How Austerity Killed the Humanities

Not long ago, the Right fought viciously over the teaching of the humanities in American universities. Now conservatives are trying to eliminate them altogether.

BY ANDREW HARTMAN

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Few people are nostalgic for those culture wars because they were a fight between implacable foes. But in retrospect, perhaps we would do well to remember a time when all sides of a national debate believed that a humanities-based education was crucial to the survival of a democracy.

In the 1980s and 1990s, debates over the humanities were a major component of American political discourse. On the one side were conservative traditionalists who believed that all American college students should read the Western Canon—the greatest books of the Western mind since Aristotle—as a foundation for democratic living. On the other side were academic multiculturalists who believed that a humanities education should be more comprehensive and should thus include texts authored by minority, female, and non-western writers.

Those debates of the ‘80s and ‘90s were heated. Indeed, they were a major front in what came to be known as “culture wars” between merciless foes. Yet all sides in these culture wars believed a humanities education—history, literature, languages, philosophy—was inherently important in a democratic society. In short, the humanities were taken for granted. In our current age of austerity, this is no longer the case. Many Americans no longer think the humanities worthy of public support. This is especially true of conservatives, who in their quest to cut off state support to higher education have abandoned the humanities entirely.

Take the state of Wisconsin, for example. In early February, Governor and Republican presidential hopeful Scott Walker drafted a draconian state budget that proposed to decrease the state’s contribution to the University of Wisconsin system by over $300 million over the next two years. Beyond simply slashing spending, Walker was also attempting to alter the language that has guided the core mission of the University of Wisconsin over the last 100 years or more, known as the “Wisconsin Idea.” Apparently Walker’s ideal university would no longer “extend knowledge and its application beyond the boundaries of its campuses” and would thus cease its “search for truth” and its efforts to “improve the human condition,” as his proposed language changes scrapped these ideas entirely; the governor’s scaled-back objective was for the university to merely “meet the state’s workforce needs.”

When a draft of Walker’s proposed revisions to the Wisconsin Idea surfaced, outraged Wisconsinites (including some conservatives) compelled the governor to backtrack. Yet Walker’s actions are consistent with recent trends in conservative politics. Republicans today are on the warpath against education—particularly against the humanities, those academic disciplines where the quaint pursuit of knowledge about “the human condition” persists.

In 2012, Florida Governor Rick Scott proposed a law making it more expensive for students enrolled at Florida’s public universities to obtain degrees in the humanities. As Scott and his supporters argued, in austere times, they needed “to lash higher education to the realities and opportunities of the economy,” as Florida Republican and State Senate President Don Gaetz put it. In other words, a humanities degree, unlike a business degree, was a luxury good. Even President Obama joined this chorus when he half-joked recently that students with vocational training are bound to make more money than art history majors.

Such anti-intellectualism, a strong animus against the idea that learning about humanity is a worthy pursuit regardless of its lack of obvious labor market applicability, has deep roots in American history. President Theodore Roosevelt advised that “we of the United States must develop a system under which each individual citizen shall be trained so as to be effective individually as an economic unit, and fit to be organized with his fellows so that he and they can work in efficient fashion together.” Contemporary conservatives are thus merely following the crude utilitarian logic that has informed many politicians and educational reformers since the nation’s first common schools.

But it was not always thus. During the 1980s and 1990s, prominent conservatives like William Bennett, who served in the Reagan administration as chair of the National Endowment for the Humanities and then as Secretary of Education, argued that every American should have an education grounded in the humanities. This surprising recent history is largely forgotten, and not only because most conservatives now dismiss the value of the humanities. It is forgotten because the arguments forwarded by Bennett and his ilk came in the context of the traumatic culture wars, when left and right angrily battled over radically different visions of a humanities education.

Few people are nostalgic for those culture wars because they were a fight between implacable foes. But in retrospect, perhaps we would do well to remember a time when all sides of a national debate believed that a humanities-based education was crucial to the survival of a democracy.

As a leading conservative culture warrior, Bennett held a traditionalist vision of the humanities. He believed the Western canon—which he defined in the terms of Matthew Arnold as “the best that has been said, thought, written, and otherwise expressed about the human experience”—should be the philosophical bedrock of the nation’s higher education.

“Because our society is the product and we the inheritors of Western civilization,” Bennett matter-of-factly contended, “American students need an understanding of its origins and development, from its roots in antiquity to the present.”

Most academics in humanities disciplines like English and history, in contrast, took a more critical stance towards the Western canon. They believed it too Eurocentric and male-dominated to properly reflect modern American society and thus revised it by adding books authored by women and minorities. Toni Morrison was to sit alongside Shakespeare. As literary theorist Jane Tompkins told a reporter from The New York Times Magazine in 1988, the struggle to revise the canon was a battle “among contending factions for the right to be represented in the picture America draws of itself.”

Many college students agreed with the canon revisionists. In 1986, Bill King, president of the Stanford University Black Student Union, formally complained to the Stanford academic senate that the university’s required Western Civilization reading list was racist. “The Western culture program as it is presently structured around a core list and an outdated philosophy of the West being Greece, Europe, and Euro-America is wrong, and worse,” he contended, “it hurts people mentally and emotionally in ways that are not even recognized.” Stanford students opposed to the Western Civilization curriculum marched and chanted, “Hey hey, ho ho, Western culture’s got to go,” and the academic senate approved mild changes to the core reading list that they hoped would satisfy the understandable demands of their increasingly diverse student body.

A sensationalist media made Stanford’s revisions seem like a proxy for the death of the West. Newsweek titled a story on the topic “Say Goodbye Socrates.” University of Chicago philosopher Allan Bloom wrote a letter to the Wall Street Journal editor in 1989—two years after his book, The Closing of the American Mind, made a rigorous if eccentric case for a classic humanities education rooted in the Western canon—in which he argued the Stanford revisions were a travesty: “This total surrender to the present and abandonment of the quest for standards with which to judge it are the very definition of the closing of the American mind, and I could not hope for more stunning confirmation of my thesis.”

Bloom believed that a humanities education should provide students with “four years of freedom,” which he described as “a space between the intellectual wasteland he has left behind and the inevitable dreary professional training that awaits him after the baccalaureate.” Liberals and leftists might have been sympathetic to such an argument had Bloom not dismissed texts authored by women, minorities, and non-westerners as lacking merit compared to the great books authored by those like Socrates who composed the Western canon.

In retrospect, these culture wars over the humanities are rather remarkable artifacts of a history that feels increasingly distant. Whether Stanford University ought to assign John Locke or the anticolonial theorist Frantz Fanon, a debate that played out on The Wall Street Journal editorial page in 1988, would be nonsensical in today’s neoliberal climate marked by budget cuts and other austerity measures. Now Locke and Fanon find themselves for the first time on the same side—and it’s looking more and more like the losing one. On the winning side? Well, to take but one example, Winning, General Electric CEO Jack Welch’s breezy management book, which is widely read in American business schools. Sadly, even the almighty Western canon, revised or not, seems feeble up against Winning and the cult of business. Conservative defenders of the humanities are voices in the wilderness. The philistines are on the march.

The culture wars over the humanities that dominated discussion of higher education in the 1980s and 1990s had enduring historical significance. Shouting matches about academia reverberated beyond the ivory tower to lay bare a crisis of national faith. Was America a good nation? Could the nation be good—could its people be free—without foundations? Were such foundations best provided by a classic liberal education in the humanities, which Matthew Arnold described as “the best that has been thought and said”? Was the “best” philosophy and literature synonymous with the canon of Western Civilization? Or was the Western canon racist and sexist? Was the “best” even a valid category for thinking about texts? Debates over these abstract questions rocked the nation’s institutions of higher education, demonstrating that the culture wars did not boil down to any one specific issue or even a set of issues. Rather, the culture wars often hinged on a more epistemological question about national identity: How should Americans think?

But in our current age of austerity, Americans are not asked to think about such questions at all. Neoliberalism is fine with revised canons—with a more inclusive, multicultural vision of the humanities. But neoliberalism is not fine with public money supporting something so seemingly useless. American conservatives have abandoned their traditionalist defense of the Western canon in favor of no canon at all.

ANDREW HARTMAN

Andrew Hartman is associate professor of history at Illinois State University and author, most recently, of A War for the Soul of America: A History of the Culture Wars.

 

http://inthesetimes.com/article/17962/how-austerity-killed-the-humanities

Beyond the ballot box: Apoyo Mutuo in Spain

By Mark Bray On May 22, 2015

Post image for Beyond the ballot box: Apoyo Mutuo in SpainFrustrated with the empty plazas and Podemos’ electoral politics, a new social movement has emerged seeking a return to the popular horizontalism of 15-M.

Four years ago this month, the 15-M movement, commonly referred to as the indignados, burst forth in Madrid’s Puerta del Sol. The movement united a wide variety of political factions and tendencies. It managed to gain momentum behind a widespread critique of the austerity measures of the two ruling parties (the PP and the PSOE, which many 15-M signs refer to collectively as the PPSOE) and a desire for “real democracy now!” (¡Democracia real ya!) embodied in directly democratic assemblies and a rejection of hierarchy.

In May 2014, Podemos surged onto the scene as a new political party that attempted to channel the popular democracy of the 15-M into the ballot box, winning five seats in the European parliament. Although Podemos claims to be the legitimate heir to the fading 15-M movement, Left critics have argued that the new party has hastened popular demobilization by selling the notion that social ills can be simply voted away and that this new party isn’t like the ones who came before it.

Leading up to the municipal elections on Sunday May 24, the party’s poll numbers are declining as party leadership has shied away from earlier promises to end home evictions, institute a guaranteed minimum income, and reduce the retirement age from 65 to 60.

As the media focuses on poll numbers, a new initiative called Apoyo Mutuo(Mutual Aid) was unveiled in Madrid on May 9 by social movement militants skeptical of the electoral path and seeking to return to the popular horizontalism of the 15-M. I spoke with Dilia Puerta, a “militant feminist and spokesperson of Apoyo Mutuo” about the motivations behind this new project and its aspirations moving forward.

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Mark Bray: What is Apoyo Mutuo? Can you tell us a little about its origins and development up to this point?

Dilia Puerta: The origin stemmed from the frustration we felt from seeing a large part of the energy that was mobilized with the 15-M — all of this collective questioning — flowing into electoral channels, leaving the streets and the plazas practically without activity. And all of this occurred while we and many other people from the social movements who didn’t identify with this shift felt like the train had left, leaving us behind.

At this moment the idea of writing a manifesto developed and that’s how the manifesto “Building a Strong Pueblo, to make another world possible” (Construyendo Pueblo Fuerte, para posibilitar otro mundo) [which set the stage for the creation of Apoyo Mutuo] came about. It’s a manifesto that put together a declaration of intentions and in a short time has hit 600 signatories. This was the impetus behind the creation of the organization.

We are a wide range of militants who have joined together individually to enrich ourselves mutually.

So is it a network or an organization or a federation?

For now it is a network of militants who are organizing themselves at a common level across the country, and it aspires to have groups at the territorial level that will join the initiative in the future.

The announcement of the creation of Apoyo Mutuo occurred a few weeks before the municipal elections. Obviously Podemos has been a controversial product of the 15-M. How do you see the influence of the 15-M and Podemos on the emergence of Apoyo Mutuo? Are you trying to respond to the popularity of Podemos to some extent?

The 15-M was a tremendous mobilizing force: in the Puerta del Sol people with very different perspectives on social struggle joined together and we all took shelter under the umbrella of “They don’t represent us” (“No nos representan”) which was already an accessible consensus since there was a palpable feeling of indignation from a pueblo that was tired of feeling swindled by the political class and was hitting the streets to protest. In these protests the need to organize ourselves emerged rapidly…

The people who had a clear electoral agenda had acted forcefully and with coordination while those who were reticent about electoral politics were left “paralyzed,” without knowing how to articulate a common discourse and an organization that could create space for all of these sensibilities. Apoyo Mutuo was born out of this self-criticism.

It is not a response to the popularity of Podemos; it is a parallel option since we can see that the neighborhoods and plazas have been thoroughly emptied out, because the sense of representation and hopefulness that people have felt with this new electoral proposal has resulted in fewer and fewer mobilizations in the streets. This generated uncertainty for us since we believe that politics cannot be limited to the election of representatives at the ballot box every four years. We can’t delegate our responsibility; as a pueblo we need to be active agents in the decision-making process.

At the presentation of Apoyo Mutuo in Madrid on May 9 one of the speakers read a quote from the Zapatistas saying, “we don’t say to vote, but neither do we say to not vote.” Similarly, in your manifesto it says:

We respect the comrades who before this same diagnosis are opting for the route of institutional participation through electoral initiatives, but we appeal to collective memory to emphasize that rights, conquests and great social transformations have never been given by the institutions. They were fought for and won in the streets, in the workplace, and in the neighborhoods. Our memory goes back far enough to remember that only a strong and combative pueblo can impose itself on the elites that govern us.

Could you comment briefly on your perspective on the elections? It seems to me that you aren’t organizing a campaign of active abstention. Has the “Other Campaign” of the Zapatistas been an influence on Apoyo Mutuo?

Voting or not voting doesn’t seem important or transcendent to us. What we want is for people to fight for their rights beyond election day, to create new forms of self-management, to debate, to join collectives so that as neighborhoods and as a pueblo we could be capable of giving articulate and convincing responses. It isn’t so important whether you vote or abstain, as long as you act conscientiously every other day.

And of course the Zapatistas are a reference. The “Other Campaign” has been an inspiration but we are still at an early stage.

Your values and the name ‘Apoyo Mutuo’ have a lot in common with anarchism, but you don’t use the word “anarchist.” Also, your images use colors like orange, blue, brown, green and purple rather than red and black. Can you tell us a little about your decision to present your initiative in this way? What is the image that you want to present to society?

First, it’s important to clarify that we are an organization of militants from different social movements (feminists, unionists, ecologists, housing activists, etc.) and that what we have in common, among other things, is that we don’t want to delegate politics to institutional channels. Certainly within the organization a good number of people have libertarian ideas, but we don’t want to be an organization of and for anarchists; we want to reach all of those people who believe that another way is possible.

There are other groups, federations, collectives and unions with similar values. Why is it necessary to create something new? Or rather, what is the difference between Apoyo Mutuo and other initiatives?

The goal isn’t to create a new collective, but rather to reinforce the networks that already exist (it isn’t an agglomeration but rather a coordination). We all have our own personal work in our collectives. We don’t want to overload ourselves [with another group], but rather mutually enrich ourselves by creating this space of confluence.

It’s a space to articulate very unusual alliances, along the lines of a proposal by María Galindo in her book “¡A despatriarcar! Feminismo Urgente!” (“To de-patriarchalize! Urgent Feminism!”). We need to escape from identitarian ghettos that asphyxiate ideas. Sometimes within these groups one forgets to “make ideology.” Instead the same slogans are just repeated and in so doing we forget to think. Only by creating “unusual alliances” can we create and actualize a discourse for the 21st century: one where unionism enriches feminism, where feminism enriches anarchism, etc…

It’s vital that we create a political program and a common strategy that strengthens us because it’s more than proven that unity creates power.

And finally what do you have planned over the coming months? What are the next steps?

We’ve gotten a very positive reception with people from all over the country interested in Apoyo Mutuo. There is a high demand for presentations about this new initiative all over Spain and in principle organizing such presentations is one of our short-term goals so that comrades will know about us and get involved.

Also along that line in Madrid we are organizing open assemblies to present our proposals to people who come and are interested and to respond to their doubts. Also, at the end of June we will organize a national meeting with Apoyo Mutuo members from different regions to start to create a common political program.

As a pueblo we need to go on the offensive and be a real, current, and conscientious political actor. We’ve already been on the defensive for many years, trying to protect the rights that we have gained while struggling, the rights that the political class continually snatches from us while ignoring us. Creating a social consciousness is a political objective.

Mark Bray is a member of the Black Rose Anarchist Federation and the author of Translating Anarchy: The Anarchism of Occupy Wall Street. He is also a PhD candidate in Modern Spanish history at Rutgers University.You can follow him on Twitter via @Mark__Bray.

 

http://roarmag.org/2015/05/spain-apoyo-mutuo-elections/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+roarmag+%28ROAR+Magazine%29

Blood…for treasure

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Blood…for treasure. I wonder how many would give their lives these days for the 1% who own this country? For Lord Zuck’s ability to make another billion? For the right to own a data-mining iPhone? I know I wouldn’t…

Why does Greece not simply get it over with and default?

By Jerome Roos On May 21, 2015

Post image for Why does Greece not simply get it over with and default?

History has shown that defaulting countries tend to fall harder but recover faster. So why does Greece’s left-led government not simply get it over with?

Photo: healthcare workers march in Athens, 20/05/2015 (Louisa Gouliamaki).

As the Greek debt drama finally comes to a head these weeks, with the Syriza-led government quietly warning the U.S. Treasury Secretary and the chief of the International Monetary Fund that its cash reserves are now all but empty and that the government will not be paying the Fund if it does not receive an infusion of new cash before early June, a critical question arises: why do the radical leftists not simply get it over with and declare a moratorium on the outstanding debt? Why do they care about their creditors in the first place?

The question may sound trite, but it becomes increasingly perplexing once we place Greece’s never-ending debt crisis in historical perspective. During the Great Depression of the 1930s, Greece — along with most Eastern and Southern European countries and practically all of Latin America — responded to its fiscal troubles by forcefully suspending debt payments to foreign bondholders. Economic history is replete with such unilateral moratoriums. In fact, before World War II, default was simply part of the rules of the game.

A remarkable contrast

Take the first wave of sovereign defaults following the independence struggles of the Latin American countries in the 1820s. Between 1822 and 1825, London and Amsterdam-based financiers — blinded by the prospect of easy profits — gobbled up Latin American government bonds like hotcakes. Some European investors were even deceived by a legendary swindler into buying the bonds of the non-existent newly independent nation of Poyais. In those years, financial euphoria (and investor myopia) reigned supreme.

The lenders’ fall was swift and painful. Lured by cheap credit, the young Latin American debtors massively over-borrowed, while the European creditors wildly overextended themselves. After the wars were over, nearly every newly independent government fell into default. As one of the leading historians of the episode noted, “during a quarter of a century most of the borrowing countries maintained an effective moratorium on their external debts, which indicated an appreciable degree of economic autonomy from the great powers of the day.”

It is not difficult to understand why the Latin American governments would have wanted to exert this autonomy to full effect. Economists have found that countries that defaulted in the 1930s, for instance, recovered faster than those that did not. The countries that repaid their debts were forced to carry out contractionary policies (i.e., austerity measures) in order to free up the currency reserves with which to pay their debts. Transferring these scarce resources abroad directly contributed to a deepening of the crisis.

Why, then, would Greece not simply go down the same path today? The country has spent about a half of its history in a formal state of default. It defaulted on its first independence war loans in the 1830s, along with the Latin American countries. It defaulted again in 1843, in 1860 and in 1893. After the latter episode, German bondholders demanded international control over Greek finances — which they obtained with the establishment of the International Committee for Greek Debt Management following the Greco-Turkish war of 1897. Still, Greece managed to default again during the 1930s. None of these defaults occurred under radical governments.

Yet today, even under an anti-austerity government led by the radical left Syriza party, whose ranks contain an array of old-school Marxists, Greece has been scrupulously obedient to the dictates of its foreign creditors, at least when it comes to repaying the debt. This is all the more remarkable because, in a previous election campaign just three years ago, the same party still pledged tounilaterally suspend debt payments and to hold an audit of the national debt with a view to repudiating all illegal and illegitimate obligations. While the Speaker of Parliament, Zoe Konstantopoulou, has since called into life such an audit committee, Prime Minister Tsipras has sworn not to take unilateral action.

So what’s really going on here…? If less radical governments defaulted one after another in previous eras, why does Europe’s most left-wing government in recent memory not simply do the same?

Structural changes in capitalism

The short answer is that the world has changed in dramatic ways since the mid-1970s. The kind of capitalism we have today is not like the capitalism of yore. It is not like the Keynesian compromise that reigned during the post-war decades and that formed the bedrock of the Bretton Woods regime, when debt crises were practically non-existent. Nor is it like the laissez-faire liberalism of the so-called “first wave of globalization” in the classical gold standard era (1880-1914), when default was still widespread.

Unlike previous eras, today’s capitalism has been thoroughly financialized. This, in turn, has had major consequences not only for the dominance of finance within the overall regime of accumulation; it has also affected the nature of the capitalist state and its relationship to private creditors. To summarize a long and complicated story, we can identify at least three structural changes that have been seminal in shifting the loyalty of governments away from their domestic populations and towards international lenders and domestic elites.

First, the growing concentration of financial markets has rendered peripheral countries increasingly dependent on an ever-smaller subgroup of systemically important and politically influential international banks and institutional investors. Second, a host of international financial institutions have been created, most importantly the IMF and the ECB, which can jump in whenever a debtor is in distress to provide emergency “bailout” loans (under strict policy conditionality) so the debts can be repaid. Third, financialization has contributed to the entrenchment of what David Harvey calls the state-finance nexus, to the point where national governments and economies have become increasingly dependent on central banks and on domestic private banking systems just to survive. As a result, bankers have obtained vast leverage over economic policy, even when they (or their friends) are not in government themselves.

These three changes have been foundational to the generalized move away from widespread default, as was the norm prior to World War II, and towards the incredible track record of debtor compliance that has been established under the neoliberal regime of financialization. Ever since the Mexican debt crisis of 1982 — and the Latin American and Third World debt crises that followed in its wake — governments have generally tried to avoid a suspension of payments at all costs. As Harvey has put it:

What the Mexico case demonstrated was one key difference between liberalism and neoliberalism: under the former lenders take the losses that arise from bad investment decisions while under the latter the borrowers are forced by state and international powers to take on board the cost of debt repayment no matter what the consequences for the livelihood and well-being of the local population.”

Of course there have been exceptions. Russia defaulted in 1998, although the fallout was limited mostly to domestic creditors and a rogue speculative hedge fund in the US. The Argentine crisis briefly punctuated the aura of neoliberal invincibility in late 2001, but as I have argued in a previous column, a closer look reveals that the country’s default was in fact triggered by deliberate actions on the part of the Wall Street-IMF-Treasury complex. This leaves Ecuador as the only country to have imposed a unilateral default in recent decades — but even Ecuador did not do so in the outright fashion of the 1930s.

The structural power of creditors

By and large, it is therefore safe to say that the overarching rule governing international finance today is that countries will repay even under the harshest of conditions, and will rarely — if ever — default on their external obligations. This has led to a bizarre situation in which Yanis Varoufakis, the fervid Greek finance minister, has pledged to “repay private creditors to the last penny,” even promising to “squeeze blood out of a stone” to repay the IMF. These statements are patently absurd, as it was Varoufakis himself who, prior to taking office, claimed that the debt cannot be paid and argued that Greece should have “stuck the finger” to Germany and defaulted a long time ago.

Still, it should be clear by now that Syriza’s backtracking and Varoufakis’ wavering statements on whether or not the debt can and should be repaid are not the result of some personal disloyalty to the cause, nor of some grand scheme of betrayal playing out between Syriza and its supporters. Instead, what has happened is that the Greek government has run headlong into the structural power of its official creditors, and the party’s leadership does not have the guts to confront it by pursuing a rupture. The power of Greece’s creditors revolves around the fact that the IMF, the ECB and the Eurogroup, which now collectively hold about 80 percent of the country’s debt, are the only ones capable of providing the Syriza-led government with what it so urgently needs: cash.

In the end, all capitalist states stand or fall by the soundness of their finances. What matters to a government in charge of such a state is whether it can pay public sector wages and pensions — and, ultimately, police and the army. What matters, in addition, is that credit keeps circulating through the domestic economy and that cash keeps coming out of ATMs when people withdraw funds from their accounts. If, within this complex system of credit circulation, there is a sudden hiccup or a systemic blockage — if the state can no longer pay its employees, or if the banks are forced to close doors and private businesses can no longer obtain trade credit — the whole system literally grinds to a halt.

The results of such an economic freeze-up, history tells us, are usually not very pretty for those in power. Argentina’s implosion following its record default in December 2001 is a case in point. Similar revolts took place during financial crises in early-modern Europe, like when the wool carders of Florence rose up in the Ciompi revolt of 1378, or when the working classes and bourgeoisie of Paris rose up against Louis XIV during the public debt crisis in 18th-century France. Just a few days ago, a Bank of Greece official ominously warned that a bank closure might have similar consequences in Greece today: “We would see the revolt that this crisis has not yet produced. There would be blood in the streets.”

Spillover costs of default

In the past, defaulting governments were able to avoid such domestic “spillover costs” by defaulting only on foreign lenders. In the process, the burden of adjustment was effectively shifted onto private bondholders in the creditor countries, and scarce resources could be reinvested domestically in order to dampen the social consequences of the crisis and hasten the recovery. But in the complex and highly intertwined financial markets of our day and age, such discrimination between externally and domestically held debt is no longer possible. Default on one becomes default on all.

The result is to make a suspension of payments very costly in the short term. In addition to the oft-repeated “calamity” of being forced out of the Eurozone, the spillover effects of default would extend all the way down into the domestic economy and would ripple out into the social fabric, threatening political stability. No democratically elected government — let alone a leftist one — would like to take responsibility for triggering (let alone putting down) a popular revolt over disappeared pensions and wages.

The flip-side of the story, of course, is that such spillover costs generally turn out to be relatively short-lived, and may therefore end up paying off over time — ifthe government is prepared for the shock and manages to hold onto power, that is. Aided by good external conditions, Argentina’s recovery began after 6 months. Greece’s conditions may be less rosy, but there is nevertheless reason to believe that unilateral default followed by a break with the euro would lead to recovery within months. Obviously, the government would need to have a well thought-out Plan B that would allow it to bridge the difficult transition period.

This is why some of Syriza’s more radical factions are now urging the government to take this gamble and pursue a rupture with the creditors. The party’s moderate and euro-friendly leadership, however, does not appear to be willing to do so. While the divide between the two camps can partly be ascribed to ideological differences within Syriza and the fear of being punished by voters for crashing out of the Eurozone, it should be clear that the predominance of creditor-friendly solutions to international debt crises cannot be ascribed purely to a lack of “political willingness” on the part of government officials. The spillover costs of default structurally limit the room for maneuver of heavily indebted peripheral states, compelling them to repay no matter who is in charge of the government and no matter how radical their ideas may be.

These limiting factors are related to the three structural changes mentioned before. In the case of Greece, the country remains dependent on foreign sources of credit — at least in the short-term — to pay pensions and wages. Since private investors have long since stopped buying Greek debt, the only ones capable of furnishing the Greek government with much-needed cash are the Eurogroup and the IMF. Both are currently withholding promised credit tranches and refusing to extend further loans unless the Syriza government surrenders to the creditors’ dictates by effectively renouncing the anti-austerity and anti-reform platform on which it was elected.

Meanwhile, the Greek state and economy remain dependent on the functioning of the domestic credit system, which is currently kept alive with drip-feed infusions of emergency liquidity assistance (ELA) from the European Central Bank. The ECB sets the ceiling for the total amount of ELA that Greek banks are entitled to, raising this amount only marginally every two weeks. This is clearly a deliberate attempt to starve the Greek economy of liquidity and thereby put pressure on the government to surrender.

Unsurprisingly, in such a context of growing financial insecurity, ordinary Greeks fear that the government may soon impose capital controls to prevent a banking collapse, so they have begun to withdraw their bank deposits in droves: more than 35 billion has been withdrawn since December. If these trends continue, the banks may have to shut their doors within three weeks. The consequences for the Greek economy would be immediate. Without ECB help, the government would be forced to come to the rescue of the banking system with an infusion of liquidity — thus forcing it to print a new currency.

At the edge of a cliff

So for all the obvious drama, there is a grave irony in all of this. The structural power of creditors in today’s heavily financialized world economy may have succeeded in preventing the vast majority of borrowing countries from pursuing unilateral default in response to a sovereign crises; but in the case of Greece the extreme stance of the creditors, in their dogged insistence on full repayment and a complete surrender of Syriza’s radicals, is threatening to produce precisely that which it is supposed to prevent: a disorderly unilateral default.

The Eurogroup seems blind to the fact that Tsipras and Varoufakis are probably the creditors’ most reliable allies in Greece today. Both are moderate reformists with widespread popular support who are actually willing to repay, even if they know they cannot. By forcing Syriza’s relatively cooperative leadership into a humiliating cash-for-reforms deal, the creditors may actually end up strengthening the hand of the pro-default radicals inside the government. Alternatively, if they refuse to sign a deal and continue to deprive the Greek government of the emergency credit on which it depends to service its maturing obligations, they may simply make default unstoppable.

This shows that even the most watertight regimes of financial control may end up backfiring into the faces of those who run them — and while there is no way to predict that this will actually happen in Greece, the creditors clearly cannot rest on their laurels just yet. Yes, unilateral default has been largely banished from the global political economy in recent decades. And yes, national governments have long since been shackled to their creditors in an all-encompassing system of hyper-financialized capitalism. But none of this provides any guarantees that Greece’s banking system will survive long enough and its cash reserves will be replenished in time for the government to be able to pay the 1.5 billion euros falling due to the IMF over the course of June.

Standing at the edge of a cliff and confronted with such a deeply entrenched and extremely asymmetric balance of power, we should not be surprised that a young and ill-prepared government like Greece’s is hesitant to jump voluntarily. Still, no one can predict how they will react when they are pushed. Maybe it’s time to give them a little nudge from below?

Jerome Roos is a PhD researcher in International Political Economy at the European University Institute, and founding editor of ROAR Magazine. Follow him on Twitter at @JeromeRoos. This article was written for TeleSUR English.

 

http://roarmag.org/2015/05/why-does-greece-not-simply-default/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+roarmag+%28ROAR+Magazine%29

Why aren’t the banksters in prison?

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22 May 2015

On Wednesday, five major international banks, including JPMorgan Chase and Citigroup, America’s largest and third-largest financial institutions, pleaded guilty to felony charges for helping to manipulate global foreign exchange markets, paying a wrist-slap fine of about $1 billion apiece.

The financial impact on JPMorgan and the other banks for pleading guilty to a felony will be effectively zero. As part of the deal, the Securities and Exchange Commission issued waivers exempting the banks from the legal repercussions arising from their status as criminal organizations, giving them continued preferential treatment in issuing debt, as well as the continued right to operate mutual funds.

Despite the claims by Justice Department officials of a criminal conspiracy “on a massive scale,” carried out with “breathtaking flagrancy,” there was no talk of breaking up JPMorgan or any other bank, let alone bringing criminal charges against any of their executives.

The rigging of global foreign exchange rates is only the latest in the string of crimes, frauds and criminal conspiracies for which JPMorgan has been fined by US and international regulators.

* In January 2013, JPMorgan, together with 10 other banks, agreed to pay a combined $8.5 billion to settle charges that they forged documents to foreclose homes more quickly.

* In November 2013, the bank agreed to pay $13 billion to settle charges that it defrauded investors by selling fraudulent mortgage-backed securities in the run-up to the housing bubble collapse in 2007 and 2008.

* That same month, JPMorgan paid $4.5 billion to settle charges that it defrauded pension funds and other institutional investors to whom it sold mortgage bonds.

* In December 2013, JPMorgan and eight other banks were fined $2.3 billion for manipulating the London Interbank Offered Rate (Libor), the global benchmark interest rate on which the values of trillions of dollars in securities are based.

* In January 2014, JPMorgan paid $2 billion in fines and penalties to settle charges that it profited from and helped operate Bernard L. Madoff’s Ponzi scheme.

As a result of the crimes perpetrated by JPMorgan and other banks over the past decade, millions of people have had their homes foreclosed, and millions more have lost their jobs, while countless university endowments, pension plans, and municipalities have been swindled out of billions of dollars.

Based on this partial list of only the latest and largest crimes carried out by JPMorgan, it is no exaggeration to conclude that America’s largest bank is a criminal organization. Why then is it impossible to prosecute, much less jail, JPMorgan CEO Jamie Dimon, the mastermind of all of these crimes and conspiracies?

The answer to this question lies in the vast retrogression in social relations that has taken place in America amid the enormous growth of social inequality. Behind the increasingly threadbare outwards trappings of democracy, America has become an aristocratic society, with entrenched legal and social privileges for the ruling elite.

Before the French Revolution of 1789, European society was divided into feudal estates, such as the nobility, the church prelates, and the commoners. The estate into which someone was born was not only an economic category, but affected all aspects of life, from the laws that applied to him, to the types of taxes he paid, even to the kind of clothes he was legally allowed to wear.

The foundations of American democracy, laid in the aftermath of the American Revolution, were set up in opposition to the rigid social hierarchy that dominated contemporary Europe. The American Constitution prohibits the granting and holding of titles of nobility, while the 14th Amendment explicitly guarantees “the equal protection of the laws” to all people.

But could anyone argue that this is the case now? According to the American Bar Association, there are more than three hundred people serving sentences of life without parole for shoplifting in the state of California alone, while countless thousands of men throughout the United States are imprisoned for being too poor to pay child support.

Meanwhile the financial oligarchy and the state officials who defend their interests are effectively immune from prosecution. This tiny elite constitutes not merely a separate economic class, but effectively a separate estate, judged under what are, in effect, a different set of laws. A worker can be thrown in jail for failing to show up for a court date, while bankers who steal billions of dollars get off scot-free.

The American financial aristocracy is an inherently criminal class. Its wealth is based not on production, but on plunder, speculation and the upward redistribution of wealth through the impoverishment of the great majority of the population.

This financial oligarchy controls all the levers of power in contemporary society. The media, courts, politicians and so-called financial regulators are all under the thumb of the Wall Street mafiosos. Far from seeking to restrain Wall Street’s criminality, the government functions to facilitate and cover up for its crimes.

In exchange, politicians are provided with millions of dollars in campaign contributions and “speaking fees,” while top financial regulators are invariably assured high-paying positions on Wall Street after their stints with the government.

Ben Bernanke, the former Federal Reserve chairman who funneled trillions of dollars to Wall Street during the 2008 bank bailout, announced this year that he has been hired by two major Wall Street firms, the hedge fund Citadel and the bond trading firm Pimco, each of whom will presumably pay him a seven-figure salary. Bernanke followed in the footsteps of his colleague Timothy Geithner, who became the head of hedge fund Warburg Pincus in November 2013, following his stint as Treasury Secretary.

There is no way to break the power of the criminal cabal that dominates political life in the United States within the framework of the present social order. Holding the Wall Street criminals to account requires a radical reorganization of society. Only then can the criminals who head the major US financial institutions be arrested, tried and convicted of the crimes that they have orchestrated against the populations of the United States and the whole world. Their ill-gotten gains must be seized, and the major Wall Street banks must be put under democratic control by the international working class.

 

Andre Damon

 

http://www.wsws.org/en/articles/2015/05/22/pers-m22.html?view=mobilearticle

 

Token fines for banks caught rigging foreign exchange markets

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By Andre Damon and Barry Grey
21 May 2015

In yet another wrist-slap settlement for bankers involved in criminality on a massive scale, the US government on Wednesday announced that five major banks had pleaded guilty to felony conspiracy and antitrust charges and agreed to pay a combined total of approximately $5 billion in fines.

The payouts, much of them tax deductible, are a fraction of the combined profits of the banks. The amounts have already been set aside by bank CEOs as the cost of doing business in an environment in which banks routinely break the law, secure in the knowledge that there will be no serious consequences.

The banks—JPMorgan Chase, Citigroup, UBS, Barclays and RBS—admitted to conspiring to rig global currency exchange rates. They made billions of dollars by illegally manipulating rates affecting countless businesses and individuals around the world. All of the banks were previously implicated in rigging Libor (the London Interbank Offered Rate), the global benchmark used to set short-term interest rates for hundreds of trillions of dollars in loans.

Two of the banks, UBS and Barclays, carried out the foreign exchange fraud in violation of the terms of their non-prosecution agreements with the US government stemming from their involvement in the Libor scandal.

The documents released by the Justice Department in relation to the settlement point to the culture of fraud and criminality on Wall Street. As one Barclays vice president put it, “If you ain’t cheating, you ain’t trying.”

Since the Wall Street crash of 2008, these and other major banks have been cited for crimes ranging from fraudulently selling worthless mortgage securities, to laundering money for Mexican drug lords, facilitating Bernard Madoff’s Ponzi scheme, and concealing billions in speculative losses. For these crimes they have suffered no serious consequences.

Instead, regulators in the US and internationally have crafted settlements in backroom negotiations with the criminals involving token fines that turn out to be significantly smaller than the nominal figures announced by government officials.

“The criminality occurred on a massive scale,” said FBI Assistant Director Andrew McCabe, announcing the foreign exchange fraud settlement on Wednesday. He explained that traders at multiple banks rigged estimates of global currency exchange rates every day for up to five years.

US Attorney General Loretta Lynch spoke of the conspiracy’s “breathtaking flagrancy, its systemic reach, and its significant impact.” Aitan Goelman, the head of enforcement at the Commodity Futures Trading Commission, called the five banks a “cabal.”

These statements, meant to give the appearance of government toughness toward the banks, only underscored the gaping discrepancy between the scale of the crimes and the toothless character of the punishment. Wednesday’s announcement was further confirmation that the US and international financial aristocracy is above the law.

Not a single major bank has been closed down or broken up since the 2008 crash, triggered by reckless and illegal speculative activities. Not a single bank CEO or top official has been prosecuted or jailed for crimes that have led to the impoverishment of countless millions of people.

But a petty crime carried out by a US worker or working-class youth brings down the wrath of a so-called “justice system” that is merciless when it comes to the lower social orders. Tens of thousands of workers and poor people are cast into America’s prison gulag every year for offenses that pale in comparison to the crimes carried out by Wall Street CEOs.

Or they are killed outright by the militarized police who occupy America’s working-class neighborhoods. Michael Brown, an 18-year-old unarmed youth, was gunned down last August by a Ferguson, Missouri cop who was tracking him for allegedly stealing a package of cigarillos from a convenience store.

In the deal announced Wednesday, the banks pleaded guilty to felony charges. This is a departure from previous settlements in which the government allowed the banks to avoid any admission of guilt.

But the guilty pleas were part of a scheme worked out between the government and the banks to render the pleas virtually meaningless. The Securities and Exchange Commission issued waivers exempting the banks from the legal repercussions of committing a felony, giving them continued preferential treatment in issuing debt as well as the continued ability to operate mutual funds.

In today’s thoroughly corrupt political environment, totally dominated by corporate money, there is no stigma attached to a bank that effectively admits to being a criminal enterprise. The media pays no attention and the markets could care less. Shares of most of the banks involved in the settlement spiked on Wednesday. UBS and Barclays both rose 3.4 percent. RBS finished the day up by 1.9 percent.

Wednesday’s settlement is further evidence of the reassertion of the aristocratic principle in contemporary capitalist society: there is one set of laws for the vast majority, the working people, and an entirely different legal framework for the financial oligarchs—one that can be summed up with the phrase “Anything goes.”

 

http://www.wsws.org/en/articles/2015/05/21/bank-m21.html?view=mobilearticle