Do rents really rise without human intervention?

It takes a lot of money to get people to vote against their own interests, and the real estate industry has plenty of money. Ideological obfuscation plays its part, too, and both contributed to a recent pair of defeats in San Francisco’s uphill fight against gentrification.

I happened to be in San Francisco in the days leading up to Election Day, and there seemed to be quite a lot of excitement over Proposition G, a modest proposal that would have instituted a tax on speculators buying and quickly selling tenant-occupied housing. “Yes on G” signs abounded and most, although not all, advocates I met believed it would pass. Why not? What renter could be against a law that might slow down, a little, skyrocketing rents? Nonetheless, the real estate industry poured $2 million into opposing Proposition G, outspending proponents 12-to-1, and it was defeated.

Only two weeks earlier, a federal judge overturned a law passed by the city government that would have forced landlords who kick tenants out of rent-controlled apartments to pay them the difference between the rent they had been paying and the fair market rate for a similar unit for a period of two years. An attempt to combat a steady upsurge in evictions, the judge nonetheless declared that skyrocketing rents aren’t the fault of landlords.

The rents go up all by themselves? Landlords by some lucky coincidence just happen to be the beneficiaries of some mysterious process outside of human control?

San Francisco's Haight-Ashbury district (photo by "Urban")

San Francisco’s Haight-Ashbury district (photo by “Urban”)

Ah, yes, the magic of the market at work again. The federal judge who handed down the ruling, Charles Breyer, has a reputation as a liberal. Yet he had no hesitation in grounding his ruling in orthodox economic ideology, largely echoing the arguments of the hard right, libertarian Pacific Legal Foundation, which represented the landlords. Judge Breyer went so far as to call the requirement a confiscation and “an impermissible monetary exaction.” But the law would not have stopped landlords from throwing tenants into the street so they could bring in new tenants who would pay more, merely ameliorate the cost to the evicted tenant.

Lawyers for the city of San Francisco argued that the two-year rent-differential payment would be “roughly proportional to the harm they impose on their tenants by evicting them from a rent-regulated unit and forcing them to seek new housing at market rates.” That is a real consequence, as the average San Francisco rent of a one-bedroom apartment is $3,100. It would require the combined salaries of 4.6 full-time jobs at San Francisco’s minimum wage to afford the average two-bedroom apartment there, according to the National Low Income Housing Coalition.

More than 10,000 San Franciscans have been evicted under a state law, the Ellis Act, that enables landlords to “exit” the landlord business (although in many cases, they “re-enter” the business after the previous tenants are evicted). The Tenants Together study that reported that total notes that it actually accounts for a small percentage of Ellis Act-related evictions as many others are forced out by the threat of an Ellis Act eviction and do not count toward the official statistic.

Court says landlords who evict are bystanders

Judge Breyer, nonetheless, blamed “market forces” and that favorite right-wing bogey, rent control, for runaway rents. Landlords, therefore, are innocent victims. In his decision, the judge wrote:

“[The law] seeks to force the property owner to pay for a broad public problem not of the owner’s making. A property owner did not cause the high market rent to which a tenant who chooses to stay in San Francisco might be exposed, nor cause the lower rent-controlled rate the tenant previously enjoyed.”

There you have it: If you are in the way of a speculator or a developer wanting to maximize their profits, get lost. That is simply a more polite way to say what former New York City Mayor Ed Koch said as gentrification got underway there in the 1980s: “If you can’t afford New York, move!”

Lost in these legal and ideological thickets are that landlords are cashing in on the sweat of others, including those they force out. Gentrification is a deliberate process. Organic cultures 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 are steadily removed and replaced by corporate money and power, which impose a colorless chain-store conformity.

Those organic cultures then became selling points to promote the targeted neighborhood, cashed in not by those who created it but by real estate interests. Local governments facilitate this process on behalf of developers, tempered by the ability of movements from below to slow the process.

The fallback position of the Pacific Legal Foundation, also adopted by the judge, was that the two-year rent-differential payment would be unfair anyway, because there was no requirement that the payment be used toward rent. The San Francisco city attorney pointed out that the recipient of such a payment would have no choice but to spend it on new housing. But the Pacific Legal Foundation attorney admitted that were such a requirement in place, it would have opposed the law just the same.

The city of San Francisco has announced it will appeal Judge Breyer’s ruling to the U.S. Court of Appeals for the Ninth Circuit. “There should be no doubt that when a landlord evicts a rent-controlled tenant, the immense rent increase the tenant faces is the direct result of the landlord’s decision to evict,” the city attorney, Dennis Herrera, said. A decision acknowledging that would be one grounded in the real world, rather than the phantasmagoria of orthodox economics and its insistence that “markets” are based in the clouds, beyond human touch. In the real world, the landlords, developers and bankers who profit are the real estate market.

A flood of real estate money

Two weeks later, Proposition G failed, with 54 percent against and 46 percent voting in favor. Prop G proposed a “speculation tax” whereby a buyer of a multi-unit property would have to pay a tax surcharge if the building were sold in less than five years; the charge would range from 24 percent in the first year to 14 percent between four and five years. After five years, there would be no such tax surcharge. Because it was designed to be applied only to speculators, the proposed tax had several exemptions, including all single-family buildings and any building sold at a loss.

A heavy barrage of landlord mailings, including false claims that all properties would be covered, was too much for housing activists to overcome. Nonetheless, in a survey of activist responses after the vote published on the 48 Hills blog, there seemed to be a consensus that the effort to talk to people in the streets changed many minds, came close to overcoming the real estate industry’s 12-to-1 spending advantage and set the stage for further efforts that could succeed. The author of this article, Gen Fujioka, policy director for the Chinatown Community Development Center, quoted Causa Justa/Just Cause organizer Maria Zamudio:

“In this election we made major gains in organizing working class immigrants, seniors, low-wage workers, parents, and tenants, firing people up around the demand that they, too, deserve to live in San Francisco. … While it did not win this year, Prop G was part of a larger [local] progressive narrative that did win [including a minimum-wage measure that passed]. That narrative, along with the tools developed and relationships built in this campaign, will be the foundation on which we can continue to grow.”

Another activist, Randy Shaw of the Tenderloin Housing Clinic, believes that a greater emphasis on community organizing would make a difference. Proposition G had been placed on the ballot by four members of the city Board of Supervisors (San Francisco’s city council), rather than by activists collecting signatures, a strategy he believes should be reconsidered. He writes:

“Had the anti-speculation tax gone the signature route, activists would have recognized when the Title and Summary for the initiative petitions was prepared that the very popular idea of ‘stopping the flip’ did not translate well into a ballot measure. At that point a decision could have been made to alter it in some way as to either guarantee that the words ‘eviction’ or ‘speculator’ were included in the ballot question, or to seek to broaden the support base before going forward. … [T]he months spent talking to voters during the petition gathering process would have educated thousands about the issue. It would have insulated these voters from the big money attacks that created, and sought to provoke, confusion about what Prop G meant.”

The influx of technology-company employees may have also tipped the balance. It is difficult to speculate as I have no seen no surveys or breakdowns of the Proposition G vote, but it is possible that techies, many of whom absorb their corporate leaders’ libertarian political tendencies, voted in large numbers against. The group Techies Who Vote called on the technology industry to “exercise its electoral muscle” and vote against Prop G and progressive candidates who supported the measure.

Don’t mourn, organize

Organization is the only recourse against further gentrification, in San Francisco and elsewhere. But reversing the powerful moneyed interests that profit from it is no small task. A local organizer, Mike Miller, writing in CounterPunch, laments the fading of coalitions such as the Mission Coalition Organization that won many battles on behalf of tenants but was unable to coalesce into a force strong enough to reach neighborhood-wide agreements with landlord representatives. He writes:

“Regulation replaced organizing as the strategy to protect tenant interests—a voter-passed initiative created a rent control law, and a Rent Control Board to administer it. Electoral politics rather than mass, disruptive, nonviolent action became the means to enforce the strategy. Each, alone, is insufficient. ‘The market’ overwhelms them: too much demand for too little supply.

Unfortunately, there is no capacity now to negotiate with landlords, developers, lenders and others who profit from this run-amuck market. There is no longer a mass organization that might hurt profits and politicians’ careers by its capacity for boycotts, disruption, lobbying and electoral action.”

The inability to stop gentrification then has ramifications for surrounding areas. Across the bay, Oakland rents have risen 15 percent this year after rising 12 percent in 2013. Housing developments, with little affordable set-asides, are mushrooming in Oakland and evictions are increasing.

That, of course, is not merely a local phenomenon. The average net income from building ownership in New York City has increased 31.5 percent since 1990 — rents collected have risen faster than expenses. Nationally, real estate prices have been increasing faster than inflation since the 1960s. Thus it is no surprise the share prices of real estate investment trusts have more than quadrupled since early 2009.

This is the result of allowing “market forces” to control housing. The way out is for housing to be recognized as a human right, instead of a capitalist commodity to be bought and sold by the highest bidder. That, however, will require a different, better world.

Forward to the past: Next stop, the 19th century

If capitalism is taking us back to feudalism, we’ll have to pass through the 19th century on our way. In terms of wealth inequality, we’re on course to return to the century of robber barons. Back then, the public-relations industry hadn’t developed, so at least they were called by an honest name, instead of “captains of industry” or “entrepreneurs” as they are today. Although “heir” would frequently be far more accurate than “entrepreneur.”

We’re not at the 19th century yet, but we have arrived at the 1920s on our trip to the past. The level of inequality of wealth in the United States today has not been seen since the decade that led to the Great Depression.

The top 0.1 percent — that is, the uppermost tenth of the 1% — have about as much wealth as the bottom 90 percent of United Statesians. To put it another way, approximately 320,000 people possess as much as do more than 280 million. It takes at least $20 million in assets to be among the top 0.1 percent, a total that is steadily rising.

An altered version of a Depression-era image. (Image by Mike Licht, NotionsCapital.com)

An altered version of a Depression-era image. (Image by Mike Licht, NotionsCapital.com)

Emmanuel Saez, an economics professor at the University of California, and Gabriel Zucman, a professor at the London School of Economics, examined income-tax data to reveal these numbers. They write that they combined that data with other sources to reach what they believe is the most accurate accounting of wealth distribution yet, one that shows inequality to be wider than previously imagined. The authors define wealth as “the current market value of all the assets owned by households net of all their debts,” including the values of retirement plans with the exception of unfunded defined-benefit pensions and Social Security. (The reason for that exclusion is that those moneys do not yet exist but are promises to be kept sometime in the future.)

The authors’ paper, “Wealth Equality in the United States since 1913: Evidence from Capitalized Income Data,” reports that, for the bottom 90 percent, there was no change in wealth from 1986 to 2012, while the wealth of the top 0.1 percent increased by more than five percent annually — the latter reaped half of total wealth accumulation.

The 22 percent of total wealth owned by the top 0.1 percent is almost equal to what that cohort owned at the peak of inequality in 1916 and 1929. Afterward, their total fell to as low as seven percent in 1978 but has been rising ever since. At the same time, the combined wealth of the bottom 90 percent rose from about 20 percent in the 1920s to a peak of 35 percent in the mid-1980s, but has been declining ever since. Although pension wealth has increased since then, Professors Saez and Zucman report, the increase in mortgage, consumer-credit and student debt has been greater.

Nonetheless, this might still be an underestimation — the authors write that they “still face limitations when measuring wealth inequality” because of the ability of the wealthy to hide assets off shore or park them in trusts and foundations.

Inequality on the rise

Although rising throughout the developing world, inequality is particularly acute in the United States. Among the nearly three dozen countries that make up the Organisation for Economic Co-operation and Development, only three (Chile, Mexico and Turkey) have worse inequality than does the U.S., measured by the gini coefficient. The standard measure of inequality, the more unequal a country the closer it is to one on the gini scale of zero (everybody has the same) to one (one person has everything).

Of course, were we to measure inequality on a global scale, the results would be more revealing. Even the U.S. gini coefficient of 0.39 in 2012 pales in comparison to the global gini coefficient of 0.52 as calculated by the Conference Board of Canada. To put it another way, global inequality is comparable to the inequality within the world’s most unequal countries, such as South Africa or Uganda.

How to reverse this? Professors Saez and Zucman offer reforms that amount to a return to Keynesianism. They advocate “progressive wealth taxation,” [page 39] such as an estate tax; access to education; and “policies shifting bargaining power away from shareholders and management toward workers.” Such policies would surely be better than the austerity that has been on offer, but the authors’ wish that this can simply be willed into existence is quite divorced from capitalist reality.

Indeed, the authors go on to lament that one factor in stagnant incomes is that “many individuals … do not know how to invest optimally.” It is difficult to believe that these two learned economists are unaware of the relentless chicanery of the financial industry. How does one invest “optimally” in a rigged casino stacked against you?

The past is not the future

Fond wishes for the return of Keynesianism will not bring those days back. (And, of course, if you weren’t a white male those days weren’t necessarily golden anyway.) The Keynesian consensus of the mid-20th century was a product of a particular set of circumstances that no longer exist. Keynesianism then depended on an industrial base and market expansion. A repeat of history isn’t possible because the industrial base of the advanced capitalist countries has been hollowed out, transferred to low-wage developing countries, and there is almost no place remaining to which to expand. Moreover, capitalists who are saved by Keynesian spending programs amass enough power to later impose their preferred neoliberal policies.

Capitalists tolerated such policies because profits could be maintained through expansion of markets and social peace bought. This equilibrium, however, could only be temporary because the new financial center of capitalism, the U.S., possessed a towering economic dominance following World War II that could not last. When markets can’t be expanded at a rate sufficiently robust to maintain or increase profit margins, capitalists cease tolerating paying increased wages.

And, not least, the massive social movements of the 1930s, when communists, socialists and militant unions scared capitalists into granting concessions and prompted the Roosevelt administration to bring forth the New Deal, were a fresh memory. But the movements then settled for reforms, and once capitalists no longer felt pressure from social movements and their profit rates were increasingly squeezed, the turn to neoliberalism was the response.

Nobody decreed “We shall now have neoliberalism” and nobody can decree “We shall now have Keynesianism.” Capitalist market forces — once again, simply the aggregate interests of the most powerful industrialists and financiers — that are the product of relentless competitive pressures have led the world to its present state and the massive inequality that goes with it.

Even if mass social movements build to a point where they could force the imposition of Keynesian reforms, the reforms would eventually be taken back just as the reforms of the 20th century have been taken back. The massive effort to build and sustain movements capable of pushing back significantly against the tsunami of neoliberal austerity would be better mobilized toward a different economic system, one based on human need rather than private profit.

Reforming what is ultimately unreformable is Sisyphean. Going back to the mid-20th century Keynesian era, even were it possible, would be no more than a detour on the way to the 19th century. Building a better world beats nostalgia.

New development banks unlikely to threaten World Bank

Forecasts that new development banks sponsored by the largest developing countries are destined to erode the economic dominance of the United States are quite premature, but it is nonetheless no contradiction that the global hegemon has vigorously sought to stop them. More than a little hypocrisy is at work here.

The newly created Chinese-led Asian Infrastructure Investment Bank has drawn much more of Washington’s ire than has the BRICS New Development Bank formed by the five “BRICS” countries of China, Russia, India, China and South Africa. The U.S. government has leaned heavily on Australia and other countries sufficiently firmly that Canberra has declined to join the Asian Infrastructure Investment Bank despite its initial interest, nor have Indonesia and South Korea.

Although the infrastructure bank is to be capitalized with US$100 billion, it would be ridiculous to say that the World Bank or International Monetary Fund will be put out of business. It will not necessarily go much beyond complementing the existing Asian Development Bank, a regional multi-lateral institution controlled by the U.S. and Japan. And even the World Bank says Asia will require trillions of dollars to build its infrastructure in coming years that it and existing institutions can’t supply.

Protest at the World Bank. (Photo by "Jenene from Chinatown," New York City)

Protest at the World Bank. (Photo by “Jenene from Chinatown,” New York City)

The politics of imperialism are at work here. The very idea that a country outside the control of the U.S. dares to set up an institution outside the control of the U.S. is an example that Washington, as the ultimate enforcer of multi-national corporations’ prerogatives, is determined to stamp out.

In a front-page article, The New York Times reported:

“American officials have lobbied against the [infrastructure] bank with unexpected determination and engaged in a vigorous campaign to persuade important allies to shun the project, according to senior United States officials and representatives of other governments involved.”

And what excuse does the U.S. government give for its opposition? Officially, the Obama administration is not talking, but, quoting a “senior official” granted anonymity, the Times reports:

“A senior Obama administration official said the Treasury Department had concluded that the new bank would fail to meet environmental standards, procurement requirements and other safeguards adopted by the World Bank and the Asian Development Bank, including protections intended to prevent the forced removal of vulnerable populations from their lands. … ‘How would the Asian Infrastructure Investment Bank be structured so that it doesn’t undercut the standards with a race to the bottom?’ asked the senior official.”

Has the Obama administration, or, more accurately, the government apparatus that has steered U.S. policy on behalf of corporate interests for generations, suddenly grown a conscience? Quite unlikely. The World Bank and International Monetary Fund, as well as regional banks such as the Asian Development Bank, have been under U.S. suzerainty since their founding. Does the World Bank really uphold development ideals? The record firmly says otherwise.

The World Bank’s record of destruction

The World Development Movement, a coalition of local campaign groups in Britain, reports that the World Bank has provided more than US$6.7 billion in grants to projects that are destructive to the environment and undermine human rights, a total likely conservative. To cite merely three of the many examples, the World Bank:

  • Loaned an energy company in India more than $550 million to finance the construction of two coal-fired power plants. Local people, excluded from discussions, were beaten, their homes bulldozed and complain of reduced food security and deteriorating health as a result of the power stations.
  • An Indonesian dam, made possible by the World Bank’s $156 million loan, resulted in the forcible evictions of some 24,000 villagers, who were subject to a campaign of violence and intimidation.
  • In Laos, a hydropower project made possible by World Bank guarantees displaced at least 6,000 Indigenous people and disrupted the livelihoods of around 120,000 people living downstream of the dam who can no longer depend on the rivers for fish, drinking water and agriculture.

A study of World Bank policies, Foreclosing the Future by environmental lawyer Bruce Rich, found that:

“Drawing on Bank studies, project evaluations and sectoral reviews, it is shown that the World Bank still suffers from a pervasive ‘loan approval culture’ driven by a perverse incentive system that pressures staff and managers to make large loans to governments and corporations without adequate attention to environmental, governance and social issues. In 2013, Bank Staff who highlight social risks and seek to slow down project processing still risk ‘career suicide.’ … [The bank] has continued to binge on enormous loans to oil and gas extraction, coal-fired power stations and large-scale mining generating environmental damage, forest loss and massive carbon emissions.”

A study prepared by the Institute for Policy Studies and four other organizations found that World Bank lending for coal, oil and gas was $3 billion in 2008 — a sixfold increase from 2004. In the same year, only $476 million went toward renewable energy sources.

It could be pointed out that China’s industrialization has had serious environmental consequences, and that Chinese money was critical to the building of the Three Gorges Dam, the construction of which led to the forced removal of at least 1.3 million people. True enough, but Canadian, French, German, Swiss, Swedish and Brazilian capital were also necessary to build the dam. The World Bank also provided loans associated with Three Gorges and provided experts during the project’s planning stages.

Despite the pressure from Washington, 21 countries signed up to be founding members of China’s Asian Infrastructure Investment Bank, including India, Singapore and the Philippines.

BRICS bank expected to bow to the logic of capital

China’s new bank was formed three months after the BRICS New Development Bank. The BRICS bank will be more modest, with a goal of US$100 billion capitalization, spread equally among the five countries. In a July 2014 communiqué, the five countries said their bank will have the “purpose of mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies.” They also pledged to organize a “BRICS Contingent Reserve Arrangement” to “help countries forestall short-term liquidity pressures” resulting from foreign-exchange or debt markets.

Although this bank is intended as a gesture of independence from the U.S.-dominated world financial system, and will use some combination of the BRICS currencies, detaching from the world system is not a simple matter of setting up new institutions. A New Delhi economics professor, C.P. Chandrasekhar, sees the bank being limited in what it can potentially do. Writing on Naked Capitalism, he said:

“However, the new development bank is fundamentally not detached from the global financial system. Being a bank, even if a specialised one, it must ensure its own commercial viability. And it must do so when a large part of the resources it lends would be mobilised from the market. … [W]anting to be seen as respectful of the sovereign interests of borrowing countries, the [New Development Bank] would be careful not to frame its lending rules in ways that threaten the policy sovereignty of borrowing countries. If the countries that approach the institution are pursuing neoliberal strategies, there may be clear limits in terms of what the new development bank itself can achieve.”

Professor Chandrasekhar concludes:

“The decision of the BRICS to set up mini-versions of the World Bank and the IMF seems to be more a symbolic declaration of resentment at the failure of the US and its European allies to give emerging countries a greater say in the operations of the Bretton Woods institutions. … The desire to redress the obvious inequities in the global financial system seems far less important.”

If it is a safe haven, it is not going away

That, for at least the near future, U.S. hegemony is not threatened received fresh confirmation during October’s week-long decline in the world’s stock markets — money from around the world quickly poured into U.S. treasuries as a safe haven. From a capitalist standpoint, doing so is entirely rational: If the U.S. government unravels, the entire global capitalist system disintegrates.

Although predictions of the U.S. eventually being dethroned will one day come true — every empire has an expiration date — that such a dethronement is imminent is wishful thinking. This is not to say that U.S. power is not eroding, but there is no conceivable replacement for the U.S. at the center of the world capitalist system. The U.S. spends about as much money on its military as every other country on Earth combined and the dollar remains the world’s reserve currency; that the world continues to buy U.S. debt as a safe haven enables the U.S. to continue to run up deficits and finance its military.

There is no military remotely in a position to become the global enforcer of capital, nor any currency that could replace the dollar at the present time. The euro is not a candidate because the eurozone is too fractured and unstable; the renminbi is not fully convertible. According to the Bank of International Settlements, the U.S. dollar was involved in 87 percent of the world’s foreign-exchange transactions in April 2013, while the euro was involved in 33 percent and the renminbi in 2 percent.

The U.S. needs China to buy its debt but China needs the U.S. as an export destination; Chinese growth continues to be dependent on unsustainable levels of investment rather than internal consumption, a situation difficult to adjust because production is moved to China to take advantage of its low sweatshop wages. A contradiction on the other side of the Pacific is that U.S. foreign policy treats China as a capitalist competitor that must be contained at the same time that U.S.-based multi-national corporations are instrumental in transferring production to China.

A change in the global hegemon from the U.S. to another country or bloc, leaving the capitalist system intact, provides no salvation, no more than did the early 20th century’s transfer from Britain. Another world is possible only with an entirely new economic system. Otherwise, the subaltern will remain subaltern, be they nation or people.

The ‘medicine’ of the Trans-Pacific Partnership as bitter as ever

The Trans-Pacific Partnership is as dangerous as ever. Denying access to medicines, increased surveillance of Internet usage and mandatory patents at the behest of multi-national corporations are some of the corporate goodies stashed in the TPP’s intellectual property chapter, revealed by WikiLeaks this month. Journalism could even be criminalized.

The more we know about the TPP, the worse it gets, which is why the governments of the 12 countries involved, led by the Obama administration, continue to negotiate in unprecedented secrecy. The latest text of the TPP’s intellectual property chapter shows very little change from an earlier draft also published by WikiLeaks. In a press release accompanying this month’s publication of the revised text, WikiLeaks says:

“[T]here are significant industry-favouring additions within the areas of pharmaceuticals and patents. These additions are likely to affect access to important medicines such as cancer drugs and will also weaken the requirements needed to patent genes in plants, which will impact small farmers and boost the dominance of large agricultural corporations like Monsanto.”

An analysis by Public Citizen explains:

“A rule [would] require the patenting of plant-related inventions, such as the genes inserted into genetically modified plants, putting farmers in developing countries at the mercy of the agriculture industry, including seed manufacturers such as Monsanto, and threatening food security in these countries more broadly.”

The architecture of Melbourne

The architecture of Melbourne

Monsanto, already attempting to gain a stranglehold over the world’s food supply, is hardly in need of yet more favorable treatment. Proprietary seeds and genetically modified organisms are Monsanto’s routes to control what you eat and what farmers grow. Once under contract, farmers are required to buy new genetically engineered seeds from the company every year and the Monsanto herbicide to which the seed has been engineered to be resistant.

Stealth ‘fast-track’ process needed to sneak TPP through Congress

Concomitant to the secrecy shrouding the TPP is the stealth needed to pass the “free trade” treaty. The Obama administration is seeking to be given “fast-track” authority by Congress. Under the fast-track process, Congress cedes its right to make any changes, limits its time to debate, and must schedule a straight yes-or-no vote (no amendments allowed) in a short period of time. Some of the worst “free trade” deals have been approved in this manner, and the importance of fast-track is shown in that the last U.S. trade pact approved, with South Korea, was approved in 2007 — literally one minute before fast-track authority expired!

A fast-track bill, known as Camp-Baucus for its two sponsors, was essentially dead on arrival early this year due to widespread opposition in Congress, mostly by Democrats but also some Republicans. That this arose was because of organized activist work by groups across the United States. But Democratic Senator Ron Wyden, last April, signaled his intention to introduce a new fast-track bill, which he rebranded “smart track.” U.S. activists widely speculate that either Senator Wyden’s thinly disguised “smart track” bill or a more openly fast-track bill, perhaps written by Republicans in the House of Representatives, will be introduced in Congress following the November election with the intention of ramming it through a lame-duck session.

U.S. activists for the past year and a half have focused on stopping fast-track in Congress because it will be virtually impossible to pass the TPP otherwise. Other countries have signaled their reluctance to agree to a final TPP text unless Congress grants the Obama administration fast-track authority. Without such authority, Congress would retain the right to make changes to an agreed-upon treaty, potentially unraveling any deal. The Canadian government, in late September, made this reluctance explicit.

Washington Trade Daily recently reported that the Canadian ambassador to the U.S., Gary Doer, said Canada and other negotiating countries won’t conclude negotiations until the Obama administration has the “political muscle” of trade-promotion authority (the formal name for fast-track). Thus, activists advocate no lessening of vigilance against new attempts to introduce fast-track legislation. A Week of Action Against Fast Track is being organized for November 8 to 14 in the U.S. In Australia, a series of rallies opposing the TPP are taking place this week in Sydney and Canberra.

These efforts come against a renewed push for a completed deal; negotiators are meeting this week, to be immediately followed on October 25 by a ministerial-level meeting in Sydney.

Criminalizing your right to know

There is much to oppose in the Trans-Pacific Partnership itself. A trade-secrets provision in the leaked intellectual property chapter is written in a way that makes it possible for reporting the contents of a future trade deal to be prosecuted. The article in question states:

“In the course of ensuring effective protection against unfair competition … each Party shall ensure that natural and legal persons have the legal means to prevent trade secrets lawfully in their control from being disclosed to, acquired by, or used by others (including state commercial enterprises) without their consent in a manner contrary to honest commercial practices.”

Criminal penalties would be mandatory for:

“the unauthorized, willful access to a trade secret held in a computer system; the unauthorized, willful misappropriation of a trade secret, including by means of a computer system; or the fraudulent (or unauthorized) disclosure of a trade secret, including by means of a computer system.”

WikiLeaks’ publication of this text would be a criminal matter under this provision. This provision would make it mandatory for signatory governments to enact strict laws protecting undefined “trade secrets.” The text of the TPP itself is classified as a secret! Legislators and the public are excluded from seeing the text. In the United States, the only people other than negotiators to have access to the text are 605 “advisers,” who are almost all executives of multi-national corporations or corporate lobbyists.

The Age newspaper of Melbourne summarizes the threat to journalism this way:

“The leaked treaty text shows that in an effort to deal with ‘unfair competition,’ largely from Chinese industrial espionage, the United States has pushed ahead with proposals to criminalise disclosure of trade secrets across the Pacific Rim. The draft text provides that TPP countries will introduce criminal penalties for unauthorised access to, misappropriation or disclosure of trade secrets, defined as information that has commercial value because it is secret, by any person using a computer system.  …

There are no public interest or free speech exemptions. Criminalisation of disclosure would apply to journalists working for commercial media organisations or wherever the leak was considered harmful to the ‘economic interests’ of any TPP country.”

Barriers to cheaper generic medications

Other rules in the TPP intellectual property text would raise barriers to generic medications becoming available and mandating that the terms of patents be extended on demand by patent holders. The United States and Japan even propose language that would require intellectual property enforcement to be elevated above any other legal consideration! The U.S. is also seeking the criminalization of copyright infringement, even in cases where there is no attempt to gain financially, such as a fan posting a work, and would also mandate that Internet service providers remove content upon a corporation’s demand to avoid legal penalties.

The linchpin to enforcement of draconian rules — the worst of which are put forth by the United States with Japan often seconding — is the “investor-state dispute mechanism.” That is a requirement that governments submit to binding arbitration in secret tribunals when an “investor” wants a law changed; the judges in these tribunals are corporate lawyers.

The dispute mechanism is not directly mentioned in the intellectual property chapter, but the one article that purports to uphold national sovereignty is contradicted by another article that mandates that multi-national corporations be given the same rights as national corporations. That clause, standard in “free trade” agreements, is a battering ram used by the secret tribunals to order the withdrawal of laws safeguarding environmental, safety, health or labor standards. These rulings, in turn, become precedents that are used to hand down future harsher decisions.

The Trans-Pacific Partnership, however, is far from the only danger to working people. There is also the Transatlantic Trade and Investment Partnership between the U.S. and the E.U.; the Trade In Services Agreement that would eliminate the ability of governments to regulate the financial industry (50 countries are in on this one); and the Canada-European Union Comprehensive Economic and Trade Agreement. Each of these are designed to elevate corporations to the level of a country, although in practice, because of tribunal precedents, they would elevate corporations above national governments.

“Free trade” agreements have little to do with trade, and much to do with imposing the domination of capital in as many spheres of life as possible. They are massive failures for working people in all countries. They offer, and can offer, nothing but a race to the bottom. Attempting to reform a race to the bottom is a fool’s errand. The TPP and its equally vile cousins must be defeated, and a complete re-conceptualization of trade and who should benefit from trade, substituted. That in turn requires directly challenging prevailing economic systems, otherwise we will be shoveling against the tide.

A bigger pie doesn’t mean you are getting a slice

The kerfuffle between executives and shareholders of The Coca-Cola Company seems to have been smoothed over, at least for now, but no matter how much the two sides wrangle over the pie, they do agree on one crucial detail: Employees deserve nothing.

Lest we dismiss the recent plan hatched by Coca-Cola’s management to transfer to itself at least US$13 billion as a fight in which we have no dog, it does provide a case study of the mindset of corporate and financial elites, and the power of Wall Street. This is a company accused of involvement in a string of human-rights violations in countries around the world and racial discrimination in the United States, and routinely lays off employees despite raking in billions of dollars per year in profits.

The $13 billion dispute is this: Coca-Cola management proposed earlier this year to issue hundreds of millions of stock and stock options to its higher-level executives. For 2014 alone, the stock grants would have been worth about $13 billion. Enter a money-management firm that owns a couple of million shares. Loudly complaining that those billions belonged to it and other shareholders, the money-management firm’s chief executive officer declared:

“In effect, the Board [of directors of Coca-Cola] is asking shareholders for approval to transfer approximately $13 billion from all of our pockets to the Company’s management over the next four years.”

Fire and ice on Colombia volcano Nevado del Huila (photo by Martin Roca)

Fire and ice on Colombia volcano Nevado del Huila (photo by Martin Roca)

Coca-Cola’s management blinked last week, but earlier defended its stock grant by saying that the stock grants “are within industry norms.” But we need not run out of tissues crying over this transfer of wealth away from needy financiers, because Coca-Cola announced that it is reducing its previous plan. Just what the company plans to give its executives is not clear from its October 1 press release, but it did have this to say:

“Consistent with our past practice, 100% of the proceeds from stock option exercises by employees will be used to repurchase shares, minimizing dilution. This is separate from, and in addition to, our normal share repurchase program.”

What that finance-speak means is that the profits of the company won’t be spread thinner because it will buy back stock in exchange for the stock it will issue its top executives. Wall Street won this round. Coca-Cola will be using some of its profits to buy back shares from existing shareholders. This is a common practice whereby a company offers to buy stock at a premium to the trading price, giving an extra payday to those who sell and leaving the profits to be divided by among a smaller group.

Money rains upon speculators

How much largesse is rained upon financiers? According to a report by Bloomberg, the companies of the S&P 500 Index will spend $914 billion on stock buybacks and dividends this year, or 95 percent of their earnings. (Those earnings are after the multimillion-dollar payouts executives pay themselves. Oops, sorry, after the payouts granted by their cronies on their hand-picked board of directors.) Bloomberg reports that S&P 500 companies are sitting on “$3.59 trillion in cash and marketable securities and they’ve raised almost $1.28 trillion in 2014 through bond sales.”

That represents quite a pile of profits. Coca-Cola has spent billions of dollars in recent years buying back its stock. The company has plenty of money, reporting almost $45 billion in net income during the past five years. A capitalist’s profits (including the large portion shared with financiers) are created through paying employees much less than the value of what they produce. So what did Coca-Cola’s employees get for producing this wealth enjoyed by executives and speculators? The back of the hand for the most part.

Having earned “only” $8.6 billion in net income for 2013, a slight drop from a year earlier, Coca-Cola announced it would cut its annual expenses by $1 billion by 2016. Undoubtedly, a savings of that size will have to include layoffs. Already, Italian workers struck last month over a plan to eliminate 12 percent of their jobs; workers at the company’s partially owned Australian affiliate have been handed a pay freeze for 2015 with new hires starting at 40 percent less; and 1,200 Spanish jobs were eliminated by closing four plants in defiance of a court order.

All this is before we get to the many human-rights abuses in which Coca-Cola is accused. In the past, the company made big profits operating in Nazi Germany and apartheid South Africa.

More recently, the company and its business affiliates have been repeatedly accused of using paramilitary death squads to kidnap, torture and assassinate union leaders. The company denies any involvement. But being an organizer in Colombia is dangerous work — of the 213 union leaders murdered worldwide in 2002, 184 died in Colombia. In the previous 15 years, almost 4,000 Colombian trade unionists were murdered.

Child labor, violence and smuggling are it

Workers seeking to join unions in Colombia are routinely fired and threats against union activists continue on a steady basis. The activist group Killer Coke has compiled a country-by-country list of outrages in various countries, including thousands of children, as young as eight-years-old, used as labor on El Salvador sugar-cane farms that supply the company; multiple kidnappings and murders of union officials at a bottling plant in Guatemala; and, in the Philippines, the use of outsourced labor to avoid paying benefits and accusations of “smuggling” sugar into the country to avoid taxes and undercut local sugar producers.

The $13 billion that the executives and the financiers were fighting over did not fall out of the sky.

The point here isn’t that Coca-Cola is a uniquely evil company. Its arch-rival PepsiCo Inc. is spending $8.7 billion this year alone in stock buybacks and dividend payouts to make financiers happy. In the past, it was a major investor in Burma during the military régime that routinely used its citizens, particularly from ethnic minorities, as slave laborers. Pepsi exchanged its income there for Burmese agricultural products that could be sold at a profit outside the country — products often produced on the military junta’s slave-labor farms that were taken by force.

Finance capital is both whip and parasite, applying relentless market pressure to force companies to squeeze ever higher profits and extracting more wealth for itself. This is what the holy grail of “efficiency” actually means. Industrialists and financiers fight over which gets the bigger piece of the pie, but they agree they deserve the whole pie. The rest of us can shut up and get back to work. Did you vote for this?

It’d be simpler if we just gave all our money to the nearest billionaire

In attempting to comprehend the staggering fortunes possessed by the world’s multi-billionaires, consider this: There are only six countries in the world with a gross domestic product bigger than the wealth possessed by 400 richest people in the United States. Could it really be that these titans produce more than the entire country of Brazil? Or Italy? Or Canada?

At the same time, more than 47 million people in the United States rely on government food assistance, and despite the federal food-stamps program (known formally as the Supplemental Nutrition Assistance Program), there are 49 million United Statesians who go hungry at least some of the time.

These two sets of facts are not unrelated.

The corporate media breathlessly reported, once again, on Fortune magazine’s annual list of the 400 richest people in the U.S., just published. These 400, Fortune reports, have a collective net worth of $2.3 trillion — an increase of $270 billion from last year. While this top of pyramid saw their net worth rise 12% in just the past year, the net worth of the bottom 75 percent has declined by more than five percent since 2010.

SerfsThe top ten on the Fortune list are familiar. Bill Gates, thanks to leveraging the personal-computer operating-system monopoly his company was once handed, continues to rank first. The Koch brothers, David and Charles, are tied for fourth at $42 billion each and four members of the Walton family, recipients of the capital amassed by Wal-Mart Stores Inc., are each among the top ten and collectively worth $144 billion.

The best democracy you can buy

As you might imagine, those billions buy a lot of political power. The Walton and Gates families are two of the three families that are the biggest bankrollers of the effort to place education under corporate control through charter schools. The Waltons amassed their fortunes through ruthless exploitation of its workers and relentlessly pressuring its suppliers to move production to China and then Bangladesh in search of ever lower wages.

Wal-Mart also enjoys vast subsidies — the company has received more than $1 billion in government giveaways, and a study of the costs of those subsidies and the public-assistance programs that Wal-Mart employees must use due to their miserably low pay add up to nearly $1 million per store. The average pay of a Bangladeshi garment worker who makes Wal-Mart’s products is US$75 to $100 per month.

Like the Waltons, the Koch brothers inherited their company. Koch Industries is one of the country’s worst polluters of the air and water as well as a major source of greenhouse gases. They are spending hundreds of millions of dollars in an effort to buy Congress and state legislatures in this election cycle alone; are major funders of the extremist American Legislative Exchange Council (ALEC) that literally writes legislation for its corporate membership; and even attempted to take control of the Cato Institute, the far-right libertarian “think tank” that, despite agitating for the end of Social Security, was apparently not extreme enough for them.

The struggle for tens of millions to eat

At the other end of the spectrum, the charity organization Hunger in America estimates that 49 million people in the U.S. are “food insecure” and that 20 percent of the country’s households with children are food insecure. But those figures are based on U.S. Department of Agriculture statistics that are considered likely to be conservative. For example, the Food Research and Action Center, in its most recent study (for 2012) reported that 18.2 percent of those surveyed in a poll conducted by Gallup answered yes when asked if they did not have enough to eat at least once in the past 12 months. That translates to 57 million people.

The more than 47 million people who relied on food stamps in the U.S. in 2013 is an all-time high and, by way of comparison, the $80 billion cost of the program is less than the net worth of brothers Charles and David Koch. That net worth keeps rising despite the money they pour into their political pressure groups; the two have more than doubled their fortune in just the past four years. The cost of food stamps is also comparable to the $78.4 billion in profits that Wal-Mart has racked up in its five most recent fiscal years.

Let us remember that profit comes from a capitalist paying employees less than the value of what they produce. As Karl Marx demonstrated, the value of a product would be the same if the workers sold the commodity themselves, thereby retaining the full value of what they produced rather than having much of it taken by the capitalist. The portion taken by the capitalist therefore is the source of the capitalist’s profit and not the circulation of the product.

There is a reason that we are enduring a decades-long race to the bottom. Although the corporate press would like you to believe the propaganda that vast fortunes result from the magical acumen of captains of industry, the reality is ruthless exploitation. Inequality does not fall out of the sky.

The lag in wages vs. productivity costs you hundreds of dollars per week

Working harder and making less isn’t a great deal for you, although it certainly is good for corporate profits. The ongoing pattern of stagnant pay as worker productivity increases, having raged unabated since the 1970s, now costs an average United States household $18,000 per year in lost income.

By no means a pattern limited to the U.S., the average Canadian household is short at least $10,000 per year because of pay lagging productivity gains. Wages have begun to decline in Britain, as well as elsewhere.

By now, studies demonstrating these trends risk finding themselves in the category of “the Sun will rise in the east tomorrow.” But although the Earth’s rotation is an immutable phenomenon of nature, getting screwed at the workplace need not be. For now we are, and for North Americans in particular this has gone on for more than three decades. A new study by the Economic Policy Institute, written by economist Elise Gould, reports:

“Between 1979 and 2013, productivity [in the U.S.] grew 64.9 percent, while hourly compensation of production and nonsupervisory workers, who comprise over 80 percent of the private-sector workforce, grew just 8.0 percent. Productivity thus grew eight times faster than typical worker compensation.” [page 4]

As a result of that under-compensation, according to the Economic Policy Institute study:

“By 2007, the growing wedge between economy-wide average income growth and income growth of the broad middle class (households between the 20th and 80th percentiles) reduced middle-class incomes by nearly $18,000 annually. In other words, if inequality had not risen between 1979 and 2007, middle-class incomes would have been nearly $18,000 higher in 2007.” [page 3]

Might your personal finances be easier with that extra money?

(Graphic by Economic Policy Institute)

(Graphic by Economic Policy Institute)

Another way of conceptualizing this trend is the share of wages and salaries as a percentage of gross domestic product. Fred Magdoff and John Bellamy Foster, writing in the March 2013 edition of Monthly Review, calculate that wages and salaries constituted 53 percent of U.S. GDP at the start of the 1970s but only 44 percent in 2011. The authors, however, caution that even that statistic understates the decline in wages because it includes the salaries of chief executive officers and other high-level executives, whose compensation has risen. They write:

“Thus, although the wage share of income has sharply dropped in the U.S. economy, this decline has not been shared equally, and applies mainly to what is properly called the working class, i.e., the bottom 80 percent or so of wage and salary workers.” [page 7]

The problem is bigger than your degree

The canard that an “education gap” is responsible for rising inequality — perhaps the favorite excuse of Right-wing commentators, simply isn’t true. The Economic Policy Institute study reports real (inflation-adjusted) hourly wages for workers with a college degree has increased all of 1.6 percent from 2000 to 2013. As a result:

“[T]he gap between the wages near the top of the wage distribution and the middle … has grown much faster since 1995 than has the wage gap between those with a four-year college degree and those with a high school degree.” [page 21]

It’s not as if there is no money for raises: U.S. publicly traded companies are sitting on $5 trillion in cash, five times the total during held during the mid-1990s.

(Graphic by Economic Policy Institute)

(Graphic by Economic Policy Institute)

Canadian workers have fared little better. A Canadian Centre for Policy Alternatives paper found that, although Canadian wages are flat since 1991, the average weekly wage would be $200 per week higher if wages had kept up with gains in productivity. That adds up to about $10,000 per year. As in the U.S., low-wage workers fared the worst, the paper said:

“After adjusting for inflation, the average provincial minimum wage has decreased from $9.14 to $7.32 between 1976 and 2006 in terms of 2006 dollars.” [page 8]

Wage decay is a more recent pattern in Britain, but wages there have suffered what the London School of Economics and Political Science calls “unprecedented falls.” A school study, lamenting that “the long US experience of stagnant real wages might be viewed as a warning sign for the UK,” found that British wage growth has lagged productivity growth for more than a decade. The study, released earlier this year, says:

“The real wages of the typical (median) worker have fallen by around 8-10% — or around 2% a year behind inflation — since 2008. Such falls have occurred across the wage distribution, generating falls in living standards for most people, with the exception of those at the very top.”

There is no returning to a Keynesian past

It’s not uncommon for those angered or depressed by the neoliberal onslaught of recent decades to advocate a return to Keynesianism. Alas, it is not so simple to do that, nor would it actually provide a solution to today’s economic crises. For one thing, it is not a matter of a leader somewhere decreeing that we shall now have neoliberalism instead of Keynesianism, or that another leader can simply reverse the policies.

The mid-20th century Keynesian moment was a product of a particular set of circumstances that can’t be repeated. The New Deal and the rising wages following World War II were the products of mass movements — communist, socialist and union — that simply do not exist today.

Mid-20th century Keynesianism depended on an industrial base and expanding markets. A repeat of history isn’t possible because the industrial base of the advanced capitalist countries has been hollowed out, transferred to low-wage developing countries, and there is almost no place remaining to which to expand. U.S. capitalists could tolerate rising wages then because of enormous export opportunities in the wake of the destruction of European and East Asian industry due to World War II and because of long pent-up domestic demand that couldn’t be fulfilled during the Great Depression and the war.

The rest of the world eventually got on its feet, increasing competition, and eventually profit rates began to come under pressure. The neoliberalism that began to take hold in the 1970s, and the accompanying financialization of the economy, were a response by capitalists to what, for them, were deteriorating conditions. Margaret Thatcher and Ronald Reagan may have ushered in the age of neoliberalism, but they were the political instruments of corporate offensives. In the U.S., neoliberalism could be said to have begun during the Carter administration, when then Federal Reserve chairman Paul Volcker unilaterally began to raise interest rates sky high, inducing the deep recession of the early 1980s.

We are living in very different times than the post-war years; the neoliberal offensive is the natural development of capitalism and the manic competition that mandates capitalists to grow or die. Even were it possible to bring back Keynesianism through legislation, it would at best be a temporary balm; the capitalists who are saved through such policies re-gain the power to again impose their preferred policies. There is no salvation in attempting to “stabilize” what is inherently unstable nor any realistic prospect that what is structurally unfair and unequal can be made just.

The advances that are the fruits of the 20th century’s mass movements have largely been erased, with no end to the race to the bottom. This century’s mass movements will have to aim much higher than mere reforms.