Bill Totten's Weblog

Wednesday, June 30, 2010

Say What?

by James Howard Kunstler

Comment on current events by the author of
The Long Emergency
(2005) (June 28 2010)

I think America missed something. It must be the time of year, what with inhaling all those fumes from the charcoal starter ... and fueling up the Jet-skis so as to turn a perfectly good mountain lake into something like a Cuisinart on the guacamole setting ... and the rousing evenings in the Nascar parking lots hitting palmetto bugs with your wiffle bat ... and all that anxious waiting for a 10W-40 hard rain to fall on the Gulf Coast states - but President Obama made a very interesting remark when the financial regulation package passed in the senate the other day. He said the bill would make sure that "Main Street is never again held responsible for Wall Street's mistakes".

Whoosh ...

That was the sound of something going over America's head. Something about the size of Rodan the Flying Reptile. And frankly I don't think the president even meant to be coy or deceptive. It just means he doesn't get it either. Never again ...

Never again?

What the fuck?

Why even this time? Why isn't there an army of federal attorneys out there, their teeth bristling with subpoenas, beating the bushes in every lane and skyscraper floor of lower Manhattan (and Fairfield County, Connecticut, not to mention a thousand office parks around the USA) to roust out the grifters and swindlers who took Main Street to the cleaners this time.

The audacity of cluelessness! And the hilarity of "next time".

Earth to President Obama: there isn't going to be a next time. This time was enough to git 'er done. Wall Street - in particular the biggest "banks" - packaged up and sold enough swindles to unwind 2500 years of western civilization. You simply cannot imagine the amount of bad financial paper out there right now in every vault and portfolio on the planet. Enough, really, to sink any company even pretending to trade in things more abstract than a mud brick or an hour of labor. What's more, the cross-collateralized obligations between them are so vast and intricate that all the standing timber in North America could not be fashioned into enough pick-up sticks to represent the hideous death-dealing tangle of frauds waiting for the wing-beat of a single black swan to come crashing down.

Go out and get a copy of Michael Lewis's recent book The Big Short (2010) for a close-up view on one micro-corner of the investment world. You will discover that the people fabricating things like synthetic collateralized debt obligations (CDOs) had no idea what the fuck they were doing - besides deliberately creating documents that nobody would ever understand, that would never be unraveled by teams of law clerks or secret words or magic incantations or prayers to some dark hirsute deity, and were guaranteed to place in jeopardy every operation of the world economy above the barter level. Sorry to invoke the hoary old metaphor about the horse being out of the barn - but the larger problem is what the horse left behind in a great steaming mound clear up to the rafters. There was nothing to understand in all this crap, except that betting against it was a good idea, and then only for those who placed the earliest bets - because everybody else is going to get just as screwed as those who stuffed their vaults and portfolios with Triple-A rated horseshit.

What banks and governments have been doing for the past eighteen months is a dumbshow meant to distract the public from the fact that the world financial system has been effectively destroyed. There isn't enough money left in the known reaches of the universe to pay off the outstanding claims. In fact, not even close. Everything that proceeds from this fiasco will be in service of impoverishing most of the population and, incidentally, probably bringing down governments and, with them, convenient social usufructs such as due process of law and civil order. What remains - what you're watching right now on CNN or Fox - is just a representation of the former structures of civilized life, what Joe Bageant refers to as "the hologram", a kind of 3-D picture you can see around, that looks like reality, but is actually immaterial, a collective hallucination. It's comfortable living in a hologram - until you discover that you're in one.

In the summertime, when there are weenies to grill and Jet-skis to commit suicide on, the public is usually having too much fun to pay attention to anything. Maybe this is how come summertime is also when lots of bad shit happens, or gets ready to happen. The guns of August ... blitzkrieg ... 9-11 ... the death of Lehman Brothers ...

A few other social notes this week: Something else the public (and, of course, the news media) missed in the General McChrystal affair. It wasn't just that the general badmouthed his civilian superiors. It was that he was not the other thing that an army officer should be: a gentleman. He was a lout who reveled in everything lowest in his own culture. He was a man so disturbed by having to spend a night in Paris at a good restaurant with civilized people that it seems to have driven him plumb batshit. General George Patton - a man renowned for his own profane intemperance - would have boxed Stanley McChrystal's ears for his sheer childishness and assigned him to Graves Registration. When the USA falls apart in a few years, let's hope General McChrystal doesn't ride over the horizon on a white horse with an army of Af-stan vets flexing their neck tattoos behind him.

Oh, and something else: notice that the Deepwater Horizon oil gusher has vanished from the front pages of The New York Times and even The Huffington Post. Nobody gives a shit anymore. Bring it on.


A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press. The title is The Witch of Hebron.

Mr Kunstler's biography is at see

Bill Totten

Is Sarah Palin Porn?

by Jack Hitt

Harper's Magazine Notebook (June 2010)

Politics is high school with guns and more money.

- Frank Zappa

The ascension of Sarah Palin beyond the realm of mortal politician occurred sometime after her clumsy resignation as governor of Alaska and before the revelation that a recent speaking contract read like out-takes from This Is Spinal Tap, peevishly demanding that if a private jet is available then the "aircraft MUST BE a Lear 60 or larger (as defined by interior cabin space) for West Coast Events", that if cameras are allowed then "the number of clicks as appropriate for length of photo op: 45 minutes/75 clicks; 60 minutes/100 clicks and 90 minutes/125 clicks", and that onstage "Unopened bottled still water (two bottles) and bendable straws are to be placed in or near the wooden lectern". What, no bowls of green M&Ms?

To the Beltway huzzah of cable shows and newspaper columns, Palin is still understood as someone who might run for president. But she is a surging media phenom whose income since July 2009 is estimated at more than $12 million. Those political followers who dog her with their psychosexually fraught signs (PALIN = G W BUSH WITH LIPSTICK; ENTER PALIN, EXIT OBAMA) are now stage props about as crucial as that small crowd of audience members who awkwardly high-five Jay Leno at the beginning of each show. She no longer has supporters; she has a mass audience for whom she is a soap opera, a Horatio Alger story, trailer trash, a goddess, a lad-mag fantasy, and a glamorous star all in one. To say that Sarah Palin is a politican mistakes a splashy debut for the breathless melodrama that now constantly engulfs her. It's like saying that Paris Hilton is a hotel heiress or that Jon Gosselin is a husband.

The marriage of politics and entertainment has long been the Republican Party's greatest asset, but Palin's rise is different and has changed the old rules. Her climb to celebrity is through politics (not the other way around, as it was for Ronald Reagan and Sonny Bono). She is living proof of David Frum's recent heretical observation that "Republicans originally thought that Fox worked for us, and now we are discovering we work for Fox". And her achievement goes a long way toward explaining why the Democrats can't (and won't) gain political traction even with a popular president, an easily blamed predecessor, and the control of both chambers of Congress.

Modern television politics, we are usually told, begins with the famous 1960 Kennedy-Nixon debates. If you look back to them, what you see is not merely the first presidential candidate to realize that packaged talking points come off convincingly on television but also an obituary for a lost political style. Critics always note that Nixon looked crummy in those debates - the five-o'clock shadow, the sweats, the sideways glances, the tugging at his infamous dewlaps. But those gestures are not what sank Nixon. They were merely symptoms of what Nixon was doing, and he was the last politician ever to do it on live TV: Nixon was thinking.

If Kennedy introduced politics to entertainment, Ronald Reagan merged them. His first memorable outing as a presidential candidate was in February 1980 in Nashua, New Hampshire. During a debate with George H W Bush, an angry moderator threatened to turn off Reagan's microphone. "I'm paying for this microphone, Mr Green!" Reagan seethed. The moderator's name was actually "Breen", but it didn't matter. The crowd roared its approval of such a bully moment, and after that Reagan never looked back. (Others did look back, many years later, to discover a precedent: Spencer Tracy, in the Frank Capra film State of the Union, finding himself in similar circumstances, fumed, "I'm paying for this broadcast!")

Sometimes Reagan's fusion of Hollywood and politics was breathtaking. (Both Israeli Prime Minister Yitzhak Shamir and Nazi hunter Simon Wiesenthal independently confirmed that they had heard Reagan tell a moving story about having filmed the death camps, even though he never left the United States during wartime. According to Reagan aide Michael Deaver, just because Reagan may have viewed "footage shipped home by the Signal Corps" and "saw this nightmare on film, not in person", that "did not mean he saw it less".) But those who compare Reagan's stagecraft to Palin's high school senior's gift for snark miss a basic difference. Reagan started his public career as a union president in 1947, was a Democrat and an FDR supporter, and in time made an honest progression to the right. He arrived there with decades of witty lines and conservative pearls. He could quip that "one way to make sure crime doesn't pay would be to let the government run it", or needle the press corps by saying, "Before I refuse to take your questions, I have an opening statement".

In other words, Reagan melded entertainment values with political nuance. Since then, the two parties haven't just had different ideologies; they've pursued them in entirely different political moods - not so much indicative versus subjunctive as triumphal versus tedious. In 1987, for instance, writer P J O'Rourke captured the essence of Reagan politics with his book Republican Party Reptile. Meanwhile, all the Democrats had to put forward that year was a doorstop called Man of the House: The Life and Political Memoirs of Speaker Tip O'Neill. When Republicans do politics, it looks like vicious fun. When Democrats do politics, it feels like conscientious homework. Just after the recent health-care legislation passed Congress, Democrat Anthony Weiner observed that it always feels like Democrats "come into knife fights carrying library books".

The origin of this shift in tone - the first beat of the butterfly's wing that would become the Reagan Revolution - arguably happened during the 1980 congressional election in South Carolina, where I grew up and where this story is told all the time, even by Democrats, and not just because it's so rude. Lee Atwater, then working for the incumbent congressman, Floyd Spence, as well as for my cousin Strom Thurmond, was assigned the task of destroying the rising career of a Democrat who bore the Faulknerian name Tom Turnipseed. People who knew Turnipseed well were aware that he'd once undergone electroshock therapy, and Thomas Eagleton's sudden withdrawal from the 1972 Democratic ticket when his similar history became public was still in people's minds. Turnipseed accused Atwater of dirty tricks (push polling, specifically), but instead of responding to the charges, Atwater winked at reporters and joked that you can't always trust the accusations of a man who's been "hooked up to jumper cables". The reporters laughed, skipped reporting the facts, and a new politics was born.

And yet this is where the Republicans' love of Palin is perilous. Her ease before the cameras happens only when she has a line or two scripted for the character she's decided to play in public. At a recent "tea party" gathering, she leaned over the lectern and sneered, "How's that hopey, changey stuff working out for you?" It was a great bit, but a great written bit.

Here Palin most resembles Reagan, but cut her loose from her speechwriters and she shrivels into Dan Quayle. It would not be fair to make this case if she'd had only a few frozen moments with television interviewers. But without a tight script or notes scrawled on her palm, she quickly becomes confused. Her itinerant syntax is now legendary, what Bill Maher calls her gift for unspooling the "sentence to nowhere". You don't need to be an English teacher correcting an essay to know that the student did not read the assignment and is slipping into classic high school bullshit.

Ronald Reagan spent twenty-five years on the lecture circuit, honing his toastmaster's chops to such burnished perfection that any kid in the 1980s could imitate his amiable head tilts and the soothing susurrus that bathed his every line. Palin's rhetorical training ground - where she learned to say to Katie Couric that her favorite newspaper is "all of them, any of them", and to Glenn Beck that her favorite Founding Father is "all of them" - was the Q&A segment of the small-town beauty pageant. Off the cuff, she always sounds like she's standing at three-quarter profile in an ill-fitting evening gown, struggling to discourse on the judges' moronic request to name her favorite nation ("All of them!").

Astonishingly, she has continued to resist any media training since she steadfastly refused the help offered by the McCain campaign back in the fall of 2008. Instead, she bitterly brings up her most colossal failures like an adolescent trying to explain away an embarrassing mistake - and then can't stop talking about it, convincing no one but herself.

When Rahm Emanuel referred to liberal activists as "retarded" in a private conversation, she opportunistically pounced. Typically, conservatives stay away from the political-correctness angle. But Palin howled that she was deeply offended. Unfortunately, Rush Limbaugh shortly thereafter denounced the retards in the White House. Retard, retard, retard - he said it forty times, with the usual honking, farting, grandmother-horrifying derision that passes for humor on radio these days. The day after that, Palin defended Limbaugh, drawing a meandering distinction between Emanuel's comments and Limbaugh's "satire". The very next day, an actual satirist, Stephen Colbert, made the argument that "we should all come to her defense and say Sarah Palin is a fucking retard". For once, Palin shut up.

She pratfalls now as regularly as she pirouettes - and she stumbles whenever she veers from the play-book. Her resignation as governor of Alaska is a torturous piece of video; it's impossible not to feel near Aristotelian catharsis watching such a calamity unfold right in front of your eyes. But that hideously painful moment - Palin straining to spin her quitting into an act of resolution - was more than just a beauty-pageant moment. It's actually what Palin's audiences love about her. They never know what they will get. She can be the petty, mean girl who gets caught using her authority as governor to ruin her hated ex-brother-in-law or using a marker to black out "McCain" on an old campaign sun visor. She can be the deliberately trashy girl who in college favored sassy T-shirts (I MAY BE BROKE BUT I'M NOT FLAT BUSTED) and who as a vice-presidential candidate not only wore a pair of harlot-red pumps (sold under the name "Naughty Monkey Double Dare") but then gave them to her niece to sell on eBay for $2,025.

She seethes at the mention of her daughter's old boyfriend, Levi Johnston, cattily characterizing his Playgirl photo shoot as "aspiring porn". Her Facebook updates are as bitchy as those of any fourteen-year-old girl. And her treacly tweets are classic examples of what the philosopher Daniel Dennett calls "deepities" - vagaries that can easily pass as profundities ("Kids: be more concerned w/ your character vs reputation bc character is what you are, reputation is merely what others think you are").

She can also do, by her own standard, some "porn". She showed off major leg in a racy spread in Runner's World, wearing a pair of tight, short shorts, with an American flag chucked on a chair like a sweat towel. In other pictures, she wears skintight leggings and assumes saucy "warm-up" positions. For her fans, it was an issue to keep in that special place where Mom never looks. When Newsweek ran the tight-shorts picture as a cover image, Palin swiftly denounced it as "sexist". But she recently showed up at John McCain's side in Arizona and thrilled her followers by wearing a black leather jacket, cut in butch style, with zippered accents defining her breasts. Palin knows her fan base, and she knows what they want: a brief tour of Google reveals dozens of Photo-shopped Palin fantasy images - and it's clear that they're not posted by her enemies.

A few days after appearing with McCain, she debuted her television show, Real American Stories (the title an apparent reference to her campaign declaration that her followers lived in the "real America"). Fox promised a show in which "three very different guests will speak to Palin", and what they got was another trademark Palin disaster. Two of her guests, LL Cool J (possibly chosen to chill the reputation of Palin's followers as mostly middle-aged and white) and Toby Keith, separately claimed that they hadn't spoken to Palin and that their interviews were re-purposed stuff from more than a year ago. The whole "real" show was mostly canned. It did modestly in Fox ratings but has not been regularly scheduled and will appear, network executives say, "periodically."

And so it goes. From time to time, new rumors about Palin's escapades in Alaska surface or a National Enquirer headline declares another one of her children a new "Boozy Wild Child" or a gossip rag alleges that Todd is reducing their marriage to a post on But then she'll give a great speech or go on Leno to pull off a decent performance. She seems to swing, like clockwork, from disaster to triumph. The comedian Kathy Griffin has called her the "gift that keeps on giving". And that is where both left- and right-wing politicos don't get Palin at all. The Democrats delight in her antics when she executes one of her routine face-plants, while a significant cohort of Republicans get all hot and bothered whenever she appears as the next great conservative savior. She's adept at always keeping her left antagonized and her right bedazzled. She lives in balanced suspension between two states of being, permanently listing forward, a kind of political optical illusion in which, depending on who's gawking, she appears always to be falling or soaring.

Setting aside her political apologists and detractors, and both are comparatively few, her mass-market base follows her because her triumphs and failures, her family, her bitchy tweets and trashy flaws keep her aloft in that mythic state Barbara Walters describes as "fascinating". She inhabits that dimension occupied by tabloid royalty. She's Northern Exposure meets Jersey Shore, with less cowbell and more moose. Sarah Palin has her own show all right, and it's not just on Fox. It's on every channel, across all platforms, all the time, and, for now, the world can hardly wait for the next episode.


Jack Hitt is a contributing editor of Harper's Magazine and the author of the forthcoming book Bunch of Amateurs: A Search for the American Character (Crown).

Bill Totten

Tuesday, June 29, 2010

A Pathless Land

The Archdruid Report (June 23 2010)

Druid perspectives on nature, culture, and the future of industrial society

The discussion of revitalization movements and fantasies of collective redemption over the last two weeks here on The Archdruid Report had an interesting though by no means unexpected result. Several people asked me whether I thought it might be possible to harness some movement of the same broad sort to get people to do the things they need to do to get ready for peak oil.

This is hardly a new idea, of course. Back in the late 1990s, when the first peak oil email lists were taking shape, the idea of organizing a peak oil movement on the large scale came up for discussion now and again, and some attempts were made, though none of them managed to find much of an audience. More recently, toward the middle of the last decade, the Post Carbon Institute launched a network of relocalization groups, which flourished for a while and then suddenly folded for reasons I've never seen discussed. Over the last few years, in its turn, the Transition Town movement has made its own transition from a college project to an international network helping communities put together plans to cope with a future of energy scarcity and strict carbon-footprint limits.

It's fair to say that none of these was or is a mass movement of the kind I was discussing; the earlier examples belong on the same list of would-be mass movements that never got off the ground as, say, Technocracy, while the last is still very much in the early phases of its trajectory, early enough that its final destination is anybody's guess. Still, it's easy to see why the idea of a grand collective movement in the direction of sustainability is so appealing to so many people.

To begin with, the failure of the established order of industrial society, and of the political classes who manage it, is becoming hard to ignore. Consider the way that the world's political leaders have reacted to the implosion of the global economy, or the way that the US government and BP management have reacted to the ongoing death by oil of the Gulf of Mexico: in each case, it's a broken-record sequence of understating the problem, trying to manage appearances, getting caught flatfooted by events, and struggling to load the blame for yet another round of failures onto anybody within reach. Rinse and repeat a few times, and even the most diehard supporters of the status quo start wishing that somebody, somewhere, would stand up and demonstrate some actual leadership.

At the same time, for those of us who have been trying to get the message of peak oil out for the last decade or more, the spreading cracks in the great wall of denial can give rise to a certain intoxication. When pundits insist that there's enough oil in current reserves to last 800 years, or that oil discoveries have more than kept pace with extraction rates all along, or that the only limits to the amount of oil we can get out of the earth are economic - all of which statements have appeared in the media in recent weeks, and all of which can easily be disproved by readily available figures or, in the last case, by plain common sense - it's hard to miss the desperation in their words. "First they ignore you, then they laugh at you, then they fight you, then you win", Gandhi said; at this point they're fighting, and some of the peak oil community are starting to think about what victory might look like.

That's a fair question. What would victory look like? Imagine for a moment that the arrival of permanently scarce energy became as much a part of the conventional wisdom in the decades ahead of us as it became, however briefly, in the 1970s. It would be easy enough to blow the dust off the plans and dreams of that latter decade, and there's arguably a real point to doing that, but the world has changed; the reserves of fossil fuels that planners in the Seventies counted on to cushion the descent into a low-energy future have been severely depleted in the years since, and there are twice as many people on this small and crowded planet as there were back then. By any realistic measure, we're in a heap of trouble, and the hope that a mass movement might yield enough enthusiasm and commitment to deal with that heap is an easy one to understand.

Still, that hope isn't one I share. Quite the contrary, I've come to think that the rise of a mass movement centered on peak oil - whether or not it turns into the sort of revitalization movement discussed in the last two posts - might well put paid to any hope of avoiding a profoundly unwelcome future. The best way to explain that sense is an indirect one, and so I trust my readers will have patience with a divagation in the direction of Philadelphia.

I was there a little while back, speaking at a conference at a posh downtown hotel. I'll spare you the details; it was one of those gigs that peak oil speakers dread, the sort of event where you've got twelve minutes in a panel discussion to explain why the future everyone has taken for granted isn't going to happen, and why whatever plans they happen to be promoting need to make room for economic and social collapse, mass impoverishment, and the whole cheerful landscape of a deindustrializing world. Well before your twelve minutes are up, it's clear that you might as well have spent the time reciting texts from the Iguvine Tablets in the original Umbrian; there's a little polite applause, the audience asks a few polite questions, a few people come up to thank you for your speech, and none of the attendees mentions peak oil in your hearing again.

Afterwards, I ducked out of the hotel and walked the streets of downtown Philly, partly to find some comfortable dive for dinner, but mostly to shake off the sense of intellectual mummification that events like that always leave behind. A session of t'ai chi on the grass in Rittenhouse Square startled the pigeons and a couple of transients but left me feeling a good deal less numbed, and I did indeed find a comfortable dive (and had a good dinner there a bit later), but what turned the day around was a couple of lines written in fading gold lettering on a window in an otherwise undistinguished block of shops and offices, announcing to the world the Philadelphia branch of the United Lodge of Theosophists

I suspect this phrase will mean nothing to most of my readers. The original Theosophical Society (TS) was founded back in 1875 in New York City by Helena Blavatsky, a Russian emigre, and a small circle of American mystics and occultists. Its purpose was to provide an alternative to the dogmatic religion and equally dogmatic scientific materialism of the day, and it offered public lectures and instruction at a time when most other esoteric spiritual groups kept their teachings hidden away behind tightly locked lodge doors. Other groups had tried to do the same thing in various ways for decades beforehand, but for some reason Theosophy caught on where these others failed, and found itself with local groups and a mass following on four continents.

Blavatsky, who by this time was the unquestioned leader of the movement, then found herself facing the same predicament that confronts every spiritual movement that attracts a large following. Of those who joined the Society, only a small percentage were actually interested in studying the philosophy, practicing the spiritual practices, and making use of the rest of what it had to teach; the majority wanted to participate in it for what amounted to social reasons. She responded by reorganizing the TS, creating an Esoteric Section for those willing to commit to daily meditation and study, and using the rest of the Society as an outer court where those interested solely in the social aspects of a mass movement could take part and contribute whatever they could.

That structure stayed in place until Blavatsky died in 1891. The Society broke apart in the years that followed; most of the Theosophical groups that emerged from the confusion kept the same policy, but he largest of the fragments did not. Headed by suffragist and Fabian socialist Annie Besant, this branch - called the Adyar TS, after the location of its headquarters - pursued a mass following, and turned into a full-blown revitalization movement when Besant decided that a boy named Jiddu Krishnamurti, the son of a Hindu servant at the Adyar headquarters, was the next World Teacher, the successor of Buddha and Christ, who would lead the world to salvation under the banner of Theosophy.

In the short term, it was a hugely popular move; the claim that the Adyar TS had a messiah on hand who would shortly launch his career of redemption proved to be a membership magnet of immense power. Chapters of the Order of the Star in the West, an organization launched in 1911 to promote Krishnamurti, sprang up like mushrooms across much of the world. After the First World War, the implosion of Europe's global ascendancy and the betrayal of wartime promises made the dream of a redeemer profoundly appealing. Meanwhile Krishnamurti grew to manhood, trained and prompted for the role he was expected to play. Finally, in 1929, a huge rally of the Order was summoned to be present as Krishnamurti formally began his career as World Teacher.

I sometimes wonder what must have gone through his mind as he mounted the podium that day and looked down at the ocean of upturned faces gazing at him in adoration. My readers might wish to imagine themselves in the same position. There you are, with tens of thousands of people eagerly awaiting your least word, and hundreds of thousands more around the world longing to receive the message you are about to give them. Will you call them to manifest your highest ideals, will you tell them to fulfill your basest desires, or will it be, as it usually is, a bit of both?

It's an intoxicating image, but there's another side to it. Not one of those tens of thousands of people has to be there; not one of the hundreds of thousands is required to listen. They are there for reasons of their own, reasons that mingle high ideals and base desires in the usual human proportions, and if the ideals or the desires you call on them to pursue are far enough from theirs that they see no way of fulfilling their own agendas by helping yours, they will turn away and go looking for another movement that shows more promise of giving them what they want. That's the trap that waits for every mass movement that tries to change society, because the ideals and desires of the majority define the structure of society as it is; a would-be mass movement that pursues a different path will reliably find itself failing to attract members, while a mass movement that reshapes its message to attract a large audience will inevitably turn into a mechanism for replicating the existing order of things.

Whether this is what went through Krishnamurti's mind is anyone's guess, as he refused to talk about the experience later. Still, by the time he descended from the podium, the elaborate fantasy Besant and her colleagues had built around him, and the revitalization movement that had grown up around that, were blown to smithereens. Truth, he told his listeners, is a pathless land; no messiah can take you there, or lift the burden of thinking for yourself off your shoulders. In front of them all, he disavowed his role as World Teacher and dissolved the Order of the Star in the West. The mass movement popped like a bubble, and all the Theosophical organizations suffered huge drops in membership; Besant's career was effectively over, though she lingered on for a few more years. Ironically, Krishnamurti went on to a long career as a spiritual teacher, but he steadfastly refused to allow any organization to form around him, and I don't know of anybody who claims that he really was the World Teacher.

The peak oil scene is a long way from finding its Krishnamurti, or even its Annie Besant. Still, the future after peak oil is also a pathless land, and as the reality of limits to growth goes mainstream and peak oil speakers find audiences more responsive than the one I faced in Philadelphia, the trap that waits for all mass movements waits for it as well. A survey just splashed over the American media points up the difficulty: a large majority of Americans surveyed agreed that the energy situation was a crisis and something needs to be done, but very few of them were willing to accept a solution that involved gasoline prices going up. The temptation to promise people that they can have a green energy future and still fill their tanks for less than $3 a gallon will be immense; those groups that do this can count on being flooded with recruits, while those that admit that in any realistic green energy future, most Americans will no longer have cars at all, will find themselves in the same sort of situation I encountered at the conference in Philadelphia, trying to talk to people for whom the future might as well be written in Umbrian.

Now it's easy to insist that getting people in the door is the important thing, and once they're in the movement they can be led gradually to more accurate views. The history of mass movements shows otherwise with depressing consistency. The leaders who imagine themselves drawing the masses step by step to some better set of beliefs and behaviors generally find out the hard way, as their predecessors did, that they are the ones who will be drawn step by step into whatever set of beliefs and behaviors will maximize the size and influence of the movement they head - which amounts to whatever set of beliefs and behaviors the masses want them to have. We've already seen some parts of the peak oil scene moving in this direction; the insistence that an optimism that will attract crowds is more important than a realism that can guide a meaningful response comes to mind in this context.

The pursuit of a mass movement is not the only option we've got, fortunately, and other options - one of which I plan on exploring in detail in next week's post, and in the weeks to come - offer a great deal more potential for viable change. Still, one of the simplest was on display in the quiet little library and meeting room of the Philadelphia United Lodge of Theosophists. The ULT stayed aloof from Annie Besant's shenanigans, and has quietly continued to follow the original plan of the movement, offering lectures and opportunities for study to those who are willing to learn. I went there after dinner and took in a talk and a lively discussion about certain points of Theosophical teaching, and had a fine time. Druidry and Theosophy are by no means the same thing, but there's enough common ground to make for congenial conversation, and you don't come through the kind of traditional occult training I had back in my misspent youth without knowing your way around Theosophical ideas. When I walked back to the hotel that evening, the day felt a lot less like a waste.

Still, the moment that remains with me happened before the meeting, while I was chatting with some of the Theosophists. One elderly African-American man mentioned that a few years back, considering the state of the world, he and his wife had decided to give up their car. Of course, he admitted, it involved some changes, but Philly public transit got them where they needed to go, and he found that doing without the costs of car ownership left him with so much money left over at the end of the month that at first he kept checking to make sure he'd paid all his bills.

I thought about him as I took the train home the next day, and I also thought about the Amish family seated behind me on the train, father and the boys in white shirts and black hats, mother and the girls in bonnets and ankle-length dresses, talking quietly to each other in the German dialect everyone around here calls Pennsylvania Dutch. The lesson I took from them is that it's the choices of individuals that ultimately make any difference that's going to be made. It's tempting to think that the social pressure of a mass movement can lead people to make changes they aren't willing to make on their own, but in practice, that's not the way it works; instead, what generally happens is that sooner or later, those who hoped to lead the world to some shining future en masse find themselves sitting in the smoking crater left by the total implosion of their dreams, wondering what happened. It would be unfortunate, to use no stronger word, to have that sort of fiasco replicated in the peak oil movement.


John Michael Greer, The Grand Archdruid of the Ancient Order of Druids in America (AODA), has been active in the alternative spirituality movement for more than 25 years, and is the author of more than twenty books, including The Druidry Handbook (Weiser, 2006) and The Long Descent: A User's Guide to the End of the Industrial Age (New Society, 2008). He lives in Cumberland, Maryland.

Bill Totten

Stock Markets Will Lead to the Extinction of Humans

by Devinder Sharma

Ground Reality (June 22 2010)

An Australian scientist who helped in eradicating smallpox has sounded a death warning. Frank Fenner, emeritus professor of microbiology at the Australian National University, has claimed that human race will be unable to survive population explosion and unbridled consumption. "Humans will become extinct, perhaps within 100 years, Fenner is quoted as saying. "A lot of other animals will, too."

Fenner's chilling prediction should not be taken as yet another sensational news. I think any sensible leader, and I am not talking of only political leadership, should be able to get the message straight and loud. If you remember, Mahatma Gandhi had said that the Earth has enough for man's need, but not greed. Prince Charles had more recently warned of 'monumental problems' if the world's population continues to rise at such a rapid pace. Probably what the Prince did not mention was the greed of the growing population through increased consumption will create the grave crisis.

Unbridled consumption is the foundations for the 'growth economics' that has become the Bible of the modern neoliberal economics. In reality, growth economics is nothing but violent economics. It unleashes violence against natural resources, against the climate, against the nature, and also against fellow human beings. It shifts natural, physical as well as financial resources from the hands of the poor into the pockets of the rich and elite. We have been often told that twenty per cent of the world's population of haves controls and uses the resources of the eighty per cent of the have not. Globalisation further strengthens that monopoly control.

In fact, globalisation has simply brought together all the haves from each country. In simple terms, each country has a North and a South, the North depicting the percentage of the bold and beautiful population. Globalisation has brought the North together. They have joined hands to usurp the world's resources, to snatch whatever lies in the hands of the South. Globalisation has actually brought the rich and the crooked together.

Blame it on the burgeoning population, but it is the twenty per cent elite that is destroying the world's resources. In the quest for more wealth they have succeeded in very cleverly changing the rules of the game. They began by first co-opting the economists, and then spread their wings to include the media. The economists laid out the ground rules. They began by designing GDP as an indicator of growth. They crafted it so deftly that we accepted an indicator of personal wealth to be a pointer to national development. They made everything, including global climate, look like a commodity to be sold and exploited.

I am reminded of what the milkman of India, Dr Verghese Kurian, had once said. One species that should disappear from the face of the Earth, and the Earth will be a wonderful place to live in, are the economists.

I am in complete agreement.

After the world became convinced about the virtues of GDP, the mainline economists and the consultancy firms worked out the stock market. I think there is no other innovation (if you don't like to use the word invention) in recent times that has not only influenced but hastened the process of unbridled consumption than the emergence of the Wall Street. In fact, the consultancy firms may refuse to accept it now, and for obvious reasons, but Stock Market will lead the world towards the extinction of human race that Fenner has warned us.

I am amazed at the way the Stock Markets work. These markets have commodified everything. Much of the world's environmental ills are a direct fallout of the Stock Market. Stock Markets will squeeze every drop of water (or other natural resources) out of the planet. There is a price for everything, including the air you breathe. In the days to come you will see Wall Street beginning to trade in synthetic life. Craig Ventor is already pitching for it. I will not be surprised if the human genes too are traded sooner than I expect.

Stock market is certainly not sustainable. The economic meltdown (economists refused to call it economic collapse) that the world witnessed in 2008 and 2009 was the outcome of a systemic failure in the Stock Markets. But the lure of money was so strong, that even the mightiest of the governments refused to let the faulty system go. In a globalised world, the economic bailout package became a necessary evil. As someone said, it amounted to privatising the profits, and socialising the costs. Everyone willingly participated. With the media being a beneficiary of this corrupt system, no dissenting voice could be heard.

If the tax-payers had refused to bailout the collapse of the markets, the world would have taken the first step towards making a correction for the better of the humanity. It didn't happen.

Such an unbridled consumption will be the beginning of the end of the world. In fact, the process is already on. Only the economists refuse to see it, and since the economists have been paid to be quiet, the media too refuses to spot the evil. Stock Markets have already caught the fancy of the media, and they are projecting it as an indicator of economic growth. And as I said earlier, growth economics is nothing but violent economics. While the economic benefits would be reaped by the rich and the crooked, you and me will have to live with the violence it unleashes. I am not sure how many of us will survive this violence.

Fenner is therefore right when he says that humans will probably become extinct within 100 years. Humans will certainly disappear from the face of the Earth, I don't doubt it. But by the time the Stock Markets succeed in plundering the Earth's resources making it absolutely inhospitable for the man to survive, the rich and the elite would have escaped to the moon.

Technological developments will by then make it possible for the humans to survive on the moon.


Devinder Sharma is an Indian journalist, writer, thinker. He is well-known and respected for his views on food and trade policy. Trained as an agricultural scientist, Sharma has been the Development Editor of the Indian Express, the largest selling English language daily in India at that time. He quit active journalism to research on policy issues concerning sustainable agriculture, biodiversity and intellectual property rights, environment and development, food security and poverty, biotechnology and hunger, and the implications of the free trade paradigm for developing countries. For more, see

Bill Totten

Monday, June 28, 2010

Twenty-Two Reasons

Why American Working People Hate the State

by James Petras (June 17 2010)

Why does the rightwing attack on "Big Government" increasingly resonate with working people? Liberals claim wage and salaried workers are acting against their "self-interest", citing government welfare programs like social security and unemployment payments.

Progressives argue that workers hostile to the state are "racists", "fundamentalists" and/or irrational, blinded by misplaced fears of threats to individual freedoms.

I will argue there are many sound, rational, material reasons for working people to be in revolt against the state

Twenty-Two Reasons Why Working People Hate the State

1. Most wage and salaried workers pay disproportionately higher taxes than the corporate rich and therefore, millions of Americans work in the "underground economy" to make ends meet; thus subjecting themselves to arrest, and prosecution by the state for trying to make a living by avoiding onerous taxes.

2. The state provides generous multi-year tax exemptions for corporations thus raising the tax rate for wage and salaried workers or eliminating vital services. The state's inequitable tax revenue policies provoke resentment.

3. High taxes combined with fewer and more expensive public services, including growing costs of public higher education and higher health charges, feed popular antagonism and frustration that they and their children are being denied opportunities to get ahead and stay healthy.

4. Many working people resent the fact that their tax money is being spent by the state on endless distant wars and to finance bailouts of Wall Street instead of investing it in reindustrializing America to create well paying jobs or to aid unemployed or underemployed workers unable to meet mortgage payments and facing eviction or homelessness. Most workers reject the inequitable budget expenditures that privilege the rich and deny the working people.

5. Working people are appalled by the state's hypocrisy and double standards in prosecuting "welfare cheats" for taking hundreds but overlooking corporate and banking swindlers, and Pentagon military cost overruns of hundreds of billions. Few working people believe there is equality before the law, implicitly rejecting its claims of legitimacy.

6. Many working class families resent the fact that the state recruits their sons and daughters for wars, leading to death and crippling injuries instead of public service jobs, while the children of the rich and affluent pursue civilian careers.

7. The state subsidizes and upgrades public infrastructure - roads, parks and utilities - in upper end neighborhoods while ignoring the demands for improvements of low income communities. Moreover the state locates contaminants - incinerators, high polluting industries et cetera - in close proximity to workers housing and schools.

8. The state holds the minimum wage below increases in the cost of living but encourages and promotes excess profits.

9. Law enforcement is strict in high end neighborhoods and lax in low income communities resulting in higher rates of homicides and robberies.

10. State imposes constraints on labor organizations struggling to secure wages and benefits and ignores corporate intimidation and arbitrary firings of workers. The state encourages corporate mergers and acquisitions leading to monopolies but discourages collective action from below.

11. State economic institutions recruit policymakers from banks and financial houses who make decisions favoring their former employers, while wage and salaried workers are excluded and have no representation in economic policy positions.

12. The state increasingly infringes on individual freedoms of social activists via the Patriot Act, arbitrary arrests, and grants impunity to police violence and punishes whistle blowers, rejecting citizen reviews with punitive powers.

13. The state is highly responsive to and increases funding for the military-industrial complex, the relocation of multi-national corporations overseas, and the high income Israel lobby while cutting funding for public investment in productive activity, applied technology and high tech job training for US workers and salaried employees and their children.

14. State policies have increased inequalities between the top ten percent and the bottom fifty percent for decades, turning the US into the industrial country with the greatest inequalities.

15. State policies have led to declining living standards as wage and salary earners work longer hours with less job security, for a greater number of years before receiving pensions and social security and under greater environmental hazards.

16. Elected state officials break most campaign promises to working people while fulfilling promises for the upper class/corporate banking elite.

17. State officials pay greater attention and are more responsive to a few big financial contributors than to millions of voters.

18. State officials are more responsive to payoffs from corporate lobbies protecting corporate profits than to the health, educational and income needs of the electorate.

19. State-corporate links lead to deregulation, which results in contamination of the environment leading to the bankruptcy of small businesses and loss of many jobs, as well as the loss of recreational areas, spoiling rest and recreation for working people.

20. The state increases the retirement age rather than increase the social security payments by the rich, with the result that workers in unhealthy work environments will enjoy fewer years of retirement in good health.

21. The state judicial system is more likely to render favorable decisions to wealthy plaintiffs with high paid, politically connected lawyers against workers defended by inexperienced public defenders.

22. State tax collectors are more likely to pursue wage and salary tax payers than upper class corporate executives employing accountants with expert knowledge in tax loopholes and tax free shelters.


The state in its multiple activities, whether in law enforcement, military recruitment, tax and expenditure polices, environmental, pension and retirement legislation and administration, systematically favors the upper class and corporate elite against wage, salaried and small business people.

The state is permissive with the rich and repressive of the working and salaried employees, defending the privileges of the corporations and the impunity of the police state while infringing on the individual freedoms of the working people.

State policies increasingly extract more from the workers in terms of tax revenues and provide less in social payments, while lessening tax payments from Wall Street and inflating state transfers.

Popular perceptions of a hostile and exploitative state correspond to their everyday practical experiences; their anti-state behavior is selective and rational; most wage and salaried workers support social security and unemployment benefits and oppose higher taxes because they know or intuit that they are unfair.

Liberal academics and experts who claim workers are "irrational" are themselves practioners of highly selective criticisms - pointing to (shrinking) state social benefits while ignoring the unjust, inequitable tax system and the biased behavior of the judicial, law enforcement, legislative and regulatory system.

State personnel, policy makers and enforcement officials are attentive to and responsive and deferential to the rich and hostile and indifferent or arrogant toward workers.

In summary the real issue is not that people are anti-state, but that the state is anti the majority of the people. In the face of the economic crises and prolonged imperial wars, the state becomes more brazenly aggressive in slashing living standards in order to channel record levels of public funds toward Wall Street speculators and the military industrial complex.

While liberal-progressives' remain embedded in 'neo-keynsian' statest ideology, outmoded in the face of a state thoroughly embedded in corporate networks, the New Right's "anti-statest" rhetoric resonates with the feelings, experiences and reasoning of important sectors of wage and salaried workers and small businesspeople.

The attempt by liberals and progressives to discredit this popular revolt against the state, by pointing to the corporate financing and rightwing manipulation behind the anti-statist movement is doomed to failure, because it fails to deal with the profound injustices experienced by working people today in their daily dealings with a state, largely administered by liberal corporate-militarists. The absence of an anti-statist left has opened the door for the rise of a mass based 'New Right'.

A 'new left' will emerge from civil society when it recognizes the pernicious exploitative role of the state, and is capable of dealing with the powerful ties between liberalism-militarism-corporate "welfarism". The revival and expansion of the debilitated public welfare programs for working people can only take place by dismantling the current state apparatus, and that depends on a complete break with both corporate parties and an agenda that 'revolutionizes' the way in which politics works in America.

Bill Totten

I am in denial

but I know children are dying (June 12 2010)

Governments around the world are being stampeded by financial commentators and international organisations (IMF, OECD, G-20) to implement austerity programs to get their "deficits under control". All sorts of horrendous predictions are being touted in the press daily by the deficit terrorists who focus their gaze on charts showing movements in financial ratios - such as the deficit to GDP and public debt to GDP ratios. They largely ignore history and when they do invoke it they introduce erroneous analyses which do not apply to the issue at hand. They erroneously conflate the Eurozone with sovereign monetary systems. And they never let up. But in all the talk of austerity the real dimensions of the problem get lost. That is what today's blog is about - getting our focus down to the fact that thousands of children will die as a result of these unnecessary austerity programs which are just designed to satisfy the ideological hangups of the (mostly) high income and wealthy elites in our societies.

The Editorial {1} in the New York Times on June 9 2010 was fairly to the point - The Wrong Message on Deficits. It said:

The whip-deficits-now fever is running hot on both sides of the Atlantic. In Europe, politicians are understandably spooked by investors dumping government bonds in the wake of the Greek meltdown. But the sudden fierce enthusiasm for fiscal austerity, especially among stronger economies, is likely to backfire, condemning Europe to years of stagnation or worse.

The United States is running the same very high risk. Democrats have soured on job creation and economic stimulus in favor of antideficit rhetoric, which Republicans have long seen as the easy road to discontented voters in a confusing election year.

The Editorial notes that the "economic crisis isn't over" and cites the appalling unemployment that remains even though share markets have been recovering and some real economies are growing again, albeit slowly. They rightly conclude that "for everybody to slash public spending when growth is faltering and unemployment remains stubbornly high risks undercutting the goal of fiscal probity by slowing economic growth and reducing tax revenues".

And, they note that there is now evidence that the world economy is slowing again as the budget cuts take their toll. They conclude that:

Right now, for the most robust economies - the United States, Germany, Britain, Japan - slashing budgets is the wrong thing to do.

Meanwhile, the Nikkei News for Thursday, June 10 2010 (you need a subscription so it is pointless to link) announced that DPJ's Fiscal Hawk Gets To Work As MOF Chief. The Report said that:

Yoshihiko Noda, the newly appointed chief of the Ministry of Finance, has long been considered one of the staunchest fiscal conservatives in the Democratic Party of Japan. Noda is eager to rebuild Japan's finances with a motto of "there should be no talk of policies without talk of funding sources". After the DPJ took power last September, Noda was named senior vice finance minister. He was front and center in cutting budget requests from ministries and agencies, rankling fellow DPJ lawmakers who formulated the requests.

So it might be a case of Sayonara Japan ... it was nice knowing you! Back to 1997!

I also recall this article (June 9 2010) - The Dark Side Of Stimulus - by one Thomas Cooley, who is a retired academic from NYU and a regular Forbes columnist {2}. The article introduces a new term into the debate - deficit deniers.

Cooley notes that the recovery from the "deep recession" is not happening very quickly despite the "staggering ... fiscal package" that the US President introduced. He concludes that:

But now people are realizing that there is a dark side to this spending orgy. It has to end, and then we have to pay the bill. If we need any reminders that the day of reckoning is coming we have only to look to Europe. There is no point in arguing about how many jobs have been created or saved by stimulus spending. We don't get to rerun history, so we won't know what the path of employment would have been absent the stimulus package.

I am wondering who the we is who has to pay the bill. The bill is already being paid - the real loss of incomes and the persistently high unemployment. The only bill is a real one.

However, if governments insist on pretending they have to "finance" their spending and follow the path the UK is now taking (among other nations heading down the austerity path) then the real bill will be the lost real income arising from the cuts in public spending, the lost private command on real resources arising from the tax hikes. These costs will enormous.

Further, the only way of calibrating the worth of the fiscal interventions is to estimate outcomes such as "how many jobs were saved". We can roughly estimate the extra spending impact on GDP and hence employment growth. The important point is that in focusing on jobs we are displaying the appropriate priorities. In focusing on largely irrelevant aggregates such as the size of the deficit or the public debt ratio, we are exhibiting a wrong set of policy priorities.

Cooley notes that:

... nothing will solve the problem except economic growth. The problem we face is that the extraordinary deficits we created are likely to restrain economic growth in the future. We do have to honor that debt.

It is true that economic growth will reduce unemployment and, by definition, it increases incomes. But there is no robust empirical evidence that shows that rising deficits are associated with falling economic growth. The evidence points the other way. The fact that the US government has to honour the public debt is supportive of growth because the interest payments provide a higher income flow than if the funds were left in non-interest bearing reserves.

The Modern Monetary Theory (MMT) camp have been referring to the likes of Cooley as deficit terrorists. Cooley has his own term for those who think deficits are beneficial (when necessary):

There are deficit deniers out there, like Paul Krugman, who think we can and should ignore deficits for a long time to come because we can continue to borrow at such low interest rates. This is the same behavior for which they excoriate households who accumulated too much mortgage and credit card debt. They also blasted Alan Greenspan and Ben Bernanke for enabling this irresponsible behavior by keeping interest rates too low for too long. But by all means let the Government borrow and spend at our current low interest rates to keep this economic recovery alive.

MMT tells us that the size or continuity of budget deficits per se are not a sensible focus of analysis. The budget outcome is driven strongly by fluctuations in private spending. So a rising deficit usually indicates a slowdown in private spending. The discretionary component of the budget outcome should signal the extent to which the non-government sector desires to save (that is, withdraw spending from the income flow).

That spending gap has to be filled or else economic growth declines. There is no magic solution out there.

Further, while households may have taken advantage of low interest rates to over-borrow, that point is irrelevant to the question of public borrowing. There is no credible analogy between households (who use the currency) and a sovereign government (which issues the currency). The former are always revenue-constrained while the latter is never so.

The institutional structures that sovereign governments voluntarily erect to give the impression they are financially constrained are ultimately meaningless. They can be changed by the very government (in almost all cases) that they seek to "constrain". A sovereign government can always service its public debt obligations whereas a household cannot.

Cooley makes another fundamental error:

There is certainly some truth to the view that we can kick the can down the road for a bit longer. Why? Because the US dollar is and will continue to be the world's reserve currency. It means that the US can run a persistent current account deficit because other countries need dollars for reserves.

Whatever the international status of the US dollar is is irrelevant to the capacity of the US dollar to net spend in its own currency. All sovereign governments (who issue their own currency) can buy whatever is available for sale in their own currency at any time of their choosing. There is nothing special about the US government in this regard.

And ... all sovereign governments can purchase any idle labour in their economies and put it to productive use any time they choose to do so.

Cooley continues to misrepresent the monetary realities:

This is also why we find it easy - even now with staggering deficits - to sell US Treasuries at low interest rates. Every time markets get shaky, as they have in recent weeks, there is a flight to the safety of US Treasury obligations. That reaffirms the belief in the long-term credibility of the US and the viability of our debt.

The high demand for US Treasuries certainly keeps the yields down given the way the auction system works. And the US dollar is seen as being a safe haven. But any sovereign government can engineer low public debt yields if it coordinates the central bank and treasury operations appropriately.

Cooley doesn't think this will last though because markets will eventually work out that the US deficit is not on "a sustainable fiscal path". To get there the US government has to "cut spending and increase revenues".

After drawing false analogies between the US and the fiscal plight of the Eurozone countries he says:

Markets and consumers are much smarter than politicians. That is why they are jittery. You don't have to be a rocket scientist to realize that the stimulus has not delivered the big bang people hoped for and that we can't afford more stimulus.

The stimulus has delivered less than imagined because they have been continually hamstrung by the deficit terrorists. In nations with the largest fiscal stimulus packages things are better. By introducing pressure on governments from the early stages of the crisis the terrorists have conspired to derail the recovery.

But then what would I know ... I am just in denial.

Anyway, this is just another one of the torrent of articles coming out which are pushing this line that austerity is needed and the larger and quicker the adjustment the better. But I have been reading some interesting research papers lately on the impacts of the stimulus packages and the likely impact of the austerity programs.

Fiscal stimulus proportions

UNICEF and other agencies have been doing work on the impact of the fiscal interventions, in particular the social protection measures that were introduced.

This UNDP paper - Social Protection in Fiscal Stimulus Packages: Some Evidence - by Zhang, Thelen and Rao {3}, found for the 35 countries studied, that, on average they:

... spend about 25% of their stimuli on social protection measures. In total, this amounts to about 653 billion US dollars, almost one percent of 2008 global GDP.

So not a lot at all. They also found most of the social spending was on infrastructure and there was no real focus on women (and their children) who take the brunt of any economic crisis.

The following Table {4} is derived Table 1 in the UNDP paper referred to above. It shows the size of the fiscal stimulus as a percentage of 2008 GDP by the countries that the UNDP studied. I ranked them highest to lowest.

The point I have regularly made when confronted with claims like those outlined by Cooley - that the fiscal stimulus hasn't worked - is to note that the fiscal response has been relatively muted. They retort (shouting) asking whether I am blind - pointing to some public net spending ratio that has gone upwards. I reply that the ratios just tell me how deep the crisis has been.

I then say that the pools of unemployment tell me whether the fiscal response has been too much, just right or too little. And the unambiguous conclusion is that the fiscal responses have been inadequate by considerable margins.

The following graph {5} uses the data on the size of the fiscal stimulus as a percentage of 2008 GDP and plots the change in unemployment rates between 2008 and April 2010 against it. The data for the unemployment rates is from the World Economic Outlook database {6} as at April 2010. The plot only includes those nations for which the IMF published unemployment rates.

And while you don't want to conclude too much from a simple scatter plot, there appears to be the relationship emerging that theory would predict. The larger the stimulus the better the unemployment outcome. I am sure that a more thorough statistical analysis of this relationship controlling for other influences would confirm the simple message being portrayed in the graph.

The Losers

In all this talk about fiscal austerity - being pushed to make the bond traders happy - they who represent the wealthiest individuals in our societies - you will rarely read anything about who will be the beneficiaries and the losers.

We know from the privatisations of the 1980s and 1990s that spectacular transfers of wealth occurred. Governments paid huge sums to private financial organisations to execute the sales. Governments also agreed to heavy discounts on the true net worth and expected net income flows flows from the public enterprises being sold off because they didn't want the embarassment of a non-sale.

But who are the losers?

In its Global Economic Prospects 2010 {7}, the World Bank estimates that the global economic crisis pushed fifty million more people into extreme poverty in 2009 and a further 64 million will be added to this pool by the end of this year.

This paper - Crises and the Poor: Socially Responsible Macroeconomics {8} - by one Nora Lustig from the Inter-American Development Bank is worth reading to get an idea of how economic crises damage the prospects of the poor. It was written in 2000. While her documentation of the implications for crisis on the poor is interesting, I don't endorse her take on macroeconomics, which often wanders too far into the foibles of mainstream macroeconomics.

She does make on interesting point which is consistent with MMT. Lustig notes that "a flexible exchange rate" regime softens the blow of crises from a "pro-poor perspective". She notes that fixed exchange rate systems promote quantity adjustments to an external crisis (which in the labour market means unemployment) whereas flexible exchange system tends to make adjustments via real wages (import prices rise). In trying to defend a fixed parity, nations resort to harsh domestic policies which exacerbate poverty.

In this UNICEF paper - Inclusive Crises, Exclusive Recoveries, and Policies to Prevent a Double Whammy for the Poor {9} - Ronald Mendoza argues that:

When it comes to aggregate economic shocks, the poor and the near-poor often face a double whammy. First, they are often among the most adversely affected by the shock, suffering from crisis effects that push them and their children (the next generation) deeper into poverty. Second, the poor and near-poor are also the least equipped to participate in and benefit from the subsequent recovery.

You can read a lay-person summary {10} of the paper also.

While most of the research in this area of enquiry is focused on less developed (developing) nations, the research in advanced countries reveals similar outcomes. The poor are less exposed to crisis in the advanced nations and there are better safety nets.

But a person plunged into long-term unemployment in the US or Australia faces a high chance of becoming poor (relatively in this sense) and losing a significant proportion of the assets they had built up while working (housing, et cetera). Their children also inherit the disadvantage that they grew up with and face major difficulties in later life.

So it is not just a developing country problem - although in the poorer nations the impacts mean death in many cases. In poorer nations, a crisis has devastating impacts. Mendoza notes that "tens of thousands of children in some of the poorest countries in the world could die, paying the ultimate price as a result of this crisis".

But the recovery is also fraught for the poor.

Mendoza notes that:

During a typical crisis episode, spending on the social sectors are often cut at precisely the time when these resources are needed the most. It is not uncommon that social spending suffers the largest cuts, and that part of social spending that has the greatest benefit for the poor is most retrenched ... we do know from past crises that families often have to sell off what little productive assets they might have, reduce health-seeking behaviour, pull children out of school, take on more debt, and in dire cases, eat less or less nutritious food in order to cope with the income shock. All these coping strategies hinder the ability of poor families to quickly recover.

This is the point that Lustig also emphasises.

The other point that Mendoza makes is that the meagre funds that:

... do allocate to the social sectors are now also at risk, as public budgets across the world are squeezed by declining tax and other revenues. If the food crisis, fuel crisis and financial crisis were the first three waves of crises - then the fourth wave is an impending public finance crisis now sweeping across developing and even some industrialised countries.

You will rarely read anything like this is the daily financial debates about how much austerity to impose. While the erroneous construction of the monetary system by the deficit terrorists has an intellectual curiosity about it - that is, I wonder about motives, et cetera - the reality is much more important.

Even Mendoza thinks there is "an impending public finance crisis" sweeping the world. In general, there is no public finance crisis (Eurozone nations excluded). Sovereign nations should be focusing fiscal policy on improving domestic outcomes, in general, and ensuring, in particular, that the weak and vulnerable in their nations are protected. That is what public purpose is about.

If you just spend each day reading and debating at the level of the evening finance report then you will quickly lose sight of the human dimension of the crisis.

Mendoza's focus (in UNICEF) is on children and he says:

Tomorrow's youth - today's children and infants - are at risk. Roughly about half of the developing world faces imminent or anticipated youth bulges within the next twenty years ... They are infants and children in some of the poorest countries today - many of the very same countries struggling to cope with the aftershocks of the food and fuel price crises, as well as the global slowdown.

Stock markets will bounce back; but children who miss an important window of nutrition, education, and care will shoulder the scars of the recent crises for the rest of their lives. Stronger social budgets, more nuanced and gender responsive policies, and where necessary support from the international community, could help to ensure that social and economic recovery from the most severe crises in recent history will be much more inclusive than in the past.

I was thinking about that statement in the context of the so-called intergenerational debate and the spurious arguments about transferring the burdens of public debt onto the next generation.

I have said it often but you cannot say it enough - the burden we are transferring to the future generation is the diminished opportunities they will have as a result of growing up in poverty. But it a burden that is also being borne now - every day - and manifests are malnutrition, lack of education and the other related pathologies that accompany poverty and social exclusion.

The austerity programs typically focus cuts in the areas where the poor are most reliant on public support.


Lustig says that:

Macroeconomic crises not only affect the current living standards of the poor, but their ability to grow out of poverty.

Governments have a responsibility to use fiscal policy in a pro-poor manner and that "crisis prevention has to be a top priority of any anti-poverty strategy". This requires governments do not cut "pro-poor" programs during a crisis or in its aftermath. They should implement viable safety nets.

The Job Guarantee {11} is one such safety net and ensures that any person who can work and wants to work is able to access a socially-appropriate minimum wage at all times. This policy is the first thing any sovereign government should implement. The first policy that a non-sovereign government should implement is to make themselves sovereign, then introduce a Job Guarantee.

Governments should always use counter-cyclical net spending to advance social protection. Failure to do this not only impacts now but stifles human capital development in the future and thus ensures that poverty is transferred between generations.

Lustig says that:

Permanent reduction in the stock of human capital of the poor, due to malnutrition and deteriorating skills, might also lead to lower economic growth. Socially responsible macroeconomic policy in crisis avoidance and crisis response can contribute simultaneously to lower chronic poverty and higher growth.

So the New York Times editorial is largely correct (although they did say some nations should still implement austerity programs). No nation should implement discretionary cutbacks in net public spending at a time when the economy is in crisis. No exceptions!

But then I am just in denial - although I wonder how many children died today because of the crisis and the poor response by governments?

The Saturday Quiz will be back sometime tomorrow - even harder than last week!

That is enough for today!














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Bill Totten

Sunday, June 27, 2010

Follow the money

When did we elect the bankers to supreme power?

Will those who sign the cheques continue to write our laws? There is at last popular resistance to currency speculation, and it is forcing governments to distance themselves from the financial industry. Although hardly far enough.

by Serge Halimi

Le Monde diplomatique, English edition (June 2010)

Shareholders in Societe Generale, reassured by a fresh European injection of 750 billion euros into the furnace of speculation, saw the value of their assets rise by 23.89% on 10 May - the same day that French president Nicolas Sarkozy announced that, due to budgetary constraints, a programme of aid that gave 150 euros to families in financial difficulty would be wound up. From one financial crisis to another, the conviction grows that those in power tailor their behaviour to the mood of shareholders. Politicians from time to time ask the people to approve of parties preselected by the markets for their innocuousness.

Belief in claims about the public good is being eroded by the suspicion of prevarication. When Barack Obama reprimanded Goldman Sachs, the better to justify his financial regulation measures, the Republicans immediately put out an ad summarising the donations that the president and his political friends had received from the company during the 2008 election campaign: "Democrats: $4.5 million. Republicans: $1.5 million. Politicians attack financial industry but take millions from Wall Street."

When the British Conservative Party, affecting concern for the poor, opposed the introduction of minimum alcohol pricing, the Labour Party accused it of being more concerned with placating the supermarket lobby (since supermarkets use alcohol as a loss leader and many people are delighted to find that beer can cost less than water). When Sarkozy eliminated advertising on France's state-owned TV channels, it was widely suspected that this would benefit the private stations run by his friends Vincent Bollore and Martin Bouygues, now free from competition for advertisers' budgets.

Such suspicions are not new. People resign themselves to situations that ought to cause scandal. They say: "It was ever thus". It's true that in 1887 the son-in-law of the French president Jules Grevy used his links with the Elysee Palace to trade in honours. At the end of the 19th century, Standard Oil made certain US state governors dance to its tune. In the dictatorship of finance, the mur d'argent (wall of money) of 1920s France is often mentioned - the financiers whose control of public debt amounted to a daily plebiscite. However, laws were passed to regulate the role of capital in political life. This even happened in the US, during the Progressive Era (1880 to 1920) and then at the end of the Watergate scandal, always after political mobilisation. France's "wall of money" finances were placed under supervision after the Liberation in 1944. Things may always have been thus, but they're capable of change.

They are also capable of changing back again. On 30 January 1976 the US Supreme Court struck down several key restrictions on the role of money in politics passed by Congress (the Buckley vs Valeo ruling). The judges reasoned that freedom of expression shouldn't depend on the financial ability of an individual to engage in public debate - so limiting expenditure amounted to stifling free speech. In January 2009 this ruling was extended to allow firms to spend whatever they wanted, to back, or attack, a candidate. In the past twenty years, with former Soviet apparatchiks who turned themselves into oligarchs and Chinese bosses who hold office in the Communist Party, with European members of the parliament, ministers and executives who go through a US-style revolving door to the private sector, and with the Iranian clergy and Pakistani military intoxicated by the world of business {1} - the slide towards corruption has become systemic. It inflects the political life of the planet.

As Bill Clinton's mediocre first term drew to an end in 1996, he began preparing his re-election campaign. He needed money and to get it he offered the most generous party donors the chance to spend a night in the White House, even in the Lincoln bedroom. Since this association with the Great Emancipator wasn't within the reach of those with modest budgets, nor necessarily to the taste of those with large ones, there were other attractions for sale, including coffee with the president at the White House. Potential big donors to the Democratic Party met members of the executive whose job was to regulate their activities. Clinton's spokesman, Lanny Davis, explained innocently that it was "a chance for regulators to learn more about issues affecting the industry" {2}.

One coffee morning may have cost the global economy several trillion dollars, stimulated the US national debt and caused the loss of tens of millions of jobs: on 13 May 1996 some of the most important US bankers had a ninety-minute meeting at the White House with leading members of the administration. Besides the president, the secretary of the treasury Robert Rubin, his deputy in charge of monetary affairs, John Hawke, and the man responsible for the regulation of the banks, Eugene Ludwig, were present. So too, by good fortune, was Democratic Party chairman Marvin Rosen. According to Eugene Ludwig's spokesman, "bankers discussed legislative issues, including ideas for breaking down regulatory barriers between banks and other financial institutions" {3}.

After the crash of 1929, the New Deal forbade savings banks from taking risks with their customers' money, which obliged the state to bail them out lest their bankruptcy should ruin their depositors. The Glass-Steagall law, signed by Franklin Roosevelt in 1933 and still on the statute book in 1996, was loathed by the bankers, who were also eager to profit from the new economy. The aim of the meeting in 1996 was to remind the president of bankers' feelings about regulation as he was about to seek their finance for his re-election campaign.

A few weeks after the meeting, the Treasury Department announced plans to send Congress a legislative package that would "overhaul banking rules established six decades ago, giving banks broad new powers to venture into insurance and securities businesses" {4}. What happened next is well known. Clinton was re-elected thanks in part to his campaign war chest {5}. In 1999, the Glass-Steagall law was repealed, worsening the speculative orgy of the past decade (with its ever more sophisticated financial products) and precipitating the crash of September 2008.

In fact, the 1996 meeting (one of 103 such gatherings in the White House at that time) only confirmed that the tide was already running in favour of financial interests. The Republican Party too had benefited from the banks' largesse and it was a Republican-majority Congress that buried the Glass-Steagall law, true to its liberal ideology and its backers' wishes. With or without the meetings, the Clinton administration wouldn't have held out against Wall Street for long; his secretary of the treasury, Robert Rubin, was a former co-chairman of Goldman Sachs. Henry Paulson was at the helm of the Treasury in September 2008; having let Bear Stearns and Merrill Lynch - two of Goldman Sachs' competitors - go to the wall, he bailed out American Insurance Group (AIG), an insurance corporation whose bankruptcy would have affected its biggest creditor, Goldman Sachs.

Immune to shock

Why does a nation, most of whose citizens are not well off, accept that its politicians will put the wishes of businessmen, lawyers and bankers first, so that politics becomes about consolidating economic power relations rather than countering them with democratic legitimacy? Why do the rich, on becoming politicians, feel entitled to enlarge their own fortunes, and to proclaim that the general interest requires satisfying the interest of the privileged classes, endowed with the power to do (through investment) or to prevent (through relocating), who must be constantly seduced (to "reassure the markets") or kept from leaving (by Sarkozy's fifty percent fiscal shield).

Consider Italy (see above), where one of the richest men on earth created a party of his own, Forza Italia, explicitly to defend his business interests rather than join an existing party and seek to influence its direction. On 23 November 2009 La Repubblica published a list of eighteen laws that have favoured Silvio Berlusconi's business empire since 1994 or allowed him to escape legal action. (Costa Rica's justice minister, Francisco Dall'Anase, has already warned of a further stage, in which a state will not only take care of the banks but will serve criminals: "Drug cartels will take over political parties, finance political campaigns and then take over the government" {6}.)

What effect did revelations in La Repubblica have on the Italian right at the ballot box? None, to judge by its success in the regional elections last March. It is as though the everyday loosening of public morals has immunised populations against any reaction to political corruption. Why get angry when politicians want to satisfy the new oligarchs or join them at the top of the rich lists? "The poor don't make political donations", was former Republican presidential candidate John McCain's shrewd observation. He's now a lobbyist for the finance industry.

The month after he left the White House, Bill Clinton made as much money as he had in all his previous 53 years. Goldman Sachs paid him $650,000 for making four speeches. A single appearance in France netted him $250,000 from Citigroup. In the last year of his presidency, the Clintons declared earnings of $357,000; between 2001 and 2007, the total came to $109 million. The best time to cash in on the fame and the contacts garnered during a political career is after that career is over. Directorships in the private sector or consultancies to banks are a lucrative substitute for a popular mandate whose term has run its course. And of course government is all about thinking about the future ...

But the desire to hop from public to private sector is not explained by the wish to become a life member of the oligarchy. Private business, international financial institutions and NGOs connected to companies have become places of power and intellectual hegemony to rival the state. In France the prestige of the financial sector, as much as the desire for a gilded future, has diverted many graduates of the grandes ecoles - the Ecole nationale d'administration (ENA), the Ecole normale superieure and the Polytechnique - from a career in public service. Former prime minister Alain Juppe, a former student at two of them, admitted the temptation: "The golden boys were great! Everyone was fascinated by these young people who arrived in London and sat in front of their screens moving billions of dollars around in a few seconds. They earned millions of euros every month. I wouldn't be entirely truthful if I denied that from time to time I said maybe if I'd done that I'd be in a different situation today." {7}

There were no such qualms for Yves Galland, former French business minister, who became CEO of Boeing France, a competitor of Airbus. Nor for Clara Gaymard, wife of Herve Gaymard, the former economy, finance and industry minister: after being a civil servant in Bercy and then a roving ambassador for international investment, she became president of General Electric France. Christine Albanel, minister for culture and communication for three years, has been using her communication skills to run France Telecom since March, her conscience untroubled.

The general interest

Half of all US senators become lobbyists when they leave the Senate, often working for the businesses they previously regulated. This is true of 283 members of the Clinton administration and 310 of the Bush administration. In the US, the annual turnover of the lobbying industry is close to $8 billion: the returns on investment are hefty. In 2003 the taxes on overseas profits made by Citigroup, JP Morgan Chase, Morgan Stanley and Merrill Lynch were cut from 35% to 5.25%. The bill for lobbying came to $8.5 million. The benefit to the bottom line was $2 billion. The name of the bill? The American Job Creation Act {8}. "In modern societies", says Alain Minc, graduate of ENA, (unpaid) adviser to Nicolas Sarkozy and (paid) consultant to several big French bosses, "the general interest can be served not only in the state sector but also in business" {9}. "The general interest" - that says it all.

The appeal of business, and of the paycheques, has charmed the Left too. "The upper middle class", François Hollande, then first secretary of the French Socialist Party, said in 2006, "was replaced when the left arrived in power in 1981. It was the state apparatus which gave capitalism its new leaders. Coming from a culture of public service, they attained the status of nouveaux riches, talking to the politicians who appointed them as if they were their masters" {10}. Those politicians were also tempted to follow in their footsteps.

More and more of us have hitched our destiny - sometimes unwillingly - to finance through pension and investment funds. Now anyone can defend banks and the stock market by affecting concern for the penniless widow or the employee who bought shares to supplement his salary or take care of his retirement. In 2004 President George W Bush pinned his re-election hopes on this "class of investors". As the Wall Street Journal explained: "The more these voters are in the market, the more likely they are to support the kind of free-market-oriented economic policies associated with Republican administrations. About three in five adult Americans (58%) have some savings invested directly or indirectly in the markets, compared with 44% six years ago. At every income level, direct investors are more likely to identify themselves as Republicans than as non-investors." {11}

"Governments that have been slaves to finance for two decades will not of their own accord turn on finance unless it threatens them directly to an intolerable extent", wrote the economist Frederic Lordon last month {12}. The extent of measures that Germany, France, the US and the G20 take against speculation will soon show us if the daily humiliation that markets inflict on states, and the popular anger at the cynicism of the banks, will reawaken any residual dignity in governments tired of being treated like lackeys.


{1} See Behrouz Aref and Behrouz Farahany, "Iran's unelected power", Le Monde diplomatique, English edition, March 2010.

{2} See "Guess who's coming for coffee?", Washington Post, 2 February 1997.

{3} Ibid.

{4} Ibid.

{5} See Thomas Ferguson, "Le tresor de guerre du president Clinton" (President Clinton's war chest), Le Monde diplomatique, 1996.

{6} Quoted in the London Review of Books, London, 25 February 2010.

{7} Broadcast "Parlons Net", France Info, 27 March 2009.

{8} Dan Eggen, "Lobbying pays", Washington Post, 12 April 2009.

{9} France Inter, 14 April 2010.

{10} François Hollande, Devoirs de verite (Obligations of Truth), Stock, Paris, 2006, pp 159-161.

{11} Claudia Deane and Dan Balz, "‘Investor Class' Gains Political Clout", Wall Street Journal Europe, 28 October 2003.

{12} Le Monde diplomatique (French website), "Les blogs du Diplo", 7 May 2010.


Translated by George Miller

See also "Italy awash with secret funds" by Francesca Lancini

More by Serge Halimi:

Bill Totten