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by sandyt

The World After Democracy

4:36 pm in Uncategorized by sandyt

Okay, so let’s start out the new year with a little perspective.  The estimable Michael Hudson has a great article up on Counterpunch called “The Financial War Against the Economy at Large”.  Unfortunately, he left it too late to be included in a lot of people’s ‘Best of 2012’ lists.  But it belongs there.  This article is only part two of a series: Part one is here.  At post time, there are no further entries, but watch that space!

So anyway, Hudson gives a really concise and pointed outline of the plans our financial whiz kids have made for the rest of us.  Their plan, which is working brilliantly so far, is to rule the world.  Yeah, you read that right.  It’s bold! It’s impudent!  It’s audacious!

And it’s working.  Here’s how:

First, use tax policy to starve what they call ‘the beast’, that is, the parts of government that serve the public rather than the rich.  The ‘beast’ starvation program was kicked off by Reagan and more or less completed by George W. Bush.  We have now made sure that the wealthy, as individuals and as capitalists, pay almost no taxes (for more on corporate taxes, see the charts here and here.  For tax rates on the wealthy, go here.  A cool animation can be found here, an illustrated history here).  All levels of government, from nation to state to locality – are hurting for revenue.  Government must now go into debt to finance capital to keep running.  The victim is in the water.  The sharks move in.  Let’s let Hudson tell it:

The aim of financial warfare is not merely to acquire land, natural resources and key infrastructure rents as in military warfare; it is to centralize creditor control over society…Tax favoritism for the wealthy deepens the budget deficit, forcing governments to borrow more. Paying interest on this debt diverts revenue from being spent on goods and services. This fiscal austerity shrinks markets, reducing tax revenue to the brink of default. This enables bondholders to treat the government in the same way that banks treat a bankrupt family, forcing the debtor to sell off assets…In an Orwellian doublethink twist this privatization is done in the name of free markets, despite being imposed by global financial institutions whose administrators are not democratically elected…Greece, for example, has been told to start selling off prime tourist sites, ports, islands, offshore gas rights, water and sewer systems, roads and other property.

As Hudson says, this is happening now in Europe, with Greece, Spain, Portugal and others putting their societies on the auction block.  Before that, it happened in East Asia following the 1997-98 financial crisis.  Before that, it happened in Russia and around the Third World, as Simon Jenkins, former IMF chief economist, points out.

But the problem is getting a lot closer to home.  Michigan’s Republican-controlled government can now appoint ‘emergency managers’ for cities (like Detroit) which can’t balance their books.  The emergency managers can overrule elected officials, terminate contracts and sell public assets.  When Michigan’s voters rejected the law in November 2012, the Republicans enacted a new version within weeks.   In other states and cities, the same thing is happening.  We’re still in the early stages, but the trend is clear.

For this whole plan to work you need corrupt, incompetent politicians who will run up huge, irresponsible debts.   Politicians like – oh, I don’t know – maybe certain former US Presidents?

You also need a policy and culture of elite impunity.  Reagan and Bush, for example, tolerated high levels of sleaze, even if you don’t count the war crimes.  But when it comes to keeping hands off financial criminals, guess who takes the cake?

So as this strategy unfolds, there is no more public property, except that which finance capital allows us to keep.  There is no more public policy, except that which finance capital decides not to veto.  No city, county, state or national government may take a step that could potentially impinge on finance capital’s interests.  Ever.  No matter what the voters say.  The European Central Bank and the IMF can tell any Euro-zone country; ‘Go ahead.  Have your little election.  Choose whoever you like.  It won’t make any difference.’  It’s happened in former Communist countries and large parts of the Third World.  It’s on the march in the United States.  The age of democracy, as it has been practiced since the late 1800s, is coming to a close.  Capital – especially finance capital, in large concentrations – will inherit the world.   If we let them.  All we have to do is nothing.  They’ll take care of the rest.  Can they count on our inaction?  Stay tuned…

For a longer version of this post, see

by sandyt

Both Barrels from the New Aristocracy

10:29 pm in Uncategorized by sandyt

Wow – a double-barrel news day for American pensions and retirement security.

Barrel One, from the Private Sector
First up, everybody’s favorite job creators and patriotic Americans, the CEO class (AKA the ruling class, the bourgeoisie, the capitalist class, MOTUs, bloodsucking vampires). It seems that sending our jobs overseas, smashing the labor movement, and laying us off by the millions isn’t enough for this crowd. No, that would be leaving too much money on the table. So they have to loot our pensions as well. That money didn’t disappear, though; it was magically transformed into profits or, in some cases, executive paychecks. Salon’s Thomas Rogers wrote about it here; his article is based on a conversation with Ellen Schultz, the author of “Retirement Heist

She draws out some salient points.
First, these pension benefits, at a lot of companies, were negotiated in lieu of cash wages. That is, they were a form of deferred compensation belonging to the employees but managed by the company. It’s not the company’s money, and when they take it, it’s theft.
Second, these corporations knew what they were doing. Court documents show the executives discussing how to disguise the changes so employees wouldn’t know it was happening.
Third, these companies snuck in the changes to their pension plans during the 1990s. Why then? It’s not as if American business was hurting during that decade. I would suspect that it had to do with opportunity. The 1990s were the decade of “rightsizing”, “downsizing”, “streamlining” and “globalization”, all code words for dumping American workers in favor of overseas workers as fast as possible. It was the decade when the white-collar workforce caught the hell that had been hitting the blue-collar workforce since the 1970s. If you’re going to kick millions of loyal people off the payroll, you don’t want to get stuck paying them what you promised them, do you? I mean, what would Wall Street think about that?

Digby covers this with her usual excellence. She goes on to point out that these shenanigans leave the taxpayers on the hook. The 1974 ERISA law created the Pension Benefit Guaranty Corporation, which is supposed to step in when private pensions “fail”. The rate of pension failure has outrun the PBGC’s funding. The fund is facing $102.5 billion in obligations with $79.5 billion in assets. Who is supposed to make up the difference? Why, the corporations, of course! Since they have trillions on hand in cash, that should be no problem.


Barrel Two, from the Public Sector
Next up, our own elected representatives at statehouses across the nation. This is discussed in a cover story in today’s USA Today.

It seems that state legislators in quite a few states have been inserting crafty language into the laws to allow themselves to really clean up on their own pensions (at the same time as they slash pensions for other state employees). A few of the tricks include: calculating their pay as if they worked 365 (or, in one case 372) days per year, allowing retirement at an earlier age, increasing the multiplier on which their pension is calculated, including pay they receive for other work into their state pension, allowing themselves to start drawing pensions while they are still working, basing their pension payments on the salaries they pay state judges, creating extra stipends for holding leadership positions, and on and on. Some legislators get pensions worth 17 times more than their legislative salaries!

Needless to say, none of the dodges engineered by these legislators to benefit themselves are available to “the voters they serve or the workers they direct”. It also goes without saying that these pension payments are on top of whatever consideration these individuals may be receiving from lobbyists, whatever business opportunities may conveniently open up to them as a result of their positions, etc.

And on the receiving end…
I think we’ve been asleep at the switch a little too long in America. In the nineteenth century, the United States was infamous around the world for the corruption of our political system. Generations went into the streets, onto the picket lines, and into the voting booths to change that. We managed to create, by our own efforts, a social contract that obliged our capitalists and elected representatives to behave to a certain standard.

Since Nixon, and especially Reagan, a counterattack has been underway, brilliantly managed and lavishly financed, and these outrages are just a few of its fruits.

So remember all this the next time you hear calls for cuts to Medicare, Medicaid, or Social Security. Remember this when you hear called for shared sacrifice. This is sacrifice, all right, but the only ones sharing it are the American people. Our new master class is doing just fine (thanks so much for asking!)