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Sunday, June 25, 2017

US Imperialism: Changing Direction?


 
Developments over the last few weeks further remove the fog obscuring the foreign policy objectives of the US ruling class. A series of seemingly unrelated events casts light on the goals of US policy makers in an era of intensifying international rivalries. Further, it is becoming clear that President Trump is now largely deferring to the ruling-class consensus on foreign affairs; his straying from the fold has been substantially checked.
 
In February, I wrote of the implications of the widely ignored shift in the status of the United States from an energy-seeking, petroleum-importing country to a net exporter, a trader in all energy resources.
 
The US still has a significant but shrinking position in the international export of coal. Of course, coal use is both third in importance among hydrocarbons and shrinking in use (coal production internationally fell by the largest percentage on record in 2016). But petroleum imports became essential to fuel the critical transportation needs of the US as well as the massive military machine in the mid-twentieth century. 

After the oil crisis of the 1970s, dependence on petroleum imports became even more acute and an even more vital factor in setting US foreign policy. Often, and for good reason, the left was quick to associate the thirst for energy resources with war-mongering and neo-colonial intrigue.
 
But matters are changing rapidly, even if many seek to obscure or ignore the new reality. As I argued in February:
 
Matters began to change in the last decade, with US domestic oil production nearly doubling between 2010 and 2014. In the last few years, US oil production has reached levels in line with the world’s largest producers, Saudi Arabia and Russia. For the first time in decades, the US is again exporting extracted energy products. In fact, many experts expect the US to become a net energy exporter in the next decade.
 
The evidence has only mounted since the February posting. Despite low prices of oil, US drillers are producing like there is no tomorrow. From its low in mid-year 2016, the rig count has nearly doubled in North Dakota. As the Wall Street Journal reported on June 19, the big companies, Chevron, Royal Dutch Shell, and Exxon Mobil are investing tens of billions in the Permian region of the Southwestern US. The giant multinational, monopoly-capital producers are stepping in where smaller producers have failed because of costs and limited capital. They are projecting Permian production at 4 million barrels a day within a decade, about the production of modern-day Iraq. Chevron, alone, anticipates a four-fold increase of Permian production within a decade. Exxon is projected to spend half or more of its massive investments in the next three years on North American oil production.
 
Where will this oil go?
 
In a June 8 article, Wall Street Journal writer Lynn Cook stated bluntly: “American [US] oil exports are emerging as a disruptive new force in global markets.” From January to April, US suppliers shipped 110 million barrels to foreign destinations, chiefly India, Hong Kong, and Denmark. Asian buyers account for 39% of purchases, with China showing, by far, the greatest growth. With massive production increases coming online, is there any doubt that US producers will be competing furiously with OPEC and other traditional exporters for existing and new markets? Should we not expect the foreign policy and the covert and overt military strategies to reflect this intensifying competition?
 
Similarly, the US is becoming an increasingly important exporter of natural gas. As new technologies of liquefying and shipping natural gas are implemented, the competition for markets is becoming ever more ruthless. Seaborne liquid natural gas accounts for 40% of the market today. As the world leader in natural gas production, along with Russia, the US has a strong interest in exporting natural gas and acquiring new markets. Among the exporters of liquid natural gas (LNG), Qatar is the world leader, with every intention of maintaining its position, recently opening its North field, believed to be the largest gas reservoir in the world.
 
Geopolitical Implications
 
The long fostered model that views US imperial interests as served by the US securing and protecting its access to energy sources, by guaranteeing energy for its Cold War allies, is in need of a new look. Today, US interests lie in acquiring markets within the global economy, competing with other energy suppliers, and creating political and economic conditions favorable to US suppliers. Oil, gas, and energy remain central to the imperialist enterprise, but the roles are shifting in important ways, with important implications.
 
I sought to define that role more clearly in February, when I wrote:
 
It should be clear, then, that the approaching oil independence of the US, the changing role of the US from consumer to producer, and the attention to markets-for-oil over sources-for-oil profoundly influences US strategic policies, including the weakening or souring relations with other major oil-producing nations like Saudi Arabia and Russia.
 
Events have only strengthened that observation. The rabid, crude intensification of hostility toward Russia, the renewed demonization of Iran, the sudden and bizarre isolation of Qatar, and the heightened aggression in the numerous destabilizing wars throughout the Middle East underline the evolution of an emerging foreign policy consistent with securing new energy markets.
 
The introduction and expansion of US military forces to hot spots like Syria, Iraq, and Afghanistan promise little resolution of the conflicts, but guarantee further instability of energy sources and the flow of hydrocarbons. The sale of a vast cache of military weaponry assures the deepening and lengthening of the Saudi incursion into Yemen.
 
The unexpected hostility toward Qatar shown by the other Gulf States in the wake of Trump’s recent vulgar performance in Riyadh, Saudi Arabia is likely directed against Qatari global leadership in the exporting of Liquid Natural Gas, the market that the US hopes to further penetrate. It is no accident that the Qatari gas fields are jointly owned with Iran and both countries have cooperated in the exploitation of the fields and the production of LNG. At the same time, the Saudis have surrendered in the price war with US shale drillers. With sovereign wealth shrinking from a costly war and low oil prices, the Saudis are more interested in finding the best moment to take ARAMCO public, to sell off portions of the national oil company and refresh the kingdom’s coffers. The king and his retinue are content to loyally serve the US in its global mission to command energy markets. Saudi leadership of OPEC in its fight for market share with US petroleum producers proved disastrous. The Saudi/OPEC output cut “has been deemed an OPEC failure and a US production win,” according to Tony Hendrick of CHS Hedging, as quoted in the WSJ (6-21-17).
 
The latest US anti-Russia (6-15-17) sanctions are clearly directed at markets for Russian natural gas. The Senate voted 98-2 to “broaden sanctions on Russia’s energy sector,” as reported by The Wall Street journal. While the message might have been lost on the mainstream media, wallowing in neo-McCarthyism, and while it might have been missed by a distracted left, it was not lost on Europeans. They immediately saw it as an attack on the Nord Stream 2 pipeline project that would bring Russian gas to Germany, Austria and other European countries. And they saw it for what it was; Germany and Austria immediately lashed out with a joint statement: “We cannot accept a threat of extraterritorial sanctions, illegal under international law, against European companies that participate in developing European energy supplies.”
 
They added sharply: “Europe’s energy supply is Europe’s business, not that of the United States of America.” and “The actual goal [of such sanctions] is to provide jobs for the US gas and oil industry...
 
And there it is-- naked recognition that US anti-Russian acts are thinly concealed covers for US imperial goals. The US wants the European gas business currently done with Russia.
 
Lest anyone pretend that US imperialism-with-a-new-twist is strictly a product of Trump, it should be noted that the 98-2 Senate vote was no aberration. Writing in the Washington Post (6-8-17), David Gordon and Michael O’Hanlon-- two solidly connected Washington insiders-- pointed to “several hopeful signs” with Trump’s foreign policy. They lauded the President’s national security team and his stance in the Middle East. They were especially enthusiastic about his continued belligerence toward Russia.
 
The reckless foreign policy of the Trump administration still deviates occasionally from the ruling class consensus expressed in the editorial pages of The New York Times or The Washington Post. But more and more it is reckless because it conforms to that consensus. The endless wars and the escalation of those endless wars are not met with ruling class impatience, but appear to be more the new global norm.
 
The destabilization of countries and the promotion of sectarianism appear less as unintended consequences and more as those resulting from the deliberate, calculated tactics of an imperialist power benefiting from chaos.
 
As in the classic pre-World War I era of reckless imperialist competition, US imperialism is aggressively advancing its economic agenda against rivals, including recent “allies.” The dangers posed by these intensifying rivalries threaten to spark even more devastating clashes and widening wars.

Zoltan Zigedy

Thursday, June 15, 2017

Toward a Socialist Ireland


Irish history shows one what a misfortune it is for a nation to have subjugated another nation. All the abominations of the English have their origin in the Irish Pale. F. Engels to Marx, 10-24-1869
 
If Britain was the template for colonial imperialism, then Ireland was, along with aboriginal inhabitants of the New World, its first victims and, assuredly, its longest suffering. When British elites once proudly proclaimed that the sun never set on the British Empire, they neglected to mention that it first cast the ugly shadow of colonial oppression over Ireland.

But there, once things are in the hands of the Irish people itself, once it is made its own legislator and ruler, once it becomes autonomous, the abolition of the landed aristocracy… will be infinitely easier… It is not only a simple economic question, but at the same time a national question, since the landlords there... [are]... the mortally hated oppressors of the nation… K. Marx to L. Kugelmann 11-29-1869

Thanks to an invitation to participate in the annual James Connolly Festival (May 8-14) in Dublin, Ireland, my MLT colleague Joe Jamison and I had the pleasure of the better part of a week of education and comradeship with a number of friends of Marxism-Leninism Today. The annual festival is seven days of music, art, film, theater, poetry, and politics, concluding with a ceremonial wreath-laying at the Arbour Hill Cemetery in honor of James Connolly and the other martyrs of the 1916 Easter Uprising. Organized by the Communist Party of Ireland and its friends, the annual festival welds culture with politics in a way that is both entertaining and educational.

The festival stresses the long history of Irish struggle against imperialism, a struggle that continues today against British colonial influence over the northern six counties, against the supranational reign of the European Union, and against the economic exploitation of US multinational corporations that, for example, use Ireland as a tax haven.

Understandably, James Connolly occupies a central place of honor and inspiration for Irish Communists and their allies. Connolly’s grasp of the dialectics of national liberation and socialism was unparalleled for his time. As few others did, he saw the struggle for an independent Irish state as organically linked to the emancipation of Irish workers. As he wrote with great eloquence in 1897:
 
If you remove the English army tomorrow and hoist the green flag over Dublin Castle, unless you set about the organization of the Socialist Republic your efforts would be in vain. England would still rule you. She would rule you through her capitalists, through her landlords, through her financiers, through the whole array of commercial and individualist institutions she has planted in this country and watered with the tears of our mothers and the blood of our martyrs.

The clarity of Connolly’s understanding of imperialism and his prescient grasp of neo-colonialism anticipates Lenin and the Bolsheviks in many respects.

Our comrades and friends advised us of the Communist and left support for the demands of the Right2water campaign for free and clear public ownership and use of Ireland’s water resources by all of its citizens, a campaign that included a national demonstration in Dublin in April.

We learned of the role of Irish Communist leaders and allied militants in support of striking employees of the national bus service, Bus √Čireann. Irish Communists are militantly active in the country’s trade union movement.

We met comrades who physically shut down Shannon International Airport in order to deter US imperialism’s affront to Irish sovereignty. When US planes land with troops, supplies or captives, to deliver torture, death, and destruction to other parts of the world, these dedicated militants attempt to block runways and accept arrest as a result.

On the ideological front, the Communist Party offers a fine monthly paper-- Socialist Voice, maintains an excellent bookstore in the heart of Dublin-- Connolly Books, publishes numerous books and pamphlets, and operates a multimedia operation, Connolly Media Group.

The bookstore regularly hosts a series of public discussions and debates on questions relevant to socialism and the working-class movement, a series dubbed Connolly Conversations.

In addition, the Communist Party has sparked a fruitful conversation with the left wing of the Irish Republican movement, a conversation that seeks to restore socialism to its place in the tradition of radical Republican thought. Organized as the Peadar O’Donnell Socialist Republican Forum, it pays tribute to a man who was a socialist, union organizer, IRA leader, editor, author, and internationalist-- once described as “the greatest agitator of his generation.” Forums are held throughout Ireland.

One of the leaders of the Forum, Tommy McKearney, spoke passionately on May 14 at the solemn ceremony held in the courtyard of Kilmainham Gaol where James Connolly was executed on May 12, 1916. The event was sponsored by the Dublin Council of Trade Unions. In his address, McKearney stressed the unity of Republicanism and socialism. Having spent 16 years in prison as a leader of the struggle against British imperialism and participating in the 1980 prison hunger strike, he is a most suitable spokesperson for the Republican cause. McKearney is one of Ireland’s leading Marxists as well. His book, The Provisional IRA: From Insurrection to Parliament is an indispensable analysis of the dynamics of the late-twentieth-century struggles against injustice in the six counties.

We concluded our visit that afternoon by participating in the Communist Party’s commemoration of James Connolly’s execution at Arbour Hill Cemetery, where the martyrs of the 1916 rebellion are buried. Jimmy Doran, Dublin District Chairperson of the Communist Party, gave an inspirational oration:
 
Lots of political parties and groups claim James Connolly as their inspiration. James Connolly was a socialist—a Marxist, an anti-imperialist, an internationalist, and a trade union organiser. James Connolly would have had no hand, act or part in the 1990 Industrial Relations Act, or “social partnership.” He certainly would have nothing to do with the prosecution of children for peaceful protest. Connolly was always on the side of the oppressed, not the oppressor.
 
He would be down on the runway in Shannon with the anti-war movement, defending our neutrality and stopping the American war machine turning Shannon into an aircraft carrier for their genocidal wars.
He would have no truck with the imperialism of the European Union, and he would laugh at the deluded suggestion of using Brexit and membership of the European Union as a means of uniting the country by surrendering our national sovereignty and democracy to the imperialism of the European Union.
 
James Connolly fought and died for a socialist republic, not for the gombeen [a gombeen is a small-time wheeler dealer, a con man] partitioned country with a divided people that the counter-revolution installed.

Doran concluded:
 
What would James Connolly say? James Connolly would say that if humanity is to survive in Ireland and the world, there is no alternative to the common good. There is no alternative to public housing. There is no alternative to public health care. There is no alternative to peace. There is no alternative to ending world poverty. There is no alternative to this environment. There is no alternative to decency and dignity for our people.
 
Comrades, there is no alternative.
It’s socialism or barbarism.
 
We only want the earth!

We thank Eugene McCartan, General Secretary of the Communist Party of Ireland, for inviting us to share the warm, generous hospitality of the Irish comrades.
 
Greg Godels (Zoltan Zigedy)

Tuesday, May 30, 2017

The Sun Setting on the Empire





“History is full of examples of politico-economic elites who equate any challenge to their privileged social order as a challenge to all social order, an invitation to chaos and perdition…” The Assassination of Julius Caesar, Michael Parenti
 
For Donald Trump, Parenti’s insight is emphatically and relentlessly demonstrated. The months since Trump’s inauguration have brought a ceaseless attack from his political adversaries. More significantly, a broad section of the ruling class has unleashed the barking dogs of the media and pressed the military and the security services to guide Trump back to the aptly named ‘swamp,’ the morass of mainstream politics. The rulers saw “chaos and perdition” in the Trump electoral campaign and the first period of his administration.

Trump constituted a challenge for two reasons: first, he threatened to engage a neo-isolationist foreign policy that violates a broad consensus established since the demise of the Soviet Union, a consensus that unites US triumphalism (Reagan, the Bushes) with the “humanitarian” interventionism of the New Democrats (Clinton, Obama). Differences apart, both doctrines spring from the idea that, in the absence of a counterforce like the Soviet Union, the US claims the right or the duty to construct the world in its own image. Each political doctrine may draw upon a different set of guiding principles, but both come to the same conclusion. Both embrace the notion that the US is and must be the dominant and decisive global power. When the humbuggery is sheared away, both are committed to continuing the US position as the top imperialist power -- by force, if necessary.

Trump presents a problem because he brings a businessman’s disposition to outwit an opponent with his cleverness and bluff. Lacking political experience and any abiding principles, President Trump saw foreign military entanglements and military alliances (NATO) as costly impediments to business arrangements. Capitalist Russia, for example, offers numerous business opportunities, especially in the energy sector. His Secretary of State, Tillerson, was desirous of these arrangements while leading Exxon. From a real estate developer’s perspective, the carefully constructed ideological apparatus of human rights, civil society, and US-approved democracy is simply unnecessary baggage. Instead, Trump saw every world leader, every government as a potential bargaining agent.

Of course, monopoly capital does not share the perspective of the petty bourgeois businessman, the boisterous, glad-handing developer. Corporate internationalism is the mindset of monopoly capital; isolation is the mindset of the small businessman.

Trump found himself on the wrong side of that fence.

Second, the US ruling class cares deeply for the image of the chief executive of the state. Protecting and preserving the mythology of the Presidency is a very high order of business. And tarnishing that image is not soon forgiven. Trump’s vulgarity and his utter contempt for long established patterns of acceptable behavior have brought forth a hailstorm of scorn and ridicule. Newsreaders and entertainers across the narrow political spectrum deride the haircut, the physical features, the body language, and all other conduct of President Trump. Trump, the celebrity, could be as tawdry as he liked; but Trump, the President, is, hypocritically, held to higher standards.

When Nixon went off the rails and discredited the Presidency, the same hailstorm befell him. After Gerald Ford bungled through Nixon’s post-resignation years, the ruling class found a gee-whiz peanut farmer, a born-again Southerner to whitewash the stained Presidency. Avuncular Jimmy Carter was the perfect answer to the Nixon criminality.

Similarly, the bungled wars and economic collapse plaguing the George W Bush administration required a fix. That fix was the youth, the vigor, the clean-image, and the originality of the first African American President, Barack Obama. The burnishing of the Presidential image was so successful that Barack Obama astonishingly received the Nobel Peace Prize less than ten months after his inauguration.

Trump threatens that image once again.
                                   Outfoxing Fox  

The media campaign against Trump has reached hysterical proportions. With Fox News on the ropes from the loss or damaging of prominent hosts and with their leading lights caught in a cesspool of sexual harassment, their media competitors leaped at the chance to exploit Fox’s vulnerability. As the voice of the right, Fox News was compelled to mount a reluctant defense of the Trump Administration.

Virtually every competing monopoly media corporation saw an opportunity to gain in influence from Fox’s weakness, launching virulent and relentless attacks on Trump. Moreover, the security services fed the media appetizing and suggestive leaks which the media hungrily and uncritically passed on to the public. Daily stories-- multiple stories-- recounted Trumpian flaws, from etiquette to criminal plotting with Russians. Every day brings new innuendo, new sensationalism. Given that the media and the security services are speaking nearly entirely with one voice, given that little or no real evidence has been produced in support of any but the most trivial charge, many have characterized the campaign as a witch hunt.

Thanks to the anti-Trump blitz, Fox News has been put in its place. The mainstream or “liberal” media has enjoyed a ratings surge. MSNBC and its leading witch hunter, Rachel Maddow, have leaped forward dramatically. Lest someone believe that the corporate entertainment/news monopolies are trouncing Trump out of public service, he or she should be reminded of the revealing statement that CBS CEO Leslie Moonves said during the primary campaign: "It May Not Be Good for America, but It's Damn Good for CBS." It’s still about the money.

It’s a fascinating irony that Fox News is now being hoisted by its own petard. The competitive monopoly media are now engaging in the same scurrilous innuendo, sensationalism, and abuse of truth that enabled Fox News to arrive at the top of the media ladder. It was a President-- Bill Clinton-- whose peccadilloes served as the fodder for the rise of Fox News; it is still another President-- Donald Trump-- whose vulnerabilities are bringing it down. Whitewater, Vince Foster, Kenyan birth certificates, and now Russian infamy: no boundary exists between news and entertainment.

And the security services are feeding the frenzy, from the unconvincingly self-righteous FBI director Comey to the devious ex-CIA director Brennan. Once, during the era of the infamous J. Edgar Hoover and his CIA counterparts, leaks and political meddling were selective and surreptitious in order to maintain the shiny image of agencies free of politics and dedicated to collecting facts. Today’s security agencies leak like sieves and brazenly intervene in political life. Comey’s schizophrenia-- vindicating Clinton, then accusing Clinton, and then stalking Trump-- can only be interpreted as the moves of a consummate political opportunist seeking a prosecutorial home run. But the liberal pundits have elevated him to the level of a civil rights icon.

Should anyone think that the recent rebuff of the US security agencies by the UK government was simply over leaking details of the Manchester tragedy, think again. The UK government is registering its alarm over the promiscuous intelligence leakage in the US and its future threat to all aspects of confidentiality.

In some circles, the growth of interventions by the security agencies in political life has suggested the existence of a “deep state.” While this makes for a catchy, popular expression for their machinations, it is somewhat misleading, suggesting a group of renegade or rogue bureaucrats operating independently of entrenched power or wealth. In fact, the security agencies work in full agreement with the historic centers of power, the ruling class. They are, as they always have been, the vital arms of the ruling class. Certainly, there are no alarms coming from corporate centers, monopoly capital, or their hired intellectuals rejecting the meddling of the security agencies. The assault on Trump is an assault on Trump’s policies fully authorized by the ruling class and aimed at bringing him back onto the reservation.

                     La Trahison des Clercs Lib√©rals

Ninety years ago, Julien Benda wrote a book, La Trahison des Clercs, excoriating the intellectuals of his day for their hypocrisy, their venality, and their spinelessness. Today’s liberal intellectuals fall below the low bar set by Benda. Russia-baiting and Putin-hating have become a national pastime with little or no reason to justify their toxic spread. With a few notable exceptions, no public intellectual with any important influence has challenged the relentless charges and rumors piling up. With a few notable exceptions, no public intellectual has acknowledged that most of the “suspicious” interactions or political interventions alleged of Russia are common with most of the US allies such as Israel, Saudi Arabia, or the UK; influence is the bourgeois lubricant for diplomacy. With a few notable exceptions, no public intellectual has noted that the US has, on numerous occasions, exercised massive, decisive influence over the political processes of other countries, from the first days of the CIA (the Italian elections of 1948) to the CIA intervention in the 2012 French elections or its role in the 2014 coup in Ukraine.

The silence of liberals in the midst of unsubstantiated allegations, rumors, and leaks attacking their political adversaries shatters their self-righteous embrace of fair play. The liberal virtues of suspended judgement and deliberate procedure apparently only apply when it is convenient. By failing to challenge the rampant leaks, liberals also fail to challenge the ubiquitous surveillance that could alone serve as the source for the information passed on by unnamed officials.

Reviewing books on Bill Clinton for The New York Review of Books (6-8-17), liberal professor Christopher Lehmann recalls the regrettable time when “Whitewater and what it led to was perfectly suited to several aspects of Washington culture, including Congress’s love of showy investigations, the rise of cable news, and conservative institutions’ need for a target…” It’s a pity that he and his liberal colleagues can’t see the parallel of endless Congressional fishing expeditions, a brutal cable television war, and the Democratic Party’s need for an easy target.

As in the Cold War, the spinelessness of the liberals opens the door to a new McCarthyism that distracts most US citizens from their real and worsening problems. Finding imaginary enemies, whether they are Reds under beds or inquisitive Russian diplomats, is an old, but trustworthy tactic to deflect attention from real and ominous issues.

“They have yet to consider that republicanism might largely be a cloak for oligarchic privilege… worn grudgingly by the elites as long as it proved serviceable to their interests.”
The Assassination of Julius Caesar, Michael Parenti

The Trump legitimacy crisis signals the continuing deterioration of the US political system. With every election, voter dissatisfaction expresses itself more dramatically and more desperately. Oligarchs try ardently to channel public anger and discontent toward acceptable targets. They seek to contrive diversionary issues; they manufacture fears; and they unveil fresh faces.

Obama was thrust into the breach precisely to contain the aftermath of an ineffective, inept Bush administration and dissipate the anger from endless wars and economic collapse.

In 2016, voters turned their backs on ruling class electoral machinations. They rejected the unappetizing Republican primary candidates preferred by the oligarchs and choose the renegade Trump. They also rejected the anointed Democratic Party candidate Clinton for social democrat Bernie Sanders, but the undemocratic leaders of the Democratic Party refused to accept that outcome. Nevertheless, candidate Clinton was defeated in the general election by Trump. Now the ruling class is trying to discipline Trump.

The “cloak” of US republicanism is now transparently a garment serving the interest of the ruling class. As the media and the security services scramble to legitimize the political system, more and more people are looking for new answers, answers that are outside of the usual two-party circus.

The capitalist US, like the Roman Empire chronicled by Michael Parenti, is entering its twilight phase, wracked by unwinnable wars, chronic economic crisis, and prosperity as a mere memory for many. The search for a new road has become urgent.

Zoltan Zigedy

zoltanzigedy@gmail.com

Thursday, April 27, 2017

A Painful Anniversary




Exactly ten years ago this past April 7, I posted an article on Marxism-Leninism Today entitled Tabloid Political Economy: The Coming Depression (for those who missed it, it is reproduced below). It was my first and only attempt at economic prognostication, always a challenging and risky venture. The “Tabloid” in the article’s title was a tongue-in-cheek reference to the headline in the April, 2007 issue of a now defunct supermarket tabloid, Weekly World News. Featured between Virgin Mary Slaps Boy and Jews Invented Pizzoh was the shrill admonition: Surviving the Next Great Depression! It’s Coming This Summer!


It didn’t come in the summer of 2007.

In fact, the Dow Jones Industrial Average continued to climb seemingly with no limit, reaching a new peak in the fall of 2007. The pundits continued to extol the virtues of unbridled capitalism.

While the folks at WWN built their case on scant evidence (“Skyrocketing gas prices, escalating war, crashing housing prices, calamitous weather and freefalling stock prices…”), there were many other good reasons to take their prediction seriously, reasons which I offered in my article. Unfortunately, the print edition did not survive to see the collapse that rocked the foundations of the global capitalist economy the following year. Nonetheless, the zany supermarket tabloid proved to be far more prescient than the Nobel laureates, academics, and popular pundits who postured as learned economists yet never saw the collapse coming. 
Ten Years On
The global economy never fully recovered from the crash of 2008. Instead, it has stumbled along from one setback to another, with economic growth only marginally topping population growth. When both the enormous loss of wealth from the crash and the obscenely unequal distribution of the wealth recovered since the crash are configured, it is fair to say that the vast majority of the world’s population have seen little or no recovery. In fact, the casualties from the crash continue to pile up.

The US economy is neither healthy nor without serious symptoms. Despite the market euphoria that surprisingly accompanied the Trump election, the Atlanta Federal Reserve has lowered its growth expectations for the first quarter to .5% from an earlier forecast of 3%. Other projections have similarly dropped.

For three months in a row, since January, durable goods orders (excluding volatile transportation orders) have dropped. Industrial production fell .1% in January and was unchanged in February. Factory output dropped .4% in March from February and was only up .8% from a year earlier.

Bank loan growth has slowed.

Retail sales slowed by .3% in February and .2% in March. Inflation, as a measure of consumer demand, dropped .3% in March. Retail stores are closing in unprecedented numbers and retail employment growth has slowed.

Sales of new cars-- the principal driver of consumption growth since the crash-- has fallen for three straight months. Auto dealers are now offering buyer incentives that are greater than the labor costs of production (labor costs are less than $2500 per car, on average). Incentives account for 10.5% of average sticker price ($31, 435). Yet the average car sits for over 70 days on the lot.

Used car prices were down 8% in February, another sign of declining demand. And auto loan defaults are on the rise.

The US trade gap-- the difference between imports and exports-- reached a 5-year high in February.

In stark human terms, the US economy is failing working people. Between January 2016 and January 2017, average hourly earnings slipped .1% and the hours of the average workweek dropped .3%. This calculates to a .4% loss in real average earnings for those twelve months.

With reduced earnings, more and more workers are drawing on their retirement savings: 20% of 401(k)s have been reduced through self-loans.

Not surprisingly, household debt in 2016 grew the most in a decade. Unlike in the lead-up to the crash, mortgage debt is growing modestly, still below the explosive growth rate of that time. Instead, the growth in debt is in credit cards, auto loans, and student loans. Auto loan debt has reached $1.2 trillion, while student debt has risen to $1.3 trillion.

Student debt is particularly crippling. There are 42 million outstanding loans. The average student loan debt jumped from $26,300 in 2013 to $30,650 in 2016. Defaults went from 3.6 million in 2015 to 4.2 million in 2016.

And senior citizens are saddled with growing debt as well. In 1998, 30% of people 65 and older were in debt. In 2012, the percentage of seniors in debt reached 43.3. Growing debt comes in the wake of the collapse of net worth since 2005, when it topped $300,000 among those 55 to 64. By 2013, average net worth within that group dropped to $168,900 (even below the net worth of $175,300 reached in 1989).

Talking heads and media “experts” hail the job market. But they seldom delve deeply into its performance. Put simply, capitalists are hiring additional workers, rather than purchasing labor-saving equipment, because labor is cheap and flexible. The failure of organized labor to defend or advance labor’s relative position has served as a disincentive for capitalist investment in new technologies and equipment. They see no need to do so, when labor power can be used on demand, with no restrictions, and at low costs.

That trend is clearly reflected in the most recent period’s historically poor growth in productivity, among the lowest periods of productivity growth since the Second World War. Contrary to the widespread hawking of the idea that most workers are in danger of being replaced by robots, corporations are showing little interest in the introduction of new or old technologies. They are spending very little on equipment. While the technology may be there, capitalists have shown little need for it, given low labor costs.

As Shawn Sprague shows in a recent BLS paper, since 2009 the growth of aggregate hours-worked has grown more quickly than the growth of non-farm business output. This fact demonstrates that US capitalists feel little pressure to “save” labor while restoring profits during the so-called “recovery.” Rather than having existing workers work more hours, they are hiring more workers at low wages and contingently. Profits rebounded nicely because the working class had been slammed by the downturn, rendering the employment costs so low that there was no need to invest in labor-saving equipment.

This harsh truth has been ignored by economists and labor leaders alike because it shows the complete bankruptcy of class collaboration as an approach to social justice for workers.

US capitalists have enjoyed a decade of low labor costs, no pressure to invest retained earnings, and high profits (corporate after-tax profits dipped in 2015, but came back smartly in 2016). By securing labor power at low costs, they have foregone the purchase of labor-saving instruments and achieved modest growth by expanding employment. Today, capital is profoundly afraid that, with reduced unemployment, competition for labor power will drive up the costs of labor and erode profits. The Trump tax change package, favorable to corporations and the repatriation of profits, is one ruling class response to this anticipated problem.

Despite the return of an overheated housing market with escalating prices (lagging new construction is fueling demand), no systemic accumulation crisis comparable to that of 2007-2008 appears on the immediate horizon. Instead, the post-collapse era of stagnation and deteriorating living standards continues for the working class. As the shrinking income and mounting debt of working people erodes aggregate consumption, the possibility of a business cycle contraction grows more and more likely. The long, tepid expansion transferred nearly all its gains to the wealthy few, leaving little but debt or asset cannibalization for the majority. With declining retail sales, especially auto sales, and the growing weight of personal debt, the likelihood of further consumption growth is in doubt.

A business cycle contraction will only further weaken the position of working people, setting them up for a further dose of sacrifice and pain.

Isn’t it time to get off the capitalist roller coaster?

Zoltan Zigedy





April 7, 2007 MLToday (unedited)

Tabloid Political Economy: The Coming Depression

Always alert to emerging trends, I spotted the latest issue of the Weekly World News at the checkout counter of my supermarket. The headline announced the coming depression scheduled for this summer. Sandwiched between a sighting of Batboy in the New York Subway and alien abductions was the dire warning to prepare for a severe decline in the world capitalist economy. Now, Left sects sport this prediction more frequently than Elvis sightings or the announcement of Armageddon. Nonetheless, I paused for a moment. Who, I asked myself, has their fingers on the pulse of the economy more than the tabloids? Should we trust the tabloids less than the battery of economists periodically assembled by The Wall Street Journal? Would Ben Bernanke of the Federal Reserve tell us a depression was coming if he knew? Would Bush? Or Hillary?

The pieces of the economic puzzle began to come together for me. The housing bubble - the steady march of rising residential values that fueled enormous borrowing against assets - had finally began deflating, with no signs of let-up. The US middle class - saddled with record consumer debt and living from pay check to pay check – mortgaged their homes to maintain their “middle” status. Deathly afraid of falling below the media fueled standards of respectable success, they drew from their most precious assets to stay in the game.

At the same time, predators seized the moment afforded by the heralded market-place. Sub-prime lenders fed on the false prosperity by drawing the poor and the status-hungry to absurd loans, front loaded with instant gratification and back loaded with long-term pain. Stoking the housing bubble, budding entrepreneurs borrowed irresponsibly to purchase residential properties fully expecting values to rise and affording them the opportunity to “flip” the properties for an easy profit.

Like all hustles, the lure of easy money drew the most vulnerable, the most gullible, and the greediest into the game just as the bubble was bursting. Millions are facing stifling debt, foreclosures, and destruction of much of the value of their most valuable asset, their home. Economists estimate that 1,300,000 homes will foreclose this year, throwing additional housing stock into a market already suffering low demand. With an expected 50% decline in sub-prime and other easy mortgage terms in 2007, fewer people will have even a remote chance to buy from the swelling housing glut.

Of course those wiser heads who diligently worked two jobs, overtime, and  ignored the temptation of easy credit also lost big time.  The value of all housing is expected to drop 5% this year - the steepest drop since the Great Depression. In other words, the most precious asset of the working class will decline to 95% of last year’s value through the sheer irrationality of the market economy.

Nor is this a short term setback. A late March report by Emmanuel Saez and Thomas Piketty shows a level of inequality in 2005 unmatched since before the Great Depression (see The New York Times 3-29-07). Based upon 2005 IRS data, the authors concluded that the top 10% of the US population now commands 48.5% of all annual income, leaving 51.5% for the other 90%. Similar inequalities exist within the top 10%: The top 1% receives 21.8% of all income (nearly half of the income share of the top 10%). And so it goes. The top 1/10 of 1% (roughly 30,000 individuals) shares nearly as much income as the bottom 150,000,000.

In short, the US has become a society rivaling and exceeding pre-industrial England in class division and inequality. One of the earliest reasonably accurate surveys of class and income division – the famous 1688 estimates of English incomes by Gregory King – show the top 5% of English families garnering 28% of incomes (the top 1% of US individuals receive 21.8% of all incomes!). So the barons, lords, merchants, and traders of Olde England were less privileged than our own capitalist class. And we fought a revolution to escape the tyranny of the English ruling class only to replace it with our own home – grown privileged class!

No doubt the insightful team of political economists at the Weekly World News are aware that the post-2000 economic “recovery” was fueled by consumer spending, a source of energy that would appear to be nearly tapped out with personal debt at an all time high and personal wealth - the home - declining in value.

While bourgeois economist whistle past the graveyard, the coveted market – the magical mechanism that guides capitalist economic growth—seems to reflect deep – seated fears and insecurities. Despite being awash in capital, financial power searches for investment opportunities to no avail. Economic theorists have been puzzled by the low returns available, even for high-risk or long-term investment. Under normal circumstances, risk and patience earn a premium in investment, but not today. Instead, the enormous pool of wealth concentrated in fewer hands can only lure borrowers at modest rates. There is simply too much accumulated wealth pursuing too few investment opportunities.

Other alarm bells sound: Productivity growth, a centerpiece of US economic health, is now slipping below historic averages. Much of the economic success of the Clinton era is attributed to the restoration and maintenance of high productivity. During the last half - decade of his term productivity hovered at the same level as the post - World War II period. Most economists attribute this largely to the integration of new technologies into US industry. After the 2000 decline, productivity rose again thanks to the Bush administration's support for draconian management practices that squeezed every extra ounce of labor from the retreating working class. Outsourcing, downsizing and bankruptcy maneuvers forced fewer workers to work harder for less. Thus, the first hike in productivity came from technological change and the second from sweated labor.

But now productivity is dropping. Apparently, the technology impact has played out and the squeeze on labor is bearing limited returns: productivity growth dropped to a low of 1.4% in the last quarter of 2006.   

The enormous national debt adds to the list of ominous signs of decline. The obscene costs of the Iraqi occupation, the hysterical “war on terror”, and tax relief for the rich have left the US with unprecedented debt. Foreign trading partners have largely financed this debt by using their enormous surplus of dollars to buy US treasury notes. Yet there are increasing signs that as the dollar declines in value, they may be looking at other options.

The recent US tariff against Chinese high – gloss paper signals increasing tension between the US and its leading trading partners. There is a strong feeling internationally that the US is anxious to pass its economic burdens onto others. In the past, US economic might was sufficient to bully other countries to accept this sacrifice. But today, there is a growing resistance to US unilateralism—another sign of declining economic power.

Since both political parties maintain a general consensus on economic doctrine, it is unlikely that any new solutions will emerge to confront these serious cracks in the US economy. This ideological uniformity limits the policy decisions of the two parties to faith in the neo-liberal market and free, unfettered trade. With no answer to growing inequality, wasteful imperial aggression, and market anarchism, the prospects for avoiding crisis appear bleak. Let’s see if the Weekly World News gets it right.

Zoltan Zigedy