Banker's Scaming You Yet Again

Bankers find way to capitalize on hardships

By Andrew Leonard

Nearly a dozen major banks and hedge funds, anticipating quick profits from homeowners who fall behind on property taxes, are quietly plowing hundreds of millions of dollars into businesses that collect the debts, tack on escalating fees and threaten to foreclose on the homes of those who fail to pay.

Here's how it works. A homeowner fails to pay property taxes on time, and gets a tax lien slapped on them by the county tax collector.

But local government doesn't have the resources or manpower to effectively enforce the proliferation of tax debts in the current distressed economic environment. So it bunches them up together and sells them off to the highest bidder at online auctions.

The winner of the auction then proceeds to do its best imitation of a loan shark, slapping on additional fines, charging high interest rates on the debt, and eventually initiating foreclosure proceedings.

Years ago, the big banks left the buying of owed taxes largely to local real estate specialists and small-time investors.

These days, banks and hedge funds, stung by the failure of many speculative investments, see the loan-shark business as a relatively safe option that can yield returns of around 7 percent.

It's so typical of the decayed state of capitalism. The banks that aided and abetted a frenzy of dubious mortgage loans then proceeded to get badly burned by their investments in mortgage-backed securities when it became clear that underlying mortgages were crap.

The ensuing economic crash pushed millions of Americans over the financial edge. And now the banks have discovered that there's a safe, steady business model in cashing in on their hardship.

Neoliberal Capitalism Doomed

Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It

 Latest collapse of the free market system


By Gonzalo Pozo

The World Bank’s recent report on global economic prospects is a bumpy and entertaining read – if terror stories are your idea of fun, that is. It contemplates the possibility of 3.5 percent economic growth for the next three years.

But it is also clear that a further loss of investor confidence (“market nervousness”) might well derail these chances of recovery.

The worst scenario would see governments defaulting on their debts, leading to a deeper crisis, and more unemployment and pain. Though the report doesn’t say so, there would almost certainly be more social and international instability.

Alex Callinicos’s latest book, Bonfire of Illusions, traces the origins of the present crisis and considers its historical significance. The book arrives at an extremely delicate moment for the capitalist system.

This book is in two sections. The first part is theoretically more intricate. It deals with the credit crunch and the structural banking crisis that hauled the economy into the deepest recession since the 1930s.

The second deals with the fracture of US dominance, the sharpening of international tensions and instabilities, and the rise of challengers like Russia and China.

These trends, which have become increasingly visible, hit us in the face in 2008. The war between Russia and Georgia broke out in August that year and the Lehman Brothers investment bank collapsed the following month.

As Callinicos shows, these episodes dealt a powerful blow to the US-based, neoliberal brand of capitalism that had been dominant since the end of the Cold War.

Crucially, they also exposed the fallacies of its main supporting ideologies – the tale of two globalisations. The first of these was liberal capitalism. We were assured that prosperity would follow from the deregulation of trade and finance.

The second globalisation was that of liberal governance.

This promised to transcend the old system of nation-states, and spread democracy and human rights.

It would mean a gradual end to environmental destruction, arms proliferation and old-fashioned tensions between states.

This tale of two globalisations was widely embraced by key figures from the early 1990s.

Now that consensus has cracked. The financial excesses have opened the floodgates of rage against bankers and speculators, from anger among workers, to scathing books and damning assessments in ruling class newspapers.

Flurry

This critical flurry has tended to locate the roots of the crisis in the greed of those in the financial sector, its excessive deregulation and in financialisation.

This is the drive to make all the goods and services traded in the market into financial instruments.

In most accounts, a combination of these circumstances ensured that incalculable financial risks were spread across the system.

This resulted in the 2007 subprime crisis, the 2008 credit crunch and a global economic recession.

Callinicos shares the general dismay about the financial agents. But his key argument is that deregulation, footloose speculative practices and financialisation, though crucial, are not the ultimate sources of the crisis.

The book analyses these trends, but it argues that the crisis was generated in the capitalist system as a whole:

“What we are confronted with is an economic crisis that exposes the depths of the contradictions that have been at work in the entire process of capitalist accumulation, and not merely as some economists... would contend, the dysfunctions of the financial system”.

The debate is incomplete if it does not address the crisis of profitability that global capitalism has been mired in since the end of the post-Second World War boom in the late 1960s.

The thrust of neoliberalism from 1979 was to create a framework in which workers would accept lower wages and worse working conditions. Markets were flung open and relatively unprofitable capital destroyed.

Its aim was to restore profit rates to the levels of the long boom. The neoliberal revolution aimed to shift the balance in favour of capital, to the detriment of workers.

However, the treatment was contradictory. One of its key ingredients was wage repression, which would potentially shrink the demand for goods bought with those wages – putting the world economy in danger.

Rich countries, particularly the US, bridged the threat of a shortfall in consumer demand by an extreme expansion of credit. As their wages fell, many workers were forced to take out loans just to get by.

Callinicos writes, “If this explanation is correct, then we can definitely see the credit bubble as an effort to allow the US economy (and hence, thanks to its central role in maintaining demand, the world), to continue to grow, despite a failure to overcome a chronic crisis of profitability and overaccumulation.”

The expansion of credit rested on a highly volatile financial set up, which was the result of decades of financial deregulation.

It had already been shaken by several stock market crashes, devaluations and defaults.

The financial system of the 2000s was also sharply unbalanced. The ability of the US and other Western economies to increase cheap lending relied on their ability to keep interest rates at historically low levels.

This further relied on the East Asian economies, in particular China, re-investing their bloated foreign reserves in US bonds.

What emerges is, in Callinicos’s words, “an accident waiting to happen”. When the last bubble burst, triggering the subprime crisis, the enormous extent of the problem emerged.

Dizzying

The estimated cost of the slump is many trillions of dollars. National governments are throwing dizzying amounts of money into the economy, in an attempt to avert a global slump of unimaginable depths.

But even if they succeed in the short-term, the real source of the crisis – decades of low profit rates – remains at the centre of the system.

The illusions of liberal-capitalist globalisation went up in smoke along with the illusions of liberal-democratic globalisation.

The fantasy that a conglomerate of international organisations held together by US leadership was superseding the nation-state has faded away.

Callinicos writes, “As the banking system crumbled and the world slipped into recession, it was the state that came to the rescue, with nationalisations, bailouts and fiscal stimuli.”

The crisis and the Russia-Georgia war left the political fragmentation of the European Union (EU) shamefully exposed. The EU is often cited as the clearest example of globalisation transcending the state.

The eurozone’s retreat into forms of national protectionism as a response to the banking crisis is an indication of the unravelling of globalisation.

The different interests of its members with regards to EU and Nato expansion have intensified.

A crucial dimension of both these projects is countries’ relationship to Russia, with Europe’s great dependence on its gas.

Enlargement

The war with Georgia helped Russia stop the enlargement of Nato into former Soviet-dominated countries. Nato enlargement has been a central goal for all US administrations since the end of the Cold War.

The message was clear – Russia was no longer the “sick man” of the post-Cold War order. It had become a regional power, thanks to its oil and gas.

All this is compounded by the decline of US power, which was already stretched in Afghanistan and Iraq. Callinicos echoes writers David Harvey and Giovanni Arrighi in claiming that “American hegemony is nearing its end”.

A pattern is emerging of a fragmented world order, less and less under US direction.

It marks, as Callinicos puts it “the beginning of an era of more intense geopolitical competition and greater global instability”.

This short book throws light on the economic and geopolitical crisis of neoliberalism. But events continue to unfold at an impossible speed.

Capitalism threatens to claw back from the edge. Even if the lies of neoliberalism no longer wash, the beast refuses to go without a fight.

The obvious consequence of bailing out the banks – ballooning levels of public debt and government deficits – have been greeted by a consensus in the media and mainstream politics.

Their bottom line is that the deficit has to be closed and the national debt slashed – at a tremendous social cost.

The recent talk of “we’re all in it together” is one of the uglier ploys used by politicians to sell regressive budgets, inequality and unemployment.

It’s a spectacularly cynical way of telling you to pay up, grin and bear it.

Meantime, top corporations continue to dish out billions in bonuses, taxes on companies are cut further, lay-offs increase, and the public sector is squeezed.

This is the outlook facing people in the West and across the world.

Though there are signs of economic growth, the cuts threaten to scupper the recovery. Moreover, the structural cause of the crisis has not been addressed.

The system’s economic prospects are dark, and we can expect more penury, pain and instability.

As Callinicos argues, 2008 marked a turning point. Neoliberal capitalism entered a period of turmoil.

The result is a historical crossroads – either neoliberalism drags itself on destructively, or it can be made to retreat further by a more rational, collective alternative.

The second prospect has immense difficulties, above all the weakness of the anti-capitalist left.

However, despite its terrible consequences, the crisis of neoliberalism opens up a chance to reformulate politics in our favour. The challenge is to seize this opportunity.

We must work to ensure that “the limits of the possible really are widened”. As usual, Alex Callinicos’s work is an invaluable tool for that task.

Obama Crash

Obama fans recover...albiet slowly 

By Alexander Cockburn

 The man who seized the White House by fomenting a mood of irrational expectation is now facing the bitter price exacted by reality. It's impossible to be a “good” American president. It’s an impossible hand to play. Obama is close to being finished.

The nation’s first black president promised change at the precise moment when no single man, even if endowed with the communicative powers of Franklin Roosevelt, the politic mastery of Lyndon Johnson, the brazen agility of Bill Clinton, could turn the tide that has been carrying America to disaster for 30 years.

This summer many Americans are frightened. Over 100,000 of them file for bankruptcy every month. Three million homeowners face foreclosure this year. Add them to the 2.8 million who were foreclosed in 2009, Obama’s first year in office.

Nearly seven million have been without jobs in the last year for six months or longer. By the time you tot up the people who have given up looking for work and the people on part-time, the total is heading toward 20 million.

Fearful people are irrational. So are racists. Obama is the target of insane charges. A hefty percentage of Americans believe that he is a socialist – a charge as ludicrous as accusing the Archbishop of Canterbury of being a closet Druid.

Obama reveres the capitalist system. He admires the apex predators of Wall Street who showered his campaign treasury with millions of dollars.

The frightful catastrophe in the Gulf of Mexico stemmed directly from the green light he and his Secretary of the Interior, Ken Salazar, gave to BP.

It is not Obama’s fault that for 30 years America’s policy – under Reagan, both Bushes and Bill Clinton – has been to export jobs permanently to the Third World.

The jobs that Americans now desperately seek are no longer here, in the homeland, and never will be. They’re in China, Taiwan, Vietnam, India, Indonesia.

No stimulus program, giving money to cement contractors to fix potholes along the federal interstate highway system, is going to bring those jobs back.

Highly trained tool and die workers, the aristocrats of the manufacturing sector, are flipping hamburgers – at best – for $7.50 an hour because U.S. corporations sent their jobs to Guangzhou, with the approval of politicians flush with the money of the “free trade” lobby.

It is not Obama’s fault that across 30 years more and more money has floated up to the apex of the social pyramid till America is heading back to where it was in the 1880s, a nation of tramps and millionaires.

It’s not his fault that every tax break, every regulation, every judicial decision tilts toward business and the rich. That was the neoliberal America conjured into malign vitality back in the mid 1970s.

But it is Obama’s fault that always, from the getgo, he remained entirely in syc with the premises of the system.

He flattered Americans with paeans to their greatness, without adequate warning of the political and corporate corruption destroying America and the resistance he would face if he really fought against prevailing arrangements.

He offered them a free and easy pass to a better future, and now they see that the promise was empty.

It’s Obama’s fault, too, that, as a communicator, he cannot rally and inspire the nation from its fears.

From his earliest years he has schooled himself not to be excitable, not to be an angry black man who would be alarming to his white friends at Harvard and his later corporate patrons.

Self-control was his passport to the guardians of the system, who were desperate to find a symbolic leader to restore America’s credibility in the world after the disasters of the Bush era. He is too cool.

So, now Americans in increasing numbers have lost confidence in him. For the first time in the polls negative assessments outnumber the positive. He no longer commands trust. His support is drifting down to 40 per cent.

The straddle that allowed him to flatter corporate chieftains at the same time as blue-collar workers now seems like the most vapid opportunism.

The casual campaign pledge to wipe out al-Quaida in Afghanistan is now being cashed out in a disastrous campaign viewed with dismay by a majority of Americans.

The polls portend disaster. It now looks as though the Republicans may well recapture not only the House but, conceivably, the Senate as well.

The public mood is so contrarian that, even though polls show that voters think the Democrats may well have better solutions on the economy than Republicans, they will vote against incumbent Democrats in the midterm elections next fall. They just want to throw the bums out.

Obama has sought out Bill Clinton to advise him in this desperate hour. If Clinton is frank, he will remind Obama that his own hopes for a progressive first term were destroyed by the failure of his health reform in the spring of 1993. By August of that year, he was importing a Republican, David Gergen, to run the White House.

Obama had his window of opportunity last year, when he could have made jobs and financial reform his prime objectives. That’s what Americans hoped for.

Mesmerized by economic advisers who were creatures of the banks, he instead plunged into the Sargasso Sea of “health reform,” wasted the better part of a year, and ended up with something that pleases no one.

What can save Obama now? It’s hard even to identify a straw he can grasp at. It’s awfully early in the game to say it, but, as Marlene Dietrich said to Orson Welles in Touch of Evil, “your future is all used up.”

Economic Darwinism

Free market ideology to the extreme

By Henry A. Giroux

The harsh values of this new social order can be seen in the increasing incarceration of young people, turning public schools into 'education prisons' and state policies that bail out investment bankers, leaving millions in poverty and insecurity.

With the advent of neoliberalism, or what some call free-market fundamentalism, we have witnessed the production and widespread adoption throughout society of what I want to call the politics of economic Darwinism.

As a theater of cruelty and a mode of public pedagogy, economic Darwinism undermines all forms of solidarity while simultaneously promoting the logic of unrestricted individual responsibility. But there is more at stake here than an unchecked ideology of privatization.

For example, as the welfare state is dismantled, it is being replaced by the harsh realities of the punishing state as social problems are increasingly criminalized and social protections are either eliminated or fatally weakened.

The harsh values of this new social order can be seen in the increasing incarceration of young people, the modeling of public schools after prisons and state policies that bail out investment bankers, but leave the middle and working classes in a state of poverty, despair and insecurity.

But it can also be seen in the practice of socialism for the rich. This is a practice in which government supports for the poor, unemployed, sick and elderly are derided.

That's because they either contribute to an increase in the growing deficit or they undermine the market-driven notion of individual responsibility.

And yet, the same critics defend, without irony, government support for the rich, the bankers, the permanent war economy, or any number of subsidies for corporations as essential to the life of the nation, which is simply an argument that benefits the rich and powerful and legitimates the deregulated wild west of casino capitalism.

Of course, this form of economic Darwinism is not enforced simply through the use of the police and other repressive apparatuses.

It's endlessly reproduced through the cultural apparatuses of the new and old media, public and higher education, as well as through the thousands of messages and narratives we are exposed to daily in multiple commercial spheres.

In this discourse, the economic order is either sanctioned by God or exists simply as an extension of nature.

In other words, the tyranny and suffering that is produced through the neoliberal theater of cruelty is unquestionable, as unmovable as an urban skyscraper.

Long-term investments are now replaced by short-term gains and profits, while compassion is viewed as a weakness and democratic public values are scorned because they subordinate market considerations to the common good.

Morality in this instance becomes painless, stripped of any obligations to the other. As the language of privatization, deregulation and commodification replaces the discourse of the public good, all things public, including public schools, libraries and public services.

They are viewed either as a drain on the market or as a pathology. At the same time, inequality in wealth and income expands and spreads like a toxin through everyday life, poisoning democracy and relegating more and more individuals to a growing army of disposable human waste.

The embrace of a type of rabid individualism, anti-intellectualism and political illiteracy is also at work in the Tea Party movement.

As social protections disappear, jobs are lost, uncertainty grows and insecurity prevails, Tea Party members express anger over a weakened social state that represents one of the few institutions capable of providing the capital, policies and safety nets necessary to protect those who have been shaken by the economic recession.

And, yet, in light of the failure of laissez-faire economics and the destructive force of the alliance of big business and government against the interests of ordinary Americans, the Tea Party movement wants to abolish government and expand even more the deregulated capitalism that has unsettled the lives of so many of its members.

As the belief in the libertarian agent, free of all dependencies and social responsibilities blows up in the face of the current economic meltdown, anger replaces critique and ignorance informs politics.

Members of the Tea Party are angry because they have been jolted into recognizing how fragile their so-called individual freedom actually is and that it is the government that is somehow responsible for making them feel so vulnerable.

Maybe so, but there is also something else at work here, less metaphysical and more pedagogical - a kind of intellectual vacuum produced at different levels of American society that cultivates ignorance, limits choices, legitimizes political illiteracy and promotes violence.

Celebrity culture puts much of the population in a moral coma and perpetual state of ignorance. Coupled with a pedagogy of economic Darwinism that is spewed out daily in the mainstream media, large segments of the population are prevented from connecting the dots between their own personal troubles and larger social problems.

In this case, the larger structural elements of a corrupt economic system disappear, while the suffering and hardship continues and the bankers and other members of the financial criminal class run to the banks to deposit their obscene bonuses.

The commercial machinery and repressive apparatuses run by the neoliberal and right-wing zombies have undermined public space and condemned more and more people to the status of disposable populations.

It's all the more crucial that academics, artists, and other intellectuals mobilize their resources in order to fight the loss of vision and the exhaustion of politics that has paralyzed American society for decades.

The key is to link struggles that have for decades been seen as discrete, with a broad anti-capitalist project whose objective is the radical transformation of economic, political, personal and social relations.

Will There be An End to Capitalist Ideolgy?

Where's the revolution?

By Antony Lerman

The causes of the global crisis lie in corruption, financial manipulation and institutionalised fraud, market rigging, bankers' greed, illegal wealth appropriation exacerbated by the bank bailouts and the promotion of war as a means of generating profits for big corporations at the cost of the poor, the disadvantaged and socially destitute.

The consequences of The Great Recession will extend far into the future.

There's the human cost, the devastating impact on people's lives, whether for us personally, for already disadvantaged groups, the country as a whole, developing nations, or the more than 2 billion people already living on less than $2 per day.

Predictions about the consequences of the deficit-reduction measures proposed are already dire. And for many millions, the debilitating impact of financial retrenchment is a reality today.

Commentators of all political stripes are falling over each other to tell us that state social programmes will collapse. Unemployment will rise massively. Millions will be impoverished.

Health services will be curtailed, pensions reduced, infrastructure projects cut, educational opportunities diminished. Worldwide living standards will deteriorate. And things won't get better any time soon.

The last comparable global economic crisis gave a boost to all-encompassing, radical ideologies that claimed to provide a comprehensive analysis of what the problem was and a complete solution: communism and fascism.

Whatever you think of them – for me, both were disastrous – there is no doubting the immensity of each one's aspiration to remake society.

If, as many claim, "humanity is at the crossroads of the most serious economic and social crisis in modern history", where is today's big answer, or bold ideological analysis and recipe for transformation, the movement that's taking the masses by storm? It's not that I want it.

It's just that the circumstances seem so ripe for such a response and yet, unless I'm missing something, nothing comparable has emerged and I'm struggling to understand why.

Perhaps it's because politicians in all countries affected have successfully framed the crisis not only in terms of economic errors but also but also moral deficiencies.

They have offered a sop to the anger of the public, but dampened down speculation about the need for revolutionary change by proposing solutions that are almost exclusively managerial.

Evil may have infected the system and a few bankers' knuckles may have been rapped, but the holy grail will be reached by cutting the deficit. The cuts may get ever more radical, but they're just cuts – what any accountant would tell you to do to get your personal finances in order.

Rebalancing the economy effectively means letting free market forces take care of growth, then incomes and spending can recover. Endure the pain, take the medicine and all will be well.

The global consensus among political leaders sees this is the right approach, with variations as to how far and how fast to go.

It may be keeping dissent in check for now, but it looks to me fragile and was achieved with no little sleight of hand. Can it really be the case that, in effect, a bunch of accountants will solve all our problems?

You don't have to look far to find powerful arguments being made that what happened is not merely natural to the economic cycle and therefore won't simply adjust itself in time.

This approach locates the cause of the global crisis in corruption, financial manipulation and institutionalised fraud, market rigging, bankers' greed, illegal wealth appropriation exacerbated by the bank bailouts and the promotion of war as a means of generating profits for big corporations at the cost of the poor, the disadvantaged and socially destitute.

If economic growth falters, and many are warning that it will, the appeal of an analysis that says the system is fundamentally broken and the economists have been revealed as emperors without any clothes, may dramatically increase.

If then pressure mounts for more radical, root-and-branch solutions, is there anything on offer that may seriously challenge the neoliberal consensus and mobilise the masses?

I have no special command of the landscape, so correct me if I'm wrong, but fully-grown, intellectually coherent political-economic solutions, ready for instant harvesting, look to me to be nonexistent.

Despite claims that Marxism is undergoing a revival, memory of the barbarous uses to which it was put by communist regimes is still too fresh to make it anything more than of minority interest.

And when a radical populist like President Lula da Silva produces 9% growth in Brazil in first quarter 2010, within a basically capitalist economic framework, what thinking revolutionary will see the appeal of Marxism?

So, too, with the anti-globalisation movement directed at G8s and G20s, which anyway seems to have run out of steam.

Green economic and political theories seem far too weak and underdeveloped to gain serious traction and the deficit-reduction bandwagon will only, and almost certainly unfairly, make green solutions look unaffordable.

It may be wrong to rule out something radically new coming from more establishment sources, like the new Soros-funded Institute for New Economic Thinking, but don't hold your breath.

Perhaps there are other ideologies in formation, which even now are generating great excitement among those keen to find a new global answer to the global crisis.

Equally, such ideologies will generate deep scepticism and possibly fear in many who distrust wholesale social engineering.

It's true that our current politics are too crude to cope with either satisfactorily, explaining the causes of our current problems or devising and implementing an intellectually coherent and fair set of solutions.

So some new thinking is desperately needed. Nevertheless, for all its inadequacies, I favour a more fox-like, piecemeal, generalist approach to this task, rather than the widespread adoption of a hedgehog-like, all-encompassing ideology.

And yet I fear that we may not escape a deeply damaging bout of the latter at some point over the next 10 years.