The escalation of global financial parasitism


25 May 2015

The announcement last week by the European Central Bank (ECB) that it was going to front-load asset purchases under its quantitative easing program was another revealing insight into the state of global financial markets. It underscored their volatility and the lack of any overall plan by the financial authorities, supposedly in charge, who rush from one trouble spot to another as they seek to prevent the eruption of another crisis.

The decision to step up purchases in May and June came in response to a major fall-off in German 10-year bonds, Bunds. Their yield, which moves in an inverse relationship to the price, jumped from near zero to above 0.55 percent in a matter of a few days.

Announcing the decision last Monday, ECB executive board member Benoit Coeuré said it was not the reversal in the price of Bunds and other sovereign bonds that was of concern but the speed with which it took place as it was another sign of “extreme volatility” and “reduced liquidity.” In other words, the ECB feared that if the sell-off gathered momentum it could be the start of a major crisis and hence it was necessary to step in.

The reaction in financial markets to the promise of enhanced funding from the ECB pointed to the escalation of parasitism which has become the central feature of financial markets and indeed the global economy more broadly.

Notwithstanding concerns that the US economy is not going to rebound in the second quarter—after a growth rate of only 0.2 percent in the first quarter, a figure that may even be revised down—continuing stagnation in Europe and the ever-increasing signs of a significant downturn in China, financial markets celebrated. The key Wall Street index, the S&P 500, experienced two record highs last week, with the Dow industrials index also touching a record on one day.

The rise in stock markets expresses not the health, but rather the deepening sickness, of the global economic order. This was made clear on Friday when markets fell on the indications by US Federal Reserve Bank’s Janet Yellen that the central bank may be considering a slight turn towards a more normal interest rate regime later in the year. They will almost certainly respond positively to any bad economic data on the basis that such news will ensure that the free-money spigot will not be tightened.

The global character of rampant parasitism was revealed in data published this week on the state of financial markets in China. Chinese brokers have raised $14 billion in capital this year—more than the past three years combined—and put half of this into the stock market.

The money is being used for margin lending where loans are secured against the stocks that have been purchased. Despite further evidence of slowing Chinese growth—factory activity, according to the latest purchasing manager’s index, has contracted for the third month in a row and is at its lowest level in a year—the Shanghai composite index is up 44 percent so far this year. It is being fuelled by the belief that as the economy worsens Chinese financial authorities will lower interest rates and take other measures to increase the supply of credit.

The disease, however, is concentrated at the very heart of the global economy and financial system. According to an article published in the New York Timeslast week, the financial sector is reporting profits that, as a proportion of the economy, are as high as they were in the early 2000s, while merger and acquisition deals, organised through Wall Street finance houses are above levels reached before the global financial crisis of 2008.

With increased financial activity comes increased criminality. Another New York Times article published earlier this month noted that in a recent study one third of people who made more than $500,000 per year said they had either witnessed or had first-hand knowledge of wrong doing. Nearly one in five felt that “financial service professionals must sometimes engage in unethical or illegal activity to be successful in the current environment.” Given the tendency not to admit to criminal activity, even in a survey, both figures are likely to be higher.

The escalation of financial parasitism points to the eruption of another global financial crisis. However, as last week’s intervention by the ECB makes clear, the situation is significantly different from seven years ago.

Prior to 2008, the central banks were not directly involved in the daily operations of financial markets. They stood aside, acting as guardians of the stability of the financial system, establishing the framework for its operations. Today, they are active participants in the market and their activities become a new source of instability as the case of the ECB demonstrates.

Following the ECB’s decision to begin purchases of sovereign debt in March at the rate of €60 billion a month until at least September 2016, the yield on sovereign bonds plunged to zero and below on the basis that their price would continue to rise because of central bank purchases. But when bonds prices fell, the ECB had to suddenly intervene lest the house of cards it had created collapsed.

It is impossible to predict what might prove to be the immediate source of a new crisis. Most likely it will be something not predicted by financial authorities. In the period leading up to September 15, 2008 there were warnings of growing dangers contained in the growth of the American sub-prime mortgage market. However Fed chairman Ben Bernanke claimed it would have no wider effect because of the smallness of this market in relation to the financial system as a whole.

Whatever might provide the initial spark, the objective conditions for a new crisis are lodged within the very operations of the financial system. Financial profits cannot continue to rise indefinitely under conditions of stagnation and outright recession in the real economy because, in the final analysis, financial assets represent a claim upon real wealth. The price of assets can continue to rise—even for a considerable period—so long as money keeps pouring into markets, but when the bubble bursts they turn out to be “toxic.”

While the course of financial events cannot be exactly predicted, the response of the ruling elites has already been established. For the past seven years, their policies have seen the accumulation of vast fortunes for the speculators and outright criminals who occupy the heights of society, while the conditions for the mass of working people have worsened.

Now they intend to deepen this onslaught. This determination was on display during the ECB’s annual conference held in Sintra, Portugal over the weekend. ECB president Mario Draghi called for “structural reforms” to realise “untapped potential” for higher output.

The claims of higher growth are so much window dressing as was made clear in comments by London-based economist Paul De Grauwe. He said when the central bank called for “structural reforms” it really meant the system of government protections should be removed. The bank, he said, was “setting itself outside the democratic process.”

The imposition of financial dictatorship is not a hypothetical issue—it has already been implemented in Greece, impoverishing millions of people. In conditions where they have no solution to the deepening crisis, the financial elites and their representatives are demanding it be extended.

Nick Beams

Despite surplus, California governor releases austerity budget


By Dan Conway
23 May 2015

California Governor Jerry Brown released the so-called May Budgetary Revision on May 15, outlining proposed state spending for the 2015-2016 fiscal year. The measures included in the May Revision are typically adopted in the enacted state budget.

The May Revision incorporates larger than expected state income and capital gains tax revenue. It uses the expanded revenue not to restore past cuts but to create new school privatization schemes, expand the state’s rainy day budget stabilization fund and to otherwise insure continued hardship for the working class.

California is the most populous state in the country and also the poorest. According to the official federal poverty measure, which is based on an annual income threshold of three times the cost of basic nutritional requirements, the state’s poverty rate is 16 percent meaning 6.1 million residents are poor. Nearly 2.5 million of these have incomes less than half of the official poverty line and half of both these groups are children.

Using the US Census Bureau’s Supplemental Poverty Measure, however, which also factors in the price of other basic necessities such as shelter, clothing and utilities, California is the most impoverished state in the country with nearly a quarter of the state’s 38 million residents, or 8.9 million people in poverty.

The administration of Governor Jerry Brown has mercilessly used state budgets to impose austerity on the working class. Said Brown upon assuming office after a nearly 30 year absence, “If you’re looking for frugality, I’m your man.”

Brown has enacted massive cuts to the CalWorks Welfare to Work program, SSI recipients, funding for AIDs education and research and numerous other critical programs for the most vulnerable sections of the population.

The new budget does not restore a single dime to CalWorks despite the fact that 1.2 million impoverished Californians already use the program. 900,000 of those dependents are children. To qualify for the CalWorks Grant, recipients must receive an annual income of less than 50 percent of the federal poverty line and thanks to cuts imposed by Brown and Governor Schwarzenegger before him, CalWorks recipients receive $180 per month less, adjusted for inflation, than they did in 2008.

Funding will also not be restored to cuts made to the state’s Supplemental Security Income/State Supplementary Payment (SSI/SSP) program that provides payments to the disabled. The program has been cut to the legal minimum of $156 per month per recipient and cost of living adjustments or COLA, typically tied to the rise in the state’s Consumer Price Index, have not been restored.

The budget also maintains a ten percent cut to Medi-Cal, the state-subsidized health insurance program. The cut was enacted at the same time that the income threshold for Medi-Cal eligibility had been raised as part of the state’s implementation of the Affordable Care Act or Obamacare. This was meant to insure that more workers would be forced to move onto the Medi-Cal rolls in a time of diminishing benefits. Under Brown, the Medi-Cal program no longer offers dental and vision services.

The only areas in the state budget that will see a significant increase in funding are in public education and in the state’s rainy day fund, which itself is meant to capture increased revenues and insure that they are not used to restore prior cuts to social programs.

Passed by state voters in 2014, Proposition 2 sets aside 1.5 percent of general fund revenues to the rainy day or state budget stabilization account. It also requires an additional transfer of capital gains tax revenues exceeding eight percent of general fund revenues to the account.

Half of the existing rainy day fund balance may be used to pay down outstanding state debt, while the remaining balance may only be used in cases of emergency if the state is running a budget deficit.

Because of the release of a portion of the existing rainy day account in the May Revision, there is now a $6.1 billion increase in funding for Public Education compared with the 2013-2014 school year, provided that these provisions in the Revision are included in the enacted budget.

As made explicitly clear in the terms of the Revision, the majority of the overall education spending will be directed towards the newly-created Local Control Funding Formula (LCFF). Under the terms of the LCFF, local school districts receive a certain amount of funding per student with those districts with a higher percentage of disabled, minority or immigrant students receiving higher funding.

Those districts can spend the money as they see fit provided that they implement “reforms” tied to standardized testing, Common Core Evaluation standards and show significant improvement in performance on those tests and other key areas each year. An example of measurable improvement would be a one percent increase in high school graduation rates each year for eight years.

To the extent that such measures cannot be realized, districts so affected would not only lose LCFF funding but would potentially fall victim to pro-charter school conversion measures such as the so-called Parent Trigger law. Under this reactionary law, a “failing” public school can be converted into a private charter operation if a majority of parents support it.

The open backing by state government of private charter schools is also made abundantly clear in the May Revision’s lack of funding for traditional public schools. Despite the overall Proposition 98 funding increase, funding for traditional public schools is decreased by $224 million in the Revision.

Also, while Cost of Living Adjustments remain in place for LCFF programs, traditional public schools will see a COLA decrease from 1.58 percent to 1.02 percent or $22.1 million.

The California Community College System (CCC) will also see a significant reduction in traditional funding as a result of the governor’s May Budget Revision. Traditional Proposition 98 funding to the CCC will be reduced by $156.1 million and COLAs are likewise to be reduced from 1.58 percent to 1.02 percent. Energy efficiency projects at CCC in the midst of one of the largest droughts in state history are also to be reduced by $825,000.

In addition to a meager $75 million expenditure to increase full time faculty, the May Revision provides $626 million to repay outstanding state debt and also to implement plans for curricula redesign and start up costs to expand the career and technical education programs and reorient the community college’s overall educational missions accordingly.

$30 million is also designated towards creating “student success outcome” plans at CCC. These are designed to provide funds to underrepresented student groups to maintain “equity,” the current political buzzword employed as a smokescreen to distract attention from overall diminishing funding levels for education.

The CCC is the largest network of state community colleges in the country, with more than 2.3 million students enrolled.

The Brown administration also reached a well-publicized agreement with the University of California (UC) Board of Regents, freezing state tuition for the next two years in exchange for reducing course loads and the amount of time it takes for students to complete their degrees. Out of state tuition will continue to increase by as much as eight percent per year.

UC enrollment rates are at their lowest levels ever as more students apply for the same number of slots available. Enrollment rates at the UC are half of what they were in the mid-1990s even though the number of academically qualified students has not declined accordingly.

As a result, Brown, together with UC Board Regent and former Department of Homeland Security head Janet Napolitano are blaming the lack of UC access on unmotivated students who are taking too long to finish their degrees and are simply taking advantage of too many opportunities to educate themselves. As such, course credit requirements will be reduced and entire classes eliminated to push through UC students more quickly.

Similar measures would also be implemented at the larger California State University system (CSU) under the terms of the May Revision.

As the state faces a $72 billion liability for retiree health care, a major overhaul in how public pensioner health benefits is also now underway. This would involve state workers pre-funding their benefits, changing from a pay-as-you-go method towards paying into a prefunded, interest-accruing trust fund. The cost of this fund would largely be borne by state workers themselves.

Workers would not only have to rely on a static, inadequate funding source to pay for increasing medical costs when they retire, the minimum amount of time these workers must have on the job to even be eligible for the program is a full thirty years.

Perhaps the most significant portion of the May Revision is what it portends for future state budgets.

The introduction to the May Revision reads, “Despite stronger revenues, the budget remains precariously balanced and faces the prospect of deficits in succeeding years. The state has hundreds of billion of dollars in existing liabilities, such as deferred maintenance on its roads and other infrastructure and its unfunded liability for future retiree health care benefits for state employees and various pension benefits.”

There can be no doubt that future budgets will include further measures to address these “liabilities” at the expense of the working class. In this, the trade unions, including the SEIU and California Teachers Association will be willing partners.

While the most vulnerable sections of the population are being squeezed California is now home to 131 billionaires, nearly a quarter of all US billionaires and more than any other nation except for the US as a whole and China. This small collection of individuals has a combined wealth of $560.1 billion, more than the GDP of 49 countries including Argentina, Poland and Taiwan.

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.


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 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.

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.


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.

Blood…for treasure



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.