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Speculators

Guest blog by Steven Miller

(This is the second of 6 guest posts by Steven Miller describing the financialization of capitalism and the takeover of the global economy by bankster speculators)

Speculators – Part II

Today the financial industry makes far more profit than any other sector of capitalist production. In 1973, they made 16% of total US profits; by 2007, financial profits reached 41% of all profits. (2) Since credit and debt control the levers of the economy, the financial industry has become politically dominant. The planning function of government increasingly devolves to their control. Finance – producing money from money – produces no value; it simply moves money around, but it does centralize even more wealth in the hands of speculators.

Once Wall Street speculators realized, after the 2008 Crash, that their new “financial instruments” were actually weapons of economic mass destruction, they understood that these tools could be employed to attack national and public wealth. Speculators get richer by seizing your wealth.

They do this today with hedge funds, among other things, which are completely private, completely unregulated and completely hidden from the public. But you can make wild speculative bets with their expert staff. Because they are “private”, we are supposed to accept whatever negative effects they have on society. Though the results are highly destructive to society, this is not up for debate.

Today the financial industry in the US is sitting on the largest mountain of cash in human history, over $2 trillion. Why? This is perceived as strange behavior, since they received over $16 trillion in the 2008/9 Bailout. In addition, the US government for at least two years has been dutifully sending them $85 billion a month, over a trillion dollars a year, in free money. (3)

So why don’t they spend it?

Every modern industry, especially finance, is based on extending credit; the debt is then “leveraged” to takeover companies and engage in various forms of speculation. As financial companies began to collapse in 2008, every one that was “solvent” lied and minimized how much of their holdings were based on toxic assets. Since each one knew that the others were also lying, they began to curtail how much credit they would extend. Without credit, modern capitalist commerce was on the verge of collapse. This is why the form of the Bailout was for the government to buy up toxic assets. This situation still prevails today.

Michel Chussodovsky, professor of economics at the University of Ottawa, and organizer of the Center for Global Research describes how this was rigged:

“In a bitter irony, while the Wall Street institutions were the recipients of the bailouts, they are also the creditors of the federal government, which has been precipitated into a structure of debt financing controlled by Wall Street. This deficit financing… is controlled by the creditors. It does not create employment. It is not expansionary.” (4)

This reality illuminates the dangerous instability of the times. In essence, the public is financing its own indebtedness and funding its own privatization. The banks collapsed the economy in 2008 because they had been counting their various toxic assets as part of their wealth. Money is now generated, loaned and invested by clicking a computer keyboard. The monthly $85 billion gift, of course, is not put into gold bars and moved into the bank vaults by elves. The financial industry uses public money to offer increasingly shady loans, essentially organized criminal activity against the public.

Every day the value of one-year’s GDP in the US – about $14 trillion  – passes through Wall Street and other financial institutions! This is the Casino Economy. Most of this vast wealth is put into play as speculative bets, driven by computer-driven programs, on anything from water to debt to fracking. Just like mortgages, anything that can be financialized – entire electrical grids, school districts, pensions, and medical credit – almost anything at all – can also be securitized and bundled as fodder for speculation.

It is important to recognize that none of these vast transactions are taxed at all. Real people pay a large sales tax on almost everything in the US; corporate people pay ZERO on their schemes to increase their great wealth. A simple tax of 2 cents on the dollar would generate $28 billion a day, enough revenue to solve every financial issue that America faces.

Numerous people have proposed this idea, since it would end Austerity and usher in an era where governments could provide incredible resources to real people for free. The fact that this “reform” will never be permitted is a telling sign of a system that is approaching its demise.

The immediate result of the Crash was that the banks, hedge funds, insurance companies, private equity firms, real estate interests, etc. simply reprogrammed their computers to speculate on food and petroleum. Hence the mega-jump in food prices in the Fall of 2008. But money that doesn’t circulate produces no profit, so the financial industry has begun to invest in solid, material assets, tangible properties that cannot be wiped out with a click of a keyboard. Meta-money is the cousin of the NSA’s meta-data. Its use by corporations is equally malign.

Thus today we are in the midst of a tsunami of privatization, as the banksters are seizing and privatizing everything they can get their hands on. They are seizing public assets and a rate never before seen. Everything is financialized – given a monetary rating; then it is securitized – turned into speculative assets, which are quickly privatized; then your access to it without money is eliminated and thus criminalized. (5)

This trend has been noted by a number of observers:

Michael Hudson, professor of economics, University of Missouri Kansas City,:

“This financial engineering is not your typical bubble. The key to the post-2000 bubble was real estate. It is true that the past year and a half has seen some recovery in property prices for residential and commercial property. But something remarkable has occurred. This new debt-strapped low-interest environment has seen Hedge funds and buyout funds doing something that has not been seen in nearly a century: They are buying up property with cash, starting with the inventory of foreclosed properties that banks are selling off at distress prices.” (6)

Ellen Brown, Web of Debt Blog:

“Giant bank holding companies now own airports, toll roads, and ports; control power plants; and store and hoard vast quantities of commodities of all sorts. They are systematically buying up or gaining control of the essential lifelines of the economy.”  (7)

Michel Chussodovsky again:

“The privatization of public monuments, museums, national parks, the post office, etc., has been raised in recent media reports as a possible ‘solution’ to the debt crisis. But let us not be misled: the process of acquisition of federal public property including the infrastructure and State institutions is likely to go much further. The public sector is up for grabs. Wall Street will eventually go on a buying spree picking up State owned assets at rock bottom prices.” (8)

References and Resources

 2)  Dave McNally, Global Slump, 2011. P 86

 3)  Harding. “Bernanke takes plunge with QE3.” www.ft.com

4)      Chussodovsky. “The Shutdown of the US Government  and ‘Debt Default’. A dress Rehearsal for the Federal State System?”. Center for Global Research

5)       5)  “Debt As a Class Weapon”. Rally Comrades, October 2011

 6)  Michael Hudson. “The Bubble Economy as a 2 Part Play for Privatisation”. July 4, 2013

 7) Ellen Brown. “The Leveraged Buy-out of America.” Center for Global Research, August 26, 2011

 8)  Chussodovsky. Op sit

photo credit: nromagna via photopin cc

To be continued.

***

Steven Miller has taught science for 25 years in Oakland’s Flatland high schools. He has been actively engaged in public school reform since the early 1990s. When the state seized control of Oakland public schools in 2003, they immediately implemented policies of corporatization and privatization that are advocated by the Broad Institute. Since that time Steve has written extensively against the privatization of public education, water and other public resources. You can email him at nanodog2@hotmail.com

Originally posted at Daily Censored

Takeover

 Guest blog by Steven Miller

(The following is an brilliant essay in 6 parts about the takeover of democracy by monopoly capitalism – that includes solutions.)

“Capitalism in the 21st Century is no longer based largely on profits resulting from a real  economy productive process, windfall financial gains are acquired through large scale speculative operations, without the occurrence of real economy activity, at the touch of a mouse button.”  Michel Chussodovsky

Part I – Summary

It is a statement of fact, not ideology, that a class of billionaires, principally based in finance and speculation, control the levers of society. Since the Crash of 2008, the 1% has been waging a war against society that drives the 99% further towards disaster and ruin. Their End Game is the complete privatization of everything that is today owned by the public. This process is inevitable as long as political power remains in their hands. The question is: can this system be reformed? Another is: If not, can we fight and win? If so, how? These are strategic questions.

There are decisive moments in the history of capitalism when one form of wealth, one kind of property, becomes the most lucrative. The capitalists that control this property often become the dominant sector of the capitalist class and take control of the state, dictating policy to society. Marx writes, “The executive of the modern State is but a committee for managing the common affairs of the whole bourgeoisie.”  (1)

The ruling class – call them the 1%, call them capitalists – commonly wages war against itself to seize markets and articulate the strategic view that makes the most profit, especially for them. They call this “the free market”. It is rigged and completely stacked in favor of the billionaires.

When the most profit-making form of labor was slavery, the slave owners ran the government and the state. They were succeeded, after the Civil War, by the railroad barons, industrialists, who owned property in factories, coal, and iron. Slave production was replaced by industrial production. Human slavery was replaced by the far more productive wage-slavery. Early bankers played an enormous role in this transition. Industrial production predominated into the 1950s. It didn’t disappear, but the control of capital passed to banks, investors and finance.

Now it’s all changing again. The tools themselves, the technology, determine which sector of capitalists comes out on top. Today the most revolutionary tools are the vast array of digital, electronic and communication technologies. This revolution is transforming society in ways unforeseen just a decade ago. When Obama was elected in 2008 – the same year as the great economic Meltdown – there was no such thing as social media, no apps, no data in the cloud, no viral videos. The IPhone was only a few months old. The tools are changing fast, driven by constantly evolving hardware and software.

As you read through this essay and examine the evidence, please keep the bigger question in mind. Can this system actually be changed in some sort of meaningful way? What would it take? How do we fight and win?

The growing electronic production of almost everything demonstrates what Karl Marx was referring to when he said, “capitalism sows the seeds of its own destruction.” But it was Adam Smith, not Marx, who first proved that the real source of profit is human labor.

References and Resources

 Lead quote – Michel Chussodovsky. “The Speculative Endgame: The ‘Government Shutdown’ and Debt Default’, a Multibillion Bonanza for Wall Street”, Center for Global Research

 1)  Communist Manifesto. Chapter 1

To be continued.

***

Steven Miller has taught science for 25 years in Oakland’s Flatland high schools. He has been actively engaged in public school reform since the early 1990s. When the state seized control of Oakland public schools in 2003, they immediately implemented policies of corporatization and privatization that are advocated by the Broad Institute. Since that time Steve has written extensively against the privatization of public education, water and other public resources. You can email him at nanodog2@hotmail.com

photo credit: Adbusters Culturejammers HQ via photopin cc

Originally posted at Daily Censored

So You Want to Have a Revolution?

A 2013 study from Fairleigh Dickinson University reveals that 29% of Americans believe an armed revolution may be necessary in the next few years to “protect liberties.” The voter survey differed from most corporate media polls in that it included a substantial number of low income, cellphone only households.

18% of Democratic respondents shared this view, 27% of Independents and 44% of Republicans.

A decade ago, the notion that anyone other than a few thousand fringe extremists would contemplate violent revolution was unthinkable. At the very least, these results suggest a significant minority of Americans are profoundly disillusioned with the government’s apparent indifference to their needs and expectations.

The End of Growth: An Inconvenient Reality

Despite government claims to the contrary, recovery from the deflationary spiral that started in 2008 (aka The Recession) has been elusive. Although stock prices continue to soar, productivity, employment and consumer spending have stubbornly refused to return to pre-2008 levels. Some latter day (non-Wall Street) economists believe the era of economic growth has ended – permanently – owing to the soaring cost of fossil fuels. In their view, the world has returned to a steady state economy.

Given the historic link between growth and “full” employment (jobless levels below 10%), they are also predicting a scenario in which roughly half the adult population is unemployed. The paid work that remains will be low paid, part time, temporary jobs, unprotected by unions, employment rights or health and safety regulations.

To appreciate that US economic growth is at a standstill, it’s essential to look at undoctored economic data. For example, when Obama and the corporate media trumpeted a 7% unemployment rate for November, they neglect to mention that this figure only reflects the number of workers newly unemployed in the last six months (i.e. the number still receiving basic unemployment benefits). Unlike other countries, the official US jobless figure doesn’t include workers whose benefits have run out, who have stopped looking for work, or who want to work full time but are stuck in part time jobs.

Data from the Federal Reserve Bank of St Louis reveals that the US economy is shedding full time jobs, rather than gaining them. The percentage of unemployed Americans of working age has increased from 35.5% in 1999 to 41.7% in 2013 – the highest since 1980. Most of that increase (5%) has occurred since Obama was first elected in 2008.

The 2008 Economic Crash Was Predictable

Prominent members of the Peak Oil movement, most notably Michael Ruppert and Richard Heinberg, predicted the 2008 economic crash. They based their predictions on declining oil reserves, the failure of oil production to keep up with increasing demand from developing countries and the steep rise in oil prices that began in 2005.* Based on their calculations, mankind had extracted half of the world’s available oil reserves by November 2005. This was officially known as Peak Oil. We reached Peak Natural Gas several years before that, though we won’t reach Peak Coal for another decade or so.

Although there still remains tons of oil, gas and coal left in the ground for us to extract and burn, we are now on a downward slope. Not only is production continuing to outstrip demand, but most of the remaining oil, natural gas and coal are difficult to get at, expensive to extract and rely on dangerous, expensive, environmentally destructive and controversial technologies, such as deep sea oil drilling, tar sands extraction fracking and mountain top removal.

Capitalism and Productivity

The steady economic expansion we call growth is a relatively new phenomenon in human history. Prior to the 19th century, the major nations of the world operated steady state economies. In fact the argument Heinberg and others make is the burst of productivity most of the world attributes to capitalism had nothing to do with the capitalist economic model itself. Rather it was based on the widespread abundance of cheap fossil fuels. British economists at the Fiesta Institute provide abundant data justifying this argument in Fleeing Vesuvius: Overcoming the Risks of Economic and Environmental Collapse. They point out that even at current oil prices, it costs far less to use a machine to perform work than to employ a human being or even a draft animal.

The birth of capitalism wasn’t just about the exploitation of fossil fuels. It was about the exploitation of all natural resources – clear cutting forests, large open pit mines to extract steal, copper, gold, bauxite (for aluminum), gold diamonds and rare earth minerals, draining swamps and eradicating wetlands. When oil started becoming more expensive (in the 1970s), it was also about moving western factories to third world countries to enable wholesale exploitation of human labor. Government encouraged this wholesale extraction and exploitation because it produced enormous prosperity for most of western society over many decades.

At the same time there were immense human and environmental costs. Western capitalism produced incalculable suffering in the third world as indigenous people were driven off the land that gave them a subsistence living, with the lucky ones obtaining jobs in brutal sweatshops that paid starvation wages. Suffering in the first world was less visible until last decade, when residents of the industrialized world began to realize they were being systematically poisoned with toxic industrial chemicals, increasing levels of both nuclear and microwave radiation and harmful organisms that had contaminated our air, water and food chain.

*Historically the oil price ranged between $2-4 a barrel prior to 1973 oil crisis. It remained between $10-20 a barrel until 1979. From 1979-1986 it fluctuated between $20-38 a barrel until 1986, when it dropped below $20 a barrel until 1989. It dropped below $20 a barrel very briefly in 1999. It hasn’t been below $40 a barrel since 2004.

photo credit: athens.rioter via photopin cc

Are They Trying to Kill Us All?

Obama Disregards Court Order on Antibiotic Use in Livestock

Nothing exemplifies more clearly the corporate takeover of democratic government than the Food and Drug Administration’s (FDA) approach to Food Inc’s routine use of antibiotics in animal feed. Thirty-six years after their 1977 finding that this practice jeopardizes human health, the FDA has given feed manufacturers three years to voluntarily remove antibiotic supplements from feed. What you won’t hear on the six o’clock news is that the the FDA move directly violates a March 2012 court ruling ordering them to ban the practice outright

Farm animals consume approximately 80% of antibiotics produced in the US. No one knows why routine consumption of antibiotics makes animals grow faster. Following this discovery in the 1950s, adding them to feed became standard practice on the gigantic factory farms that steadily replaced family farms. Producing animals that grow bigger and faster translates into higher profits. Especially in the overcrowded sheds and feedlots where fecal contamination creates the perfect breeding ground for harmful bacteria.

Death by Antibiotic-Resistant Superbug

Pumping antibiotics indiscriminately into the environment turns out to be even more effective in breeding deadly antibiotic-resistant “superbugs,” which are subsequently transferred to people through their food. This was confirmed by an April 2013 FDA finding revealing that more than 80% of raw turkey, pork, beef and chicken contain antibiotic-resistant bacteria

The Centers for Disease Control (CDC) estimate that 2 million Americans a year contract drug-resistant infections every year, resulting in approximately 23,000 deaths. Prior to the advent of antibiotics in the 1940s, people routinely died of pneumonia brought on by flu and the common cold. It’s frightening to even think of returning to that era.

The 1998 EU Ban

To curtail the spread of antibiotic resistant bacteria, the EU banned antibiotics in animal feed in 1998. In the US, meanwhile, the National Resources Defense Council (NRDC) launched petitions in 1999 and 2005 demanding the FDA launch a similar ban.  On learning of the FDA’s intention to opt for a voluntary ban, they, along with Center for Science in the Public Interest, the Food Animal Concerns Trust, Public Citizen, and the Union of Concerned Scientists, filed suit in federal district court. In March 2012, the judge ruled that the voluntary program violated the FDA’s statutory duty (i.e. was illegal) and ordered them to enact a total ban like the EU.

From the ruling:

“[T]he statutory scheme requires the Agency to ensure the safety and effectiveness of all drugs sold in interstate commerce, and, if an approved drug is not shown to be safe or effective, the Agency must begin withdrawal proceedings. The Agency has forsaken these obligations in the name of a proposed voluntary program, Guidance # 209, and acted contrary to the statutory language.”

and

“[FDA] must evaluate the safety risks of the petitioned drugs and either make the finding that the drugs are not shown to be safe or provide a reasoned explanation as to why the Agency is refusing to make such a finding.”

Obama Appeals

So why, you might ask, is the Obama administration ignoring this obvious public health crisis, proceeding with a voluntary program and wasting taxpayer dollars on appealing the ruling? Obviously it has a lot to do with the Food, Inc lobby, which spent $71 million on campaign contributions and $95 million on lobbying in 2012. When our elected leaders place the wishes of their corporate benefactors over the welfare of their constituents, human life becomes very cheap.

I’m happy to report Representative Louise Slaughter (D-NY) is an exception. Slaughter, 84, has been in Congress since 1987. In March 2013, she introduced her Preservation of Antibiotics for Medical Treatment Act bill for the fourth time. The bill would ban non-therapeutic uses of medically important antibiotics in food animal production.

How the Public Can Help

My initial reaction to this total disregard for human life (are they trying to kill us all or what?)  is to go for the pitchforks. It’s clear from her interview with Food Safety News that Slaughter herself is pretty angry with the Obama administration.

However she proposes a more moderate approach, namely a public boycott of hormonally and antibiotic treatment animals.

“Food babe” Vani Hari, who also thinks the new FDA rule is a joke, recently appeared on CNN (which would lose their broadcast license for promoting insurrection) with recommendations on how consumers can avoid tainted meat.

Buy direct from farms. Hari provides links on her website to connect online with farmers markets and CSA buying clubs.
Stick with USDA certified organic foods that also meat the highest standard Animal Welfare Rating Standards (i.e. that aren’t produced by factory farms).
Cut back on meat and dairy by substituting other healthy high protein foods, such as nuts, peanuts, and dried beans.
Follow Mark Bittman’s advice in a recent New York Times oped, and lean on your local supermarket to stock and label antibiotic-free meat and dairy products.

photo credit: Socially Responsible Agricultural Project via photopin cc

Originally published in Veterans Today

How an LVT Might Have Altered the Course of History

The Traumatised Society: How to Outlaw Cheating and Save Our Civilisation

by Fred Harrison (Shepheard-Wallwyn Limited, 2012)

Book Review – Part II

(In this section Harrison discusses the history of countries and communities that have tried to enact a Land Value Tax. See Part I here)

Britain’s Experience with Land Value Tax (LVT)

In Britain there have been several attempts to end predatory rent-seeking through the enactment of LVT. As a result of Henry George’s 1879 international bestseller Progress and Poverty, Winston Churchill (still a liberal in 1909) became one of the most vocal proponents of the People’s Budget. The law, passed by the British parliament in 1909, sought to shift the burden of taxation from wages to land. It was never implemented because the British aristocracy went to court to block the land valuation required to assess the tax. In 1931 Parliament passed a revised version of the People’s Budget, which Chancellor of the Exchequer Neville Chamberlain simply deleted it from the law book in 1934. If the LVT had been fully implemented, Britain would have been spared the worst effects of the Great Depression.

How an LVT Might Have Altered the Course of History

Harrison moves on to explore how an LVT might have alleviated severe economic and political turmoil in other countries:

Ireland – rent seekers “sucked: out all the wealth of Ireland for 200 years, a process that didn’t end with independence. Ireland’s “Celtic Tiger” could have been sustainable if it had been funded by a LVT rather than debt. The result was a debt/real estate bubble that left the country even worse off when the bubble burst in 2008. In 2010, Harrison advocated for Ireland to pay off its debt by implementing a LVT. This would have provided the revenue the Irish government needed to stimulate growth. Instead the IMF bailout and austerity cuts has deeply suppressed growth.
China – made a fatal error by failing to implement an LVT when they began to privatize collectively owned land in the 1980s. China is currently facing slowing growth, thanks to a $1.7 trillion debt incurred by their city and provincial governments. While the central government was building up massive cash reserves by selling cheap exports, they forced regional governments to self-fund their public services. The only way they could do this was by selling land to property developers and by borrowing money.
Cuba – made a fatal error on November 11, 2011 when they began selling collectively owned land to rent-seekers, and allowed rents to be capitalized into land prices – instead of taxing them.
Russia – Gorbachev envisioned land remaining in public hands as part of Glasnost. After a threatened military coup forced him to step down, Harrison went to Russia trying to persuade Yeltsin to adapt an LVT. Instead Russia’s first president opened the country to the IMF and western rent-seekers. Both sucked out sufficient wealth to set the country’s standard of living back several decades.
Africa – South Africa’s current economic difficulties relate to a fatal error they made in 2004. They amended their LVT to add a tax on property improvements but should have done the opposite – increase the LVT and reduce other taxes. Much of the land in the rest of sub-Saharan Africa is still communally owned. Thus there is still great potential for emerging African economies to adopt an LVT. This would allow them to develop debt-free, sustainable economies that don’t leave the majority of the population in abject poverty.
The US – suffers from a “constitutional neurosis,” according to Harrison. Supposedly the Declaration of Independence and US Constitution were based on the Scottish Enlightenment. Whereas John Locke talked about a universal right to “Life, Liberty and Estate (Land),” our founding fathers changed this to “Life, Liberty and the Pursuit of Happiness” even before the Constitution was written.

The Future of LVT

As Harrison points out, at present rent-seekers are extremely powerful and have absolute control over government, media, and public education. Nevertheless as countries in the Middle East, North Africa and Latin America escape US military control, it’s imperative they have an avenue to escape the economic control of local and international rent-seekers. By adopting an LVT, they guarantee themselves sufficient income to provide government and public services – without falling into the predatory clutches of international bankers and the IMF.

In his 2011 book Re-Solving the Economic Puzzle, Walter Rybeck relates how the US contemplated LVT enabling legislation during the Carter administration. As an assistant to Representative Henry Reuss (D-Milwaukee), Rybeck helped Reuss (as chair of the House, Banking, Finance and Urban Affairs Committee) promote land and resource taxes as a way to address crumbling infrastructure in financially strapped cities and states.

Enter Sarah Palin

According to Rybeck, a number of communities (and one state) have already adopted variations of an LVT. Alaska’s oil/gas tax is the best example of a resource-based LVT. This tax provides 80-90% of Alaska’s general fund, as well as providing annual dividends to residents. As governor of Alaska, Sarah Palin introduced Alaska’s Clear and Equitable Share (ACES), which charges a 25 percent tax rate on oil profits, with the rate increasing progressively as oil prices go up.

Five other states have passed LVT enabling legislation – Connecticut, Maryland, New York, Pennsylvania, Virginia, Washington – to make it easier for local communities to adopt an LVT.

Other American communities that have already benefited from an LVT include California’s Central Valley, Fairhope in Alabama, Arden in Delaware, and Pittsburgh and other cities in Pennsylvania.

Originally published in Dissident Voice

The Trauma of Cultural Genocide

The Traumatised Society: How to Outlaw Cheating and Save Our Civilisation

by Fred Harrison (Shepheard-Wallwyn Limited, 2012)

Book Review – Part I

(The first half of Harrison’s book explores the history of land value tax and the cultural genocide that resulted from the Enclosure Acts and the dispossession of Europeans from communally owned lands.)

The Land Value Tax (LVT) is a “radical” form of taxation first proposed by Henry George in his 1879 Progress and Poverty (see Progress and Poverty: the Suppressed Economics Classic). What George proposes is to replace taxes on wages, purchases, and investments with a tax on unimproved land and natural resources. In The Traumatised Society, Fred Harrison  provides an exhaustive update of George’s original work.

As Winston Churchill famously observed, “History is written by the victors.” Nearly all history books written in the last 400 years were written by or on behalf of the ruling elite. The Traumatised Society is unique in that it recounts the history of the industrial revolution from the perspective of the 99%. Harrison also presents a simple, but elegant prescription for taking back power from the corporate oligarchy, ending economic inequality and the debt crisis, staving off ecological disaster, and preventing World War III. On the surface these claims appear extravagant and somewhat grandiose. Yet, in my view, Harrison makes his case very convincingly.

Adam Smith was the first prominent economist to propose the LVT as the most “moral” and least economically harmful tax in his classic Wealth of Nations. Neoconservative icon Milton Friedman also considered it the “least bad” kind of tax. The most famous contemporary Georgist is former World Bank Economist and Nobel Prize winner Joseph Stiglitz.

Basically the argument for an LVT goes as follows: because publicly funded infrastructure increases land values, this added value should return to the public. It shouldn’t return to the landowner, who has done nothing more than sit on his land. An LVT provides a valuable source of public revenue. It eliminates the need for governments to borrow from private banks without depleting the total wealth of the landowner.

Economies and personal freedom flourish wherever an LVT has been implemented. As Harrison reminds us, the economic surge known as the Asian Tiger didn’t start in China, but in Taiwan and Hong Kong – as a direct result of LVT-based economies. Moreover unlike China, economic growth in both Taiwan and Hong Kong has proved genuine and sustainable. In 2011, the per capita GDP of China was $8,400, while that of Taiwan was $37,900.

The Trauma of Cultural Genocide

The title The Traumatised Society is based on a severe dislocation Europeans experienced during the eighteenth century, a process remarkably similar to that of African slaves and indigenous people oppressed by colonization. The cause of this dislocation was The Enclosure Acts, a series of laws that drove our peasant ancestors off the communal farm lands that had supported them for a thousand years and fenced it to off as private property. In England alone, 160,000 freehold farmers were thrown off their land between 1700 and 1812. In addition to being stripped of their livelihood, our ancestors also experienced “cultural genocide,” as they lost a thousand years of cultural tradition linked to communal land ownership. This process is vividly described in the poems of 18th century poet John Clare, whose parents ended up in the poor house (i.e. jail) after being thrown off their land. Clare’s work was suppressed until the late 19th century, when the work of American journalist Henry George revived the British land reform movement.

The end result of this massive dislocation has been slavery, debt, alienation, depression, poverty (which was virtually non-existent prior to the Industrial Revolution), murder, rape, child abuse and alcohol and drug addiction. Counselors and therapists who work with African American and indigenous communities are very much aware of the trauma, which is passed from generation to generation, that results from severe economic dislocation and cultural genocide. Ironically, however, Europeans have no historical memory that we have been subjected to the same kind of trauma.

According to Harrison, the “moral evolution” of the human race ceased in the 1700s. This is when an authentic human culture of cooperation and interdependence was replaced with an artificial “cheating culture,” in which the highest ideal is to get something for nothing. The modern, free market version of Christianity is part and parcel of this phony culture – as is Marxism. Harrison feels Marx did us a great disservice by demonizing capitalism. The capitalistic funding model in itself isn’t the primary source of our major economic and social problems.

The Concept of Economic Rents

The Traumatised Society is written in classical economic language, in which “rent” refers to unearned income from the monopolization of land, natural resources, or the cultural commons (e.g. the public airwaves and money). Economic rent includes unearned profit gained from selling land that has increased in value (often due to land speculation). A “rent-seeker” is someone who derives unearned income from monopolization of these resources.

For most of human history land and resources were owned communally and any “rent” or unearned income went to finance public services. Beginning in the 18th century, this all changed. When “rent-seekers” privatized land and natural resources, they also captured control of government and shifted the burden of funding public services to workers. In this way modern capitalist society came to be divided into two classes, the Predators or rent-seekers, and the Producers, who engage in work to create economic wealth.

As more and more wealth is extracted from Producers, both as “rents” and as taxes, there is less and less money available to maintain public infrastructure. Eventually the number of Producers becomes inadequate to support the Predator rent-seeking class. At this point, the latter seeks to remedy the problem by conquering new lands and colonizing new populations, by using fossil fuel technology to increase productivity, by borrowing and extracting wealth from future generations, and/or by capital depletion (liquidating assets created by past production – like Greece).

Originally published in Dissident Voice

To be continued.

Honoring the Real Nelson Mandela

In “The Mandela Barbie,” BBC journalist and investigative reporter Greg Palast’s eulogy of Nelson Mandela provides a rare breath of sanity in the media stampede to remake a legendary Marxist revolutionary into an icon of free market capitalism. According to Palast, “The ruling class creates commemorative dolls and statues of revolutionary leaders as a way to tell us their cause is won, so go home.”

Al Jazeera America also offers a fairly balanced assessment of Mandela’s accomplishments. In “Mandela Sought Balance Between Socialism and Capitalism,” Martin O’Neill and Thad Williamson acknowledge that Mandela and the African National Congress totally failed to deliver on economic provisions – freedom from poverty, genuine equality of opportunity and a fair share of national wealth – in the ANC’s 1955 Freedom Charter. They also note that despite the advent of majority rule, poverty and living standards are much worse for black South Africans under the ANC.

I frankly expected Democracy Now, the Nation, Mother Jones and other “alternative” media outlets to do a better job of distinguishing between superficial ballot box democracy and the genuine freedom that can only come from true economic democracy. Instead they were all happy to ape CNN and the New York Times in celebrating the cosmetic reforms masking the reality of brutal South African living conditions.

Naomi Klein and The Shock Doctrine

Naomi Klein has an excellent chapter on the Freedom Charter and South Africa’s worsening economic apartheid in her bestselling 2007 The Shock Doctrine. In “Born in Chains: South Africa’s Constricted Freedom,” she offers a blow by blow description of the secret negotiations between the ANC and the outgoing apartheid regime. In her view, the ANC was clearly outmaneuvered at the negotiating table. This happened in part due to political naïveté, in part due to the threat of civil war (the South African police were continuing to massacre ANC leaders and white industrialists were arming black gangs to terrorize the black townships), and in part due to the ANC’s misplaced confidence in Thabo Mbeke, a London-trained admirer of Margaret Thatcher (who would succeed Mandela as president in 1998).

The Trap of “Trickle Down” Economics

The economic package Mbeke accepted at the negotiating table contained standard “trickle down” provisions aimed at attracting foreign investment, in the hope economic benefits would “trickle down” to the black townships. Among its provisions were

establishment of a private, independent (unaccountable) central bank to issue and control South Africa’s money supply. This was a classic Chicago School neoliberal move the ANC took against the advice of their economic adviser Vishnu Padayachee. When Padayachee subsequently learned that the white finance ministers from the apartheid regime would run both the central bank and the treasury, he knew the economic provisions of the Freedom Charter could never be enacted and refused to serve in the ANC government.
an agreement to honor the $14 billion IMF debt the apartheid government had racked up.
an agreement to sign onto the General Agreement on Tariffs and Trades (GATT), the precursor to the World Trade Organization (WTO).
an agreement to guarantee (and pre-pay) lifelong pensions of former white officials under the apartheid regime.

Because the apartheid regime and Mbeke minimized these economic concessions as merely “technical” and “administrative,” they received no serious examination by either the media or ANC loyalists. Only in 1994, after ANC leaders assumed positions in government, did they recognize this economic stranglehold left them with no real power.

Between 1994 and 1996, the ANC government attempted to make good on the Freedom Charter’s promises of wealth redistribution through government investment in 100,000 new homes and subsidies to connect millions of households to water, electricity and phone services. In the end, however, mounting government debt forced the ANC to raise rents and utility prices, as well as evicting families and cutting off services when poor residents couldn’t make their payments.

A Missed Opportunity

Once the threat of civil war abated, Klein feels the ANC missed a historic opportunity to launch a second liberation struggle against economic apartheid. Instead, under the neoliberal stranglehold of an independent central bank, the IMF and the WTO, the economic welfare of black South Africans steadily worsened. Instead of creating new jobs, the ANC was forced to shut down hundreds of auto plants and textile factories because of WTO rules outlawing government subsidization of manufacturing. They were also required to abide by WTO intellectual property rules which prevented them from providing generic drugs to millions of AIDS patients.

Poverty and Living Conditions Worse Under ANC

After three decades, there is no longer any doubt that neoliberal trickle down economics benefits wealthy corporations at the expense of people and always increases income inequality. South Africa is no exception. As Klein notes, the effects of economic apartheid were already brutally clear after only twelve years under a majority black government. By 2006

the number of South Africans living on less than $1 per day had doubled (from 2 million to 4 million) under the ANC.
unemployment among black south Africans had more than doubled, from 23-48%.
close to 1 million people had been evicted from farms under the ANC.
despite the 1.8 million new homes build by the ANC, 2 million black South African had lost their homes.

The Shock Doctrine is available digitally at TheShockDoctrine.pdf

Klein’s website also has links to some of the source documents she used in compiling her chapter on economic apartheid Shock Doctrine Resources

Originally published in Dissident Voice

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I’m really stoked this morning that my new $3.99 ebook A Rebel Comes of Age has been nominated for a Global Ebook Award. Purchase link (all formats): A Rebel of Age

I’m even more pleased to learn it’s been pirated by at least five Torrent download sites. None of my earlier books have been pirated, so I should be flattered, right?

The Robber Barons Behind Neoclassical Economics

John D Rockefeller

Classical Economics as a Stratagem Against Henry George (free link)

By Mason Gaffney (2007)

Book Review-Part II

(In Part I, I discuss how Henry George’s work inspired the Populist and Progressive movements of the early 1900s and how the corporate elite struck back by inventing a new type of economics for the rich, called neoclassical economics.)

Who Paid for Neoclassical Economics to Take Over American Universities?

Gaffney’s book traces the phenomenal public support Georgism enjoyed before the tenets of neoclassical economics took hold in American universities. In addition to inspiring the Populist and Progressive movements, an LVT to fund irrigation projects in California’s Central Valley made California the top producing farm state. In 1916 the first federal income tax law was introduced by Georgist members of Congress (Henry George Jr and Warren Bailey) and included virtually no tax on wages. In 1934 Georgist Upton Sinclair was almost elected governor of California.

Gaffney also identifies the robber barons whose fortunes financed the economics departments of the major universities who went on to substitute neooclassical economics for classical economic theory. At the top of this list were

Ezra Cornell (owner of both Western Union and Associated Press) – founder of Cornell University
John D Rockefeller – helped found the University of Chicago and installed his cronies in its economics department.
J. P Morgan – investment banker and early funder of Columbia University
B&O Railroad – John Hopkins University
Southern Pacific Railroad – Stanford University

The final section of Gaffney’s book lays out the tragic economic, political, and social consequences of allowing the Red Scare and neoclassical economics to stifle America’s movement for a single Land Value Tax:

Economic Consequences

The corporate elite has privatized, or is privatizing, most of the public domain (including fisheries, the public airwaves, water, offshore oil and gas, and the right to clean air) without compensation to the public.
The rate of saving and capital formation continues to fall rapidly. This is the main reason there is no recovery. Although profits soar, corporations have no incentive to invest in expansion and jobs. Instead they invest their profits in real estate, derivatives, and commodities speculation.
American capital is decayed and obsolete. The US has lost much of its steel and auto industries. Power plants and oil refineries are ancient and polluting. Most public capital (infrastructure) is old and crumbling.
The number of American farms has fallen from 6 million in 1920 to 1 million in 2007.
The USA, once so self-sufficient, has grown dangerously dependent on importing raw materials and foreign manufacturers.
The US financial system is a shambles, supported only by loading trillions of dollars of bad debts onto the taxpayers.
Real wage rates have continued to fall since 1975,
Unemployment has risen to chronically high levels.
Inequality in wealth and income continues to increase rapidly.

Political Consequences

The corporate elite has nullified all the Progressive Era electoral reforms by pouring money into politics and “deep lobbying,” at all levels of government, including our institutions of higher learning and our public schools.
The corporate elite continue to pour ever more of our tax money into prisons.

Social Consequences

Homelessness has risen to new heights, in spite of decades of subsidies to home-building and, favorable tax treatment of owner-occupied homes
Hunger is rampant.
Street begging, once rare, is everywhere
Americans have experienced a sharp loss of community, honor, duty, loyalty and patriotism.
In the shadow world between crime and business there is now the vast, gray underground economy that includes tax evasion, tax avoidance, and drug-dealing.
The US which once led the world in nearly every endeavor, has fallen far behind in infant survival, in longevity, in literacy, in numeracy, in mental health.
American education no longer leads the world. Privatized education in the form of commercial TV has largely superseded public education.

photo credit: cliff1066™ via photopin cc

The Mythology of Neoclassical Economics

Classical Economics as a Stratagem Against Henry George (free link)

By Mason Gaffney (2007)

Book Review-Part I

Why do American school children study the beliefs of a German radical named Karl Marx, the villain Americans love to hate? Yet Henry George, whose views on land and tax reform gave rise to the Progressive and Populist movements of the 1900s, is totally absent from US history books. During the 1890s George, author of the 1879 bestseller Progress and Poverty, was the third most famous American, after Mark Twain and Thomas Edison. In 1896 he outpolled Teddy Roosevelt and was nearly elected mayor of New York.

In Neo-classical Economics as a Stratagem Against Henry George (2007), University of California economist Mason Gaffney argues that George and his Land Value Tax pose a far greater threat than Marx to America’s corporate elite. America’s enormous concentration of wealth has always depended on the inherent right of the wealthy elite to seize and monopolize vast quantities of land and natural resources (oil, gas, forests, water, minerals, etc) for personal profit. Adopting an LVT would essentially negate that right. What’s more, every jurisdiction that has ever implemented an LVT finds it works exactly the way George predicted it would. Productivity, prosperity, and social well being flourish, while inflation, wealth inequality, and boom and bust recessions and depressions virtually vanish. (See prior post Facebook’s Billionaire Tax Refugee).

When Progress and Poverty first came out in 1879, it started a worldwide reform movement that in the US manifested in the fiercely anti-corporate Populist Movement in the 1880s and later the Progressive Movement (1900-1920). Many important anti-corporate reforms came out of this period, including the Sherman Antitrust Act (1890), a constitutional amendment allowing Americans to elect the Senate by popular vote (prior to 1913 the Senate was appointed by state legislators), and the country’s first state-owned bank, The Bank of North Dakota (1919).

The Corporate Elite Strikes Back

As with any major reform movement, the corporate backlash was predictable. In Neo-classical Economics, Gaffney reveals that this backlash took two main forms. The first was the Red Scare (1919-1989), overseen by J Edgar Hoover as Assistant Attorney General and later as FBI director. The second was more insidious and involved the deliberate reframing of the classical economic theory developed by Adam Smith, Locke, Hume, and Ricardo as so-called neoclassical economics. The latter totally negates Adam Smith’s basic differentiation between “land”, a limited, non-producible resource. and “capital”, a reproducible result of past human production. Smith, Locke, Hume, and Ricardo all held that individuals have no right to seize and monopolize scarce natural resources, such as land, minerals, water, and forests. They believed that because these resources are both limited and essential for human survival, they should belong to the public.

Neoclassical economics, which first developed in the 1890s, was based on the premise that growth and development can only occur if a handful of rent-seekers are allowed to monopolize scarce land and natural resources for their personal profit. Henry George, who publicly debated the early pioneers of neoclassical economics, claimed the science of economics was being deliberately distorted to discredit him. Gaffney agrees. Because George’s proposal to replace income and sales tax with single land value taxed is based on logical concepts of land, capital, labor, and rent advanced by Adam Smith, Locke, Hume, and Ricardo, they all had to be discredited.

Gaffney believes neoclassical economic theory undermines George’s arguments for a single Land Value Tax in two basic ways: 1) by claiming that land is no different from other capital (ironically Marx made the identical argument) and 2) by portraying the science of economics as a series of hard choices and sacrifices that low and middle income people must make. Some examples:

If we want efficiency, we must sacrifice equity.
To attract business, we must lower taxes and shut libraries and defund schools.
To prevent inflation, we must keep a large number of Americans unemployed.
To create jobs, we must destroy the environment and pollute the air, water, and food chain.
To raise productivity, we must fire people.

Below, brief video of Gaffney discussing LVT:

To be continued.

Permaculture Village in Davis, California

A great video about a 30 year old community food forest in Davis California.

Despite working full time jobs, residents can produce 70% of their food needs in their front and back yards.

The beauty and simplicity of permaculture and perennial food forests.

Full video free online at

http://www.geofflawton.com/fe/60356-food-forest-suburb