Central banks step in to prop up global financial bubble

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31 August 2015

Early last week, global stock markets experienced their worst selloff since the 2008 financial crisis. At the opening of US markets on Monday, the Dow Jones Industrial Average was down more than 1,000 points, its largest intraday fall in history. By the end of the week, however, the markets in the United States and Europe had staged a major rally, recovering much of what they had lost.

The reason for the turnaround in global stock markets was not hard to find. As the New York Times put it: “Once again, the Federal Reserve helped save the day for investors” who were “inspired by soothing words from an influential Fed policy maker.” By “soothing words,” the Times means the promise of further infusions of cash into the financial system, which has fueled the continual rise in equity prices.

In particular, the Times was referring to the comments of William Dudley, president of the Federal Reserve Bank of New York and a key ally of Fed Chairwoman Janet Yellen, who said that the deterioration of the US economy made the case for raising interest rates “less compelling.”

Whether or not the Fed actually raises interests rates a small amount at its meeting next month, these statements were a pledge to do whatever it takes to keep the Wall Street asset bubble inflated.

The same day, European Central Bank Executive Board member Peter Praet made clear that the ECB stood ready to go even further by expanding its ongoing “quantitative easing” money printing operation. “There should be no ambiguity on the willingness and ability of the Governing Council to act if needed,” he declared.

These announcements compounded the moves by the Chinese central bank Tuesday to cut its target interest rate and reduce banks’ reserve requirements simultaneously, sending yet another flood of money into the economy on top of the 900 billion renminbi ($140 billion) it is estimated to have injected in June and July.

It is striking that, largely on the basis of a few hints dropped by monetary policy officials, the biggest global stock market sell-off since 2008 was at least partially reversed.

These developments underscore a basic reality of the contemporary capitalist economy: the ongoing stock market surge, which has seen all three major US stock indexes triple in value since 2009, is the product not any genuine economic “recovery,” but of continual infusions of cash from global central banks.

The present situation is the outcome of an extended process. Over the course of decades, the creation of wealth for the financial elite has become increasingly divorced from any productive activity and tied ever more directly to speculation in financial bubbles—a process most nakedly expressed in the United States. As Raymond Dalio, head of Bridgewater Associates, the world’s largest hedge fund put it, “The money that’s made from manufacturing stuff is a pittance in comparison to the amount of money made from shuffling money around.”

Significantly, Dalio, whose wealth has tripled since 2008, this week called for the Federal Reserve to respond to growing turmoil in financial markets with a new round of quantitative easing.

In fact, so dependent has the global economy become on free money that former Treasury Secretary Lawrence Summers conceded in a column last week that, “Satisfactory growth, if it can be achieved, requires very low interest rates that historically we have only seen during economic crises,” concluding that “new conditions require new policies.”

Of course, the wealth of the financial elite cannot come from nowhere. Ultimately, the continual infusion of asset bubbles is the form taken by a massive transfer of wealth, from the working class to the banks, investors and super-rich. The corollary to the rise of the stock market is the endless demands, all over the world, for austerity, cuts in wages, attacks on health care and pensions.

Nowhere are these processes more clear than in the US. In the aftermath of the 2008 crash, the Obama administration and the US Federal Reserve made trillions of dollars available to the banks and major financial institutions. As a result, the share of wealth held by the richest 0.1 percent of the population grew from 17 percent in 2007 to 22 percent in 2012, while the wealth of the 400 richest families in the US has doubled since 2008.

The same period has witnessed an unprecedented decline in the incomes of working people. According to the latest Federal Reserve survey of consumer finances, between 2007 and 2013 the income of a typical US household fell 12 percent. The median US household now earns $6,400 less per year than it did in 2007.

The threatened bursting of the asset bubbles is driven by concern that the easy money policy is reaching some form of denouement, that the ammunition of central banks is drying up. All the more ferocious will be the ruling elite’s assault on the working class, in the United States and internationally.

As the WSWS wrote in 2009, “The most essential feature of a historically significant crisis is that it leads to a situation where the major class forces within the affected country (and countries) are compelled to formulate and adopt an independent position in relationship to the crisis.”

The ruling class responded to the crisis with a drive to vastly expand its own social wealth and privileges at the expense of the great majority of society. This drive will only intensify in the coming months and years. The working class must advance its own worked out program, based on an understanding of the forces that it confronts: a ruthless financial aristocracy, political institutions that are bought-and-paid for by the banks and giant corporations, and a global social system, capitalism, that has reached a historic dead-end.

Andre Damon

 

http://www.wsws.org/en/articles/2015/08/31/pers-a31.html

China’s economic downturn raises concerns about political instability

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By Peter Symonds
28 August 2015

Amid continuing global share market volatility, the financial elites around the world have been intently focussed on the movement of Chinese stock markets and more broadly on the state of the Chinese economy. Yesterday’s rise of the benchmark Shanghai Composite Index, after falls in six successive trading sessions, produced an almost audible sigh of relief as share prices responded by rising on major markets internationally.

The deluge of media commentary on the Chinese economy reflects the degree to which the world economy as a whole is dependent on continued growth in China. Speaking on the Australian Broadcasting Corporation’s “Lateline” program last night, Ken Courtis, chairman of Starfort Holdings, pointed out that “this year we’re expecting 35 to 40 percent of all the world’s growth to come from China.” If that did not happen, “then we have a real problem.”

Concerns in ruling circles that China’s economic slowdown will lead to political instability were evident in an article published in the Financial Times (FT) on Tuesday entitled, “Questions over Li Keqiang’s future amid China market turmoil.” Analysts and party insiders who spoke to the FT suggested that the Chinese premier was “fighting for his political future” after the Shanghai Composite Index plunged by 8.5 percent on Monday—its largest decline since early 2007.

Analyst Willy Lam from the Chinese University of Hong Kong told the newspaper: “Premier Li’s position has certainly become more precarious as a result of the current crisis. If the situation worsens and if there comes a point where [President Xi Jinping] really needs a scapegoat, then Li fits the bill.”

Li and Vice Premier Ma Kai were closely associated with efforts in early July to stem the falling share markets, including a ban on short selling and new stock offerings and share sales by large investors. According to the FT, state-owned institutions pumped an estimated $200 billion into the share market, only to see it plummet over the past week.

The Chinese leadership is more broadly under fire. A lengthy article in the New York Times last weekend reported that Xi had been told by powerful party elders to focus more on restoring economic growth and less on his anti-corruption drive.

Xi, however, has exploited high-profile anti-corruption cases to consolidate his grip on power, jail potential rivals or challengers, and intimidate factions critical of his government’s accelerating pro-market reform and further opening up to investment. A shrinking economy will only fuel tensions within the isolated and sclerotic Chinese Communist Party (CCP) regime and open up the prospect of renewed factional infighting.

Having all but abandoned its socialistic posturing, the CCP leadership has depended for its legitimacy on continued high levels of economic growth. The fear in Beijing and major financial centres around the globe is that rising unemployment and deepening social inequality will lead to social unrest, particularly in the working class, which is now estimated to number 400 million.

The official growth figures have fallen this year to 7 percent—well below the 8 percent level that the CCP long regarded as the minimum required for social stability. Many analysts, however, regard even 7 percent as significantly overstating actual growth. A recent Bloomberg survey of 11 economists put the median estimate of Chinese growth at 6.3 percent.

Others put the figure far lower. Analyst Gordon Chang told the Diplomatwebsite that “influential people in Beijing” were “privately saying that the Chinese economy was growing at a 2.2 percent rate.” He pointed to other indicators of declining economic activity: rail freight (down 10.1 percent in the first two quarters of 2015), trade volume (down 6.9 percent), construction starts by area (down 15.8 percent) and electricity usage (up by just 1.3 percent).

While the Beijing leadership is under pressure to boost the economy, the slowdown in China is bound up with the broader global crisis of capitalism. The restoration of capitalism in China over the past three decades has transformed the country into a vast cheap labour manufacturing platform that is heavily reliant on exports to the major economies.

In highlighting China’s contribution to world growth, Ken Courtis noted on “Lateline” yesterday that “Japan is contracting or in great difficulty still, the US is growing at 2, 2.5 percent, [and] Europe is slugging around at 1.5, 1 percent.” These economies, however, are precisely the markets on which China depends. The latest figures for July showed that exports slumped by 8.3 percent year-on-year, with exports to Europe and Japan down 4 percent, partially compensated by a rise of 7 percent to the US.

Following the 2008 global financial crisis, the CCP leadership only maintained economic growth through a massive stimulus package and the expansion of credit. However, with exports and industrial production stagnating, the money flowed into infrastructure spending, property speculation and, more recently, stock market speculation. Notwithstanding occasional rallies in response to government measures to ease credit, falling property prices over the past year, and now plunging share prices, underscore the fact that these speculative bubbles are unsustainable.

The Chinese regime is under international pressure to accelerate its pro-market reform agenda, including privatisation of state-owned enterprises (SOEs) and the further liberalisation of the financial sector to open up new profit opportunities for foreign investors. Such measures, however, will only heighten the social gulf between rich and poor and provoke wider social unrest. The last round of privatisations in China resulted in the destruction of tens of millions of jobs.

The Beijing regime, which represents the interests of the tiny layer of Chinese millionaires and billionaires, is deeply fearful of the emergence of a movement of the working class. The fact that questions are being raised about the future of Prime Minister Li Keqiang is an indicator of the existing sharp tensions that will only intensify as financial and economic turmoil worsens and impacts on the lives of hundreds of millions of people.

 

http://www.wsws.org/en/articles/2015/08/28/chin-a28.html

What’s Behind the Stock Market’s Rollercoaster Ride?

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The real problem is that we’re in a nonrecovery in America, and Europe is in an absolute class war of austerity.

In an interview with Democracy Now!. economist Michael Hudson talked about the wild ride on Wall Street Monday that saw the Dow Jones Industrial Average initially fell a record 1,100 points before closing down nearly 600 points. “The real problem is that we’re still in the aftermath of when the bubble burst in 2008,” he told Amy Goodman, “that all of the growth in the economy has only been in the financial sector, in the monopolies—only for the 1 percent. And it’s as if there are two economies, and the 99 percent has not grown. And so, the American economy is still in a debt deflation. So the real problem is, stocks have doubled in price since 2008, and the economy, for most people, certainly who listen to your show, hasn’t grown at all.

Below is an interview with Hudson, followed by a transcript:

http://www.democracynow.org/embed/story/2015/8/25/casino_capitalism_economist_michael_hudson_onAMY GOODMAN: “Black Monday.” That’s how economists are describing yesterday’s market turmoil, which saw stock prices tumble across the globe, from China to Europe to the United States. China’s stock indexes fell over 8 percent Monday and another 7 percent today. On Wall Street, the Dow Jones Industrial Average initially fell a record 1,100 points before closing down nearly 600 points. The decline also caused oil prices to plunge to their lowest levels in almost six years.

Joining us now to try to make sense of what’s really behind the fluctuations in the market is economist Michael Hudson, president of the Institute for the Study of Long-Term Economic Trends, a Wall Street financial analyst and distinguished research professor of economics at the University of Missouri, Kansas City. His latest book, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.

MICHAEL HUDSON: Welcome to Democracy Now! It’s great to have you with us.

Thanks for having me again.

AMY GOODMAN: Professor Hudson, talk about what happened in China and what happened here in the United States.

MICHAEL HUDSON: Well, what happened in China doesn’t have very much to do at all with what happened in the United States. Wall Street would love to blame China, and the Obama administration would love to blame China, and Europe would love to blame China. But most of the Chinese stocks went down because small Chinese investors were borrowing from, let’s say, the equivalent of payday loan lenders to buy stocks. There was a lot of small speculation in Chinese stocks pushing it up. But this was an internal Chinese phenomenon. And China, as a whole, doesn’t really have the problems.

The real problem is that we’re still in the aftermath of when the bubble burst in 2008, that all of the growth in the economy has only been in the financial sector, in the monopolies—only for the 1 percent. And it’s as if there are two economies, and the 99 percent has not grown. And so, the American economy is still in a debt deflation. So the real problem is, stocks have doubled in price since 2008, and the economy, for most people, certainly who listen to your show, hasn’t grown at all.

So, finally, the stocks were inflated really by the central bank, by the Fed, creating an enormous amount of money, $4.5 trillion, essentially, to drop over Wall Street to buy bonds that have pushed the yields down so high—so low, to about 0.1 percent for government bonds, that pension funds and investors say, “How can we make money?” So they buy stocks. And they borrowed at 1 percent to buy up stocks that yield maybe 4 percent. But who are the largest people who buy the stocks? They’re the companies themselves that have done stock buybacks. They’re the managers of the companies that have used their earnings, essentially, to push up stock prices so they get more bonuses. Ninety precent of all the earnings of the biggest companies in America in the last five years have gone for stock buybacks and dividends. It’s not being invested. It’s not building new factories. It’s not employing more people.

So, the real problem is that we’re in a nonrecovery in America, and Europe is in an absolute class war of austerity. That’s what the eurozone is, an austerity zone. So that’s not growing. And that’s really what’s happening. And all that you saw on Monday was just sort of like a shift, tectonic shift, is people realizing, “Well, the game is up, it’s time to get out.” And once a few people want to get out, everybody sees the game’s up.

AMY GOODMAN: And China?

MICHAEL HUDSON: In China, it’s largely small borrowers who borrowed from intermediate lenders, that have borrowed from the big banks. So a lot of individuals in China that tried to get rich fast by riding the stock market all of a sudden find out that they have a lot of debt to intermediate, you know, non-bank lenders, insiders, people who banks will lend to. It’s like the British banks lending to real estate speculators to lend out to homebuyers. So this is essentially the attempt to get rich by riding the stock market in China went way overboard. Chinese stocks are still above what they were at the beginning of the year. This is not a crisis. This is not very much. It’s just that the artificial increase in the market has now ended some of the artificial push-up. And it’s still artificial, and it will still go down some more.

AMY GOODMAN: I’m surprised you say that what happened in China and what happened in the United States are not related.

MICHAEL HUDSON: They are related in a way, but the U.S. funds have not invested very much in the Chinese stocks. Most of the China fund stocks are inHSBC, which lends to China—the bank. The break first happened in China, but the break itself was within China. And this showed investors—this is a symptom—that what happened in China is going to happen in Europe, and it’s going to happen in the United States.

AMY GOODMAN: Talk about China as the world’s second largest economy, and what you think would be the healthiest relationship between China and the United States.

MICHAEL HUDSON: Well, the economy is not the stock market. China’s economy had to accumulate a large amount of foreign reserves just to withstand the kind of American financial war that brought the Asia crisis of 1997. So China acted defensively. It exported a lot, developed huge international reserves to make itself independent of the West. And now it’s in the middle of shifting away from an export economy to begin to produce for its own people. I mean, why should Chinese workers spend all their lives making goods for Wal-Mart to sell in the United States and Europe? Why don’t they make goods for themselves to raise their own standard of living? That was what China’s doing, and that means that China doesn’t have to export more, and there’s really nowhere to export to, if Europe isn’t growing and the U.S. consumers aren’t spending. Obviously, the attempt is to make China itself grow. But the Chinese took the money; instead of consumer goods, they bought stocks.

AMY GOODMAN: As markets in China plunged Monday, former U.S. treasury secretary and president emeritus of Harvard University, Larry Summers, tweeted this dire prediction: “As in August 1997, 1998, 2007 and 2008 we could be in the [early] stage of a very serious situation.” Is he overstating what’s going on?

MICHAEL HUDSON: The question is: What does he mean by “situation”? When he says “situation,” he means his constituency, the 1 percent. He doesn’t mean the economy as a whole, the 99 percent. He’s been wrong on almost everything that he’s called. What he’s calling for now is: You have to cut taxes on the 1 percent more; you have to give the 1 percent more money, and it will all trickle down. This is part of his patter talk, trying to support his usual right-wing position. But you have to be very careful when you listen to Larry Summers.

AMY GOODMAN: Michael Hudson, your book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy. Explain what you mean.

MICHAEL HUDSON: Well, most people think of parasites as sort of just taking, taking money from the economy, and the 1 percent is sort of sucking up all the income from the 99 percent. But in nature, what parasites do, they don’t simply take. In order to take, they have to take over the brain of the host. And economists have a word, “host economy.” It’s for a foreign country that lets American investors in. Smart parasites help the host grow. But the parasite, first of all, has to make the host believe that the intruder is actually part of the body, to be nurtured and taken care of. And that’s what’s happened in national income accounting in America and in other countries. The newspapers and the media—not your show, but most of the media—treat the financial sector as if that’s really the economy, and when the stock market goes up, the economy is going up. But the economy isn’t going up at all.

And the financial sector somehow depicts itself as the brains of the economy, and it would like to replace government. What Larry Summers said is what—governments have to pay their debts by privatizing more, essentially, by doing what Margaret Thatcher did in England. That’s his solution to the crisis: All the governments have to do is balance the budget, sell everything to Wall Street on credit, and we won’t have any more problem. And that’s basically—the financial sector is almost at war, not only against labor, as most of the socialists talk about, but against governments and against industry. It’s cannibalizing industry. So now most of the corporations in America are using their income not to do what industrial capitalism did a century ago, not to build more factories and employ more people and make more profits; they’re just using it, as I said, to push it to pay dividends and to buy back their shares and to somehow manipulate the financial sector in the stock prices, not the economy as a whole. So there’s been a divergence between the real economy and what I call the—economists call the FIRE sector—finance, insurance and real estate. And they’re going in separate directions.

AMY GOODMAN: You are—you have been an adviser to the Syriza party in Greece. You’re a friend of the former finance minister, Yanis Varoufakis. Can you talk about what’s happening there now and what that bodes for the economy, not only in Greece, but in Europe, maybe even here?

MICHAEL HUDSON: Well, the story begins, actually, about four years ago, when Greece had a very large foreign debt, taken on basically by the military government and what followed. And it was obvious that as soon as thePASOK, the socialist party, came in, they said, “Look, the debt’s much larger than we thought. We can’t pay it.” And they were going to write it down. TheIMF looked in and said, “Greece can’t pay the debts. We’ve got to write them down.” The board looked in, said they can’t pay the debts. But then the European central banks came in and said, “Look, our job as central bankers is to support the banks. Greece owes the debt to the, essentially, French banks and German banks, and we’ve got to support them.” So, despite the fact that the IMF was pushing for a debt write-down four years ago—the head of theIMF at that time, Dominique Strauss-Kahn, wanted to run for president of France, and he was told by French President Sarkozy, “Well, wait a minute, if French banks hold most of Greek debts, you can’t, at the IMF, say that we’re going to write down the debts.” So they didn’t. And meanwhile, the eurozone said, “We won’t let you, the IMF, be part of our program, the troika, if you don’t pretend that Greece can pay the debt.”

So Greece was left with a huge debt. It was pushed into depression. The GDP fell worse than it did in the 1930s. Finally, the Syriza party came in, in January, and Varoufakis and Tsipras thought, “Well, then, OK, we can explain to the finance ministers of Europe that you can’t expect to push Greece into a depression, push more austerity, and somehow austerity will enable us to repay the debt. That’s crazy.” And he thought that he could reason with them. And the Europeans, who he was reasoning with, the central bankers, said, “We’re not here to talk about economics. We’re lawyers. We’re here to collect money. It doesn’t matter that you’re going to go into a depression. It doesn’t matter that you’re going to have to have another 20 percent of your population emigrate. We’re only here to collect the payments. And if you don’t pay, then we’re going to pull the plug.”

And they pulled the plug on the Greek banks a few months ago and said, “We’re not going to accept any of the bank transfers, payments with Greek banks here. So, if you’re exporting and you want credit for export, you’re not going to give it to you. We’re going to treat Greece like America treated Cuba and America treated North Korea. You’re going to be the North Korea of Europe if you don’t succumb, surrender and pay.” And that’s why Tsipras said, “Oh, my—we don’t want to bring an absolute, you know, total breakdown, because that would bring the right wing to power.” Varoufakis said, well, he agrees that there’s no alternative but to sort of surrender for the present and try to join hands with Italy, Spain and Portugal, but he wasn’t going to be the administrator of the depression. So you had the referendum, and the Greeks now say, “Well, no matter what, we’re not going to pay.” And the eurozone says, “Then we’re going to just wreck you, or smash and grab.”

AMY GOODMAN: I want to ask you very quickly about presidential politics, about two of the Republican presidential candidates, Jeb Bush and John Kasich. Both worked for Lehman Brothers, Kasich after he ran for—after he was a congressman; Jeb Bush, according to The Wall Street Journal, Bush signed on with Lehman after leaving the Florida Governor’s Mansion, making it clear he wanted to work as a hands-on investment banker. I believe he made something like $14 million working for Lehman and then Barclays.

MICHAEL HUDSON: Well, almost—both parties are basically run by Wall Street. The Democratic Party, ever since Bill Clinton, was run by Robert Rubin. And all of the secretaries of the treasury, the officials, have basically come from Goldman Sachs, especially Tim Geithner. One of the problems in Greece, by the way, was that Obama and Geithner, coming from the Rubin group, met at the Group of Eight meetings and told—were told, basically, Greece, “You have to pay, because the American banks have made so many big bets on Greek bonds that if Greece doesn’t repay”—this is back in 2011—”then the American banks will go under, and if we go under, we’re going to pull Europe down.” So, the American banks basically—we’re talking about Wall Street investment firms. They don’t—they’re called investment bankers, but they don’t invest. They gamble. And we’re really much more in casino capitalism than finance capitalism.

So you have Wall Street people basically running politics, whether they’re the actual politicians—Obama didn’t work on Wall Street, but he worked with the real estate families. No matter who the president is, they’re going to appoint Treasury heads and Fed, Federal Reserve, heads from Wall Street. Wall Street has a veto power on all the major Cabinet positions, and so, essentially, the economy is being run by the financial sector for the financial sector. That’s the problem with politics in America today.

AMY GOODMAN: Michael Hudson, thank you very much for being with us, president of the Institute for the Study of Long-Term Economic Trends, a Wall Street financial analyst, distinguished research professor of economics at the University of Missouri, Kansas City. His latest book, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.

 

Amy Goodman is the host of Democracy Now! and the co-author of The Silenced Majority.

 

http://www.alternet.org/economy/whats-behind-stock-markets-rollercoaster-ride?akid=13420.265072.agKDr2&rd=1&src=newsletter1041522&t=18

Fed acts to push US stocks higher

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By Barry Grey
27 August 2015

A top official of the Federal Reserve Board broadly hinted Wednesday that the US central bank, contrary to previous indications, would not begin to raise its benchmark interest rate at the September meeting of its policymaking committee.

The statement by William Dudley, president of the Federal Reserve Bank of New York and vice chairman of the Fed’s Federal Open Market Committee (FOMC), was timed to buttress and expand an early morning rally on US stock exchanges, which had seen over $2 trillion in market capitalization wiped out in massive declines over the previous six trading sessions. Over those six days, the Dow lost 11 percent of its market value.

Speaking in New York about one hour after the 9:30 a.m. start of trading, Dudley said, “From my perspective, at this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago.” “Normalization” is Fed-talk for beginning to gradually lift the federal funds rate from near-zero, where it has remained since shortly after the September 2008 Wall Street crash.

Dudley’s remarks carry additional weight because he is known to be a close ally of Fed Chairwoman Janet Yellen. His statement was a calculated signal to Wall Street banks and other financial interests that the US central bank and government were prepared to open the cash spigot even wider and provide whatever public funds were necessary to shield the financial elite from the consequences of a new eruption of the global capitalist crisis.

When Dudley made his remarks, an opening bell surge of 430 points on the Dow Jones industrial average had fallen back to 300 points and fears were mounting of a repeat of Tuesday’s session, when an opening gain of 442 points turned into a rout in the final 30 minutes of trading, with the Dow closing down 205 points, or 1.3 percent.

Dudley’s intervention had the desired effect. Major investors went on a buying spree and drove the rally higher, resulting in massive gains for all three major indexes—the Dow, the Standard & Poor’s 500, and the technology-laden Nasdaq. The Dow finished with a gain of 619 points (3.5 percent), the S&P 500 closed 73 points higher (3.90 percent), and the Nasdaq gained 191 points (4.24 percent). These were the biggest one-day gains for all three indexes since the second half of 2011.

The surge on US markets came despite another down day on Chinese markets. An early rally on the Shanghai Composite Index collapsed, leading to a 1.3 percent loss at the close of trading. It was the fifth consecutive down session, during which the main Chinese exchange has lost more than a quarter of its value.

The loss was all the more significant in that it followed Tuesday’s announcement by the Chinese central bank of major moves, including a quarter percentage point cut in the benchmark interest rate and a reduction in bank reserve capital ratios, designed to push hundreds of billions of dollars worth of new cash into the country’s financial markets.

The surge on Wall Street came as well against the backdrop of new losses on European markets. On Wednesday, the French CAC 40 closed down 1.40 percent, the German DAX lost 1.29 percent, and Britain’s FTSE 100 index declined by 1.68 percent.

There were other signs that the global deflationary pressures underlying the recent stock market selloffs were continuing unabated. The protracted fall in commodity prices continued, with oil prices falling in both the US and Europe. The drop in the US market followed the release of weekly US inventory data showing a drop in gasoline demand and record-high stockpiles of crude oil and petroleum products.

Copper prices were down 3.1 percent.

Besides the sharp slowdown in Chinese economic growth and collapsing commodity prices, the other acute expression of a worsening world slump and mounting financial problems is the crisis in the so-called emerging market economies. Countries ranging from Brazil, to Russia, Turkey, Indonesia, Thailand, and South Africa are reeling from falling stock and bond prices, plunging currencies, and increasing indebtedness.

They are being hit particularly hard by the slowdown in China, a major market for commodity exports, and the broader combination of plunging commodity prices and glutted markets. On Tuesday, South Africa, the biggest economy on the African continent, unexpectedly reported that its economic output contracted by 1.3 percent on an annualized basis in the second quarter. Economists had predicted a gain of 0.6 percent, itself a sharp decline from the country’s first-quarter 1.3 percent expansion.

In his morning remarks to reporters, Dudley alluded to the recent global stock market and currency turmoil. “International developments have increased the downside risk to US economic growth somewhat,” he said. “The slowdown in China and the sharp fall in commodity prices are increasing the strains on many emerging market economies and this could lead to a slower global growth rate and less demand for US goods and services.”

While implicitly acceding to demands from prominent financial figures, such as former Treasury Secretary Lawrence Summers, to delay any increase in interest rates, Dudley rebuffed the call made Tuesday by Summers and Ray Dalio, head of hedge fund giant Bridgewater Associates, for a new round of “quantitative easing,” i.e., Fed bond purchases, to directly pump additional billions of dollars into US financial markets.

“I’m a long way from quantitative easing. The US economy is performing quite well,” he said. He also held out the possibility of the Fed raising rates before the end of 2015, saying, “I really hope we can raise interest rates this year.”

But in signaling the Fed’s determination to do whatever is necessary to rescue the financial aristocracy from the consequences of its own speculative and semi-criminal activities, Dudley is making clear that the ruling class will continue to carry out the very policies that, far from producing a genuine recovery, have deepened the crisis announced by the Wall Street meltdown of 2008.

The US central bank and government, and their counterparts internationally, have focused all of their efforts on rescuing the financial oligarchy and creating the conditions for it to further enrich itself at the expense of the working class.

The primary means has been the provision of unlimited funds to subsidize and underwrite the parasitic activities of the banks and hedge funds. The main mechanism for promoting what the Fed calls the “wealth effect,” i.e., the enrichment of the financial-corporate elite, has been the stock market, with the Fed financing a massive inflation of share values by means of zero interest rates and money-printing in the form of quantitative easing.

Before the latest market turmoil, share values on US markets had tripled from their lows at the height of the financial crisis in early 2009, and stock markets internationally had hit record highs.

This has gone hand in hand with a relentless attack on the conditions of the working population by means of mass layoffs, wage-cutting and the gutting of social programs. Governments have been bankrupted by the diversion of funds to bail out the banks and speculators, whose debts have been shifted onto the balance sheets of the capitalist state, with the working class made to foot the bill.

Meanwhile, the real economy has been starved of productive investment and left to stagnate. The current stock market turmoil reflects the growth of deflationary forces in the global economy that threaten to overpower the efforts to inflate and maintain financial bubbles for the benefit of the rich.

 

http://www.wsws.org/en/articles/2015/08/27/econ-a27.html

As global selloff deepens, US stock market teeters on edge of collapse

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By Barry Grey
25 August 2015

World stock markets continued to plummet Monday, fueled by another steep decline in Chinese shares and concerns over a marked slowdown in the world’s second-largest economy and turmoil in emerging market economies.

The Shanghai Composite Index fell 8.5 percent, its sharpest fall since February 2007, bringing its losses since June to nearly 40 percent. Major stock exchanges across Asia followed suit, with Japan and Hong Kong falling 4.6 percent and 5.2 percent, respectively.

The panic spread to Europe, with the British, German and French indexes plunging between 4.6 percent and 5.2 percent. Stocks also sank across the Middle East and in Latin America.

But the meltdown was most intense in the United States. With pre-market futures for the Dow Jones Industrial Average down 700 points, the Dow collapsed at the opening bell, along with the S&P 500 and Nasdaq indexes.

Within four minutes of the trading start, the Dow had sunk by 1,089 points, or 6.6 percent, the biggest single-day point drop in US history. The Nasdaq dropped 400 points, or more than 8 percent, and the S&P 500 fell over 100 points, about 5 percent.

The massive and seemingly unstoppable wave of selling shocked market experts and commentators and provoked comparisons to the “Black Monday” trading disaster of 1987, when the Dow plunged 22 percent in one day. There were many indications that a full-scale meltdown was in progress.

Apple stock plunged 13 percent at the opening, prompting CEO Tim Cook to go on CNBC television to reassure Apple investors that the company’s business in China was not threatened. Apple ended the day with a 2.47 percent loss.

Online brokerage firms TD Ameritrade and Scottrade were swamped by a wave of sell orders, blocking many investors from gaining access to their accounts. Scottrade said that it experienced a 230 percent spike in trading volume at the opening.

The VIX, a market index that measures volatility and is known as the “fear index,” hit 53. The last time it was over 50 was in March 2009, when the market hit bottom following the September 15, 2008 Wall Street crash.

The atmosphere of panic was also reflected in a large-scale move from stocks to US government bonds. The yield on US ten-year Treasury notes, considered a safe haven, fell below 2 percent for the first time in months, reflecting a surge in demand for the bonds.

Yet five minutes after the initial US market collapse, a wave of buying cut the losses in half. At one point the Dow came within 115 points of breaking even. The selloff resumed later in the day and the Dow ended the session with a loss of 588 points, or 3.6 percent. The S&P 500 ended down 77 points, or 3.94 percent, and the Nasdaq closed with a loss of 179 points, a decline of 3.82 percent.

All three indexes are in “correction” territory, having declined by more than 10 percent from their recent highs.

There can be little doubt that the Federal Reserve Board and related government agencies intervened behind the scenes to organize the massive buying spree that halted the opening market plunge. Reports emerged later that the New York Stock Exchange had invoked an obscure and rarely used rule to preempt panic selling. Rule 48 speeds up the opening of trading by suspending a requirement that stock prices be announced at the beginning of the session. This may have been used to facilitate an intervention by the Fed.

Given the role of the Fed in financing the tripling of stock prices since the 2008-2009 crash by holding interest rates at near-zero and pumping trillions of dollars into the financial markets, such an intervention to once again rescue the financial elite would not be an aberration. The entire policy of the Fed and other major central banks and governments since the eruption of the crisis seven years ago has been focused on engineering a vast redistribution of wealth from the working class to the corporate-financial elite through a combination of austerity and record high stock prices.

The unprecedented bull market has been the main mechanism for further enriching the world’s multimillionaires and billionaires, even as the real economy was starved of productive investment and remained mired in stagnation. The current stock market panic reflects the growth of deflationary pressures in the global economy that are overpowering the efforts to inflate and maintain financial bubbles for the benefit of the rich and the super-rich.

The slowdown in China, marked by a decline in manufacturing and falling exports and investment, is itself an expression of a global downturn. China is hit particularly hard because it has been the main impetus for global economic growth since the 2008 crisis and is heavily dependent on expanding world production and markets for its industrial exports. Its attempts to stimulate growth through infrastructure projects, real estate speculation and an expansion of its stock markets have foundered against a general climate of stagnant or anemic growth in the US, Europe and Japan.

Analysts attributed Monday’s further decline in Chinese stocks to disappointment over the government’s failure to intervene more strongly to prop up the market after a series of sharp falls last week. The regime gave approval for Chinese pension funds, with some $550 billion in assets, to invest in the stock market, but failed to lower the level of bank reserves, which would free up cash to plough into the market.

“The pension fund signal didn’t work, which proves that investors have entirely lost confidence in the market,” said Wu Xianfeng, president of Longteng Asset Management in Shenzhen. “The market has been in a panic since last week.”

The slowdown in China and in the world economy more broadly, along with a rise in the US dollar, has undermined so-called emerging market economies from Brazil and Mexico to Turkey, Russia, Indonesia and South Africa, which depend on China as a market for their commodities exports. The financial markets and currencies of these countries have been plunging for weeks, exacerbating the international tendencies toward slump and threatening to spark a financial crisis.

A definitive expression of economic stagnation is the ongoing decline in commodity prices. US oil prices on Monday fell another 5 percent to six-year lows, dipping below $38 a barrel. Brent crude oil fell below $45 for the first time since 2009. London copper and aluminum futures also hit their lowest levels since 2009.

Since China devalued its currency two weeks ago following poor data on exports and industrial activity, trillions of dollars in market value worldwide have been wiped out as a result of falling stock prices. Germany’s DAX index has lost 22 percent since its April high.

“Until we have some sign that China and the emerging markets aren’t being sucked into some vortex from which they can’t recover…it is unlikely this selloff will stem,” Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, told Reuters.

A former adviser to ex-British Prime Minister Gordon Brown was more apocalyptic. Damian McBride tweeted advice on “the looming crash,” stressing the need to put “hard cash in a safe place” and not assume that banks will be open. Suggesting the eruption of civil strife and state repression, he counseled the need to stock up on “bottled water, tinned goods & other essentials at home to live a month indoors.”

He further advised the preparation of a “rally point” for loved ones “in case transport and communication get cut off.”

 

http://www.wsws.org/en/articles/2015/08/25/econ-a25.html

Why the Rich Love Burning Man

Burning Man became a festival that rich libertarians love because it never had a radical critique at its core.

burning-man

In principle the annual Burning Man festival sounds a bit like a socialist utopia: bring thousands of people to an empty desert to create an alternative society. Ban money and advertisements and make it a gift economy. Encourage members to bring the necessary ingredients of this new world with them, according to their ability.

Introduce “radical inclusion,” “radical self-expression,” and “decommodification” as tenets, and designate the alternative society as a free space, where sex and gender boundaries are fluid and meant to be transgressed.

These ideas — the essence of Burning Man — are certainly appealing.

Yet capitalists also unironically love Burning Man, and to anyone who has followed the recent history of Burning Man, the idea that it is at all anticapitalist seems absurd: last year, a venture capitalist billionaire threw a $16,500-per-head party at the festival, his camp a hyper-exclusive affair replete with wristbands and models flown in to keep the guests company.

Burning Man is earning a reputation as a “networking event” among Silicon Valley techies, and tech magazines now send reporters to cover it. CEOs like Mark Zuckerberg of Facebook and Larry Page of Alphabet are foaming fans, along with conservative anti-tax icon Grover Norquist and many writers of the libertarian (and Koch-funded) Reason magazine. Tesla CEO Elon Musk even went so far as to claim that Burning Man “is Silicon Valley.”

Radical Self-Expression

The weeklong Burning Man festival takes place once a year over Labor Day weekend in a remote alkali flat in northwestern Nevada. Two hours north of Reno, the inhospitable Black Rock Desert seems a poor place to create a temporary sixty-thousand-person city — and yet that’s entirely the point. On the desert playa, an alien world is created and then dismantled within the span of a month. The festival culminates with the deliberate burning of a symbolic effigy, the titular “man,” a wooden sculpture around a hundred feet tall.

Burning Man grew from unpretentious origins: a group of artists and hippies came together to burn an effigy at Baker Beach in San Francisco, and in 1990 set out to have the same festival in a place where the cops wouldn’t hassle them about unlicensed pyrotechnics. The search led them to the Black Rock Desert.

Burning Man is very much a descendent of the counterculture San Francisco of yesteryear, and possesses the same sort of libertine, nudity-positive spirit. Some of the early organizers of the festival professed particular admiration for the Situationists, the group of French leftists whose manifestos and graffitied slogans like “Never Work” became icons of the May 1968 upsurge in France.

Though the Situationists were always a bit ideologically opaque, one of their core beliefs was that cities had become oppressive slabs of consumption and labor, and needed to be reimagined as places of play and revolt. Hence, much of their art involved cutting up and reassembling maps, and consuming intoxicants while wandering about in Paris.

You can feel traces of the Situationists when walking through Black Rock City, Burning Man’s ephemeral village. Though Black Rock City resembles a city in some sense, with a circular dirt street grid oriented around the “man” sculpture, in another sense it is completely surreal: people walk half-naked in furs and glitter, art cars shaped like ships or dragons pump house music as they purr down the street.

Like a real city, Burning Man has bars, restaurants, clubs, and theaters, but they are all brought by participants because everyone is required to “bring something”:

The people who attend Burning Man are no mere “attendees,” but rather active participants in every sense of the word: they create the city, the interaction, the art, the performance and ultimately the “experience.” Participation is at the very core of Burning Man.

Participation sounds egalitarian, but it leads to some interesting contradictions. The most elaborate camps and spectacles tend to be brought by the rich because they have the time, the money, or both, to do so. Wealthier attendees often pay laborers to build and plan their own massive (and often exclusive) camps. If you scan San Francisco’s Craigslist in the month of August, you’ll start to see ads for part-time service labor gigs to plump the metaphorical pillows of wealthy Burners.

The rich also hire sherpas to guide them around the festival and wait on them at the camp. Some burners derogatorily refer to these rich person camps as “turnkey camps.

Silicon Valley’s adoration of Burning Man goes back a long way, and tech workers have always been fans of the festival. But it hasn’t always been the provenance of billionaires — in the early days, it was a free festival with a cluster of pitched tents, weird art, and explosives; but as the years went on, more exclusive, turnkey camps appeared and increased in step with the ticket price — which went from $35 in 1994 to $390 in 2015 (about sixteen times the rate of inflation).

Black Rock City has had its own FAA-licensed airport since 2000, and it’s been getting much busier. These days you can even get from San Carlos in Silicon Valley to the festival for $1500. In 2012, Mark Zuckerberg flew into Burning Man on a private helicopter, staying for just one day, to eat and serve artisanal grilled cheese sandwiches. From the New York Times:

“We used to have R.V.s and precooked meals,” said a man who attends Burning Man with a group of Silicon Valley entrepreneurs. (He asked not to be named so as not to jeopardize those relationships.) “Now, we have the craziest chefs in the world and people who build yurts for us that have beds and air-conditioning.” He added with a sense of amazement, “Yes, air-conditioning in the middle of the desert!”

The growing presence of the elite in Burning Man is not just noticed by outsiders — long-time attendees grumble that Burning Man has become “gentrified.” Commenting on the New York Times piece, burners express dismay at attendees who do no work. “Paying people to come and take care of you and build for you . . . and clean up after you . . . those people missed the point.”

Many Burners seethed after reading one woman’s first-person account of how she was exploited while working at the $17,000-per-head camp of venture capitalist Jim Tananbaum. In her account, she documented the many ways in which Tananbaum violated the principles of the festival, maintaining “VIP status” by making events and art cars private and flipping out on one of his hired artists.

Tananbaum’s workers were paid a flat $180 a day with no overtime, but the anonymous whistleblower attests that she and others worked fifteen- to twenty-hour days during the festival.

The emergent class divides of Burning Man attendees is borne out by data: the Burning Man census (yes, they have a census, just like a real nation-state) showed that from 2010 to 2014, the number of attendees who make more than $300,000 a year doubled from 1.4% to 2.7%. This number is especially significant given the outsize presence 1 percenters command at Burning Man.

In a just, democratic society, everyone has equal voice. At Burning Man everyone is invited to participate, but the people who have the most money decide what kind of society Burning Man will be — they commission artists of their choice and build to their own whims. They also determine how generous they are feeling, and whether to withhold money.

It might seem silly to quibble over the lack of democracy in the “governance” of Black Rock City. After all, why should we care whether Jeff Bezos has commissioned a giant metal unicorn or a giant metal pirate ship, or whether Tananbaum wants to spend $2 million on an air-conditioned camp? But the principles of these tech scions — that societies are created through charity, and that the true “world-builders” are the rich and privileged — don’t just play out in the Burning Man fantasy world. They carry over into the real world, often with less-than-positive results.

Remember when Facebook CEO Mark Zuckerberg decided to help “fix” Newark’s public schools? In 2010, Zuckerberg — perhaps hoping to improve his image after his callous depiction in biopic The Social Network donated $100 million to Newark’s education system to overhaul Newark schools.

The money was directed as a part of then–Newark Mayor Cory Booker’s plan to remake the city into the “charter school capital of the nation,” bypassing public oversight through partnership with private philanthropists.

Traditionally, public education has been interwoven with the democratic process: in a given school district, the community elects the school board every few years. School boards then make public decisions and deliberations. Zuckerberg’s donation, and the project it was attached to, directly undermined this democratic process by promoting an agenda to privatize public schools, destroy local unions, disempower teachers, and put the reins of public education into the hands of technocrats and profiteers.

This might seem like an unrelated tangent — after all, Burning Man is supposed to be a fun, liberating world all its own. But it isn’t. The top-down, do what you want, radically express yourself and fuck everyone else worldview is precisely why Burning Man is so appealing to the Silicon Valley technocratic scions.

To these young tech workers — mostly white, mostly men — who flock to the festival, Burning Man reinforces and fosters the idea that they can remake the world without anyone else’s input. It’s a rabid libertarian fantasy. It fluffs their egos and tells them that they have the power and right to make society for all of us, to determine how things should be.

This is the dark heart of Burning Man, the reason that high-powered capitalists — and especially capitalist libertarians — love Burning Man so much. It heralds their ideal world: one where vague notions of participation replace real democracy, and the only form of taxation is self-imposed charity. Recall Whole Foods CEO John Mackey’s op-ed, in the wake of the Obamacare announcement, in which he proposed a healthcare system reliant on “voluntary, tax-deductible donations.”

This is the dream of libertarians and the 1 percent, and it reifies itself at Burning Man — the lower caste of Burners who want to partake in the festival are dependent on the whims and fantasies of the wealthy to create Black Rock City.

Burning Man foreshadows a future social model that is particularly appealing to the wealthy: a libertarian oligarchy, where people of all classes and identities coexist, yet social welfare and the commons exist solely on a charitable basis.

Of course, the wealthy can afford more, both in lodging and in what they “bring” to the table: so at Burning Man, those with more money, who can bring more in terms of participation, labor and charity, are celebrated more.

It is a society that we find ourselves moving closer towards the other 358 (non–Burning Man) days of the year: with a decaying social welfare state, more and more public amenities exist only as the result of the hyper-wealthy donating them. But when the commons are donated by the wealthy, rather than guaranteed by membership in society, the democratic component of civic society is vastly diminished and placed in the hands of the elite few who gained their wealth by using their influence to cut taxes and gut the social welfare state in the first place.

It’s much like how in my former home of Pittsburgh, the library system is named for Andrew Carnegie, who donated a portion of the initial funds. But the donated money was not earned by Carnegie; it trickled up from his workers’ backs, many of them suffering from overwork and illness caused by his steel factories’ pollution. The real social cost of charitable giving is the forgotten labor that builds it and the destructive effects that flow from it.

At Burning Man the 1 percenters — who have earned their money in the same way that Carnegie did so long ago — show up with an army of service laborers, yet they take the credit for what they’ve “brought.”

Burning Man’s tagline and central principle is radical self-expression:

Radical self-expression arises from the unique gifts of the individual. No one other than the individual or a collaborating group can determine its content. It is offered as a gift to others. In this spirit, the giver should respect the rights and liberties of the recipient.

The root of Burning Man’s degeneration may lie in the concept itself. Indeed, the idea of radical self-expression is, at least under the constraints of capitalism, a right-wing, Randian ideal, and could easily be the core motto of any of the large social media companies in Silicon Valley, who profit from people investing unpaid labor into cultivating their digital representations.

It is in their interest that we are as self-interested as possible, since the more we obsess over our digital identity, the more personal information of ours they can mine and sell. Little wonder that the founders of these companies have found their home on the playa.

It doesn’t seem like Burning Man can ever be salvaged, or taken back from the rich power-brokers who’ve come to adore it and now populate its board of directors. It became a festival that rich libertarians love because it never had a radical critique at its core; and, without any semblance of democracy, it could easily be controlled by those with influence, power, and wealth.

Burning Man will be remembered more as the model for Google CEO Larry Page’s dream of a libertarian state, than as the revolutionary Situationist space that it could have been.

As such, it is a cautionary tale for radicals and utopianists. When “freedom” and “inclusion” are disconnected from democracy, they often lead to elitism and reinforcement of the status quo.

 

https://www.jacobinmag.com/2015/08/burning-man-one-percent-silicon-valley-tech/

How Colleges Train For Work, Not For Thought

Prof. Larry Wilkerson discusses the role universities play in prepping a work force rather than an intellectual force.

JARED BALL, PRODUCER, TRNN: Welcome, everyone, back to the Real News Network. I’m Jared Ball here in Baltimore.

While leading Democratic party politicians are now hawking new plans for a debt-free college experience, which of course sounds great to what are now the most indebted college graduates in world history, there are still some concerned about the kind of education even those not having to pay at all would receive. In a recent article for Harper’s magazine William Deresiewicz describes a situation where, as he says, colleges have sold their soul to the market.

To discuss this is Larry Wilkerson, former chief of staff to Colin Powell and a professor at the College of William and Mary. We welcome back Col. Wilkerson to the Real News. Welcome back.

LARRY WILKERSON, FMR. CHIEF OF STAFF TO COLIN POWELL: Thanks, Jared. Good to be with you.BALL: So tell us what you think about this article. It suggests that neoliberalism has taken hold, and the designs of the corporate world are all that most universities are being encouraged, at least, to be concerned about. What do you see is the problem here with this trend?

WILKERSON: This is an age-old problem, as you probably know. It goes way back in the life of universities, certainly argued majorly in or on campuses like Oxford University, Cambridge University in England, and other, older schools. It is typified by on the one side the humanists, the exponents of liberal arts, of teaching young men and young women how to think critically as opposed to skills enhancement and training, and those on the other side of the argument exemplified at that time by the Huxley brothers, scientists, by those who reflect what we’re talking about today when we say STEM, science, technology, engineering and so forth.

And what is increasingly becoming the case, and I think is the real object of the article in Harper’s and others who are talking about this in great detail today, and that is the predatory capitalist state, which is what we have become in addition to being a national security state. That predatory capitalist state wants, one, workers who are not going to question things. That is to say, they can’t think critically. And it wants people who are more or less inured to what they produce, do, and mean in daily existence. That is to say, they want workers who are compliant with the structure that we’ve created in this country, the structure that works for minimum wages, that does things that need to be done for the corporate good, and so forth.

It’s a meaner argument, if you will, today. I can give the Huxley brothers their due, as they argued for example with John Henry Cardinal Newman about whether a liberal arts education or a science-based education was the best. And like Plato and Aristotle I would probably argue that somewhere in between is probably the best kind of education. That is to say, you need scientists who can think critically too, and therefore be good voters and so forth, and you need humanists that know something, liberal arts people who know something about science, engineering, math, and so forth. That’s the ideal world.

What you do not need is colleges and universities that are focused on getting jobs for people, and getting jobs in a society that is increasingly plutocratic, that is to say, the only people with the really good jobs are at the very top, and everybody else is a worker bee for those people. That’s what these colleges and universities are tending towards now, and that’s what the advertisements, that’s what the brouhaha in U.S. News and World Report and other places like that is all about. Oh, you’re spending $200,000 for Jane’s education. Then Jane needs to get a job, and she doesn’t need an education. What she needs is training and skills enhancement. Well, that’s not the purpose of a university.

BALL: But this sounds like, to me at least, that this is an expansion, as you said, of a much longer existing problem. That is, that for many, that is for working whites, for poor working whites in this country and certainly for African-descended people and indigenous people, there has long been a history of teaching those communities only to be part of the workforce. That is, with Native American residential schools, with the industrial schools of the 19th century for African-Americans, for the establishment of a public school system in this country in general that was designed specifically to prepare white working people for their roles in society, that this has long been an issue.

So how is this discussion, other than upping it, so to speak, into the upper echelons of society, how is this a change in terms of the history of this country’s education, generally speaking?

WILKERSON: It’s not a change in the sense that you just expressed it, that it has all this complexity, all this nuance and all these different parts to it. For example, there is the part of minority education, the part of minorities being shorted for 400 years, still being shorted. I worked in the DC public school system, for example, for Colin Powell for ten years. It is for all intents and purposes I was segregated when I worked in it as it was in 1850, if it existed at that time. I mean this is no, nothing news to people who’ve worked in inner city schools, that minorities get short shrift when it comes to education.

But this is a bigger argument. It’s a huge argument at the very top of what you might call the sophistication of education argument. And it is first of all, should everyone get a university education, well, I for one, I’m talking about. The answer to that question is no. no matter how egalitarian you may be, everyone in the world does not need to be a philosopher, does not need to be a Ph.D in nuclear physics, and so forth. They don’t have the intellectual capacity, and frankly–and this is more important–they don’t have the inclination.

There are plenty of people that ought to run automotive repair shops, ought to be tradesmen and craftsmen and so forth. And we’ve sort of lost that in this culture today because what we are is a finance giant. We service people, we finance things. We don’t do any real making of anything anymore. But there is a niche, a huge niche in our society for artisans. For craftsmen. For people who by their own wishes don’t want what I’m talking about when I say a university education. And in many cases, aren’t intellectually equipped for it.

So that’s the first division you have to make, and you do have to make that division. We’ve been very [inaud.] by allowing the market to make that division, which is why we get so many idiots who are billionaires, and so many bright people who are not making any money at all. It’s a hypocritical stance in this country that we take on merit and education, and so forth.

But back to the argument, the university takes in people who are intellectually, mentally predisposed to and want to be critical thinkers. That’s not everybody in society. I daresay if a study were done, and it were done over time, you’d probably find 30-40 percent of any given society that really ought to have a university education of the type I’m talking about. Other types of education that mostly community colleges can offer, that are in fact sort of a combination of what I mean by education and what I mean by skills enhancement that are aimed at particular niches in society for example, computer training being the latest example of that on a broad base, ought to be done also. But this is a sort of combination of the university and the artisan segments of society.

The Germans do this really well. They have trade schools and they have universities. And they know everyone’s not going to university, by inclination or by capability. So they identify those people and send those people to university. Those who want trades and good jobs in trades, like working at Mercedes or BMW or whatever, they then send to trade school. Because they want to go to trade school, and because they have intellectual and other capacity to do that. This is the way education should be divided in this country. But hypocrites that we are, hypocrites that we’ve always been, we say everyone should have a $250,000 or more university education. That’s pure poppycock.

BALL: Larry Wilkerson, thanks again for joining us here at the Real News.

WILKERSON: Thanks for having me on, Jared.

BALL: And thank you for joining us here at the Real News. For everyone involved, again, I’m Jared Ball here in Baltimore. And as always, as Fred Hampton used to say, to you we say peace if you’re willing to fight for it. So peace everybody, and we’ll catch you in the whirlwind.

 

Jared A. Ball is the author of “I MiX What I Like: A MiXtape Manifesto” (AK Press, 2011) and co-editor of “A Lie of Reinvention: Correcting Manning Marable’s Malcolm X” (Black Classic Press, 2012). Ball is an associate professor of communication studies at Morgan State University in Baltimore, Maryland and can be found online at IMixWhatILike.org.

 

http://www.alternet.org/education/how-colleges-train-work-not-thought?akid=13408.265072.1tPeuq&rd=1&src=newsletter1041316&t=16