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Krugman: The Madoff Economy -- The Economy of Parasite

An amazing op-ed article by the Nobel Prize winning economist, Paul Krugman explaining how the financial industry, and the neoliberal economy was basically built on a massive fraud perpetrated on investors and the public at large. The strange, self-serving incentives on Wall Street, and other financial markets have destroyed a once productive economy. Today we face total debt in the hundreds of trillions, we have allowed major corporations to become so big that they have essentially socialized our economy in the worst possible way with private benefits and public costs (bailouts), 50% of the world's market capitalization has been wiped off, millions of jobs have been erased off the payrolls, and we aren't done yet.

How bad does it have to get for people to seriously consider viable alternatives? The stock markets are hyper-inefficient at allocating capital (as we have seen), the free market is never free, and the credit-card economy had reached a brick wall. The solutions are simple, but politically hard. Redistribute income, impose income caps, increase the minimum wage and tie it to inflation, increase taxes on non-productive/parasitic sectors (FIRE), increase taxes on the super-rich who have been the ones who have dis-saved NOT the poor who have saved--running contrary to that beautiful notion of "common sense", and the nationalization of the financial industry, or at least heavy regulation. If we ignore the lessons of this crisis our entire society will suffer a hole deeper than we can ever hope to dig ourselves out of. Quoting Keynes, "When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill done." (Keynes 193)

Oh and Merry Christmas!

The Madoff Economy

The revelation that Bernard Madoff — brilliant investor (or so almost everyone thought), philanthropist, pillar of the community — was a phony has shocked the world, and understandably so. The scale of his alleged $50 billion Ponzi scheme is hard to comprehend.

Yet surely I’m not the only person to ask the obvious question: How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole?

The financial services industry has claimed an ever-growing share of the nation’s income over the past generation, making the people who run the industry incredibly rich. Yet, at this point, it looks as if much of the industry has been destroying value, not creating it. And it’s not just a matter of money: the vast riches achieved by those who managed other people’s money have had a corrupting effect on our society as a whole.

Let’s start with those paychecks. Last year, the average salary of employees in “securities, commodity contracts, and investments” was more than four times the average salary in the rest of the economy. Earning a million dollars was nothing special, and even incomes of $20 million or more were fairly common. The incomes of the richest Americans have exploded over the past generation, even as wages of ordinary workers have stagnated; high pay on Wall Street was a major cause of that divergence.

But surely those financial superstars must have been earning their millions, right? No, not necessarily. The pay system on Wall Street lavishly rewards the appearance of profit, even if that appearance later turns out to have been an illusion.

Consider the hypothetical example of a money manager who leverages up his clients’ money with lots of debt, then invests the bulked-up total in high-yielding but risky assets, such as dubious mortgage-backed securities. For a while — say, as long as a housing bubble continues to inflate — he (it’s almost always a he) will make big profits and receive big bonuses. Then, when the bubble bursts and his investments turn into toxic waste, his investors will lose big — but he’ll keep those bonuses.

O.K., maybe my example wasn’t hypothetical after all.

So, how different is what Wall Street in general did from the Madoff affair? Well, Mr. Madoff allegedly skipped a few steps, simply stealing his clients’ money rather than collecting big fees while exposing investors to risks they didn’t understand. And while Mr. Madoff was apparently a self-conscious fraud, many people on Wall Street believed their own hype. Still, the end result was the same (except for the house arrest): the money managers got rich; the investors saw their money disappear.

We’re talking about a lot of money here. In recent years the finance sector accounted for 8 percent of America’s G.D.P., up from less than 5 percent a generation earlier. If that extra 3 percent was money for nothing — and it probably was — we’re talking about $400 billion a year in waste, fraud and abuse.

But the costs of America’s Ponzi era surely went beyond the direct waste of dollars and cents.

At the crudest level, Wall Street’s ill-gotten gains corrupted and continue to corrupt politics, in a nicely bipartisan way. From Bush administration officials like Christopher Cox, chairman of the Securities and Exchange Commission, who looked the other way as evidence of financial fraud mounted, to Democrats who still haven’t closed the outrageous tax loophole that benefits executives at hedge funds and private equity firms (hello, Senator Schumer), politicians have walked when money talked.

Meanwhile, how much has our nation’s future been damaged by the magnetic pull of quick personal wealth, which for years has drawn many of our best and brightest young people into investment banking, at the expense of science, public service and just about everything else?

Most of all, the vast riches being earned — or maybe that should be “earned” — in our bloated financial industry undermined our sense of reality and degraded our judgment.

Think of the way almost everyone important missed the warning signs of an impending crisis. How was that possible? How, for example, could Alan Greenspan have declared, just a few years ago, that “the financial system as a whole has become more resilient” — thanks to derivatives, no less? The answer, I believe, is that there’s an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they’re doing.

After all, that’s why so many people trusted Mr. Madoff.

Now, as we survey the wreckage and try to understand how things can have gone so wrong, so fast, the answer is actually quite simple: What we’re looking at now are the consequences of a world gone Madoff.


So long, farewell, Auf Wiedersehen, goodnight

There's a sad sort of clanging
From the clock in the hall
And the bells in the steeple, too
And up in the nursery
An absurd little bird
Is popping out to say coo-coo

coo-coo Regretfully they tell us
coo-coo But firmly they compel us
to say goodnight
Too you

So long, farewell
Auf Wiedersehen, goodnight
I hate to go and leave this pretty sight





The War in South Ossetia

Russia’s Geo-Political Position

The Russia of 2008 could not be further away from the dark, grim reality of Russia in 1998. The collapse of the Ruble, the record low oil price, the brisk movement of “the West’s” borders encroaching towards the borders of the former Soviet Union looks unstoppable. Russia was in a midst of an existential crisis, unsure of its status as a Western power, a Eurasian power, or whether or not it was even a power at all. From the depth’s of disappear also arises a means to rise from the ashes.

The appointment of Vladimir Putin in 1999 to the position of Prime Minister was possibility the best move that President Yeltsin ever made. Nineteen ninety-nine did bring about the end of the neoliberal, pro-western alignment in Moscow. The liberals were maligned by the inability of market reforms to jump start the economy, the brushing aside of Moscow’s objections to the use of force against Serbia, the terrorist attacks in Moscow by Chechen rebels, and finally the slowly rising oil price all enabled a strategic change in Moscow’s thinking.

What is not and what is being said in the Western mainstream media/analysis:

Mainstream media outlets in the West deride the rise of Russia as being the coming of the second Cold War, that Russia is the aggressor nation breaking the sacred bounds of international law. Russia after the invasion of Iraq made it clear that it would also preemptively attack nations that it considered threats to its national security. When George Bush said this in 2003 to the run-up to the war, it was lauded by the media as the only logical course of action in the post-9/11 world.

The war in Georgia was qualitatively different; Russia was defending its citizens in South Ossetia, citizens who voluntarily accepted Russian passports. Thus, Russia’s war justified on grounds more than sufficient because Russia is indeed defending its citizens in a foreign country. The Georgian’s started the war against South Ossetia, read Russia. It was not as if Saakashvili did not know that the citizens of South Ossetia were Russian, and even more egregious, that Russian military personnel were located as peacekeepers in the region. It was that negligence, if not criminality, that led to the invasion of Russian forces in to Georgia. Saakashvili even lacked the legal right to attack South Ossetia, as it went the 1992 peace agreement which set-up a buffer zone to protect the enclave from Georgian aggression.

The notion in the Western media, is that tiny democratic Georgia is being invaded by Russia, that’s the headline; within the footnote it says, due to a Georgian attack on South Ossetia. The reality is that Saakashvili’s Georgia is nominally democratic, with a record of flouting the rule of law, restricting the freedom of speech, the press, and questionable electioneering. However, since Saakashvili is unwaveringly pro-American, neoliberal, and actively supports the subversion of Russian interests in the Caspian/Caucausus region, these blights on Saakashvili’s democratic record are routinely overlooked by the mainstream Western press.

Some of the conservative commentators even go as far to defend Georgia’s action justified on the mere fact that it is a “democracy” and Russia is a tyranny. In reality, neither Russia nor Georgia are model liberal-democracies, but to explain away Georgia’s actions solely on its faux liberal democratic credentials is propaganda.

The Western media also makes the claim that Russia has lost the PR battle, that its already negative image has been compounded by its “neo-imperialist” act of aggression against Georgia. Russia’s actions may indeed have turned off some members of the Western community, but in many parts of the world, where American hegemony is consistently challenged, Russia’s actions are popular. Russia received its most vivid and unequivocal support from anti-hegemonic factions in the global south—Venezuela, Hamas, Hezbollah, Syria, Belarus, etc.--indicating that Russia’s actions are realigning Russia’s position as a counter-hegemonic force.

Hypocrisy abounds:

Certainly, Russia is not without its own contradictions, it claims to care about the human rights and safety of its citizens from aggression. This obviously begs the question, Chechnya? There are some differences between South Ossetia and Chechnya legally and geopolitically, but Russian’s claims to protect the lives and property of its citizens “anywhere at any time” rings hollow with its own record within its own borders. Russia’s demand for the self-determination of the South Ossetians also rings hallow considering Russia’s own minorities who may also demand such a right that Moscow has denied them.

The United States is also highly hypocritical, and its hypocrisy has even been noted by the mainstream media; principally the hypocrisy stems from the administration giving Moscow a tongue-lashing for invading a “sovereign state” like Georgia, one need only point to Iraq to end that argument. The difference that is made, either implicitly or explicitedly, is that since Georgia is “democratic” its sovereignty is qualitatively different from autocratic Iraq. This argument degrades international law to an even more base level, by creating a legal apartheid, whereby state-rights are guaranteed by their adherence to certain, read American, standards of government and the free market.

Lessons Learned:

Russia may very well be recovering lost ground since 1991, the Russians now are increasing their links in the Middle East, principally Syria; Venezuela, where Chavez is actively campaigning for the basing of the Russian fleet; and even Cuba where overtures of a reestablishment of Russian bases has been growing. What is more important for Russia is that its influence in the CIS has grown exponentially. The lesson has been learned for any former Soviet state that seeks to undermine Russia’s geo-political position; Russia will be relentless in its perceived self-defense.

The other lesson is that the United States and NATO will not come to the defense of these nations in any real substantive way. No American will sacrifice Atlanta, GA. For Tbilisi, Georgia. This is a major strategic reverse for the United States, and its Eurasian strategy of encirclement and re-routing energy resources away from the Russian near-monopoly.

The other lesson that is being is not being learnt in the halls of Washington D.C. is that state-owned companies like Gazprom represent the new form of the state, the corporate state of the early twenty-first century. The interests of Gazprom are the interests of the Russian state and visa versa. While the United States decentralizes and privatizes the most elementary functions of government, the rising powers are doing the opposite. America’s pyrrhic affair with neoliberal decentralization is already leading to crisis and disenchantment may soon follow, and a different American state may form; however, one should not hold their breath!


Challenging catering to it...?

Latin America again may be on America's radar.

There have been a recent string of discoveries of large reserves of oil and natural gas in the Southern Cone (Brazil, Uruguay, Argentina) in the last 6 months. The most notable of these has been the massive find of oil off Brazil, known as the Tupi and Sugarloaf fields. According to Bloomberg:

"A tripling of proved reserves from 12.6 billion barrels would move Brazil into the world's top 10 nations in oil supplies, according to estimates from London-based BP Plc. Brazil, Latin America's largest economy, would overtake Nigeria, currently No. 10 with 36.2 billion barrels, and put it close to Kazakhstan, which has 39.8 billion barrels."

This has massive implications for geopolitics of the world and Latin America in particular. Since the oil is readily accessible to the American market, conceivably it can supplement or replace Venezuelan oil supplies to the US. Hugo Chavez is not a dumb one, he has signed an agreement with China to supply China with 1 million barrels of oil a day, and before people say that he can't because the oil is too heavy, China is building a refinery in Southern China for the express purpose of refining Vene. oil. What this means is that since Venezuela's oil production has been falling, if Venezuela wants to keep its commitment to China it has to reduce exports to the US.

This is actually against US interests because in so doing, Chavez is enabling China to become vested in the future of the pseudo-socialist regime of Hugo Chavez, meaning political, material,and possibly even military support to his administration and project. Hugo Chavez is also making overtures to Moscow:

"President Hugo Chavez says that Venezuela is fortifying "all levels of cooperation" with Russia, including the purchase of more arms."

"Venezuela spent $4.4 billion in weapons purchases from 2003 to 2006 to modernize its armed forces, according to a report by the U.S. Congressional Research Service."

"Venezuela's military fired its first test missile from a recently acquired Russian Sukhoi fighter jet and launched its first seaborne missile in 13 years, showcasing new capabilities in exercises carried live on state television."

The Chavez regime has every reason to beef up its military in light of the record of the Bush regime and traditional American imperialism in the Caribbean basin. It would rather impossible to have a socialist revolution without the force of arms to protect yourself against American intrigues (lest we forget Chavez was overthrow by an American supported coup d'etat in 2002). By appealing to China for diplomatic assurances, and Russia for investment (Gazprom, which is really an arm of Russia's corporate state, and foreign policy apartus) Chavez is building a truly powerful coalition of international forces to protect him against the United States.

Brazil though has the capacity to undermine Chavez, with the large reserves of oil recently found in Brazil's waters, it could change the whole dynamic. For Venezuela, the more centrist, but still socialist Brazilian government could spread Brazilian semi-peripheral imperialism to safeguard against "revolutionary" socialism of Hugo Chavez, while still appealing to the redistributionist demands of the populations. The oil find will give Brazil major power status, and its oil monopoly Petrobras the ability to challenge Exxon and other major Western oil firms (it is already bigger than Chevron). Brazil can also challenge American or support the United States in the region, certainly Brazil wants to replace the United States as the hegemonic power in Latin America, and has succeeded imo in Mercosur. The United States needs Brazil more than ever, also considering that Brazil will now export major amounts of ethanol to the United States:

"America’s thirst for ethanol is set to grow in line with targets in last year’s Energy Independence and Security Act. Brazil would like to sell more to Europe and Japan too...This year Brazil hopes to export up to 3 billion litres of ethanol to the United States. But this market depends on the corn price being so high as to make it profitable to pay the import tariff...For those worried about climate change, Brazilian ethanol is worth buying only if it is as green as it claims to be. It is certainly much greener than its corn-based rival in America: it packs 8.2 times as much energy as is used in its production, compared with just 1.5 times for corn ethanol, according to the Woodrow Wilson Centre, a Washington think-tank."

So Brazil has the capability of become America's new Saudi Arabia...instead its MUCH COOLER!


The Endemic Crisis of American Capitalism

With the massive increases in the price of oil and other commodities, it is becoming obvious to just about everyone-with the exception of the Treasury-that these price forces are a result of institutionalized speculation. Looking at this historically, this point was inevitable considering that since 1975 there has been looming financial crisis that have not fully corrected themselves. Conservatives deride the government for being pro-lazy, etc. The reality is that the government works in the interests of corporations and their interests.

Since the first oil crisis in 1973, the American economy has transformed itself from a industrial society with a fairly equitable distribution of income and a strong progressive bent, whereas today the United States could not be further from that. In that process of rising inequality, deindustrialization, and increasing poverty has seen the role of FIRE (financials) increase exponentially to becoming the major industry in the United States. As the financial sector was gradually deregulated and given freer and freer reign with less and less government oversight the curses of rampant financial speculation has created a monster beneath the surface of a calm economy.

Consider the number of unresolved crisis' in the financial sector since 1975:

-1982: Debt Crisis
-1987: S&L Crisis
-1998: LTCM Crisis
-2000: DOT-COM Bubble
-2001: ENRON/TYCO/Global Crossing
-2007: Sub-prime mortgage Crisis
-2008: Oil Bubble
-20??: Next Crisis

Each succeeding crisis has gotten worse, and there are troubling reasons why. First, the Fed and the government since the early 1980s has engaged in the logic of "Too Big To Fail" T.B.T.F, whereby they save banks and after Bear Sterns, investing institutions. This is known as a moral hazard, if these massive amalgamated corporations with such leverage over the whole economy know that the government and the tax payer will bail them out, they will continue their highly speculative behaviour for short-term profit. The welfare state does not exist for the poor, rather it exists for the rich who make stupid decisions.

Secondly, with the take over of Bear Sterns by the Fed and J.P. Morgan, the concentration of power increases exponentially in smaller and smaller hands. Each succeeding crisis has lead to collapses of financial corporations, and the selling of assets to a smaller and smaller group of what is termed "dominant capital". Thus, as these mega-corporations become more and more mega...the government will have no choice to come in and save them.

Thirdly, the government has been increasingly lax in the regulation of the markets. Hedge-funds are basically free of any regulatory oversight, as evidenced in the LTCM affair in 1998:

Hedge funds are not regulated by anybody. Indeed, they are legally exempt from the two major pieces of legislation which govern other firms in the financial industry: the Securities Exchange Commission Act of 1934 and the Investment Company Act of 1940. In order to remain exempt from the Investment Company Act, hedge funds must have fewer than a hundred investors, or, alternatively, their investors must be worth at least five million dollars each. (In order to avoid the reporting requirements of the Securities Exchange Act, hedge funds must have fewer than five hundred investors.) The securities laws were designed to protect ordinary investors from Wall Street tricksters. Rich people were viewed as smart enough to look after themselves. (New Yorker, 1999)

About the current crisis in oil:

"A June 2006 US Senate Permanent Subcommittee on Investigations report on “The
Role of Market Speculation in rising oil and gas prices,” noted, “...there is
substantial evidence supporting the conclusion that the large amount of
speculation in the current market has significantly increased prices.”

What the Senate committee staff documented in the report was a gaping loophole
in US Government regulation of oil derivatives trading so huge a herd of elephants
could walk through it. That seems precisely what they have been doing in ramping
oil prices through the roof in recent months." (Engdahl, May 2)*

Without any meaningful government oversight, these super-elite can do whatever they want and not suffer the consequences. CEO's do not care about the economy, or even their own corporations they care about their own value. Meaning they manipulate the market by creating hype, and when they know things are going to tank they short their stocks or sell their long positions. Then they are exposed, are fired (and paid millions to be fired) and get a new CEO position somewhere else. This is a totally new class of rich, they have no loyalty to country, company, nothing but themselves. These transient CEO's remind me of those unemployed men in the 1930s on the trains looking for work, hobo's. According to eminent American sociologist, Thorstein Veblen on this very subject (written in 1904):

It follows, further, that under these circumstances the men
who have the management of such an industrial enterprise,
capitalized and quotable on the market, will be able to induce a
discrepancy between the putative and the actual earning-capacity,
by expedients well known and approved for the purpose. Partial
information, as well as misinformation, sagaciously given out at
a critical juncture, will go far toward producing a favorable
temporary discrepancy of this kind, and so enabling the managers
to buy or sell the securities of the concern with advantage to
themselves. If they are shrewd business men, as they commonly
are, they will aim to manage the affairs of the concern with a
view to an advantageous purchase and sale of its capital rather
than with a view to the future prosperity of the concern, or to
the continued advantageous sale of the output of goods or
services produced by the industrial use of this capital.

That is to say, the interest of the managers of a modern
corporation need not coincide with the permanent interest of the
corporation as a going concern; neither does it coincide with the
interest which the community at large has in the efficient
management of the concern as an industrial enterprise. It is to
the interest of the community at large that the enterprise should
be so managed as to give the best and largest possible output of
goods or services; whereas the interest of the corporation as a
going concern is that it be managed with a view to maintaining
its efficiency and selling as large an output as may be at the
best prices obtainable in the long run; but the interest of the
managers, and of the owners for the time being, is to so manage
the enterprise as to enable them to buy it up or to sell out as
expeditiously and as advantageously as may be.

(Veblen, Theory of Business Enterprise)

Fourthly, the warfare state has been another source of corporate welfare. The perpetual "War on Terror" and its corresponding imperialist war in Iraq have lead to a privatization of the most basic functions of the liberal state, the monopolization of the legitimate use of violence in the state's hands.Iraq's oil fields now-as mentioned by Cenk-are now back in the hands of Western dominant capital, principally the five-sisters, Exxon, Shell, BP, Total, Chevron.** Iraq is being neoliberalized as it was one of the only state's in the post-Cold War period that refused to accede to American hegemony. A warning about the effects of imperialism within a liberal democratic country was sounded by J.A. Hobson back in 1902, from my essay on the subject of imperialism:

"Understandably, Hobson perceived imperialism to be a destabilizing factor to the
future of Britain as a liberal democracy; the much larger scale of imperialism, the capture
of the state by investing class interests, the forcible submission of large foreign
populations, and imperial competition with other imperialist states. Hobson wrote, “as a
result of imperial competition, an ever larger proportion of the time, energy, and money
of ‘imperialist’ nations is absorbed by naval and military armaments” (Hobson II.I.40).
An observation not lost on Etherington who noted that “two-thirds of government
spending” is due to these military expenditures (Etherington 22). This militarization had
social effects that Hobson saw as being anti-democratic and authoritarian. “Both the
colonial administrator and the professional soldier acquired habits of mind fundamentally
at odds with liberal democracy” (Etherington 23). Hobson also warned about the consequences of this move towards militarism, and the growing tendency towards
illiberality in Europe and Britain in the early twentieth century as inter-imperialist
competition began to grow"

The US government has been engaging in right-wing populism (corporatism) for the last 30 years, prejudicing against the average working man and woman in the United States, destroying the family, and creating increasingly precarious situations for the youth. Meanwhile incomes of the super-rich have increased hundreds of times. In 2006, 50% of the nations income went to the richest 20% and that has increased since then. This is the REAL welfare state, one of neglect, negligence and subsidy at the cost of your living standards and that of your heavily indebted children born with the "original debt".



As I continue my odyssey into the world of critical political economy, I realize that in order to see the world from a perspective that is critical from the mainstream will be difficult. I say this not because it is going against the grain, but because it is difficult to find the resources to build an alternative view of society and theory.

It is also going to be exceedingly difficult to do my studies, when the majority of the source that I will be reading or forced to read is based on false analysis. The purpose of academia is to challenge and to open new lines of analysis, but from what you hear from academics this is difficult. There are many reasons for this, principally many of the academics who are taught in x do not want their cherished theories seriously challenged. I do not have any sympathy for these individuals because unlike in other professions or walks of life, ignorance is no excuse!


Marxism ain't dead yet...

It is ironic that within the context of the largest economic boom since the mid-70s, the left is again rising. It was in the mid-70s when the left reached a tipping point, a negative one. Being brutally suppressed all over the developing world starting with the modern bureaucratic-authoritarian regimes in Brazil/Indonesia in 1964-65. culminating in the coup d'etat in Argentina in 1975, the left was systematically destroyed. The mythology that the left was conquered by, "the logic of the market" has been propagated much. In the West, the left was being subverted by their own failures to go farther than they did, and slowly making concessions to the neoliberalism of Hayek, and Freidman.
Recent articles that I have been reading have been confirming a trend that has become apparent to me, the left is coming back. It is interesting that the great swings from left to right last about 30 years, and about 30 years after the implementation of neoliberalism, the tensions and contradictions that neoliberalism have created world-over are starting to bite back.
Three articles that I read have confirmed this for me, and from the most unlikely of sources. Two are from The Economist magazine, of which I have great respect. The first article, "The post-communist Karl Marx", discusses the increasing popularity of Marxist thought, making the explicit case that it is more read than Adam Smith's work. Since it is from The Economist, he derides Marxism as irrelevant: "It is the breadth of Marx's continuing influence, especially as contrasted with his strange irrelevance to modern economics, that is so arresting." Of course Marxism is not irrelevant to "modern economics" because it was the Marxist critique of classical economics that pushed economists to create neoclassical economics. The article makes BOLD assertions like, "Class war is the sine qua non of Marx. But the class war, if it ever existed, is over." Anyone with ANY sense of history KNOWS that not only has class struggle been the defining characteristic of the 20th century, it is still with us today.

This brings me to the second article that proves the existence of class struggle in the world's future superpower, China. Titled, "Conditions of the Working Class in China" by Robert Weil. The work shows that with the reforms of Deng Xiaoping and the increasing inequality and dispossession that it wrought, old cultural revolutionaries and the "new left" are making connections to raise awareness of an alternative. As stated in the article, "Class conflict and social turmoil have
surged to levels not seen for decades. The workers, peasants, and migrants in China today are mounting some of the largest demonstrations anywhere in
the world, at times involvingclashes with the authorities."
With hundreds of millions of peasants, the reforms of Deng, which started in the 1970s, enabled China to have the manpower to become a major world power. Problematically, like all industrializing states, there are increasing social tensions. What the article is pointing to is the awareness of the old generation of the rights and proto-democratic rule they enjoyed under Mao-although the author does not discuss the negatives of Mao's era-and the new generation's organic ties to the old generation through the mass diffusion of university education to all members of society. What makes China so different is that indeed it has had the experience of socialism, and workers activism. Is this what The Economist was talking about when it stated, no more class war? Nonsense!
The last article actually contradictions the bold assertion of the initial article. The article in question is named, "Communist survival and revival". The article is informative because it dispels the notion that communism is dead, quite the opposite it is in a stage of revival. The new communist movement, it notes, has gotten over much of the bitter divisiveness that has characterized communism in the 20th century: "Eurocommunists can rub shoulders with Stalinists who would once have called them traitors; even different brands of Maoists turn up, ranging from the Chinese party to former admirers of Albania's Enver Hoxha."The revival of the Italian communist party is indicative of a strong connection that the communist party has in continental Europe. This is not to say that communism is a good thing unto itself, as Marxism like neoclassical analysis is riddled with unsuportable assumptions, principally the transformation problem. However, what it does show is that in the myth from the 1980s, of a "property-owning democracy" of Thatcher, people are still capable of thinking beyond themselves.


Traitorous ignorance

Organically I am from the working class, thus I defend the interests of the working class. I am surprised how some members of the same class, become traitors not only to their class but to themselves. I am currently reading Steve Keen's book, Debunking Economics. After reading the chapter on how economists justify exploitation of labour through anti-minimum wage positions and anti-union positions. All of it is based on the notion of perfect competition, no such situation can theoretically exist and thus, has never existed. The economists make so many morbid and unrealistic assumptions about the functioning of the human being and the economy it makes you want to laugh if it weren't so influential.

For instance, economists would argue that as people make less money they work less. Which, to even the most reasonable of observers is a ludicrous assumption. People work more when they are making less money to survive, economists assume that there is an actual "indifference" between leisure and work, meaning that people choose the amount of time they work. In the real world, people want to work more because they do not make enough. Economists must assume as Keen points out that workers have alternative means of income, they simply do not. Work is not a choice, its a coercive act.

I am not going to explain the whole illogical assumptions and conclusions that Keen points out in his book. It pains me to understand and hold all of the information in my head, so I am not going to be so pretentious as to know exactly how to articulate the idea's presented in the book. You will have to trust that the notions of a downward sloping demand curve, and upward sloping supply curve is nonsense.

What about the traitors? They know no better, they are usually conservatives who in the grand tradition of conversatism, do not know terribly much. I have debated conservatives on the idea of unions for instance. They argue that, in their articulation, that "unions are greedy". Thus, that almost primal understanding of the economy determines the power of labour to demand fair wages and conditions at the ballot box. I do blame these individuals who went to university, for their ignorance. The argument in reality is that there is no perfectly competitive market, we have oligopolies and monopolies, but we do not have the equivalent in the labour market. Instead, we have a "competitive" labour market, where you have millions of people fighting hand over fist for positions, positions that increasingly pay less and offer less.

This asymmetry of power is not being corrected, in part thanks to the economics of false assumptions and ignorance of reality of the real world. We need to counteract the power of amalgamated capital-corporations-with amalgamated labour power. To go beyond the trade-union movement, to get workers to organize, even the unemployed, in the field in which they seek to find employment. LIke a medical association, or the bar association, and use that association of labour to find and demand fair wages and working conditions for labour. Its a working idea.

Until later



An old fascination

My fascination with the late 1920s and early 1930s is due to the potential for change that existed in that time. After reading the third installment of Hannah Arendt's Totalitarianism, I am beginning to understanding the mentality of the immediate post-WWI generation.

The First World War, unlike the Second World War, lead to a total collapse of an old order. The imperialistic, heavily class-based order of Europe, which Keynes had spoken of so fondly could no longer be salvaged. Although, the initial revolutionary spirit of 1919-1923 was not enough to take hold throughout Europe, and was suppressed rather brutally in the United States, known as the "Red Scare". What Arendt explained was the collapse of the class-system in much of continental Europe, particularly in Germany and Soviet Russia.
As Arendt wrote: "This generation remembered the war as the great prelude to the breakdown of classes and their transformation into masses. War, with its constant murderous arbitrariness, became the symbol for death, the 'great equalizer' and therefore the true father of a new world order" (27).

What was interesting was with the collapse of the class system, came about a nihilist mob system, that rejected the bourgeois ideologies and hypocrisies that maintained authority in the pre-war world. Although, the onset of Great Depression was the final straw that destroyed the mythologies of liberalism, and capitalism. She posits that the solution to this crisis was to reject the old order in its entirety, and to accept questionable ideologies that sought to explain everything in a immutable logic of history and/or nature, communism/racism.

"They were satisfied with blind partisanship in anything that respectable society had banned, regardless of theory or content, and they elevated to a major virtue because it contradicted society's humanitarian and liberal hypocrisy" (29)

The period of 1929-1933 was that period of time when that hypocrisy was exposed to the world. All around the world, the collapse of liberal democracy occurred as a rejection of the past, and the utilitarian assumptions of liberalism. The common assumption is that this happened only in places like Germany or Stalin taking over in the USSR. This happened in Japan with the end of their democracy and the ascension of the cult of the emperor, which was a creation of the post-1868 elite. Japan's coup was certainly reactionary, although I must say, I must re-read the book Hirohito to refresh my memory.

In Latin America the onset of the Great Depression ended the glory-age of lassiez-faire oligarchic classes, and the insertion of the state. One article I read discussed how due to the collapse of class hegemony in Latin American states, the state had to take over to fulfill the gap left by the end of hegemony, or Bonapartism. In Uruguay for instance, the most democratic state in the region, say its democracy collapse due to the pressures of the depression and a dispension of democratic government as ineffective.

The United States was not much different in the sense that under F.D.R. the state became the main foci for organization and growth in society. A little known fact that most American's forget is that there was a planned coup d'etat against FDR by corporate interests, especially DuPont, to replace FDR or to make FDR a figurehead leader. A proto-fascist movement, by using one of America's greatest generals, and symbolic leader of the veterans from WWI to organize like a SA.

The movie's and art of the era also suggest a modernist break with the past. The pre-code movies of the United States will full of heavy sexual innuendo, references to drug abuse, abuse, glorification of violence and gangsterism, the emancipation of women sexually and professionally. It was indeed a period of rejection of the past mores, and a drive to modernism, guided by the ideologies as Arednt argues, the tyranny of logic.

This was set in an era where a quarter of the American population was unemployed, and worldwide a similar percentage of people were left without means. A book entitled "A Commonwealth of Hope: The New Deal Response to Crisis", I believe gives a very good description of the state of America at the time. There are particularly telling passages in the book I wish to share:

"Less visible were the scavengers who haunted alleys behind restaurants or picked over garbage dumps in search of edible scraps. One observer who witnessed such scenes of desolation was especially struck by the elderly woman, formerly of means, who always took off her glasses so that she wouldn't see the maggots crawling over what she was eating" (Lawson 9).

Within that context it is hard to believe that a rejection of the liberal hegemony could not occur. The "free market" was destroying itself through its own internal contradictions. The disconnect between the reality and the theory was too great, it was the end of free marketism, and liberal traditional values. The ruling classes were delusional and so disconnected from the realities around them that J.P. Morgan himself discussed how maintaining the class inequalities were so fundamental to civilization:

"If you destroy the leisure destroy civilization'. When pressed about how to define the leisure class, Morgran said it would include all those who could afford a maid--about twenty-five to thirty million people, he supposed, until informed that there were only about two million servants in the whole country...Under scrutiny, those who had presided over the debacle and now sought to lead the nation back into the same old promised land showed how little they had troubled themselves to learn about eh society that had made them rich" (Lawson 15).

Finally to make a link to Arednt's position on this whole hypocrisy:

"Since the bourgeoisie claimed to be the guardian of Western traditions and confounded all moral issues by parading publicly virtues which it not only did not possess in private and business life" (Arednt 32).

I hope the connections are being made in your mind...

Thus, understand why I am fascinated by that period, a very honest period.


Power relations

Changing the world has been one of the prerogatives of ordinary men to become extraordinary men. Changing the world to many men is not a question of making it better, but changing it in their image. However, does the changing the world require disempowerment, or the empowerment of the masses?

It is a question that I am only beginning to grapple with. I could be a complete cynic and argue that some men achieve power for the mere sake of power, but I do not believe that most men do this. Power is the most elemental, primal necessity of men. People seek power to fulfill a desire or a need to change themselves and/or the world around them. Although, power unto itself contains an appeal because it appeals to mankind's fascination with control and subduing nature/God.

All the social relations that are of any real significance, sex, business, and politics is based on the notion of power. Power does not only manifest itself through brute force, usually when it is manifested in such a manner it is indicative of the weakness of the person's power. Rather power is manifested through the manipulation of individual talents to maximum effect, and that manipulation is best confirmed by the acceptance by other's of that person's framing of reality. In order to be powerful one has to be cognizant and confident enough to recognize and use those talents.

There are instances, where what could be a person's most powerful asset, for example sex appeal, or greed becomes their greatest enemy. Simply because that power is not rationally harnessed by the individual. Rather, the individual sees these assets merely as ends to themselves, not means. When one pursues sex, or profit as the end and not out of the social implications of that relation they are weakened to the point whereby they can be manipulated to someone who is knowledgeable of their own power. The individual seeks to only submit to the will of the other. This is due to their own inability to admit or seek their own truth and power in fear of the implications of independence and responsibility.Those who are in power recognize these failing's and exploit the weaknesses in the other to their own benefit. The exploited, due to either self-interest,fear, or gullibility simply cannot compete especially when that one in power has set the agenda.

Sadly, in order for power to exist, these, people have to exist. These people who are unable to realize their own potential power, who are tramped on and who are gullible to power, enable the worst excesses of power to exist, needless to say they are usually the first victims in the wrath of power. Indeed, power is a function of exploitation and realization of the other's weakness real of perceived.

One of the problems with the notion of empowerment is that it destroys the basis of power, the asymmetrical relationship. Empowerment is not bringing people up, it is bringing people down. Is this a bad thing? Of course it is not, if everyone is brought to an equitable level of "power", which is a contradiction. Due to the natural inequalities of man, strength, knowledge would have to be conditioned out of the notions of power or they will be used to impose on the equal masses power once again. Thus, to empower the masses seems suspect at this point.

Bourgeois ideology?


Purpose of this blog

Dear Readers

Thank you for coming to my blog space, perspectivos. The purpose of this blog is to foster open discussion and alternative views of issues that affect all of our lives. Brining about counter-hegemonic, critical, and countercultural discourses is increasingly important in a world increasingly monopolized by a few corporations, especially controlling what we see through the mainstream media.

The other aspect of this blog is also to discuss more less controversial issues such as art, architecture, urban landscapes, sexuality and music. The exploration of culture is important to connect with our collective past, and to embrace the achievements of our forefathers. In addition, understanding and appreciation of more sophisticated forms of culture is becoming a rarity among the youth, this tendency to limit ones perspective to the immediate is a highly disturbing development.

This blog will also discuss the intersection between mass consumerism, capitalism, education, and even religion all come together to subordinate the mentality of millions. Many of us are victims of this intersection, and we constantly see the dehumanization and commodification of our thoughts and actions in our compatriots. Fetishism, mystification and commodification of our lives through hegemony of the system is something that should be and will be challenged.

About the author: I try never to talk about issues that I do not feel comfortable discussing, and I try never to go beyond my own limits intellectually. Although I challenge others to challenge themselves, and not to accept the status quo, and not to engage in self-pity. I am not a terribly out-going person, nor am I terribly charismatic, but I am a very thoughtful.
Thank You,



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