When water is a commodity instead of a human right

The shutoff of water to thousands of Detroit residents, the proposed privatization of the water system and the diversion of the system’s revenue to banks are possible because the most basic human requirement, water, is becoming nothing more than a commodity.

The potential sale of the Detroit Water and Sewerage Department is one more development of the idea that water, as with any commodity, exists to produce private profit rather than to be a public necessity. And if corporate plunder is to be the guiding principal, then those seen as most easy to push around will be expected to shoulder the burden.

Thus, 17,000 Detroit residents have had their water shut off — regardless of ability to pay — while large corporate users have faced no such turnoff. The Detroit Water and Sewerage Department began its shutoff policy in March with a goal of shutting off the water to 3,000 accounts per week. Residents can be shut off for owing as little as $150. That is only two months of an average bill.

Water is a human right, the people of Detroit say. (Photo by Moratorium NOW! Coalition to Stop Foreclosures, Evictions, amd Utility Shutoffs)

Water is a human right, the people of Detroit say. (Photo by Moratorium NOW! Coalition to Stop Foreclosures, Evictions, and Utility Shutoffs)

Detroit water rates have more than doubled during the past decade, according to Left Labor Reporter, and in June another 8.7 percent raise was implemented. Yet only in July, months after residential water shutoffs began, did the water department announce it would send warning notices to delinquent businesses. There is no report, however, that any business has had its water turned off.

About half of the city’s overdue water payments are owed by commercial and industrial customers. Forty offenders, according to the department, have past-due accounts ranging from around $35,000 to more than $430,000. One golf course operator is said to owe hundreds of thousands of dollars.

The same week that the residential water shutoffs began, Detroit Emergency Manager Kevyn Orr put the water department up for sale. The department takes in about $1 billion in revenue per year, The Wall Street Journal reports, and collects more revenue than it spends. The system would potentially be a valuable asset for one of the multi-national corporations that have taken over privatized water systems around the world, mostly to the regret of the local governments and ratepayers.

Reversing the privatization of water

If Emergency Manager Orr succeeds in selling off Detroit’s water system, he will be bucking a trend. Dozens of cities in France and Germany have reversed earlier privatizations and are taking back their water systems after finding that higher prices and reduced services had been the norm post-privatization. French private water prices are on average 31 percent higher than in public water services. Five Pennsylvania towns that privatized their water saw their rates more than triple on average.

That rate differential shouldn’t come as a surprise — a government doesn’t need to generate a profit like a corporation. A water company, like any other capitalist enterprise, is expected to generate large profits for its investors and giant payouts to its executives, and thus must extract more money out of its property.

If the water system is privatized, Detroit’s city budget will receive a one-time boost, but forgo future revenues and lose control of a public good built with public money. Nor is there any guarantee that it would be sold at market value. A utility undervalued would produce quicker profits for any water company that got its hands on it, and every incentive is for it to be bought at as low a price as possible.

Banks, however, have already extracted huge profits from Detroit’s infrastructure. The water department is believed to have paid banks penalties of $537 million to escape its disastrous interest-rate default swaps. Instead of simply selling plain-vanilla bonds — paying bond holders a set amount on a set schedule — Detroit (like many municipal governments) became entangled in various complicated financial derivatives layered on top of its bonds.

Investment banks sold local governments interest-rate swaps as a form of insurance as a hedge against rising interest rates. But if interest rates went down — which they did — then the governments would be on the hook for large sums of money. (That rates would fall was predictable; central banks cut interest rates as a matter of routine during recessions.) Thanks to financial engineering falsely sold as “insurance,” the Financial Times reports it will cost Detroit $2.7 billion to pay back $1.4 billion in borrowing — this total includes $502 million in interest payments and $770 million as the cost of the derivatives.

The $537 million the Detroit water department handed to banks to escape continued extra payments to cover the swaps is more than four times the entire past-due water bill, residential and commercial, at the start of the water shutoffs in March.

Not so quick to challenge the banks

Yet there appears to be no effort to recoup any of that penalty money or to investigate if there was any illegality in the deals. Curt Guyette, writing for a Detroit alternative publication, Metro Times, said:

“Given the fact that former Mayor Kwame Kilpatrick, who is now is serving a decades-long sentence in federal prison for running the city as if it were a criminal enterprise when these deals went down, [was then in office] it doesn’t seem unreasonable to at least suspect that something shady might have been going on.

Nonetheless, Orr and the legal team from [corporate law firm] Jones Day — where Orr was a former partner, and which has as clients both Bank of America and a division of UBS — have, as the complaint [filed in federal court by community activists] points out, ‘failed to investigate the misconduct or take measures to recoup any portion of the $537 million in suspect termination fees paid to the banks.’ ”

Both Bank of America and UBS profited enormously from the interest-rate swaps. Emergency Manager Orr does not seem terribly bothered by democratic processes, however. He is going ahead with a separate plan to privatize Detroit’s parking department despite the fact that the City Council voted, 6-2, against it. The Detroit Free Press reports that the parking system generates $23 million in revenue with only $11 million in expenses. This would be another revenue stream leaving public hands, and the same needs of a private owner to generate profits would be expected to lead to the same results that privatizations of water systems and other public services have led.

The people of Detroit are fighting back, through demonstrations, lawsuits, appeals to the United Nations and in physically blocking crews assigned to turn off the water. Water is also being turned back on without asking for permission from authorities. Activists demand the immediate resumption of water service for everyone and to make water affordable. Detroit Debt Moratorium, for example, is calling for water bills to be capped at two percent of household income.

These efforts have borne some fruit as Emergency Manager Orr issued an order handing Mayor Mike Duggan managerial control over the water department in late July. The department subsequently declared a moratorium on water shutoffs until August 25.

A commodity is privately owned for the purpose of profit, regardless of human need; that the commodity is something as necessary as water does not alter that a commodity goes to those who can pay the most. The market determines who gets what, or if you get it at all — and the market is simply the aggregate interests of the most powerful industrialists and financiers. The agony of Detroit is the logical conclusion of reducing social and economic decisions to market forces. Detroit just happens to the be the locality that got there first.

Economists say solution to problems is more of the same

Neoliberalism is dead! Long live neoliberalism! Such is the contradictory message given by the OECD in its report on the global economy’s next 50 years.

Seemingly intent on providing yet more evidence that orthodox economics is a service for the one percent rather than a science, the report’s prescriptions are a mix of advocacy of more of the same policies that have brought the world to its present crisis with mild reforms that would be in direct opposition to the logical outcomes of those same policies and contradict the interests of the corporate beneficiaries of those policies.

The paper, “Policy Challenges for the Next 50 Years,” published by the OECD (the Organisation for Economic Co-operation and Development, a club of the the world’s most developed countries along with a few large developing countries), carries the caveat that it does not necessarily reflect the view of OECD member countries, but as it is presented as a “synthesis” of several earlier OECD studies, it is fair to consider the paper an authoritative representation of elite thinking.

(Mural by Ben Shahn)

(Mural by Ben Shahn)

Those elites, evidently, see difficulties ahead but believe the adoption of the right policies will allow everything to be just fine as we march into the second half of the 21st century with the world capitalist system intact and robust.

Perhaps the biggest contradiction, or perhaps an unwillingness to think through the implications, is the paper’s prediction of a steady decline in world economic growth, from an overall 3.6 percent (but only 1.2 percent for OECD countries) in the 2010-2020 decade to 2.4 percent (0.5 percent for OECD countries) in the 2050-2060 decade. Although the “Policy Challenges” paper never uses the word, or so much as hints at it, that is a forecast of another half-century of stagnation.

The implications of that stagnation are a sputtering economy, more unemployment and more inequality because capitalism is a system that requires growth. A system based on endless growth can’t function without it — slow growth (all the more so no growth) means misery for working people as the recent years of “recovery” from the 2008 economic collapse has demonstrated. That is so even without the austerity policies advocated by the “Policy Challenges” paper, which would only accelerate dislocation.

A lot of austerity and a little wishful thinking

Among the prescriptions the paper calls for are:

  • More and bigger “free trade” agreements, supported by “policies that favour … worker mobility (e.g. pension portability).”
  • “Enact social insurance reforms to maintain labour supply in the face of rising longevity and an ageing workforce.”
  • Push more of the costs of a university education onto students.
  • International coordination of intellectual property rights, greenhouse-gas emissions and taxation.
  • Adoption of policies to encourage renewable energy.
  • Phasing in higher capital requirements for banks and continued “accommodative” monetary policies.
  • “Flexible” labor markets that are “pursued in a way that cushions their potentially negative impact on equality.”

At first glance, the above list appears to be a somewhat eclectic mix of austerity and, shall we say, Keynesian lite (albeit with the emphasis on austerity). But the austerity measures fit snugly into current economic policy while the ameliorative measures are directly in opposition to not only current policy but the advocated austerity measures.

It is disingenuous to advocate more corporate globalization through more and bigger “free trade” agreements while at the same arguing for harmonization of taxation and environmental rules so as to avoid a race to the bottom. The very point of corporate globalization and, especially, “free trade” agreements is to take advantage of lower wages and lesser environmental and labor standards among different countries. We already are in a race to the bottom, fueled by existing “free trade” agreements, which “harmonize” downward.

The accompanying call for “pension portability” is code for privatizing public-retirement systems. It also presupposes that working people have pensions connected to their jobs, but in the United States that is a relic of the past for the vast majority of employees. At best, a worker might have a “defined contribution” plan such as a 401(k) that mostly relies on the employee’s own contributions and shifts the risks from employer to employee. A public retirement system has no need for “portability”; only a privatized system free of employer responsibility and job security does.

Bullet point number two above, in parallel with “pension portability,” is a polite way of advocating people work more years before being eligible for retirement and receive less money on which to retire. Bizarrely, the OECD paper rests its labor prescriptions on “labor shortages in the OECD” countries! Huh? The unemployment rate for the European Union, which includes most of the OECD countries, is 10.3 percent. The official U.S. unemployment rate is 6.1 percent, but the real rate is 12.1 percent. (The “U-6” figure including part-time workers needing full-time work and discouraged workers.)

The paper forecasts “income convergence between OECD countries and developing countries” in the coming decades (although it does not address if that will be an upward or a downward convergence) that “may dampen work-related migration flows, exacerbating labour shortages in the OECD” [page 26]. Completely missing are future flows of migrants escaping environmental damage from global warming. The paper sees global warming as no big deal, despite predicting that greenhouse-gas emissions will double from 2010 to 2060.

Although the paper does state that “rising greenhouse gas concentrations pose the most comprehensively global risk to economic output,” [page 30] it projects that the cut to global gross domestic product will be only 0.7 to 2.5 percent.

Oh, that’s right, it’s the “magic of the market”

The rosy future of a benign world of international convergence in which income inequality is entirely the product of differentiated skill levels depicted by the OECD paper rests on the neoliberal belief in “free trade” agreements. The paper asserts:

“Openness to trade is associated with higher incomes and growth. These benefits are transmitted through several channels: shifting production from low to high productive locations; relocation of factors of production towards sectors and firms with high productivity; and rising incomes due to an increase in market size that supports more specialisation, faster technology diffusion and stronger incentives to invest in ‘non-rival’ assets.” [page 34, citation omitted]

Reality is far different from these neoliberal fairly tales. Production has been shifted to “high-productive locations” only if we define those as locations in which the maximum possible amount of profit is extracted through the lowest wages and harshest working conditions. That is “productive” — for the industrialists and financiers who extract and pocket these profits.

That “free trade” agreements fill the pockets of capitalists while immiserating working people certainly accounts for much of the reason for the persistent promotion of them as job-building exercises, but not all of it. Ideology also plays a part. The economic models are based on the “magic of the market” that assume, inter alia, that capital and labor instantaneously react to changing conditions but never cross national borders; that market mechanisms will ensure full use of all resources; and that flexible exchange rates will prevent lowered tariffs from causing changes in trade balances.

In his recent book, Capitalist Globalization: Consequences, Resistance, and Alternatives, non-orthodox economics professor Martin Hart-Landsberg dismantled these arguments. He wrote:

“[T]his kind of modeling assumes a world in which liberalization cannot, by assumption, cause or worsen unemployment, capital flight or trade imbalances. Thanks to these assumptions, if a country drops its trade restrictions, market forces will quickly and effortlessly lead capital and labor to shift into new, more productive uses. And since trade always remains in balance, this restructuring will generate a dollar’s worth of new exports for every dollar of new imports. Given these assumptions, it is no wonder that mainstream economic studies always produce results supporting ratification of free trade agreements.”

That is still the case as seen in the unrealistic, propagandized boosterism for deals like the Trans-Pacific Partnership and more subtle but similar assumptions imbedded in the OECD “Policy Challenges for the Next 50 Years” paper. The paper, despite its embrace of more reliance on market forces as the “solution” to human development, is seemingly oblivious to the consequences of markets.

Market forces will call the tune, not wishful thinking

Calls for international coordination of taxation and governmental regulations, and for higher capital requirements for banks, fly directly in the face of what has and and will occur as a result of market forces — a race to the bottom. Capitalist markets are nothing more than the aggregate interests of the most powerful industrialists and financiers. “Free trade” agreements continually push rules more draconian, and facilitate monopolies on an international scale, because doing so benefits those interests. That is why these agreements are negotiated in secret, with full participation by corporate lobbyists while labor and environmental advocates are shut out.

To argue, as the final bullet point above does, that “flexible” labor markets should be “pursued in a way that cushions their potentially negative impact on equality” is oxymoronic. Just how are the falling wages and substitution of part-time work for full-time generated by labor “flexibility” not going to create a “negative impact” on equality?

(OECD projections of world economic growth. Graphic from "Policy Challenges for the Next 50 Years" paper, page 15, OECD)

(OECD projections of world economic growth. Graphic from “Policy Challenges for the Next 50 Years” paper, page 15, OECD)

The slowing growth forecast — in particular for the world’s mature capitalist countries, forecast to decline to 0.5 percent annually by mid-century and not average much above one percent per year during any other decade — contains serious implications. Again, that is a forecast of permanent stagnation. Under capitalism, gross domestic products must increase faster than the working population because of new machinery, computerization, work speedups and layoffs continually introduced by capitalists subject to relentless competitive pressures.

Economic growth of 2.5 percent is necessary simply to maintain the unemployment rate where it is and “substantially stronger growth than that” is necessary for a rapid decrease, according to a former White House Council of Economic Advisers chair, Christina Romer.

Capitalism already fails to produce jobs. Using International Labour Organisation figures as a starting point, professors John Bellamy Foster and Robert W. McChesney calculate that the “global reserve army” — workers who are underemployed, unemployed or “vulnerably employed” (including informal workers) totals 2.4 billion. In contrast, the world’s wage workers total only 1.4 billion!

The stimulus to the global economy from the Internet has likely already run its course; thus it would take a future unforeseen technological breakthrough to provide growth on the scale of what was seen during much of the 20th century. The economist Robert J. Gordon, in a 2012 paper forecasting dwindling future growth, argued that this most recent period of innovation from computers focused on entertainment and communication devices, while earlier periods of innovation brought a rapid series of inventions that took upwards of a century to be fully realized, fueling long periods of growths.

A major effect of the mass introduction of computers was simply to shift commerce to online merchants from traditional ones. By contrast, the taming of electricity and the inventions of steam engines and automobiles powered development for long periods of time.

An economic system designed to meet human needs, rather than private profit, would have no need to grow. But as capitalism is designed for private profit, and requires continual growth to maintain itself, harsher austerity (and the force that will be necessary to implement it) is what is on offer by the world’s elites.

Federal Reserve talks jobs, but (in)action speaks louder than words

If you haven’t gotten a pay raise lately, you are not alone. The percentage of U.S. workers reporting no change in their renumeration remains near its all-time high, according to statistics kept by the San Francisco branch of the Federal Reserve.

The San Francisco Fed’s “wage rigidity meter” — the percentage of “job stayers” who report receiving the same pay as one year earlier, rose above 15 percent in 2010 and has remained there since. For comparison, that figure was 11 percent in 2008, at the start of the global economic downturn and about six percent in the early 1980s, when this statistic first began to be tracked. For hourly workers, not surprisingly, conditions are even worse: More than 20 percent report no increase in pay, about triple the number in the early 1980s.

That is merely one additional piece of evidence — if any more be needed — that inequality is on the rise. Reuters reports that there is some discussion within the Federal Reserve to temporarily tolerate higher inflation as a “tradeoff” to encourage growth in wages and an accompanying boost to full-time employment. How serious this talk actually is might be signaled by this paragraph in the same Reuters report:

“Fed staff economists accepted in 2010 that labor’s share of annual U.S. output, which over a decade had dropped to around 56 percent from its long-term average of around 62 percent, was unlikely to recover.”

In other words, the Federal Reserve says inequality is here to stay. So perhaps tinkering with policy that possibly could make a marginal difference — even the Fed has to keep up appearances sometimes — is the most that might be expected. Contrast that with the enthusiasm with which the Fed has shoveled money into its “quantitative easing” programs — measures that have primarily acted to inflate a new stock-market bubble with a small secondary effect of re-animating real estate prices.

(Graphic by the U.S. Bureau of Labor Statistics)

(Graphic by the U.S. Bureau of Labor Statistics)

“Quantitative easing” is the technical name for a central bank going on an asset buying spree. In conjunction with setting low interest rates, it is a theoretical attempt to stimulate the economy by encouraging investment. The Federal Reserve’s program buys U.S. government debt and mortgage-backed securities in massive amounts.

Through the end of June 2014, the Fed poured about US$4.1 trillion into three quantitative-easing programs since December 2008. The Bank of England had committed £375 billion to its Q.E. program as of the end of 2013.

Prior to the economic downturn, the Fed held between $700 billion and $800 billion of U.S. Treasury notes on its balance sheet, but, because of its quantitative-easing programs, it now holds more than $4 trillion. The Fed is in the process of winding down its buying spree with an intent to finish it in October. Instability is likely to occur when the Fed tries to unload its bloated piles of assets, and many of the world’s other central banks will seek to unload their assets as well.

The latest stock-market bubble, then, will burst as all others before it, with high debt loads dropping another anchor on the economy. A commentary in Forbes calculates that the level of borrowing used to buy stocks is already higher than it ever was during the 1990s stock-market bubble or the run-up before the 2008 crash as measured in inflation-adjusted dollars or as a ratio with the S&P 500 stock index.

What could the world’s governments have done with this massive amount of money had it instead gone to socially useful programs? Instead, trillions of dollars were spent to inflate another stock-market bubble. One more way the world’s wealthiest have gotten fatter while the sacrifices are borne by the rest of us.

And that is merely one way that inequality not only continues to grow, but is accelerating. From 2000 to 2009, labor productivity rose an average of 2.5 percent annually while real hourly wages rose only 1.1 percent, according to U.S. Bureau of Labor Statistics calculations — the biggest gap it has yet measured, going back to the late 1940s.

(Graphic by the U.S. Bureau of Labor Statistics)

(Graphic by the U.S. Bureau of Labor Statistics)

More recent figures, according to Reuters, indicate the gap continues to grow — from 2007 to today, average hourly wages have risen a total of 1.5 percent while productivity has increased by 11.4 percent. Nor is that a phenomenon limited to the United States. The International Labour Organisation calculates that wages in the world’s developed countries increased six percent from 1999 to 2011 while labor productivity increased about 15 percent.

If the employees are not receiving the benefits from their increased productivity, then it is the bosses and speculators who are grabbing it. Thus it is no surprise that the gap in wealth has increased more sharply than have incomes. A research paper written by Fabian T. Pfeffer, Sheldon Danziger and Robert F. Schoeni found that accumulated wealth has decreased for the majority of people since 1984. The median level of net worth — that is, the 50th percentile or the point where the number of people with more is equal to the number with less — has decreased by about 20 percent since 1984. By contrast, those at the 95th percentile have nearly doubled their net worth since 1984.

So much money has flowed upward that industrialists and financiers, and the corporations they control, have more money than they can possibly find investment for — this money is diverted into increasingly risky speculation in an attempt to find higher returns. Working people were handed the bill for the previous bubbles, and before we can get back on our feet the bursting of another bubble looms. Class war is raging, and it’s clear what side is winning.

High court rules that financiers are more sovereign than Argentina

The victory handed to speculators by the United States Supreme Court over one of the world’s larger countries provides a lesson in where power actually lies. It is not in a government building.

Two June 16 decisions by the U.S. Supreme Court elevates the “right” of hedge-fund speculators to massive windfall profits above all other human considerations. That ruling is consistent with rulings handed down by the secret tribunals used to arbitrate disputes between corporations and national governments that arise under “free trade” agreements that elevate “investors’ rights” above environmental and labor laws.

Between these Supreme Court decisions, most of the attention has focused on the ruling that federal courts in the U.S. can order sovereign countries to hand over information on their assets to speculators. In other words, the U.S. legal system has formally declared it has jurisdiction over other countries. Arrogant as that ruling is, the more dramatic development was the court refusing to hear an appeal of lower-court rulings directing Argentina to pay $1.3 billion to holdout speculators that refused to accept terms agreed to by a large majority of bond holders.

Simply put, the U.S. legal system not only declares U.S. law applies around the world, but that it will be applied to benefit the most aggressively greedy.

The Puerto Madero district of Buenos Aires. (Photo by Juan Ignacio Iglesias)

The Puerto Madero district of Buenos Aires. (Photo by Juan Ignacio Iglesias)

Much of the commentary on this case has attempted to reduce it to a simple morality tale of a debtor being obligated to pay back its creditors. The lead speculator in this affair, hedge-funder Paul Singer, who is trying to be paid the full value of bonds on which he paid pennies on the dollar, has tried to paint it that way.

Reality, of course, is far more complex. So first it is useful to understand the odious nature of Argentina’s debt.

Military junta uses dirty war to impose austerity

Prior to the 1976 military seizure of power, Argentina was an industrialized country with active union and left-wing movements, a sizable middle class and large tracts of arable land. But the Argentine economic elite and the multinational corporations that operated there wanted Argentina turned into a low-wage haven. Only extreme violence would be able to achieve that goal.

Upon seizing power, the military handed over economic policy to a well-connected industrialist, José Alfredo Martínez de Hoz, who ruthlessly implemented a severe neoliberal program of shock therapy, backed by a savage campaign of torture, “disappearances” and killings waged by the military and two allied fascist groups. The CGT union federation was abolished, strikes outlawed, prices raised, wages tightly controlled and social programs cut. As a result, real wages fell by 50 percent within a year. Because of the collapse of internal consumption caused by this austerity, ten percent of Argentina’s workforce was laid off in 1976 alone.

Tariffs were reduced deeply, leaving the country wide open to imports and foreign speculation, causing considerable local industry to shut. High interest rates led to more foreign speculation and an overvalued currency, further hurting national production. Against this backdrop, the dirty war was intensified — initially targeting leftists, the régime quickly began to eliminate students, lawyers, journalists and trade unionists.

This was the régime of which David Rockefeller, whose loans helped finance it, famously said, “I have the impression that Argentina has a regime which understands the private enterprise system.” Further economic contraction occurred, and for the last five years of the military junta, 1978 to 1983, Argentina’s foreign debt increased to US$43 billion from $8 billion, while the share of wages in national income fell to 22 percent from 43 percent.

Civilian control and formal democracy was re-established following the collapse of the junta, but the debt did not go away.

A civilian president, Carlos Menem, imposed an austerity program in the early 1990s in conjunction with selling off state enterprises at below-market prices. This fire sale yielded $23 billion, but the proceeds went to pay foreign debt mostly accumulated by the military dictatorship — after completing these sales, Argentina’s foreign debt had actually grown. The newly privatized companies then imposed massive layoffs and raised consumer prices.

By 1997, about 85 percent of Argentines were unable to meet their basic needs with their income. During this period, Argentina’s debt steadily mounted, leading to a scheme under which the debt would be refinanced. A brief pause in the payment schedule was granted in exchange for higher interest payments — Argentina’s debt increased under the deal, but the investment bank that arranged this restructuring racked up a fee of $100 million, the latest in a series of financial maneuvers that shipped a billion dollars to investment banks in ten years.

It all finally imploded at the end of 2001, when the government froze bank accounts and the country experienced so much unrest that it had five presidents in two weeks. The last of these presidents, Néstor Kirchner, suspended debt payments. Had Argentina resumed scheduled payments in 2005, interest payment alone on the debt would have consumed 35 percent of total government spending. Kirchner announced that Argentina intended to pay only 25 percent of what was owed and any group that refused negotiations would get nothing; in the end, Argentina paid 30 percent to bondholders who agreed to talk.

Vulture capitalist seeks extortionist gains

Approximately 93 percent of bondholders agreed to accept 30 percent of the face value — 30 percent is better than zero. Argentina has repaid these on a steady schedule and Argentine law forbids giving the holdouts a better deal. Some of the bonds held by the original holdouts were bought by NML Capital, a subsidiary of Paul Singer’s Elliot Capital Management, and another hedge fund, Aurelius Capital Management. These were the two whose lawsuits reached the U.S. Supreme Court.

Including interest, the holdouts would walk off with $1.5 billion if paid in full. NML Capital, Argentine President Cristina Fernández said, would see a gain of 1,600 percent for bonds it bought for $48.7 million. “I don’t even think that in organized crime there is a return rate of 1,608 per cent in such a short time,” she said in a national address following the U.S. Supreme Court decisions, in which she said Argentina would not “submit to such extortion.”

Mr. Singer, the type of character for which the term “vulture capitalist” was coined, certainly has been persistent in attempting to collect the full face value of bonds for which he paid a small fraction of that value. In November 2012, he had an Argentine naval ship impounded in Ghana after earlier plotting to seize the presidential plane and artworks that were to have been shown at a Frankfurt book fair.

Among other exploits, he has demanded $400 million from the Republic of the Congo for bonds he bought for less than $10 million and compelled the government of Peru to pay him a 400 percent profit on the debt of two Peruvian banks he bought four years earlier. His specialty is buying debt at a small fraction of the face value and demanding full payment, regardless of the cost to others, and has become a billionaire through doing so.

In the imperialist crosshairs

A series of one-sided rulings in a federal trial court, upheld by the U.S. Court of Appeals for the Second Circuit, favored the hedge funds over Argentina. When the appeals reached the Supreme Court, the bond holders who agreed to accept 30 percent (a “haircut” in financial parlance) backed Argentina, fearing that there would be no money for them should Argentina be forced to pay off the holdouts at full face value. The U.S. government also sided with Argentina, fearing a precedent that could be used to enable it to be sued.

The Foreign Sovereign Immunities Act of 1976 is supposed to bar lawsuits in U.S. courts against non-U.S. governments, but a 7-1 bipartisan majority of the Supreme Court decided that the law is malleable when not convenient. The Argentine bonds were sold with a provision that New York law would be used to settle disputes related to them, which gave U.S. courts the excuse needed to extend U.S. law to Argentina.

Under New York law, investors must be treated equally. That provision could have been interpreted to mean the holdouts would get the same 30 percent payment in installments — which the Argentine government would have agreed to had they been willing to negotiate — but instead it was used as an opportunity to give more rights to speculators.

The practical effect of these rulings is that “investors” — hedge funds with the well-earned sobriquet of “vultures” — have been elevated above a national government. This is perfectly consistent with the decisions handed down by secret tribunals like the World Bank-affiliated International Centre for Settlement of Investment Disputes when “investors” sue governments under “free-trade” agreements such as the North American Free Trade Agreement.

The hedge funds can leverage the U.S. legal system to enforce their will over Argentina in this case because the U.S. financial system is used to make payments to the bondholders who negotiated the 30 percent agreement with the South American country. Argentina could only continue to make those payments, while simultaneously refusing to pay anything to the holdouts, by doing so completely outside the U.S. financial system, which is possible but very difficult due to the system’s global reach. Moreover, those payees within the reach of the U.S. legal system would be susceptible to being sued by the holdouts.

Argentina has consistently said it has does not have the money to pay the holdouts and continue to meet its continuing obligations to the bondholders it has been paying, another reason for those bondholders to side with Argentina against the holdouts. The next payment is due June 30 — on that date, Argentina would be in defiance of the U.S. Supreme Court should it not pay the full face value of the holdouts’ bonds. But if it does so, or simply agrees to pay more than 30 percent, the holdouts would likely demand to re-negotiate to get the same deal.

Immediate conflict doesn’t negate larger interests

What to do? One possibility is to up the ante. That is the recommendation of Argentina’s counsel at the New York corporate law firm Cleary Gottlieb Steen & Hamilton in a memorandum dated May 2, 2014:

“[T]he best option for the Republic could be to permit the Supreme Court to force a default and then immediately restructure all of the external bonds so that the payment mechanism and the other related elements are outside of the reach of American courts. Argentina wants to continue paying its restructured debt. The Courts, nevertheless, have placed it in a terrible position.”

Courts do not act in a vacuum, but ultimately express the interests of the most powerful industrialists and financiers similar to any other component of a government in the capitalist system. It is certainly true that those interests are in conflict in this matter. Such a conflict is not unusual. The victory for one particular set of speculators here, however, serves to tighten the screws of austerity by further codifying the dominance of the most ruthless capitalists within the capitalist legal system.

Should the end result of this case be that all parties agree to a payment level higher than 30 percent, would the speculators on the losing side be crestfallen? Regardless of the outcome, the precedent set here provides additional leverage for speculators in future financial deals. Not even the opinion of the U.S. government, the ultimate protector of corporate interests through its intelligence and military apparatuses and “free trade” agreements, was allowed to interfere with a bid to further tighten corporate power. That is what was at stake here, not the short-term interests of this or that speculator.

For Argentina, or any other subaltern country, to rid itself of odious debt and re-orient itself toward the greater good of its citizenry rather than the profiteering of speculators, will require entirely new structures in a different economic system.

How long will Europeans accept austerity?

Europe is not ready to revolt. Or, possibly more accurately, given the 43 percent participation rate, Europeans simply see the European Parliament as irrelevant. Given the little power it has, and the anti-democratic structure of European Union institutions, many saw the election as simply as an opportunity to cast a protest vote.

Yet despite the hand-wringing over the advance of far Right parties (and I am not suggesting that is not worrisome), Europeans continued the general pattern of voters in the global North of alternating between their mainstream parties. The two main blocs, the E.U.’s center-right and center-left groupings, comprising almost all of the major parties, combined for almost 54 percent of the vote, and if we throw in the more than eight percent won by the third-place liberal grouping (for North American readers, European liberals are roughly equivalent to libertarians), the parties of austerity won a solid majority.

The combined total is about ten percentage points less than than won by the three largest groupings in the previous election in 2009, but still a comfortable majority.

Strasbourg, France

Strasbourg, France

The Left made some advances, too, albeit falling short of some expectations.

The fourth-place Green alliance and sixth-place European United Left combined for 13 percent of the vote, considerably more than far Right parties garnered, despite the strong showings of the United Kingdom Independence Party, France’s National Front and the Danish People’s Party. In Greece, Syriza (the Coalition of the Radical Left) came in first place. In Spain the United Left and Podemos — a four-month-old party organized by the “Indignados,” Spain’s Occupy movement — combined for 18 percent of the vote, and Left parties in Portugal did about as well.

Keeping the devil you know

Nonetheless, those who did not bother to vote formed a majority of the E.U. electorate. And those who did vote voted for more of the same, even if in most countries the one major party was swapped for the other major party. More of the same surely isn’t appealing, as the E.U. unemployment rate is 11.8 percent, barely off the 12 percent peak of March 2013. Inequality, although less severe than in the United States, has been rising for three decades. Moreover, the three largest blocs, plus a small right-wing bloc that includes Britain’s Conservative Party, are committed to the Transatlantic Trade and Investment Partnership, a “free trade” agreement being negotiated in secret between the U.S. and the E.U. with the warm approval of multi-national corporations on both sides of the Atlantic.

The lack of democracy in E.U. institutions is not a happenstance; the intention of them is imposition of a U.S.-style régime. There was and is no vote on the mandatory budget constraints national governments must abide by nor the policies of the European Central Bank. When loans are made to Greece by E.U. institutions, the money does not go to Greeks, it passes right through the Greek government and into the hands of French and German banks.

Thus it is no surprise to hear that of E.U. negotiators’ 127 closed meetings concerning the Transatlantic Partnership talks, at least 119 were with large corporations and their lobbyists, information known only because of investigatory work done by a public-interest group, Corporate Europe Observatory.

European food safety and privacy laws are squarely in the crosshairs of U.S.-based multinational corporations. European capitalists are one with their U.S. counterparts that trade rules should be “harmonized” — which means “harmonized” with the lowest standards. This is only one aspect of the larger project of neoliberal austerity to which Europe’s center-left parties are as committed as its center-right parties, as the French voters who put François Hollande into office have found. In Germany it was none other than the Social Democratic Party, through its “Agenda 2010” legislation, that instituted austerity there. The so-called German “miracle” rests on a decade of wage cuts for German workers.

You can only do so much in a voting booth

The large number of abstentions and decreased vote totals for major parties are symptomatic of Europeans becoming fed up with economic stagnation, high unemployment and the relentless austerity being imposed on them by unaccountable, undemocratic supranational institutions. But only in a handful of countries, where austerity has pushed down the hardest, have sizable opposition movements coalesced.

Those voters who could be bothered to vote for the European Parliament are not yet exhausted with their political and economic systems, mostly remaining content to alternate between major parties. Although the vote totals for the extreme Right were, overall, not as dramatic as press reports have portrayed them, nonetheless the strong increase in those votes is cause for concern, especially as Britain’s Conservative leadership increasingly appears inclined to adopt UKIP talking points and France’s Union for a Popular Movement does the same with National Front talking points.

When there is not an active Left to provide an alternative to institutional decay, the Right will fill the vacuum with scapegoating, programs to weaken anything that counters corporate power, paeans for a return to a mythological past, and the potential for nationalistic violence, a threshold already trampled by Greece’s Golden Dawn. But change in capitalist systems does not derive from parliamentary maneuvers, it comes from organized, militant popular movements.

We do not yet live in dictatorships; there remain cracks, seams and fissures in political systems that enable reforms. These can be significant reforms such as those won in the 1960s and, in the United States, in the 1930s. But those democratic spaces are closing — the ever more powerful spying apparatuses, militarized police, top-down rules imposed through “free trade” agreements and subsidies lavished on the already wealthy do not fall out of the sky. Moreover, reforms can and are taken back and are better seen as means to larger goals, not ends in themselves.

An intensified race to the bottom is all that is on offer by the governments and institutions of the world’s mature capitalist countries. There is no tweak of policy, nor exchange of one corporate party for another corporate party, that can solve the structural crisis of the global economic system. The European Parliament elections are interesting as a barometer of public opinion, but not for much else. An increasing number of people (although hardly a decisive number as yet) are signaling discontent but also that while they are beginning to decide what they don’t want, what they do want is much more inchoate. Nature abhors a vacuum.

The scorecard of NAFTA: Losses for all three countries

The North American Free Trade Agreement has been a lose-lose-lose proposition for working people in Canada, the United States and Mexico.

Let us count the ways: Lost jobs, reduced wages, more unemployment, higher food prices and reversals of environmental laws. NAFTA, a 20-year laboratory for mainstream economics, has been a bonanza for the executives of multi-national corporations, and that is all you need to know why the so-called “free trade” model continues to be promoted despite the immiseration and dislocation it spawns. Agreements like NAFTA, and proposed deals that would go further in handing power to corporate executives and financiers such as the Trans-Pacific Partnership, have little to do with trade and much with ensuring corporate wish lists are brought to life.

Not dissimilar to medieval doctors who insisted that having leeches bleed the patient was the only course of action, neoclassical economists, who dominate the field, won’t budge from their prescriptions of neoliberal austerity. But although the medical field has made enormous strides in recent centuries, there is no such progress among neoclassical economists. That is because said economists — most often under the banner of “Chicago School” but sometimes using other names — promote ideology on behalf of the powerful, not science for all humanity.

"Canada in fog" photo by Kat Spence

“Canada in fog” photo by Kat Spence

Thus the spectacularly wrong predictions made for NAFTA before it was went into force on January 1, 1994, have no effect on their predictions for new deals. To provide one example, in 1993 the Peterson Institute for International Economics predicted 170,000 jobs would be created in the U.S. alone by 1995, that the U.S. would enjoy an expanded trade surplus with Mexico and that the Mexican economy would grow by four to five percent annually under NAFTA.

As we will see presently, none of those rosy predictions came close to becoming reality. (True to neoliberal form, the institute is grandly predicting “gains of $1.9 trillion” for the Trans-Pacific Partnership.) The point here isn’t to pick on one particular institution — in fact, it is quite typical. The models developed to make these predictions and explain economics are mathematical constructs disconnected from the real world.

Sure it works better in a dream world

The Chicago School and other mainstream neoclassical schools of economics rest their models on the concept of “perfect competition,” which assumes that all prices automatically calibrate to optimum levels, and that there are so many buyers and sellers that none possess sufficient power to affect the market. This model assumes that employees are in their jobs due to personal choice, and wages are based only on individual achievement independent of race, gender and other differences. That this bears little resemblance to the real world is not your imagination.

From this, mainstream economists assume all trade will be beneficial because all economic activity quickly adjusts to create a new equilibrium following a disruption. As Martin Hart-Landsberg wrote in his 2013 book Capitalist Globalization: Consequences, Resistance and Alternatives:

“[T]his kind of modeling assumes a world in which liberalization cannot, by assumption, cause or worsen unemployment, capital flight or trade imbalances. Thanks to these assumptions, if a country drops its trade restrictions, market forces will quickly and effortlessly lead capital and labor to shift into new, more productive uses. And since trade always remains in balance, this restructuring will generate a dollar’s worth of new exports for every dollar of new imports. Given these assumptions, it is no wonder that mainstream economic studies always produce results supporting ratification of free trade agreements.” [page 104]

World Bank studies promoting “free trade” agreements, Professor Hart-Landsberg wrote, assumes that tariff reductions will have no effect on government deficits, governments will automatically be able to replace lost tariff revenue with revenue from other sources and that there is full employment. He writes:

“Although working people have been ill served by capitalist globalization, many are reluctant to challenge it because they have been intimidated by the ‘scholarly’ arguments of those who support it. However … these arguments are based on theories and highly artificial simulations that deliberately misrepresent the workings of capitalism. They can and should be challenged and rejected.” [page 80]

Mexican farmers forced off their lands

Mexico had annual per capita gross domestic product growth of 0.9 percent in the first 20 years of NAFTA — one-fifth of the per capita GDP growth of the preceding 20 years. The Center for Economic and Policy Research reports that Mexico’s growth during the past 20 years under NAFTA ranks the country 18th of 20 Latin American countries and is half of the average Latin American growth rate. Among other results, the center reports:

• 4.9 million family farmers have been been displaced — more than half the total number of Mexican farmers in 1991.
• More than 14 million more Mexicans live below the poverty line than in 1994. Just more than half of Mexicans are below the poverty line, nearly identical to the 1994 rate, but the population has increased.
• Inflation-adjusted wages have risen two percent over 18 years and are barely above the 1980 level.

Subsidized corn from the United States flooded Mexico, sold below the costs of small Mexican farmers. Corn imports from the U.S. increased fivefold and pork imports from the U.S. increased by more than 20 times, according to a Truthout report by David Bacon.

As a result, Mexican farmers forced off their land either became seasonal workers on growing agribusiness farms, sought work in the cities or migrated north. Seasonal agricultural workers (those working less than six months per year) grew by almost three million — more than doubling their ranks — during the same period that 4.9 million family farmers were displaced. The number of Mexicans emigrating to the U.S. rose by almost 80 percent from 1994 to 2000, before falling significantly afterword because of the post-9/11 increased border security.

Nor did Mexicans get cheaper food as a result of the flood of U.S. corn. Public Citizen, in its just released report on NAFTA, reports that the deregulated price of tortillas nearly tripled in the first 10 years of the agreement and that a Mexican minimum-wage earner can buy 38 percent less than he or she could when NAFTA went into effect.

The only countervailing effect, the increase in factory jobs as maquiladoras (factories near the U.S. border producing for export) increased for a time, but those low-wage jobs are now dwindling because China’s wages are far cheaper than Mexico’s. The same pitiless market competition that sent jobs south now sends them across the Pacific. China now accounts for 23 percent of U.S. imports as compared to Mexico’s 12 percent, according to International Monetary Fund statistics.

A 2011 paper issued by the Economic Policy Institute summarized the effects of NAFTA on Mexico:

“From the standpoint of the business community, NAFTA’s most important achievement was that it made Mexico a much safer and more attractive location to invest and outsource U.S. manufacturing production. NAFTA’s investment provisions created new and improved safeguards for foreign investors, including new dispute settlement tribunals providing a mechanism for settling disputes with foreign governments outside of the Mexican legal system. By eliminating Mexico’s developmental state and use of local content rules, and other demands and conditions on foreign investors, the trade agreement greatly reduced the cost of doing business in Mexico, and increased the security of those investments.” [page 6]

Mexico’s conversion into an export platform does not mean higher skills for its workforce. The biggest initiative in job creation came during the administration of Vicente Fox, which offered training in low-skill jobs for landscapers, construction workers, factory workers and maids.

Hundreds of thousands of jobs leave the United States

The United States has seen a net displacement of almost 700,000 jobs through 2010 directly attributable to NAFTA, according to Economic Policy Institute calculations. Moreover, the U.S. has had large annual trade deficits with Mexico since NAFTA was implemented; in earlier years, trade was roughly balanced between the two. In addition to the job losses, Public Citizen reports these negative impacts on U.S. workers:

• U.S. food prices have risen 67 percent since NAFTA took effect, despite an increase in food imported from Mexico and Canada.
• Purchasing power for U.S. workers without a college degree, adjusted for inflation and taking into account those consumer goods that have become cheaper, has declined 12 percent under NAFTA.
• Two-thirds of displaced manufacturing workers who were rehired in 2012 experienced a wage cut; the reduction in the majority of cases was at least 20 percent.
• U.S. manufacturing and services exports to Mexico and Canada grew slower after NAFTA took effect than it had been earlier.

By making it easier for capitalists to move production, NAFTA has directly contributed downward pressure on wages. With fewer well-paying manufacturing jobs, pressure on wages not only affects manufacturing but other industries as well as displaced workers seek employment elsewhere.

Capital mobility has been an irresistible hammer for holding down wages and worsening job conditions — a study by Cornell University Professor Kate Bronfenbrenner found that more than 50 percent of employers made threats to shut down and/or move their facilities in response to unionization activity during the three-year period of 1993 to 1995, and that the rate of actual shutdowns tripled from the pre-NAFTA rate. She wrote:

“NAFTA has created a climate that has emboldened employers to more aggressively threaten to close, or actually close their plants to avoid unionization. The only way to create the kind of climate envisioned by the original drafters of the [National Labor Relations Act], where workers can organize free from coercion, threats, and intimidation, would be through a significant expansion of both worker and union rights and employer penalties in the organizing process both through substantive reform to U.S. labor laws and by amendments to the North American Agreement on Labor Cooperation.” [page 3]

That would take massive organizing to achieve. The Obama administration is actively trying to use the rules of NAFTA as a starting point for further weakening of labor, safety, health and environmental laws in the ongoing Trans-Pacific Partnership negotiations, which would tighten corporate control should the ongoing TPP negotiations be successful. The White House undoubtedly has the same goals for the Transatlantic Trade and Investment Partnership talks with the European Union.

Canadian safety net shredded to ‘compete’ in markets

Spending on Canada’s social safety net has decreased while corporate revenue has doubled and manufacturing jobs disappeared. In addition, a Canadian Centre for Policy Alternatives researcher reports, the country’s growing trade surplus with the United States has translated to few jobs. The study found:

• After 12 years of NAFTA, government transfers to individuals have dropped from 11.5% of GDP to 7.8% of the country’s GDP.
• “[M]uch of the growth in gross exports over the last decade reflected the markedly elevated use by Canadian-based companies of imported inputs in their production, significantly overstating the employment impact of the growth of manufactured exports.”
• The length that Canadians could collect unemployment benefits was reduced, the amount of the benefits were cut and the criteria for those eligible were reduced, reducing the proportion of unemployed people who qualified for unemployment insurance to one-third from three-quarters.
• Composite revenues of 40 of Canada’s biggest businesses increased 105 percent from 1988 to 2002, while their workforces shrank by 15 percent.

These developments fueled rising inequality, the centre’s executive director, Bruce Campbell, wrote:

“The most striking feature of this growing inequality has been the massive gains of the richest 1% of income earners at the expense of most of the population. The growth of precarious employment, the undermining of unions as a countervailing power to transnational capital, the erosion of the Canadian social state, and heightened economic dependence on the United States are the hallmarks of the free trade era in Canada.” [page 53]

Pressing its advantage, Canadian big business interests demanded and received tax cuts on the ground that Canada could not be competitive otherwise. Those cuts resulted in loss of C$20 billion in federal revenue for 2005 alone, the study said, on top of provincial revenue losses of $30 billion. The tax cuts were primarily given to high-income individuals and corporations, who argued that these would create “a level field of competition” with the United States but also increase labor market “flexibility” — a code word meaning lower wages and reduced job security, always the goal of capitalists.

It’s always our turn to ‘cut back,’ never the bosses’ turn

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 law that might prevent the corporation from extracting the maximum possible profit.

Under these provisions, 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 thus constitute the “evolving standard of investor rights” required under “free trade” agreements.

Toothless “side agreements” on labor rights are meaningless window dressing; the arbitration bodies that decide these cases (in secret with no accountability or right of appeal) are governed by the main body of the text, such as Chapter 11. Corporations can sue governments over regulations or laws they don’t like, but working people and governments have no right to sue.

As Mr. Bacon put it in his Truthout report:

“The most any union or group of workers got from filing a case was ‘consultations’ between the governments and public hearings. There is no process in the agreement for penalties for violation of union rights. And although there are minor penalties for violating child labor or occupational health laws, they’ve never been implemented. Not a single contract was signed as a result of the side-agreement process, nor was a single worker rehired. Those unions that have filed cases have generally sought to use the process to gain public exposure of abuses and exert indirect pressure on employers.”

The neoliberalism that began gathering steam with the rise of Margaret Thatcher and Ronald Reagan, and which has intensified since, is not the handiwork of some secretive cabal, nor is it some tragic bad turn from an otherwise “rational” system. It is the natural evolution of modern capitalism and its relentless competition. “Free trade” agreements that have little to do with trade and much to do with imposing corporate wish lists in the service of ever more inequality and power imbalances is an inevitable component.

Implementing a “reform” of agreements designed to maximize corporate profits above all other considerations and shred the remnants of democracy is less than an illusion. Overturning the entire “free trade” apparatus is indispensable to any serious project of building a better world. Trade should conducted for the benefit of all, not only the one percent — unlike the current global system in which human beings are in the service of markets instead of the other way around.

Freedom is the most abused word in the English language

“Freedom” naturally means different things to different people, but we’ve gone far down a slippery slope when it is reduced to the right to exploit others to the maximum extent.

Humans exploiting other humans is hardly a new phenomenon, but seldom has it ever been elevated to a “democratic” principle in the way it has in recent decades. This is because freedom is morphing from something intrinsic to people to a right embedded in money. Those who have the capital are free to wield it in any way that earns themselves more capital, regardless of harm to others.

Ideologies of individualism are not simply mechanisms to atomize society through breaking down bonds of solidarity — although that is an important reason for their propagation — they grant a license for those who have more but never enough. The cult of individuality, by reducing all social outcomes to personal behaviors independent of any social structure, provides the basis for the celebration of greed while simultaneously inculcating those who have been run over with the self-defeating idea that their individual failures account for their fate.

The class interest of industrialists and financiers is presented as all of society’s interest. “Freedom” is equated with individualism — but as a specific form of individualism that is shorn of responsibility. More wealth for those at the top (regardless of the specific ideologies used to promote that goal, including demands for ever lower taxes) 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.

Photo by Istvan Takacs, Budapest.

Photo by Istvan Takacs, Budapest.

When the means of collective defense have been sufficiently eroded, material standards of living are bought at higher personal prices — longer working hours, greater workloads, ever-present insecurity from the fear of being sent to the unemployment line and fear for the future because of the lack of a secure pension. That material standard can be taken away at any moment, and for many is taken away in an era of outsourcing, corporate globalization and attacks on unions and solidarity.

Even the consumer goodies constantly dangled in front of us are a source of anxiety — commodities must be designed to lead to further consumption rather than satisfy desire so as to prop up the economy, and that wages are insufficient to buy what is produced leads to reliance on credit. The imposition of debt as a means of fattening wallets is not merely a process of saddling unsustainable levels of debt on students, retirees and everybody in between, it ensnares entire countries.

Governments borrow money from the ultra-wealthy and from corporations instead of taxing them, then have to pay higher interest rates on those borrowings because the ultra-wealthy and the corporations complain that too much is being borrowed. In exchange for continuing to buy government debt, financial institutions demand that 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 super-wealthy and corporations, who have hoarded the country’s wealth. Governmental central banks continue to keep the interest rates at which they loan money to big banks close to zero to ensure that the banks will continue to loan money, without which capitalist economies can not function. The banks in turn loan money at much higher rates, profiting from the creation of debt.

The capital wielded in exploitative ways itself comes from exploitation — profits are accumulated on the backs of employees through paying them far less than the value of what they produce, and when there is more surplus than can be usefully invested or shoveled into luxury consumption, it goes to speculation, further destabilizing living standards when the bubble inevitably bursts.

Graphic by Bryan Helfrich

Graphic by Bryan Helfrich

Fables are concocted to “explain” this “freedom.” The United States declared itself to be the freest society on Earth while enshrining enslavement in its constitution. Revolutionary French leaders swore to establish “liberty, equality, fraternity” while mercilessly putting down slave rebellions in the Caribbean. Profits from the slave trade and from colonial plantations were critical to bootstrapping the takeoff of British industry and modern capitalism in the second half of the eighteenth century into the early nineteenth century.

The U.S. maintained slavery until the mid-nineteenth century, enabling the plantation aristocracy to accumulate enormous wealth on the backs of its slaves, then allowed servile relations such as sharecropping, and systematic state-backed violence, to maintain African-Americans’ subjugation for another century. The wealth of the plantation owners and the desperate poverty of newly freed slaves were both transmitted to their respective descendants, locked in through terrorism. When the civil rights movement forced a dismantling of Southern apartheid, U.S. elites countered by saying, in effect: “Look! We’re all equal now! If you are not rich it’s your own fault.” Is this not preposterous?

Supreme Court decisions such as Citizens United equating money with speech are but a logical outgrowth of pernicious ideology masquerading as “freedom.” So pervasive is this ideology that, as Fredric Jameson famously wrote, it is easier to imagine the end of the world than the end of capitalism. It’s true: Hollywood movies invariably depict the breakdown of society or the aftermath of a major disaster as a brutal war of all against all as if the very concept of the survivors cooperating to ensure their survival were beyond the ability to conceptualize.

The current globalized race to decide who dies with the most toys can only lead to the death of civilization.