Selling Out Argentina’s Future—Again

Published by Anonymous (not verified) on Thu, 04/01/2018 - 8:00am in

Alan Cibils and Mariano Arana[1]

In Argentina’s 2015 presidential run-off election, the neoliberal right-wing coalition “Cambiemos” (literally, “lets change”), headed by Mauricio Macri, defeated the populist Kirchnerista candidate by just two percentage points. Macri’s triumph heralded a return to the neoliberal policies of the 1990s and ended twelve years of heterodox economic policies that prioritized income redistribution and the internal market. The ruling coalition also performed well in the October 2017 mid-term elections and has since begun implementing a draconian set of fiscal, labor, and social security reforms.

One of the hallmarks of the Cambiemos government so far has been a fast and furious return to international credit markets and a very substantial increase in new public debt. Indeed, since Macri came to power in 2015, Argentina has issued debt worth more than $100 billion. This marks a clear contrast to the Kirchner administrations, during which the emphasis was debt reduction.

The Kirchner Years: Debt Reduction?

Both Néstor and Cristina Kirchner pointed to desendeudamiento—debt reduction—as one of the great successes of their administrations. To what extent was debt reduced during the twelve years of Kirchnerismo?

Figure 1 shows the evolution of Argentina’s public debt stock and the debt/GDP ratio between 2004-2017. One can see that there was a substantial reduction in the debt to GDP ratio between 2004-2011—the first two Kirchner terms—due primarily to: a) the 2005 and 2010 debt restructuring offers, b) a deliberate policy of desendedudamiento (debt cancellation), and c) high growth rates. Indeed, debt/GDP dropped from 118.1% in 2004 to 38.9% in 2011. One can also see that the actual stock of public debt fell after the 2005 debt restructuring process, and then remained relatively stable until 2010. In 2011, it began a slow upward trend, due to the re-appearance of the foreign exchange constraint once the commodity bubble burst and capital flight increased.

Figure 1: Public Debt Stock (millions of dollars) and Debt/GDP ratio

Cibils-Arana-Fig1Source: Ministry of Finance, Argentina.

An additional, fundamental change occurred during the first two Kirchner administrations: the change in currency composition of Argentina’s public debt. Indeed, as Figure 2 shows, peso-denominated public debt reached 41% of total debt after the 2005 debt-restructuring process. Between 2005 and 2012 it remained relatively stable, and then, after 2012, dollar-denominated public debt began to grow again although never reaching pre-2005 debt-restructuring levels. The currency composition change is key, since it reduces considerably the pressure on the external accounts.

Figure 2: Currency Composition of Argentina’s Public Debt (as a % GDP)

Cibils-Arana-Fig2Source: Ministry of Finance, Argentina.

Fast and Furious

Since Macri became president in December 2015, there has been a dramatic change in official public debt strategy, radically reversing the process of debt reduction of the previous decade. As shown in Figure 1, there was a substantial jump in the stock of public debt in 2016, and it has continued to grow in 2017.The result to date has been a substantial increase in the stock of Argentina’s dollar-denominated public debt, as well as an increase of the debt service to GDP ratio. New debt has been used to cover the trade deficit, pay off the vulture funds, finance capital flight, and meet debt service payments. All of this has resulted in growing concerns about Argentina’s future economic sustainability, not to mention any possibility of promoting economic development objectives.

Upon taking office, the Macri Administration rapidly implemented a series of policies to liberalize financial flows and imports, and a 40% devaluation of the Argentine peso.[2] In this context, it also went on a debt rampage, increasing dollar denominated debt considerably. Between December 2015 and September 2017, Argentina’s new debt amounts to the equivalent of $103.59 billion.[3] This includes new debt issued by the Treasury (80%), provincial governments (11%), and the private sector (9%). While Argentina’s debt had been increasing slowly since 2011, the jump experienced in 2016 was unlike any other in Argentina’s history.

If the increase in debt is alarming, the destination of those funds is also cause of concern. Data from Argentina’s Central Bank (Banco Central de la República Argentina or BCRA) show that during the first eight months of 2017, net foreign asset accumulation of the private non-banking sector totaled $13.32 million, 33% more than all of 2016, which itself was 17% more than all of 2015. This means that since December 2015, Argentina has dollarized assets by approximately $25.29 billion.

According to the BCRA, during the same period there was a net outflow of capital due to debt interest payments, profits and dividends of $8.231 billion. Additionally, the net outflow due to tourism and travel is calculated at roughly $13.43 billion between December 2015 and August 2017.

In sum, the dramatic increase in dollar-denominated debt during the two first Macri years served to finance capital flight, tourism, profit remittances, and debt service, all to the tune of roughly $50 billion.

Where is this headed?

Argentina’s experience since the 1976 military coup until the crash of 2001 has shown how damaging is the combination of unfavorable external conditions and the destruction of the local productive structure. The post-crisis policies of the successive Kirchner administrations reversed the debt-dependent and deindustrializing policies of the preceding decades. However, since Macri took office in December 2015, Argentina has once again turned to debt-dependent framework of the 1990s. Not only has public debt grown in absolute terms, but the weight of dollar-denominated debt in total debt has also increased. Despite significant doubts regarding the sustainability of the current situation, the government has expressed intentions of continuing to issue new debt until 2020.

What are the main factors that call debt-sustainability into question? First, capital flight, which, as we have said above, is increasing, is compensated with new dollar-denominated public debt. Second, Argentina’s trade balance turned negative in 2015 and has remained so since, with a total accumulated trade deficit between 2015 and the second quarter of 2017 of $6.53 billion. Import dynamics proved impervious to the 2016 recession, therefore it is expected that the deficit will either persist as is or increase if there are no drastic changes. Furthermore, in the 2018 national budget bill sent to Congress, Treasury Secretary Nicolás Dujovne projects that the growth rate of imports will exceed that of exports until at least 2021, increasing the current trade deficit by 68%.

Finally, according to the IMF’s World Economic Outlook (October 2017), growth rate projections for industrialized countries increase prospects of a US Federal Reserve interest rate increase. This would make Argentina’s new debt issues more expensive, increasing the burden of future debt service and increasing capital flight from Argentina (in what is generally referred to as the “flight to safety”).

The factors outlined above generate credible and troublesome doubts about the sustainability of the economic policies implemented by the Macri administration. While there are no signs of a major crisis in the short term (that is, before the 2019 presidential elections), there are good reasons to doubt that the current level of debt accumulation can be sustained to the end of a potential second Macri term (2023). In other words, there are good reasons to believe that Argentines will once again have to exercise their well-developed ability to navigate through yet another profound debt crisis. This is not solely the authors’ opinion. In early November 2017 Standard & Poor’s placed Argentina in a list of the five most fragile economies.[4] It looks like, once again, storm clouds are on the horizon.

[1] Political Economy Department, Universidad Nacional de General Sarmiento, Buenos Aires, Argentina.

[2] For details, see “Macri’s First Year in Office: Welcome to 21st Century Neoliberalism.”

[3] Observatorio de la Deuda Externa, Universidad Metropolitana para la Educación y el Trabajo (UMET).


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Everything That’s Tied Down Is Coming Loose

Published by Anonymous (not verified) on Tue, 19/12/2017 - 1:45pm in

Our times at last have found their voice, and it belongs to a Pakistani American: Ayad Akhtar. Winner of the Pulitzer Prize for Drama, his plays revel in the combustions of an America on edge, bursting with excess — too much of everything, from wealth and impoverishment to religion, rage and radicalism, from sad hearts and hollow souls and shifting identities to the glorious celebration of money. In his new play Junk, perhaps that should be the inglorious celebration of money: E Pluribus Unum transformed into Every Man a Midas. Continue reading

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American Tsarism

Going though YouTube the other day, I found a clip, whose title quoted a political analyst, radical or politicians, as saying that the American political elite now regards its own, ordinary citizens as a foreign country. I’m afraid I’ve forgotten who the speaker was, but I will have to check the video out. But looking at the title of what the leader of the Conservative branch of the Polish nationalist movement said about the Russian Empire. He described how the tsars and the autocracy exploited and oppressed ordinary Russians, stating baldly that ‘they treat their people as a foreign, conquered nation’. Which just about describes tsarist rule, with its secret police, anti-union, anti-socialist legislation, the way it ground the peasants and the nascent working class into the ground for the benefit of big business and the country’s industrialisation. The system of internal passports, which were introduced to keep the peasants on the land, and paying compensation to their masters for the freedom they had gained under Tsar Alexander, and to continue working for them for free, doing feudal labour service: the robot, as it was known in Czech. It’s no accident that this is the word, meaning ‘serf’ or ‘slave’, that Karel Capek introduced into the English and other languages as the term for an artificial human in his play Rossum’s Universal Robots.

We’re back to Disraeli’s ‘two nations’ – the rich, and everyone else, who don’t live near each other, don’t have anything in common and who may as well be foreign countries. It’s in the Tory intellectual’s Coningsby, I understand. Disraeli didn’t really have an answer to the problem, except to preach class reconciliation and argue that the two could cooperate in building an empire. Well, imperialism’s technically out of favour, except for right-wing pundits like Niall Ferguson, so it has to be cloaked in terms of ‘humanitarian aid’. Alexander the Great was doing the same thing 2,500 years ago. When he imposed tribute on the conquered nations, like the Egyptians and Persians, it wasn’t called ‘tribute’. It was called ‘contributions to the army of liberation’. Because he’d liberated them from their tyrannical overlords, y’see. The Mongols did the same. Before taking a town or territory, they’d send out propaganda, posing as a force of liberators come to save the populace from the tyrants and despots, who were ruling them.

What a joke. Someone asked Genghis Khan what he though ‘happiness’ was. He’s supposed to have replied that it was massacring the enemy, plundering his property, burning his land, and outraging his women. If you’ve ever seen the 1980s film version of Conan the Barbarian, it’s the speech given by Conan when he’s shown in a cage growing up. I think the film was written by John Milius, who was responsible for Dirty Harry ‘and other acts of testosterone’ as Starburst put it.

And it also describes exactly how the elite here regard our working and lower-middle classes. We’re crushed with taxes, more of us are working in jobs that don’t pay, or forced into something close to serfdom through massive debt and workfare contracts. The last oblige people to give their labour free to immensely profitable firms like Tesco’s and Sainsbury’s. And at the same time, the elite have been active in social cleansing – pricing the traditional inhabitants of working class, and often multicultural areas, out of their homes. These are now gentrified, and become the exclusive enclaves of the rich. Homes that should have people in them are bought up by foreigners as an investment and left empty in ‘land-banking’. And you remember the scandal of the ‘poor doors’ in London, right? This was when an apartment block was designed with two doors, one of the rich, and one for us hoi polloi, so the rich didn’t have to mix with horned handed sons and daughters of toil.

I got the impression that for all his Toryism, Disraeli was a genuine reformer. He did extend the vote to the upper working class – the aristocracy of Labour, as it was described by Marx, creating the ‘villa Toryism’ that was to continue into the Twentieth Century and our own. But all the Tories have done since is mouth platitudes and banalities about how ‘one nation’ they are. Ever since John Major. David Cameron, a true-blue blooded toff, who was invited by the Palace to take a job there, claimed to be a ‘one nation Tory’. Yup, this was when he was introducing all the vile, wretched reforms that have reduced this country’s great, proud people, Black, brown, White and all shades in-between – to grinding poverty, with a fury specially reserved for the unemployed, the sick, the disabled. These last have been killed by his welfare reforms. Look at the posts I’ve put up about it, reblogging material from Stilloaks, Another Angry Voice, the Poor Side of Life, Diary of a Food Bank Helper, Johnny Void, et al.

But that’s how the super-rich seem to see us: as moochers, taxing them to indulge ourselves. It was Ayn Rand’s attitude, shown in Atlas Shrugs. And it’s how the upper classes see us, especially the Libertarians infecting the Republican and Conservative parties, whose eyes were aglow with the joys of the unrestrained free market and the delights of South American death squads and the monsters that governed them. Walking atrocities against the human condition like General Pinochet, the Contras, Noriega. All the thugs, monsters and torturers, who raped and butchered their people, while Reagan slavered over them as ‘the moral equivalent of our Founding Fathers’. And you know what? An increasing number of progressives are taking a hard look at the Fathers of the American nation. Patricians to a man, who definitely had no intention of the freeing the slaves, or giving the vote to the ladies. and who explicitly wrote that they were concerned to protect property from the indigent masses. Outright imperialists, who took land from Mexico, and explicitly wrote that they looked forward to the whole of South America falling into the hands of ‘our people’. If you need a reason why many South Americans hate America with a passion, start with that one. It’s the reason behind the creation of ‘Arielismo’. This is the literary and political movement, which started in Argentina in the 19th century, which uses the figure of Caliban in Shakespeare’s the Tempest to criticise and attack European and North American colonialism, with the peoples of the South as the Caliban-esque colonised. It was formed by Argentinian literary intellectuals as a reaction to America’s wars against Mexico and annexation of Mexican territory, and their attempts to conquer Cuba during the Spanish-American War.

That’s how South America responded to colonisation from the North and West. And colonialism – as troublesome ‘natives’ to be kept under control, is very much how the elite see ordinary Brits and Americans, regardless of whether they’re White, Black, Asian or members of the First Nations.

But you can only fool people for so long, before the truth becomes blindingly obvious. You can only print so many lies, broadcast so many news reports telling lies and twisted half-truths, before conditions become so terrible ordinary people start questioning what a corrupt, mendacious media are telling them. The constant scare stories about Muslims, foreign immigration, Black crime and violence; the demonization of the poor and people on benefit. The constant claim that if working people are poor, it’s because they’re ‘feckless’ to use Gordon Brown’s phrase. Because they don’t work hard enough, have too many children, or spend all their money on luxuries like computers – actually in the information age a necessity – or computer games, X-Boxes and the like.

You can only do that before the workers you’ve legislated against joining unions start setting up workers’ and peasants’ councils – soviets. Before the peasants rise up and start burning down all those manor houses, whose denizens we are expected to follow lovingly in shows like Downton Abbey. Which was written by Julian Fellowes, a Tory speechwriter.

Before ordinary people say, in the words of ’80s Heavy Metal band Twisted Sister, ‘We ain’t goin’ to take it’.

Before decent, respectable middle class people of conscience and integrity decide that the establish is irremediably corrupt, and there’s absolutely no point defending it any longer.

A month or so ago, BBC 4 broadcast a great series on Russian history, Empire of the Tsars, present by Lucy Worsley. In the third and last edition, she described the events leading up to the Russian Revolution. She described how Vera Zasulich, one of the 19th century revolutionaries, tried to blow away the governor of St. Petersburg. She was caught and tried. And the jury acquitted her. Not because they didn’t believe she hadn’t tried to murder the governor of St. Petersburg, but because in their view it wasn’t a crime. Zasulich was one of the early Russian Marxists, who turned from peasant anarchism to the new, industrial working classes identified by Marx as the agents of radical social and economic change.

And so before the Revolution finally broke out, the social contract between ruler and ruled, tsarist autocracy and parts of the middle class, had broken down.

I’m not preaching revolution. It tends to lead to nothing but senseless bloodshed and the rise of tyrannies that can be even worse than the regimes they overthrow. Like Stalin, who was as brutal as any of the tsars, and in many cases much more so. But the elites are preparing for civil unrest in the next couple of decades. Policing in America is due to become more militarised, and you can see the same attitude here. After all, Boris Johnson had to have his three water cannons, which are actually illegal in Britain and so a colossal waste of public money.

Don’t let Britain get to that point. Vote Corbyn, and kick May and her gang of profiteers, aristos and exploiters out. Before they kill any more people.

Leviathan in Electric Sheep’s Clothing, by Timothy Erik Ström

Published by Anonymous (not verified) on Fri, 15/12/2017 - 11:42am in

Over the last few years, the Chinese government has been working on a colossal experiment in social control. The first public mention of this project was in mid-2014 in a document called ‘Planning Outline for the Construction of a Social Credit System’. There the State Council, the chief administrative authority of the People’s Republic of China, proposed the creation of a vast system of surveillance in which every citizen would be given a numerical score that indicated their trustworthiness. This system would be based on wide-reaching tracking of online and offline actions, all purchases, media engagement and social relations. All the information scraped off by this surveillance process would be centralised in a database and groomed by algorithms looking to extract patterns. These patterns would then be interpreted in a strongly normative way. Taken together, the algorithms would settle on a single number: the ‘Citizen Score’. This score will have massive impacts on people’s lives, with punishments and rewards once the system becomes operational. The State Council wants to make the Social Credit System compulsory for all citizens by 2020. Here’s how the State Council puts it in the Planning Outline:

Accelerating the construction of a Social Credit System is an important basis for comprehensively implementing the scientific development view and building a harmonious Socialist society, it is an important method to perfect the Socialist market economy system, accelerating and innovating social governance, and it has an important significance for strengthening the sincerity consciousness of the members of society, forging a desirable credit environment, raising the overall competitiveness of the country and stimulating the development of society and the progress of civilization.

Sincerity and socialism, competition and civilisation, morality and markets: all mediated by networked computing machines. This vast surveillance system that will underpin the Social Credit System is not unique—Silicon Valley’s tech titans have been developing its basic processes for decades; indeed, this is the secret of much of their profit and power. The key difference in China is the active involvement of the State Council in taking centralised control of the system.

One of the main purposes of the Social Credit System is to enable more of China’s 1.3 billion people to borrow money. The majority of people in China have limited or no credit history; hence, it is difficult for them to get a loan, and this is seen as slowing potential economic growth. In countries like Australia, credit-rating systems are entrenched and generally not controversial, or they are passively accepted. Payment histories are used to predict whether someone will repay their credit-card bill or whether they are eligible for a mortgage.

To develop a credit-rating system fit for the twenty-first century’s ‘Socialism with Chinese characteristics for the new era’, the State Council licensed eight Chinese corporations to develop systems and algorithms for the Social Credit System. This outsourcing went to some of the biggest players in the Chinese tech sector, many of whom had already been developing aspects of the system. In July 2017 this process stalled, with the People’s Bank of China pulling back on plans to license the firms. Regulators expressed concerns over potential conflicts of interest, with most of the worries focusing on the fact that the big tech firms are reluctant to share their data with rival platforms, thus making it difficult to establish a comprehensive score for people. Despite this change of tack, the government is still determined to go ahead with the project and much can be learned from developments thus far.

One of the most important of the original eight companies was Alibaba, a sprawling conglomerate with a market capitalisation of around US$481 billion—around the same as Poland’s GDP. Alibaba introduced AliPay, a payment system that allows people to buy things offline and transfer money to other AliPay account holders. For example, if someone wanted to buy a bowl of rice porridge from a street vendor, they could use their smartphone to take a photo of a QR code, type in the amount—say 3 yuan—and hit go. Then, the vendor checks their phone, sees the money has been transferred, and the transaction is settled. Alibaba’s system is huge, overtaking PayPal back in 2013 as the world’s largest mobile payment platform. These kinds of practices are part of the uneven global drive for a ‘cashless society’. Financial corporations have a particular interest in pushing governments to phase out cash. Cash is something of a public utility, and every use of it for a transaction is, for techno-finance, a missed opportunity to profit from increasingly fine-grained surveillance of consumer habits and predilections.

Under Alibaba’s umbrella lies Ant Financial Services Group, and beneath that Sesame Credit, one of the State Council’s prospective licence holders. Some of the potential infrastructure of the Social Credit System has been developed through Sesame Credit. Alibaba has not revealed the ‘complex algorithm’ used to reduce people to a single number. It has, however, revealed a number of factors that are taken into consideration in this black-box process. Credit history and fulfilment capacity are central, with the algorithms going over people’s payment histories and ability to service debts. Behaviour and preferences are implicated, with the algorithms drawing conclusions about people according to their actions. Algorithms might note a person’s shopping habits and see them as a measure of their character. For example, if someone spent money on alcohol or violent computer games, the software could be programmed to see this as a sign of irresponsibility, which could lead to a lower score. Other factors such as exercise regimes or the hours that people spend on the internet could be taken on board.

Social relations between friends online are also a factor in determining a person’s score. Sesame Credit gives points for sharing what they call ‘positive energy’ online. Announcing publicly on social media how great China is or how well the economy is going can lift one’s score. Social relations are also significant, as a person’s score is connected to their friends’ scores. So, if you are friends with someone with a high score who is always posting wonderful things about the status quo, that will likely reflect well on you. Conversely, you do not want to associate with a dissident. Alibaba maintains that there are no penalties for friends making negative comments, but it is not hard to imagine this trajectory. Indeed, this possibility played out in science fiction in ‘Nosedive’, the first episode of season three of Black Mirror.

Penalties are set to come into force once the system becomes mandatory in 2020. The system is being designed to punish people if they break trust. The planning document summaries its intention thus: it will allow ‘the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step’. This translates into an elaborate system of automated carrots and sticks. Thus far, while it is a voluntary opt-in system, it’s all carrots: a system of social control gamified into a series of enticements. Alibaba gives instant loans to anyone whose points get to a certain level (as long as the credit is spent on its products). Achieve a slightly higher score and you can get a loan to spend anywhere. Get a higher score again, and you will be fast-tracked for a visa to visit Europe.

This system of gamification can even extend to one’s love life. One of the eight companies selected to develop the Social Credit System infrastructure is Baihe, China’s biggest online-dating company. The dating app teamed up with Alibaba to allow its users to show off their good credit ratings. Baihe promotes people with good credit scores, giving them a better standing on its website and thus increasing their chance of getting a date. Zhuan Yirong, Baihe’s vice-president, explains: ‘A person’s appearance is very important. But it’s most important to be able to make a living. Your partner’s fortune guarantees a comfortable life’.

It might be all carrots at the moment, but a system of sticks is also being assembled. In 2016 the State Council’s General Office released a policy document elaborating the effects of having a low Social Credit Score. The document is quite detailed, with wide-reaching proposals on how to punish those deemed untrustworthy by the algorithm. To mention just a few of the proposals, it suggests that a person with a low score be restricted in their ability to receive government subsidies or support. A low score would also make renting a property or finding a job more difficult. The document specifically forbids a person with a low score from being employed in high management, finance, the legal sector or the military, or as a civil servant, and would disallow membership of the Party. Low-scoring people will be the focus of more intensive police surveillance and frisking. The document recommends ‘restrictions on conspicuous consumption’, including catching trains and aircraft, visiting hotels and restaurants, sending children to high-fee schools, and building or renovating houses. In its clunky bureaucratic language, the policy document states:

All levels’ Party and units are encouraged to use name list information concerning persons subject to enforcement for trust-breaking, integrate it into their own areas, professional scope and business activities, and implement credit supervision, warning and punishment over persons subject to enforcement for trust-breaking.

The State Council’s dys/utopian vision is shot through with the rhetoric of trust, with the system being conceived as an apparatus designed to enhance trust and sincerity. The concept of trust evokes a combination of confidence, reliance, dependence and hope. However, when computing machines automate and quantify trust in order to make it legible for governments and corporations, the social basis of trust is undermined. Abstracted from its roots in ordinary social life, it comes back into social organisation as a techno-scientific process that radically enhances forms of social control.

As noted, one aim of the Social Credit System is to get more people to be able to borrow money, with the Citizen Score being a key factor in determining someone’s ability to access credit—or, to say the same thing differently, their ability to get into debt. This inversion is significant, for it helps to tease out the shifting power relations in play. When someone gets into debt they make a promise to devote part of their future to repaying this debt, with interest. On the other side of this relation is the creditor, who gets a guaranteed income stream from the interest—profit from usury.

The State Council worries that China’s consumer economy is underfinanced, and it is looking to prop up spending via debt. There are some parallels between this situation and the massive increase in debt following the large-scale use of credit cards in the United States in the 1980s. This led to spiralling household debt, which, for a time, effectively served to cover stagnating wages by introducing new contradictions into the economy. Of course, this debt explosion created more financial instability, as we saw in the global financial crisis (on that note, US credit-card debt just topped US$1 trillion for the first time since 2008). Debt mechanisms also serve as systems of social control, so the ‘Social Debt System’—as it could easily be called—combines mass surveillance, gamified corporate loyalty programs and debt peonage. As these credit/debt relations spread, it is clear on which side of the divide lies the real power. In October a joint notice issued by the Publicity Department of the Communist Party of China Central Committee, the Supreme People’s Court and the China Banking Regulatory Commission advised authorities across the country that they must establish a debtors list. Debtors are to be listed on online platforms as a punishment for their dishonesty.

While this Social Debt System can be seen as a frightening prospect, this is not to encourage a ‘naughty China’ perspective. Similar technocratic systems of social control exist under the US model, albeit with different patterns. Plainly, Google, Facebook, Amazon and the other Silicon Valley tech titans have a similar girth of surveillance, as do the National Security Agency, National Reconnaissance Office, Central Intelligence Agency, Defense Intelligence Agency and other such organisations, while Wall Street’s financial predations are infamous.

Fredric Jameson has described the market as ‘Leviathan in sheep’s clothing’. Playing with that evocative metaphor, the US tech companies like to project themselves as benevolent and neutral—they wear electric-sheep costumes, all cuddly and trustworthy. Occasionally, as with the Edward Snowden leaks, we glimpse the terrible eye gazing out from all that synthetic wool. In China it’s a different pattern, with the state taking a direct and driving role in constructing a technocratic control apparatus. Here Leviathan does not need a cuddly sheep costume. Either way, the message from the beast is the same: you will pay your debt, and you will conform.

Ken Surin on How Privatisation Wrecked New Zealand’s Electricity Grid

Today’s Counterpunch has a very interesting piece by Ken Surin giving his selective impressions of New Zealand. Throughout the article he calls the country by its Maori name, Aotearoa, and part of the article is about the poverty and marginalisation that is particularly experienced by New Zealand’s indigenous people and Pacific Islanders. He begins the article with his reminiscences of on-pitch violence by the county police and county farmers’ teams when he played university rugby back in the ’60s. This has a tenuous connection to the rest of the article as two of his team mates came from the country. He then goes on to discuss the effects of neoliberalism on New Zealand. Reading his article, I got the impression that New Zealand did not suffer as much as other nations from the neoliberal agenda of privatisation, wage restraint, welfare cuts and rampant deregulation. But at the same time, he argues that it hasn’t done as much as it could either to stop and reverse it.

From this side of the Pacific, one of the most interesting pieces of the article is his description of the way privatisation wrecked the New Zealand electricity network when it was introduced, leading to a power outage, or outages, lasting five weeks.

Aucklanders of a certain age remember the Great Power Outage, symptomatic of their country’s dalliance with neoliberalism, that lasted for 5 weeks from late February 1998.

New Zealand’s electric industry had been deregulated, and the company running Auckland’s grid, Mercury Energy, had been formed in 1992. Mercury promptly downsized its workforce from 1,411 to 600, and skimped on cable maintenance to boost profits. At the time of the Great Power Outage, Mercury Energy was also busy trying to take over another electric utility, again to enhance revenues.

One of several assessments of the handling of the Outage by Mercury Energy and the city’s administration described their response, somewhat charitably, as “ad hoc”. They predicated their responses throughout the crisis on best-case scenarios, and were flummoxed when none materialized.

Practical preparation for worst-case scenarios costs money— duh! – and thus erodes profit margins.

Auckland’s electricity was/is supplied by 4 poorly maintained mega-cables (there have been five serious outages since the 1998 crisis), which failed in quick succession.

Traffic lights stopped working, ventilation systems broke down in the southern hemisphere summer, people were trapped for hours in elevators, food rotted in supermarkets, hospitals had to cancel operations, emergency services were put under extreme pressure, workers had to hike up 20 floors in high-rise buildings to get to their offices, and giant generators had to be flown in from Australia to tide the city over while the mega-cables were repaired over the course of the 5 weeks.

Harsh jokes were made about Auckland’s Third World electricity grid. One example: what did Aucklanders use before candles and oil lamps? Answer: electricity.

The mayor, whose city was becoming a laughing stock, and whose competence was questioned as the crisis dragged on, lost his bid for reelection soon afterwards, while Mercury’s CEO died of a heart attack at his desk.

Neoliberalism can be death-dealing, even for its beneficiaries and overseers.


And other economists have pointed out that neoliberalism has been no more successful elsewhere. The American author of Zombie Economics, a Harvard economist, has pointed out that privatisation has not brought in the investment the electricity industry has needed, and resulted in worse performance than when they were state owned.

The Tories and corporate apologists for private industry like to go on about how terrible the British nationalised industries were in trying to put people off voting for Jeremy Corbyn and Labour, who have promised to renationalise electricity and the railway network. A few days ago the I newspaper in their selection of quotes from elsewhere in the press had a paragraph from the Spectator’s Karren Bradey banging on about this, before stating that Corbyn was a ‘Communist’ who was hanging on to an outmoded theory because of ‘weird beliefs’. Which I would say is, with the exception of the term ‘Communist’, a fair description of most Conservatives and other cultists for the free market. They are indeed continuing to support a grotty, failed ideology long past its sell-by date for their own weird reasons. This is an effective rebuttal to their claims.

He also describes how the introduction of neoliberalism into New Zealand wrecked the economy, and created more poverty while cutting taxes for the rich:

The New Zealand economy duly tanked– shrinking by 1% between 1985 and 1992, while productivity stagnated at below 1% between 1984 and 1993, and inflation remained at around 9% a year. Foreign debt quadrupled, and the country’s credit rating was downgraded twice. Taxes were cut for top earners (from 66% to 33%), while benefits were reduced by up to 30% for the poorest families. The number of poor grew by around 35% between 1989 and 1992.

This is exactly what we’ve experienced in this country during these seven years of Tory rule. And New Zealand and Britain aren’t going to be the only nations who’ve suffered these effects. They’re general, right across the globe. Neoliberalism is responsible for these problems. Except if you’re Theresa May and the Tories, who’ll bleat constantly about how all it’s all due to the last, ‘high-spending’ Labour government.

Rubbish. Neoliberalism is an utter and complete failure. It’s promoted by the Tories as it makes the rich even richer while keeping the rest of us poor and desperate. It’s time it was ended and a proper Labour government under Corbyn was elected.

How Progressives Can Win Big: Casting out the Spirit of Defeatism, One Keystroke at a Time

Published by Anonymous (not verified) on Mon, 11/12/2017 - 12:44pm in

By Steve Grumbine.

Progressives Trigger warning: Compassion required. When is the last time you heard Greens, Berniecrats or Indie voters not acknowledge the distinct and pressing need for election reform, campaign finance reform, voting reform? More to the point, when haven’t they mentioned unleashing 3rd parties from the fringe of irrelevancy and up onto the debate stage?

That is mostly what is talked about, simply because it is low hanging fruit.

It has long been known that our electoral system and methods of voting are corrupt, untrustworthy, and easily manipulated by less than savvy politicians, state actors, and hackers alike. The answers to many of these issues is the same answer that we would need to push for any progressive reforms to take place in America: namely, we need enlightened, fiery, peaceful, and committed activists to propel a movement and ensure that the people rise, face their oppressors, and unify to demand that their needs be met.

What is not as well-known, however, is how a movement, the government, and taxes work together to bring about massive changes in programs, new spending, and the always scary “National Debt” (should be “National Assets”, but I will speak to that later). In fact, this subject is so poorly understood by many well-meaning people on all sides of the aisle that these issues are the most important we face as a nation. Until we understand them and have the confidence and precision necessary to destroy the myths and legends we have substituted in the absence of truth and knowledge, it must remain front and center to the movement.

Progressives, like most Americans, are almost religiously attached to the terms “the taxpayer dollar,” and the idea that their “hard earned tax dollars” are being misappropriated. Often, the most difficult pill for people to swallow is the concept that our Federal Government is self-funding and creates the very money it “spends”. It isn’t spending your tax dollars at all. To demonstrate this, consider this simplified flow chart:

These truths bring on even more hand wringing, because to the average voter they raise the issue of where taxes, tax revenue, government borrowing, and the misleading idea of the “National Debt” (which is nothing more than the sum of every single not yet taxed federal high-powered dollar in existence) fit into the federal spending picture. The answer is that they really don’t.

A terrible deception has been perpetrated on the American people. We have been led to believe that the US borrows its own currency from foreign nations, that the money gathered from borrowing and collected from taxing funds federal spending. We have also been led to believe that gold is somehow the only real currency, that somehow our nation is broke because we don’t own much gold compared to the money we create, and that we are on the precipice of some massive collapse, etc. because of that shortage of gold.

The American people have been taught single entry accounting instead of Generally Accepted Accounting Practices, or GAAP-approved double entry accounting, where every single asset has a corresponding liability; which means that every single dollar has a corresponding legal commitment. Every single dollar by accounting identity is nothing more than a tax credit waiting to be extinguished.  Sadly, many only see the government, the actual dollar creator, as having debt; that it has liabilities, not that we the people have assets; assets that we need more and more of as time goes on, to achieve any semblance of personal freedom and relative security from harm.

In other words, at the Federal level it is neither your tax dollars nor the dollars collected from sales of Treasury debt instruments that are spent. Every single dollar the Federal Government spends is new money.

Every dollar is keystroked into existence. Every single one of them. Which brings up the next question: “Where do our hard-earned tax dollars and borrowed dollars go if, in fact, they do not pay for spending on roads, schools, bombs and propaganda?” We already know the answer. They are destroyed by the Federal Reserve when they mark down the Treasury’s accounts.

In Professor Stephanie Kelton’s article in the LA Times “Congress can give every American a pony (if it breeds enough ponies)” (which you can find here ) She states quite plainly:

“Whoa, cowboy! Are you telling me that the government can just make money appear out of nowhere, like magic? Absolutely. Congress has special powers: It’s the patent-holder on the U.S. dollar. No one else is legally allowed to create it. This means that Congress can always afford the pony because it can always create the money to pay for it.”

That alone should raise eyebrows and cause you to reconsider a great many things you may have once thought. It will possibly cause you to fall back to old, neoclassical text book understandings as well, which she deftly anticipates and answers with:

“Now, that doesn’t mean the government can buy absolutely anything it wants in absolutely any quantity at absolutely any speed. (Say, a pony for each of the 320 million men, women and children in the United States, by tomorrow.) That’s because our economy has internal limits. If the government tries to buy too much of something, it will drive up prices as the economy struggles to keep up with the demand. Inflation can spiral out of control. There are plenty of ways for the government to get a handle on inflation, though. For example, it can take money out of the economy through taxation.”

And there it is. The limitation everyone is wondering about. Where is the spending limit?

When we run out of real resources. Not pieces of paper or keystrokes. Real resources.

To compound your bewilderment, would it stretch your credulity too much to say that the birth of a dollar is congressional spending and the death of a dollar is when it is received as a tax payment, or in return for a Treasury debt instrument, and deleted? Would that make your head explode? Let the explosions begin, because that is exactly what happens.

Money is a temporary thing. Even in the old days we heard so many wax poetically about how they took wheelbarrows of government — and bank – printed IOUs to the burn pile, and set the dollar funeral pyre ablaze.  

In the same LA Times piece, Professor Kelton goes on to say:

“Since none of us learned any differently, most of us accept the idea that taxes and borrowing precede spending – TABS. And because the government has to “find the money” before it can spend in this sequence, everyone wants to know who’s picking up the tab.

There’s just one catch. The big secret in Washington is that the federal government abandoned TABS back when it dropped the gold standard. Here’s how things really work:

  1. Congress approves the spending and the money gets spent (S)
  2. Government collects some of that money in the form of taxes (T)
  3. If 1 > 2, Treasury allows the difference to be swapped for government bonds (B)

In other words, the government spends money and then collects some money back as people pay their taxes and buy bonds. Spending precedes taxing and borrowing – STAB. It takes votes and vocal interest groups, not tax revenue, to start the ball rolling.”

Let’s be clear, we are not talking about the Hobbit or Lord of the Rings. We are not talking about Gandalf the Grey or Bilbo Baggins. We are not referencing “my precious!”. It’s not gold, or some other commodity people like to hold, taste and smell. It is simply a tally. Yet somehow, we have convinced ourselves that there is a scarcity of dollars, when it is the resources that are scarce. We have created what Attorney Steven Larchuk calls a “Dollar Famine”.

To quote Warren Mosler in his must-read book “The 7 Deadly Innocent Frauds of Economic Policy” (you can download a free copy right here) he states:

“Next question: “So how does government spend when they never actually have anything to spend?”

Good question! Let’s now take a look at the process of how government spends.

Imagine you are expecting your $1,000 social security payment to hit your bank account which already has $500 in it, and you are watching your account on your computer screen. You are about to see how government spends without having anything to spend.

Presto! Suddenly your account statement that read $500 now reads $1,500. What did the government do to give you that money? It simply changed the number in your bank account from 500 to 1,500. It added a ‘1’ and a comma. That’s all.”

Keystrokes. Is it becoming clearer? Let’s go further for good measure. Mosler continues:

“It didn’t take a gold coin and hammer it into its computer. All it did was change a number in your bank account. It does this by making entries into its own spread sheet which is connected to the banking systems spreadsheets.

Government spending is all done by data entry on its own spread sheet we can call ‘The US dollar monetary system’.

There is no such thing as having to ‘get’ taxes or borrow to make a spreadsheet entry that we call ‘spending’. Computer data doesn’t come from anywhere. Everyone knows that!”

So why do we allow people to tell us otherwise? Maybe it is too abstract. And on cue, Mosler explains this phenomenon via a sports analogy for those who are not comfortable with the straight economic narrative:

“Where else do we see this happen? Your team kicks a field goal and on the scoreboard the score changes from, say, 7 point to 10 points. Does anyone wonder where the stadium got those three points? Of course not! Or you knock down 5 pins at the bowling alley and your score goes from 10 to 15. Do you worry about where the bowling alley got those points? Do you think all bowling alleys and football stadiums should have a ‘reserve of points’ in a ‘lock box’ to make sure you can get the points you have scored? Of course not! And if the bowling alley discovers you ‘foot faulted’ and takes your score back down by 5 points does the bowling alley now have more score to give out? Of course not!

We all know how ‘data entry’ works, but somehow this has gotten all turned around backwards by our politicians, media, and most all of the prominent mainstream economists.”

Ouch! Mosler pointed out the obvious, the propaganda machine has polluted our understanding. So how is this done in economic language? Let’s let Warren finish the thought:

“When the federal government spends the funds don’t ‘come from’ anywhere any more than the points ‘come from’ somewhere at the football stadium or the bowling alley.

Nor does collecting taxes (or borrowing) somehow increase the government’s ‘hoard of funds’ available for spending.

In fact, the people at the US Treasury who actually spend the money (by changing numbers on bank accounts up) don’t even have the phone numbers of the people at the IRS who collect taxes (they change the numbers on bank accounts down), or the other people at the US Treasury who do the ‘borrowing’ (issue the Treasury securities). If it mattered at all how much was taxed or borrowed to be able to spend, you’d think they’d at least know each other’s phone numbers! Clearly, it doesn’t matter for their purposes.”

So why do progressives allow the narrative that the nation has run out of points deter us from demanding we leverage our resources to gain points, to win the game of life, and have a robust New Deal: Green Energy, Infrastructure, free college, student debt eradication, healthcare as a right, a federal job guarantee for those who want work and expanded social security for those who do not want to or cannot work?

How has a movement so full of “revolutionaries” proved to be so “full of it” believing that we must take points away from the 99% to achieve that which the federal government creates readily, when people do something worth compensating? Why does the narrative that the nation is “broke” resonate with progressives? Why do they allow this narrative to sideline the entire movement?

I believe it is because progressives are beaten down. Many have forgotten what prosperity for all looks like or sounds like. Many are so financially broke and spiritually broken that the idea of hope seems like gas lighting. It feels like abuse. It crosses the realm of incredulity and forces people into that safe space of defeatism.

If they firmly reject hope, then they can at least predict failure, be correct and feel victorious in self-defeating apathy. If the system is rigged; if the politicians are all bought off; if the voting machines are hacked; if the deep state controls everything; then we think we are too weak to unite and stand up and demand economic justice, equality, a clean environment, a guaranteed job, healthcare and security and then we have a bad guy to blame.

Then we can sit at our computers, toss negative comments around social media, express our uninformed and uninspired defeatism about the system, and proclaim it is truth by ensuring it is a self-fulfilling prophecy about which we can be self-congratulatory in our 20/20 foresight as we perform the “progressive give-up strategy”. Or, if we want to achieve a Green New Deal, then in a radical departure from the norm we can own our power; we can embrace macroeconomic reality through the lens of a monetarily sovereign nation with a free floating, non-convertible fiat currency and truly achieve the progressive prosperity we all deserve.

The choice is ours. It is in our hands.


**For more of Steve’s work check out Real Progessives on Facebook or Twitter

The post How Progressives Can Win Big: Casting out the Spirit of Defeatism, One Keystroke at a Time appeared first on The Minskys.

The Real Causes Of Deficits And The US Debt

Published by Anonymous (not verified) on Fri, 08/12/2017 - 5:00am in



Above Photo: A general view of the Capitol Dome in Washington, D.C. | Photo: Reuters Google is blocking our site. Please use the social media sharing buttons (upper left) to share this on your social media and help us break through. Whatever financing issues exist for social security, Medicare, Medicaid, disability insurance, food stamps, etc., they can be simply and easily adjusted. With the Senate and House all but assured to pass the US$4.5 trillion in tax cuts for businesses, investors, and the wealthiest 1 percent households by the end of this week, phases two and three of the Trump-Republican fiscal strategy have begun quickly to take shape. Phase two is to maneuver the inept Democrats in Congress into passing a temporary budget deficit-debt extension in order to allow the tax cuts to be implemented quickly. That’s already a ‘done deal’. Phase three is the drumbeat growing to attack social security, Medicare, food stamps, Medicaid, and other ‘safety net’ laws, in order to pay for the deficit created by cutting taxes on the rich. A whole new set of lies are resurrected and being peddled by the media and pro-business pundits and politicians. Deficits and Debt: Resurrecting Old Lies and Misrepresentations Nonsense like social security and Medicare will be insolvent by 2030. When in fact social security has created a multi-trillion dollar surplus since 1986, which the U.S. government has annually ‘borrowed’, exchanging the real money in the fund created by the payroll tax and its indexed threshold, for Treasury bonds deposited in the fund. As for Medicare, the real culprit undermining the Medicare part A and B funds has been the decades-long escalating of prices charged by insurance companies, for-profit hospital chains (financed by Wall St.), medical devices companies, and doctor partnerships investing in real estate and other speculative markets and raising their prices to pay for it. As for Part D, prescription drugs for Medicare, the big Pharma price gouging is even more rampant, driving up the cost of the Part D fund. By the way, the prescription drug provision, Part D, passed in 2005, was intentionally never funded by Congress and George Bush. It became law without any dedicated tax, payroll or other, to fund it. Its US$50 billion plus a year costs were thus designed from the outset to be paid by means of the deficit and not funded with any tax. Social Security Disability, SSI, has risen in costs, as a million more have joined its numbers since the 2008 crisis. That rise coincides with Congress and Obama cutting unemployment insurance benefits. A million workers today, who would otherwise be unemployed (and raising the unemployment rate by a million) went on SSI instead of risking cuts in unemployment benefits. So Congress’s reducing the cost of unemployment benefits in effect raised the cost of SSI. And now conservatives like Paul Ryan, the would be social security ‘hatchet man’, want to slash SSI as well as social security retirement, Medicare benefits for grandma and grandpa, Medicaid for single moms and the disabled (the largest group by far on Medicaid), as well as for food stamps. Food stamp costs have also risen sharply since 2008. But that’s because real wages have stagnated or fallen for tens of millions of workers, making them eligible under Congress’s own rules for food stamp distribution. Now Ryan and his friends want to literally take food out of the mouths of the poorest by changing eligibility rules. They want to cut and end benefits and take an already shredded social safety net completely apart–while giving US$4.5 trillion to their rich friends (who are their election campaign contributors). Whatever financing issues exist for social security, Medicare, Medicaid, disability insurance, food stamps, etc., they can be simply and easily adjusted, and without cutting any benefits and making average households pay for the tax cuts for the rich in Trump’s tax cut bill. Social security retirement, still in surplus, can be kept in surplus by simply one measure: raise the ‘cap’ on social security to cover all earned wage income. Today the ‘cap’, at roughly US$118,000 a year, exempts almost 20 percent of the highest paid wage earners. Once their annual salary exceeds that amount, they no longer pay any payroll tax. They get a nice tax cut of 6.2 percent for the rest of the year. Furthermore, if capital income earners (interest, rent, dividends, etc.) were to pay the same it would permit social security retirement benefits to be paid at two thirds one’s prior earned wages, and starting with age 62. The retirement age could thus be lowered by five years, instead of raised as Ryan and others propose. As for Medicare Parts A and B, raising the ridiculously low 1.45 percent tax just another 0.25 percent would end all financial stress in the A & B funds for decades to come. For SSI, if Congress would restore the real value of unemployment benefits back to what it was in the 1960s, maybe millions more would return to work. (It’s also one of the reasons why the labor force participation rate in the U.S. has collapsed the past decade). But then Congress would have to admit the real unemployment rate is not 4.2 percent but several percentages higher. (Actually, it’s still over 10 percent, once other forms of ‘hidden unemployment’ and underemployment are accurately accounted for). As for food stamps’ rising costs, if there were a decent minimum wage (at least US$15 an hour), then millions would no longer be eligible for food stamps and those on it would significantly decline. In other words, the U.S. Congress and Republican-Democrat administrations have caused the Medicare, Part D, SSI, and food stamp cost problems. They also permitted Wall St. to get its claws into the health insurance, prescription drugs, and hospital industries–financing mergers and acquisitions activity and demanding in exchange for lending to companies in those industries that the companies raise their prices to generate excess profits to repay Wall St. for the loans for the...

Is Homo Economicus Dead?

Published by Anonymous (not verified) on Fri, 08/12/2017 - 4:17am in

by Peter Fleming*

In Martin Scorsese’s film The Wolf of Wall Street the narcissistic, egotistical and money hungry investment banker Jordan Belford memorably summed up his attitude to life: “Let me tell you something. There’s no nobility in poverty. I’ve been a poor man, and I’ve been a rich man. And I choose rich every fucking time.”
Belford is terrifying not simply because of his ruthless demeanour and unscrupulous greediness. He scares us because this persona was celebrated, nurtured and encouraged by a particular economic paradigm: neoliberal capitalism. He’s a product of our own making. At the end of the film we are left wondering, how could such as monster be unleashed on society?
Jordan Belford is meant to epitomize ‘homo economicus’ — the self-interested, utility maximizing individual that is at the heart of neoclassical and mainstream economics. Of course, homo economicus is an imaginary figure, an idealization that economists assume we more or less approximate. An ‘as if’ proposition (let’s assume people act as if they are self-interested individuals) that feeds abstract econometric formula and theorems. While homo economicus has been around since the days of Adam Smith, only with the rise of Thatcher and Reagan did governments have the audacity to completely rebuild society after its image. And behavioural economics has done little to dethrone the trend.
The Death of Homo EconomicusThere is a problem with The Wolf of Wall Street narrative. I noticed it when I began conducting research for my new book The Death of Homo Economicus: Work, Debt and the Myth of Endless Accumulation (Pluto Press, 2017). When the myth of homo economicus was used to inspire the wholesale reform of education, the workplace, healthcare and government agencies, it wasn’t really the rich who were affected. Ironically, the wealthy tend to enjoy a more socialist and gentler surroundings, particularly the plutocracy. No, homo economicus was probably designed for those who could never live like Jordan Belford, namely, the unemployed, working poor and the middle-classes who were least likely to successfully live up to the ideals of possessive individualism.
A good example here is human capital theory developed by Gary Becker, Milton Friedman and T.W. Schultz. It assumes that people actively invest in their own earning potential through skill acquisition, training and education. But the notion has strong ideological elements too. Chicago School ministers alleged that Marxists are wrong for seeing any clash of interests between labor and capital because now everybody’s a capitalist of some sort. Moreover, human capital cannot be owed by anyone else and its benefits are only accrued by its individual possessor. Thus, why should anyone else pay for its investment, particularly the public purse?
In one foul swoop, human capital theory helped break unions since they’re irrational in this worldview. It also stigmatized public investment in education and training. Now you are on your own, and tough luck if who can’t afford a tertiary education. We can draw a direct line from neoclassical ideas like human capital theory to massive problems today facing working people such as student loan repayments, insecure contracts and low wages. Of course, the ultra-rich curiously had little interest in human capital or its cognates for this very reason.
The provocative title of my book is trying to highlight what has happened after 30 years of being water-boarded by the ideology of homo economicus. It is truly bizarre that following the 2007-2008 financial crisis the glorification of homo economicus didn’t die. Indeed, the ethos is promoted in both the public and private sectors more now than ever, driven by policy makers, politicians and captains of industry. Economic historians will be trying to figure out why for years to come.
However, what about the real people who have to live their lives according to the extreme and largely unworkable ideal of homo economicus? This is where the real tragedy of neoliberalism lies in my opinion, which is consistently swept under the carpet and seldom mentioned in the American Economic Review. In the real world, homo economicus is sick and dying off at an alarming rate. Two areas are explored in the book to back up this point.
When filtered through the lens of neoliberal capitalism, homo economicus is first and foremost a worker. She requires income to invest and consume. Hence why work is still so celebrated, even in the face of structural unemployment, a stress epidemic and the coming wave of robotics that threatens to abolish work for good. For sure, over the last 15 years a near suicidal work ethic has emerged, exacerbated by economic insecurity and mobile technology. Epidemiologists have increasingly pointed to the public health crisis that’s unfolding due to overwork and stress. It’s now up there with smoking.
Just look at the case of Moritz Erhardt. He was a 21-year-old Bank of America intern working in London. He put in an incredible 71 hours of non-stop work and died of an epileptic seizure. The tragedy raised serious questions about the killer-work ethic that is condoned in many institutions, even among the poor and unemployed. For example, I also mention another UK case of a very ill woman whom the government declared fit for work and thus ineligible for welfare payments – she died the day the letter arrived.
I also examine the issue of debt, particularly student debt. I suggest this directly stem from human capital theory and the argument that funding education is strictly a private responsibility. In the US the student loan bill stands at a breath-taking US$1.26 trillion. And the stress and anxiety caused by indebtedness is killing people. For example, Jason Yoder incurred a $100,000 debt studying at Illinois State University. He committed suicide after he failed to find a job. His mother said that even when preparing for her son’s funeral the debt collector agency constantly called about the outstanding sum.
So this book is about how an idea – homo economicus – is sadly still alive and well in theory, but in practice represents an unfolding human catastrophe that is hidden in plain sight. When I imagine homo economicus personified I don’t see The Wolf of Wall Street’s Jordan Belford. Jason Yoder is closer to the mark.
The real question at the heart of the book is this: What will replace homo economicus and what kind of economic analysis will emerge as a result?
Market individualism is basically about privatizing the economic event. Not only public assets and state organizations, but the individual productive act itself, with work as leading example. There is no way to collectively let off steam and call for progressive change. Workers fall in upon ourselves and remain mute as a result. Thus we need to vigorously revive a notion of the public good in my opinion, where economic (mis)fortunes are lived not as a private torment but openly acknowledged as a trans-individual phenomenon. Homo Politicus is thus diametrically opposed to homo economicus because s/he reverses the privatization of work and debt, viewing it as a shared problem that no individual should face alone.
This is the central message of my book, The Death of Homo Economicus.
* Peter Fleming is Professor of Business and Society at Cass Business School, City, University of London. He is a columnist for the Guardian and the author of The Mythology of Work, also published by Pluto Press (2015).

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PostCapitalism: A Guide to Our Future

Published by Anonymous (not verified) on Tue, 28/11/2017 - 3:30am in

By Hannah Temple.­

 ­It is difficult to get through a day without encountering the idea that we as a species and a planet are at some kind of a tipping point. Whether for environmental, economic or social factors (or a mix of them all) there is a growing collective of voices claiming that the fundamental ways in which we live our lives, often linked to the structures and incentives of capitalism, must change. And they must change both radically and soon if we are to protect the future of the human race. Paul Mason’s PostCapitalism: A Guide to Our Future adds another compelling voice to this increasingly hard-to-ignore din. However, what makes this book refreshingly different is the tangible picture it paints of our possible path to a “postcapitalist” world. Mason’s belief is that capitalism’s demise is in fact already happening, and it is happening in ways we both know and like.

The book starts by looking at Kondratieff waves– the idea developed by Nokolai Kondratieff in the 1920s that capitalist economies experience waves or cycles of prosperity and growth, followed by a downswing, characterised by regular recessions, and usually ending with a depression. This is then followed by another phase of growth, and so on and so on. Many people, especially those that benefit from the current economic model, argue that what we are experiencing currently is just another of these regular downswings and we all just have to hunker down and ride the wave until the going gets good again. Mason, however says that even a quick glance at whatever form of evidence takes your fancy (global GDP growth, interest rates, government debt to GDP, money in circulation, inequality, financialization, productivity), demonstrates that the 5th wave that we should currently be riding has stalled and is refusing to take off.

The shift from the end of one wave and the start of a new one is always associated with some form of societal adaptation. Usually this is through attacks on skills and wages, pressure on redistribution projects such as the welfare state, business models evolving to grab what profit there is. However, if this de-skilling and wage reduction is successfully resisted then capitalism is forced instead into more fundamental mutation- the development of more radically innovative technologies and business models that can restore dynamism based on higher wages rather than exploitation. The 1980s saw the first adaptation stage in the history of long waves where worker resistance collapsed. This allowed capitalism to find solutions through lower wages, lower-value models of production and increasing financialization and thus rebalance the entire global economy in favour of capital. “Instead of being forced to innovate their way out of the crisis using technology, the 1 per cent simply imposed penury and atomization on the working class.”

This failure to resist the will of capital and the subsequent emergence of an increasingly atomised, poor and vulnerable global population is part of Mason’s explanation for our stalled 5th wave. The other half of the explanation comes from the nature of our recent technological innovations. Mason contends that the technologies of our time are fundamentally different to those of previous eras in that they are based on information. This is significant in that information doesn’t work in the ways that printing presses or telephones or steam engines work. Information throws all the basic tenets of capitalism- supply and demand, ownership, prices, competition- on their heads. Information technology essentially works to produce things that are increasingly cheap or even free. Think of music- from £10 for a CD in 1997 to 95p for an iTunes track in 2007 to completely free via sharing sites like Spotify in 2017. Over time, Mason claims the market mechanism for setting prices for certain information-based goods will gradually drive them down and down until they reach essentially or even actually zero – eroding profits in the process.

Capitalism’s response to this shift has basically been to put up lots of walls and retreat to stagnant rentier activity rather than productivity or genuine innovation. Legal walls such as patents, tariffs and IP property rights are used to try to maintain monopoly status so that profits can continue to be earnt. Politics is following in the same path with some real walls as well as plenty of metaphorical ones in the form of disintegrating international agreements and partnerships, import tariffs, immigration caps and so on. “With info-capitalism a monopoly is not just some clever tactic to maximise profit, it is the only way an industry can run. Today the main contradiction in modern capitalism is between the possibility of free, abundant socially-produced goods and a system of monopolies, banks and governments struggling to maintain control over power and information”.

However, what seems to be part of the problem is, according to Mason, a critical part of the solution. These new sharing, or “information” technologies, have led to what Mason sees as an already emerging postcapitalist sector of the economy. Time banks, peer-to-peer lending, open-source sharing like Linux and Wikipedia and other technologies are not based on a profit-making motive and instead enable individuals to do and share things of value socially, outside of the price system. This peer-to-peer activity represents an indication of the potential of non-market economies and what our future might look like.

Mason argues that we have now reached a juncture at which there are so many internal and external threats facing our existing system- from climate change, migration, overpopulation, ageing population, government debts- that we are in a similar position to that faced by feudalism before it dissolved into capitalism. The only way forward entails a break with business as usual. Mason emphasises that it is important to remember that capitalism is not a “natural” state of being, nor has it gone on for such a long time. We live in a world in which its existence is seen to be unquestionable but we must take time to teach our brains how to imagine something new again. For Mason, in rather sci-fi fashion, this “something new” is called Project Zero.

Project Zero aims to harness to full capabilities of information technologies to:

– Develop a zero-carbon energy system
– Produce machines, services and products with zero marginal costs (profits)
– Reduce labour time as close as possible to zero

“We need to inject into the environment and social justice movements things that have for 25 years seemed the sole property of the right: willpower, confidence and design.”

Mason provides us with a comprehensive and exciting list of activities to be cracking on with to shape our new world. Some of his ideas are excitingly fresh and new such as the development of an open, accurate and comprehensive computer simulation of current economic reality using real time data to enable the planning of major changes. Others are more familiar such as the shifting of the role of the state to be more inventive and supportive of human wellbeing by coordinating infrastructure, reshaping markets to favour sustainable, collaborative and socially just outcomes and reducing global debts. He also supports the introduction of a universal basic income, the expansion of collaborative business models with clear social outcomes and the removal of market forces- particularly in the energy sector in order to act swiftly to counter climate change. He calls for the socialisation of the finance system. This would involve the nationalization of central banks, setting them explicit sustainability targets and an inflation target on the high side of the recent average to stimulate a “socially just form of financial repression”. It would also involve the restructuring of the banking system into a mixture of non-profit local and regional banks, credit unions and peer-to-peer lenders, a state-owned provider of financial services and utilities earning capped profits. Complex, financial activities should still be allowed but should be separate and well-regulated, rewarding innovation and punishing rent-seeking behaviour.

This push towards a system that rewards and encourages genuine innovation underlies most of Mason’s suggestions for our postcapitalist future. He contends that, if we continue down our current path, it will suffocate us and lead to a world of growing division, inequality and war. We already have systems for valuing things without prices. Working on optimising the technologies we have available to expand these systems, allowing us to live more sustainable, equal and happy lives, Mason argues, should be the key focus for us all.


This book review of Paul Mason’s PostCapitalism by Hannah Temple is originally posted at Rethinking Economics.­  ­­ ­­ ­­ ­­ ­­­

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Money-power and the capitalist state in the Global South

Published by Anonymous (not verified) on Fri, 03/11/2017 - 6:00am in


Blog, Debt

Over the past thirty years or so, global financial market integration and financial (re)regulation have largely contributed to the increased vulnerability of Developing and Emerging Capitalist Countries (DECC) to the volatile cross-border movement of money and capital. Repeated financial crises have recently sparked a series of innovative institutional and policy initiatives at various scalar levels of governance across the Global South:

  1. The deployment of ‘self-insurance’ strategies at the national level, such as large foreign reserve accumulation, different forms of capital controls, sustained foreign exchange market interventions, the upgrading and tight regulation of domestic financial systems, and the use of state-owned banks for counter-cyclical policies;
  2. The multiplication of bilateral, sub-regional, and regional financial and monetary mechanisms, including currency-swaps and reserve-pooling arrangements, credit lines, and development finance; and
  3. Growing assertiveness and calls for more inclusivity and representativeness in the Bretton Woods institutions, G20, and other multilateral organisations.

This raises a series of questions: what is the historical significance of these new forms of socio-spatial regulation of monetary and financial issues for contemporary capitalism, and what is their role in the reproduction of capitalist class rule across the Global South? In a recent article published in New Political Economy, I draw upon Marxist political economy and radical geography in order to explore those questions.

My main claim is that the aforementioned policy initiatives need to be understood in light of much broader transformations in geographies of state power across the Global South, in the context of considerable expansion of what I call the spaces of money-power. Over the last thirty years or so, this expansion has been extensive: the removal of capital-account regulations, the liberalisation of exchange controls, the opening and privatisation of domestic financial systems, have contributed to increasing the spatial reach of money-capital. It has also been intensive: growing volumes of interest-bearing money-capital have been created and have circulated across the financial world market in the form of fictitious capital. This has been accompanied by the extension of debt relations at a variety of spatial scales (to national governments, regional and municipal governments, private and public sector corporations, households and workers) and to areas of social reproduction that were previously relatively protected from their reach, resulting in the deepening of the rule of money over social life. These dynamics of financial expansion have been inseparable from the acceleration of the spatial reorganisation of global production, the huge expansion of the reserve army of labour and the relative surplus population on a global scale, and the growing marketisation and financialisation of land and ecological commodities: the spatial expansion of the money-power of capital and the deepening of its reach has been a key mechanism in the appropriation of growing pools of living labour and extra-human natures by capital.

In that context, the Global South has received growing volumes of money-capital. According to World Bank Debt Statistics, net private money-capital flows increased from about $50 billion in 1990 (the equivalent of about 2% of GDP) to about $510 billion in 2010 (4.4% of GDP), with a peak of more than $1.1 trillion in 2007 (about 8% of GDP). Yet, DECC have retained their subordinate position in the financial world market and the global monetary system, and have remained highly vulnerable to the volatile cross-border movement of money-capital. This has led to acute difficulties in managing monetary and financial affairs, violent crises, and posed growing problems in terms of the management of class relations at national and sub-national scales, because of the multiplication of forms of resistance to crisis deflationary adjustments, dispossession, displacement, and ecological destruction. To paraphrase Neil Brenner, expanding spaces of money-power engendered contextually specific forms of socio-spatial dislocation and crisis formation.

My key contention is that this in turn sparked transformations in socio-spatial state configurations in order to facilitate the expansion and deepening of monetary disciplines, and the appropriation of growing pools of living labour and extra-human natures by capital, while politically mediating the contradictions and social conflicts that have emerged at various scalar levels, from the world market to bodies and subjectivities. In the article, I identify and discuss at length 5 types of transformations in socio-spatial state configurations: the rescaling of the spaces of monetary, fiscal, and exchange rate policies and the growing direct involvement of the state in the cross-border circulation of money-capital; the internationalisation of financial and monetary state apparatuses and their prioritisation over other forms of socio-spatial regulation; an intensification of states’ management of monetary flows across space, between regions and sectors; and the growing involvement of the state in processes of financial subjectification.

Making sense of these socio-spatial transformations is crucial because they are far from being neutral. It is clear that the great winners have been those classes and social subjects, both in the Global North and the Global South, capable (due to access to specific monetary, cultural, social resources) of commanding over the expanding spaces of money-power. Through strategies of portfolio diversification, that is, the holding of assets with different risk/reward ratios, those social subjects have been able to tap into larger pools of labour and extra-human natures than ever. This constant spatial rearrangement of financial assets (facilitated by the aforementioned state transformations) across uneven geographies with different magnitudes of risk/reward, has allowed those social actors to take advantage of enhanced competition between particular places and leverage small differences in socio-environmental conditions of labour exploitation at various scales.

The state transformations have also had clear distributional impacts, by shifting the social costs of crises onto labour, and by providing handsome rewards to the application of capital in its money-form. Here we can think of how policies associated with monetarist imperatives and tight public finances, have transferred large amounts of surplus to particular classes within and across territorial borders. For instance, in South Africa, high real interest rates have provided handsome financial returns to both local ruling classes and international investors, who owned about 35% of government debt in 2013. According to recent IMF figures, more than $1trillion of DECC government debt is held by foreign investors in local and hard currency. The production of new state configurations, then, has largely contributed to safeguarding the financial assets and income streams of particular social groups, and to channelling value across the global capitalist space economy.

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