King Hussein.

August 11, 2011

In his verbose and rather trivial book The Conscience of a Liberal, published in 2007, Paul Krugman made an interesting critique of Thomas Frank’s much more interesting book What’s The Matter With Kansas? Frank believed that the Republicans were dominating the Democrats in American politics because they had mastered the art of distracting their voters through cultural populism — panicking them with homosexuality, liberalism and abortion, marshalling them with flag-waving, working-class iconography and anti-intellectualism — and thus managed to get them to vote for the thing which really matters for American politicians (the transfer of wealth from the poor to the rich).
Krugman didn’t want to hear this, partly because it made Democrats look weak, but perhaps also because he was painfully aware that Democrats were almost equally concerned about such a transfer of wealth, whereas his Keynesian principles theoretically worked in the opposite direction. He seems to have cast about for a refutation, and found one in the claim that actually it was all about race. Republicans were racists, Democrats weren’t, case closed.
Why should Krugman have pursued such gibberish? Obviously, because he knew what was coming down the pipeline — that the next Presidential candidate would most probably be Barack Hussein Obama, the junior Senator for Michigan, and the Democrats would be preening themselves over putting a black man up as a candidate. (Hillary Clinton’s lust for power almost made it a woman candidate instead, which would no doubt have startled Krugman who had made no attempt in his book to prove that all Republicans were misogynists — but the Democrat power-structure wore Clinton’s bid down in the end.)
How did the son of a white American woman and a black Kenyan man, born in Hawaii and resident in Chicago, get to become a presidential candidate? Obama had all the necessary privileges; he went to Harvard and studied law, editing the Harvard Law Review, a job they don’t give to underlings. In Chicago he mixed at first with some on the left wing of the Democrats, not that this means much (they’d been radicals when Obama was a toddler, but he was grown up and they’d repudiated their youthful indiscretions) but then, naturally, inserted himself into the party machine, did what he was told, and, being handsome and well-spoken and an ambitious natural bootlicker, rapidly became the coming man and got a Senate seat. Privilege can do a lot for you in Chicago, as the Daley family long noticed.
Obama, however, was also a natural spoiler to keep Clinton out. He was from the Midwest, meaning that he was just folks as opposed to the elitist from New York (the fact that Clinton came up, like her husband, through the Arkansas structures cut no ice in the 2008 primaries, for American Democrats, like American Republicans, suffer from Korsakov’s Syndrome and remember nothing for more than a few minutes). He was black, meaning that the Democrats could capitalise on being non-racist. He was also less conspicuously arrogant, unpleasant and widely-despised than the two previous candidates, Gore and Kerry, because he was such a nonentity; he would not charge about boasting of his Vietnam record or his ersatz green credentials. In short, the Democrats thought he was God’s gift to them.
But he was also, of course, God’s gift to the ruling class. The ruling-class ideology had suffered a degree of embarrassment under the Bush administration; the policy of bloody violence abroad and malign neglect at home had not brought the returns which the American ruling class had anticipated — foreign terror and domestic acquiescence. Instead, both foreigners and Americans were heartily sick of the nonsense which the Republicans had wrought. It was high time for a rebranding of ruling-class ideology — not to change the ideology, of course, but to change the image. It was also important, given the financial and political disasters brought into being by Bush and his allies, to put a Democrat in charge so that they could have responsibility for the disasters imposed on them. Comes the hour, comes the man; a man without principles or beliefs who would do precisely what he was told by his bosses, and who would provide a convenient four-year caretaker until Americans had forgotten the awfulness of the previous regime and were ready to vote for it again.
Plus, if by some miracle Obama managed to weather the storms and got re-elected in 2012, since he had no ideas of his own he was unlikely to challenge anything in his last term; he would not threaten the status quo. He couldn’t, in a sense, for Michigan is not particularly dominant in Democratic terms (unlike New York, where Clinton might potentially have possessed some independent clout) and because even in Michigan Obama had been a dark horse, and therefore he had no independent power-base with which to run wild even if he had wanted to.
But a loyal Harvard lawyer wouldn’t want to run wild, anyway.
Obama made certain promises and undertook certain actions (which amounted to promises) before he was elected. He promised to close the Guantanamo Bay concentration camp, and he promised to pursue renewable energy resources. These were issues which had become of considerable importance among Democrats in the Bush era, and they also made a certain amount of sense; the point was, though, that Obama had to make them if he was to identify himself as a Democrat. Rather more surprising was his promise to wage war on Pakistan if he were elected, which was definitely not something which the average Democrat was concerned about. Less surprising, but still striking, was Obama’s uncritical enthusiasm for the first banking bailout undertaken by Bush and his Congress (a Democrat-dominated Congress, note well), which was essentially a promise to always put Wall Street’s interest ahead of those of Main Street.
The problem with these was reconciling them, for he was thus promising to reign both as a Republican and as a Democrat. Escalating the war against the world meant swallowing the Republican military imperialist agenda, which more or less demanded the demonisation of the nation’s imaginary enemies — so how could he do this and simultaneously close the concentration camps? America’s right-wing financiers were all devoted to oil, coal, gas and nuclear energy — how could he square his support for them with a desire to set up renewable energy on a large scale and thus build a challenge to their dominance?
The answer was that he had no intention of doing this. The famous “Hope” poster displaying a low-resolution monochrome Obama was meaningless; so were his other two slogans, “Change” and “Yes we can!”. If he had desired to say anything he could have said it — there was no doubt that he was able to mobilise Democrat activists, largely because they were quite desperate to get rid of Bush and because many genuinely felt that there was something to fight for — specifically the health-care legislation which Krugman claimed would seal Democratic control of the country by proving that liberals could get things done where conservatives could not.
But in the end, once elected, Obama simply jettisoned the pledge to close Guantanamo Bay and to promote renewable energies. Instead he expanded the concentration camp at Bagram in Afghanistan, since his new war in Pakistan provided an endless stream of victims to go into the bag. Instead he promoted gas, coal, oil and nuclear energy. What a surprise! Then he amplified the Bush financial class warfare to unprecedented scale, bankrupting the United States in the process of giving his political enemies gigantic windfalls. Having done this, he dusted off his hands and provided a plan for universal healthcare which would be expensive, bewildering and unsatisfactory for the participants, but gigantically profitable for the health insurance companies which he put in charge of it.
Tears streaming down his face (to which he held a strategically-concealed onion) Obama explained that he couldn’t possibly provide the single-payer quasi-private healthcare which every other Western country other than Britain (which has nationalised healthcare) provides, because unfortunately he had only three-fifths of Congress behind him, and this wasn’t enough. (As if the President of the United States couldn’t bully a single Republican senator into supporting him if he chose.) Luckily for him, within two years his right-wing policies had so alienated his base that he lost the House of Representatives and only narrowly held Senate, so thereafter he could keep up the pretense of being impotent in the face of the mighty Republicans with a somewhat straighter face.
Well, we know now how it turned out. Obama could, possibly, have governed as a maverick Democrat, trying to exploit his undoubted popularity among Democrat voters, but then he would have been denounced by the Democrat Press and the Democrat establishment and business and who knows what else. Whether he was afraid of these forces, whether he was just unwilling to make the necessary effort to challenge them, we shall never know. All we know is that he kowtowed to them shamelessly and thus gradually shaved away all the support which he had brought to the Democrats, until all that was left was the core of support, which may not be enough to get him re-elected.
But does he really want to be re-elected? Perhaps, all along, he wanted to be a one-term President. He will have all the privileges of Presidency for the rest of his life, including the title. He will not, perhaps, have power, but then he has never had power; throughout his term of office, far more than George W Bush, he has been taking orders from his masters.
If he wants to be re-elected, he has certainly not gone about his governance in a way calculated to ensure this. His promised war in Pakistan did not go well (apart from the slaughter of the hapless Bin Laden) but it went swimmingly compared with his second war of choice in Libya. He lurched from humiliation to humiliation in the Middle East, embarrassingly failed to make capital out of the popular discontent in Arab countries while shambling along behind the disgusting Israeli government, and of course the scourge of economic decline was constantly coming down on the shoulders of all his active supporters, reminding them that Obama was not their friend.
And then he had to face the “debt ceiling” crisis. At last he drew a line in the sand. No simple cuts in social-service spending for him! No, let the Republicans block the funding of the nation! Then they would surely be blamed for the consequences — even though that might be a cut in the national credit rating, and even a stock market crash. He insisted that half the money come from taxes. Well, all right, since the Republicans wouldn’t accept that — twenty percent? No? All right, none, then. But he insisted, did this warmonger President, that there be deep cuts in defense spending. No? All right, shallow cuts in defense spending. No? All right, no cuts in defense spending, if you absolutely insist. And with bad grace the Republicans accepted as Obama gave them everything they had asked for.
And then the stock market crashed and the national credit rating was slashed.
Obama is said to be a serious churchgoer. One may doubt this, but possibly it is true. In which case, as he bows off the national scene in 2012, he may idly wonder what awaits him when he breathes his last on his deathbed. Will it perhaps be the icy frozen lake reserved for the traitors? The Abominable Sand? The river of boiling blood? So many options for Beelzebub to provide for Obama’s shrivelled little soul.
James Fenton summed up Obama best:

There’s a Christ for a whore and a Christ for a punk
A Christ for a pickpocket and a drunk
There’s a Christ for every sinner but one thing there ain’t —
There ain’t no Christ for any cut-price saint.

A Correction.

August 11, 2011

The stock exchange prices have fallen, on average, just under ten percent in the last week. This is described, by professional market analysts (people who are paid by speculators in the stock market to say things about the stock market) as a “correction”. That is, the stocks were overvalued by ten percent. Now they are correctly valued. This is correct, this is how capitalism corrects itself, and the Stock Exchange is a House of Correction.
What has actually happened, disregarding all this bullshit?
The stock exchange prices were, obviously, a bubble. This was not, however, a coincidence, an accident which had to be corrected by the market. The bubble was deliberately blown, almost certainly, by the US Federal Reserve, which created hundreds of billions of dollars, a process called “quantitative easing” (QE), and then ploughed this money into the bond market. Evidently this then found its way into the stock market. The process was global, but was particularly applied in the U.S. stock market, which explains why the US market managed to rise so much and so rapidly in spite of the obvious fact that the prospects of the companies in the market were not particularly bright.
The problem with quantitative easing is that it potentially creates inflation in the long run. Inflation may or may not be a serious problem in the current global economy — it’s assumed that the real danger is deflation (falling prices, basically), but nobody really knows. However, what people do know is that the entire financial system has, for thirty years, been built on preventing inflation. Therefore, quantitative easing was cautious, was only used to inject money indirectly into the economy (that is, the money wasn’t given directly to anyone who might spend it) and came to an end in June 2011, after which everybody breathed a sigh of relief. For the neoliberals who dominate global finance, quantitative easing must have felt like keeping your family solvent by renting your children to brothels.
On the other hand, everybody knew that quantitative easing was the only thing which was keeping global financial markets afloat. This is because virtually all the expansion of money in the Western world is going into corporate profits which are then kicked back to the ruling class. This tremendous transfer of wealth from poor to rich is happening because the companies have fired workers, frozen the wages of those who are working and extended their working hours, and stopped making fixed investments in productive activity. If you do that, you can make profits in the short run, but in the long run the obvious problem is that there is a contraction in the number of people capable of buying goods and services and therefore the profits start to diminish. Our old friend Marx’s decline in the rate of profit must kick in at some stage, so long as capitalists absolutely insist on following Marx’s script.
The only other option was for governments, the only actual force serving market interests, to borrow money and spend it. Unfortunately, that has been happening to a tremendous extent in 2009 and 2010, and as a result the budget deficits and the national debts have soared to unmanageable levels. If you keep running a double-digit deficit for more than a couple of years, your debt will soar. Right this minute you can keep interest rates low and the cost of servicing the debt will rise more slowly — but unfortunately interest rates are ultimately determined by the banking system, and eventually the system will make you raise interest rates (especially because this is the only neoliberal method for restraining inflation). Hence, unless you also have double-digit economic growth, you are bound to see your debt servicing grow as a proportion of your budget, and therefore, your actual public spending shrinking.
What this means is that Western governments are running into trouble. They have borrowed more than they could afford in order to bail out their banks, only to discover that this did not translate into rapid economic growth. The reduction in salaries for the working and middle classes has reduced governmental income, locking governments into a state of seemingly permanent deficit and pushing many states’ national debts into unsustainable territory. Now they fear a rise in interest rates. They don’t want to borrow more, especially not in order to give the money to rich people who give nothing back to the state. Those rich people have forced their governments into this corner, yet no government dares acknowledge this, or respond to it by, for instance, raising taxes on the rich.
So, what governments are doing instead is to cut public spending — naturally, social welfare spending, which rich people insist on governments cutting. This means that the economy will not only not grow — it will contract. Very probably it will contract so much, and most particularly in the areas where the government obtains its revenue (sales and middle/working-class income), that governments will wind up having less revenue than before, and therefore the deficit problem will remain much the same, or might even increase. Everybody knows this, but nobody says so, because nobody has the courage to face down rich people, and particularly, nobody has the courage to raise taxes on the highest-income people who are demanding these cuts. (Raising taxes on such people is the only sure-fire way to obtain income without damaging the economy — because the rich are not investing that money in anything productive, so it might as well be taken away from them and used for something more economically desirable.)
Everybody knows this, but the people who know it best are, of course, the rich. They know that the policies which they have demanded have simultaneously bankrupted Western countries and rendered them less capable of recovering from bankruptcy. They also know that the only alternative to those policies would be that they should pay for that recovery — either directly, through taxes, or indirectly, through investing in keeping the stock market high, the banks solvent, and the productive economy growing, in the way that the rich did in the past. However, they are not prepared to do this, which is why they have channelled wealth so completely into profits rather than reinvestments. Essentially, having lived the sweet life for thirty years, the rich are not prepared to change their behaviour and live the sour life for two or three years, any more than bankers are prepared to change their corrupt practices merely because they have caused the greatest banking crisis in human history.
What’s more, it would at best be a huge gamble for the rich to step in. The recent market crash lopped more than four thousand billion dollars off the world’s stock exchange values. No billionaires, no group of billionaires, have four thousand billion dollars to throw around, not in real money. The danger is that in providing the “organised support” which the bankers offered the New York Stock Exchange in October 1929, hoping to repeat the policies which ended the Panic of 1907, they would simply lose more money, just as the bankers did in 1929. The financial system has become uncontrollable even to the people who pretend to control it. All that the rich can do is hide the fact that they are not in control, and manipulate the surface details of the market to their own advantage. For over thirty years the rich have been playing what amounts to a rigged roulette wheel. Now the wheel is spinning out of control, and the only thing they could do is stop playing under conditions which enable them to pocket their winnings — and one problem is that many are still in denial about that wheel, and want to be allowed to go on placing bets forever, blindly believing that nothing will ever come between them and their undeserved billions.
But when to get out, and how, and why? The logical thing to do was to get out after QE folded up a couple of months ago. There were, however, reasons not to. For one thing, the market was going to sustain itself for a while on its own momentum. Nobody could be absolutely certain, but it could be weeks, even months, before the stock exchanges headed southwards. The markets would be jittery, with many aware that there were problems, and when the market swings up and down wildly, there is enormous potential to make money. So it was sensible to keep the bubble inflated for as long as possible. In addition, the U.S. was doing its best to focus all the attention on Europe — because much of the world’s money was flooding into U.S. Treasury bonds, thus enabling the U.S. to finance its imports — and so long as the world wasn’t looking at the biggest bubble of all in New York, it would be possible to keep things inflated.
There was another opportunity. It’s hard to be sure, but obviously the “debt ceiling” crisis was a way to use the global financial crisis to political advantage. Although the President of the United States has done everything he can to help the ruling class and crush the middle and working class, the rich would naturally prefer a Republican in power. One reason is that the current President is a Democrat, and the Democrats once were aligned with the American trade union movement and thus some Democrats have a residual distrust for absolute plutocracy; furthermore, the Democrats created the soft social-democratic policies of the New Deal which generated thirty years of economic growth under conditions more egalitarian than those prevailing now. The fear is that somehow, the Democrats might bring back those dark times when the rich were less relatively rich than they are now.
The “debt ceiling” crisis was caused by the desire of the Republicans to compel the President to impose savage spending cuts, thus alienating his base, slowing economic growth and virtually guaranteeing his defeat in 2012. The Republican threat was that if he did not do what they ordered him to do, they would prevent the U.S. from borrowing money, precipitating a global economic crisis and wrecking U.S. credit. Therefore, it was absolutely essential, while the negotiations were doing on, for the economy to remain stable, and if possible to seem as if it were growing. If the economy had crashed during the negotiations, the President might have decided that he had nothing to lose from taking a more moderate and conservative line, and might then have raised taxes instead of slashing services. He could also have blamed Republican intransigence for the crisis.
So it seems likely that the American rich, the greatest concentration of wealth on the planet, might have offered the market the organised support they are not usually prepared to offer, up until the deal was signed. Then, of course, they could withdraw it — because there was nothing that the President could do once it was signed. It is impossible for the U.S. to borrow more than the very limited amount that the Republicans are allowing it to borrow, meaning that nothing can be done to stimulate the economy or bail out failed companies. Hence, not only is there now an economic crisis, and one which is not obviously directly connected with Republicans or the rich. It is also a crisis happening under conditions where the American Presidency is essentially impotent. He has tied his own hands and now must face the heavyweight champion, the mother of all recessions.
So what is happening is simple. The rich are getting out of the economy which they have looted and ruined, and doing so with their wealth intact, and in a way in which does the maximum harm to their self-defined political enemy. Of course this means that the Western economy is probably collapsing, but the rich knew that it would collapse anyway. They can always move to one of the BRIC countries if things get really tough in the West. But most probably something will turn up — at least, that is what they are hoping for. Maybe the West will start sprouting dictatorships like Latin America in the 1960s and 1970s, and the dictatorships will pull the rich’s chestnuts out of the fire by force, compelling the poor and the middle class to sponsor their masters at gunpoint. We can’t be sure.
All that we can be sure of is that nothing good is coming down the track.