008. Between December 2007 and July 1, 2008 more than $690 Billion in mortgages will face an interest rate jump according to the contract terms of the ARMs written two years before. That means market interest rates for those mortgages will explode monthly payments just as recession drives incomes down. Hundreds of thousands of homeowners will be forced to do the last resort of any homeowner: stop monthly mortgage payments.
Here is where the Ohio court decision guarantees that the next phase of the US mortgage crisis will assume Tsunami dimension. If the Ohio Deutsche Bank precedent holds in the appeal to the Supreme Court, millions of homes will be in default but the banks prevented from seizing them as collateral assets to resell. Robert Shiller of Yale, the controversial and often correct author of the book, Irrational Exuberance, predicting the 2001-2 Dot.com stock crash, estimates US housing prices could fall as much as 50% in some areas given how home prices have diverged relative to rents.
The $690 billion worth of “interest only” ARMs due for interest rate hike between now and July 2008 are by and large not Sub-prime but a little higher quality, but only just. There are a total of $1.4 trillion in “interest only” ARMs according to the US research firm, First American Loan Performance. A recent study calculates that, as these ARMs face staggering higher interest costs in the next 9 months, more than $325 billion of the loans will default leaving 1 million property owners in technical mortgage default. But if banks are unable to reclaim the homes as assets to offset the non-performing mortgages, the US banking system and a chunk of the global banking system faces a financial gridlock that will make events to date truly “peanuts” by comparison. We will discuss the global geo-political implications of this in our next report, The Financial Tsunami: Part 2.
F. William Engdahl is the author of A Century of War: Anglo-American Oil Politics and the New World Order. He is a Research Associate of the Centre for Research on Globalization (CRG). His most recent book, which has just been released by Global Research is Seeds of Destruction, The Hidden Agenda of Genetic Manipulation.
Even experienced banker friends tell me that they think the worst of the US banking troubles are over and that things are slowly getting back to normal. What is lacking in their rosy optimism is the realization of the scale of the ongoing deterioration in credit markets globally, centered in the American asset-backed securities market, and especially in the market for CDO’s—Collateralized Debt Obligations and CMO’s—Collateralized Mortgage Obligations. By now every serious reader has heard the term “It’s a crisis in Sub-Prime US home mortgage debt.” What almost no one I know understands is that the Sub-Prime problem is but the tip of a colossal iceberg that is in a slow meltdown. I offer one recent example to illustrate my point that the “Financial Tsunami” is only beginning.
Deutsche Bank got a hard shock a few days ago when a judge in the state of Ohio in the USA made a ruling that the bank had no legal right to foreclose on 14 homes whose owners had failed to keep current in their monthly mortgage payments. Now this might sound like small beer for Deutsche Bank, one of the world’s largest banks with over €1.1 trillion (Billionen) in assets worldwide. As Hilmar Kopper used to say, “peanuts.” It’s not at all peanuts, however, for the Anglo-Saxon banking world and its European allies like Deutsche Bank, BNP Paribas, Barclays Bank, HSBC or others. Why?
A US Federal Judge, C.A. Boyko in Federal District Court in Cleveland Ohio ruled to dismiss a claim by Deutsche Bank National Trust Company. DB’s US subsidiary was seeking to take possession of 14 homes from Cleveland residents living in them, in order to claim the assets.
Here comes the hair in the soup. The Judge asked DB to show documents proving legal title to the 14 homes. DB could not. All DB attorneys could show was a document showing only an “intent to convey the rights in the mortgages.” They could not produce the actual mortgage, the heart of Western property rights since the Magna Charta of not longer.
Again why could Deutsche Bank not show the 14 mortgages on the 14 homes? Because they live in the exotic new world of “global securitization”, where banks like DB or Citigroup buy tens of thousands of mortgages from small local lending banks, “bundle” them into Jumbo new securities which then are rated by Moody’s or Standard & Poors or Fitch, and sell them as bonds to pension funds or other banks or private investors who naively believed they were buying bonds rated AAA, the highest, and never realized that their “bundle” of say 1,000 different home mortgages, contained maybe 20% or 200 mortgages rated “sub-prime,” i.e. of dubious credit quality.
Indeed the profits being earned in the past seven years by the world’s largest financial players from Goldman Sachs to Morgan Stanley to HSBC, Chase, and yes, Deutsche Bank, were so staggering, few bothered to open the risk models used by the professionals who bundled the mortgages. Certainly not the Big Three rating companies who had a criminal conflict of interest in giving top debt ratings. That changed abruptly last August and since then the major banks have issued one after another report of disastrous “sub-prime” losses.
A new unexpected factor
The Ohio ruling that dismissed DB’s claim to foreclose and take back the 14 homes for non-payment, is far more than bad luck for the bank of Josef Ackermann. It is an earth-shaking precedent for all banks holding what they had thought were collateral in form of real estate property.
How this? Because of the complex structure of asset-backed securities and the widely dispersed ownership of mortgage securities (not actual mortgages but the securities based on same) no one is yet able to identify who precisely holds the physical mortgage document. Oops! A tiny legal detail our Wall Street Rocket Scientist derivatives experts ignored when they were bundling and issuing hundreds of billions of dollars worth of CMO’s in the past six or seven years. As of January 2007 some $6.5 trillion of securitized mortgage debt was outstanding in the United States. That’s a lot by any measure!
In the Ohio case Deutsche Bank is acting as “Trustee” for “securitization pools” or groups of disparate investors who may reside anywhere. But the Trustee never got the legal document known as the mortgage. Judge Boyko ordered DB to prove they were the owners of the mortgages or notes and they could not. DB could only argue that the banks had foreclosed on such cases for years without challenge. The Judge then declared that the banks “seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test,” the Judge concluded, “their weak legal arguments compel the court to stop them at the gate.” Deutsche Bank has refused comment.
What next?
As news of this legal precedent spreads across the USA like a California brushfire, hundreds of thousands of struggling homeowners who took the bait in times of historically low interest rates to buy a home with often, no money paid down, and the first 2 years with extremely low interest rate in what are known as “interest only” Adjustable Rate Mortgages (ARMs), now face exploding mortgage monthly payments at just the point the US economy is sinking into severe recession. (I regret the plethora of abbreviations used here but it is the fault of Wall Street bankers not this author).
The peak period of the US real estate bubble which began in about 2002 when Alan Greenspan began the most aggressive series of rate cuts in Federal Reserve history was 2005-2006. Greenspan’s intent, as he admitted at the time, was to replace the Dot.com internet stock bubble with a real estate home investment and lending bubble. He argued that was the only way to keep the US economy from deep recession. In retrospect a recession in 2002 would have been far milder and less damaging than what we now face.
Of course, Greenspan has since safely retired, written his memoirs and handed the control (and blame) of the mess over to a young ex-Princeton professor, Ben Bernanke. As a Princeton graduate, I can say I would never trust monetary policy for the world’s most powerful central bank in the hands of a Princeton economics professor. Keep them in their ivy-covered towers.
Now the last phase of every speculative bubble is the one where the animal juices get the most excited. This has been the case with every major speculative bubble since the Holland Tulip speculation of the 1630’s to the South Sea Bubble of 1720 to the 1929 Wall Street crash. It was true as well with the US 2002-2007 Real Estate bubble. In the last two years of the boom in selling real estate loans, banks were convinced they could resell the mortgage loans to a Wall Street financial house who would bundle it with thousands of good better and worse quality mortgage loans and resell them as Collateralized Mortgage Obligation bonds. In the flush of greed, banks became increasingly reckless of the credit worthiness of the prospective home owners. In many cases they did not even bother to check if the person was employed. Who cares? It will be resold and securitized and the risk of mortgage default was historically low.
That was in 2005. The most Sub-prime mortgages written with Adjustable Rate Mortgage contracts were written between 2005-2006, the last and most furious phase of the US bubble. Now a whole new wave of mortgage defaults is about to explode onto the scene beginning January 2008. Between December 2007 and July 1, 2008 more than $690 Billion in mortgages will face an interest rate jump according to the contract terms of the ARMs written two years before. That means market interest rates for those mortgages will explode monthly payments just as recession drives incomes down. Hundreds of thousands of homeowners will be forced to do the last resort of any homeowner: stop monthly mortgage payments.
Here is where the Ohio court decision guarantees that the next phase of the US mortgage crisis will assume Tsunami dimension. If the Ohio Deutsche Bank precedent holds in the appeal to the Supreme Court, millions of homes will be in default but the banks prevented from seizing them as collateral assets to resell. Robert Shiller of Yale, the controversial and often correct author of the book, Irrational Exuberance, predicting the 2001-2 Dot.com stock crash, estimates US housing prices could fall as much as 50% in some areas given how home prices have diverged relative to rents.
The $690 billion worth of “interest only” ARMs due for interest rate hike between now and July 2008 are by and large not Sub-prime but a little higher quality, but only just. There are a total of $1.4 trillion in “interest only” ARMs according to the US research firm, First American Loan Performance. A recent study calculates that, as these ARMs face staggering higher interest costs in the next 9 months, more than $325 billion of the loans will default leaving 1 million property owners in technical mortgage default. But if banks are unable to reclaim the homes as assets to offset the non-performing mortgages, the US banking system and a chunk of the global banking system faces a financial gridlock that will make events to date truly “peanuts” by comparison. We will discuss the global geo-political implications of this in our next report, The Financial Tsunami: Part 2.
F. William Engdahl is the author of A Century of War: Anglo-American Oil Politics and the New World Order. He is a Research Associate of the Centre for Research on Globalization (CRG). His most recent book, which has just been released by Global Research is Seeds of Destruction, The Hidden Agenda of Genetic Manipulation.
Slavoj Žižek: Don’t Just Do Something, Talk
One of the most striking things about the reaction to the current financial meltdown is that, as one of the participants put it: ‘No one really knows what to do.’ The reason is that expectations are part of the game: how the market reacts to a particular intervention depends not only on how much bankers and traders trust the interventions, but even more on how much they think others will trust them. Keynes compared the stock market to a competition in which the participants have to pick several pretty girls from a hundred photographs: ‘It is not a case of choosing those which, to the best of one’s judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligence to anticipating what average opinion expects the average opinion to be.‘ We are forced to make choices without having the knowledge that would enable us to make them; or, as John Gray has put it: ‘We are forced to live as if we were free.’
Joseph Stiglitz recently wrote that, although there is a growing consensus among economists that any bailout based on Henry Paulson’s plan won’t work, ‘it is impossible for politicians to do nothing in such a crisis. So we may have to pray that an agreement crafted with the toxic mix of special interests, misguided economics and right-wing ideologies that produced the crisis can somehow produce a rescue plan that works – or whose failure doesn’t do too much damage.’ He’s right: since markets are effectively based on beliefs (even beliefs about other people’s beliefs), how the markets react to the bailout depends not only on its real consequences, but on the belief of the markets in the plan’s efficiency. The bailout may work even if it is economically wrong.
There is a close similarity between the speeches George W. Bush has given since the crisis began and his addresses to the American people after 9/11. Both times, he evoked the threat to the American way of life and the necessity of fast and decisive action to cope with the danger. Both times, he called for the partial suspension of American values (guarantees of individual freedom, market capitalism) in order to save the same values.
Faced with a disaster over which we have no real influence, people will often say, stupidly, ‘Don’t just talk, do something!’ Perhaps, lately, we have been doing too much. Maybe it is time to step back, think and say the right thing. True, we often talk about doing something instead of actually doing it – but sometimes we do things in order to avoid talking and thinking about them. Like quickly throwing $700 billion at a problem instead of reflecting on how it came about.
On 23 September, the Republican senator Jim Bunning called the US Treasury’s plan for the biggest financial bailout since the Great Depression ‘un-American’:
Someone must take those losses. We can either let the people who made bad decisions bear the consequences of their actions, or we can spread that pain to others. And that is exactly what the Secretary proposes to do: take Wall Street’s pain and spread it to the taxpayers . . . This massive bailout is not the solution, it is financial socialism, and it is un-American.
Bunning was the first publicly to give the reasoning behind the GOP revolt against the bailout plan, which climaxed in its rejection on 29 September. The resistance was formulated in terms of ‘class warfare’, Wall Street against Main Street: why should we help those responsible (‘Wall Street’) and let ordinary borrowers (on ‘Main Street’) pay the price for it? Is this not a clear case of what economists call ‘moral hazard’? This is the risk that someone will behave immorally because insurance, the law or some other agency protects them against any loss that his behaviour might cause: if I am insured against fire, for example, I might take fewer fire precautions (or even burn down my premises if they are losing me money). The same goes for big banks, which are protected against big losses yet able to retain their profits.
That the criticism of the bailout plan came from conservative Republicans as well as the left should make us think. What left and right share in this case is their contempt for big speculators and corporate managers who profit from risky decisions but are protected from failures by ‘golden parachutes’. In this respect, the Enron scandal of January 2002 can be interpreted as an ironic commentary on the notion of a risk society. Thousands of employees who lost their jobs and savings were certainly exposed to risk, and had little choice in the matter. However, the top managers, who knew about the risk and also had the opportunity to intervene in the situation, minimised their exposure by cashing in their stocks and options before the bankruptcy. So while it is true that we live in a society that demands risky choices, it is one in which the powerful do the choosing, while others do the risking.
If the bailout plan really is a ‘socialist’ measure, it is a very peculiar one: a ‘socialist’ measure whose aim is to help not the poor but the rich, not those who borrow but those who lend. ‘Socialism’ is OK, it seems, when it serves to save capitalism. But what if ‘moral hazard’ is inscribed in the fundamental structure of capitalism? The problem is that there is no way to separate the welfare of Main Street from that of Wall Street. Their relationship is non-transitive: what is good for Wall Street isn’t necessarily good for Main Street, but Main Street can’t thrive if Wall Street isn’t doing well – and this asymmetry gives an a priori advantage to Wall Street.
The standard ‘trickle-down’ argument against redistribution (through progressive taxation etc) is that instead of making the poor richer, it makes the rich poorer. However, this apparently anti-interventionist attitude actually contains an argument for the current state intervention: although we all want the poor to get better, it is counter-productive to help them directly, since they are not the dynamic and productive element; the only intervention needed is to help the rich get richer, and then the profits will automatically spread down to the poor. Throw enough money at Wall Street, and it will eventually trickle down to Main Street. If you want people to have money to build, don’t give it to them directly, help those who are lending it to them. This is the only way to create genuine prosperity – otherwise, the state is merely distributing money to the needy at the expense of those who create wealth.
It is all too easy to dismiss this line of reasoning as a hypocritical defence of the rich. The problem is that as long as we are stuck with capitalism, there is a truth in it: the collapse of Wall Street really will hit ordinary workers. That is why the Democrats who supported the bailout were not being inconsistent with their leftist leanings. They would fairly be called inconsistent only if we accept the premise of Republican populists that capitalism and the free market economy are a popular, working-class affair, while state interventions are an upper-class strategy to exploit hard-working ordinary people.
There is nothing new in strong state interventions into the banking system and the economy in general. The meltdown itself is the result of such an intervention: when, in 2001, the dotcom bubble burst, it was decided to make it easier to get credit in order to redirect growth into housing. Indeed, political decisions are responsible for the texture of international economic relations in general. A couple of years ago, a CNN report on Mali described the reality of the international ‘free market’. The two pillars of the Mali economy are cotton in the south and cattle in the north, and both are in trouble because of the way that Western powers violate the same rules that they impose so brutally on Third World nations. Mali produces cotton of the highest quality, but the US government spends more money to support its cotton farmers than the entire state budget of Mali, so it is small wonder that Mali can’t compete. In the north, the European Union is the culprit: the EU subsidises every single cow to the tune of five hundred euros a year. The Mali minister for the economy said: we don’t need your help or advice or lectures on the beneficial effects of abolishing excessive state regulations; just, please, stick to your own rules about the free market and our troubles will be over. Where are the Republican defenders of the free market here? Nowhere, because the collapse of Mali is the consequence of what it means for the US to put ‘our country first’.
What all this indicates is that the market is never neutral: its operations are always regulated by political decisions. The real dilemma is not ‘state intervention or not?’ but ‘what kind of state intervention?’ And this is true politics: the struggle to define the conditions that govern our lives. The debate about the bailout deals with decisions about the fundamental features of our social and economic life, even mobilising the ghost of class struggle. As with many truly political issues, this one is non-partisan. There is no ‘objective’ expert position that should simply be applied: one has to take a political decision.
On 24 September, John McCain suspended his campaign and went to Washington, proclaiming that it was time to put aside party differences. Was this gesture really a sign of his readiness to end partisan politics in order to deal with the real problems that concern us all? Definitely not: it was a ‘Mr McCain goes to Washington’ moment. Politics is precisely the struggle to define the ‘neutral’ terrain, which is why McCain’s proposal to reach across party lines was pure political posturing, a partisan politics in the guise of non-partisanship, a desperate attempt to impose his position as universal-apolitical. What is even worse than ‘partisan politics’ is a partisan politics that tries to mask itself as non-partisan: by imposing itself as the voice of the Whole, such a politics reduces its opponents by making them agents of particular interests.
This is why Obama was right to reject McCain’s call to postpone the first presidential debate and to point out that the meltdown makes a political debate about how the two candidates would handle the crisis all the more urgent. In the 1992 election, Clinton won with the motto ‘It’s the economy, stupid!’ The Democrats need to get a new message across: ‘It’s the POLITICAL economy, stupid!’ The US doesn’t need less politics, it needs more.
Joseph Stiglitz recently wrote that, although there is a growing consensus among economists that any bailout based on Henry Paulson’s plan won’t work, ‘it is impossible for politicians to do nothing in such a crisis. So we may have to pray that an agreement crafted with the toxic mix of special interests, misguided economics and right-wing ideologies that produced the crisis can somehow produce a rescue plan that works – or whose failure doesn’t do too much damage.’ He’s right: since markets are effectively based on beliefs (even beliefs about other people’s beliefs), how the markets react to the bailout depends not only on its real consequences, but on the belief of the markets in the plan’s efficiency. The bailout may work even if it is economically wrong.
There is a close similarity between the speeches George W. Bush has given since the crisis began and his addresses to the American people after 9/11. Both times, he evoked the threat to the American way of life and the necessity of fast and decisive action to cope with the danger. Both times, he called for the partial suspension of American values (guarantees of individual freedom, market capitalism) in order to save the same values.
Faced with a disaster over which we have no real influence, people will often say, stupidly, ‘Don’t just talk, do something!’ Perhaps, lately, we have been doing too much. Maybe it is time to step back, think and say the right thing. True, we often talk about doing something instead of actually doing it – but sometimes we do things in order to avoid talking and thinking about them. Like quickly throwing $700 billion at a problem instead of reflecting on how it came about.
On 23 September, the Republican senator Jim Bunning called the US Treasury’s plan for the biggest financial bailout since the Great Depression ‘un-American’:
Someone must take those losses. We can either let the people who made bad decisions bear the consequences of their actions, or we can spread that pain to others. And that is exactly what the Secretary proposes to do: take Wall Street’s pain and spread it to the taxpayers . . . This massive bailout is not the solution, it is financial socialism, and it is un-American.
Bunning was the first publicly to give the reasoning behind the GOP revolt against the bailout plan, which climaxed in its rejection on 29 September. The resistance was formulated in terms of ‘class warfare’, Wall Street against Main Street: why should we help those responsible (‘Wall Street’) and let ordinary borrowers (on ‘Main Street’) pay the price for it? Is this not a clear case of what economists call ‘moral hazard’? This is the risk that someone will behave immorally because insurance, the law or some other agency protects them against any loss that his behaviour might cause: if I am insured against fire, for example, I might take fewer fire precautions (or even burn down my premises if they are losing me money). The same goes for big banks, which are protected against big losses yet able to retain their profits.
That the criticism of the bailout plan came from conservative Republicans as well as the left should make us think. What left and right share in this case is their contempt for big speculators and corporate managers who profit from risky decisions but are protected from failures by ‘golden parachutes’. In this respect, the Enron scandal of January 2002 can be interpreted as an ironic commentary on the notion of a risk society. Thousands of employees who lost their jobs and savings were certainly exposed to risk, and had little choice in the matter. However, the top managers, who knew about the risk and also had the opportunity to intervene in the situation, minimised their exposure by cashing in their stocks and options before the bankruptcy. So while it is true that we live in a society that demands risky choices, it is one in which the powerful do the choosing, while others do the risking.
If the bailout plan really is a ‘socialist’ measure, it is a very peculiar one: a ‘socialist’ measure whose aim is to help not the poor but the rich, not those who borrow but those who lend. ‘Socialism’ is OK, it seems, when it serves to save capitalism. But what if ‘moral hazard’ is inscribed in the fundamental structure of capitalism? The problem is that there is no way to separate the welfare of Main Street from that of Wall Street. Their relationship is non-transitive: what is good for Wall Street isn’t necessarily good for Main Street, but Main Street can’t thrive if Wall Street isn’t doing well – and this asymmetry gives an a priori advantage to Wall Street.
The standard ‘trickle-down’ argument against redistribution (through progressive taxation etc) is that instead of making the poor richer, it makes the rich poorer. However, this apparently anti-interventionist attitude actually contains an argument for the current state intervention: although we all want the poor to get better, it is counter-productive to help them directly, since they are not the dynamic and productive element; the only intervention needed is to help the rich get richer, and then the profits will automatically spread down to the poor. Throw enough money at Wall Street, and it will eventually trickle down to Main Street. If you want people to have money to build, don’t give it to them directly, help those who are lending it to them. This is the only way to create genuine prosperity – otherwise, the state is merely distributing money to the needy at the expense of those who create wealth.
It is all too easy to dismiss this line of reasoning as a hypocritical defence of the rich. The problem is that as long as we are stuck with capitalism, there is a truth in it: the collapse of Wall Street really will hit ordinary workers. That is why the Democrats who supported the bailout were not being inconsistent with their leftist leanings. They would fairly be called inconsistent only if we accept the premise of Republican populists that capitalism and the free market economy are a popular, working-class affair, while state interventions are an upper-class strategy to exploit hard-working ordinary people.
There is nothing new in strong state interventions into the banking system and the economy in general. The meltdown itself is the result of such an intervention: when, in 2001, the dotcom bubble burst, it was decided to make it easier to get credit in order to redirect growth into housing. Indeed, political decisions are responsible for the texture of international economic relations in general. A couple of years ago, a CNN report on Mali described the reality of the international ‘free market’. The two pillars of the Mali economy are cotton in the south and cattle in the north, and both are in trouble because of the way that Western powers violate the same rules that they impose so brutally on Third World nations. Mali produces cotton of the highest quality, but the US government spends more money to support its cotton farmers than the entire state budget of Mali, so it is small wonder that Mali can’t compete. In the north, the European Union is the culprit: the EU subsidises every single cow to the tune of five hundred euros a year. The Mali minister for the economy said: we don’t need your help or advice or lectures on the beneficial effects of abolishing excessive state regulations; just, please, stick to your own rules about the free market and our troubles will be over. Where are the Republican defenders of the free market here? Nowhere, because the collapse of Mali is the consequence of what it means for the US to put ‘our country first’.
What all this indicates is that the market is never neutral: its operations are always regulated by political decisions. The real dilemma is not ‘state intervention or not?’ but ‘what kind of state intervention?’ And this is true politics: the struggle to define the conditions that govern our lives. The debate about the bailout deals with decisions about the fundamental features of our social and economic life, even mobilising the ghost of class struggle. As with many truly political issues, this one is non-partisan. There is no ‘objective’ expert position that should simply be applied: one has to take a political decision.
On 24 September, John McCain suspended his campaign and went to Washington, proclaiming that it was time to put aside party differences. Was this gesture really a sign of his readiness to end partisan politics in order to deal with the real problems that concern us all? Definitely not: it was a ‘Mr McCain goes to Washington’ moment. Politics is precisely the struggle to define the ‘neutral’ terrain, which is why McCain’s proposal to reach across party lines was pure political posturing, a partisan politics in the guise of non-partisanship, a desperate attempt to impose his position as universal-apolitical. What is even worse than ‘partisan politics’ is a partisan politics that tries to mask itself as non-partisan: by imposing itself as the voice of the Whole, such a politics reduces its opponents by making them agents of particular interests.
This is why Obama was right to reject McCain’s call to postpone the first presidential debate and to point out that the meltdown makes a political debate about how the two candidates would handle the crisis all the more urgent. In the 1992 election, Clinton won with the motto ‘It’s the economy, stupid!’ The Democrats need to get a new message across: ‘It’s the POLITICAL economy, stupid!’ The US doesn’t need less politics, it needs more.
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