Poverty of Political Imagination

August 17, 2012 at 11:48 am | Posted in Capitalism, democracy, Free Trade, International Relations, Labor, Political Economy, Production, World Politics | Leave a comment
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Though it should not have caused any surprise, the news that Eurozone economies had contracted by 0.2 percent in the second quarter of 2012 underscored the deepening economic crisis faced by the 17-state bloc. Though the German economy may have grown by 0.3 percent, France recorded a third straight quarter of no growth, and the Finnish, Italian, Portuguese, and Spanish economies all fell sharply. Greece, of course, suffered the steepest fall: 6.2 percent in the second quarter–and was 18 percent below its GDP level in the April-June quarter of 2008.

There is little doubt that the declines have been aggravated by a failure of political imagination. Confronted by budget deficits brought about by high levels of government borrowing and by the collapses of housing bubbles, the creation of a common currency has meant that indebted Eurozone economies have not been able to resort to a currency devaluation to gain a competitive edge. Consequently, the troika of the European Commission, the European Central Bank, and the International Monetary Fund sought to impose an “internal devaluation” on these economies by forcing budget cuts to lower government deficits and wage cuts.

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It follows as the night the day that if budgets and wages are cut, the economy will shrink. Lower government spending due to budget cuts means welfare and pension benefits fall, the cost of health care rises, and educational opportunities vaporize. These impact far more adversely on the elderly and the young. With wage cuts, people have less money to spend and this will depress all sectors of the economy–as sales reduce because of lower spending, companies will slash their work forces leading to greater declines in sales and to further cuts in employment. In the most severely affected of the southern European economies, unemployment rates for the youth are already at 50 percent or more. By May 2012, unemployment in the euro zone had already reached 11.1 percent or 17.5 million people and the International Labor Organization (ILO) estimates that it would rise to almost 22 million in the next four years. And if the euro zone were to break up, the ILO estimates unemployment in the 17-state bloc could reach 17 percent.

The adverse conditions created by the stringent cuts mandated by the troika are aggravated by the greater interest rates imposed on the weaker economies by international financial markets–thus for instance, while Austrian banks and other financial institutions can borrow at 2 percent, Italian banks have to pay 6 percent. As these higher interest costs are passed on by the banks to their borrowers, the cost of doing business in Italy, Spain, Portugal, or Greece increases correspondingly and could even negate the wage cuts imposed by the troika!

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The effects of economic contraction will spread to the better performing economies. After all, Germany has been able to have a strong industrial sector because cheaper credit to other eurozone members had allowed them to buy German products while the German small-scale sector–which employs 60 percent of the country’s labor force–did not have to worry about currency movements in other European countries or fear that a strong German mark will price them out of the market in other countries.

As Susan Watkins has written, German lessons on debt repayment are especially galling to the Greeks.

Under the Nazi occupation, a hefty monthly payment was extracted from the Greek central bank to cover the Wehrmacht’s expenses; in March 1942 an additional forced loan of 476 million Reichsmarks was levied by the Axis powers. Greek partisans put up some of the toughest military resistance to the Nazis in Europe; the damage wreaked by the occupiers’ revenge was commensurate. Reprisals were exacted on the civilian population at a rate of fifty Greeks for every German killed. Much of the country’s infrastructure was destroyed; forced exports and economic collapse helped bring about one of the worst famines in modern European history.

German occupation (strictly a tripartite occupation since the Italians and the Bulgarians also participated) of Greece also led to hyperinflation–Richard Clogg says it was

five thousand times more severe than the Weimar inflation of the early 1920s. Price levels in January 1946 were more than five trillion times those of May 1941. The exchange rate for the gold sovereign in the autumn of 1944, shortly after the liberation, stood at 170 trillion drachmas.

After the war, the question of German reparations were deferred till German reunification and in the so-called 2+4 (Bonn and Berlin with the US, the USSR, the UK and France) agreement of 1990, Greek claims were excluded. Though several Greek politicians including the current prime minister, Antonis Samaras when he was the foreign affairs minister in 1991, had raised the issue of 476 million marks with the Germans, their demands were summarily dismissed. If this money had, in fact, been paid as the Germans are legally obliged to do, with interest for more than half a century, Greece would no longer be a problem economy.

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It is galling too because while ancient historical myths as Greece being the ‘birthplace of democracy’ are routinely trotted out in discussions of the contemporary situation, recent history that people over 70 remember are carefully hidden from view! Be that as it may.

What is crucial is that the crisis demonstrates that capital and finance markets need to be regulated more stringently. It was irresponsible lending that led to high government deficits in Greece and to the housing bubbles in Spain and Ireland, to the subprime crisis in the US, and to the meltdown of the Icelandic economy to mention just the most obvious cases. Financial markets are continuing to demand punitive rates of interest from the weaker economies. The unchecked power of finance must be corralled–or we will enter another great depression just as the obsession with the gold standard led to the depression as Karl Polanyi showed in his Great Transformation.

What is required is a new political imagination not the shrill advocacy of measures that have already aggravated the situation!

Massacres, the Gun Lobby, and the Crisis of Capitalism in the United States

August 13, 2012 at 10:33 pm | Posted in Uncategorized | Leave a comment
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With alarming regularity, gunmen have been shooting dead innocent people on college and high school campuses, movie theaters, and most recently in a gurudwara (Sikh temple) in the United States. Each gruesome event reignites the debate on gun control, and when the victims are largely from an ethnic minority, issues concerning racism. Gun control and racism, important in their own right, are however merely symptoms of a deeper malaise–the crisis of capitalism in the United States–that is seldom raised in the mainstream media.


In recent years, spurred by propaganda by the National Rifle Association (NRA), the right to bear arms enshrined in the US constitution by the Second Amendment has become almost inviolate. Yet, as Jill Lepore wrote in the New Yorker–in an article that was later plagiarized by Fareed Zakaria–the right to bear arms was seen not as Frankln Delano Roosevelt’s solicitor general argued before the US Supreme Court in 1939

not one which may be utilized for private purposes but only one which exists where the arms are borne in the militia or some other military organization provided for by law and intended for the protection of the state.

And this was unanimously upheld by the Court.
Later, when the Black Panther Party invoked the Second Amendment to procure guns, the US Congress passed a number of laws that restricted the sale of guns both in response to the assassinations of John and Robert Kennedy and Martin Luther King, and to solve what was still called the “negro problem.” Even the NRA grudgingly supported these measures, and it was only in the 1970s that the organization moved strongly to advocate the right of the people to bear arms. The subsequent success of this move has meant that the US has now the most militarized population on the planet: virtually a gun for every man, woman, and child. Of course not every one has a gun: 
Most Americans do not, however, own guns, because three-quarters of people with guns own two or more. According to the General Social Survey, conducted by the National Policy Opinion Center at the University of Chicago, the prevalence of gun ownership has declined steadily in the past few decades. In 1973, there were guns in roughly one in two households in the United States; in 2010, one in three. In 1980, nearly one in three Americans owned a gun; in 2010, that figure had dropped to one in five.
Yet, the NRA’s powerful lobby makes any changes to the law, unrealistic as state after state further dilutes restrictions on gun ownership and sales.
If loosening restrictions–since 1980, Lepore reports, forty-four states have passed laws permitting the carrying of concealed weapons; five other states had such laws on the books before 1980 and Illinois is the only state still holding out–attacks on racial minorities has a long and sordid history in the United States. Yet, what was different in the news commentaries on the attacks on the gurudwara in the Milwaukee suburb of Oak Ridge was its dominant theme: that the Sikhs were targeted because the gunman mistook them for Muslims because of their turbans, Just as Time magazine produced a racist article on how to distinguish the Japanese from the Chinese in the aftermath of the attack on Pearl Harbor in 1941, Chicago’s Red Eye printed an equally racist ‘Turban Primer” to help people distinguish between Muslims and Sikhs!
Even commentators in the mainstream media showed their complete ignorance! A CBS reporter said that Sikhism is based “on truth and nonviolence and the Muslim religion is just a completely different religion” while CNN’s Don Lemmon wondered whether Sikhs have ‘traditional enemies’–perhaps like a snake and a mongoose! The real question, of course, is not whether it was a case of mistaken religious identity but whether Muslims should be targeted–apparently in post-9/11 America, the targeting of Muslims is not considered as heinous, to put it mildly, as the targeting of adherents of other faiths!
Racism and the elimination of restrictions on gun ownership are merely symptoms of a much deeper malaise: the crisis of capitalism in the United States. As Vijay Prashad noted, in highlighting the white supremacist ideology of Wade Michael Page, the gunman who shot dead six Sikhs in the Oak Ridge gurudwara, commentators gloss over the economic malaise of the United States. Unemployment continues to rise while good manufacturing jobs disappear altogether, The gap between the rich and the poor are at an all time high. As good jobs are increasingly hard to find, young men turn to the military where they are trained to use lethal weapons, And after a few tours of duty in Iraq and Afghanistan, they are demobilized and return to a civilian population with little prospect of finding a well paying job, Indeed, a 2009 report  by the US department of Homeland Security noted that
returning veterans who faced trouble reintegrating into their communities could “lead to the potential emergence of terrorist groups or lone wolf extremists capable of carrying out violent attacks
Faced with a violent backlash by veterans and the conservative right, Homeland Security Secretary Janet Napolitano apologized for the report and effectively gutted it–and yet the events at the Oak Ridge gurudwara makes it prescient. If the lesson is clear–that the US can lower the incidence of massacres only by promoting widespread economic growth rather than ensuring that most economic gains go to those at the very top: in 2010, 93 percent of the total income increase went to the top 1 percent in the United States (those with incomes over $350,000) and a mere 7 percent to the bottom 99 percent. Unless this vast disparity is reversed, as more veterans are demobilized, there will be more massacres!
The New York Times
March 26, 2012    

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