The current economic and social crisis is certainly a deep one and is driving capitalist states and capitalist companies towards some desperate measures to try and stabilise the system and restore (and where possible) increase real profit levels. But this is not to assume that particular capitalist governments or companies are stuck with only one set of inflexible policies. The problem is that isolated struggles by workers in the context of intense capitalist competition will give the capitalists more abillity to offload any gains made by one sector onto other workers The generalisation of struggle will make that harder for them to achieve this and can potentially push back the austerity measures accross a wider front at least on a temporary basis.
Alexander Berkman, the author of the anarchist ABC, put it, "capitalism will continue as long as such an economic system is considered adequate and just". Until people see through it capitalism will continue to stagger on from economic crisis to war to ecological crisis. To simply denounce finance capitalism as the main enemy is to side with industrial capital in the struggle between the two over how much each is to get of the wealth produced by the worker class. When we challenge capitalism, we challenge it all or we do not challenge it at all.
Can crisis, in certain circumstances provide an accelerant to the class struggle? And what will motivate the working class to overthrow capitalism if not the crisis of the latter? For decades self-proclaimed "Marxists" (especially Trotskyists) fetishise the word "crisis", and describe every economic downturn and political turn of events as the "crisis of capitalism" or even prophesising the "inevitable" (Manifesto) end of capitalism. Its proposed that in a crisis, the closer we are to revolution. The worse conditions become - the more politicised and inclined to take direct action the populace become. Some communists welcome the economic crisis of capitalism and claim there is no perspective of revolution without it. Some of those "Marxists" say "bring on the crisis" because for the working class things will not be able to continue as before. It is argued that without some form of crisis there's no reason at all for the proletariat to revolt. As long as capitalism can offer us palliatives (or at least the illusions of them) to soothe our exploitation, the system will survive It is argued that crises opens up the possibility of revolution, even if it doesn't guarantee it. But without crisis there is no possibility whatsoever. There unfortunately won't be a perspective of revolution with it, either. Genuine socialists prefer that working class living standards aren't severely cut. How do we agitate workers around this issue? "Cheers for the crisis"!! Most of the vanguard Left seems to be basing all of its activity around either recruiting workers into their particular party, or upon the vague hope that the working class will engage in some kind of spontaneous communist revolution. Wishing the massive impacts of a massive economic crisis/recession upon people's lives just in the hope that their fringe ideas will get picked up and perhaps adhered to by a handful of additional people, the contempt that it shows for humanity is disdainful. It also lays bare the complete and utter impotence of said movements in the first place. This overly optimistic wish fulfilment mixed with its crude utopian determinism does no justice to Marx.
Historically, it hasn't shown crises capable of producing anything that is favourable to the process of implementing a sustainable social and economic system that could both eclipse and be more progressive than the current form of organising society. The track records of crises are such that they have not produced a lasting positive effect on any attempts to eclipse the current method of organising society. We've seen countless crises since the birth of capitalism, all of which the effects of have been disproportionaly visited upon those who can least afford to bear those consequences, and none of which have ended up leaving the position of class struggle or even progressive social democratic politics in an enhanced position after the event, maybe for blips of time, but in the long run, crisis have been kinder to capitalism than they have to us - and those going into a crisis with power will invariably come out of the other end of it in a far better position than those who went into it with less power. Anyone who had a realistic view of the implications of the coming crisis relating to the environment, resources, food and population pressures would not be so gleeful in their wishing those effects upon an already downtrodden working class. Crisis in the main are useful to capitalism. Capitalism needs crisis to continually move onto the next stage and it is odd that those who are supposedly against capitalism wish for things that will help capitalism to reassert itself even wider and deeper than it currently is.
Communists will not bring consciousness to the working class from the outside but it will be developed in its struggles to defend itself against the inevitable intensification of the attacks against it. There's nothing inevitable about this and if the working class cannot rise to the occasion overall it gets defeated. The economic crisis (like war, etc.) can provide a stimulus for class struggle, but this is not always the case. In some circumstances it can demoralise the class or, even if the class struggles it can be dragged onto bourgeois terrain like the strikers in France in the 30s who supported leftist governments and marched under the national flag. Despite the considerable militancy, the class struggle was contained. What can happen is that the working class could be beat down more than it already has been in the previous decades. The working class is mostly under the sway of bourgeois ideology, is not organised even into class fighting organisations, and therefore is presently unable to threaten the bourgeoisie's power. The Great Depression produced no revolutionary upsurge and the appalling conditions of workers in the 3rd world haven't automatically led to social revolution in those countries either.We can perhaps even expect to see reactionary ideology make a resurgence amongst the working class, in the midst of any coming crisis. If the working class is not already prepared it will be divided and defeated. That is not appealing prospect.
Economic crisis and increasing misery for the working class doesn't necessarily and inevitably lead to revolution. Relying upon the effects of the crisis seems to be the lazy way to try and approach social change, scrap all the groundwork and hope the crisis does it for you. While it is argued that downturns make people angry and more susceptible to revolutionary ideas, the opposite may be true. It may be downturns just lead to despair, fatalism, acceptance of misery and cynicism to things getting better. Upturns in the economy make revolution more likely because it is the human condition never to be satisfied and when you've got the job, house, wages, car and all the mod cons then you want more - security, control over your own life which can only be got by workers ownership and control of our own work, residents ownership of their own homes and individuals control over our lives, all of which can only be got by anarcho-communism by way of social revolution. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That is our basic function: to develop alternatives, to keep them alive and available until the politically impossible becomes politically inevitable. The best we can hope for is to use this as an opportunity to re-group, in order to get the working class in a stronger position to start from when the boom returns. All we can do is to try to negotiate the best terms possible and try to resist as effectively as we can the increased downward pressures on wages and working conditions (for which we need collective organisation and action, even within the existing trade unions). As to what revolutionaries can do, at the moment being so small a minority, we can't do much more than keep on arguing that the only way-out is to replace capitalism by a system based on common ownership (instead of class ownership) and production solely for use (instead of production for profit) and to keep on urging workers to self-organise themselves democratically to bring this social revolution about
The whole point of class struggle is about winning gains, making our lifes better, getting better conditions at work, at home and in society, things that the bulk of the population can easily measure in terms of the direct affect on their day to day lives. We are not going to get much support for our ideas if we come out with argument like "well your living standards may well have declined, your worse off now than when we started, and we havn't gained anything in terms of changing the incredibly unjust system of organising society, but just look at the enormous gains we've made in terms of the class struggle" - the whole point is to win real tangible gains that in turn can bolster people and show it can be done, thus allowing momentum to build, more people won over to a critical analysis of the society they live in, more ideas developed for such a time that when the crisis does come so that the right ideas are lying around, in sufficent depth and breadth, that they can be picked up and used, and some good made out of a crisis. But until that time comes it's just pissing against the wind. Struggles should be aimed towards achieving real gains for the sake of those gains or delivering 'an increased confidence, autonomy, initiative,participation, solidarity, egalitarian tendencies and the self-activity of the masses', but all of these are a means to and end and that end should be measurable in terms of improvements in our lives. Workers benefit from their struggles in terms of learning how to organise, discovering their collective power, etc.
Like it or not but capitalism did deliver huge increases in the standards of living over various phases, take the post-war golden age for example, capitalism in the social democratic era brought about a flourishing of consumer capitalism ) The intention of this was not to increase conditions and the general living conditions of the working class, but it was a means to an end for capitalism to accumulate more, and as we know capital will do anything if it means being able to accumulate more, so from that point of view capitalism was happy to, and indeed was required to, deliver a vast increase in living standards and quality of life compared with previous periods of history. In order for it to do this it meant wreaking havoc in other areas and storing up problems for the future, but the bottom line was that the general conditions of the working class have improved under capitalism. You could argue however that conditions have just improved because time has moved on and those improvements would have been seen in any method of organising society, but that would be indulging in what-if's. A substantial amount of the demands of early reformists and the like have actually been delivered. It is it's galling to perhaps admit these things but it does help if you want change, to actually know where you are before embarking on any activity, practical or theoretical, aimed at bringing about that change.
Marx said in the Holy Family:
"Not in vain does it go through the stern but steeling school of labour. It is not a question of what this or that proletarian, or even the whole proletariat, at the moment regards as its aim. It is a question of what the proletariat is, and what, in accordance with this being, it will historically be compelled to do. Its aim and historical action is visibly and irrevocably foreshadowed in its own life situation as well as in the whole organization of bourgeois society today."
Consciousness is something that workers has to acquire, even if it does not want to.
The liberation of our class will only come about when we, the class ourselves, for ourselves, do the hard work of organising, which needs that we class conscious workers doing the equally hard work of convincing our fellow workers. At the end of the day , as pro-revolutionaries, it is not in our interest to try and save capitalism but rather to destroy it and to encourage current struggles to develop on an independent, self-organised, class basis and extend accross national boundaries which may well give rise to an escalation of the social crisis and starts to challenge capitalism as a whole from a position of some class strength. Only the self-organisation of the proletariat contains the potential to defend its own interests both in the short-term economic and the longer term political. A working class that can't defend itself is also a working class that is incapable of making a revolution.
Marx wrote "Philosophers have only tried to understand the world. The point is to change it."
The IWW sang "Don't moan, Organise!"
Showing posts with label recession. Show all posts
Showing posts with label recession. Show all posts
Monday, March 19, 2012
Thursday, January 26, 2012
The Madness of Two Worlds
If you are poor:-
Leandro Andrade is serving a life sentence in California for stealing five videotapes from a K-Mart. He was convicted under the state's three strikes law, after convictions for petty theft, burglary, and possession of marijuana. Justice David Souter noted that Andrade "committed theft of trifling value...with no violent crimes against the person."
-Sisters Jamie and Gladys Scott received double life sentences in 1994 for an $11 armed robbery, the first criminal for either of them. They spent 17 years in jail.
As of 2003 in California there were 344 individuals serving sentences of 25 years or more for shoplifting as a third offense, in many cases after two non-violent offenses.
If you are the rich:-
The Savings and Loan fraud cost the nation between $300 billion and $500 billion, about 100 times more than the total cost of burglaries in 2010. The financial system bailout has already cost the country $3 trillion.
Goldman Sachs packaged bad debt, sold it under a different name, persuaded ratings services to label it AAA, and then bet against it by selling it short. Other firms accused of fraud and insider trading were Morgan Stanley, Bear Stearns, Bank of America, Countrywide Financial, and Wells Fargo.
New York Times reported in 2008 that the Justice Department had postponed the bribery or fraud prosecutions of over 50 corporations, choosing instead to enter into agreements involving fines and 'monitoring' periods.
"The financial system led us into the crisis and it will lead us out." -- Goldman Sachs chairman Lloyd Blankfein.
"Western-style private enterprise...will lead the world out of the mess it led the world into." -- Chicago Tribune.
"If capitalism is perceived to not be working in America...it's because the system isn't capitalist enough." -- Rachel Marsden
From here
Leandro Andrade is serving a life sentence in California for stealing five videotapes from a K-Mart. He was convicted under the state's three strikes law, after convictions for petty theft, burglary, and possession of marijuana. Justice David Souter noted that Andrade "committed theft of trifling value...with no violent crimes against the person."
-Sisters Jamie and Gladys Scott received double life sentences in 1994 for an $11 armed robbery, the first criminal for either of them. They spent 17 years in jail.
As of 2003 in California there were 344 individuals serving sentences of 25 years or more for shoplifting as a third offense, in many cases after two non-violent offenses.
If you are the rich:-
The Savings and Loan fraud cost the nation between $300 billion and $500 billion, about 100 times more than the total cost of burglaries in 2010. The financial system bailout has already cost the country $3 trillion.
Goldman Sachs packaged bad debt, sold it under a different name, persuaded ratings services to label it AAA, and then bet against it by selling it short. Other firms accused of fraud and insider trading were Morgan Stanley, Bear Stearns, Bank of America, Countrywide Financial, and Wells Fargo.
New York Times reported in 2008 that the Justice Department had postponed the bribery or fraud prosecutions of over 50 corporations, choosing instead to enter into agreements involving fines and 'monitoring' periods.
"The financial system led us into the crisis and it will lead us out." -- Goldman Sachs chairman Lloyd Blankfein.
"Western-style private enterprise...will lead the world out of the mess it led the world into." -- Chicago Tribune.
"If capitalism is perceived to not be working in America...it's because the system isn't capitalist enough." -- Rachel Marsden
From here
Thursday, November 03, 2011
The recession's recovery
"Permanent crises do not exist" Marx wrote
He meant that the slump itself would create the conditions for capital accumulation to resume. For Marx the accumulation of capital, which is the engine of economic growth, proceeded in fits and starts, a series of cycles of moderate activity, boom, crisis, slump, recovery, moderate activity, boom, crisis, etc. Booms eventually created the conditions for the next following slump while slumps created those for recovery.
“This fall in the purely nominal capital,” Marx explained “State bonds, shares etc....amounts only to the transfer of wealth from one hand to another and will, on the whole, act favourably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners.”
The financial world has been gripped by the recession. Yet one cabal of investors, bankers and lawyers found plenty to toast at London’s opulent Claridge’s hotel last month. One fund manager enthused “There’s a tidal wave of opportunities coming now.”
A German minister once called them “locusts”. Other choice descriptions are “corporate raiders”, “predators”, “vultures” and “asset strippers”. Socialists apply some of these descriptions to all capitalists, but what have these particular kind of capitalists done to earn such epithets even from non-socialists?
This is the sector which seeks to take advantage of stressed and dislocated financial markets. It typically comprises hedge funds or private equity firms that acquire at a discount fundamentally sound or defaulted loans, bonds or entire portfolios of debt from banks and other investors under duress, and attempt to squeeze out a profit. Alternatively, they may try to seize control of struggling companies by buying their loans and bonds, and converting this debt into equity ownership – a strategy known as “loan to own”.
European companies have to repay more than $4,000bn of loans and bonds in the next four years, according to credit rating agency Standard & Poor’s – a formidable sum at a time when the continent faces unprecedented pressure. Most are expected to manage to repay or roll over these debts, but some are expected to founder and could be taken over by distressed debt investors. Europe’s banks, normally a ready source of funding for many of these companies, are themselves struggling. Banks in France, the UK, Ireland, Germany and Spain have unveiled plans to slash a total of €775bn ($1,065bn) of assets, according to data collected by Bloomberg. Leon Black of Apollo Global Management, a leading investor in distressed debt, recently estimated this sum could increase to €1,500bn in coming years. It will provide investors with opportunities to cherry-pick assets, financiers say. Many are eyeing Ireland, where loans and property worth a nominal €72bn have been taken over by the National Asset Management Agency, a state-run “bad bank”, and will gradually be sold off.
Most investment banks are rebuilding or beefing up distressed debt desks, expecting the sector to provide a rich vein of lucrative business in the coming years. “We’re just in the first innings,” says the European head of a major US firm. “We have already bought quite a bit already, and the market is going to be huge over the next few years.”
From capitalism’s point of view, they are not doing anything wrong. In fact, they are only doing what comes naturally to capitalists: trying to make the biggest profit they can. The parvenus are buying up failed and failing business at bargain prices. As well as laughing all the way to the bank they can justify their unpopular activity as performing a necessary function in capitalism’s business cycle. As indeed they are.
What shape will the recovery turn out to have. The optimists are hoping that it will be V-shaped (i.e. a fairly rapid return to pre-recession levels). Others see it as being more like a tick (i.e. a slower recovery). The pessimists see it like a W (i.e. a double dip, a initial small recovery followed by second fall).
The only solution to the problems of a depression is the depression itself. If capitalism is to return to profitability, unprofitable concerns must be closed, workers laid off, wages suppressed, and capital devalued. This restores profitability and lays the basis for a new round of capitalist prosperity.Unprofitable firms must be eliminated, their capital destroyed or devalued, and real wages must fall, so as to restore the rate of profit. That means more company failures and more unemployment. In short, more misery. This tells us nothing about how long this might take. Could the present slump really last for a decade or more? The truth is we don’t know and can’t know. The future course of capitalism is largely unpredictable.Economic forecasting is no more reliable than an astrological horoscope. All we can say with certainty is that it is an irrational system.
A number of quite distinct and separate things need to happen before a slump can run its course. Firstly, capital has to be wiped out if excess productive capacity is to be tackled with devalued capital being bought cheaply by those enterprises in the best position to survive the slump. Secondly, de-stocking needs to take place, with overproduced commodities bought up cheaply or written off entirely. Investment will not resume if overproduction still exists. Thirdly, after this has occurred there needs to be an increase in the rate of industrial profit helped both by real wage cuts and falling interest rates (which tail off naturally as the demand for more money capital eases off in the slump). This will help renew investment and increase accumulation. Also, if recovery is to be sustained, a large proportion of the debt built up during the boom years will need to be liquidated, if it is not to act as a drag on future accumulation. Through these mechanisms a slump helps build the conditions for future growth, ridding capitalism of inefficient units of production. When these processes have run their course, accumulation and growth can begin once more with capitalism again creating a boom situation, which will be inevitably followed by a crisis and slump. This has been the history of capitalism ever since it first developed. Far from being an aberration, this cycle of misery is the natural cycle of capitalism.
Workers cannot be indifferent to a crisis, no matter how much we are disgusted by the predictable pendulum swing between “boom” and “bust” , because our lives can be directly influenced by today’s financial turbulence. But at the same time, we have no interest whatsoever in thinking up ways to put capitalism “back on track” or make it “healthy” again. Even when the system is in tip-top shape it works directly counter to the interests of workers. The crisis will not miraculously or mechanically turn every worker into a socialist, as some hope, but it does at least create a situation where socialists may find workers more willing to consider an alternative to capitalism. It is up to us, as socialists, to present that alternative in a convincing way based on our understanding of the essential nature and limitations of the capitalist system.
He meant that the slump itself would create the conditions for capital accumulation to resume. For Marx the accumulation of capital, which is the engine of economic growth, proceeded in fits and starts, a series of cycles of moderate activity, boom, crisis, slump, recovery, moderate activity, boom, crisis, etc. Booms eventually created the conditions for the next following slump while slumps created those for recovery.
“This fall in the purely nominal capital,” Marx explained “State bonds, shares etc....amounts only to the transfer of wealth from one hand to another and will, on the whole, act favourably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners.”
The financial world has been gripped by the recession. Yet one cabal of investors, bankers and lawyers found plenty to toast at London’s opulent Claridge’s hotel last month. One fund manager enthused “There’s a tidal wave of opportunities coming now.”
A German minister once called them “locusts”. Other choice descriptions are “corporate raiders”, “predators”, “vultures” and “asset strippers”. Socialists apply some of these descriptions to all capitalists, but what have these particular kind of capitalists done to earn such epithets even from non-socialists?
This is the sector which seeks to take advantage of stressed and dislocated financial markets. It typically comprises hedge funds or private equity firms that acquire at a discount fundamentally sound or defaulted loans, bonds or entire portfolios of debt from banks and other investors under duress, and attempt to squeeze out a profit. Alternatively, they may try to seize control of struggling companies by buying their loans and bonds, and converting this debt into equity ownership – a strategy known as “loan to own”.
European companies have to repay more than $4,000bn of loans and bonds in the next four years, according to credit rating agency Standard & Poor’s – a formidable sum at a time when the continent faces unprecedented pressure. Most are expected to manage to repay or roll over these debts, but some are expected to founder and could be taken over by distressed debt investors. Europe’s banks, normally a ready source of funding for many of these companies, are themselves struggling. Banks in France, the UK, Ireland, Germany and Spain have unveiled plans to slash a total of €775bn ($1,065bn) of assets, according to data collected by Bloomberg. Leon Black of Apollo Global Management, a leading investor in distressed debt, recently estimated this sum could increase to €1,500bn in coming years. It will provide investors with opportunities to cherry-pick assets, financiers say. Many are eyeing Ireland, where loans and property worth a nominal €72bn have been taken over by the National Asset Management Agency, a state-run “bad bank”, and will gradually be sold off.
Most investment banks are rebuilding or beefing up distressed debt desks, expecting the sector to provide a rich vein of lucrative business in the coming years. “We’re just in the first innings,” says the European head of a major US firm. “We have already bought quite a bit already, and the market is going to be huge over the next few years.”
From capitalism’s point of view, they are not doing anything wrong. In fact, they are only doing what comes naturally to capitalists: trying to make the biggest profit they can. The parvenus are buying up failed and failing business at bargain prices. As well as laughing all the way to the bank they can justify their unpopular activity as performing a necessary function in capitalism’s business cycle. As indeed they are.
What shape will the recovery turn out to have. The optimists are hoping that it will be V-shaped (i.e. a fairly rapid return to pre-recession levels). Others see it as being more like a tick (i.e. a slower recovery). The pessimists see it like a W (i.e. a double dip, a initial small recovery followed by second fall).
The only solution to the problems of a depression is the depression itself. If capitalism is to return to profitability, unprofitable concerns must be closed, workers laid off, wages suppressed, and capital devalued. This restores profitability and lays the basis for a new round of capitalist prosperity.Unprofitable firms must be eliminated, their capital destroyed or devalued, and real wages must fall, so as to restore the rate of profit. That means more company failures and more unemployment. In short, more misery. This tells us nothing about how long this might take. Could the present slump really last for a decade or more? The truth is we don’t know and can’t know. The future course of capitalism is largely unpredictable.Economic forecasting is no more reliable than an astrological horoscope. All we can say with certainty is that it is an irrational system.
A number of quite distinct and separate things need to happen before a slump can run its course. Firstly, capital has to be wiped out if excess productive capacity is to be tackled with devalued capital being bought cheaply by those enterprises in the best position to survive the slump. Secondly, de-stocking needs to take place, with overproduced commodities bought up cheaply or written off entirely. Investment will not resume if overproduction still exists. Thirdly, after this has occurred there needs to be an increase in the rate of industrial profit helped both by real wage cuts and falling interest rates (which tail off naturally as the demand for more money capital eases off in the slump). This will help renew investment and increase accumulation. Also, if recovery is to be sustained, a large proportion of the debt built up during the boom years will need to be liquidated, if it is not to act as a drag on future accumulation. Through these mechanisms a slump helps build the conditions for future growth, ridding capitalism of inefficient units of production. When these processes have run their course, accumulation and growth can begin once more with capitalism again creating a boom situation, which will be inevitably followed by a crisis and slump. This has been the history of capitalism ever since it first developed. Far from being an aberration, this cycle of misery is the natural cycle of capitalism.
Workers cannot be indifferent to a crisis, no matter how much we are disgusted by the predictable pendulum swing between “boom” and “bust” , because our lives can be directly influenced by today’s financial turbulence. But at the same time, we have no interest whatsoever in thinking up ways to put capitalism “back on track” or make it “healthy” again. Even when the system is in tip-top shape it works directly counter to the interests of workers. The crisis will not miraculously or mechanically turn every worker into a socialist, as some hope, but it does at least create a situation where socialists may find workers more willing to consider an alternative to capitalism. It is up to us, as socialists, to present that alternative in a convincing way based on our understanding of the essential nature and limitations of the capitalist system.
Thursday, September 22, 2011
A poor view on life
The poor, we're taught to believe, will always be with us. A good many of the poor have jobs, but receive too little pay to lift their family up from poverty. One in six Americans lives in poverty, more than 46 million. Twenty-five million people are in need of full-time work; 49 million go without health insurance excluded from a health-care system that is twice as expensive, per capita, as those in other industrial nations, captured by the drug lobby and the insurance and private hospital industries.
Poverty is destructive. The poor are more likely to be sick, vulnerable from hunger, to lack prenatal and infant care and to contract diseases that go undiagnosed. But if being poor makes Americans sick, getting sick too often makes them poor. Serious illness is the leading cause of bankruptcy. Poverty destroys hope. A hungry child finds it hard to learn. A toothache drowns out a teacher's voice. As poverty rates increase, the number of dropouts rises. Poverty destroys neighborhoods. Foreclosed homes become drug dens. The desperate turn to crime. Exploiters - the payday lenders, the sub-prime peddlers - target the vulnerable. The poor are less likely to have access to transportation that might take them to a job. They are less likely to have access to affordable groceries. They are more likely to go to an under-funded school, from which the best teachers have fled. The working poor are more likely to be in debt, more likely to live paycheck to paycheck.
The Chairman of Merck was paid $17 million last year, a period during which his company laid off considerable employees. Bank of America's chairman was paid $10 million, and that’s being paid for in part by the laying off of 30,000 workers. The 400 richest Americans got 12% wealthier.
Lets change the world
adapted from here
Poverty is destructive. The poor are more likely to be sick, vulnerable from hunger, to lack prenatal and infant care and to contract diseases that go undiagnosed. But if being poor makes Americans sick, getting sick too often makes them poor. Serious illness is the leading cause of bankruptcy. Poverty destroys hope. A hungry child finds it hard to learn. A toothache drowns out a teacher's voice. As poverty rates increase, the number of dropouts rises. Poverty destroys neighborhoods. Foreclosed homes become drug dens. The desperate turn to crime. Exploiters - the payday lenders, the sub-prime peddlers - target the vulnerable. The poor are less likely to have access to transportation that might take them to a job. They are less likely to have access to affordable groceries. They are more likely to go to an under-funded school, from which the best teachers have fled. The working poor are more likely to be in debt, more likely to live paycheck to paycheck.
The Chairman of Merck was paid $17 million last year, a period during which his company laid off considerable employees. Bank of America's chairman was paid $10 million, and that’s being paid for in part by the laying off of 30,000 workers. The 400 richest Americans got 12% wealthier.
Lets change the world
adapted from here
Wednesday, August 31, 2011
Money makes the world go round ....
This article on Der Spiegel Online about the financial sector made good reading . The following is an adaptation of the full article.
Speculation has always existed in economic history, but never to such an extent as today. Over time, the [finance] industry was able to rid itself of overly obstructive regulations. In fact, financial supervision was virtually eliminated. In 2004 the European Union had threatened to limit the foreign transactions of major US investment banks if the United States did not tighten its own regulations. This prompted five investment bankers to travel to Washington to exert their influence on the SEC. They proposed that the SEC be given the power to take a closer look at their high-risk positions in the future, but only if, in return, the banks would be required to keep less of their own capital in reserve to offset the risks of their transactions. From then on, the banks were able to expand their business unchecked. The second part of the deal -- the SEC's supervision -- was pursued far less energetically.
The financial industry had managed to create a belief system which held that what's good for Wall Street is good for society as a whole. Between 1973 and 1985, before deregulation began, profits in the US financial sector made up no more than 16 percent of the total profits of all US companies. This industry's share of total profits increased to 30 percent in the 1990s, and in the last decade it even reached 41 percent. It was no surprise that the myth of efficient financial markets was accepted so uncritically.
Of all people, it was an academic specializing in literary studies who managed to most accurately analyze the insanity of the financial markets and the impotence of economists. With his short 2010 book "Das Gespenst des Kapitals" ("The Specter of Capital"), Joseph Vogl wrote a bestseller that attracted attention among economists. His theory is that crises are not some kind of occupational hazard in the financial system. Instead, Vogl argues, it is the system itself that inevitably leads to new crises.
Vogl was teaching at Princeton University when Lehman Brothers collapsed. He knew nothing about financial markets, and yet he was fascinated by the "confusing empiricism," which had so little to do with theory. According to economic theory, the invisible hand of the market always leads to equilibrium, as Adam Smith wrote in his classic 1776 work "The Wealth of Nations," which Vogl refers to as the "Bible of economists." The same theory is still taught in universities today. But the theory also tells us that today's excesses in the financial markets should never have occurred. This leads Vogl to conjecture that "by no means does the capitalist economy behave the way it's supposed to." While the theory tends to be based on the economics of a village market, completely different circumstances apply in the financial markets, where both goods and expectations are being traded, and where speculative transactions are used to hedge against other speculative transactions.
Vogl describes the principle as follows: "Someone who doesn't have a product, and neither expects to have it nor will have it, sells this product to someone who also neither expects nor wants to have it, and in reality does not receive it."
This type of market will always have a tendency toward excess -- in either direction.
Paul Woolley holds the same view, but from a different perspective. He is intimately familiar with the financial markets, after having made millions working in the London financial district. He spent four years with the deeply traditional Barings Bank. He later worked for the American fund manager GSO.
In Woolley's experience, the idea that financial markets are efficient is erroneous. "All players in the financial markets behave rationally from their own perspective, but the outcome of this process can be disastrous for mankind," he says. His goal is to prove how dangerous the financial markets are. "It's like a tumor that keeps growing," he says. According to Woolley, there is no justification for the fact that this industry brings in more than 40 percent of all US corporate profits and pays the highest salaries in good years, while in bad years it is bailed out by taxpayers.
Woolley has observed the same phenomenon again and again. "The herd runs behind a trend until a crash occurs." Society, he says, also pays a high price for this behavior. "The financial industry is doing a pretty good job of destroying society," says Woolley. Many of his former colleagues, he adds, have a guilty conscience because "they can't believe that the financial industry is still getting away with it." He feels that bankers have a strong incentive to design products to be as complex and non-transparent as possible. These products enable them to earn returns upwards of 25 percent, because customers simply do not understand the extent to which they are being had. Structured mortgage-backed securities, the risks of which even their creators no longer understood in the end, as well as credit default swaps, which allow investors to bet on the bankruptcies of entire countries, are only the best-known examples.
The more activity there is in the markets, the higher the fluctuations and the greater the potential profits. There is little that the traders at investment banks and hedge funds fear more than a boring market, one in which the economy is humming along nicely and the prices show little movement. The conditions that are reassuring to managers and employees in the real economy often lead to depression in the financial sector.
Whoever has the fastest connection to the market stands the best chance of taking advantage of a critical millisecond and thus reacting to a price signal ahead of the competition. The computers are far more efficient than any human trader, because they can process hundreds of pieces of information per second. At the same time, such programs can also amplify -- or even trigger -- a crash. On May 6, 2010, prices on Wall Street plunged by almost 10 percent within a few minutes. To this day, no one knows exactly what caused the so-called Flash Crash. Because this sort of thing happens with growing frequency, the US Securities and Exchange Commission (SEC) has imposed a waiting period on computers in emergency situations. If the price of a stock has dropped by 10 percent within five minutes, trading is temporarily halted, allowing the human players to consider whether there is in fact a real reason for the sharp decline. Computers have long set the tone in foreign currency trading. The currency markets are now too complex for humans to manage alone. "We realized that you couldn't really manage this with the human thought process, it was too difficult, there were too many variables," says New York hedge fund manager Taylor. Many of his roughly 60 employees are IT experts, mathematicians and engineers. They feed massive volumes of data into the computers, including figures on the gross domestic product of countries, interest rates, commodities prices and inflation rates. "The only thing the computers can't handle are political developments, that is why we have me as Chief Investment Officer," says Taylor, although he points out that the money ultimately follows the instructions that are spat out by the computers.
Following the near-collapse of the markets, then-German President Horst Köhler characterized the financial markets as a "monster." And there were plenty of good intentions when it came to taming this monster. "History cannot be allowed to repeat itself," US President Barack Obama promised after the Lehman bankruptcy, while French President Sarkozy spoke of a historic opportunity to create a new world. The United States and Europe did attempt to constrain the monster that was the financial market but because the industry is globally interconnected solo efforts by individual countries are pointless. Internationally coordinated solutions are difficult. As a result, the regulations remain nothing more than piecemeal. Politicians haven't done much more than push around a lot of paper. The financial industry, new regulations are often little more than a sportsmanlike challenge to search for new tricks with which to circumvent the rules. In their conflict with politicians and regulatory agencies, banks and hedge funds have a clear competitive advantage: They hire the brightest minds in the financial world and pay them millions. The public-sector regulators can hardly compete. The banks' lobbyists can exert their influence on this process to make sure that many of the new regulations are watered down. But the monster cannot be tamed with half-hearted reforms
The European Commission has developed a draft of new capital market rules, which includes 165 pages of guidelines and another 500 pages of regulations. Under the proposed rules, banks would be required to keep more capital resources in reserve to protect against risk, and they would only be allowed to borrow up to a certain ratio. These proposals make sense, but the financial industry is already two steps ahead. It has created a world in which the usual rules for exchanges and banks do not apply: the realm of the "shadow banks." For bankers, this is by no means a world of illegal or semi-legal institutions, despite what the term implies. Hedge funds and private equity firms are known as shadow banks. In the United States, shadow banks have already incurred debts of more than $16 trillion, as compared with $13 trillion among commercial banks. It is believed highly likely by some commentators that the next crisis will emanate from this largely unregulated realm of hedge funds. Britain isn't keen on keeping too close an eye on hedge funds, because the financial industry is one of the few remaining sectors in which the British are still competitive worldwide. This poses a huge risk for the financial market.
An effective financial market reform would have to treat shadow banks the same way all other banks are treated. This would mean completely banning so-called short selling, which is essentially betting on falling prices. It would also have to improve licensing requirements on new financial instruments and ban some that already exist, because they are designed solely for speculative purposes. It would also involve establishing a number of other rules that would make doing business significantly more difficult for banks, hedge funds and private equity firms. All of these measures would rein in the financial market and put its importance for the economy into perspective. Banks would have to concentrate once again on the role they played prior to the great deregulation of the financial market, namely to organize payment transactions, manage the investments of private customers and companies and finance their business deals with loans.
But that seems unlikely. There are too many contradictions and conflicts of interest between the countries involved and governments to allow such a massive change to occur.
Speculation has always existed in economic history, but never to such an extent as today. Over time, the [finance] industry was able to rid itself of overly obstructive regulations. In fact, financial supervision was virtually eliminated. In 2004 the European Union had threatened to limit the foreign transactions of major US investment banks if the United States did not tighten its own regulations. This prompted five investment bankers to travel to Washington to exert their influence on the SEC. They proposed that the SEC be given the power to take a closer look at their high-risk positions in the future, but only if, in return, the banks would be required to keep less of their own capital in reserve to offset the risks of their transactions. From then on, the banks were able to expand their business unchecked. The second part of the deal -- the SEC's supervision -- was pursued far less energetically.
The financial industry had managed to create a belief system which held that what's good for Wall Street is good for society as a whole. Between 1973 and 1985, before deregulation began, profits in the US financial sector made up no more than 16 percent of the total profits of all US companies. This industry's share of total profits increased to 30 percent in the 1990s, and in the last decade it even reached 41 percent. It was no surprise that the myth of efficient financial markets was accepted so uncritically.
Of all people, it was an academic specializing in literary studies who managed to most accurately analyze the insanity of the financial markets and the impotence of economists. With his short 2010 book "Das Gespenst des Kapitals" ("The Specter of Capital"), Joseph Vogl wrote a bestseller that attracted attention among economists. His theory is that crises are not some kind of occupational hazard in the financial system. Instead, Vogl argues, it is the system itself that inevitably leads to new crises.
Vogl was teaching at Princeton University when Lehman Brothers collapsed. He knew nothing about financial markets, and yet he was fascinated by the "confusing empiricism," which had so little to do with theory. According to economic theory, the invisible hand of the market always leads to equilibrium, as Adam Smith wrote in his classic 1776 work "The Wealth of Nations," which Vogl refers to as the "Bible of economists." The same theory is still taught in universities today. But the theory also tells us that today's excesses in the financial markets should never have occurred. This leads Vogl to conjecture that "by no means does the capitalist economy behave the way it's supposed to." While the theory tends to be based on the economics of a village market, completely different circumstances apply in the financial markets, where both goods and expectations are being traded, and where speculative transactions are used to hedge against other speculative transactions.
Vogl describes the principle as follows: "Someone who doesn't have a product, and neither expects to have it nor will have it, sells this product to someone who also neither expects nor wants to have it, and in reality does not receive it."
This type of market will always have a tendency toward excess -- in either direction.
Paul Woolley holds the same view, but from a different perspective. He is intimately familiar with the financial markets, after having made millions working in the London financial district. He spent four years with the deeply traditional Barings Bank. He later worked for the American fund manager GSO.
In Woolley's experience, the idea that financial markets are efficient is erroneous. "All players in the financial markets behave rationally from their own perspective, but the outcome of this process can be disastrous for mankind," he says. His goal is to prove how dangerous the financial markets are. "It's like a tumor that keeps growing," he says. According to Woolley, there is no justification for the fact that this industry brings in more than 40 percent of all US corporate profits and pays the highest salaries in good years, while in bad years it is bailed out by taxpayers.
Woolley has observed the same phenomenon again and again. "The herd runs behind a trend until a crash occurs." Society, he says, also pays a high price for this behavior. "The financial industry is doing a pretty good job of destroying society," says Woolley. Many of his former colleagues, he adds, have a guilty conscience because "they can't believe that the financial industry is still getting away with it." He feels that bankers have a strong incentive to design products to be as complex and non-transparent as possible. These products enable them to earn returns upwards of 25 percent, because customers simply do not understand the extent to which they are being had. Structured mortgage-backed securities, the risks of which even their creators no longer understood in the end, as well as credit default swaps, which allow investors to bet on the bankruptcies of entire countries, are only the best-known examples.
The more activity there is in the markets, the higher the fluctuations and the greater the potential profits. There is little that the traders at investment banks and hedge funds fear more than a boring market, one in which the economy is humming along nicely and the prices show little movement. The conditions that are reassuring to managers and employees in the real economy often lead to depression in the financial sector.
Whoever has the fastest connection to the market stands the best chance of taking advantage of a critical millisecond and thus reacting to a price signal ahead of the competition. The computers are far more efficient than any human trader, because they can process hundreds of pieces of information per second. At the same time, such programs can also amplify -- or even trigger -- a crash. On May 6, 2010, prices on Wall Street plunged by almost 10 percent within a few minutes. To this day, no one knows exactly what caused the so-called Flash Crash. Because this sort of thing happens with growing frequency, the US Securities and Exchange Commission (SEC) has imposed a waiting period on computers in emergency situations. If the price of a stock has dropped by 10 percent within five minutes, trading is temporarily halted, allowing the human players to consider whether there is in fact a real reason for the sharp decline. Computers have long set the tone in foreign currency trading. The currency markets are now too complex for humans to manage alone. "We realized that you couldn't really manage this with the human thought process, it was too difficult, there were too many variables," says New York hedge fund manager Taylor. Many of his roughly 60 employees are IT experts, mathematicians and engineers. They feed massive volumes of data into the computers, including figures on the gross domestic product of countries, interest rates, commodities prices and inflation rates. "The only thing the computers can't handle are political developments, that is why we have me as Chief Investment Officer," says Taylor, although he points out that the money ultimately follows the instructions that are spat out by the computers.
Following the near-collapse of the markets, then-German President Horst Köhler characterized the financial markets as a "monster." And there were plenty of good intentions when it came to taming this monster. "History cannot be allowed to repeat itself," US President Barack Obama promised after the Lehman bankruptcy, while French President Sarkozy spoke of a historic opportunity to create a new world. The United States and Europe did attempt to constrain the monster that was the financial market but because the industry is globally interconnected solo efforts by individual countries are pointless. Internationally coordinated solutions are difficult. As a result, the regulations remain nothing more than piecemeal. Politicians haven't done much more than push around a lot of paper. The financial industry, new regulations are often little more than a sportsmanlike challenge to search for new tricks with which to circumvent the rules. In their conflict with politicians and regulatory agencies, banks and hedge funds have a clear competitive advantage: They hire the brightest minds in the financial world and pay them millions. The public-sector regulators can hardly compete. The banks' lobbyists can exert their influence on this process to make sure that many of the new regulations are watered down. But the monster cannot be tamed with half-hearted reforms
The European Commission has developed a draft of new capital market rules, which includes 165 pages of guidelines and another 500 pages of regulations. Under the proposed rules, banks would be required to keep more capital resources in reserve to protect against risk, and they would only be allowed to borrow up to a certain ratio. These proposals make sense, but the financial industry is already two steps ahead. It has created a world in which the usual rules for exchanges and banks do not apply: the realm of the "shadow banks." For bankers, this is by no means a world of illegal or semi-legal institutions, despite what the term implies. Hedge funds and private equity firms are known as shadow banks. In the United States, shadow banks have already incurred debts of more than $16 trillion, as compared with $13 trillion among commercial banks. It is believed highly likely by some commentators that the next crisis will emanate from this largely unregulated realm of hedge funds. Britain isn't keen on keeping too close an eye on hedge funds, because the financial industry is one of the few remaining sectors in which the British are still competitive worldwide. This poses a huge risk for the financial market.
An effective financial market reform would have to treat shadow banks the same way all other banks are treated. This would mean completely banning so-called short selling, which is essentially betting on falling prices. It would also have to improve licensing requirements on new financial instruments and ban some that already exist, because they are designed solely for speculative purposes. It would also involve establishing a number of other rules that would make doing business significantly more difficult for banks, hedge funds and private equity firms. All of these measures would rein in the financial market and put its importance for the economy into perspective. Banks would have to concentrate once again on the role they played prior to the great deregulation of the financial market, namely to organize payment transactions, manage the investments of private customers and companies and finance their business deals with loans.
But that seems unlikely. There are too many contradictions and conflicts of interest between the countries involved and governments to allow such a massive change to occur.
Monday, January 10, 2011
Globalisation
Globalisation has brought us closer to “the end of geography”. The intensified cross-border exchange of goods, services, capital, technology, ideas, information, legal systems, and people — is irreversible. The outright rejection of globalisation and a retreat into autarky is neither practical nor desirable.
Globalisation is not uncontrolled. The movement of people remains tightly restricted. There is a growing divergence in income levels between countries and peoples, with widening inequality among and within nations. Assets and incomes are more concentrated. Wage shares have fallen. Profit shares have risen. Capital mobility alongside labour immobility has reduced the bargaining power of organised labour. The growth in transnational flows has not been matched by an equivalent growth in global governance mechanisms to regulate them. And yet the very nature of the structure of globalised networks, which intertwine global actors and interests, ensures that no single power is able to maintain its position within the newly emerging global disorder without making compromises with other global players.
Over the last two decades, overseas development assistance from the rich to poor countries has totalled $50-80 billion per year. In the same period, every year, $500-800 billion of illegal funds have been sent from the poor to rich countries. That is, for every one dollar of aid money over the table, the West gets back $10 under the table. Illicit trade, accounting for 10 per cent of global economic product according to some estimates, could be growing at seven times the rate of growth of legal trade.In Africa, home to 36 of the world's 50 least developed countries, state weakness often has opened the door to transnational crime and terrorism. Garth le Pere and Brendan Vickers highlight six pathologies that are particularly prevalent across Africa: illegal exploitation of natural resources, terrorism, the drug trade, illegal migration and human trafficking, gun running, and money laundering.
The benefits and costs of linking and delinking are unequally distributed. Industrialised countries are mutually interdependent; developing countries are largely independent in economic relations with one another; and developing countries are highly dependent on industrialised countries. Brazil, China and India are starting to change this equation. Even before the global financial crisis (GFC), many developing countries were worried that globalisation would impinge adversely on economic sovereignty, cultural integrity and social stability. “Interdependence” among unequals translates into the dependence of some on international markets that function under the dominance of others. The GFC confirmed that absent effective regulatory institutions, markets, states and civil society can be overwhelmed by rampant transnational forces. The growth of the transnational networks threatens state institutions and civil society in many countries.
The notion that endless liberalisation, deregulation and relaxation of capital and all border controls (except labour) will assure perpetual self-sustaining growth and prosperity has proven to be delusional. The three Baltic nations that embarked on this course (Estonia, Latvia and Lithuania) — to which, for good measure, they added the flat tax — all had double-digit negative growth in 2009. For developing countries, lowering all barriers to the tides of the global economy may end up drowning much of local production. Raising barriers that are too high may be counterproductive, if not futile. National-level progress in India has gone hand in hand with an ever greater gap between the prosperity of urban, middle-class Indians and the squalor still seen in many of its 600,000 villages where most Indians live. Uprooted from ancestral lands and unable to adapt to the demands of a modern economy, aboriginal populations (Adivasis) often see revolutionary redemption as the only way out of their predicament. 40% of Indians still live below the poverty line; 93 million live in slums; 128 million do not have access to clean water; and over seven million children are still excluded from education. The statistics for malnutrition among children, and for maternal deaths, remain equally distressing.
Jorge Heine holds the Chair in Global Governance at the Balsillie School of International Affairs and is a Distinguished Fellow at the Centre for International Governance Innovation (CIGI) in Waterloo, Ontario. Ramesh Thakur is Professor of Political Science at the University of Waterloo.
Taken from The Hindu
Globalisation is not uncontrolled. The movement of people remains tightly restricted. There is a growing divergence in income levels between countries and peoples, with widening inequality among and within nations. Assets and incomes are more concentrated. Wage shares have fallen. Profit shares have risen. Capital mobility alongside labour immobility has reduced the bargaining power of organised labour. The growth in transnational flows has not been matched by an equivalent growth in global governance mechanisms to regulate them. And yet the very nature of the structure of globalised networks, which intertwine global actors and interests, ensures that no single power is able to maintain its position within the newly emerging global disorder without making compromises with other global players.
Over the last two decades, overseas development assistance from the rich to poor countries has totalled $50-80 billion per year. In the same period, every year, $500-800 billion of illegal funds have been sent from the poor to rich countries. That is, for every one dollar of aid money over the table, the West gets back $10 under the table. Illicit trade, accounting for 10 per cent of global economic product according to some estimates, could be growing at seven times the rate of growth of legal trade.In Africa, home to 36 of the world's 50 least developed countries, state weakness often has opened the door to transnational crime and terrorism. Garth le Pere and Brendan Vickers highlight six pathologies that are particularly prevalent across Africa: illegal exploitation of natural resources, terrorism, the drug trade, illegal migration and human trafficking, gun running, and money laundering.
The benefits and costs of linking and delinking are unequally distributed. Industrialised countries are mutually interdependent; developing countries are largely independent in economic relations with one another; and developing countries are highly dependent on industrialised countries. Brazil, China and India are starting to change this equation. Even before the global financial crisis (GFC), many developing countries were worried that globalisation would impinge adversely on economic sovereignty, cultural integrity and social stability. “Interdependence” among unequals translates into the dependence of some on international markets that function under the dominance of others. The GFC confirmed that absent effective regulatory institutions, markets, states and civil society can be overwhelmed by rampant transnational forces. The growth of the transnational networks threatens state institutions and civil society in many countries.
The notion that endless liberalisation, deregulation and relaxation of capital and all border controls (except labour) will assure perpetual self-sustaining growth and prosperity has proven to be delusional. The three Baltic nations that embarked on this course (Estonia, Latvia and Lithuania) — to which, for good measure, they added the flat tax — all had double-digit negative growth in 2009. For developing countries, lowering all barriers to the tides of the global economy may end up drowning much of local production. Raising barriers that are too high may be counterproductive, if not futile. National-level progress in India has gone hand in hand with an ever greater gap between the prosperity of urban, middle-class Indians and the squalor still seen in many of its 600,000 villages where most Indians live. Uprooted from ancestral lands and unable to adapt to the demands of a modern economy, aboriginal populations (Adivasis) often see revolutionary redemption as the only way out of their predicament. 40% of Indians still live below the poverty line; 93 million live in slums; 128 million do not have access to clean water; and over seven million children are still excluded from education. The statistics for malnutrition among children, and for maternal deaths, remain equally distressing.
Jorge Heine holds the Chair in Global Governance at the Balsillie School of International Affairs and is a Distinguished Fellow at the Centre for International Governance Innovation (CIGI) in Waterloo, Ontario. Ramesh Thakur is Professor of Political Science at the University of Waterloo.
Taken from The Hindu
Tuesday, January 04, 2011
Missed opportunity
Unemployment remains at nearly ten percent, the highest level in almost 30 years; foreclosures have forced millions of Americans out of their homes; and real incomes have fallen faster and further than at any time since the Great Depression. Many of those laid off fear that the jobs they have lost -- the secure, often unionized, industrial jobs that provided wealth, security, and opportunity -- will never return.
Yet a curious thing happened in the midst of all this misery. The wealthiest Americans got richer. And not just a little bit richer; a lot richer.
In 2009, the average income of the top five percent of earners went up, while on average everyone else's income went down. The share of total income going to the top one percent has increased from roughly eight percent in the 1960s to more than 20 percent today. Income inequality in the United States is higher than in any other advanced industrial democracy and by conventional measures comparable to that in countries such as Ghana, Nicaragua, and Turkmenistan.
Labor policies have made it harder for unions to organize workers and provide a countervailing force to the growing power of business; corporate governance policies have enabled corporations to lavish extravagant pay on their top executives regardless of their companies' performance; and the deregulation of financial markets has allowed banks and other financial institutions to create ever more Byzantine financial instruments that further enrich wealthy managers and investors while exposing homeowners and pensioners to ruinous risks.
Policymakers have repeatedly failed to enact reforms that would have accommodated new union-organising techniques and empowered unions to counter the growing power of business to resist labor's demands. In this realm, the United States is running a twenty-first-century economy under 1940s rules. Obsessive obstructionism is not just a symptom of general crabbiness; it is a shrewd and sensible part of a larger strategy to enrich corporations.
Rather than titanic conflict between workers and capitalists, so the argument went, pluralist democracy would produce solid incremental policy changes that would inch American society forward toward security and affluence. The dramatic and decidedly nonincremental events of the 1960s and 1970s -- the civil rights movement, the Vietnam War, and broader cultural upheaval -- punctured this view. But to business elites, the 1960s marked the nadir of their influence in American society, and they did not react passively. The era saw the stirrings of a conservative counterrevolution marked by ideological, political, and organizational developments, and particularly by the political awakening of business. So by the late 1970s, dissatisfaction with the state of the government, politics, and policy was rampant across the board, among the wealthy and the middle class alike, and the conditions were ripe for a turn against the political status quo. Conservatives, on behalf of the wealthy, were ready with ideas and organization to seize the moment
ROBERT C. LIEBERMAN, Professor of Political Science and Public Affairs at Columbia University and the author of Shifting the Color Line: Race and the American Welfare State.
http://www.foreignaffairs.com/articles/67046/robert-c-lieberman/why-the-rich-are-getting-richer
Yet a curious thing happened in the midst of all this misery. The wealthiest Americans got richer. And not just a little bit richer; a lot richer.
In 2009, the average income of the top five percent of earners went up, while on average everyone else's income went down. The share of total income going to the top one percent has increased from roughly eight percent in the 1960s to more than 20 percent today. Income inequality in the United States is higher than in any other advanced industrial democracy and by conventional measures comparable to that in countries such as Ghana, Nicaragua, and Turkmenistan.
Labor policies have made it harder for unions to organize workers and provide a countervailing force to the growing power of business; corporate governance policies have enabled corporations to lavish extravagant pay on their top executives regardless of their companies' performance; and the deregulation of financial markets has allowed banks and other financial institutions to create ever more Byzantine financial instruments that further enrich wealthy managers and investors while exposing homeowners and pensioners to ruinous risks.
Policymakers have repeatedly failed to enact reforms that would have accommodated new union-organising techniques and empowered unions to counter the growing power of business to resist labor's demands. In this realm, the United States is running a twenty-first-century economy under 1940s rules. Obsessive obstructionism is not just a symptom of general crabbiness; it is a shrewd and sensible part of a larger strategy to enrich corporations.
Rather than titanic conflict between workers and capitalists, so the argument went, pluralist democracy would produce solid incremental policy changes that would inch American society forward toward security and affluence. The dramatic and decidedly nonincremental events of the 1960s and 1970s -- the civil rights movement, the Vietnam War, and broader cultural upheaval -- punctured this view. But to business elites, the 1960s marked the nadir of their influence in American society, and they did not react passively. The era saw the stirrings of a conservative counterrevolution marked by ideological, political, and organizational developments, and particularly by the political awakening of business. So by the late 1970s, dissatisfaction with the state of the government, politics, and policy was rampant across the board, among the wealthy and the middle class alike, and the conditions were ripe for a turn against the political status quo. Conservatives, on behalf of the wealthy, were ready with ideas and organization to seize the moment
ROBERT C. LIEBERMAN, Professor of Political Science and Public Affairs at Columbia University and the author of Shifting the Color Line: Race and the American Welfare State.
http://www.foreignaffairs.com/articles/67046/robert-c-lieberman/why-the-rich-are-getting-richer
Monday, December 13, 2010
the new revolutionaries
A very good article that's worth lengthy extractsStudents carried placards with witty and sometimes obscure slogans such as “Be realistic, ask the impossible” and “Under the paving stones, the beach”. But it turned violent as groups of anarchists seized buildings and confronted the police. Pretty soon, there was an atmosphere of revolution.
No, that wasn’t a report from last week’s student demonstrations in London. It was from Paris, May 1968, when students seized the city in the spirit of the Paris Commune.
Their actions struck a chord with the trades unions, and within days 10 million French workers went out on strike. Charles De Gaulle, the president, put the military on alert for a violent revolution then scurried off to Germany. His government was forced to concede an early general election.
The current student intifada in Britain against tuition fees may not be quite in the same revolutionary league; there’s no sign yet of any general strike following the Battle of Westminster. But it is important nevertheless.
We saw general strikes in Spain and France, riots in Greece, mass demonstrations in Ireland as EU governments sought to deal with the financial crisis by driving down living standards and cutting public services. Students have invariably been in the thick of the action. Until recently, however, Britain’s streets had remained eerily calm despite widespread discontent at the prospect of swingeing spending cuts and the return of banker bonuses. It was as if people didn’t quite know what to do, were waiting for something to happen. Then, on November 10, out of a clear blue sky, 50,000 students took to the streets in London and provided the first serious challenge to the political and financial establishment since the financial crisis broke in 2007. The impact was all the greater for the fact that no-one had predicted it, not even the National Union of Students, who had organised the protest. The response was immediate; it was as if a dam had broken. Within 10 days, 34 universities had been occupied and students had launched a rolling campaign of nationwide strikes and demonstrations. It culminated last Thursday in a pitched battle in Parliament Square as angry protesters smashed their way into the Treasury itself after learning that the parliamentary bill to triple tuition fees in England had been passed by 21 votes.
As Rector of Edinburgh University I’ve spent many long hours with students in recent weeks, not least on overnight bus trips to and from London, and I’ve been astonished by how rapidly these idealistic but largely apolitical young people have been radicalised by their experience. They see their rebellion as less about fees and more about how society should be organised. They reject mindless thuggery, but they are outraged at the rewards given to bankers who caused the financial crisis, yet have escaped any penalty. They are contemptuous of politicians who’ve made ordinary people and students pay the cost of bailing out the banks. Above all, they loathe the Liberal Democrats, who have come to symbolise all that is wrong in a political culture where politicians say one thing to get elected and do the reverse when they get into office. Direct action has become cool again, for the first time since the poll tax marches 20 years ago. Students have been heavily involved in the UK Uncut flash mob demonstrations against alleged tax avoidance by directors of Topshop and Vodafone. Last Monday, students from the University College London occupation descended on Topshop in Oxford Street, to accuse Arcadia Group owner Sir Philip Green of “tax dodging”. Their slogan:"You marketise our education, and we’ll educate your market.”
In four short weeks, the students have changed the weather in British politics. They have thrown down a gauntlet to parents, politicians, trades unions and voluntary organisations to call a halt to what the anti-cuts movement calls the Coalition’s “scorched earth” policies.
Old school radicals, such as writer, Tariq Ali, who was a leading figure in the student revolts of the 1960s, believe that the student uprising is a game-changer – the spark that will ignite wider public discontent at banker capitalism and “a new cycle of protest across Europe”.
Guardian columnist Deborah Orr dismissed it all as infantile posturing and ultimately futile. “Protesting against the cuts is like protesting against water’s stubborn habit of flowing downwards.”
The Independent’s Steve Richards scoffed that protests “rarely achieve their objectives”.
It’s easy to dismiss demonstrations, especially peaceful ones, as futile. Back in 2003, over a million people marched against the Iraq invasion in the biggest popular demonstration London had ever witnessed. It didn’t stop Tony Blair launching an illegal war on the basis of weapons of mass destruction that weren’t there. In 2005, a quarter of a million people dressed entirely in white encircled Edinburgh in a largely peaceful attempt to Make Poverty History. It didn’t. Hundreds of thousands marched peacefully in Scotland against the poll tax in 1988/9, but it wasn’t until March 1990, and the riots in Trafalgar Square, that the poll tax’s fate was sealed.
Protest does have an impact, though sometimes it isn’t obvious. The campaign against the Criminal Justice Bill in 1994 did not “kill the bill” but it did moderate it. The anti-war marchers who said “not in my name” in 2003 made clear to history that the war was illegitimate in the eyes of many millions of ordinary people, and destroyed Tony Blair’s credibility. The poll tax demonstrations really did succeed in getting the community charge scrapped, though it took a couple of years and the removal of its architect, Margaret Thatcher. She was forced from office a matter of months after the London poll tax riots, by Tory ministers who realised that she had become a vote loser. In Scotland, the poll tax protests fuelled demands for a Scottish parliament as the only certain means of protecting the country from future Tory legislation. The urban race riots in 1981 in areas like Toxteth, Southall and Brixton led to the Scarman Report, police reform and multicultural policies in local government.
It’s also true that the student demos are not Paris, May 1968. But the truth is that 1968 didn’t directly achieve all that much either. Europe’s greatest popular uprising since the Second World War was a political failure. The student unrest and the strikes evaporated almost as quickly as they had emerged, and in the subsequent general election, the right-wing Gaullists were returned with an increased majority. But les evenements, while a failure electorally, were immensely significant culturally, and historians agree that 1968 was a watershed year in Europe and the world. The rebellion wasn’t really a revolution in the traditional sense and was led as much by hedonism as Marxism. The revolt captured the imaginations of young people all over Europe, and marked the end of the authoritarian, sexually repressed and socially conservative post-war era. Feminism, environmentalism and gay liberation all trace their origins to the “spirit of ’68”.
Students have always been in the vanguard of popular protest. They tend to be a weathervane for social and political change. After all, they don’t have mortgages, families and responsibilities. They haven’t been worn down by the relentless pressures of bureaucratic life, their brains fixed in an orthodox pattern. They are more open to new ideas and more willing to demand action.
Street protest is essentially an emotional experience, not dissimilar to a music festival or a football match. Being in close contact with tens of thousands of like-minded individuals unleashes a kind of euphoria, a sense of power. The noise itself is energising – the roars that run up and down the march like aural Mexican waves. I felt it for the first time in 35 years when I was on last month’s march in London. It was impressive ... and rather uncomfortable. So was having to shout dumb slogans such as: “Students and workers unite and fight!” The only workers around were the hard hats on the Whitehall building sites, and they looked down with bemused indifference. Last week’s violence in Parliament Square underlines an inconvenient truth about street protest: people get caught up in the excitement, the disinformation, the chaos, the ecstasy of violence. It ends with broken windows in the Treasury and fire extinguishers thrown from the roof of Millbank Tower, with 34 students and 12 police hospitalised. Protests, even peaceful ones, are a kind of surrogate warfare – a physical show of strength on the streets, and that is why they are so powerful. You can have any number of Facebook campaigns and Twitter flash mobs, but they lack the impact of actually getting out there and putting boots on the street.
The social media, far from replacing street protest, has become another tool for those engaged in it. Twitter was used by breakaway groups of students to wrong-foot the police. Facebook has turned into an alternative media for many young people, who are more inclined to believe what they read there than what they see in the conventional press. Social media can also replace old-style political organisation. But digitally or physically, mass protest involves a challenge to the state. Direct action, even non-violent civil disobedience, is a threat to public order, and the threat is generally met by a show of force. Kettling is, after all, a form of summary punishment where the police form a kind of impromptu prison to contain the demonstrators for up to seven hours. It’s an unpleasant experience, and intended to be: the equivalent of being taken down to the nick and thrown in the cells for a few hours. Not surprisingly, many are frightened of demonstrations altogether after being kettled. But almost as many are radicalised on the spot, realising for the first time in their sheltered lives, the reality of the power.
Len McCluskey, the new militant leader of the Unite trade union, has called for an “alliance of resistance” to spending cuts, uniting public sector workers and students. And with inflation rocketing in the new year – food prices are already rising at an annual rate of nearly 10% – and wages frozen, even many who initially supported Government cuts will start to wonder why they, and not the bankers, are paying the price of the financial crisis.
There is no sign, however, of any general strike. Most people are still in work and clinging on to their homes thanks to zero interest rates. Public sector unions have wisely been keeping their heads down, aware that – as a relatively privileged group of workers who still have jobs, increments and pensions – they may find it hard to win much public support from private sector workers who are really feeling the pinch. The big challenge for public sector unions in the new year will be to demonstrate to the 70% of employees who don’t work for the state that they can still support those who do in opposing public spending cuts.
But the students have given a lead Рa very powerful one. Apathy is pass̩. Commitment is back. And now the fight against fees will move from Westminster to Holyrood as students try to defend free higher education in Scotland. A generation is being radicalised, just as many of their parents were by les evenements in 1968, when the Rolling Stones celebrated Street Fighting Man.
From The Herald
Thursday, November 25, 2010
Greedy Bankers Or Capitialism
Recessions are inherent in the boom bust cycle of capital. "Greedy bankers" are a scapegoat distracting from the fact that this will happen again and again and again. Blaming them implies you could have a nicer capitalism with good bankers. Pinning the blame on greedy bankers lets the real culprits off the hook. This is not just a financial crisis, but a crisis of the whole capitalist economy in which the whole business and political class are fully implicated.
If a few get rich while millions lose out big style, then this is capitalism working as it only can work. If there is recession followed by boom followed by recession, then capitalism is working healthily. Capitalism is working perfectly well. It works the only way it can work - in an anarchic and chaotic manner, negligent and oblivious to the misery and suffering it creates. As usual it is the working class that suffers the cutbacks, the reduced standard of living, and the vicious and right-wing reform programmes that every such crisis engenders.
That capitalism is chaotic is evident. Its frequent booms and slumps— its unavoidable features— become global. The disasters get bigger, and nastier. Those who pointed to the relatively rapid rate of capital accumulation to deny the socialist contention that world capitalism has been in a depressive state since the end of the post-war boom in the early 1970s have had their come-uppance. Marx was right. They were wrong. There can be no such thing as a permanent boom. Marx, the first person to provide a convincing analysis of how the capitalist economic system worked.Capital accumulation proceeds by fits and starts, periods of relatively rapid growth being followed by periods of contraction and stagnation. The graph of long-term growth under capitalism is not a straight line moving up from left to right but a jagged line with peaks and troughs, with each peak normally higher than the previous one. Marx argued that this cyclical pattern of growth was not just accidental but was inevitable under capitalism-it was the way capitalism functioned and developed, its "law of motion" as he put it-with each period of rapid growth ending in a slump and each slump preparing the conditions for the next round of growth.Capitalism is driven, not by consumer demand, but by the drive to make and accumulate profits as further capital and that this is by no means a smooth process.
In order to maintain or increase their share of the market and realise the surplus value embodied in their products, capitalist firms are compelled by competition to reduce their costs by improving their productivity, in particular by the introduction of more productive machines. This leads to an increase in overall productive capacity. During the period of recovery that follows a slump this poses no problem as the market is beginning to recover and expand again. However, as the competitive pressures to increase productive capacity continue, the point is eventually reached when productive capacity in a key industry or group of industries comes to outstrip the market demand for its products. At this point a crisis of overproduction breaks out. As profits fall, production is cut back, workers are laid off and, through the knock-on effect on other industries, the market shrinks, so inaugurating the period of slump. During the slump, the least productive machines are taken out of production and capital is depreciated or simply written off. This purge of under-productive machinery and over-valued capital eventually creates the conditions which allow capitalist growth to recommence, so beginning the boom-slump cycle again. This is how capitalism has developed and continues to develop.
A key factor in this is that capitalism's financial apparatus is largely built on confidence that transactions will be smooth and payments will be met. When this confidence in the efficiency of trade and commerce starts to ebb then things can take spectacular and serious turns for the worse. The erosion of financial confidence is one of the ways in which a downturn in one sector or country can spread to others.
The financial crisis is a reflection of the fact that stock exchange and foreign currency gamblers have realised that countries have expanded their productive capacities beyond market demand. One consequence of this period of slow growth was that significant amounts of profits were not being reinvested in production but, instead, being held in liquid form and invested in financial assets with the aim of making as large a short-term profit in as short a time as possible. All the multinational corporations had treasury departments engaged in financial speculation of one form or another whether on the stock exchange, the bond market, currency transactions, commodity markets or dodgy hedges such as derivatives.
This extra demand for financial assets, deriving from non-reinvested profits, has driven up their price, so creating the anomalous situation of a stock exchange boom in what is essentially a depressed economy. Most of the financial transactions that took place were not investments of productive capital- not used to set up factories or to buy machinery, equipment or raw materials-but are to buy and sell shares or bonds or foreign currencies or commodity futures or property or failing companies to asset strip them. Such purely financial transactions are utterly unproductive, even from a capitalist point of view. Not only do they not result in the production of a single extra item of wealth but they don't even increase the amount of surplus value available for sharing amongst the various sections of the capitalist class. It's a zero-sum game. As socialists have always maintained, stock exchanges are places where capitalists gamble and try to cheat each other with a view to acquiring as large a mass as possible of the surplus value that has already been produced by and robbed from the workforce.
The bankers are not wicked finance capitalists against whom the anger of workers should particularly be directed, just capitalists with their capital invested in a particular line of business, no more nor less reprehensible than the rest of the blood sucking parasitic capitalist class.
If a few get rich while millions lose out big style, then this is capitalism working as it only can work. If there is recession followed by boom followed by recession, then capitalism is working healthily. Capitalism is working perfectly well. It works the only way it can work - in an anarchic and chaotic manner, negligent and oblivious to the misery and suffering it creates. As usual it is the working class that suffers the cutbacks, the reduced standard of living, and the vicious and right-wing reform programmes that every such crisis engenders.
That capitalism is chaotic is evident. Its frequent booms and slumps— its unavoidable features— become global. The disasters get bigger, and nastier. Those who pointed to the relatively rapid rate of capital accumulation to deny the socialist contention that world capitalism has been in a depressive state since the end of the post-war boom in the early 1970s have had their come-uppance. Marx was right. They were wrong. There can be no such thing as a permanent boom. Marx, the first person to provide a convincing analysis of how the capitalist economic system worked.Capital accumulation proceeds by fits and starts, periods of relatively rapid growth being followed by periods of contraction and stagnation. The graph of long-term growth under capitalism is not a straight line moving up from left to right but a jagged line with peaks and troughs, with each peak normally higher than the previous one. Marx argued that this cyclical pattern of growth was not just accidental but was inevitable under capitalism-it was the way capitalism functioned and developed, its "law of motion" as he put it-with each period of rapid growth ending in a slump and each slump preparing the conditions for the next round of growth.Capitalism is driven, not by consumer demand, but by the drive to make and accumulate profits as further capital and that this is by no means a smooth process.
In order to maintain or increase their share of the market and realise the surplus value embodied in their products, capitalist firms are compelled by competition to reduce their costs by improving their productivity, in particular by the introduction of more productive machines. This leads to an increase in overall productive capacity. During the period of recovery that follows a slump this poses no problem as the market is beginning to recover and expand again. However, as the competitive pressures to increase productive capacity continue, the point is eventually reached when productive capacity in a key industry or group of industries comes to outstrip the market demand for its products. At this point a crisis of overproduction breaks out. As profits fall, production is cut back, workers are laid off and, through the knock-on effect on other industries, the market shrinks, so inaugurating the period of slump. During the slump, the least productive machines are taken out of production and capital is depreciated or simply written off. This purge of under-productive machinery and over-valued capital eventually creates the conditions which allow capitalist growth to recommence, so beginning the boom-slump cycle again. This is how capitalism has developed and continues to develop.
A key factor in this is that capitalism's financial apparatus is largely built on confidence that transactions will be smooth and payments will be met. When this confidence in the efficiency of trade and commerce starts to ebb then things can take spectacular and serious turns for the worse. The erosion of financial confidence is one of the ways in which a downturn in one sector or country can spread to others.
The financial crisis is a reflection of the fact that stock exchange and foreign currency gamblers have realised that countries have expanded their productive capacities beyond market demand. One consequence of this period of slow growth was that significant amounts of profits were not being reinvested in production but, instead, being held in liquid form and invested in financial assets with the aim of making as large a short-term profit in as short a time as possible. All the multinational corporations had treasury departments engaged in financial speculation of one form or another whether on the stock exchange, the bond market, currency transactions, commodity markets or dodgy hedges such as derivatives.
This extra demand for financial assets, deriving from non-reinvested profits, has driven up their price, so creating the anomalous situation of a stock exchange boom in what is essentially a depressed economy. Most of the financial transactions that took place were not investments of productive capital- not used to set up factories or to buy machinery, equipment or raw materials-but are to buy and sell shares or bonds or foreign currencies or commodity futures or property or failing companies to asset strip them. Such purely financial transactions are utterly unproductive, even from a capitalist point of view. Not only do they not result in the production of a single extra item of wealth but they don't even increase the amount of surplus value available for sharing amongst the various sections of the capitalist class. It's a zero-sum game. As socialists have always maintained, stock exchanges are places where capitalists gamble and try to cheat each other with a view to acquiring as large a mass as possible of the surplus value that has already been produced by and robbed from the workforce.
The bankers are not wicked finance capitalists against whom the anger of workers should particularly be directed, just capitalists with their capital invested in a particular line of business, no more nor less reprehensible than the rest of the blood sucking parasitic capitalist class.
Thursday, February 26, 2009
capital confusion
A quick peruse of this mornings paper and i find capitalism confuses even itself .
The figures confirm that the UK had plunged into recession at the end of last year and with interest rates nearing zero, the Bank of England is moving towards buying assets with newly-created money to try and boost demand.
Both professional services, such as accountants and legal firms, and consumer businesses, such as hotels and restaurants, reported sharp falls in profitability and warned of plans to scale back investments and jobs. The numbers employed also declined at a record rate,
Companies selling to other businesses likewise saw record rates of decline in job numbers and profitability, with worries about the ability to raise funds for expansion.
The CBI's chief economic adviser, Ian McCafferty, said: "Consumers are clearly reining back their discretionary spending - postponing holidays, and spending less on leisure activities and personal care.Similarly, an already deteriorating demand for business services such as advertising, legal advice and temporary office staff has slumped in recent months .Jobs are already being lost at the fastest rate in over 10 years from the whole of the service sector, and firms' expectations suggest conditions will remain depressed for some time to come."
Bruce Stout, manager of Aberdeen Asset Management's £568m Murray International investment trust, said
"Political rhetoric claimed the nation had never been in better shape heading into a downturn - in reality it was the complete opposite Policymakers outwardly delivered assurances whilst internally they panicked. Interest rates were slashed to historic lows whilst simultaneously fiscal pledges and spending rocketed. The effects of such drastic measures have yet to be felt, but given the chronic state of the banking system and the sheer scale of debt outstanding, the UK economy is likely to suffer the worst recession of all G7 countries."
Professor Tim Besley states
"The idea that we can and should use short-term interest rates to quell asset booms or to curb lending practices is intellectually and practically suspect," he adds. "Put another way, all those charged with getting us out of this mess are now having to make it up as they go. And one obvious risk of throwing too many weapons at the credit crunch is that inflation turns negative for too long and we find ourselves in that very uncomfortable downwards spiral experienced by the Japanese throughout their lost decade. "
Tuesday, November 04, 2008
Chinese Bubble Pricked
China's manufacturing contracted by the most on record last month as the global financial crisis cut demand for exports, a second survey showed. A government-backed survey released on Nov. 1 also showed a record contraction, adding to concern that the world's fastest- growing economy may slump.
With export orders falling because of the global slowdown and rising raw material and labor costs, more than 68,000 small companies nationwide collapsed in the first half of 2008 and about 2.5 million jobs in the Pearl River Delta region may be lost by the end of the year, according to government and industry estimates.
As the economy has soured, dissatisfaction has grown: Since mid-October, there have been dozens of labor protests involving thousands of workers at major exporters, including several publicly listed companies. China needs to grow in order to keep generating enough factory jobs to maintain stability in the labor market, as millions of peasants continue to pour into Chinese cities in search of work.In Jiangsu province, the government extended unemployment benefits to migrant workers laid off from ailing factories; these workers had previously been shut out of public services because they don't have residency cards.
The Guangdong provincial government in the south is scrambling to set up a special fund to compensate laid-off workers in order to "protect against some of the financial and social problems caused by such closures."
In the eastern city of Wujiang, nearly 1,000 workers from bankrupt Chunyu Textile Co. received four months' salary on Oct. 27 after they swarmed the area's four main roads to draw attention to their cause. After more than 1,000 workers for home appliance maker BEP International Holdings gathered outside the factory to protest, district officials gave them $44 each late last month. The employees were also allowed to continue living in the defunct factory's dormitories for free. The same week, the government offered three months' back pay to the 900 workers at Gangsheng, an electronics supplier, after they staged a protest at a shop near their factory.
In the neighboring city of Dongguan, the local government handed out about $3.5 million on Oct. 21 to the employees of Smart Union -- which sold its toys to Mattel , Disney and Hasbro -- after the 7,000 workers staged a strike.Employees became nervous when the owners slipped three months behind on salary payments. The workers occupied the factory and the surrounding streets until government officials promised them they would be paid.
China's most revered companies, whose growth once seemed limitless, have reported surprising losses in the past few days. Air China , the nation's biggest international carrier, posted its first loss in seven quarters because of declining passenger numbers and wrong-way bets on fuel prices.Bank of China , the nation's largest foreign-exchange lender, said that as credit-market losses went up, its profit growth went down to its slowest in two years.
China's leaders have made a variety of moves to try to stabilize the economy -- three interest rate cuts in six weeks, new export tax rebates, reduced costs for home buyers, and billions spent on infrastructure.
"...What the government fears most is workers making trouble..." Hu said.
"....no one wants to hire you because they know about the blockade and now we have a bad reputation..." Jia said.
With export orders falling because of the global slowdown and rising raw material and labor costs, more than 68,000 small companies nationwide collapsed in the first half of 2008 and about 2.5 million jobs in the Pearl River Delta region may be lost by the end of the year, according to government and industry estimates.
As the economy has soured, dissatisfaction has grown: Since mid-October, there have been dozens of labor protests involving thousands of workers at major exporters, including several publicly listed companies. China needs to grow in order to keep generating enough factory jobs to maintain stability in the labor market, as millions of peasants continue to pour into Chinese cities in search of work.In Jiangsu province, the government extended unemployment benefits to migrant workers laid off from ailing factories; these workers had previously been shut out of public services because they don't have residency cards.
The Guangdong provincial government in the south is scrambling to set up a special fund to compensate laid-off workers in order to "protect against some of the financial and social problems caused by such closures."
In the eastern city of Wujiang, nearly 1,000 workers from bankrupt Chunyu Textile Co. received four months' salary on Oct. 27 after they swarmed the area's four main roads to draw attention to their cause. After more than 1,000 workers for home appliance maker BEP International Holdings gathered outside the factory to protest, district officials gave them $44 each late last month. The employees were also allowed to continue living in the defunct factory's dormitories for free. The same week, the government offered three months' back pay to the 900 workers at Gangsheng, an electronics supplier, after they staged a protest at a shop near their factory.
In the neighboring city of Dongguan, the local government handed out about $3.5 million on Oct. 21 to the employees of Smart Union -- which sold its toys to Mattel , Disney and Hasbro -- after the 7,000 workers staged a strike.Employees became nervous when the owners slipped three months behind on salary payments. The workers occupied the factory and the surrounding streets until government officials promised them they would be paid.
China's most revered companies, whose growth once seemed limitless, have reported surprising losses in the past few days. Air China , the nation's biggest international carrier, posted its first loss in seven quarters because of declining passenger numbers and wrong-way bets on fuel prices.Bank of China , the nation's largest foreign-exchange lender, said that as credit-market losses went up, its profit growth went down to its slowest in two years.
China's leaders have made a variety of moves to try to stabilize the economy -- three interest rate cuts in six weeks, new export tax rebates, reduced costs for home buyers, and billions spent on infrastructure.
"...What the government fears most is workers making trouble..." Hu said.
"....no one wants to hire you because they know about the blockade and now we have a bad reputation..." Jia said.
Subscribe to:
Posts (Atom)