Reliving the tragic 1930s... this time as farce

"The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear." Antonio Gramsci

“Hegel remarks somewhere that all great, world-historical facts and personages occur, as it were, twice. He has forgotten to add: the first time as tragedy, the second as farce.”  Karl Marx, The Eighteenth Brumaire of Louis Bonaparte  

Most newsaholics tend to limit their reading to people they agree with... I think that is a big mistake, especially for anyone who is trying to make a serious analysis of reality. Why? Because it's always interesting, instructive... and creatively disturbing when you find that someone you detest is saying something that makes a lot of sense.

For example, an arch-villain of any progressive citizen, Charles Koch, (yes one of the brothers who are busy corrupting the entire US democracy in order to discredit climate science), is here found talking much sense about the "War on Terror":

“We have been doing this for a dozen years. We invaded Afghanistan. We invaded Iraq. Has that made us safer? Has that made the world safer? It seems like we’re more worried about it now than we were then, so we need to examine these strategies.” (...) “I’ve studied revolutionaries a lot,” he says. “Mao said that the people are the sea in which the revolutionary swims. Not that we don’t need to defend ourselves and have better intelligence and all that, but how do we create an unfriendly sea for the terrorists in the Muslim communities? We haven’t done a good job of that.” With about 1.6bn Muslims worldwide “in country after country. What,” he asks, “are we going to do: go bomb each one of them?". Lunch with Charles Koch - Financial Times

Koch quotes Chairman Mao! How is that for chutzpah?

In an odd sort of way Koch practices what he preaches; for example by trying to create an "unfriendly sea" for ecologists and climate scientists in America's mainstream media and the US Congress. Having said that, what he affirms in the quote above is one of the most sensible thing that I can remember having read about America's "War on Terror". It will be interesting to see how the Koch brothers, with all their oil interests, will react if Muslim-baiter, Donald Trump, is finally the Republican nominee.

...Morbid symptoms appear

There are reputable analysts who today are predicting a worse recession than 2008.

For example: if  Lehman Brothers' collapse  in 2008 was 1929's tragedy repeated as farce, where we are moving right now could be seen as a priapistic version of the same thing.  

Three of the biggest US banks revealed the damage wrought by a plunging oil price this week, disclosing big jumps in costs for bad energy loans and fears of contagion in other portfolios. Financial Times

Cleaning up the aftermath of financial mistakes — a depressingly familiar experience — is just a part of the challenge the world confronts. Equally important is finding a powerful new engine of demand as old ones splutter and die. It is not at all obvious where this is to be found. But the rest of the world is hoping, probably over-optimistically, that the US will provide what it seeks. Unfortunately, it will not do so.  Martin Wolf - Financial Times

We seem to have come to a dead end.

There has always been a tension at the heart of capitalism. (...) Its self-regulating properties, contrary to the efforts of generations of economists trying to prove otherwise, are weak.(...) A low oil price historically presages economic good times. Instead, the markets are panicking. They are panicking because what is driving the lower oil price is global disorder, which capitalism is powerless to correct. Indeed, it is capitalism running amok that is one of the reasons for the disorder. Profits as a share of national income in Britain and the US touch all-time highs; wages touch an all-time low as the power of organized labor diminishes and the gig economy of short-term contracts takes hold.(...) All this requires a new generation of political leaders prepared to throw off the categories in which thinking has been cast since 1980(...).  Will Hutton - The Guardian

The Unborn

Another commentator who is often worth reading, despite being even further to the right than the Koch brothers is Pat Buchanan. He is a paleolithic-conservative, pre-conciliar Catholic and the adviser behind Nixon's "Southern Strategy", which has probably been the most noxiously successful and sinister political ploy since the disenfranchisement of African-Americans ending Reconstruction.

To give you an idea of how far to the right Buchanan is, none other than Donald Trump (way back in the 1990s) considered him a "Nazi-whacko".

This is how Pat Buchanan sums up the present situation:

Everyone sees clearly now the de-industrialization of America, the cost in blood and treasure from decade-long wars in Afghanistan and Iraq, and the pervasive presence of illegal immigrants. (...) (W)hen you see Bernie Sanders running neck and neck with Hillary Clinton in Iowa and New Hampshire and Trump and Ted Cruz with a majority of Republican voters. Not to put too fine a point on it, the revolution is at hand. Pat Buchanan - Washington Post

What is Trump's reaction to Pat Buchanan in 2016?

Donald J. Trump 
‏@realDonaldTrump
Pat Buchanan gave a fantastic interview this morning on @CNN - way to go Pat, way ahead of your time!

How is that for chutzpah?

What is interesting for me in the Buchanan quote above is that he groups both Sanders and Trump as "revolutionaries". The old is dying and the new is yet unborn.

Lets hear from Bernie:

“If poverty is increasing and if wages are going down, I don’t know why we need millions of people to be coming into this country as guest workers who will work for lower wages than American workers and drive wages down even lower than they are now,” Sanders said in a television interview in June 2007. But in his current campaign for president, Sanders has been unequivocally in favor of a path to citizenship for undocumented immigrants, and he has spoken passionately on protecting families from deportation. Many immigration activists note that Sanders’ plan is more detailed than Hillary Clinton’s. Time Magazine

What we see here from Sanders is nuance: recognizing that massive third world immigration is a huge problem for underpaid American workers and at the same time compassion and practical solutions for the problems of the immigrants already in the USA, who are also helpless, innocent, victims of the globalization process.

And now here's Trump's official position on immigration:

When politicians talk about “immigration reform” they mean: amnesty, cheap labor and open borders. The Schumer-Rubio immigration bill was nothing more than a giveaway to the corporate patrons who run both parties. Real immigration reform puts the needs of working people first – not wealthy globetrotting donors. We are the only country in the world whose immigration system puts the needs of other nations ahead of our own. Donald Trump's official webpage

Notice all the dog-whistle words: "amnesty", "cheap labor", "wealthy globetrotting donors" ("rootless cosmopolitans"?), "needs of other nations". That vocabulary and not the actual content is the real message

Now Sanders on China:

One of Bernie’s key goals is to end our disastrous trade policies with China which force American workers to compete against low-wage labor, which serves largely to benefit already wealthy corporations. Feel the Bern

Now Trump:

We have been too afraid to protect and advance American interests and to challenge China to live up to its obligations. We need smart negotiators who will serve the interests of American workers – not Wall Street insiders that want to move U.S. manufacturing and investment offshore. Donald Trump's official webpage

 Again, notice the word choice: "afraid",  "protect", "challenge", "live up to", "smart", "insiders", "offshore", etc.

Repetition?

At the top of the page I put: "History repeats itself, first as tragedy, then as farce"  and "The old is dying and the new cannot be born". Those two quotes could well define the historical period we live in.

Where Buchanan may be on to something is in calling both Trump and Sanders "revolutionaries"; revolutionaries in the same sense that both Adolf Hitler and Franklin D. Roosevelt were revolutionaries in the context of the 1930s,.

FDR changed the classic capitalism practiced by  the Republicans beyond recognition and saved America from the sort of turbulence that  tore Europe apart.

Hitler, on the other hand rode that turbulence to power and literally destroyed Germany and most of Europe with it.

Here is a definition of Hitler's method of taking power, from Adam Gopnik's New Yorker  piece on the new edition of Mein Kampf. See if you can observe a formula that is still in use:

"The faith in a strong man; the love of the exceptional character of one nation above all others; the selection of a helpless group to be hated, who can be blamed for feelings of national humiliation. He didn’t invent these arguments. He adapted them" 

Sound familiar? It should, it is being used every day and not just by Donald Trump, even nominal liberals have invoked "American exceptionalism" in recent memory to justify interfering in the internal affairs of other countries or even voting in favor of "wars of choice".

Rhyme or farce?

Back in the 1930s the Republican party's laissez faire, hands off, version of capitalism was finished (for the moment). The choice of a way forward then was between Hitler/Mussolini, Joseph Stalin... or FDR.

Now the Nazis and the fascisti are long gone and Stalin's Marxist-Leninism is on the ash heap.

Today the categories of "ists" and "isms" are different:  Now Russia's ruling ideology is Putinist-Hands-in-the-cookie-jar-ism, while China is following Friedmanist-Leninism and apparently is entering into some kind of a shitstorm with it.

Meanwhile the United States and all who sail in her seem to be experiencing a terminal crisis in the economic policies that have been in favor since the 1980s, which we might call Reaganist-Thatcherism or Clintonist-Blairist-Bushism.

However, this not the 1930s, Pope Francis is not Pius XII, Stalin is gone, with no one to follow. Donald Trump is a Monty Python parody of Adolph Hitler or Benito Mussolini, Hillary Clinton is not Herbert Hoover and Bernie Sanders is not (yet) Franklin Delano Roosevelt.

But, as Mark Twain said,"History does not repeat itself, but it often rhymes". This is the interregnum that Gramsci spoke of, with all its morbid symptoms, the old is dying... and the new, whatever that might be... Can it be born? DS

The Spanish Economic Crisis Explained

David Seaton's News Links

In case you are interested, this hour long documentary from the BBC gives a very workmanlike breakdown of how it all happened.

Spain is the canary in the coal mine for the world's top economies, because of its large size and its fragility. The story carries lessons for everyone, everywhere. What happens in Spain first can happen later in more robust economies.

Well made and clearly explained, in one hour with this video, you'll be up to speed. DS

The world crisis as it develops

David Seaton's News Links

The other day we went shopping at a huge hypermarket of the French, "Carrefour" chain on the outskirts of Madrid. We hadn't been there for about a year and we were struck by how the quality of the store-brand, discount merchandise had deteriorated in that time. Not that long ago it was possible to buy quite nice things at discount: bluejeans, appliances, etc, for very little money. The prices have held, but what is for sale is shoddy junk. This is a trend that I am noticing in all over the discount stores: hypermarkets, supermarkets, etc.

Obviously to avoid raising prices in the middle of a recession, the merchants are looking for ever more cut rate suppliers...  this appears to be the last "firewall" against inflation and when it is broken it will be difficult  for the great majority to continue to consume, especially since credit has tightened and jobs continue to be offshored; again, an attempt to buck the inflationary trend.

If the consumers in the wealthy countries can no longer afford to consume, many factories in the third world will be closed and their workers laid off, which will lead to turbulence in those countries, where workers and their families are much more exposed to the rising cost of basic food items... and so it goes.

There follow a series of quotes to fill in a possible profile of what awaits us in the coming months:

“The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit.” [Marx - Capital, Volume III, Chapter 30]

(...) High inflation endangers China’s status as the low-cost workshop for the world.(...) Food prices are soaring, and the government said on Friday that the consumer price index in March had risen 5.4 percent, its sharpest increase in nearly three years.(...) Beijing and many municipal governments have required employers to raise wages. The government has raised minimum wages in the hope of reducing the big income gap between the rich and the poor, and the urban and rural.(...)  “China is moving into a new era, a new norm,” said Dong Tao, an economist at Credit Suisse in Hong Kong. (...)  In some cases, retailers are bidding for goods at prices the exporters consider too low.“I hear that many Chinese exporters are rejecting orders from Wal-Mart and other Western retailers,” Mr. Tao said. “I’ve been covering the Chinese economy for a long time, and I’ve never heard that before.”(emphasis mine) New York Times

"The hedge funds are now active in commodities and are playing the futures contracts, where upwards of 30 million tons of soybeans for future delivery are contracted for every day. They are also buying the companies that stock grains.(...) Futures purchases of agricultural commodities classically have been the means by which a limited number of traders stabilized future commodity prices and enabled farmers to finance themselves through future sales. Speculative purchases have no other purpose than to make money for the speculators, who hold their contracts to drive up current prices with the intention not of selling the commodities on the real future market, but of unloading their holdings onto an artificially inflated market, at the expense of the ultimate consumer. Even the general public can now play the speculative game; most banks offer investment funds specializing in metals, oil, and more recently, food products. It is astonishing in the present situation that the international financial institutions and government regulators have done little to control or banish this parasitical and anti-social practice. The myth of the benevolent and ultimately impartial market prevails against all contrary evidence." William Pfaff

"The social theories of Karl Marx were long ago discarded as of little value, even to revolutionaries. But he did warn that capitalism had a tendency to generate its own crises. Indeed, the spread of capitalism, and its accelerated industrialization and wealth-creation, may have fomented the food-inflation crisis — by dramatically accelerating competition for scarce resources." Tony Karon - Time

It has always seemed to me that Marx's predictions were foiled by availability of ever cheaper and more abundant consumer goods and ever cheaper and more abundant credit with which to buy them, despite stagnant or falling wages. This formula seems to be in crisis now. It will be interesting to see how we wiggle out of this one. DS

The Crisis Rant

Temptation of St Anthony
Hieronymus Bosch
Madrid, Museo del Prado

David Seaton's News Links
Gideon Rachman, the Financial Times chief foreign affairs columnist has written a very fine column called, "Generation L and its fearful future". In Rachman's lexicon "L" stands for "lucky". He writes:

Those of us born in western Europe or the US have never really experienced hard times. Our parents and grandparents lived through world wars and the Great Depression. We have had decades of peace and prosperity.

Could that change? Perhaps Generation L has just had the luxury of an extended “holiday from history”, which is now coming to an end.

I think Rachman has hit the zeitgeist nail on the head here. I think my generation is probably the luckiest group of individuals in the history of humanity, even sinister things like the atom bomb worked in our favor.

I for one having been born an American at the end of WWII have always had a deep affection for the atom bomb.

Without the restraining terror the atom bomb, the USA and the USSR would have surely fought WWIII with highly developed "conventional weapons" and judging what the contending armies were able to achieve with much more primitive stuff in World Wars One and Two, most of us of military age, in both countries probably including me, would have been killed or maimed. So I am all for nuclear proliferation: the more the merrier. I get the feeling that those, like the USA and Israel, who are afraid of others having the bomb are precisely those that would like to go to war. The great lesson of my youth is that mutual nuclear terror means peace.

If I were to pick a nit with Gideon Rachman, I would say that "Generation Ls" golden age really ends not now, but with the oil embargo and stagflation of the 70s and 80s. That was really the end of the genuine good times. That is when the economy lost its balance.

Intense smoke and mirrors have been applied since then to maintain the patient's healthy appearance… What we have now reminds me of the last scenes of Visconti's "Death in Venice", where the aging Dirk Bogarde goes into a barber shop and gets his hair and eyebrows dyed and his face powdered and rouged in order to enamor the teasing Tadzio; then he goes off to the beach and with the heat melting the hair dye and mixing with his sweat and the rouge, he has a heart attack in his beach chair and dies.

Dirk Bogarde would be the economy, the barber would be Alan Greenspan and Tadzio would be "the pursuit of happiness".

Now a new team of former Clintonites join with the providential Barack Obama to pump up the corpse with massive dose of economic Viagra to see if the old thing (the economy) will stand up just one more time.

Tadzio will probably turn out to be the destruction of the dollar, triple digit inflation and and a Wiemar America.

But I am not dismayed or depressed by all of this. Like Rachman, I believe that:

Long periods of peace and prosperity, however, are not always terribly interesting. Amid all the economic gloom, I do not think I am alone in feeling an odd excitement at the sense of living in uncertain and historic times.

Frankly I think we need a good crisis… we need to tear out our hair in clumps and beat our chests and rend our garments and cover ourselves with ashes and scrape at our sores with a pot shard.

After the years of this bloated and fictitious, credit financed “prosperity”, crawling with neo cons and plenty of vieux cons, we need the mental and cultural equivalent of a high colonic enema.

Who knows, maybe somebody will finally write a truly great book again. DS

Annus horribilis: (Clarification)

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I get a feeling that my last post,"Annus horribilis... and you are pretty cute yourself" may have been so chock full of goodies and long winded quotes that some of my readers may have had a bit of trouble seeing just what I was driving at, so today I'll try to be more concise and to the point.

I am coming to believe that at the bottom of the crisis is the creeping impoverishment of the once universally envied American middle class; this impoverishment has been brought on by an American lead revolution in productivity, which has made American workers themselves redundant except as consumers. This process resembles the flight of a legendary bird that flying in ever tighter concentric circles, finally flies up its own behind and disappears.

The communications revolution of the Internet, which makes it possible for Indian and Bangladesh knowledge workers to do the back office work of the American multinationals and for Chinese factory workers to produce most of the world's hard goods at amazingly low prices, has left the American middle class with only the universal role of "consumer of last resort". How does that play?

Since today's Americans are no longer much needed for useful work, they have to be loaned money from the earnings and savings of those around the world who now do that real work, in order for them to be able to buy the things those workers and savers produce. If Americans ever stop borrowing money to buy all of this, or if other people stop lending it to them, then the world will collapse... Or so the story goes. That is about as an encapsulated summing up of the situation as you are likely to find anywhere.

First, lets look at the impoverishment part. In my last post I quoted The Atlantic's James Fallows at length. Today I'll limit myself to one paragraph:

Half this country's households live on less than $50,000 a year. That sounds like a significant improvement from the $44,000 household median in 2003. But a year in private college now costs $83,000, a day in a hospital $1,350, a year in a nursing home $150,000—and a gallon of gasoline $9. Thus we start off knowing that for half our people there is no chance—none—of getting ahead of the game. James Fallows

Now, lets have a quick look at how the "working poor" can consume all they must consume in order for the world to survive:

Today’s global crisis was triggered by the collapse of the U.S. housing bubble, but it wasn’t caused only by it. America’s credit excesses were in residential mortgages, commercial mortgages, credit cards, auto loans and student loans. Nouriel Roubini

Here follows the Financial Times chief economist, Martin Wolf summing it all up and projecting what will probably happen:

What makes rescue so difficult is the force that drove the crisis: the interplay between persistent external and internal imbalances in the US and the rest of the world. The US and a number of other chronic deficit countries have, at present, structurally deficient capacity to produce tradable goods and services.(...) (This)means that US rescue efforts need to be big enough not only to raise demand for US output but also to raise demand for the surplus output of much of the rest of the world.(...) Now think what will happen if, after two or more years of monstrous fiscal deficits, the US is still mired in unemployment and slow growth. People will ask why the country is exporting so much of its demand to sustain jobs abroad. They will want their demand back. Martin Wolf - Financial Times

In plain language, the US government is going to print a lot of money (lots and lots) and hope that it gets into the hands of American consumers so that they can buy Chinese goods in the hopes that the Chinese don't sell off their US treasury bonds and destroy the dollar (think a hundred dollar cardboard cup of coffee in McDonald's, think granny spending her month's pension on a bucket of KFC). If this doesn't work, Wolf thinks the results will be catastrophic:

Once the integration of the world economy starts to reverse and unemployment soars, the demons of our past - above all, nationalism - will return. Achievements of decades may collapse almost overnight.

What I don't have clear is exactly whose "nationalism" it is that Wolf is talking about. As far as I know Americans are, and always have been, very nationalistic, except that they call themselves "patriotic", and only when other people are patriotic do they call it "nationalistic"... I confess that I fail to see much difference and since Wolf is not American, I'm not sure what he means.

In my opinion those are the different forces that are pulling and tugging the situation into one shape or another and what the final shape will be depends on what or who tugs the most.

Optimism or pessimism?

If you think it would be great if things had stayed the way they were, then you should be pessimistic. If you think things sucked the way they were and would like to see things change, then you can be optimistic. Things are going to change anyway and, who knows, they might end up better. DS

Annus horribilis... and you are pretty cute yourself

"My bucket's got a hole in it, and I can't buy no beer"
Hank Williams

David Seaton's News Links

I am getting the feeling that we are entering the most fascinating period since the Second World War, and we are entering it without a road map... if there ever was a road map. Part of me is excited by the idea of finally seeing some meaningful political thought and action and the rest of me is just plain scared.

Nobody seems to know what's going on or when the waves of the tsunami are going to sweep over us. We know how the crisis reads, but we have yet to really see how it plays.

Max Hastings writes in The Guardian:

What seems most striking about the credit crunch is that it reduces most people to silence, because they find its implications and possible solutions beyond their comprehension. It is rendered especially baffling because, metaphorically speaking, no bombs are falling. Shoppers still pack suburban malls, cars crowd motorways, passengers throng airports, the lights stay on. Thus far, for all except some hundreds of thousands who have already lost their jobs, only statistics reveal the bad news. The implications have yet to work through into real life. There seems an overwhelming public mood of fatalism. Anger must follow, sooner or later, and even perhaps social unrest. But this will come only when the consequences literally reach home. Meanwhile, number blindness has overtaken most of us. Max Hastings - Guardian

The huge stimulus plans look just like inflating another bubble to me... it was easy credit and low interest rates that created the mess in the first place

I find myself agreeing with some of the super-orthodox economists that think that all this will lead to hyperinflation and with it Wiemar-like destruction of the middle class which leaves a debt that future generations will curse all their lives or simply refuse to pay... And either choice will have catastrophic consequences.

I'd like to present a little collage of excerpts from articles that for me, alone and together, go some way in summing up the economic situation and the zeitgeist today.

First a well observed, artistic even, "slice of life", from Peggy Noonan:

At a certain point in the '00s, I began to notice, on the east side of Manhattan, that the 3-week-old infants, out for the first time in their sleek black Mercedes-like strollers, were amazingly, almost alarmingly, perfect. Perfect round heads, huge perfect eyes, none of the dents, bruises and imperfections that are normal and that tend to accompany birth. I would ask friends: Why are babies perfect now, how did that happen? The answers were the usual: a healthy, well-fed populace, etc. Then a friend said: "These are the children of the scheduled C-sections of the affluent. They are scooped out, perfect." They were little superbabies whose handsome, investment banking, asset-bundling, financial-instrument-creating parents commanded even Nature. Peggy Noonan- Wall Street Journal

Let's move farther into this with a quote from an article by Noam Chomsky on the election that, as always, should be read by anyone not satisfied with the pablum handed out by mainstream analysts. Here Chomsky talks about the recession-cum-depression and the president-elect's economic "new" team:

The power of financial institutions reflects the increasing shift of the economy from production to finance since the liberalization of finance in the 1970s, a root cause of the current economic malaise: the financial crisis, recession in the real economy, and the miserable performance of the economy for the large majority, whose real wages stagnated for 30 years, while benefits declined. The steward of this impressive record, Alan Greenspan, attributed his success to "growing worker insecurity," which led to "atypical restraint on compensation increases" - and corresponding increases into the pockets of those who matter. His failure even to perceive the dramatic housing bubble, following the collapse of the earlier tech bubble that he oversaw, was the immediate cause of the current financial crisis, as he ruefully conceded.(...) Obama's transition team is headed by John Podesta, Clinton's chief of staff. The leading figures in his economic team are Robert Rubin and Lawrence Summers, both enthusiasts for the deregulation that was a major factor in the current financial crisis. As Treasury Secretary, Rubin worked hard to abolish the Glass-Steagall act, which had separated commercial banks from financial institutions that incur high risks. Economist Tim Canova comments that Rubin had "a personal interest in the demise of Glass-Steagall." Soon after leaving his position as Treasury Secretary, he became "chair of Citigroup, a financial-services conglomerate that was facing the possibility of having to sell off its insurance underwriting subsidiary... the Clinton administration never brought charges against him for his obvious violations of the Ethics in Government Act." Rubin was replaced as Treasury Secretary by Summers, who presided over legislation barring federal regulation of derivatives, the "weapons of mass destruction" (Warren Buffett) that helped plunge financial markets to disaster. He ranks as "one of the main villains in the current economic crisis," according to Dean Baker, one of the few economists to have warned accurately of the impending crisis. Placing financial policy in the hands of Rubin and Summers is "a bit like turning to Osama Bin Laden for aid in the war on terrorism," Baker adds. The business press reviewed the records of Obama's Transition Economic Advisory Board, which met on November 7 to determine how to deal with the financial crisis. In Bloomberg News, Jonathan Weil concluded that "Many of them should be getting subpoenas as material witnesses right about now, not places in Obama's inner circle." About half "have held fiduciary positions at companies that, to one degree or another, either fried their financial statements, helped send the world into an economic tailspin, or both." Is it really plausible that "they won't mistake the nation's needs for their own corporate interests?" He also pointed out that chief of staff Emanuel "was a director at Freddie Mac in 2000 and 2001 while it was committing accounting fraud." Noam Chomsky

And back in 2005, James Fallows wrote an astoundingly prophetic piece called Countdown to a Meltdown that makes Nouriel Roubini sound like Little Mary Sunshine:

Half this country's households live on less than $50,000 a year. That sounds like a significant improvement from the $44,000 household median in 2003. But a year in private college now costs $83,000, a day in a hospital $1,350, a year in a nursing home $150,000—and a gallon of gasoline $9. Thus we start off knowing that for half our people there is no chance—none—of getting ahead of the game. And really, it's more like 80 percent of the public that is priced out of a chance for future opportunity. We have made a perfect circle—perfect in closing off options. There are fewer attractive jobs to be had, even though the ones at the top, for financiers or specialty doctors, are very attractive indeed. And those who don't start out with advantages in getting those jobs have less and less chance of moving up to them. Jobs in the middle of the skill-and-income distribution have steadily vanished if any aspect of them can be done more efficiently in China, India, or Vietnam. The K-12 schools, the universities, the ambitious research projects that could help the next generation qualify for better jobs, have weakened or dried up.39 A dynamic economy is always losing jobs. The problem with ours is that we're no longer any good at creating new ones. America is a less attractive place for new business because it's a less attractive place, period.40 In the past decade we've seen the telephone companies disappear. Programming, data, entertainment, conversation—they all go over the Internet now. Pharmaceuticals are no longer mass-produced but, rather, tailored to each patient's genetic makeup. The big airlines are all gone now, and much of publishing, too. The new industries are the ones we want. When their founders are deciding where to locate, though, they'll see us as a country with a big market—and with an undereducated work force, a rundown infrastructure, and a shaky currency. They'll see England as it lost its empire. They'll see Russia without the oil reserves, Brezhnev's Soviet Union without the repression. James Fallows: Countdown to a Meltdown - Atlantic

What Chomsky and Fallows are talking about has more the look of a systemic crisis and not just a recession. Some, like Niall Ferguson, think that the United States is better positioned than other countries to weather the storm... this is how he imagines Obama's New Years message in 2010:

The "unipolar moment" was over, no question. But power is a relative concept, as the president pointed out in his last press conference of the year: "They warned us that America was doomed to decline. And we certainly all got poorer this year. But they forgot that if everyone else declined even further, then America would still be out in front. After all, in the land of the blind, the one-eyed man is king." And, with a wink, President Barack Obama wished the world a happy new year. Niall Ferguson

I think Ferguson is whistling past the graveyard myself. I don't think that any country in world history is less prepared than the citizens of the United States of America: ideologically, culturally or morally for a serious failure of the capitalist system, less prepared for a failure which destroys social mobility and leaves a pauperized ex-middle class to carry wood and draw water for the super-rich that will float above the disaster, ... having the American dream chewed up and spat in their faces will finally mean blood. Of that I have no doubt.

Some observers predict that the global economic crisis will lead to "unrest" in Russia and China and this unrest will lead to greater "democracy" and "liberalization"...

They say this while the USA is effectively nationalizing banks and the auto industry and none of these observers seem to take into account that there might still be a "Communist" wing of the Chinese Communist Party or remember, in case the "villain" Putin falters, that Russia's largest opposition party is the Communist Party. I think the Chinese Communist Party could shift gears without missing a beat. Many if not most Russians already seem quite nostalgic for the good old days.

"Really-existing socialism", as it was called was dull, repressive and gray, but it guaranteed employment, housing and education to the entire population: nobody slept in the street or lacked medical care... "They pretend to pay us and we pretend to work" was how Iron-Curtain wags described the system. With double digit unemployment that might start to look like a pretty good deal again... and not just in Russia and China.

The greatest challenge in foreseeable future may be to keep the need for social justice of some sort compatible with an acceptable degree of freedom of speech and association.

In this line I'd close these reflections with this quote from my favorite historian Eric Hobsbawm:

"None of the major problems facing humanity in the 21st century can be solved by the principles that still dominate the developed countries of the west: unlimited economic growth and technical progress, the ideal of individual autonomy, freedom of choice, electoral democracy. As is evident in the case of the environmental crisis, facing these problems will require in practice regulation by institutions, in theory a revision of both the current political rhetoric and even the more reputable intellectual constructions of liberalism. The question is can this be done within the framework of the rationalist, secularist and civilised tradition of the Enlightenment. As for left vs right, it will plainly remain central in an era which is increasing the gap between haves and have-nots. However, today the danger is that this struggle is being subsumed in the irrationalist mobilisations of ethnic or religious or other group identity." Eric Hobsbawm, historian - Prospect Magazine - March, 2007

Hobsbawm is very old, when he dies I don't know how I'll go on... I survived Edward Said's passing with difficulty, but Hobsbawm? May Noam Chomsky live a hundred years. DS

Notes of the roundtable

Former Costa Rican president, José María Figueres Olsen, with Bubba and a redhead, August 2000

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Yesterday I attended a round table discussion about the world "crisis" which was held in one of Spain's largest banks. There were economic and political analysts from the Spanish government, banks, foundations, embassies, etc. The round table was chaired by the former president of Costa Rica, José María Figueres-Olsen, educated at West Point and Harvard, who, in my opinion, said some of the most interesting things of the whole afternoon.

Some of the themes of concern mentioned were the possibilities of:

• Return of protectionism

• End of globalization
  

• Less funds for aid to developing countries

• Change in the balance of world power

• Lack of leadership in the European Union

• Destabilization of China and Russia
  

One of the most interesting speakers was a Chinese analyst that spoke of the enormous significance of the China-Japan-Korea summit held last week. These are key countries whose relations have historically been very bad and full cooperation between them in facing the present crisis might mean a true shift in the world balance of power. The summit certainly hasn't received the attention it deserves

Many of the analysts seemed to hope and believe that under the new Obama administration America would take take the lead in strong measures to snap the world out of its slump.

President Figueres, who is center-left, pointed out to the assembled analysts that the people who had voted for Obama were expecting him to get them out of the crisis, not the world, and that he would be judged accordingly and that those outside the USA should not get their hopes too far up, especially in regards to the further liberalization of world trade.

Figueres also had an observation about the new Obama team, which was the fruit of his own extensive administrative experience. He said that Obama's new cabinet, made up of "luminarios", was an "all-star" team, and he had serious doubts that a group containing such a group of gigantic egos (and he knows many of them personally) in most of the sensitive areas, could work together smoothly.

As to the role that the USA might play in fixing things, one bright, young Spanish analyst from the BBVA brought up the London Economic Conference of 1933, where Franklyn D. Roosevelt scuppered any chance of an international economic agreement, one which might have ended the depression and avoided World War Two, as an indication of America's probable reaction in times of a general world economic crisis.

If I had been on the dias, I would have opened with a quote from Marx (Groucho) "The secret of life is honesty and fair dealing: if you can fake that, you've got it made". At the heart of the crisis is the failure of American credibility.

If the USA is not able to take the medicine of fiscal orthodoxy it has forced painfully down everybody's throats in the past, nobody is ever going to take them or their prescriptions seriously again. This is something that has to be faced.

I am not at all sure that Bernake and his printing press are going to do anything finally but destroy the dollar and create Argentinian type hyper-inflation... once people get deleveraged who is going to want to hold depreciating US dollars?

Some analysts felt that the European Central Bank should follow the fed in flooding the system with newly printed cash. It would seem to me that one of the clearest and unfifying achievments of the EU has been the Euro's creation and its value. From a view to European unity it doesn't make much sense to lower its value in any way, even if maintaining it is painful.

Others feared that the crisis might make the EU more inward looking.

As I understand it the EU is a market of 450M people and that most of what we consume here is produced within the Union itself... I would think that a strategic understanding with neighboring Russia, in order to take mutual advantage of the fabulous synergies, would make the EU as nearly self-sufficient as it would be possible for anyone, anywhere to be.

In my opinion one of the most important reasons that European unity is not getting people excited is that it is being presented as a partnership with the USA to run around the world jousting with windmills, which the people in Europe don't want to do. The EU and the US have vastly different geopolitical realities and objectives... another fact that finally must be faced.

Really, as soon as the USA has nationalized Freddy and Fannie and Citi Bank and now Detroit... what is the meaningful economic difference between the USA, Russia and China? At this point both the capitalism and the social democracy of the EU is clearer than Russia's, China's and the USA's. Only the European Union has both a meaningful social net and correct financial fundamentals.

As to spreading democracy, I think that in these troubled times if we can maintain democracy in the countries where there is a tradition and a culture of democracy we will be doing very well, indeed. I don't think the Chinese people will want to risk destabilizing their country in the midst of a crisis and I don't imagine the Russians will either... The temptation in troubled times will be toward authoritarian regimes and the Russians and the Chinese already have them.

Although things are bad and getting worse, I think this period may finally be vindicated by people getting truly serious about who we are and what we really want and need and what we are prepared to pay for it. DS