Thursday, April 24, 2008

Musical Innerlube: 'Path' by Apocalyptica

"No slogans, no jargon, no unexamined assumptions, no party line"

The Euston Moment by Alan Johnston

Two years ago a 3,000-word political statement, the Euston manifesto, argued that much of the left had suffered a theoretical collapse and a collapse of sensibility. In the words of Nick Cohen's bestseller, the left had "lost its way". We called for a realignment of progressive politics.

By reducing the complexity of the post-cold war world to a single great contest in which "imperialism" or "empire" faced "anti-imperialism" or "the resistance", parts of the left had transformed themselves into a reactionary post-left that took its enemy's enemy for its friend. We were "all Hizbullah now"as the placards had it. Listen to John Rees, a leader of the Stop the War Coalition and Respect:

"Socialists should unconditionally stand with the oppressed against the oppressor, even if the people who run the oppressed country are undemocratic and persecute minorities, like Saddam Hussein."

America was the global oppressor and Bush was the "No 1 terrorist". Anyone shooting at Americans became, by that act, the resistance to empire. A collapse of sensibility followed. The reductionism in the theory licensed habits of mind and structures of feeling well-known among the older fellow travellers of Stalinism - apologia, denial, grossly simplifying tendencies of thought, moral relativism.

The consequence was profound political disorientation. Tony Benn sat in front of the mass murderer, Saddam Hussein, and asked him, "I wonder whether you could say something yourself directly through this interview to the peace movement of the world that might help to advance the cause they have in mind?" Days later Benn was less kind to an Iraqi oppositionist, spitting the words "CIA stooge!"

The Euston manifesto was a warning cry. Post-leftists, we said, were living in what Paul Berman called "foggy zones of half-believed beliefs, freed of any responsibility to subject any given opinion to the simplest of common-sense tests".

What were these half-believed beliefs?

A demented "anti-zionism". Paul Berman observed:

"During the last two or three years, large publics in western Europe and even in the United States have taken up the view that, if extremist political movements have swept across large swaths of the Muslim world, and if Ba'athists and radical Islamists have slaughtered literally millions of people during these last years, and then have ended up at war with the United States, Israel and its crimes must ultimately be to blame. And if America has been drawn into war in Iraq, it is because President Bush's second-level foreign policy advisers include a few Jews (though all of his top level advisers are Protestants), and these second-level figures have manipulated everyone else to the bidding of Ariel Sharon."

Anti-Americanism. A lunatic book like Thierry Meyssan's Le 11 Septembre 2001, l'Effroyable Imposture (translated into English as 9/11: The Big Lie) - was given respectful attention in Le Monde Diplomatique and sold 200,000 copies in France within one month of publication. The dinner party talk was that America "had it coming". Anti-Americanism was becoming a "self-sustaining hatred" as Andre Glucksmann puts it, akin to the other grand hatreds - of women and of Jews.

Occidentalism and self-hatred. Whatever "they" do, it is "our" fault. We are the great satan and they are "the resistance", so the worse their atrocity (decapitating aid workers, blowing up wedding parties, marketplaces, and mosques of the "wrong" sort, slaughtering election workers, assassinating elected MPs, hanging homosexuals, torturing trade unionists, flying airliners into buildings, using the mentally ill as suicide bombers, denying the Holocaust, threatening to "wipe Israel off the face of the Earth", killing those who would teach girls, that sort of thing) the more starkly was revealed the depths of ... our sin! Agency and moral responsibility lay with the west, so "they" could not really be held responsible. ("They" could not really come into focus at all.)

Albert Camus warned that a love of freedom and progress can become "weirdly inseparable from a morbid obsession with murder and suicide". In the foggy zone of the post-left there is a new ease with violence. The urbane intellectual shouts "Victory to the Resistance!" The affluent middle-class anti-globalisation protestors chant "Martyrs not Murderers". And John Pilger tells us we "can't be choosy".

Careless moral equivalencing that rots the ability to judge. Listen to leftwinger Ellen Willis. "Central to Bush's outlook is a Christian fundamentalism as hostile to liberalism as Sayyid Qutb". As hostile? Even the usually excellent Martin Bright has argued that '[Paul] Berman's description of a paranoid 'people of God' convinced of its own righteousness, prepared to kill its enemies and sacrifice its own in pursuit of a realm of pure truth might just as easily apply to the United States as to its Ba'athist and Islamist foes." Just as easily?

Along this road madness lay. The Euston manifesto set up a checkpoint and offered some alternative signposts.

It is vitally important for the future of progressive politics that people of liberal, egalitarian and internationalist outlook should now speak clearly. We must define ourselves against those for whom the entire progressive-democratic agenda has been subordinated to a blanket and simplistic "anti-imperialism" and/or hostility to the current US administration. The values and goals which properly make up that agenda - the values of democracy, human rights, the continuing battle against unjustified privilege and power, solidarity with peoples fighting against tyranny and oppression - are what most enduringly define the shape of any left worth belonging to.

And, like Roy in Bladerunner, for a short while Euston burned so very very brightly. But we had no staff or money and we never really sought such things. For Euston was a political moment, not a political movement. (If you speak post-structuralese, Euston was a "plateau" I suppose.) Those who wanted (or feared) "Euston branches" and "Euston policy papers" were disappointed (or relieved).

To boot, we lacked the doctrinal agreement to become a group. The manifesto was agnostic on which economic system to support, was oddly silent about Europe, and none of the authors could honestly say the environment was at the heart of our concerns. We had not even shared a common view on the war (despite the New Statesman's deliberate mis-framing of us as "the pro-war left").

But the Euston Manifesto did encourage progressives to speak up for their core values against the reactionary left. As Will Hutton predicted, Euston acted as a goad to map a new direction in foreign policy - a progressive democratic internationalism set against both a hubristic neo-conservatism and a reactionary "anti-imperialist" left. David Miliband's recent speech on the democratic imperative set out a post-Blair not an anti-Blair foreign policy. If Euston helped to create the political space for that speech to be given then it was all worth it.

The intellectual and campaigning energies that created the manifesto continue to pulse. Go online and look at normblog, Harry's Place, Engage, Labour Friends of Iraq, Democratiya, and the work of all the contributing online journals, blogs, signatories, journalists and activists. Consider the success of Nick Cohen's book What's Left. Watch the Channel 5 documentary No Excuses for Terror, or the Euston-organised parliamentary seminars on humanitarian interventionism and the terror threat, or the Engage rally against the academic boycott.

The dogged work of organising solidarity with the democrats in Iraq is continued by Labour Friends of Iraq. Engage still fights antisemitism. Eric Lee's cyber-campaigns for global labour rights grow more influential. Philip Spencer is forging links between Unite Against Terror and the French anti-terrorism group, MPCT, part of an international network of citizen responses to Islamist terror. International links proliferate.

The writings of Eustonians continue to pour out. Paul Berman's study of Tariq Ramadan, David Zarnett's ongoing, meticulous critique of the work of Edward Said, Marko Attila Hoare's careful mapping of the Balkan conflicts and the maladies of the left, Andrei Markovits's acclaimed study of anti-Americanism, David Hirsh's brilliant monograph (pdf) Antizionism and AntiSemitism: Cosmopolitan Reflections, Brian Brivati on genocide and intervention, Norman Geras on the deficits of international law, and much more.

At the online political journal Democratiya, many Eustonians now gather. A new book, Global Politics After 9/11: The Democratiya Interviews, has just been published by the Foreign Policy Centre. It carries a preface by the Eustonian political philosopher and Dissent co-editor Michael Walzer. What he writes about Democratiya was true of the Euston moment too:

Two commitments give shape to the Democratiya project. The first is to defend and promote a left politics that is liberal, democratic, egalitarian, and internationalist. Those four adjectives should routinely characterise left politics, but we all know that they don't. The second commitment is to defend and promote a form of political argument that is nuanced, probing, and concrete, principled but open to disagreement: no slogans, no jargon, no unexamined assumptions, no party line.

Second World War French Resistance fighter Germaine Tillion dies at 100

Germaine Tillion, a Second World War resistance fighter and celebrated anthropologist, died Saturday, her association said. She was 100.

Tillion, who wrote about her experiences in a Nazi camp, died at her home in Saint-Mande in the Paris region, said the head of the Germaine Tillion Association, Tzvetan Todorov.

Tillion was sent in 1943 to the Nazi camp for women and children in Ravensbruck, Germany, for her work with France's underground Resistance network.

She was the recipient of the Grand Cross of the Legion of Honour, one of France's highest distinctions. She was one of only five women to have received such an honour.

Tillion wrote extensively about her experiences in the camp, revisiting through her work the place where her mother died.

In a 1988 book on the camp, Tillion wrote that she had managed to survive thanks to luck, anger, the desire to bring crimes to light and to the bonds of friendship.

After the end of Second World War, Tillion devoted herself to documenting the history of France's Resistance to German occupation. She was also a prominent voice against the French colonial presence in Algeria and spoke out against torture.

~ more... ~

Top 10 Reasons To Take It To The Streets (by 'flycatcher')

Here are my top 10 reasons to "take it to the streets." I think you know what I mean. Our best hope of salvaging what's left of our economy involves ordinary people like you and me engaging in peaceful public protest of the recent moves by the Federal Reserve and the US Treasury Department. All of these moves were sanctioned by our Congressional leadership -- meeting behind closed doors -- to ensure a soft landing for liars and cheats while decent people lose their houses, life savings, and pension funds.

If Fed Chairman Ben Bernanke admitted we nearly avoided a domino-like crash of the nation's secondary financial institutions (i.e., Bear Stearns) it admitted that it allowed the housing bubble backed by inflated ABS/MBS securities and the even more inflated securities derivative debacle to go on for way too long. I think we're past the point of no return. And I think so do many of you.

I'm not writing here trying to impress anyone. Many people have a better idea of how bad things are than I do. And I'm certainly no economist -- I'm just appealing for public support to voice opposition to the contempt for working-class people that we've endured for 8 years.


Is the Bush record any indication? Here's his legacy after nearly eight years in office and the full support of a doting MSM:
  1. Trillions in unfunded Bush tax cuts for the "have and have mores." It might have been harder for George to sign off for his rich friends if he ever met real Americans face to face.
  2. The $2 trillion Iraq/Afghanistan quagmire. That's before you add in the human cost and the lifetime of care so many US veterans will need to lead anything resembling a normal life.
  3. The Fed's continuous low-interest "bubble-making" prime rates. Billions in worthless high-risk high-interest securities and the unfathomable derivatives of same have now been guaranteed by the Fed at bargain basement Fed prime rates. Add to that the Fed's pitiful stewardship of an oblique and out of control banking system otherwise known as "deregulation"...
  4. ...Leaving the country with toxic high-risk, high default ABS/MBS securities and derivatives now totaling high residual balances on brokerage houses and secondary credit banks (i.e., 50-60%) of assets claimed on balance sheets). All thanks to deregulation of the banking system. Trillions of dollars of loans made with little effort, less market research, bad computer models, and just plain greed.
  5. $4 trillion more of national debt than 2001. This increases at a rate of $43 million an hour.
  6. The overall destruction of America's industrial base. Again at bargain basement prices. Even the unions are glad to lend a hand to become major players in the health insurance industry and pension funding.
  7. "No bid" black budget, Homeland Security, and FEMA contracts which aren't submitted to so much as double-entry bookkeeping. Their real value only adds to the nearly $10 trillion national debt. Meaning...
  8. ... it's even more likely we'll see the systematic destruction of the world's reserve currency with the same intensity as the destruction of Iraqi cities. Only we'll see it a little sooner.
  9. The Fed bailing out criminals by putting up benchmark securities (i.e., Fannie Maes, Freddie Macs) as collateral for nearly worthless sub prime mortgages, markedly devalued hedge funds -- thereby allowing the Fed to create 21st Century versions of junk bonds. Because these outstanding debts are now financed at low Fed prime rate prices.
  10. FINALLY convincing the world we really are nuts as the world starts to boycott the $2-3 billion a day in US Treasury securities the government needs to stay in operation. If this lasts the government will default sometime this summer and a run on the dollar will be more like a rout.
So whatever you've seen to ain't seen nothing' yet.

"Putin's Plan"

From: The Hibernation by Michael Idov

Putin's historic achievement is the creation, in eight short years, of what the chief Kremlin ideologist Vladislav Surkov terms suverennaya demokratiya ("sovereign democracy") and what's been rechristened, in liberal circles, suvenirnaya demokratiya: "souvenir democracy." In brief, this system consists of a narrow executive silo--about 50 Putin insiders spread out among government agencies--through which all policy is funneled, and a collection of decorative Western-style institutions pivoting around it. The fat around Putin's lean machine includes a costly, tautological United Russia party structure, useless regional governments (since 2004, the president appoints governors directly), and an equally useless State Duma, the lower house of the parliament. Under the rules imposed just in time for last December's parliamentary election, voters now pick between parties, as opposed to individual delegates--and Putin's status as the head of United Russia happened to put his name at the top of every ballot. You thus voted not for parliamentary representation but for something called "Putin's Plan." A United Russia landslide ensued, helped along by epidemic poll fraud: The official ballot counts amusingly spike on every round number (70, 80, 90), a pattern possible only with furious rounding-up. By January of 2008, newspapers began dropping the name "United Russia" from articles. What Russia had was, once again, The Party.

In the absence of any real legislative work, United Russia delegates are often businessmen pursuing tiny goals--importers out to lower a specific tariff, radio-station owners with sights on a particular frequency--or absurd celebrities who have pledged loyalty to the party. A notorious photo of twentysomething gymnasts-cum-lawmakers Svetlana Khorkina and Alina Kabaeva depicts them cavorting in the chamber like bored schoolchildren in the back of a classroom. In the run-up to the December election, many seats were bought and sold for the attendant perks, which include an apartment in Moscow, immunity against criminal investigation, and five aide positions to fill as one wishes. At least two sources tag the price of a Duma seat at around $1 million, 50 percent of which is instantly recoupable: Those aide spots go at $100,000 a pop.

Besides corrupting older institutions, the party feeds superfluous newer ones like Nashi--a politicized "youth movement" with its own network of mildly brainwashing camps (and a sprawling website that disseminates newsflashes like "Garry Kasparov's SUV ran over a young fan"). It may sound sinister, and its name, meaning "Ours," is terribly unfortunate--Nashist sounds like both "Nazi" and "fascist"--but, in truth, Nashi is a deeply dopey fund-waster. A quick conversation with a participant in any of Nashi's many rallies (for "Putin's Plan," against Kosovo's independence) will invariably reveal that the students have been bused in under threat of a failing grade or harder community service. The morning after Medvedev's victory, on Pushkin Square, I joined a group of about 60 young Nashi men and women with government-issue flags huddled, under freezing rain, in front of an outdoor stage. A government-approved rapper, swaying in his best approximation of Jay-Z, delivered an upbeat refrain: U menya vsyo okei, u menya vsyo okei--"I'm just fine, I'm just fine"--periodically throwing in a misplaced shout-out to "South Bronx." The wet crowd looked utterly miserable. More than a few boys clutched beer bottles. A violet-eared militia officer was the only one bobbing his head to the beat: At least he was getting paid to be there.

The final leg of Sovereign Democracy is in what used to be the private sector. A de facto nationalization of Russia's most flush industries--oil and gas--provides the cushion that keeps the bureaucratic deadweight afloat. Both functionaries and dissidents, struggling to put this socioeconomic model into first-world terms, like to say that the new Russia is being run like a corporation. To an extent, it is a corporation, and that corporation is Gazprom--currently headed by Dmitri Medvedev. The government is unhealthily symbiotic with the gas concern, which provides at least 8 percent of the country's GDP, serves as an unsubtle diplomatic chip, and, dissidents allege, helps the principals funnel vast fortunes abroad. Per Medvedev, Gazprom should be worth $1 trillion by 2017, which will make it the world's largest company. The rest of its directors' board teems with government officials and Putin and Medvedev's fellow St. Petersburg mayor's office alums. It could, in a pinch, make a decent shadow cabinet. In the late 1990s, a jokey draft of a "Gazprom- State Unity Bill," circulated in the Russian Parliament hallways, stated that, "in case of Prime Minister's incapacitation, his duties shall be carried out by the Chairman of the Gazprom Board of Directors, and vice versa." Less than a decade later, it's no longer a joke.

'Quarrelsome Nation: The Thirteen American Arguments'

"The Thirteen American Arguments" takes a sweeping look at the fundamental debates that, Fineman argues, have shaped America from its seventeenth-century colonial roots. Who, for instance, is a person? Who, for that matter, is an American? What is the role of faith in public life, or the role of the individual vis as vis an expansive, growing state? How, ultimately, can we make sure our system is equitable and "fair"?

Fineman's years as a high-level political reporter have armed him with a library of up-close-and-personal anecdotes that give the book its flavor, but the real meat of each chapter comes from the condensed--in some cases, one wishes they were less so--historical perspective offered on each debate. Whether it comes to the Supreme Court's many contradictory rulings on race or the long history of squelching free speech in America, each major argument serves as a useful reminder that many things held sacred as "quintessentially American" are actually modern evolutions, produced by years of painful debate.

The primary goal of the book, Fineman writes, is to "cut through the noise of the day," unveiling the core themes and arguments that simmer under our various public debates. "The earthquakes and lava eruptions we see and hear every day, whether at Daily Kos or the Drudge Report, whether on O'Reilly or NPR, are merely visible expression of deeper forces," he writes. However, if you know your political and historic turf, he argues, "you can separate what is useful from what is mere bombast and entertainment." In the midst of the rather bombastic and always entertaining 2008 presidential campaigns, where many debates devolve into "he said," "she said," and various denials, dissembling, and vituperation regarding what he or she said, this would be a useful skill indeed.

Several of Fineman's thirteen American arguments, including "Debt and the Dollar," "The Terms of Trade," and "War and Diplomacy," have, at least on the surface, been hashed and rehashed into near-oblivion this year. The deeper, more prevalent debate, however, dances around the last of Fineman's thirteen arguments: the quest for a "fair, 'more perfect' union," fueled by an effort to "dismantle the power of the elites who have rigged the system against the little guy." Sound familiar, campaign watchers? This particular American argument, Fineman writes, is held "between Main Street and Wall Street, grass roots and powers that be...The Argument lures us down byways of hatred, fear, and division, but mostly it has led to a fairer, more open America." Today, of course, this argument is best seen in Democratic class-warfare rhetoric. Whether it will continue to lead to a more open America, however, is certainly worth questioning--particularly if the argument centers on imaginary grievances or constructed identities rather than the real, more daunting problems at hand.

50 years of the peace symbol

The peace symbol -- which has had wars aplenty to rub up against since it was created 50 years ago -- is one of the most recognizable emblems in the world. And some peace symbol standard-bearers are using its 50th anniversary to highlight five years of protest since the war in Iraq began.

Among them are peace veterans who marched when the symbol came into its own, spreading with the flood of protest some 40 years ago during the Vietnam War.

The symbol was a much more sensitive subject then, said Ed Mulready, a member of Pacem in Terris (Peace on Earth), a Wilmington-based peace organization that for almost five years has been holding twice-weekly vigils to urge the return of troops from Iraq.

"At times during the Vietnam War, that logo meant you were taking sides," said Mulready, 62, of Newark, who also crusaded for peace during that period. "I don't think people remember how ferocious the opposition to the violence was."

As a faculty member and adviser to the student newspaper, The Rocket, at Slippery Rock State College in Pennsylvania, he helped make the bold decision to run the peace symbol at the top of the front page almost every day in 1970 and 1971 as a protest against the Vietnam War.

"In the middle of a war, we were saying, with that peace symbol, that we were taking sides," he said. "It was an incredibly divisive thing. But it was also, I think, idealistic and decent."

~ read on... ~

Marxists on the capitalist crisis: 2. Costas Lapavitsas - A new sort of financial crisis.

Costas Lapavitsas is a Marxist economist specialising in the study of financial systems. His writings include the chapter on money in Anti-Capitalism: A Marxist Guide (edited by Alfredo Saad Filho), and he is a lecturer at the School of Oriental and African Studies in London. Interview by Martin Thomas

It has gradually become clear that one of the key features of the last thirty years is increasing autonomy of finance.

Many things have happened in the world economy since 1973-4, which is basically the end of the long boom, but one thing that is clear is that the financial system has become proportionately much larger and increasingly autonomous from real accumulation - production and circulation of value and surplus value.

The reasons for this are many and varied. There are reasons of technological innovation. There are reasons of institutional and political transformation - the deregulation and liberalisation of finance which has been instigated by a number of governments.

There are also reasons, more fundamental perhaps, which have to do with big capital, the large enterprises, becoming progressively less dependent on banks for credit to finance investment. And so the financial system has begun to target the personal income of private individuals - workers and broader strata of the population - as a source of profit.

This is a new departure in capitalism. I’d call it direct exploitation - profit being extracted directly from personal income and not through the process of production. Financial institutions increasingly make their profits from private individuals by lending for housing, for consumer credit, and so on.

The US Federal Reserve’s own figures show that the proportion of personal income paid out in debt servicing went up from 15.6% in 1983 to 19.3% in June 2007. A fifth of personal income is used to service debt. The figures in Britain are comparable. And remember, in the United States, financial profits are now a third of total profits.

Money incomes that people receive as wages or salaries or whatever, are increasingly transformed into loanable money capital, and out of that, banks and other financial institutions make profits. The process has created new layers of the capitalist class, feeding off those profits - new power centres, new centres of influence over policy.

Financial institutions also increasingly make profits by drawing fee income, that is, by mediating in financial markets - not lending and borrowing, but facilitating the lending and borrowing of others. This is an activity that banks have engaged in since the beginning of capitalism, but the size and importance of it now are quite new in the history of capitalism.

Altogether, interest income derived by banks out of profits made by industrial businesses has become proportionately smaller, though it remains important. On the other hand, interest income drawn from wages and other personal income, as well as income from fees, have become progressively more important for banks.

These are key structural changes. As a result there has been tremendous instability in the financial system and the economy as a whole. As banks and other financial institutions have made this turn in drawing their profits, they have created gigantic and novel forms of instability which implicate broad layers of ordinary people.

The instability has to do with the methods through which the transformation of finance has taken place. To make the turn, banks and other financial institutions had to rely on technological advances. The reason is obvious – to make loans to large numbers of individuals, banks must have the ability to process large amounts of individual data.

Until recently, they were not able to do that. But with developments in computers and telecommunications, they have acquired this capability.

Banks have started to use computationally intensive techniques and statistical methods in order to assess risk and to judge to whom they should lend. Bank lending and has become more of an arm’s-length process. People are turned into units which the banks can treat in a uniform way.

Instead of going to see your bank manager to ask for a loan, you tick a few boxes on an application form downloaded from the Internet. The bank adds other information it might have about you and then makes its decision by assigning a credit score to you. This, of course, raises problems of democratic control of information, but the point here is that the bank has lost personal contact with the borrower. The judgement they make of the borrower as a risk depends on a numerical assessment of data provided at a distance.

Moreover, since the banks and financial institutions have also moved into making money from fees - and not just from lending - they take these mortgage debts, package them into new securities, and sell them in open financial markets.

Thus, the mortgage debt that people used to owe to a bank for 20 or 30 years is now packaged by the banks offload onto others. The banks create composite or derivative types of debt on the basis of the original mortage.

It is worth stressing the change that has taken place by looking more closely at the process of mortgage securitisation. In the past, a bank would grant a mortgage by the bank manager talking to the borrower and deciding whether the borrower was a good prospect. The bank had a direct interest in working out whether the borrower was likely to repay regularly because otherwise it would lose its money.

Nowadays it is not like that. The borrower ticks the boxes; if the credit score clears a threshold, the bank would give the money; and next week the bank would package the mortgage into new securities and sell it, essentially providing others with a right to the stream of debt payments from the mortgage. After that it is not ostensibly the bank’s concern whether the borrower repays normally, or not.

All that relies on someone else, other than the bank, vouching for the process by better examining the creditworthiness of the new securities. That was done by a credit ratings organisation, such as Standard and Poor’s, or Fitch.

But the credit ratings organisations are also remote from borrower. They are also paid by the bank that creates the new securities, and so have a conflict of interest.

Finally, another institution, an insurer, would come along and guarantee the new securities. That again is happens at a considerable distance from the original borrower.

None of the capitalist enterprises involved in this mechanism has a solid interest in assessing the long-term reliability of the person who obtained the original mortgage. Each just wants to collect its fee, or sell its securities, and go on to generate new business of the same type.

If there is “cheap money” in the system in the first place, that is, if the central bank has made money available at low interest rates, then this mechanism is a secure way of making profits for banks and others.

But, depending on how problematic the original mortgages were, risks are accumulating, and nobody knows where they are concentrated. In the USA subprime mortgages were advanced to very poor people without real prospects of repaying regularly, especially if interest rates rose. As they defaulted on their mortgages, banks and others were left holding new securities that were not worth very much at all. That is ultimately why Bear Sterns, a huge bank, failed in March.

These problems were not clear until recently because this is the first time we have seen a financial system of this type emerge on this scale. At the time, economists and others were saying that it was a secure and stable way of doing things because the risk was spread out among a large number of people. Now we know that is far from the case.

The difference in responses to the crisis between the US Federal Reserve and the European Central Banks is based on a difference of outlook which has existed for a very long time.

It has to do with how those institutions were set up. The ECB is far more focused on price stability, whereas the Fed also sees itself as looking after the economy as a whole.

The Fed is also different from the ECB in the sense that the Fed produces world money and operates in the most important economy in the world. Its outlook is shaped by different concerns from the ECB’s.

At the moment, my judgement is that the Fed is so worried about the state of the American financial system that it is prepared to do whatever it takes to rescue it. Hence the huge amounts of money that it has made available to JP Morgan rapidly to take over the failed Bear Sterns. Hence also the rapid lowering of interest rates. The ECB takes a different line. It seems to think that the European financial system is in less danger.

In short, the Americans are less concerned about what is happening to the dollar and the international position of US capital, and even the domestic economy as a whole, than they are about rescuing the financial system.

Are they right? At the moment there is evidence that inflation is picking up. For the first time for many years, inflation might become a serious problem because of oil prices and food prices.

If that inflation problem materialises, then the Fed is going to regret what it is doing at the moment.

Moreover, the Fed has been overseeing a substantial, but quite orderly, decline of the dollar. The decision-makers in the United States seem to want the dollar to fall in order to remedy the US trade deficit. Is there a risk of that decline accelerating out of control? It is very hard to say, but it might. If the financial system were to receive an even bigger jolt than it has so far the decline of the dollar might accelerate out of control. That might happen, for instance, if some large financial institutions went under and holders of dollars across the world became very worried that US finance were collapsing.

There are some ruling class commentators in the Financial Times and elsewhere who have argued that the Fed’s measures might work, but at the cost of creating further problems for the future as they would be rescuing irresponsible banks. These comments are based on reality but most of those who make them are in an impossible position.

It is true that if interest rates are brought down, and if the Fed and other central banks pump money into the system, they are running the risk of creating another crisis down the road. The logical way of avoiding this would be to impose strong and pervasive controls on finance.

But the same people are completely against serious control and regulation of the financial system. They are in favour of liberalised finance. They believe that somehow the financial system, when it operates freely, improves the performance of the economy and everybody’s incomes. On this basis, it is impossible to take a consistent position.

My own view is that the Fed is reacting to very pressing requirements at the moment. It has to intervene to rescue the system. The risks are very great of a generalised crisis, and a few wrong moves by the Fed might lead to it. Whether as a result another crisis will happen down the road, in five or ten years’ time, is another matter that requires profound structural reform of finance.

Yes, people like Martin Wolf are rather embarrassed by the operation of a minimally-regulated financial system which means that when things are going well, you pocket the loot; when they go bad, you go to the government and ask to be bailed out. Can the left put alternative ideas into play on the question of regulating the financial system?

I think so. The ideas that are coming out of the orthodoxy and the capitalist class are terribly pedestrian. It’s the same old stuff that we have been hearing for more than two decades but appearing in technically different ways. In short, free markets and minimal regulation.

It is very important for the left to put across ideas of control. There is no reason, for instance, why the financial institutions cannot be controlled in terms of the assets they are required to hold and the proportions in which they hold them. At the moment, all the regulation is in terms of the capital they are required to have - Basel 1 and Basel 2*. The financial institutions have become very good at bypassing those regulations and using them to their own advantage. At the moment they can all meet the Basel 2 requirements, which presumably makes them safer, but at the same time several of them are at great risk, as we now know.

We should demand that regulation be imposed on where financial institutions lend and how. We should also demand that financial transactions are controlled and taxed. Financial institutions should not be able to trade any way they like, continually churning money over time and time again in order to generate fees.

More broadly and radically, we should insist that the mobilisation of money out of ordinary people’s incomes should become detached from securitisation and other speculative practices of the financial system. Houses, pensions, health, basic consumption should not be sources of profit for finance.

There should be public mechanisms that provide ordinary people with pensions in secure and controlled ways. There is no reason why the housing problems of society should be dealt with through the financial system. In London, for example, bringing housing well and truly into the realm of finance has meant that house prices have increased by a factor of about five in the last 20 years while personal incomes have increased by a factor of two. That divergence is related, in large part, to the grip that the financial system has acquired on housing. We should demand good quality social housing, while detaching housing from the financial system.

Since the 70s it has been a commonplace view, among Marxists and others, that the USA is in relative decline. But maybe it’s not. In all the big international forums of capital, the USA is still the dominant voice.

The United States has declined in terms of measures to do with production. But if you look at finance, there is no relative decline. The leading financial institutions of the world are US institutions. US banks dominate financial markets, and US ways of managing finance are very influential across the world. Financial systems across the world increasingly imitate the ways of the US financial system.

The dollar remains the closest the world has to world money, and it is produced by the United States.

At the same time, the US is structurally weak because it runs a huge trade deficit. But it has managed to turn even the deficit into a source of strength. The countries that make the trade surpluses end up holding the dollar as reserves of world money. If the dollar were to collapse these countries would make significant losses.

In short, in the realm of finance, the US remains very powerful, but its power is precariously based. That, in a sense, is the key problem of present-day capitalism. Note though that the current crisis has not yet brought the international aspect of finance strongly into play. But as the USA continues to be wracked by instability, the crisis could well become truly international.

What about the rise of the BRICs - big fast-growing economics like Brazil, Russia, India, and China?

This is a development of the first importance. The centre of gravity of productive capital is shifting east - to Japan for a long time now, to China and East Asia, and to a certain extent to India, though that is not comparable to China.

The implications in the sphere of finance are not as straightforward as the shift of productive power would indicate. The financial mechanisms are dominated by the United States, and world money is dominated by the United States.

A lot of the fast-growing economies trade in dollars and pay in dollars. Their key exchange rate is against the dollar. Consequently, they have an interest in maintaining stability of the dollar, and they accumulate dollar reserves.

In the last ten years, many developing capitalist countries have accumulated vast reserves of dollars. This imposes a huge cost on very poor people, since it represents a transfer of capital to the United States that could have been used to sustain investment and production in their domestic economies.

But it also gives to the countries that have the reserves some protection from the storms which are breaking in the world economy at the moment. The crisis which has broken out in the richer countries might not affect them as immediately as it would have done previously.

How long this factor of protection will operate, nobody can tell. Already, for example, US financial institutions are moving into Mexico and similar countries in order to trade mortgage-backed securities there. This might reproduce the same effects there as in the USA, or there may be a knock-on effect if the US financial system suffers a more serious collapse.

The rate of profit is generally reckoned to be the key factor in crises, and generally we expect to see some decline in the rate of profit in the run-in to crises. Do the fairly high rates of profit in production currently mean that production is insulated against this financial crisis?

That takes us back to the autonomy of finance. The financial system is now more autonomous and draws more of its profits out of personal income rather than from the surplus value created by productive capitalists.

Nonetheless, Marxist theory is of great use in analysing these phenomena. Marx differentiates between, on the one hand, financial crises which are continuations of a crisis in production, to do with profitability and the ability to sell, and on the other, crises which are generated within the realm of finance. The latter might or might not affect real accumulation in severe ways.

In other words, there has always been some autonomy of finance, and the world of finance has always created crises out of its own operations. In the last thirty years, the scope for this has become greater, and it now involves vast numbers of ordinary people, through mortgages, consumer credit and pensions. This makes financial storms more worrying and damaging for the working class and the majority of the population.

By impacting on ordinary people, the financial crisis could well impact on real accumulation as it might lead to cutting down on consumption. In short, there are complex ways in which financial bubbles and crises could affect the real economy. Novel developments have taken place in contemporary capitalism and the standard guidance of Marxism needs to be reconsidered, while maintaining its core principles.

* An international agreement of 2004 - “Basel 2”, superseding “Basel 1” of 1988 - sets a “capital adequacy framework” for banks. Under Basel 1, capital (primarily, shareholders’ equity) must be at least 8% of the bank’s risk-weighted assets. Under Basel 2 it is proposed that large banks with technically sophisticated ways of measuring risk keep a lower percentage. See

'Anybody seen our gold?'

GATA's advertisement in The Wall Street Journal

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-- Paragraph 6, U.S. Treasury Department international reserve position reports:

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Mater Dei team gets 2,843 miles to the gallon

Mater Dei High School finished first and third out of 33 high school and college student teams from North and South America, shattering the miles per gallon record set last year by Cal Poly San Luis Obispo.  

Mater Dei's "6th Gen" car won the traditional fuel combustion category in the Shell Eco-Marathon Americas with run of 2,843.4 miles per gallon.  

Mater Dei's other car in competition, "5th Gen" finished third with a Friday run of 2,383.8 miles per gallon.

Mater Dei wins $10,000 for first prize, along with an additional $2,400 for internal combustion engine awards.

~ more... ~


'The birth pangs of a cosmic Prometheus rising out of the long nightmare of domesticated primate history'

Excerpts from Robert Anton Wilson's 'Prometheus Rising':

From: 'Preface to the Second Edition' (1997)

As I contemplate this tenth printing of a "far out" or "freaked out" book that began its career back in 1978, I feel only mildly embarassed by the predictions that proved over-optimistic. ... I feel much more astonished, and pleased that many of the predictions now seem much less shocking than when I first published them. Indeed the wildest and most "Utopian" future-scans in here are precisely the ones that have had the greatest support in the 1990s. To see two decades ahead, even in a few years, counts as some sort of success in the Futurism game. And every bulletin from the embattled MIR space station reminds me that if my space forecasts projected "too much too soon," part of what I expected does in fact already exist and the rest is obviously evolving.

I feel more chagrined about my lyrical evocation of Intelligence Intensification. In the 1970s, I simply did not recognize the extent to which the 1960s "youth revolution" had terrified our ruling Elite, or that they would try to prevent future upsurges of radical Utopianism by deliberately "dumbing down" the educational system. What they have produced, the so-called Generation X, must rank as not only the most ignorant but also the most paranoid and depressive kids ever to infest our Republic. I agree with outlaw radio star Travis Hipp that the paranoia and depression result inevitably from ignorance. These kids not only don't know anything; they don't even want to know. They only realize, vaguely, that somebody has screwed them out of something, but they don't have zest or bile to try to find out who screwed them and what they were screwed out of.

Fortunately, this Age of Stupidity cannot last very long. Already most people know that if you want a good TV or VCR, you buy Japanese or German, etc. Eventually, in order to compete, the Elite will have to allow a bit more education for American youth, before we sink fully to the level of a Third World nation.

From 'Chapter Five -- Dickens & Joyce:The Two-Circuit Dialectic'

In Chapter Three of Finnegan's Wake, the "offenders" (invaders) and "defenders" (natives) get so thoroughly mixed up that all that remains is a composite "fender" who takes the blame for everybody.

This cyclical view of history, whether in Joyce, Rattray, Taylor, Vico (Joyce's source), Hegel-and-Marx, etc. is only part of the truth, but it needs to be stressed because it is the part that most people fearfully refuse to recognise. Whether we speak in terms of Taylor's Matrist-Patrist dialectic, Vico's cycle of Divine, Heroic and Urbanized ages, the Marx-Hegel trinity of Thesis-Antithesis-Synthesis, or any variation thereon, we are speaking of a pattern that is real and that does repeat.

But it only does so to the extent that people are robotized: trapped in hard-wired reflexes.
When the accumulated facts, gimmicks, tools, techniques and gadgets of neuro-science -- the science of brain change and brain liberation -- reaches a certain critical mass, we will be able to free ourselves from these robot cycles. It is the thesis of this book that we have been approaching that critical mass for several decades now and will reach the crossover point faster than you expect.

The current rampages of territorial-emotional pugnacity sweeping this planet are not just another civilization failing, Vico fashion.

They are the birth pangs of a cosmic Prometheus rising out of the long nightmare of domesticated primate history.

From Chapter Six -- The Time-Binding Semantic Circuit

Whoever can scare people enough (produce bio-survival anxiety) can sell them quickly on any verbal map that seems to give them relief, i.e., cure the anxiety. By frightening people with Hell and then offering them salvation, the most ignorant or crooked individuals can "sell" a whole system of thought that cannot bear two minutes of rational analysis. And any domesticated primate alpha male, however cruel or crooked, can rally the primate tribe behind him by howling that a rival alpha male is about to lead his gang in an attack on this habitat. These two mammalian reflexes are known, respectively, as Religion and Patriotism. They work for domesticated primates, as for the wild primates, because they are Evolutionary Relative Successes. (So far.)
The emotional-territorial or "patriotic" circuit also contains status programs or pecking order. Working in tandem with first-circuit bio-survival anxieties, it is always able to pervert the functioning of the semantic-rational circuit. Whatever threatens loss of status, and whatever invades one's "space" (including one's ideological "head space"), is a threat to the average domesticated primate.

Meltdown of U.S. Dollar Underway as China Dumps the Currency

Comments by China that it intends to move away from its reliance on the dollar triggered a sharp drop in the Dow Jones Industrial Average and heightened worldwide fears about the U.S. currency's stability. Chinese Central Bank Vice Director Xiu Jian said that his country is planning to shift much of its $1.4 trillion national currency reserve from dollars to more stable currencies, such as the euro or Canadian dollar. After these comments, the dollar fell to record lows relative to other currencies -- the lowest ever against the euro, the lowest in a generation against the British pound, and the lowest in 57 years against the Canadian dollar.

"The big issue on any currency is if its rate of depreciation is so fast that it scares away all capital, and the announcement that we heard from China sort of feeds those fears," said Larry Smith, chief investment officer at Third Wave Global Investors.

China is the world's largest investor in U.S. Treasury bonds and securities, holding more U.S. debt than any country but Japan. Because China's currency is linked to the dollar, the country also maintains a massive reserve of the currency.

But this policy had already begun to shift at the time of Xiu's comments. China has divested approximately 5 percent of its $400 billion holdings in the U.S. Treasury and established a $200 billion fund to help diversify its investments in equities and stocks around the world.

"We will favor stronger currencies over weaker ones, and will readjust accordingly," said Cheng Siwei, vice chairman of China's National People's Congress.

It is not just U.S. investors who are concerned. Because the dollar's fluctuations have driven up the euro, exports in Europe have fallen and sparked fears for the stability of that continent's economy. In a recent speech, French president Nicolas Sarkozy added his voice to those calling for the Bush administration to act to stabilize the currency.

"The dollar cannot remain 'someone else's problem,' " Sarkozy said. "If we are not careful, monetary disarray could morph into economic war. We would all be its victims."

Pentagon Pundits

Media facilitate Iraq propaganda effort

A lengthy April 20 New York Times investigation of the Pentagon's program of feeding talking points to military pundits featured on TV newscasts raised disturbing questions about the media's role as a conduit for Pentagon propaganda.

According to the Times, the Pentagon recruited over 75 retired generals to act as "message force multipliers" in support of the Iraq War, receiving special Pentagon briefings and talking points that the analysts would often parrot on national television "even when they suspected the information was false or inflated." The Times even noted that at one 2003 briefing the military pundits were told that "We don't have any hard evidence" about Iraq's illicit weapons-a shocking admission the analysts decided not to share with the public.

The Times also documented that many of the analysts had ties to "military contractors vested in the very war policies they are asked to assess on air"--information that the media outlets did not disclose to viewers. The Times reported that the "analysts represent more than 150 military contractors either as lobbyists, senior executives, board members or consultants." The analysts themselves told the Times that "the networks asked few questions about their outside business interests," and "were only dimly aware" of the special Pentagon briefings they were receiving.

While the Times article focused on the role of the Pentagon, the parties that arguably have most to answer for are the media organizations that relied on these Pentagon analysts and failed to disclose blatant conflicts of interest posed by their ties with defense contractors.

The military analysts' ties with military contractors and pro-war advocacy groups had been documented as far back as 2003, when the Nation (4/21) reported that prominent analysts like NBC's Barry McCaffrey and Wayne Downing were among the pundits who "have ideological or financial stakes in the war. Many hold paid advisory board and executive positions at defense companies and serve as advisers for groups that promoted an invasion of Iraq." As the Nation reported, McCaffrey told MSNBC viewers early in the war, "Thank God for the Abrams tank and... the Bradley fighting vehicle." Unbeknownst to viewers, McCaffrey was sitting on the board of a company called IDT, which received multi-million dollar contracts related to both of those pieces of military hardware.

As the Times story made clear, NBC was hardly the only offender. As a former Pentagon official told the Times, "CNN failed to disclose the fact that, "for nearly three years" on-air military analyst James Marks "was deeply involved in the business of seeking government contracts, including contracts related to Iraq."

This is not to suggest that there are no ethical standards at the networks--at least one military analyst has been sanctioned for inappropriate behavior. In May 2007, retired Army Major General John Batiste was fired as a CBS News consultant for appearing in a VoteVets television ad that criticized George W. Bush. A CBS vice president justified Batiste's firing by invoking standards that seem to have been entirely missing in the case of the retired generals:

"When we hire someone as a consultant, we want them to share their expertise with our viewers. By putting himself front and center in an anti-Bush ad, the viewer might have the feeling that everything he says is anti-Bush. And that doesn't seem like an analytical approach to the issues we want to discuss."

Of course, the Pentagon's propaganda plan would have little effect if not for the enthusiastic participation of the corporate media. As a former Pentagon official told the Times, "We were able to click on every single station and every one of our folks were up there delivering our message."

The Times likened the program to "other administration tactics that subverted traditional journalism," but that would seem to discount the fact that the media have for decades demonstrated a preference for featuring retired military officials in their war coverage, with little if any serious efforts to offer balancing perspectives. The run-up to the Iraq invasion was no different. As former CNN chief news executive Eason Jordan explained (4/20/03):

"I went to the Pentagon myself several times before the war started and met with important people there and said, for instance, at CNN, 'Here are the generals we're thinking of retaining to advise us on the air and off about the war,' and we got a big thumbs-up on all of them. That was important.

Media executives have historically rationalized their disproportionate reliance on analysts from within the ranks of the military by claiming that they are on the air to share independent expertise about military affairs-something that need not be balanced. As former CNN vice President Frank Sesno stated to journalist Amy Goodman in 1999, "Generals are analysts, and peace activists are advocates."

In light of the fresh documentation that many of the media's military analysts were Pentagon advocates, it is time for the media to rethink this assumption.

Our Gilded Age and Theirs


Think of it as gilding the pain. Last year, hedge fund manager John Paulson of Paulson & Co. hauled in a nifty $3.7 billion. (Yes, you read that right.) Mainly, he did so, according to the Wall Street Journal, "by shorting, or betting against, subprime mortgage securities and collateralized debt obligations." And he wasn't alone. Hedge fund money-maker Philip Falcone of Harbinger Capital Partners raked in a comparatively measly $1.7 billion in 2007, also by shorting subprime mortgages. These are fortunes beyond imagining, made in no time at all by betting on the pure misery of others. Think of them as Las Vegas with a mean streak a mile wide.

In a week in which Citibank released news of quarterly losses of $5.1 billion and sweeping job cuts, food riots dotted the planet, oil hit $117 a barrel, and regular gas prices averaged $3.47 a gallon at the pump (with another 30 cents likely to be tacked on in the next month), Institutional Investor's Alpha magazine released its list of the 50 top hedge fund managers. In 2007, they "made" a cumulative $29 billion. (Even to slip in among the top 25, you had to take in at least $360 million.) To put this in perspective, Paulson alone made $1.6 billion dollars more than it is going to cost J.P. Morgan Chase to pick up the tanking Bear Stearns; in one hour, he made 30 times what the median American family earned all last year. And here's a little tidbit to go with that: Income inequality in 2007 was, according to the Associated Press, "at the highest level since 1928, the year before the Great Depression began."

And still, a New York Times piece on the gains of Paulson and crew described the hedge fund managers with genuine awe as "those masters of a secretive, sometimes volatile financial universe." Master of the Universe (a label originally attached to an over-muscled action figure of the 1980s by the name of He-Man) -- such descriptions have been with us since the beginning of our new Gilded Age and no one knows this better than Steve Fraser. His book on our financial "masters of the universe" from the eighteenth century to the present, Wall Street: America's Dream Palace, has just been published. As he writes, "Beginning with the merger and acquisition mania of the mid-1980s, the media were overrun with depictions of Wall Street 'gunslingers,' 'white knights' and 'black knights,' 'killer bees,' 'hired guns,'… and 'barbarians at the gates,' warrior appellations borrowed helter-skelter from antiquity, the Middle Ages, and America's mythologized West." The language brought to bear always had that requisite edge of awe, part of an ethos that added up to a cult of the Titan. Fraser, whose book is simply superb (and, in this age of information onslaught, mercifully short), offers a brief history of key images of Wall Street movers and shakers -- the aristocrat, the confidence man, the hero, and the immoralist -- taking you on a concise tour of America's love/hate relationship with Wall Street from the founding of the republic to late last night.

Now, as the gilding on our present age begins to peel and flake, Fraser turns back to the last Gilded Age at the end of the nineteenth century, to ask a few questions germane to our moment, especially why, today, unlike in the late nineteenth century, the protests over the Paulsons of our world aren't rising to the heavens. Tom

The Great Silence

Our Gilded Age and Theirs
By Steve Fraser

Google "second Gilded Age" and you will get ferried to 7,000 possible sites where you can learn more about what you already instinctively know. That we are living through a gilded age has become a journalistic commonplace. The unmistakable drift of all the talk about it is a Yogi Berra-ism: it's a matter of déjà vu all over again. But is it? Is turn-of-the-century America a replica of the world Mark Twain first christened "gilded" in his debut bestseller back in the 1870s?

Certainly, Twain would feel right at home today. Crony capitalism, the main object of his satirical wit in The Gilded Age, is thriving. Incestuous plots as outsized as the one in which the Union Pacific Railroad's chief investors conspired with a wagon-load of government officials, including Ulysses S. Grant's vice president, to loot the federal treasury once again lubricate the machinery of public policy-making. A cronyism that would have been familiar to Twain has made the wheels go round in these terminal years of the Bush administration. Even the invasion and decimation of Iraq was conceived and carried out as an exercise in grand-strategic cronyism; call it cronyism with a vengeance. All of this has been going on since Ronald Reagan brought back morning to America.

Reagan's America was gilded by design. In 1981, when the New Rich and the New Right paraded in their sumptuous threads in Washington to celebrate at the new president's inaugural ball, it was called a "bacchanalia of the haves." Diana Vreeland, style guru (as well as Nancy Reagan confidante), was stylishly blunt: "Everything is power and money and how to use them both… We mustn't be afraid of snobbism and luxury."

That's when the division of wealth and income began polarizing so that, by every measure, the country has now exceeded the extremes of inequality achieved during the first Gilded Age; nor are our elites any more embarrassed by their Mammon-worship than were members of the "leisure class" excoriated a century ago by that take-no-prisoners social critic of American capitalism Thorstein Veblen.

Back then, it was about masquerading as European nobility at lavish balls in elegant hotels like New York's Waldorf-Astoria, locked down to forestall any unpleasantness from the street (where ordinary folk were in a surly mood trying to survive the savage depression of the 1890s). Today's "leisure class" is holed up in gated communities or houseoleums as gargantuan as the imported castles of their Gilded Age forerunners, ready to fly off -- should the natives grow restless -- to private islands aboard their private jets.

The Free Market as Melodrama

At the height of the first Gilded Age, William Graham Sumner, a Yale sociologist and the most famous exponent of Herbert Spencer's theory of dog-eat-dog Social Darwinism, asked a good question: What do the social classes owe each other? Virtually nothing was the professor's answer.

As in those days, there is today no end to ideological justifications for an inequality so pervasive that no one can really ignore it entirely. In 1890, reformer Jacob Riis published his book How the Other Half Lives. Some were moved by his vivid descriptions of destitution. In the late nineteenth century, however, the preferred way of dismissing that discomfiting reality was to put the blame on a culture of dependency supposedly prevalent among "the lower orders," particularly, of course, among those of certain complexions and ethnic origins; and the logical way to cure that dependency, so the claim went, was to eliminate publicly funded "outdoor relief."

How reminiscent of the "welfare to work" policies cooked up by the Clinton administration, an exchange of one form of dependency -- welfare -- for another -- low-wage labor. Poverty, once turned into the cultural and moral problem of the impoverished, exculpated Gilded Age economics in both the nineteenth and twenty-first centuries (and proved profitable besides).

Even now, there remains a trace of the old Social Darwinian rationale -- that the ascendancy of "the fittest" benefits the whole species -- and the accompanying innuendo that those consigned to the bottom of the heap are fated by nature to end up there. To that must be added a reinvigorated belief in the free market as the fairest (not to mention the most efficient) way to allocate wealth. Then, season it all with a bravura elevation of risk-taking to the status of spiritual, as well as economic, tonic. What you end up with is an intellectual elixir as self-congratulatory as the conscience-cleansing purgative that made Professor Sumner so sure in his cold-bloodedness.

Then, as now, hypocrisy and self-delusion were the final ingredients in this ideological brew. When it came to practical matters, neither the business elites of the first Gilded Age, nor our own "liquidators," "terminators," and merger and acquisition Machiavellians ever really believed in the free market or the enterprising individual. Then, as now, when push came to shove (and often way earlier), they relied on the government: for political favors, for contracts, for tax advantages, for franchises, for tariffs and subsidies, for public grants of land and natural resources, for financial bail-outs when times were tough (see Bear Stearns), and for muscular protection, including the use of armed force, against all those who might interfere with the rights of private property.

So too, while industrial and financial tycoons liked to imagine themselves as stand-alone heroes, daring cowboys on the urban-industrial-financial frontier, as a matter of fact the first Gilded Age gave birth to the modern, bureaucratic corporation -- and did so at the expense of the lone entrepreneur. To this day, that big business behemoth remains the defining institution of commercial life. The reigning melodrama may still be about the free market and the audacious individual, but backstage, directing the players, stands the state and the corporation.

Crony capitalism, inequality, extravagance, Social Darwinian self-justification, blame-the-victim callousness, free-market hypocrisy: thus it was, thus it is again!

At the end of the Reagan years, public intellectuals Kevin Phillips and Gary Wills prophesied that this state of affairs was insupportable and would soon end. Phillips, in particular, anticipated a populist rising. It did not happen. Instead, nearly 20 years later, the second Gilded Age is alive, if not so well. Why such longevity? The answer tells us something about how these two epochs, for all their striking similarities, are also profoundly unalike.

Missing Utopias and Dystopias

As a title, Apocalypse Now could easily have been applied to a movie made about late nineteenth century America. Whichever side you happened to be on, there was an overwhelming dread that the nation was dividing in two and verging on a second civil war, that a final confrontation between the haves and have-nots was unavoidable.

Irate farmers mobilized in cooperative alliances and in the Populist Party. Farmer-labor parties in states and cities from coast to coast challenged the dominion of the two-party system. Rolling waves of strikes, captained by warriors from the Knights of Labor, enveloped whole communities as new allegiances extended across previously unbridgeable barriers of craft, ethnicity, even race and gender.

Legions of small businessmen, trade unionists, urban consumers, and local politicians raged against monopoly and "the trusts." Armed workers' militias paraded in the streets of many American cities. Business and political elites built massive urban fortresses, public armories equipped with Gatling guns (the machine guns of their day), preparing to crush the insurrections they saw headed their way.

Even today the names of Haymarket (the square in Chicago where, in 1886, a bombing at a rally of rebellious workers led to the legal lynching of anarchist leaders at the most infamous trial of the nineteenth century), Homestead (where, in 1892, the Monongahela River ran red with the blood of Pinkerton thugs sent by Andrew Carnegie and Henry Clay Frick to crush the strike of their steelmaking employees), and Pullman (the company town in Illinois where, in 1894, President Grover Cleveland ordered Federal troops to put down the strike of the American Railway Union against the Pullman Palace Car Company) evoke memories of a whole society living on the edge.

The first Gilded Age was a moment of Great Fears, but also of Great Expectations -- a period infatuated with a literature of utopias as well as dystopias. The two most successful novels of the nineteenth century, after Uncle Tom's Cabin, were Edward Bellamy's utopian Looking Backward and the horrific dystopia Caesar's Column by Populist tribune Ignatius Donnelly. The latter reached its denouement when Donnelly's fictional proletarian underground movement, the "Brotherhood of Destruction," marked its "triumph" with the erection of a giant pyramid composed of a quarter-million corpses of its enemy, "the Oligarchy" and its minions, cemented together and laced with explosives so that no one would dare risk removing them and destroying this permanent memorial to the barbarism of American industrial capitalism.

This end-of-days foreboding and the thirst for utopian release were not, moreover, confined to the ranks of agrarian or industrial trouble-makers. Before "Pullman" became a word for industrial serfdom and the Federal government's bloody-mindedness, it was built by its owner, George Pullman, as a model industrial city, a kind of capitalist utopia of paternal benevolence and confected social harmony.

Everyone was seeking a way out, something wholly new to replace the rancor and incipient violence of Gilded Age capitalism. The Knights of Labor, the Populist Party, the anti-trust movement, the cooperative movements of town and country, the nation-wide Eight-Hour Day uprisings of 1886 which culminated in the infamy of the Haymarket hangings, all expressed a deep yearning to abolish the prevailing industrial order.

Such groups weren't just angry; they weren't merely resentful -- although they were that, too. They were disturbed enough, naïve enough, desperate enough, inventive enough, desiring enough, deluded enough -- some still drawing cultural nourishment from the fading homesteads and workshops of pre-industrial America -- to believe that out of all this could come a new way of life, a cooperative commonwealth. No one really knew what exactly that might be. Still, the great expectation of a future no longer subservient to the calculus of the marketplace and the capitalist workshop lent the first Gilded Age its special fission, its high (tragic) drama.

Fast-forward to our second Gilded Age and the stage seems bare indeed. No great fears, no great expectations, no looming social apocalypses, no utopias or dystopias -- just a kind of flat-line sense of the end of history. Where are all the roiling insurgencies, the break-away political parties, the waves of strikes and boycotts, the infectious communal upheavals, the chronic sense of enough is enough? Where are the earnest efforts to invoke a new order which, no matter how sketchy and full of unanswered questions, now seem as minutely detailed as the blueprints for a Boeing 747 compared to "yes we can"?

What's left of mainstream populism exists on life-support in some attic of the Democratic Party. Even the language of our second Gilded Age is hollowed out. In a society saturated in Christian sanctimony, would anyone today describe "mankind crucified on a cross of gold" as William Jennings Bryan once did, or let loose against "Mammon worship," condemn aristocratic "parasites," or excommunicate "vampire speculators" and the "devilfish" of Wall Street? If nineteenth century evangelical preachers once pronounced anathema on capitalist greed, twenty-first century televangelists deify it. Tempers have cooled, leaving God, like many Americans, with only part-time employment.

The Great Silence

I exaggerate, of course. Movements do exist today to confront the inequities and iniquities of our own Gilded Age. Wall Street bandits are, once in a while, arrested by a sheriff. Some ministers, even born-again ones, do still preach the Social Gospel. But all this seems a pale shadow of what was. Something fundamental about the metabolism of capitalism has changed.

Perhaps the answer is simple and basic: The first Gilded Age rested on industrialization; the second on de-industrialization. In our time, a new system of dis-accumulation looted American industry, liquidating its assets to reward speculation in "fictitious capital." After all, the rate of investment in new plant, technology, and research and development all declined during the 1980s. For a quarter-century, the fastest growing part of the economy has been the finance, insurance, and real estate (FIRE) sector.

De-industrialization has set off an avalanche whose impact is still being felt in the economy, in the country's political culture, and in everyday life. It laid the industrial working class and the labor movement low, killing it twice over. This, more than anything else, may account for the great silence of the second Gilded Age, when measured, at least, against the raucous noise of the first. Labor was mortally wounded by direct assault, beginning with President Reagan's decision in 1981 to fire all the striking air traffic controllers. His draconian act licensed American business to launch its own all-out attack on the right to organize, which continues to this day.

In itself, however, resorting to coercion to deal with the opposition hardly distinguishes our own gilded elite from the first one. If anything, we live in less savage times, at least here at home. More fatal by far was the arrival of a new mode of capital accumulation, starkly different from the one that had prevailed a century ago. It eviscerated towns, cities, regions, and whole ways of life. It demoralized people, hollowed out popular institutions that had once offered resistance, and stoked the fires of resentment, racism, and national revanchism. Here was the raw material for mean-spirited division, not solidarity.

Dis-accumulation transformed the working class into a disaggregated pool of contingent labor, contract labor, temporary labor, and part-time labor, all in the interests of a new "flexible capitalism." Ideologues gussied-up this floating workforce by anointing it "free agent" labor, a euphemism designed to flatter the free market homunculus in each of us -- and, for a time, it worked. But the resulting reality has proved a bitter pill to swallow. To be a "free agent" today is to be free of health care, pensions, secure jobs, security in every sense. In our gilded era, downward mobility, lasting a quarter-century and still counting, has marked the social trajectory of millions of people living in the American heartland.

Dis-accumulating capitalism also undermined the political gravitas of poverty. In the first Gilded Age, poverty was a function of exploitation; in the second, of exclusion or marginalization. When we think about poverty, what comes to mind is welfare and race. The first gilded age visualized instead coal miners, child labor, tenement workshops, and the shantytowns that clustered around the steel mills of Aliquippa and Homestead.

Poverty arising out of exploitation ignited widespread moral revulsion and a robust political assault on the power of the exploiters. The perpetrators of the poverty of exclusion of our own time have been trickier to identify. In his 1962 book The Other America, Michael Harrington noted the invisibility of poverty. That was half a century ago and misery still lives in the shadows. Helped along by an ingrained racism, poverty in the second Gilded Age was politically neutered… or worse.

Decline, dispossession, and marginalization: a grim scenario. Yet the new political economy of finance-based dis-accumulation also announced itself as the second coming of democratic capitalism. And in the realm of the collective imaginary, if not in reality, it convinced millions.

The Myth of Democratic Capitalism

Aristocrats don't exist anymore, but it is remarkable how long they lasted as major actors in the country's political dramaturgy. Franklin Delano Roosevelt was still denouncing "economic royalists" and "tories of industry" at the height of the New Deal. The struggle against the counter-revolutionary aristocrat, seen to be subverting the institutions of democratic life, piling up unearned riches, supplied the energy powering American reform for generations. In real life, the robber baron industrialists and financiers of Wall Street were no more aristocrats than my grandma from the shtetl. They were parvenus.

For their own good reasons, however, they actively conspired in this popular misperception by playing the aristocratic role for all it was worth. In hindsight, what looks like one of the silliest utopias of the first Gilded Age was enacted by these nouveaux riches, performing in tableaux vivants at gala balls dressed in aristocratic drag, or cavorting in the castles and villas they had transported stone by stone from France and Italy, or showing off at the weddings of their daughters to the offspring of bankrupt European nobility, or parading to New York's Metropolitan Opera in coaches driven by liveried servants and embossed with their family's "coat of arms," complete with hijacked insignia and faked genealogies that concealed their owners' homelier origins.

We may laugh at all this now. Back then, for millions, these aristocratic pretensions confirmed an ancient Jeffersonian suspicion: Capitalists were nothing more or less than camouflaged aristocrats. And mobilizing to rescue the republic and democracy from such a danger was practically an indigenous instinct. However, pushing beyond this horizon of political democracy in the direction of social democracy is a different matter entirely, arousing anxiety about threatening the understructure of private property which is, after all, also part of the American dream. Having an aristocracy to kick around, even an ersatz one, can be politically empowering.

Minus the oddball exception or two, the new tycoonery of the second Gilded Age does not fancy itself an aristocracy. It does not dress up like one or marry off its daughters to fortune-hunting European dukes and earls. On the contrary, its major figures regularly dress down in blue jeans and cowboy hats, affecting a down-home populism or nerdy dishevelment. However addicted to the paraphernalia of flamboyant excess they may be, the new capitalist elite does not pretend these are the insignia of ruling class entitlement.

Once upon a gilded time, the lower orders aped the fashions and manners of their putative betters; today it's the other way around. Indeed, it is no longer even apt to talk of a "leisure class," since our moguls of the moment are workaholics, Olympians of the merger-and-acquisition all-nighter.

Although the economic and political throw-weight of our gilded elite is at least as great as that of its predecessors in the days of J.P. Morgan and John D. Rockefeller, an American fear of a moneyed aristocracy has subsided accordingly. Instead, from the Reagan era on, Americans have been captivated by businessmen who took on the rebel role against a sclerotic corporate order and an ossified government bureaucracy that, together, were said to be blocking access to a democracy of the bold.

Often men from the middling classes, lacking in social pedigree, the overnight elevation of people like Michael Milken, Carl Ichan, or "greed is healthy" Ivan Boesky, flattered and confirmed a popular faith in the American dream. These irreverent new "revolutionaries," intent on overthrowing capitalism in the interests of capitalism, made fun of the men in pin-striped suits.

When the captains of industry and finance lorded it over the country in the late nineteenth century, no one dreamed of calling them rebels against an overweening government bureaucracy or an entrenched set of "interests." There was then no government bureaucracy, and tycoons like Russell Sage and Jay Gould were "the interests." They worried about being overthrown, not overthrowing someone else.

Our corporate elite are much more adept than their Gilded Age predecessors were at playing the democracy game. The old "leisure class" was distinctly averse to politics. If they needed a tariff or tax break, they called up their kept Senator. When mortally challenged by the Populists and William Jennings Bryan in 1896, they did get involved; but, by and large, they didn't muck about in mass party politics which they saw as too full of uncontrollable ethnic machines, angry farmers, and the like. They relied instead on the Federal judiciary, business-friendly Presidents, constitutional lawyers, and public and private militias to protect their interests.

Beginning in the 1970s, our age's business elite became acutely politically-minded and impressively well-organized, penetrating deeply all the pores of party and electoral democracy. They've gone so far as to craft strategic alliances with elements of what their nineteenth century predecessors -- who might have blanched at the prospect -- would have termed the hoi polloi. Calls to dismantle the federal bureaucracy now carry a certain populist panache, while huffing and puffing about family values has -- so far -- proven a cheap date for a gilded elite that otherwise generally couldn't care less.

Moreover, the ascendancy of our faux revolutionaries has been accompanied by media hosannas to the stock market as an everyman's Oz. America's long infatuation with its own democratic-egalitarian ethos lent traction to this illusion.

Horace Greely's inspirational admonition to "go West young man" echoed through all the channels of popular culture in the 1990s -- from cable TV shows and mass circulation magazines to baseball stadium scoreboards and Internet chat rooms. Only now Greeley's frontier of limitless opportunity had migrated back East to the stock exchange and into the ether of virtual or reality. The culture of money released from all ancient inhibitions enveloped the commons.

"Shareholder democracy" and the "ownership society" are admittedly more public relations slogans than anything tangible. Nonetheless, you can't ignore the fact that, during the second Gilded Age, half of all American families became investors in the stock market. Dentists and engineers, mid-level bureaucrats and college professors, storekeepers and medical technicians -- people, that is, from the broad spectrum of middle class life who once would have viewed the New York Stock Exchange with a mixture of awe, trepidation, and genuine distaste, and warily kept their distance -- now jumped head first into the marketplace carrying with them all their febrile hopes for social elevation.

As Wall Street suddenly seemed more welcoming, fears about strangulating monopolies died. Dwindling middle-class resistance to big business accounts for the withering away of the old anti-trust movement, a telling development in the evolution of our age's particular form of "big-box" capitalism. Once, that movement had not only expressed the frustrated ambitions of smaller businessmen, but of all those who felt victimized by monopoly power. It embodied not just the idea of breaking up the trusts, but of competing with or replacing them with public enterprises.

Long before the Reagan counter-revolution defanged the whole regulatory apparatus, however, the "anti-trust" movement was over and done with. Its absence from the political landscape during the second Gilded Age marks the demise of an older middle-class world of local producers, merchants, and their customers who were once bound together by the ties of commerce and the folk truths of small town Protestantism.

Big-box capitalism, the capitalism of Wal-Mart, still incites local uproars that carry a hint of that anti-trust past, but oppositional forces are divided. The capitalism of which Wal-Mart is emblematic generates a dissonant universe of political and cultural desires. It appeals, first of all, to instincts of individual and family material wellbeing which may run up against calls for a wider social solidarity. Moreover, in its own everyday way consumer culture -- more far-reaching than anything imaginable a century ago -- channels desire into forms of expressive self-liberation. Grand narratives that tell a story of collective destiny -- Redemption, Enlightenment, and Progress, the Cooperative Commonwealth, Proletarian Revolution -- don't play well in this refashioned political theater.

The End of the Age of Acquiescence?

However, the wheel turns. The capitalism of the Second Gilded Age now faces a systemic crisis and, under the pressure of impending disaster, may be headed back to the future. Old-fashioned poverty is making a comeback. Arguably, the global economy, including its American branch, is increasingly a sweatshop economy. There is no denying that brute fact in Thailand, China, Vietnam, Central America, Bangladesh, and dozens of other countries and regions that serve as platforms for primitive accumulation. Hundreds of millions of peasants have become proletarians virtually overnight.

Here at home, something analogous has been happening, but with an ironic difference and bearing within it a new historic opportunity. One might call it the unhorsing of the middle class.

During the first Gilded Age, the sweatshop seemed a noxious aberration. It lawlessly offered irregular employment at sub-standard wages for interminable hours. It was ordinarily housed helter-skelter in a make-shift workshop that would be here today, gone tomorrow. It was an underground enterprise that regularly absconded with its workers' paychecks and made chiseling them out of their due into an art form.

Today, what once seemed abnormal no longer does. The planet's peak corporations depend on this system. They have thrived on it. True enough, it has also encouraged the proliferation of petty enterprises -- sub-contractors, consulting firms, domestic service companies -- fertilizing the soil in which our age of democratic capitalism is rooted. But the ubiquity of the sweated economy promises to alter the nation's political chemistry.

Many of the newly flexible proletarians working for Wal-Mart, for auto parts or construction company sub-contractors, on the phones at direct mail call centers, behind the counters at mass market retailers, earn a dwindling percentage of what they used to. Even new hires at the Big Three automobile manufacturers will now make a smaller hourly wage than their grandfathers did in 1948. So too, the relative job security such employees once enjoyed is gone, leaving them vulnerable to the "lean and mean" dictates of the new capitalism: double or triple work loads; or, even worse, part-time work, work always shadowed by indignity and fear; or, worse yet, no work at all.

Meanwhile, the white collar Tomorrowland of "free agent" techies, software engineers, and the like -- not to mention a whole endangered species of middle management -- lives a precarious existence, under intense stress, chronically anticipating the next round of lay-offs. Yet many of them were once upon a time members in good standing of the "middle class." Now, they find themselves on the down escalator, descending into a despised state no one could mistake for middle class life.

"Flexible accumulation" joins this dispossession of the middle class to the super-exploitation of millions who never laid claim to that status. Many of these sweated workers are women, laboring away as home health care aides, in the food services industry, in meat processing plants, at hotels and restaurants and hospitals, because the arithmetic of "flexible accumulation" demands two workers to add up to the livable family wage not so long ago brought home by a single wage earner.

Millions more are immigrants, legal as well as undocumented, from all over the world. They live, virtually defenseless, in a twilight underworld of illegality and prejudice. Thanks to all this, the category of the "working poor" has reentered our public vocabulary. Once again, as during the first Gilded Age, poverty seems a function of exploitation at work, not only the lot of those excluded from work.

Might these developments augur the end of our second Gilded Age; or rather the end of the age of acquiescence? No one can know. Yet anger and resentment over insecurity, downward mobility, exploitation, second-class citizenship, and the ill-gotten gains of our Gilded Age mercenaries and their political enablers already rippled the political waters during the mid-term elections of 2006. This primary season has witnessed a discernable leftward shift of the center of gravity within even the cowed leadership ranks of the Democratic Party, a shift driven in large measure by the sub-prime mortgage collapse and the ominous rumblings of severe recession.

Anger and resentment, however, do not by themselves comprise a visionary alternative. Nor is the Democratic Party, however restive, a likely vehicle of social democratic aspirations. Much more will have to happen outside the precincts of electoral politics by way of mass movement building to translate these smoke signals of resistance into something more muscular and enduring. Moreover, nasty competition over diminishing economic opportunities can just as easily inflame simmering racial and ethnic antagonisms.

Nonetheless, the current break-down of the financial system is portentous. It threatens a general economic implosion more serious than anyone has witnessed for many decades. Depression, if that is what it turns out to be, together with the agonies of a misbegotten and lost war no one believes in any longer, could undermine whatever is left of the threadbare credibility of our Gilded Age elite.

Legitimacy is a precious possession; once lost it's not easily retrieved. Today, the myth of the "ownership society" confronts the reality of the "foreclosure society." The great silence of the second Gilded Age may give way to the great noise of the first.

Steve Fraser is working on a book about the two gilded ages. A Tomdispatch regular, he is the author of, among other works, the just published Wall Street: America's Dream Palace. He is Editor-at-Large of New Labor Forum magazine.


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