[by Andrew Pollack]
Simultaneous with the announcement of his 10-year budget plan, Obama rolled out new bank bailouts.
Obama announced on February 26th he was considering giving $750 billion or more to banks, and that he had budgeted $250 billion in reserves, based on a conservative estimate of what it could lose in the course of spending that $750 billion on assets which might never regain their value.
The day before Obama ordered the nation’s 19 biggest banks to undergo “stress tests” to see whether they could survive if the economy deteriorated further.
The banks will have to carry out supervised analyses of how much their capital would be depleted under various scenarios. If regulators conclude a bank would not have enough capital, it would have to raise private capital within six months or get it from the government in exchange for ceding a part-ownership stake to Washington. And such a stake will be bought at prices pegged to a date when they were relatively high, minimizing existing shareholders’ losses.
Administration officials, insisting they want to avoid full-fledged bank nationalizations, left themselves wide discretion on how to interpret the results of the stress tests.
“It sure sounds to me like they are designing this to make it sound like the banking system is in great shape,” said Paul Miller, an analyst at a brokerage firm.
Christopher Whalen of Institutional Risk Analytics said the biggest banks would almost certainly become insolvent once they absorb the full brunt of losses from the economic downturn – and that Obama’s plan doesn’t address this.
“The stress test is about politics,” Whalen said. Washington, he added, already knows the results of the test.
Progressive economist Doug Henwood described the plan as “coddling” bankers,” and quoted two Citigroup analysts saying it was “bank- and investor-friendly.” The goal, they said, was to increase bank capital “while minimizing the amount and duration of any government ownership of common stock.”
And by painting a rosy picture of the economy’s road to recovery, Obama provides himself an excuse for not intervening more drastically in the banks’ business. The stress tests lay out two scenarios, a baseline and a “more adverse” scenario. The latter, which in theory would lead to more drastic government intervention, are in fact more like nongovernment economists’ baseline predictions.
So the banks – which want bailout cash, not government takeover of even a minority of their shares – can tell Washington “we’re fine, thanks” and not have to announce what would happen to them under the much more drastic downturn still to come.
Obama’s motivation for the plan, said Henwood: “Anything but nationalization!”
More evidence of Obama’s kindly feelings toward bankers and other financial institutions came in late February, with new bailouts of Citigroup and the world’s biggest insurer, AIG.
Citigroup got its third bailout in the form of a plan for conversion of $52 billion in US-owned preferred stock to common, giving the US potentially as much as 40% of such voting stocks. There is no new infusion of cash involved, but the change leaves taxpayers liable for losses in the common stock’s value: holders of common stock absorb losses before those of preferred. And ironically the seeming advantage of common – that it gives holders voting rights – is one the government is refusing to wield for fear of seeming to tread on the rights of private property!
Meanwhile AIG, the world’s biggest insurer, got its fourth bailout, for $30 billion.
Yet mainstream commentators were universal in their expectations that this will not be the last bailout for either firm, or for the financial sector in general. As a result calls for “nationalization” Swedish style are on the lips of a growing number of pundits and politicians. In the 1990s Sweden temporarily took over banks, but returned them completely to private hands once their books were straightened out and they had been relieved of the worst of their debts.
"This idea of nationalizing banks is not comfortable," said Sen. Lindsey Graham (R-SC), a self-described “fiscal conservative,” on ABC’s “This Week.” "But we've got so many toxic assets spread throughout the banking and financial community, throughout the world, that we're going to have to do something no one ever envisioned a year ago, no one likes. I would not take off the idea of nationalizing the banks."
Nationalization fears helped drag down shares of Citigroup and Bank of America as much as 36% at one point on February 20th, after Senate Banking Committee Chair Chris Dodd said he could see regulators briefly taking over the two.
Even Alan Greenspan, former Federal Reserve chair and staunch free marketeer, told the Financial Times that the government may have to nationalize some banks on a temporary basis.
But this developing ruling class consensus is so far blocked by crucial holdouts. New York Senator Chuck Schumer – a Democrat, and the biggest recipient of campaign funds from Wall Street – rejected nationalization calls: "I don't think government is good at making these decisions."
In this he is joined by Obama, who in a recent interview with ABC rejected the Swedish solution: “We want to retain a strong sense of private capital fulfilling the core investment needs of this country." And the day after Senator Dodd’s comments, a White House spokesperson said "The president believes a privately held banking system regulated by the government is what this country should have.” In this he was seconded by Federal Reserve chair Ben Bernanke.
With this stance the Administration reflects the sentiments of their banker friends, who don’t want even Swedish-style nationalizations, preferring continued bailouts without government ownership or control. Every time the media reports on threats to nationalize any or all banks, bank stocks plunge on fears that the value of their stocks will be diluted or even wiped out. But as the type of nationalization being discussed would eventually return the banks to private hands, the banks – and their friend in the White House – may yet change their tune as the depression deepens. (But not, we can be certain, before much more drastic efforts are made to get workers to pay the price for their swelling losses.)
But for now, the New York Times reports, "President Obama's top aides have steered clear of the word [nationalization] entirely," and the Washington Post notes, "Administration officials are ... trying to offer federal assistance to financial firms without nationalizing them outright." Treasury Secretary Tim Geithner told Congress, "We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."
Simon Johnson told Fortune magazine: “The FDIC does it [seizing banks] all the time for small banks. But with the big banks, nobody has the political will to do it.”
Wielding another increasingly common phrase in this stage of the crisis – zombie banks (referring to the walking dead status of banks unable and/or unwilling to perform their lending functions) – Times columnist Paul Krugman wondered why, knowing that only the government can resurrect these banks, “the Obama administration keeps coming up with proposals that sound like possible alternatives to nationalization, but turn out to involve huge handouts to bank stockholders.”
Krugman pointed out that under any of Obama’s proposals so far, whether guarantees to banks against losses on troubled assets, or lending money to private investors to buy toxic assets, bankers win and taxpayers lose, no matter what direction the prices of such assets go.
Normally any bourgeois government will recoil in horror at the notion of seizing bourgeois property – unless forced to do so in the interests of saving the system as a whole. This stems not only from a healthy respect for the sanctity of private property, but also from a desire to avoid the obligations which would come from exercising control over such property. Should the government become even the largest minority shareholder of a bank, political pressure to use that control to direct bank funds to production or services would mount.
As the Wall Street Journal put it: “While the goal of nationalization may be to return companies to private hands, the temptation to run them for political purposes would be immense.” That is, if the government controlled a bank, there would be political pressure for such control to be used on behalf of homeowners facing eviction, workers losing their jobs, and so on.
Writing in the middle of World War I, Lenin explained in his book “Imperialism” how the “interlocking” of big banks and manufacturers represented the objective socialization of production, and thus the potential for a revolutionary restructuring of society: “When a big enterprise assumes gigantic proportions, and organizes according to plan the supply of primary raw materials to the extent of two-thirds, or three-fourths, of all that is necessary for tens of millions of people; when the raw materials are transported in a systematic and organised manner to the most suitable places, sometimes hundreds or thousands of miles; when a single centre directs all the consecutive stages of processing the material right up to manufacture; when these products are distributed according to a single plan among tens and hundreds of millions of consumers — then it becomes evident that private economic and property relations constitute a shell which no longer fits its contents, a shell which must inevitably decay if its removal is artificially delayed, a shell which may remain in a state of decay for a fairly long period, but which will inevitably be removed.”
What we are going through now is that same process of decay despite the objective socialization of production via an even more thorough “interlocking” of finance and production. To escape it, workers must “remove the shell,” as did Lenin and his followers, by seizing in turn the banks, the biggest manufacturers, and ultimately the economy as a whole.
To start down that road we must demand access for committees of workers to all the banks’ books, both the ones they deign to show regulators and the ones they keep hidden even from their own government. Such committees meeting in congress can then work out a plan for restarting production with a precise calculation of the money available in these banks, the needs of working people, and the production levels needed to match the two.
Needless to say such a calculation will begin with a complete wiping off the books – not a bailout – of all “toxic assets” and fictitious, pyramided investments. And the complete price for such a measure will have to be paid by the country’s rich through confiscatory taxes, while deposits of workers would be fully protected.
Tuesday, March 10, 2009
Obama’s New Budget
[by Andrew Pollack]
On February 26th, Obama unveiled a 10-year budget proposal. Most of its provisions won’t kick in until 2010 or even later, and are clearly not designed to deal with the current effects of the crisis.
Instead it was designed to showcase his grand plans for restructuring the US economy, which consists largely of new subsidies to corporations while using rhetoric about fighting climate change, achieving “universal” healthcare coverage, etc.
Following in the footsteps of FDR, whose fiscal conservatism meant doling out public funds in drops even during the worst of the 1930’s Depression, Obama’s budget promises to sharply cut the US deficit. And to prove he’s not kidding about this, he chose as keynote speaker to his February 23rd "Summit on Fiscal Responsibility" private equity billionaire Pete Peterson, whose main hobby these days is demanding that Social Security and Medicare be drastically cut or even eliminated.
In the same spirit, Obama’s new budget continues to ignore majority sentiment for single-payer government insurance. It cuts some of the Medicare subsidies to private insurers, and seeks further savings by tinkering with the quality of, and payment for, care under Medicare and Medicaid. But it won’t touch the real source of waste: the profits and administrative expenses of insurers, for-profit hospitals and equipment manufacturers. Even the mild reforms it will finance, based as they are on taxes for the rich that don’t begin until 2011, won’t take effect until 2012.
Similarly his budget addresses catastrophic climate change by selling carbon credits to manufacturers as part of a cap-and-trade plan – universally recognized by climate scientists and activists as a barrier to the real conversion needed to slow climate change.
The basic military budget in 2010 would increase to $534 billion in 2010. And this doesn’t even include spending on the wars in Iraq, Afghanistan, and Pakistan, which will certainly not drop, as some troops are shifted from Iraq to the latter two, and tens of thousands remain permanently in Iraq. What’s more, the increase in the basic military budget, which will shift spending from some high-tech systems to smaller programs “focused on fighting insurgents in Iraq and Afghanistan,” will likely mean many more troops called up to use existing weapons.
The budget also included a cut in itemized tax deductions for those in top tax brackets earmarked to pay for his healthcare “reform.” This would still leave the US ruling class the least-taxed of any in the world.
On February 26th, Obama unveiled a 10-year budget proposal. Most of its provisions won’t kick in until 2010 or even later, and are clearly not designed to deal with the current effects of the crisis.
Instead it was designed to showcase his grand plans for restructuring the US economy, which consists largely of new subsidies to corporations while using rhetoric about fighting climate change, achieving “universal” healthcare coverage, etc.
Following in the footsteps of FDR, whose fiscal conservatism meant doling out public funds in drops even during the worst of the 1930’s Depression, Obama’s budget promises to sharply cut the US deficit. And to prove he’s not kidding about this, he chose as keynote speaker to his February 23rd "Summit on Fiscal Responsibility" private equity billionaire Pete Peterson, whose main hobby these days is demanding that Social Security and Medicare be drastically cut or even eliminated.
In the same spirit, Obama’s new budget continues to ignore majority sentiment for single-payer government insurance. It cuts some of the Medicare subsidies to private insurers, and seeks further savings by tinkering with the quality of, and payment for, care under Medicare and Medicaid. But it won’t touch the real source of waste: the profits and administrative expenses of insurers, for-profit hospitals and equipment manufacturers. Even the mild reforms it will finance, based as they are on taxes for the rich that don’t begin until 2011, won’t take effect until 2012.
Similarly his budget addresses catastrophic climate change by selling carbon credits to manufacturers as part of a cap-and-trade plan – universally recognized by climate scientists and activists as a barrier to the real conversion needed to slow climate change.
The basic military budget in 2010 would increase to $534 billion in 2010. And this doesn’t even include spending on the wars in Iraq, Afghanistan, and Pakistan, which will certainly not drop, as some troops are shifted from Iraq to the latter two, and tens of thousands remain permanently in Iraq. What’s more, the increase in the basic military budget, which will shift spending from some high-tech systems to smaller programs “focused on fighting insurgents in Iraq and Afghanistan,” will likely mean many more troops called up to use existing weapons.
The budget also included a cut in itemized tax deductions for those in top tax brackets earmarked to pay for his healthcare “reform.” This would still leave the US ruling class the least-taxed of any in the world.
More Signs of Worker Resistance Around the Globe
[by Andrew Pollack]
February not only saw a new stage to the crisis, but also a new level of fightback among workers worldwide.
On February 26th, 60,000 General Motors workers struck at 14 factories across Europe, including at its rapidly failing Opel subsidiary in Germany (but not, tellingly, in the US).
Just as Iceland’s government fell after mass protests at year’s end, Latvia’s government fell on February 20th as a result of large demonstrations and riots against government failure to address the crisis.
In the Ukrainian capital, Kiev, demonstrators took to the streets and truckers blocked roads in late February and early March as depositors rushed to pull their money out of local banks.
Several thousand attended rallies in Moscow and Vladivostok on January 31, demanding the government resign.
A million workers downed tools in a nationwide strike in France on January 29th.
A general strike began in the French colony of Guadeloupe on January 20th and spread to Martinique on February 5th.
In late January strikes broke out at power plants around the United Kingdom over the use of Italian and Portuguese contract employees. Socialists intervened to encourage strikers to focus on demands for jobs and union rights for all, rather than the widespread chauvinistic “British Jobs for British Workers” demand. Such interventions will have to be repeated elsewhere – especially in the US – as immigrant workers are increasingly scapegoated for the crisis.
Bulgarian farmers blocked a major border crossing with Romania on February 4th and held rallies across the country to press the government to cut cheap agricultural imports and set a minimum price for milk. This followed a large late-January demonstration in the capital, Sofia.
Two hundred thousand rallied in Dublin on February 21st against government plans to impose a pension levy on public sector workers and freeze their pay.
For years Ireland – like the Eastern European countries – was hailed as proof that lesser-developed European countries could leapfrog to prosperity by opening their doors wide to foreign capital. Now it, like all of Eastern Europe, is falling faster than its more industrialized neighbors.
The example of all these actions – especially that of Guadeloupe, where workers have not only struck for weeks but have repeatedly mobilized at street barricades in the face of employer and government repression – needs to be taken to heart by workers in the US. The broadly-sponsored multi-union rally in New York on March 5th was the first mass action of any consequence in the US since the crisis began. Rallies like it need to occur across the country. To ensure this, union militants in every town and city need to meet to discuss how to pressure unions to call such rallies. And such meetings can discuss how to agitate for a national Congress of Labor calling together representatives of every US union and labor federation, as well as representatives of immigrants, oppressed nationalities, women, etc
February not only saw a new stage to the crisis, but also a new level of fightback among workers worldwide.
On February 26th, 60,000 General Motors workers struck at 14 factories across Europe, including at its rapidly failing Opel subsidiary in Germany (but not, tellingly, in the US).
Just as Iceland’s government fell after mass protests at year’s end, Latvia’s government fell on February 20th as a result of large demonstrations and riots against government failure to address the crisis.
In the Ukrainian capital, Kiev, demonstrators took to the streets and truckers blocked roads in late February and early March as depositors rushed to pull their money out of local banks.
Several thousand attended rallies in Moscow and Vladivostok on January 31, demanding the government resign.
A million workers downed tools in a nationwide strike in France on January 29th.
A general strike began in the French colony of Guadeloupe on January 20th and spread to Martinique on February 5th.
In late January strikes broke out at power plants around the United Kingdom over the use of Italian and Portuguese contract employees. Socialists intervened to encourage strikers to focus on demands for jobs and union rights for all, rather than the widespread chauvinistic “British Jobs for British Workers” demand. Such interventions will have to be repeated elsewhere – especially in the US – as immigrant workers are increasingly scapegoated for the crisis.
Bulgarian farmers blocked a major border crossing with Romania on February 4th and held rallies across the country to press the government to cut cheap agricultural imports and set a minimum price for milk. This followed a large late-January demonstration in the capital, Sofia.
Two hundred thousand rallied in Dublin on February 21st against government plans to impose a pension levy on public sector workers and freeze their pay.
For years Ireland – like the Eastern European countries – was hailed as proof that lesser-developed European countries could leapfrog to prosperity by opening their doors wide to foreign capital. Now it, like all of Eastern Europe, is falling faster than its more industrialized neighbors.
The example of all these actions – especially that of Guadeloupe, where workers have not only struck for weeks but have repeatedly mobilized at street barricades in the face of employer and government repression – needs to be taken to heart by workers in the US. The broadly-sponsored multi-union rally in New York on March 5th was the first mass action of any consequence in the US since the crisis began. Rallies like it need to occur across the country. To ensure this, union militants in every town and city need to meet to discuss how to pressure unions to call such rallies. And such meetings can discuss how to agitate for a national Congress of Labor calling together representatives of every US union and labor federation, as well as representatives of immigrants, oppressed nationalities, women, etc
Global Economy in Free Fall
[by Andrew Pollack]
For months mainstream economists and politicians have been reassuring us that a recovery would begin later this year or at worst in 2010. But in February the most commonly-used phrase in economics reporting was “free fall,” as mutually-reinforcing downward trends left observers unable to say either when or how a recovery might take place.
On Friday, February 27th, the government announced that the economy shrank at a 6.2% annualized pace in the last quarter of 2008, the worst in 25 years. Earlier predictions for the fourth quarter had been for only a 3.8% decline.
Estimates now for the first quarter are of a 5% annualized drop, but, says the Associated Press, “given the dismal state of the jobs market, some economists believe an even sharper decline is possible. AP described “a self-perpetuating vicious cycle causing the economy to deteriorate at a rapid pace.”
Said the Washington Post: “Just a few months ago, analysts had been forecasting that the last few months of 2008 would be the worst and the first quarter of the new year would bring a slight improvement. Now the first quarter is shaping up as a contender for the recession's worst."
''It doesn't appear as if the free-fall in the economy has slowed down at all,'' said the chief economist at PNC Financial Services. ''There is no net.''
For months economists and politicians refused to use the “D” word, but some are openly speaking of today’s crisis as a depression, if not another “Great Depression,” and others speak at least of a “deep recession” or a “prolonged slump.”
In the last 17 months the Dow has fallen 52%, the largest drop since the Great Depression. This mirrors the 55% drop over a similar time period after the September 1929 pre-Depression peak. And while most commentators balking at calling today’s crisis a depression point to the eventual 90% drop in the 1930s, it took 34 months after the 1929 peak for that to occur – so we are still have 16 months to go to reach an equivalent low.
Orders for durable goods plummeted for the sixth month in a row in January and the number of first-time claims for unemployment benefits shot up at the end of February.
The Labor Department said employers cut nearly 600,000 jobs in January, sending the official unemployment rate to 7.6%. The Times quoted an economist predicting the figure for February will be 785,000, the biggest one-month drop in almost 60 years.
Markets around the world plunged February 17th on news of the global nature of the crisis, despite the signing by Obama on the same day of the $787 billion stimulus bill.
Global markets plunged again March 2nd – this time below 7,000 – on news of the US GDP decline.
Another common thread in economics reporting in February was the absence of any sign of factors that might reverse the economy’s course. All countries, developed or developing, are suffering, so none can serve as an outlet for exports shut off elsewhere by disappearing demand. And there are no signs of new types of investments which would make up for the overcapacity and dwindling profits in existing industries.
Putting the two together, the Washington Post said: “In the face of this global slowdown, alarmed economists see no obvious engine for recovery.”
In the last quarter of 2008, Japan's economy shrank at an annual rate of 12.7% and Germany’s by 2.1%. Their economies rely heavily on exports, but global demand for such items Japanese and German cars has evaporated.
"Manufacturing, construction, financial services, non-financial, retail -- wherever you look, you see a complete collapse in demand," said an economist at Barclays Capital. “The floor has come out of confidence in global economic demand."
Another factor in the mid-February stock plunge was panic among Western European banks whose massive investments in Eastern Europe after the collapse of the Soviet Union are now in danger of disappearing, as those countries’ currencies rapidly lose value and factories shut their doors. The blowback will in turn drag down even further countries such as the US and China whose production and finance are interwoven with Western Europe as never before.
“There’s a domino effect,” said Kenneth Rogoff, former chief economist of the International Monetary Fund. “A snowballing credit crisis in Eastern Europe could cause New York municipal bonds to fall.”
Investors hurt by plunging markets in Europe are having to sell American assets to raise money, adding pressure on US stocks.
“It’s one big trans-Atlantic money market out there, and these banks lend money to each other all the time,” said Simon Johnson, another IMF veteran. “Deutsche Bank and UBS and Goldman Sachs and Citi are all intertwined.”
Asked in an interview how he would label the downturn, Monthly Review writer John Bellamy Foster responded: “There is no doubt that we are in another depression. In fact the IMF has just come out with a statement that the ‘advanced economies are already in depression.’ An analyst at Merrill Lynch says: ‘We are likely enduring a great depression today’ that could last as long as seven years.”
In an article on “The collapse of manufacturing,” The Economist reported that “In Germany December’s machine-tool orders were 40% lower than a year earlier. Half of China’s 9,000 toy exporters have gone bust. Taiwan’s shipments of notebook computers fell by a third in January. The number of cars being assembled in America was 60% below January 2008.
“Industrial production fell in the latest three months by 3.6% and 4.4% respectively in America and Britain (equivalent to annual declines of 13.8% and 16.4%). Germany’s industrial production in the fourth quarter fell by 6.8%; Taiwan’s by 21.7%; Japan’s by 12%. Industry is collapsing in eastern Europe, Brazil, Malaysia and Turkey. Thousands of factories in southern China are now abandoned. Workers went home to the countryside for the new year. Millions never came back.”
Yet The Economist argued against government aid to industry. Governments can’t, it claimed, “deal with the varied, constantly changing difficulties of the world’s manufacturing industries.” And: “Sectoral aid does not address the underlying cause of the crisis—a fall in demand, not just for manufactured goods, but for everything. Some firms must close. How can governments know which firms to save or the ‘right’ size of any industry? That is for consumers to decide.”
The Economist’s pleas against government intervention are no doubt motivated by a recognition that workers around the world are seriously listening, for the first time in a long time, to socialist arguments that only public management of the economy – under the democratic control of workers – can end the crisis. It was the anarchy of marketplace decision making (compounded by corporate rigging of the market’s rules) that got us in this mess. And socialists argue also that it is precisely a unified, democratic plan that alone can determine which firms and industries need to survive. To take just the most crucial example, only an economy controlled by workers can decide democratically how to convert auto plants both to preserve jobs, healthcare and pensions for all, while retooling them to produce wind turbines, light rail, and other climate-friendly products.
For months mainstream economists and politicians have been reassuring us that a recovery would begin later this year or at worst in 2010. But in February the most commonly-used phrase in economics reporting was “free fall,” as mutually-reinforcing downward trends left observers unable to say either when or how a recovery might take place.
On Friday, February 27th, the government announced that the economy shrank at a 6.2% annualized pace in the last quarter of 2008, the worst in 25 years. Earlier predictions for the fourth quarter had been for only a 3.8% decline.
Estimates now for the first quarter are of a 5% annualized drop, but, says the Associated Press, “given the dismal state of the jobs market, some economists believe an even sharper decline is possible. AP described “a self-perpetuating vicious cycle causing the economy to deteriorate at a rapid pace.”
Said the Washington Post: “Just a few months ago, analysts had been forecasting that the last few months of 2008 would be the worst and the first quarter of the new year would bring a slight improvement. Now the first quarter is shaping up as a contender for the recession's worst."
''It doesn't appear as if the free-fall in the economy has slowed down at all,'' said the chief economist at PNC Financial Services. ''There is no net.''
For months economists and politicians refused to use the “D” word, but some are openly speaking of today’s crisis as a depression, if not another “Great Depression,” and others speak at least of a “deep recession” or a “prolonged slump.”
In the last 17 months the Dow has fallen 52%, the largest drop since the Great Depression. This mirrors the 55% drop over a similar time period after the September 1929 pre-Depression peak. And while most commentators balking at calling today’s crisis a depression point to the eventual 90% drop in the 1930s, it took 34 months after the 1929 peak for that to occur – so we are still have 16 months to go to reach an equivalent low.
Orders for durable goods plummeted for the sixth month in a row in January and the number of first-time claims for unemployment benefits shot up at the end of February.
The Labor Department said employers cut nearly 600,000 jobs in January, sending the official unemployment rate to 7.6%. The Times quoted an economist predicting the figure for February will be 785,000, the biggest one-month drop in almost 60 years.
Markets around the world plunged February 17th on news of the global nature of the crisis, despite the signing by Obama on the same day of the $787 billion stimulus bill.
Global markets plunged again March 2nd – this time below 7,000 – on news of the US GDP decline.
Another common thread in economics reporting in February was the absence of any sign of factors that might reverse the economy’s course. All countries, developed or developing, are suffering, so none can serve as an outlet for exports shut off elsewhere by disappearing demand. And there are no signs of new types of investments which would make up for the overcapacity and dwindling profits in existing industries.
Putting the two together, the Washington Post said: “In the face of this global slowdown, alarmed economists see no obvious engine for recovery.”
In the last quarter of 2008, Japan's economy shrank at an annual rate of 12.7% and Germany’s by 2.1%. Their economies rely heavily on exports, but global demand for such items Japanese and German cars has evaporated.
"Manufacturing, construction, financial services, non-financial, retail -- wherever you look, you see a complete collapse in demand," said an economist at Barclays Capital. “The floor has come out of confidence in global economic demand."
Another factor in the mid-February stock plunge was panic among Western European banks whose massive investments in Eastern Europe after the collapse of the Soviet Union are now in danger of disappearing, as those countries’ currencies rapidly lose value and factories shut their doors. The blowback will in turn drag down even further countries such as the US and China whose production and finance are interwoven with Western Europe as never before.
“There’s a domino effect,” said Kenneth Rogoff, former chief economist of the International Monetary Fund. “A snowballing credit crisis in Eastern Europe could cause New York municipal bonds to fall.”
Investors hurt by plunging markets in Europe are having to sell American assets to raise money, adding pressure on US stocks.
“It’s one big trans-Atlantic money market out there, and these banks lend money to each other all the time,” said Simon Johnson, another IMF veteran. “Deutsche Bank and UBS and Goldman Sachs and Citi are all intertwined.”
Asked in an interview how he would label the downturn, Monthly Review writer John Bellamy Foster responded: “There is no doubt that we are in another depression. In fact the IMF has just come out with a statement that the ‘advanced economies are already in depression.’ An analyst at Merrill Lynch says: ‘We are likely enduring a great depression today’ that could last as long as seven years.”
In an article on “The collapse of manufacturing,” The Economist reported that “In Germany December’s machine-tool orders were 40% lower than a year earlier. Half of China’s 9,000 toy exporters have gone bust. Taiwan’s shipments of notebook computers fell by a third in January. The number of cars being assembled in America was 60% below January 2008.
“Industrial production fell in the latest three months by 3.6% and 4.4% respectively in America and Britain (equivalent to annual declines of 13.8% and 16.4%). Germany’s industrial production in the fourth quarter fell by 6.8%; Taiwan’s by 21.7%; Japan’s by 12%. Industry is collapsing in eastern Europe, Brazil, Malaysia and Turkey. Thousands of factories in southern China are now abandoned. Workers went home to the countryside for the new year. Millions never came back.”
Yet The Economist argued against government aid to industry. Governments can’t, it claimed, “deal with the varied, constantly changing difficulties of the world’s manufacturing industries.” And: “Sectoral aid does not address the underlying cause of the crisis—a fall in demand, not just for manufactured goods, but for everything. Some firms must close. How can governments know which firms to save or the ‘right’ size of any industry? That is for consumers to decide.”
The Economist’s pleas against government intervention are no doubt motivated by a recognition that workers around the world are seriously listening, for the first time in a long time, to socialist arguments that only public management of the economy – under the democratic control of workers – can end the crisis. It was the anarchy of marketplace decision making (compounded by corporate rigging of the market’s rules) that got us in this mess. And socialists argue also that it is precisely a unified, democratic plan that alone can determine which firms and industries need to survive. To take just the most crucial example, only an economy controlled by workers can decide democratically how to convert auto plants both to preserve jobs, healthcare and pensions for all, while retooling them to produce wind turbines, light rail, and other climate-friendly products.
What's San Francisco Bay Area SA up to?
By Marc Rome, March 9, 2009
Last night I attended a meeting, organized by the Democrats and local pastors, at St. Anthony's church in the heart of San Francisco's Latino community. It featured Rep. Luis Gutierrez (D-IL) and Nancy Pelosi. It was part of Gutierrez's 17 city "Family Unity" tour that is intended to garner support for "for fair and just immigration reform."
I was among 6 members of the San Francisco based ad-hoc immigrant rights coalition, May 1st Coalition, who passed out 500 leaflets for our upcoming March 14 meeting to organize May Day this year. Before the meeting, most people politely took the leaflets. After the meeting, as I handed them out, I prefaced it with either "Alto las redadas" and/or "organizar el Primero de Mayo" and folks seemed to snap up the leaflets with more interest. Clearly, they were charged up after the meeting, and we offered them something meaningful to plug into.
The main banner over the archway leading into the church said in Spanish: "We ask Congress and the President for a just immigration reform that permits residency and respects civil, labor and human rights." Below that was written, "We the workers make and produce the wealth."
At least 600 people, 99% Latino workers, comprised a standing room only crowd.
The meeting was conducted in both English and Spanish with most of the speakers doing their own translation. Though, some speakers spoke in Spanish only.
A young mixed Anglo/Latino minister kicked off the evening asking God to stop the raids and to keep families together. Ay Dios mio.
The MC, a Latina, explained that the meeting was for the Congress people to hear testimony by citizen children of undocumented immigrants about their fears of their parents being deported, the reality of having their parents deported or having their homes raided by ICE. Several young people between the ages of 9 and 17 gave their testimony about living under the constant terror of ICE. It was heart wrenching.
Several times the MC said "No More Raids!" which invariably was followed by thunderous applause, a response repeated any time anyone said "Stop the Raids!"
Gutierrez was introduced to a standing ovation. He said that this tour was for the 4-5 million citizen children of undocumented workers and that we have to "stop separating mother from children." I don't know if he consciously left out fathers from the equation, but it struck me as strange. He went on to say that we (Latin@s) have to make our voice strong enough so that Obama will be forced to hear our plea to protect our families. Several times he said that we have to stop the raids and to make U.S. immigration policy fair and just, but without going into detail.
Pelosi was introduced to a standing ovation and chants of "Si se puede." She too said "stop the raids" and "we need a comprehensive immigration policy/reform with a path to legalization."
The only course of action proposed was to sign a petition to Obama urging him to "stop the misguided raids and deportations" and to enact a "comprehensive immigration reform." This was circulated at the end of the meeting (see attachment). There was no question and answer session.
Upon reflection, this was a scary meeting with the Democrats sounding like they were friends of immigrant workers, that they were allies in stopping the raids, but nothing could be further from the truth. It was like watching them bait a trap. The raids will continue, and are used, as mentioned in James Frickey's 2007 report on immigrant rights, "to manufacture consent for Congress to pass its guest-worker bill [in this case, a yet to be proposed "comprehensive immigration reform"] and to break the resolve of immigrant workers to resist it. In the long run, the raids enable ICE to test its capacity for mass deportation." The combination of U.S. bosses seeking profits at any cost, who have already dealt serious blows to organized labor, and the spectre of an economic depression, we can be sure that the raids will continue until Congress has delivered a legislative gift for the bosses: an immigrant labor force that can be super-exploited with virtually no rights and whose fate is tied to the dictates of the boss.
Senator John Kerry recently authored an article entitled, "Toward humane immigration enforcement," where he employs Orwellian logic and lays out a plan to make raids more "humane." He says in part, "the raid at Michael Bianco prompted me to introduce the Families First Immigration Enforcement Act. I saw it as a way to stop other communities from experiencing the same kind of soul-wrenching event that had occurred in New Bedford. It included common-sense ideas, such as coordinating with state agencies to provide interpreters and social services and establishing humanitarian exceptions for the sick, elderly, pregnant or nursing mothers and others especially vulnerable to the consequences of detention.
"President Obama," Kerry continues, "has reaffirmed his commitment to push for immigration reform along the lines of the measure originally proposed by Senators
Ted Kennedy and John McCain with a renewed emphasis on the employer side — rather than the employee side — of workplace enforcement." Certainly any legislation along those lines could hardly be called "humane." The Kennedy/McCain bill called for a major increase in the number of ICE agents, a 700-mile border wall and path citizenship that would have required 5-12 years residency in the U.S., passing a criminal background check and paying thousands of dollars in back taxes and fines. And of course employer side workplace enforcement almost invariably targets workers, with the employer getting off relatively lightly, if he is punished at all.
Outside the church, a small anti-immigrant group of about 7 held a banner that read "No Amnesty," and while these guys were fringe fanatics, as the economy continues to deteriorate, we should be prepared to confront the backward views of nativist workers that are likely to surface. "During times of capitalist contraction," explains Chacon and Davis in No One is Illegal, "such as recession or depression, or other threats to the stability of profits, admiration for the immigrant gives way to disdain. During these volatile periods, the immigrant is portrayed as a malicious force in society, responsible for a constellation of social ills that threaten the nation."
In conclusion, it seems that the Democrats are playing their repressive hand with much more sophistication than the previous Republican administration, in no small part because they witnessed the reaction to the ham-fisted Sensenbrenner Bill: 4-6 million immigrant workers out the streets, what the coming American Revolution will look like. Allowing the Democrats to placate immigrant workers with their demagogic calls to "End the Raids!" would be to stand by and watch them be further immobilized. By the same token, we risk alienating our allies and ultimately the immigrant workers that we want to defend if we engage in denunciations of the Democrats. They have put the issue of the raids front and center, and knowing that they won't be the ones organizing the targeted communities against the raids (rather, they'll be organizing the raids, "humanely"), we have to energetically work to mobilize the victims and give them confidence that only they have the power stop the government's campaign of terror.
Here's an article on the meeting from the Chronicle
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/03/07/BAHJ16BE8V.DTL
Last night I attended a meeting, organized by the Democrats and local pastors, at St. Anthony's church in the heart of San Francisco's Latino community. It featured Rep. Luis Gutierrez (D-IL) and Nancy Pelosi. It was part of Gutierrez's 17 city "Family Unity" tour that is intended to garner support for "for fair and just immigration reform."
I was among 6 members of the San Francisco based ad-hoc immigrant rights coalition, May 1st Coalition, who passed out 500 leaflets for our upcoming March 14 meeting to organize May Day this year. Before the meeting, most people politely took the leaflets. After the meeting, as I handed them out, I prefaced it with either "Alto las redadas" and/or "organizar el Primero de Mayo" and folks seemed to snap up the leaflets with more interest. Clearly, they were charged up after the meeting, and we offered them something meaningful to plug into.
The main banner over the archway leading into the church said in Spanish: "We ask Congress and the President for a just immigration reform that permits residency and respects civil, labor and human rights." Below that was written, "We the workers make and produce the wealth."
At least 600 people, 99% Latino workers, comprised a standing room only crowd.
The meeting was conducted in both English and Spanish with most of the speakers doing their own translation. Though, some speakers spoke in Spanish only.
A young mixed Anglo/Latino minister kicked off the evening asking God to stop the raids and to keep families together. Ay Dios mio.
The MC, a Latina, explained that the meeting was for the Congress people to hear testimony by citizen children of undocumented immigrants about their fears of their parents being deported, the reality of having their parents deported or having their homes raided by ICE. Several young people between the ages of 9 and 17 gave their testimony about living under the constant terror of ICE. It was heart wrenching.
Several times the MC said "No More Raids!" which invariably was followed by thunderous applause, a response repeated any time anyone said "Stop the Raids!"
Gutierrez was introduced to a standing ovation. He said that this tour was for the 4-5 million citizen children of undocumented workers and that we have to "stop separating mother from children." I don't know if he consciously left out fathers from the equation, but it struck me as strange. He went on to say that we (Latin@s) have to make our voice strong enough so that Obama will be forced to hear our plea to protect our families. Several times he said that we have to stop the raids and to make U.S. immigration policy fair and just, but without going into detail.
Pelosi was introduced to a standing ovation and chants of "Si se puede." She too said "stop the raids" and "we need a comprehensive immigration policy/reform with a path to legalization."
The only course of action proposed was to sign a petition to Obama urging him to "stop the misguided raids and deportations" and to enact a "comprehensive immigration reform." This was circulated at the end of the meeting (see attachment). There was no question and answer session.
Upon reflection, this was a scary meeting with the Democrats sounding like they were friends of immigrant workers, that they were allies in stopping the raids, but nothing could be further from the truth. It was like watching them bait a trap. The raids will continue, and are used, as mentioned in James Frickey's 2007 report on immigrant rights, "to manufacture consent for Congress to pass its guest-worker bill [in this case, a yet to be proposed "comprehensive immigration reform"] and to break the resolve of immigrant workers to resist it. In the long run, the raids enable ICE to test its capacity for mass deportation." The combination of U.S. bosses seeking profits at any cost, who have already dealt serious blows to organized labor, and the spectre of an economic depression, we can be sure that the raids will continue until Congress has delivered a legislative gift for the bosses: an immigrant labor force that can be super-exploited with virtually no rights and whose fate is tied to the dictates of the boss.
Senator John Kerry recently authored an article entitled, "Toward humane immigration enforcement," where he employs Orwellian logic and lays out a plan to make raids more "humane." He says in part, "the raid at Michael Bianco prompted me to introduce the Families First Immigration Enforcement Act. I saw it as a way to stop other communities from experiencing the same kind of soul-wrenching event that had occurred in New Bedford. It included common-sense ideas, such as coordinating with state agencies to provide interpreters and social services and establishing humanitarian exceptions for the sick, elderly, pregnant or nursing mothers and others especially vulnerable to the consequences of detention.
"President Obama," Kerry continues, "has reaffirmed his commitment to push for immigration reform along the lines of the measure originally proposed by Senators
Ted Kennedy and John McCain with a renewed emphasis on the employer side — rather than the employee side — of workplace enforcement." Certainly any legislation along those lines could hardly be called "humane." The Kennedy/McCain bill called for a major increase in the number of ICE agents, a 700-mile border wall and path citizenship that would have required 5-12 years residency in the U.S., passing a criminal background check and paying thousands of dollars in back taxes and fines. And of course employer side workplace enforcement almost invariably targets workers, with the employer getting off relatively lightly, if he is punished at all.
Outside the church, a small anti-immigrant group of about 7 held a banner that read "No Amnesty," and while these guys were fringe fanatics, as the economy continues to deteriorate, we should be prepared to confront the backward views of nativist workers that are likely to surface. "During times of capitalist contraction," explains Chacon and Davis in No One is Illegal, "such as recession or depression, or other threats to the stability of profits, admiration for the immigrant gives way to disdain. During these volatile periods, the immigrant is portrayed as a malicious force in society, responsible for a constellation of social ills that threaten the nation."
In conclusion, it seems that the Democrats are playing their repressive hand with much more sophistication than the previous Republican administration, in no small part because they witnessed the reaction to the ham-fisted Sensenbrenner Bill: 4-6 million immigrant workers out the streets, what the coming American Revolution will look like. Allowing the Democrats to placate immigrant workers with their demagogic calls to "End the Raids!" would be to stand by and watch them be further immobilized. By the same token, we risk alienating our allies and ultimately the immigrant workers that we want to defend if we engage in denunciations of the Democrats. They have put the issue of the raids front and center, and knowing that they won't be the ones organizing the targeted communities against the raids (rather, they'll be organizing the raids, "humanely"), we have to energetically work to mobilize the victims and give them confidence that only they have the power stop the government's campaign of terror.
Here's an article on the meeting from the Chronicle
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/03/07/BAHJ16BE8V.DTL
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