Posted: 09/30/2015 12:39 pm EDT Updated: 2 minutes ago
After first refusing to confirm nor deny it, the Vatican has confirmed that Pope Francis met with the Kentucky clerk Kim Davis at the Vatican Embassy in Washington, where Davis’ attorney — who made the news public after the pope’s trip ended — said Francis told her to “stay strong.” And that simple encounter completely undermines all the goodwill the pope created in downplaying “the gay issue” on his U.S. trip.
The pope played us for fools, trying to have it both ways. As I noted last week, he’s an artful politician, telling different audiences what they want to hear on homosexuality. He did that in Argentina as a cardinal — railing against gay marriage when the Vatican expected him to do so — and he’s done that since becoming pope, striking a softer tone on the issue after Benedict’s harsh denunciations were a p.r. disaster for the Catholic Church in the West. But this news about Kim Davis portrays him as a more sinister kind of politician. That’s the kind that secretly supports hate, ushering the bigots in the back door — knowing they’re an embarrassment — while speaking publicly about about how none of us can judge one another.
I would have more respect for the pope if he had publicly embraced Kim Davis and made an argument for her, as he did in his visit with the Little Sisters of the Poor, who are battling against filling out a form to exempt themselves from Obamacare’s contraception requirement, claiming that even filling out the form violates their religious liberty — even though I vehemently disagree with the pope on that issue. I’d have more respect if he boldly, explicitly made a public statement (not the vague, general statement he made on his plane on the way home only in response to a reporter’s question about Davis), as he did in trying to stop the execution of a Georgia inmate who was put to death this morning. But by meeting with Davis secretly, and then at first having the Vatican neither confirm nor deny the encounter — and now having the Vatican say it “won’t deny” the meeting while it still won’t offer any other details — the pope comes off as a coward.
He shows himself to be antithetical to much of what he preaches and teaches. He talks about dialogue and having the courage of one’s convictions and the courage to speak out. But he swept this Davis meeting under the rug, seemingly ashamed and certainly not wanting to broach the subject. Even Davis’s supporters should find that insulting to them.
We all knew Francis was playing a p.r. game, and we were fine with that. He was focusing on climate change, immigration and other issues passionate to him — and certainly I, and I hope everyone, still welcome whatever influence he can have on those issues. And it appeared he viewed the LGBT rights debate as a distraction from a focus on those causes. He even told U.S. bishops in a meeting during his trip that they should stop complaining about it and turn their attention to other issues. The sense was that he was probably not passionate about gay rights, but not passionate about attacking them either.
But by telling Davis that she should “stay strong” — if her attorney’s account of the encounter is to be believed — the pope is only encouraging the bigots, even if he’s doing so quietly. We don’t know all the details yet regarding how Davis came to meet Francis — if, for example, it was one of the more vocally anti-gay U.S. Catholic Church leaders who brought her along, or if the Vatican invited her.
But the optics of it are bad no matter what. Rather than moving us forward on LGBT rights ever so slightly, as many viewed the pope as doing, he now, with this meeting, emboldens the haters in the church who will be pushing to make sure church doctrine continues to call homosexuality “intrinsically disordered.” And it sends a message to all those people who’ve experienced anti-gay discrimination — like the Catholic school teachers fired from their jobs in the U.S. simply because of who they are — that this pope is not going to end that discrimination any time soon. Rather than stopping that discrimination, he welcomed, with open arms in the Vatican’s own embassy, the bigots who promote that discrimination but who’ve turned themselves into the victims.
“Music, uniquely among the arts, is both completely abstract and profoundly emotional,” Oliver Sacks wrote in contemplating music’s singular power over the human spirit — a power that has humbled some of humanity’s most brilliant minds into a state of awe that transcends the intellect.
Among them was the great German philosopher Friedrich Nietzsche (October 15, 1844–August 25, 1900). He who proclaimed that “god is dead” and believed that nothing worthwhile is easy found in music life’s sole unmerited grace.
God has given us music so that above all it can lead us upwards. Music unites all qualities: it can exalt us, divert us, cheer us up, or break the hardest of hearts with the softest of its melancholy tones. But its principal task is to lead our thoughts to higher things, to elevate, even to make us tremble… The musical art often speaks in sounds more penetrating than the words of poetry, and takes hold of the most hidden crevices of the heart… Song elevates our being and leads us to the good and the true. If, however, music serves only as a diversion or as a kind of vain ostentation it is sinful and harmful.
Nietzsche wrote these lines two months before his fourteenth birthday — a detail doubly poignant when contrasted with the “vain ostentations” marketed to teenagers today. But his profound reverence for music never left him. Toward the end of his life, he immortalized it in an aphorism included in his 1889 book Twilight of the Idols, or, How to Philosophize with a Hammer:
What trifles constitute happiness! The sound of a bagpipe. Without music life would be a mistake. The German imagines even God as a songster.
The fundamental truth about American economic growth today is that while the work is done by many, the real rewards largely go to the few. The numbers are, at this point, woefully familiar: the top one percent of earners take home more than 20 percent of the income, and their share has more than doubled in the last thirty-five years. The gains for people in the top 0.1 percent, meanwhile, have been even greater. Yet over that same period, average wages and household incomes in the US have risen only slightly, and a number of demographic groups (like men with only a high school education) have actually seen their average wages decline.
Income inequality has become such an undeniable problem, in fact, that even Republican politicians have taken to decrying its effects. It’s not surprising that a Democrat like Barack Obama would call dealing with inequality “the defining challenge of our time.” But when Jeb Bush’s first big policy speech of 2015 spoke of the frustration that Americans feel at seeing “only a small portion of the population riding the economy’s up escalator,” it was a sign that inequality had simply become too obvious, and too harmful, to be ignored.
Something similar has happened in economics. Historically, inequality was not something that academic economists, at least in the dominant neoclassical tradition, worried much about. Economics was about production and allocation, and the efficient use of scarce resources. It was about increasing the size of the pie, not figuring out how it should be divided. Indeed, for many economists, discussions of equity were seen as perilous, because there was assumed to be a necessary “tradeoff” between efficiency and equity: tinkering with the way the market divided the pie would end up making the pie smaller. As the University of Chicago economist Robert Lucas put it, in an oft-cited quote: “Of the tendencies that are harmful to sound economics, the most seductive, and…the most poisonous, is to focus on questions of distribution.”
Today, the landscape of economic debate has changed. Inequality was at the heart of the most popular economics book in recent memory, the economist Thomas Piketty’s Capital. The work of Piketty and his colleague Emmanuel Saez has been instrumental in documenting the rise of income inequality, not just in the US but around the world. Major economic institutions, like the IMF and the OECD, have published studies arguing that inequality, far from enhancing economic growth, actually damages it. And it’s now easy to find discussions of the subject in academic journals.
All of which makes this an ideal moment for the Columbia economist Joseph Stiglitz. In the years since the financial crisis, Stiglitz has been among the loudest and most influential public intellectuals decrying the costs of inequality, and making the case for how we can use government policy to deal with it. In his 2012 book, The Price of Inequality, and in a series of articles and Op-Eds for Project Syndicate, Vanity Fair, and The New York Times, which have now been collected in The Great Divide, Stiglitz has made the case that the rise in inequality in the US, far from being the natural outcome of market forces, has been profoundly shaped by “our policies and our politics,” with disastrous effects on society and the economy as a whole. In a recent report for the Roosevelt Institute called Rewriting the Rules, Stiglitz has laid out a detailed list of reforms that he argues will make it possible to create “an economy that works for everyone.”
Stiglitz’s emergence as a prominent critic of the current economic order was no surprise. His original Ph.D. thesis was on inequality. And his entire career in academia has been devoted to showing how markets cannot always be counted on to produce ideal results. In a series of enormously important papers, for which he would eventually win the Nobel Prize, Stiglitz showed how imperfections and asymmetries of information regularly lead markets to results that do not maximize welfare. He also argued that this meant, at least in theory, that well-placed government interventions could help correct these market failures. Stiglitz’s work in this field has continued: he has just written (with Bruce Greenwald) Creating a Learning Society, a dense academic work on how government policy can help drive innovation in the age of the knowledge economy.
Stiglitz served as chairman of the Council of Economic Advisers in the Clinton administration, and then was the chief economist at the World Bank during the Asian financial crisis of the late 1990s. His experience there convinced him of the folly of much of the advice that Western economists had given developing countries, and in books like Globalization and Its Discontents (2002) he offered up a stinging critique of the way the US has tried to manage globalization, a critique that made him a cult hero in much of the developing world. In a similar vein, Stiglitz has been one of the fiercest critics of the way the Eurozone has handled the Greek debt crisis, arguing that the so-called troika’s ideological commitment to austerity and its opposition to serious debt relief have deepened Greece’s economic woes and raised the prospect that that country could face “depression without end.” For Stiglitz, the fight over Greece’s future isn’t just about the right policy. It’s also about “ideology and power.” That perspective has also been crucial to his work on inequality.
The Great Divide presents that work in Stiglitz’s most popular—and most populist—voice. While Piketty’s Capital is written in a cool, dispassionate tone, The Great Divideis clearly intended as a political intervention, and its tone is often impassioned and angry. As a collection of columns, The Great Divide is somewhat fragmented and repetitive, but it has a clear thesis, namely that inequality in the US is not an unfortunate by-product of a well-functioning economy. Instead, the enormous riches at the top of the income ladder are largely the result of the ability of the one percent to manipulate markets and the political process to their own benefit. (Thus, the title of his best-known Vanity Fair piece: “Of the 1 percent, by the 1 percent, for the 1 percent.”) Soaring inequality is a sign that American capitalism itself has gone woefully wrong. Indeed, Stiglitz argues, what we’re stuck with isn’t really capitalism at all, but rather an “ersatz” version of the system.
Inequality obviously has no single definition. As Stiglitz writes:
There are so many different parts to America’s inequality: the extremes of income and wealth at the top, the hollowing out of the middle, the increase of poverty at the bottom. Each has its own causes, and needs its own remedies.
But in The Great Divide, Stiglitz is mostly interested in one dimension of inequality: the gap between the people at the very top and everyone else. And his analysis of that gap concentrates on the question of why incomes at the top have risen so sharply, rather than why the incomes of everyone else have stagnated. While Stiglitz obviously recognizes the importance of the decline in union power, the impact of globalization on American workers, and the shrinking value of the minimum wage, his preoccupation here is primarily with why the rich today are so much richer than they used to be.
To answer that question, you have to start by recognizing that the rise of high-end incomes in the US is still largely about labor income rather than capital income. Piketty’s book is, as the title suggests, largely about capital: about the way the concentration of wealth tends to reproduce itself, leading to greater and greater inequality. And this is an increasing problem in the US, particularly at the highest reaches of the income spectrum. But the main reason people at the top are so much richer these days than they once were (and so much richer than everyone else) is not that they own so much more capital: it’s that they get paid much more for their work than they once did, while everyone else gets paid about the same, or less. CorporateCEOs, for instance, are paid far more today than they were in the 1970s, while assembly line workers aren’t. And while incomes at the top have risen in countries around the world, nowhere have they risen faster than in the US.
One oft-heard justification of this phenomenon is that the rich get paid so much more because they are creating so much more value than they once did. Globalization and technology have increased the size of the markets that successful companies and individuals (like pop singers or athletes) can reach, so that being a superstar is more valuable than ever. And as companies have gotten bigger, the potential value that CEOs can add has increased as well, driving their pay higher.
Stiglitz will have none of this. He sees the boom in the incomes of the one percent as largely the result of what economists call “rent-seeking.” Most of us think of rent as the payment a landlord gets in exchange for the use of his property. But economists use the word in a broader sense: it’s any excess payment a company or an individual receives because something is keeping competitive forces from driving returns down. So the extra profit a monopolist earns because he faces no competition is a rent. The extra profits that big banks earn because they have the implicit backing of the government, which will bail them out if things go wrong, are a rent. And the extra profits that pharmaceutical companies make because their products are protected by patents are rents as well.
Not all rents are terrible for the economy—in some cases they’re necessary evils. We have patents, for instance, because we think that the costs of granting a temporary monopoly are outweighed by the benefits of the increased innovation that patent protection is supposed to encourage. But rents make the economy less efficient, because they move it away from the ideal of perfect competition, and they make consumers worse off. So from the perspective of the economy as a whole, rent-seeking is a waste of time and energy. As Stiglitz puts it, the economy suffers when “more efforts go into ‘rent seeking’—getting a larger slice of the country’s economic pie—than into enlarging the size of the pie.”
Rents are nothing new—if you go back to the 1950s, many big American corporations faced little competition and enjoyed what amounted to oligopolies. But there’s a good case to be made that the sheer amount of rent-seeking in the US economy has expanded over the years. The number of patents is vastly greater than it once was. Copyright terms have gotten longer. Occupational licensing rules (which protect professionals from competition) are far more common. Tepid antitrust enforcement has led to reduced competition in many industries. Most importantly, the financial industry is now a much bigger part of the US economy than it was in the 1970s, and for Stiglitz, finance profits are, in large part, the result of what he calls “predatory rent-seeking activities,” including the exploitation of uninformed borrowers and investors, the gaming of regulatory schemes, and the taking of risks for which financial institutions don’t bear the full cost (because the government will bail them out if things go wrong).
All this rent-seeking, Stiglitz argues, leaves certain industries, like finance and pharmaceuticals, and certain companies within those industries, with an outsized share of the rewards. And within those companies, the rewards tend to be concentrated as well, thanks to what Stiglitz calls “abuses of corporate governance that lead CEOs to take a disproportionate share of corporate profits” (another form of rent-seeking). In Stiglitz’s view of the economy, then, the people at the top are making so much because they’re in effect collecting a huge stack of rents.
This isn’t just bad in some abstract sense, Stiglitz suggests. It also hurts society and the economy. It erodes America’s “sense of identity, in which fair play, equality of opportunity, and a sense of community are so important.” It alienates people from the system. And it makes the rich, who are obviously politically influential, less likely to support government investment in public goods (like education and infrastructure) because those goods have little impact on their lives. (The one percent are, in fact, more likely than the general public to support cutting spending on things like schools and highways.)
More interestingly (and more contentiously), Stiglitz argues that inequality does serious damage to economic growth: the more unequal a country becomes, the slower it’s likely to grow. He argues that inequality hurts demand, because rich people consume less of their incomes. It leads to excessive debt, because people feel the need to borrow to make up for their stagnant incomes and keep up with the Joneses. And it promotes financial instability, as central banks try to make up for stagnant incomes by inflating bubbles, which eventually burst. (Consider, for instance, the toleration, and even promotion, of the housing bubble by Alan Greenspan when he was chairman of the Fed.) So an unequal economy is less robust, productive, and stable than it otherwise would be. More equality, then, can actually lead to more efficiency, not less. As Stiglitz writes, “Looking out for the other guy isn’t just good for the soul—it’s good for business.”
This explanation of both the rise in inequality and its consequences is quite neat, if also bleak. But it’s also, it has to be said, oversimplified. Take the question, for instance, of whether inequality really is bad for economic growth. It certainly seems plausible that it would be, and there are a number of studies that suggest it is. Yet exactly why inequality is bad for growth turns out to be hard to pin down—different studies often point to different culprits. And when you look at cross-country comparisons, it turns out to be difficult to prove that there’s a direct connection between inequality and the particular negative factors that Stiglitz cites. Among developed countries, more unequal ones don’t, as a rule, have lower levels of consumption or higher levels of debt, and financial crises seem to afflict both unequal countries, like the US, and more egalitarian ones, like Sweden.
This doesn’t mean that, as conservative economists once insisted, inequality is good for economic growth. In fact, it’s clear that US-style inequality does not help economies grow faster, and that moving toward more equality will not do any damage. We just can’t yet say for certain that it will give the economy a big boost.
Similarly, Stiglitz’s relentless focus on rent-seeking as an explanation of just why the rich have gotten so much richer makes a messy, complicated problem simpler than it is. To some degree, he acknowledges this: in The Price of Inequality, he writes, “Of course, not all the inequality in our society is the result of rent seeking…. Markets matter, as do social forces….” Yet he doesn’t really say much about either of those inThe Great Divide. It’s unquestionably true that rent-seeking is an important part of the rise of the one percent. But it’s really only part of the story.
When we talk about the one percent, we’re talking about two groups of people above all: corporate executives and what are called “financial professionals” (these include people who work for banks and the like, but also money managers, financial advisers, and so on). These are the people that Piketty terms “supermanagers,” and he estimates that together they account for over half of the people in the one percent.
The emblematic figures here are corporate CEOs, whose pay rose 876 percent between 1978 and 2012, and hedge fund managers, some of whom now routinely earn billions of dollars a year. As one famous statistic has it, last year the top twenty-five hedge fund managers together earned more than all the kindergarten teachers in America did.
Stiglitz wants to attribute this extraordinary rise in CEO pay, and the absurd amounts of money that asset managers make, to the lack of good regulation. CEOs, in his account, are exploiting deficiencies in corporate governance—supine boards and powerless shareholders—to exploit shareholders and “appropriate for themselves firm revenues.” Money managers, meanwhile, are exploiting the ignorance of investors, reaping the benefits of what Stiglitz calls “uncompetitive and often undisclosed fees” to ensure that they get paid well even when they underperform.
The idea that high CEO pay is ultimately due to poor corporate governance is a commonplace, and certainly there are many companies where the relationship between the CEO and the board of directors (which in theory is supposed to be supervising him) is too cozy. Yet as an explanation for why CEOs get paid so much more today than they once did, Stiglitz’s argument is unsatisfying. After all, back in the 1960s and 1970s, when CEOs were paid much less, corporate governance was, by any measure, considerably worse than it is today, not better. As one recent study put it:
Corporate boards were predominately made up of insiders…or friends of theCEO from the “old boys’ network.” These directors had a largely advisory role, and would rarely overturn or even mount major challenges to CEO decisions.
Shareholders, meanwhile, had fewer rights and were less active. Since then, we’ve seen a host of reforms that have given shareholders more power and made boards more diverse and independent. If CEO compensation were primarily the result of bad corporate governance, these changes should have had at least some effect. They haven’t. In fact, CEO pay has continued to rise at a brisk rate.
It’s possible, of course, that further reform of corporate governance (like giving shareholders the ability to cast a binding vote on CEO pay packages) will change this dynamic, but it seems unlikely. After all, companies with private owners—who have total control over how much to pay their executives—pay their CEOs absurd salaries, too. And CEOs who come into a company from outside—meaning that they have no sway at all over the board—actually get paid more than inside candidates, not less. Since 2010, shareholders have been able to show their approval or disapproval of CEOpay packages by casting nonbinding “say on pay” votes. Almost all of those packages have been approved by large margins. (This year, for instance, these packages were supported, on average, by 95 percent of the votes cast.)
Similarly, while money managers do reap the benefits of opaque and overpriced fees for their advice and management of portfolios, particularly when dealing with ordinary investors (who sometimes don’t understand what they’re paying for), it’s hard to make the case that this is why they’re so much richer than they used to be. In the first place, opaque as they are, fees are actually easier to understand than they once were, and money managers face considerably more competition than before, particularly from low-cost index funds. And when it comes to hedge fund managers, their fee structure hasn’t changed much over the years, and their clients are typically reasonably sophisticated investors. It seems improbable that hedge fund managers have somehow gotten better at fooling their clients with “uncompetitive and often undisclosed fees.”
So what’s really going on? Something much simpler: asset managers are just managing much more money than they used to, because there’s much more capital in the markets than there once was. As recently as 1990, hedge funds managed a total of $38.9 billion. Today, it’s closer to $3 trillion. Mutual funds in the US had $1.6 trillion in assets in 1992. Today, it’s more than $16 trillion. And that means that an asset manager today can get paid far better than an asset manager was twenty years ago, even without doing a better job.
This doesn’t mean that asset managers or corporate executives “deserve” what they earn. In fact, there’s no convincing evidence that CEOs are any better, in relative terms, than they once were, and plenty of evidence that they are paid more than they need to be, in view of their performance. Similarly, asset managers haven’t gotten better at beating the market. The point, though, is that attributing the rise in their pay to corruption, or bad rules, doesn’t get us that far. More important, probably, has been the rise of ideological assumptions about the indispensability of CEOs, and changes in social norms that made it seem like executives should take whatever they could get. (Stiglitz alludes to these in The Price of Inequality, writing, “Norms of what was ‘fair’ changed, too.”) Discussions of shifts in norms often become what the economist Robert Solow once called a “blaze of amateur sociology.” But that doesn’t mean we can afford to ignore those shifts, either, since the rise of the one percent has been propelled by ideological changes as much as by economic or regulatory ones.
Complicating Stiglitz’s account of the rise of the one percent is not just an intellectual exercise. It actually has important consequences for thinking about how we can best deal with inequality. Strategies for reducing inequality can be generally put into two categories: those that try to improve the pretax distribution of income (this is sometimes called, clunkily, predistribution) and those that use taxes and transfers to change the post-tax distribution of income (this is what we usually think of as redistribution). Increasing the minimum wage is an example of predistribution. Medicaid is redistribution.
Stiglitz’s agenda for policy—which is sketched in The Great Divide, and laid out in comprehensive detail in Rewriting the Rules—relies on both kinds of strategies, but he has high hopes that better rules, designed to curb rent-seeking, will have a meaningful impact on the pretax distribution of income. Among other things, he wants much tighter regulation of the financial sector. He wants to loosen intellectual property restrictions (which will reduce the value of patents), and have the government aggressively enforce antitrust laws. He wants to reform corporate governance so CEOs have less influence over corporate boards and shareholders have more say over CEO pay. He wants to limit tax breaks that encourage the use of stock options. And he wants asset managers to “publicly disclose holdings, returns, and fee structures.” In addition to bringing down the income of the wealthiest Americans, he advocates measures like a higher minimum wage and laws encouraging stronger unions, to raise the income of ordinary Americans (though this is not the main focus of The Great Divide).
These are almost all excellent suggestions. And were they enacted, some—including above all tighter regulation of the financial industry—would have an impact on corporate rents and inequality. But it would be surprising if these rules did all that much to shrink the income of much of the one percent, precisely because improvements in corporate governance and asset managers’ transparency are likely to have a limited effect on CEO salaries and money managers’ compensation.
This is not a counsel of despair, though. In the first place, these rules would be good things for the economy as a whole, making it more efficient and competitive. More important, the second half of Stiglitz’s agenda—redistribution via taxes and transfers—remains a tremendously powerful tool for dealing with inequality. After all, while pretax inequality is a problem in its own right, what’s most destructive is soaring posttax inequality. And it’s posttax inequality that most distinguishes the US from other developed countries. As Stiglitz writes:
Some other countries have as much, or almost as much, before-tax and transfer inequality; but those countries that have allowed market forces to play out in this way then trim back the inequality through taxes and transfer and the provision of public services.
The redistributive policies Stiglitz advocates look pretty much like what you’d expect. On the tax front, he wants to raise taxes on the highest earners and on capital gains, institute a carbon tax and a financial transactions tax, and cut corporate subsidies. But dealing with inequality isn’t just about taxation. It’s also about investing. As he puts it, “If we spent more on education, health, and infrastructure, we would strengthen our economy, now and in the future.” So he wants more investment in schools, infrastructure, and basic research.
If you’re a free-market fundamentalist, this sounds disastrous—a recipe for taking money away from the job creators and giving it to government, which will just waste it on bridges to nowhere. But here is where Stiglitz’s academic work and his political perspective intersect most clearly. The core insight of Stiglitz’s research has been that, left on their own, markets are not perfect, and that smart policy can nudge them in better directions.
Indeed, Creating a Learning Society is dedicated to showing how developing countries can use government policy to become high-growth, knowledge- intensive economies, rather than remaining low-cost producers of commodities. What this means for the future of the US is only suggestive, but Stiglitz argues that it means the government should play a major role in the ongoing “structural transformation” of the economy.
Of course, the political challenge in doing any of this (let alone all of it) is immense, in part because inequality makes it harder to fix inequality. And even for progressives, the very familiarity of the tax-and-transfer agenda may make it seem less appealing. After all, the policies that Stiglitz is calling for are, in their essence, not much different from the policies that shaped the US in the postwar era: high marginal tax rates on the rich and meaningful investment in public infrastructure, education, and technology. Yet there’s a reason people have never stopped pushing for those policies: they worked. And as Stiglitz writes, “Just because you’ve heard it before doesn’t mean we shouldn’t try it again.”
The bankruptcy of the US investment bank Lehman Brothers seven years ago today signalled a breakdown of the global capitalist economy and financial system that continues to deepen.
Within hours of Lehman’s demise, it became clear this was not simply the failure of an individual bank, but the expression of a crisis engulfing the entire US and global financial system. At that point, US financial authorities stepped in to bail out American International Group (AIG), a transnational insurance giant that threatened to go under and take the entire American and world financial system with it.
This was the start of a process that has since seen central banks around the world continually increase the supply of ultra-cheap money—the US Federal Reserve alone has pumped out more than $4 trillion—to finance the speculation and parasitism of the banks and finance houses. These measures have done nothing to alleviate the crisis. On the contrary, they have created the conditions for another disaster.
This is evidenced by the recent violent fluctuations on financial and currency markets, including the fall of the Chinese stock market and collapse of some emerging market currencies in South East Asia to their lowest point since the Asian crisis of 1997–98.
Issuing the latest quarterly review of the Bank for International Settlements at the weekend, the bank’s chief economist, Claudio Borio, noted that “debt levels are too high, productivity growth too weak and financial risks too threatening.” Referring to the most recent market turbulence, he warned: “We are not seeing isolated tremors, but the release of pressure that has gradually accumulated over years along major fault lines.”
Not only have none of the underlying contradictions that led to the crisis of 2008 been overcome, the very measures adopted over the past seven years have intensified them.
Parasitism—the accumulation of wealth through financial market speculation completely unrelated to productive activity, and, indeed, inimical to it—has grown to unprecedented heights, while the real economy has stagnated.
Economic output in Europe, one of the central components of the global economy, has still not returned to the levels it attained in 2007. And, as the International Monetary Fund and other major economic bodies have pointed out, investment levels in the major capitalist countries—the key driver of the real economy—are at least 25 percent below pre-crisis levels, with no prospect of revival.
At the same time, Chinese economic growth is falling while so-called emerging markets, once held out as a new basis for global capitalist expansion, are experiencing lower growth or outright contraction amid fears of a major financial crisis if interest rates in the US begin to rise.
One day after the collapse of Lehman Brothers, the WSWS spelled out its implications in an analysis that has in the intervening period been fully confirmed: “A sea change is unfolding in the US and world economy that portends a catastrophe of dimensions not seen since the Great Depression of the 1930s … These events are signposts in the historic failure of American and world capitalism. For the working class, they mean a rapid growth of unemployment, poverty, homelessness and social misery.”
In the immediate aftermath of the collapse, the leaders of the major capitalist powers pledged cooperation and collaboration as they tackled the crisis. Those commitments have long gone by the board, replaced by intensifying conflicts over control of markets, competitive currency devaluations and divergent policy measures.
As in the Depression of the 1930s, the capitalist breakdown has fuelled the drive to war in every part of the world. American imperialism, under the Obama administration, has intensified the drive to bring the vast Eurasian landmass and its economic resources under its control, launching a series of provocations against Russia in the West and making preparations for war against China in the East under the so-called “pivot to Asia.”
German imperialism has initiated a campaign to reassert its position as a global power, while the Japanese government of Prime Minister Abe is moving to do away with restrictions on military activity imposed under the post-war constitution.
In every country, the term “austerity” has become a by-word for deepening attacks on the working class amid rising inequality and social misery. As the wealth of the upper layers increases, wages decline and health care, education and other basic social services are targeted for endless cuts.
The bogus “war on terror” has become the justification for the shredding of fundamental democratic rights and the development of ever more authoritarian forms of rule. This is one of the clearest indications that the ruling classes themselves know they have no solution to the economic breakdown and are preparing to meet the social struggles it must produce with mass repression.
The past seven years of economic breakdown, coupled with the threat of world war, growing repression and poverty, and the creation of the largest number of refugees since World War II, testify to the historic bankruptcy of the capitalist system. That understanding must form the basis for the development of a political struggle of the international working class against war and in defence of social and democratic rights against the financial elites and their governments.
Capitalism has worked for big business and for the people with stocks and estates. But for the past 35 years our economic system, stripped of sensible regulations, has poisoned the nation with deadly inequality and driven much of middle America to an ever-wideninglower class.
Yet for much of the nation the delusion persists, against all common sense, that deregulated free-market capitalism works, that it equates to true Americanism, and that people have only themselves to blame for their failure to thrive in this expanding world of wealth. The reasons for this delusion are not hard to determine.
1. The Rich are Easy to Understand: Capitalism Justifies Selfishness
Studies have consistently shown that increased wealth causes people to turn inward, to believe more in their own “superior” traits, and to care less about the feelings and needs of others. This anti-social attitude blends well with the Ayn-Randish “greed is good” message of unregulated capitalism.
2. The Would-Be Rich: Dollar Signs Dance in Their Heads
Capitalism allows profit-seekers to view students as sources of revenue, and to drain money from the public school system. Jeb Bush likened schools to milk cartons in a supermarket aisle: “I wish our schools could be more like milk…You can get whole milk, low fat milk or skim milk…chocolate, strawberry or vanilla…milk alternatives, like soy milk, almond milk and rice milk…Who would have ever thought you could improve upon milk? Yet, freedom, innovation and competition found a way.”
Bush’s milk alternative is the charter school business. David Brain, head of the tellingly named Entertainment Properties, called it “a great opportunity set with 500 schools starting every year. It’s a two and a half billion dollar opportunity set in rough measure annually.”
But the money didn’t start rolling in until the public school system began to be starved. The U.S. Department of Education reported that $197 billion is needed to repair the nation’s K-12 public school buildings. The public system is going broke, deprived of tax dollars that go to charters. State budgets are providing less per-pupil funding for kindergarten through 12th grade than they did six years ago – in many cases far less.
And the results of the capitalist school experiment? Still coming in, although evidence is quickly accumulatingthat many charter school systems are mired in fraud and secrecy, and shaping up as a prime example of the folly of treating human beings like products to be bought and sold.
3. The Rest of Us: The Media Keeps Telling Us That Capitalism Is the Only Way to Live
The mainstream media’s unwillingness to state the truth about inequality has led people to vastly underestimate the wealth gap in our country, guessing that the poorest 40 percent own about 10% of the wealth, when in reality they own much less than 1% of the wealth. Out of every dollar, they own a third of a penny.
Conservative writers overwhelm us with their capitalist-loving mantras:
Many of them believe that the state of America is reflected in the stock market. But the richest 10% own over 90 percent of the stocks and mutual funds. No problem for the Koch Foundation. They comfort us with the knowledge that If you earn over $34,000 a year, you are one of the wealthiest one percent in the world.
4. Anyone Above the Lowest Class: It’s Empowering to Look Down on Someone
Members of the sinking middle class in our pathologically unequal society may well find it convenient to blame people in lower economic classes, who are unlikely to fight back. Guidance for such condescension comes from libertarian write Charles Murray, who apparently doesn’t understand the family stress caused by the lack of educational and employment opportunities. He accuses the poor of having a “genetic makeup that is significantly different from the configuration of the population above the poverty line.” And, he adds, “Married, educated people who work hard and conscientiously raise their kids shouldn’t hesitate to voice their disapproval of those who defy these norms.”
This inspires people like Paul Ryan and Scott Walker, both of whom compared the safety net to a “hammock,” and John Boehner, who explained the thinking of poor people: “I really don’t have to work…I think I’d rather just sit around.”
The critics of struggling Americans should be reminded that the cost of the entire Safety Net is only about ONE-SIXTH of the $2.2 trillion in tax avoidance that primarily benefits the rich.
A good American capitalist like Republican Senator Lindsey Graham would say, “It’s really American to avoid paying taxes, legally…It’s a game we play.”
It’s a game for the people looking down on a troubled nation.
The annual festival Burning Man is over and, as always, it was pretty insane. It’s hard to imagine everything the festival has to offer if you’ve never been, but try to imagine what would happen if the characters from The Maze Runner were dropped off in the middle of it. Well, Quiznos did and in addition to a hilarious video, it created one of the best critiques of Burning Man we’ve ever seen.
Rosa Clemente, who ran for Vice President with Cynthia McKinney in 2008, reminds us that Cornel West and many other notable left activists and intellectuals who have given lip-service to the need for an independent left politics in the U.S., dutifully lined-up to give their support to Barack Obama. For many of these leftists, the rationale offered to support the Democrat candidate wasn’t even about the traditional “lesser of two evils,” but a strange belief that somehow this individual, selected and pushed by powerful forces within the liberal democrat establishment and some defectors from the Clinton DLC wing of the party, represented a significant break with the neoliberal agenda that both parties had committed themselves to since the late 70s.
Brother West, who claimed that Barack Obama was a “good and decent brother” whose “character and judgement” would overcome his lack of experience, endorsed and campaigned incessantly for the freshmen senator from Illinois. In more than sixty appearances, West assured black and progressive audiences that Obama represented the embodiment of democratic hope to reverse a corrupt and moribund politics in the U.S.
Of course, being the pro-capitalist flim-flam man and opportunist pimp that he had always been for most of his adult life, Barack Obama had no intention of breaking with the corporate neoliberal agenda. Obama’s vigorous support for the bank bailout and the role he played lining up skeptical members of the Democrat party to get behind the Bush bailout in September 2008 should have been a wake-up to his “progressive” supporters that without significant pressure from his “left” all of his “liberal” campaign promises would be jettisoned and hewould govern from the right. Surprisingly, after Obama won and it became even more clear with his appointments and advisors that he was in fact going to govern as a neoliberal, many leftists, including West, withheld early criticisms of his policies and even more tragically decided to deploy a strangely passive and disempowering “wait and see” strategy.
Now almost eight years later and brother West is giving his support to Bernie Sanders, another candidate running as a Democrat. West professes a deep love for Sanders and identified Sanders as belonging to a tradition of “prophetic politicians” because according to West, he “ tells the truth about Wall Street, white supremacy, empire, patriarchy and homophobia.”
Prophetic politicians? Not only does this seem on the surface to be an oxymoronic construction, especially when one considers that bourgeois politicians almost by definition are self-creations as opposed to representing prophetic, popular mass-based movements, but his qualifiers for who would fit that category seems to disqualify every politician in the race today, including Sanders, and every mainstream person who ever ran for the presidency of the U.S.
Therefore, I think that it is legitimate to ask what is going on here. To question the politics and strategic reasoning behind what is turning out to be a consistent pattern of sheep-dogging for the Democrat party on the part of our dear brother.
“Sheepdogs are herders, and the sheepdog candidate is charged with herding activists and voters back into the Democratic fold who might otherwise drift leftward and outside of the Democratic party, either staying home or trying to build something outside the two party box.”
What is being argued here is that sheep-dogging for the democrat party is not reducible to support for this or that candidate, but to the corrupt institution and the anti-people interests represented by the democrat party itself.
I am not making some purist argument against radical participation in electoral politics or a principled opposition to a strategy of contestation within the national Democrat party depending on the objective circumstances at a particular moment.
The Sanders campaign is a fact, the only question for progressives and/or radicals is to determine how they relate or not relate to the campaign and whether or not it can be used for progressive purposes? I for one, am not interested in just attacking the campaign and have, consequently, refrained from the debate on the left around the campaign until now.
But with the endorsement of the campaign by West and the possible impact it might have for progressive and left-leaning African Americans and their attitudes toward the Democrat party and its politics, the principle of accountability that West has mentioned numerous times, demands a further explanation from West related to the politics that he claims to champion.
My position is that within the candidate-centered style of bourgeois politics, if a radical alternative and contestation within the democratic party is not grounded by an independent political structure, or an organized and coordinated radical “social bloc,” the insurgency will not last beyond the election cycle and will only result in expanding the social base of support for the party.
But even more importantly, the struggle to break the grip of the Democrat party has serious implications beyond the national electoral cycle for black politics. The local Democrat party apparatus is the home for the retrograde politics of neoliberal black petit-bourgeois urban regimes across the country. Any politics that further legitimizes the narrow politics and policy options championed by local black Democrats and their party only makes it harder to reconnect black resistance with its radical foundations and history.
To his credit, brother West broke with the liberal-centrist democrat coalition relatively early, compared to the opportunism and tailism of many other black leftist celebrities. And with Obama’s second run in 2012, West informed the public that he didn’t vote at all because he could not bring himself to vote for a “war criminal”.
But with the endorsement of Sanders, we need to ask brother West how the objective necessity for building independent power among the black working class and poor is advanced by support for the Sander’s campaign. What does that endorsement represent in terms of a strategy? Is it part of an inside-outside strategy for contesting power within the Democrat party? And if so, from what social base? Where is the authority derived from for advancing this strategy? What about the question of political independence from the bourgeois parties? Is the Sander’s campaign supposed to represent an independent thrust in U.S. politics?
In response, West might argue that his endorsement of Sanders is related to his belief that 1) Sanders represents a departure from traditional corporate democrat party priorities and that 2) Sanders can win the nomination and thus will be in a position to halt or least slow the right-ward movement of politics in the U.S., and 3) he might argue more clearly that even if Sanders does not win, his candidacy with the issues raised and the public airing of important contradictions reflected in the neoliberal corporate agenda will force the eventual nominee to take on more populist positions in favor of workers and the poor.
Assuming for the sake of argument here, that this is the rationale for West’s endorsement, and it seems to me to be the most logical explanation based on my understanding of his politics and public statements on the matter, the political calculus represented by those points does not avoid the charge of sheep-dogging for the Democrats.
West can reasonably argue that his endorsement is only his and does not represent any standing as a movement leader or the representative of any organized political structure. However, as probably the most visible black public intellectual and activist in the U.S., he understands that his endorsement goes well beyond him as an individual and that is why there must be accountability.
West argues that Sanders’ deserves support because of his positions on Wall Street and by extension the billionaire bankers that Sanders’ condemns. And of course within the context of conservative political culture in the U.S., any criticism of the extreme class contradictions represented by the wealth concentration among the small billionaire class is a welcome contribution to the ongoing ideological battle. But beyond Sander’s focus on wealth concentration and economic inequality, does his campaign utterances really differ substantially from many of the positions taken by Barack Obama in 2007-8?
However, even more damaging question for West who has always ground his politics in a revolutionary ethical framework, is how he squares his endorsement for Sanders with his ethics when it comes to Sander’s foreign policy positions.
For West, the most troubling aspect of Sanders’ foreign policy positions is his continued support for the Israeli occupation: “I don’t hear my dear brother Bernie hitting that, and I’m not gonna sell my precious Palestinian brothers and sisters down the river only because of U.S. politics.”
But as morally challenged as West might be regarding Sanders’ support for Israel, it is Sander’s positions on a whole host of other foreign policy positions that should cause some pause for brother West.
Sander’s stakes out a position very similar to many white leftists on the issue of Ukraine, Putin and the destruction of Libya and Syria. And his argument that the reactionary dictatorship of Saudi Arabia should be encouraged to become more militarily involved in the region is just bizarre.
But what should be the most problematic position for West and his endorsement of Sanders and his placement of Sanders in the category of “prophetic politicians, is his recent statement that he would continue Obama’s illegal and immoral drone warfare. And as everyone is aware, it was the issue of drone warfare waged by Obama that West relentlessly condemned.
The Dead-end Politics of Liberal Reformism and Social Democracy
There is blatant dishonesty in claiming to want a changed domestic policy in the United States without also changing foreign policy. The two are linked, and American workers can’t have a living wage or health care as long as imperialism goes unchecked. Liberals can’t claim superiority to followers of Donald Trump if they consent to war crimes and human rights violations. Their only requirement seems to be that Democrats ought to be in charge of the carnage.
While West identifies the contradictions of neoliberalism and the dominance of finance capital as the source of the economic and moral crisis of Western states, Sanders articulates a mild form of European social democracy that has never been able to fully embrace the politics that would lead to a rupture with capitalism.
Sanders program of economic nationalism from his opposition to TPP to a raising income for working people, is still based on the assumption of the continued disproportionate consumption patterns and income generation guaranteed by the global hegemony of the imperialist/capitalist West. Solidarity with the populations slated for super-exploitation as a result of these neoliberal trade agreements is not even an afterthought.
Where is the prophetic break with empire and white supremacy? Bernie Sander’s policy prescriptions appear to be firmly grounded in the grand tradition of European social democracy, that is, politically and philosophically committed to capitalist reform. His economic program reflects a position that understands the functioning of capitalism as 1) a system that can still be reformed with the right policies, and 2) is predicated on the assumption that the “American” way of life, the middle-class dream, will only be maintained by the continued, brutal suppression and exploitation of the world’s people’s.
And while West claims that he would be upset with Sanders if he just turned his power over to Clinton, are we supposed to believe that he thinks Sanders would do something differently if he didn’t win the nomination?
No brother West, we are not convinced that you and all of the other radicals who support Sanders are not going to give your support to the eventual Democratic nominee if Sanders doesn’t win the nomination.
You revealed from your own actions in 2012 that you are not committed in any way to a national electoral politics outside of the two party system when you decided that instead of voting for the only national third party candidate running in 2012, the Green Party’s Jill Stein, you made a conscious choice not to cast your vote for anyone!
Instead of drawing voters into an independent political alignment representing an authentic attempt to democratize the anti-democratic electoral processes in the U.S., you and Sanders are drawing voters into the corrupt Democratic party with no discernable plans to build anything beyond the activities of the national electoral cycle.
And brother West, you can’t quote King on his stance against militarism and support a candidate that is unable to utter a word against U.S. militarism. You can’t condemn Obama as the “drone president” and give moral cover to a candidate that confesses that he would continue that immoral policy.
You can’t proclaim the value of Black lives and support a candidate that is just as willing as the other imperialist candidates to shed non-European blood from Yemen, Gaza and Syria to the 651 military operations carried out by the U.S. military in Africa last year, in the interests of maintaining Pan-European colonial/capitalist hegemony.
“Every sheepdog candidate surrenders the shreds of his credibility to the Democratic nominee in time for the November election. This is how the Bernie Sanders show ends…”
Brother West, I raise these questions as someone who defended you when the Obama Negroes were calling for your head. You should consider that as black people in the U.S. build a militant, independent resistance movement for liberation and socialism for themselves and the people of the world, you risk your credibility in the “chocolate” cities of the U.S. and the non-white spaces of the world by once again giving your support to a democrat party candidate that is committed to upholding the interests of empire.
Unfortunately, unlike the criticism coming from the blind supporters of Obama, this time my brother, you have been caught in a moral and political contradiction of your own making.
Ajamu Baraka is a human rights activist, organizer and geo-political analyst. Baraka is an Associate Fellow at the Institute for Policy Studies (IPS) in Washington, D.C. and editor and contributing columnist for the Black Agenda Report. He is a contributor to “Killing Trayvons: An Anthology of American Violence” (CounterPunch Books, 2014). He can be reached atwww.AjamuBaraka.com