Tuesday, 28 August 2007

Neoliberalism! - How the neoliberals stitched up the wealth of nations for themselves

 


A cabal of intellectuals and elitists hijacked the economic debate, and now we are dealing with the catastrophic effects

George Monbiot
Tuesday August 28, 2007
The Guardian


For the first time the UK's consumer debt exceeds the total of its gross national product: a new report shows that we owe £1.35 trillion. Inspectors in the United States have discovered that 77,000 road bridges are in the same perilous state as the one which collapsed into the Mississippi. Two years after Hurricane Katrina struck, 120,000 people from New Orleans are still living in trailer homes and temporary lodgings. As runaway climate change approaches, governments refuse to take the necessary action. Booming inequality threatens to create the most divided societies the world has seen since before the first world war. Now a financial crisis caused by unregulated lending could turf hundreds of thousands out of their homes and trigger a cascade of economic troubles.
These problems appear unrelated, but they all have something in common. They arise in large part from a meeting that took place 60 years ago in a Swiss spa resort. It laid the foundations for a philosophy of government that is responsible for many, perhaps most, of our contemporary crises.
When the Mont Pelerin Society first met, in 1947, its political project did not have a name. But it knew where it was going. The society's founder, Friedrich von Hayek, remarked that the battle for ideas would take at least a generation to win, but he knew that his intellectual army would attract powerful backers. Its philosophy, which later came to be known as neoliberalism, accorded with the interests of the ultra-rich, so the ultra-rich would pay for it.
Neoliberalism claims that we are best served by maximum market freedom and minimum intervention by the state. The role of government should be confined to creating and defending markets, protecting private property and defending the realm. All other functions are better discharged by private enterprise, which will be prompted by the profit motive to supply essential services. By this means, enterprise is liberated, rational decisions are made and citizens are freed from the dehumanising hand of the state.
This, at any rate, is the theory. But as David Harvey proposes in his book A Brief History of Neoliberalism, wherever the neoliberal programme has been implemented, it has caused a massive shift of wealth not just to the top 1%, but to the top tenth of the top 1%. In the US, for instance, the upper 0.1% has already regained the position it held at the beginning of the 1920s. The conditions that neoliberalism demands in order to free human beings from the slavery of the state - minimal taxes, the dismantling of public services and social security, deregulation, the breaking of the unions - just happen to be the conditions required to make the elite even richer, while leaving everyone else to sink or swim. In practice the philosophy developed at Mont Pelerin is little but an elaborate disguise for a wealth grab.
So the question is this: given that the crises I have listed are predictable effects of the dismantling of public services and the deregulation of business and financial markets, given that it damages the interests of nearly everyone, how has neoliberalism come to dominate public life?
Richard Nixon was once forced to concede that "we are all Keynesians now". Even the Republicans supported the interventionist doctrines of John Maynard Keynes. But we are all neoliberals now. Margaret Thatcher kept telling us that "there is no alternative", and by implementing her programmes Clinton, Blair, Brown and the other leaders of what were once progressive parties appear to prove her right.
The first great advantage the neoliberals possessed was an unceasing fountain of money. US oligarchs and their foundations - Coors, Olin, Scaife, Pew and others - have poured hundreds of millions into setting up thinktanks, founding business schools and transforming university economics departments into bastions of almost totalitarian neoliberal thinking. The Heritage Foundation, the Hoover Institute, the American Enterprise Institute and many others in the US, the Institute of Economic Affairs, the Centre for Policy Studies and the Adam Smith Institute in the UK, were all established to promote this project. Their purpose was to develop the ideas and the language which would mask the real intent of the programme - the restoration of the power of the elite - and package it as a proposal for the betterment of humankind.
Their project was assisted by ideas which arose in a very different quarter. The revolutionary movements of 1968 also sought greater individual liberties, and many of the soixante-huitards saw the state as their oppressor. As Harvey shows, the neoliberals coopted their language and ideas. Some of the anarchists I know still voice notions almost identical to those of the neoliberals: the intent is different, but the consequences very similar.
Hayek's disciples were also able to make use of economic crises. An early experiment took place in New York City, which was hit by budgetary disaster in 1975. Its bankers demanded that the city follow their prescriptions - huge cuts in public services, smashing of the unions, public subsidies for business. In the UK, stagflation, strikes and budgetary breakdown allowed Thatcher, whose ideas were framed by her neoliberal adviser Keith Joseph, to come to the rescue. Her programme worked, but created a new set of crises.
If these opportunities were insufficient, the neoliberals and their backers would use bribery or force. In the US, the Democrats were neutered by new laws on campaign finance. To compete successfully for funding with the Republicans, they would have to give big business what it wanted. The first neoliberal programme of all was implemented in Chile following Pinochet's coup, with the backing of the US government and economists taught by Milton Friedman, one of the founding members of the Mont Pelerin Society. Drumming up support for the project was easy: if you disagreed, you got shot. The International Monetary Fund and the World Bank used their power over developing nations to demand the same policies.
But the most powerful promoter of this programme was the media. Most of it is owned by multimillionaires who use it to project the ideas that support their interests. Those ideas which threaten their interests are either ignored or ridiculed. It is through the newspapers and TV channels that the socially destructive notions of a small group of extremists have come to look like common sense. The corporations' tame thinkers sell the project by reframing our political language (for an account of how this happens, see George Lakoff's book, Don't Think of an Elephant!). Nowadays I hear even my progressive friends using terms like wealth creators, tax relief, big government, consumer democracy, red tape, compensation culture, job seekers and benefit cheats. These terms, all invented or promoted by neoliberals, have become so commonplace that they now seem almost neutral.
Neoliberalism, if unchecked, will catalyse crisis after crisis, all of which can be solved only by greater intervention on the part of the state. In confronting it, we must recognise that we will never be able to mobilise the resources its exponents have been given. But as the disasters they have caused unfold, the public will need ever less persuading that it has been misled.


Play Movie Mash-up and win BIG prizes! Hayek, wealth,

Sunday, 26 August 2007

Even I Question The 'Truth' About 9/11

By Robert Fisk

26 August, 2007
The Independent


Each time I lecture abroad on the Middle East, there is always someone in the audience – just one – whom I call the "raver". Apologies here to all the men and women who come to my talks with bright and pertinent questions – often quite humbling ones for me as a journalist – and which show that they understand the Middle East tragedy a lot better than the journalists who report it. But the "raver" is real. He has turned up in corporeal form in Stockholm and in Oxford, in Sao Paulo and in Yerevan, in Cairo, in Los Angeles and, in female form, in Barcelona. No matter the country, there will always be a "raver".

His – or her – question goes like this. Why, if you believe you're a free journalist, don't you report what you really know about 9/11? Why don't you tell the truth – that the Bush administration (or the CIA or Mossad, you name it) blew up the twin towers? Why don't you reveal the secrets behind 9/11? The assumption in each case is that Fisk knows – that Fisk has an absolute concrete, copper-bottomed fact-filled desk containing final proof of what "all the world knows" (that usually is the phrase) – who destroyed the twin towers. Sometimes the "raver" is clearly distressed. One man in Cork screamed his question at me, and then – the moment I suggested that his version of the plot was a bit odd – left the hall, shouting abuse and kicking over chairs.

Usually, I have tried to tell the "truth"; that while there are unanswered questions about 9/11, I am the Middle East correspondent of The Independent, not the conspiracy correspondent; that I have quite enough real plots on my hands in Lebanon, Iraq, Syria, Iran, the Gulf, etc, to worry about imaginary ones in Manhattan. My final argument – a clincher, in my view – is that the Bush administration has screwed up everything – militarily, politically diplomatically – it has tried to do in the Middle East; so how on earth could it successfully bring off the international crimes against humanity in the United States on 11 September 2001?

Well, I still hold to that view. Any military which can claim – as the Americans did two days ago – that al-Qa'ida is on the run is not capable of carrying out anything on the scale of 9/11. "We disrupted al-Qa'ida, causing them to run," Colonel David Sutherland said of the preposterously code-named "Operation Lightning Hammer" in Iraq's Diyala province. "Their fear of facing our forces proves the terrorists know there is no safe haven for them." And more of the same, all of it untrue.

Within hours, al-Qa'ida attacked Baquba in battalion strength and slaughtered all the local sheikhs who had thrown in their hand with the Americans. It reminds me of Vietnam, the war which George Bush watched from the skies over Texas – which may account for why he this week mixed up the end of the Vietnam war with the genocide in a different country called Cambodia, whose population was eventually rescued by the same Vietnamese whom Mr Bush's more courageous colleagues had been fighting all along.

But – here we go. I am increasingly troubled at the inconsistencies in the official narrative of 9/11. It's not just the obvious non sequiturs: where are the aircraft parts (engines, etc) from the attack on the Pentagon? Why have the officials involved in the United 93 flight (which crashed in Pennsylvania) been muzzled? Why did flight 93's debris spread over miles when it was supposed to have crashed in one piece in a field? Again, I'm not talking about the crazed "research" of David Icke's Alice in Wonderland and the World Trade Center Disaster – which should send any sane man back to reading the telephone directory.

I am talking about scientific issues. If it is true, for example, that kerosene burns at 820C under optimum conditions, how come the steel beams of the twin towers – whose melting point is supposed to be about 1,480C – would snap through at the same time? (They collapsed in 8.1 and 10 seconds.) What about the third tower – the so-called World Trade Centre Building 7 (or the Salmon Brothers Building) – which collapsed in 6.6 seconds in its own footprint at 5.20pm on 11 September? Why did it so neatly fall to the ground when no aircraft had hit it? The American National Institute of Standards and Technology was instructed to analyse the cause of the destruction of all three buildings. They have not yet reported on WTC 7. Two prominent American professors of mechanical engineering – very definitely not in the "raver" bracket – are now legally challenging the terms of reference of this final report on the grounds that it could be "fraudulent or deceptive".

Journalistically, there were many odd things about 9/11. Initial reports of reporters that they heard "explosions" in the towers – which could well have been the beams cracking – are easy to dismiss. Less so the report that the body of a female air crew member was found in a Manhattan street with her hands bound. OK, so let's claim that was just hearsay reporting at the time, just as the CIA's list of Arab suicide-hijackers, which included three men who were – and still are – very much alive and living in the Middle East, was an initial intelligence error.

But what about the weird letter allegedly written by Mohamed Atta, the Egyptian hijacker-murderer with the spooky face, whose "Islamic" advice to his gruesome comrades – released by the CIA – mystified every Muslim friend I know in the Middle East? Atta mentioned his family – which no Muslim, however ill-taught, would be likely to include in such a prayer. He reminds his comrades-in-murder to say the first Muslim prayer of the day and then goes on to quote from it. But no Muslim would need such a reminder – let alone expect the text of the "Fajr" prayer to be included in Atta's letter.

Let me repeat. I am not a conspiracy theorist. Spare me the ravers. Spare me the plots. But like everyone else, I would like to know the full story of 9/11, not least because it was the trigger for the whole lunatic, meretricious "war on terror" which has led us to disaster in Iraq and Afghanistan and in much of the Middle East. Bush's happily departed adviser Karl Rove once said that "we're an empire now – we create our own reality". True? At least tell us. It would stop people kicking over chairs.

© 2007 Independent News and Media Limited

Saturday, 25 August 2007

Listen To The People

If this deal is so indispensable, why can't the government get even a simple majority in its favour in Parliament?

VINOD MEHTA
O, National Interest, what sins are committed in thy name! Prakash Karat is protecting our national interest, Manmohan Singh is protecting our national interest, Amar Singh is protecting our national interest, George Fernandes is protecting our national interest, V.P. Singh is protecting our national interest. Mother India is being suffocated by these eminent protectors. One longs for someone who is selling the country for a few pieces of silver! It seems not patriotism, but national interest is the last refuge of the scoundrel. So complete and comprehensive is this protection that the country's blood pressure is at bursting point while the government is hanging by its short hairs. India needs to be saved from its protectors.

How did we arrive here? Barely two weeks ago, the UPA was sailing smoothly, uplifted by impressive victories in a presidential and vice-presidential poll. Politics was at once boring and predictable. In the UK, August (when the natives go en masse on chhutti) is the silly season. Newspaper stories about spotting the first cuckoo abound. So, too, it seemed in our blessed republic where completion of 60 years of freedom had resulted in an orgy of self-congratulation.

Governments, especially coalition governments, fall regularly in all democracies. In India, sometimes serious, sometimes less serious issues cause a government to go down. However, never in our chequered history has a foreign policy issue caused the death of a government. It is always a local issue—Advani's rath yatra, Rajiv taking umbrage at some IB men loitering in the wrong place—which has profound domestic implications.

Now we have the possibility of a civilian nuclear deal with the United States, which 99 per cent of the indigenous population do not understand or care much about, dragging the Congress-led coalition to the brink of self-annihilation.

A civilian nuclear deal with America is important, even very important. The ayatollahs of get-into-bed-with-the United States confidently assert it is a life or death matter for the country. Perhaps. From 3 per cent to 7 per cent of nuclear power is a gargantuan leap, and who knows what other goodies await us in the brave, new world of technological embrace with George Bush.

Forgive the frivolity. The deal, we are told, is a "stunning foreign policy achievement". The deal is Manmohan Singh's gift to the nation. The deal cements the economic, strategic, political and emotional bonds between the world's largest and oldest democracies. The deal will further boost the morale of 1.5 million NRIs in the US (according to me, that is good reason for rejecting the deal). All the aforementioned arguments are either wholly or partially true. Nevertheless, one must ask: is the deal worth sacrificing the government for?

If the much-desired deal is for some reason delayed or scrapped, will the US declare war on India? Will McDonald's pack up, will Boeing stop selling us aeroplanes, will GE shut shop, will Pizza Hut quit our shores? Without the sainted deal, Indo-US ties are booming, they are touching the stratosphere. Those who maintain that non-signing will cripple or seriously hamper bilateral relations are being economical with the truth. We need the deal, but we don't have to cut our nose to spite our face in order to get it.

It is not just the comrades who are suspicious of George Bush or Hillary Clinton. To talk about an independent foreign policy is not the sole prerogative of the Communists or the cold warriors. Do we wish to get into a clinch with a country which could bomb Iran before the deal is signed by the US Congress?

In Delhi the latest parlour game is to heap abuse on the Left. Hypocrites, harlots ("power without responsibility"), ideological dinosaurs, blind, selfish, Chinese spies—Messrs Bardhan and Karat may well be the hate figures of our America-loving democracy.Alas, abusing them won't get us very far. If this deal is so indispensable, why can't the government get even a simple majority in its favour in Parliament?

Dr Manmohan Singh is a wise, sincere, honest patriot and politician. Someone who he trusts and respects must explain to him that politics without power is meaningless. If the PM wants this deal and other free market reforms to go through, he must help his party win 272 seats. At present, it is Deal vs Government. Which will he choose? More important: which will the people of India choose?

Market Efficiency Hokum

By Stephen Lendman

24 August, 2007
Countercurrents.org

You know the story triumphantly heard in the West. Markets work best when governments let them operate freely - unconstrained by rules, regulations and taxes about which noted economist Milton Friedman once said in an interview he was "in favor of cutting....under any circumstances and for any excuse, for any reason, whenever it's possible (because) the big problem is not taxes (but government) spending.

Friedman is no longer with us, but by his reasoning, the solution to curbing it is "to hold down the amount of income (government) has (and presto) the way to do it is to cut taxes." He seemed to forget about borrowing and the Federal Reserve's ability to print limitless amounts of ready cash the way it's been doing for years and during the current credit squeeze. Friedman further added in the same interchange "If the White House were under (GW) Bush, and House and Senate....under the Democrats, I do not believe there would be much spending."

Clearly, either the Nobel laureate wasn't paying attention or age was taking its toll late in his life. Since 2001, Democrats embraced tax cutting and overspending policies as enthusiastically as Republicans with both parties directing the benefits hugely to the right pockets. They're on Wall Street and in corporate boardrooms where recipients know "free markets" work great with a little creative resource directing from Washington.

Financial Market Efficiency

In investment finance, Eugene Fama is generally regarded as the father of efficient market theory, also known as the "efficient market hypothesis (EMH)." He wrote his 1964 doctoral dissertation on it titled "The Behavior of Stock Market Prices" in which he concluded stock (and by implication other financial market) price movements are unpredictable and follow a "random walk" reflecting all available information known at the time. Thus, no one, in theory, has an advantage over another as everyone has equal access to everything publicly known (aside from "insiders" with a huge advantage). That includes rumored and actual financial, economic, political, social and all other information, all of which is reflected in asset prices at any given time.

Those buying this theory believe Milton Friedman knew best. He became the modern-day godfather of "free market" capitalism and leading exponent that markets work efficiently and best when unfettered by government intervention that generally gets things wrong. In 1958, Friedman explained it in his famous "I, Pencil" essay. In it, he illustrated the notion of Adam Smith's invisible hand and conservative economist Friedrich Hayek's teachings on the importance of "dispersed knowledge" and how the price system communicates information to "make (people) do desirable things without anyone having to tell them what to do."

Friedman's "pencil" story explained "a complex combination of miracles: a tree, zinc, copper, graphite, and so on." Added to these ingredients from nature is "an even more extraordinary miracle: the configuration of creative human energies - millions of tiny know-hows configuring naturally and spontaneously (responding to) human necessity and desire and in the absence of any human master-minding." None of them working independently was trying to make a pencil. No one directed them from a central office. They didn't know each other, lived in many countries, spoke different languages, practiced different religions, and may have even hated each other. Yet, their unrelated contributions produced a pencil.

By Friedman's reasoning, this could never happen through central planning. It sounds good in theory, but how does it jibe with reality. The Soviets split the atom, were first in space ahead of the US with Sputnik 1, and developed many advanced technologies even though they were outclassed and outspent by the West overall with greater resources to do it.

In practical reality, governments, like individuals operating freely in the marketplace, can succeed or fail. It comes down to people skills and how well they do their jobs. Top down or bottom up has little final effect on the end result, but does direct what's undertaken and what isn't. Top down in Canada, Western Europe and Venezuela delivers excellent state-funded health care to everyone. Bottom up in America offers it to anyone who can pay, but if not, you're out of luck if your employer won't provide it. Forty-seven million and counting had their luck run out, and Friedman's pencil making miracle won't treat them when they'll ill.

Put another way, if "free market" capitalism works best and America is its lead exponent, why then:

-- is poverty high and rising in the world's richest country;

-- incomes stagnating;

-- higher education becoming unaffordable for the majority;

-- public education crumbling;

-- jobs at all levels disappearing to low-wage countries;

-- the nation's vital infrastructure in a deplorable state;

-- 3.5 million or more homeless and heading higher in the wake of subprime defaults;

-- the standard of living of most in the country declining; and,

-- the nation, in fact, bankrupt according to a 2006 study for the St. Louis Fed.

Clearly, something is wrong with the "pencil miracle" working for some but not for most. Friedman no longer can respond and his acolytes won't.

The Myth that Markets Get It Right and Operate Efficiently

Economist Hyman Minsky was mostly ignored while he lived, but his star may be rising 11 years after his death in 1996. Some described him as a radical Keynesian based on the theories of economist John Maynard Keynes who taught economies operate best when mixed. He believed state and private sectors both play important roles with government stepping in to stimulate or constrain economic activity whenever private sector forces aren't able to do it best alone.

It's the opposite of "supply-side" Reaganomics and its illusory "trickle down" notion that economic growth works best through stimulative tax cuts its proponents claim promote investment that benefits everyone. It was Reagan-baloney then and now, and so is the notion markets are efficient and work best when left alone.

Minsky explained it, and people are now taking note in the wake of current market turbulence. His work showed financial market exuberance often becomes excessive, especially if no regulatory constraints are in place to curb it. He developed his theories in two books - "John Maynard Keynes" and "Stabilizing an Unstable Economy" as well as in numerous articles and essays.

In them, he constructed a "financial instability hypothesis" building on the work of Keynes' "General Theory of Employment, Interest and Money." He provided a framework for distinguishing between stabilizing and destabilizing free market debt structures he summarized as follows:

"Three distinct income-debt relations for economic units....labeled as hedge, speculative and Ponzi finance, can be identified."

-- "Hedge financing units are those which can fulfill all of their contractual payment obligations by their cash flows: the greater the weight of equity financing in the liability structure, the greater the likelihood that the unit is a hedge financing unit."

-- "Speculative finance units are units that can meet their payment commitments on 'income account' on their liabilities, even as they cannot repay the principle out of income cash flows. Such units need to 'roll over' their liabilities - issue new debt to meet commitments on maturing debt."

-- "For Ponzi units, the cash flows from operations are (insufficient)....either (to repay)....principle or interest on outstanding debts by their cash flows from operations. Such units can sell assets or borrow. Borrowing to pay interest....lowers the equity of a unit, even as it increases liabilities and the prior commitment of future incomes."

"....if hedge financing dominates....the economy may....be (in) equilibrium. In contrast, the greater the weight of speculative (and/or) Ponzi finance, the greater the likelihood that the economy is a deviation-amplifying system....(based on) the financial instability hypothesis (and) over periods of prolonged prosperity, the economy transits from financial relations (creating stability) to financial relations (creating) an unstable system."

"....over a protracted period of good times, capitalist economies (trend toward) a large weight (of) units engaged in speculative and Ponzi finance. (If this happens when) an economy is (experiencing inflation and the Federal Reserve tries) to exorcise (it) by monetary constraint....speculative units will become Ponzi (ones) and the net worth of previous Ponzi units will quickly evaporate. Consequently, units with cash flow shortfalls will be forced to (sell out). This is likely to lead to a collapse of asset values."

Minsky developed a seven stage framework showing how this works:

Stage One - Displacement

Disturbances of various kinds change investor perceptions and disrupt markets. It may be a tightened economic policy from higher interest rates or investors and lenders retrenching in reaction to:

-- a housing bubble, credit squeeze, and growing subprime mortgage delinquencies and defaults with spreading contagion affecting:

-- other mortgages, and the toxic waste derivative alchemy of:

-- collateralized debt obligation (CDO) instruments (packages of mostly risky junk and other debt),

--commercial and residential mortgage-backed securities (CMBS and RBMS - asset backed by mortgage principle and interest payments), and even

-- commercial and AAA paper; plus

-- home equity loans harder to service after mortgage reset increases.

Stage Two - Prices start to rise

Following displacement, markets bottom and prices begin rising as fundamentals improve. Investors start noticing as it becomes evident and gains momentum.

Stage Three - Easy credit

Recovery needs help and plentiful easy credit provides it. As conditions improve, it fuels speculation enticing more investors to jump in for financial opportunities or to borrow for a new home or other consumer spending. The easier and more plentiful credit gets, the more willing lenders are to give it including to borrowers with questionable credit ratings. Yale Economist Robert Shiller shares the view that "booms....generate laxity in standards for loans because there a general sense of optimism (like) what we saw in the late 80s" preceding the 1987 crash that doesn't necessarily signal an imminent one now.

New type financial instruments and arrangements also arise as lenders find creative and risky ways to make more money. In recent years, sharply rising housing prices enticed more buyers, and lenders got sloppy and greedy by providing interest-only mortgages to marginal buyers unable to make a down payment.

Stage Four - Overtrading

The cheaper and easier credit is, the greater the incentive to overtrade to cash in. Trading volume rises and shortages emerge. Prices begin accelerating and easy profits are made creating more greed and foolish behavior.

Stage Five - Euphoria

This is the most dangerous phase. Cooler heads are worried but fraudsters prevail claiming this time is different, and markets have a long way to go before topping out. Greed trumps good sense and investors foolishly think they're safe and can get out in time. Stories of easy riches abound, so why miss out. Into the fire they go, often after the easy money was made, and the outcome is predictable. The fraudsters sell at the top to small investors mistakenly buying at the wrong time and getting burned.

Stage Six - Insider profit taking

The pros have seen it before, understand things have gone too far, and quietly sell to the greater fools buying all they can. It's the beginning of the end.

Stage Seven - Revulsion

When cheap credit ends, enough insiders sell, or an unexpected piece of bad news roils markets, it becomes infectious. It can happen quickly turning euphoria into revulsion panicking investors to sell. They begin outnumbering buyers and prices tumble. Downward momentum is far greater and faster than when heading up.

Sound familiar? It's a "Minsky Moment," and the irony is most investors know easy credit, overtrading and euphoria create bubbles that always burst. The internet and tech one did in March, 2000, and since mid-July, reality caught up with excess speculation in equity prices, the housing bubble, growing mortgage delinquencies and subprime defaults. Goldilocks awoke and sought shelter as lenders remembered how to say "no." This time, central banks rode to the rescue (they hope) with huge cash infusions, the Fed cut its discount rate a half point August 17, and it signaled lower "fed funds" rates ahead if markets remain tight.

Intervention may reignite "animal spirits" and work short-term but won't easily band-aid over what noted investor Jeremy Grantham calls "the broadest overpricing of financial assets - equities, real estate, and fixed income - ever recorded" with the financial system dangerously "overstretched (and) overleveraged." His view is that current conditions have "almost never been this dire," and we're "watching a (too late to stop) very slow motion train wreck." Minsky would have noticed, too.

Grantham's exhaustive research shows all markets revert to their mean values, and all bubbles burst as the greatest Fed-engineered equity one ever in US history did in 2000 but didn't complete its corrective work. In Grantham's view, lots more pain is coming and before it's over, it will be mean, nasty and long, affecting everyone. Minsky saw it earlier, studied it, and wrote about it exhaustively when no one noticed. If he were living today, he'd say "I told you so."

Federal Reserve Engineered Housing Bubble and Resultant Financial Market Turmoil

Astute observers continue to speculate and comment that the housing bubble and resultant current financial market turmoil came from deliberate widespread malfeasance aided by considerable cash infusion help from the Federal Reserve in the lead on the scheme.

Economist Paul Krugman is one of the latest with his views expressed in an August 16 New York Times op ed piece titled "Workouts, Not Bailouts." He began by debunking Wall Streeter Treasury Secretary Henry Paulson's ludicrous April claim that the housing market was "at or near the bottom" followed by his equally absurd August view that subprime mortgages were "largely contained." Krugman's response: "the time for denial is past....housing starts and applications for building permits have fallen to their lowest levels in a decade, showing that home construction is still in free fall....home prices are still way too high (at 70% above their long-term trend values according to the Center for Economic and Policy Research, and) the housing slump (will be around) for years, not months" with all those empty unbought homes needing hard to find buyers to fill them.

In addition, mortgage problems are "anything but contained" and aren't confined to the subprime category. Krugman believes current real estate troubles and mortgage fallout bear similarity to the late 1990s stock bubble. Like today, they were accompanied by market manipulation and scandalous fraud at companies like Enron and WorldCom. In his view, "it is becoming increasingly clear that the real-estate bubble of recent years (like the 1990s stock bubble)....caused and was fed by widespread malfeasance." He left out the Fed but named co-conspiratorial players like Moody's Investors Service and other rating agencies getting paid lots of money to claim "dubious mortgage-backed securities to be highest-quality, AAA assets." In this role, they're no different than were "complaisant accountants" like Arthur Andersen that lost its license to practice from its role in the Enron fallout.

In the end, this scandal may be more far-reaching than earlier ones because so many underwriters and other firms are part of the fraud or are seeking to profit from it. At this point, it's hard separating villains from victims as, in some cases, they may be one in the same. They're all involved in dispersing up to trillions of dollars of risks through the derivative alchemy of highly complex, hard to value, packages of mostly subprime CDO and various other type debt instruments that may even end up in so-called safe money market funds unbeknownst to their unsuspecting owners.

Before this scandal ends, they'll be plenty of pain to go around, but as always, small investors and low income subprime and other mortgage homeowners will be hurt most. Krugman says this is "a clear case for government intervention," but it won't be the kind he wants. He cites a "serious market failure (needing fixing to) help (as many as) hundreds of thousands" of Americans who otherwise may lose their homes and/or financial nest eggs. Faced with this problem, "The federal government shouldn't be providing bailouts, (it should) arrange workouts....we've done (it) before (and it worked) - for third-world countries, not for US citizens." It helped both debtors escape default and creditors get back most of their money.

By providing huge cash infusions to ease credit and reignite "animal spirits," the Fed and other central banks showed they aren't listening. It proves what Ralph Nader said in his August 19 Countercurrents article called "Corporate Capitalists: Government Comes To The Rescue" that's also on CounterPunch titled "Greed and Folly on Wall Street." With "corporate capitalists' knees" a bit shaky, Nader recalled what his father once explained years ago when he asked and then told his children: "Why will capitalism always survive? Because socialism will always be used to save it." Put another way, the American business ethic has always been socialism for the rich, and, sink or swim, free market capitalism for the rest of us.

As the housing slump deepens and many tens of thousands of subprime and other mortgage holders default, vulture investors will profit hugely buying troubled assets at a fraction of their value as they always do in troubled economic times. Writer Danny Schechter calls the current subprime credit squeeze debacle a "sub-crime ponzi scheme (in a) highly rigged casino-like market system" targeting unsuspecting victims. Schechter wants a "jailout" for "criminal....financial institutions (posing) as respectable players." Krugman, on the other hand, wants a "workout" for the victims. Neither will get what he wants. In the end, as ordinary people lose out, big government will again rescue "corporate capitalism" (at least in the short-term) the way it always does when it gets in trouble. It's the "American way." It'll be no different this time.

Stephen Lendman lives in Chicago and can be reached in Chicago at lendmanstephen@sbcglobal.net.

Why We Are Against India-US Nuclear Deal!


By Sandeep Pandey, Aruna Roy & Medha Patkar
24 August, 2007
Countercurrents.org


Much has been said and written about the India-US Nuclear Deal; beginning with the statement issued by many eminent nuclear scientists soon after the talks on the deal began between India and US governments. Public fora and People's organisations such as Campaign for Nuclear Disarmament and Peace called it anti-Sovereignty. Today when it is seen as an issue of conflict between the UPA and its Left front allies, we as representatives of people's movements must re-iterate our stand, which is that the deal is not just anti-democratic but against peace, and against environmentally sustainable energy generation and self-reliant economic development.

The Left front is questioning the fact that such an international deal with significant implications is imposed on the Indian people and Parliament, with no public debate and consultation in India. While US Congress took a year and a half to discuss the proposed change in the US laws, permitting nuclear commerce with India, the process in India has been totally undemocratic.
The deal is part of a successful attempt by the United States to build a strategic relationship with India, in confronting the rising capitalist challenge from China where India will be used as its client in the region. Directly or indirectly, the US will also enter the Indian sub-continent, to manage intra-regional, inter-country relations. This whole process is likely to escalate the arms race between Pakistan and India, sabotaging the India-Pakistan peace process. How can we ignore that fact the US sells arms to both India and Pakistan?
The agreement also facilitates a full-fledged international exchange of nuclear fuel and technology with insufficient caution and control. There will no doubt be a corporate rush to extract, export and misuse nuclear fuel and technology, and it will be very difficult to prevent misuse even for the arms trade. Highly superficial clauses don't instill any confidence against such a possibility.
However, our basic objections to this deal stem from our opposition to the production and use of both nuclear weapons and nuclear energy. The irreversible dangers of radioactivity and its ongoing impact on health, water, and the environment are factors that are being summarily dismissed in an irresponsible manner. The whole cycle of nuclear production beginning with uranium mining, is fraught with catastrophic dangers, and as a nation we cannot use the decisions of another country as justification for our own. Places like Jaduguda in Jharkhand, Kota and Pokhran in Rajasthan, have already demonstrated the ongoing dangers of nuclear use to the common citizen.
We, in India, have inherited rich renewable sources of energy, which are environmentally benign and abundantly available. The solar, wind, and ocean waves along with human power need to be fully tapped and put to use with people's control. Appropriate technology, research and development for production of cheaper equipment and tools, need to be combined with just distribution, for the right priorities. There is no political will for this in the ruling establishment. Estimates show that India can generate far more energy through alternative, environmentally sound sources. The nuclear energy option should be put up for widespread public debate giving citizens a full opportunity to make an informed choice.
This deal however raises questions beyond nuclear energy opening up large spaces for US government and corporate control in India. This, no doubt, is a symbol of imperialism already demonstrated through the Iraq war and the obvious links of US policy with corporate control over resources. With unbound exchange of information, data and material, knowledge and technology the dominant global power is all set to encroach upon Indian reserves and impinge upon our sovereignty. The deal ensures supply of sufficient nuclear material to nuclear reactors in India for the next 40 years, but the precautionary agreements to negotiations and consultations are only promises for the future. All this is subject to approvals and conditions to be monitored by the US Congress, while sidelining the Indian parliament.
The UPA government is proving to be increasingly submissive to the exploitation of our resources, knowledge and cheap labour by commercial interests and corporate interests. The BJP and its allies are also in the power game, using capitalist forces for support. The Left has raised an important issue using their bargaining power. Non-party people's formations may not have the power in parliament, but we have an important set of issues that need to be considered.
The Indian Constitution which allows deal such as this, as well as international treaties and agreements to be reached without democratic consultation, needs an amendment to make public debate and referendums mandatory and pre-conditional. We need an approval from the Indian electorate before we agree to sign the agreement.

Sandeep Pandey
ashaashram@yahoo.com

Aruna Roy
e-mail: arunaroy@gmail.com, mkssrajasthan@gmail.com

Medha Patkar
e-mail: nba.medha@gmail.com



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Friday, 24 August 2007

UK GDP v Debt

For the first time, Britons' personal debt exceeds Britain's GDP
Another worrying milestone on a nation's journey deeper into debt
By Martin Hickman, Consumer Affairs Correspondent
Published: 24 August 2007

Britons have racked up so much debt on loans and credit cards that the total borrowed now exceeds the entire value of the economy, new research shows today. The financial consultant Grant Thornton is forecasting that gross domestic product (GDP) will hit £1.33 trillion this year, less than the £1.35trn which was outstanding on mortgages, credit cards and personal loans in June.

The symbolic overtaking is the first time that the country's 60 million people owe more to the banks than the value of everything made by every office and factory in the country. It prompted a warning that personal borrowing was so out of control that many more people would be pushed over the "financial edge". The runaway housing market is the biggest reason why consumer debt has spiralled, totalling £1.131trn. Debt on personal loans and credit cards totals £214bn. Overall, individuals owe the staggering sum of £1,344,721,000,000.

Grant Thornton ascribed the level of borrowings to a "buy now, pay later" culture and warned that interest rate rises could impose a significant burden on families and individuals. "Fortunately, most consumer debt is secured and can be repaid over several years otherwise we would be technically bankrupt," its chief economist, Stephen Gifford, said.

The research further darkens the storm clouds gathering over the British economy. Repossessions, personal insolvencies and debt judgments have all risen by about a third in the past year as borrowers have struggled to cope with the impact of five rate rises in a year.

Yesterday the financial website moneyexpert.com suggested that 2.5 million people were "very concerned" about their personal financial situation.

In the United States, the sudden failure of the poor to repay home loans in recent months has sparked a "sub-prime" crisis that has spooked the financial markets and wiped billions of pounds off share prices.

Responding to the latest figures, the Bank of England predicted debts would remain a "social" rather than an "economic" problem, indicating it believes indebtedness will be contained to individuals rather than threaten businesses.

Grant Thornton's notional payback date for personal debt has advanced markedly through the calendar during the past 10 years. In 1997 the UK took until 23 August to pay off its debt, but this year the date will be 5 January the following year, 2008.

Mark Allen, a personal insolvency partner, said it was not uncommon to encounter individuals with debts of £50,000 spread across five credit cards on top of a mortgage. "In our experience these are the sort of people walking a perilous financial tightrope," he said. "All it takes is an increase in costs or, as is the present case, a rise in mortgage premiums due to higher interest rates, to force people to default on their repayments - hence the increase in bankruptcies and individual voluntary arrangements."

Repossession leapt 30 per cent in the first six months of this year compared with the first half of last year. County court judgments rose 32. 5 per cent and personal insolvencies in England and Wales 33 per cent to more than 62,000 last year.

Mortgage payments are making ever-larger dents in household income, rising from 12.5 per cent in 1997 to 17.6 per cent in May this year. Datamonitor, the independent financial analyst, warned this week that the total number of Britons credit blacklisted by 2011 will jump by 20 per cent to 8.6 million.

Moneyexpert.com suggested in its survey that 7 per cent of adults were "very concerned" about their ability to keep on top of their debts, which would amount to 2.5 million adults. However, 40 per cent of the 2,000 respondents were unconcerned about their ability to manage their borrowings.

Malcolm Hurlston, the chairman of the Consumer Credit Counselling Service, said Grant Thornton's research made a symbolic point. "Basically speaking, it's just a mathematical question: the relationship between GDP and borrowing. It's really another way of saying that house prices have been going up quicker than wages," he said. "But what is happening is that unsecured debt is less of a problem than it used to be, whereas secured debt is the problem, and I think the Council of Mortgage lenders is expecting the figures for repossessions to get worse."

He added: "The problem on the secured front - mortgages - is getting worse because of the rising gap between house prices and incomes. In terms of volume, it's not going to be as bad as the early 1990s because the mortgage companies are gearing up for it - this time they will be trying to avoid repossessions as much as possible. But there's going to be a lot of activity and a lot of people will find that they can't pay the money back."

Mr Gifford said: "The level of debt has so far not caused much of a problem for the UK economy. Interest rates have been historically low and the UK economy has been ticking along healthily. But with five interest rate rises in the past year the picture is changing and becoming a burden for families and households."

Thursday, 23 August 2007

America And Venezuela: Constitutional Worlds Apart

By Stephen Lendman

22 August, 2007
Countercurrents.org

Although imperfect, no country anywhere is closer to a model democracy than Venezuela under President Hugo Rafael Chavez Frias. In contrast, none is a more shameless failure than America, but it was true long before the age of George W. Bush. The difference under his regime is that the mask is off revealing a repressive state masquerading as a democratic republic. This article compares the constitutional laws of each country and how they're implemented. The result shows world's apart differences between these two nominally democratic states - one that's real, impressive and improving and the other that's mostly pretense and under George Bush lawless, corrupted, in tatters, and morally depraved.

US Constitutional Law from the Beginning

Before they're old enough to understand its meaning, young US children are taught to "pledge allegiance to the flag of the United States of America and to the Republic for which it stands," and, by inference, its bedrock supreme constitutional law of the land. At that early age, they likely haven't yet heard of it, but soon will with plenty of misinformation about a document far less glorious than it's made out to be.

This article draws on Ferdinand Lundberg's powerfully important 1980 book, "Cracks in the Constitution," that's every bit as relevant today as then. In it, he deconstructs the nation's foundational legal document, separating myth from reality about what he called "the great totempole of American society." He analyzed it, piece by piece, revealing its intentionally crafted flaws. It's not at all the "Rock of Ages" it's cracked up to be, but students at all levels don't learn that in classrooms from teachers going along with the deception or who simply don't know the truth about their subject matter.

The Constitution falls far short of a "masterpiece of political architecture," but it's even worse than that. It was the product of very ordinary scheming politicians (not the Mt. Rushmore types they're portrayed as in history books) and their friends crafting the law of the land to serve themselves while leaving out the greater public that was nowhere in sight in 1787 Philadelphia. Unlike the Venezuelan Constitution, discussed below, "The People" were never consulted or even considered, and nothing in the end was put to a vote beyond the state legislative bodies that had to ratify it. In contrast to popular myth, the framers crafted a Constitution that didn't constrain or fetter the federal government nor did they create a government of limited powers.

They devised a government of men, not laws, that was composed of self-serving devious officials who lied, connived, used or abused the law at their whim, and pretty much operated ad libitum to discharge their duties as they wished. In that respect, things weren't much different then from now except the times were simpler, the nation smaller, and the ambitions of those in charge much less far-reaching than today.

The Constitution can easily be read in 30 minutes or less and just as easily be misunderstood. The opening Preamble contains its sole myth referring to "We the people of the United States of America." The only people who mattered were white male property owners. All others nowhere entered the picture, then or mostly since, proving democracy operatively is little more than a fantasy. But try explaining that to people today thinking otherwise because that's all they were taught from the beginning to believe.

They were never told the American revolution was nothing more than a minority of the colonists seceding from the British empire planning essentially the same type government repackaged under new management. Using high-minded language in Article I, Section 8 of the supreme law of the land, the founders and their successors ignored the minimum objective all governments are, or should be, entrusted to do - "provide for....(the) general welfare" of their people under a system of constitutional law serving everyone. But that's not its only flaw build in by design.

Our revered document is called "The Living Constitution," and Article VI, Section 2 defines it as the supreme law of the land. In fact, it's loosely structured for governments to do as they wish or not wish with the notion of a "government of the people, by the people, for the people" a nonstarter. "The People" don't govern either directly or through representatives, in spite of commonly held myths. "The People" are governed, like it or not, the way sitting governments choose to do it. As a consequence, "The Living Constitution" was a "huge flop" and still is.

Setting the Record Straight on the Framers

Popular myth aside, the 55 delegates who met in Philadelphia from May to September, 1787 were very ordinary self-serving, privileged, property-owning white men. They weren't extraordinarily learned, profound in their thinking or in any way special. Only 25 attended college (that was pretty rudimentary at the time), and Washington never got beyond the fifth grade.

Lundberg described them as a devious bunch of wheeler-dealers likely meeting in smoke-filled rooms (literally or figuratively) cutting deals the way things work today. He called them no "all-star political team" (except for George Washington) compared to more distinguished figures who weren't there like Jefferson, Adams (the most noted constitutional theorist of his day), John Jay (the first Supreme Court Chief Justice), Thomas Paine, Patrick Henry and others. Madison and Alexander Hamilton, who did attend, were virtual unknowns at the time, yet ever since Madison has been mischaracterized as the Constitution's father. In fact, he only played a modest role.

The delegates came to Philadelphia in May, 1887, assembled, did their work, sent it to the states, and left in a despondent mood. They disliked the final product, some could barely tolerate it, yet 39 of the 55 attendees knowingly signed a document they believed flawed while we today extoll it like it came down from Mt. Sinai. The whole process we call a first-class historical event was, in fact, an entirely routine uninspiring political caucus producing no "prodigies of statecraft, no wonders of political (judgment), no vaulting philosophies, no Promethean vistas." Contradicting everything we've been "indoctrinated from ears to toes" to believe, the notion that the Constitution is "a document of salvation....a magic talisman," or a gift to the common man is pure fantasy.

The central achievement of the convention, and a big one (until the Civil War changed things), was the cobbling together of disparate and squabbling states into a union. It held together, tenuously at best, for over seven decades but not actually until Appomattox "at bayonet point." The convention succeeded in gaining formal approval for what the leading power figures wanted and then got it rammed through the state ratification process to become the law of the land.

After much wheeling and dealing, they achieved mightily but not without considerable effort. Enough states balked to thwart the whole process and had to be won over with concessions like legitimizing slavery for southern interests and more. Then consider the Bill of Rights, why they were added, for whom, and why adopting them made the difference. It came down to no Bill of Rights, no Constitution, but they weren't for "The People" who were out of sight and mind.

These "glorified" first 10 Amendments were first rejected twice, then only added to assure enough state delegates voted to ratify the final document with them included. Many in smaller states were displeased enough to want a second convention that might have derailed the whole process had it happened. To prevent it, concessions were made including adding the Bill of Rights because they addressed key state delegate concerns like the following:

-- prohibitions against quartering troops in their property,

-- unreasonable searches and seizures there as well,

-- the right to have state militias,

-- the right of people to bear arms, but not as the 2nd Amendment today is interpreted,

-- the rights of free speech, the press, religion, assembly and petition, all to serve monied and propertied interests alone - not "The People,"

-- due process of law with speedy public trials for the privileged, and

-- various other provisions worked out through compromise to become our acclaimed Bill of Rights. Two additional amendments were proposed but rejected by the majority. They would have banned monopolies and standing armies, matters of great future import that might have made a huge difference thereafter. We'll never know for sure.

In the end and in spite of its defects, the framers felt it was the best they could do at the time and kept their fingers crossed it would work to their advantage. None of them suggested or wanted "a sheltered haven....for the innumerable heavily laden, bedraggled, scrofulous and oppressed of the earth." On the contrary, they intended to keep them that way meaning things weren't much different then than now, and the founders weren't the noble characters they're made out to be.

There were no populists or civil libertarians among them with men like Washington and Jefferson (who was abroad and didn't attend) being slave-owners. In fact, they were little more than crass opportunists who willfully acted against the will of "The People" they ignored and disdained. In spite of it, they're practically deified and ranked with the Apostles, and one of them (Washington) sits in the most prominent spot atop Mt. Rushmore.

The constitutional convention ended September 17, 1787 "in an atmosphere verging on glumness." Of the 55 attending delegates, 39 signed as a pro forma exercise before sending it to the states with power to accept or reject it. Again, "The People" were nowhere in sight in Philadelphia or at the state level where the real tussle began before the founders could declare victory.

What Was Achieved and What Wasn't

Contrary to popular myth, the new government wasn't constrained by constitutional checks and balances of the three branches created within it. In fact, then and since, sitting governments have acted expediently, with or without popular approval, and within or outside the law. In this respect, our system functions no differently than most others operating as we do. It's accomplished through "the narrowest possible interpretations of the Constitution," but it's free to go "further afield under broader or fanciful official interpretations." History records many examples under noted Presidents like Lincoln, T. and F. Roosevelt and Wilson along with less distinguished ones like Reagan, Clinton, Nixon, GHW Bush and his bad seed son, the worst ever of a bad lot.

Key to understanding the American system is that "government is completely autonomous, detached, (and) in a realm of its own" with its "main interest (being) economic (for the privileged) at all times." Constitutional shackles and constraining barriers are pure fantasy. Regardless of law, custom or anything else, sitting US governments have always been freelancing and able to operate as they please. They've also consistently been unresponsive to the public interest, uncaring and disinterested in the will and needs of the majority, and generally able to get around or remake the law to suit their purpose. George W. Bush is only the latest and most extreme example of a tradition begun under Washington, who when elected unanimously (by virtual coronation) was one of the two richest men in the country.

The Legislative Branch

The Constitution then and since confers unlimited powers on the government constituted under its three branches of the Congress, Executive and Judiciary. Article I (with seven in all plus 27 Amendments) deals with the legislative branch. Section 8, Sub-section 18 states Congress has power "to make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution....or in any department or officer thereof." It's for government then to decide what's "necessary" and "proper" meaning the sky's the limit under the concept of sovereignty.

The Executive and Judiciary branches are dealt with below with the three branches comprising a labyrinthine system the framers devised under the Roman notion of "divide and rule" as follows:

-- a powerful (and at times omnipotent) chief executive at the top,

-- a bicameral legislature with a single member in the upper chamber able to subvert all others in it through the power of the filibuster (meaning pirate in Spanish),

-- a committee system controlled mostly by seniority or a political powerbroker,

-- delay and circumlocution deliberately built into the system,

-- a separate judiciary able to overrule the Congress and Executive, but too often is a partner, not an adversary,

-- staggered elections to assure continuity by preventing too many officials being voted out together,

-- a two-party system with multiple constituencies, especially vulnerable to corruption and the influence of big (corporate) money that runs everything today making the whole system farcical, dishonest and a democracy only in the minds of the deceived and delusional.

The Judiciary

Article III of the Constitution establishes the Supreme Court saying only: "The judicial power shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish." Congress is explicitly empowered to regulate the Court, but, in fact, the opposite often happens or, at times, it cuts both ways. The function of Congress is to make laws with the Court in place to interpret them and decide their constitutionality if challenged and it decides to adjudicate.

As for the common notion of "judicial review," it's nowhere mentioned in the Constitution nor did the framers authorize it. Nonetheless, courts use it to judge the constitutionality of laws in place and public sector body actions. They derive their power to do it by deduction from two separate parts of the Constitution: Article VI, Section 2 saying the Constitution, laws and treaties are the supreme law of the land and judges are bound by them; then in Article III, Section 1 saying judicial power applies to all cases, implying judicial review is allowed. Under this interpretation of the law, appointed judges, in theory, "have a power unprecedented in history - to annul acts of the Congress and President."

With or without this power, Lundberg makes a powerful case overall that the constitutional story comes down to a question of money and money arrangement - who gets it, how, why, when, where, what for, and under what conditions. Also addressed is who the law leaves out. The story has nothing whatever to do with guaranteeing life, liberty, and the pursuit of happiness (Jefferson's Orwellian language meaning property); establishing justice; upholding the rule of law equitably for everyone; promoting the general welfare; or securing the blessings of freedom for "The People" unconsidered, unimportant and ignored by the three branches of government serving monied and property interests only, of which they are a part.

The Executive Branch

Lundberg's theme is clear and unequivocal. Under US constitutional law, the President is the most powerful political official on earth, bar none under any other system of government. "The office he holds is inherently imperial," regardless of the occupant or how he governs, and the Constitution confers this on him. Unlike the British model, with the executive as a collectivity, the US system "is absolutely unique, and dangerously vulnerable" with one man in charge fully able to exploit his position. "The American President (stands) midway between a collective executive and an absolute dictator (and in times of war like now) becomes, in fact, quite constitutionally, a full-fledged dictator." Disturbingly, the public hasn't a clue about what's going on.

A single sentence, easily passed over or misunderstood, constitutes the essence of presidential power. It effectively grants the Executive a near-limitless source, only constrained to the degree he chooses. It's from Article II, Section 1 reading: "The executive power shall be vested in a President of the United States of America. Article II, Section 3 then almost nonchalantly adds: "The President shall take care that the laws be faithfully executed" without saying Presidents are virtually empowered to make laws as well as execute them even though nothing in the Constitution specifically permits this practice. More on that below.

To understand how the US government works, it's essential to know what executive power is, in fact, knowing it's concentrated in the hands of one man for good or ill. Also crucial is how Presidents are elected - "literally (by) electoral (unelected by the public) dummies" in an Electoral College. The scheme is a long-acknowledged constitutional anomaly as these state bodies are able to subvert the popular vote, never meet or consult like the College of Cardinals electing a Pope, and, in effect, reduce and corrupt the process into a shameless farce.

Once elected, it only gets worse because the power of the presidency is awesome and frightening. The nation's chief executive:

-- is commander-in-chief of the military functioning as a virtual dictator in times of war; although Article I, Section 8 grants only Congress that right, the President, in fact, can do it any time he wishes "without consulting anyone" and, of course, has done it many times;

-- can grant commutations or pardons except in cases of impeachment;

-- can make treaties that become the law of the land, with the advice and consent of two-thirds of the Senate (not ratification as commonly believed); can also terminate treaties with a mere announcement as George Bush did renouncing the important ABM Treaty with the former Soviet Union; in addition, and with no constitutional sanction, he can rule by decree through executive agreements with foreign governments that in some cases are momentous ones like those made at Yalta and Potsdam near the end of WW II. While short of treaties, they then become the law of the land.

-- can appoint administration officials, diplomats, federal judges with Senate approval, that's usually routine, or can fill any vacancy through (Senate) recess appointments; can also discharge any appointed executive official other than judges and statutory administrative officials;

-- can veto congressional legislation, and history shows through the book's publication they're sustained 96% of the time;

-- while Congress alone has appropriating authority, only the President has the power to release funds for spending by the executive branch or not release them;

-- Presidents also have a huge bureaucracy at their disposal, including powerful officials like the Secretaries of Defense, State, Treasury, and Homeland Security and the Attorney General in charge of the Justice Department;

-- Presidents also command center stage any time they wish. They can request and get national prime time television for any purpose with guaranteed extensive post-appearance coverage promoting his message with nary a disagreement with it on any issue;

-- throughout history, going back to George Washington, Presidents have issued Executive Orders (EOs) although the Constitution "nowhere implicitly or explicitly gives a President (the) power (to make) new law" by issuing "one-man, often far-reaching" EOs. However, Presidents have so much power they can do as they wish, only constrained by their own discretion.

-- George Bush also usurped "Unitary Executive" power to brazenly and openly declare what this section highlights - that the law is what he says it is. He proved it in six and a half years of subverting congressional legislation through a record-breaking number of unconstitutional "signing statements." - They rewrote over 1132 law provisions through 147 separate "statements," more than all previous Presidents combined. Through this practice, George Bush expanded presidential power well beyond the usual practices recounted above.

-- Presidents are, in fact, empowered to do almost anything not expressively forbidden in the Constitution, and very little is; more importantly, with a little ingenuity and lots of creative chutzpah, the President "can make almost any (constitutional) text mean whatever (he) wants it to mean" so, in fact, his authority is practically absolute or plenary. And the Supreme Court supports this notion as an "inherent power of sovereignty." If the US has sovereignty, it has all powers therein, and the President, as the sole executive, can exercise them freely without constitutional authorization or restraint.

In effect, "the President....is virtually a sovereign in his own person." Compared to the power of the President, Congress is mostly "a paper tiger, easily soothed or repulsed." The courts, as well, can be gotten around with a little creative exercise of presidential power, and in the case of George Bush, at times just ignoring their decisions when they disagree with his. As Lundberg put it: "One should never under-estimate the power of the President....nor over-estimate that of the Supreme Court. The supposed system of equitable checks and balances does not exist, in fact, (because Congress and the courts don't effectively use their constitutional authority)....the separation in the Constitution between legislative and the executive is wholly artificial."

Further, it's pure myth that the government is constrained by limited powers. Quite the opposite is true "which at the point of execution (resides in) one man," the President. In addition, "Until the American electorate creates effective political parties (which it never has done), Congress....will always be pretty much under (Presidents') thumb(s)." Under the "American constitutional system (the President) is very much a de facto king," and under George Bush a corrupted, devious, criminal and dangerous one.

As for impeaching and convicting a President for malfeasance, Article II, Section 4 states it can only be for "treason, bribery, or other high crimes and misdemeanors." Based on the historical record, it's near-impossible to do with no President ever having been removed from office this way, and only two were impeached, both unjustly. John Adams, the most distinguished constitutional theorist of his day, said it would take a national convulsion to remove a President by impeachment, which is not to say it won't ever happen and very likely one day will with no time better than the present to prove it.

In sum from the above, the US system of constitutional law is full of flaws and faults. "The People" were deliberately and willfully left out of the process proving the Constitution doesn't recognize democracy in America in spite of the commonly held view it does. In addition, the President, at his own discretion, can usurp dictatorial powers and end republican government by a stroke of his pen. That should awaken everyone to the clear and present danger that any time, for any reason, the President of the United States can declare a state of emergency, suspend the law of the land and rule by decree.

Constitutional Government in Venezuela

How does America's system of government contrast with rule under the 1999 Constitution of the Bolivarian Republic of Venezuela? Hugo Chavez was first elected president in December, 1998 and took office in February, 1999. He then held a national referendum so his people could decide whether to convene a National Constituent Assembly to draft a new constitution to embody his visionary agenda. It passed overwhelmingly followed three months later by elections to the National Assembly to which members of Chavez's MVR party and those allied with it won 95% of the seats. They then drafted the revolutionary Constitucion de la Republica Bolivariana de Venezuela. It was put to a nationwide vote in December, 1999 and overwhelmingly approved changing everything for the Venezuelan people.

It established a model humanistic participatory social democracy, unimaginable in the US, providing real (not imagined) checks and balances in the nation's five branches of government. They comprise the executive, legislative and judicial ones plus two others. One is the independent national electoral council that regulates and handles state and civil society organization electoral procedures to assure they conform to the law requiring free, fair and open elections. The other is a citizen or public power branch functioning as a unique institution. It lets ordinary people serve as ombudsmen to assure the other government branches comply with constitutionally-mandated requirements. This branch includes the attorney general, the defender of the people, and the comptroller general.

The Legislative Branch

Venezuela is governed under a unicameral legislative system called the National Assembly. It's composed of 167 members (compared to 535 in the two US Houses) elected to serve for five years and allowed to run two more times. It differs from the bicameral system in the US but is broadly similar to governments like in the UK. Although it's bicameral, it's governed solely by publicly elected members of the House of Commons that includes the Prime Minister and his cabinet as members of Parliament. The upper House of Lords is merely token and advisory, there by tradition like the Queen, with no power to overrule the lower House that runs everything.

The Office of the President

The President is elected with a plurality of universally guaranteed suffrage. Article 56 of the Bolivarian Constitution states: "All persons have the right to be registered free of charge with the Civil Registry Office after birth, and to obtain public documents constituting evidence of the biological identity, in accordance with law." In addition, all Venezuelans are enfranchised to vote under one national standard and are encouraged to do it under a model democratic system with the vast majority in it actively participating.

In contrast, the US system is quite different. Precise voting rights qualifications are for the states to decide with no constitutionally mandated suffrage standard applying across the board for everyone. The result is many US citizens are denied their franchise right. They're unable to participate in the electoral process for a variety of reasons no democratic state should tolerate, but America built it into the system by design.

The Judicial System

Under Article 2 in The Bolivarian Constitution, the judicial system shares equal importance to the law of the land. But it wasn't always that way earlier when the Venezuelan judiciary had an odious reputation before Chavez was elected. It had a long history of corruption, a disturbing record of being beholden to political benefactors, and a tradition of failing to provide an adequate system of justice for most Venezuelans. Chavez vowed to change things and undertook a major restructuring effort after taking office. He put this government branch under the Supreme Tribunal of Justice and made it independent of the others. The law now requires those serving be elected by a two-thirds legislative majority (not the previous simple one), and tighter requirements are in place regarding eligible candidates along with public hearings to vet them.

In addition, to root out long-standing corrupt practices, Chavez created a Judicial Restructuring Commission to review existing judgeships and replace those not fit to serve. Henceforth, all sitting judges with eight or more corruption charges pending are disqualified. It effectively eliminated 80% of those on the bench in short order and showed the extent of malfeasance in the national judicial culture. It also suggested the huge amount throughout the government from generations of institutionalized privilege. Those in power were licensed to steal the country blind and enrich themselves and foreign investors at the expense of the vast majority.

Reform in all areas of government is still a work in progress, including in the judiciary needing much of it. The process hasn't been perfect because of the enormity of the task. By the end of 2000, about 70% of sitting judges in the so-called capital region of Caracas, Miranda and Vargas states were replaced by provisional ones with charges of old judges removed for equally beholden new ones. It may be true and points to how hard the going is to change the long-standing culture of privilege and institute real democratic reforms throughout the government.

Nonetheless, the Constitution established Chavez's vision for a foundation and legal framework for revolutionary structural change. He's been working since to transform the nation incrementally into a model participatory social democracy serving all Venezuelans instead of for the privileged few alone the way it traditionally was in the past and how US framers designed American constitutional law. The differences between the two nations couldn't be more stark.

The spirit of the Venezuelan Bolivarian Constitution is stated straightaway in its Preamble:...."to establish a democratic, participatory and self-reliant, multiethnic and multicultural society in a just, federal and decentralized State that embodies the values of freedom, independence, peace, solidarity, the common good, the nation's territorial integrity, comity and the rule of law for this and future generations;"

It further "guarantees the right to life, work, learning, education, social justice and equality, without discrimination or subordination of any kind; promotes peaceful cooperation among nations and further strengthens Latin American integration in accordance with the principle of nonintervention and national self-determination of the people, the universal and indivisible guarantee of human rights, the democratization of imitational society, nuclear disarmament, ecological balance and environmental resources as the common and inalienable heritage of humanity;......"

This language would be unimaginable in the US Constitution, and, unlike our federal law, they're more than words. This is Hugo Chavez's commitment to all Venezuelans ordained under nine Title headings, 350 Articles, and 18 Temporary Provisions. It's a first class democratic document, little known in the West, that greatly outclasses and shames what US framers' enacted for themselves and privileged friends alone. Democracy was nowhere in sight then nor has it shown up since. In Venezuela under Hugo Chavez, it's resplendent, glorious, still imperfect and a work in progress, but heading in the right direction with newly proposed changes discussed below.

The contrast with America today couldn't be greater. The nation under George Bush is ruled by Patriot and Military Commissions Act justice under an institutionalized imperial system of militarized savage capitalism empowering the rich to exploit all others. A state of permanent war exists; civil liberties are disappearing and human rights are a nonstarter; dissent is a crime; social decay is growing; a culture of secrecy and growing fear prevail; torture is practically sanctified; injustice is tolerated; the dominant media function as virtual national thought-control police gatekeepers; and the law is what a boy-emperor president says it is. Aside from the privileged it serves, democracy in America is only in the minds of the bewildered and last of the true-believers who sooner or later will discover the truth.

Consider Venezuela's Bolivarian spirit in contrast. The people freely and openly choose their leaders in honest, independently monitored elections. They're unemcumbered by a farcical electoral college voting scheme (for Presidents) and a system of rigged electronic voting machine and other electoral engineered fraud corrupting the entire process sub rosa. They also have unimaginable benefits like free quality health and dental care (mandated in Articles 83 - 85) as a "fundamental social right and....responsibility of the state....to guarantee....to improve the quality of life and common welfare." It's administered through a national public health system proscribed from being privatized. That's how health delivery in America gets corrupted for profit. The result is 47 million and counting are uninsured, many millions more have too little coverage, and the cost of care is unaffordable for all but the well-off or those on Medicare, Medicaid (if qualify) or under disappearing company-paid plans.

The Constitution also enacted the principle of participatory democracy from the grassroots for everyone. It's mandated in Articles 166 and 192 establishing citizen assemblies as a constitutional right for ordinary people to be empowered to participate in governing along with their elected officials. Constitutionally guaranteed rights also ban discrimination; promote gender equity; and insure free speech; a free press; free, fair, and open elections; equal rights for indigenous people (assured a minimum three National Assembly legislative seats); and mandates government make quality free education available for all to the highest levels, as well as housing and an improved social security pension system for seniors, and much more.

Hugo Chavez brought permanent change, and most Venezuelans won't tolerate returning to the ugly past. Why should they? They never got these essential social services before. Under a leader who cares, they do now, and their lives improved enormously.

Other Venezuelan Constitutionally Guaranteed Rights

The Bolivarian Constitution is a glorious document, fundamentally different in spirit and letter from its US counterpart it shames by comparison. Before Chavez took office in February, 1999, Venezuela only paid lip service to civil liberties, human rights and needs. They're now mandated by law. It encompasses an impressive array of basic rights and essential services like government-paid health care, education, housing, employment and human dignity enforced and funded by a caring government as the law requires.

Article 58 in the Constitution also guarantees the right to "timely, true, and impartial" information "without censorship, in accordance with the principles of this constitution." The opposite is true in America where major media are state propaganda instruments for the privileged.

Articles 71 - 74 establish four types of popular national referenda never imagined or held in America outside the local or state level where they're often non-binding. The US is one of only five major democracies never to have permitted this type citizen participation. In Venezuela under Hugo Chavez, the practice is mandated by law and institutionalized to give people at the grass roots a say in running their government. Four types of referenda are allowed:

--consultative - for a popular, non-binding vote on "national transcendent" issues like trade agreements;

-- recall - applied to all elected officials up to the President;

-- approving - a binding vote to approve laws, constitutional amendments, and treaties relating to national sovereignty; and

-- rescinding - to rescind or change existing laws.

Referenda can be initiated by the National Assembly, the President, or by petition from 10 - 20% of registered voters, with different procedural requirements applying for each.

Social, family, cultural, educational and economic rights are guaranteed under Chapters V - VII with the government backing them financially.

Indigenous Native Peoples' rights are covered in Chapter VIII. Even environmental rights are addressed with Article 127 stating "It is the right and duty of each generation to protect and maintain the environment for its own benefit and that of the world of the future....The State shall protect the environment, biological and genetic diversity, ecological processes....and other areas of ecological importance." Try imagining any US federal law with teeth containing this type language let alone the Constitution that includes nothing in its Articles or Amendments.

Citizen Power gets considerable attention under Articles 273 - 291. It's exercised by "the Republican Ethics Council, consisting of the People Defender, the General Prosecutor and the General Comptroller of the Republic....Citizen Power is independent and its organs enjoy operating, financial and administrative autonomy." Citizen Power organs are legally charged with "preventing, investigating and punishing actions that undermine public ethics and administrative morals, to assure lawful sound management of public property....(to help) create citizenship, together with solidarity, freedom, democracy, social responsibility, work" and more.

Venezuela's Constitution covers much more as well under each of its nine Titles from:

-- stating its fundamental Bolivarian principles in Title I, to

-- National Security in Title VII,

-- Protection of the Constitution in Title VIII to assure its continuity in the event of "acts of force" or unlawful repeal with each citizen having a duty to reinstate it if that need arises; and finally

-- Constitutional Reforms in Title IX in the form of amendments, other reforms to revise or replace any of its provisions, and the National Constituent Assembly with power "resting with the people of Venezuela." They're empowered to call an Assembly to transform the State, create a new "juridical order" and draft a new Constitution to be submitted to a national referendum for the people to accept or reject. That's how democracy is supposed to work. In Venezuela it does. In the US, it doesn't, never did, and was never conceived or intended to from the nation's founding to the present.

This happens because Americans know painfully little about their law of the land hidden from them in plain view. They're taught misinformation about it and the framers who drafted it. Few ever read it beyond a quoted line or two and even fewer ever think about it. In contrast, in Venezuela, the Bolivarian Constitution is sold in pocket-sized form almost everywhere. People buy, read and study it. Why? Because it's a vital unifying part of their lives codifying core democratic values and principles Venezuelan people cherish and wish to keep.

Prospective Venezuelan Constitutional Reforms

In July, President Chavez announced he'd be sending the National Assembly a proposal of suggested constitutional reforms to debate and consider. He stressed Venezuelans would then get to vote on them in a national referendum so that "the majority will decide if they approve....constitutional reform."

Chavez submitted his proposal in an August 15 address to the National Assembly that will debate and rule on them in three extraordinary sessions over the next 60 to 90 days. Included are amendments to 33 of the Constitution's 350 articles to "complete the death of the old, hegemonic oligarchy and the old, exploitative capitalist system, and complete the birth of the new state." Chavez stressed the need to update the 1999 Constitution because it's "ambiguous (and) a product of that moment. The world (today) is very different from (then). (Reforms now are) essential for continuing the process of revolutionary transition." They include:

-- extending presidential terms from six to seven years;

-- unlimited reelections (that countries like England, France, Germany and others now allow); Chavez wants the reelection option to be "the sovereign decision of the constituent people of Venezuela;"

-- guaranteeing the right to work and establishing policies to develop and generate productive employment;

-- creation of a Social Stability Fund for "non-dependent" or self-employed workers so they have the same rights as other workers including pensions, paid vacations and prenatal and postnatal leave entitlements;

-- reducing the workday to six hours so businesses would have to employ more workers and hold unemployment down;

-- ending the autonomy of Venezuela's Central Bank;

-- recognition of different kinds of property defined as social, collective, mixed and private;

-- redefining the role of the military so henceforth "The Bolivarian Armed Forces (will) constitute an essential patriotic, popular and anti-imperialist body organized by the state to guarantee the independence and sovereignty of the nation...;" and

-- guaranteeing state control over the nation's oil industry to prevent any future privatization of this vital resource;

Chavez also wants other changes to strengthen the nation's participatory democracy at the grassroots. He stresses "one of the central ideas is my proposal to open, at the constitutional level, the roads to accelerate the transfer of power to the people" in an "Explosion of Communal (or popular) Power." It's already there in more than 26,000 democratically functioning grassroots communal councils. They're government-sanctioned, funded, operating throughout the country, and may double in number and be strengthened further under proposed constitutional changes.

Chavez wants "Popular (people) Power" to be a "State Power" along with the Legislature, Executive, Judicial, Citizen and Electoral ones and considers this constitutional change the most important one of all. If it happens, various sovereign powers and duties now handled at the federal, state and municipal levels will be transfered to local communal, worker, campesino, student and other councils. This will strengthen Venezuela's bedrock participatory democracy making it even more unique and impressive than it already is.

In America, it's unimaginable a President or other government officials would recommend "People Power" become our fourth government branch, co-equal with the others, with citizens empowered to vote in national referenda on crucial proposed changes in law.

Chavez also proposed a "new geometry of power" by amending article 16 that now states "the territory of the nation is divided into those of the States, the Capital District, federal dependencies and federal territories. The territory is organized into Municipalities." Chavez wants this amended so popular referenda can create "federal districts" in specific areas to serve as states. He called this idea "profoundly revolutionary (and needed) to remove the old oligarchic, exploiter hegemony, the old society, and (quoting Gramsci weaken the former) historic block. If we don't change the (old) superstructure (it) will defeat us."

Chavez also stressed this new structure is needed to be in place when "Venezuela (grows to) 40 - 50 million people." His plan includes "restructur(ing) Caracas" into a Federal District with more local autonomy, as it was at an earlier time.

These proposals and other initiatives are part of his overall socialism for the 21st century plan that's also very business-friendly. Chavez opposes savage capitalism, not private enterprise, and under his stewardship domestic and foreign businesses have thrived. They're a dominant force powering the economy to accelerated growth since 2003 with latest Central Bank 2nd quarter, 2007 figures coming in at 8.9%. With oil prices high and world economies prospering, this trend is likely to continue. That's good news for business and households sharing in the benefits through greater purchasing power.

Chavez wants his new United Socialist Party (PSUV) to drive the revolutionary process and continue his agenda of reform for all Venezuelans. He wants everyone to enjoy the benefits, not just a privileged few like in the past and in the US today. Under his leadership, their future is bright while in America poverty is growing, the middle class is dying, and the darkness of tyranny threatens everyone under George Bush with his agenda likely continuing under a new president in 2009.

Governance differences exist between these two nations because their constitutional laws are mirror opposite, and America has no one like Hugo Chavez. He's a rare leader who cares and backs his rhetoric with progressive people-friendly policies. In the US, there's George Bush, and that pretty much explains the problem. Knowing that, which leader would you choose and under which system of government would you prefer to live?

Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and listen to The Steve Lendman News and Information Hour on TheMicroEffect.com Saturdays at noon US central time.

Tuesday, 21 August 2007

Lessons for business!

 

Why Rorty's search for what works has lessons for business


19 June 2007 Financial Times
What mattered to Richard Rorty was not the search for what is true, but the search for what works. And that is what economists can learn from him. The test of a model, a way of thinking, or a theory, is not truth, but usefulness.
When a student of business and economics wants to ponder the conceptual foundations of these subjects, Richard Rorty, who died on June 8, is the modern philosopher I recommend. This suggestion would have surprised Rorty. He was the archetypal American liberal, with no time or regard for the world of business and finance. His most important work, published 30 years ago, was Philosophy and the Mirror of Nature, which debunked the notion that scientists could succeed in a search for the mirror of nature, the truth about "The Way the World Is".

Rorty was not a relativist who believed that all opinions were equally valid. He called the leftwing postmodernists of American humanities departments, who parroted phrases from the continental European philosophers he admired, creeps. Rorty was a modern representative of the American pragmatic tradition, associated with John Dewey and William James. By claiming that philosophical distinctions mattered only if they made a difference to practice, Rorty distanced himself from recent analytic philosophy. What mattered to him was not the search for what is true, but the search for what works. The test of a model, a way of thinking or a theory is not truth but usefulness.

Many of Rorty's philosophical critics claimed he was attacking a straw man, arguing that no one really believes they know, or might know "The Way the World Is". But I have met people who believe they know "The Way the World Is", in executive suites, on trading floors and in investment banks. I know consultants who are employed to report on "The Way the World Is". To be sure, there is an element of pragmatism in their approach. What better demonstration of their insight into "The Way the World Is" than their exalted positions and extravagant bonuses?

The academic search for truth, for scientific rather than commercial knowledge of "The Way the World Is", has different motives. The modern economist is driven by physics-envy. Physicists have the best claim to hold a mirror to nature: their models have proved so useful that no one would think about heat, pressure or motion in any other way. Many people claim this is because these theories are true.

The pragmatic Rorty argued that to say the theories are true adds nothing to the observation that the models are useful. This claim, applied to hard science, is a subject of continuing disagreement. But Rorty's perspective is surely right for complex and fluid situations whose outcome depends on human interaction. The soldier's war stories give insight into "The Way the World Is", but in a very different way from the models of quantum physics. No individual soldier – no general – ever sees the whole picture; no one can ever, in this sense, hold a mirror to nature. The best accounts will eventually come from the military historian or the novelist who pieces together – and manufactures – a narrative from fragments of information and experience. There can be many such accounts, some better than others, none representing a unique correspondence with the truth.

And so it is with business and finance. I have often given an account of an event in business history and been confronted by a participant who offers an account of "The Way It Was". But all he offers is an account of the way it was for him. Even an aggregation of such accounts can provide only a partial and controversial description of the whole. Economists often assert that economic theory says this or predicts that. But economic theory will never hold a mirror to nature. Good economic arguments are specific to their context. There are no universal economic laws, only trends and tendencies.

Yet business journalists continue to believe that chief executives can tell them "The Way the World Is" at their companies. Professional modellers imagine that by adding ever more realism and complexity to their black boxes, they come closer to describing "The Way the World Is". Visionary leaders imagine they can reconstruct industries through rationalist knowledge of "The Way the World Is".

Rorty's pragmatism can save us from these errors. His philosophy meets his own test: an understanding of it should change how we behave.




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