Category Archives: Banks

Forgive them their debts as they forgive those…

It is “budget time” again!

That is the season when the persons displayed on television screens as representatives of those who have no representation engage in the theatrical display of subordination to those who actually own things, like the countries we happen to inhabit. Although there have been a few publicised investigations and even some occasional criminal charges against (usually septuagenarians) some conspicuous miscreants, there has been no action which could restore some health or sanity to what most of us consider the daily economy. In some countries, like where I live, people go on strike. There is little indication that the fundamental message of the strikers gets heard. Perhaps that is also why the television seems obsessed with the marketing of hearing aids. There is a hearing aid for every occasion, except sessions of the national assembly, where such technology might really help.

One way of dealing with the hearing impaired is repetition. In scientific terms this means increasing the rate of signal in proportion to noise in the hope that the essential message is received. Although I wrote a version of this paper in 2014, four years later I cannot help feeling some repetition would do no harm. If every budget season one has to listen to the same set of distortions, then it is only fair to reproduce the corrections.

Like the absurd climate debate, which never includes the “carbon footprint” of the largest military machines, the budget debates (essentially interchangeable) never discuss the cost of subsidising international banks and corporations to facilitate their extraction of wealth from the national economy. There is no intelligent, let alone honest, discussion of what is meant by “public debt”—or why the taxpayers must bear losses to guarantee tax-exempt profits for investors.

I always ask myself when someone says or writes “loss”, where did the money go? Even when a ship is lost at sea there is generally wreckage. Of course, the ocean is bigger than the economy and it is possible that a ship’s remains disappear beyond recovery. The price of abandoning the very modest social gains of the New Deal in the US and social democracy in Europe with the ascendancy of Margaret Thatcher and Ronald Reagan has been enormous, not only for US and European working people but, for the rest of the world. In fact, the meter is still running with no indication of when it will stop.

The crisis no one cares to talk about any more comprises trillions in losses. If these losses are real, then that means the value has been forfeited in favour of someone else. E.g. after the Great War France and Britain were essentially bankrupt: they owed nearly everything to US banks. Without economic manipulation, war and terror, India would probably have occupied the same status vis a vis Great Britain in 1945 that Brazil gained vis a vis Portugal after the Napoleonic Wars. The claims against the productive capacity and assets of Old Europe were held by identifiable third parties, representing, then as now, a tiny band of bankers. Of course, those claims were so great that no normal income streams from taxation could satisfy them. Control of Britain was effectively ceded to the US, while India was wracked by civil war rather than collecting the wartime debt Britain owed to her.

The other meaning of loss is the inability to sustain a certain valuation of an asset or income stream. The nature of the initial valuation is then the problem. The continuous attempts in the IFRS (international accounting standards) to skirt around the issue of essentially fraudulent valuation illustrates that even the private sector’s notion of “value”, whether book value or fair value, is the product of casuistry.

Since European “banking” was reorganised on the US Federal Reserve model by creation of the European Central Bank, it is instructive to consider how grand theft in the state-banking sector of the US functions. In other words, the “losses” hidden on the books of the USG banks, “Fannie” and “Freddie”, are either notional or they reflect claims that were satisfied in favour of third parties beyond the capacity of those institutions to generate income. Again we know who those third parties are. The “losses” are essentially sacrificed sovereignty.

Government institutions pledge to private persons (corporations and foreign exchange pirates) the State’s capacity to pay, derived from the ability to tax the working population, beyond any realistic possibility to extract that income. This was called “tax farming” in the bad old days of “colonialism”. Frequently punitive military force was sent into any country that was not delivering enough booty (aka interest on foreign debt). In fact, as retired general of US Marines infamously confessed that was his main job in the Corps—protecting corporate plunder.

This is essentially the same principle imposed through the ECB—except that some nominal account has to be taken of national political systems. Since in Europe the State was far more frequently the owner of capital infrastructure, absorbing the cost of its operation and regulating labour as civil servants, considerable ideological work had to be performed to cultivate the generation, which privatised most of the national capital assets held by European states. The fact that since 1945 the US has controlled the international payments system has reduced the need for military intervention. Decisions taken in New York, London, Frankfurt or Brussels can deprive a country of any affordable means to engage in the most basic financial transactions. The entities involved are privately owned and therefore cannot be coerced except by measures that would “threaten private property”.

Just as the railroads and banks obtained control over most of the continental US by defrauding the US government in the 19th century, the surviving banks have defrauded most of the American population of its home equity today. Although it was established that a conspiracy of UK-based clearing banks illegally fixed the LIBOR/ EURIBOR rates, this had no serious consequences. If one considers very carefully that nearly all mortgage and commercial financing agreements base their interest computations on one of these benchmarks, the true scope of the fraud becomes apparent. Everyone who made an interest rate agreement assuming the “free market” condition of the underlying rate was cheated. It could be argued that the interest rate clauses of innumerable contracts were void due to fraud. A perusal of public debt instruments would no doubt reveal even more catastrophic deception.

The endless wars, funded by plundering the public treasury and the wealth of other countries, are part of that income extraction, too. Now the US government and those of its vassals are little more than one large mercenary enterprise, together as NATO, the most heavily armed collection agency on behalf of third party creditors on the planet. It does not matter who occupies the mansion at 1600 Pennsylvania Avenue.

Of course, there is plausible denial for any of the beneficiaries of this plunder since populations weaned on soap operas and “crime drama” are incapable of examining, let alone comprehending, the most obvious operations of US corporations and their agents– who almost never appear as criminals on television. The “crime drama” narrative dominates almost every bandwidth on the critical spectrum and as a much younger US director, Michael Moore demonstrated in Bowling for Columbine, corporate crime does not make acceptable television. The most elemental sociological truths, plain to anyone who has ever belonged to a club or worked in middle management of a company, namely that “democratic” and “meritocratic” decisions are regularly subverted by scheming among the ambitious at the expense of the docile– become discredited when the insight is applied to the polity as a whole. People who do not think twice about making a phone call to a “friend” to influence a decision in their social club or place of employment, become incredulous at the suggestion that the chairman of a major investment bank would dictate policy to the head of state whose election he had financed.

In short, the debate about the current global economic “crisis” is obscenely counterintuitive and illogical to the point of incoherence. Who is willing to “follow the money”? This dictum, popularised in the Woodward and Bernstein fairy tale of US President Richard Nixon’s demise– All the President’s Men— appears utterly forgotten, despite recurring astronomic fraud perpetrated by US corporations since the so-called “S&L scandal”– crimes for which no more than a handful of people were indicted, let alone tried or sentenced. Only one corporation was deprived of its right to do business, Arthur Andersen, and this was patently done to spare all the politicians from the reigning US president, most of the US Congress, and untold state and local officials who had been bribed or otherwise influenced by Enron.

If the stories reported by Pete Brewton in 1992, the documented history of the OSS “China insurer” AIG, and the implications of the 2002 Powers Report on the Enron collapse are taken seriously, then Houston lies on a financial fault line more devastating than the San Andreas. That fault line runs from Texas through Virginia to the bedrock of Manhattan. The economic earthquakes that have persisted since 1980 are both literally and figuratively the result of deployment of the US atomic arsenal and the policies that gave rise to it. The US dollar’s continued, if fluctuating, strength as a reserve currency is based on drugs, weapons, and oil– all traded in US dollars. However, this material reality is also based on an ideological or dogmatic constitution. The seismic activity induced by US corporations created gaping holes in the global economy– holes which could only be breached by the financial instruments developed in the weapons laboratories of Wall Street based on the same conceptual models as the neutron bomb and today’s nano-munitions developed at Lawrence Livermore. Indeed, the theory has been almost universally accepted that people are always to blame for the problems of government and Business is the sole and universal solution to all problems. Hence tax monies will only be spent on weapons, war, and subsidies for corporations—the things Business needs.

A considerable obstacle to any change in the US, short of its destruction, is the fact that as Michael Hudson and former assistant Treasury secretary under Reagan, Paul Craig Roberts, write repeatedly, the US government has absolutely lost whatever legitimate function it may ever have had as an instrument of popular will. In other words, the efforts of working people, whether immigrant or ex-slave to remake the plutocratic regime of the 19th century into a State responsive to their needs were frustrated by the massive assaults on labour, combined with the ideological warfare of the “Progressive” movement. The latter, funded heavily by the newly created super-philanthropies, including those of Rockefeller, Sage, Peabody, and Carnegie, predated CIA-style front organizations and infiltration. They helped turn popular sovereignty movements into the kind of technocratic organisations which prevail today– dependent on corporate donations and led by the graduates of cadre schools like the Ivy League colleges, Oxford and the LSE. With few exceptions the only remnants of the “popular will” in the US are those that drive lynch mobs, reincarnated in “talk radio” today.

The main work of the USG and the corporations for which it stands has been to undermine any notion that the State is rightfully an expression of the popular will for the realisation of popular welfare. The State has been reduced to a protection racket. By the time Ronald Reagan, imitating Margaret Thatcher, pledged to “get government off the back of the people”, the only “people” who counted were corporations and those in thrall to them.

It is easy to forget that the US was actually founded on the basis of a kind of white (in that sense “enlightened”), oligarchic absolutism– the British parliamentary dictatorship minus hereditary monarch. Its moral vision predated the Thirty Years War and, until John Kennedy was elected president, its hypocrisy was that of Cromwellian fanatics. In revolutionary France and countries that were inspired by France, as opposed to the American independence war, struggle continued on the premises that the State is not the King (in whatever incarnation) but created by the citizens (not the possessive individual) for the maintenance of the common weal– including the nutrition, health, housing, education of its people. The opposition to destruction of the public sector or public services and the debate that continues in Greece, France, Italy, and to a lesser extent Germany, defies comprehension in North America and Great Britain because of some unfortunate residues of that revolutionary vision of the State so violently opposed by Britain and the US ever since 1789– except when the resulting instability provided business opportunities. (Thatcher did not restore the spirit of Churchill to power—but that of Wellington.)

Moreover as Coolidge once said, “the business of America is business”. If a policy or action of government cannot be expressed in terms of someone’s maximum private profit then it is indefensible in the US. The conditions of the Maastricht Treaty establishing the euro and the ECB are an attempt to impose those same ideological and political constraints on the European Union enforced by adoption of the Federal Reserve Act in the US. The Federal Reserve is essentially a technology for naturalising usury and endowing it with supernatural legitimacy. But just as it has been argued in some quarters that the US Federal Reserve triggered the Great Depression– for the benefit of the tiny bank of banking trusts– the European Central Bank, urged by the right-wing government in Berlin, is being pressured to follow the same rapine policies as the FED is pursuing today. Of course, there are other countries ruled by financial terrorism or where banking gangs have turned their entire arsenal against sovereign peoples.

The “Crisis” is not really about the “debt” or the heinous losses. It is a crisis of sovereignty. The failure of popular sovereignty means that a microscopic bacterial colony of the immeasurably rich can make war on the rest of the world, destroying the common weal and commerce at home and everything else abroad. Germany’s citizens have been bludgeoned since 1945 by Anglo-American propaganda and the occupation forces to persuade them that they– not the great banking and industrial cartels on both sides of the Atlantic– were responsible for Adolph Hitler’s rise to power. When in 1968, student leaders like Rudi Dutschke tried to remind Germans that their democracy was destroyed before Hitler’s putsch and that they had the right and opportunity to demand a democratic Germany after the war, those young people were harassed and even killed. (Dutschke was shot in the head by an unemployed labourer. That “lone” killer later died in prison with a plastic bag over his head.) Attempts to create a truly popular democratic government in Germany have been frustrated by foreign intervention since the French Revolution. Nevertheless people in Germany still believe that the State is there to provide services to the people– and not to fight wars to further foreign trade as suggested by Horst Köhler before he was relieved of his duties (ostensibly resigning) as German federal president.

There is no doubt in Germany that former Chancellor Schroeder’s refusal to follow the US into Iraq—whatever motivated it—enjoyed the widest support, even among those who tend to believe anything the US government says. The resignation of former IMF director and Federal President Köhler expressed the sensitivity of the situation then. On one occasion he referred to the great banking interests as “monsters” and then broke the silence on the German war efforts in Central Asia by explicitly articulating what had been Chancellor Merkel’s, silent but deadly policy of supporting US counter-terror in Afghanistan. Köhler was not opposed to the future escalation of German belligerence, but by his calling a spade a spade on national radio, the right-wing government in Berlin almost had to defend its unconstitutional deployment of German soldiers in public. Already that April Angela Merkel had been forced to sacrifice an army general and a cabinet minister when it became known that German combat aircraft were also bombing civilians like their US counterparts—and trying to keep the fact a secret.

In the midst of the financial crisis, that is the plunder and pillage of the accumulated reserves of Europe’s working population after those of the US are exhausted, it is impossible to ignore the restoration of Asian political and economic prominence. This process started in the 1960s when Britain and the US launched their wars to secure footholds and control of the vast resources of Indonesia and Indochina. Although only partly successful, the destruction of national independence movements throughout South Asia created the conditions for de-industrialising Europe and North America. Mistakenly much of the North American and European Left judged the losses in Korea and Vietnam as defeats for US power. Such judgments have been based on assessments of the official war aims and not on any analysis of the underlying corporate and financial policy objectives. The long-term results of those wars included creation of the massive debt system that is at the root of financial collapse for the majority of US Americans. Of course, China remains the great unconquerable threat to continuation of US hegemony. The balance of power in Asia may be very delicate indeed.

Continental Europe remained somewhat insulated from those seismic forces until 1989. The “velvet” invasion of Eastern Europe and the former Soviet Union led by US capital, aided as usual by the combined secret services and economic “consultants” of Shock Therapy, began the destruction of the economic base for European social democracy and “real socialism”. The debt machine created to exploit Eastern Europe was applied in Germany first– destroying the GDR and financing that destruction with EU-generated debt, culminating in the euro. Introduction of the euro effectively destroyed half of the purchasing power of working people in the Euro Zone overnight, creating the conditions for consumer borrowing which had prevailed in the US since the late 60s and eroding wages and benefits drastically.

The final loss of control over archaic legislative instruments (whether in the US or Europe) is not only assured by the system of bribery that turns those in office into indentured servants of corporations. Full investigation of the Enron scandal would have proven once and for all that there is almost no one in the US Congress not owned by some corporation. Similar conditions have come to prevail in European legislatures where for decades US academic and policy exchange programmes have trained the political class to work first and foremost for Business.

The loss is also assured by the now entrenched belief that the only legitimate human goal is individual personal profit. As Hudson has suggested, this is the “theology of the Chicago School”. Since Margaret Thatcher was appointed to convert Britain to that dogma, nearly the entire political, academic and “civil” culture has been saturated with people who cannot think in any other terms– even when they assert that they are still social democrats or democratic socialists. The latter insist that “social policy” is merely a palliative to prevent the poor and destitute from becoming unsightly spectres in urban entertainment centres. They all have become positivists– reifying the prevailing economic relations and worshipping quantitative methods– subordinating human agency to pseudo-science and thinly disguised opportunism. The only kindness this ethical standpoint can express is “charity”. Charity, however, has nothing to do with the common weal or the State as an embodiment of the popular will. In fact, it is just as parasitic as the belief from which it springs. If those whom John Pilger called “the new rulers of the world” consent to relieve us– that is to allow us anything resembling our dignity and subsistence wages– then it will scarcely exceed the infamous “dimes” with which John D. Rockefeller cloaked his cynicism in piety and charity. Nowhere is the cynicism more profound than in the expression “giving back”. Of course, the pennies “given back” are microscopic compared with the billions “taken” in the first place. But those shiny pennies and dimes are enough to keep embedded intellectuals loyal to Bill Gates or George Soros. For a few dollars more they will even protect the likes of Blankfein or Buffett.

“Charity” is the gratification a person finds when scratching a mosquito bite. One feels better while scratching– although this provides no relief. The cause of the itch is the substance injected by the mosquito while sucking the blood from its victim. Of course, some mosquitoes offer only token charity and the itch disappears. But there are mosquitoes that carry other parasites– the effects of their charity can last forever, or at least until the victim dies.

India’s Farmers Plan Mass March to the Nation’s Parliament as Agrarian Crisis Reaches “Civilization Proportions”

With over 800 million people, rural India is arguably the most interesting and complex place on the planet. And yet it is also one of the most neglected in terms of both investment and media coverage. Veteran journalist and founder of the People’s Archive of Rural India P. Sainath argues that the majority of Indians do not count to the nation’s media, which renders up to 75 percent of the population ‘extinct’.

According to the Centre for Media Studies in Delhi, the five-year average of agriculture reporting in an Indian national daily newspaper equals 0.61 percent of news coverage, while village-level stories account for 0.17 percent. For much of the media, whether print or TV, celebrity, IT, movements on the stock exchange and the daily concerns of elite and urban middle class dwellers are what count.

Unlike the corporate media, the digital journalism platform the People’s Archive of Rural India has not only documented the complexity and beauty of rural India but also its hardships and the all too often heartbreaking personal stories that describe the impacts of government policies which have devastated lives, livelihoods and communities.

Rural India is plagued by farmer suicides, child malnourishment, growing unemployment, increased informalisation, indebtedness and an overall collapse of agriculture. Those involved in farming and related activities are being driven to migrate to cities to become cycle rickshaw drivers, domestic servants, daily wage labourers and suchlike.

Hundreds of thousands of farmers in India have taken their lives since 1997 and many more are experiencing economic distress or have left farming as a result of debt, a shift to (GM) cash crops and economic liberalisation. According to this report,  the number of cultivators in India declined from 166 million to 146 million between 2004 and 2011. Some 6,700 left farming each day. Between 2015 and 2022 the number of cultivators is likely to decrease to around 127 million.

The core problems affecting agriculture centre upon the running down of the sector for decades, the impact of deregulated markets and profiteering corporations (Monsanto and its Bt cotton seeds being just one case in point), increasing debt and lack of proper credit facilities, the withdrawal of government support, spiralling input costs and the effects of cheap, subsidised imports which depress farmers’ incomes.

The root causes of India’s agrarian crisis have been well documented, not least by policy analyst Devinder Sharma, who says:

“India is on fast track to bring agriculture under corporate control. Amending the existing laws on land acquisition, water resources, seed, fertilizer, pesticides and food processing, the government is in an overdrive to usher in contract farming and encourage organized retail. This is exactly as per the advice of the World Bank and the International Monetary Fund as well as the international financial institutes.”

From the geopolitical lending strategies of institutions like the World Bank to the opening up of food and agriculture to foreign corporations via WTO rules and the US-India Knowledge Initiative on Agriculture, there is an ongoing strategy to displace the existing system of smallholder cultivation and village-based food production with one suited to the interests of global seed, pesticide, food processing and retail corporations like Monsanto-Bayer, Cargill and Walmart.

In outlining the nature of the agrarian crisis, P. Sainath encapsulates the drive towards corporate farming in five words: “Predatory commercialization of the countryside.” He uses another five words for the outcome (referring to the mass migration from rural India): “The biggest displacement in history.”

By deliberately making agriculture economically non-viable for smallholder farmers (who form the backbone of food production in the country) the aim is to lay the groundwork to fully incorporate India into a fundamentally flawed and wholly exploitative global food regime that is undermining the country’s food security and food sovereignty as well as its health, soils, water supply and rural communities.

Rural India is in crisis. And with hundreds of millions destined to be forced to migrate to cities if current policies persist, the suffering will continue because the urban centres are not generating anything near the required levels of employment to soak up those whose livelihoods are being eradicated in the countryside. Jobless ‘growth’ haunts India, which is not helped by a global trend towards increasing automation and the impacts of artificial intelligence.

There are growing calls for liberating farmers from debt and guaranteeing prices/levels of profit above the costs of production. And it is not as though these actions are not possible. It is a question of priorities: the total farm debt is equal to the loans provided to just five large corporations in India.

Where have those loans gone? A good case has been put forward for arguing that the 2016 ‘demonetisation’ policy was in effect a bail-out for the banks and the corporates, which farmers and other ordinary folk paid the price for. It was a symptom of a country whose GDP growth has been based on a debt-inflated economy (the backbone of neoliberalism across the world). While farmers commit suicide and are heavily indebted, a handful of billionaires get access to cheap money with no pressure to pay it back and with little or no ‘added value’ for society as a whole.

The trigger point of the Mandasur farmer’s uprising in Central India in 2016, in which six farmers were shot dead was the demonetisation action. It meant that farmers faced a severe crash-crunch on top of all the other misery they faced. This was the last straw. That incident epitomised the fact that agriculture has been starved of investment while corporations have secured handouts. Farmers have been sacrificed on the altar of neoliberal dogma: food has been kept cheap, thereby boosting the disposable income and consumer spending of the urban middle classes, helping to provide the illusion of GDP ‘growth’ (corporate profit).

But both urban and rural Indians are increasingly coming together to help place farmers’ demands on the national political (and media) agenda. For instance, a volunteer group called Nation for Farmers, comprising people from all walks of life, is in the process of helping to mobilise citizens in support of the All India Kisan Sangharsh Co-ordination Committee’s (AIKSCC) march to parliament that is planned for the end of November.

The AIKSCC is an umbrella group of over 200 farmers’ organisations, which is calling for a march to Delhi by farmers, agricultural labourers and other distressed rural Indians from all over the country. The aim is to mobilise up to one million people. A similar march took place early in 2018 from Nashik to Mumbai. This time, however, the aim is to place the issues on the agenda of the nation’s parliament.

On behalf of the AIKSCC, two bills – The Farmers’ Freedom from Indebtedness Bill (2018) and The Farmers’ Right to Guaranteed Remunerative Minimum Support Prices for Agricultural Commodities Bill (2018) – have already been placed before parliament and are awaiting discussion. While the AIKSCC has focused on ensuring proper minimum support prices for farmers, there is now also the demand for a special 21-day joint session of parliament where the AIKSCC’s concerns can be heard.

To this end, the organisers of the march have written to the President of India Ram Nath Kovind. In their letter, they say that the agrarian crisis has now reached “civilizational proportions”.

They argue:

… successive governments have witnessed the destruction of the countryside and the unchecked destitution of farmers and yet little has been done to alleviate their misery. They have witnessed the deepening misery of the dispossessed, including the death by suicide of well over 300,000 farmers these past 20 years.

The letter makes clear to the president that the AIKSCC is fighting to save the livelihoods of tens of millions of rural Indians and has organised a ‘Kisan Mukti March’ to Delhi for three days from 28 to 30 November. The president is urged to pay heed to the demand for a special, 21-day joint session of parliament, dedicated entirely to discussing the agrarian crisis and related issues.

The letter states:

We request your intervention as the President of the Republic of India and the Constitutional head to ensure that a crisis of this scale that renders 70 percent of Indian citizens vulnerable is addressed by a joint session of the Parliament of this country… Surely the precariousness of the lives of millions of citizens merits the undivided attention of Parliament and thereby its commitment to find enduring solutions.

A special parliamentary session is called for because – after numerous protests, petitions, pleadings by distressed farmers, labourers, forest communities, fisher folk and the foot soldiers of India’s literacy and health care programmes – have failed to garner the attention of successive governments to the agrarian crisis.

The aim is that any special session on the crisis will be rooted in the testimonies of its victims, who need to be heard from both outside and inside the parliament. The session would enable them to address their fellow citizens and representatives from the floor of the parliament and explain the impact of devastating farming policies, the lack of rural credit and fair prices, and the unbearable violence of privatising water, healthcare and education.

We can only hope that the media and its well-paid journalists might be galvanised into action too!

Visit the website where you can read the letter to the president in full, sign the petition, publicise the issues and get involved. 

India’s Farmers Plan Mass March to the Nation’s Parliament as Agrarian Crisis Reaches “Civilization Proportions”

With over 800 million people, rural India is arguably the most interesting and complex place on the planet. And yet it is also one of the most neglected in terms of both investment and media coverage. Veteran journalist and founder of the People’s Archive of Rural India P. Sainath argues that the majority of Indians do not count to the nation’s media, which renders up to 75 percent of the population ‘extinct’.

According to the Centre for Media Studies in Delhi, the five-year average of agriculture reporting in an Indian national daily newspaper equals 0.61 percent of news coverage, while village-level stories account for 0.17 percent. For much of the media, whether print or TV, celebrity, IT, movements on the stock exchange and the daily concerns of elite and urban middle class dwellers are what count.

Unlike the corporate media, the digital journalism platform the People’s Archive of Rural India has not only documented the complexity and beauty of rural India but also its hardships and the all too often heartbreaking personal stories that describe the impacts of government policies which have devastated lives, livelihoods and communities.

Rural India is plagued by farmer suicides, child malnourishment, growing unemployment, increased informalisation, indebtedness and an overall collapse of agriculture. Those involved in farming and related activities are being driven to migrate to cities to become cycle rickshaw drivers, domestic servants, daily wage labourers and suchlike.

Hundreds of thousands of farmers in India have taken their lives since 1997 and many more are experiencing economic distress or have left farming as a result of debt, a shift to (GM) cash crops and economic liberalisation. According to this report,  the number of cultivators in India declined from 166 million to 146 million between 2004 and 2011. Some 6,700 left farming each day. Between 2015 and 2022 the number of cultivators is likely to decrease to around 127 million.

The core problems affecting agriculture centre upon the running down of the sector for decades, the impact of deregulated markets and profiteering corporations (Monsanto and its Bt cotton seeds being just one case in point), increasing debt and lack of proper credit facilities, the withdrawal of government support, spiralling input costs and the effects of cheap, subsidised imports which depress farmers’ incomes.

The root causes of India’s agrarian crisis have been well documented, not least by policy analyst Devinder Sharma, who says:

“India is on fast track to bring agriculture under corporate control. Amending the existing laws on land acquisition, water resources, seed, fertilizer, pesticides and food processing, the government is in an overdrive to usher in contract farming and encourage organized retail. This is exactly as per the advice of the World Bank and the International Monetary Fund as well as the international financial institutes.”

From the geopolitical lending strategies of institutions like the World Bank to the opening up of food and agriculture to foreign corporations via WTO rules and the US-India Knowledge Initiative on Agriculture, there is an ongoing strategy to displace the existing system of smallholder cultivation and village-based food production with one suited to the interests of global seed, pesticide, food processing and retail corporations like Monsanto-Bayer, Cargill and Walmart.

In outlining the nature of the agrarian crisis, P. Sainath encapsulates the drive towards corporate farming in five words: “Predatory commercialization of the countryside.” He uses another five words for the outcome (referring to the mass migration from rural India): “The biggest displacement in history.”

By deliberately making agriculture economically non-viable for smallholder farmers (who form the backbone of food production in the country) the aim is to lay the groundwork to fully incorporate India into a fundamentally flawed and wholly exploitative global food regime that is undermining the country’s food security and food sovereignty as well as its health, soils, water supply and rural communities.

Rural India is in crisis. And with hundreds of millions destined to be forced to migrate to cities if current policies persist, the suffering will continue because the urban centres are not generating anything near the required levels of employment to soak up those whose livelihoods are being eradicated in the countryside. Jobless ‘growth’ haunts India, which is not helped by a global trend towards increasing automation and the impacts of artificial intelligence.

There are growing calls for liberating farmers from debt and guaranteeing prices/levels of profit above the costs of production. And it is not as though these actions are not possible. It is a question of priorities: the total farm debt is equal to the loans provided to just five large corporations in India.

Where have those loans gone? A good case has been put forward for arguing that the 2016 ‘demonetisation’ policy was in effect a bail-out for the banks and the corporates, which farmers and other ordinary folk paid the price for. It was a symptom of a country whose GDP growth has been based on a debt-inflated economy (the backbone of neoliberalism across the world). While farmers commit suicide and are heavily indebted, a handful of billionaires get access to cheap money with no pressure to pay it back and with little or no ‘added value’ for society as a whole.

The trigger point of the Mandasur farmer’s uprising in Central India in 2016, in which six farmers were shot dead was the demonetisation action. It meant that farmers faced a severe crash-crunch on top of all the other misery they faced. This was the last straw. That incident epitomised the fact that agriculture has been starved of investment while corporations have secured handouts. Farmers have been sacrificed on the altar of neoliberal dogma: food has been kept cheap, thereby boosting the disposable income and consumer spending of the urban middle classes, helping to provide the illusion of GDP ‘growth’ (corporate profit).

But both urban and rural Indians are increasingly coming together to help place farmers’ demands on the national political (and media) agenda. For instance, a volunteer group called Nation for Farmers, comprising people from all walks of life, is in the process of helping to mobilise citizens in support of the All India Kisan Sangharsh Co-ordination Committee’s (AIKSCC) march to parliament that is planned for the end of November.

The AIKSCC is an umbrella group of over 200 farmers’ organisations, which is calling for a march to Delhi by farmers, agricultural labourers and other distressed rural Indians from all over the country. The aim is to mobilise up to one million people. A similar march took place early in 2018 from Nashik to Mumbai. This time, however, the aim is to place the issues on the agenda of the nation’s parliament.

On behalf of the AIKSCC, two bills – The Farmers’ Freedom from Indebtedness Bill (2018) and The Farmers’ Right to Guaranteed Remunerative Minimum Support Prices for Agricultural Commodities Bill (2018) – have already been placed before parliament and are awaiting discussion. While the AIKSCC has focused on ensuring proper minimum support prices for farmers, there is now also the demand for a special 21-day joint session of parliament where the AIKSCC’s concerns can be heard.

To this end, the organisers of the march have written to the President of India Ram Nath Kovind. In their letter, they say that the agrarian crisis has now reached “civilizational proportions”.

They argue:

… successive governments have witnessed the destruction of the countryside and the unchecked destitution of farmers and yet little has been done to alleviate their misery. They have witnessed the deepening misery of the dispossessed, including the death by suicide of well over 300,000 farmers these past 20 years.

The letter makes clear to the president that the AIKSCC is fighting to save the livelihoods of tens of millions of rural Indians and has organised a ‘Kisan Mukti March’ to Delhi for three days from 28 to 30 November. The president is urged to pay heed to the demand for a special, 21-day joint session of parliament, dedicated entirely to discussing the agrarian crisis and related issues.

The letter states:

We request your intervention as the President of the Republic of India and the Constitutional head to ensure that a crisis of this scale that renders 70 percent of Indian citizens vulnerable is addressed by a joint session of the Parliament of this country… Surely the precariousness of the lives of millions of citizens merits the undivided attention of Parliament and thereby its commitment to find enduring solutions.

A special parliamentary session is called for because – after numerous protests, petitions, pleadings by distressed farmers, labourers, forest communities, fisher folk and the foot soldiers of India’s literacy and health care programmes – have failed to garner the attention of successive governments to the agrarian crisis.

The aim is that any special session on the crisis will be rooted in the testimonies of its victims, who need to be heard from both outside and inside the parliament. The session would enable them to address their fellow citizens and representatives from the floor of the parliament and explain the impact of devastating farming policies, the lack of rural credit and fair prices, and the unbearable violence of privatising water, healthcare and education.

We can only hope that the media and its well-paid journalists might be galvanised into action too!

Visit the website where you can read the letter to the president in full, sign the petition, publicise the issues and get involved. 

Agents of Chaos: Trump, the Federal Reserve and Andrew Jackson

It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes.

— President Andrew Jackson, Washington, July 10, 1832

They are three players, all problematic in their own way.  They are the creatures of inconvenient chaos.  Donald Trump was born into the role, a misfit of misrule who found his baffling way to the White House on a grievance.  Wall Street, with its various agglomerations of vice and ambition constitute the spear of global instability while the US Federal Reserve, long seen as a gentlemanly symbol of stability, has done its fair share to avoid its remit to right unstable ships, a power in its own right.

The Federal Reserve, despite assuming the role of Apollonian stabiliser, remained blind and indifferent through the Clinton era under the stewardship of Alan Greenspan.  The creatures of Dionysus played, and Greenspan was happy to watch.  While he is credited with having contained the shock of the 1987 stock-market crash, he proceeded to push a period of manically low interest rates and minimal financial regulation through the hot growth of the 1990s and early 2000s. Rather than condemning “Ninja loans” and other such bank exotica, he celebrated them as creations of speculative genius.

The mood at the Fed these days might seems chastened.  They are the monkish wowsers and party poopers, those who lock down the bar and tell the merrily sauced to head home.  The sense there is that the market, boosted and inflated, needs correction after years of keeping interest rates at floor levels. Unemployment levels are at 3.7 percent; inflation levels are close to 2 percent.  “If the strong growth in income and jobs continues,” reasoned Federal Reserve chairman Jerome H. Powell in August, “further gradual increases in the target range for the federal funds rate will likely be appropriate.”

Cooling through an increase in interest rates was deemed necessary in light of a consumer binge induced by Trump’s tax cuts, and no one knows when it will stop.  “What’s not yet clear,” observes Timothy Moore, “is how far rates will have to rise to reach a level that the Fed considers neutral – where rates neither bolster nor restrain the pace of growth – because rates already have risen so much.”  To three rises in the federal-funds rate that have already taken place could be added another in December and in 2019.

Powell is now facing attacks by President Trump, a self-described “low interest rate person,” in a manner not unlike the assault on the Second Bank of the United States by President Andrew Jackson.  Trump’s adolescent indignation is akin to the person whose balloons have been pinched.  In July, he was “not thrilled” with that round of rate hikes and said as much.  “Because we go up and every time you go up they want to raise rates again.”  Markets, playing their side of the disruptive bargain, reacted, with the dollar, stocks and treasury yields falling.

This month, the same story repeated itself.  When the markets go up, Trump, invariably, sees his hand in it; when they go down, someone else foots the blame.  Now, according to the president, the Federal Reserve has “gone crazy” and “wild” in various measures.  “I’d like our Fed not to be so aggressive, because I think they’re making a big mistake.”  To Fox News’s Shannon Bream, Trump insisted that, “The Fed is going loco and there’s no reason for them to do it.”  White House chief economic advisor Larry Kudlow found himself defending his boss “as a successful businessman and investor” informed about such matters.

The history between the Fed and the White House has been punctuated by occasional bouts of surliness.  Paul Volcker’s time as chairman saw an irate, desperate James Baker, when President Ronald Reagan’s chief of staff, attempt to gain an assurance that interest rates would not rise.  He failed.  By and by, however, the Fed has remained something of a holy cow, a point Trump cares little about.

But it was Jackson’s loathing of banks that proved not only effectual but the stuff of legend.  He found much suspicion in the whole notion of credit. He had also previously suffered at the hands of a land transaction involving the use of valueless paper notes.  Only specie – silver and gold – deserved his commanding trust.

The very idea of a central bank running rough shod over state rights presented the hero of the Battle of New Orleans with a perfect target.  His vision of frontiersman expansionism was being foiled.  Such acrimony, according to Arthur Schlesinger Jr.’s The Age of Jackson, was a case of socio-economic falling out.  Elites were attempting to monopolise financial power; Jackson, if in somewhat exaggerated fashion (though less so than Trump), spoke of common-man values against big business.

John M. McFaul, on the other hand, sees it somewhat differently.  “Jacksonian banking policy was the result of neither an ideological timetable of entrepreneurial design nor radical hard-money purposes.”  Political expedience came first.  The truth lies tantalisingly in between: the ideologue and the opportunist sharing the same body of a man.

From 1823 to 1836, Nicholas Biddle served as president of the Second Bank.  While he was deemed within pro-banking advocates competent and assured, his values were those of a system that had entitled him.  He dispensed favours to his friends with aristocratic grace; he resisted regulatory efforts.  His move to limit credit and insist on calling in loans was intended to corner Jackson, forcing his hand to add more government funds to the bank deposits.

Jackson called his bluff, and his 1832 veto not to renew the bank’s charter remained, an effective freeze on supplying federal funds.  “Is there,” he rhetorically posed to the Senate in his veto message, “no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country?”  Eventually, Congress was won over, leaving the Second Bank defunct on the expiry of its charter in 1836.  Jackson did his own bit of chaotic undermining by draining the bank coffers in a way that would subsequently be deemed an abuse of executive power.

The stock gurus and economic wizards are waving wands and gazing at crystal balls, but the markets are simply engaging in the usual frenetic activity that accompanies remarks made by figures of power.  Behind the scenes, the speculators get busy and anticipate the next flurry.  Creative — or perhaps not so creative — destruction is currently unfolding, much of it an illusion.  Trump’s America remains, much like Jackson’s discredited paper notes, of questionable value.  But unlike the Second Bank, the Federal Reserve is very much intact in the face of institutional mocking. Thankfully for its board and Powell, its charter is not coming up for renewal, nor is Powell going to prove to be another Biddle.

A Global People’s Bailout for the Coming Crash

When the global financial crisis resurfaces, we the people will have to fill the vacuum in political leadership. It will call for a monumental mobilisation of citizens from below, focused on a single and unifying demand for a people’s bailout across the world.

*****

A full decade since the great crash of 2008, many progressive thinkers have recently reflected on the consequences of that fateful day when the investment bank Lehman Brothers collapsed, foreshadowing the worst international financial crisis of the post-war period. What seems obvious to everyone is that lessons have not been learnt, the financial sector is now larger and more dominant than ever, and an even greater crisis is set to happen anytime soon. But the real question is when it strikes, what are the chances of achieving a bailout for ordinary people and the planet this time?

In the aftermath of the last global financial meltdown, there was a constant stream of analysis about its proximate causes. This centred on the bursting of the US housing bubble, fuelled in large part by reckless sub-prime lending and an under-regulated shadow banking system. Media commentaries fixated on the implosion of collateralised debt obligations, credit default swaps and other financial innovations—all evidence of the speculative greed and lax government oversight which led to the housing and credit booms.

The term ‘financialisation’ has become a buzzword to explain the factors which precipitated these events, referring to the vastly expanded role of financial markets in the operation of domestic and global economies. It is not only about the growth of big banks and hedge funds, but the radical transformation of our entire society that has taken place as a result of the increasing dominance of the financial sector with its short-termist, profitmaking logic.

The origins of the problem are rooted in the early 1970s, when the US government decided to end the fixed convertibility of dollars into gold, formally ending the Bretton Woods monetary system. It marked the beginning of a new regime of floating exchange rates, free trade in goods and the free movement of capital across borders. The sweeping reforms brought in under the Thatcher and Reagan governments accelerated a wave of deregulation and privatisation, with minimum protective barriers against the ‘self-regulating market’.

The agenda was pushed aggressively by most national governments in the Global North, while being imposed on many Southern countries through the International Monetary Fund and World Bank’s infamous ‘structural adjustment programmes’. A legion of books have examined the disastrous consequences of this market-led approach to monetary and fiscal policy, derisorily labelled the neoliberal Washington Consensus. As governments increasingly focused on maintaining low inflation and removing regulations on capital and corporations, the world of finance boomed—and the foundations were laid for a dramatic dénouement in 2008.

Missed opportunities

What’s extraordinary to recall about the immediate aftermath of the great crash is the temporary reversal of those policies that had dominated the previous two decades. At the G20 summit in April 2009 hosted by British Prime Minister Gordon Brown, heads of state envisaged a return to Keynesian macroeconomic prescriptions, including a large-scale fiscal stimulus in both developed and developing countries. It appeared that the Washington Consensus had suddenly lost all legitimacy. The liberalised global financial system had clearly failed to provide for a net transfer of resources to the developing world, or prevent instability and recurrent crisis without effective state regulation and democratic public oversight.

Many civil society organisations saw the moment to call for fundamental reform of the Bretton Woods institutions, as well as a complete rethink of the role of the state in the economy. There was even talk of negotiating a new Bretton Woods agreement that re-regulates international capital flows, and supports policy diversity and multilateralism as a core principle (in direct contrast to the IMF’s discredited approach).

The United Nations played a staunch role in upholding such demands, particularly through a commission set up by the then-President of the UN General Assembly, Miguel d’Escoto Brockmann. Led by Nobel laureate Joseph Stiglitz, the ‘UN Conference on the World Financial and Economic Crisis and its Impact on Development’ proposed a number of sensible measures to protect the least privileged citizens from the effects of the crisis, while giving developing countries greater influence in reforming the global economy.

Around the same time, the UN Secretary-General endorsed a Global Green New Deal that could stimulate an economic recovery, combat poverty and avert dangerous climate change simultaneously. It envisioned a massive programme of direct public investments and other internationally-coordinated interventions, arguing that the time had come to transform the global economy for the greater benefit of people everywhere, including the millions living in poverty in developing and emerging industrial economies.

This wasn’t the first time that nations were called upon to enact a full-scale reordering of global priorities in response to financial turmoil. At the onset of the ‘third world’ debt crisis in 1980, an Independent Commission on International Development Issues convened by the former West German Chancellor, Willy Brandt, also proposed far-reaching emergency measures to reform the global economic system and effectively bail out the world’s poor.

Yet the Brandt Commission proposals were widely ignored by Western governments at the time, which marked the rise of the neoliberal counterrevolution in macroeconomic policy—and all the conditions that led to financial breakdown three decades later. Then once again, governments responded in precisely the opposite direction for bringing about a sustainable economic recovery based on principles of equity, justice, sharing and human rights.

A world falling apart

We are all familiar with the course of action taken from 2008-9: colossal bank bailouts enacted (without public consultation) that favoured creditors, not debtors, despite using taxpayer money. Quantitative easing (QE) programmes that have pumped trillions of dollars into the global financial system, unleashing a fresh wave of speculative investment and further widening income and wealth gaps. And the perceived blame for the crisis deflected towards excessive public spending, leading to fiscal austerity measures being rolled out across most countries—a ‘decade of adjustment’ that is projected to affect nearly 80 percent of the global population by 2020.

To be sure, the ensuing policy responses across Europe were often compared to structural adjustment programmes imposed on developing countries in the 1980s and 1990s, when repayments to creditors of commercial banks similarly took precedence over measures to ensure social and economic recovery. The same pattern has repeated in every crisis-hit region, where the poorest in society pay the price through extreme austerity and the privatisation of public assets and services, despite being the least to blame for causing the crisis in the first place.

After ten years of these policies a new billionaire is created every second day, banks are still paying out billions of dollars in bonuses each year, and the top 1% of the world population are far wealthier than before the crisis happened. At the same time, global income inequality has returned to 1820 levels, and indicators suggest progress is now reversing on the prevention of extreme poverty and multiple forms of malnutrition.

Indeed the United Nations continues to face the worst humanitarian situation since the second world war, in large part due to conflict-driven crises that are rooted in the economic fallout of the 2008 crash—most dramatically in Syria, Libya, and Yemen. Countries of both the Global North and South remain in the grip of a record upsurge of forced human displacement, to which governments are predictably failing to respond to in the direction of cooperative burden sharing through agreements and institutions at the international level.

Not to mention the rise of fascism and divisive populism that is escalating in almost every society, often as a misguided response to pervasive inequality and a widespread sense of unfairness among ordinary workers. It is surely reasonable to suggest that all these trends would not be deteriorating if the community of nations had seized the opportunity a decade ago, and acted in accordance with calls for a just transition to a more equitable world order.

The worst is yet to come

We now live in a strange era of political limbo. Neoclassical economics may have failed to predict the great crash or provide answers for a sustained recovery, yet it still retains its hold on conventional academic thought. Neoliberalism may also be discredited as the dominant political and economic paradigm, yet mainstream institutions like the IMF and OECD still embrace the fundamentals of free market orthodoxy and countenance no meaningful alternative. Consequently, the new regulatory initiatives agreed at the global level are largely voluntary and inadequate, and governments have done little to counter the power of oligopolistic banks or prevent reckless speculative behaviour.

Banks may be relatively safer and possess a bigger crisis toolkit, but the risk has moved to the largely unregulated shadow banking system which has massively increased in size, growing from $28 trillion in 2010 to $45 trillion in 2018. Even major banks like JP Morgan are forewarning an imminent crisis, which may be caused by a digital ‘flash crash’ in which high frequency investments (measuring trades in millionths of a second) lead to a sudden downfall of global stock markets.

Another probable cause is the precipitous rise in global debt, which has soared from $142 to $250 trillion since 2008, three times the combined income of every nation. Global markets are running on easy money and credit, leading to a debt build-up which economists from across the political spectrum agree cannot last indefinitely without catastrophic results. The problem is most acute in emerging and developing economies, where short-term capital flowed in response to low interest rates and QE policies in the West. As the US and other rich countries begin to steadily raise interest rates again, there is a risk of a mass exodus of capital from emerging markets that could trigger a renewed debt crisis in the world’s poorest countries.

Of most concern is China, however, whose credit-fuelled expansion in the post-crash years has led to massive over-investment and national debt. With an overheating real-estate sector, volatile stock market and uncontrolled shadow banking system, it is a prime candidate to be the site for the next financial implosion.

However it originates, all the evidence suggests that an economic collapse could be far worse this time around. The ‘too-big-to-fail’ problem remains critical, with the biggest US banks owning more deposits, assets and cash than ever before. And with interest rates at historic lows for many G-10 central banks while the QE taps are still turned on, both developed and developing countries have less policy and fiscal space to respond to another shock.

Above all, China and the US are not in a position to take the same decisive central bank action that helped avert a world depression in 2008. And then there are all the contemporary political factors that mitigate against a coordinated international response—the retreat from multilateralism, the disintegration of established geopolitical structures and relationships, the fragmentation and polarisation of political systems throughout the world.

After two years of a US presidency that recklessly scraps global agreements and instigates trade wars, it is hard to imagine a repeat of the G20 gathering in 2009 when assembled leaders pledged never to go down the road of protectionist tariff policies again, fearing a return to the dire economic conditions that led to a world war in the 1930s. The domestic policies of the Trump administration are also especially perturbing, considering its current push for greater deregulation of the financial sector—rolling back the Dodd-Frank and consumer protection acts, increasing the speed of the revolving door between Wall Street and Washington, D.C., and more.

Mobilising from below

None of this is a reason to despair or lose hope. The great crash has opened up a new awareness and energy for a better society that brings finance under popular control, as a servant to the public and no longer its master. Many different movements and campaigns have sprung up in the post-crash years that focus on addressing the problems wrought by financialisation, which more and more people realise is the underlying source of most of the world’s interlinking crises. All of these developments are hugely important, although the true test of this rising political consciousness will come when the next crash happens.

After the worldwide bank bailouts of 2008-9—estimated in excess of $29 trillion by the US Federal Reserve alone—it is no longer possible to argue that governments cannot afford to provide for the basic necessities of everyone. Just a fraction of that sum would be enough to end income poverty for the 10% of the global population who live on less than $1.90 a day. Not to mention the trillions of dollars, euros, pounds and yen that have been directly pumped into financial markets by central banks of the major developed economies, constituting a regressive form of distribution in favour of the already wealthy that could have been converted into some form of ‘quantitative easing for the people’.

A reversal of government priorities on this scale is clearly not going to be led by the political class. They have already missed the opportunity, and are largely beholden to vested interests that are unduly concerned with short-term profit maximisation, not the rebuilding of the public realm or the universal provision of essential goods and services. The great crash and its aftermath was a global phenomenon that called for a cooperative global response, yet the necessary vision from within the ranks of our governments was woefully lacking. If the financial crisis resurfaces in a different and severer manifestation, we the people will have to fill the vacuum in political leadership. It will call for a monumental mobilisation of citizens from below, focused on a single and unifying demand for a people’s bailout across the world.

Much inspiration can be drawn from the popular uprisings throughout 2011 and 2012, although the Arab Spring and Occupy movements were unable to sustain the momentum for change without a clear agenda that is truly international in scope, and attentive to the needs of the world’s majority poor. That is why we should coalesce our voices around Article 25 of the Universal Declaration of Human Rights, which proclaims the right of everyone to the minimal requirements for a dignified life—adequate food, housing, medical care, access to social services and financial security.

Through ceaseless demonstrations in all countries that continue day and night, a united call for implementing Article 25 worldwide may finally impel governments to cooperate at the highest level, and rewrite the rules of the international economic system on the basis of shared mutual interests. In the wake of a breakdown of the entire international financial and economic order, such a grassroots mobilisation of numberless people may be the last chance we have of resurrecting long-forgotten proposals in the UN archives, as notably embodied in the aforementioned Brandt Report or Stiglitz Commission.

The case of Iceland is widely remembered as an example of how a people’s bailout can be achieved, following the ‘Pots and Pans Revolution’ that swept the country in 2009—the largest protests in the country’s history to date. As a result of the public’s demands, a new coalition government was able to buck all trends by avoiding austerity measures, actively intervening in capital markets and strengthening social programs for the less privileged. The results were remarkable for Iceland’s economic recovery, which was achieved without forcing society as a whole to pay for the blunders of corrupt banks. But it still wasn’t enough to prevent the old establishment political parties from eventually returning to power, and resuming their support for the same neoliberal policies that generated the crisis.

So what must happen if another systemic banking collapse occurs of even greater magnitude, not only in Iceland but in every country of the world? That is the moment when we’ll need a global Pots and Pans Revolution that is replicated by citizens of all nationalities and political persuasions, on and on until the entire planet is engulfed in a wave of peaceful demonstrations with a common cause. It will require a huge resurgence of the goodwill and staying power that once animated Occupy encampments, although this time focused on a more inclusive and universal demand for implementing Article 25 and sharing the world’s resources.

It may seem far-fetched to presume such an unprecedented awakening of a disillusioned populace, as if we can expect a visionary leader of Christ-like stature to point out the path towards resurrecting the UN’s founding ideals of “better standards of life for everyone in the world”. Unfortunately, nothing less may suffice in this age of economic chaos and confusion, so let us all be prepared for the climactic events about to take place.

The Aftershocks Of The Economic Collapse Are Still Being Felt

Photo by Oli Scarff for Getty Images

There has been a spate of articles recently on the ten year anniversary of the financial collapse. We wrote about this anniversary two weeks ago, describing the cause of the collapse and the reasons why we are still at risk for another one. Now, we look at how the aftermath of the collapse is shaping current politics, people’s views on the economic system and the conflict that lies ahead to create an economy for the 21st Century.

Economic Violence Is Being Waged Worldwide (Source Twitter)

The Aftershocks Of The Collapse Are Still Being Felt

Jerome Roos of ROAR Magazine writes that the response to the 2008 crash – bailing out the banks but not the people – led to unrest across the globe, beginning with the Arab Spring, and a growing anti-capitalist sentiment. He goes on to say:

It has recently begun to consolidate itself in the form of vibrant grassroots movements, progressive political formations and explicitly socialist candidacies that collectively seek to challenge the untrammeled power and privileges of the ‘1 percent’ from below.

The stagnant economy, austerity measures and resulting increased debt have opened a space for people to search for and try out alternative economic structures that are more democratic. They have also created conditions for a rise of nationalism on the right. Roos concludes that the “real confrontation is yet to come.”

In the United States, the economic conditions have revived populist movements on both the right and the left. Gareth Porter explains the Democratic and Republican parties are aware of the great dissatisfaction with their failed policies and know they need to try to appease the public by trying new policies, but they don’t know how.

He points to recent joint papers put out by the Center for American Progress, a Democratic Party think tank, and the American Enterprise Institute, a Republican Party think tank. One from May is called, “Drivers of Authoritarian Populism in the United States,” and the other from July is called, “Partnership in Peril: The Populist Assault on the TransAtlantic Community.” In the papers, rather than present alternative solutions, they attack Jill Stein of the Green Party and Bernie Sanders, a Democratic Socialist.

There is a battle inside the Democratic Party between progressives, some who call themselves socialists, and the dominant business-friendly corporatists. As Miles Kampf-Lessin writes:

An August poll shows that, for the first time since Gallup started asking the question 10 years ago, Democrats now view socialism more favorably than capitalism.

But the Democratic Party has been deaf to the interests of its constituents for decades. At meetings organized by centrist Democratic Party groups this summer, lacking populist solutions, the best they could come up with was “the center is sexier than you think.” And while a few “progressives” in the Democratic Party won their primaries, they are not receiving support from the party. Instead, the party leaders are throwing their weight behind security state Democrats, who could make up half of newly-elected Democrats this November.

In the Republican Party, Donald Trump’s faux populism has shown itself to be a sham. The Republican Party is unable to handle Trump, who defeated a series of elitist candidates starting with the next heir of the royal Bush family, Jeb. A record number of Republicans have given up and decided not to run for re-election. Speaker of the House Paul Ryan saw the writing on the wall and said he wanted to spend time with his family.

The 2018 election will bring change as Republican control of both Chambers of Congress is at risk, especially the House, but this is unlikely to resolve the crises the country is facing. Democrats are more focused on going after Trump. We can expect a flood of subpoenas investigating all aspects of his administration and business, rather than solutions to the economic and social crises.

From Catholic News USA

What The People Are Demanding

There is a growing anti-capitalist revolt, especially against the form it has taken in the United States; i.e., neoliberalism that privatizes everything for the profit of a few while cutting essential services for the many.  Anti-capitalism is so widespread that even corporate media outlets like Politico are taking notice, as they did in an article describing what socialism would look like in the United States. And President Obama this week discovered “a great new idea,” Medicare for all.

Of course, there has been a movement for National Improved Medicare for All for decades, and it is now gaining momentum. A new poll found even a majority of Republicans support Medicare for all, as do 85% of Democrats. Out of all of the ‘wealthy’ nations, the United States is ranked at the bottom, only above Greece, when it comes to the percentage of the population that has healthcare coverage. The third poorest country in our hemisphere, Bolivia, announced this week it will provide healthcare for all.

While polls indicate increased support for socialism, in the United States there is a lack of clarity on what that means exactly. Rather than a state socialism, most people are advocating for policy changes that socialize the basic necessities of the people. National Improved Medicare for All is one example.  There is also increased pressure for community-controlled or municipal Internet, taking this critical public service out of the hands of the much-hated for-profit providers.

Other demands include a living wage, free college education and affordable housing. There is also increased advocacy for a universal basic income and for public banks. All of these socialized programs can and do exist in capitalist countries.

From Prout.org

Creating Economic Democracy For The 21st Century

The new economy is still taking shape and will likely result from a process of trying new practices out and gradually replacing current economic institutions with the new ones that gain support. The new institutions will need to be radically different than the current ones, meaning they are rooted in different values, if they are to change the current system.

In Policy Options, Tracy Smith Carrier urges using a human rights framework for the new economy. The human rights principles are universality, equity, transparency, accountability and participation. Rather than charity, which doesn’t solve the problems that brought people into a situation of need, her research team advocates for putting in place a poverty-reduction strategy that targets “the building blocks of society that reproduce poverty.”

This past week, we interviewed economist Emily Kawano of the US Solidarity Economy Network for our podcast, Clearing the FOG. The episode is called “So You Want To End Capitalism, Here’s How.” Like the human rights framework, the solidarity economy is built on a set of principles: democracy, cooperation, equity, anti-oppression, sustainability and pluralism. Kawano describes the formation of the solidarity economy using the analogy of a caterpillar’s metamorphosis into a butterfly – the various pieces of the economy are forming and finding each other and may eventually coalesce into a new system composed of old and new elements.

This week on Clearing the FOG, we will publish an interview with Nathan Schneider, author of Everything for Everyone: The Radical Tradition that is Shaping the New Economy. Schneider acknowledges that his generation is the first one that will fare worse than its predecessors. Out of necessity, people are creating more democratic economic structures. The Internet is a helpful tool in the process, particularly in creating ‘platform cooperatives.’

The economy needs to move from concentrated wealth to shared economic prosperity. In addition to requiring specific changes in policy that lead to greater socialization of the economy, systemic changes will be needed to establish a cooperative and egalitarian economy. Without far-reaching changes to the structure of the state, they are highly unlikely to succeed.

There will be another economic crisis in the near future which will present opportunities for rapid transformational change, if the movement is organized to demand it. JP Morgan issued a report on the tenth anniversary of the collapse warning of another collapse and mass social unrest like the US has not seen in 50 years. It is up to us now to prepare for that moment by developing our vision for the future and working out the types of institutions that will bring it about. The other option, if we are not prepared, could bring fascism and greater repression.

As Jerome Roos concludes, “…the political fallout of the global financial crisis is only just getting started. The real confrontation, it seems, is yet to come.”

Central Banks Have Gone Rogue, Putting Us All at Risk

Central bankers are now aggressively playing the stock market. To say they are buying up the planet may be an exaggeration, but they could. They can create money at will, and they have declared their “independence” from government. They have become rogue players in a game of their own.

Excluding institutions such as Blackrock and Vanguard, which are composed of multiple investors, the largest single players in global equity markets are now thought to be central banks themselves. An estimated 30 to 40 central banks are invested in the stock market, either directly or through their investment vehicles (sovereign wealth funds). According to David Haggith on Zero Hedge:

Central banks buying stocks are effectively nationalizing US corporations just to maintain the illusion that their “recovery” plan is working . . . . At first, their novel entry into the stock market was only intended to rescue imperiled corporations, such as General Motors during the first plunge into the Great Recession, but recently their efforts have shifted to propping up the entire stock market via major purchases of the most healthy companies on the market.

The US Federal Reserve, which bailed out General Motors in a rescue operation in 2009, was prohibited from lending to individual companies under the Dodd-Frank Act of 2010; and it is legally barred from owning equities. It parks its reserves instead in bonds and other government-backed securities. But other countries have different rules, and today central banks are buying individual stocks as investments, with a preference for big tech stocks like Amazon, Apple, Facebook and Microsoft. Those are the stocks that dominate the market, and central banks are bidding them up aggressively. Markets, including the US stock market, are thus literally being rigged by foreign central banks.

The result, as noted in a January 2017 article on Zero Hedge, is that central bankers, “who create fiat money out of thin air and for whom ‘acquisition cost’ is a meaningless term, are increasingly nationalizing the equity capital markets.” At least they would be nationalizing equities, if they were actually “national” central banks. But the Swiss National Bank, the biggest single player in this game, is 48% privately owned; and most central banks have declared their independence from their governments. They march to the drums not of government but of big international banks.

Marking the 10th anniversary of the 2008 collapse, former Fed chairman Ben Bernanke and former Treasury secretaries Timothy Geithner and Henry Paulson wrote in a September 7 New York Times op-ed that the Fed’s tools needed to be broadened to allow it to fight the next anticipated economic crisis, including allowing it to prop up the stock market by buying individual stocks. To investors, propping up the stock market may seem like a good thing; but what happens when the central banks decide to sell?  The Fed’s massive $4 trillion economic support is now being taken away, and other central banks are expected to follow. Their US and global holdings are so large that their withdrawal from the market could trigger another global recession. That means when and how the economy will collapse is now in the hands of central bankers.

Moving Goal Posts

The two most aggressive central bank players in the equity markets are the Swiss National Bank and the Bank of Japan.  The goal of the Bank of Japan, which now owns 75% of Japanese exchange-traded funds, is evidently to stimulate growth and defy longstanding expectations of deflation. But the Swiss National Bank is acting more like a hedge fund, snatching up individual stocks because “that is where the money is.” About 20% of the SNB’s reserves are in equities, and more than half of that is in US equities. The SNB’s goal is said to be to counteract the global demand for Swiss francs, which has been driving up the value of the national currency, making it hard for Swiss companies to compete in international trade. The SNB does this by buying up other currencies, and it needs to put them somewhere, so it is putting the money in stocks.

That is a reasonable explanation for the SNB’s actions, but some critics suspect other motives. Switzerland is home to the Bank for International Settlements, the “central bankers’ bank” in Basel, where central bankers meet regularly behind closed doors. Dr. Carroll Quigley, a Georgetown history professor who claimed to be the historian of the international bankers, wrote of this institution in Tragedy and Hope in 1966:

[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.  This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences.  The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.

The key to their success, said Quigley, was that they would control and manipulate the money system of a nation while letting it appear to be controlled by the government. The economic and political systems of nations would be controlled not by citizens but by bankers, for the benefit of bankers. The goal was to establish an independent (privately owned or controlled) central bank in every country. Today, that goal has largely been achieved.

In a paper presented at the 14th Rhodes Forum in Greece in October 2016, Dr. Richard Werner, Director of International Development at the University of Southampton in the UK, argued that central banks have managed to achieve total independence from government and total lack of accountability to the people, and that they are now in the process of consolidating their powers. They control markets by creating bubbles, busts, and economic chaos. He pointed to the European Central Bank, which was modeled on the disastrous earlier German central bank, the Reichsbank. The Reichsbank created deflation, hyperinflation, and the chaos that helped bring Adolf Hitler to power. The problem with the Reichsbank, says Werner, was its excessive independence and its lack of accountability to German institutions and Parliament. The founders of post-war Germany changed the new central bank’s status by significantly curtailing its independence. Werner writes, “The Bundesbank was made accountable and subordinated to Parliament, as one would expect in a democracy. It became probably the world’s most successful central bank.”

But today’s central banks, he says, are following the disastrous Reichsbank model, involving an unprecedented concentration of power without accountability. Central banks are not held responsible for their massive policy mistakes and reckless creation of boom-bust cycles, banking crises and large-scale unemployment. Youth unemployment now exceeds 50 percent in Spain and Greece. Many central banks remain in private hands, including not only the Swiss National Bank but the Federal Reserve Bank of New York and the Italian, Greek and South African central banks.

Banks and Central Banks Should Be Made Public Utilities

Werner’s proposed solution to this dangerous situation is to bypass both the central banks and the big international banks and decentralize power by creating and supporting local not-for-profit public banks. Ultimately, he envisions a system of local public money issued by local authorities as receipts for services rendered to the local community. Legally, he notes, 97 percent of the money supply is already just private company credit, which can be created by any company, with or without a banking license. Governments should stop issuing government bonds, he says, and instead fund their public sector credit needs through domestic banks that create money on their books (as all banks have the power to do). These banks could offer more competitive rates than the bond markets and could stimulate the local economy with injections of new money. They could also put the big bond underwriting firms that feed on the national debt out of business.

Abolishing the central banks is one possibility, but if they were recaptured as public utilities, they could serve some useful purposes. A central bank dedicated to the service of the public could act as an unlimited source of liquidity for a system of public banks, eliminating bank runs since the central bank cannot go bankrupt. It could also fix the looming problem of an    unrepayable federal debt, and it could generate “quantitative easing for the people,” which could be used to fund infrastructure, low-interest loans to cities and states, and other public services.

The ability to nationalize companies by buying them with money created on the central bank’s books could also be a useful public tool. The next time the megabanks collapse, rather than bailing them out they could be nationalized and their debts paid off with central bank-generated money. There are other possibilities. Former Assistant Treasury Secretary Paul Craig Roberts argues that we should also nationalize the media and the armaments industry. Researchers at the Democracy Collaborative have suggested nationalizing the large fossil fuel companies by simply purchasing them with Fed-generated funds. In a September 2018 policy paper titled “Taking Climate Action to the Next Level,” the researchers wrote, “This action might represent our best chance to gain time and unlock a rapid but orderly energy transition, where wealth and benefits are no longer centralized in growth-oriented, undemocratic, and ethically dubious corporations, such as ExxonMobil and Chevron.”

Critics will say this would result in hyperinflation, but an argument can be made that it wouldn’t. That argument will have to wait for another article, but the point here is that massive central bank interventions that were thought to be impossible in the 20th century are now being implemented in the 21st, and they are being done by independent central banks controlled by an international banking cartel. It is time to curb central bank independence. If their powerful tools are going to be put to work, it should be in the service of the public and the economy.

• First published on Truthdig.com.

Canada: An International Banking Powerhouse

Strange how some people think Canada is a colony, a victim of U.S. power, when so much evidence points to the Great White North being an imperial power.

For example, Canada is an international banking powerhouse.

The Globe and Mail report on TD’s third-quarter results noted that its “international operations  – mostly in the United States and Latin America – produced outsized returns” while another recent story in that paper’s business pages pointed out that the Bank of Nova Scotia and Bank of Montreal “are doing brisk business lending in international markets, helping drive third-quarter profits higher.” For Canada’s biggest bank, reported the Financial Post, “U.S. wealth management unit helps propel RBC to $3.1 billion profit.”

Canada’s international banking prowess is not new. Dating to the 1830s, Canadian banks had become major players in the English Caribbean colonies and US-dominated Cuba by the early 1900s.

The Royal Bank of Canada began operating in Britain’s Caribbean colonies in the late 1800s and had branches there before Western Canada. During the 1898-1902 occupation of Cuba RBC was the preferred banker of US officials. (National US banks were forbidden from establishing foreign branches until 1914.) By the mid-1920s the “Banco de Canada”, as it was popularly known, had 65 branches in Cuba. In 1919 RBC established an association with the Westminster Bank, which had operations in British Africa. In 1925 RBC published an ad in Canadian magazines with a map of the Western Hemisphere with dots denoting the Royal’s presence throughout the Caribbean and South America. The headline read, “A bank with 900 branches: at home and abroad.”

The Bank of Montreal has operated in the Caribbean since the late 1800s. It was tied to British rule there and in Africa. According to James L. Darroch in Canadian Banks and Global Competitiveness:

In 1920, a substantial interest in the Colonial Bank was purchased [by the Bank of Montreal] to fill out the branch network and to provide representation in the West Indies and West Africa.

The Canadian Imperial Bank of Commerce (CIBC) entered the Caribbean just after World War One and Mexico a bit earlier. According to Darroch, “the CIBC acted for the U.S. government after the U.S. came into possession of the Philippines following the Spanish-American war” of 1898.

Scotiabank has “full-service  banking operations in 37 countries”. It set up shop in British controlled Jamaica in 1889, US-dominated Philippines a few years later and the Dominican Republic during the US occupation of 1916-1924.

With operations spanning the globe, Canadian banks are major international players. The five major Canadian banks are among the world’s 59 biggest banks. At 0.5% of the world’s population, Canada should have 1 of the world’s top 200 banks. To put it differently, this country’s proportion of the world’s 59 biggest banks is more than 15 times the share of Canada’s global population.

Canada’s outsized banking power is not new. In 1960 three of the world’s twelve biggest banks were Canadian and Canadian banks oversaw 15% of the international foreign currency market.

Similarly, Canada’s big five banks have long generated a significant share of their sizable profits from their international operations. In 1981 a Bank of Nova Scotia executive said, according to Walter Stewart in Towers of Gold, Feet of Clay: The Canadian Banks, “I don’t know why Canadians are upset about bank profits. We’ve stopped screwing Canadians. Now we’re screwing foreigners.”

Foreigners have protested Canadian banks for at least a century. CIBC and the Bank of Montreal were targeted during the 1910–17 Mexican Revolution and there’s been publicly recorded criticism of Canadian banking practices in the Caribbean since at least 1925. In the early 1970s Canadian banks were fire bombed in nationalist protests in Trinidad and Tobago and Scotiabank was targeted by demonstrators and the courts in Argentina at the start of the 2000s.

Amazingly, the Canadian left has generally ignored Canada’s international banking prowess (even as their foreign operations receive direct government assistance). The dominant left nationalist political economy perspective frames Canada as a victim of international capitalism. Looking at the world through a left nationalist lens generally leads individuals to ignore, or downplay, the destruction wrought by Canadian corporations abroad and “Canada’s hugely privileged place in the world economy”, as Paul Kellogg puts it in Escape from the Staple Trap: Canadian Political Economy after Left Nationalism.

Canadian banks have amassed significant wealth through their domestic operations and relationship to the profits generated from Tim Hortons’ workers, Inuit resources, oil extraction, etc. But, they’ve also made huge sums internationally and by skimming some of the wealth produced in US oil fields, Peruvian mines and Port-au-Prince sweatshops.

People on the left should tell it like it is: Canada is an imperial power, our ruling class profits greatly from the exploitation of poorer countries.

Tenth Anniversary Of Financial Collapse, Preparing For The Next Crash

Jail Bankers Not Protesters, Occupy Wall Street, 2011 (Photo by Stan Honda for AFP-Getty Images)

Ten years ago, there was panic in Washington, DC, New York City and financial centers around the world as the United States was in the midst of an economic collapse. The crash became the focus of the presidential campaign between Barack Obama and John McCain and was followed by protests that created a popular movement, which continues to this day.

Banks: Bailed Out; The People: Sold Out

On the campaign trail, in March 2008, Obama blamed mismanagement of the economy on both Democrats and Republicans for rewarding financial manipulation rather than economic productivity. He called for funds to protect homeowners from foreclosure and to stabilize local governments and urged a 21st Century regulation of the financial system. John McCain opposed federal intervention, saying the country should not bail out banks or homeowners who knowingly took financial risks.

By September 2008, McCain and Obama met with President George W. Bush and together they called for a $700 billion bailout of the banks, not the people. Obama and McCain issued a joint statement that called the bank bailout plan “flawed,” but said, “the effort to protect the American economy must not fail.” Obama expressed “outrage” at the “crisis,” which was “a direct result of the greed and irresponsibility that has dominated Washington and Wall Street for years.”

By October 2008, the Troubled Asset Relief Program (TARP), or bank bailout, had recapitalized the banks, the Treasury had stabilized money market mutual funds and the FDIC had guaranteed the bank debts. The Federal Reserve began flowing money to banks, which would ultimately total almost twice the $16 trillion claimed in a federal audit. Researchers at the University of Missouri found that the Federal Reserve gave over $29 trillion to the banks.

This did not stop the loss of nine million jobs, more than four million foreclosures and the deep reduction in wealth among the poor, working and middle classes. A complete banking collapse was averted, but a deep recession for most people was not.

The New Yorker described the 2008 crash as years in the making, writing:

…the crisis took years to emerge. It was caused by reckless lending practices, Wall Street greed, outright fraud, lax government oversight in the George W. Bush years, and deregulation of the financial sector in the Bill Clinton years. The deepest source, going back decades, was rising inequality. In good times and bad, no matter which party held power, the squeezed middle class sank ever further into debt.

Before his inauguration, Obama proposed an economic stimulus plan, but, as Paul Krugman wrote:

Obama’s prescription doesn’t live up to his diagnosis. The economic plan he’s offering isn’t as strong as his language about the economic threat.

In the end, the stimulus was even smaller than what Obama proposed. Economist Dean Baker explained that it may have created 2 million jobs, but we needed 12 million. It was $300 billion in 2009, about the same in 2010, and the remaining $100 billion followed over several years — too small to offset the $1.4 trillion in annual lost spending.

New York Magazine reports the stimulus was “a spending stimulus bigger, by some measures than the entire New Deal.” But unlike the New Deal, which benefited people at the bottom and built a foundation for a long-term economy, the bi-partisan post-2008 stimulus bailed out Wall Street and left Main Street behind.

Wall Street executives were not prosecuted even though the financial crisis was in large part caused by their fraud. Bankers were given fines costing dimes on the dollar without being required to admit guilt or having their cases referred for prosecution. The fines were paid by shareholders, not the perpetrators.

Protest near Union Square in New York, April, 2010. Popular Resistance.

Still at Risk

Many of the root causes of the crisis remain today, making another economic downturn or collapse possible. The New Yorker reports that little has changed since 2008, with Wall Street banks returning to risky behavior and the inadequate regulation of Dodd-Frank being weakened. Big finance is more concentrated and dominant than it was before the crash. Inequality and debt have expanded, and despite the capital class getting wealthier in a record stock market with corporate profits soaring, real wages are stuck at pre-crisis levels.

People are economically insecure in the US and live with growing despair, as measured by reports on well-being. The Federal Reserve reported in 2017 that “two in five Americans don’t have enough savings to cover a $400 emergency expense.” Further, “more than one in five said they weren’t able to pay the current month’s bills in full, and more than one in four said they skipped necessary medical care last year because they couldn’t afford it.”

Positive Money writes:

Ten years on, big banks are still behaving in reckless, unfair and neglectful ways. The structural problems with our money and banking system still haven’t been fixed. And many experts fear that if we don’t change things soon, we’re going to sleepwalk into another crash.

William Cohen, a former mergers and acquisitions banker on Wall Street, writes that the fundamentals of US economy are still flawed. The Economist describes the current situation: “The patient is in remission, not cured.”

From Occupy Washington DC at Freedom Plaza

The Response Of the Popular Movement

Larry Eliott wrote in the Guardian: “Capitalism’s near-death experience with the banking crisis was a golden opportunity for progressives.” But the movement in the United States was not yet in a position to take advantage of it.

There were immediate protests. Democratic Party-aligned groups such as USAction, True Majority and others organized nationwide actions. Over 1,000 people demonstrated on Wall Street and phones in Congress were ringing wildly. While there was opposition to the bailout, there was a lack of national consensus over what to do.

Protests continued to grow. In late 2009, a “Move Your Money” campaign was started that urged people to take their money out of the big banks and put it in community banks and credit unions. The most visible anti-establishment rage in response to the bailout arose later in the Tea Party and Occupy movements. Both groups shared a consensus that we live in a rigged economy created by a corrupt political establishment. It was evident that the US is an oligarchy, which serves the interests of the wealthy while ignoring the necessities of the people.

The anti-establishment consensus continues to grow and showed itself in the 2016 presidential campaigns of Senator Bernie Sanders and Donald Trump. They were two sides of the same coin of populist anger that defeated Jeb Bush and Hillary Clinton. Across the political spectrum, there is a political crisis with both mainstream, Wall Street-funded political parties being unpopular but staying in power due to a calcified political system that protects the duopoly of Democrats and Republicans.

Occupy Wall Street 2011

Preparing for the Next Collapse

When the next financial crisis arrives, the movement is in a much stronger position to take advantage of the opportunity for significant changes that benefit people over Wall Street. The Occupy movement and other efforts since then have changed the national dialogue so that more people are aware of wealth inequality, the corruption of big banks and the failure of the political elites to represent the people’s interests.

There is also greater awareness of alternatives to the current economy. The Public Banking movement has grown significantly since 2008. Banks that need to be bailed out could be transformed into public banks that serve the people and are democratically controlled. And there are multiple platforms, including our People’s Agenda, that outline alternative solutions.

We also know the government can afford almost $30 trillion to bail out the banks. One sixth of this could provide a $12,000 annual basic income, which would cost $3.8 trillion annually, doubling Social Security payments to $22,000 annually, which would cost $662 billion, a $10,000 bonus for all US public school teachers, which would cost $11 billion, free college for all high school graduates, which would cost $318 billion, and universal preschool, which would cost $38 billion. National improved Medicare for all would actually save the nation trillions of dollars over a decade. We can afford to provide for the necessities of the people.

We can look to Iceland for an example of how to handle the next crisis. In 2008, they jailed the bankers, let the banks fail without taking on their debt and put controls in place to protect the economy. They recovered more quickly than other countries and with less pain.

How did they do it? In part, through protest. They held sustained and noisy protests, banging pots and pans outside their parliament building for five months. The number of people participating in the protests grew over time. They created democratized platforms for gathering public input and sharing information widely. And they created new political parties, the Pirate Party and the Best Party, which offered agendas informed by that popular input.

So, when the next crash comes. Let’s put forward a People’s Agenda. Let’s be like Iceland and mobilize for policies that put people first. Collectively, we have the power to overcome the political elites and their donor class.

How China’s Mobile Ecosystems Are Making Banks Obsolete

Giant Chinese tech companies have bypassed credit cards and banks to create their own low-cost digital payment systems.

The US credit card system siphons off excessive amounts of money from merchants, who must raise their prices to cover this charge. In a typical $100 credit card purchase, only $97.25 goes to the seller. The rest goes to banks and processors. But who can compete with Visa and MasterCard?

It seems China’s new mobile payment ecosystems can. According to a May 2018 article in Bloomberg titled “Why China’s Payment Apps Give U.S. Bankers Nightmares”:

The future of consumer payments may not be designed in New York or London but in China. There, money flows mainly through a pair of digital ecosystems that blend social media, commerce and banking—all run by two of the world’s most valuable companies. That contrasts with the U.S., where numerous firms feast on fees from handling and processing payments. Western bankers and credit-card executives who travel to China keep returning with the same anxiety: Payments can happen cheaply and easily without them.

The nightmare for the US financial industry is that a major technology company – whether one from China or a US giant such as Amazon or Facebook – might replicate the success of the Chinese mobile payment systems, cutting banks out.

According to John Engen, writing in American Banker in May 2018, China processed a whopping $12.8 trillion in mobile payments in the first ten months of 2017. Today even China’s street merchants don’t want cash. Payment for everything is with a phone and a QR code (a type of barcode). More than 90 percent of Chinese mobile payments are run through Alipay and WeChat Pay, rival platforms backed by the country’s two largest internet conglomerates, Alibaba and Tencent Holdings. Alibaba is the Amazon of China, while Tencent Holdings is the owner of WeChat, a messaging and social-media app with more than a billion users.

Alibaba created Alipay in 2004 to let millions of potential customers who lacked credit and debit cards shop on its giant online marketplace. Alipay is free for smaller users of its platform. As total monthly transactions rise, so does the charge; but even at its maximum, it’s less than half what PayPal charges — around 1.2 percent. Tencent Holdings similarly introduced its payments function in 2005 in order to keep users inside its messaging system longer. The American equivalent would be Amazon and Facebook serving as the major conduits for US payments.

WeChat and Alibaba have grown into full-blown digital ecosystems – around-the-clock hubs for managing the details of daily life. WeChat users can schedule doctor appointments, order food, hail rides and much more through “mini-apps” on the core app. Alipay calls itself a “global lifestyle super-app” and has similar functions. Both have flourished by making mobile payments cheap and easy to use. Consumers can pay for everything with their mobile apps and can make person-to-person payments. Everyone has a unique QR code, and transfers are free. Users don’t need to sign into a bank or payments app when transacting. They simply press the “pay” button on the ecosystem’s main app and their unique QR code appears for the merchant to scan. Engen writes:

A growing number of retailers, including McDonald’s and Starbucks, have self-scanning devices near the cash register to read QR codes. The process takes seconds, moving customers along so quickly that anyone using cash gets eye-rolls for slowing things down.

Merchants that lack a point-of-sale device can simply post a piece of paper with their QR code near the register for customers to point their phones’ cameras at and execute payments in reverse.

A system built on QR codes might not be as secure as the near-field communication technology used by ApplePay and other apps in the U.S. market. But it’s cheaper for merchants, who don’t have to buy a piece of technology to accept a payment.

The mobile payment systems are a boon to merchants and their customers, but local bankers complain that they are slowly being driven out of business. Alipay and WeChat have become a duopoly that is impossible to fight. Engen writes that banks are often reduced to “dumb pipes” – silent funders whose accounts are used to top up customers’ digital wallets. The bank bears the compliance and other account-related expenses, and it does not get the fees and branding opportunities typical of cards and other bank-run options. The bank is seen as a place to deposit money and link it to WeChat or Alipay. Bankers are being “disintermediated” – cut out of the loop as middlemen.

If Amazon, Facebook or one of their Chinese counterparts duplicated the success of China’s mobile ecosystems in the US, they could take $43 billion in merchant fees from credit card companies, processors and banks, along with about $3 billion in bank fees for checking accounts. In addition, there is the potential loss of money market deposits, which are also migrating to the mobile ecosystem duopoly in China. In 2017, Alipay’s affiliate Yu’e Bao surpassed JPMorgan Chase’s government market fund as the world’s largest money market fund, with more than $200 billion in assets. Engen quotes one financial services leader who observes, “The speed of migration to their wealth-management and money-market funds has been tremendous. That’s bad news for traditional banks, where deposits are the foundation of the business.”

An Amazon-style mobile ecosystem could challenge not only the payments system but the lending business of banks. Amazon is already making small-business loans, finding ways to cut into banks’ swipe-fee revenue and competing against prepaid card issuers; and it evidently has broader ambitions. Checking accounts, small business credit cards and even mortgages appear to be in the company’s sites.

In an October 2017 article titled “The Future of Banks Is Probably Not Banks,” tech innovator Andy O’Sullivan observed that Amazon has a relatively new service called “Amazon Cash,” where consumers can use a barcode to load cash into their Amazon accounts through physical retailers. The service is intended for consumers who don’t have bankcards, but O’Sullivan notes that it raises some interesting possibilities. Amazon could do a deal with retailers to allow consumers to use their Amazon accounts in stores, or it could offer credit to buy particular items. No bank would be involved, just a tech giant that already has a relationship with the consumer offering him additional services. Phone payment systems are already training customers not to need bankcards, which means not to need banks.

Taking those concepts even further, Amazon (or eBay or Craigslist) could set up a digital credit system that bypassed bank-created money altogether. Users could sell goods and services online for credits, which they could then spend online for other goods and services. The credits of this online ecosystem would constitute its own user-generated currency. Credits could trade in a digital credit clearing system similar to the digital community currencies used worldwide, systems in which “money” is effectively generated by users themselves.

Like community currencies, an Amazon-style credit clearing system would be independent of both banks and government; but Amazon itself is a private for-profit megalithic system. Like its Wall Street counterparts, it has a shady reputation, having been variously charged with worker exploitation, unfair trade practices, environmental degradation, and extracting outsized profits from trades. However, both President Trump on the right and Senator Elizabeth Warren on the left are now threatening to turn Amazon, Facebook and other tech giants into public utilities. This opens some interesting theoretical possibilities. We could one day have a national non-profit digital ecosystem operated as a cooperative, a public utility in which profits are returned to the users in the form of reduced prices. Users could create their own money by “monetizing” their own credit, in a community currency system in which the “community” is the nation or even the world.

First posted on TruthDig.com.