Monday, 30 March 2009

Free Market Fantasies: Capitalism in the Real World

Noam Chomsky
Delivered at Harvard University, April 13, 1996
(transcription courtesy of William Greene)

For those who are interested in the real world, a look at the actual history suggests some adjustment -- a modification of free market theory, to what we might call "really existing free market theory." That is, the one that's actually applied, not talked about.
And the principle of really existing free market theory is: free markets are fine for you, but not for me. That's, again, near a universal. So you -- whoever you may be -- you have to learn responsibility, and be subjected to market discipline, it's good for your character, it's tough love, and so on, and so forth. But me, I need the nanny State, to protect me from market discipline, so that I'll be able to rant and rave about the marvels of the free market, while I'm getting properly subsidized and defended by everyone else, through the nanny State. And also, this has to be risk-free. So I'm perfectly willing to make profits, but I don't want to take risks. If anything goes wrong, you bail me out.

So, if Third World debt gets out of control, you socialize it. It's not the problem of the banks that made the money. When the S&Ls collapse, you know, same thing. The public bails them out. When American investment firms get into trouble because the Mexican bubble bursts, you bail out Goldman Sachs. And -- the latest Mexico bail out, and on and on. I mean, there's case after case of this.

In fact of the leading -- top -- hundred leading transnationals in the Fortune list of transnationals -- there was a recent study of how they -- how they related to the States in which they- they're all somewhere, you know, so they're all mostly here -- in some National State, it turns out that all hundred of them had benefited from industrial policies, meaning, State intervention in their behalf. All hundred had benefited from the State in which they're based. And twenty of the hundred had been saved from total disaster, that is, collapse, by just State bail-out. When people talk about globalization of the economy, remember that the nanny State has to be very powerful in order to bail out the rich. And nothing is changing in that regard. Twenty out of a hundred, again, were saved from collapse by this, including a number here.

Well, that's really existing free market theory. There are many examples of it quite close to home. So, we could start with our own Governor, Governor Weld, who is described by the Boston Globe as a libertarian with a religious belief in free markets. And then a couple of days later, they reported that through various scams he had- his administration was able to sharply increase Federal subsidies to Massachusetts, so that- way beyond what they were before, so that he could parade as a fiscal conservative. And that's pretty common.

Just the year before, you may recall, if you have long memories, they had to close Georges Bank -- the richest fishing area in the world -- because it was being overfished, thanks to a combination of deregulation and subsidies to the fishing industry, which have that odd consequence that you tend to get overfishing. So it looked as if the ground fish were wiped out, and they had to close it off. It didn't take long for the religious libertarian fanatic, William Weld, to take the next jet plane down to Washington, hat in hand, asking for a Federal bail-out. They wanted the Federal government to declare it a natural disaster. And the reason was, as he explained, with, presumably, some scientists in tow, that there was some strange kind of predatory fish which no one had yet found, but they would find it, don't worry. So some kind of predatory fish had come and, sort of, wiped out all the, you know, the Cod and the Haddock, and all those things. So it was a natural disaster, and therefore the general public had to, sort of, pay off the results of deregulation and subsidizing the fishing industry. Well, that's the way to be a libertarian with religious fervor.

Another one is the leader of the conservative revolution, Newt Gingrich. Nobody is more passionate about the market than he is, in particular about what he -- his own district, which he calls a Norman Rockwell world of jet planes and fiber optics, as indeed it is. Except, if you ask where jet planes and fiber-optics came from, you discover that the public paid for them, and still pays for them. And in fact he manages to get more Federal subsidies for his district than any suburban county in the country outside the Federal system. So, you can have conservatism flowering among the malls, and so on.

Or you can go back to the Reaganites, who were also very passionate about free markets for everyone else. Meanwhile, they boasted to the American business community, correctly, that they had done more- that they had instituted more protection than any post-war American administration, in fact, more than all of them combined. They had doubled import restrictions, blocking- and helped -- and poured public funds into major industries to enable them to recapitalize, to protect the -- in fact reconstruct, the steel industry, and the automotive industry, and semiconductors, and so on, which would have disappeared if they had opened the markets.

The Thatcherites in England were about the same. Government expenditures relative to GNP stayed pretty constant, although, anything that went to the general population collapsed. Meanwhile, military industry shot up, arms sales were booming -- that's all publicly subsidized stuff -- arms sales to nice guys like Saddam Hussein, and General Suharto, and others.

Well, that's really existing free market theory.

What are the core policies?

Well, the Washington consensus -- which is basically designed for the Third World to make it that way, and keep it that way -- it's now being applied not just to the Third World countries, but to the rich industrial societies, with the United States and Britain in the lead. However, it's with a twist.

Since it's being applied at home, this is really existing free market theory that's being applied at home, meaning nuanced. So, powerful government to protect the rich, and market discipline and tough love for everyone else. And you see that very clearly. Go through the various elements of the Washington consensus.

The first one is to-about reducing government. Well, that's false. We're not reducing government, we're switching it -- shifting it around. So, social spending is indeed way down since the 1970s when this stuff started -- accelerated after 1980, but it was starting in the mid 70s. The -- kind of a benchmark example is AFDC, the main support system. That was cut virtually in half from about 1970 to 1990, with obvious effects on poor families and children, and so on. It was a part of a general war against women and children that was conducted by the conservatives under the name of "family values." It's interesting that they were able to get away with that. It tells you something about the intellectual culture.

Well one part was the reduction of AFDC from -- by roughly half from about 1970 to about 1990. It's now, essentially gone. That's- the purpose of that, as you know, is so that seven million- couple of million -- I think five or six million kids, average seven years old can learn responsibility. That's part of tough love.

Meanwhile, another part of the government has been very stable, and in fact is going up, namely, the Pentagon system, which remains at approximately Cold War levels. In fact it's higher now than it was under Nixon, although, you know, the big enemy has disappeared, which tells you exactly how much -- tells a rational person at least, exactly how much they were worried about the Russian threat. Not only does it remain at Cold War levels, but it's going up, under the initiative of the fiscal conservatives. The Heritage Foundation, which, you know, sort of a right-wing foundation that designs the budget for the Gingrich army, are calling for an increase in the Pentagon system, as is Gingrich, as indeed was Clinton. So that goes up.

And I should say that cutting of social spending- social spending is being cut very sharply, very much over public opposition. At the time of the 1994 Congressional election -- you know, the big landslide -- over 60% of the public wanted social spending to increase. Ok. It went very sharply down. What about the Pentagon spending going up? Well that's- the public is 6 to 1 opposed to that, which gives you some- one- it's one aspect of a big picture about what's happening to American democracy, and somewhat of a change, not a huge change.

The- so one part of the system is going up: Pentagon spending. Another part is going down: social spending.

And the same is true in other domains. Like, for example, legal aid for the poor is being slashed and virtually destroyed. On the other hand, the security system, the State -- government security system, State and Federal, that's going up. So, prisons are going way up. The prison population -- crime hasn't really -- hasn't changed for about twenty years, but -- and incidentally, U.S. crime rates are not off the spectrum, contrary to what a lot of people believe. Crime rates are sort of at -- toward the high end of the industrial world, but not off the spectrum, with one exception, namely, murder with guns. But that's a special feature of American society which doesn't have to do with crime rates. Apart from that, crime rates are kind of toward the high end, not going up.

The prison population tripled during the Regan years. It's going up even faster now. And I think the reason is another aspect of the Third World model, namely, the superfluous population. There is a big superfluous population -- they don't contribute to wealth protection. Well, we're civilized folks. We're not like the people that we fund in Colombia who go out and murder them. So, we throw them into jail. And that's going way up, even more. And there's also kind of like a side benefit to this. Putting more and more people in jail -- and in fact, under harsher and harsher conditions -- has an -- is a technique of social control for everybody else.

I mean when you're -- if you're -- you know, someday down the road if you decide to run a dictatorship, and you want to really harm people, it's kind of like Hitler in Germany or something, you know that you're going to carry out policies that are going to cause people a lot of harm, you've got to control them somehow. And there aren't many ways to do it. Everyone hits on the same ways. What you do is engender fear, and hatred, and you know, make them hate the guy who looks a little different, or whatever it may be, and then you punish those bad guys because they're really awful, and, you punish them really hard, and so on. And that makes people even more frightened. You can just see that happening right around you. And building up the perception of crime -- crime has a, like a, what they call in literary theory a subtext -- you're supposed to understand, "criminal" has the word -- little word "black" in front of it. Just like "welfare mother", you know "black"- "rich black welfare mother." And criminal means, you know, that black guy who's coming after you. So what you want to do is -- this has the dual effect of getting rid of the superfluous population -- basically unskilled workers -- close race/class correlation -- and also demonizing them, so everybody else is scared and frightened and they'll be willing to accept what's happening to them too, and not look at where the source is.

So that part of the -- that -- the drug war is basically for this, it has almost nothing to do with drugs, but it has plenty to do with criminalizing an unwanted population, and scaring everybody else.

And so does the harshening of prison conditions. Which is really -- it's -- the United States is off the map on this. We're in violation of international conventions, constantly condemned in human rights forums, and getting much worse. The reinstitution of chain gangs was of course bitterly condemned. But you know, that's that bad South, Alabama. Well, it's now in Illinois. The State Senate of Illinois last -- a week or two ago legislated chain gangs -- not for violent criminals, incidentally -- for people who are found with drugs, or, you know, robbed a store, or something like that. The Chicago press pointed out that this carries a -- this is kind of reminiscent of slavery. But the legislator, the Senator -- State Senator who put it through said that this is just another aspect of what he called tough love. And then he explained that some people work better under humiliation. So it's really good to restore elements of slavery, and again, the subtext is everybody else gets scarred. You know, those guys have to walk around like slaves in chains, we must be in real danger, so therefore, we'll accept what's happening to us. That's the logic.

So prisons are going up and it's -- and that has a lot of side benefits apart from just getting rid of the superfluous population. It is a source of cheap labor. So, prison labor is going way up. Cheap labor, you don't have to worry about unions, no benefits, they don't get out of line. And that also, naturally, undercuts wages elsewhere. So what -- just like forcing welfare mothers to work -- you know, raising children isn't work, as anybody knows who's had children -- so you have to drive them to work. Kind of like people who go to, you know, Fidelity Investment to figure out scams about how to deal with the security market. You really want these people to work. But since there's no jobs for them, they're going to work at low-paid, or publicly subsidized wages, which will undercut other wages. The same with prison labor.

In fact the scale of prison construction -- which is a kind of Keynesian stimulus to the economy anyway -- but its scale has become so enormous that even high-tech industry, you know, the guys who are usually just ripping off the Pentagon system, they're beginning to look at it, figuring out -- recognizing that high-tech surveillance devices, and so on, may be another way to, sort of, get -- to transfer public funds to make sure that high-tech industry keeps moving. It's reached -- it's not at the scale of the Pentagon, but it's going up.

Well, that's one aspect of what's called, reducing government -- modifying government, to be precise.

Another aspect of it is what's called "devolution" -- reducing -- moving governmental power from the Federal to the State level. And that has a kind of a rationale which you hear all over the time -- place. For example there was an op-ed a couple of weeks ago in the New York Times by John Cogan -- Hoover Institute at Stanford, who has pointed out what he called a philosophical issue that divides the Democrats from the Republicans. The philosophical issue is that the Democrats believe in big government and entitlements, and the Republicans believe in getting power down closer to the people, to the States, because they're kind of populist types.

Well, it takes about maybe three seconds' thought to realize that moving power down to the States, in funding and so on, is just moving it away from the people, for a perfectly elementary reason: there's a hidden part of the system -- of the power system that you're not supposed to know about, or think about, and that's private power.

Now, it takes a big corporation, like say, General Electric or Microsoft to sort of pressure the Federal government, but even middle-sized guys have no problems with State governments, they can control them quite easily. And in case anyone was too dull to figure this out by themselves, the same day as Cogan's op-ed in the New York Times, which is a typical one, there was a story in the Wall Street Journal about Massachusetts, which had a headline that read: What Fidelity Investment Wants It Usually Gets. And then the story went on to say that Fidelity Investment, the biggest investment firm in Massachusetts, wanted even more subsidy and support from the State government than it already gets, and it was threatening if it didn't it would move over the border to Rhode Island, where it just owns the place. So therefore, the passionately libertarian Governor quickly rearranged, you know, tax subsidies, and one thing or another, so that Fidelity got what it wanted.

Well Fidelity couldn't have done that with the Federal government. It couldn't have said, you know, "you give us even more or we're going to move to Switzerland" or something. I mean, other guys can do it maybe, but not Fidelity.

Raytheon, which is the biggest manufacturing producer, did the same thing. Raytheon -- incidentally Fidelity is not -- it's not that Fidelity is poor, they just announced record profits a couple days ago. Same with Raytheon -- just announced record profits, but you know, having big problems, so they wanted even a bigger tax subsidy, and -- direct subsidy, and tax write-offs, which just means transfer of taxes to -- from the State of Massachusetts, and they threatened that if they didn't get them they were going to go to Tennessee, so of course they got them. The legislature passed a special law giving what they called defense industry special extra subsidies.

Notice that Raytheon is publicly subsidized in the first place. That's where its money comes from. But now it has to be additionally subsidized so that its profits will be even higher than the record profits it just made. Same with Fidelity. And that's the kind of game anybody can -- you know, even -- even way down to much smaller businesses can play with the States.

The consequences of devolution are quite straightforward. It means that any funding that goes to, say, block grants that go to the States, you can be reasonably confident that they'll end up in the deep pockets of rich people, not, you know, in the hands of hungry children, or poor mothers, or anything like that. That's how you get power down to the people. Ok. That's devolution.

In fact quite generally, when you look at it, what's called "government cutting" is more or less cost transfer. It's almost never reduction, sometimes it's increase.

So let's take what's -- take health reform. "Reform" is a word you always ought to watch out for. Like when Mao started the cultural revolution it wasn't called a reform. Reform is a change that you're supposed to like. And watch -- so as soon as you hear the word reform, you kind of reach for your wallet and see who's lifting it. Anyhow, there are things called "health reforms." And health reforms are supposed to, you know, cut government costs. Well they do cut one kind of cost, but of course they raise another kind of cost.

There's a very respectable outfit called the National Bi-Partisan Leadership Council, headed by two ex-Presidents, Ford and Carter, and it just did a study of the cost-transfer effects of the planned health reforms. It concluded that they would add about ten billion dollars a year extra costs, but those extra costs will come from wages, and higher premiums. Which means it's a highly regressive tax on the poor. Highly regressive tax, you know, if it comes from wages and premiums of course. And that's ten billion dollars a year. They also estimated that it will increase the number of uninsured by fifteen to twenty percent up by -- this is by the year 2002 -- so up to about 54 million by the year 2002. Well that's a cost. A big cost, unmeasurable cost. And so you find all the way across the board. And furthermore it's no big secret.

So, like, the Wall Street Journal had a headline which pointed out that -- when the reforms were, you know, moving through Congress -- it said: Rich Gain, Poor Lose, Tradeoffs For The Middle Class. Which is right. That's exactly what the reforms are intended to do. You have to remember, by "Middle Class" they mean the people right below the very rich. So they don't mean the median, you know, they're not talking about people with thirty thousand a year income, they mean -- so what it really means is: great for the rich -- super-rich, tradeoffs for the near-rich, tough love for everybody else, which is most everyone. When you close public hospitals, and that sort of thing, you know exactly who's going to suffer.

Well, let's go to -- what are -- take, say, New York, which has a conservative Governor and a conservative Mayor. And they're carrying out very extensive conservative tax cuts, because they're fiscal conservatives.

The tax cuts, the New York Times pointed out in a small item, all benefit business. So, by accident, all the tax cuts benefit business. Well, there are also tax increases, which are compensating for the tax cuts. But they don't call them tax increases. What they call them is, the phrase is: reduction of subsidies for public transportation and for tuition in public universities.

Well "subsidy" is another interesting word, kind of like reform. It's a subsidy if public funds are used for public purposes. That's called a subsidy. It's not called a subsidy when they go to private wealth. That's reform. So the -- so they're cutting down subsidies for public transportation. Well, that's just a tax. If you pay 20 percent more for getting on the subway, that's a tax. Same if you pay higher tuition at City College. And that's a highly regressive tax. So, who rides the subways, and who goes to City College?

So what they're doing is shifting- is cutting taxes for business -- for the rich, and increasing taxes for the poor, which are going to compensate for that. And that's called fiscal conservatism, and cutting government. Well, so it is across the board. Take- I'll come to other examples, but if you think about it, all the -- take a look -- a close look at the things that are called cutting government, and you notice that they quite characteristically have this property.

The next element of the Washington Consensus is making the tax system more regressive. Ok, we don't have to talk about that, it's stated openly. The thing that isn't stated openly is the reason.

This is supposed to be in order to increase investment and give everyone jobs. But it's a really weird way to do that. I mean, the country is already awash in capital. The people whose taxes are being cut don't know what to do with their money. If you want to increase growth, there's another approach that might be used: stimulate weak demand by progressive taxes. That is, put more money into the hands of people who can spend it. That increases growth -- that would increase growth, but that's not the right way to do it. The right way to do it is by cutting financial gains so that you can have even more speculation against currencies. The- so that's the second part, make the tax system more regressive. What about deregulation?

Well, same effect. Deregulation is a cost shifting measure. So for example if you deregulate -- if you allow industries to -- as they have done already, to deposit toxic wastes without cost, because you have deregulation, it increases their profits, but it also increases water and sewage rates, which is a regressive tax on everybody else who's got to pay that. Also, it has further costs. Some of them you can't estimate. For example, the costs in, say, health, and quality of life, and so on. No way to give numbers to those. And there's also going to be the eventual cost of cleanup. But that's going to be a public cost, remember. Incidentally, a good one, because when you clean up the wastes, that increases the Gross National Product, and we all like to see that go up. But, the public will pay those costs.

So what it is, is just another form of radical cost shifting: increase wealth for the rich, and decrease it for everyone else. So, it fits the experiment's design. In general, it's kind of like a short-term profit gain for some, a very small some, and a big cost for everyone else. What about deregulating the labor market?

Well, same process. Actually that was done by simply criminal behavior. The best review of this I know is in Business Week. The Reagan administration, as they point out, essentially informed the corporate world that they were not going to enforce the laws. There are laws, you know, much hated laws like the Wagner Act, that give you the right to organize, and the Reagan administration simply informed business they weren't going to enforce them.

So the number of illegal firings went up by about a factor of six. And similarly across the board. They also informed business they were not going to enforce the OSHA regulations -- health and safety regulations. So the number of days lost to injury, and the number of injuries, and so on, also shot up. And in fact, that was a great way to undermine unions, and the right to organize -- a whole pile of policies like that -- which was part of deregulating labor markets.

Another part of deregulation of labor markets is to make them more -- what's called, more flexible. Meaning, you don't have any security, and no guarantee, the number of temporary workers goes right up -- way up, no benefits, you never know if you're going to have a job tomorrow. That's really good for the economy. That's good for having jobs.

Some of the most profitable corporations, the ones whose- way up on the Fortune 500 list, and booming, are the ones that, what they call, sell manpower, you know, like Manpower Incorporated, selling temps. Which is terrific for making labor markets flexible. It happens to destroy everybody's life, but that doesn't really matter.

It's -- again, the similarity to the Third World is very close. Back in nineteen -- this is what's called "economic health." When you -- when this is carried -- happens, you call it an "economic miracle", another technical term.

So for example, Brazil. There's a terrific economic miracle under the neo-Nazi Generals that we installed with great self-adulation back in the 60s. And by 1971 it had become the Latin American darling of the business community. And the President, the General who ran the place, pointed out that the economy is doing fine, it's just that the people aren't.

Well we just -- we have a Nobel Prize winner, who just won the Nobel Prize last yea r- last time -- Robert Lucas of Chicago, and he was interviewed by the Wall Street Journal, and said, we've been doing great, and have been for a long time. He didn't even bother to add what the Brazilian General did: it's only the people who aren't doing well. What he means by "we" is the top five percent, or maybe top ten percent. And that's right. We've been doing great, we're doing fine, the economy's fine -- by now we don't even worry about the fact that the people aren't doing so well, like -- I won't bother repeating the statistics which you know, and he knows perfectly well.

Ok, that's economic miracles. We're now beginning to get one ourselves.

What about privatization?

Well, again, the effects of that are obvious. So, say, in the latest economic miracle in Mexico, privatization meant, as usual, handing over public assets to friends of the President, or you know, other rich people, or international investors, at a fraction of their cost. And in fact in Mexico the number of billionaires during the economic miracle went up even faster than the percentage of people on the poverty line, as some were doing well, and the people didn't happen to be doing so well. In fact it was a catastrophe for them, even before the collapse. So that's privatization. What about property rights -- increase of property rights?

That's very important, in fact it's a critical aspect of the -- what are called, misleadingly, the free trade agreements, which actually have strong protectionist elements in them. The Uruguay Round, and NAFTA, and so on. And one of them is increase of intellectual property rights. I won't go into the details, but what it amounts to is guaranteeing that major corporations have a monopoly on the technology and knowledge of the future. And they extended those to the -- by various devices, so that it's about fifty years before you can interfere with owned property, which comes from public subsidy, usually through research, and then is handed over to some private corporation, and nobody else is allowed to touch it.

So increasing property rights has a big effect -- highly protectionist measure which is central to the new trade agreements, and has a long-lasting effect, way down the road on organizing the international economy in who gains and who loses. Last element of the Washington Consensus is reducing trade barriers. And here there's another scam that you ought to keep your eyes on.

What's called "trade" in economics is a very odd notion. So, for example, if Ford Motor Company moves parts from Indiana to Illinois for assembly, and then moves them back to Indiana, that's not called trade. But if Ford Motor Company takes parts made in Indiana and moves them across the border to Mexico, where you can get much cheaper labor and you don't have to worry about, you know, pollution and so on, and they get reassembled in Mexico and then sent back to, say, Illinois for value-added, that's called "exports and imports." It never had anything to do with the Mexican economy, or, in fact, any economy, it was all internal to the Ford Motor Company, but it's exports and imports.

So, how big an element is that? Well, about fifty percent of U.S. trade. So about fifty percent of what's called U.S. trade is actually internal to individual corporations. Meaning, controlled by a very visible hand, with all sorts of methods around for distortion of markets, and you know, robbery, and so on and so forth. About the same for Japan. And for the world, you know, it's hard to get numbers, but what's estimated for the world is around forty percent of trade.

Agreements like, say, the Uruguay Round, you know, GATT, if that increases what's called trade, what it actually does is increase investor rights. That is, it increases the power of transnational corporations. You have to really look pretty closely to figure out what the effect is on trade in any meaningful sense. For example, it may increase cross-border operations, but decrease trade, in a meaningful sense of trade, meaning something that's not under the control of, kind of, corporate mercantilism. Going on with this, it's perhaps worth noticing that the very concept of capitalism, and markets, has virtually disappeared.

So for example, if you take the current issue of Foreign Affairs, there's an article by Joseph Nye of the Kennedy School, I think maybe he's Dean of the Kennedy School, who explains that there's a big new weapon in the hands of American diplomats. American diplomats, he says, has a -- diplomacy has a force multiplier. And the reason is because of the attraction of democracy and free market enthusiasms in the United States. That's given -- those things have given the U.S. a real force multiplier. Then he spells it out. It comes from Cold War investments in high technology: electronics, aviation, telecommunications, and so on. That's our free market enthusiasms and democracy.

Well, where did electronics and, you know, aviation and telecommunications come from? Well, from public funds. They didn't have anything to do with the free market. They came from public funds, which were transferred to high-technology industry, under the conscious guise, deceit, of security. And it was conscious.

So, Truman's first Secretary of the Air Force, back in 1948, pointed out to Congress that the word to use is not "subsidy", the word to use is "security." And in fact the whole system was designed that way, and stays that way. So that's the tribute to democracy and free markets. The tribute to democracy and free markets is: you rob the public by deceit to pay- put- to enrich the rich. That's free markets and democracy. And it's published without comment.

Another article in- and probably nobody notices, you know, because the concept of capitalism, just like the concept of democracy, is just gone. Nobody knows what it is. Democracy means: deceive people into doing what the rich people want. And markets means: making sure -- make sure the public subsidize the rich.

Or to take another example, take, say, the Wall Street Journal, which you'd think would be the last holdout of somebody who remembers what capitalism is. Well they had a front -- lead article a couple of weeks ago, on various strategies that States -- meaning, like, States of the Union -- were using to try to be more business friendly. And they picked two examples, Virginia and Maryland, who are sort of competing to see who can most sponsor entrepreneurial values, and be most business friendly, and so on. And they said, well for a while it looked like -- they have somewhat different strategies, that's why they were describing them -- for a while Maryland was doing better, then it turned out Virginia is doing better- now Virginia is doing better, they're more business friendly, more gung-ho about business, and so on.

Alright, you read the article. Turns out it's not Virginia and Maryland. What it is, is the suburbs of Washington, some of which are in Virginia, and the others of which are in Maryland. And what are the two business strategies- entrepreneurial strategies? Well, the suburbs of Washington figured they could rip-off the National Institute of Health and others to develop Biology-based industries, so they were looking for Biotechnology, and so on. They figured that's going to be the big cash cow. And Virginia, which is more business friendly, decided that the old cash cow, the Pentagon, would probably be the best way to rip-off public funds. So they were concentrating on electronics and telecommunications, and so on. And it turned out that Virginia had the better strategy- the better business strategy. They made a better guess about which public funds to rob. And that's what it means to have entrepreneurial values. And it's, again, reported without comment.

This just continues, virtually without a break. The New -- I'll give you one last example.

The New Yorker had a rather good article, actually. You know the -- by now the story about what's happening to the economy and to the population, which used to be what, you know, crazies on the Left talked about, it's now, sort of, hit the public, you know, so you can -- you read it in the newspapers. The New Yorker had an article in which they reviewed the figures on decline of real wages, and you know, increase in profits, and the story you're familiar with, by a guy named Thomas Cassidy. Wasn't a bad article, actually, he sort of repeated the familiar facts. And then he ended up by saying, look no one's to blame for this, it's just the market in its infinite and mysterious wisdom. It just has these effects and there's nothing you can do about it. Then he gave three examples, exactly three examples in the article, of the market in its infinite and mysterious wisdom, namely: Grumman, McDonald Douglass, and Hughes Aircraft.

Now, you know, maybe this is some kind of subtle irony that I'm missing, but these are three prototypes of publicly subsidized corporations. Grumman, Hughes, McDonald Douglass? They wouldn't exist for two minutes if it wasn't for huge public subsidy.

So that's the market in its infinite and mysterious wisdom.

When Clinton was announcing his grand vision of the free market future at the A.P.E.C. conference in Seattle, he did the same thing. It was in the Boeing terminal, that's where he announced it, and he gave Boeing -- Boeing -- as the example of the grand vision of the free market future, and there were big headlines in all the newspapers, and a lot of applause about our love of the free market, and so on. It's not necessary to comment.

But it is kind of interesting. What it means is, that the concept of capitalism and markets has disappeared as fully as the concept of democracy, which is an interesting fact about the modern period, and a kind of a natural effect of, you know, of applying the Washington Consensus at home. Because you really have to drive out any understanding of what's going on, namely, that it's really existing free markets that are being imposed. Well, all of these current measures share one fundamental principle -- and I guess we're at the heart of it -- well, two related fundamental principles. One is: they transfer wealth to the wealthy. And the second is: they transfer decision-making power to the wealthy. So, all of them have the effect, just think them through, what all -- every one of them has the effect of putting more power to make decisions into the hands of unaccountable private tyrannies, what we call "corporations." Basically totalitarian institutions -- but they're mostly unaccountable. And that's the effect. Think through the examples. Every case of the Washington Consensus applied at home has exactly this effect.

And a good part of the propaganda system has the same goal. In this case surely conscious.

So the propaganda system is designed, has been for years, to demonize unions, which makes a lot of sense. Unions are a democratizing force in which the mass- one of the few ways in which the large mass of the population can pool limited resources and work together for some common good. So that's that bad thing: democracy. So naturally you want to demonize and destroy unions, and that's been going on forever.

And the other leading propaganda theme -- and I don't mean by that, you know, like, just what you hear in the newspapers- read in the newspapers and so on, like the entertainment industry and television and everything else -- is anti-politics. Meaning, setting up a picture -- it's called anti-politics -- the picture -- but a very specific kind of anti-politics -- you have to establish the image, you know, get into people's heads, that the Government is the enemy- the Federal Government. State Governments are okay, because they can be sort of controlled by business anyway, so it doesn't matter. But the Federal Government is sometimes a little too big to be pushed around, so it's the enemy. And it cannot be, nobody can dream of the possibility, that the Government is of, by, and for the people. That's impossible. It's an enemy to be hated and feared.

Not that there aren't a lot of things wrong with it, but that's not -- what's wrong with it, from their point of view, is it has a big defect: it's potentially influenceable by the population, and big enough to stand up against private power. And that's the defect.

So, you have to regard it as the enemy. It cannot be of, by, and for the people. It's a kind of a, Them versus Us business. "Them" is the Government which is the enemy. "Us" is all of us nice people, you know, sober working man, his loyal wife -- maybe, extra job these days -- the hard-working executive toiling twenty hours a day, you know, for the benefit of all, the friendly banker who's out there trying to find -- to give you money. That's "Us." And then there's "Them." "Them" is the outsiders, the un-Americans, you know, the agitators, the union organizers, big government, and so on. And it's sort of, Us versus Them. That's the picture.

That has been rammed into people's heads for at least fifty or sixty years by intensive propaganda everywhere. Movies, television, textbooks -- just constant. And not by accident. This is- this part is all extremely conscious. We have a huge public relations industry which spends billions a year -- dollars a year on exactly this sort of thing, and consciously. They even tell you about it. Well why is it happening now, not, say, thirty years ago?

One proposal is: it's the market in its mysterious wisdom. We can put that aside. This is perfectly conscious social policy, and also, hence, under social control. Second is: we live in lean-and-mean times, we've got to tighten our belts. Complete nonsense. I mean, all you have to do is look at the business press. They're just ecstatic, you know, and have been for years.

Business Week just came out a couple of days ago with the annual issue on the top one-thousand corporations. The headline is: 1995 Was One For The Books. America's Most -- and subline: America's Most Valuable Companies Grew Even More Valuable By A Record Thirty-Five Percent. That's these lean-and-mean times we're in. Another headline in Business Week reads -- The Problem Now: What To Do With All That Cash, as the coffers of corporate America are overflowing with surging profits. Another one talks about the Government, really great Government. It says, the Gingrich Congress represents a milestone for business -- never before have so many goodies been showered so enthusiastically on America's entrepreneurs. The headline of that one, incidentally, is Return To The Trenches. You know, like, we've got to ask more- feeding frenzy has to go on from the nanny State.

Fortune magazine, you know the other big business journal, I mean, they can't even find the adjectives in the last couple of years to describe what's going on. One year it's "dazzling", you know. The next year "stupendous." I mean, I'm waiting for the Fortune 500 issue to see what adjectives they come out with next week. What they've been -- double-digit profit growth for an unheralded four years, with pretty stagnant sales, and, fortunately, wages going down.

CEO salaries are going through the roof, and it's uncorrelated with performance. That's another interesting aspect of it. There have been, now, studies of it, so it's just some other thing, it has nothing to do with markets, or anything else. The -- I mean, while wages continue to decline, as does family income, and so on.

Well, you know, nobody who even looks at the business press can believe that there are lean-and-mean times. As I said, the country's just awash with capital. Their problem is they don't know what to do with it. So, therefore, get more.

Another theme that's around now is, you have to have what's called "downsizing" in order to be competitive.

Well, the Bureau of Labor Statistics came out with its figures -- up to the last year they have them for it, 1993 -- from 1983 to 1993 the category of executives, managers, and administrative personnel grew 30 percent. Ok. That's downsizing. The fastest growing white collar population happens to be security guard. Well, yeah, that's connected with turning it into a Third World country. You take a walk down San Salvador, you know, you'll see plenty of security guards. You know, rich people have to be protected. And furthermore, all these prisons you're throwing people into, they need security guards. So, yeah, there's -- they're administrative personnel, and that's increasing, but so are- same in corporations. So there's no downsizing going on, except for working people. That's quite different. Why is it happening now? Anyway those are- let's go back to why it's happening now.

Well, fact is, it's always going on, just depending on the weapons at hand. Business, American business particularly, is highly class-conscious, and very open about it, incidentally. And it's always fighting a bitter class war.

You go back a century ago, into what were called "the gay 90s" -- when incidentally, the international economy was about as -- the international economy was pretty much a s- like it is now in terms of capital flows, and so on, it hasn't become more globalized in terms of trade and capital flow, and so on, than it was then, maybe less so -- the -- about a century ago it looked as if the game was over. You know, they were talking about the end of history, perfection had been reached in the Devil-take-the-hindmost society, where everybody's for themselves, and, enrich yourselves, and so on. It was monstrous for the working people. Very brutal in fact, here. That was a century ago.

Well, you know, it didn't end. You know, in Europe particularly, the social contract was slowly imposed -- not easily. It didn't happen here. By the "roaring 20s", as they were called, labor had no voice. This is the, you know, the age of mass-production of automobiles, and so on. Labor was out of it. It was a business-run society, almost completely, and it looked permanent. Again, you know, utopia of the masters, end of history, all this talk.

In the 1930s it proved to be wrong. There was a lot of popular organizing, popular protest. It rammed through elements of the social contract that had been achieved in Europe decades earlier. And that just caused hysteria in the business community. You read the business press, it was talking about, you know, the hazard facing manufacturers, and, the rising political power of the masses, and, how we're going to face disaster unless we figure out some way to reverse this, and, control their minds, and, control them, and so on.

A huge propaganda campaign began right after the Wagner act was passed -- 1935. In the -- in those -- in the next two years the National Association of Manufacturers, it's public relations budget multiplied by a factor of 20, as they recognized that force alone is not going to be enough. The U.S. has a very violent labor history, and plenty of workers were getting killed, but it was clear that this wasn't going to be enough. They had to have huge propaganda. It was sort of put on -- that's when all this "harmony" business that I was talking about got designed. You know, it's a specific design as to how to carry out what they called scientific methods of strike-breaking by controlling communities, and so on. Well, it was put on hold during the War, and then it picked up right after the Second World War was over, with an enormous propaganda campaign. I mean, you can't believe the scale until you look at it, and the purpose was very explicit.

The purpose was to win the everlasting battle for the minds of men, which have to be indoctrinated with the capitalist story, as we sell our preferred way of life, and on and on; these are all just quotes from mainstream PR literature. And it was very substantial, and aimed precisely at what I described. They describe what they're doing, and you can see it in the propaganda, the schools, the entertainment industry, everything else.

Well, what happened in the 1970s?

What happened is, there were some changes in the international economy, and in technology and so on, which just put new weapons into the hands of the masters.

One crucial factor, which everyone points to, is an enormous growth in financial capital -- financial transactions -- it just boomed -- short range financial transactions. That came about, partly, because of the dismantling of the post-war Bretton Woods system of regulated currencies which kind of made currencies free-floating. The Nixon administration just dismantled it. Partly it came about for technical reasons. I mean, the telecommunications revolution, which was of course publicly subsidized, at that point made it possible to transfer funds very rapidly. So, like, you can -- by now it's estimated at around a trillion dollars a day just shift up and back from one market to another -- very short term transactions. All aimed -- and at a huge -- and, aimed at something: they're all aimed at low growth, and high profits, and low wages. And that's -- that is a factor that's driving policy in that direction. I don't think it's by any means an uncontrollable factor, but it is a -- it's definitely a factor. And that's just put a lot -- and this -- the changes in the composition of capital transactions are very striking.

Around- from about maybe -- the time when you have data, like, late 19th Century, up until about 1970, rough estimate was that about ninety percent of capital transfers had to do with the real economy, you know, with investment and trade, ten percent speculation. By 1990, the figures had reversed. By 1995, the latest UNCTAD -- you know, U.N. Economic Commission estimate was about five percent real economy, ninety five percent speculation -- short term speculation, like, against currencies, which is, essentially, aimed at driving down growth and increasing profits and lowering wages.

This was understood very quickly -- by the late 70s. And there were proposals made, for example by James Tobin -- Yale economist Nobel Prize winner -- at an American Economic Association Presidential Address 1978, simply -- suggested a simple reform: low tax, very low tax, on short-term financial transactions, just to slow it down, you know, throw a little sand in the gears. Probably work, it's been called the Tobin Tax, but it's not getting anywhere because the weapon is a very important one. That weapon has been used very efficiently for all the purposes that have been described.

And there are other things.

Business schools not needed in new world?

 
 
There is little mistaking the growth of business schools, especially as the economy contracts and jobless bankers seek to boost their qualifications
 
Textbook Economics | Matthew Lynn
 
When King Henry VIII broke with the church in Rome, he shut England's monasteries. When Fidel Castro took power in Cuba, he did the same with Havana's casinos.
 
So let's close down business schools to get into the spirit of the new financial order.
 
In the past 20 years, the master of business administration (MBA) factories have created the conditions that helped land the global economy in the current mess. They legitimized a pseudo-scientific approach to finance that turned out to be bogus; they promoted a management style that was too mechanistic; and they formed a managerial elite more interested in rewards than producing lasting wealth for the economies they operate in.
 
There is little mistaking the growth of business schools, especially as the economy contracts and jobless bankers seek to boost their qualifications. Applications to MBA programmes in 2008 rose at the fastest pace on record, according to the Graduate Management Admission Council in McLean, Virginia. The trouble is, the last batch of MBA graduates who rose to the top made such a hash of things it is hard to believe the next will do much better.
 
The people who steered the global economy onto the rocks in the past year all benefited from the finest management education that money can buy.
 
Richard Fuld, chief executive officer of Lehman Brothers Holdings Inc. when it collapsed, has an MBA from New York University. John
Thain, the former CEO of Merrill Lynch and Co., is a graduate of Harvard Business School. Christopher Cox, the former chairman of the Securities and Exchange Commission, has an MBA from Harvard University. And so does former US president George W. Bush.
 
The record isn't much better in Europe. Andy Hornby, the chief executive officer of British bank HBOS Plc. is another Harvard Business School alumnus. HBOS had to be bailed out in a merger with Lloyds Banking Group Plc. and then both had to be rescued by the UK government.
 
Peter Wuffli, who as chief executive officer presided over the huge losses that took Zurich-based UBS AG to the brink of disaster, studied management at Switzerland's University of St Gallen.
 
Of course, it is unfair to assign all blame to business schools. Over the last three decades, taking an MBA has become just another qualification, a hoop to be jumped through on your way to getting a good job on Wall Street, or in London or Zurich's financial centres. If we studied the records, we would probably find that most of the chief executives who led us into the crisis also did finger painting at kindergarten—and it would be wrong to pin the credit crunch on that.
 
Still, it raises the issue of what business schools are teaching, and how they managed to create leaders who were so unable to spot the flaws in the companies they were running. If a flight-training school produced this number of crashes, we would be asking some questions. There is no reason that business studies should be exempt from the same kind of scrutiny.
 
The schools should be called to account for several things. First, they encouraged a quasi-scientific approach to business, sermonizing that everything could be nailed down in a textbook. By preaching a set series of formulas, they encouraged students to believe that running a company could be mastered by anyone. The entire private-equity industry is founded on that principle. So are mergers and acquisitions.
 
In reality, management is a skill that is acquired through experience, judgement and flair. Billions are about to be wasted relearning a simple fact that should never have been forgotten. Second, the intellectual tools that led us into the financial meltdown were largely invented within academia. Complex models for pricing risk created the market for the options and derivatives contracts that have caused so much trouble in the past year.
 
The business schools took something that was mysterious and unknowable—risk—and tried to make it as easy to count as peas in a pod. By doing so, they encouraged a whole generation of young men and women to go into investment banking armed with the belief that they had mastered risk, that it had been tamed and brought under control. The truth, of course, turned out to be different. Bankers can no more tame risk than sailors can tame the oceans. All they can hope to do is steer a safe course through it.
 
Third, the schools created a managerial elite that acted like a caste apart. One reason the bonus culture ran out of control was that many of the people involved were trapped in a bubble. They thought guaranteed bonuses, private jets and multimillion-dollar pay-offs were normal. That process started in business schools. No doubt, we will hear a lot in the next year about how the schools are reorganizing themselves. We will see lots of papers and proposals, and probably a few equations, explaining how to stop the credit crunch from happening again.
 
But as Henry VIII and Castro both concluded, for different reasons, sometimes an institution is beyond redemption. It can't be fixed, simply because it is the problem.
 
Just shut them down.


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Monday, 23 March 2009

HDI Oscars: Slumdogs Versus Millionaires


 


What does it mean [for India] to rank much better on GDP per capita than in the HDI, as we do? It means we have been less successful in converting income into human development.

 

It has been the night of the long knives for our burgeoning billionaire population. Its band has just been decimated, falling by more than half from 53 to 24. The latest Croesus Count, also known as the Forbes Billionaires list, makes that much clear. We also fell by two notches to the sixth rank in the list of nations with the most billionaires. Our earlier No. 4 slot being slyly usurped by the Chinese who clock in with 29. More mortifying, we are a rung below the Brits who've grabbed Perch 5, with 25.

 

The net asset worth of India's brightest and best has also shrunk by over a third from the time of the last Forbes scroll. By 2007, that worth had reached $335 billion. That is, 53 individuals in a population of one billion held wealth equal to almost a third of their nation's GDP at the time. This year, that worth plunged to $107 billion. (A moment's respectful silence in memory of the dear, departed billions seems in order.) But there is some comfort in that our team is still worth more than twice what its Chinese rivals are. And we even now have eight billionaires more than all the Nordic nations put together — though they boast the highest living standards in the world.

 

"Four Indians were among the world's top ten richest in 2008, worth a combined $160 billion," points out Forbes. Today, alas, "that same foursome is worth just $54 billion." But the 29 Indian tycoons reduced to the penury of mere millionairehood should not lose heart. Forbes offers us these words of reassurance. "The winds of wealth can change quickly ... They may yet again blow favourably in the direction of these tycoons." So what if the big balances fly at half mast briefly? There could be gales ahead.

 

Alongside this grim tragedy runs a slightly longer-term saga. India has fallen to 132 in the new rankings of the United Nations Human Development Index (HDI) for 179 nations. Each year since 1990, the U.N. Development Programme has brought us this index, as a part of its Human Development Report. The HDI "looks beyond GDP to a broader definition of well-being." It seeks to capture "three dimensions of human development: a long and healthy life (measured by life expectancy at birth). Being educated (measured by adult literacy and enrolment in primary, secondary and tertiary education). And third: GDP per capita measured in U.S. dollars at Purchasing Power Parity (PPP)."

 

Worst in a decade

 

In the Index of 2007-08, India ranked a dismal 128. Now we're at 132. That is our worst ever grade on the Index this decade. It means, among other things, that little Bhutan, never once in the Forbes hall of fame, has trumped us in the new HDI rankings. The tiny Himalayan nation clocks in at 131. That is, a notch above its "second-fastest-growing-economy-in the-world" neighbour. Bhutan once languished amongst the bottom 15 nations in the U.N.'s HDI. It has never been among the world's fastest growing economies.

 

At rank 132, India also lags behind Republic of the Congo, Botswana, and Bolivia. (The last often called Latin America's poorest nation). The Occupied Territories of Palestine (torn by conflict for 60 years) are also ahead of us. Another neighbour — Sri Lanka — has been devastated by war for over two decades and has slipped a few notches. It still logs in at 104 — 28 rungs above India. Vietnam suffered casualties in millions in the war waged against it by the United States. Decades after, its agriculture is yet to recover from the planned destruction, lethal bombing, and the conscious use of deadly poisons. But Vietnam clocks in at 114. And China at 94 despite falling several places.

 

The bad news about the bad news is that these figures reflect the good news days. They relate to the year 2006. (The Sensex was booming. It breached the 10,000 and even 14,000-mark for the first time ever. The Indian economy also grew at 9.6 per cent in 2006-07 and 9.4 per cent in 2005-06.) Those were the glory days our 132nd rank is rooted in. The same period when we churned out 53 dollar billionaires. So the updated HDI numbers do not begin to capture the economic downturn. The picture will be even less pretty when those factors kick in.

 

They do capture, though, the revised purchasing power parity (PPP) estimates that clocked in by late 2007. These columns foretold this problem at the time (The Hindu, Dec. 24, 2007). It was clear that if the Index was using the older PPP data, then "even our awful HDI performance could get worse" once those were revised. (India's GDP per capita (PPP) fell from $3,452 to $2,489 with the new data.)

 

And yet, we'd be even lower down than rank 132 but for our showing on the GDP-per capita front. Even now, our rank on that front is six notches higher than our HDI rank. It makes us look better than we are. For instance, in making out the current rankings, U.N. researchers point out that the GDP per capita data for 2006 "caused India to rise one place." But "new data (for 2006) on life expectancy caused India to fall one place." India then also fell two more places as two more nations — Montenegro and Serbia — joined the list. Both fared better than we did. We fell a further two places "as a result of revised PPP estimates." That's how we ended up four slots below our last rank.

 

What does it mean to rank much better on GDP per capita than in the HDI, as we do? It means you have been less successful in converting income into human development. Our GDP per capita rank is six rungs above our HDI rank. Vietnam's HDI rank of 114 is 15 rungs above its GDP per capita rank. Unlike us, Vietnam has — despite awful historic handicaps — converted its wealth into human development far better.

 

Cuba logs in at 48, thus breaking into the top 50 nations in the HDI. (While India firms up its place in the bottom 50.) That's seven places above wealthy Saudi Arabia, whose per capita GDP is three times higher than Cuba's. In that ranking, Saudi Arabia is No. 35, towering above Cuba's 88. But when it comes to human development, Saudi Arabia lags seven rungs below Cuba. Apart from suffering lower income, Cuba has lived under crippling sanctions for decades. Sanctions that have imposed huge constraints and high prices on all essentials. Yet, life expectancy at birth in Cuba is now 77.9 years. That's almost the same as the U.S. (78). And about 14 years better than India's 64.1. Meanwhile, the U.S. has logged its worst rank ever, falling to 15 from 12. Between 1995 and 2000, the U.S. was always in the top 5, even staying at rank 2 for a couple of years. Like with India, its decline in HDI has come in the very years seen as its best, the Golden Age of the Free Market. The Nirvana point of neo-liberalism. A year into the economic reforms, India in 1992 ranked 121 among 160 nations then covered by the Index. Today, India is at 132 among 179 nations. Straight comparisons across that time are hard as the Index has changed in numbers and methodology. But the trend is clearly not joyous.

 

Steady decline

 

The HDI figures since 2002 signal a steady decline in the nation's conversion of wealth into human development — even as the numbers of its billionaires and millionaires doubled and trebled. Now the billionaires have shrunk in number, but not the slumdogs. There are at least 836 million Indians living on less than Rs. 20 a day, as the government's own report told us in 2007. Over 200 million of those get by on less than Rs.12 daily. And those are pre-downturn numbers, too. Maybe, we need a new Forbes 500 list — naming the world's 500 poorest citizens. Who could beat us on that one?




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Jade Goody: She showed the brutal reality of Britain


 

Johann Hari:  

 
There will be no rewrite of "Candle in the Wind" for Jade Goody's funeral, but in her own glottal, gobby way, she jabbed a knitting needle into the subconscious of Britain just as surely as Diana Spencer did, and revealed something dark and darkening about us. Why was a big-hearted, big-mouthed young woman who came fourth on a reality show back in 2002 seized on with such glee and turned into one of the most famous people in the country? Because we needed her, to salve our own soiled consciences.
 
In her short life, Jade showed how as Britain has spiralled into one of the most unequal and immobile societies on earth, we have begun to openly jeer and sneer at the people trapped at the bottom. We gleefully seized on her as "proof" that the people rotting on abandoned estates were not there because of the grim accident of birth, but because they were stupid and ugly and bigoted. And all we proved – with unwitting irony – was our own stupidity and ugliness and bigotry.
 
Here was a 20-year-old girl with a noisy laugh, a quick wit, and almost no knowledge. She thought "East Angular" was a separate country, and wondered what currency they use in Liverpool. So the press jeered that she was "a moron", "the High Priestess of the Slagocracy", and "proof of Britain's underclass".
 
That summer, a string of images of white, working-class women presenting them as bestial imbeciles dominated our screens. Vicky Pollard – a single mum so thick she swaps her baby for a Westlife CD, played by a multimillionaire private schoolboy – was becoming a national icon. A chaotic single mum established Wife Swap as one of our favourite shows. Words of straightforward snobbish abuse – "chav" and "pikey" – were becoming acceptable again.
 
Go to any extremely unequal society, say, South Africa, or South America, and you will find a furiously suppressed sense of guilt. It's hard not to ask, at the back of your mind, "Why am I here in this mansion, while they are in the slums?" This guilt is resolved one way: by convincing yourself that the poor are sub-human, and don't have feelings like you and me. Oh, the people in the barrios and townships? They're animals! They stink! They're stupid! Jade and Vicky and the labelling of the poor as "chavs" filled that role for us. They know nothing! They are repulsive!
 
Nobody wanted to stop and ask: why doesn't Jade know much? Here's why. Her mother was a seriously disabled drug addict, so Jade didn't go to school much because she stayed at home to look after her. From the age of five, she was in charge of doing the cooking and ironing and cleaning. Jade explained: "As early as I could remember, I'd spent my whole life trying to protect my mum, frantically hiding the stolen chequebooks she used to have lying around the house when the police barged in on one of their raids; desperately denying to the teachers at school that she'd hit me for fear of being sent to social services."
 
Her father treated her even worse. He stashed a gun under her cot, and her first memory was of him shooting heroin in her bedroom, his eyes rolling back and his body juddering. Eventually, after periods in and out of prison, he was found dead from an overdose in the toilet of a Kentucky Fried Chicken. "He died without a single vein left in his body," Jade said. "In the end, he'd injected every single part of it and all his veins had collapsed, even the ones in his penis."
 
Despite this, Jade always worked, in shops, for minimum wage, and stayed away from drugs (apart from weed). She applied for Big Brother because her mum was sinking into crack addiction, and she couldn't think of any other way to avoid witnessing it. To the end, she was terrified of matches, and couldn't bear to have tinfoil in her house, because they reminded her of crack.
And so she appeared in British public life, and we jeered and howled and held her up as a poster-girl for "the underclass". Jade soon proved her latent smartness by turning her fourth place on Big Brother into a fortune, launching her own brand of perfume, a beauty salon, and a series of sensitive, rather beautiful autobiographies, all appealing to young women who had never seen people just like themselves on television before. The perception of her slowly changed. As people learned about her life story – and saw her chaotic, broken mother being interviewed – many realised that their gleeful poring over her mispronunciations had been vile. The sense of superiority was, for a moment, scrambled.
 
Then came Celebrity Big Brother, and oh, how we rejoiced. Jade was placed in the house with Shilpa Shetty, a sweet, unworldly Bollywood star who had been raised with servants and never had to do anything practical for herself. She activated all of Jade's feelings of being sneered at and patronised all her life. Jade said: "Ultimately, we were fighting because we were from different classes ... I didn't want anyone to think they're better than me, just because they have more money or have had a more educated upbringing. And, to me, she was a posh, up-herself princess."
 
One day, Shilpa tried to flush an entire cooked chicken down the toilet. Jade, enraged and perplexed, started to scream at her. "Who the fuck are you? You aren't some Princess in Neverland!" she yelled. She said Shilpa clearly had no idea how ordinary Indians lived, and howled: "You need a day in the slums!" This was seized on as racist, equivalent to telling her to go back where she came from. But it wasn't. Other housemates did say despicable, racist things about Shilpa: the beauty queen Danielle Lloyd said "I think she should fuck off home ... She can't even speak English properly." But Jade didn't; her own father was mixed-race, for one.
 
But here was a way we could rehabilitate our Jaded view of the white working class, and feel self-righteous about it too. If we can't feel superior to the poor because they are stupid, then we can feel superior to them because they are racist. One newspaper ran the typical headline "Class vs Trash" over a picture of Shilpa and Jade, and a columnist huffed that Jade's problem was "hating her social superiors". Once more, we could hate the poor and feel good about it too.
 
And even when she was dying, we continued to jeer. Nobody said John Diamond was "exploiting" his cancer by writing about it in The Times, but Jade's decision to talk about it on TV so she could leave a pot of cash for her kids was apparently evidence of her "vulgarity". One newspaper huffs that now we will be subjected to "a chav state funeral".
 
Even as she rots, we still want to see Jade Goody as a "chav" imbecile, subconsciously reassuring us that our own higher place in the class pyramid is earned by our intellect and sensitivity and anti-racism, rather than by the fluke of birth.
Believe that if you want, but you should know it's not Jade you are condemning, but yourself.


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Sunday, 22 March 2009

Let’s penalize all the culprits, including ourselves

 

22 Mar 2009, 0248 hrs IST,
Swaminathan S Anklesaria Aiyar


Through history, said my former editor Girilal Jain, whenever things go wrong, Indian rulers blamed the bania. The US is no different. After the global meltdown, US politicians are baying for the blood of financiers. They have just legislated a 90% tax on bonuses of staff at AIG, the insurance giant rescued by the US government. Legislators were angry that financiers responsible for AIG's collapse could be rewarded with bonuses, and sought to expropriate these.

Many Indians will cheer. Yet, banias alone are rarely responsible for disasters: many others are usually responsible too. The financial crisis occurred in the most regulated sector of the US and world economy. So it was a failure not just of bankers but of the state, regulators, investors, and all other participants. If you can tax AIG staff, why not all the others?

For starters, what about a retrospective 90% tax on the two Fed chiefs, Alan Greenspan and Ben Bernanke? They knew bubbles were forming in housing and stock markets, but instead of halting this they claimed it was best to let the bubbles burst and then sweep up the mess.

Next, tax all US legislators who for decades sought to make all Americans home owners through excessive implicit and explicit subsidies. One law forced banks to lend to sub-prime poor borrowers. Legislators created Fannie Mae and Freddie Mac, government-sponsored entities that bought or underwrote four-fifths of all US mortgages, and enjoyed exemption from normal regulations. Politicians repeatedly rejected stiffer regulation despite Greenspan's warning that these under-regulated giants posed huge risks.

Next, tax regulators. All major countries had regulators for banking, insurance and financial/ stock markets, but these were asleep at the wheel. Critics today demand more regulations, but these will not thwart the next crisis if regulators remain asleep. A 90% tax might keep them awake.

Next, tax all banks and mortgage lenders. Instead of keeping mortgages on their own books, lenders packaged these into securities and sold them. So, they no longer had incentives to thoroughly check the creditworthiness of borrowers. Lending norms were constantly eased. Ultimately, banks were giving loans to people with no verification of income, jobs or assets.

Next, tax all existing and former employees of investment banks. Once famous for providing financial services such as underwriting and wealth management, these institutions recently began trading on their own account. Deservedly, all five top investment banks have disappeared. But their former employees are still around, so why not expropriate them?

Next, tax all staff of the rating agencies. Moody's and Standard and Poor's failed to spot the rise in risk as bank leverage skyrocketed. They allowed BBB mortgages to be laundered into AAA mortgages.

Next, tax all finance ministers, central bankers and economists who created the Basle rules for banks across the world. Basle-II rules allowed banks to use credit ratings and historical models to lower the risk-ratings of many securities. This dilution of norms led to excesses everywhere. Iceland's banks went bust holding loans/securities totalling 10 times its GDP.

Next, let's tax all US consumers. They used to save 6% of disposable income some time ago, but recently that fell to zero as they went on a huge borrow-and-spend spree. This fuelled the asset bubbles, and also created huge, unsustainable trade deficits.

Next, tax China, OPEC and all other Asian countries that undervalued their currencies to stimulate exports and create large trade surpluses with the US. They accumulated trillions in forex reserves, and put these mostly into dollar securities. This depressed US interest rates, fuelling a borrowing binge there.

Finally, let's tax everybody. People in all countries and markets were delighted when housing prices boomed, stock markets boomed, and credit became cheap and easily available. Bubbles inflated in full public view, but neither politicians nor the public wanted to stop the party. They all loved easy money and rising asset prices, and this trumped prudence across the world.

Of course, there is not the slightest chance that politicians will tax all those responsible, including themselves. It is far simpler to blame the bania, who is, after all, not blameless.

Yet, economics has a way of providing rough justice of its own. To tackle the global recession, countries across the world are running huge budget deficits. These are now being financed by printing trillions of dollars worth of currency. This tsunami of money now helps combat the recession, but will in a few years produce a monetary overhang that fuels high global inflation. Inflation is the tax that we will all pay, as the penalty for our own part in creating bubbles that we loved until the day they burst.



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Saturday, 21 March 2009

Tax havens exist because of the hypocrisy of larger states


 

 

By John Kay
Published: March 20 2009 20:00 | Last updated: March 20 2009 20:00
 
By the pool of my French house in Menton, I often contemplate the economic consequences of the least-known uprising of Europe's year of revolutions in 1848. The citizens of Menton and Roquebrune wrested independence from the neighbouring principality of Monaco. The rebellion ended six centuries of Grimaldi rule. The result deprived the state of its agricultural hinterland and cost the Grimaldi dynasty the major part of its revenues.
 
Prince Florestan hatched a scheme with the entrepreneur, François Blanc, to restore the family fortunes. Blanc built a casino on the hills of Monte Carlo opposite the royal palace, where punters could indulge in games of chance that were illegal in France and many other European states. The venture had a shaky start, but a new railway brought visitors from across the continent. Gambling made the tiny state prosperous.
 
Florestan and Blanc brought the concept of the sanctuary, or haven, to economic policy. A small jurisdiction attracts business by implementing a more liberal fiscal or regulatory regime than its neighbours. Smugglers and pirates had occupied territories for centuries, but their activities were outside the law, and anyone who dealt there did so at real risk to their property and person. The haven provides the apparatus of the legal state while enabling its clients to escape the inconveniences of regulation and taxation and unwanted attention to their affairs.
 
Doing business in a haven is expensive. In the 19th century, the rail fare to Monte Carlo was substantial. Today the costs of establishing an offshore company or trust put such arrangements out of the reach of ordinary people. So the clients, individuals and corporations are necessarily affluent. Since the disreputable simply disregard the law, and the morally upright observe its spirit as well as its letter, the customers of the haven are respectable, but not very respectable, citizens – the gambling aristocrats of the 19th century, the tax exiles of today. Monaco has never shaken off Somerset Maugham's tag of "a sunny place for shady people".
 
From its inception, the existence of the haven depended on the hypocrisy of its larger neighbours, which tacitly acknowledged the utility of the haven as a safety valve. Their politicians could denounce excesses of wealth and proclaim the need to regulate improper or immoral behaviour, but their rich and famous citizens could always ensure that the restraint on them did not become too onerous.
 
Governments can make life difficult for the havens or for the people who use them. But they rarely do. After decades of pontification, only mild bullying was needed to persuade Switzerland, the most respectable and most powerful of havens, to modify its banking secrecy. The Monaco casino project would have been stillborn if there had been genuinely principled opposition from neighbouring states. Monaco, then and now, is completely dependent on France for its physical infrastructure and on the European financial system for its financial infrastructure. Minor harassment of returning visitors, and a more determined refusal to co-operate with companies that did business in the haven, would have ended the project.
 
People are willing to make agreements under the laws of Bermuda, not just because they know that the laws of Bermuda are not very different from the laws of England, but also because they also know that the consequences of agreements made under the laws of Bermuda will be enforced by the courts of England. Such formal recognition is the essential difference between dealing with a haven and dealing with smugglers, and a difference that exists because we choose to facilitate it.
 
Few managers of hedge funds based in St James's in London or Connecticut could locate their registered offices on a map. Many havens are islands, which is why we use the term offshore. Most are under present or former British jurisdiction, accidental relics of empire and naval power. The territories have been allowed, even encouraged, to reduce their dependence on British government aid by attracting global financial services activity. With great success, in many cases. The tiny population of the Cayman Islands has a per capita income well above that of the mother country.
 
So when the haven falls into disrepute – as recently in the Turks and Caicos Islands – it falls to the British government to sort it out. If you operate in the penumbra of legality, as havens do, it is easy to slip outside the bonds of legality altogether. Where there is legal avoidance of tax and regulation, illegal avoidance of tax and regulation is rarely far behind, and often hard to distinguish: where there is secrecy the motive is frequently impropriety; where there is impropriety, criminality is rarely far behind, and hard to distinguish. To turn a blind eye to avoidance of the law is to undermine all law.
 
Today's political outrage is humbug. Havens exist only because larger states allow them to exist, and larger states allow them to exist because the customers of havens are the rich and powerful. In the 1860s, the typical client of a haven was a patron of Blanc's casino: in the years after 2000, the typical client of a haven was a hedge fund registered in Grand Cayman. Plus ça change, plus c'est la même chose.

 
John Kay's latest book, The Long and the Short of It, was published in January



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Morals: the one thing markets don't make


 

 

No amount of regulation will restore our sense of honour and shame. Economics needs ethics

The continuing disclosures about excessive pensions and payoffs, salaries and bonuses for people at the top stir in us feelings for the oldest of human bloodsports: the search for a scapegoat. But they ought to lead us to think more deeply about the values of our culture as a whole.
 
Often, these past months, I have found myself going back to one of the most painful conversations I have had. It was with one of Britain's leading industrialists. He had led his company to consistent success for decades. When I met him he had retired and was near the end of his life.
 
He was not a religious man but he was a deeply moral one. He spoke of the principles that had guided him in business and of the salary he had drawn. It was not negligible, but it was modest. What pained him was that his successor had awarded himself a salary ten times that amount, while systematically destroying the company he had so carefully built.
 
I recall another conversation with a successful investment banker. He told me that the first thing he had to establish was his character, his reputation for trustworthiness and honesty. Without that, he would have been unable to trade. Nowadays, he said, deals no longer depend on character but on lawyers.
 
Common to these stories is the gradual disappearance of the cluster of principles that went by the name of morality. Whatever its source - religion, conscience, custom or code - it meant that there are certain things you don't do because they are not done. You don't reward yourself when customers, clients or shareholders or employees are suffering losses. You don't pay yourself out of all proportion to what you pay others. You don't take advantage of your position just because you can. You are guided, even if no one is watching, by a sense of what is responsible and right. Without that internalised code of honour and trust, no institution can be sustained in the long run.
 
Somehow, between the 1960s and 1980s the idea prevailed that we could do without the moral sense. Who needed it any more? In the 1960s we thought that the State would take care of our problems. In the 1980s we thought that the market would. Self-imposed restraints were dismissed as outmoded and killjoy. Greed was good. The guy with the most toys when he dies, wins.
The result was that we began to lose our understanding of the vital distinction between the value of things and their price. The key example - at the heart of the entire financial collapse - was housing. The value of a house is that it is a home. It's a shelter, a haven, personal space in an impersonal world. For many, it's where we sustain a marriage and build a family. It's where love finds its local habitation and name.
 
At a point in time, some began to think of houses not as homes but as capital investments. They began to borrow more and spend more. Building societies duly obliged.
 
House prices kept on rising. Their attraction as investments grew, and so the cycle fed itself: ever higher prices, ever bigger mortgages, until house prices and borrowing lost all connection with average incomes and sustainability. Those who just wanted a home had no choice but to join the game, at great expense and risk. The speculators were convinced they had become richer, but in real terms they hadn't. The value of housing had changed not an iota, because value is not the same as price.
 
It was bound to collapse, and anyone who had thought it through, said so. The investor Warren Buffett called sub-prime mortgages "financial weapons of mass destruction" as long ago as 2002. In the collective madness, no one was listening.
 
After financial collapse many questions are being asked. Should there be more regulation? State ownership of financial institutions? Have we reached the end of the market economy? They are good questions, but they get nowhere near the heart of the matter.
The market economy has generated more real wealth, eliminated more poverty and liberated more human creativity than any other economic system. The fault is not with the market but with the idea that the market alone is all we need.
 
Markets don't guarantee equity, responsibility or integrity. They can maximise short-term gain at the cost of long-term sustainability. They don't distribute rewards fairly. They don't guarantee honesty. When it comes to flagrant self-interest, they combine the maximum temptation with the maximum opportunity. Markets need morals, and morals are not made by markets.
They are made by schools, the media, custom, tradition, religious leaders, moral role models and the influence of people. But when religion loses its voice and the media worship success, when right and wrong become relativised and morality is condemned as "judgmental", when people lose all sense of honour and shame and there is nothing they won't do if they can get away with it, no regulation will save us. People will outwit the regulators, as they did by the securitisation of risk so no one knew who owed what to whom.
 
The big question is: how do we learn to be moral again? Markets were made to serve us; we were not made to serve markets. Economics needs ethics. Markets do not survive by market forces alone. They depend on respect for the people affected by our decisions. Lose that and we lose not just money and jobs but something more significant still: freedom, trust and decency, the things that have a value, not a price.
 
Sir Jonathan Sacks is the Chief Rabbi of the United Hebrew Congregations of the Commonwealth





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Friday, 20 March 2009

The Pleasure Principle

  
SAN FRANCISCO

EVEN in a culture in which sex toys are a booming business and Oprah Winfrey discusses living your best life in the bedroom, a coed live-in commune dedicated to the female orgasm hovers at the extremes.

The founder of the One Taste Urban Retreat Center, Nicole Daedone, sees herself as leading "the slow-sex movement," one that places a near-exclusive emphasis on women's pleasure — in which love, romance and even flirtation are not required.
"In our culture, admitting our bodies matter is almost an admission of failure," said Ms. Daedone, 41, who can quote the poet Mary Oliver and speak wryly on the intricacies of women's anatomy with equal aplomb. "I don't think women will really experience freedom until they own their sexuality."

A core of 38 men and women — their average age the late 20s — live full time in the retreat center, a shabby-chic loft building in the South of Market district. They prepare meals together, practice yoga and mindfulness meditation and lead workshops in communication for outside groups as large as 60.

But the heart of the group's activity, listed cryptically on its Web site's calendar as "morning practice," is closed to all but the residents.

At 7 a.m. each day, as the rest of America is eating Cheerios or trying to face gridlock without hyperventilating, about a dozen women, naked from the waist down, lie with eyes closed in a velvet-curtained room, while clothed men huddle over them, stroking them in a ritual known as orgasmic meditation — "OMing," for short. The couples, who may or may not be romantically involved, call one another "research partners."

A commune dedicated to men and women publicly creating "the orgasm that exists between them," in the words of one resident, may sound like the ultimate California satire. But the Bay Area has a lively and venerable history of seekers constructing lives around sexual adventure.

San Francisco is proud of its libertine heritage, as Sean Penn recently demonstrated in "Milk." The search for personal transformation, including through sex, led to the oceanside hot tubs at the Esalen Institute in Big Sur, cradle of the human potential movement, and in the 1960s, communes flourished in the city, many espousing free love.

One Taste is but the latest stop on this sexual underground, weaving together strands of radical individual freedom, Eastern spirituality and feminism.

"The notion of a San Francisco sex commune focused on female orgasm is part of a long and rich history of women being public and empowered about their sexuality," said Elizabeth A. Armstrong, an associate professor of sociology at Indiana University, who has studied San Francisco's sexual subcultures.

As with many a commune before it, the leader of One Taste, Ms. Daedone, is a polarizing personality, whom admirers venerate as a sex diva, although some former members say she has cultlike powers over her followers. They say she sometimes strongly suggested who should pair off with whom romantically.

"There was always a pushing of peoples' boundaries," said Judy Silber, who lived at One Taste for three and a half years and left last fall. "We all knew it was a hardcore place, and we came to play hard."

The group has drawn scant attention during its four and a half years — perhaps because it is just the sort of community San Franciscans expect in their backyard — although there was a brief sensation when The San Francisco Chronicle wrote about the group's naked (nonsexual) yoga classes. Many voyeuristic non-yogis showed up. Now the yoga is fully clothed.

Those drawn to One Taste are an eclectic lot. Some are in life transitions, among them a baby-faced 50-year-old Silicon Valley engineer, a recently divorced man, who said that the practice of manually fixing his attention on a tiny spot of a woman's body improves his concentration at work.

Most residents are young questers, seeking to fill an inner void and become empowered through Ms. Daedone's blend of female-centric spirituality and sexuality. One, Beth Crittenden, 33, grew up in conservative Virginia tobacco country, a place, she said, where the fundamentals of the female anatomy were never discussed and masturbation was unmentionable. "I'd never done anything even in the dead of night," she said.

She stumbled onto the center's Folsom Street building, with its comfy overstuffed sofas, and enrolled in a women's self-pleasure course because her relationships with men, as she put it, "kept running into a cement wall."

She resisted offers to pursue further courses (for a fee), deleting the center's incessant e-mail messages. But on the cusp of her 29th birthday, she tentatively returned. "I was scared to open up my life that much, but I was more scared not to," she said.
Now an instructor herself, Ms. Crittenden talks about "the lingering velocity of my desire and my hesitation to give into it."
Another member, Racheli Cherwitz, 28, had spent years grappling with anorexia and alcoholism, she said. In search of identity, she moved to Israel and became an Orthodox Jew.

Discovering One Taste, she said, has improved her self-image and given her "deep physical access to the woman I am and the woman I want to be."

Ms. Cherwitz commutes to New York and offers private sensuality coaching at a satellite outpost operated by One Taste on Grand
Street. Many of her clients, she said, are married Orthodox Jewish couples from Brooklyn.

In the One Taste world, a weirdly clinical pact is made between the women and men. There is no eye contact during orgasmic meditation. The idea, similar to Buddhist Tantric sex, is to extend the sensory peak — and publicly share it — before "going over," as residents, who tend toward group-speak, call climaxing.

Although men are not touched by the women and do not climax, they say they experience a sense of energy and satiation. Both the strokers and strokees insist that all this OMing is really about the "hydration" of the self, the human connection, not sex.
Reese Jones, a venture capitalist-slash-geek-slash Ms. Daedone's boyfriend, likens orgasmic meditation to massage.

"It's a procedure to nourish the limbic system, like yoga or Pilates, with no other strings attached," he said. "When you go to a massage therapist," he added, "you don't take the masseuse to dinner afterward."

MS. DAEDONE'S inspiration and mentor as a sex guru was Ray Vetterlein, who achieved fame of sorts in sex circles by claiming to lengthen the average female orgasm to 20 minutes.

Mr. Vetterlein, now in his 80s, was inspired by Lafayette Morehouse, a controversial 40-year-old community still in existence in suburban Lafayette, Calif., that has been conducting public demonstrations of a woman in orgasm since 1976.
Morehouse's founder, Victor Baranco, was a former appliance salesman who called his philosophy "responsible hedonism." By some accounts, Mr. Baranco, who died in 2002, used coercive techniques of mind control.

"It was a huge ego-crushing machine, as any valid monastic tradition is," said a man who lived at Morehouse for 20 years and did not want to be identified.

Ms. Daedone's early career was hardly alternative: she studied semantics at San Francisco State University and then donned her pearls to help found an art gallery. But at 27, her world came crashing down when she learned that her father, from whom she was largely estranged, was dying of cancer in prison, after being convicted of molesting two young girls.

"Everything in my reality just collapsed," she said. "My body turned to stone and crumbled."

Her father had not behaved inappropriately toward her, Ms. Daedone said; on the contrary, he was a distant figure.
"There had been a way I felt close to him in this felt way, and then all of the sudden he would shut down," she said. "I later came to understand that he was trying to protect me from himself, from his pathology."

Her pathway back to life was initially Buddhism, which she pursued with a vengeance, intending to live in a Zen community. But at a party in 1998, she met a Buddhist who had a practice in what he called "contemplative sexuality."

He invited her to lie down unclothed, set a timer and, while stroking her, proceeded to narrate in tender detail the beauty he saw, the colors that went from coral, to deep rose, to pearlescent pink. "I just broke open, and the feeling was pure and clean," Ms. Daedone said. "In a strange way, I think at that moment I decided to live."

Since opening One Taste, she has allowed it to go through numerous permutations; to her chagrin, it initially attracted misfits who "liked to get sloppy and grope each other," she said.

She concedes that she has made mistakes — among them the naked yoga class — but she has been savvy about packaging her product. She changed the term "deliberate orgasm," as it is called by other practitioners, to the more marketable "orgasmic meditation."

Much of the community's tone revolves around Ms. Daedone, a woman of considerable charm, although detractors regard her as a master manipulator.

"Nicole groks people," said Marci Boyd, 57, the group's oldest resident, borrowing a phrase from Robert A. Heinlein's "Stranger in a Strange Land" that connotes understanding someone so totally that the observer becomes one with the observed.
Elana Auerbach, an original resident, who left the group with Bill Press, who is now her husband, said the upshot of Ms. Daedone's ability to become exactly the person an individual yearns for is that "they take on Nicole, exude Nicoleness."
"You stop trusting yourself and start trusting Nicole," she said.

Until recently, residents lived in tight quarters, sacrificing privacy for the group, two to a bed, 12 beds to a room, each bed separated by a curtain. Now they have private rooms in a building adjacent to the meditation center (both are somewhat providentially on Folsom Street, home of the world's largest annual leather, bondage and fetish fair).

Ms. Auerbach said that she and Mr. Press eventually decided they wanted a life that was "heart-focused rather than genital-focused." Now parents of a baby boy, they view their experience as a cautionary tale.

"Nicole promulgates a message and everyone else reflects that," Mr. Press said.

Ms. Daedone insists she does not invite or like the all-powerful image. "There's a high potential for this to be a cult," she said.
She recently moved out of the communal living quarters, in part to fight this tendency. "Whenever I was in the space, everybody treated me like a guru," she said. "I'd wake up and people would come sit on my bed."

Now she lives with Mr. Jones, her boyfriend, a braniac who sold a computer software company he founded, Netopia, to Motorola for $208 million, and makes financial resources available to One Taste, including helping to buy a retreat in Stinson Beach, Calif.
Ms. Daedone wants One Taste to be mainstream, and to that end the center presents lectures by rabbis and Tibetan monks, along with public classes and workshops in "mindful sexuality."

But a One Taste Peoria seems hard to imagine. At a weekend workshop at the center recently, attended by scores of men and women interested in learning orgasmic meditation, Ms. Daedone outlined her philosophy.

"In our culture," she said, while beatifically seated on a cushion, "women have been conditioned to have closed sexuality and open feelings, and men to have open sexuality and closed feelings. There's this whole area of resistance and shame."

Soon the aspiring OM-ers, including a couple from Marin County hoping to rekindle their marriage, gathered on the floor kindergarten-style around a massage table. Justine Dawson, a wholesome-looking 34-year-old community resident, took off her robe and hopped up. Another resident, Andy Roy, 28, began his task, his concentration so exquisite that he broke into a sweat.

Attendees were instructed to call out their feelings, and many did, describing the turn-on they, too, were feeling.
When it was over, Ms. Dawson emanated radiance worthy of a Caravaggio, a youthful innocence. In another context, it might have been a profound and romantic moment between two lovers. Instead, a different image came to mind: the post-coital interview by Howard Cosell, holding a microphone, in Woody Allen's "Bananas."

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