Articles that are relevant to the issue of economics.

Are State-Owned Banks the Antidote to the Too-Big-To-Fail Epidemic? (2)

Comment by Healthwrights staff

Much of the history of the United States has been a struggle between big banks and democracy. Money talks, and when a very tiny proportion of the population owns a hugely disproportionate share of the wealth, money talks louder than the rest of us. In 1980, with the election of Ronald Reagan, the bankers, and their collaborators, the multinational corporations, won a resounding victory. The endless wars, the economic chaos, the continuing deregulation of the environment, and the raiding of public funds to bail out "too big to fail" institutions are the logical outcome of that victory. As the article below suggests, conservatives as well as progressives now see that the deregulation of the big banks has been a disaster. Perhaps we are ready to look at an alternative. Interestingly, one of the most conservative states in the Union offers us a model that is very much worth looking at. To create state banks in most or all the states of the union would be a doable step in the right direction.

The Article

Time magazine

By Christopher Matthews Jan. 15, 2013

The American Great Plains are known for their expansive farm lands, endless horizons, and — in recent history — staunchly conservative politics. So it may come as a surprise that only state-owned bank in the U.S. (an institution more widely associated with communist China than the Republican Party) can be found in ruby-red, rural North Dakota.

That’s right, The Bank of North Dakota (BND) — the largest bank in the state by deposits — was founded by legislative mandate in 1919, and has been a mainstay of the North Dakotan economy since that time, mostly through partnering with community banks to provide loans for local businesses. And advocates of public banking are holding up the BND as an example of what government-owned banks can do for an economy.

Take for example a problem that seems obvious to many observers of the financial system, but is one for which there is no evident solution: the concentration of power in the banking industry. Since the 1970s, the concentration of power in the nation’s largest banks has grown swiftly. According to a report issued by the Federal Reserve Bank of Dallas last year, the share of assets controlled by the five largest U.S. banks has more than tripled from 17% in 1970 to a whopping 52% in 2010. This concentration of power is the main ingredient of “Too-Big-to-Fail,” as these outsized institutions pose a danger to the entire U.S. economy if one of them were to fail. But a bank’s size also can create a greater risk of failure in and of itself, the report argues, as larger banks are more difficult to manage and to regulate.

Therefore, small, community banks are vital to the health of a financial system — and the Bank of North Dakota is an institution that is primarily focused on partnering with community banks by providing a minority of the funding for loans those banks have decided to issue, thus allowing banks to expand the funding they are able to issue at lower interest rates. The result? North Dakota’s banking industry is dominated by small financial institutions. According to a 2011 report by the Federal Reserve Bank of Boston which studied the affect of the BND on the North Dakotan economy, “banks with less than $500 million in deposits account for almost one-half of the total bank deposits in the state.” South Dakota, on the other hand, is dominated by one too-big-to-fail bank: Wells Fargo, which accounted for 73% of the bank deposits in the state in 2010.

The financial crisis has only served to concentrate the banking sector further, as weak banks were taken over (often with the support of the Fed and Treasury) by stronger banks. This dynamic has been almost universally criticized from those on the left and the right as well as by those inside government and the banking industry itself. Of course, nobody has yet to propose a realistic way to actually shrink the TBTF banks down to size.

But what if we instead figured a way to level the playing field for smaller banks, and make it easier for them to grow? Ellen Brown, chairman and president of the Public Banking Institute, a think tank that promotes public banking in the U.S., argues that the Bank of North Dakota is vital in promoting the strength of community banks in the state. “Wall Street banks aren’t as interested in evaluating local businesses or potential mortgagors, whereas community banks want this business, but quite often don’t have the capital to fund it,” says Brown. “North Dakota has the highest number of banks per capita,” she adds, attributing the strength of community banking in the state to the fact that they have a well-capitalized state bank to partner with to fight off competition from well-capitalized Wall Street banks.

Community banks have proven to be a vital cog in the nation’s financial system. The subprime mortgage crisis which sparked the financial panic of 2008 and caused so much suffering across America and the world, was more the fault of large banks than small ones. And the robosigning scandal, which was recently put to bed after settlements with states attorneys general last February, and with banking regulators earlier this month, has led to the nation’s largest banks paying collective penalties of more than $30 billion. But according to the FDIC, community banks fared far better when it came to sound mortgage underwriting and fair foreclosure proceedings.

Yet the weak economy and regulatory changes following the passage of Dodd-Frank have put more pressure on community banks than ever before. At a recent industry conference Emmet Daly, a Sandler O’Neill Investment Banker,  predicted that the number of community banks in America would shrink from more than 7,000 today down to just a few hundred, according to Fortune Magazine.

So even though there seems to be near-universal agreement from all sides of the political debate that something must be done to curb the power of large financial institutions, we are standing idly by while the TBTF banks’ only competition nears extinction. Encouraging state governments to set up government-owned banks along the lines of the Bank of North Dakota is an idea that has a real chance of working, and doesn’t involve any action from Washington.

Sure, there are many obstacles to launching publicly-owned financial institutions. Pulling state capital out of commercial institutions could prove to be disruptive to the current financial system. And proper controls need to be set up to avoid political considerations overwhelming proper analysis of lending opportunities. But North Dakota has avoided these pitfalls, and the NBD is an institution that has proven its ability to work alongside the private banking industry to help the state’s economy — one of the most successful in the nation in recent times — develop and grow.


The “Global Crises of Capitalism”; Whose Crises, Who Profits?

Introduction by POH staff:

At the present time the world is largely ruled by an international network of very wealthy bankers and multinational corporations. This ruling elite does its planning in an interlocking network of groups and think tanks such as the Bilderberg Group, the Council on Foreign Relations, The Trilateral Commission, and the Skull and Bones Fraternity -- groups that share an overlapping membership. Their policies are implemented by many organizations and governments, but perhaps most notably the United States armed forces, the Federal Reserve, Wall Street, The World Bank, the World Trade Organization and the International Monetary Fund. These people and organizations are not, as some slightly fuzzy headed theorizers speculate, trying to implement a world socialist government -- motivated by questionable "collectivist" ideals. On the contrary, people in the international elite want everything privatized and are motivated by simple greed. They want a merger of government and business, that is ruled by the very wealthy. In other words we are increasingly being ruled by a fascist system. This picture of reality is not a "conspiracy theory" based on some mixture of fact and fantasy. It is the obvious state of affairs, which can be confirmed by data that is easily available to anyone.


bloody_us_empireThe Bloody Global EmpireThis group is widening the gap between the rich and the poor, wrecking the world economy, pursuing a policy of endless war, risking a nuclear war, increasing the probability of a variety of global pandemics with its brutal and dangerous methods of growing animals for meat, destroying our agriculture through its reliance on mono-cultures and genetically engineered crops, and bringing us ever closer to ecological collapse through its nuclear and fossil fuel based energy policies. It has not encountered more opposition than it has within the US because it is skillful in muddling the minds of the majority of people with propaganda and mindless diversions. The global elite stands in the way of any real solutions to the critical problems that we collectively face. It is not reformable. It makes no difference who gets elected to be president of the United States. All the contenders are in the pocket of the Global Elite. Our economy works only for the very wealthy, and no minor reforms are going to change this. The system must be replaced by one that will be responsive to the needs of all people and of the earth itself. That is what the following article is about.

The main article:


Global Research, February 20, 2012
- 2012-02-19


From the Financial Times to the far left, tons of ink has been spilt writing about some variant of the “Crises of Global Capitalism”. While writers differ in the causes, consequences and cures, according to their ideological lights, there is a common agreement that “the crises” threatens to end the capitalist system as we know it.

There is no doubt that, between 2008-2009, the capitalist system in Europe and the United States suffered a severe shock that shook the foundations of its financial system and threatened to bankrupt its ‘leading sectors’.

However, I will argue the ‘crises of capitalism’ was turned into a ‘crises of labor’. Finance capital, the principle detonator of the crash and crises, recovered, the capitalist class as a whole was strengthened, and most important of all, it utilized the political, social, ideological conditions created as a result of “the crises” to further consolidate their dominance and exploitation over the rest of society.

In other words, the ‘crises of capital’ has been converted into a strategic advantage for furthering the most fundamental interests of capital: the enlargement of profits, the consolidation of capitalist rule, the greater concentration of ownership, the deepening of inequalities between capital and labor and the creation of huge reserves of labor to further augment their profits.

Furthermore, the notion of a homogeneous global crisis of capitalism overlooks profound differences in performance and conditions, between countries, classes, and age cohorts.

The Global Crises Thesis:The Economic and Social Argument

The advocates of global crises argue that beginning in 2007 and continuing to the present, the world capitalist system has collapsed and recovery is a mirage. They cite stagnation and continuing recession in North America and the Eurozone. They offer GDP data hovering between negative to zero growth. Their argument is backed by data citing double digit unemployment in both regions. They frequently correct the official data which understates the percentage unemployed by excluding part-time, long-term unemployed workers and others. The ‘crises’ argument is strengthened by citing the millions of homeowners who have been evicted by the banks, the sharp increase in poverty and destitution accompanying job loses, wage reductions and the elimination or reduction of social services. “”Crises” is also associated with the massive increase in bankruptcies of mostly small and medium size businesses and regional banks.

The Global Crises: The Loss of Legitimacy

Critics, especially in the financial press, write of a “legitimacy crises of capitalism” citing polls showing substantial majorities questioning the in justice s of the capitalist system, the vast and growing inequalities and the rigged rules by which banks exploit their size (“too big to fail”) to raid the Treasury at the expense of social programs.

In summary the advocates of the thesis of a “Global Crises of Capitalism” make a strong case, demonstrating the profound and pervasive destructive effects of the capitalist system on the lives of the great majority of humanity.

The problem is that a ‘crises of humanity’ (more specifically of salary ad wage workers) is not the same as a crisis of the capitalist system. In fact as we shall argue below growing social adversity, declining income and employment has been a major factor facilitating the rapid and massive recovery of the profit margins of most large scale corporations.

Moreover, the thesis of a‘global’ crises of capitalism amalgamates disparate economies, countries, classes and age cohorts with sharply divergent performances at different historical moments.

Global Crises or Uneven and Unequal Development?

It is utterly foolish to argue for a “global crises” when several of the major economies in the world economy did not suffer a major downturn and others recovered and expanded rapidly. China and India did not suffer even a recession. Even during the worst years of the Euro-US decline,the asian giants grew on average about 8%. Latin America’s economies especially the major agro-mineral export countries (Brazil, Argentina, Chile, ) with diversified markets, especially in Asia, paused briefly (in 2009) before assuming moderate to rapid growth (between 3% to 7%) from 2010-2012.

By aggregating economic data from the Euro-zone as a whole the advocates of global crises, overlooked the enormous disparities in performance within the zone. While Southern Europe wallows in a deep sustained depression,by any measure, from 2008 to the foreseeable future, German exports, in 2011, set a record of a trillion euros; its trade surplus reached 158 billion euros, after a155 billion euro surpluses in 2010. (BBC News, Feb. 8 2012).

While aggregate Eurozone unemployment reaches 10.4%, the internal differences defy any notion of a “general crises”. Unemployment in Holland is 4.9%, Austria 4.1% and Germany 5.5% with employer claims of widespread skilled labor shortages in key growth sectors. On the other hand in exploited southern Europe unemployment runs to depression levels, Greece 21%, Spain 22.9%, Ireland 14.5%, and Portugal 13.6% (FT 1/19/12, p.7). In other words, “the crises” does not adversely affect some economies, that in fact profit from their market dominance and techno-financial strength over dependent, debtor and backward economies. To speak of a ‘global crises’ obscures the fundamental dominant and exploitative relations that facilitate ‘recovery’ and growth of the elite economies over and against their competitors and client states. In addition global crises theorists wrongly amalgamated crises ridden, financial-speculative economies (US, England ) with dynamic productive export economies ( Germany , China ).

The second problem with the thesis of a “global crises” is that it overlooks profound internal differences between age cohorts. In several European countries youth unemployment (16-25) runs between 30 to 50% (Spain 48.7%, Greece 47.2%, Slovakia 35.6%, Italy 31%, Portugal 30.8% and Ireland 29%) while in Germany, Austria and Holland youth unemployment runs to Germany 7.8%, Austria 8.2% and Netherlands 8.6% (Financial Times (FT) 2/1/12, p2). These differences underlie the reason why there is not a ‘global youth movement’ of “indignant” and “occupiers” .Five-fold differences between unemployed youth is not conducive to ‘international’ solidarity. The concentration of high youth unemployment figures explains the uneven development of mass- street protests especially centered in Southern Europe . It also explains why the northern Euro-American “anti-globalization” movement is largely a lifeless forum which attracts academic pontification on the “global capitalist crises” and the impotence of the “Social Forums” are unable to attract millions of unemployed youth from Southern Europe .They are more attracted to direct action. Globalist theorists overlook the specific way in which the mass of unemployed young workers are exploited in their dependent debt ridden countries. They ignore the specific way they are ruled and repressed by center-left and rightist capitalist parties. The contrast is most evident in the winter of 2012. Greek workers are pressured to accept a 20% cut in minimum wages while in Germany workers are demanding a 6% increase.

If the ‘crises’ of capitalism is manifested in specific regions, so too does it affect different age/racial sectors of the wage and salaries classes. The unemployment rates of youth to older workers varies enormously: in Italy it is 3.5/1, Greece 2.5/1, Portugal 2.3/1, Spain 2.1/1 and Belgium 2.9/1. In Germany it is 1.5/1 (FT 2/1/12). In other words because of the higher levels of unemployment among youth they have a greater propensity for direct action ‘against the system’; while older workers with higher levels of employment (and unemployment benefits) have shown a greater propensity to rely on the ballot box and engage in limited strikes over job and pay related issues. The vast concentration of unemployed among young workers means they form the ‘available core’ for sustained action; but it also means that they can only achieve limited unity of action with the older working class experiencing single digit unemployment.

However, it is also true that the great mass of unemployment youth provides a formidable weapon, in the hands of employers to threaten to replace employed older workers. Today, capitalists constantly resort to using the unemployed to lower wages and benefits and to intensify exploitation(dubbed to “increase productivity”) to increase profit margins. Far from being simply an indicater of ‘capitalist crises’, high levels of unemployment have served along with other factors’ to increase the rate of profit, accumulate income, widen income inequalities which augments the consumption of luxury goods for the capitalist class:the sales of luxury cars and watches is booming.

Class Crises: The Counter-Thesis

Contrary to the “global capitalist crises” theorists, a substantial amount of data has surfaced which refutes its assumptions. A recent study reports “US corporate profits are higher as a share of gross domestic product than at any time since 1950” (FT 1/30/12). US companies cash balances have never been greater, thanks to intensified exploitation of workers, and a multi-tiered wage systems in which new hires work for a fraction of what older workers receive (thanks to agreements signed by ‘door mat’ labor bosses).

The “crises of capitalism” ideologues have ignored the financial reports of the major US corporations.According to General Motors 2011 report to its stockholders,they celebrated the greatest profit ever,turning a profit of $7.6 billion, surpassing the previous record of $6.7 billion in 1997.A large part of these profits results from the freezing of its underfunded US pension funds and extracting greater productivity from fewer workers-in other words intensified exploitation-and cutting hourly wages of new hires by half.(Earthlink News 2/16/12)

Moreover the increased importance of imperialist exploitation is evident as the share of US corporate profits extracted overseas keeps rising at the expense of employee income growth.In 2011, the US economy grew by 1.7%,but median wages fell by 2.7%.Accordingto the financial press”the profit margens of the S and P 500 leapt from

6% to 9% of the GDP in the past three years,a share last achieved three generations ago.At roughly a third, the foreign share of these profits has more than doubled since 2000”(FT 2/13/12 P9.If this is a “capitalist crises”then who needs a capitalist boom ?

Surveys of top corporations reveal that US companies are holding 1.73 trillion in cash, “the fruits of record high profit margins” (FT 1/30/12 p.6). These record profit margins result from mass firings which have led to intensifying exploitation of the remaining workers. Also negligible federal interest rates and easy access to credit allow capitalists to exploit vast differentials between borrowing and lending and investing. Lower taxes and cuts in social programs result in a growing cash pile for corporations. Within the corporate structure, income goes to the top where senior executives pay themselves huge bonuses. Among the leading S and P 500 corporations the proportion of income that goes to dividends for stockholders is the lowest since 1900 (FT 1/30/12, p.6).

A real capitalist crisis would adversely affect profit margins, gross earnings and the accumulation of “cash piles”. Rising profits are being horded because as capitalists profit from intense exploitation , mass consumption stagnates.

Crises theorists confuse what is clearly the degrading of labor, the savaging of living and working conditions and even the stagnation of the economy, with a ‘crises’ of capital: when the capitalist class increases its profit margins, hoards trillions, it is not in crises. The key point is that the ‘crises of labor’ is a major stimulus for the recovery of capitalist profits. We cannot generalize from one to the other. No doubt there was a moment of capitalist crises (2008-2009) but thanks to the capitalist state’s unprecedented massive transfer of wealth from the public treasury to the capitalist class – Wall Street banks in the first instance – the corporate sector recovered, while the workers and the rest of the economy remained in crises, went bankrupt and out of work.

From Crises to Recovery of Profits: 2008/9 to 2012

The key to the ‘recovery’ of corporate profits had little to do with the business cycle and all to do with Wall Street’s large scale takeover and pillage of the US Treasury. Between 2009-2012 hundreds of former Wall Street executives, managers and investment advisers seized all the major decision-making positions in the Treasury Department and channeled trillions of dollars into leading financial and corporate coffers. They intervened financially troubled corporations,like General Motors, imposing major wage cuts and dismissals of thousands of workers.

Wall Streeters in Treasury elaborated the doctrine of “Too Big to Fail” to justify the massive transfer of wealth. The entire speculative edifice built in part by a 234 fold rise in foreign exchange trading volume between 1977-2010 was restored (FT 1/10/12, p.7). The new doctrine argued that the state’s first and principle priority is to return the financial system to profitability at any and all cost to society, citizens, taxpayers and workers. “Too Big to Fail” is a complete repudiation of the most basic principle of the “free market” capitalist system: the idea that those capitalists who lose bear the consequences; that each investor or CEO, is responsible for their action. Financial capitalists no longer needed to justify their activity in terms of any contribution to the growth of the economy or “social utility”. According to the current rulers Wall Street must be saved because it is Wall Street, even if the rest of the economy and people sink (FT 1/20/12, p.11). State bailouts and financing are complemented by hundreds of billions in tax concessions, leading to unprecedented fiscal deficits and the growth of massive social inequalities. The pay of CEO’s as a multiple of the average worker went from 24 to 1 in 1965 to 325 in 2010 (FT 1/9/12, p.5).

The ruling class flaunts their wealth and power aided and abetted by the White House and Treasury. In the face of popular hostility to Wall Street pillage of Treasury, Obama went through the sham of asking Treasury to impose a cap on the multi-million dollar bonuses that the CEO’s running bailed out banks awarded themselves. Wall Streeters in Treasury refused to enforce the executive order, the CEO’s got billions in bonuses in 2011 . President Obama went along, thinking he conned the US public with his phony gesture,while he reaped millions in campaign funds from Wall Street!

The reason Treasury has been taken over by Wall Street is that in the 1990’s and 2000’s, banks became a leading force in Western economies. Their share of the GDP rose sharply (from 2% in the 1950’s to 8% in 2010” (FT 1/10/12, p.7).

Today it is “normal operating procedure” for President’s to appoint Wall Streeter’s to all key economic positions; and it is ‘normal’ for these same officials to pursue policies that maximize Wall Street profits and eliminate any risk of failure no matter how risky and corrupt their practioners.

The Revolving Door: From Wall Street to Treasury and Return

Effectively the relation between Wall Street and Treasury has become a “revolving door”: from Wall Street to the Treasury Department to Wall Street. Private bankers take appointments in Treasury (or are recruited) to ensure that all resources and policies Wall Street needs are granted with maximum effort, with the least hindrance from citizens, workers or taxpayers. Wall Streeters in Treasury give highest priority to Wall Street survival, recovery and expansion of profits. They block any regulations or restrictions on bonuses or a repeat of past swindles.

Wall Streeters ‘make a reputation’ in Treasury and then return to the private sector in higher positions, as senior advisers and partners. A Treasury appointment is a ladder up the Wall Street hierarchy. Treasury is a filling station to the Wall Street Limousine: ex Wall Streeters fill up the tank, check the oil and then jump in the front seat and zoom to a lucrative job and let the filling station (public) pay the bill.

Approximately 774 officials (and counting) departed from Treasury between January 2009 and August 2011 (FT 2/6/12, p. 7). All provided lucrative “services” to their future Wall Street bosses finding it a great way to re-enter private finance at a higher more lucrative position.

A report in the Financial Times Feb. 6, 2012 (p. 7) entitled appropriately Manhattan Transfer” provides typical illustrations of the Treasury-Wall Street “revolving door”.

Ron Bloom went from a junior banker at Lazard to Treasury, helping to engineer the trillion dollar bailout of Wall Street and returned to Lazard as a senior adviser. Jake Siewert went from Wall Street to becoming a top aide to Treasury Secretary Tim Geithner and then graduated to Goldman Sachs, having served to undercut any cap on Wall Street bonuses.

Michael Mundaca, the most senior tax official in the Obama regime came from the Street and then went on to a highly lucrative post in Ernst and Young a corporate accounting firm, having help write down corporate taxes during his stint in “public office”.

Eric Solomon, a senior tax official in the infamous corporate tax free Bush Administration made the same switch. Jeffrey Goldstein who Obama put in charge of financial regulation and succeeded in undercutting popular demands, returned to his previous employer Hellman and Friedman with the appropriate promotion for services rendered.

Stuart Levey who ran AIPAC sanctions against Iran policies out if Treasury’s so-called “anti- terrorist agency” was hired as general counsel by HSBC to defend it from investigations for money laundering (FT 2/6/12, p. 7). In this case Levey moved from promoting Israels ’ war aims to defending an international bank accused of laundering billions in Mexican cartel money. Levey, by the way spent so much time pursuing Israels ’ Iran agenda that he totally ignored the Mexican drug cartels’ billion dollar money laundering cross-border operations for the better part of a decade.

Lew Alexander a senior advisor to Geithner in designing the trillion dollar bail out is now a senior official in Nomura, the Japanese bank. Lee Sachs went from Treasury to Bank Alliance, (his own “lending platform”). James Millstein went from Lazard to Treasury bailed out AIG insurance run into the ground by Greenberg and then established his own private investment firm taking a cluster of well-connected Treasury officials with him.

The Goldman-Sachs-Treasury “revolving door” continues today. In addition to past and current Treasury heads Paulson and Geithner, former Goldman partner Mark Patterson was recently appointed Geithner’s “chief of staff”. Tim Bowler former Goldman managing director was appointed by Obama to head up the capital markets division.

It should be abundantly clear that elections, parties and the billion dollar electoral campaigns have little to do with “democracy” and more to do with selecting the President and legislators who will appoint non-elected Wall Streeters to make all the strategic economic decisions for the 99% of Americans. The policy results of the Wall Street-Treasury revolving door are clear and provide us with a framework for understanding why the “profit crises” has vanished and the crises of labor has deepened.

The “Policy Achievements” of the Revolving Door

The Wall Street-Treasury conundrum (WSTC) has performed herculean and audacious labor for finance and corporate capital. In the face of universal condemnation of Wall Street by the vast majority of the public for its swindles, bankruptcies, job losses and mortgage foreclosures, the WSTC publically backed the swindlers with a trillion dollar bailout. A daring move on the face of it; that is if majorities and elections counted for anything. Equally important the WSTC dumped the entire “free market” ideology that justified capitalist profits based on its “risks”, by imposing the new dogma of “too big to fail” in which the state treasury guarantees profits even when capitalists face bankruptcy, providing they are billion dollar firms. The WSTC dumped the capitalist principle of “fiscal responsibility” in favor of hundreds of billions of dollars in tax cuts for the corporate-financial ruling class, running up record peace time budget deficits and then having the audacity to blame the social programs

supported by popular majorities. (Is it any wonder these ex-Treasury officials get such lucrative offers in the private sector when they leave public office?) Thirdly, Treasury and the Central Bank (Federal Reserve) provide near zero interest loans that guarantees big profits to private financial institution which borrow low from the Fed and lend high, (including back to the Government!) especially in purchasing overseas Government and corporate bonds. They receive anywhere from four to ten times the interest rates they pay. In other words the taxpayers provide a monstrous subsidy for Wall Street speculation. With the added proviso, that today these speculative activities are now insured by the Federal government, under the “Too Big to Fail” doctrine.

Under the ideology of “regaining competitiveness” the Obama economic team (from Treasury, the Federal Reserve, Commerce, Labor) has encouraged employers to engage in the most aggressive shedding of workers in modern history. Increased productivity and profitability is not the result of “innovation” as Obama, Geithner and Bernache claim; it is a product of a state labor policy which deepens inequality by holding down wages and raising profit margins. Fewer workers producing more commodities. Cheap credit and bailouts for the billion dollar banks and no refinancing for households and small and medium size firms leading to bankruptcies, buyouts and ‘consolidation’ namely, greater concentration of ownership. As a result the mass market stagnates but corporate and bank profits reach record levels. According to financial experts under the WSTC “new order” “bankers are a protected class who enjoy bonuses regardless of performance, while relying on the taxpayer to socialize their losses” (FT 1/9/12, p.5). In contrast labor, under Obama’s economic team, faces the greatest insecurity and most threatening situation in recent history: “in what is unquestionably novel is the ferocity with which US business sheds labor now that executive pay and incentive schemes are linked to short term performance targets” (FT 1/9/2012, p. 5).

Economic Consequences of State Policies

Because of the Wall Street “ takeover” of strategic economic policy positions in Government we can now understand the paradox of record profit margins in the midst of economic stagnation. We can comprehend why the capitalist crises has, at least temporarily, been replaced by a profound crises of labor. Within the power matrix of Wall Street-Treasury Dept. all the old corrupt and exploitative practices that led up to the 2008-2009 crash have returned: multi-billion dollar bonuses for investment bankers who led the economy into the crash; banks “snapping up billions of dollars of bundled mortgage products that resemble the sliced and diced debt some (sic) blame for the financial crises” (FT 2/8/12, p.1). The difference today is that these speculative instruments are now backed by the taxpayer (Treasury). The supremacy of the financial structure of the pre-crises US economy is in place and thriving … “only” the US labor force has sunk into greater unemployment, declining living standards, widespread insecurity and profound discontent.

Conclusion: The Case Against Capitalism and for Socialism

The profound crises of 2008-2009 provoked a spate of questioning of the capitalist system, even among many of its most ardent advocates (FT 1/8/12 to 1/30/12) criticism abounded. ‘Reform, regulation and redistribution’ were the fare of financial columnists. Yet the ruling economic and governing class took no heed. The workers are controlled by door mat union leaders and lack a political instrument. The rightwing pseudo populists embrace an even more virulent pro capitalist agenda, calling for across the board elimination of social programs and corporate taxes. Inside the state a major transformation has taken place which effectively smashed any link between capitalism and social welfare, between government decision-making and the electorate. Democracy has been relaced by a corporate state, founded on the revolving door between Treasury and Wall Street, which funnels public wealth to private financial coffers. The breach between the welfare of society and the operations of the financial architecture is definitive.

The activity of Wall Street has no social utility, its practioners enrich themselves with no redeeming activity. Capitalism has demonstrated conclusively, that it thrives through the degradation of tens of millions of workers and rejects the endless pleas for reform and regulation. Real existing capitalism cannot be harnessed to raising living standards or ensuring employment free of fear of large scale, sudden and brutal firings. Capitalism, as we experience it over the past decade and for the foreseeable future, is in polar opposition to social equality, democratic decision-making and collective welfare.

Record capitalist profits are accrued by pillaging the public treasury, denying pensions and prolonging ‘work till you die’, bankrupting most families with exorbitant private corporate medical and educational costs.

More than ever in recent history, record majorities reject the rule by and for the bankers and the corporate ruling class (FT 2/6/12, p. 6). Inequalities between the top 1% and the bottom 99% have reached record proportions. CEO’s earn 325 times that of an average worker (FT 1/9/12, p.5). Since the state has become the ‘foundation’ of the economy of the Wall Street predators, and since ‘reform’ and regulation has dismally failed , it is time to consider a fundamental systemic transformation that begins via a political revolution which forcibly ousts the non-elected financial and corporate elites running the state for their own exclusive interests. The entire political process,including elections, are profoundly corrupt: each level of office has its own inflated price tag.The current Presidential contest will cost $2 to $3 billion dollars to determine which of the servants of Wall Street will preside over the revolving door.

Socialism is no longer the scare word of the past. Socialism involves the large-scale reorganization of the economy, the transfer of trillions from the coffers of predator classes’ of no social utility to the public welfare. This change can finance a productive and innovative economy based on work and leisure, study and sport. Socialism replaces the everyday terror of dismissal with the security that brings confidence, assurance and respect to the workplace. Workplace democracy is at the heart of the vision of 21st century socialism. We begin by nationalizing the banks and eliminating Wall Street. Financial institutions are redesigned to create productive employment, to serve social welfare and to preserve the environment. Socialism would begin the transition, from a capitalist economy directed by predators and swindlers and a state at their command, toward an economy of public ownership under democratic control.

James Petras
' most recent book is The Arab Revolt and the Imperialist Counter Attack (Clarity Press 2012) 2nd edition.

James Petras is a frequent contributor to Global Research.

The Cancer Stage Of Capitalism:

Our social immune system is being overwhelmed by growing out-of-control money market cancer

wall- street-wave-bNote by HealthWrights staff:

A symbiotic relationship benefits both of its partners. A parasitic relationship benefits only one of them. A relationship that is both parasitic and malignant threatens the well-being of the host. The relationship between human beings and the ecological totality we call the “natural order” is no longer symbiotic. It has become both parasitic and malignant. Thus, as this article makes clear, the human species, organized as it presently is by the principles of unregulated capitalism, has become the overriding health threat in the world today.

This article was published in the CCPA Monitor, July/August 1996.

When we think of a society's "defense system," we think of its armed forces. We have long been conditioned to do this. The military-industrial establishment and the armaments business are the world's most powerful institutions of organized violence and international trade. For them to preserve their vast power, it is essential that they be sold as society's primary form of "self-defense."

Society's real system of self-defense, its public health process, is in this way deprived of its proper resources and functions. At the same time, ever more invasive assaults on the protection of life within societies by environmental despoliation, redistribution of wealth from the poor and middle-income classes to the rich, and the radical dismantling of public forms of life-provision now attack society's health and life-defenses from another side.

In these ways, we now confront a situation where the cumulative breakdown of life-security and health-protection poses a more systemically far-reaching threat to social and planetary well-being than we--through our social immune system--are yet prepared for. This threat takes the form of the recent global mutation of the capitalist system.

Prior to the 1970s, capitalism had been compelled by the "communist threat," workers' movements, and a new electoral accountability to adopt preventive measures against its own internal pathologies. Slowly and under great social pressure, advanced capitalist societies introduced social reforms to limit the invasive assaults on workers' lives and development.

This process began with social legislation that restricted working hours and factory-caused hazards and diseases, and eventually led to laws requiring tax-supported educational, health, and social security protections for all members of society. In this way, the pathological patterns of the capitalist organization of society were counterbalanced by socially legislated protections of life development and security.

Social breakdown under the strains of blind money-profit maximization was for a time resisted by newly accountable government bodies. In this overall social immune maturation, a state-regulated system of recognizing and responding to the vital life needs of social bodies as a whole increasingly shielded members from disease, starvation, and disabling morbidities of all kinds against which social life-systems are always in some ways formed to prevent.

Despite this development of a social immune system, however, a relatively sudden mutation of social orders has recently emerged. Dramatic changes and "restructurings" of social life-organizations have rapidly led to a breakdown in evolved social immune systems in virtually every parameter of life protection.

The loss of income security: Only income security can assure members of a capitalist-organized society the requisite needs of life. As the goods of life that meet human needs have become increasingly commodified (i.e., available only upon payment of money), continuity of money income for vital life sustenance has become increasingly essential. Food, clothing, and shelter are now normally available only in commodity form. But capitalist-organized societies are reducing and eliminating the social infrastructures that assure sufficient monetary life-income for members of social bodies.

The real incomes of most of society's members have declined across the world. With revenue increasingly flowing to private money-capital investors, the means of life that remain have become ever more endangered and insecure.

Unemployment rates continue to rise, and protective social sectors everywhere are suffering cutbacks. The unregulated cross-border movement of money capital for nonproductive speculative seizures of social incomes is accelerating in volume and velocity everywhere, reaching an estimated 30 to 40 times the size of the total dollar turnover for goods and services.

One-quarter of the world's people are now starving, and one-third of all children are malnourished--a pattern of deprivation of the most basic means of life. What is most alarming about this deepening, spreading deprivation of the basic requirements of life sustenance is the universality, rapidity, and apparent inexorability of its advance. A relatively small and increasingly walled-in proportion of social bodies is escalating its appropriation of world society's income, while access to vital life means is radpidly decreasing and becoming more insecure for a rising majority of the globe's population.

Social breakdown: In capitalist-organized societies there are two great classes of social members--those who are employed and paid for contributing to the generation and accumulation of capital, and those who are unemployed. Since the need for employees declines with labour-cost reduction methods and with the dismantling of the public sector, the number of full-time employees in capitalist-organized societies is diminishing with runaway speed.

Nearly one-third of the world's 2.2 billion workers are now estimated to be unemployed. This loss of a social function leads to a wide variety of pathological outcomes. The probability of an unemployed man succumbing to heart disease or cancer doubles within five years. Adolescent suicide and prostitution rates escalate as future employment prospects darken. Most lethally, ethnic wars, racist attacks, armed violence, urban riots, beatings of women and children, and mass murders seem also to rise in areas of high unemployment.

Environmental damage: The capitalist organization of environmental usage--the atmosphere, fresh water and oceans, topsoils, forests, animal habitats and species, and mineral resources--primarily determines the environment's sustainability, or lack of it. The degeneration of all these global life conditions and elements is clear to see, but in spite of the environmental crisis, corporate leaders are demanding even less "government interference" in regulating and protecting the environment.

On a world scale, 20,000 pages of GATT or World Trade Organization regulations and 1,400 articles within NAFTA specify exact rules to protect the rights of capitalist corporations to own, produce, sell, and invest across boundaries. Yet absent from this mountain of regulations are any effective environmental protections against increasing pollution, destruction, wastes, exhaustion, or extinction.

The invasiveness of such "free trade" regimes may be discerned by the pathologies of its outcomes. The air is increasingly unbreathable; no one may stay in the sun without cancer danger; oceans and ecosystems are becoming lifeless in various parts of the planet; tropical and temperate rain forests are clear-cut at the rate of 100 acres a minute; plants and animals of countless varieties are becoming extinct every year; and the sounds of the world are ever more dominantly coming from the din of fossil-fuel motors--but the profit-exploitation of the global life-environment only increases its assaults without self-control.

The Cancer Stage of Capitalism

Long-term, systematic and irreversible destruction of global life-organization emerged for the first time during the current advanced stage of capitalism. If we consider the defining principles of cancer and the eventual destruction of a life-host, it is difficult to avoid seeing that a cancer pattern is increasingly invading and spreading across the planet.

In other words, there is--

1. an uncontrolled and unregulated reproduction and multiplication of an agent in the host body that:

2. is not committed to any function of the host body;

3. increasingly appropriates nutriments from the host body in its growth and reproduction;

4. is not effectively recognized by the immune system;

5. possesses the ability to transfer or metastasize its assaultive growth to sites across the host body;

6. progressively infiltrates and invades the host body until it obstructs, damages, or destroys successive organs of its life-system; and

7. eventually destroys the life-host in the absence of an effective immune-system recognition and response.

Two comparatively sudden and rapidly advancing systemic changes across the social bodies and global environment are attacking the evolved systems of life-protection just as the stress and assault on their carrying capacities by money-capital circuits have become more rapid, intense, and pervasive.

The most sudden attack is on society's protective systems, which were designed to ward off the internal starvation of members' functions and growth by capitalist invasion and accumulation. Globally, protective systems are now being dismantled at every level. The pattern is now so universal and aggressive that even the language of its agents no longer disguises its destructive intent--"drastic cutbacks," "axing social programs," "slashing public services," and so on. And society's protective systems are openly being "cut," "slashed," and "axed" to "reassure lenders and investors"--that circuit of money investment and profit that is no longer linked to the production or circulation of useful goods and services.

Money capital that seeks more money without producing any life good or service goes back as far as usury, but never before has it been the dominant form of social life-organization. The mutation in this macro-circuit of money investment and profit occurred when money capital became exclusively committed at every stage of its growth to the direct multiplication of itself. The comparison with a carcinogen is starkly evident. A cancer pattern of disease and metastasis is confirmed when money capital lacks any commitment to any life-organization on the planet, but is free to move with increasing volume and velocity in and out of--but not to sustain--social and environmental life-hosts. On the contrary, ever more social resources and protections are being diverted to assist the capitalist cancer to multiply.

The spiralling debt and deficit circuits currently bankrupting governments and social infrastructures around the world are a primary channel of money-capital's mutated form as it invades social hosts and appropriates their life resources for its own growth and spread. For example, even after over $14 trillion had already been taken from poor, less-developed countries by the money-extraction cycles of major banks, their total indebtedness to the banks doubled from approximately $819 billion in 1982 to $1,712 billion in 1993.

Such processes cannot continue for long without destroying the host body. Symptoms of this destructive pattern are visible across the nations of the world, but especially in Africa and Latin America. At a certain stage of this invasive appropriation of life-resources, social bodies can no longer continue to convert their life-sustenance base to more money for the money-lenders. "Restructuring" and "structural adjustment" programs are then imposed on them to ensure that the money cancer keeps spreading without resistance from the host bodies.

The disease agent advances against the weakened host social body and spreads more widely and deeply into its vital organs. Society's ruling orders submit. Restructurings of social-life organization to feed the invaders proceed faster and deeper. More and more of society's resources are yielded up to the money lenders and investors.

Unemployment rises, organized labour declines, and jobs become more insecure. Poverty levels rise. Social programs for health, education and housing are cut back or dismantled. Social despair and panic spread beneath the mask of normality. Incremental starvation of social bodies advances to sustain continuous money outflows to agents who lack a committed function to any life-host. The life prospects of most of society's members rapidly deteriorate.

Systemic deprivation and starvation of the social body's life sustenance are now clearly evident, from the most undeveloped to the most advanced societies. In Canada, for example, infant mortality rates, the quintessential indicator of social health, have just risen an astonishing 43%, the first recorded rise in over 30 years. At the bottom end of the world's social bodies, 500,000 more children die each year from the enforced "restructuring" of their countries' economies.

As this deprivation grows, the capitalist cancer increasingly diverts effective demand for use-value production to its own growth and self-multiplication. Its modes of mutating the metabolism of the social body to its own proliferation have many new and aberrant forms, such as turning bankrupt governments into receiver states that enforce money lenders' insatiable demands on ever poorer public sectors; demanding more tax breaks for investment and debt instead of equity, and in non-productive speculation instead of job-creating enterprises; attacking national currencies by speculative buying and selling in multi-billion-dollar profit accumulations that create no use value and cripple social and economic orders overnight; operating high-interest savings and loan banks so that their principals can expropriate up to $500 billion from taxpayers to pay for their money-into-more-money amassments; shifting tax obligations from banking and financial institutions to productive members of society who have less and less income to extract; and channelling vast pension and mutual funds into stock speculation transactions. Everywhere the channels of money investment are systemically and progressively converted into the metabolism of money for more money instead of into commitments to social life functions.

At this stage of money capital's development, we clearly confront an unprecedented disease challenge to the survival of its social and planetary life-hosts. Indicative of the classic pattern of cancer mutation and spread are the synergistic effect of money capital's cumulative destruction of the planet's basic conditions of life (air, sunlight, water, soil, and biodiversity), its increasingly aggressive invasions and assaults on social infrastructures and self-protective systems of life sustenance and circulation, its systemic intolerance of bearing the costs of maintaining social and environmental carrying and defense capacities, and its rapidly escalating, autonomous self-multiplication that is no longer subordinated to any requirement of life-organization.

The essential problem of any life-threatening cancer is that the host body's immune system does not effectively recognize or respond to the cancer's challenge and advance. This failure of our social immune system to recognize and respond to the cancerous form of capitalism is understandable once we realize that the surveillance and communication organs of host social bodies across the world, as they now function, are incapable of recognizing the nature and patterns of the disease. That is, capitalist-organized media and information systems select for dissemination only messages that do not contradict the capitalist organization of social bodies.

Consequently, whatever exposes the systemic disorder of this social organization's structure (such as this essay) is normally refused transmission through its communications media. In this way, our social immune system has been gravely compromised by the accelerating control of multinational capital conglomerates over most of the recorded information produced and exchanged around the world--mass communications, the production of textbooks and educational resources for higher learning, and the biotechnology for reproducing and adapting life-forms themselves.

Because of this subordination of social systems of research and communication to transnational capital control, whatever does recognize the capitalist cancer is normally rejected. This social immune suppression is now global, with over 90% of all foreign news output, for example, controlled by five U.S. and European multinational news agencies. Cancerous takeovers of life-systems only prevail if they are not recognized by their hosts. This is our predicament today.

Life-bodies recover when the immune system recognizes and responds to the systemic disease that is attacking them. At this stage of money capital's mutation and invasion, signs of disease are increasingly evident. Even capitalist-organized mass media display the life-danger in sporadic, partial recognitions of biospheric and social-structural breakdowns, and even the decoupling of money-capital circuits from productive life functions. These eruptions, however, are not linked to the underlying disease pattern.

As on any level of complex life-organization, the social immune system must recognize the disease agent before it can effectively respond to its invasion. Only when this recognition is clear can an effective defense be mounted. On the macro-level of carcinogenic invasion, effective response now minimally requires a global determination to resist, regulate and beat back the lethal, uncontrolled growth and metastasis of cancerous capitalism. This could be a transformation of the world's now failing political and economic systems which nothing short of a global cancer could effectively bring about.

(John McMurtry's latest book, "The Global Market as an Ethical System," was recently published by Garamond.)


Scroll down for articles about economics.

freedomLittle needs to be said about the growing gap between the rich and the poor. We are all acutely aware that the economic elite in the United States has almost absolute control of our government and that, as least for the last forty years, it has successfully instituted policies that have made the rich richer and the poor poorer. On a global level the World Bank, the IMF and the World Trade organization have in a similar manner created and enforced policies that sink poor countries in hopeless debt and make it very difficult for them to develop economically. These policies also serve to maintain, and in many cases increase, the gap between the rich and the poor within countries.

The Connection With Health:

The federal government of the United states, in its Institute of Medicine 2003 report "The Future of the Public's Health in the 21st Century," states on page 59: "more egalitarian societies (i.e. those with a less steep differential between the richest and the poorest) have better average health." If fact, the biggest gains in health are not to be found in technological advances so much as in increasing economic equity. This would, of course, mean that the resources that are available would be distributed more fairly. But over and above access to needed medicines and services, it has been found the inequity in income, in and of itself, has a negative impact on the health of all citizens – rich and poor.

Also one has to consider the profoundly negative impact that an economic system in which profit is the only bottom line has on the ecological stability of the planet. The health implications of this fact cannot be overstated. The very survival of the species may be at stake.

Libya: It’s Not About Oil, It’s About Currency and Loans

mass_deceptionNote by HealthWrights Staff

Endlessly the government spins noble but fanciful narratives about its illegal, brutal and ill-advised wars, and the mainstream press distributes these narratives to the people along with its soaps and advertisements. The reality, on the other hand, is always pretty much the same. These wars are not about democracy and human rights. They are about oil and power. They are about maintaining the power of a dying empire, and even more about protecting and increasing the wealth of the already obscenely wealthy. The sooner the people in this country are able to set aside their Walt Disney image of reality, and see the real world for what it is, the sooner we will be able to create a real world worth living in. The article below does a very nice job clarifying the reasons for the United State's latest violation of the Nuremberg Accords.

The Main Article

"Information Clearing House" -- WASHINGTON -(Dow Jones)- World Bank President Robert Zoellick Thursday said he hopes the institution will have a role rebuilding Libya as it emerges from current unrest.

Zoellick at a panel discussion noted the bank's early role in the reconstruction of France, Japan and other nations after World War II.

"Reconstruction now means (Ivory Coast), it means southern Sudan, it means Liberia, it means Sri Lanka, I hope it will mean Libya," Zoellick said.

 On Ivory Coast, Zoellick said he hoped that within "a couple weeks" the bank would move forward with "some hundred millions of dollars of emergency support." ( By Jeffrey Sparshott, Of DOW JONES NEWSWIRES –full article here)

We listen to U.S. spokespeople try to explain why we’re suddenly now entangled in another Middle East war. Many of us find ourselves questioning the official justifications. We are aware that the true causes of our engagement are rarely discussed in the media or by our government.

While many of the rationalizations describe resources, especially oil, as the reasons why we should be in that country, there are also an increasing number of dissenting voices. For the most part, these revolve around Libya’s financial relationship with the World Bank, International Monetary Fund (IMF), the Bank for International Settlements (BIS), and multinational corporations.

According to the IMF, Libya’s Central Bank is 100% state owned. The IMF estimates that the bank has nearly 144 tons of gold in its vaults. It is significant that in the months running up to the UN resolution that allowed the US and its allies to send troops into Libya, Muammar al-Qaddafi was openly advocating the creation of a new currency that would rival the dollar and the euro. In fact, he called upon African and Muslim nations to join an alliance that would make this new currency, the gold dinar, their primary form of money and foreign exchange. They would sell oil and other resources to the US and the rest of the world only for gold dinars.

The US, the other G-8 countries, the World Bank, IMF, BIS, and multinational corporations do not look kindly on leaders who threaten their dominance over world currency markets or who appear to be moving away from the international banking system that favors the corporatocracy. Saddam Hussein had advocated policies similar to those expressed by Qaddafi shortly before the US sent troops into Iraq.

In my talks, I often find it necessary to remind audiences of a point that seems obvious to me but is misunderstood by so many: that the World Bank is not really a world bank at all; it is, rather a U. S. bank. Ditto, its closest sibling, the IMF. In fact, if one looks at the World Bank and IMF executive boards and the votes each member of the board has, one sees that the United States controls about 16 percent of the votes in the World Bank - (Compared with Japan at about 7%, the second largest member, China at 4.5%, Germany with 4.00%, and the United Kingdom and France with about 3.8% each), nearly 17% of the IMF votes (Compared with Japan and Germany at about 6% and UK and France at nearly 5%), and the US holds veto power over all major decisions. Furthermore, the United States President appoints the World Bank President.

So, we might ask ourselves: What happens when a “rogue” country threatens to bring the banking system that benefits the corporatocracy to its knees? What happens to an “empire” when it can no longer effectively be overtly imperialistic?

One definition of “Empire” (per my book The Secret History of the American Empire) states that an empire is a nation that dominates other nations by imposing its own currency on the lands under its control. The empire maintains a large standing military that is ready to protect the currency and the entire economic system that depends on it through extreme violence, if necessary. The ancient Romans did this. So did the Spanish and the British during their days of empire-building. Now, the US or, more to the point, the corporatocracy, is doing it and is determined to punish any individual who tries to stop them. Qaddafi is but the latest example.

Understanding the war against Quaddafi as a war in defense of empire is another step in the direction of helping us ask ourselves whether we want to continue along this path of empire-building. Or do we instead want to honor the democratic principles we are taught to believe are the foundations of our country?

History teaches that empires do not endure; they collapse or are overthrown. Wars ensue and another empire fills the vacuum. The past sends a compelling message. We must change. We cannot afford to watch history repeat itself.

Let us not allow this empire to collapse and be replaced by another. Instead, let us all vow to create a new consciousness. Let the grass-roots movements in the Middle East – fostered by the young who must live with the future and are fueled through social networks – inspire us to demand that our country, our financial institutions and the corporations that depend on us to buy their goods and services commit themselves to fashioning a world that is sustainable, just, peaceful, and prosperous for all.

We stand at the threshold. It is time for you and me to step across that threshold, to move out of the dark void of brutal exploitation and greed into the light of compassion and cooperation.



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