Top Down Takeover Of Egypt's Revolution

The revolution in Egypt erupted like all revolutions do, from the bottom up. It was unemployment and high food prices that propelled working and poor people into action. Now, the media reports that the "opposition” in Egypt is a group of well-to-do folks who have very little in common with the poor of Egypt.


This top down takeover of the revolution is being engineered with the support of the U.S. and European nations, the same allies of the dictatorship that lasted three decades. If this elite group of Egyptians manages to gain power, they'll soon find themselves confronted with the real opposition of Egypt, the overwhelming majority of working and poor people.


Who are these upper-crust oppositionists? Middle East journalist Robert Fisk explains:

"[the oppositionists] include Amr Moussa, the secretary general of the Arab League, ... the Nobel prize-winner Ahmed Zuwail, an Egyptian-American who has advised President Barack Obama; Mohamed Selim Al-Awa, a professor and author of Islamic studies, ... and the president of the Wafd party [a tiny political party], Said al-Badawi...Other nominees for the committee...are Nagib Suez, a prominent [super-wealthy] Cairo businessman... Nabil al-Arabi, an Egyptian UN delegate; and even the heart surgeon Magdi Yacoub, who now lives in Cairo." (February 4, 2011).

What is the task of this committee? Al-Jazeera reports:

“The committee — which was formed last night... proposed that vice president Omar Suleiman [the head of the brutal secret police] preside over a transitional government, and that he pledge to dissolve parliament (whose lower house was elected just last year) and call early elections.” (February 4, 2011).

Are these oppositionists so naive to believe that a "pledge" from a snake like Suleiman is worth anything? Is this a man that any respectable person should be negotiating with?


And herein lies the problem. There can be no smooth "peaceful transition," as Obama and other politicians would like to see, unless nothing in Egypt changes. This is because the ruling political power in the country, the National Democratic Party (NDP), has extremely deep ties to the rich and powerful in Egypt, backed up by both senior military officials and the U.S. government foreign aid program, which enriches various sections of the NDP. 


The New York Times explains:

"Since the revolt, the military has surged to the forefront, emerging as the pivotal player in politics it long sought to manage behind the scenes. The beneficiary of nearly $40 billion in American aid during Mr. Mubarak’s rule, its interests span the gamut of economic life — from the military industry to businesses like road and housing construction, consumer goods and resort management. Even leading opposition leaders, like Mohamed ElBaradei, have acknowledged that the military will have a key role in a transition."

To summarize, U.S. aid to Egypt has been the lifeblood of the dictatorship and the ruling party associated with it, while leading opposition figures have no interests in confronting these powerful interests, only removing their current figurehead. The opposition group that plans to negotiate with the NDP must know that any agreed to middle ground will be unacceptable to the majority of Egyptians, since the NDP will work to maintain their own privileges and wealth.


If the ruling party stays intact, then so will the ruling security apparatus, which will eventually steer the wheel of history backwards again. The party of the dictatorship must be crushed and dismembered, so that real democracy can have room to grow. The official "opposition" has no interest in doing this, because they have no interest in real change.


What would real change look like? It would require a drastic departure from the free-market policies that have been implemented for years, including privatizations of state run industries, lowering taxes for the rich and corporations, eliminating regulations, subsidies, and tariffs, etc. These policies were required by the IMF and World Bank, U.S.-led institutions that created in Egypt what exists in the U.S. — an incredible gap between rich and poor.


None of Egypt's "respectable" opposition are mentioning these policies, because many benefit from them.


If an anti-Mubarak, pro-free-market opposition gains power, they will collide immediately with the majority of working and poor Egyptians, who want a change in the above policies that brought about their misery.


The only opposition group that is expressing the economic demands of the people seems to be the newly-formed Egyptian Federation for Independent Unions, which broke away from the government dominated unions to demand that a "... a minimum wage no less than 1200 LE, with a yearly raise proportionate to inflation; guarantee workers rights to bonuses and benefits according to work value, especially work compensation for those facing work hazards."
and:


"The right for all Egyptian citizens to fair social security including the right to health care, housing, education ‘ensuring free education and syllabus development to cope with science and technology evolution,’ the right for all retired to decent pensions and benefits."


It is demands like these that will decide Egypt's future the day after Mubarak is gone. This will require a complete transformation of Egypt's political system, including its economic policies that are intimately connected to the billions of U.S. foreign aid. It will also require that Egypt's poor and working class develop a clear vision of what they want in order to avoid being led astray by enemies acting as friends.


By Shamus Cooke/www.workerscompass.org

US Chickens Come Home to Roost in Egypt

Mass demonstrations of workers and youth throughout Egypt shook the regime of US-backed dictator Hosni Mubarak on Friday. Hundreds of thousands poured into the streets to demand the president’s resignation, denouncing mass unemployment and poverty, clashing with police, and burning down the headquarters of the ruling National Democratic Party.

The protests came just two weeks after demonstrations forced another US-backed dictator, Zine El Abidine Ben Ali of Tunisia, to flee. Significant demonstrations have spread to other countries in the region, including Yemen, Jordan and Algeria.

Like all revolutionary upheavals, the developments in Egypt are serving to clear away hoary myths and lies, including the American ruling elite’s pretensions of support for democracy around the world. These events are exposing the role of the US government as the lynchpin of reaction throughout the Middle East and North Africa.

From the beginning of the unrest, the Obama administration has made clear its support for Mubarak and the Egyptian regime, a critical US ally.

President Obama devoted his remarks Friday evening to defending Mubarak in the face of the mass popular revolt. On a day in which Mubarak’s police killed at least a dozen people, injured hundreds more and arrested an untold number of demonstrators, Obama cynically proclaimed that the US was “calling upon Egyptian authorities to refrain from any violence against peaceful protesters.”

Obama spoke as if he were an innocent observer. But the truncheons, guns, tear gas canisters, water cannons and tanks used by the Egyptian government to suppress the people all bear the stamp, in some cases literally, “Made in the USA.” The US provides Egypt with $1.5 billion a year to finance its apparatus of repression, making it the second largest beneficiary of US aid after Israel.

Obama lectured Mubarak about respecting human rights on the very day that WikiLeaks posted US State Department cables showing that his administration was aware of and complicit in Mubarak’s use of torture and assassination against his political opponents.

Obama reiterated the position expressed by other US officials that “those protesting in the streets have a responsibility to express themselves peacefully,” as if there could be any comparison between the state violence meted out by Mubarak and the attempts by workers and youth to defend themselves.

The main aim of Obama’s remarks was to make clear the administration’s continued backing for Mubarak. Obama spoke shortly after the Egyptian president appeared on television to declare that he would not step down and warn that he would enforce “security” against “chaos.” Mubarak’s announcement that a new cabinet would be formed and his empty promises to make democratic reforms and expand economic opportunity only increased the popular outrage, spurring more people to pour out into the streets in defiance of the military-imposed curfew.

The real attitude of the US to the events in Egypt was revealed in Obama’s statement: “The United States has a close partnership with Egypt, and we have cooperated with each other on many issues.”

In other words, the United States views the Egyptian government, despised by its population, as a key strategic ally. These remarks echo those of Vice President Joseph Biden, who said on Thursday, as Mubarak moved to shut off the Internet and deploy special operations forces, that the president “has been very responsible… relative to (US) geopolitical interests in the region.”

By “geopolitical interests,” the administration means the determination of the United States to maintain its hegemony over the Middle East and North Africa, including the region’s vast oil and gas reserves. With military aid and training, the US has propped up corrupt and dictatorial regimes from Egypt to the sheikhdoms in Saudi Arabia and other oil producing Gulf States.

Through covert and overt military operations, the US has worked systematically to undermine any government that posed a potential challenge to its interests. Over the past ten years alone the United States has launched bloody colonialist wars in Afghanistan and Iraq.

Egypt has played a critical role in the maintaining US domination, particularly since Anwar Sadat, Mubarak’s predecessor, signed the Camp David accords with Israel in 1978. In 1979, the US lost a key ally with the downfall of the Shah in Iran. Since that time, the Egyptian military and intelligence apparatus has worked closely with both the US and Israel in the suppression of the masses throughout the region.

The entire approach of the American government to the events in Egypt is guided by its immense fear that the resurgence of the class struggle in the region will deal a major blow to its geo-strategic interests.

While the administration may be considering whether it can do without Mubarak, replacing him directly by the military or by one or another of the “opposition” figures, it also knows that the fall of Mubarak, coming after the flight of Tunisia’s Ben Ali, threatens to unleash a wave of popular revolt that could sweep through the entire region.

Workers in the Middle East and the Maghreb have demonstrated immense courage and heroism. The struggle, however, is still in its initial stages. The critical question facing the working class is the development of a new revolutionary leadership and program. Absent this, the ruling elite of the region, in alliance with US imperialism, will regroup either to maintain the existing tyrants or impose new governments equally committed to the defense of the existing political order.

From WSWS

Keynes And The The Paradox Of Capitalism

Once upon a time, economic downturns were looked on as inevitable. Or incurable. Or even a morally justified, righteous cleansing of an economy burdened by the sins of excess. One result of this thinking was the policy mistakes that contributed to the Depression. One of the few good developments to come out of this experience was perhaps the most important economic breakthrough in the 20th century: John Maynard Keynes' 1936 book, 'The General Theory of Employment, Interest, and Money.'

Keynes pointed out that in a downturn, an economy simultaneously has idle factories, unemployed workers and too little spending. This creates the possibility of a virtuous circle: Getting people to spend more will put the factories back to work, staffed by the previously unemployed workers. Put another way, in the short run, when the economy is operating below its potential, expanding demand can create supply.

Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal actions by the government to stabilise output over the business cycle.

Keynes argued that the solution to depression was to stimulate the economy (“inducement to invest”) through some combination of two approaches: a reduction in interest rates and government investment in infrastructure. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth.

The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment. Not surprisingly, Keynesian theory is being touted as a mantra in these recessionary times when government “stimulus packages” are being hailed as the best way to save capitalism from itself.

Though bourgeois in his outlook, Keynes was a remarkably insightful economist. But even his insights could not fully comprehend the paradox that is capitalism. Indeed, our own experience belies the Keynesian optimism about the future of mankind under capitalism, writes Prabhat Patnaik in this insightful article.

In a famous essay 'Economic Possibilities for our Grandchildren' (1930), Keynes had argued: “Assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not, if we look into the future, the permanent problem of the human race.” (emphasis in the original)

He had gone on to ask: “Why, you may ask, is this so startling? It is startling because, if instead of looking into the future, we look into the past, we find that the economic problem, the struggle for subsistence, always has been hitherto the most pressing problem of the human race… If the economic problem is solved, mankind will be deprived of its traditional purpose.” He had then proceeded to examine how mankind could fruitfully use its time in such a world.

True, after Keynes had written there has been the second world war, but thereafter mankind has had six-and-a-half decades without any “important war” of the sort that could interrupt what he had called the “era of progress and invention”. And the rate of population growth has also not accelerated to a point that can be considered to have invalidated Keynes’ premise.

And yet if we take mankind as a whole, it is as far from solving the economic problem as it ever was. True, there has been massive accumulation of capital, and with it an enormous increase in the mass of goods available to mankind; and yet, for the vast majority of mankind, the “struggle for subsistence” that Keynes had referred to has continued to remain as acute as ever, perhaps in some ways even more acute than ever before.

To say that this is only because not enough time has passed, that over a slightly longer time period Keynes’ vision will indeed turn out to be true, is facile. The fact that the bulk of mankind continues to face an acute struggle for subsistence is not a matter of degree; it is not as if the acuteness of this struggle for this segment of mankind has been lessening over time, or that the relative size of this segment has been lessening over time. We cannot therefore assert that the passage of more time will lift everybody above this struggle.

Dichotomy Structurally Inbuilt In Capitalism
Likewise, to say that while enormous increases have taken place in the mass of goods and services available to mankind (the increase in this mass being more in the last 100 years than in the previous 2000 years, as Keynes had pointed out), its distribution has been extremely skewed and hence accounts for the persistence of the struggle for subsistence for the majority of the world’s population, is to state a mere tautology.

The whole point is that there is something structural to the capitalist system itself, the same system that causes this enormous increase in mankind’s capacity to produce goods and services, which also ensures that, notwithstanding this enormous increase, the struggle for subsistence must continue to be as acute as before, or even more acute than before, for the bulk of mankind.

Keynes missed this structural aspect of capitalism. His entire argument in fact was based on the mere logic of compound interest, i.e. on the sheer fact that “if capital increases, say, 2 per cent per annum, the capital equipment of the world will have increased by a half in twenty years, and seven and a half times in a hundred years.”

From this sheer fact it follows that output too would have increased more or less by a similar order of magnitude, and mankind, with so much more of goods at its disposal, would have overcome the struggle for subsistence. The reason Keynes assumed that an increase in the mass of goods would eventually benefit everyone lies not just in his inability to see the antagonistic nature of the capitalist mode of production (and its antagonistic relationship with the surrounding universe of petty producers), but also in his belief that capitalism is a malleable system which can be moulded, in accordance with the dictates of reason, by the interventions of the State as the representative of society.

He was a liberal and saw the state as standing above, and acting on behalf of, society as a whole, in accordance with the dictates of reason. The world, he thought, was ruled by ideas; and correct, and benevolent, ideas would clearly translate themselves into reality, so that the increase in mankind’s productive capacity would get naturally transformed into an end of the economic problem.

If the antagonism of capitalism was pointed out to Keynes, he would have simply talked about state intervention restraining this antagonism to ensure that the benefit of the increase in productive capacity reached all.

The fact that this has not happened, the fact that the enormous increase in mankind’s capacity to produce has translated itself not into an end to the struggle for subsistence for the world’s population, but into a plethora of all kinds of goods and services of little benefit to it, from a stockpiling of armaments to an exploration of outer space, and even into a systematic promotion of waste, and lack of utilization, or even destruction, of productive equipment, only underscores the limitations of the liberal world outlook of which Keynes was a votary.

The State, instead of being an embodiment of reason, which intervenes in the interests of society as a whole, as liberalism believes, acts to defend the class interests of the hegemonic class, and hence to perpetuate the antagonisms of the capitalist system.

Antagonisms In Three Distinct Ways
These antagonisms perpetuate in three quite distinct ways the struggle for subsistence in which the bulk of mankind is caught. The first centres around the fact that the level of wages in the capitalist system depends upon the relative size of the reserve army of labour.

And to the extent that the relative size of the reserve army of labour never shrinks below a certain threshold level, the wage rate remains tied to the subsistence level despite significant increases in labour productivity, as necessarily occur in the “era of progress and innovation.” Work itself therefore becomes a struggle for subsistence and remains so.

Secondly, those who constitute the reserve army of labour are themselves destitute and hence condemned to an even more acute struggle for subsistence, to eke out for themselves an even more meagre magnitude of goods and services.

And thirdly, the encroachment by the capitalist mode upon the surrounding universe of petty production, whereby it displaces petty producers, grabs land from the peasants, uses the tax machinery of the State to appropriate for itself, at the expense of the petty producers, an amount of surplus value over and above what is produced within the capitalist mode itself, in short, the entire mechanism of “primitive accumulation of capital” ensures that the size of the reserve army always remains above this threshold level.

There is a stream of destitute petty producers forever flocking to work within the capitalist mode but unable to find work and hence joining the ranks of the reserve army. The antagonism within the system, and vis-à-vis the surrounding universe of petty production, thus ensures that, notwithstanding the massive increases in mankind’s productive capacity, the struggle of subsistence for the bulk of mankind continues unabated.

The growth rates of world output have been even greater in the post-war period than in Keynes’ time. The growth rates in particular capitalist countries like India have been of an order unimaginable in Keynes’ time, and yet there is no let up in the struggle for subsistence on the part of the bulk of the population even within these countries.

In India, precisely during the period of neo-liberal reforms when output growth rates have been high, there has been an increase in the proportion of the rural population accessing less than 2400 calories per person per day (the figure for 2004 is 87 per cent). This is also the period when hundreds of thousands of peasants, unable to carry on even simple reproduction have committed suicide.

The unemployment rate has increased, notwithstanding a massive jump in the rate of capital accumulation; and the real wage rate, even of the workers in the organized sector, has at best stagnated, notwithstanding massive increases in labour productivity. In short, our own experience belies the Keynesian optimism about the future of mankind under capitalism.

But Keynes wrote a long time ago. He should have seen the inner working of the system better (after all Marx who died the year Keynes was born, saw it), but perhaps his upper class Edwardian upbringing came in the way.

But what does one say of people who, having seen the destitution-“high growth” dialectics in the contemporary world, still cling to the illusion that the logic of compound interest will overcome the “economic problem of mankind”?

Neo-liberal ideologues of course propound this illusion, either in its simple version, which is the “trickle down” theory, or in the slightly more complex version, where the State is supposed to ensure through its intervention that the benefits of the growing mass of goods and services are made available to all, thereby alleviating poverty and easing the struggle for subsistence.

But this illusion often appears in an altogether unrecognizable form. Jeffrey Sachs, the economist who is well-known for his administration of the so-called shock therapy in the former Soviet Union that led to a veritable retrogression of the economy and the unleashing of massive suffering on millions of people, has come out with a book where he argues that poverty in large parts of the world is associated with adverse geographical factors, such as drought-proneness, desertification, infertile soil, and such like.

He wants global efforts to help these economies which are the victims of such niggardliness on the part of nature. The fact that enormous poverty exists in areas, where nature is not niggardly, but on the contrary bounteous; the fact that the very bounteousness of nature has formed the basis of exploitation of the producers on a massive scale, so that they are engaged in an acute struggle for existence precisely in the midst of plenitude; and hence the fact that the bulk of the world’s population continues to struggle for subsistence not because of nature’s niggardliness but because of the incubus of an exploitative social order, are all obscured by such analysis. Keynes’ faith in the miracle of compound interest would be justified in a socialist order, but not in a capitalist one.

Fareed Zakaria's 'Capitalist Manifesto': A Desperate Attempt At Reassurance

Fareed Zakaria, editor of Newsweek International, has written an essay entitled 'The Capitalist Manifesto: Greed is Good (To a point)', which is intended to express relief that the panic engendered by the global financial crisis is easing, and to offer reassurances that, for all its faults, capitalism is still “the most productive economic engine we have yet invented.”

The problem with this claim that all is, again, for the best in the best of all possible worlds, is that far from the crisis having ended, it is only just beginning to unfold. Zakaria begins by drawing comfort from the fact that the financial crises of the past 20 years were all overcome, leading to further economic growth.

The stock market crash of 1987 defied predictions of a return to the Great Depression and “turned out to be a blip on the way to an even bigger, longer boom.” The 1997 Asian financial crisis did not lead to a global slump. Instead, the Asian economies “rebounded within two years”.

The collapse of Long Term Capital Management in 1998, described by then US Treasury secretary Robert Rubin as “the worst financial crisis in 50 years”, did not result in the end of hedge funds. Rather they have “massively expanded” since then.

How were these earlier crises overcome? As Zakaria notes, US Federal Reserve chairman Alan Greenspan always advanced the same solution: cut interest rates and provide easy money, creating a series of asset bubbles.

When the subprime crisis developed in 2007, Fed chairman Ben Bernanke followed the same procedure. However, on this occasion, interest rate cuts failed to alleviate the crisis. The Fed initiated its injections of liquidity in August 2007, but the situation only worsened.

The investment bank Bear Stearns went under in March 2008, followed by the collapse of Lehman Brothers in September and, by the end of 2008, notwithstanding massive injections of liquidity, all five Wall Street investment banks had either collapsed or been forced to restructure. The global financial system was on the brink of a meltdown.

This alone demonstrates that, far from the happy scenario painted by Zakaria—this crisis is just like the others since 1987—the collapse that began in 2007 marked a qualitative turn in an ongoing process.

Zakaria is forced to acknowledge that the global financial system has been “crashing more frequently over the past 30 years than in any comparable period in history”. But he insists that the problem is not with the profit system itself. “What we are experiencing is not a crisis of capitalism. It is a crisis of finance, of democracy, of globalization and ultimately of ethics.”

In the first place, the separation of capitalism from each of these phenomena is absurd—as if the capitalist mode of production could somehow be lifted out of the historical situation in which it is situated; as if it does not shape the socio-political environment in which it operates, including the prevailing ethics.

Let us examine each of Zakaria’s explanations of the crisis in turn.

He insists, along with many others, that the fault lies with the operations of the financial system. “Finance screwed up, or to be more precise, financiers did. In June 2007, when the financial crisis began, Coca-Cola, PepsiCo, IBM, Nike, Wal-Mart and Microsoft were all running their companies with strong balance sheets and sensible business models. Major American corporations were highly profitable, and they were spending prudently, holding on to cash to build a cushion for a downturn.”

The separation of finance (the bad side) from the rest of the capitalist economy (the good side) has a long history. It was taken up by Marx in his withering critique of the French petty-bourgeois anarchist Proudhon more than 150 years ago. As Marx explained then, the “bad” side cannot be separated from the “good”, especially as it turns out that, more often than not, the “bad” side is the driving force of historical development. And that is the case in the current situation.

The development of American capitalism—and the global economy—has been grounded on the vast changes associated with the processes of financialisation that began in the 1980s.

A few figures illustrate what has occurred. In 1980, financial firms accounted for about 5 per cent of total corporate profits. By 2006 this had risen to around 40 per cent. On a global scale, financial assets in 1980 were roughly equal in value to world gross domestic product.

Twenty-five years later they constituted 350 per cent of global GDP. At the heart of this transformation has been the accumulation of finance sector debt in the US economy. It rose from 63.8 per cent of GDP in 1997 to 113.8 per cent in 2007—a result of the banks and financial corporations plunging ever deeper into debt in order to fund their debt-based financial operations.

The rise and rise of financialisation was not simply a policy choice, but a response to a crisis in the capitalist accumulation process that had developed in the late 1960s and 1970s. Faced with a downturn in the rate of profit, American capitalism undertook a major restructuring program from the end of the 1970s onwards.

This involved the destruction of large swathes of manufacturing industry, a concerted assault on the social position of the working class, the development of off-shoring and outsourcing to take advantage of cheaper sources of labour, and a turn to financial manipulation, such as hostile takeovers and mergers, as the source of profit.

New Mode of Accumulation

The transformation of the American economy in the 1980s saw the emergence of a new mode of accumulation, in which profits were made through the appropriation, by financial methods, of already created wealth.

Historically, wealth had been accumulated in the US economy through investment, trade and manufacturing. Now the driving force of accumulation became rising asset prices. This has determined the shape of the US economy, and the accumulation of profit by all sections of capital—even for those not immediately connected to finance.

Back in the 1950s and 1960s, manufacturing firms based on assembly-line production were not the largest component of the American economy. But the vast increases in profitability that these methods made possible created the conditions where all sectors of capital could expand. This was a society dominated by what sociologists have called a “Fordist regime” in which, as former GM CEO Charles Wilson famously noted, “what was good for the country was good for General Motors and vice versa.”

In the past 25 years, the fundamental role once played by assembly-line manufacturing in the American economy has been assumed by finance capital. No matter how sound or well-run an individual capitalist firm may be, the accumulation of profit is a social process. Each firm depends for its expansion on the growth of the economy as a whole. And in the US, finance capital has been the driving force.

Any attempt to separate the “bad” side from the “good” collapses upon even a cursory review. Zakaria points to various corporations as part of the “good” side of American capital. One of them is Microsoft. But one of the chief sources of Microsoft’s profits has been the sales of the computers and software programs that have powered the finance sector.

Consider Nike and Wal-Mart. They have profited by exploiting cheap labour in China and other countries, under conditions of globalised production. But these operations, involving complex financial relationships, would have been impossible without the growth of financial derivatives.

At the same time, Nike and Wal-Mart could not have remained profitable without the rise in US consumer debt—much of it from housing finance—that has sustained American consumption spending in the face of stagnant or declining real incomes over the past quarter century. The essential significance of the global financial crisis is that it marks the breakdown of the mode of accumulation that has prevailed for the past 25 years.

Financial assets derive their value, in the final analysis, from their claim upon the production of real wealth. Shares are an obvious example. The share is a claim to a portion of a stream of income generated by a particular company. But this share can be bought and sold, and its value may increase in the market in excess of the value of the underlying asset.

The fact that financial assets have expanded almost four-fold in relation to global production over the past two and a half decades means that all their claims to real wealth cannot be met. This disparity is expressed in the emergence of so-called “toxic assets” on the books of the banks and finance houses—claims to income and wealth that are essentially worthless.

In other words, the crisis is not one of liquidity, i.e., lack of sufficient funds to ensure the functioning of an otherwise healthy system, but of insolvency. Its dimensions are indicated by the fact that to restore the parity that existed in 1980 between the value of financial assets and global GDP would mean wiping out financial asset values equivalent to twice global GDP.

These figures make clear the meaning of the bailout and stimulus packages launched by governments around the world. They have nothing to do with maintaining the jobs and living standards of the working class. Rather, they are aimed at transferring as much as possible of the massive debts and “toxic assets” amassed by the financial corporations and banks to the state.

It is precisely this state rescue operation that has boosted stock markets over the past three months and enabled Zakaria to breathe a sigh of relief. As a recent article in the Wall Street Journal noted, one of the main reasons for the more than 30 per cent rebound is “disarmingly simple”. Financial markets are “awash in government cash” as a result of the biggest combined financial stimulus the world has seen in modern times.

The US government has already pledged $12.7 trillion in support of the financial system, almost equivalent to America’s gross domestic product. Since the financial crisis intensified in September 2008, governments worldwide have committed $18 trillion in public funds, equivalent to almost 30 per cent of world GDP, to recapitalising the banks. This has led to a blowout in their fiscal position.

In Britain, government debt is expected to soon reach 100 per cent of GDP while Japan’s government debt is headed for 200 per cent by 2011 and government debt in the US is expected to reach 100 per cent of GDP by the same time. According to IMF economists, by 2014 public debt to GDP ratios in the G-20 economies, comprising some 85 per cent of the global economy, will have increased by 36 percentage points of GDP compared to the levels at the end of 2007.

A New Political Regime

Government finance, however, cannot go on indefinitely. The debts incurred by the state to finance the banks will be paid through slashing government spending and social services and forcibly impoverishing the working class. The scale of this assault on social conditions and living standards will be directly proportionate to the size of the sums of money involved. According to one estimate in Britain, consumption there will have to be reduced by at least 20 per cent from its level in 2006-2007 to make even a start on balancing the government’s books.

Zakaria points to the “terrifying” growth of government debt in America, especially when entitlements and pension commitments are included, and remarks that “no-one has tried seriously to close the gap, which can be done only by (1) raising taxes or (2) cutting expenditures.”

“This is the disease of modern democracy: the system cannot impose any short-term pain for long-term gain.” The political implications are clear: it is impossible to impose the massive spending cuts and rises in revenue needed to wipe off government debt within the present political order. Restructuring the US and other major capitalist economies requires a new, far more repressive regime.

Zakaria goes to extraordinary lengths in his attempt to claim that capitalism is not the cause of the crisis. The real problem, he insists, is not failure, but too much success. The world has been moving to “an extraordinary degree of political stability”; there is no major military competition among the great powers; political violence is on the decline.

Given the wars being conducted by the US in Iraq, Pakistan and Afghanistan, such an assertion can only be described as absurd. As for the subsidence of great power rivalry, one need only point to the constant and growing concern in US policy-making circles about the rise of China.

However, Zakaria is not going to let facts get in the way of the story he wants to tell. Political stability, he claims, has been accompanied by a reduction in inflation, economic growth and the establishment of a global economic system. It is these “good times” that made people complacent, and, as the cost of capital sank, more foolish.

“The world economy had become the equivalent of a race car—faster and more complex than any vehicle anyone had ever seen. But it turned out that no one had driven a car like this before, and no one really knew how. So it crashed.”

What of the future? “The real problem,” he continues, “is that we’re still driving this car. The global economy remains highly complex, interconnected and imbalanced. The Chinese still pile up their surpluses and need to put them somewhere. Washington and Beijing will have to work hard to slowly stabilize their mutual dependence so that the system is not being set up for another crash.”

In other words, while the crisis is over, all the conditions that produced it are still present, and nowhere nearer to being resolved.

Lenin once remarked that the power of Marxism is that it is true. Every so often, even conscious opponents of Marxism are forced, by the very logic of objective facts, to point to processes that form the centre of Marxist analysis. This is the case here.

According to Zakaria: “More broadly, the fundamental crisis we face is of globalisation itself. We have globalised the economies of nations. Trade, travel and tourism are bringing people together. Technology has created worldwide supply chains, companies and customers. But our politics remains resolutely national. This tension is at the heart of the many crashes of this era - a mismatch between interconnected economies that are producing global problems but no matching political process that can effect global solutions.”

The Marxist movement has long identified as one of the central contradictions of world capitalism that between the global development of the productive forces on the one hand, and the nation state system on which the legal and political superstructure is based, on the other. It is this contradiction that renders socialism, based on the development of an internationally planned economy, an historic necessity.

Just as the feudal political order had to be overthrown to make possible the growth of the productive forces under capitalism, so today the globalisation of production has made the capitalist nation-state system as reactionary and backward as the feudal principalities and kingdoms two and three centuries ago.

This contradiction erupted in the first decade of the last century in the form of World War I. It has now emerged once again, at an even higher level. It can only be resolved by the working class taking political power on a global scale; otherwise mankind faces being plunged into wars and economic crises potentially more devastating than those that characterised the first five decades of the twentieth century.

Zakaria calls for better international coordination. But the objective logic of the capitalist system itself drives events in the opposite direction. Capitalist production is carried out on a global scale. Its purpose is not to meet human needs, but to accumulate private profit.

When accumulation is expanding, the different sections of capital, as Marx noted, operate as a kind of fraternity, dividing up the spoils among themselves. When the system breaks down and it becomes no longer a question of sharing profits but of trying to avoid losses, a violent struggle breaks out.

Such a breakdown no longer simply involves intensified competitive struggles in the market, as it did in the nineteenth century, but, with the vast growth of capitalist industry and finance, economic crises inevitably bring the direct involvement of the capitalist state.

This is what occurred last year. After the collapse of Lehman Brothers in September, with the banking and financial system threatened with meltdown, every government around the world responded, not by working for globally coordinated action, but to protect its “own” banking system, leading to immediate conflicts.

In the months since, the differences have only widened. The Germans and French are hostile to the American government’s bailouts because they fear, rightly, that these will enable US banks to retain their dominant global position. The American government, for its part, opposes calls for greater regulation, because they are directed at US finance.

The British government, meanwhile, does not want to introduce tougher regulations fearing that they would endanger London’s position, described by Financial Times commentator John Plender as “the adventure playground of the global financial system.”

This brings opposition from the German government, which harboured hopes that the crisis would offer more opportunities for Frankfurt. The various industry interventions, likewise, have sharpened national rivalries. The German government’s bailout of Opel, for example, endangers operations in Belgium, even raising questions as to whether rules governing the operation of the single European market might have been breached.

As for co-ordination between the US and China to resolve international monetary imbalances, the Chinese central bank has twice called, within the past three months, for the international financial system to be restructured and the dollar replaced as the world reserve currency. Were that to take place, it would cause a rapid decline in the global position of American capitalism, which has enjoyed enormous advantages from the dollar’s role as world money.

Failing international co-operation, Zakaria warns, there will be “more crashes, and eventually there may be a retreat from globalization toward the safety—and slow growth—of protected national economies.” The development of just such a situation in the 1930s led directly to World War II. It would have even more devastating consequences today.

In the end, Zakaria concludes that a “moral crisis” may “lie at the heart of our problems”. Most of what happened over the past decade was legal but “very few people acted responsibly.” However, he continues, none of this happened because “business people have suddenly become more immoral. It is part of the opening up and growing competitiveness of the business world.”

Zakaria does not choose to develop this point, because to do so would make it all too clear that this “moral crisis” is itself an expression of the crisis of the capitalist economy.

The very processes associated with the rise of finance capital have made the dividing line between legality and illegality, not to speak of morality and immorality, ever-more blurred.

In a world of multi-million and multi-billion dollar financial transactions involving the use of complex derivatives, where the value of a financial asset can be altered by changing the value of one or other of the variables in the mathematical model on which it is based; where the more complex and obscure a financial derivative is, the greater the profit going to the seller; where vast fortunes can be made from financial gambling, and where a firm that does not employ the latest dubious methods to boost the bottom line faces being gobbled up by an asset stripper financed with junk bonds, what price ethics?

Moreover, the growth of a financial oligarchy, which dominates and controls the entire political system, means that any rational reform of the present order is impossible, even if a solution were available.

The productive forces of the global economy—the complex and powerful racing car, to use Zakaria’s analogy—created by the combined intellectual and physical labour of the world’s working class, have developed on an immense scale.

But they can no longer be left in the hands of a ruling elite that has lost the historical, political and moral right to remain at the wheel. That is why a socialist revolution, and the transfer of political power to the hands of the working class, has become a historical necessity.

Nick Beams

The Significance Of Washington's Coup Attempt In Honduras

There should be no doubts about the US’ decisive role behind the now-crumbling military coup in Honduras. As commander and chief of the US armed forces, the blame for this intervention lies solely on President Obama.

The White House, however, would like you to believe that they “attempted to convince the Honduran military not to intervene.”

Rubbish.

When it comes to the Honduran military, the US government needn’t ask permission for anything. The decades long relationship between the two institutions is one of dependence — Honduras’ military has long been financed and trained by the US. The New York Times explains:

“The two nations have long had a close military relationship, with an American military task force stationed at a Honduran air base about 50 miles northwest of Tegucigalpa. The unit focuses on training Honduran military forces, counternarcotics operations, search and rescue, and disaster relief missions throughout Central America.” (June 28, 2009)

And from Latin American expert Eva Gollinger:

“The US Military Group in Honduras trains around 300 Honduran soldiers every year, provides more than $500,000 annually to the Honduran Armed Forces and additionally provides $1.4 million for a military education and exchange program for around 300 more Honduran soldiers every year.”

This year US aid to Honduras was $43 million.

It is utterly unimaginable that the Honduran military would act against the wishes of the hemisphere’s military and economic superpower.

In fact, the chief military leader of the Honduran coup — Joint Chief of Staff Romeo Orlando Vasquez Velasquez — lived and was trained at the notorious School of Americas (SOA), a US military base that trains Latin American military officers to act in the best interests of United State’s corporations. It is no coincidence that another coup leader — Air Force head Gen. Luis Javier Prince Suazo — is also an SOA graduate.

When Honduran President Manuel Zelaya realized that Vasquez was acting against him, he was fired — the rest of the military chiefs resigned in protest; and the coup was on.

The highly conservative Honduran Supreme Court then gave the military the “legal” cover it needed to pursue the coup, a fact the US media uses to justify the events.

The reason for the coup lies in President Zelaya’s recent foreign policy shift — away from the United States towards Venezuela and the rest of Latin America. This turn was the result of the United States largely ignoring Honduras, after a long lasting, villainous relationship had ended: the US had, for years, funneled large amounts of cash and arms to the Honduran government to kill the regions political leftists, the high point being the regions turbulent 1980’s.

After Zelaya was elected in 2006 (he still has one year left in his term), he promised to shift Honduras’ politics toward helping the poorer layers. He realized that he could not achieve any of his promises with the scant amount of aid from the US and looked instead to the Latin American trade association, ALBA. Zelaya explained:

"I have been looking for projects from the World Bank, the Inter-American Development Bank, Europe and I have received very moderate offers ... that forces us to find other forms of financing like ALBA." ( Rueters, April 26,2008 )

The US government did not like this move, since it prefers US banks to dominate the economies of Latin American countries. The New York Times confirms:

“…[Washington’s] relations with Mr Zelaya…had recently turned colder because of the inclusion of Honduras in the Bolivarian Alternative for the Americas, or ALBA, a leftist political alliance led by Venezuela.” (June 28, 2009)

Nearly all of the US media’s writing about the Honduran coup is littered with negative references to Hugo Chavez, the “socialist project,” and other buzzwords meant to influence the reader toward acceptance of the coup.

For example:

“…[Zelaya] has the support of labor unions and the poor. But the middle class and the wealthy business community fear he wants to introduce Mr. Chávez’s brand of socialist populism into the country, one of Latin America’s poorest.” (New York Times, June 28, 2009)

Obama himself does nothing to condemn the coup. Yes, he is “deeply concerned” about the events in Honduras, but his vague comments about “dialogue” and respecting “legal procedures” is full of loopholes — big enough for a coup to squeeze through.

If Obama immediately refused to recognize the newly installed coup government in Honduras, while threatening to withdraw US military and financial aide — along with the US ambassador — the coup would dissolve in seconds. Strong actions like these, however, were completely absent.

Eva Gollinger comments:

“I think a clear coup d'etat against a democratic government that also happens to be a major dependent on US economic and political aid should provoke a more firm and concise statement by the US Government.”

Such a statement did come not only from the General Assembly of the United Nations, but from the formerly US-dominated Organization of American States (OAS). Both organizations are refusing to recognize the new coup government in Honduras and are demanding the return of Zelaya. This is a big blow to Washington, who in better times could rely on the OAS and UN to turn a blind eye to a US-sponsored coup, such as the one in Haiti in 2004.

Now, however, the OAS has largely broken from the U.S. stranglehold, emboldened by the independent path taken by numerous Latin American countries, though especially Venezuela.

And this is the broader motive for the coup. The US banks and other corporations that once dominated Latin America are being quickly pushed aside, so that governments may use their country’s wealth for social services and real economic development — not foreign for-profit plunder.

The US coup attempt in Honduras is thus a sign of desperation. It was also a huge gamble. Obama had hoped that the UN and OAS would let this one slide. It was also hoped that the Honduran people would be intimidated by martial law and a communications blackout. Neither was the case.

Huge protests have defied the military-ordered curfew. Latin American countries have united in defiance of a tyrannical US policy. It is reported that these happenings are causing splits in the Honduran military, while also a general strike was being prepared by the nation’s trade unions.

In consequence, the coup is likely to crumble, and Obama’s first attempt to re-tame Latin America will have failed. The actions of the UN and OAS are striking examples of the shrinking international influence of the US, meaning that future interventions — both military and economic — are likely to be more direct to restore US hegemony. Obama’s more-subtle attempts to uphold US “influence” in the world will ultimately require blunter, Bush-like tactics.

If the Honduran coup fails, Obama will eloquently discuss how pleased he is that “democracy was restored” — while refusing to admit that he tried to kill it.

Shamus Cooke/CounterCurrents.Org

EU Voters Turn Back On Social Democracy

When millions of workers turn their back on social democracy in the middle of an economic crisis, it shows one thing: they no longer expect any solution to their problems from these parties


The most notable result of the European elections held last weekend is the dramatic decline of social democracy. On average across Europe, social democratic parties received only 22 per cent of the vote, six per cent less than in the previous European election in 2004. With a turnout of just 43 per cent, this means that less than one in ten of the electorate voted for these parties.

Average European figures distort the real extent of the decline. In the major industrial countries of Western Europe, where social democratic parties have led governments for decades or functioned as the main opposition party, their losses were huge—irrespective of whether the parties are currently in government or opposition.

In Great Britain, where the Labour Party has been in power for the past twelve years, Labour’s support plummeted to a record low of 16 per cent—lower than the vote received by the extreme right-wing UK Independence Party.

In Spain, the ruling Socialist Party lost five percentage points and trailed the right-wing Peoples Party.

In Germany, the Social Democratic Party (SPD), which has been in government for eleven years, recorded an historic low of 21 per cent.

In Portugal, support for the ruling Socialist Party fell from 45 to 27 per cent.

In France, where the Socialist Party has been in opposition for the past seven years, the party received just 17 per cent—a decline of 12 percentage points compared to five years ago.

In Italy, support for the Democratic Party, which is a successor organisation to the Italian Communist Party and other “left” parties, plunged from 31 per cent to 26 per cent.

In Denmark, the opposition Social Democrats lost 12 percentage points and finished with a total of 21 per cent.

The vote for the Dutch Labour Party was halved to 12 per cent, and in Austria it sank from 33 per cent to 24 per cent.

This decline is all the more remarkable when one bears in mind that the election took place in the midst of the most severe world economic crisis since the 1930s. Although unemployment is rising rapidly and the living conditions of broad layers of the population have worsened considerably, voters are deserting the social democrats in droves.

The cause for this shift is to be found in the politics and character of the social democratic parties, which have for many years functioned like any other bourgeois party. In the past two decades, they have used their influence, in close alliance with the trade unions, to carry out the sort of social attacks that had provoked massive resistance when attempted by conservative governments.

In Britain, the Labour Party led by Tony Blair adopted the program of the Conservative Party’s “iron lady,” Margaret Thatcher, while the German SPD led by Gerhard Schröder passed the anti-welfare Hartz laws and carried out more attacks on social rights than all previous conservative governments put together.

The 'Financial Times' in an editorial on June 9 pointed to the seeming anomaly of massive electoral losses for parties historically associated with socialism under conditions of growing popular disillusionment with capitalism. It correctly notes that, in fact, there are no serious differences in economic and social policy between the social democratic and conservative parties.

The newspaper wrote: “At a time when ‘the end of capitalism’ is raised as a serious prospect, the parties whose historical mission was to replace capitalism with socialism offer no governing philosophy. Their anti-crisis policies are barely distinguishable from those of their rivals.”

When millions of workers turn their back on social democracy in the middle of an economic crisis, it shows one thing: they no longer expect any solution to their problems from these parties.

The election result also expressed a broad rejection of the European parliament. The job of the parliament is to provide a pseudo-democratic cover for the institutions of the European Union and the army of 40,000 well-paid bureaucrats in Brussels who, in turn, serve at the beck and call of a comparable army of business lobbyists.

Vast numbers of voters, especially from the working class, refrained from casting ballots. The biggest party in the election was the party of non-voters. At 43 per cent, voter participation was 2.5 percentage points lower than the previous record low turnout, in 2004. In Holland, Great Britain and most Eastern European countries, turnout was less than 40 per cent.

The resulting political vacuum was exploited by conservative and right-wing parties. This has led many commentators to speak of a “turn to the right” in Europe. Such a conclusion is unwarranted and superficial. Right-wing parties were able to exploit the collapse in support for social democracy and the low turnout. In most cases, however, they failed to increase their vote and in some cases saw their support decline significantly.

Even extreme right, xenophobic parties that gained significantly—such as Geert Wilders’ Freedom Party in Holland (17 per cent), the UK Independence Party (17 per cent), and the British National Party (6 per cent)—have, based on the low voter turnout of 35 per cent in the two countries, less support than their results suggest.

What is evident in the European election is a sharp social polarisation. Until now, the ruling classes have been able to rely on the social democratic parties and the trade unions to suppress social struggles. The decline of these organisations means that future class confrontations will take a more open and explosive form.

Peter Schwarz

India must look after its own interests first

By Ashok Mitra

Hell has finally been let loose. It may look like the end of the capitalist order to those done in by the holocaust. Capitalism, with its feline features, has however proved it has more than nine lives. What is more legitimate to claim is the end of the officiousness of the ideology of laissez faire, which has for this long buttressed capitalism. Recent weeks have decisively settled the issue: the so-called free market does not raise human welfare to its highest possible level, allowing the animal spirit in man to roam unfettered does not lead to either an equilibrium of bliss or to the emergence of a just society, the animal spirit actually wraps within itself such evils as greed, envy, ill-will, skulduggery and a fearsome lack of moral principles.
Since luminaries from the United States of America were the most vocal votaries of the free market, it was almost inevitable for that country to be the first and severest victim of the catastrophe that has set in. The long, dismal procession of financial collapses, insolvencies, take-overs and whining pleas to the government to bail out the wrongdoers — and those at the receiving end of their wrongdoing — is almost a re-run of the Great Depression. Quite a few of those at this moment importuning with the begging bowl were, till yesterday, holier-than-thou specimens. In that sense, it has been a great leveller: the high and mighty mortgage financiers Fanny Mae and Freddie Mac, for more than a century the majordomo in investment banking Lehman Brothers, other investment banking giants such as Morgan Stanley and Goldman Sachs, the grand insurance conglomerate, the American International Group; the mega stockbroker Merill Lynch, have all bitten the dust. The individual tales of how they came a cropper have their specific nuances, but the basic malady is the same: overreaching ambition goading those in charge of these institutions to cut absurd corners. The entire American nation has now to pay for the sins of a collection of private sharks, big and small. Because over the past decades so much gibberish has been talked, and listened to, on the necessity of financial integration on a global scale, Europe — and Asia too, at least partially — are also at panic’s door. What in the jargon is known as the elasticity of expectations has gone haywire: since people expect the market to crash, the market is crashing — and keeps crashing — all over.

Hard times call for hard decisions. Whatever the wrench in the heart, dogmas have to be thrown into the wastebasket. Can you believe it, George W. Bush presenting himself before the world’s media and thundering in no-nonsense terms: the government must intervene in the affairs of the economy? The free market is officially buried. The State must reassume centre-stage, the treasury and the federal reserve board will be handing out rescue money right and left in order to save banking and non-banking institutions alike. Even when such entities have gone bust entirely on account of devious doings on their own part, State generosity will not be denied. After all, the survival of American capitalism is at stake. Saving a crooked and corrupt Wall Street is saving the capitalist order.

At the same time, it is being rubbed in even to the thugs in trouble, there is no free lunch. The US Congress, representing the American nation, has assumed the role of a stern taskmaster. State agencies will henceforth oversee and regulate the activities of institutions receiving government bounty. In some instances, such institutions — including banks — will have to part with a segment of their equity to these agencies, a euphemism for semi-nationalization. That is to say, American capitalism, in sackcloth and ashes, has agreed to the shackles of a regulatory regime. Even salaries and perquisites going to the executive personnel of quite a few fund-receiving institutions will be subject to public scrutiny. Margaret Thatcher’s Britain, equally hard hit by the blowing typhoon, has gone even further, to the extent of nationalizing, in full, some of its largest banks.

Will the message reach the shores of India, where the authorities, bewitched by liberalization, have been obstinately anxious to integrate the domestic financial market with miracle-making Wall Street? Render unto Caesar what belongs to Caesar: it is only determined resistance by the Left which has stood in the way of a greater exposure of our financial system to American banks and insurance firms. Notwithstanding that piece of luck, share prices here are behaving like Nervous Nellies. And this for a solid reason.

Short-term capital funds from abroad have parked in our stock exchanges in substantial quantities. Foreigners have purchased a sizeable slice of equity of not only many Indian industrial and commercial ventures, but of some of our leading banks as well. If, because of uncertainties originating in the US and Europe, these equity investments are withdrawn at an extraordinarily fast pace, it could cause a debacle in both share prices and our foreign exchange holdings. The nervousness on our bourses is largely on account of contemplation of that prospect, which can be avoided only if the authorities, without losing a moment, re-clamp restrictions on capital movements on the current account.

The neo-colonial grip on North Block is yet to slacken. Even as both Sensex and Nifty show signs of a free fall, the prime minister, his finance minister and their cronies persist in glib talk about the “strong fundamentals” of the Indian economy, a copycat version of the assertion of the US Republican presidential candidate, Senator John McCain that the American economy is “structurally sound”. Hope is being pinned exclusively on providing additional liquidity to participants in the share markets. Official verbiage continues to avoid mentioning the most crucial fact though. Foreign institutional investors at present hold around 70 billion US dollars —equivalent to Rs 350,000 crore — in Indian stocks, including equity of major banks and corporate bodies. If worst comes to the worst, foreigners could all of a sudden begin to sell short, dump these stocks, take their pickings and depart from the scene. The consequences could be frightening for share prices, the external value of the rupee and the country’s foreign exchange reserves. The Reserve Bank of India’s pump-priming would be hopelessly inadequate in that kind of a situation.

Is not what is immediately called for is, if not a total ban, at least a strict regime of controls, on taking short-term capital out of the country? Those at the helm of our affairs, overly concerned about possible negative reactions from their patrons in Washington DC to exchange control proposals, would like to perish such a thought and mumble inanities like the necessity of a global solution to a global problem. But the rude fact will not go away: finance ministers of the Western countries will lay stress on solutions which save their own skin; India and other developing countries are not at the top of their agenda.

What should worry our policy-framers is that, in case, while they do nothing, foreigners scoot with their loot, the stock markets collapse, foreign exchange assets shrink and some of the banks go under, the so-called “fundamentals” of the economy might cease to stay “strong” for any length of time. To cling to the notion of globalization together with liberalization leading us to an Arcadia would be plain silly in this season. The Americans and the Europeans are taking care of themselves, and have returned to the shelter of the State. In our country too the State has to step in and choose the most efficacious instruments, including those which foreigners disfavour: our own interests should precede the interests of foreigners.

The town cynic would conceivably chip in here. He would contribute a further argument against financial accommodation to save speculators in the stock markets. Why not let those who live by share prices, he would suggest, die by share prices too? After all, they constitute at most three per cent of the national population. Why not invest the money for an alternative purpose, for bettering the lot, for instance, of the agrarian community, which makes up close to two-thirds of the nation? That would, he would add, contribute much more towards strengthening the “fundamentals” of the economy.
(Courtesy: The Telegraph, Kolkata)
Roger And Out