It’s not only jobs that are off-shored; the profits are as well

By Pete Dolack

There’s no money! Cut, cut, cut! So go the mantras of austerity. The second exclamation follows on the first, but the first is not so. Where then is the money?

Much of the money is hiding in tax havens; both corporations and the top executives and financiers who rake in fabulous wealth on the backs of the employees of the enterprises they control make full use of such havens. U.S. elites are encouraged to do this is because U.S. tax law, through mind-numbing complexity, allows profits and income to be shifted offshore, where they remain untaxed.

Such accounting legerdemain is openly acknowledged (although the details and scale are always hidden), and most often justified by another oft-repeated mantra: That U.S. tax rates are simply too high. But a simple lesson in history demonstrates that is not so, either.

The highest personal tax rate was 91 percent during the 1950s and early 1960s. The latter decades were not periods of U.S. economic hardship, nor did the wealthy by and large fail to remain wealthy. But as neoliberal ideology became dominant, those tax rates fell sharply — from 70 percent at the start of Ronald Reagan’s two presidential terms to 28 percent by the time he was done.

Today, the top tax rate in the U.S. is 35 percent in the wake of several adjustments. The top corporate tax rate is the same. Millionaires, however, don’t pay anywhere near that rate, nor do corporations, because there are so many generous loopholes, making the Right-wing argument that the U.S. corporate tax rate is among the world’s highest specious. (And most of the wealthy’s income derives from capital gains, which are taxed at only 15 percent.) Just how little many economic elites actually pay in taxes was revealed again in an interesting study released earlier this month by the Institute for Policy Studies.

The report found that:

• In 2011, for the second year in a row, 25 of the 100 highest-paid corporate chief executive officers in the U.S. took home more in pay than their company paid in federal income taxes. On average, the 25 firms had nearly $1 billion in U.S. pre-tax income but still received net tax benefits that averaged $129 million.
• The chief executive officers of these 25 firms received $20.6 million in average total compensation last year. Combined, the 25 firms have 533 subsidiaries in tax-haven locations such as the Cayman Islands, Bermuda and Gibraltar.
• The four most direct tax subsidies for excessive executive pay cost taxpayers an overall estimated $14.4 billion per year. That amount could cover the annual cost of hiring about 212,000 elementary-school teachers or Head Start slots for about 1.9 million pre-school children for one year.

The Institute for Policy Studies report states that:

“Nationwide, budget cuts have axed 627,000 public service jobs since June 2009, all but 6 percent of that total at the state and local level. Schools, health clinics, fire stations, parks, and recreation facilities—virtually no public service has gone unsqueezed. … Yet tens of billions of these scarce tax dollars are getting diverted. These tax dollars are flowing from average Americans who depend on public services to the kingpins of America’s private sector. They’re subsidizing, directly and indirectly, the mega-million paychecks that go to the top executives at our nation’s biggest banks and corporations.”

One of the ways that working people subsidize stratospheric executive pay is a loophole that allows unlimited compensation to be deducted from a corporation’s tax bill — the more outlandish the executive pay, the less a corporation owes in taxes.

The massive tax cuts for the wealthiest put through by the Bush II/Cheney administration is often cited as a leading reason for the yawning deficits that opened up during the decade of the 2000s. The wealthiest certainly benefited, as the Institute for Policy Studies report demonstrates: Fifty-seven chief executive officers alone saved a composite $104 million, or $1.8 million per CEO, as a result of the Bush tax cuts.

U.S. economic elites are not unique, and there are many more than 57 people enjoying massive benefits from tax cuts, subsidies, tax havens and tax shelters. A July 2012 Tax Justice Network report found that:

“A significant fraction of global private financial wealth — by our estimates, at least $21 to $32 trillion as of 2010 — has been invested virtually tax-free through the world’s still-expanding black hole of more than 80 ‘offshore’ secrecy jurisdictions. We believe this range to be conservative.”

That is a whole lot of wealth not being taxed. And while most of that total is accumulated by the wealthiest in the advanced capitalist countries, much of it comes from elites in other countries. The Tax Justice Network studied 139 middle- and low-income countries for which it had sufficient World Bank data and found that:

“Since the 1970s, with eager (and often aggressive and illegal) assistance from the international private banking industry, it appears that private elites in this sub-group of 139 countries had accumulated $7.3 to $9.3 trillion of unrecorded offshore wealth in 2010, conservatively estimated, even while many of their public sectors were borrowing themselves into bankruptcy, enduring agonizing ‘structural adjustment’ and low growth, and holding fire sales of public assets.”

Within the United States, Citizens for Tax Justice reports that:

“Tax evasion by individual taxpayers is estimated to deprive the U.S. Treasury of as much as $70 billion per year (corporate offshore tax avoidance is estimated to cost the Treasury an additional $90 billion per year).”

The U.S. government budget deficit is much larger than $160 billion per year, but the total in the above paragraph is only an estimate of shell games performed with off-shore tax havens. Add in tax loopholes, accounting gimmicks and assorted other ways to avoid paying tax on income and profits, and the numbers begin to add up.

The wealthy would much rather loan money than pay taxes. They would like more money to flow to them. But extreme inequality leads to hard times and a vicious circle — more austerity is imposed, reducing the amount of money in the hands of working people, causing them to spend less due to fear of the future, which leads to more weakness in the economy. (No small factor when consumer spending constitutes 60 to 70 percent of the gross domestic product of advanced capitalist countries.)

As more money and capital is concentrated into fewer hands, and the ability to move jobs and production is more unfettered, more power is concentrated in the hands of economic elites, giving them a greater ability to have their preferred policies adopted by governments.

The cycle of austerity can be summarized in two paragraphs: Governments borrow money from the rich and from corporations instead of taxing them, then have to pay higher interest rates on those borrowings because the rich and the corporations complain that too much is being borrowed. To ameliorate the demand for higher interest rates, the governments’ central banks are lending money nearly interest-free to financial institutions so that they will continue to buy the governments’ loans at the higher interest rates. In exchange for continuing to buy government debt (which will earn them a nice profit because they are using the cheap money to buy the debt), the financial institutions demand that the governments cut social services, lay off workers, sell assets and impose other austerity measures.

As a result of the austerity, governments take in less revenue, so they have to borrow more from the rich and corporations, who have hoarded the country’s wealth, at the same time the governments’ central banks are giving financial institutions more cheap money and giving them the green light to hand out more money to insiders, leaving them more vulnerable to the next economic downturn, when, because they are “too big to fail,” they are confident they will receive another bailout.

The standard ideological obfuscation used to justify ever lower tax rates on the wealthy is a variation of “you can decide what to do with your money better than government”; a subset of this is that higher taxes on the wealthy are meant to “punish” them. But social services — schools, transportation infrastructure, court systems, police, fire departments, unemployment insurance and much else — cost money, and a civilized society has to pay for them.

Moreover, the successful businessperson, whether he or she inherited the business or led the building of it, benefits enormously from the society that enables them to amass their wealth. The line of “you can decide what to do with your money better than government” is seductive: Of course you should make your own choices. But that’s not what taxes are — they are not a “taking away” of an individual’s autonomy, they are the price we all pay to live in a civilized country.

The plutocrat making that argument is not concerned about his or her employees’ autonomy; only about his or her ability to slake his or her greed. But the problem with greed is that it can never satisfied; more is never enough.

Nor do plutocrats “create” jobs —  they are created by a need to fulfill demand. More jobs mean more employees to profit from because profits are derived from the work of employees.

“Freedom” is equated with individualism — but as a specific form of individualism that is shorn of responsibility. More wealth for the rich is advertised as good for everybody despite the shredding of social safety nets that accompanies the concentration of wealth. Those who have the most — obtained at the expense of those with far less — have no responsibility to the society that enabled them to amass such wealth. Imposing harsher working conditions is another aspect of this individualistic “freedom,” but freedom for who?

“Freedom” for industrialists and financiers is freedom to rule over, control and exploit others; “justice” is the unfettered ability to enjoy this freedom, a justice reflected in legal structures. Working people are “free” to compete in a race to the bottom set up by capitalists — this is the freedom loftily extolled by the corporate media and the institutions of the wealthy.

As I have previously noted, the economist Richard Wolff, in his Economic Update radio show, points out that if only U.S. residents with at least $1 million at their disposal for investment were taxed 10 percent on this portion of their wealth — their fixed assets such as mansions, yachts and collectibles such as works of art would remain untouched — the entire yearly U.S. government budget deficit would be eliminated.

There is enough to go around — if there is enough collective will and organization to make it happen.

Hotter than the Dust Bowl, but not hot enough for denialists

By Pete Dolack

There is delusion, and then there is willful fantasy. At what point does the first pass into the second?

Wherever on the anti-science continuum lies the point we might wish to pinpoint, surely global-warming denialists have slid past, riding a toboggan down a slope so steep it threatens to become a cliff. And with the snow rapidly melting, there are many exposed rocks that could bring the ride to a sharp halt.

Unless you live in Seattle, Dublin or Edinburgh, this Northern Hemisphere summer has been difficult to ignore. The United States last month experienced its hottest month in recorded history, breaking the record set in July 1936 at the peak of the Dust Bowl, when farming became nearly impossible in the Great Plains because of heat and drought. As the Dust Bowl years of the mid-1930s still weigh heavily in the U.S. psyche, that is a particularly dramatic record.

A small sampling of trends creates a cumulative picture. Here are four:

• The 20 hottest years on a global basis have all occurred since 1987.
• Nine of the ten hottest years have occurred since 2001.
• June marked the 328th consecutive month that the global temperatures exceeded the 20th century average.
• For 2010 and 2011 combined, 27 countries recorded an all-time national high temperature while one recorded a national low.

Global warming increases the likelihood of unusually severe heat waves and makes them more intense. No single hot day or event can necessarily be attributed definitively to global warming; at least that has been conventional thinking. But recently the climatologist James Hansen, who has been sounding the klaxon for years, was the lead author of a research paper published in the journal Proceedings of the National Academy of Sciences that has found, through statistical analysis, a tighter link.

There has been considerable push-back on this paper, but as Hansen has consistently been ahead of the curve on global warming, it is difficult to dismiss the research. The U.S. space agency, the National Aeronautics and Space Administration, said in its announcement of the paper:

“A new statistical analysis by NASA scientists has found that Earth’s land areas have become much more likely to experience an extreme summer heat wave than they were in the middle of the 20th century. … The statistics show that the recent bouts of extremely warm summers, including the intense heat wave afflicting the U.S. Midwest this year, very likely are the consequence of global warming. …

“Hansen and colleagues analyzed mean summer temperatures since 1951 and showed that the odds have increased in recent decades for what they define as ‘hot,’ ‘very hot’ and ‘extremely hot’ summers. … The researchers detailed how ‘extremely hot’ summers are becoming far more routine. ‘Extremely hot’ is defined as a mean summer temperature experienced by less than one percent of Earth’s land area between 1951 and 1980, the base period for this study. But since 2006, about 10 percent of land area across the Northern Hemisphere has experienced these temperatures each summer.”

Other studies have shown a correlation between increases in carbon dioxide in the atmosphere and rising temperatures (methane is also a contributor); carbon dioxide and other pollutants are a direct result of industrial activity and correlate with the increase in it.

At times, one or another denialist will acknowledge rising temperatures but attempts to blame the Sun, either claiming that the Sun is becoming brighter (completely untrue) or connecting it to the sunspot cycle (there is no basis for this, either). Those who attempt to advocate the sunspot cycle rely on a period known as the “maunder minimum,” a Medieval period when the Sun stopped producing sunspots for several decades that coincides with a period of unusually cold weather in Europe.

But it is not known if that extraordinary cold period in Europe was replicated elsewhere. There seem to be no conclusive evidence of similar cold spells elsewhere; at most, a somewhat colder than normal series of winters in North America but not on the scale of what Europe experienced.

The next logical step is to compare the sunspot cycle (which has been reliably observed for centuries) with global temperatures. And we find no correlation whatsoever. During a normal 11-year cycle, sunspots dwindle to almost zero at the bottom of the cycle before rising to an active peak, but there is no matching temperature pattern. In fact, we just experienced an unusually lengthy period of solar inactivity, with the minimum period lasting about three years instead of the usual much briefer period.

Sunspot activity has remained well below normal since 2008. That has not seemed to have cooled the weather.

So what could have caused that long spell of cold winters in Europe? An analysis on Discover Magazine’s marvelous “Bad Astronomy” web pages concludes that during the depth of the cold spell, in the 1690s, there was an unusually intense period of volcanism (based on natural records of atmospheric sulfur) and a persistent dip in the jet stream that allowed Arctic air to pour into Europe. The jet stream’s behavior was due to its being weaker than normal, which the “Bad Astronomy” analysis said was due to a reduction in ozone that in turn resulted from weaker magnetic activity on the Sun.

The dearth of sunspot activity was arguably a contributing factor toward cold European winters, but “Bad Astronomy” cautions against making too much of the connection:

“Mind you — and this is fairly important — there’s evidence that the Little Ice Age began long before the Maunder Minimum. It may have actually been more like series of cold pulses that started centuries earlier. So any connection between the solar cycle and ice ages is pretty weak.”

A similar jet stream pattern caused unusually snowy winters in eastern North America during the 2009-10 and 2010-11 winters, but, perversely, that was due to global warming. As explained in a series of articles on the Weather Underground web site, dramatically warmer weather in the Arctic caused a decline in the difference of strength between the semi-permanent Icelandic low and Azores high, weakening the jet stream; a weakened jet stream becomes more variable and when it dips to the south persistently, cold air pours in as was the case during those snowy eastern North American winters.

We’re left with the only plausible explanation for global warming: human activity. So we should ask the obvious question: Who profits from the activity that causes global warming (i.e., pumps carbon dioxide and other pollutants into the atmosphere) and who funds the anti-science global-warming denialist groups?

Surprise, surprise: They are the very same organizations, principally oil and gas companies.

Exxon Mobil, the largest oil company in the world (which recorded the largest yearly profit of any corporation in history in 2008 at US$41 billion) is well established as the largest paymaster. Exxon Mobil is reported to have spent $16 million funding various denialist groups just from 1998 to 2005, according to a May 2012 article in the Monthly Review (and that is a small fraction of what it spends on lobbyists). Exxon, however, is far from unique — all major petroleum companies (including Koch Industries), all three U.S. automobile manufacturers and the infamous U.S. Chamber of Commerce, a relentless and powerful pressure group that regularly flexes its ample muscle, all contribute. At least two of their denialist “think tanks” started life as shills for the tobacco industry, pumping out reports denying links between smoking and health problems.

A favorite tactic is to claim, falsely, that global warming is a matter of controversy. It is not. Climatologists are virtually unanimous that global warming is real and caused by human activity (in contrast to a split among television weather reporters, who are not so trained). The only real controversy is how fast temperatures will rise during this century and what level of carbon dioxide concentration will trigger feedback loops that will cause more dramatic changes.

Groups that are paid propagandists for oil and gas companies and other industries concerned with short-term profits rather than long-term good flood the corporate mass media with misinformation, which is given equal time in yet another misguided application of the news media’s concept of “neutrality.” Nor does the news media distinguish between what is true, what is genuinely controversial and what is false, instead using the cover of “neutrality” to simply quote the various sides and allow readers, listeners and viewers to sort it out themselves. But we aren’t all experts in science.

There is no grand conspiracy at work here, nor any need for one. Although some obviously biased Right-wing news outlets consciously slant in favor of their corporate benefactors, more often there is nothing at work here other than an unthinking application of the concept of “neutrality,” a cherished ideal in the mass media of the U.S. and many other countries. The concept of media “neutrality” is easily exploited by denialist “think tanks” (and other lavishly funded corporate fronts) that pump out reports and provide spokespeople.

A lack of scientific knowledge among the general public plays into these hands as well. All these groups need do — as leaked documents from a couple of them confirm — is to sew doubt among the public. The acquiescence of their representatives in the legislatures is all else that is needed. Keep those profits coming!

Ultimately, even energy-company executives won’t be able to avoid the effects of global warming. Blithe soundbites that crops will be grown further North ignore that whatever small benefit there may be from longer growing seasons in high latitudes in North America, for instance, will be more than countered by the Great Plains turning into a desert and the Midwest becoming more susceptible to drought and debilitating hot weather (as it has during the summer of 2012).

There are some wealthy executives who seem to believe they can build a high enough wall or a deep enough moat to keep the world’s troubles away from them, or who simply believe the misinformation pumped out by their paid propagandists. People who spend their lives frantically scrambling for ever bigger piles of money tend to possess very narrow personalities; many are ignorant of the world outside their business interests. (Which is why the concept of businessperson as natural political leader is nonsense.) Wrapped in a mantle of nationalism and riddled with fear-mongering, their propaganda appeals to those who refuse to believe anything that might contradict their own narrow worldview.

The more you know, the more you realize you don’t know. Ignorance, however, is self-fulfilling — if you think you know everything, there is no need to learn anything. The global-warming denialists are following the playbook of religious fundamentalists who deny the reality of evolution by falsely claiming that a “controversy” exists in the face of scientific evidence overwhelmingly backing it.

As the saying goes, when there is no more clear air, water and food, you’ll find out you can’t eat money.

Could the rise of China fatally de-stabilize capitalism?

By Pete Dolack

The world is not limitless, yet growth without limits is touted as a permanent economic elixir. But natural resources aren’t infinite, nor can demand be infinite. What happens when the limits of growth are reached?

We aren’t supposed to ask that question about capitalism; the assumption is that economic activity will always grow. The insertion of China into the world capitalist system has created the opportunity for more growth as a country of 1.3 billion people has been thrown open to the world’s markets.

But what if, rather than throwing capitalism a lifeline in the form of a vast pool of consumers who will drive demand, China instead will fatally destabilize an already weakened world economic system?

China will be the final straw that will bring about the downfall of the capitalist system is the provocative conclusion of an interesting book by a Chinese economist, Minqi Li, who now teaches at the University of Utah. Professor Li doesn’t pull any punches in his book; indeed his book’s title is The Rise of China and the Demise of the Capitalist World Economy.* The book’s central thesis is that the huge mass of low-wage Chinese workers will drag down wage levels globally; the increase of industrialization in developing countries will lead to exhaustion of energy sources; and that ecological limits will force a halt to growth, fatal to a system dependent on growth.

Professor Li believes that the combination of these crises will bring an end to the capitalist system by the middle of this century. The Rise of China, however, is not apocalyptic; rather it methodically builds it case piece by piece through a sober examination of economic trends, calculations of the limits to a range of natural resources, analysis of long-term environmental unsustainability, and study of historical trends going back centuries. Nor is this a bleak work; Professor Li writes in the Gramscian spirit: pessimism of the intellect, optimism of the will. What will follow the collapse of capitalism is not pre-ordained but is up to humanity to determine.

The first two of the book’s seven chapters provide an interesting discussion of Chinese history, before and after the 1949 revolution. Pro-capitalist factions within the Chinese Communist Party gained the upper hand soon after Mao Zedong’s death in 1976, with Deng Xiaoping wresting party leadership by the end of the decade. Early reforms granting concessions to workers and peasants cemented political control for the Deng faction, Professor Li writes, enabling the party to then introduce capitalism. A 1988 law granted enterprise managers full control in the workplace (including hiring and firing at will), and the development of market relations enabled privileged bureaucrats to enrich themselves.

Intellectuals on the one hand, and enterprise and bureaucratic elites on the other, sought the growth of market relations and a firm turn toward capitalism. The two groups, however, disagreed on how the spoils would be divided between them, and the party was split three ways on how fast and how far to move toward putting the economy on full market relations. It was Deng who proved to be “the master of Chinese politics,” Professor Li writes, as he was able to implement an intermediate strategy between the party’s poles and use the crackdown in Tianamen Square to reduce the intellectuals to the junior partners of the ruling elites and to break the resistance of urban working people. Thus the stage was set:

“Throughout the 1990s, most of the state and collective-owned enterprises were privatized. Tens of millions of workers were laid off. The urban working class was deprived of their remaining socialist rights. Moreover, the dismantling of the rural collective economy and basic public services had forced hundreds of millions of peasants into the cities where they became ‘migrant workers,’ that is, an enormous, cheap labor force that would work for transnational corporations and Chinese capitalists for the lowest possible wages under the most demanding conditions. The massive influx of foreign capital contributed to a huge export boom.” [pages 64-65]

The “socialist rights” that were revoked included job security, medical insurance, access to housing and guaranteed pensions. The creation of an exodus from the countryside provided a huge pool of surplus labor to keep wages extremely low.

“China’s economic rise has important global implications. First, China’s deeper incorporation into the capitalist world-economy has massively increased the size of the global reserve army of cheap labor. In some industries, this allows capitalists in the core states to directly lower their wages and other costs by directly relocating capital to China. But more important is the ‘threat effect.’ That is, capitalists in the core states force core-state workers to accept lower wages and worse working conditions by threatening to move their factories or offices to cheap labor areas such as China, without actual movement of physical capital. …

“Secondly, China’s low-cost manufacturing exports directly lower the prices of many industrial goods. To the extent that unequal exchange takes place between China and the core states, part of the surplus value produced by Chinese workers is transferred to the core states and helps to raise the profit rate for capitalists in the core states.” [pages 70-71]

Professor Li’s analysis rests on “world systems” theory, which divides the world’s capitalist countries into three general groupings. World systems theory emphasizes that capitalism is a global system that changes and mutates over time and therefore must be analyzed as a single unit rather than as a collection of nation-states. The global division of labor forms the basis for a division of the world’s countries into three broad categories: core, semi-periphery and periphery, with the latter two subordinate to the core countries and the periphery the most exploited.

Inequality between core and periphery is an “indispensable mechanism” of global capitalism, Professor Li writes, and the existence of a semi-periphery acts as an important buffer because it is exploited to a relatively lesser degree than the periphery and can also, to a lesser degree, exploit the periphery. The semi-periphery historically comprised a small percentage of the world’s population and thus could be “bought off” relatively easily and thus a buffer against any united resistance by the world’s non-core countries. But if the semi-periphery were to become a significant portion of the world’s population, the world system would be destabilized.

The massive size of China is the destabilizing agent, Professor Li argues. He presents four possible scenarios that could arise from the rise of China:

“First, China may fail. China’s great drive toward ‘development’ in the end may turn out to be no more than a great bubble. [In this scenario,] as China sinks back to the status of periphery or poor semi-periphery, China’s existing regime of accumulation will collapse as it can no longer withstand the exploding social pressures the very process of accumulation has generated. This scenario, however, may be the least devastating for the capitalist world-economy.

“For the capitalist world-economy, the problem of China lies with its huge size. China has a labor force that is larger than the total labor force in all the core states, or that in the entire well-to-do semi-periphery. As China competes with the well-to-do semi-peripheral states in a wide range of global commodity chains, the competition eventually would lead to the convergence between China and well-to-do semi-peripheral states in profit rates and wage rates. This convergence may take place in an upward manner or a downward manner.

“In the downward-conversion scenario (the second scenario), China’s competition, with its enormous labor force, will completely undermine the relative monopoly of the historical well-to-do semi-peripheral states in certain commodity chains. As relative monopoly is replaced by intense competition, the value added contained in the traditional semi-peripheral commodity chains will be squeezed, forcing the historical well-to-do semi-peripheral states to accept lower wage rates that are closer to Chinese wage rates.” [pages 109-110]

Professor Li is arguing that, in this second possible scenario, wages rates in industrialized countries not among the “core” states (industrialized countries other than Western and Northern Europe, North America, Japan, arguably South Korea) would collapse under the competitive pressure of China’s low wages, which long hovered at about five percent of U.S. wage rates, and in the mid-2000s were one-quarter to one-fifth of countries such as Argentina and Hungary. A collapse in wages in semi-peripheral countries around the world such as Argentina, Hungary and Turkey would spark unrest and lead to economic depression around the world.

“There is the third scenario, that of upward convergence. China may succeed in its pursuit of ‘modernization’ and become a secured, well-to-do semi-peripheral state. In the meantime, the historical well-to-do semi-peripheral states may succeed in maintaining their relative monopoly in certain commodity chains. As a result, the Chinese wage rates converge upwards towards the semi-peripheral levels. Unfortunately, this scenario is as dangerous for the capitalist world-economy as the second scenario. The problem, again, lies with China’s huge size. Should the Chinese workers generally receive the semi-peripheral levels of wages, given the size of the Chinese population, the total surplus value distributed to the working classes in the entire well-to-do semi-periphery would have to more than double. This will greatly reduce the share of the surplus value available for the rest of the world.” [pages 110-111]

Here, Professor Li is arguing that a multi-fold increase in Chinese wages simultaneous with a maintenance of wages in countries around the world would likely be unsustainable. Multi-national companies based in core countries have moved production to China to take advantage of its low wages and lack of effective labor laws, enabling them to extract more surplus value. “Surplus value” is the sizable difference between the value of what an employee produces and what the employee is paid; some of the surplus value is used by capitalists for investment or to cover other expenses but much of it goes into stratospheric executive pay and financial-market speculation.

An upward convergence of wages around the world in present-day low-wage havens such as China would significantly reduce capitalists’ profits. In this scenario, capitalists would seek to cut wages in core countries to make up the difference, which in turn would trigger reductions in demand. Declining rates of profit, under capitalism, lead to economic downturns. Each of the world’s major economic crises, from 1873 on, have followed declines in the rate of profit.

“If the scenario of upward convergence turns out to be too expensive for the capitalist world-economy, what if China’s upward mobility takes place at the expense of the historical well-to-do semi-periphery? In other words, imagine the scenario (the fourth scenario) in which the rise of China (and India) successfully displaces the historical well-to-do semi-periphery, what are the likely implications for the existing world system? … [A]fter all of the investment is distributed, how much will be left for the other half of the globe?” [page 111]

Were the growth in energy consumption of the Chinese and Indian economies to continue at the same rates, and likewise for the United States and the eurozone, the rest of the world would be left without an energy supply in two decades, Professor Li argues. He writes:

“Given these trends, the rest of the world will have to get by with less and less energy consumption after 2017 and by 2035 there would be virtually no available energy left for the entire world outside China, India, the U.S. and the Eurozone. It is certainly impossible for such a scenario to materialize.” [pages 111-112]

But will there be enough energy to meet even the increasing needs of whatever countries will be in a position to dominate energy resources? Because of the intense competition imposed by the market in capitalism — individuals, businesses and states must all engage in it — a substantial amount of available surplus value must be used toward further capital accumulation to secure and expand market share. Those who do not do so are eliminated in the competition.

Investment is a necessity, and to compete successfully, what is wrung out of labor must rise. Machinery is the route toward greater efficiency. But as machinery and consumer products become more sophisticated, energy and other resources are consumed at greater rates; thus energy inputs rise faster than the population, pushing energy usage beyond sustainability and degrading the environment.

The world is already consuming resources beyond the world’s bio-capacity, Professor Li argues. Not only have the world’s “core” countries already exceeded their regional bio-capacities, but China, India, the Middle East and Central Asia have as well. Using calculations in a 2006 report by the World Wildlife Fund in the USA and Canada, the Zoological Society of London and Global Footprint Network, China and India consume resources and impose domestic environmental damage at a rate twice beyond their ability to be sustainable. Although those countries consume per capita far less than do the U.S. or the European Union, they also have much lower bio-capacities.

Such problems are compounded by an imminent peak in oil and gas, and limits to a variety of metals and other natural resources. If renewable energy sources prove unable to make up for the future shortfall in energy from oil and gas, the world will have much less energy available to it in the latter part of the 21st century than is available now. Professor Li believes that renewable energy will only be able to produce a small percentage of that of non-renewable sources. Even if his pessimism proves unfounded, the unsustainability of present energy consumption remains — as is the damage being done to the environment.

Another looming crisis for the capitalist system is the lack of a successor to the United States as the system’s center. Capitalism has had a succession of dominant centers; each successive center has been bigger to be able to cope with increasingly complex tasks. When London succeeded Amsterdam as the financial center, the financial center became located within a country with a powerful military, not only a large merchant fleet as Amsterdam’s United Provinces possessed. With New York succeeding London, the country at the center is continental in size and possesses a military that can be projected around the world.

Professor Li predicts a rapid decline for the U.S., including an imminent end to the dollar as the world’s central currency. Here I believe the professor’s forecast will prove to be considerably off; although the U.S. has entered a period of decline, its military and financial powers will remain preeminent for some time. And the dollar and U.S. debt instruments remain safe havens.

Declines from the capitalist system’s apex have tended to be gradual and not precipitous; moreover, the former financial center tends to remain powerful in financial markets for some time after the military baton has been passed. And there is no country remotely near being able to mount any challenge to U.S. military supremacy; U.S. military spending is nearly equal to military spending of all the rest of world put together and a significant portion of the Pentagon budget goes to weaponry.

It is a contradiction that the “duties” of the central power contribute to its ultimate decline. For the U.S., that is not only the enormous drain of military spending that starves the rest of its economy of investment and needed social provisions, but that it props up the world system through its deficits.

“After the systemic breakdown of the early twentieth century, the capitalist world-economy can no longer afford another similar breakdown. The hegemonic power has since then assumed the new responsibility to actively manage the global economy. Instead of allowing the system to simply collapse [during the repeated economic crises from the 1980s], the U.S. responded to growing systemic instability by running large and rising current account deficits, in effect pumping ‘liquidity’ into the global economy.” [page 123]

No other country has a big enough economy, nor a big enough military to apply the muscle that underlies the capitalist system, to replace the U.S., yet the capitalist system is unable to function without such a center. The next hegemon must be bigger than the U.S., and there is no country or bloc that fits the bill. Moreover, Professor Li argues, such a hegemon would be so large that it would stifle competition among countries, kicking out one of the crucial legs of the capitalist system.

Crises in economics, the environment, shrinking natural resources and the chaos of global warming are leading to a threat to very survival of humanity, Professor Li argues. Moreover, multiple crises are leading to a point where economic growth is no longer possible, the ultimate contradiction for the capitalist system, the very existence of which is based on endless growth and accumulation. He writes:

“Centuries of relentless capitalist accumulation have set humanity on a course of self-destruction. The very survival of humanity and civilization is at stake. The crisis can not be avoided or overcome within the historical framework of capitalism. To rebuild human society on an ecologically sustainable basis, there must be an economic system that is based on the production for use which is capable of meeting people’s basic needs, rather than one that is oriented towards the endless pursuit of profit and accumulation.” [page 173]

What comes next is up to humanity to decide. Professor Li quotes world-systems theorist Immanuel Wallerstein as predicting the world will enter a post-capitalist era in the second half of the 21st century. But what will that system or systems be? It could well be much worse — an authoritarian feudalism in which survival is a struggle in a time of scarcity is certainly foreseeable. Or it could be a democratic socialist system, in which production is for human necessity rather than an elite’s wealth accumulation and in which the consequences of a changing climate and the limitations on the world’s resources are handled in fully democratic, rational manners without elites to confiscate most of what is produced.

All social systems are historical, and capitalism is no exception, Professor Li argues. Indeed, all previous systems have reached their limits and been supplanted by newer forms. Ending on an optimistic note, he writes that “if the future socialism is able to make the best use of the human knowledge of nature that has been developed under capitalism and further expand that knowledge” and a sustainable relationship between population and resources can be established, then “humanity will be in a position to resume the great historical march to the realm of freedom.”

The Rise of China rewards the reader with a wealth of information and analysis. It is not necessary to agree with everything in the book to find it a valuable contribution toward understanding the stresses of the present economic crisis and a stimulant to discussion of the viability of continuing on the current economic path. One conclusion that shouldn’t be controversial, however, is that there will be no saviors. We’ll have to save ourselves.

* Minqi Li, The Rise of China and the Demise of the Capitalist World Economy [Monthly Review Press, New York, 2008]

The corporate steamroller of gentrification is a deliberate process

By Pete Dolack

Gentrification is an ongoing process, of which we’ve had two reminders in the past month in New York City. The recent closing of the Bowery Poetry Club is a sad reminder of the dwindling number of community spaces — and one need only look across the street to see a high-end corporate clothing boutique occupying the space where CBGB showcased musical acts for more than three decades.

Even last weekend’s annual commemoration of the Tompkins Square Park police riot of 1988 was, in its own way, an echo of gentrification as the event served mostly as an act of nostalgia for the past of Manhattan’s Lower East Side that remains only in pockets. No New York City neighborhood put up more of a fight for its survival as an alternative haven for non-conformists in cultural, political and social milieus. That any of its tradition as a place of resistance to the overwhelming power of money survives in the now legalized squats, smattering of community spaces, and the out-numbered activists, artists and non-conformists who are able to remain by virtue of rent regulations is because of collective action.

Just to be clear about what is meant by the term gentrification, a working definition of it is: A process whereby an organic culture originating in the imagination, sweat and intellectual ferment of a people living in a particular time and place who are symbolically or actually distinct from a dominant moneyed mono-culture is steadily removed and replaced by corporate money and power, which impose a colorless chain-store conformity. The process of gentrification is assisted by a local government under the sway of local corporate elites, and is centered on dramatic increases in commercial and residential rents such that the people and culture who are being removed find it increasingly difficult to remain.

This process is concurrent in many cities and countries. A special twist in New York City is that artists are used as a “bait” to put formerly industrial areas on the map as destinations, until the artists are no longer needed and are forced out by the sharply rising rents that sweep over the area once gentrification takes hold. This process can happen gradually, as it was in Brooklyn’s Williamsburg neighborhood, or it can happen swiftly, as it was further down Brooklyn’s East River waterfront in the “Dumbo” enclave.

These processes are never organic, but become orchestrated once a neighborhood attracts a reputation as “hip” or “interesting.” In this variant, the artists arrive in places either emptied by de-industrialization, subject to high crime rates under the impact of neglect, or a combination of the two. In the case of Williamsburg, the process greatly accelerated following a massive rezoning that allowed 40-story luxury condominium buildings along the East River where only industrial uses has previously been allowed. (That more than 95 percent of local speakers at an hours-long hearing were in opposition and that local activists spent years developing an alternative plan in line with the neighborhood’s character was of no consequence.)

So now we have the “irony” of aggressively marketed buildings branded as “The Edge” located where an open-air waste-transfer station operated only a few years earlier: Bags of garbage used to molder there until a barge could arrive to remove them.

One strongly suspects the developers responsible for the complex do not inform the newcomers of the recent past.

The neighborhood that became know as Dumbo (the name is an acronym for “Down Under the Manhattan Bridge Overpass”) underwent the process much quicker. Artists had settled there, too, as space became available. One real estate company essentially bought the neighborhood and openly used the artists as bait to make the neighborhood a desirable destination, going so far as to give street-level space for them to use as galleries or performance stages for a couple of years until the developers would be ready to reclaim the building to convert into condominiums and/or rental space for high-end corporate retail businesses.

The process extended to the corporatization of the annual Dumbo Arts Festival. I appeared as a poet in the 1999 pre-gentrification edition of the festival, simply because I happened to meet the friendly organizers of the spoken-word event, which was held on a loading dock. Artists would open their studios to the public, and those participating in the festival were primarily artists who lived there. A decade later, the neighborhood had been transformed into an expensive shopping mall, and the festival now boasts a string of corporate sponsors. Few artists remain in a neighborhood now dominated by million-dollar condominiums, the owners of whom undoubtedly fancy themselves as trend setters by virtue of living there.

The idea of corporatization has so taken hold that Dumbo’s open space, the Brooklyn Bridge Park, is expected to generate a profit. That sounds crazy, but it is really true: Some of the land set aside for the park is being sold to developers to build high-end hotels or other commercial enterprises to offset the costs of the park.

But the draw of artists is not necessary. Gentrification moves in waves and is ongoing; in New York City, developers are greedily preparing to devour Harlem — its historical cachet reduced to an advertising campaign — and have begun to eye outlying neighborhoods such as Bushwick. Gentrification frequently means the replacement of a people, particularly the poor members of a people, with others of a lighter skin complexion. A corporatized, sanitized and usurped version of the culture of the replaced people is left behind as a draw for the “adventurous” who move in and as a product to be exploited by chain-store mangers who wish to cater to the newcomers.

The city’s oldest gentrification project is that of the Lower East Side. Here the concept of “spatial de-concentration” was put into practice. “Spatial de-concentration” is a deliberate strategy of reducing the available housing stock to disperse a population. The Lower East Side in the 1970s suffered from a wave of landlord abandonments, arsons and city neglect, such as reduced firefighting services; eventually a shortage of housing triggered rising rents and stimulated real estate speculation.

A neighborhood that was an escape from the pervasiveness of corporate mass culture — its unique ambience created by a mix of Puerto Ricans, Ukrainians, Poles, artists, squatters, community gardeners, anarchists, communists and beatniks — and anchored by community spaces and local mom-and-pop businesses has been transformed into an alcohol-fueled playground for the privileged overrun by “trendy” bars and chain stores. Deep-pocketed chain stores and boutiques owned by holders of trust funds are becoming the only entities that can afford the commercial rents as the very concept of commercial rent control is never raised by any political leader.

The average neighborhood residential monthly rent is now $2,400 — this in a neighborhood where, 40 years ago, people paid less than $100 for an apartment. Commercial space has increased in price still more steeply; local businesses that give back to the community are steadily forced to close their doors. As the former population becomes a smaller minority within in its neighborhood, the ability to fight back in an organized way dwindles, until a critical point is reached where real estate interests become essentially dictatorial and the process accelerates.

At some point, history becomes nostalgia. And 24 years later, the Tompkins Square Park police riot — when police hiding their badges went on a rampage against anybody luckless enough to be near the park sparked an intense period of struggle that lasted for several years — was unmistakably an object of nostalgia in this year’s commemoration. And even that had its corporate echo, as one person seized control of the annual event after chasing out others who previously helped organize it, and announced that he owns the marbles and will take them home if others don’t do as he says. A most capitalist attitude.

A community needs community institutions. Several years ago, I published a book of poetry by a friend who had recently died. The poet was well-liked and very modest; his friends felt it important that his work be kept alive. After I had completed the book, I walked one Friday afternoon to the Bowery Poetry Club, saw the owner, Bob Holman, there and began to ask him if I could schedule the book-release party there. Before I could get the first sentence out of my mouth, he enthusiastically said yes, giving me a two-hour Sunday slot without charge. I don’t think Starbucks would have done that.

I don’t pretend to know the club’s financial specifics, but I don’t think it takes a stretch of imagination to imagine that Mr. Holman had a large mortgage or rent to cover each month. And his club, home to artists and performers in a variety of disciplines, was a haven for community do-it-yourself arts and culture. I mention this not because its closing is a loss to a specific community (which it is) but because it is an example of what is happening on a mass scale through the corporate homogenization that arrives in the wake of gentrification.

Gentrification is part of the process whereby people are expected, and socialized, to become passive consumers. Instead of community spaces, indoors and outdoors, where we can explore our own creativity, breath new life into traditional cultural forms, create new cultural traditions and build social scenes unmediated by money and commercial interests, a mass culture is substituted, a corporate-created and -controlled commercial product spoon-fed to consumers carefully designed to avoid challenging the dominant ideas imposed by corporate elites.

Gentrification is part of the process whereby the “commons” are taken away and replaced by privately owned space. When there are no longer places where the community can gather — whether for their own cultural events, to discuss community issues or as gathering places for demonstrations and protests — the ability to maintain alternatives to the pervasive corporate culture and to continue to retain the ability to cohesively resist corporatization or to defend themselves against a city government determined to push them out is greatly diminished.

The Lower East Side will provide an example here. During the 1990s, a former school building was used to build a community space called Charas/El Bohio; benefit concerts, dance parties, space for a variety of local cultural groups and performers, and meeting places for organizers were among its uses. In a rapidly gentrifying neighborhood in which real estate developers saw dollar signs in front of their eyes and in which a large body of neighborhood activists resisted gentrification, Charas was seen not as the busy community resource it was, but as a threat that had to be eliminated.

In one of former Mayor Rudy Giuliani’s last acts, he saw to it that is was eliminated. Partly because of his hatred of community organizers or any opposition, partly because of his embrace of corporate ideology that insists private profit is the only legitimate usage of any property, and partly in support of a corrupt local council member in bed with developers who literally saw himself in a war against the neighborhood but who supported Giuliani, Charas was taken away and sold at far below market rate to a connected developer. Because of ongoing pressure that has blocked a necessary zoning change (the corrupt council member who did not try to hide the hatred he felt for his own constituents is long out of office), the developer has not been able to realize his plans. But 13 years later, Charas sits empty behind sealed walls and has so deteriorated that it is now uninhabitable.

That’s capitalism in action: A community resource created and run by the community is taken away so one person can make a profit, and the resource is allowed to rot unused if that one person doesn’t realize the profit.

The path of gentrification mirrors that of culture. The corporatized art world now mimics finance capital. In the financial world, a tiny number of people succeed in positioning their company for an initial public offering and the fantastic riches that flow upward from it while so many others labor for little; in the art world, a small number of artists catch the eye of a wealthy investor, generating multimillion-dollar sales while legions of other artists starve.

None of these patterns are new. The taking away of the commons is as old as capitalism; in fact capitalism was built on the privatization of commons. As a market arose for commodity agricultural products, feudal lords wanted to clear space for sheep meadows. Peasants were forced off the land they had farmed and barred from the “commons” (cleared land on which they grazed cattle and forests in which they foraged), forcing them to become beggars, risking draconian punishment for doing so, or laborers in the new factories to endure pitifully low wages and inhuman working hours.

As the Industrial Revolution gathered steam, a “moral” crusade promoted by owners of factories and agricultural estates in which the tiny fraction of commons that had survived were taken away; the measure of independence that rights to the use of commons provided wage laborers was denounced for fostering “laziness” and “indolence” — defects that could be cured only by forcing them to be fully dependent on wage work.

Legal codes make such work more civilized these days, but the principal remains. An independent community is a community that can’t be pacified or narcotized by consumerism; common or collective property available for community use presents a counter-example to privatization of all spaces; and the use of resources for community benefit instead of for private profit represents an especially dangerous counter-example. Such concepts must be systematically stamped out, and for resisters, a militarized police force is used to enforce the rule of wealthy elites instead of the army as in past times.

If democracy is the goal, then community self-management must be a part of it — decision-making that requires a radically different way of organizing the community. A system in which the community exists to be plundered for the private profit of local elites is incompatible with democracy.

Trans-Pacific Partnership trade pact more draconian than NAFTA

By Pete Dolack

Imagine a world in which which labor safeguards, safety rules and environmental regulations will be struck down because a multi-national corporation’s profits might be affected. A world in which measures to reign in financial speculation are illegal. A world in which the task of governments, codified in law, is to maximize corporate profits.

Imagine a world in which corporations can bypass national laws and courts when they are in a dispute with a government, and instead can have their dispute adjudicated by a closed tribunal controlled by their lawyers.

Unfortunately, the above is not dystopian science fiction; it is the reality of the top-secret Trans-Pacific Partnership. If you like NAFTA, you will love the TPP.

Haven’t heard of the Trans-Pacific Partnership? There is good reason. It is a proposed trade agreement being secretly negotiated that would not only codify the one-sided rules heavily favoring corporate interests exemplified in the North American Free Trade Agreement, it would go beyond them. And many of the harshest rules proposed to be included in the TPP are being pushed by the Obama administration.

Nine countries — Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the United States — have negotiated for four years. No text has ever been released to the public, and even the U.S. Congress has been left in the dark as to the TPP’s contents. That we know anything at all about it is due to leaks. A portion of the text, the chapter covering investment rules, is posted at http://tinyurl.com/tppinvestment.

What the TPP represents is multi-national corporations going beyond lobbying for deregulation, bending rules and decisively influencing government policy to having their interests in profit maximization regardless of impact written into international law and controlling the tribunals that will adjudicate corporation/government disputes. “Free trade” agreements have become a favored route toward this corporate goal. In the nearly two decades that NAFTA has been in force among Canada, Mexico and the United States, there has been a steady procession of corporations filing complaints alleging that regulations “harm” them.

Thus we have had the spectacle of a U.S. corporate parcel-delivery service suing Canada in an attempt to have the Canadian postal system dismantled and chemical companies suing because a chemical they produce has been banned because it is poisoning water supplies. The key NAFTA provision is Chapter 11, which codifies the “equal treatment” of business interests in accordance with international law and enables corporations to sue over any regulation or other government act that violates “investor rights,” which means any regulation or act that might prevent the corporation from earning the maximum possible profit.

The usual result is either the complaining corporation wins its case or the defendant government settles on terms advantageous to the corporation to avoid a worse result. Multi-national corporations don’t win every time — for instance, Canada was graciously allowed to retain its postal service. The TPP is designed to tilt the scales still more heavily in favor of “investors” — not only via rules granting more “rights” to multi-national corporations, but further expanding the definition of “investor.” There are extensive rules governing the “right” to an near guarantee of profits, but no rules concerning labor, environment, public health or safety.

NAFTA, as draconian as it is, is a starting point. The TPP’s extraordinarily one-sided rules, which go beyond NAFTA in several ways, are intended to be a new floor in the ongoing effort to lock in the domination of industrialists and financiers through the multi-national corporations that they control. The TPP is intended to be “scalable” — that is, other countries can join but are forbidden to oppose any measure already agreed upon. Just two months ago, Canada and Mexico accepted invitations to join, so it is quite conceivable that TPP may supplant NAFTA.

The U.S. watchdog group Public Citizen issued an analysis of the leaked TPP investor chapter earlier this summer. Sounding the alarm, Public Citizen said:

“Over $350 million has been paid to investors by governments under the investor-state provisions in NAFTA alone over toxic waste dump permits, logging rules, bans of toxic substances and more. Currently, there are over $13 billion in pending corporate “investor-state” trade pact attacks on domestic environmental, public health and transportation policy. And, mere threats of such cases have repeatedly resulted in countries dropping important public interest initiatives, exposing their populations to harm that could have been avoided. Yet the leaked text shows that while TPP countries have agreed to impose binding obligations on themselves to provide foreign investors an array of extraordinary new privileges, the TPP countries have not agreed to health, labor or environmental obligations to be required of investors.”

The Public Citizen report notes that the use of international tribunals to overturn regulations has increased dramatically in the past decade:

“Over $719 million has been paid out under U.S. Free Trade Agreements and Bilateral Investment Treaties alone — 70 percent which are from challenges to natural resource and environmental policies, not traditional expropriations. Tobacco firms are using the regime to challenge tobacco control policies, including a case by Phillip Morris against Australia. Absent substantial changes to the leaked text, TPP would greatly increase the number of investor-state attacks on public interest policies and would expose governments to massive new financial liabilities.”

The use of international tribunals is an aspect of bi-lateral and multi-lateral trade agreements often overlooked. The TPP would require the use of the International Centre for Settlement of Investor Disputes (ICSID) — an arbitration board that is an arm of, and controlled by, the World Bank. Cases that go before one of the Centre’s tribunals are decided by a panel of three judges that are selected from a roster. The judges are appointed by the national governments that have signed on to ICSID, which are most of the world’s countries.

Eight of the judges have been appointed by the United States. Each is a lawyer whose career has been spent in the service of large corporations. Six are currently partners in some of the world’s most formidable corporate law firms, one is an academic who formerly was a corporate lawyer and one is a lobbyist for a business group that seeks to codify pro-corporate trade rules under law. Five of the eight U.S.-named lawyers have been counsel to various Republican Party administrations and several of the eight specialize in representing corporations before international arbitration boards.

These are the U.S. panelists who are among those judging the merits of corporate claims against government regulations:

• Fred Fielding: An attorney who bounces back and forth between Republican administrations and corporate law firms; among his clients has been the mercenary military contractor Blackwater.
• William Park: Currently a law school professor but has practiced with three corporate law firms and has been an arbitrator on many business-arbitration boards.
• Daniel Price: A corporate lawyer who represents companies in international arbitration and a former economic adviser to George W. Bush.
• John M. Townsend: A corporate lawyer who represents pharmaceutical companies and specializes in representing companies in arbitrations against governments; he is also a trustee of a business lobbying group.
• J. Caleb Boggs III: A corporate lawyer who specializes in representing financial institutions and other clients before regulators and helped write a law deregulating banks while a Senate aide.
• William A. Burck: A corporate lawyer who specializes in representing companies and corporate officers in disputes with U.S. and other governments; he is a former legal adviser to George W. Bush.
• Ronald A. Cass: The chair of a lobbying group that seeks to tilt international trade law further in favor of business; he was a trade representative for two Republican administrations.
• Emmet Flood: A corporate lawyer who represents companies in disputes against government regulations and a former counsel to George W. Bush; among his past clients are the Koch brothers.

The rules that panelists will adjudicate would supersede national laws. Article 12.7 of the TPP, for instance, provides a long list of prohibitions against government actions; under it, laws imposing capital controls (even to ameliorate a crisis), rules governing domestic content of products or any protections of any domestic industry would be illegal. It then provides a generic exception allowing environmental or other measures “that are not inconsistent with the Agreement; necessary to protect human, animal, or plant life or health; or related to the conservation of living or non-living exhaustible natural resources.”

That exception, however, is meaningless. It specifically requires that excepted rules must be “not inconsistent with the Agreement” — and that is the towering thorn sticking out of the minuscule rose. The key sentence opens Article 12.6: “Each Party shall accord to covered investments treatment in accordance with customary international law.” The “Party” here are national governments, and the “customary international law” is that already established by NAFTA and the decisions made by ICSID and similar arbitration bodies concerning disputes under NAFTA and other trade agreements. Those decisions skew heavily toward corporate complainants.

Venezuela recently became the third South American country to withdraw from ICSID; in doing so, the country’s foreign ministry said ICSID “has ruled 232 times in favor of transnational interests out of 234 lawsuits received throughout its history.” A 2007 report issued by the Institute for Policy Studies and Food and Water Watch, “Challenging Corporate Investor Rule,” said multi-national corporations have won 70 percent of the cases (it did not specify how many of the remainder were a loss for the corporation nor how many were not decided or withdrawn). These tribunals are conducted in secret; only two ICSID cases have been conducted with public attendance in its history.

The World Bank is one of the principal bodies imposing austerity on countries around the world; it routinely conditions loans to governments of developing countries on the swift privatization of state-owned enterprises and public utilities, typically conducted at fire-sale prices as salivating corporate executives are aware of the hammer being held over the selling government. When the buying corporation decides it has not made the profits it expected, it can file a claim heard by ICSID, which is controlled by the very same World Bank.

In one notorious case, the World Bank forced the privatization of the water system in the Bolivian city of Cochabamba. Bechtel, the company that was handed the water system as the sole bidder in a secret process, charged a sum equal to one-quarter of city residents’ average household income and imposed a contract provision banning the collection of rainwater. After massive local protests backed by a global campaign forced it to leave the city, Bechtel sued Bolivia for US$50 million in damages and lost profits although its investment is believed to have been less than $1 million and Bechtel’s revenues are six times the size of Bolivia’s gross domestic product.

Bechtel settled without receiving a payment only because of massive international pressure and because Bolivians continued to resist in large numbers despite being repeatedly fired upon. That pressure was necessary as, according to Earthjustice, World Bank officials refused to disclose when or where the first hearing in the case would take place.

That is a very rare ending. Although developing countries are most often the targets of ICSID actions, regulations anywhere can be overturned. For instance, Canada was sued under the provisions of NAFTA by a U.S.-based chemical company after it banned the use of a gasoline additive already banned in the U.S. because it is a known toxic agent. Thanks to ICSID, Canada had to reverse its ban, pay millions of dollars to cover the company’s “lost profits” and issue an apology to the chemical company.

Among the features of NAFTA to be replicated in the TPP are that:

• Governments pay attorney costs, win or lose, in addition to paying judgments.
• Taxation and regulation constitute “indirect expropriation” mandating compensation (a reduction in the value of an asset is sufficient to establish expropriation rather than a physical taking of property as required under U.S. law).
• Older decisions become precedents for further expansions of investor “rights” and will be read as the “evolving standard of investor rights” required under the TPP.
• No mention of labor rights, nor any standards for environmental, health or safety that must be met.

A London Court of International Arbitration panel, ruling in July 2005 for a unit of the Occidental Petroleum Corp. in a case heard under the U.S.-Ecuador bi-lateral investment treaty, declared that any change in business conditions constitutes a violation of “investor rights.” If such a ruling is accepted as precedent, any attempt at regulation is potentially illegal.

Among the features of the TPP that go beyond NAFTA are:

• An expansion of who or what constitutes an “investor” — extending those eligible to file a claim to anyone who applies for a permit or license, or who “channels” resources or capital to set up a business, without placing any limits on what qualifies for such a status.
• No language to block frivolous claims.
• The U.S. is seeking to include government bonds as a covered investment; if that stands, speculators would have the right to recover the full value of government bonds bought at discounted prices.
• Requiring new intellectual property laws that would criminalize many acts not currently classified as such.
• Significantly tighten corporate control of the Internet and force service providers to hand over personal data.

A separately leaked section of the TPP, covering pharmaceutical products, contains this interesting item on its cover page: “Declassify on: Four years from entry into force of the TPP agreement or, if no agreement enters into force, four years from the close of the negotiations.” What is being hidden? New monopoly rights for pharmaceutical companies and the ability to overturn the policies of countries such as Australia and New Zealand that force much lower prices on drugs, policies that U.S.-based pharmaceutical companies wish to overturn. In addition, Citizens Trade Campaign reports:

“This U.S. intellectual property proposal, which rolls back initial reforms made in a trade pact that the Bush administration signed with Peru only four years ago, would lengthen pharmaceutical monopolies, eliminate safeguards against patent abuse, grant additional exclusive controls over clinical trial data and favor the giant pharmaceutical companies’ monopoly interests at every stage.”

Médecins Sans Frontières/Doctors Without Borders similarly reports that:

“The Obama administration is walking away from previous efforts to ensure that developing countries can access affordable medicines, setting a dangerous new standard that will likely be replicated in future trade agreements with developing nations. The administration is touting a so-called ‘access window’ as a mechanism to boost access to medicines. In fact, the administration is confusing access with affordability. The ‘access window’ is all about getting brand-name drugs to market faster, and giving their producers longer monopoly rights that prevent price-lowering competition and keeping medicines out of the hands of the millions of people who need them.”

The White House claims that “The Obama Administration has been working in partnership with Congress and consulting closely with stakeholders around the country to ensure TPP addresses the issues that American businesses and workers are facing today, and may confront in the future.” That clearly is not true, as senators and representatives are demanding disclosure. Nor does any of the agreement’s text appear on the Web page dedicated to the TPP.

Executives and lobbyists from some of the largest corporations on the planet — commanding revenues much larger than the gross domestic products of the smaller TPP countries — are meeting in secret with government officials to give themselves yet more power and control.

Corporate-written rules for self-benefit are intimately connected with financiers manipulating markets and benefiting from the austerity they insist governments impose. Industrialists extract the surplus value from their from their workers that becomes profit and financiers provide the whip that intensifies the process and create the speculative instruments that profits are poured into. We can have corporate dictatorship, or democracy. But not both.