You hear it all the time. The Greeks are lazy. Those indolent loafers deserve what they get seeing as they've been living high on the hog for the past decade on cheap credit. Retiring at 50 after a life on the payroll of the state where they took ouzo-filled three-hour coffee breaks filled with idle chit-chat about how to avoid paying their taxes before kicking off work early to head to the beach. It's all their fault the financial markets are gyrating wildly, freezing the lines of credit needed to feed the economic recovery that's just around the corner. Don't get me started on the Italians and how they'll be better off now that Berlusconi's gone. We all know his lascivious penchant for underage girls and bunga-bunga parties were the reason the bond market had turned its attention to Italy driving rates over the unsustainable 7% level. It's too perfect to be true and so, as usual, it isn't. Its all propaganda, doing its job of diverting our attention from what's really happening as democracy does its elephant imitation and returns to die in its birthplace.
Yeah, I know cliche, but c'mon. Tragedy, pandemonium, chaos and drama are all Greek words, tailor made for headlines that mix truth and lies. The stories are almost pre-written - the financial fixes proposed so far are just rearranging deck chairs on the Titanic, water guns when we need bazookas and so on. Only farce could bring us the word play of a Papendreou being replaced by a Papademos on the orders of Merkozy or a surreal comedy get away with having a communist president finally replacing a buffoon like Berlusconi with a bankster butler named Monti. Yet neither Monty Python nor Groucho Marx had anything to do with it, the iceberg has already hit and it isn't very funny. Calling them unity or caretaker governments is meaningless as they aren't legitimate, nothing but our civilized version of a military coup with bankers in place of generals to pass and enforce austerity measures the people would never agree to and will be voted out once the dirty work is done. We'll pat ourselves on the back for returning the power to the people but it'll be too little too late.
Before we go back to the beginning, let's dispel a few of those myths that somehow make this takeover palatable. Greeks, along with the rest of the Club Med countries, work more hours per week and receive less paid holidays than German workers. At 42 hours/week, the Greeks top the EU table while you find the Germans mid-table at 36 and the Dutch at the bottom clocking in 31 hours. In fact, a quick look at all the OECD nations tells us the Greeks trail only the South Koreans in the developed world. The Greeks, Spaniards, Portuguese and the Irish all retire later than Germans while the percentage of GDP devoted to public pensions is roughly the same in Greece, France and Germany. As for that profligate Greek spending, well they lay out less for their public sector as a percentage of GDP than the EU average. Yes, they've got some tax collection problems but it's clearly not the average Greek who's to blame for the problems and understandably don't want to be the ones to pay for them.
The next fallacy is that this is a crisis caused by Greek/Irish/Portuguese/Spanish/Italian debt. Neither jubilant crowds celebrating the departure of Silvio Berlusconi in piazzas across Italy, nor Greece swearing in a new cabinet after George Papandreou's resignation, nor Ireland paying billions to unsecured Anglo Irish Bank bondholders, nor Portugal's recently elected prime minister Pedro Passos Coelho promising his serious looking suit-clad visitors from Brussels and Frankfurt that his country will fulfill the pledges the previous caretaker government made, nor Spaniards replacing their government today with the same party that got them into trouble and promises to make deeper and more painful budget cuts, will get us any closer to solving the problem. No, no, no, no and no, we've been witness to a putsch executed with blietzkreig efficiency, a European disaster that is doing exactly what should have been expected, subsidizing German producers and punishing the PIIGS for feeding at the trough placed in front of them.
It's the Germans who have been the most heavily subsidized for the past decade thanks to the creation of the eurozone. Waaaaah? That's right. Think about it, the euro has given German producers a powerful boost while crippling the peripheral, low-capital investment economies. The 17 current members of the eurozone share the same currency but have wildly divergent cultures, economies and policies. Yeah, only in theater of the absurd could anyone have expected a worker in Greece to be as productive as a German given the capital infrastructure differences. Exchange rates have traditionally been the mechanism by which countries regain competitiveness but these countries have now had over 12 years of fixed rates (10 for Greece). So, not only has German industry been granted a huge barrier-free market but also a set exchange rate to keep its goods reasonably priced from Lisbon to Athens. The explosion of Benzes, Beemers and Audis on the streets of Madrid and Dublin created a surplus that found its way back to German banks who had to lend this money to someone and were happy to find eurozone approved customers from Porto to Thessaloniki so that they could buy more German cars and build beach resorts for their builders. If Germany had its own currency, the New Deutschmark would be like the Swiss Franc on steroids and appreciate dramatically while the currencies of other nations would fall making their products more competitive, helping their domestic industries while forcing German industry to contract.
"The traitor within the European family"?
It's hard to remember but the German economy still hadn't fully recovered from reunification by the launch of the euro, even falling in 2003 as the Economist wrote of the Teutonic Plague (there's those misleadingly true headlines again!). By setting interest rates artificially low, the ECB helped German and French exporters but it also inflated real-estate bubbles in Spain and Ireland. The resulting decade of eurozone-aided German current account surpluses and the corresponding accumulation of debt willingly doled out to the PIIGS has given rise to contagion fears of another kind, debt default. It's no coincidence that the combined $183 billion current account deficit of Italy, Spain, Portugal and Greece are almost perfectly offset by Germany's current account surplus of $182 billion. The only solution we are told is for the PIIGS to implement austerity in exchange for more debt. Yet the only entities being helped by this are the banks while ensuring long term pain for everyone else in the countries receiving the 'help'. We've mentioned it here many times but it bears repeating, almost all of the bailout money winds up being siphoned out of the country by the banks and the payments only grow with each 'rescue' package. Meanwhile, the austerity measures demanded in return only serve to slow economic growth meaning further bailouts will be needed.
One need only have looked at the forerunner to the euro, the European Exchange Rate Mechanism (ERM) based on the European Currency Unit (ECU) to have foreseen the impracticality of fixed exchange rates among countries without common economic policy. This was a semi-pegged system based on fixed currency exchange rate margins, but with exchange rates variable within those margins. Only looking between November of 1991 and July of 1993, the Finnish markka was first devalued by 12% then severed the link altogether, the British Pound fell to its lower limit leading to its suspension, the Italian lira was devalued by 7%, as was the Spanish peseta, first by 5% then later another 8% along with the Portuguese escudo by 6.5% and the Irish punt by 10%, then Sweden and Norway abandoned the peg until finally the trading band had to be widened from 2.25% to 15% to save the French franc. Yet, 1999 apparently offered a unique point in economic ceteris paribus time when currencies could forever be fixed againt each other. It's not that currency pegs have failed time and again or have ever given powerful exporting nations an advantage leading to balance of trade problems, otherwise we might have known the idea was doomed to failure.
"Those who would give up Essential Liberty, to purchase a little Temporary Safety, deserve neither Liberty nor Safety"
- Benjamin Franklin
The funny thing about the whole EU project has been how anti-democratic it's consistently been from its ECSC beginnings, from Maastricht through the Lisbon Treaty all the way up to murdering democracy in its cradle. Even opposing the idea has somehow always been considered heresy, you've gotta be a wacky UKIP supporter or conspiracy theorist to have questioned it at any point. Yet nobody voted for the Treaty of Paris in 1957 that created the first incarnation of the EU suprastate, the European Coal and Steel Commission between France, West Germany, Italy, Belgium, Luxembourg and the Netherlands. Though ostensibly a trade arrangement, Robert Schuman, the man who first proposed the idea, declared his aim was to "make war not only unthinkable but materially impossible." To do this, the temper of the people had to be cooled, no more nasty Hitler-type populism-fueled democratic uprisings. When the ECSC morphed into the EEC, again there were no ballots. From time to time, annoying national constitutions required a yes vote in a referendum. Given the choice, the Danes rejected Maastricht and the Irish Lisbon, but both were told they had voted wrong and made to do it right. So who was surprised when the Papendreou was forced out for giving the Greek people a choice of whether or not to turn up the torture of the past few years?
I pity poor Papendreou a bit. Elected in October 2009, he not only inherited a crisis but was finally forced to fully revealed the extent to which the Greek books were cooked. National debt had been concealed, hidden and masked in order to get them into the eurozone and had now exploded, making the debt to GDP ratio unsustainable. The austerity demanded by the troika (the ECB/EU/IMF) in exchange for bailouts to keep the debt payments being made to the (mostly) French and German banks not only adds debt to the numerator and lowers GDP in the denominator but also fuels skyrocketing suicide, drug use and HIV rates while crippling employment, support and hope. There was no alternative until he wanted to give the people one. Reality becomes conspiracy from this point as the elected leader of Greece was summoned to the G20 meeting early where he received a scolding of French in one ear and German in the other. We learned Merkozy was annoyed, orders were issued and we were told the Greeks would have a new prime minister. Oh, and there wouldn't be any kind of referendum as it would have to be about being in or out of the EU and not about accepting more debt in exchange for death.
Whether it was a political ploy on Papendreou's part or not, announcing a referendum on the latest plan to (en)s(l)ave Greece was the right thing to do. The headlines trumpeted the EFSF, the European Financial Stability Facility, as cutting Greek debt by 50% in exchange for another €100 billion or so and more austerity pain. However, €150 of the total €350 or so billion in debt, the portion lent by the ECB and IMF, wouldn't be touched by this plan, making it a reduction of less than 30% (do the math 200/2=100; 100/350=.2857). Even more importantly, the wording states the private lenders were 'voluntarily' accepting the plan. Ha! Who are they fooling? Oh, that's right, the ISDA, the body that determines when a credit event occurs (PDF) and triggers all the CDS (Credit Default Swaps, you remember those right?) and a replay of Lehman Brothers 2008. They're the big reason neither default nor leaving the currency could be discussed until now. Yet while Papendreou's gambit may have backfired, it has made leaving the EU a possibility. After over a year of strikes and rioting he finally knew it was time to ask the people after seeing the national day parades to commemorate the Greek refusal to surrender to a Hitler-backed Mussolini being halted by violence and the president being shouted down as a traitor.
(Not so) funny enough, across the Adriatic the Italians got a new PM with much the same credentials as the Greek PM and the head of the ECB. Yes, newly appointed (last week) Greek PM Lucas Papademos and Super Mario Brothers, as in the new president (as of November 1st) of the ECB Mario Draghi and new Italian PM Mario Monti (last week) are all Goldman Sachs alumni. Greece gets a former ECB official who worked at Goldman Sachs, Italy gets an EU near-lifer with a bit of Goldman advising thrown in all because the current Italian head of the ECB, another Goldman Sachs alumni won't bend the ECB directives to bail out his countrymen and print euros. While the Germans try to hold the line on turning on the printing press for fear of a 1930s style inflation disaster, the vampire squid has maneuvered its tentacles around the economic lifeline of Europe much as it has done in America. No wonder we can't talk about how we got here otherwise we might notice that the same folks who wrote the opening scenes of this farce are being placed in charge of fixing it.
We need to flashback again. The 1990s saw a number of countries, notably Italy and Greece deliberately engage in financial transactions with no other purpose than to mask their public debt levels in order to secure entry into the euro. We don't need to look far to find those who put these debt bombs in place; Greece's PM Papademos oversaw his country's entry to the euro running the Central Bank of Greece from 1994 to 2002 before he became vice-president of the ECB in between stints advising Goldman and indoctrinating the next generation of neoliberals from Colombia University; Italian PM Mario Monti had to quit his role as adviser to Goldman Sachs before taking his new job while Mario Draghi was head of the Italian Treasury from 1991-2001 before heading to Goldman until 2005 until he took over at the Italian Central Bank. By using complex derivatives supplied by Goldman Sachs, Italy and Greece were able to slim down the apparent size of their government debt, which euro rules mandated shouldn't be above 60% of the size of the economy and thus created the problem the technocratic rulers are now tasked with fixing.
I'm not the only to have noticed that it seems as though technocratic overlords have been dropped into erstwhile democratic nations in order to implement the medicine that their kind deems necessary. Goldman Sachs Conquers Europe; Goldman Sachs, le trait d'union entre Mario Draghi, Mario Monti et Lucas Papadémos; Our Friends From Goldman Sachs; The great euro Putsch rolls on as two democracies fall, read headlines from Paris to London. As the Financial Times itself said, it's like we've decided the Borg would make a better commander of the Enterprise than Jean Luc Picard. Worse yet, they have provided a smokescreen for the vile Berlusconi to transform himself from goat to sacrificial lamb. Instead of being tossed from the legislative to the prison chamber for any of the many criminal cases pending against him or new revelations of some perversion vile enough to revolt even his media desensitized pubic, he offered himself up in exchange for passing austerity measures the markets had suddenly deemed necessary. This despite the fact the country runs a primary fiscal surplus, its fiscal deficit to GDP ratio being only 60% of the OECD average, less than the euro area average and its ratio of non-financial private debt to GDP also being very low relative to other OECD economies. Every new announcement is met by cheers from the market, but each period of euphoria is shorter than the last, like a junkie perpetually searching for a quicker hit. I'm taking bets Berlusconi's back in a few years and will be PM again as the Italians were robbed of the opportunity of purging the toxin themselves.
You'd think the Goldman/ECB/unity/caretaker/technocratic overlords in Italy and Greece would be careful about naming ministers representative of the people's wishes while (fourth)Reich-enbachs land in Athens and Rome to ensure compliance and Monti parrots Merkel's phrase about Europe facing its toughest test since WWII. No, Monti's cabinet is technocratic not democratic, consisting of bankers, soldiers and diplomats without a single elected member. It's worse in Greece where Papademos has named a motley crew with multiple links to the pre-1974 military junta. Full blown former fascists are being transformed into non-ideological technocrats to administer the neoliberal medicine to solve the problem, modern day quacks applying leeches to cure their patients. Terms of surrender are accepted not for fear of bullets and bombs but of losing our pensions and iPads, the former getting more elusive and the latter more addictive as it becomes harder to qualify for benefits and gadgets get ever more distracting. Few even noticed that while most Greek government bonds were issued under Greek law where the bonds could be redenominated in new drachma should they ever have to leave the euro, the deal stuck October 26th changes the jurisdiction governing the bonds to English law, making redenomination impossible, resistance is indeed futile, we're being assimilated.
You want worse? Well, the Spaniards are about to vote in the PP, the right wing freakshows that brought us the Jose Maria Aznar gongshow, now led by a non-entity named Mariano Rajoy because they'll do a better job of following the banksters orders. Yeah, right. Not only did the Irish people start paying back unsecured Anglo-Irish Bank bondholders as penance for their sins, they also watched as the one-time richest man in Ireland Sean Quinn who owes Anglo-Irish some €2.9 billion declare personal bankruptcy - in Northern Ireland where the law is more friendly. In Portugal, retired Col. Otelo Saraiva de Carvalho, a leader of the democracy-restoring 1974 "Carnation Revolution", told Lusa news that a growing dissatisfaction with the government could trigger a military revolt. The entire euro zone is already in severe recession, yet the ECB, the Germans, the French and virtually every single policy maker in the core continue to advocate the economic equivalent of medieval blood-letting via ongoing fiscal austerity in order to keep the interest payments flowing to the banks so they can gamble on the commodity markets, driving the price of heating oil and corn up so we freeze and starve. And, surprise, surprise, the public deficits continue to grow. Americans can't be too smug about the situation seeing as their government was long ago taken over by Goldman Sachs, Citigroup et al and are about to pay their pound of flesh across the board as the 12 person "super committee" can't seem to agree how to serve 200 lobbyists rather than 300 million citizens. Wouldn't it be interesting if we spent more time talking about the reality of who this craziness is helping instead of the mythology of lazy Greeks and Berlusconi's bunga-bunga?
Ultimately Greece will have to default and in all likelihood so will Italy, Spain, Ireland and Portugal (and yes, eventually the UK and the US too). The technocrats are nothing but another ploy played by the bankers to keep skimming off as much as possible for as long as possible, repeating over and over that there is no alternative. As long as we keep believing their myths we'll stay pinned to the mat as our rights are slowly stripped away along with our wealth. We just need to turn our heads away from the screen to see the choices we really have instead of what they're offering us. Argentina declared bankruptcy as recently as 2001, Russia in 1998 as has almost every other nation on Earth while Greece was the first recorded case of sovereign default in 377 BC. You want a more modern model? Just compare Iceland's quasi-default to Latvia's austerity. Yes, it'll be a tragedy, pandemonium, chaos and drama but would it really be so bad if they had to import a little less stuff for a while? The money lenders will always return and at least it offers a light at the end of the tunnel instead of this cycle of doom and gloom. Modern Greece has already tried being a failed German state; it's time to shake off the myths and remember that Athenian democracy could only be established after Solon legislated "shaking off the burdens" to free the people from debt slavery.
Imagine how differently the Wizard of Oz would have ended if Dorothy and the gang had listened to that order from the great and powerful wizard behind the curtain. The scarecrow wouldn't have gotten his brain, the lion, courage, the tinman his heart and of course Dorothy may never have made it back home to Kansas. Well, ignoring the machinations of the wizard behind the curtain is exactly what the world has been doing for the past three decades. Even when the smoke and mirrors machine malfunctioned as another financial bubble burst in 2008, instead of holding the wizard to account and then fixing the mess he'd caused, we allowed him to hold us hostage for ransom. He demanded we prop him back up and put things back the way he wanted. So, unsurprisingly, here we are more than three years later hearing the same demands as then, except this time we're bailing out entire nations as we transferred all of the losses the wizard should have paid onto the backs of sovereign states giving the wizard even more power than he ever had before.
Oh, I know, we shouldn't be surprised, after all, that's what we've been trained to do; hide our heads under the covers and hope that everything bad just goes away while the wizard takes care of things for us so we can keep living as we did before. The past decade has been particularly demoralizing as we've allowed terrorists to not only take over the economy and financial markets but to hold our environment hostage and spread a global war that has necessitated trading in many of our civil rights. The wizard is no fool, he knows how to push our buttons, pulling levers and cranking wheels to produce the thunder and lightning that manufactures consent to his demands regardless of the cost. Yet no matter how hard we try to appease him, the wizard will never be satisfied, the witch's broom today, 50% of our GDP tomorrow, each command creating a new catastrophe leading to a new demand in an endless chain. Bailouts, oil spills, wars and Patriot Acts (check out this infographic) all have the perverse result of leading to the next emergency as the wizard's warriors - politicians, economists and the mainstream media - hype the next threat. It seemed for awhile we'd never learn our lesson, yet perhaps we've been given a second chance to peek behind the curtain and finally have the conversation we should have had three years ago.
Yes, the Arab Spring that flowed into Europe as the Indignados finally washed up on the shores of America on September 17th. Occupy Wall Street seems to have signaled to the rest of the world that even Americans can see we're heading in the wrong direction, galvanizing the globe into action as the occupy movement went viral on October 15th. Simultaneous protests in 951 cities in 82 countries don't happen every day you know, especially for something as amorphous as this, where there is no leader nor concrete demands. Instead, it's a general feeling that we're no longer in control; ballot boxes are meaningless when the wizard dictates our range of choices while free markets have become the wizard's money laundering service thanks to corporate lobbying for deregulation and government handouts. It's impossible to pin down what the protesters want which drives those who don't understand batty. Lol'd into passive acceptance by cute cats and TV talking heads whose job it is to propogate the very social, political and economic infrastructure the movement wants to tear down. The strength of the occupy movement is simply it's presence, Toto pulling back the curtain on a system of the 1%, by the 1% and for the 1%. We understand that Wall Street is but one player (albeit an important one) in a global system in which finance, state, and entities like the World Bank, the IMF, and multinationals worldwide work for the benefit of an elite few, all at the cost of the rest of us, perpetuating a global system of slavery, war, and inequality.
"There are no conditions of life to which a man cannot get accustomed, especially if he sees them accepted by everyone around him." Tolstoy - 1877
Here we are three years into the financial crisis, great recession, lesser depression or whatever you want to call it and we're still no closer to getting out of it. In fact, if we listen to those unelected officials the system has empowered to guide us to safety, things are in fact looking positively apocalyptic. US Treasury Secretary Tim Geithner warns of "cascading defaults", "bank runs" and "catastrophic risk". The International Monetary Fund says "the global economy is in a dangerous new phase" while World Bank President Robert Zoellick warns that Europe, Japan, and the U.S. are in such danger, they’re threatening to "drag down not only themselves, but the global economy." Those elected are no more reassuring; Obama deflects the US failure to accomplish anything by telling Europe they are "scaring the world" so the G20 finance ministers meet again and again to point fingers while Merkozy huddle together to formulate another plan to further enslave the Greeks and the Polish finance minister warns of war if we allow the EU to break up. This all sounds eerily familiar, doesn't it? Preparing us for the next crisis moment when we'll have to do everything in our power to save the world economy; it's just like October 2008 all over again.
In fact we're in a worse place today because we're still chasing the delusion of perpetual GDP growth and using debt as a propellant. A five thousand year old habit driving a much newer idea; even the Babylonians had debt but it took an American, Simon Kuznets in 1937, to come up with a catch-all number to measure a nation's production. It has become the measuring stick by which we gauge our success and just as importantly, is used in the calculation of how much debt we can service. Thanks to the charity shown to the banks, the level of aggregate net government debt in the world rose from $23 trillion in 2007 to $34 trillion in 2010 and IMF forecasts indicate the level will reach $48 trillion in 2015. The ratio of world debt to world GDP rose from 44 percent in 2007 to 59 percent in 2010, and is expected to climb to 65 percent in 2015. Oh, and the total of outstanding ‘bets’ in the leveraged, optioned, securitized derivatized casino in all likelihood exceeds a quadrillion (yeah, $1,000,000,000,000,000)
Every crisis, real or invented, offers opportunity, and disaster capitalism thrives on taking advantage of catastrophes. Whether it's structural adjustment in Latin America, shock and awe in Iraq or the big bang in London, each shock treatment, while sold as a free market initiative, has the result of concentrating wealth and power in the hands of the few. Since being blackmailed back in 2008 it's impossible to put a number on how much private loss we've socialized. Hundreds of billions quickly turned into trillions in a dizzying display of support when the wizard called for it. Emergency lending programs, near zero financing at the Fed discount window, the Troubled Asset Relief Program, the Financial Stability Plan, the European Financial Stability Facility or a mere $16 trillion in secret Federal Reserve loans to everyone from McDonald's to the South Korean Central Bank. Well, seeing as the goal of all this was to keep the debt Ponzi scheme from collapsing, not help society, I guess they can claim mission accomplished. Banks that were too big to fail are bigger; the largest six financial institutions in the United States now have assets equivalent to 60% of total US GDP. As Senator Richard Durbin, an Illinois Democrat, bluntly said in 2009, despite having caused the crisis, these same financial firms "are still the most powerful lobby on Capitol Hill. And they, frankly, own the place."
Bailout beneficiary Bank of America can transfer $75 trillion from their derivative division at Merrill Lynch to deposits so they are backstopped by the American taxpayer through the FDIC, start charging customers $5/month to use their own money, layoff 40000 employees and give a $6 million and a $5 million payout to a couple of departing executives all in the same month. Oh, don't try to close your account there or Citibank, otherwise you're bound to get arrested. Executive pay at the 200 biggest US companies last year went up by an average 23% over 2009, the median executive salary was $10.8 million. Even after being saved by the taxpayers, of the 100 highest-paid chief executives in the United States in 2010, 25 took home more pay than their company paid in federal corporate income taxes. Coincidentally, the collective net worth of members of Congress rose 25% in the past two years, an increase of more than $2 billion. Directors' pay at the largest UK companies was up an average of 50% in 2010. Meanwhile, the average American family's household net worth declined 23% between 2007 and 2009.
You don't need to understand the processes of cognitive dissonance, epistemic closure, conformation or anchoring bias to know why so many accept and even defend a broken system. Upton Sinclair put it best, "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!". Most of us are lucky if we have time to read the morning headlines before rushing off to work, we've got mortgages, car loans, student loans, home entertainment system loans and credit cards to pay off don't you know? While those shiny gizmos bought from Wal-Mart on Chinese credit along with all real wealth, from buildings to oil and pigs, are subject to the inescapable entropy law of thermodynamics and will rot, rust, or wear out with age, money and debt, as accounting devices invented by humans, are subject only to the laws of mathematics. Like a latter-day priesthood, with abstruse equations in place of latin texts, the bankers and economists dominate the discourse, convincing us that it's all too complicated when in fact "the process by which banks create money is so simple that the mind is repelled." We have sat powerlessly and watched all the king's horses and all the king's men try to put the Humpty-Dumpty banking cartel together again through a series of bailouts, zero-interest loans, and mergers and acquisitions which have done nothing but make the original problem worse.
"Thus did a handful of rapacious citizens come to control all that was worth controlling in America. Thus was the savage and stupid and entirely inappropriate and unnecessary and humorless American class system created. Honest, industrious, peaceful citizens were classed as bloodsuckers, if they asked to be paid a living wage. And they saw that praise was reserved henceforth for those who devised means of getting paid enormously for committing crimes against which no laws had been passed. Thus the American dream turned belly up, turned green, bobbed to the scummy surface of cupidity unlimited, filled with gas, went bang in the noonday sun." - Kurt Vonnegut, God Bless You, Mr. Rosewater
Ah, the original problem. Take a look in the mirror. Yep, you're probably looking at it. This world wasn't created overnight and it won't be fixed by writing a letter to the editor or to your government representative. We allowed ourselves to be sold an impossible dream, we made a deal with the devil in which we sold our souls for an IOU. We gave up our homes, pensions, education, unions and freedom in exchange for the easy life where housing prices always went up, we didn't have to do any dirty work, our kids would go to the best schools and we could all retire at 55 while the wizards of Wall Street made it all happen. We could maintain an affluent, equitable society without any maintenance of the infrastructure through the magic of technology driven efficiency. These wizards not only had our ear but they whispered sweet nothings into our leaders' ears as well and together we allowed them to take control. Thus neoliberalism came to rule the world in a whirlwind of privatization, deregulation, free trade and tax cuts for everyone. Technology, efficiency and most importantly, finance, would take care of everything while assuming that rule of law, infrastructure and basic decency just happen. A few among us saw the warning signs, their cautionary tales simply became how-to-manuals on how to succeed as Gordon Gecko was transformed into the ideal and we somehow imagined we could all be Paris Hilton.
"When people stop believing in God, they don't believe in nothing - they believe in anything." - G.K. Chesterton
We've killed all our gods but one and now it's killing us. Over the past couple hundred years we've transformed the once quirky humanities subject of political economy into the science of economics, and not just a normative one but positive, a science that describes things as they are, not simply the way we want them to be. Heck, we even pretend it has its own Nobel Prize which was never Alfred's intention. Just as traditional religions often find the most vulnerable among us the most susceptible to conversion, western society was a ripe target for proselytization forty years ago. We had seemingly hit the limits of growth as ecological catastrophe loomed alongside the stagflation created by the oil crisis, while Watergate, Vietnam and the failure of price controls had shaken our faith in government. This opened the door for a new faith, where economic growth would come from unleashing the power of the market by relying on individual greed. Milton Friedman became more powerful than elected officials thanks to his prophecies while his disciples took over the levers of the world's economies, going so far as overthrowing sovereign nations, and created a neoliberal world order.
"An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today." - Laurence J. Peter
The problem is that it's all built on an edifice of lies and assumptions that just don't hold true. Do you believe that everybody has the same access to information or that we all make decisions to maximize our utility? That we make rational choices and have rational addictions? How can you believe in an efficient market and still base rewards on random luck and call it skill? The promise of stability by risk management has done the opposite from the get-go thanks to the wizards we empowered and their hocus pocus. Walter Wriston and Citicorp (later bank then group) knew how to deal with all those extra dollars floating around thanks to the oil shock - invest them in South America. Poof - the Latin American debt crisis. The magic of the Garn–St.Germain Depository Institutions Act of 1982 produced the Savings & Loans Crisis and the 1987 market crash. The incantation of deregulation brought the junk bonds of Michael Milken and the insider trading of Ivan Boesky that destroyed real wealth by enabling leveraged buy-outs which created instant billionaires out of nothing. The 1990s sorcery of derivatives and sophisticated hedging techniques promising low risk investment returns with little money down produced the explosion at Proctor and Gamble and Orange County in 1994. Voodoo economics prescriptions created and worsened the East Asian Financial Crisis in 1997, the Russian rouble crash of 1998 while the internet bubble had to pop eventually every bit as much as the tulip market more that 350 years before. The repeal of Glass-Steagall, low-interest rates and the easy money facilitated from raising money from pension and mutual funds alongside dictators and small investors were all pieces in the puzzle leading to the mortgage crisis in 2007 that caused the financial crisis that is still with us in 2011. Oh, did I forget Enron, WorldCom, Nortel, AIG, Arthur Anderson, Tyco...yeah, just can't trust the government, less regulation must be the way to go.
"An economist is someone who sees something working in practice and asks whether it would work in principle." - Stephen M. Goldfeld
How can a model predict anything when the variables don't have any sense and have changed beyond recognition over time. The Kennedy administration wanted to lower unemployment so they invented the term 'discouraged worker' which disappeared millions of job seekers. Johnson created the 'unified budget', which rolls surplus Social Security funds into the general budget, where they are spent but then not reported as part of the deficit. Nixon stipped out food and fuel to give us the "core inflation" measure we normally use today which is like reporting inflation ex-inflation. In 1996, Clinton further mangled the meaning by giving us substitution, weighting, and hedonics, where the basket of goods measured from year to year changes as it is now assumed that when the price of something rises, people will switch to something cheaper (hot dogs for salmon), goods and services that are rising most rapidly in price get a lower weighting under the assumption that people will use less of those things and adjusts for quality improvements, especially those that lead to greater enjoyment or utility of the product (iPad2 over iPad1). GDP figures meanwhile are just as meaningless as they include trillions in imputations, which assume economic value had been created but no actual transactions took place. Examples include the 'value' that the owner of a house receives by not having to pay themselves rent or the benefits from receiving free checking accounts. Oh, yeah, the magic of hedonics boosts the GDP too. Even if we had perfectly reliable numbers to plug into economic models, we'd still get the wrong results thanks to the wonders of model calibration in which the dismal science simply reinvents the wheel each time the cart crashes. Is it any wonder that nearly every economist was blindsided by the financial crisis?
On the first day God created the sun - so the Devil countered and created sunburn. On the second day God created sex - in response the Devil created marriage. On the third day God created an economist. This was a tough one for the Devil, but in the end and after a lot of thought he created a second economist!
Instead of altering their views to fit the facts, economists simply alter the facts to fit their views. Thus, we get jokes played on us such as the Laffer Curve which theorized government revenue goes up when taxes are decreased and rationalized tax cuts. The laugh is on the poor who are looking for the wealth that was supposed to trickle down while the rich keep laughing all the way to the bank. Neoliberal driven deregulation has led to free trade agreements under the guise of comparative advantage that simply allow production to be shifted to slave labor countries and the CEO to award themselves for their ingenuity. To add insult to injury, the modern day gurus tasked with manipulating these numbers to argue for government policy are inevitably recruited from the largest financial institutions and return to the private banking world through a revolving door. So, not only are we relying on the equivalent of the alchemist to make gold out of copper and engineer economic stimulus or the astrologer to chart the skies and predict the future, these charlatans have every incentive to create policies that benefit the JP Morgan and Goldman Sachs of the world.
We've highlighted the inequality created by the crony capitalism here many times but one of the spin-offs of the new awakening enabled by the protests is even the mainstream press has been forced to report on the carnage that was apparent even before 2008. You know, like the 400 wealthiest Americans having a greater combined net worth than the bottom 150 million, yeah the top 1% of Americans possess more wealth than the entire bottom 90%. Even in the good times of debt bubbles, the 'Bush expansion' from 2002 to 2007, 65% of economic gains went to the richest 1%. Preferential tax treatment has helped drive the U.S. to its worst level of income inequality since the Great Depression, with the nation ranking more unequal than the Ivory Coast, Ethiopia, and Pakistan. Since 1979, "the gaps in after-tax income between the richest 1 percent of Americans and the middle and poorest fifths of the country more than tripled." All this is bad news even for those who think winning is determined by GDP as Robert H. Frank's "The Darwin Economy" cites a study showing that among 65 industrial nations, the more unequal ones experience slower growth on average. Likewise, individual countries grow more rapidly in periods when incomes are more equal, and slow down when incomes are skewed, as seen in the US where they enjoyed considerable equality from the 1940s through the 1970s with accompanying strong growth. Since then inequality has surged, and growth has slowed.
Continent color-coded correlation by country b/w GINI & life expectancy
The IMF wrote last month that "the recent global economic crisis, with its roots in U.S. financial markets, may have resulted, in part at least, from the increase in inequality," and argued that "equality appears to be an important ingredient in promoting and sustaining growth." Another IMF paper said "The crisis is the ultimate result, after a period of decades, of a shock to…two groups of households, investors who account for 5% of the population, and whose bargaining power increases, and workers who account for 95% of the population." The 5%, broadly speaking, lend to the 95%, and in so doing gain still greater wealth and power. The shock comes when the creditor class suddenly realizes that the borrowers are drowning in debt and cannot possibly absorb any more. At that point, financial assets connected to consumer debt are dumped and prices crash, much as they did in 2007. The authors added, "To our knowledge, our framework is the first to provide an internally consistent mechanism linking the empirically observed rise in income inequality…and the risk of a financial crisis." It gets worse, as shown by Wilkinson and Pickett in "The Spirit Level" that inequality also causes shorter, unhealthier and unhappier lives as it is a driver in increasing the rate of infant mortality, teenage pregnancy, violence, obesity, imprisonment and addiction. The USA is already experiencing a drop in life expectancy in poorer regions while the UK and most visibly, Greece, are proof that the austerity measures being forced on populations as a result of socializing bank losses leads to social ills such as soaring suicide rates, prostitution, and ultimately violence.
Of course what we're witnessing is mainly a youth awakening. Not only do they have the most energy and technological savvy but also are the ones getting screwed the most and will have to live with the ecological consequences of our growth addicted culture. Society tells us that if we go to school and get a degree we can write our own ticket. We're supposed to be a meritocracy where effort and a little bit of luck puts us on the path to the American Dream: a house, 2.4 kids, dog in the backyard and a nice middle-class life. Instead, many are trapped in the nightmare of debt servitude as the combination of youth unemployment, over 40% in many places, and student loan debt which will haunt them for the rest of their lives. The amount of student loans taken out in the US each year has doubled over the past decade to $100 billion (after adjusting for inflation!) and the total outstanding has doubled in the past five years, surpassed total credit card debt, and will pass the $1 trillion mark before the end of the year. Yeah, another fraudulent credit bubble we all know will eventually burst! Here's the kicker: student loans cannot be disposed of even in bankruptcy thanks the the bankruptcy reform act of 2005. Not only does our system enslave nation's to debt (welcome to the club Libya!) we get our own populations when they're young.
Turning colleges and universities into profit seeking corporations has not only turned them into machines to generate revenues for faculty, research scientists, theorists and facilities but has also turned education into a simple monetary investment with no guarantees. When this is seen alongside the closed intellectual circle formed between universities, business and government (hello Larry Summers!) it's no wonder the system is only capable of producing drones who don't have the ability to think critically. Conformity is valued over ingenuity driving the best and brightest to study finance and economics in hopes of going to Wall Street to move numbers around and make money. instead of philosophy or science. This brain drain will continue, leaving us with no alternative unless society learns to value education as an essential ingredient toward a more complete populace instead of a mechanism for enrichment for the few at the expense of the many.
While students in Europe don't need to enslave themselves to get a higher education as it is considered the human right that it is (with the glaring exception of the UK), their countries' sovereign debt, particularly the PIIGS, has subjugated the entire continent. Each crisis in confidence leads to renewed market attacks resulting in constant emergency meetings which issue renewed demands for national austerity in order to qualify for ever growing debt-packages to pile onto the existing debt. We're warned the interconnectedness of the world's financial markets means that the failure of one node in the global debt payment merry-go-round could cause a replay of the Lehman Brothers collapse in 2008. Yet, ultimately, countries such as Greece will have to jump off as the very austerity demanded in exchange for new debt makes it increasingly difficult to pay as economic growth is retarded. If you take the macro view of debt and investment, it can only be a stable (sustainable) scenario when it is actually being used to build systems that will produce more tangible wealth: That way debt is multiplied and repaid, with interest. Taking Greece again as the example, one can see most of the new debt is simply going to old debt.
Logic, ever bit as much as the protests from Stygmata Square to Wall Street, has shifted the conversation over the past couple of years from the impossibility toward the inevitability of default. Don't be fooled though, we'll keep waking up to "I Got You Babe" just like Bill Murray in Groundhog Day, but it'll be sung by the duo of Merkozy with the Chinese singing backup instead of Sonny and Cher and every morning will be a little worse than the previous. The latest deal to save Greece and the eurozone through a combination of begging the weaker banks to raise $100 billion in capital, borrowing a trillion from wherever they can find it and bribing the private bondholders to take a 50% haircut is too little too late no matter how much they sing the praises of fixing a debt problem with more debt now that Greece has been scalped. In this bizarro world, omniscient markets soar and bond spreads narrow on news that a credit event, which would have required the payout on billions of euros in credit default swaps, has been avoided as the imposition on the debt holders is called voluntary and it's normal watching Sarkozy beg the Chinese to become Europe's master.
First they ignore you, then they laugh at you, then they fight you, then you win. - Mahatma Gandhi (purportedly)
A big question is what took so long? We forget that popular protests took a few years to develop even after the Great Depression and there's always the 400% increase in the use of anti-depressants over the past two decades. There's also the memory of how the US government responded then or just a few years ago to protests they don't like. Besides, after the first round of financial terrorism in 2008, the elite astroturfed a Faux News promoted faux-populist movement to channel the rage away from the corporate culprits onto their lackies, the US government. Compared with the Tea Party media coverage, Occupy Wall Street was ignored early on, it took a bit of police brutality to whet the appetite of the public. Once it became clear the protesters weren't going away, the politicians and the press followed the playbook by mocking, attacking and demeaning those involved. Eric Cantor, the House majority leader, denounced "mobs" and "the pitting of Americans against Americans". The GOP presidential candidates weighed in, with Mitt Romney accusing the protesters of waging "dangerous, class warfare" while Herman Cain called them "anti-American". Senator Rand Paul did his best to one-up the wingnuts by worrying aloud that the protesters will start seizing iPads, because the protesters believe rich people don’t deserve to have them. If you were listening to the talking heads on CNBC, you learned that the protesters "let their freak flags fly" and are "aligned with Lenin". On Faux News, Sean Hannity told one occupier she didn't "believe in freedom" while Ann Coulter called the Wall Street occupation "The beginning of totalitarianism." If you're unlucky enough to be exposed to the corporate propaganda of CNN, you might have caught former bankster, current bankster fiancee and all-around evil tool of the banking cartel Erin Burnett's expose revealing...well, her vapidness. Seriously? The US made $20 billion on the TARP bailout? Um, no, more like lost around $100 billion. Oh, and I guess she just forgot about the $1.5 trillion still owed for those Fed loans.
If the occupy protests in the US were to be broken up today (under a hail of rubber bullets, tear gas and flash bangs like in Oakland) they could already claim victory. Fed Chairman Ben Bernanke said he "can't blame" protesters for being angry. Republican leader of the House, John "I pass tobacco kickbacks out on the congressional floor" Boehner has said that he understands the "frustrations" driving the Occupy Wall Street movement. Dick Cheney, possibly the single best exemplar of why such protests are so necessary has said when he looks at Wall Street, he sees "a group of people that I fundamentally disagree with on a lot of things" - particularly "where they wield political influence." Later in the same interview though he cautioned against claims that his former company Halliburton wields too much influence, "We’ve got to be careful, I’m always a little bit leery of conspiracy theories". Of course it was Cheney's influence wielding that brought riches to his former company Halliburton through first war in Iraq and then inserting the Halliburton loophole into the 2005 Energy Act to exempt his and other gas companies from environmental regulation to allow the practice of hydraulic fracturing to wreak havoc on lives and the environment.
Mitt Romney suddenly expressed "worry" for the 99%, Eric Cantor admitted "there is too much income disparity" after they learned a Time magazine poll found 54% of Americans support the protests. They have forced the scarecrow public to at least take a look at the state of the world we've allowed to be created as the story of income inequality, crony capitalism and purchased politicians has spilled out of the blogosphere into the mainstream media, giving the tinman heart to break the vicious circle that has led to a culture that celebrates death and violence by igniting a virtuous spiral as interest leads to more investigation and discussion on how to change the direction we're headed. Together we can find the courage of a lion to take away the wizards' system of privilege (from the Latin privi legere i.e."private law"; a special right, immunity, or exemption granted to persons in authority or office to free them from certain obligations or liabilities) that has created a two-tier legal system. President's turn the world into a battlefield to assassinate even their own citizens while profit-driven privatized prisons have delivered the highest prison population in the world thanks to a war on drugs but we punish rent-seeking parasites pittances for pillaging out patronage. We all knew something wasn't quite right before but could only suspect that others felt it too as we've become so isolated from one another, in our cubicle, car or confessional. Only by coming together to share ideas and experiences can we turn ideas into action. Toto has given us one last chance to get Dorothy back to Kansas.
Perversely, our system of representative democracy and free markets has created the authoritarian oligarchy we live in as the idea of representation is used to legitimize the vast decision-making powers of the ruling elite. It took humanity over 10,000 years to give democracy a shot and now that we're a few hundred years into the experiment many think the present system is programmed into our DNA. However, democracy clearly isn't viable in the context of extreme instability and social inequality, in which 1% of the population owns and polices the other 99%. A central tenant of the Occupy/Indignado movement is a call to end the corrupt occupations of western democracies by a system of corporate lobbying and campaign financing along with the takeover of decision making by unelected bureaucrats. We're still in the early dawn of the Citizens United decision to allow unlimited corporate political spending but the need for revolution rather than just evolution is already obvious, the evidence that spending money lobbying Congress means higher corporate profits is mainstream knowledge. Bailouts, lobbyists, campaign donations and a revolving door between corporate boardrooms and positions in government are just a few of the signs.
Robert Rubin moves from Goldman Sachs to Treasury Secretary where he led the charge for financial deregulation that culminated in the repeal of Glass-Steagall which broke the barriers between banking, investment and insurance setting the stage for the financial crisis. Oh yeah, then he raked in $128 million as a payoff from Citigroup, a company who owes its existence to the laws he shaped. Legislation intended to rein in Wall Street such as the Frank-Dodd bill has no chance of having any teeth when bank lobbyists spend hundreds of millions to ensure it doesn't. Citizens United has codified the fact that money does talk ensuring corporate persons have the only voices that count in getting people elected. Legality is determined by justices with conflicts of interest, presidents are elected if Wall Street says so and congressmen only hear their corporate benefactors. When people are given the chance to have their say, it is ignored when unelected elites deem their words to be meaningless until we say what they want us to. Unelected bureaucrats in Brussels and Frankfurt not only dictate austerity for all but force constitutions to be amended, labour laws to be relaxed and pensions to be slashed.
In the pay to play world of politics, legislators should dress like Nascar drivers wearing the logos of the corporations they take their orders from, mostly Big Oil, Big Pharma and Big Bank. The top lobbying firms and super PACs determine who gets elected and then the policies they pass. The media reflects this by reporting on the never-ending election cycle like a horse race determined more by money than policy. It's simply a self-fulfilling prophecy that corporate profits reach new record levels quarter after quarter, industry after industry as US Bank announces record profit while about 10 million mortgages are estimated to be underwater (the house is worth less than the loan) and home prices continue to fall. Unemployment will never come down as long as free trade agreements are crafted to serve the interests of multinational corporations instead of the people. Of course Dave Hartnett, the permanent secretary for tax at HM Revenue & Customs in the UK is the most wined and dined public servant in the land, he ensures Vodafone and the banks don't have to pay their fair share of taxes. How else would we explain the shrinking share of corporate taxation in overall tax revenue at a time of record deficits caused by the very same firms paying for all the wine. Over the past 5 years, while GE made $26 billion in profits in the US, it received a $4.1 billion refund from the IRS; $19 million was paid to Chevron for making $10 billion in profits in 2009 while Exxon made $19 billion the same year and received a cheque for $156 million from Uncle Sam. In response to the We Are the 99% Tumblr, rightwing nuts created the We Are the 53% (sorry for not linking to a hate site) to spread the false meme that 47% of Americans don't pay taxes while the fact is the poor pay a bigger share of their income in other taxes, particularly the highly regressive payroll tax, than the rich. Over 1,400 millionaires paid no income taxes in 2009 while Warren Buffett wants to be taxed more as he pays less than his secretary and hedge fund managers who made $1 billion last year now pay a lower effective tax rate than many nurses
Meanwhile this corrupt economic machine has also created an insatiable military industrial complex that necessitates the creation of enemies, real and imagined. Even rightwing nuts become "weaponized Keynesians" believing in government's ability to create jobs as long as it means building bombs instead of bridges. The voice of the 99% was ignored on February 15, 2003 when upward of 15 million people in sixty countries marched together to try to stop Dubya from finishing his dad's work in Iraq. Maybe by creating occupied territories at home we can force the spotlight onto the other Occupied Territories, helped by the authorities who use the very firepower deployed by the IDF on Palestinians in American cities such as Oakland and somehow reveal the hypocrisy of our leaders' efforts to negotiate a settlement which simply allows Israel to build illegal settlements. The 1% reap the rewards while the ranks of the 99% provide the fodder for the machine; the rich don't fight in the wars they create, just profit from them. Prime Minister's cut their teeth playing lapdog to superpowers by marching their country off to war before earning their payday playing the part for JPMorgan with foreign dictators who we help murder after their usefulness has worn off. The cost of funding the Pentagon and operations in Iraq every year is more than the rest of the world spends on defense and almost double what the US spends on education, health, housing and transport combined.
That's why despite the celebration of the assassination of Osama bin Laden, an enemy Reagan created, the perpetual war on terror isn't any closer to ending. Much of the west is still in an unwinnable war in Afghanistan that has slipped into it's second decade. Iraq festers. The Cameron/Sarkhozy war against Berlusconi, er, I mean the nine months of NATO bombing the hell out of Libya, oops, I mean limited kinetic operation protecting the people of Bengazi from the regime we chose to change by murdering, yikes, I mean helped hunt down so a future terrorist, whoops, freedom fighter could kill him in cold blood, in Libya is just a stepping stone to AFRICOM. All a necessary part of the package, exploded bombs and missiles need to be replaced, on credit preferably. Anyone else notice how quick the TNG got a central bank up in running in the previously debt free country of Libya? Let's not even talk about how troops landing in Uganda is just a geopolitical chest thumping for the Chinese who are busy buying up and building the continent. Won't it be fun when the US and China are forced into the inevitable confrontation, probably over Taiwan or maybe debt collection when the debt jubilee is finally declared.
What's that? Debt Jubilee? No, I'm not talking about the party Dorothy can wear those ruby red shoes to but what I'd like to see the occupy movement deliver. Never heard of it? Well, if you've heard of the Rosetta Stone, you should know all about it. Still no? The term Rosetta Stone is now used in other contexts as the name for the essential clue to a new field of knowledge. But the decree issued at Memphis in 196 BC on behalf of Ptolemy V written in three scripts, ancient Egyptian hieroglyphs, Demotic, and Ancient Greek that solved the mystery of hieroglyphics, could also hold the key to the Greek, student, underwater homeowner and economic woes of much of the world. On the occasion of his coming of age and ascending the throne, the 13-year-old Pharoah declared a general amnesty which included wiping the slate clean of debt. Once upon a time, a creditor would seize the debtor’s livestock and vineyard, perhaps even his children to be enslaved as household servants, until the debts were repaid. If the failure of borrowers persisted, the wealthy lenders would wind up owning all the property, with the peasants reduced to tenant farmers on the land they had once owned. The negative cycle stopped when the peasants could no longer borrow because they had nothing left for lenders to claim in default. Economic life at that point was frozen or depressed, no longer functioning. Sound familiar (for those lacking in imagination, replace cars, small businesses and homes for livestock, vineyards and children)
As recorded in the bible, every seven (or fifty depending on interpretation) years, ancient Hebrew societies solved the cycle of debt accumulation, along with the flip side of power concentration, by declaring a general forgiveness called the year of jubilee. David Graeber, author of Debt: The First 5,000 Years, thinks this tradition was likely influenced by the Babylonians who issued clean slate edicts whenever debt accumulation threatened social crisis. We've been trained to scoff at such a suggestion and modern economists will decry the moral hazard that would result. Our times call for more civilized answers, such as bailing out banks and quantitative easing, printing money to give to those who caused the crisis instead of facing the reality that the inequality caused partially by debt is what's causing the economic malaise. We need to learn Charlie Chaplin's lesson from the Great Dictator that "Our knowledge has made us cynical; our cleverness, hard and unkind. We think too much and feel too little. More than machinery, we need humanity. More than cleverness, we need kindness and gentleness."
An indebted country has a moral obligation to default on that loan if paying it would mean starving its people. Extreme austerity is a trap. Defaulting is not that big of a deal. They did it in the 1980's with the Brady bonds. They did it in Brazil, in Argentina. Those countries got re-established, and here we are 20 years later. It's not the end of the world. Banks have been going out of business for centuries. Look at the United States, the British were constantly loaning money for railroad construction, canal construction, there were booms and busts. They lost money. And they'd come back two years later and do it all over again. So the idea that because some big banks go under its the end of the world is not just morally wrong, it's historically wrong. It's not how banking and economic history has worked. Some economists study inequality and what drives it. Others study financial fragility and macroeconomic volatility. But the two subjects are seldom addressed as underlying cause and effect. Gross concentrations of money at the top help explain why the system eventually stalls out. This is a basic insight that ought to inform the agenda for recovery.
Hopefully you're asking yourself how I could propose a recovery and return to perpetual economic growth in the west when it's clearly impossible, after all, nothing grows forever. It's become obvious to all but the blind that infinite growth on a finite planet is ecological suicide. We seem to be on the horns of a seemingly intractable dilemma - without growth, we spiral into poverty; with it, we deplete the planet. Either way, we lose. But who's to say we can't have prosperity without growth? To stave off unemployment, we shorten the workweek to roughly four days, creating more jobs, we also set up higher taxes on the rich and more public services for the poor, and impose a carbon tax to fill government coffers and discourage the use of fossil fuels y voila! John Stuart Mill argued that growth was necessary only up to the point where everyone enjoyed a reasonable standard of living; likewise in 1930, John Maynard Keynes predicted that possibly as soon as his grandchildren's time the economy wouldn't need to grow (pdf) further to meet our basic needs; even Adam Smith acknowledged that it might be possible for an economy to max out its natural resources and stop growing. Yet since the conclusions of the Club of Rome in the 1960s that the world would eventually reach The Limits to Growth was attacked and delegitimized by the powers that be, not much attention has been paid to zero-growth economics.
Yet here we've been offered the perfect opportunity to wake up to the fact that we've probably already hit the limit, after all, today's measurement of health, GDP, measures all economic activity, including everything from oil spills to car accidents, both of which hugely boost economic activity. Worse, we have no way of measuring the negative impact we are having on future generations, such as the production of greenhouse gasses. All told, we are most likely already experiencing real negative growth. Besides, shouldn't the aim be to happiness? Yet despite GDP doubling in the US since 1957, the proportion of people who say they are very happy has barely budged. It seems happiness suffers from diminishing and then zero returns after about $75,000 (non-PDF). The Kingdom of Bhutan has already made the switch to GNH, Gross National Happiness as the yardstick by which the nation's success is judged. The upsurge of recent interest has given us Peter Victor's 2008 Managing Without Growth, and last December's Prosperity Without Growth (pdf) by Tim Jackson, economics commissioner for the UK's Sustainable Development Commission that have both good and bad news. People will benefit as efficiencies will bring about an explosion in free time allowing us to reconnect with our friends and families and most importantly nature, which itself will benefit from the lowering of consumerism. Sadly, however, you won't be able to buy a new iPhone every six-months and the zombie walk at the mall will become a bed-time story about the olden-days.
"Let’s treat this beautiful movement [Occupy] as if it is most important thing in the world. Because it is. It really is." - Naomi Klein
As the world welcomes it's seven billionth human it's high time we stop being trapped by what is, we've got to push for what ought to be. The underlying principle is that the powerful will do whatever they have to do to protect their interests. If you do not threaten those interests, you are free to do as you wish. If what you do somehow threatens that power, then the powerful will beat, arrest, or kill you. A piece of paper is not going to stop that even if it says constitution or bill of rights at the top as many occupy protesters from New York to Denver and Oakland have found out. Just as waking from a deep slumber can shock the system and seem disturbing, the process of realizing that when you live in a country that only allows you to exercise your rights in free speech zones you don't have real freedom. That's why this movement demands more than change along the edges. Obama's proposal to lower the maximum number of years and percentage of income to pay student loans from 30 to 25 years and 15 to 10%, the 50% haircut for Greek bondholders, letting the Bush tax cuts for the rich expire, or some kind of Tobin tax on financial transactions - all great ideas but are just bribes to keep the game the same, the slow bleeding of the patient for the benefit of the wizard. We've gotta go big or go home - if we want to get home like Dorothy that is.
"Still, if you will not fight for the right when you can easily win without bloodshed; if you will not fight when your victory will be sure and not too costly; you may come to the moment when you will have to fight with all the odds against you and only a precarious chance of survival. There may be a worse case. You may have to fight when there is no hope of victory, because it is better to perish than to live as slaves." - Churchill, Winston; The Second World War, Volume I: The Gathering Storm
Part-time recluse, part-time rockstar,full-time ranter. Paying the bills teaching English in the wild west of capitalism.
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