Saturday, April 30, 2011

The Tipping Point

It seems as though the divide between the wealthy and the rest of us is becoming so obvious that observers across the country can't avoid seeing the effects of wealth inequality. When the divide hits the mainstream press the problem will be laid bare for all to see. This article by Justice Little of Taipan Publishing Group goes to the extreme Mad Max scenario that I think is unlikely. I do believe the marriage between corporate and political leaders will get tighter, leading to the open exploitation this country as Fascist state. The true meaning of Mussolini's Fascist ideals was less an ideology or racist theory and more the sublimation of the individual to the needs to corporate and political leaders. If you think the attacks on unions don't resemble the Fascist stirrings in Europe in the 1920s you need to look to the past to see our future. Nevertheless when Wal Mart notices that people are running out of money each and every month everyone should be able to understand there is a serious problem brewing in America.

For months now we have talked about the devil's bargain struck by the powers that be. In that bargain, the artificial recovery has been paid for with stimulus, dollar debasement and corporate cost cutting, with the piece de resistance of jobs moving offshore.

This is a combo that works well for the upper regions of U.S. economic society -- the top 30%. The "wealth effect" so cherished by the Federal Reserve, in which Americans feel better about the value of their paper assets going up, requires owning a good chunk of paper assets in the first place.

But the problem with the scheme -- as asset values are pumped up and purchasing power is eroded -- comes with the bottom 70%.

These are the people who do not matter to the stock market, because they do not drive spending trends. They are not buying yoga pants at LuluLemon Athletica or burritos at Chipotle Mexican Grill. They are not gorging on "stuff." But the top 30% are picking up the slack quite handily... so Wall Street doesn't care.

Americans are quite good at buying "stuff." And we haven't stopped. As The Wall Street Journal reports,

A non-scientific study of Commerce Department data suggests that in February, U.S. consumers spent an annualized $1.2 trillion on non-essential stuff including pleasure boats, jewelry, booze, gambling and candy. That's 11.2% of total consumer spending, up from 9.3% a decade earlier and only 4% in 1959, adjusted for inflation.

So what's the problem, if we are now back to our old ways? It comes back to that 70/30 split again. The gap between Americans with discretionary income and those without is getting wider and wider. It threatens to become a yawning gulf.

We can see from the above data that the buying binge is still ongoing. But there is further evidence that the lower strata of U.S. earners are not participating. This is where the cracks come in.

The Canary in the Low-Price Coal Mine
When it comes to the consumer spending habits of the financially strapped, Wal-Mart is an excellent barometer. The low-price behemoth is spread all across the United States, and attracts those shoppers who need to save a buck.

And right now, Wal-Mart CEO Mike Duke has an alarming message: His customers are running out of money.

Duke believes prices at the pump are a big factor. "We're seeing core consumers under a lot of pressure," he said in New York. "There's no doubt that rising fuel prices are having an impact."

"Purchases are really dropping off by the end of the month even more than last year," the Wal-Mart CEO added. "This end-of-month cycle is growing to be a concern."

Wal-Mart is sensitive to the calendar, CNNMoney reports, because of the lower income shopper's habit of living "paycheck to paycheck." Bulk purchases are made early in the month, just after getting paid. As things get tighter, Wal-Mart shoppers are left with more and more month at the end of their money (rather than the other way round).

This split between haves and have-nots is exactly what one would expect from policies as they exist now. The result is practically tailor-made to order. In bailing out the megabanks to the tune of hundreds of millions to trillions, Washington and Wall Street robbed taxpayers blind to save a connected few. And the Federal Reserve's broader policies, aimed at pumping up the stock market, are destroying the U.S. economy from the bottom up through creeping inflation.

Facing the "Tipping Point"

Craig Johnson, president of research firm Consumer Growth Partners, believes we are headed toward a potential "tipping point" -- and may have already passed it.

Johnson notes that, in five of the six U.S. recessions since 1970, energy prices crossing a key threshold have played a role. The situation is even worse this time -- possibly the worst since the 1973-75 recession -- because food costs are rising sharply too.

Again, you aren't hearing about this on CNBC because the stock market doesn't care. The invisible many are not playing a significant role in the earnings of public companies tied to discretionary spending.

But this trend is important because it is so unsustainable... and because the key drivers behind it are not getting better, they are getting worse.

As long as central banks attempt to prop up markets with artificial stimulus -- and emerging market food and energy demand continues to rise -- cost of living expenses will continue to rise too. There is the double whammy of a "speculative bid" under crude oil, grains, gasoline and other staples, coupled with the real fundamental shift of higher demand and less supply.

The possibility remains that crude oil could see a price collapse. In the event of a deflationary bust, all commodities could fall sharply in price. (We will talk more about that soon.)

But if that happened, it would only be against the backdrop of the global economy heading into a new tailspin. And once things picked up again -- so too would the food and energy price ramp.

A Society Destroyed

This focus on the less fortunate is not emphasized as a call to class warfare or a bleeding-heart liberal crusade. Rather, it comes from a genuine source of alarm. If the divide between "haves" and "have-nots" grows too wide, America as we know it could be pulled to pieces.

Various studies have shown that large gaps in economic status are not good for society. Your humble editor witnessed this in a trip to Buenos Aires, Argentina, a few years back.

Buenos Aires itself, known as "the Paris of Latin America," was architecturally gorgeous. In terms of economic mix, you had a small population of those who were thriving -- the type not to notice food and energy costs at all -- and a much larger contingent of those struggling to get by on the equivalent of $5 a day.

When Argentina defaulted on its debt early in the last decade, low-income earners were hit hardest. In Buenos Aires alone, there were an estimated 40,000 "cartoneros," or waste pickers -- destitute souls who scraped by looking for recyclables among garbage and pawnable items at dump sites.

As the venerable Lao Tzu once said, "If you do not change direction, you may end up where you are heading." Where we are heading now, in respect to American society at large, is toward a sort of Mad Max wasteland, in which a small portion of the population lives well with the equivalent of security fences and barbed wire, as the bulk of the population slowly descends into desperation and squalor.

It is not a pretty picture, but then neither is the idea of running out of money at Wal-Mart...

Not Used to It

The final concern here is the very real long-term threat of political and secular violence. America is slowly becoming like many other places in the world, where barbed wire and pockets of wealth among poverty are the norm.

But a crucial difference is that lower-middle-class Americans -- a large portion of the 70% -- are not accustomed to being destitute or nearly so.

When a segment of society has psychologically accepted the way things are, there is more of a tendency toward dormancy. The constant poor quietly accept their fate.

Yet those who find themselves newly headed in that direction -- with memories of what used to be -- are not likely to be so complacent. Instead, they are likely to get angry. There is a hidden fuse that has been lit, with physical and political violence the outcome when the bomb it is attached to explodes.

Your editor shudders to think what kind of political backlash we will see -- and what vicious speeches and demagogue measures will be taken on both sides -- when the weight of the problem hits full force. Be prepared, because none of this is happening by accident. We are progressing down a very deliberate path -- a path of irresponsibility, greed and larceny, taking from the clueless many to enrich the connected few -- and will soon enough be reaping what we sow.

Friday, April 29, 2011

President Obama's Failures

From Black Agenda Report,

Top Ten Answers To Excuses For Obama's Betrayals and Failures

by BAR managing editor Bruce A. Dixon

Early this month, panelists on MSNBC's corporate “Black Agenda” show agreed that black dissatisfaction, disappointment and disaffection with the Obama administration was growing. The brick and mortar of the Black Wall Around Barack Obama are the plentiful and often contradictory excuses which black misleaders and ordinary people offer and accept for his administration's many failures and betrayals. These excuses are important because the illusion of nearly unanimous black support, no matter what he does or does not do remains President Obama's most vital political asset.

It's high time for black America to stop making and to stop accepting excuses for the presidency of Barack Obama.

So as a public service, we offer this list of the top ten such excuses, followed by a quick and effective answer for each. We invite our gentle readers to try these out on the Obamaphiles you meet on a daily basis, your family, friends, co-workers, classmates and others. Be respectful, not derisive, and remember that not many adults will change their minds in real time in front of you and tell you so. Be mindful of opportunities to conduct your discussions with Obamaphiles in front of one or more bystanders. You're more likely to convert them. Let us know how it works out, and use the comments section if you run into new and noteworthy excuses.

EXCUSE NUMBER 10: “You can't expect him to address issues like black unemployment, which has been double the white rate forever. He's not the president of Black America, and you can't expect him to act like it. He's the president of the United States of America...”

QUICK ANSWER: Obama wasn't drafted, he volunteered for the job, he campaigned for it, said he was “Joshua” to Dr. King's Moses, and lectured us on the Fierce Urgency of Now. He campaigned like a “civil rights leader.” His web site said “Join the Movement!” If the black president can't or won't address black mass incarceration, black unemployment, HIV-AIDS, the foreclosure crisis and other matters that disproportionately affect our communities, then why do we have any kind of collective racial obligation to support him?

EXCUSE NUMBER 9: “President Obama is doing the best he can. It took Bush and Cheney eight whole years to screw things up this thoroughly. Obama's only been in office (fill in the blank) years...”

QUICK ANSWER: This excuse supposes Barack Obama really is dedicated to undoing the horrible damage of the Bush-Cheney crime wave. There is no evidence of this. You have to look mighty long and hard to find any Bush era crime that Obama has reversed. But you can find plenty of Bush era crimes and atrocities President Obama has doubled down on.

Here are a few --- sold to Democrats early on as a “peace candidate,” by August 2008 Obama had endorsed Bush's Iraq war “surge” and promised to escalate the war in Afghanistan, which he did by expanding it into Pakistan. Obama refused to prosecute Bush and Cheney out of office, or any of their torturers, and has declined to go after telecom companies which intercepted the personal traffic of millions, or the banks which are going through with fraudulent foreclosures. The original Bush bailout was only passed when candidate Obama came to Washington to personally herd the Black Caucus and reluctant Democrats into passing it. Once in office, Obama increased the bailout from Bush's $3 trillion to more than $20 trillion. The Obama White House proposed not one new law, not one single regulatory change that would mitigate or prevent another catastrophe like last year's Deepwater Horizon oil blowout in the Gulf of Mexico.

Whatever “doing the best he can means, it does not include undoing the Bush-Cheney crime wave.

EXCUSE NUMBER 8: “President Obama can't do all the things he wants to do because he's being blocked by Democratic blue dogs. (b) racist tea party Republicans (c.) Fox News...”

QUICK ANSWER: This was a widely heard excuse during the time Democrats controlled Congress. It's really not just an excuse for the Obama administration, but for Democrats in general. But it was Obama's own chief of staff Rahm Emanuel who, in 2006 funneled vast amounts of campaign cash to right wing Democrats whenever they were challenged in primary elections by Democrats opposed to the war. Obama even declared himself a “blue dog” New Democrat once in the White House.

EXCUSE NUMBER 7: “President Obama's agenda is being obstructed by Fox News and racist tea party Republicans...”

QUICK ANSWER: In 2009 and 2010 Republicans were in the minority in both houses of Congress. They could pass nothing, subpoena nobody, investigate nothing. They only gained control of Congress at the beginning of 2011. But even without the blessing of Congress, the president and the executive branch possess vast powers to change the nation's direction. Obama could direct the US Post Office and federal agencies to purchase electric cars, trucks and buses, for example, creating countless green jobs and market incentives for improving those technologies. The vast research and manufacturing capacity of General Motors, which the White House controlled without any congressional oversight, could have been directed to manufacture high speed rail, electric vehicles or improved home building and retrofit materials that radically reduce carbon emissions and provide jobs for millions.

EXCUSE NUMBER 6: “The president doesn't have 60 votes in the Senate. Filibuster rules mean that without a super-majority he and his party can't get anything through the Senate...”

QUICK ANSWER: Like excuses 7 and 8, this one is designed to deflect blame not just from the president, but from Democrats in Congress. The president and his party passed their 2009 health care bill, which was really a bailout of health insurance companies through the Senate with a simple majority. Congressional Democrats can sweep aside the super majority rule any time they choose. They choose not to. But the excuse is too valuable to lose.

EXCUSE NUMBER 5: “President Obama isn't superman and can't do everything. People like the Congressional Black Caucus and other black leaders need to stand up and take some responsibility...”

QUICK ANSWER: This gem of an excuse was offered by the president's put bull, the Rev. Al Sharpton on MSNBC's corporate “Black Agenda” in early April. The Congressional Black Caucus has endorsed the budget proposals of the Congressional Progressive Caucus, which call for a reduction in the military budget, an end to bank bailouts, along with new taxes on Wall Street speculators and the wealthy to guarantee the funding of Medicaid, Medicare and social security. That's leadership. President Obama won't touch the subject with a ten foot pole because that's not the direction in which he chooses to lead. Nobody is expecting superman, but a leader with a vision is a reasonable expectation.

EXCUSE NUMBER 4: “The Congressional Black Caucus and other black leaders and complainers in general need to shut up and sit down and support the president, or there will be nothing he can do anyway....”

QUICK ANSWER: Never a man bothered by contradiction, Rev. Al Sharpton shouted this excuse within seconds of excuse number 7, in his efforts to drown out the questions of Cornel West. Most of the visible black leadership is already supporting President Obama. The question is, aside from the symbolic value of a pretty black family in that big White House, whether the black community is receiving anything in return for its overwhelming support of the president. Even the show's host Ed Schulz remarked at its conclusion that black leaders seemed afraid to demand anything in particular from the black president. If we give support, but get nothing, isn't that a rather one-sided bargain? If we give support and actually get kicked in return (see answer 9), isn't that a kind of abusive relationship?

EXCUSE NUMBER 3: “At least he took care of health care. Millions of people who were not insured before will be insured by the bill Obama passed in 2009....”

QUICK ANSWER: Not really. When President Johnson passed Medicare back in 1965 it took eleven months to start delivering medical care to millions. The obvious political calculus of the time was that its popularity would guarantee Johnson's re-election in 1968. Presidents do still run for re-election. If Obama's health care bill really extended medical care to additional millions, why did he delay its implementation till 2014, after what he hopes is his re-election. And why is the Obama White House granting wave after wave of exemptions to its employer mandate provisions, including to high-profit, low wage employers like McDonalds? The employer mandate is already full of holes, and these are growing more numerous every week. Arguably, the single unambiguously good thing in the Obama health care bill was the extension of Medicaid to millions not covered before. But Obama's willingness to put Medicaid “on the table” in deficit reduction negotiations virtually guarantees that gains in the number of the insured may be largely erased before the bill takes effect in 2014, no matter who is president then. And as millions of American families know, being insured is no guarantee that health care will be affordable or even available.

EXCUSE NUMBER 2: “Only the most naïve souls among us believe a president can or should work for justice at home and peace abroad. Wise up. Do for self, and be content with the symbolic value of a pretty brown family in that big White House.

QUICK ANSWER: This pernicious excuse is advanced by people who imagine themselves so much more sophisticated than the rest of us. Obama's press secretary mumbled a version of it when he declared that people who wanted peace and justice should be drug tested. The president himself has echoed similar disparagements of the millions who accepted his campaign rhetoric at face value. The worldly wise who offer this excuse are attacking the people's very democratic right to dream a better world and demand it, as though this is only a privilege of children. We will only stop being children when we reject this excuse out of hand.

EXCUSE NUMBER 1: “It's our fault the Obama presidency hasn't kept its commitments. We need to 'make him do it.'”

QUICK ANSWER: This excuse is based on an apocryphal tale about a 1940s meeting between black socialist and labor leader A. Philip Randolph, the first lady and President Franklin Roosevelt. After hearing a litany of black demands, Roosevelt is supposed to have said he agreed with everything Randolph told him, but that he must compel the president to do those worthy things.

If the story is true, we absolutely know what Randolph's demands must have been at the time. They would have included an end to black exclusion from jobs in the war industries, (they still called them that in the 1940s), and end to segregation in the military, along with anti-lynching and fair housing laws. The only thing African Americans got in Roosevelt's lifetime was the limited opening of some war industry plants to blacks. Military segregation persisted until 1948, when Harry Truman felt pressed by the specter of black support for third party candidate Henry Wallace. Fair housing statutes had to wait twenty more years, and anti-lynching laws never happened at all. Federal officials in the 1960s began prosecuting white vigilantes under federal civil rights statute, achieving some of the effect of a federal anti-lynch statute.

The lesson here is that even when black demands are limited and “reasonable,” when the first lady is your advocate and the president says he wants to meet them, that the political culture of the United States is sufficiently democracy-proof and people-proof to resist black demands for a long time to come. You cannot make a US president do what he fundamentally doesn't want to. Michelle Obama is nice to look at, but she is no Eleanor Roosevelt. Franklin Roosevelt used to publicly bask in the hatred of wealthy banksters. Barack Obama's dream is mostly not to piss off rich people.

Excuses 1 and 2 simply say the president's betrayals and failures are somehow our fault.

This is our own list of excuses. We know there are others, and other answers. Again, we invite our readers to use the comments section to offer their own, along with their most effective answers, and to share their experiences answering the cloud of excuses emanating from Barack Obama's mostly unconditional supporters.

Bruce A. Dixon is managing editor at Black Agenda Report, and based in Marietta GA, where he is a state committee member of the Georgia Green Party, and one of the principals of a technology and consulting firm.

Wednesday, April 20, 2011

The Forgotten Man

I was reading this essay at Truthdig, originally from the Washington Post and that proverbial ligth bulb went off in my head. I have been saying this for years, that the people in charge, the people who buy our elected officials and set the policies have lost sight of the need to support and sustain the rest of us in this country. It isn't enough to make a profit, nowadays corporate leaders want maximum profits even if that requires moving operations outside the US, or dumping health benefits, pensions or any other social programs that make life worth living for working Americans. Personally I don't see the point of racking up hundreds of millions more if your neighbor is suffering, but I guess people with disposable capital have their eyes focused somewhere other than the rest of this country. I fear we will have to go through much suffering before the balance will be restored.


By E.J. Dionne, Jr. The American ruling class is failing us—and itself. . At other moments in our history, the informal networks of the wealthy and powerful who often wield at least as much influence as our elected politicians accepted that their good fortune imposed an obligation: to reform and thus preserve the system that allowed them to do so well. They advocated social decency out of self-interest (reasonably fair societies are more stable) but also from an old-fashioned sense of civic duty. “Noblesse oblige” sounds bad until it doesn’t exist anymore.


An enlightened ruling class understands that it can get richer and its riches will be more secure if prosperity is broadly shared, if government is investing in productive projects that lift the whole society, and if social mobility allows some circulation of the elites. A ruling class closed to new talent doesn’t remain a ruling class for long. . But a funny thing happened to the American ruling class: It stopped being concerned with the health of society as a whole and became almost entirely obsessed with money.


Oh yes, there are bighearted rich people when it comes to private charity. Heck, David Koch, the now famous libertarian-conservative donor, has been extremely generous to the arts, notably to New York’s Lincoln Center. . Yet when it comes to governing, the ruling class now devotes itself in large part to utterly self-involved lobbying. Its main passion has been to slash taxation on the wealthy, particularly on the financial class that has gained the most over the last 20 years. By winning much lower tax rates on capital gains and dividends, it’s done a heck of a job.


Listen to David Cay Johnston, the author of “Free Lunch” and a columnist for Tax Notes. “The effective rate for the top 400 taxpayers has gone from 30 cents on the dollar in 1993 to 22 cents at the end of the Clinton years to 16.6 cents under Bush,” he said in a telephone interview. “So their effective rate has gone down more than 40 percent.” . He added: “The overarching drive right now is to push the burden of government, of taxes, down the income ladder.” . And you wonder where the deficit came from. . If the ruling class were as worried about the deficit as it claims to be, it would accept that the wealthiest people in society have a duty to pony up more for the very government whose police power and military protect them, their property and their wealth.


The influence of the ruling class comes from its position in the economy and its ability to pay for the politicians’ campaigns. There are not a lot of working-class people at those fundraisers President Barack Obama has been attending lately. And I’d underscore that I am not using the term to argue for a Marxist economy. We need the market. We need incentives. We don’t need our current levels of inequality. . Those at the top of the heap are falling far short of the standards set by American ruling classes of the past. As John Judis, a senior editor at The New Republic, put it in his indispensable 2000 book “The Paradox of American Democracy,” the American establishment has at crucial moments had “an understanding that individual happiness is inextricably linked to social well-being.” What’s most striking now, by contrast, is “the irresponsibility of the nation’s elites.”


Those elites will have no moral standing to argue for higher taxes on middle-income people or cuts in government programs until they acknowledge how much wealthier they have become than the rest of us and how much pressure they have brought over the years to cut their own taxes. Resolving the deficit problem requires the very rich to recognize their obligation to contribute more to a government that, measured against other wealthy nations, is neither investing enough in the future nor doing a very good job of improving the lives and opportunities of the less affluent.


“A blind and ignorant resistance to every effort for the reform of abuses and for the readjustment of society to modern industrial conditions represents not true conservatism, but an incitement to the wildest radicalism.” With those words in 1908, President Theodore Roosevelt showed he understood what a responsible ruling class needed to do. Where are those who would now take up his banner?

Monday, April 18, 2011

America The Socialist

One can always allow oneself to be amazed by history, and i wonder how many people would be amazed to know the rich Socialist history of the United States, the place where labor battles of a century ago are going to have to be fought and won again as we head into a fiercely oligarchic 21st century. The older I get the more I appreciate Eugene Debs mentioned in this essay reproduced below from the Global Research site

On April 15, on the floor of the U.S. House of Representatives, Congress members spoke in defense of Medicare, Social Security, the Environmental Protection Agency, and other programs that by almost anyone's definition are socialist, programs that were denounced as socialist by opponents of their passage in decades past, programs that would not have been created without the efforts of socialists and the Socialist Party. The debate screeched to a halt, however, because an opponent of the Congressional Progressive Caucus's "People's Budget" then under discussion suggested that its supporters might be Socialists.


Congressman Keith Ellison, co-chair of that caucus, protested the vicious accusation and demanded that the words of his accuser be transcribed for the record (and possible legal action?). The Republican congress member guilty of the horrible slander announced that he was retracting it. Rep. Raul Grijalva, the other co-chair of the Progressive Caucus, thanked him sincerely for the retraction. Although polls show socialism to be far more popular than Congress, neither Ellison nor Grijalva insisted on being cleared of the label "congress member."


"Socialism," remarked Frank Zeidler, former socialist mayor of Milwaukee, "believes that people working together for a common good can produce a greater benefit, both for society and for the individual, than can a society in which everyone is shrewdly seeking their own self-interest." Missing from Washington, D.C., is not just a single individual who would hurl the term "capitalist" with the strength to have a retraction demanded. Missing also is any sense of working for a cooperative society based on the above truth -- a truth apparent to any child who has neither read Ayn Rand nor viewed cable news, but a truth that sounds insane in our nation's capital.


And one more thing is missing: awareness of the debt our nation owes to its rich socialist history. That's where the best book yet by John Nichols -- and that's saying something! -- comes in. The author of "The Genius of Impeachment," among other brilliant books, has just published "The 'S' Word: A Short History of an American Tradition . . . Socialism." The book is marred by a militaristic cover depicting the flag-raising pose on Iwo Jima, and its focus on the U.S. national tradition is not without problems. Nichols' goal is to depict socialism as American, as rooted in the tradition of Thomas Paine, Abraham Lincoln, the founding of the Republican Party, the rise of competent public planning in 20th century cities, the New Deal, the struggle for free speech and freedom of the press, and the civil rights movement.


In this he is very successful. But a strain of thought related to much socialism and admirable in its own right holds that an idea need not be American to be the best for America. You'd think we'd learn that in KINDERGARTEN. Nichols does not argue with such internationalism; it just fails to harmonize with the theme of his book.


Yet, while other authors have sought to bring out the rich leftist tradition of the United States as something predating and independent of, and better off without, Marxism, Nichols goes out of his way to highlight Marx's employment by a New York newspaper and communications with President Lincoln. Doing so certainly cannot hurt and makes for fascinating reading. Of course, the fascination is in large part based on the reader's imagining of the explosive cognitive dissonance a contemporary Republican might face in discovering his or her party's founding father's appreciation of Marx. This imagination may give too much credit to contemporary Republicans for cognitive processes of whatever sort. Nichols has posted an excerpt of his book online.


Here is an excerpt of that excerpt: "Could a plan decried as 'socialized medicine' by the American Medical Association because it was, in fact, socialized medicine really be 'the American way'? Of course. During the Medicare debate in the early ’60s, Texas Senate candidate George H.W. Bush condemned the proposal as 'creeping socialism.' Ronald Reagan, then making the transition from TV pitchman for products to TV pitchman for Barry Goldwater, warned that if it passed citizens would find themselves 'telling our children and our children’s children what it once was like in America when men were free.'


But Bush and Reagan managed the program during their presidencies, and Tea Party activists now show up at town hall meetings to threaten any legislator who would dare to tinker with their beloved Medicare. "Americans would not have gotten Medicare if Michael Harrington and the socialists who came before him -- from presidential candidates like Debs and Thomas to organizers like Mary Marcy and Margaret Sanger and the Communist Party’s Elizabeth Gurley Flynn -- had not for decades been pushing the limits of the healthcare debate. No less a player than Senator Edward Kennedy would declare, 'I see Michael Harrington as delivering the Sermon on the Mount to America.'


The same was true in abolitionist days, when socialists -- including friends of Marx who had immigrated to the United States after the 1848 revolutions in Europe were crushed -- energized the movement against slavery and helped give it political expression in the form of the Republican Party. The same was true early in the twentieth century, when Socialist Party editors like Victor Berger battled attempts to destroy civil liberties and defined our modern understanding of freedom of speech, freedom of the press and the right to petition for redress of grievances.


The same was true when lifelong socialist A. Philip Randolph called the 1963 March on Washington for Jobs and Freedom and asked a young preacher named Martin Luther King Jr., who had many socialist counselors besides the venerable Randolph, to deliver what would come to be known as the 'I Have a Dream' speech. "Again and again at critical junctures in our national journey, socialist thinkers and organizers, as well as candidates and officials, have prodded government in a progressive direction.


It may be true, as historian Patrick Allitt suggests, that 'millions of Americans, including many of these critics [of the Obama administration], are ardent supporters of socialism, even if they don’t realize it and even if they don’t actually use the word' to describe public services that are 'organized along socialist lines,' like schools and highways. In fact, contemporary socialists and Tea Partiers might actually find common (if uncomfortable) ground with Allitt’s assertion that 'socialism as an organizational principle is alive and well here just as it is throughout the industrialized world' -- even as they would disagree on whether that’s a good thing.


Programs 'organized along socialist lines' do not make a country socialist. But America has always been and should continue to be informed by socialist ideals and a socialist critique of public policy." As the co-author with Robert McChesney of some of our best books on the corporate media, Nichols is aware that we no longer have the capacity for critiques of public policy we once had. While Nichols degrades his excellent and inspiring chapter on Thomas Paine by stooping to debate the likes of Glenn Beck (and I admit I've done the same), he is fully aware of what he's involved in: "It might seem amazing today, when Glenn Beck describes modest social spending in 'Darkness at Noon' terms and when even supposedly moderate commentators conflate social democracy with Stalinism, that the good burghers of Milwaukee would elect and re-elect a Socialist mayor throughout the McCarthy era -- and in McCarthy's home state, no less. But there is simply no question that the quality of debate, the range of ideological diversity and the level of social and political awareness were far higher for most Americans in the 1940s and 1950s -- and dramatically higher for media commentators.


Americans in general, and Milwaukeeans in particular, understood the distinction between municipal socialists who believed in public enterprise and totalitarian dictators who wanted to rule the world." I hope these snippets of Nichols' 300-page masterpiece whet your appetite. "The 'S' Word" could, if widely read, lead to a different view of our country, our government, and our best course going forward. Visitors to the Lincoln Memorial might recall the words of President Lincoln's first war-time State of the Union address: "Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."


Lincoln went on to foreshadow Eisenhower's warning of the rise of the military industrial complex. Visitors to his memorial should also recall A. Phillip Randolph, the man who made the March on Washington happen. His bust in Union Station, with the eye-glasses in his hand broken off, should cause every traveler to freeze in his or her tracks and question himself or herself as to where in the world we are all headed.


David Swanson is the author of "War Is A Lie"

Sunday, April 17, 2011

Federal Revenue

There is a myth in the US that has become conventional wisdom, that is to say a popularly spread lie. That corporations pay more than their fair share of taxes. Danette's political website, carries an interesting discussion on the National Priorities Project and revelations they report on where Federal Revenue comes from. If such pointed reporting were to make it to the mainstream press I wonder how many people would be astonished to learn the proportions between borrowing (53%), corporate taxes (7%) and individual taxes (40%) estate and assorted taxes make up a couple of percentage points between them. If such numbers were widely bandied about perhaps we could get the eleven largest corporations to pay some taxes at least instead of getting off Scott free as they currently do. And that is why these numbers will never appear in newspapers or on television.

Friday, April 15, 2011

Libya Versus The Bankers

From Global Research, a Canadian website discussing the behind scenes reasons for why things are the way they are these two fascinating essays on the Libyan war. It was never clear to me why suddenly the US France and Britain declared war on Libya, nor yet why NATO (the North Atlantic Treaty Organization- a cold war white elephant if ever there was one) is so busy killing people and destroying towns in Libya. All in the name of freedom? How strange, especially since Libya's leader Muammar Qaddafi had recently declared eternal friendship with the West and so forth. Eccentric he may be but mad he is not and as it turns out perhaps his government has been less the bloody autocratic dictator that western reports might suggest. Certainly people in his country are fighting hard in his defense. Really hard. Perhaps it is as these authors suggest, more about banking independence than anything else, this odd and violent war in Libya.

Several writers have noted the odd fact that the Libyan rebels took time out from their rebellion in March to create their own central bank – this before they even had a government. Robert Wenzel wrote in the Economic Policy Journal: I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising. This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences. Alex Newman wrote in the New American: In a statement released last week, the rebels reported on the results of a meeting held on March 19.

Among other things, the supposed rag-tag revolutionaries announced the “[d]esignation of the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and appointment of a Governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.” Newman quoted CNBC senior editor John Carney, who asked, “Is this the first time a revolutionary group has created a central bank while it is still in the midst of fighting the entrenched political power? It certainly seems to indicate how extraordinarily powerful central bankers have become in our era.” Another anomaly involves the official justification for taking up arms against Libya. Supposedly it’s about human rights violations, but the evidence is contradictory. According to an article on the Fox News website on February 28: As the United Nations works feverishly to condemn Libyan leader Muammar al-Qaddafi for cracking down on protesters, the body's Human Rights Council is poised to adopt a report chock-full of praise for Libya's human rights record.

The review commends Libya for improving educational opportunities, for making human rights a "priority" and for bettering its "constitutional" framework. Several countries, including Iran, Venezuela, North Korea, and Saudi Arabia but also Canada, give Libya positive marks for the legal protections afforded to its citizens -- who are now revolting against the regime and facing bloody reprisal. Whatever might be said of Gaddafi, the Libyan people seem to be thriving. A delegation of medical professionals from Russia, Ukraine and Belarus wrote in an appeal to Russian President Medvedev and Prime Minister Putin that after becoming acquainted with Libyan life, it was their view that in few nations did people live in such comfort:

Libyans are entitled to free treatment, and their hospitals provide the best in the world of medical equipment. Education in Libya is free, capable young people have the opportunity to study abroad at government expense. When marrying, young couples receive 60,000 Libyan dinars (about 50,000 U.S. dollars) of financial assistance. Non-interest state loans, and as practice shows, undated. Due to government subsidies the price of cars is much lower than in Europe, and they are affordable for every family. Gasoline and bread cost a penny, no taxes for those who are engaged in agriculture. The Libyan people are quiet and peaceful, are not inclined to drink, and are very religious.

They maintained that the international community had been misinformed about the struggle against the regime. “Tell us,” they said, “who would not like such a regime?” Even if that is just propaganda, there is no denying at least one very popular achievement of the Libyan government: it brought water to the desert by building the largest and most expensive irrigation project in history, the $33 billion GMMR (Great Man-Made River) project. Even more than oil, water is crucial to life in Libya. The GMMR provides 70 percent of the population with water for drinking and irrigation, pumping it from Libya’s vast underground Nubian Sandstone Aquifer System in the south to populated coastal areas 4,000 kilometers to the north. The Libyan government has done at least some things right.

Another explanation for the assault on Libya is that it is “all about oil,” but that theory too is problematic. As noted in the National Journal, the country produces only about 2 percent of the world’s oil. Saudi Arabia alone has enough spare capacity to make up for any lost production if Libyan oil were to disappear from the market. And if it’s all about oil, why the rush to set up a new central bank? Another provocative bit of data circulating on the Net is a 2007 “Democracy Now” interview of U.S. General Wesley Clark (Ret.). In it he says that about 10 days after September 11, 2001, he was told by a general that the decision had been made to go to war with Iraq. Clark was surprised and asked why. “I don’t know!” was the response. “I guess they don’t know what else to do!”

Later, the same general said they planned to take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran. What do these seven countries have in common? In the context of banking, one that sticks out is that none of them is listed among the 56 member banks of the Bank for International Settlements (BIS). That evidently puts them outside the long regulatory arm of the central bankers’ central bank in Switzerland. The most renegade of the lot could be Libya and Iraq, the two that have actually been attacked. Kenneth Schortgen Jr., writing on, noted that “[s]ix months before the US moved into Iraq to take down Saddam Hussein, the oil nation had made the move to accept Euros instead of dollars for oil, and this became a threat to the global dominance of the dollar as the reserve currency, and its dominion as the petrodollar.”

According to a Russian article titled “Bombing of Lybia – Punishment for Ghaddafi for His Attempt to Refuse US Dollar,” Gadaffi made a similarly bold move: he initiated a movement to refuse the dollar and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar. Gadaffi suggested establishing a united African continent, with its 200 million people using this single currency. During the past year, the idea was approved by many Arab countries and most African countries. The only opponents were the Republic of South Africa and the head of the League of Arab States.

The initiative was viewed negatively by the USA and the European Union, with French president Nicolas Sarkozy calling Libya a threat to the financial security of mankind; but Gaddafi was not swayed and continued his push for the creation of a united Africa. And that brings us back to the puzzle of the Libyan central bank. In an article posted on the Market Oracle, Eric Encina observed: One seldom mentioned fact by western politicians and media pundits: the Central Bank of Libya is 100% State Owned. . . . Currently, the Libyan government creates its own money, the Libyan Dinar, through the facilities of its own central bank. Few can argue that Libya is a sovereign nation with its own great resources, able to sustain its own economic destiny. One major problem for globalist banking cartels is that in order to do business with Libya, they must go through the Libyan Central Bank and its national currency, a place where they have absolutely zero dominion or power-broking ability.

Hence, taking down the Central Bank of Libya (CBL) may not appear in the speeches of Obama, Cameron and Sarkozy but this is certainly at the top of the globalist agenda for absorbing Libya into its hive of compliant nations. Libya not only has oil. According to the IMF, its central bank has nearly 144 tons of gold in its vaults. With that sort of asset base, who needs the BIS, the IMF and their rules? Ellen Brown in The Global Economic Crisis: All of which prompts a closer look at the BIS rules and their effect on local economies. An article on the BIS website states that central banks in the Central Bank Governance Network are supposed to have as their single or primary objective “to preserve price stability.”

They are to be kept independent from government to make sure that political considerations don’t interfere with this mandate. “Price stability” means maintaining a stable money supply, even if that means burdening the people with heavy foreign debts. Central banks are discouraged from increasing the money supply by printing money and using it for the benefit of the state, either directly or as loans. In a 2002 article in Asia Times titled “The BIS vs National Banks,” Henry Liu maintained: BIS regulations serve only the single purpose of strengthening the international private banking system, even at the peril of national economies. The BIS does to national banking systems what the IMF has done to national monetary regimes. National economies under financial globalization no longer serve national interests. . . . FDI [foreign direct investment] denominated in foreign currencies, mostly dollars, has condemned many national economies into unbalanced development toward export, merely to make dollar-denominated interest payments to FDI, with little net benefit to the domestic economies.

He added, “Applying the State Theory of Money, any government can fund with its own currency all its domestic developmental needs to maintain full employment without inflation.” The “state theory of money” refers to money created by governments rather than private banks. The presumption of the rule against borrowing from the government’s own central bank is that this will be inflationary, while borrowing existing money from foreign banks or the IMF will not. But all banks actually create the money they lend on their books, whether publicly-owned or privately-owned. Most new money today comes from bank loans. Borrowing it from the government’s own central bank has the advantage that the loan is effectively interest-free. Eliminating interest has been shown to reduce the cost of public projects by an average of 50%. And that appears to be how the Libyan system works. According to Wikipedia, the functions of the Central Bank of Libya include “issuing and regulating banknotes and coins in Libya” and “managing and issuing all state loans.”

Libya’s wholly state-owned bank can and does issue the national currency and lend it for state purposes. That would explain where Libya gets the money to provide free education and medical care, and to issue each young couple $50,000 in interest-free state loans. It would also explain where the country found the $33 billion to build the Great Man-Made River project. Libyans are worried that NATO-led air strikes are coming perilously close to this pipeline, threatening another humanitarian disaster. So is this new war all about oil or all about banking? Maybe both – and water as well. With energy, water, and ample credit to develop the infrastructure to access them, a nation can be free of the grip of foreign creditors. And that may be the real threat of Libya: it could show the world what is possible. Most countries don’t have oil, but new technologies are being developed that could make non-oil-producing nations energy-independent, particularly if infrastructure costs are halved by borrowing from the nation’s own publicly-owned bank. Energy independence would free governments from the web of the international bankers, and of the need to shift production from domestic to foreign markets to service the loans.

If the Gaddafi government goes down, it will be interesting to watch whether the new central bank joins the BIS, whether the nationalized oil industry gets sold off to investors, and whether education and health care continue to be free.

Ellen Brown is an attorney and president of the Public Banking Institute,

Thursday, April 14, 2011

General Economic Contraction

From this essay by Dave Cohen nicely summarizing a few of the many reasons why daily decline appears inevitable. I have no doubt poor people in poor countries will suffer the most, and indeed their suffering is already increasing on a planet of finite resources with an infinitely expanding population. When I was born 53 years ago the worlds population was half the seven billion of today. My life has seen no reductions in energy use among those of us lucky to be born in the First World. Those reductions will be forced on all of us soon as we lack the political will to make changes collectively and our leaders are busy hoarding comfort and wealth for themselves in the face of decline. I keep wishing there were light at the end of the tunnel. I am fond of saying I enjoyed my middle class life and would liked it to have continued to my death via retirement uninterrupted. Who knows, perhaps it will, even as I prepare mentally to face hard times, though I cannot see how. Nor can Dave Cohen apparently.

Although the International Monetary Fund (IMF) assures us that global economic growth is proceeding apace, there are good reasons to believe that GDP numbers recording that growth exaggerate the economic expansion underway. The United States has experienced a statistical recovery in which GDP grows due to the enormous fiscal and monetary stimulus, but without creating many jobs, and despite the fact that the housing market is only a pale semblance of what it once was. Growth in the European Union is jeopardized by the debts of several of its member countries. Japan's economy was languishing before the devastating earthquake. The emerging economies are said to be booming, but the growth numbers in China are suspect. Do newly constructed ghost cities where no one lives count? Or newly constructed ghost malls?

We have witnessed a substantial breakdown of economic expansion in the developed (OECD) economies, and there are good reasons to believe that whatever growth the emerging economies are experiencing will not last forever as many optimists predict. Does it seem plausible that China's future growth will be as vigorous and longlasting as Japan's long expansion (circa 1960-1989) after World War II? My thesis is that global economic expansion has broken down, and where there are pockets of economic growth as in China or Brazil, it is unlikely that growth will continue for much longer. (I am thinking on decadal scales.) Clearly this is a subject for a book, whereas today I am going to outline why this thesis is credible in a blog post.

It's been decades since the "Limits To Growth" crowd published their systems analysis of what might happen in the 21st century. There has been one update to their "World3" model since then, but decades have passed in which we have gained valuable experience not captured in that model. A number of independent researchers have investigated these problems since the 1970s. Today it's my turn. I am going to list the primary reasons why I believe it is reasonable to expect a breakdown of human economic expansion in the 21st century. Underlying everything I say is the ultimately impossible requirement of exponential growth in economies to meet the needs of exploding human populations. But long before humankind hits a strict mathematical wall on a finite planet, things start to fall apart.

That is where we stand in 2011. And now, here are the five main causes of slowing and ultimately waning economic expansion. 1. The adoption of fiat money — when the United States abandoned the gold standard, all limits on the expansion of the world's reserve currency (the dollar supply) were lifted. The debasement of the dollar has proceeded as expected. Fiat money paved the way for unlimited expansion of credit (debt). After the oil price shocks and inflation of the 1970s, this expansion made it possible for growth to occur as it had after World War II. However, the replacement of economic growth based on savings and investment by growth based on the expansion of credit was a devil's bargain.

The advanced economies have now hit the limits on debt-based growth. One nasty side-effect was the financialization of everything (including commodity markets) and an astonishing expansion in derivatives of all kinds. Thus did gambling replace savings & investment. As a result, there has been an inevitable trend toward more mal-investment and unwarranted asset price inflation (bubbles). The explosive expansion of credit/debt has also created the astonishing and growing income & wealth inequality we see not only in the United States, but all over the world. I contend that such inequality stymies "real" economic growth everywhere it occurs, as opposed to growth measured by GDP. Does a feudal economy "grow" if only the landowners get richer? 2. Higher energy costs — energy imports are a tax on economies.

The world has entered the era of permanently high oil prices, although there is great volatility as we've seen over the last 4 years. Despite fiat money expansion and inflation, the taxes paid by developed economies are rising in real terms, and will continue to rise over time. It is notable that most of the world's 15 largest economies, including emerging economies like China and India, are net oil importers. The relationship between oil price shocks and recessions is well-established. There are a number of reasons for the increasing scarcity of oil, and thus its rising price over time. I will not go into those reasons here.

However, the classic economic theory of non-renewable resources predicts a switch to substitutes for oil which has not occurred, or has occurred unsustainably at great cost (e.g. biofuels). Thus we can expect the energy tax on growth in the world's largest economies to continue to increase. 3. Growing external costs — this is a catch-all cause of the breakdown. Name your favorite environmental or resource shortage disaster! Economists view the costs of climate change and other disasters as external costs, also known as negative externalities — "when the private calculation of benefits or costs differs from society's valuation of benefits or costs. Pollution represents an external cost because damages associated with it are borne by society as a whole [societal costs] and are not reflected in market transactions."

I can not even begin to list here all the external costs being imposed upon modern societies as a result of human population and economic expansion, but consider the costs imposed by 1) anthropogenic climate change; 2) overfishing and destruction of the oceans; 3) growing freshwater shortages; and 4) various threats to future crop yields. Societies must bear these growing costs, which severely crimp economic expansion in the traditional sense. Bear in mind that we are still in the early stages of most of these disasters—we have already reached "peak wild-caught fish"—and thus external costs will rise inexorably over time. For example, consider the costs of (only) a 1 meter rise in sea level by 2100.

If the big ice sheets (Greenland, West Antarctica) react to greenhouse gas forcing in an unforeseen, detrimental way, an outcome which is possible based on our evolving knowledge of their behavior, 1 meter of sea level rise could easily turn into 2 meters. 4. Faltering technological progress — the primary driver of economic expansion is technological progress. If such progress fails to materialize—to abate external costs, for example—or does not materialize at a sufficiently high "rate" to support economic growth, that growth will not occur. In recent decades, technological progress has continued in areas such as wireless communications, nanotechnology, biotech, and so forth. However, to support economic expansion, such developments must be commercial and widely deployed. While we have seen an explosion of wireless devices that make entrepreneurs like Steve Jobs wealthy, we have not seen a comparable expansion of commercial technnology in almost every other area in which research is ongoing.

For example, improvements in transportation technology (plug-ins, etc.) have been painfully slow. Ditto with energy technology. While incremental improvements happen all the time, breakthroughs, as the name implies, are rare. As things stand in the early part of the second decade of the 21st century, commercial technological progress has not been sufficiently robust to support continuing economic expansion. Sorry, Ray Kurzweil! 5. The problem of complexity — as globalized human economies expand, the complexity of the systems (e.g. fossil fuel energy extraction and distribution) required to support those economies explodes.

As Joseph Tainter has noted, there are diminishing returns on such complexity, meaning you are getting less bang for the buck (a lower cost-to-benefit ratio) as systems become more complex. Unfortunately, that is not all there is to it. Human beings vastly overestimate their ability to manage risk in such systems, a subject Nassim Taleb has spent considerable time elucidating. Not only are there unintended, disastrous consequences—Black Swans!—but it is also the case that human beings vastly underestimate their own ability to subvert the complex systems they create—no system is human-proof. The financial meltdown of 2008 demonstrates all this beyond any doubt. It would be naive to expect there will be no future economic catastrophes like the ones we've seen in the last decade. Before the world became so economically interconnected and interdependent, financial blow-ups could be contained locally. Clearly, global economic expansion can not proceed apace if it is more and more frequently thrown for a loop. I am going to leave it at that this morning. As I see it right now, these are the main causes of a breakdown of economic expansion in the 21st century. I considered adding other causes, e.g. the dangerous hubris of the United States.

Readers may want to add to this list of causes, or consolidate different causes, or expand on certain causes. I have stuck to a high level of generality here, and the causes of the breakdown interact in myriad ways. My apologies to all those who have also thought about these problems for many years now. I thought I'd throw my two cents in, having also thought about these problems on and off for a long time. In fact, I have lived long enough to watch the disaster unfold, which is not an outcome I expected. Unless humankind engages with what appear to be clear limitations on its economic prospects in the 21st century, we will be completely unprepared for the chaos to come.

Lack of preparation is the outcome I expect.

Wednesday, April 13, 2011

Real Inflation

From CNBC a reality check on the subject of inflation. One way the federal Government calculates the inflation rate is by including housing costs and as those of have been plummeting inflation has been rated as absurdly small. In the real world this skewed statistic reveals itself easily enough in supermarkets but finally we have a mainstream media outlet trying to tell us the truth. I recommend the shadow stats website for realistic government statistics.

After former Federal Reserve Chairman Paul Volcker was appointed in 1979, the consumer price index surged into the double digits, causing the now revered Fed Chief to double the benchmark interest rate in order to break the back of inflation. Using the methodology in place at that time puts the CPI back near those levels. Inflation, using the reporting methodologies in place before 1980, hit an annual rate of 9.6 percent in February, according to the Shadow Government Statistics newsletter. Since 1980, the Bureau of Labor Statistics has changed the way it calculates the CPI in order to account for the substitution of products, improvements in quality (i.e. iPad 2 costing the same as original iPad) and other things.

Backing out more methods implemented in 1990 by the BLS still puts inflation at a 5.5 percent rate and getting worse, according to the calculations by the newsletter’s web site, “Near-term circumstances generally have continued to deteriorate,” said John Williams, creator of the site, in a new note out Tuesday. “Though not yet commonly recognized, there is both an intensifying double-dip recession and a rapidly escalating inflation problem. Until such time as financial-market expectations catch up with underlying reality, reporting generally will continue to show higher-than-expected inflation and weaker-than-expected economic results in the month and months ahead.” The pay-site and newsletter by Williams, an economic consultant for the last 30 years to companies, has gained a cult following among bloggers hungry to criticize Bernanke these days. The mission statement of the newsletter, according to the site, is to expose and analyze “flaws in current U.S. government economic data and reporting…net of financial-market and political hype.”

Investors are anxiously awaiting the release of March’s CPI reading on Friday. The consensus estimate from economists is for an annual inflation rate of 2.6 percent. “Given ongoing inflation problems with food and the spreading impact of higher oil-related costs in the broad economy, reporting risk is to the upside of consensus expectation,” said Williams, citing a 10 percent jump in gasoline prices in March, in the note. “While the federal government would have us believe the numbers are rather tame, our own personal gauge leads us to believe inflation is running between 5 percent to 6 percent annually,” wrote Alan Newman in his latest Crosscurrents newsletter that refers to Williams’ statistics. Newman uses recent comments from Walmart CEO Bill Simon that inflation is going to be “serious” to back up the much higher CPI figures from him and Williams. “Given Walmart’s [WMT 53.52 0.70 (+1.33%) ] sales of $422 billion, we think Mr. Simon has a good idea of what’s in the pipeline,” said Newman.

To be sure, the BLS argues that the changes it has made over the last three decades more accurately reflect a true change in the cost of living. For example, in response to its hedonic adjustments, the BLS web site states, “to measure price change accurately, the CPI must be able to distinguish the portion of price change due to this quality change. Still, going by recent strong comments from Federal Reserve officials, even members of the central bank must believe inflation is being underreported.

Dallas Federal Reserve President Richard Fisher said in a speech last week that the central bank was reaching a “tipping point” as far as changing its policy so it can react to inflation. Maybe Fisher stumbled across The voting member did, after all, mention Volcker in the same speech. “The need to break the back of that (budgetary debt) spiral is as dire now as was the need for Paul Volcker to break the back of inflation in the 1980s,” said Fisher on April 8th. “As a result of his steadfast determination to press on with exorcising inflation, Mr. Volcker is today among the most respected living Americans and widely considered an exemplar for public servants worldwide.”

Saturday, April 9, 2011

It's Time For Resistance

There is a protest planned in New York Ctiy April 15th and this essay explains some of the outrageous reasons for such a protest. Things are so bad in this country I expect to see more of this. What a waste of energy our leaders are forcing us to expend on simply arguing for our civil rights. That these expectations are now considered subversive gives us an idea what a Soviet state we are expected to live in. The Cold War is Dead! Long Live the Cold War! Weird.
By Chris Hedges at truthdig,
The phrase consent of the governed has been turned into a cruel joke. There is no way to vote against the interests of Goldman Sachs. Civil disobedience is the only tool we have left. We will not halt the laying off of teachers and other public employees, the slashing of unemployment benefits, the closing of public libraries, the reduction of student loans, the foreclosures, the gutting of public education and early childhood programs or the dismantling of basic social services such as heating assistance for the elderly until we start to carry out sustained acts of civil disobedience against the financial institutions responsible for our debacle. The banks and Wall Street, which have erected the corporate state to serve their interests at our expense, caused the financial crisis.

The bankers and their lobbyists crafted tax havens that account for up to $1 trillion in tax revenue lost every decade. They rewrote tax laws so the nation’s most profitable corporations, including Bank of America, could avoid paying any federal taxes. They engaged in massive fraud and deception that wiped out an estimated $40 trillion in global wealth. The banks are the ones that should be made to pay for the financial collapse. Not us. And for this reason at 11 a.m. April 15 I will join protesters in Union Square in New York City in front of the Bank of America. “The political process no longer works,” Kevin Zeese, the director of Prosperity Agenda and one of the organizers of the April 15 event, told me. “The economy is controlled by a handful of economic elites. The necessities of most Americans are no longer being met. The only way to change this is to shift the power to a culture of resistance.

This will be the first in a series of events we will organize to help give people control of their economic and political life.” If you are among the one in six workers in this country who does not have a job, if you are among the some 6 million people who have lost their homes to repossessions, if you are among the many hundreds of thousands of people who went bankrupt last year because they could not pay their medical bills or if you have simply had enough of the current kleptocracy, join us in Union Square Park for the “Sounds of Resistance Concert,” which will feature political hip-hop/rock powerhouse Junkyard Empire with Broadcast Live and Sketch the Cataclysm. The organizers have set up a website, and there’s more information on their Facebook page.

We will picket the Union Square branch of Bank of America, one of the major financial institutions responsible for the theft of roughly $17 trillion in wages, savings and retirement benefits taken from ordinary citizens. We will build a miniature cardboard community that will include what we should have—good public libraries, free health clinics, banks that have been converted into credit unions, free and well-funded public schools and public universities, and shuttered recruiting centers (young men and women should not have to go to Iraq and Afghanistan as soldiers or Marines to find a job with health care).

We will call for an end to all foreclosures and bank repossessions, a breaking up of the huge banking monopolies, a fair system of taxation and a government that is accountable to the people. Advertisement The 10 major banks, which control 60 percent of the economy, determine how our legislative bills are written, how our courts rule, how we frame our public debates on the airwaves, who is elected to office and how we are governed. The phrase consent of the governed has been turned by our two major political parties into a cruel joke. There is no way to vote against the interests of Goldman Sachs. And the faster these banks and huge corporations are broken up and regulated, the sooner we will become free. Bank of America is one of the worst. It did not pay any federal taxes last year or the year before. It is currently one of the most aggressive banks in seizing homes, at times using private security teams that carry out brutal home invasions to toss families into the street. The bank refuses to lend small business people and consumers the billions in government money it was handed. It has returned with a vengeance to the flagrant criminal activity and speculation that created the meltdown, behavior made possible because the government refuses to institute effective sanctions or control from regulators, legislators or the courts.

Bank of America, like most of the banks that peddled garbage to small shareholders, routinely hid its massive losses through a creative accounting device it called “repurchase agreements.” It used these “repos” during the financial collapse to temporarily erase losses from the books by transferring toxic debt to dummy firms before public filings had to be made. It is called fraud. And Bank of America is very good at it. US Uncut, which will be involved in the April 15 demonstration in New York, carried out 50 protests outside Bank of America branches and offices on Feb. 26.

UK Uncut, a British version of the group, produced a video guide to launching a “bail-in” in your neighborhood. Civil disobedience, such as that described in the bail-in video or the upcoming protest in Union Square, is the only tool we have left. A fourth of the country’s largest corporations—including General Electric, ExxonMobil and Bank of America—paid no federal income taxes in 2010. But at the same time these corporations operate as if they have a divine right to hundreds of billions in taxpayer subsidies.

Bank of America was handed $45 billion—that is billion with a B—in federal bailout funds. Bank of America takes this money—money you and I paid in taxes—and hides it along with its profits in some 115 offshore accounts to avoid paying taxes. One assumes the bank’s legions of accountants are busy making sure the corporation will not pay federal taxes again this year. Imagine if you or I tried that.

“If Bank of America paid their fair share of taxes, planned cuts of $1.7 billion in early childhood education, including Head Start & Title 1, would not be needed,” Zeese pointed out. “Bank of America avoids paying taxes by using subsidiaries in offshore tax havens. To eliminate their taxes, they reinvest proceeds overseas, instead of bringing the dollars home, thereby undermining the U.S. economy and avoiding federal taxes. Big Finance, like Bank of America, contributes to record deficits that are resulting in massive cuts to basic services in federal and state governments.”

The big banks and corporations are parasites. They greedily devour the entrails of the nation in a quest for profit, thrusting us all into serfdom and polluting and poisoning the ecosystem that sustains the human species. They have gobbled up more than a trillion dollars from the Department of Treasury and the Federal Reserve and created tiny enclaves of wealth and privilege where corporate managers replicate the decadence of the Forbidden City and Versailles. Those outside the gates, however, struggle to find work and watch helplessly as food and commodity prices rocket upward.

The owners of one out of seven houses are now behind on their mortgage payments. In 2010 there were 3.8 million foreclosure filings and bank repossessions topped 2.8 million, a 2 percent increase over 2009 and a 23 percent increase over 2008. This record looks set to be broken in 2011. And no one in the Congress, the Obama White House, the courts or the press, all beholden to corporate money, will step in to stop or denounce the assault on families. Our ruling elite, including Barack Obama, are courtiers, shameless hedonists of power, who kneel before Wall Street and daily sell us out.

The top corporate plutocrats are pulling down $900,000 an hour while one in four children depends on food stamps to eat. We don’t need leaders. We don’t need directives from above. We don’t need formal organizations. We don’t need to waste our time appealing to the Democratic Party or writing letters to the editor. We don’t need more diatribes on the Internet. We need to physically get into the public square and create a mass movement. We need you and a few of your neighbors to begin it.

We need you to walk down to your Bank of America branch and protest. We need you to come to Union Square. And once you do that you begin to create a force these elites always desperately try to snuff out—resistance.

Chris Hedges’ column appears every Monday at Truthdig. Hedges, a fellow at The Nation Institute and a Pulitzer Prize-winning journalist, is the author of “Death of the Liberal Class.”

Friday, April 8, 2011

Japan's Energy Crisis

The British Guardian newspaper, a voice of the political left, published an article recently on the dire effects on daily living caused by the nuclear power plant catastrophe. However the article is not focused on the radiological aspects but on the knock-on effects of the sudden and immediate loss of so much electrical power in a country apparently not prepared for disaster. The obvious question arises, if it is so tough to get by daily in a wide swath of organized Japan, what will happen here (wherever here happens to be) when, not if, we have our own catastrophe? Are we prepared for energy failures, food shortages, poisoned water supplies and lack of fuel for our vehicles? I try to be; how about you?


For large parts of eastern Japan that were not directly hit by the tsunami on 11 March 2011, including the nation's capital, the current state of affairs feels very much like a dry-run for peak oil. This is not to belittle the tragic loss of life and the dire situation facing many survivors left without homes and livelihoods. Rather, the aim here is to reflect upon the post-disaster events and compare them with those normally associated with the worst-case scenarios for peak oil.

The earthquake and tsunami affected six of the 28 oil refineries in Japan and immediately petrol rationing was introduced with a maximum of 20 litres per car (in some instances as low as 5 litres). On 14 March, the government allowed the oil industry to release 3 days' worth of oil from stockpiles and on 22 March an additional 22 days' worth of oil was released. The Tokyo Electric Power Company (TEPCO), which serves a population of 44.5 million, lost one quarter of its supply capacity as a result of the quake, through the closedown of its two Fukushima nuclear power plants (Dai-ichi and Dai-ni), as well as eight fossil fuel based thermal power stations. Subsequently, from 14 March 2011 onwards, TEPCO was forced to implement a series of scheduled outages across the Kanto region (the prefectures of Gunma, Tochigi, Ibaraki, Saitama, Tokyo, Chiba, and Kanagawa).

While the thermal power stations may restart operations soon, the overall shortfall will become even more difficult to manage over the summer period when air conditioning is utilized. The reality is that these power cuts could continue for years, especially since the one of the two Fukushima nuclear plants has effectively become a pile of radioactive scrap. Related to this, when the Tokyo Metropolitican Government began to announce levels of radioactive contamination of drinking water above permissible levels, this was immediately followed by the rapid sell-out of bottled water, even after the levels dropped again. When bottled water is on sale in local convenience stores after some restocking took place, each customer is only allowed to purchase one 2 litre bottle.

Immediately after the quake, supermarkets outside the disaster area in Tokyo and other major cities began to sell out of foodstuffs, including various instant meals. The electrical appliance stores sold out of batteries, flashlights and portable radios. As we all know, the twin natural and human tragedies are having impacts beyond the Tohoku region where Fukushima lies, and the Greater Tokyo area. It has been difficult for Japan's notoriously efficient industries to maintain production, given that they rely on just-in-time systems and which have supply plants (for needed parts) that are located in the zone impacted by these combined disasters.

One example is in car production, where major firms have had to suspend work at their factories when key parts are no longer available from the affected region. The fragility of this system of industrial production is glaringly obvious and it is something that peak oil commentators have warned of multiple times. These food and bottled water shortages, power cuts, fuel-rationing and breakdowns in just-in-time manufacturing have been anticipated by those who take peak oil seriously. It is almost as if eastern Japan is experiencing a peak oil rehearsal, although other regions of Japan are virtually unaffected. If proponents of peak oil are correct, then the rest of the world may experience something similar within the next 5 to 10 years, and hence it is important that we learn valuable lessons from Japan's response to the current circumstances. What makes the current situation different from peak oil? Under a peak oil scenario, the entire world (not just one country) would be affected by a continuous decline in global oil production. The rate of that decline is the key factor.

If the rate is very gradual (a few percent points each year), then economies and their food and energy production and distribution systems in particular will have more time to adapt. In such circumstances, we could envisage a significant decline in the flow of goods and people across the globe — a slowing or a potentially grinding halt. For a country like Japan that relies heavily on the import of food, having only 40% self-sufficiency, the real peak oil scenario would have dire impacts. Under the present situation, Japan can still rely on imports to alleviate food supply problems. This is fortunate as over 600 farms, 125 harbours and 2,333 fishing vessels were destroyed by the tsunami, not to mention the thousands of people who made their livelihoods from agriculture and fishing who are either deceased or displaced.

Furthermore, the 20-30 km zone around the Fukushima Dai-ichi plant may not be used for food production for some time to come and the good reputations of those areas for providing clean produce may take even longer to be restored. In a global peak oil scenario, it is highly likely that food prices would increase significantly. To some extent this is happening. For instance, in February 2011 it was reported that food prices reached a record high due to poor harvests, rising oil prices (at US$105 per barrel) and increasing demand for foodstuffs due to rising population and incomes.

The conflict in Libya was predicted to further exacerbate the food and oil prices. In fact, conflict and civil unrest in oil producing countries is another facet of various peak oil scenarios as nations scramble for the remaining resources. It is something that Richard Heinberg describes as the "last one standing" scenario in which powerful countries will use their assets to promote their own survival at the expense of everyone else. So in the current predicament facing Japan, the situation is ameliorated by the ability of different nations to offer support and continue trading (for instance, Evian is selling a lot of bottled water to Japan at the moment). This certainly would be more difficult under some of the extreme peak oil scenarios, where rapid oil decline is involved.

While the consequences of the current disaster for Japan have been tragic in terms of the loss of life and while it is clear that the emotional, psychological and economic impacts are enormous, there are real signs of hope. The first important lesson to recognize is the way that Japan's leaders acted rapidly and responsibly. We have already indicated that fuel rationing was in place from 12 March 2011. The reality is that Japan is one of the most disaster-prepared nations in the world and regularly undertakes wide-scale drills. This practice proved to be of vital importance in helping people, communities and institutions cope with the major challenges that they have had to face. Government officials quickly recognized that people were hoarding food supplies and began to publicly request that they only buy what they need.

This was followed up by a series of public service announcements by the Japan Ad Council under theme of "What I can do now." The Minister in charge of consumer affairs, Renho Murata, frequently called on people not to panic buy and hoard food. She argued that this kind of activity was undermining the ability to provide relief supplies to the quake hit areas. At the same time, the general public and the private sector in the Kanto region were encouraged to comply with the scheduled power outages and to significantly reduce their energy consumption. Everybody responded positively – keen to play their part in solving this problem.

Prime Minister Naoto Kan in particular made an appeal to the people of Japan on 13 March 2011 when he said, "We Japanese have overcome many very trying situations in the past to create our modern society of peace and prosperity. I firmly believe that through our citizens working together to respond to this great earthquake and tsunami, we will certainly be able to overcome this crisis." This message has been echoed across the media and the Japanese public has responded by showing calmness, patience, respect for each other and mutual support.

If anything, they have exemplified Richard Heinberg's power down scenario — the path of cooperation, conservation and sharing. Whether they can hold true to this path over a prolonged period of time remains to be seen. In the global Transition Movement, they often refer to the "head, heart and hand" approach to coping with peak oil and climate change, as discussed in Rob Hopkin's Transition Handbook. Put simply, the head signifies the exploration needed about how we can re-orient our lives to become more local and small scale as our awareness increases of the energy crisis we are heading into. The heart symbolizes how we can generate positive visions of the future and how they can be harnessed to overcome the feelings of powerlessness in the face of these immense challenges. The hands are a representation about understanding how the transition model can be employed in practice for specific communities. For many communities in eastern Japan, the current circumstances represent the first time they have had to consider questions about food and energy security. The vast majority appear, quite naturally, to share the overwhelming desire to get back to normal, back to the way things were before. But there are also signs of the head, heart and hand approach as many Japanese commentators are asking questions about how will develop in the future.

If Japan is to build back better, then it should perhaps do so by building more resilient, more locally oriented communities in the areas affected by the quake and tsunami, and beyond. In fact, this is a chance to reconsider completely the development path for Japan towards one that is less vulnerable, less reliant upon fossil fuels, and ideally a low carbon society.

To borrow the words of Prime Minister Kan once again when he called upon his compatriots: "Through this resolve, let us all now — each and every individual — firmly reinforce our bonds with our families, friends, and communities, overcoming this crisis to once more build an even better Japan."

Thursday, April 7, 2011

Law Makers Breaking Law

This story from the msnbc affiliate in New York City is a local story with national implications. Protesters in Albany were locked out of a vote by lawmakers, and this is going to be the trend as the real economic news gets worse and worse in defiance of the nonsense coming out of the official organs of government. On the one hand they tell us things are getting better, on the other they maneuver to take away our jobs and our benefits and our security and they want to do that behind closed doors. In this age of the Internet and world wide communications there is something very Soviet about the disregard for the law our lawmakers display at every turn. I find myself thinking that Orwell's novel 1984 needs another read as we are stepping ever closer to his vision of misinformation, perpetual war and social terror at the hands of our formerly elected leaders.

By Gabe Pressman

The state’s new $132.5 billion dollar budget was passed amid a lot of loud protests by people in the hallways of the Capitol. It was a steamroller -- and the legislators didn’t seem to care that, while achieving the long-sought goal of passing a budget by the April 1 deadline, they trampled on the First Amendment to the U.S. Constitution. It was, as Susan Lerner of Common Cause said, “outrageous.” The reform leader described what happened as a “virtual lock down” of the state Capitol “to prevent ordinary citizens from observing their elected representatives conducting what is supposed to be the people’s business.” The First Amendment prohibits Congress from denying “the right of the people peaceably to assemble and to petition the government for a redress of grievances.” If the protesters in Albany weren’t assembling peaceably to petition the government to address their grievances, what were they doing? It takes a mighty lot of chutzpah for the leaders of the Assembly and Senate to deny this right. The Assembly and the Senate belong to us -- and so does the governor’s office. To refuse citizens access to the Assembly and Senate chambers should be considered a crime. Who do these guys think they are? It’s not a private club and the sergeants at arms are not supposed to be bouncers. On a deeper level, the “lockdown” shows how little some of these alleged representatives of the people truly care about the people. The budget bills, Lerner says, “are arguably the bills which will have the most immediate and direct impact on millions of New Yorkers. It is outrageous that the Legislature is so frightened of ordinary New Yorkers that they will not allow anyone other than staff and the press to observe the debates in person.” I spoke to Ms. Lerner and she thought there was one good thing coming out of this sad circumstance. “People,” she said, “are getting a real glimpse of how the two branches of the Legislature operate. In 2010, when it became clear that some legislators were ignoring the people some were voted out. In 2012, many more will be voted out of office. “It’s really very sad and short-sighted.” she said. And that sums it up to a t.

Wednesday, April 6, 2011

Privilege Extended

Stand up, all victims of oppression,
For the tyrants fear your might!
Don't cling so hard to your possessions,
For you have nothing if you have no rights!
Let racist ignorance be ended,
For respect makes the empires fall!
Freedom is merely privilege extended,
Unless enjoyed by one and all.

The opening verse of The Internationale seems to gain more meaning and relevance as we move forward into the brave new world of topsy turvey economics that is America in the 21st century. In discussing the statistics related here by noted economist Joseph Stiglitz my friends and neighbors look at me as though I am nuts. It's just the American way they say, placidly, thinking that with 40 percent of wealth safely in the hands of one percent of the population all is as it should be. Not exactly. We now find ourselves in the paradoxical situation of looking like the oppressed workers of one hundred years ago who were forced into open rebellion by the obdurate selfishness of the one percent of their day. It seems so odd to me that these days the exceedingly wealthy can't see the ruin they are bringing down on all of us by their greed and determination to suck up everything at our expense. We really do seem doomed to repeat history and I find that fact alone exhausting. I am too old to fight the October Revolution in the 21st century. And too dubious about the outcome of revolution in general.

It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided.

While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride.

Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.

Economists long ago tried to justify the vast inequalities that seemed so troubling in the mid-19th century—inequalities that are but a pale shadow of what we are seeing in America today. The justification they came up with was called “marginal-productivity theory.” In a nutshell, this theory associated higher incomes with higher productivity and a greater contribution to society.

It is a theory that has always been cherished by the rich. Evidence for its validity, however, remains thin. The corporate executives who helped bring on the recession of the past three years—whose contribution to our society, and to their own companies, has been massively negative—went on to receive large bonuses. In some cases, companies were so embarrassed about calling such rewards “performance bonuses” that they felt compelled to change the name to “retention bonuses” (even if the only thing being retained was bad performance).

Those who have contributed great positive innovations to our society, from the pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin. Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong.

An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. There are several reasons for this. First, growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible. Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy. This new inequality goes on to create new distortions, undermining efficiency even further. To give just one example, far too many of our most talented young people, seeing the astronomical rewards, have gone into finance rather than into fields that would lead to a more productive and healthy economy.

Third, and perhaps most important, a modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.

None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good.

The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes. Economists are not sure how to fully explain the growing inequality in America. The ordinary dynamics of supply and demand have certainly played a role: laborsaving technologies have reduced the demand for many “good” middle-class, blue-collar jobs. Globalization has created a worldwide marketplace, pitting expensive unskilled workers in America against cheap unskilled workers overseas.

Social changes have also played a role—for instance, the decline of unions, which once represented a third of American workers and now represent about 12 percent. But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end.

Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.

When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement—we started way behind the pack, but now we’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing. Wealth begets power, which begets more wealth. During the savings-and-loan scandal of the 1980s—a scandal whose dimensions, by today’s standards, seem almost quaint—the banker Charles Keating was asked by a congressional committee whether the $1.5 million he had spread among a few key elected officials could actually buy influence. “I certainly hope so,” he replied.

The Supreme Court, in its recent Citizens United case, has enshrined the right of corporations to buy government, by removing limitations on campaign spending. The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office.

By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.

America’s inequality distorts our society in every conceivable way. There is, for one thing, a well-documented lifestyle effect—people outside the top 1 percent increasingly live beyond their means. Trickle-down economics may be a chimera, but trickle-down behaviorism is very real. Inequality massively distorts our foreign policy. The top 1 percent rarely serve in the military—the reality is that the “all-volunteer” army does not pay enough to attract their sons and daughters, and patriotism goes only so far.

Plus, the wealthiest class feels no pinch from higher taxes when the nation goes to war: borrowed money will pay for all that. Foreign policy, by definition, is about the balancing of national interests and national resources. With the top 1 percent in charge, and paying no price, the notion of balance and restraint goes out the window. There is no limit to the adventures we can undertake; corporations and contractors stand only to gain.

The rules of economic globalization are likewise designed to benefit the rich: they encourage competition among countries for business, which drives down taxes on corporations, weakens health and environmental protections, and undermines what used to be viewed as the “core” labor rights, which include the right to collective bargaining. Imagine what the world might look like if the rules were designed instead to encourage competition among countries for workers. Governments would compete in providing economic security, low taxes on ordinary wage earners, good education, and a clean environment—things workers care about. But the top 1 percent don’t need to care. Or, more accurately, they think they don’t.

Of all the costs imposed on our society by the top 1 percent, perhaps the greatest is this: the erosion of our sense of identity, in which fair play, equality of opportunity, and a sense of community are so important. America has long prided itself on being a fair society, where everyone has an equal chance of getting ahead, but the statistics suggest otherwise: the chances of a poor citizen, or even a middle-class citizen, making it to the top in America are smaller than in many countries of Europe.

The cards are stacked against them. It is this sense of an unjust system without opportunity that has given rise to the conflagrations in the Middle East: rising food prices and growing and persistent youth unemployment simply served as kindling. With youth unemployment in America at around 20 percent (and in some locations, and among some socio-demographic groups, at twice that); with one out of six Americans desiring a full-time job not able to get one; with one out of seven Americans on food stamps (and about the same number suffering from “food insecurity”)—given all this, there is ample evidence that something has blocked the vaunted “trickling down” from the top 1 percent to everyone else.

All of this is having the predictable effect of creating alienation—voter turnout among those in their 20s in the last election stood at 21 percent, comparable to the unemployment rate. In recent weeks we have watched people taking to the streets by the millions to protest political, economic, and social conditions in the oppressive societies they inhabit. Governments have been toppled in Egypt and Tunisia. Protests have erupted in Libya, Yemen, and Bahrain.

The ruling families elsewhere in the region look on nervously from their air-conditioned penthouses—will they be next? They are right to worry. These are societies where a minuscule fraction of the population—less than 1 percent—controls the lion’s share of the wealth; where wealth is a main determinant of power; where entrenched corruption of one sort or another is a way of life; and where the wealthiest often stand actively in the way of policies that would improve life for people in general. As we gaze out at the popular fervor in the streets, one question to ask ourselves is this: When will it come to America? In important ways, our own country has become like one of these distant, troubled places. Alexis de Tocqueville once described what he saw as a chief part of the peculiar genius of American society—something he called “self-interest properly understood.” The last two words were the key.

Everyone possesses self-interest in a narrow sense: I want what’s good for me right now! Self-interest “properly understood” is different. It means appreciating that paying attention to everyone else’s self-interest—in other words, the common welfare—is in fact a precondition for one’s own ultimate well-being. Tocqueville was not suggesting that there was anything noble or idealistic about this outlook—in fact, he was suggesting the opposite. It was a mark of American pragmatism. Those canny Americans understood a basic fact: looking out for the other guy isn’t just good for the soul—it’s good for business.

The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn.

Too late.