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Numbers released this past week show, once again, that the European Union’s economy failed to grow in the last quarter, making this officially the longest recession the EU has ever suffered. Numbers from America revealed a sudden, unexpected drop in manufacturing growth. Even now that the stock market has finally re-reached its post-crash heights, troubling indicators like this continue to appear, an uncomfortable reminder that the collapse of ’07 is still with us.

Behind the ugly numbers lies a raging debate about economic theory and policy. On one side, the followers of John Maynard Keynes, such as Paul Krugman, lead economist of the NYT. On the other, the beliefs of Hayek, Mises and the “Austrian School“. Keynes is renowned for his role in ending the first Great Depression through New Deal style spending, whereas Hayek prescribes what has come to be known as austerity – cuts, privatization and tax relief for the wealthy. Both of these sides are winning in their own way – Krugman is pretty blatantly winning the argument, while most of the world’s governments are still pushing austerity measures.

Losing the Argument
Among the strongest arguments for austerity was the landmark study, Growth in a Time of Debt, held up around the world as proof that a high debt:GDP ratio led to falling economic growth. Fortunes for authors Reinhart and Rogoff recently took a turn for the worse, though, when 28-year-old grad student Thomas Herndon took a close look for a class project and realized that the crux of the argument was based around a spreadsheet error in Microsoft Excel. He listed other methodological errors, of course, many of which had been pointed out before (and all of which should have been obvious). This humiliated many austerity proponents to the point where Stephen Colbert joined in the fun, and young Mr. Herndon has gone on to continue debunking Reinhart and Rogoff’s responses.

Other high-profile criticism of austerity has been coming from a surprising source – the International Monetary Fund. Leading officials, including Christine Lagarde, the IMF’s managing director, have started to urge restraint with austerity. Given the IMF’s history, this says a lot – they spent decades as the leading global proponent of Third-World austerity (“Structural Adjustment”), usually with similarly dismal results.

Perhaps most damning of recent condemnations has come from an entirely different unexpected source – the new Pope, Francis. His Holiness, in a recent address to foreign ambassadors, made his feelings quite clear; “The worship of the golden calf of old has found a new and heartless image in the cult of money and the dictatorship of an economy which is faceless and lacking in any truly human goal”. His speech touched on the “common good”, curbing speculation and focusing on the plight of the poor, themes echoed by many cardinals and, not surprisingly, the Greek Orthodox Church. Makes ya wonder, doesn’t it – if even the world’s most revered religious figure is talking about the “tyranny” of capitalism, why is it so hard for the rest of us to have a serious conversation about it?

These are only a few examples I could name – they’re quite well publicized if you know where to look – and it’s not as if the New York Times, IMF or the Pope are hard to find. Among those opposed to austerity are some of the biggest names in capitalism today and their arguments are quite well-founded in standard (capitalist) economic theory. It feels odd, as an ardent anticapitalist, to be taking a side at all, but it does help to give a little context. Even by their own standards, these policies aren’t working.

I’m no economist, but the flaws in this logic should have been apparent long ago. For starters, if the source of the European Debt Crisis was the high cost of “Eurosocialism”, then why were Spain, Italy and Greece most afflicted, and not Sweeden, Denmark and Norway (their merciless creditors)? How was putting thousands more out of work, cutting wages, increasing tuition and raising working-class taxes supposed to “stimulate the economy”? And, of course, how come the countries which worked hardest to implement these policies aren’t getting better?

The View From Below
What’s remarkable is how little of this filters down to the local level. When we look in our own newspapers (at least, outside the business section), it’s as if the only people objecting were camped in Zuccotti Park. Our politicians, even (sadly) those on the left, are similarly convinced about the need to pass “austerty budgets”. From the front page, or any television or radio station, it’s hard to tell there’s any argument about the economic merits of cutting, deregulating and downsizing, except from a few long-haired hippie socialists and ageing union leaders.

While economists are ignored, though, conditions on the ground have steadily worsened. Unemployment numbers, especially around youth have been at crisis levels in multiple countries for a while now, reaching even the point of public, politicized suicides. Greece in particular has been pushed to the edge of a total social breakdown by austerity, shown best by the frightening rise of the neo-Fascist Golden Dawn in Parliament and on the streets. Italy and Spain aren’t far behind, and the widespread breakdown in support for the EU itself has been dramatic. Parties on both the left and right are now openly expressing disdain and the future of the superstate itself is in doubt. If there’s one reason above all others that many capitalists are critical of these policies, it’s because they’re genuinely concerned that austerity will cause another collapse.

The effects of austerity can be charted in another way, as David Stuckler and Sanjay Basu just illustrated in their new book, The Body Economic: Why Austerity Kills. Stucker, a “leading expert on the economics of health”, with a host of ivy league credentials, decided to study the subject using the same “evidence-based” approach used when testing new treatments, only to award a failing grade. Their study found ten thousand additional suicides and up to a million extra cases of depression across North America and Europe since the austerity programs begam, and a 200% increase in Greek HIV rates. As far as positive effects of austerity go, when comparing different countries and policy responses, they find little evidence that austerity actually leads to more “growth”. Health care spending in particular, they argue, stimulates the economy far better than bailout cheques.

Why bother listing off the opinions of people I obviously don’t agree with on just about any other issue? Because they’re very important people as far as these debates are concerned. This brings up the very interesting question of why they’re having so little impact on policy or public debates. Part of it can be ascribed to the incredibly successful marketing of ideas that’s left many incapable of distinguishing between “economics” and the opinions of a radical fringe of right-wing economists. It takes more than propaganda, though, to sway the policies of so many governments. In spite of all the evidence, austerity is still going ahead, which tells us something about the real motives at work, and how power functions within this global Leviathan. Why embrace an economic strategy with such clearly devastating results? As the old saying goes; cui bono? Who benefits? How do they benefit? And how the hell were they able to accomplish it?

Is austerity a failure? That depends on the intent. If the point was to bring us back to “prosperity” then austerity measures have most certainly been a miserable failure. If the point was to shift capital flows toward a tiny elite of bankers and shareholders, it was largely successful. Corporate profits just had another record-setting year and thanks to the bailouts, the financial industry has rebounded nicely. Even the stock markets are setting record highs again. While most of us are suffering, a few are making off like bandits. To characterize this as a robbery, though, would be somewhat inaccurate. The bailouts were robberies – austerity is more of a racket. Rather than a one-time theft, austerity’s payments just keep coming in. At its core, austerity is a permanent shift in the way money and resources flow in our society. It’s not about bringing back “prosperity”, it’s about changing who prospers.

Behind both the profits and the suffering lies a clearly political, albeit still very economic motive. The two are never far apart, since both fundamentally come down to the many bargaining processes which rule our lives. Austerity entails shedding a lot of responsibility, public and private, for the well-being of workers. Shifting this burden alters the fundamental balance of power, allowing a few to gain far more leverage and thus make much larger returns. High unemployment and low welfare rates are classic examples of this – how much you get paid tends to come down to whether you could find a better paying job (or OW cheque) faster than your boss could find some desperate scab who’d work for less. For this reason, cuts anywhere tend to have reverberations everywhere and often gain a lot of political support from people who don’t seem directly affected.

There’s another dimension to this shift, though, which helps to explain why so many other capitalists are angry. Neither the state nor capitalism are monolithic hierarchies. Within each are a lot of competing individuals and factions. What’s good for banks isn’t always good for auto-makers, and what’s good for auto makers isn’t always good for retailers. Marx wrote long ago about the inherent conflict between “industrial” and “financial” capital, but this is only one of many examples. Some investors seek stable, long-term growth, while others look for large but risky short-term returns. Since most of the major players in finance these days are playing, primarily, with other people’s money, it’s obvious which they prefer (and why their clients are so annoyed). A lot of people in the business world held a strange fixation for Occupy Wall Street and often echoed support for its message. They weren’t calling for “class war”, though, just some stability to the current class system, a totally understandable response given the way bankers had recently lost their fortunes at the global craps table. These days, this is often articulated, ironically, in the language of GDP growth, also backed up by plenty of evidence.

As I’ve already mentioned, austerity is one of the only points where I agree, even partially, with Krugman or Lagarde. Nonetheless, I still feel the capitalist critique of austerity is very relevant here. It reveals a lot about austerity, but even more about capitalism itself. As for political strategy, I’d say there’s two big implications. The first, given this kind of widespread opposition, is that a political victory against austerity is entirely possible, maybe even probable. The second, though, is that it doesn’t end there. Defeating austerity alone is hardly a “radical” goal and in many ways would likely strengthen the status quo. That’s why so many capitalists support it, and that’s the inherent danger of reformist politics.

Austerity is like a fad diet – unhealthy, unsustainable and usually resulting in an actual weight gain. The national debts derided by austerity proponents skyrocketed most (especially in America) during the reign governments like Reagan and (either) Bush, who came to power pledging to eliminate them. This embezzlement continues not for any of the stated reasons – economic recovery, stimulating growth or brining “prosperity” – but because it benefits a few people in positions to sway public policy anyway. Above all else, it’s a frightening reminder that powerful people don’t need to win an argument to get their way, and it begs the more general question of why we allow these people to hold such power in the first place.

Don't hate the playa, hate the game...
In case you’ve been wondering about your paycheque lately, no, it isn’t your imagination.

According to the latest data from the St. Louis Fed., two important (and related) trends are continuing to set records. As a percentage of the total economy (GDP), corporate profits just hit an all-time high while wages, again, sunk to new lows.

These two facts paint a very different picture of our “struggling economy” than we are usually shown. Some people, obviously, are doing pretty well right now, despite the ongoing effects of the worst economic collapse since the Great Depression. Now, just as in the 30s, those who’ve managed to stay rich are doing pretty well for themselves. With competitors failing and plenty of bailouts, many actually gained from the market meltdown. The rest of us, obviously, haven’t fared so well.

Recessions, like most calamities, tend to be felt most at the bottom of social hierarchies, among those who are already most vulnerable. Poor, racialized communities will be hit harder than wealthier white ones, and in those communities, women, children and the elderly will likely suffer the most. Those who are “higher ups” can easily pass on costs to those “below” them, while the opposite rarely has a chance to happen. The same happens in times of war, natural disasters and “prosperity” – that’s the nature of life in a ranked society.

What the growing distance between profits and wages tells us, much like other rapidly growing forms of inequality over the last 40 years, is that wealth is a poor measure of general “prosperity”. Contrary to the myths of “trickle-down economics”, the rich can get much richer without any direct benefit to those around them. Decades of policies which attempted to fix the economy by stimulating businesses only widened the gap between them and everybody else. The role of “Reaganomics”, in the end, was more rhetorical than anything else, drawing attention away from the obvious source of these corporations’ new wealth.

This statistic in particular is important because of the terms it uses: wages vs. profits. While discussion of the “1%” focus on individuals, it tends to draw attention away from the systems which allow one percent of the population to amass so much wealth. While CEO bonuses are indeed outrageous, they’re still only a very tiny fraction of the money involved. Much larger sums are spent on the corporation itself – on bureaucracy, advertising, marketing, financing and investment. The cost of such bureaucracy has exploded in the past few decades, also afflicting the public and non-profit sectors. Often the corporations themselves are owned by large groups of shareholders who, in turn, own many others, so it makes little sense to look at any CEO or corporation in isolation. Capital, in general, is the issue here. It can just as easily move between investors as it can between companies or nations, but as a share of the total economy it’s been growing both in size and influence, to the point where many find it indistinguishable from the economy itself.

Ignoring the distinction between capital and the rest of the economy was the mistake that allowed nearly all mainstream economists and business writers to miss the obvious signs of an impending economic collapse in the last decade. Because they measured success in stock prices, everything seemed to be booming. In reality, as investment revenues grew wildly out of proportion with the rest of society, they inflated prices for any and every investment, creating a massive bubble which couldn’t help but burst. All the major solutions (bailouts, austerity, tax cuts etc) have followed the same logic – giving trillions to banks and large corporations and inflicting harsh cuts on everybody else.

Pumping more of what little money we have available to us into investment capital will not revive our economy – at best it will put off the inevitable. Bailouts, tax cuts, “quantitative easing” and other forms of stimulus and subsidy all have their costs, which of course fall on the rest of us. These infusions of money can drive up speculation for a while, but if the underlying economy is losing funding, that will catch up with markets soon enough. In the long run, these kinds of imbalances are never sustainable.

This growing inequality isn’t just a nasty-side effect of the problems we’re facing, it is the issue. These catastrophic “bubbles” wouldn’t have been possible had investors not had enough cash on hand to drive markets all over the planet into delirium. People would not have needed sub-prime mortgages if they hadn’t been excluded from normal housing markets (by income, race and geography) and of course, we wouldn’t have trouble spending money or making loan payments if we could earn a decent wage. Capitalism, by definition, is rule of the economy by investors – a form of control ultimately based on inequality and disparity. Poverty and recession aren’t the result of mistakes or failures – they’re the product of this system functioning exactly the way it’s supposed to. Until we acknowledge that, we’ll continue to be mystified by this process and the results, but once we do, it all starts to make a frightening sort of sense.

...and always bring a towel.

Good advice from a stencil on the Jackson Square rooftop, Hamilton, Ontario.

Once again, the European Union is spiraling toward oblivion. Not only are Greece’s re-elections a week away, but Spain is now in need of another bailout and Italy is beginning to sputter again. As the dangers involve swing once again from “quagmire” to “clusterfuck”, even the Toronto Stock Exchange is feeling the brunt of it. In response, one very clever graffiti artist has decorated the roof of Jackson Square with two choice words which would serve the EU’s leaders and bankers very well right now: “don’t panic”.

No, that’s not deja-vu you’re feeling, this really has been happening every couple of weeks for over a year now. At the core of the problem lies the way national debt is traded on bond markets, much like stocks or futures. Demand in these auctions and markets determines the interest rate on the debt, therefore fear of a debt-crisis-spiral (like seen in Greece) can easily drive a country’s interest rates through the roof (as they did to Spain and Italy today). The standard response is to cut debt and deficits (“austerity”), but since it’s far easier for interest rates to double than to cut a national debt in half, this usually does a lot more harm than good (as it has in Greece, Spain, Britain, and most of the Third World). Worst of all, the only thing really needed to kick off this cycle is to announce that you’re planning a bailout or austerity measures to send investors panicking, even if the national economy in question is relatively “healthy”.

They will, of course, panic, sooner or later. There is no way out of this crisis without a “correction” of some kind or another. Economies will topple like a row of dominos line up around the globe. When this happens, and it will, we’ll have one task that’s more important than any other: not panicking.

Good luck with that.

In the past decade “microcredit” and “microfinance” have taken the world by storm. Particularly since the Nobel Prize was granted to Muhammed Yunus, founder of the Grameen Bank, they have blossomed into a global financial industry. These “micro” lenders now offer small loans to very poor people in all over the planet. At first, this was marketed as a scheme to help lift poor women out of poverty by helping them start microbusinesses and afford necessary items. Quickly, though, the practice took a turn toward loan-sharking, and we’re now beginning to see some truly ugly results emerge.

Parts of rural India have seen waves of suicides linked to these loans. Both community activist groups and leaked internal memos of SKS (“Self Help Society”, the largest microcredit firm in the country) support this. Not only were these lenders harassed, threatened and publicly shamed, but they were often told “only death” could release them from their loans. Other documents from inside SKS show the company transformed when it “went public”, receiving billions in investments and expanding rapidly with little care for proper training of new loan officers. For a while the government and courts stepped in, even going so far as to arrest loan officers, though pressure from the company eventually forced them to back down.

In Egypt, on the other hand, microcredit groups took a different approach – they involved the police. Though microfinance groups began much like in India – promising to reduce poverty, they quickly took a similar turn toward loan-shark banking. Because those they lent to had no collateral, institutions required a deposit cheque which could cash in the event of a late payment – when said cheque bounced, it became a “crime”. As they began to use (corrupt) police to collect debts and punish those who were late for payments (“even for a day”), this evolved into a racket and the police became its enforcers. Frequent, brutal sexualized violence against women and young people became the norm. These tensions, of course, played a large role in provoking Egypt’s revolution last year, and go a long way to explaining why Tahrir Square protesters and others were so hostile to the police.

The Microcredit “movement” sought to re-brand capitalist ideas as some sort of grassroots, Third World anti-poverty struggle. In practice, it turned out like any other banking scheme. These institutions quickly became less like charities and more like payday-loan outlets – a vast and under-regulated network of banking start-ups every bit as corrupt as those at the head of the industry. Rather than lifting people out of poverty, it begun a new phase in the economic and ideological colonization of the Third World. Through institutions like the SKS, international finance can now lend directly to the poorest people on the planet. No longer is it enough to sink the nations as a whole into inescapable debts, but now these institutions seek to establish themselves in every remote village. In this new world, no poor woman, anywhere, should be without the option of getting into debt.

Like all colonialist attitudes, there’s a lot of ugly implicit assumptions here. We’re assured that poor women in African and Asian villages are struggling because they’re not enough like us. It’s assumed that our system works, and that our success has nothing to do with Third World poverty. Left unmentioned is the debt crisis which has gripped these nations for decades, or the long and brutal history of conquest and colonization which came before it. Instead, like always, we’re left with racist mythologies about why these nations are inherently warlike, despotic and poor.

It would be both dishonest and self-serving to pretend that the actions of incomparably rich foreigners in desperately poor communities only ever bring positive outcomes and effects. There’s privilege implicit in every word we speak and every step we take in a place like that. Our dollars are worth truckloads of theirs, we have easy access to media with international reach, and we can be assured that if we go missing or turn up dead, somebody outside the village will care. Even when we simply sit in Canada and invest a few dollars or make a few ill-conceived public statements on foreign policy, those small acts on our part can easily hold more influence than entire communities. Whether we come as investors, missionaries, or aid/development workers, we must always be wary of using poor and vulnerable communities as our playgrounds.

Those of us in countries like Canada can’t pretend we don’t know how capitalism operates. We had to know this would happen. We see it every day,especially in our own poor communities. Even under the strongest watchdogs with a very comprehensive safety net, lending like this generates tiny wealthy elites, large impoverished under-classes and rigid, uncaring bureaucracies to enforce them. Why would we think the result would be any different effect in regions with rampant corruption and no safety nets? Are we so enamoured with the ideals of capitalism that we’re now willing to consider them an act of charity? And what does it say that these ideas have gone so unchallenged (publicly) thus far?

Sorry guys, but investment isn’t charity, no matter how small the scale.

This year America’s collective gas bill is on track to hit half a trillion dollars. With that comes not only colossal public expenses, but crippling blows to individual finance. Some Americans are reportedly paying up to 50% of their income on their cars between insurance, repairs, fuel and other expenses. Those with the largest burden, of course, are often the poorest. A new website and project from the New America Institute is hoping to bring attention to the high cost of car ownership. The Energy Trap features personal video testimonials from all over the US talking about the time and money being devoted to people’s commutes.

This high cost is starting to take its toll (often literally). The Globe and Mail recently ran an interesting article about “Peak Cars” (RTH link), which notes that rates of driving have already been falling for some time, especially among young people. Because of the high cost of insurance, generally low incomes and already high debt burdens, it just doesn’t make sense for many young people to drive. For most younger men I know especially, it’s pretty much an either-or choice of having your own car or appartment, and I must admit that I would have trouble owning a half-decent car for less than I pay in rent. Putting this in visual and financial terms, Streamline Refinance released this ‘infographic‘ about how much commuting costs in terms of housing or how much it effectively lowers your wages. They claim a thirty mile commute is the long-term equivalent of just under half a million extra to spend on a home (after mortgage voodoo is worked out), or nearly a million if both couples drive it.

Cars provide a perfect example of how costs in our society get hidden by distribution. Governments certainly spend a lot on roads, highways and parking lots, – more than any other form of transport, and most other programs – but that doesn’t buy any vehicles. On top of the horrendous cost of roads (often tens of millions per kilometre for urban highways), there’s also the price of the cars themselves as well as their fuel and parking spaces. These costs are borne by the public, so they don’t show up on government balance sheets except as tax revenues. Instead they’re paid directly by us, or hidden in the prices of everything we buy (“free parking” at malls, trucking costs etc). Despite this illusion, the price of cars is still a very real public cost – simply paid for directly by us and not by the state.

There are, of course, a great many public costs associated with cars. Virtually every part of the industry receives massive public subsidies (oil, manufacturing, roads etc). This includes policing, the incredible increase in regulations needed for traffic management, and the criminalization of many otherwise-harmless activities like “jaywalking”. It includes health care costs related to accidents, inactivity and air pollution, as well as the incalculable price of human suffering for those affected. And then there’s the environment costs – mining, quarrying, oil extraction, roads, parking, smog, sprawl, climate change – any of these, alone, generate billions in “externalized” costs for the environment and society. Oh, and then there’s oil wars…

What this demonstrates is that demanding “jobs” or “growth” as a cure-all to economic issues can in fact lead us into traps that really aren’t economic or efficient at all. Automobile manufacturing is pretty much the primary industry in Ontario, linked by some to one out of four jobs. Taken uncritically, that’s a massive boon to our economy. But is it? We need to be wary of “progress” measured only in hours worked or money spent – neither relates directly to our welfare or quality of life. Health, safety, air quality – these things do. The more intently our economy focuses on the abstractions it creates, the more it loses focus on measuring or accounting for real world value, and the more detached and alienated it becomes.

With the decline in first-world manufacturing, most people (especially in Hamilton) are no stranger to the idea of work becoming more irrelevant and pointless. If you have any doubt that a person can be employed full-time for purposes which create next to no real-world value, I’d suggest a short stint at one of our many call centres. Complex and expensive machines like cars provide an attractive remedy to that, since they’re one of the few things we still make. Unfortunately, making pointless machines is no more useful than making pointless phone calls. Time spent building cars and roads is time which by definition isn’t spent on housing, food or medicine (all are in fact more expensive as a result). Decades of development make it fairly clear that providing a posh fleet of luxury vehicles for the wealthy doesn’t equate to feeding the hungry or housing the homeless. The last decade has shown pretty clearly what happens to the world’s poor when we try using part of our food supply (corn) to supplement our fuel supply.

It’s time to focus on our needs, and not ill-defined amorphous ways of getting them like “jobs” or “economic growth”. If we need to get from one side of town to another, there are ways of achieving that which don’t involve over a hundred horses’ power per person. There are bikes, trains, feet and buses. There are better ways to efficiently use those cars (ride and car shares), and there are far more efficient ways to build and arrange cities so a half-hour car ride isn’t necessary to reach school, work or amenities. If we need homes, let’s devote our funds and efforts toward building the best and most efficient homes possible rather than convoluted methods of financing them. If we need food, let’s grow it. If we need clothes, medicine or tools, let’s make them. Doing these tasks is “work” too, often far more rewarding than most jobs you could name (which is why so many people do them when not paid for it). If the jobs we’re working and institutions we’re relying aren’t meeting our needs, why continue to meet their demands for cash and labour?

With the growing shortages of just about any resource one can name, the environmental struggles of the past century are about to become a lot more “real”. With declining economic prospects and growing energy costs, “green living” is going to go from being a middle-class lifestyle fad into a basic demand of millions of poor people, even more than today. This is a necessary transformation if the environmental movement is to grow and evolve. Rather than asking ourselves what we can do to shame and cajole motoring suburbanites into changing their “evil” ways (cars, meat, McDonalds, Wal-Mart etc), it’s time to ask ourselves how we can help the growing chunk of society who can no longer afford to be a part of this industrial, petrochemical society. How do we help people live through the winter when natural gas and fuel oil are no longer available (Canada has already seen a fuel oil shortage, and our gas reserves are plummeting)? How do we help people get to work, school or grocery stores when they have to sell their car? If environmentalism wants to become a truly popular movement, these are the kind of questions we needs to ask. Most people don’t benefit from pollution and environmental devastation any more than we do from sky high bank and corporate profits. It’s time to stop pretending “the environment” is a separate issue from the political and economic woes faced by average people – all economic issues are ecological, and vice versa. Once we all recognize this, we may finally be able to do something about it.

First of all, so that we’re all on the same page, read this. Henry Blodget, CEO of Business Insider, published these charts, which give a very clear picture of why people are so angry about the economy. To summarize: corporate profits are at an all-time high, while wages (adjusted for inflation) are still lower than the early 1970s. In fact, the percentage of the GDP spent on wages is at an all-time low after decades of declines. Employment still hasn’t recovered since the crash of 2008, the number of people giving up on job searches is growing, as is the average length of unemployment. By standard measures of inequality, America scores lower than China and India. All of these figures have been common enough, but it’s really nice to see them all in one place. It’s also a lot better than what Blodget first had to say about the protesters.

I chose this link among the millions talking about these protests because it gives us glimpse inside the machine. We all know about the symptoms of the problem – poverty, unemployment, etc – but that offers no prescriptions. The dire plight of those in poverty has been used to justify every economic policy from Reaganomics to Leninism. We don’t just need to talk about how bad it is – we need to ask ourselves what’s happening that’s driving all of these numbers with such consistency. There’s lots of villains here – “corporate greed”, banks, the Federal Reserve, the government etc. Easy as those answers might be – they do very little to actually explain what the problem is.

So what is?

Our entire economic system. Call it capitalism if you like, or corporatism if that suits you better. Some like “neo-liberalism”. Plutocracy also works, and the term technocracy is becoming more applicable by the day. Whichever name you use, it’s clear that beyond the divisions in individual fortunes, competing corporations or even nation-states, lies a system which is far too consistent and inter-related to be a coincidence. Globalization has brought together all the worlds major powers for the purpose of un-ending profit, and despite all the petty feuds, it still manages to function like one massive machine.

Looking at the issue this way is important. It explains our colossal power structures without conspiracy theories about secret cabals of bankers ruling the world for centuries. What makes control by a secret society of bankers really all that much different from ordinary, run-of-the mill capitalism? Looking for someone to blame will only find us the most local and recent examples – it doesn’t really matter who’s in these positions of power. If they want to keep their job, they have to play along – that’s the genius of this system. It isn’t a question of “who”, it’s a question of “what”.

This system is not static. It has been growing and evolving for at least two centuries. The simple growth in scale and scope is clear enough – 3% yearly growth means doubling in size every 24 years – and very clearly matches what we’ve seen over those years. Equally important, though, is the growth in complexity. The explosive growth of bureaucracy in both the public and private spheres now demands an enormous flow of cash, resources and capital to support, leaving little for wages or production itself.

Why does bureaucracy grow in this way? Because powerful groups and institutions are always competing for dominance. Growth is a survival strategy, to avoid being taken over or pushed aside. Over time, a few do become dominant and grow much larger than the rest. As they grow, they must become more complex to maintain and reproduce central control over a wider area and population. That complexity takes the form of rigid and bureaucratic institutions designed to supervise us and act as intermediaries between ourselves and the system (in ways which, of course, suit the system).

More power, wealth and prestige clearly benefit the people in charge of these institutions, as well as the institutions themselves, but the benefits to us are dubious at best. Having larger and more distant institutions ruling us certainly doesn’t grant us any greater representation. It also isn’t any cheaper, at least for clients, as the efficiencies they create (like buying in bulk) are all too often spent on themselves.

While advertising, management and banking cost money and create jobs, they don’t actually add value to products. A carrot is still a carrot, regardless of how many billboards advertise it or how many managers watched it grow. The carrot in question will surely be expensive and may even be profitable, but it’s no use to starving millions. Many of our largest corporations no longer even manufacture their own goods – choosing to focus entirely on investments and “brand image”. This growing overhead cost puts pressure on all other prices associated with production – there’s less money to spend on wages or raw materials, and a strong drive to raise prices. From appliances to homes, we’ve witnessed some pretty impressive raises in prices over the last few decades, though clearly not in the costs of production.

At first, the growing distance between wages and prices seemed to be a boon. It boosted profit margins and forced families to work more to get by. Eventually it began forcing individuals and even nations deeply into debt, which made even more money since they could lend their profits back to us, at interest to buy more goods. Sooner or later, though, these debts catch up with us and we hit a wall as there’s just no more blood to squeeze from the stone and people can no longer afford to buy or borrow. This kind of rampant, disproportional and parasitic growth is never really sustainable, as any tumour can tell you.

Our economy has literally exploded since the 1970s, but since about that time, the amount given to wages froze, and even began to decline. The global economy opened up, we had a few digital revolutions, and stock market growth which blew away everything which came before it. This enormous influx of profits was spent finding ways to grow even larger fortunes, generally at the expense of workers and customers. The idea that wealth can grow without “trickling down” isn’t an anti-establishment fantasy – it’s been the dominant trend in nearly all economic data in many of our lifetimes.

Many people would suggest more government regulation to solve this problem. Given the sorry state of the European and Chinese economies at the moment, it seems fairly obvious that no form of state-based socialism – democratic or autocratic – is faring any better. The endless, ideologically driven debates about public versus private spending have sheltered the obvious answer – that these kinds of bureaucracies are just as ineffective, inefficient and petty whether they’re owned by billionaires or run by the government. The endless battle between the two has taken a horrendous toll on the rest of us, as each new set of regulations spawned whole new bureaucracies on each side, all eventually paid for by us.

This system needs to be looked at as a whole. Trying to isolate different sectors will only get us caught up in its circular and self-serving logic. Villainizing the bankers valorizes the government, and vice versa. Either approach takes half of the status quo for granted. Taking a more distant view, things come much more clearly into focus: the state and capitalists are intimately related, one issue Karl Marx and Adam Smith could totally agree on. The government exists to enforce property relations for private businesses, who exist to create enough commerce to fund the state. To both groups, the rest of us exist largely as a resource to be exploited, and a populace to be ruled.

Gathering in the streets and occupying parks isn’t a solution to this problem, but it’s a crucial step. It isn’t the signs we carry that are important, the statements we make to the press or the “demands” everyone’s so concerned about that matter – it’s the directly democratic process by which it’s all organized. That crucial aspect of these protests has been largely ignored, but is by far the most important. The ability of people who’ve never met before to assemble and self-organize into networks of occupations and protests spanning the globe is the true revolution here, and these encampments are only the first step.

Another world is undeniably possible. But before we can go about building it, we need to avoid that first crucial mistake of the current order. We can’t assume that any one person, group or platform is worth more than the input of the people involved. I’m not the 99% and neither are you – we all are. If we’re going to claim to speak on behalf of just about everybody, then we better make damned sure we’re actually offering them a chance at the mic, and not just grandstanding. A directly democratic world cannot be imposed by despots.

What might a directly democratic society and economy look like? Neighbourhood assemblies and their committees could take over many of the duties of local governments. Business and production could be run along co-operative and federated lines, for which there’s already many models, ranging from very small to very large businesses. The ghastly and grossly inefficient retail empires could fairly easily be replaced by consumer federations, collectively organizing bulk purchases directly from suppliers. These are a few vague options, but one aspect unites them. Their self-organizing nature eliminates the need for costly administrations and bureaucracies, and with them these motivations for exploitation and endless growth. While shouldering the burden of organization and capital on ourselves won’t be easy, especially at first, it isn’t as if we aren’t already paying for them with our working lives.

A recent post from Joe Weisenthal, one of my favourite voices from the business press, is too good not to share. A monumental moment has arrived, which threatens to change the face of economics forever: capitalists have started reading Marx. If this isn’t a sign of chaos to come, I don’t know what is. Are we now going to see “Hot Marxist Stock Tips” alongside the market advice now dispensed by Peak Oil “experts”? Or is this simply a sign of some very frightened bankers?

Everyone’s got an opinion on Marx. Most are horrifically uninformed, including many “Marxists”. For those that have read some of his work, most have only read The Communist Manifesto – more of a pamphlet than anything else. Capital is very different – dense and analytical, and very few people I know have made it through. Despite all this, as the great academic anti-hero of the last century, it’s nearly impossible to find a university where he isn’t talked about extensively in a very broad range of subjects, from sociology to literature.

What did Marx actually say? I certainly can’t do it justice. Nothing I’ve ever come across compares to Prof. David Harvey’s online course Reading Marx’s Capital, though it’s quite a commitment time-wise. The arguments he put forward here, near the end of his life, are probably the best and most thorough description of the failures of capitalism ever written. Using classical economists like Smith and Ricardo as his starting point, he investigated ideas like value, money and price. Unlike those writers of the previous generation, though, Marx was not simply articulating the philosophy of a new era (the shift from feudalism to capitalism). By the time of Marx, who wrote Capital a century after the French and American revolutions, the consequences of this new system were becoming clear – slums, sweatshops and a new kind of class structure. In this system, as Marx described, work was bought as a commodity from desperate sellers for much less than it was worth, and the difference between that ‘use value’ and ‘exchange value’ allowed capitalists to turn a hefty profit at the worker’s expense, which of course would mean that the worker stayed poor and had to continue working.

What was written in the Manifesto itself contained fairly little analysis, but on prediction which has come to define him ever since: the end of capitalism. I may not be the biggest fan of historical determinism, but it’s a little chilling how well old Karl predicted the unfolding of events a century after his own death. This prediction is based on a couple factors which could be seen growing by the 1870s but haven’t really come to dominate until the 1970s – corporate globalization, the intensification of consolidation and a broad ‘squeeze’ on profits. As he wrote, when no more avenues for expansion exist, and only one or a few mega-corporations remain, the system will fall either as a result of it’s own contradictions or because the few remaining centres of power become easy targets for a revolution of everybody else. This would be the beginning of the next phase of economic evolution, which he called communism but actually wrote fairly little about (and even less that was clear or consistent).

With all of the discussion about money, debt and economics right now, there’s a desperate need for a counterbalance to the pseudo-libertarian nonsense of Ron Paul and others. Every day I read more scathing condemnations of debt, patents, banks, markets and (especially) the dreaded Federal Reserve. Try as I might, I can’t disagree – it’s essential to question all of these things right now. But rather than constructing elaborate conspiracy theories to explain how this is all connected, let’s look at what they actually have in common: they’re all forms of capital. From your landlord to your bank to your boss – and there’s no secret society needed to explain why they’re in control or how they do it. So why is everyone so afraid to say it?

There is no doubt that there’s a lot the world today could learn from Marx’s actual writings, rather than superficial readings of them. I’ll be the first to admit that he’s not a prophet and there are many others who are at least as relevant. The anarchists of this era were just as involved in worker’s movements, and had no problem predicting exactly where a society centred around Marx’s ideas would lead. We should be dusting off all these old books and more. Before we continue our inane quest for “new ideas”, we should at least be sure we understand old ones.

For about a decade now, some fairly solid predictions have been floating around. They’ve included skyrocketing prices for oil and natural resources, hedge fund bubbles bursting and a general increase in chaos and turmoil. They’ve been everywhere on the fringes – anarchists, environmentalists, peak-oil nuts, conspiracy theorists, internet addicts and urban critics have been catching on for years, but many in the mainstream still deny it. As so many of these predictions began to come true, though, many have taken notice. Behind the scenes, there’s a growing awareness that things are not right, and that big trouble is coming if they do not change.

Jeremy Grantham is a co-owner and founder of one of the world’s largest asset management companies. Since the mortgage meltdown he’s become increasingly critical of why some saw it coming while those in charge did not. Recently, he’s taken this a little further and published a lengthy treatise on what’s going on. The message? We now have too many people, using too many resources, and the markets can no longer grow. Business Insider has compiled a slideshow of his argument, and the amount of high-quality data he’s providing is truly frightening. It’s not that Grantham’s argument is original – every word of it reads like a (slightly financial) Mathew Simmons or James Howard Kunstler rant from 2004. He bemoans exponential growth, refers to Malthus and talks about the role of petrochemicals in fueling all this. What is unique, though, is the quality of his data – all what you would expect from a cutting-edge investment firm. He illustrates how much prices have skyrocketed over the last decade for everything from fuel to food to metals. In one example – in order to see if these prices were the result of random market changes and speculation – for beef the chance is about 1 in 2. For Iron, it’s one in over two million.

Other examples of this kind of thing are beginning to abound. Those working in the financial sector have the data, and the truth is becoming increasingly clear. Here’s another recent article on Business Insider which basically comes clean about the nature of corporate “efficiency“, and another from Dailyreckoning about “peak profits” and the total unsustainability of current all-time-record-high corporate profits.

Capitalism is failing – even the capitalists are waking up to that fact. The question is, what comes next?

Yestderday saw further falling stocks and oil price rises, in what has become a far too normal day of news. Leading the crisis was the failure of recent OPEC talks. Though price are skyrocketing (Brent Crude is now around $120/barrel), oil producing nations have been unable to increase output.

The world has been faced with a lot of economic bad news lately, and yesterday was no exception. The TSX is now down 7 days in a row. The Americans are reaching their legal “debt ceiling” and many are talking of a default. Obama is now planning for “one last stimulus” – a payroll tax cut which hopes to change sagging employment figures. There’s also big layoffs in the works at many of the largest financial institutions in the world – such as JP Morgan and Bank of America. Fears about the stability of the American, European and Chinese economies is causing many people to worry heavily about the globe as a whole.

Two key stories have come forward in the past few days that really illustrate how rotten things have become, and on what kind of scale. There’s the exploding scandal around Sino-Forest, a Chinese forestry firm listed on the Toronto Stock Exchange. It appears to have been using a convoluted web of subsidiaries and a lot of imaginary trees to bilk investors for millions. Another brewing story involves the enormous African land grab by hedge funds, unearthed by a new Oakland Institute study. In 2009 these hedge funds bought up 60 million hectares of land – an area the size of France – displacing millions to grow cash crops for export.

Faith in the global economy is fading fast. With all the talk of a failing recovery and “double-dip recession”, it’s starting to become clear that this is not just like the recessions of the past. This isn’t just another correction or recession. When markets failed in the past (something that’s happened at least once a decade for most of our lifetimes), they could always turn to expansion. They could open up new foreign markets, pump more fossil fuels or take on more debt. These aren’t long-term solutions, though, and we’re running out of band-aids. Many fear that another market crash is in the near future, but the real threat is a long, grinding decline in our fortunes. What do we do if endless, perpetual growth is no longer an easy option?

A new report from the Vanier institute in Ottawa has found that the average familiy debt in Canada has now passed $100 000. This represents, on average, 150% of what this “average” family makes in a year. And the trend is still getting worse.

This research paints a stark picture of financial life for the average working Canadian. With stagnating wages, rapidly rising costs and diminishing savings, it’s getting harder and harder for even “successful” people to make ends meet.

“No one has pensions anymore, mortgages are bigger than ever, there’s just more things tugging at our money,” he said. “Putting your kid through university is a six-figure price tag and no one is ready for it.”

-Kurt Rosentreter, “Family CFO”

“Experts” are quick to blame this all on a lack of “financial planning” knowledge among the public. And with the explosion of consumer debt among young people, it’s hard not to believe that plays a role. But “better financial planning” doesn’t make up for losing your job, pension, or having expenses like education and housing double in price. The cost of living is going up and that’s not something that can happen to millions of people without consequences.

These kinds of financial pressures are not sustainable. Socially, they put us on a path straight for the kind of revolt and unrest seen so recently in Africa, Europe and the Middle East, where pensions, unemployment, tuitions and other basic cost-of-living issues have destabilized entire regions. Economically, these are the same pressures which recently sent the global economy into a nosedive. Another such crash (suspected by many to be on its way), would hit far harder than the last – all the easy credit solutions have already been tried and now are yet more liabilities. Unless these debts are dealt with, like our booming national debts and those of others, we will all be doomed to suffer an increasingly unaffordable cost of money.

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