If capitalism is ‘natural,’ why was so much force used to build it?

If capitalism is such a natural outcome of human nature, why were systematic violence and draconian laws necessary to establish it? And if greed is the primary motivation for human beings, how could the vast majority of human existence have been in hunter-gatherer societies in which cooperation was the most valuable behavior?

Cheerleaders for capitalism — who generate endless arguments that greed is not only good but the dominant human motivation — tend to not dwell on the origination of the system, either implying it has always been with us or that it is the “natural” result of development. Critics of capitalism, interestingly, seem much more interested in the system’s origins than are its boosters. Perhaps the bloody history of how capitalism slowly supplanted feudalism in northwest Europe, and then spread through slavery, conquest, colonialism and routine inflictions of brute force makes for a less than appealing picture. It is not for nothing that Marx wrote, “If money … ‘comes into the world with a congenital blood-stain on one cheek,’ capital comes dripping from head to foot, from every pore, with blood and dirt.”

A correlation of this violence applied by the elites of those times and the governments that, then as now, served their society’s elites, was that peasants and the earliest wage workers must have resisted. Indeed they did. There is a long history of resistance to capitalist offensives, and although movements, those organized and the many more that were spontaneous, were not able to bring about a more humane and equitable world, these are histories well worth knowing. A new book from Monthly Review Press, The War Against the Commons, Dispossession and Resistance in the Making of Capitalism by Ian Angus*, brings much of this history to vivid life.

Concentrating on the birthplace of capitalism, England, Mr. Angus is forthright about the violent details as they unfolded from the 15th century through to the Industrial Revolution, “focus[ing] on the first and most complete case, the centuries-long war against the agricultural commons, known as the enclosure in England and the clearances in Scotland.” At the dawn of capitalism (most commonly seen as arising in the 16th century although not firmly established until later), England and Scotland were overwhelmingly populated by farmers, much as the rest of the world. Although there was wage work, very few were dependent on it and only under capitalism did mass reliance on wage work occur.

Thus forced removal from the land, elimination of access to common lands and putting an end to the ability to live without working for others was essential for capitalism to develop, and that is the topic of War Against the Commons. In his introduction, Mr. Angus puts this forth in characteristically clear, unambiguous language:

“For wage labor to triumph, there had to be large numbers of people for whom self-provisioning was no longer an option. The transition, which began in England in the 1400s, involved the elimination not only of shared use of land, but of the common rights that allowed even the poorest people access to essential means of subsistence. The right to hunt or fish for food, to gather wood and edible plants, to glean leftover grain in the fields after harvest, to pasture a cow or two on undeveloped land — those and more common rights were erased, replaced by the exclusive right of property owners to use Earth’s wealth.”

Capitalism has only existed for a few centuries, while humans have roamed the Earth for hundreds of thousands of years. This of course is not an argument that we should go back to a hunter-gatherer existence — quite impossible given the size of the human population even if it were desirable — but simply an acknowledgment that capitalism is not “natural”; it has existed for a blink of an eye in human history.

Flipping the tragedy of the commons onto its feet

Naturally, Mr. Angus has to first clear out well-propagated misconceptions. He first shoots down the “tragedy of the commons,” a much-traveled piece of neoliberal nonsense. The originator of the concept of the “tragedy of the commons,” an ideological argument for privatization of everything, is a biology professor whose textbook argued for “control of breeding” for “genetically defective” people. Mr. Angus notes this professor “had no training in or particular knowledge of social or agricultural history” when writing his article, published in 1968. But the “thesis” was politically useful, being used to justify stealing the land of Indigenous peoples, privatizing health care and social services, and much else. What the “tragedy of the commons” “thesis” asserts is that land held and used in common will inevitably be overused and destroyed because everybody will want to use more of the common resource, such as introducing more animals on a pasture, until “common ruin” is the result.

War Against the Commons points out that no evidence was presented in this article; its thesis was simply asserted. But commons-based agriculture lasted for centuries; this success on its own disproves the thesis. Those who have actually studied how commons were used and provide actual evidence for their works demonstrate that peasants had sophisticated systems for managing commons and regulating animals.

In the early 16th century, 80 percent of English farmers grew for themselves while only the remaining 20 percent sent some of their production to markets but few of these employed labor. Differentiations were beginning to be seen, however, as complaints about enclosures began to be heard in the 1480s and the process accelerated in the 1500s. King Henry VIII’s adviser condemned enclosures, Mr. Angus writes, and a series of laws against the practice were passed, none with any effect. (The king would not seem to have taken any such advice; tens of thousands were hung during his reign as “vagabonds” or “thieves” during a time of repeated peasant uprisings.)

Mr. Angus argues that the failure of Tudor anti-enclosure legislation was due to their targeting consequences rather than causes and that judicators were local gentry who consistently sided with their colleagues. Regardless, Henry VIII conducted a massive confiscation of church lands and then sold most of it to lords, needing to raise revenue for his wars. The consolidation of large farms means there would be space for fewer small farms. Opposition to private ownership of land and greed in 16th century England was often religious, but Protestant preachers would condemn greed in one breath and in the next condemn all rebellion.

Rebellion there was, nonetheless. The dispossessed fought wage labor, which was commonly seen as “little better than slavery” and the “last resort” when all other options had been precluded. In the late 15th and into the 16th centuries, most enclosures were physical evictions, often entire villages; after 1550, landlords often negotiated with their largest tenant farmers, by now inserted into capitalist markets, to divide the commons and undeveloped lands between them. The landless and smallholders got nothing; the number of agricultural laborers with no land quadrupled from 1560 to 1620. Economic pressures were supplemented by state coercion to force the dispossessed into wage labor. A series of brutal measures were passed into law. Although there were not enough jobs for those forced into wage work, those without unemployment were classified as “vagrants” and “vagabonds” and subject to draconian punishments.

A 1547 law, for example, ordered any “vagrant” who refused an offer of work to be branded with a red-hot iron and be “literally enslaved for two years.” The new slave was subject to having iron rings put around their neck and legs and to suffer beatings. A 1563 law mandated that any man or woman up to the age of 60 could be compelled to work on any farm that would hire them, anyone who offered or accepted wages higher than those set by local employers acting as judges could be thrown in jail, and written permission was needed to leave a job on pain of whipping and imprisonment. Other laws mandated “whippings through the streets until bloody” with repeat offenders put to death. Many of those convicted were increasingly sent to the colonies as indentured servants, completely at the mercy of their New World masters.

Such were the tender mercies shown by nascent capitalists and the state increasingly oriented toward capitalists’ interests.

Might makes right as a foundation

With the simultaneous rise of the coal and textile industries, workers were needed — the draconian laws were the route to forcing people into jobs with low pay, long hours and sometimes dangerous conditions. Coal mining itself triggered more enclosures in the 16th century. Some landlords found that coal mining was more profitable for them than renting farmland, requiring dispossession of tenants, and remaining smallholders could be robbed of their land because they were prohibited from refusing access to minerals under their land. Early manifestations of current-day “property rights” where if you are big enough, might makes right.

Although much resistance consisted of spontaneous uprisings, there were organized campaigns. Two movements were the Diggers and the Levellers. The Levellers’ moniker comes from their “leveling” the hedges and stone fences landlords used to demarcate the lands they had enclosed; these organized groups repeatedly removed these demarcations. The Diggers were a collective movement founded by Gerrard Winstanley that sought to put theory into better practice. The Diggers created communes on common land, first on a hill near London. All members would receive a share of the produce in exchange for helping work the land. 

Winstanley produced a program that criticized the inhumanity of the wealthy and stated that the road to freedom was through common ownership of the land. Wage labor, private ownership of land, and buying and selling land were all prohibited in Digger communities. Everyone was to contribute to the common stock and take only what was necessary; any penalties for free riders were designed to rehabilitate rather than punish. Winstanley and the Diggers saw private ownership of land as the cause of poverty and exploitation, and one of their demands was that all land should be given to those who would work it, including land confiscated from the church. They, after all, were living through the early days of agricultural capitalism with so many around them experiencing poverty and exploitation.

^{Richard II meeting with the rebels of the Peasants’ Revolt of 1381 (Bibliothèque nationale de France via Wikimedia Commons)}

Remarkably, Winstanley’s concept, devised two centuries before Marx’s concept of communism as “from each according to their ability, to each according to their needs,” bore significant resemblances to the latter’s ideas, although Marx could not have known of Winstanley as the Diggers’ ideas were ruthlessly stamped out and were only re-discovered late in the 19th century. State-directed violence against Digger communes was not long in coming. Landlords were determined to eliminate the Diggers. Local magistrates, themselves landowners, indicted Diggers for trespass and unlawful assembly, and imposed fines too large to pay; mobs organized by landowners destroyed crops and homes until the communes had to be abandoned.

By the latter half of the 17th century, “large landowners and merchants won decisive control of the English state,” Mr. Angus writes. “In the 1700s, they would use that power to continue the dispossession of commoners and consolidate their absolute ownership of the land.” And as the Industrial Revolution began to develop, new rounds of enclosures were initiated, this time through laws enacted by Parliament, to strip people of their remaining abilities to be self-sufficient and not be forced into wage work with low pay and long hours of drudgery.

A class state promotes class interests

From the so-called “Glorious Revolution” of 1689 to the 1832 Great Reform Act, Britain was controlled by agrarian magnates and merchant capitalists; the state existed to benefit the wealthy. The author writes:

“The very rich ruled Parliament through their unchallenged domination of the House of Lords, their effective control of the executive, and their strong influence on the slightly less-rich members of the House of Commons. The lower House was elected, but only about 3 percent of the population (all male) could vote, and high property qualifications ensured that only the wealthy could be candidates. In E.P. Thompson’s words, ‘The British state, all eighteenth-century legislators agreed, existed to preserve the property and, incidentally, the lives and liberties, of the propertied.’ ”

More than 4,000 enclosure acts were passed by Parliament from 1730 to 1840, laws that affected a quarter of all cultivated land. Laws were heavily skewed in favor of big estates and the aristocracy. Peasants resisted, but had too much force arrayed against them. The displaced, unless they emigrated, became wage workers in the new factories. Development in England had been built on slavery, with the huge profits from slave-grown agricultural products and the slave trade itself providing capital for industrial takeoff. And many of the big estate owners were in a position to buy up land because of the profits they directly accrued from slave labor. Abolishing the slave trade was simply another move of economic beneficiary. Mr. Angus writes:

“Defenders of British imperialism like to brag that Britain outlawed the slave trade in 1807, but that’s like praising a serial killer because he eventually retired. The ban came after centuries in which British investors had grown rich as human traffickers, and it did nothing for the 700,000 Africans who remained enslaved in Britain’s Caribbean colonies. Britain’s vaunted humanitarianism is belied by the British army’s slaughter of rebellious slaves in Guyana — seventeen years after the slave trade was declared illegal.”

British parliamentarians, carrying out their class interests, were no less inclined to draconian legislation than had been their predecessors. From 1703 to 1830, 45 statutes were passed relating to banning all but elite landowners from hunting; these laws should be seen in the context of their time when small farmers and the landless needed to hunt to ensure they and their families had enough food to survive. The Black Act of 1723 saw 350 offenses made eligible for the death penalty; already, hanging, whipping and expulsion to Australia for hard labor were on the books for minor offenses. Even cutting down a tree could result in hanging.

That such draconian laws were repeatedly passed over long periods of time demonstrate that capitalism is not “natural” and indeed could only be imposed by force, War Against the Commons persuasively demonstrates. This is a book that is most useful for those already acquainted with this bloody history and wish to obtain more knowledge, including of the still largely unknown Winstanley and the Diggers movement, but also for those without this knowledge who wish to learn about the history of capitalism. The author writes in clear, understandable language without jargon, producing a work that requires no prior knowledge yet is useful for those who do have familiarity with the subject. Anyone who is interested in understanding the dynamics of capitalism, and cares to approach the subject with an open mind, will benefit.

* Ian Angus, The War Against the Commons, Dispossession and Resistance in the Making of Capitalism [Monthly Review Press, New York 2023]

As long as housing is a commodity, rents will keep rising

Capitalism marches on. And thus housing, because it is a capitalist commodity, has resumed its upward cost, putting ever more people at risk of homelessness, hunger, inability to access medical care and medications, or some combination of those.

There had been a temporary dip in the costs of rentals in 2020 as the pandemic threw a spanner into the economy, but the dynamics of capitalist markets have reasserted themselves. Rent is not only too damn high but getting higher, fast. And almost everywhere, not just in your city.

Here are a few numbers that begin to tell the story:

• In the United States, rents on residential units have increased at more than double the rate of inflation since 1980.
• In Canada, rents increased seven and a half times faster than wages from 2000 to 2020.
• In England, rents grew 60% faster than wages between 2011 and 2017.
• Germany’s 77 largest cities have a shortage of 1.9 million affordable apartments.
• In Australia, rent from 2006 to 2022 has increased 12 times faster than inflation-adjusted wages.

Those are countrywide numbers, not specific to particular cities. The numbers are more disastrous in the largest cities.

^{“Greed” by Rolf Dietrich Brecher}

Does this just happen? Could this be, as the corporate media, corporate-funded “think tanks” and the whole panoply of capitalist institutions incessantly propagate, the natural workings of the world? A federal judge in San Francisco, one with a reputation as a liberal, once declared that landlords have nothing to do with rent increases but instead rents rise without human invention in striking down a city law that would have required 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.

Perhaps this is what is meant when right-wing ideologues praise the “magic of the market.” More profits just by showing up.

In the real world, actions don’t necessarily happen without human intervention and large trends don’t happen without larger interests. As a case in point, gentrification does not happen spontaneously, but is a result of powerful social forces.

Corporate and government backing of gentrification

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

Gentrification frequently means the replacement of a people, particularly the poor members of a people, with others of a lighter skin complexion. A corporatized, sanitized and usurped version of the culture of the replaced people is left behind as a draw for the “adventurous” who move in and as a product to be exploited by chain-store managers who wish to cater to the newcomers. Once community members are pushed out, real estate money begins to pour in, rapidly pushing up rents and making the area increasingly unaffordable for those who remain. 

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

One city where this process was particularly harsh is Detroit. Not only are municipal services withdrawn, schools starved of resources, militarized police unleashed and homelessness criminalized, but a “gentrification to prison pipeline” is set up, with People of Color targeted by the legal system. In a “personal” article published in Truthout detailing his experience in Detroit’s Cass Corridor area, Lacino Hamilton, who was incarcerated for 26 years thanks to a wrongful conviction, gives first-hand testimony. He writes:

“I don’t know which came first, but the changes came hard and fast: mortgage foreclosures, the imposition of tax liens, governments seizing property through their power of eminent domain, the reduction and gutting of city services, city officials ignoring an influx of drugs and prostitution, rampant homelessness, and courts and prisons’ increased presence in our lives. But I am certain we were being pushed out of the Cass Corridor, displaced through a complex network of public and private interests. In the mid 1980s, Detroit Mayor Coleman Young announced that city dollars would be used to finance the development of downtown hotels, so that Detroit could attract convention business. Homes were foreclosed. Businesses were dismantled. And everyday decision-making power was shifted from families and local business owners to state legislators, venture capitalists and a combination of financial institutions and interests. It was as if a number of bombs just went off. Almost overnight the Cass Corridor resembled a war zone. …

Forcing people to evacuate a neighborhood or entire section of a city cannot be achieved by democratic means. It is inconceivable that anyone would vote to displace themselves, right? This explains why police, courts and prison are often used to remove and disappear some people. …

The grim reality of gentrification for a large portion of the Cass Corridor’s population has been evident for years. In the eyes of city officials and the big corporations that now control that section of Detroit, the ‘limits of development’ did not call for public participation but for confinement. We were viewed as obsolete commodities that had to leave whether we had some place to go or not, and many of us didn’t. This is how the city of Detroit’s approach to ‘social development’ came to rely so dramatically on the bricks and mortar of prison at the expense of other responses that would have been both more humane and more effective — such as social development with people in mind, not profit.”

That process is deeply related to other problems imposed on Detroit in recent years, such as the same city officials who assisted the process of gentrification being fleeced by financial industry predators who talked them into buying complex, and poorly understood, derivatives that are much more profitable for Wall Street than the issuance of “plain vanilla” municipal bonds that denominate a set amount of debt paying back a set amount of interest on a specific schedule. Following Detroit having to declare bankruptcy because of the financial fleecing, the city literally became a colony with a corporate lawyer imposed as an “emergency manager” who oversaw the shutting off of water to tens of thousands while allowing businesses to accrue vastly higher arrears without penalty. That corporate lawyer was a partner at one of the biggest law firms in the U.S., Jones Day, which supplied at least a dozen officials to the Trump administration.

Pitting renters and homeless people against each other

Gentrification is certainly not confined to Detroit. Far from it. Nor are the processes set in motion by capitalists, especially those in the real estate industry. In Boston, the United Front Against Displacement, an anti-gentrification organization, has reported on the “onslaught of gentrification being unleashed upon Boston’s working-class residents by developers, construction companies, and the city government.” A part of the city’s strategy was to create divisions between renters and homeless people. The organization writes:

“The cops were also regularly messing with people, allowing them to stay in the park for a week or two and then forcing them to move on. They often push people towards a part of the city known as ‘methadone mile’ because of the concentration of methadone clinics. ‘Methadone mile’ is not somewhere most homeless people want to end up, since there is a lot of stealing, violence, and heavy drug use. The police know this stuff is going on and don’t do anything to stop it, preferring to push homeless people from across the city into a situation where they’re likely to get caught up in violence, have their stuff stolen, or fall back into addiction. …

These dynamics have created significant divisions between homeless people in the park and working-class residents of the surrounding projects and apartment complexes. Many residents have grown frustrated after dealing with unsafe conditions in the park for years, from needles left on the playground to stabbings, fights, and other violence. These problems have so far been a significant barrier to bringing residents of the apartments and the homeless population together.

The major divisions we saw amongst people in the park and between them and local tenants are not unique to this one part of Boston. They reflect a larger strategy that the ruling elite use to keep people down by creating conflict and division between people who really should be organizing together. For instance, the police push homeless people to move into the park and the city fails to provide services or sufficient shelters to them. They do this knowing that it will lead to various negative effects for people living in the area: needles and broken bottles in the park, violence, and so on. Then a section of the tenants will start to blame the homeless for these problems, and potentially support increased police patrols and the like as a result. Then two groups of people, homeless people and working-class tenants, who have a common interest in opposing gentrification, are at each other’s throats instead of organizing together.”

^{Boston Public Garden (photo by Rizka)}

Divide and conquer is of course one of the oldest tricks in bourgeois tool boxes. The new administration of New York City Mayor Eric Adams, shortly after taking office, began sending the police to make hundreds of sweeps of homeless encampments. Mayor Adams claims he wants homeless people to “trust” authorities, but having the police arrest them and throw away their belongings hardly seems likely to earn “trust.” At the same time, he appointed real estate-aligned people to the city board that oversees what landlords can charge tenants in rent-stabilized apartments, who promptly asked for massive increases despite steady increases in landlord profits since 1990, a trend that accelerated from 2005.

Seeing battles for affordable rent in a larger context

Although a full toolbox is needed to combat high rents, one tool desperately needed is rent control. Few localities have it, and in most places that do it is inadequate and in need of strengthening. One place with some of the strongest rent control laws in the United States, yet still not providing needed protection, is San Francisco. 

Randy Shaw, writing on the FoundSF website, has provided a brief history of rent control in San Francisco, noting that a comprehensive struggle must go beyond that issue:

“As rents rose and gentrification and displacement worsened, tenant activists unified around a common goal: strengthening rent control. While Proposition R represented a comprehensive response to all aspects of city housing policy, since 1980 the tenant movement has been a series of campaigns designed to improve the very weak 1979 rent control ordinance. This exclusive focus on rent control had positive and negative implications. The 1979 laws clearly provided tenants with inadequate legal protections against eviction, and permitted automatic 7% annual rent raises, an amount well in excess of inflation. Moreover, San Francisco’s rent control law allowed unlimited rent increases on vacant apartments. This gave landlords an economic incentive to evict, and meant that the housing stock would, as tenants vacated, become increasingly unaffordable. As a result, rent control on vacant apartments (i.e., vacancy control) became the chief goal of tenant groups throughout the 1980s.

Tenants’ exclusive focus on strengthening rent control, however, had a major downside: the movement became divorced from the larger urban crisis agenda. Tenant-landlord and rent control fights were no longer surrounded by discussions of class, economic unfairness, and redistribution of wealth. The broader context of rent control as akin to progressive taxation was replaced by debates whose dialogue excluded the tax benefits offered to landlords, their superior wealth, and the conflict between Democratic Party politicians who espoused Republican, free-market principles when rent control was involved. The tenant movement was increasingly comprised of people whose involvement arose from negative personal experiences with their landlords rather than from a broader political outlook. Progressive activists who came to tenant issues in response to an urban crisis were not drawn to tenant organizations whose only response to the crisis was stronger rent control.”

Could a broader focus have helped pass a 2014 ballot referendum that would have imposed a “speculation tax” on building owners who sell a building in less than five years after buying? The proposed law included exemptions to ensure it would have applied only to speculators. Outspent 12-to-1 by real estate interests, the referendum narrowly lost. An activist with the Tenderloin Housing Clinic believed that a greater emphasis on community organizing would have made a difference; the referendum 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.

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

United Front Against Displacement, also active there, reports that “almost all the public housing has been privatized” in San Francisco and Oakland. The organization writes:

“In San Francisco, there is an ongoing citywide privatization scheme … called HOPE SF. The city government, banks like Bank of America, Wells Fargo, JP Morgan Chase, corporations like Google, Kaiser Permanente, and foundations in the city are working together to achieve the HOPE SF scheme. HOPE SF’s plan is to eliminate the last public housing in San Francisco (Sunnydale, Potrero, Double Rock/Alice Griffith, Hunters View), which are in working class neighborhoods in San Francisco, by destroying them and building mixed income developments owned and managed by different private developers.”

United Front Against Displacement reports that the San Francisco Housing Authority actually sent them a letter alleging its organizers were harassing tenants! In response, tenant organizers at one of the targeted public housing projects sent a letter to the authority saying its “misrepresentation is particularly shocking” in light of “over a hundred tenants, voicing opposition to the HOPE SF’s privatization of Sunnydale that is destroying our homes.”

Even getting effective laws passed does not guarantee better housing policies will be implemented. In Berlin, for example, a rent cap that would have frozen rents for 90% of the city’s apartments at their June 2019 level for five years was overturned by Germany’s Constitutional Court in April 2021. The German high court ruled that because the federal government had already made a law regulating rents, which allowed landlords to raise rents by 10% above the local market level, state governments can not impose their own law. But this ruling does not simply repeal Berlin’s law, it may even result in higher rents, reports German broadcaster Deutsche Welle. The “decision could mean a windfall for landlords as rents are instantly raised by hundreds of euros a month, on top of which landlords could now demand their tenants back-pay higher rents for the past year,” DW reported.

Predatory speculations spread their tentacles

Although everybody who rents is affected by gentrification and the social forces pushing rents upwards, those stranded in low-wage jobs and in particular People of Color are most affected. Racism being an ever present reality throughout the advanced capitalist countries, it would be most surprising if that did not impact housing. And here we have no surprises. A highly useful new book, Counterpoints: A San Francisco Bay Area Atlas of Displacement & Resistance, prepared by the Anti-Eviction Mapping Project collective, provides a series of stories and colorful graphics and charts detailing the precarious state of housing in the nine counties of the San Francisco Bay Area, backed by copious research. For example, research detailed in Counterpoints revealed that although Latinx communities represented 25 percent of the populations of San Mateo County in 2014 and 2015, they were 49 percent of those evicted. Black/African-American peoples were 2.5 percent of the county’s population but 21 percent of the evictions.

Displacement is not confined to cities such as Oakland, but is underway in suburban towns. This is due, in part, to the voracious appetite of financial speculators buying up houses in large numbers to rent out, a trend that catalyzed in the wake of the 2008 economic collapse. Geography professor Desiree Fields, writing in Counterpoints, outlines the scale of that speculation, which contributes to rents becoming out of reach. As many as 7 million single-family homes in the U.S. have been converted to rentals since 2008. This is now a suburban phenomenon, not only an urban one, Dr. Fields writes:

“Whereas, for generations, urban crises set off by financial exploitation were largely confined to aging buildings in [the] ‘inner city,’ after 2008, the single-family home, representing middle-class suburban life, became the ‘mascot’ of the crisis. Cul-de-sacs in low-density subdivisions were lined with for sale signs, and auction notices dotted the front yards of McMansions. In sunny California, Arizona, and Florida, ‘zombie pools’ in abandoned properties grew algae and bred mosquitoes, becoming incubators for disease. Speaking to how the crisis overflowed the spatial, racial, and class boundaries of the urban core, Alex Schafran observed, ‘Just as burned-out housing projects in inner cities were the iconic images of the mid-1970s recession, trashed-out tract homes in California and the Sun Belt are the signature images of crisis in post-millennial America.’

In suburbs and exurbs like Antioch, Brentwood, and Pittsburg (and down-at-the-heels sites of industry like Richmond and Vallejo), places where African American, Hispanic, and Filipino American Bay Area residents displaced from the region’s urban core sought affordable (ultimately unsustainable) homeownership, it was these ‘trashed out tract homes’ to which investors — of all kinds — were drawn in the aftermath of 2008. Crisis as opportunity is, of course, nothing new in capitalism. If anything, crisis is one of its fundamental dynamics and how it adapts to changing contexts, thereby reproducing itself anew. And so, as crisis created a ready population of tenants comprised of former homeowners and those unable to qualify for mortgages under tightened crisis conditions, a financial industry ‘somewhere between anxious and desperate for new products’ began to reimagine single-family rental homes as financial assets. The activities of large-scale ‘corporate’ investors have been particularly notable in parts of California and the Sun Belt hit hardest by the crisis.

Able to raise cash cheaply on capital markets rather than relying on the uncertainties of mortgage credit and armed with digital technology allowing them to zero in on properties meeting their investment criteria, these corporate actors enjoyed a distinct advantage over smaller investors. … ‘Wall Street’ landlords saw in single-family rental the ingredients for a novel financial asset: once they had aggregated ownership, bundles of rent checks could replace bundles of mortgage checks, fueling a model of securitization suited to a potentially post-ownership society. … The sale of these financial assets to bondholders allows Wall Street landlords to borrow against the value of the properties, securing a cash infusion to settle previous debts or pay themselves out. Meanwhile, tenants back this loan with their rent checks.”

^{SkyView Atlanta (photo by Don McCulley)}

Similar dynamics are at work on the other side of the U.S., in Atlanta. A U.S. Department of Housing and Urban Development report, “From Foreclosure to Eviction: Housing Insecurity in Corporate-Owned Single-Family Rentals,” found that evictions are spatially concentrated, meaning minority renters are more likely to be thrown out of their homes, and that corporate landlords are much more likely to evict. The report said:

“We document a high, spatially concentrated evictions rate. More than 20 percent of all rental households received an eviction notice in 2015, and 5.6 percent of tenants received a judgment or were forcibly removed from their homes. Evictions are spatially concentrated; in some zip codes, over 40 percent of all rental households received an eviction notice and over 15 percent of all households received a judgment or were forcibly removed. … We find that large corporate owners of single-family rentals, which we define as firms with more than 15 single-family rental homes in Fulton County [the county centered on Atlanta], are 68 percent more likely than small landlords to file eviction notices even after controlling for past foreclosure status, property characteristics, tenant characteristics, and neighborhood. …  Depending on the firm, institutional investors were between 11 percent and 205 percent more likely to file for eviction than mom-and-pop firms, even after controlling for property, tenant, and neighborhood characteristics.”

Out of control rent increases vastly outpace wages and inflation

This is a trend almost certainly to get worse — the Housing and Urban Development report said that, from 2011 to 2013, institutional investors and hedge funds bought an estimated 350,000 bank-owned homes.

A New York Times report noted that “Various studies have found that corporate landlords are more likely to raise rents, evict their tenants and poorly maintain their properties than smaller landlords.” Financial speculators are rapidly buying up single-family homes and are targeting African-Americans. The report said:

“Real estate investors bought a record 18.4 percent of the homes that were sold in the United States in the fourth quarter of 2021, up from 12.6 percent a year earlier. In Charlotte and Atlanta, investors purchased more than 30 percent of the homes sold in the fourth quarter of 2021, according to Redfin. In Jacksonville, Fla., Las Vegas, and Phoenix, they bought just under 30 percent. …  More than 93 percent of homes purchased by corporations as of May 2021 were bought for under $300,000. Many of them were in predominantly Black neighborhoods.”

Regardless of whether you rent a single-family house in the suburbs or an apartment in a city, rent is going up, around the world. In the United States, average rent prices have increased at a rate of 8.9% per year since 1980, consistently outpacing wage inflation by a significant margin. By comparison, average wages increase at an annual rate of 3.44%. Thus, as stated above, rents increase at more than double the rate of wages. A report in the online publication Real Estate Witch reports that from 1985 to 2020, the national median rent price rose 149%, while overall income grew by only 35%. That 35% figure may be overstated; the Pew Research Center reported that U.S. wages, adjusted for inflation, have increased by pennies since 1970, from about $22 per hour then to $22.65 in 2019.

To put all this in another way, your rent would be hundreds of dollars less per month if rents had increased at only the rate of inflation over the past 50 years. If rents had risen at the rate of inflation from 2000, today’s rents, on a national average, would average nearly $200 per month less than they do; if rents had risen at the rate of inflation from 1970, today’s rents would average about $380 per month less than they do. That’s money stuffed into landlords’ pockets and all they have to do is put their feet on the desk and let the checks roll in.

^{Vancouver as seen from Lookout Tower}

One final statistic on U.S. rents, this time for New York City: The Housing and Vacancy Survey, conducted triennially for the city by the U.S. Census Bureau, published its latest report on May 16, 2022. The median wage in New York City is only half of what would be necessary to pay for the median rent, a figure calculated by using the standard metric that nobody should pay more than 30 percent of income to rent. The report said, “The median rent of a unit that was available for rent was $2,750, which would require an income of at least $110,000 to afford; yet, the median household income of renters in 2021 was only $50,000.” In 2021, more than half of New York City renter households (53 percent or just under 1 million households) were rent burdened (more than 30% of income going to rent) and one-third were severely burdened (more than 50% of income going to rent).

These trends are accelerating as the brief pause in rent increases in 2020 are now behind us. Median rents for one-bedroom apartments in several Boston-area towns, including Cambridge, are up by at least 30 percent compared to last year. Boston itself wasn’t far behind with a 27 percent increase in median one-bedroom rents.

Rent gouging and spiraling housing costs in Canada, Britain

As dramatic as housing costs are in the United States, the situation may be even more out of control in Canada. Unlike the U.S. and many European countries such as Germany, housing costs did not pause following the 2008 economic collapse. Prices have risen dramatically since 2000, and the trend of institutional investors scooping up housing is more accelerated in Canada than in the United States. Better Dwelling, which describes itself as “Canada’s largest independent housing news outlet,” reports on the rapid increase of speculation in housing:

“Canadian real estate is being scooped up by investors with excessively cheap credit. Ownership data for residential real estate across four regions show a significant share owned by investors in 2020. What’s most impressive is how fast this trend must have accelerated. Cities have seen up to 90% of recently completed homes go to investors, much higher than normal. … Since we’re only looking at cities, no one’s shack in the woods is likely to be included. Only data for Ontario, British Columbia (BC), and Atlantic Canada is available. … About 1 in 5 (21.0%) homes in the median city across the four regions are investor-owned. When isolating new construction (built after 2016), that number rises to 1 in 3 (33.7%) bought by investors. …

Toronto is Canada’s biggest real estate market, and it’s seeing investor-ownership soar. Investors owned 18.4% of the housing stock in 2020, just shy of 1 in 5 homes. Isolating recently completed homes (after 2016), investors owned 39.1% of the new supply. … Vancouver real estate shows a similar trend, but a higher share of investors. Investors owned nearly 1 in 4 (23.5%) of total housing supply in 2020. For recent builds, that share jumps to nearly half (44.0%) of the supply. It’s easy to see how Toronto and Vancouver home prices are so distorted. There’s a lot less friction for home prices when you’re passing the costs on to someone else. … Atlantic Canada real estate is quickly becoming home to a robust rentier class. In Nova Scotia, investors owned 25.5% of total housing stock in 2020 but 48.7% of recently completed homes. New Brunswick has seen a similar trend where 17.2% of total housing is investor-owned, representing 41.0% of recent completions.”

That concentration of ownership helps fuel the dramatic increase in Canadian housing costs. Sales figures show a 318% rise in home prices since 2000, according to the Canadian Broadcasting Corporation. House prices in Montréal, Toronto and Vancouver tripled from 2000 to 2020, and the rest of the country wasn’t far behind, as Canadian house prices overall increased two and a half times, adjusted for inflation, from 2000 to 2020. Canadian wages, by contrast, increased only 49% from 2000 to 2020, which really means wages barely improved because Canadian inflation rose 44% from 2000 to 2020.

Across the Atlantic, rent in Britain is too high as well, and it is not only London where such is the case. A report in the Shelter blog reveals that the average renter in England is rent-burdened, by the standard of paying no more than 30 percent of wages to housing. “Other government figures confirm the reality of the affordability crisis in the privately rented sector,” the blog said. “The English Housing Survey (EHS) shows that renters spend 40% of their income on housing costs — double what owner-occupiers pay (19%). Affordability is particularly acute for those with the lowest incomes in England, who spend over 75% of their income on housing costs.”

As noted above, rents in England increased 60% quicker than wages from 2011 to 2017 . The Shelter report said, “And this isn’t just an issue confined to London and the south-east, as you might expect. … So as well as affordability worsening in London, rents in Rugby in the West Midlands have risen at twice the national rate (30% vs. 16%) yet wages have increased by just 5%. Similar figures are seen for East Hertfordshire in the east of England, and in Daventry wages have fallen, while rents have increased by 26%.” In Cambridge, rents increased 36 percent from 2011 to 2017, while wages rose only nine percent. Separately, a 2016 report by the Resolution Foundation found the household income of British renters increased two percent from 2002 to 2015, while their housing costs increased 16 percent.

And on it goes, from Barcelona to Paris to Berlin to Istanbul to Sydney to Melbourne.

Capitalism is global, and it follows that gentrification is global. Rents will continue to rise as long as housing remains a capitalist commodity. That can only change if we create a better world.

There’s no money? Then how can there be $10 trillion for financiers in two years?

Noting that there is always money to be thrown at the finance industry but little for social needs is by now about as startling as noting the Sun rose in the east this morning. But what is eye-opening is the truly gargantuan amounts of money handed out to benefit the wealthy.

We’re not talking billions here. We are talking trillions.

For example, the amount of money created by the central banks of five of the world’s biggest economies for the purpose of artificially propping up financial markets since the beginning of the Covid-19 pandemic totals US$9.94 trillion (or, if you prefer, €8.76 trillion). And that total represents only one program of the many used by the U.S. Federal Reserve, the European Central Bank, Bank of Japan, Bank of England and Bank of Canada.

That is on top of the US$9.36 trillion (or €8.3 trillion at the early 2020 exchange rate) that was spent on propping up financial markets in the years following the 2008 global economic collapse.

So we’re talking approximately US$19.3 trillion (€17.1 trillion) in the span of 14 years for five central banks’ “quantitative easing” programs, the technical name for intervening in financial markets by creating vast sums of money specifically to be injected into them and thereby inflating stock-market bubbles. And that total doesn’t include various other programs that also come with price tags, nor the similar programs of other central banks, including those of Australia, Sweden and Switzerland. As just one example, the Paycheck Protection Program initiated by the U.S. Congress in 2020 sent most of its money into the grasping hands of business owners and shareholders rather than workers earning a paycheck.

Given these repeated massive subsidies, why are we supposed to believe that the capitalist economic system “works”? And why do working people always have to pay for financiers’ ever more imaginative speculations?

^{“Greed” (Nicholas Kwok)}

Imagine all the public good that could have been done with even a fraction of that money. Fixing infrastructure, proper funding of social programs, upgrading health coverage, adequately funding hospitals, canceling student debt, strengthening education systems and more — all of this could have been done.

For example, the consultancy firm Aecom estimates that Britain’s infrastructure needs are underfunded by a total less than what the Bank of England spent on its quantitative-easing scheme for the past two years. Parallel to that, the U.S. could wipe out all student debt, fix all schools, rebuild aging water and sewer systems, clean up contaminated industrial sites and repair dams for less than what the Federal Reserve spent on quantitative easing since the pandemic began. As for Canada, one estimate is that the country needs to spend an additional C$60 billion per year on technologies that would enable Canada to meet its carbon neutral targets by mid-century — a total that is a fraction of what the Bank of Canada has thrown at the financial industry.

Spending big to inflate a stock-market bubble

What is quantitative easing and why does it matter? Quantitative easing is the technical name for central banks buying their own government’s debt in massive amounts and, generally in lesser amounts, corporate bonds. In the case of the Federal Reserve, it also buys mortgage-backed securities as part of its QE programs.

The supposed purpose of quantitative-easing programs is to stimulate the economy by encouraging investment. Under this theory, a reduction in long-term interest rates would encourage working people to buy or refinance homes; encourage businesses to invest because they could borrow cheaply; and push down the value of the currency, thereby boosting exports by making locally made products more competitive.

In actuality, quantitative-easing programs cause the interest rates on bonds to fall because of the resulting distortion in demand for them, enabling bond sellers to offer lower interest rates and making them less appealing to speculators. Seeking assets with a better potential payoff, speculators buy stock instead, driving up stock prices and inflating a stock-market bubble. Money also goes into real estate speculation, forcing up the price of housing. Money not used in speculation ends up parked in bank coffers, boosting bank profits, or is borrowed by businesses to buy back more of their stock, another method of driving up stock prices without making any investments. And the strategy of governments to lower the value of their currencies — a widespread tactic in the years following the 2008 collapse — can’t succeed everywhere because if someone’s currency devalues, someone else’s concurrently rises in value.

In other words, these programs, along with most everything else central banks in capitalist countries do, are to benefit the wealthy, at the expense of everybody else. Although we wouldn’t reasonably expect capitalist government agencies to act differently, central banks are particularly one-sided in their policies, which they can do because they are “independent” of their governments. Thus they openly serve the wealthy without democratic control.

A trillion here, a trillion there but not for you

Figuring out what central banks are up to and how much money they are creating for financiers is difficult because they don’t provide totals; at best there are monthly targets for spending and, even then, targets are not listed for all programs. And some, such as the Bank of Canada, are particularly reluctant to share money figures. Most often, banks’ websites and press releases proudly list the many programs designed to benefit financiers but without putting price tags on them. Thus the figures below may not be precisely accurate, but they are in the ballpark. To the biggest financial corporations, what’s a hundred billion more or less?

Having provided the caveats, my best calculations of what some of the world’s most prominent central banks have spent on quantitative easing are as follows (figures in U.S. dollars):

• U.S. Federal Reserve $4.04 trillion
• European Central Bank $3.4 trillion
• Bank of Japan $1.6 trillion
• Bank of England $600 billion
• Bank of Canada $300 billion

That’s a total of US$9.94 trillion. Imagine the height of the stack of bills that such a sum would reach — maybe it would be so high that orbiting spacecraft would ram into it, scattering the money across wide areas. At least that way, more people might benefit.

^{The European Central Bank in Frankfurt (photo by DXR)}

The above of course are not the only central banks to join the party. The Reserve Bank of Australia has spent an estimated A$320 billion in the past two years, although, according to Reuters, it is “considering how and when to wind up its A$4 billion ($2.84 billion) in weekly bond buying given the economic pick up.” Sweden’s Riksbank and the Swiss National Bank also indulge in quantitative easing; Switzerland’s central bank has done so much of it that it owns assets valued at more than the country’s gross domestic product. Similar to Australia’s, central banks, the Bank of Japan excepted, also are indicating they’d like to wind down their latest QE programs, but doing so is a delicate operation given that speculators have become drunk on the spending and cutting off the money could lead to sudden downturns in stock prices, in turn triggering disruptions in the economy.

Nothing like free money to make the party fun. But, on a less humorous note, how is it that deficit scolds and ideologues of austerity, who never miss an opportunity to shoot down legislation intended to give working people assistance, are silent about these gargantuan piles of money thrown at financial markets? The later version of the Build Back Better plan pushed by President Joe Biden, originally estimated to cost about $3.5 trillion before being reduced to less than $2 trillion, would have cost less than half of what was spent on quantitative easing. And, however flawed, would have provided vastly better relief.

And remember, the nearly $10 trillion and counting in two years of QE programs are only a portion of the money rained on business and the wealthy who benefit from these policies.

One sure outcome of all this is that inequality will increase, as exemplified by the dramatic increases in the wealth of billionaires. A report published last month by Oxfam, appropriately titled “Inequality Kills,” found that the wealth of the world’s 10 richest people has doubled since the pandemic began while “99% of humanity are worse off because of COVID-19,” a situation Oxfam calls “economic violence.” The wealth of the world’s 2,755 billionaires has increased by $5 trillion in less than a year — from $8.6 trillion in March 2021 to $13.8 trillion in January 2022.

And although increasing inequality is nothing new, the pace is accelerating. The Oxfam report states:

“This is the biggest annual increase in billionaire wealth since records began. It is taking place on every continent. It is enabled by skyrocketing stock market prices, a boom in unregulated entities, a surge in monopoly power, and privatization, alongside the erosion of individual corporate tax rates and regulations, and workers’ rights and wages—all aided by the weaponization of racism.”

Unlimited money for U.S. financiers, a little money for workers

In addition to quantitative easing, the Federal Reserve has instituted nine lending programs; three of these are “unlimited” and the other six authorized for $2.9 trillion. (This is all in addition to the $4 trillion spent on QE.) Of this additional $2.9 trillion, just $500 billion is earmarked for revenue-strapped state and local governments; the remainder are for businesses, including those in the financial industry. About $450 billion per day for several weeks during spring 2020 was dedicated to dollar swaps with other central banks — an agreement between two central banks to exchange currencies, most often to enable central banks to provide foreign currencies to domestic commercial banks.

Is there anyone who actually knows how much money the Federal Reserve is spending to keep capitalism running?

And even when money is supposed to go to working people, it mostly doesn’t go to them. A prime example of this not terribly surprising phenomenon is the U.S. Paycheck Protection Program (PPP). Multiple studies over the past year have shown that most PPP money flowed upward, regardless of what the intentions of Congress members who designed the program may have been.

^{The New York Stock Exchange (photo by Elisa Rolle)}

The most recent and likely most comprehensive of these studies, a National Bureau of Economic Research “working paper” issued in January 2022 by 10 authors led by David Autor of the Massachusetts Institute of Technology, found the PPP to be “highly regressive.” About three-quarters of PPP money wound up in the hands of the top 20 percent of households. The paper estimates that 23 to 34 percent of PPP dollars went directly to workers who would otherwise have lost jobs. The majority of the funds flowed to business owners and shareholders. The study focused on 2020 results; the paper’s authors believe that 2021 loans did not boost employment, a result that implies the share of PPP money going to workers would actually reduce the 23 to 34 percent estimate.

The paper calculates that for every $1 in wages saved by the PPP, $3.13 went somewhere else. To put it another way, the cost of saving a job for a year was $170,000 to $257,000, three to five times the average compensation for affected jobs. “This program was highly, highly regressive,” Dr. Autor told The New York Times.

Three papers published earlier came to similar conclusions. A study by Michael Dalton, a research economist for the Bureau of Labor Statistics, that was issued in November 2021, found that “a range of $20,000 to $34,000 of PPP spent per employee-month retained, with about 24% of the PPP money going towards wage retention in the baseline model.” To put it another way, $4.13 were spent for each $1 of wages saved. Finding still worse results, a separate National Bureau of Economic Research working paper, with Raj Chetty as lead author, found that so little of PPP spending flowed to businesses most affected by the pandemic that employment at small businesses increased by only 2%, “implying a cost of $377,000 per job saved.” Finally, a paper published by Amanda Fischer, then the Policy Director at the Washington Center for Equitable Growth, concluded that PPP funding did not have a statistically significant impact on preventing avoidable layoffs among employees and that PPP money was not geographically directed at the worst-hit areas, further reducing effectiveness.

Class warfare in action, pandemic style. A little bit for working people, lots for those who already have more. The PPP did provide benefits, including saving jobs, and surely played a role in the unprecedented reversal of the high unemployment rate of 2020, but at a price far higher than necessary — no help for working people without more going to the wealthy.

Class warfare in Europe

In addition to its quantitative easing, the European Central Bank is increasing borrowing limits and easing borrowing rules for banks; it is also reducing required capital holdings for banks. The ECB has upped its QE spending to €40 billion per month and will reduce that to €20 billion by October 2022. A December 2021 announcement implied it intends to eventually end the program altogether, “shortly before it starts raising the key ECB interest rates.”

Remember all the finger-pointing and scapegoating of Greeks when the ECB and the European Commission imposed punishing austerity on Greece? There was no money and people had to be punished. Yet there are virtually unlimited funds to benefit financial speculators. These disparate responses aren’t completely inconsistent — Greeks had to be punished because the ECB and European Commission, leading institutions of the European Union, were determined that big banks, particularly French and German banks, had to be repaid in full, no matter the cost to working people or the Greek economy — the ECB even cut off Greek banks from routine financial flows in 2015 to enforce their diktats.

Britons recently received a fresh lesson in who the Bank of England serves when the bank’s governor, Andrew Bailey, declared that employees should not be given raises. It was sufficiently embarrassing that this open class-warfare statement, the sort of policy that is supposed to be kept behind closed doors, was said in public that the British government actually issued a rebuke. Noting that British household disposable incomes are expected to fall by 2 percent this year and that inflation-adjusted pay remains below the pre-2008 financial crisis peak, The Guardian reported:

“The governor of the Bank of England has come under fire from unions and earned a rebuke from 10 Downing Street for suggesting workers should not ask for big pay rises to help control inflation. Andrew Bailey said he wanted to see ‘quite clear restraint’ in the annual wage-bargaining process between staff and their employers to help prevent an upward spiral taking hold. However, his comments drew a furious response from union leaders, as households face the worst hit to their living standards in three decades as soaring energy prices cause inflation to outstrip wage growth. … Bailey was paid £575,538, including pension, in his first year as the Bank’s governor from March 2020, more than 18 times the UK average for a full-time employee.”

The average full-time employee is not who the Bank of England, or any other central bank in the capitalist world, has in mind when setting policy. What this episode nicely illustrates is that profits increase when wages are held down. Profit, it can’t be said too often, comes from paying employees only a small fraction of the value of what they produce. The drive by the corporations of the advanced capitalist countries to move production to low-wage, low-regulation havens around the world, continually in search of the next stop on a race to the bottom, is why so-called “free trade” agreements contain ever more extreme rules to benefit multi-national capital.

Class warfare in Canada and Japan

Getting precise figures on what the Bank of Canada is up to is impossible as it is particularly coy in announcing money figures. Bloomberg, for example, could only say that “hundreds of billions of dollars” has been spent in the bank’s QE program. My calculation on what the bank may have spent on quantitative easing is based on the C$376 billion differential on the amount of assets held by the bank between the end of 2019 and on February 2, 2022.

Like the other central banks, the Bank of Canada has several other programs to benefit the financial industry. In the first weeks of the Covid-19 pandemic, it announced multiple programs. The bank implemented several QE programs for buying corporate bonds, federal and provincial government bonds, mortgage bonds and commercial paper (short-term debt issued by corporations), as well as programs to provide credit and “support the stability of the Canadian financial system.” The bank was not forthcoming about the total cost of these programs at the time; it committed to spending C$5.5 billion per week, with no cutoff date, on just two programs, the purchases of federal government bonds and mortgage bonds.

The amount of “direct aid to households and firms” was only a small fraction of what was committed to helping the financial industry. No different, of course, than the response of other central banks.

^{Ottawa from the McKenzie Bridge (photo by Siqbal)}

The Bank of Japan, which had never ended the quantitative easing it began after the 2008 economic collapse, has committed to unlimited government bond buying. In a September 2021 announcement in which it committed to buying ¥20 trillion worth of corporate bonds, the central bank said it “will purchase a necessary amount of Japanese government bonds (JGBs) without setting an upper limit so that 10-year JGB yields will remain at around zero percent.” So large has the bank’s purchases been that it owns assets worth almost 130 percent of Japan’s gross domestic product. The bank doubled the pace of its bond purchases at the beginning of the pandemic.

Since March 2020, the benchmark index of the Tokyo Stock Exchange, the Nikkei 225, has increased 51 percent. In contrast, Japanese wages are “about at the same level as two decades ago,” The New York Times reports. Wages actually fell by around one percent in both 2020 and 2021, Reuters reports, with wage declines accelerating at the end of 2021. Working people have not done well from the world’s longest experiment in quantitative easing.

Circling back to the (admittedly rhetorical) questions asked in the opening paragraphs of this article, it depends on what is meant by “works.” If we mean by that word, as most people likely would, that an economic system functions for the benefit of all, then the scope of money required to keep it functioning forces a conclusion that it does not work in any meaningful sense. If, however, we mean “works” in the meaning given that word by financiers, industrialists and those who serve them and/or interpenetrate with them, most certainly including central bank officials, then all is well because it facilitates the accumulation of capital. Working people around the world pay to maintain financiers and industrialists in their accustomed wealth and power because that is how capitalism is supposed to work. How else would absurd “theories” like trickle down still be implemented after 40 years of failing to do what they are publicly advertised to do?

Another reminder that capitalist markets are simply the aggregate interests of the most powerful financiers and industrialists, and those interests are diametrically opposed to the interests of the vast majority of humanity. It cannot be otherwise.

Private sector is “efficient” only at extracting money from public

There is nothing that capitalists won’t grab if they see a possibility to score a profit. Not even the most basic needs for human life, such as water, are exempt.

A favorite tactic for grabbing what had once been in the public domain and converting it into private profit is the “public-private partnership.” A tactic sadly abetted by the world’s governments, as the name implies.

Public-private partnerships (PPPs), a decades-long string of disasters for the public but often a bonanza for the private, have left behind a long trail of one-sided results in water systems, electricity distribution, sewers, highways, hospitals and other infrastructure. The latest report testifying to the damage wrought by PPPs comes to us courtesy of the European Federation of Public Service Unions (EPSU), a federation of 8 million public service workers from over 250 trade unions across Europe, and the European Network on Debt and Development (Eurodad), a network of 49 civil society organizations from 20 European countries “working for transformative yet specific changes to global and European policies, institutions, rules and structures.”

The Palace of Westminster (photo by Andrew Dunn)

The EPSU/Eurodad report, “Why public-private partnerships (PPPs) are still not delivering,” paints a damning picture. The report declares:

“PPP advocates claim they bring financing, efficiency and innovation. But real-life experience reveals a different picture. The following points outline eight reasons why PPPs are not working: 1. PPPs do not bring new money – they create hidden debt 2. Private finance costs more than government borrowing 3. Public authorities still bear the ultimate risk of project failure 4. PPPs don’t guarantee better value for money 5. Efficiency gains and design innovation can result in corner-cutting 6. PPPs do not guarantee projects being on time or on budget 7. PPP deals are opaque and can contribute to corruption 8. PPPs distort public policy priorities and force publicly run services to cut costs.”

The EPSU/Eurodad report defines PPPs as “long-term contractual arrangements where the private sector provides infrastructure assets and services that have traditionally been directly funded by government, such as hospitals, schools, prisons, roads, bridges, tunnels, railways, and water and sanitation plants, and where there is also some form of risk sharing between the public and the private sector.” There may be risk sharing on paper, but in reality even this definition is a little too generous toward PPPs — in almost all cases, contractual clauses put the risk squarely on the public, and when the private company that has taken over a previously public good proves unable to manage or goes out of business, it is the public that pays.

The paper drew on examples across Europe, with some of the worst examples coming in Britain. Privatizing public services leads to higher costs, reductions in the quality of service and lengthier periods in completing construction. All of these results, of course, are directly opposite of what incessant capitalist propaganda continually blares. Although the EPSU/Eurodad report didn’t speculate as to why these results occur, it takes little imagination to see the reasons: Corporations exist to make the biggest profit regardless of social cost while governments need only provide a reliable service without having to generate seven- and eight-figure salaries for executives and windfalls for stockholders and other speculators.

It’s not profits above all else, it’s nothing but profits

Consider the words of Milton Friedman, godfather of the Chicago School of economics whose words are widely followed in corporate boardrooms and in financial publications. He put it plainly in an interview with author Joel Bakan in the context of a former BP chief executive officer suggesting (however disingenuously) the company would make environmental concerns more important:

“Not surprisingly, Milton Friedman said ‘no’ when I asked him how far John Browne could go with his green convictions. … ‘He can do it with his own money. If he pursues those environmental interests in such a way as to run the corporation less effectively for its stockholders, then I think he’s being immoral. He’s an employee of the stockholders, however elevated his position may appear to be. As such, he has a very strong moral responsibility to them.’ ”

That is the standard of the corporate world: Profits for speculators, period. No other considerations, no matter how flowery their public relations concoctions may be. There are no exceptions because a service or product is necessary for human life.

To return to the EPSU/Eurodad report, a much higher cost of financing was one cause of higher costs for the public to access previously public goods. Noting the hidden debt in these deals, the paper said, “In a PPP, instead of the public authority taking a loan to pay for a project, the private sector arranges the financing and builds the infrastructure, then the public sector pays a set fee over the lifetime of the PPP contract. In some cases, users also pay part or all of the fee directly to the private sector company (e.g. toll roads).” The United Kingdom National Audit Office “found that the effective interest rate of all private finance deals (7%-8%) was double that of all government borrowing (3%-4%).”

The Grand Palais in Paris (photo by Thesupermat)

An even larger differential was found in France: “A particularly vivid example was the Paris Courthouse PPP, signed in 2012, which featured an investment of €725.5 million and no less than €642.8 million in financing costs. The French Court of Auditors found that the interest rate for borrowing for the PPP was 6.4 per cent, while in 2012 the weighted average rate for government bond financing in the medium-long term was 1.86 per cent,” the report said, adding that operating costs were also higher. 

Another example is a Stockholm hospital that cost €2.4 billion instead of the projected €1.4 billion. The hospital was not only completed four years later than scheduled, but a “design competition” resulted in “operating theatres not being adapted for operations; the risk of medicines being destroyed because of medicine rooms being too warm; and physicians having to carry administrative material in backpacks because of the lack of space for administrative tasks.” One conclusion from this poor result is that “the high level of complexity, together with the private partner’s interest in cost-cutting as much as possible, can easily result in undesirable corner-cutting.”

The report concludes that “What decades of experience has shown is that PPPs come at a high cost and are not delivering the expected benefits.” 

If you can sell it, they will buy it

PPPs are particularly common in Britain, an unfortunate development that is not the cause of any one party. Britain’s version of public-private partnerships are called “private finance initiatives.” A scheme concocted by the Conservative Party and enthusiastically adopted by the New Labour of Tony Blair and Gordon Brown, the results are disastrous. A 2015 report in The Independent revealed that the British government owed more than £222 billion to banks and businesses as a result of private finance initiatives. Jonathan Owen reported:

“The startling figure – described by experts as a ‘financial disaster’ – has been calculated as part of an Independent on Sunday analysis of Treasury data on more than 720 PFIs. The analysis has been verified by the National Audit Office. The headline debt is based on ‘unitary charges’ which start this month and will continue for 35 years. They include fees for services rendered, such as maintenance and cleaning, as well as the repayment of loans underwritten by banks and investment companies. Responding to the findings, [British Trades Union Congress] General Secretary Frances O’Grady said: ‘Crippling PFI debts are exacerbating the funding crisis across our public services, most obviously in our National Health Service.’ ”

The Independent article reported that private firms can even flip their contracts for a faster payday. Four companies given 25-year contracts to build and maintain schools doubled their money by selling their shares in the schemes less than five years into the deals for a composite profit of £300 million. Clearly, these contracts were given at well below reasonable cost. Nor is health care exempt: A 2019 report by the Progressive Policy Think Tank found that there are English hospitals forced to divert one-sixth of their income to paying back private finance initiatives, with National Health Service trusts paying more than £2 billion on such repayments per year, “taking money away from vital patient services.” For just £13 billion of private investment, the NHS must pay back £80 billion! Quite a windfall for banks.

Naturally, such financial legerdemain is not limited to any particular country. Here is just a small sampling of outcomes:

• During the course of a 25-year contract with Suez and Veolia, water rates in the city of Paris doubled after accounting for inflation. Thanks to a secret clause, the two companies received automatic price rises every three months. When the contract finished, Paris re-municipalized its water system. Despite the short-term expenses of doing so, the city saved about €35 million in the first year and was able to reduce rates by eight percent.
• A privatization of the Buenos Aires water and sewer systems resulted in chronic failures to meet contractual obligations, repeated demands that the contract be renegotiated (granted by the neoliberal governments of the 1990s), failure to meet water-safety standards, worsening pollution of underground water sources, and price increases over the first decade of the contract 12 times that of inflation. The Argentine government then had to spend years raising legal challenges to take back the system even though the private company was in obvious default of its contractual obligations.
• The German city of Bergkamen (population about 50,000) reversed its privatization of energy, water and other services. As a result of returning those to the public sector, the city began earning €3 million a year from the municipal companies set up to provide services, while reducing costs by as much as 30 percent.
• A report by Food & Water Watch found that investor-owned utilities in the United States typically charge 59 percent more for water and 63 percent more for sewer service than local-government utilities. After privatization, water rates increase at about three times the rate of inflation, nearly tripling on average after 11 years of private control. Corporate profits, dividends and income taxes can add 20 to 30 percent to operation and maintenance costs.
• A study by University of Toronto researchers of 28 Ontario public-private partnerships found they cost an average of 16 percent more than conventional contracts. Elsewhere in Canada, the Sea-to-Sky Highway in British Columbia will cost taxpayers C$220 million more than if it had been financed and operated publicly, and the cost of a project at the Université de Québec à Montréal was doubled to C$400 million.

Water as a commodity rather than a human right

That even water is a commodity is no surprise when corporate leaders consider it just another product that should have a price, most notoriously enunciated in 2014 when the chairman of Nestlé S.A., Peter Brabeck-Letmathe, issued a video in which he denounced as “extreme” the very idea of water being considered a human right. And not only water — various schemes exist to destroy the U.S. Postal Service in the interest of corporate profit.

There are even corporate executives who want to privatize the weather. No, that’s not in the realm of science fiction. The head of a private weather forecaster, AccuWeather, has repeatedly lobbied to prohibit the U.S. government’s National Weather Service from issuing forecasts! Under this scenario, the Weather Service would hand all of its data to private companies, who would then issue forecasts, while of course letting taxpayers foot the bill for the data. One of the U.S. Senate’s dimmest bulbs, fundamentalist Rick Santorum (thankfully no longer in office), once promoted a bill to do just that. And, incidentally, the National Weather Service issues forecasts more reliable than those of AccuWeather.

Photo by Marlon Felippe

Public-private partnerships are one of the surest ways of shoveling money into the gaping maws of corporate wallets. The result has been disastrous — public services and infrastructure maintenance is consistently more expensive after privatization. Cuts to wages for workers who remain on the job and increased use of low-wage subcontractors are additional features of these privatizations. Less services and fewer employees means more profit for the contractor, and because the contractor is a private enterprise there’s no longer public accountability.

The rationale for these partnerships is, similar to other neoliberal prescriptions, ideological — the private sector is supposedly always more efficient than government. A private company’s profit incentive will supposedly see to it that costs are kept under control, thereby saving money for taxpayers and transferring risk to the contractor. In the real world, however, this works much differently. A government signs a long-term contract with a private enterprise to build and/or maintain infrastructure, under which the costs are borne by the contractor but the revenue goes to the contractor as well.

Public-private partnerships are nothing more than a variation on straightforward schemes to sell off public assets below cost, with working people having to pay more for reduced quality of service. Capitalism in action.

The political economy of Covid-19

Governments around the world are attempting to prop up a failing capitalist system by — surprise! — throwing money at wealthy individuals and corporations, especially in the financial industry. In other words, in this time of unprecedented crisis and economic difficulty, it’s business as usual.

We were here not much more than a decade ago, although the rise in unemployment has been more dramatic than during the economic collapse of 2008. That global economic crisis was a long time coming but was inevitable for anyone willing to pay attention. During the 1990s stock-market bubble, traders repeatedly said the dramatic price rises could not last, but as long as the consensus view was that the long bull market would continue they were not going to step off the ride. When the bubble did burst, new forms of speculation kept the financial industry’s party going for several more years. Credit was the lubricant for the later round, both inflating a real estate bubble and enabling consumer spending to continue in the face of declining wages, until the speculation became unsustainable.

No more bubbles to inflate, governments representing the world’s four largest economies alone committed US$16.3 trillion in 2008 and 2009 on bailouts of the financiers who brought down the global economy and, to a far smaller extent, for economic stimulus. Those commitments included $11 trillion for the U.S. (where money thrown at capitalists far exceeded the $700 billion in the Troubled Assets Relief Program), $4 trillion for the European Union, $750 billion for Japan and $600 billion for China. Smaller economies did that too. The Reserve Bank of Australia shoveled A$1.8 billion (US$1.5 billion at the then exchange rate) at financiers to shore up its banking system. The Reserve Bank of India did the same, handing out 60 billion rupees (US$1.3 billion).

Cherry blossoms in Washington (photo by Sarah H. from USA)

All that was simply to deal with the immediate crisis of 2008. As stagnation continued, many of the world’s most prominent central banks decided to throw new gigantic sums of money at the financial industry. Specifically, through programs known by the technical name of “quantitative easing.” What that is are central banks buying in massive amounts bonds issued by their own governments, corporate bonds and/or mortgage-backed securities. For all the talk of the world’s governments taking “unprecedented” measures to deal with the dramatic economic crash triggered by the Covid-19 pandemic, most of the money being committed is in the form of new quantitative easing.

An economic song and dance

The supposed purpose of quantitative-easing programs is to stimulate the economy by encouraging investment. Under this theory, a reduction in long-term interest rates would encourage working people to buy or refinance homes; encourage businesses to invest because they could borrow cheaply; and push down the value of the currency, thereby boosting exports by making locally made products more competitive.

In actuality, quantitative-easing programs cause the interest rates on bonds to fall because of the resulting distortion in demand for them, enabling bond sellers to offer lower interest rates. Seeking assets with a better potential payoff, speculators buy stock instead, driving up stock prices and inflating a stock-market bubble. Money not used in speculation ends up parked in bank coffers, boosting bank profits, or is borrowed by businesses to buy back more of their stock, another method of driving up stock prices without making any investments.

By any standard, we are indeed talking about massive amounts of money. Just on “quantitative easing” alone, the Federal Reserve, European Central Bank, Bank of England and Bank of Japan spent approximately US$9.36 trillion, or, if you prefer, €8.3 trillion, in the years following the 2008 collapse. Here’s a breakdown:

• The Federal Reserve spent $4.1 trillion in three QE programs that ended in November 2014.
• The European Central Bank spent €2.6 trillion on its QE programs, which only concluded at the end of 2018.
• The Bank of England spent £375 billion on its QE program.
• The Bank of Japan has spent north of ¥200 trillion; precise figures are not available. Japan’s QE has been so large and long-lasting that the Bank of Japan now owns assets valued at more than the entire country’s economy.

Think of all the social needs that could have been fixed for such sums. For example, the British think tank Policy Exchange estimated in 2015 that Britain’s needs for investment in transportation, communication and water infrastructure to be a minimum of £170 billion. That is less than half of what the Bank of England spent on its quantitative-easing scheme. The U.S. could have wiped out all student debt, fixed all the schools, rebuilt aging water and sewer systems, cleaned up contaminated industrial sites and repaired dams — all for $700 billion less than what was spent on quantitative easing.

Given this recent history — by no means an aberration in the history of these capitalist governments — it is no surprise that relief for the economic crash caused by Covid-19 has been largely directed at corporate boardrooms and the bank accounts of the wealthy.

Stimulus packages to deal with pandemic, but who gets stimulated?

The Federal Reserve, like most central banks, is “independent” of the rest of government. The reason given is to avoid “political interference,” but in reality so the elites of financial institutions can continue to do whatever they want without consequence. But as is customary, the Federal Reserve doesn’t act in a vacuum; Congress and the White House are also doing what they can to shovel gigantic sums of money at financiers and industrialists.

So far, Congress has passed two stimulus packages that were signed into law, one in late March and the second in April. A third has been passed by the House of Representatives, but the Senate has shown no inclination to take it up and there is reason to doubt House Democrats are actually serious about this last effort.

The first stimulus is the CARES (Coronavirus Aid, Relief, and Economic Security) Act, worth $2 trillion, which was signed into law on March 27. This is the act that resulted in United Statesians receiving one-time $1,200 checks from the federal government. Considering that the average monthly rent in most cities of the United States is more than that, those checks are tokens that serve to obscure where most of the money went. It wasn’t to households left without work.

The Federal Reserve (photo by Stefan Fussan)

A second stimulus bill was passed and signed into law on April 24 and is worth another $500 billion. Most of the money in this second stimulus bill was earmarked for the Paycheck Protection Program (PPP), a loan program in the CARES Act intended for small businesses that may be forgiven if firms use them to keep workers on payroll; the PPP had run out of money in two weeks. Democrats said they wanted money in this round to go to state governments struggling with suddenly shrinking tax revenue but, as is their custom, immediately capitulated when Republicans said no.

The CARES Act included $250 billion to bolster unemployment insurance, $500 billion in aid for industry and state governments, other monies going directly to specific industries and $350 billion for the PPP. Sounds nice, yes? Appearances and reality, however, diverge.

Before the second, supplemental stimulus package was passed, it had already become apparent that much of the stimulus money was going to Big Business. And that was not all, as yet more tax cuts for large corporations were included in the CARES Act. According to Democracy Now, “A congressional committee reports tax provisions in the coronavirus stimulus passed by Congress last month will overwhelmingly benefit the wealthiest Americans. Four out of five tax filers benefiting from the $70 billion temporary tax loophole are millionaires or billionaires. They’ll receive an average windfall of $1.6 million — dwarfing the $1,200 payments for working Americans.”

Manipulation of Paycheck Protection Program

Meanwhile, much of the PPP money didn’t go to mom-and-pop businesses forced to close due to the Covid-19 pandemic. At least 75 publicly traded companies received funds from the PPP, which is supposed to help small businesses. The Associated Press reports:

“The Paycheck Protection Program was supposed to infuse small businesses, which typically have less access to quick cash and credit, with $349 billion in emergency loans that could help keep workers on the job and bills paid on time. But at least 75 companies that received the aid were publicly traded, the AP found, and some had market values well over $100 million. And 25% of the companies had warned investors months ago — while the economy was humming along — that their ability to remain viable was in question. By combing through thousands of regulatory filings, the AP identified the 75 companies as recipients of a combined $300 million in low-interest, taxpayer-backed loans. Eight companies, or their subsidiaries, received the maximum $10 million possible, including a California software company that settled a Securities and Exchange Commission investigation late last year into accounting errors that overstated its revenue.”

Even the Big Business cheerleaders at the CNBC business news cable channel reported that “Hundreds of millions of dollars of Paycheck Protection Program emergency funding have been claimed by large, publicly traded companies, new research published by Morgan Stanley shows.” This report estimated that at least $243.4 million of the total $349 billion handed out in the PPP as of April 21 — by which time the PPP had already run out of money — went to publicly traded companies.

The above figures might be an underestimate; a later Washington Post report said “hundreds” of publicly traded companies have received a composite of more than $1 billion in PPP funding, although some of that money has been returned under public pressure. Eighty percent of applicants were left with nothing after funding ran out.

Published reports differ in determining the number of inappropriate recipients of PPP money because there is little accountability. One reason for that, beyond the usual wanting to shield favored donors from public scrutiny, might be that several members of Congress have themselves received PPP money. The Trump administration is refusing to provide information; it would not be a surprise to find there is something to hide there as well. Politico reports that “at least four members of Congress have reaped benefits,” and the actual total might be higher. “It’s a bipartisan group of lawmakers who have acknowledged close ties to companies that have received loans from the program — businesses that are either run by their families or employ their spouse as a senior executive,” Politico reports, naming two Democrats (Susie Lee of Nevada and Debbie Mucarsel Powell of Florida) and two Republicans (Roger Williams of Texas and Vicky Hartzler of Missouri).

Tax breaks for the one percent slipped into stimulus

One tax break inserted into the second stimulus bill only applies to companies with revenue of $25 million and another provision lets people in households earning at least $500,000 a year deduct even more of their business losses from stock market profits, The New York Times reports. These deductions will enable the recipients to reduce what they owe in capital gains taxes. Victor Fleischer, a tax law professor at the University of California, Irvine, told the Times, “Many of the tax benefits in the stimulus are ‘just shoveling money to rich people.’ ”

And given the grifters who occupy the White House, it will come as no surprise that there are special benefits for the owners of real estate. One of the goodies stuffed into the stimulus packages will allow people who own their businesses through partnerships or other similar structures to use all of the losses they claim on paper to offset taxes they might otherwise owe from other income, such as stock market profits, eliminating a cap on how much of those losses could be used. These partnerships can be very profitable, but as long as they show a loss on paper the owners can offset taxes. Jesse Drucker of The New York Times, in an interview on National Public Radio’s Fresh Air program, estimates this tax break for the wealthy will cost the government $135 billion — essentially all of which will go to the top one percent.

The Rideau Canal in Ottawa (photo by John Talbot)

This massive tax break is not specifically written for the real estate industry, but that is the industry that is likely to benefit the most as corporate real estate operations are often structured in these ways. Mr. Drucker said:

“In real estate, you can actually have, in the real world, what is quite a profitable business that generates losses on tax returns because real estate developers get to write down the value of their buildings. That turns into a deduction. And the result is that people like Jared Kushner and Donald Trump — to the degree that we have had some insight into their taxes over the last few years, we have seen that they have reported big losses on their tax returns. In many cases, it’s almost certainly the result of some of these favorable provisions that let them write down the value of their buildings. So the point is that any tax law change you make that gives people the ability to make maximum use of their losses is something that could very easily benefit real estate investors because they have so many losses. And in the case of Jared Kushner and Donald Trump, we don’t have to speculate on that. We know that in previous years, they have reported big losses, which would put them in a position to benefit from this.”

Not even the most elementary provisions to put some limits on where the money is going were inserted into these stimulus bills. For example, although there is a clause prohibiting the use of the money for stock buybacks and extra executive pay, it’s followed by another clause allowing Treasury Secretary Steve Mnuchin (the foreclosure king) to waive the prohibition. Nor are there measures to demand that corporate recipients even pay tax. Reuters reports that the PPP has given “millions of dollars in American taxpayer money to a number of firms that have avoided paying U.S. tax.” Twelve companies provided with $104 million in loans use offshore havens to cut their tax bills, seven of which paid no taxes.

Federal Reserve offers trillions of dollars

The Federal Reserve’s contribution to the wealthy goes far beyond the two stimulus bills. By the end of March, the Fed had already committed more than $3 trillion in loans and asset purchases in the wake of a rapidly collapsing economy. This included fresh commitments to a recently announced new quantitative-easing program in which the Fed had pledged to spend $700 billion to buy Treasury and mortgage-backed bonds in addition to multiple loan programs. Although most of this will come from printing money, $450 billion of this came from the $2 trillion CARES Act stimulus passed by Congress.

Following its March 23 announcement, the Fed announced another round of measures on April 9, this time committing $2.3 trillion in new loans and credits for business and local governments. The centerpiece of this round is the “Main Street Lending Program,” which makes it sound like these loans will be earmarked for small businesses, but loans will be offered to corporations with as many as 10,000 workers and revenues of up to $2.5 billion. Not exactly what we have in mind when we think of “Main Street.” The set of measures could inject $6 trillion into the financial system, but that money, if actually spent, seems mostly destined for the pockets of speculators.

With state and local governments dangerously short on revenue due to the economic crisis, and thus putting social programs in jeopardy, what does the White House want to do? The only “solution” demanded by Donald Trump is to cut the payroll tax, the source of money for Social Security. The president claims he wants a “temporary” payroll tax cut, but that has to be seen not only in light of his complete inability to say anything truthful but his and his administration’s stated desire to cut Social Security. Cutting the funding for the retirement program is a good way to undercut it, which has long been the wish of Wall Street. Even if there weren’t nefarious reasons at work, would a temporary payroll tax cut provide a jolt to the economy? Definitely no, says the Center on Budget and Policy Priorities in a May 12 commentary.

“President Trump has said he will not support any additional relief or stimulus measures in response to the human and economic crisis caused by the Covid-19 pandemic unless they include a temporary payroll tax cut,” the Center said. Stimulus packages are only effective “if they quickly deliver resources to people and businesses that most need it and so are most likely to spend rather than save any extra dollars they receive.” But the Trump plan would fail to help either. The Center said:

“Cutting the employee share of payroll taxes gives the most help (in dollar terms) to higher earners, who are less likely to need the help or to spend most or all of the extra money. Compounding the weaknesses of this approach, it does less for those with lower earnings and nothing at all for people who have lost jobs. And cutting employer payroll taxes is an ineffective way to shore up business hiring and investment. Business’ main problem now is lack of customers for their products — both because of social distancing measures and because many customers’ incomes have fallen dramatically as unemployment has risen. Businesses will not hire (or retain) more workers or invest in more equipment than they need to produce the goods and services they can actually sell.”

Already there are signs that the windfall large businesses have received from the Trump administration have been slipped into bank accounts, not into investment. Economist Jack Rasmus has calculated that the loss of income for the tens of millions of United Statesians plunged into unemployment has cost them a composite $1.3 billion in lost wages. Ridiculing the orthodox economic “theory” that the problem with recessions are “sticky wages” — in other words, wages don’t fall fast enough or far enough during downturns — Professor Rasmus notes that businesses are not investing in the wake of the wage reductions. He writes:

“They’re hoarding the $1.74 trillion in Congressional loans and grants bailouts. And hoarding the $650 billion in business tax cuts also in the bailout legislation thus far (which one hears very little about in the media, I might add). … [T]he short term cash deposits by business in just institutional money funds (only one source) has risen from $2.3 trillion before March 1, 2020 to $3.3T today. That’s a $1T rise in cash deposits by businesses, just in institutional money funds. More is being deposited in commercial banks. The long run average of business deposits in commercial banks has been around 5% (6% under Obama and 4.6% under Trump 2016-19) to 15.8% since March 1. Businesses and investors are hoarding their cash and stuffing it in their short term accounts in banks, funds, and who knows where else, on and offshore.”

Much of that hoard of cash is likely destined for stock buybacks, dividends, speculation, buying companies and boosting lobbying efforts down the road. U.S. corporations spent more than $1.1 trillion on buying back stock in 2018 and although the pace slacked a bit in 2019, more than $700 billion went toward buybacks. Stock buybacks are completely unproductive spending — they are simply corporations buying their own stock, giving those who sell a premium to the trading price and boosting profits for remaining shareholders because the profits will be shared among fewer people. Speculators love them.

Britain, EU and Canada: Lots for financiers, crumbs for working people

Capitalism is a global system, and thus using a crisis to benefit the wealthy and powerful is hardly limited to the United States, even if it is the center of the global capitalist system and thus at the forefront of propping up its winners. Tax Watch UK, which describes itself as an “investigative think tank,” discovered that among the recipients of loans under the Bank of England’s Covid Corporate Financing Facility are 13 companies with links to tax havens or that “have seen controversy regarding their financial affairs.” Those 13 companies received £4.8 billion, or almost 30 percent of the total. Tax Watch UK reports that among these is Baker Hughes, a subsidiary of General Electric, “which is embroiled in a £1 billion tax dispute over unpaid taxes going back to 2004.”

The British government, headed by the mendacious Boris Johnson, hasn’t been shy about handing out money to business. The Bank of England has committed £200 billion to quantitative easing (bond buying), £330 billion in loan guarantees for business and an unspecified amount for “short-term liquidity” for the government, among other measures. Separately, Whitehall has committed tens of billions of pounds to three separate loan programs, property tax holidays, direct grants for small firms, grants for “innovation” and other items. For working people? A total of £14.7 billion of additional funding to the National Health Service and £7 billion for increased payments under the Universal Credit scheme and other benefits. Overall, quite one-sided toward capital.

City of London expanding (Photo by Will Fox)

Similar to the United States and United Kingdom, the bulk of money committed by the European Union to shore up the economy during the Covid-19 pandemic is for quantitative easing. The EU has committed to pouring €1.35 trillion into buying private- and public-sector securities by June 2021 under its Pandemic Emergency Purchase Program.

The EU will also offer a €540 billion addition to its European Stability Mechanism, an International Monetary Fund-style loan program under which money is loaned to governments under condition that recipients implement severe austerity. (This is the program under which the EU paid off the Greek government’s debt to European banks, meaning that Greece instead owed its debts to EU institutions rather than the banks, doing nothing to lower the debt level but forcing Athens to administer punishing austerity that left Greeks destitute.) And on top of the above, the EU has thrown in another €200 billion for businesses. For working people, nothing more than relative crumbs: €37 billion “to support public investment for hospitals, [small businesses], labor markets, and stressed regions” and €100 billion to protect workers and jobs. Once again, quite one-sided in favor of capital.

Back across the Atlantic, Canada has announced multiple programs, including quantitative easing. The Bank of Canada has implemented several QE programs for buying corporate bonds, federal and provincial government bonds, mortgage bonds and commercial paper (short-term debt issued by corporations), as well as programs to provide credit and “support the stability of the Canadian financial system.” The Bank of Canada is not forthcoming about the total cost of these programs; it has committed to spending C$5.5 billion per week, with no cutoff date, on just two programs, the purchases of federal government bonds and mortgage bonds. A measure of what has been spent so far is indicated in the central bank’s balance sheet, which reveals that total assets held by it increased from $120 billion on March 11 to $498 billion on June 11. So that’s $378 billion with more to come.

What is Canada spending on working people? $116 billion for “direct aid to households and firms” and $4 billion for the health system. So a lot less, and even some of this much smaller amount will be going to businesses.

Although more direct aid for working people is being included this time around — given the crisis of neoliberalism and that the massive subsidies to the same financiers responsible for the crash of the economy in 2008 haven’t been forgotten, political leaders had no choice but to sweeten the pot a little — the overwhelming majority of the money dispensed is going to the financial industry and to large corporations. Again it must be asked: How much more useful would it have been to use this money for practical needs and direct payments to people instead of propping up a bloated and wasteful financial system? More directly, how long can the peoples of the world continue to believe that a system in crisis so frequently and requires such massive bailouts works?

Leaked Trump infrastructure plan is a plan for corporate subsidies

The Trump administration’s plans to rebuild infrastructure in the United States have been leaked, and it appears to be as bad as feared. At least three-quarters of intended funding will go toward corporate subsidies, not actual projects. It is possible that no funding will go directly toward projects.

There’s no real surprise here, given that President Donald Trump’s election promise to inject $1 trillion into infrastructure spending was a macabre joke. What is actually happening is that the Trump administration intends to push for more “public-private partnerships.” What these so-called partnerships actually are vehicles to shovel public money into private pockets. These have proven disastrous wherever they have been implemented, almost invariably making public services more expensive. Often, far more expensive. They are nothing more than a variation on straightforward schemes to sell off public assets below cost, with working people having to pay more for reduced quality of service.

That is no surprise, as corporations are only going to provide services or operate facilities if they can make a profit. And since public-private partnerships promise guaranteed big profits, at the expense of taxpayers, these are quite popular in corporate boardrooms. And when those promises don’t come true, it taxpayers who are on the hook for the failed privatization.

Panorama of Paris (photo by Benh Lieu Song)

The collapse earlier this month of Carillion PLC in Britain put 50,000 jobs at risk, both those directly employed and others working for subcontractors. The holder of a vast array of government contracts for construction, services and managing the operations of railways, hospitals, schools and much else, Carillion received contracts worth £5.7 billion just since 2011. Overall, an astonishing £120 billion was spent on outsourcing in Britain in 2015.

What did British taxpayers get for this corporate largesse? It certainly not was the promised savings. Parliament’s spending watchdog agency, the National Audit Office, found that privately financing public projects costs as much as 40 percent more than projects relying solely on government money. The office estimates that existing outsourcing contracts will cost taxpayers almost £200 billion for the next 25 years. (This report was issued before Carillion’s collapse.) In response, Labour leader Jeremy Corbyn said, “These corporations need to be shown the door. We need our public services provided by public employees with a public service ethos and a strong public oversight,” The Guardian reported.

Naturally, there was one group that did quite well from this privatization: Carillion’s shareholders, who reaped £500 billion in dividends in the past seven years. But it is the government that will have to pick up the tab if the company’s employees are to continue to be paid. On top of that, the company’s pension shortfall reached £900 billion, according to Reuters.

By no means is Carillion’s collapse the only privatization disaster in Britain. A bailout of the corporate-run East Coast rail system is expected to cost hundreds of millions of pounds. There are numerous other examples that have proven windfalls for corporate executives but expensive mistakes for the public.

Offer subsidies first, ask questions later

One of the many empty promises made by President Trump during the 2016 campaign was that his infrastructure plan would “leverage public-private partnerships, and private investments through tax incentives, to spur $1 trillion in infrastructure investment over ten years. It is revenue neutral.”

“Spur” investment, not actually spend on investment. This supposed plan originated with Wilbur Ross and Peter Navarro, a conservative economics professor. Ross, now Commerce secretary (although perhaps not for long if recent reports are to believed), was an investment banker who specialized in buying companies and then taking away pensions and medical benefits in order to quickly flip his companies for a big short-term profit. The two recommended the Trump administration allocate $137 billion in tax credits for private investors who underwrite infrastructure projects. The two claimed that over 10 years the credits could spur $1 trillion in investment.

So the new administration won’t actually spend $1 trillion to fix the country’s badly decaying infrastructure; it hopes to encourage private capital to do so through tax cuts.

That brings us to this week’s leak. The news site Axios published the Trump administration’s six-page outline for infrastructure investment on January 22. The document mentions no dollar figures. But what the document does do is to discuss where money will be sent. First up is “infrastructure incentives initiative,” which is to account for 50 percent of total appropriations. This category will provide grants to be used for “core infrastructure” projects and requires “Evidence supporting how applicant will secure and commit new, non-federal revenue to create sustainable long-term funding” and requires new sources of “revenue for operations, maintenance and operations.”

Netherlands highway (Daan Roosegaarde)

Although it is possible that local- or state-government funding could provide the required revenues, given the intentions of the Trump régime, what this means is that privatization is being counted on for these projects, with corporations taking over public facilities providing the required ongoing revenue streams.

A hint that this is intended is that the first item on a list of “Principles for Infrastructure Improvements” is an intention to make it easier for tolls to be placed on highways. That item is this: “Allow states flexibility to toll on interstates and reinvest toll revenues in infrastructure.” Again, it is possible that state governments might do this themselves. But the more likely scenario is the privatization of highways, with the corporations gaining control then installing toll booths to not only provide funds for maintenance but to hand themselves a perpetual profit. And if the profits don’t materialize, it won’t be private capital holding the bag. For example, nine privatized toll roads in Spain will cost taxpayers there €5 billion because the roads are being nationalized in the wake of the private operators’ failures.

A further hint is found buried in the section on water infrastructure, where we find this passage: “Remove the application of Federal requirements for de minimis Federal involvement.” This is likely intended to provide a green light to privatization of water systems. That has been done in France and Germany, with disastrous results. For example, water prices in Paris doubled over 25 years before the city took back its water system, saving €35 million in the first year and cutting rates. The German city of Bergkamen reduced costs by as much as 30 percent after returning its basic utilities to the public sector.

No details for a plan not based in reality

Another 25 percent of the total appropriations for the White House infrastructure investment plan is a “rural infrastructure program,” under which state governments are “incentivized to partner” with “private investment.” Various other programs constitute the remainder of the plan, none of which are clear as to who or what will be eligible.

The official unveiling of the plan will likely not be released until after the January 30 State of the Union address, according to a report in The Hill. A further sign of the lack of specifics is that the White House has had nothing substantial to say on the topic. The most recent statement on infrastructure that a search of the official White House web page could find was an August announcement that the president had signed an executive order making the “environmental and permitting processes more efficient.”

Channeling the president’s usual disregard for reality, the announcement claimed that “delays” in infrastructure projects cost “trillions” of dollars. The only actual projects mentioned are three pipelines, including the Keystone XL and Dakota Access lines, of which the announcement claims will “create over 42,000 jobs and $2 billion in earnings.” (Those figures appear directly copied from a widely discredited State Department environmental impact statement issued in 2014, when the Obama administration was supporting them.) In reality, a study by the Cornell Global Labor Institute found that, when all effects are calculated, there may be a net loss of jobs. Additional fuel costs in the Midwest, pipeline spills, pollution and the rising costs of climate change would contribute to job losses.

Of course, environmental damages are not considered in Trump administration projections, putting them even more in the realm of fantasy. Consider two World Health Organization studies that concluded polluted environments cause 1.7 million children age five or younger to die per year. The U.S. Environmental Protection Agency estimated a year ago that 230,000 lives would be saved and 120,000 emergency-room visits saved in 2020 if the Clean Air Act is left intact. Globally, air pollution could lead to nine million premature deaths and US$2.6 trillion in economic damage from the costs of sick days, medical bills and reduced agricultural output by 2060, according to an Organisation for Economic Cooperation and Development study.

This doesn’t come cheap, either — a study of energy subsidies estimates the totality of subsidies given to fossil fuels for 2015 was $5.6 trillion. Lest you think some “anti-oil” group made that calculation, that figure comes to us courtesy of the International Monetary Fund! The Trump administration will only add to this mind-boggling total as it has made clear its intentions to further subsidize gas, oil and especially coal, no matter the lack of rational economics. And the cost of global warming? Incalculable. What would be the future cost of hundreds of millions displaced from drowned cities? Or, in the long term, of destroying the Earth’s ability to maintain a stable environment?

Although Donald Trump is the worst yet of a long line of disastrous U.S. presidents, let’s forgo the easy idea that he alone is responsible for facilitating corporate plunder at the cost of all other human considerations. He is highly useful to the plutocrats who control the Republican Party, so much so that talk of a Trump impeachment should be relegated to the level of fantasy for the foreseeable future, barring an all-time wipeout in the 2018 midterms despite the Democratic Party’s uncanny ability to blow elections. The greater question is if sufficient numbers of Trump voters come to realize the degree they were hoodwinked for believing that a billionaire who built his fortune by screwing working people would somehow come to their rescue.

That’s the short term. For the longer term, humanity finding its way out of the dead end it is speeding toward depends on freeing itself from the grips of a system that repeatedly throws up Trumps, Bushes, Harpers, Thatchers and the like. The Trump administration is a symptom, not a cause, of morbid decay.

Brexit will only count if everybody leaves the EU

Britain can leave the European Union, but it would remain just as tied to capitalist markets as before. The decision to leave the EU is not a decision to leave the world capitalist system, or even disengage from Europe, and thus is not a decision that will lead to any additional “independence” or “sovereignty” outside of proponents’ imaginations.

What has been unleashed is the nationalism and xenophobia of right-wing “populism” — those on the Left celebrating a blow against elites might pause for thought. Yes, voting in defiance of what elites told them to do played its part in favor of a British exit from the EU, but nationalism, scapegoating of immigrants, and convincing people at the mercy of corporate power that less regulation is in their interest were dominant.

It is the far Right that been given a shot in the arm from Brexit — from the National Front in France and the Party for Freedom in the Netherlands to the United Kingdom Independence Party (UKIP) and the hard right within the Conservative Party. The Labour Party’s Blairites have also been emboldened, as the parliamentary coup against Jeremy Corbyn illustrates.

Sunset near Tromsø, Norway (photo by Moyan Brenn)

By no means is the above survey meant as any defense of the EU. It is a neoliberal project from top to bottom, an anti-democratic exercise in raw corporate power to strip Europeans of the gains and protections hard won over two generations. The EU has a similar function to the North American Free Trade Agreement on the other side of the Atlantic. European capitalists desire the ability to challenge the United States for economic supremacy, but cannot do so without the combined clout of a united continent. This wish underlies the anti-democratic push to steadily tighten the EU, including mandatory national budget benchmarks that require cutting social safety nets and forcing policies designed to break down solidarity among wage earners across borders by imposing harsher competition through imposed austerity.

So we should be celebrating anything that weakens the EU, yes? Perhaps. If this were the first blow to a visibly crumbling edifice, then surely yes. If there were a continental Left with a clear alternative vision to corporate globalization, then emphatically yes. But neither of these conditions are in force, so a more cautious response is called for. What is really needed is the destruction of the EU, for all countries to leave it, not only one.

Britain leaving by itself will lead to far less of a change than Brexit proponents hope, and not necessarily for the better. This is so because the conditions of capitalist competition will remain untouched.

Norway and Switzerland are out but are really in

Brexit proponents point to Norway and Switzerland as models of countries outside the EU but which retain trading access. But what those countries have is the responsibilities of EU membership without having any say.

Norway has the closer relationship of the two. Norway (along with Iceland and the micro-state of Lichtenstein) is part of the European Economic Area, essentially an agreement tightly binding those three countries to the EU. The EEA has been described as a “transmission belt” whereby the EU ensures that the EEA countries adopt EU laws as the price for being a part of the “free trade” area of the EU. That is a one-way transmission. Norway has no say in the creation of any EU laws and regulations.

The EEA treaty calls for Norwegian consultation, but Norway is not represented in any EU body. The agreement allows Norway to “suspend” any EU law that is disliked, but Norway has done so only once. By contrast, Norway’s parliament has approved EU legislation 287 times, most of them unanimously. This loss of sovereignty does not seem to be an issue for Norway’s political leaders. A 2012 Norwegian review of EEA membership concludes:

“This raises democratic problems. Norway is not represented in decision-making processes that have direct consequences for Norway, and neither do we have any significant influence on them. … [O]ur form of association with the EU dampens political engagement and debate in Norway and makes it difficult to monitor the government and hold it accountable for its European policy.”

The chair of the review committee noted that “There is no upside for Norwegian politicians to engage in European policy. … Because politicians are not interested in European policies, the media are not interested, and lack of media interest reinforces the lack of politicians’ interest.”

The minister of European Affairs in the current Conservative Party-led Norwegian government, Elisabeth Aspaker, confirms government ease with adaptation to EU law. Norway, in fact, has committed to voluntarily contribute €2.8 billion in aid to poorer EU countries for the period 2014 to 2021. In an interview with EurActiv, Minister Aspaker said:

“[W]e believe this is in our interest to improve social and economic cohesion in Europe. If Europe is doing well, Norway will also be doing well. If Europe is doing poorly or is destabilised, this will have a negative impact on Norway and the Norwegian economy. So this is why we believe we should involve ourselves beyond what is required under the EEA agreement.”

Switzerland has a separate agreement with the EU that is essentially a “free trade” agreement. Switzerland has a little bit of room to not adopt EU laws, but some of its goods are blocked from export to EU countries as a result. Switzerland, however, is under pressure to do as the EU dictates, and not only does Berne not have representation, it lacks even the toothless consultation that Oslo has.

Britain will still pay but have no say

Will Britain really be free of transfers to Brussels as the “Leave” campaign, dominated by the Tory right and UKIP, loudly claimed before the referendum? Their immediate back-tracking on that, and on their implied promise of significantly reduced immigration, provides an important clue. The Centre for European Reform, a neoliberal think tank that declares itself in favor of European integration, in a nonetheless sober analysis declares that Britain would pay a substantial amount to retain its access to European markets. In its report, “Outsiders on the inside: Swiss and Norwegian lessons for the UK,” the Centre writes:

“Britain would also have to pay a financial price, as well as a political price, for retaining access to the single market. As a relatively rich country, it would presumably be expected to pay special contributions to EU cohesion and aid programmes on a similar basis [as] the Norwegians and Swiss do. Currently, Norway contributes €340m a year to the EU. If multiplied by 12 for Britain’s much larger population, that rate would imply a contribution for the UK of just over €4 billion, or nearly half its current net contribution to the EU budget as a full member. That is a lot to pay for associate status of the club.”

It is possible to grumble that the foregoing is a product of a pro-EU perspective, but doing so would ignore that Britain’s firm place in the world capitalist system, geographical location and trading patterns dictate that it retain its commercial access to Europe. A post-Brexit Britain’s remittances to Brussels might be larger than even that postulated by the Centre for European Reform. An Open Europe analysis calculates that Norway’s net contribution to the EU works out to €107 per person, while Britain’s current contribution is €139 per person. It may not be realistic to expect a future British contribution to be substantially less than Norway’s.

Sea defenses on the South Coast near Winchelsea, England (photo by Atelier Joly)

Furthermore, the Open Europe analysis notes that gross immigration to Britain is significantly less than that of Norway, Switzerland and Iceland. Those countries each must accept the free flow of people (along with goods, services and capital) the same as any EU member. The scare tactics of UKIP and the Tory right were simply that, tactics. And the promise by Brexit proponents of the return of an golden age and the scare tactics of Brexit opponents that financial armeggedon would be at hand? A separate Open Europe report finds the most likely range of change to British GDP would be within minus 0.8 percent to plus 0.6 percent by 2030.

Not much of a change. The high end of that modest range assumes that Britain adopts “unilateral liberalisation” with all its major trading partners because “free trade” offers the “greatest benefit,” the Open Europe report asserts. But studies purporting to demonstrate the benefits of “free trade” agreements tend to wildly overstate their case through specious assumptions. These often start with models that assume liberalization can not cause or worsen employment, capital flight or trade imbalances, and that capital and labor will smoothly shift to new productive uses under seamless market forces.

Thus groups like the Peterson Institute invariably come up with rosy projections for “free trade” agreements, including fantasy figures for the North American Free Trade Agreement and the Trans-Pacific Partnership that ignore the reality of job losses and resulting downward drag on wages. So it is perhaps not a surprise that the rosiest prediction here is for Britain to throw itself wide open to world markets, as if Britain wasn’t already one of the most de-regulated countries in the global North.

There are lies and then there are damned lies

A different sort of lack of realism pervaded the Brexit campaign, and their avowed desire to remain in the European single market surely has something to do with their rapid backtracking. Boris Johnson, a leading spokesperson for Brexit, certainly was far more cautious in his post-vote June 26 column in The Telegraph than during the campaign. He claimed, in the face of all evidence, that immigration fears were not a campaign factor, that the British economy is “outstandingly strong” and “nothing changes” except for a goodbye to European bureaucracy. Seldom do we see so much undisguised lying in a single article.

The response from the other side of the English Channel is illuminating. A commentary in Der Spiegel, undoubtedly reflecting official thinking in Germany, concludes by declaring, “The British have chosen out, and now they must face the consequences,” given with a favorable reference to hard-line Finance Minister Wolfgang Schäuble. The Guardian, quoting an assortment of European diplomats, provided this report:

“ ‘It is a pipe dream,’ said [one] EU diplomat. ‘You cannot have full access to the single market and not accept its rules. If we gave that kind of deal to the UK, then why not to Australia or New Zealand. It would be a free-for-all.’

A second EU diplomat said: ‘There are no preferences, there are principles and the principle is no pick and choose.’

The diplomat stressed that participating in the single market meant accepting EU rules, including the jurisdiction of the European court of justice, monitoring by the European commission and accepting the primacy of EU law over national law — conditions that will be anathema to leave advocates who campaigned on the mantra ‘take back control.’ ”

No wonder no Tory seems eager to start negotiations. Perhaps “more of the same but with less say” will not meet the expectations of those who voted for a British exit from the EU. Certainly, corporate ideology has done its job well of convincing some that corporations abandoning communities isn’t the fault of the corporations leaving nor the capitalism that rewards those abandonments. Consider this passage in The New York Times on June 28, quoting a blue-collar worker in an English city that voted heavily to leave:

“ ‘All the industries, everything, has gone,’ said Michael Wake, 55, forklift operator, gesturing toward Roker Beach, once black from the soot of the shipyards. ‘We were powerful, strong. But Brussels and the government, they’ve taken it all away.’ ”

Of course, the ceaseless competitive pressure of capitalism, ever ready to move to the place with the lowest wages and weakest regulations, is responsible for the hollowing out of Sunderland, England, and so many industrial cities like it. Britain adhering to EU rules on unrestricted mobility of capital as the price of retaining its European trade links will have exactly zero effect on that dynamic, and British entry into “free trade” agreements like the Transatlantic Trade and Investment Partnership or similar deals will accelerate it. Governments sign such agreements, true, but they are acting under compulsion of powerful industrialists and financiers within and without their borders, conceding ever more sovereignty to multi-national capital as the price of remaining “competitive.”

The EU is a bonanza for multi-national corporations and an autocratic disaster for working people across Europe. But one country leaving and agreeing to the same terms as an “outsider” will effect no change whatsoever. An exit from capitalism is what the world needs, not from this or that capitalist treaty.