29 Apr 2015

21st Century Challenges To American Democracy: Part III

Jon Kofas

“Consumption Democracy”
Consumption values are at the core of contemporary American culture. The mass media, businesses and politicians equate such values with freedom and democracy. The social contract as the Founding Fathers conceived of it is not about democracy, freedom and equality, but about mass consumption of citizens as consumers, an idea that America has exported to the rest of the world since the end of WWII. Government and the courts are more interested protecting consumer rights than civil rights. The legal system is also geared to serve and protect consumers rather than citizens.
The ideology of “consumption democracy” became integrated into the culture because government, corporations, and media equated it with the late 18th century concept of the contractual relationship that exists among businesses. By the late 19th century with the rise of the urban middle class, consumer protection of the bourgeois citizen was one of customer whose legal rights were as protected as those of businesses based on his/her purchasing power in society. Citizen identity with the nation during the age of romanticism in the early 19th century was replaced with consumption values prevailing during the Age of Materialism in the late 19th century. The idealism imbedded in American nationalism that can be seen by the time of Emerson had been replaced with the age of advertising focused on propagating “wants and needs” of the growing middle class during the era that Mark Twain called Gilded Age. (Lizabeth Cohen, A Consumers' Republic: The Politics of Mass Consumption in Postwar America ).
“Consumption democracy” is the Ralph Nader brand of bourgeois democracy as expressed in consumer protection that media, businesses and government project as America’s unique political culture. In theory at least, this unique type of democracy transcends race, religion, and ethnicity because it is class-based in a country that never had a privileged aristocracy like Europe and was founded by the commercial, financial, and agrarian bourgeoisie of a British colony. With its deep roots in late 19th century industrial America that produced scandals involving various services and products from rotted meats to pharmaceuticals, consumer advocacy became a legitimate way to defend democratic rights of the middle class during the Progressive Era. Although Upton Sinclair’s The Jungle was a leftist critique of American capitalism, it was the bourgeois progressive movement that used it to justify the creation of a much needed Food and Drug Administration.
As big business gave birth to big government bureaucracies during the Progressive Era, consumer protection was the new expression of democracy through which the middle class could fight for its rights. Despite resistance on the part of many capitalists opposed to regulatory mechanisms, corporate social responsibility became good business and attorneys filing law suits made sure of it in an effort to protect the middle class consumer. Naturally, consumption democracy did not extend to worker’s rights despite trade union organizing efforts. For example, US Steel Corporation had no problem with the concept of consumer rights, but it fought hard to keep union out of the industry. (Daniel Yankelovich, Profit with Honor; John Goldring, “Consumer Protection, the Nation-State, Law, Globalization, and Democracy.” Journal of Computer-Mediated Communication, Vol. 2, 1996; D. E. Saros, Labor, Industry, and Regulation during the Progressive Era)
As far as apologists of the “consumption democracy” are concerned, there is nothing wrong with the citizen-government relationship transformed into consumer-business contractual relationship just as there is nothing wrong of a business-to-business contractual relationship. After all, Adam Smith argued that government has a regulatory function and determines rules for binding agreements that involve private property and contracts. In order to protect his/her interests, the citizen’s role is commoditized in the market economy and reduced to a legal business role. Naturally, there are conservatives, neoliberals, and Libertarians who oppose regulations because they see them as impediments to capitalism.
Social democrats see the regulatory regime as the only viable tool of democracy in a capitalist society. Pro-regulatory elements believe that it is both good for business and society’s harmonious function to have rule regulating human relations even though it may be on the business contractual model. Operating on a very different concept of democracy, neoliberals of our time see it as an anathema to capitalist expansion and constrictive to capital accumulation that they equate with democracy. (Michael Lipsky, Rulemaking as a Tool of Democracy” MEMOS.org/ 17 December 2014)
The notion of legal consumer protection from faulty or fraudulent products and services is highly characteristic of service-oriented economies with the US at the core. In most countries around the world, the idea that consumer protection equals democracy would be as odd as the idea of commoditizing the citizen like a bag of potatoes. However, globalization and the emergence of the thriving “cybermarket” have resulted in “consumption democracy” gone global. Does this mean that globalization and cyberspace is contributing to democratization of the world or simply integrating it more closely into the capitalist system? A way to rationalize the capitalist system while providing some protection to the middle class, “consumption democracy” caught on especially after WWII because it operated within the milieu of “market economy values”, while it restricted freedoms owing to the Cold War climate and overriding national security concerns that transcended civil rights.
In the age of globalization, the Russian consumer of Microsoft products and services is entitled to the same courtesy as her US counterpart. The global corporation treats both Russian and US consumers as patrons of the company not as citizens. Whereas in the US consumer service is then turned into a social good and an integral part of the American Dream, this is not the case in Russia that has a market economy but people do not equate democracy with consumerism as Americans do. While one could argue that is largely cultural because the British consumer is much closer to her American counterpart in equating democratic rights with consumption, both the British and Russia citizens hold a much higher level of class consciousness than their American counterparts. Although according to opinion polls more than half of the Americans believe their government intervenes to strengthen the rich, they do not frame inequality issues in terms of class in the same manner and to the level Europeans and Russians do. Is the challenge of the American people to equate democracy with social justice, or is it a reflection of their culture that the European and Russian masses do not appreciate consumerist values and “consumption democracy”?
Apologists of capitalism insist that American “consumerist values” and market populism is a more democratic than political democracy that many Europeans advocate. These same neoliberal apologists would not recognize the right of a worker to unionize whether in the US or anywhere else in the world, but they have no problem with consumer advocacy organizations. This form of democracy is predicated on consumption levels, which in essence leaves out the working poor of the world from partticipation. The more money the individual has, the more consumption, thus the more democracy one enjoys. In other words, democratic rights are not predicated on citizenship rights of equality for all, but on income that varies based on class. Former Labor Secretary Reich is absolutely correct observing that consumerism has overtaken democracy and poses a challenge to the republic in this century. While for critics like Reich the challenge for a democratic society is to readjust its values otherwise its lifespan will not be long and thriving, as society is already in the phase of “corporatocracy” – economic, political, social and cultural life controlled by corporations, neoliberals insist that “consumption democracy” is the future for the world under globalization. (Robert Reich, Supercapitalism: The Transformation of Business, Democracy, and Everyday Life).
The American middle class aspiring to the American Dream is convinced that consumerism equals democracy and shopping at the mall is something between entertainment and a religious experience. However, they are not as convinced that the system works for them nearly as well as it does for the privileged socioeconomic elites whose interests government promotes. After all, one cannot possibly be a consumer of everything described in the American Dream if one fears the prospect of downward social mobility, let alone lapsing close to the poverty line. If the political regime allows the very rich to shape all institutions and determine policy that impacts the lives of people both as citizens and consumers, then can such a system be labeled democracy or would a different name – oligopoly under oligarchy - more accurately describe it?
Voter Apathy
On 20 April 2015, the Washington Post ran a front page story that all voters are fed up with “big money” flowing into political campaigns. Presumably, this will be a defining issue in 2016, as it has been for one presidential election after the other in decades past. This may be the case for 2016, but Mother Jones magazine also ran a headline 250 Years of Campaigns, Cash, and Corruption. Going back to my undergraduate years when the Watergate scandal erupted on the political arena, big money in politics is all I can remember every four years of presidential elections. Rich people giving money to secure appointments as ambassadors, to secure tax breaks, to secure perks for their industry. The result of massive amounts of money from very few people in politics has left the majority alienated. Therefore, the level of “consumption democracy” is acquired privilege bought and paid for by those who can afford it.
It ought not to surprise anyone that America has one of the lowest voter turnouts in the world. Voter participation is below 40% for congressional elections and below 60% of registered voters in presidential contests. According to the Center for the Study of the American Electorate, only 14.8% of eligible voters participated in 25 states. In the 2014 mid-term election that was a disaster for the Democrats, the US had the lowest voter turnout in 72 years, with 43 states fewer than half of the eligible citizens participating. It is interesting to note that some of the poorest states in the country, and some still not recovered from the effects of the 2008 recession scored below the national average in voter participation.
The result was a clean sweep by Republicans carrying an agenda favoring the wealthy even more than what the Democrats would have permitted. One could argue that voter apathy as a sign of cynicism about the political system is unhealthy and a warning sign that the percentage of non-participants will rise unless the system if fixed. However, the Republican Party, which has been in the minority since FDR, has actually been winning elections largely because of voter apathy, although by no means as the only variable. (“The Worst Voter Turnout in 72 Years”, New York Times, 11 November 2014) Can a functioning democracy continue with voter turnout of one-third participation, and if so, can it be called a democracy when two-thirds of the people do not participate even in a two-party system that represents the capitalist class?
Senator Bernie Sanders among others has argued that one can understand voter apathy when billionaire ultra-conservatives like the Koch brothers and their business lobby “Freedom Partners” spend enormous amounts to money to determine candidates and agendas. While most people would argue that voter apathy undermines democracy, this is exactly the result that conservatives and far right wingers want. Their goal is to marginalize as much of the voters as possible so Democrat candidates would not be elected. Although the US has Christian fundamentalists and an assortment of other right wingers that detest democracy in as Thomas Paine and Thomas Jefferson conceived of it, it is true that ideological manipulation through the media has as its ultimate goal to silence dissent and perpetuate the monolithic corporatist state with a right wing ideological and political orientation. (Chris Hedges, American Fascists: The Christian Right and the War On America; Noam Chomsky, Necessary Illusions: Thought Control in Democratic Societies).
Although the US has always been a status quo country, and moved to the right during the Cold War, it is hardly a totalitarian country, or even Fascist in the sense of classical Fascism that made its appearance in the interwar era. However, Sheldon Wolin is correct that the US has very troubling signs of a nation in the grip of “inverted totalitarianism” where government and corporations are in collaboration to maintain a political economy and social structure that resembles a totalitarian society. As long as there was upward social mobility from 1945 until 1975, “inverted totalitarianism” was camouflaged because income distribution was not as concentrated as it has become. The massive capital concentration, however, has resulted in a more right wing course. In a nation where class consciousness is far lower than any other among the advanced capitalist countries, and where a sense of powerlessness prevails and conformity constantly reinforced by media and the state, the result is apathy rather than organizing and fighting to change the undemocratic system. (Sheldon Wolin, Democracy Incorporated: Managed Democracy and the Specter of Inverted Totalitarianism)
Institutionalized Racism
If we need incontrovertible evidence of a chronic threat to American democracy, then we need not look any farther than institutionalized racism manifesting itself in the police enforcement, judicial and penal systems. This is not to say that there is no evidence of racism when we analyze socioeconomic indicators from unemployment and income distribution to housing, health and education statistics. It would be false to argue that there has been no progress since the 1960s. However, it would equally wrong to argue that institutionalized racism is not a 21st century challenge for American democracy. Regardless of the Bill of Rights, amendments to the Constitution, the Civil Rights movement, and of course political correctness intended to provide a thin veil of superficial politeness beneath which rests an apartheid mindset, racism remains an institutional problem.
The absence of political will to enforce the Fourteenth Amendment from the end of the Civil War until the early 1960s meant that it was not until the Johnson administration that the courts finally began to impose the law, and then only selectively and on-case-by-case depending on the court. The numerous court cases and millions of dollars paid to victims of civil rights violations have yet to stop either the police or any other entity public or private from overlooking the law with regard to race. Despite a black US president and a Justice Department with minority leadership from 2008 until 2016, the militarist-racist culture in police departments around America is clearly manifested in its treatment of minorities, especially black males. Targeting minorities by police and the methods often used is a reflection on the entire democratic system and the collapse of the Constitutional protections afforded to citizens. Recorded visual and audio evidence of police methods notwithstanding, and police and court records clearly showing deliberate targeting of minorities, government at all levels from local and state to federal have done nothing to change the culture of racism, thus sending the message that democracy must be subordinated to police-state methods that violate the law of the land.
Beyond the numerous incidents involving police officers and black males, despite the reality of US prisons populated inordinately by minorities, there is an inexorable link between “consumption democracy” and racism that impacts mostly poor black people. It is true that class transcends race otherwise we would not have black millionaires and blacks in management. However, Obama sitting in the White House and Oprah owing several mansions has absolutely nothing to do with institutionalized racism that is very much alive in society where the mass media portrays it as “isolated incidents” rather than at the core of the dominant culture. (Ahmed Shwaki, Black Liberation and Socialism)
In the early 21st century, American democracy will be challenged by the persistence of the culture of discrimination against minorities that has been a part of the history from Independence until the present. Marginalizing minorities reflects the glaring contradiction between the ideological commitment to the constitution that promises equality for all, and the reality of subtle and blatant discrimination against blacks, non-white immigrants, and in the last two decades Muslims. If Muslim, black and Hispanic minorities have to engage in self-censorship to show that they have accepted the institutional structure and hegemonic culture that is in itself a constraint on their freedom and their right of dissent in a democratic society. If there is a need for Affirmative Action because the majority is not to be trusted to make decisions based on a combination of merit criteria and rectifying social injustices, that too is a reflection that democracy is not functioning the same for all as the Constitution stipulates. (Manisha Sinha and Penny von Eschen, Contested Democracy: Freedom, Race, and Power in American History)
Minorities as well as a segment of the majority population realize that America has a serious problem with racism and one that is not going away any time soon. On 13 December 2014, there were large popular protest rallies across major US cities, including New York, San Francisco, Washington D.C. and Boston. These demonstrations came after numerous others had taken place throughout November and early December when grand juries – in essence the justice system – failed to indict white police officers killing unarmed black males. On 12 April 2015, Freddie Gray died in police custody after running from the police after a chase for allegedly carrying a knife. The city of Baltimore, like so many other cities across America, has seen popular protests by people demanding respect for civil rights of minorities. In a nation hardly known for its tradition of protests and defiance of authority, such mass protests across the country reveal a systemic problem that government, media and the elites deliberately ignore and try to settle with payments to the families of victims after law suits filed in court. (“Protesters vow to 'shut down' Baltimore over Freddie Gray killing,” Christian Science Monitor, 25 April 2015)
The anti-racist protests in American cities come right out American history when the entire justice system was stacked against minorities and remains so to this day as evidence by court cases and prison statistics of minorities. No matter the superficiality of “Political Correctness” intended as protocol and legal cover for the hypocritical political and legal structure desperate to project a non-racist image, the empirical evidence suggests vestiges of an apartheid society. Because the American institutional structure is rooted in racism and the police state is in full force during the era of counter-terrorism it really does not mean much that there is a black president and attorney general in the Department of Justice, or a black anchor person reporting the news. The challenge to American democracy in the 21st century is to eradicate institutional racism, not to allow a small percentage of minorities be integrated into the institutional mainstream as leaders.
The most significant protest movements in American history that have resulted in reforms include tax revolts (Boston Tea Party rebellion 1773) that led to the War of Independence, the abolitionist movement leading to the Civil War, the Women’s suffrage that led to voting rights, and the Civil Rights movement that ended legalized segregation. The degree to which popular protest movements have actually resulted in reforms of greater democratization is debatable, considering that women remain the discriminated gender, and racism has very deep institutional roots as evidenced by all indicators from the percentages of blacks living below poverty to the percentage convicted and imprisoned in comparison with the general population. It is simply impossible to overcome the challenge of racism to American democracy in isolation and not part of an integrated effort of democratizing all of society as part of a commitment to social justice. Both Malcolm X and Martin Luther King recognized toward the end of their lives that institutionalized racism is part of a larger issue regarding social justice. (Nick Bromell, The Time is Always Now: Black Thought and the Transformation of US Democracy; Joseph Barndt, Understanding and Dismantling Racism: The Twenty-First Century Challenge to White America.)
Gun violence and NRA-Democracy
Does gun violence have anything to do with democracy, or is it strictly a Second Amendment issue as the gun-manufacturing supported NRA insists? Clearly, there is a direct correlation between gun violence and poverty and unemployment in urban America, as many politicians, academics and journalists acknowledge. While the predominantly white middle class in suburban areas are hardly affected, it is not so for the mixed race-ethnically diverse inner city poor areas where political participation is extremely low and residents are victimized by gun violence.
Gun violence is unique in the history of the US, perhaps because of the confrontational relationship with Native Americans as well as the glorification of lawlessness as part of the Westward expansion movement. Considering that there is greater gun ownership per capita in Switzerland but far less violence, we are forced to consider how gun violence fits into American culture. Not just the history involving decimating the Native American population and preserving the apartheid regime even after the Civil War, but the consumer culture itself are inexorably part of the gun violence society that presents a major challenge to democracy.
At the core argument of the Second Amendment (The right of the people to keep and bear arms shall not be infringed.) is the right of the individual and the sense of freedom gun ownership provides. Is the proliferation of firearms constructive to a democracy or detrimental? Is society as a whole pays for the devastating results of gun violence almost as much as the entire Medicaid program does society have the right to a gun-violence free environment? Clearly, this is an ideological issue with arch-conservatives opting for gun ownership they equate with rugged individualism and the “American way of life”. However, if it were not for the powerful NRA lobby, this would not be an issue. (Firmin DeBrabander, Do Guns Make Us Free?: Democracy and the Armed Society; Joan Burbick, Gun Show Nation: Gun Culture and American Democracy)
It is amazing that the cost of gun violence to America is $229 billion, according to a recent estimate by Mother Jones. However, even it gun violence cost a tiny fraction of what is estimated, does this make it acceptable? Should a democratic society tolerate the rightwing ideologues backed by the gun lobby imposing a massive burden on the majority of the population? That Mother Jones has fallen into the assumptions of the mainstream media and framed the issue of gun violence in sheer terms of the bottom line is indicative of how the dominant culture prevails in defining not just the issues of importance, but how they are presented to the public. “at least 750,000 Americans injured by gunshots over the last decade, and she was lucky not to be one of the more than 320,000 killed. Each year more than 11,000 people are murdered with a firearm, and more than 20,000 others commit suicide using one.” Mother Jones April 2015
Beyond the right wing NRA politics, gun violence is at its core a class, race and ethnicity issue. The victims of gun violence are minorities and poor whites, while the affluent are rarely touched except as hunters. The leading cause of death among black teenagers is gun violence. While the media and government become alarmed when gun violence impacts middle class white areas, they rarely mention the impact of gun violence in minority neighborhoods. That a democratic country places the individual’s right to gun ownership above people’s right to live free of fear from gun violence reveals a great deal of an ideological commitment to gun manufacturers and values rooted in violence. (John D. Marquez, Genocidal Democracy: Neoliberalism, Mass Incarceration, and the Politics of Urban Gun Violence.)
Political Polarization
From 1980 to the present, there is a noticeable trend toward bitter partisanship and disintegration of America’s 'consensus politics' that has exacerbated sociopolitical polarization. Given the declining living standards with the erosion of the middle class at a time that we have seen vast wealth concentration, the beneficiaries are clearly the financial elites that want the state to maintain the appearance of pluralism but in fact have authoritarian traits. The dynamics of human society are similar today as in the 17th century when Hobbes wrote The Leviathan. Therefore if a modern American Leviathan emerges it will be an expression of contemporary society confronting a social and economic structure that is unraveling. (Juan Enriquez, The Untied States of America: Polarization, Fracturing, and Our Future; John Sides and D. J. Hopkins, Political Polarization in American Politics)
The media that has the power to mold public opinion and convince people that Leviathan means “salvation” from self-destructive proclivities of an otherwise irrational public. If people are convinced that safety and security rests in the hands of the Leviathan, will society move away from the Jeffersonian model that some equate with ideal democracy toward one that projects an image of narrowly-defined democracy equated with freedom to enjoy safety and security, consume and vote for politicians who represent the same elites? Is this a democratic model or one behind which rests an authoritarian/police/military state? How much freedom would Americans enjoy under an authoritarian government model?
In January 2011, the US-government funded NGO watchdog group Freedom House, released a report listing 25 of 194 countries with declining levels of freedom, a list that includes France and Hungary, among the usual Middle East, African, and Latin American suspects. Well known for clandestine activities in a number of countries the US opposes, Freedom House does not include the US on its list of nations with declining freedoms, but many other organizations and public opinion polls have the US on their lists.
The World Press Freedom Index ranks the US 49th out of 180, below Chile, Niger and South Africa! The UK’s Legatum Institute lists the US lists the US 21st in the world, largely because of its lack of tolerance of dissident voices characteristic of an authoritarian country rather than a democracy. In 2014, the Legatum Prosperity Index showed that while the US was 10th most prosperous country in the world, 86% of its citizens felt that their personal freedom has been in decline because of inability to choose the way to live.
Although party affiliation as related to social class is not nearly as great a factor in the US as it is in Europe, the US has been drifting toward political-ideological polarization that reflects socioeconomic polarization in the last 30 years. Sociopolitical polarization is more evident today than it was when the Reagan-Bush team came to Washington and contributed to that phenomenon. But is it the fault of the politicians seeking elected office at almost any price, the well-paid “talking heads” that propagate for one side or the other, or is it the source of polarization a political economy that has resulted in the weaker middle class According to a Pew Research Center study conducted in June 2014, 36% of Republicans view Democrats as a threat to America’s wellbeing and 27% of Democrats feel likewise for the Republicans. This also reflects the reality that those identifying with the Republican Party are much more rightwing in 2014 than they were in 1994, while the majority of Democrats have also shifted left of the liberal “middle” that the party wants voters to embrace.
This polarization in the voter base, added to voter apathy reveals that the vast majority of the American people no longer believe in the kind of political consensus that developed under Truman in the late 1940s in both domestic and foreign policy. The irony here is that while the Republican Party has most certainly moved to the far right by embracing Tea Party agenda elements, the Democrat Party has also moved to the right away from principles and policies that in the 1960s afforded a sense of hope for the workers, the middle class, workers and minorities. As much in foreign policy as in fiscal and trade policy, there is hardly much difference between the two. Where there are differences on environmental and culturally liberal issues such as gay marriage, right to life, those have only a marginal impact on society, no matter how polarizing the media tries to portray them.
All presidential campaigns promise the American Dream to all citizens, but all of them deliver even greater privileges to those making the hefty campaign contributions. The presidential race for 2016 is no different, considering that the campaign of the Republican favorite and presumptive nominee Jeb Bush is already engaged in illegal activities. In fact, the super PAC raising money for Jeb Bush has done so in record time and exceeded all previous records. According to Reuters, the Bush campaign is trying to convert the super PAC backing him into a campaign committee so that they can circumvent the limits on unlimited donations. “A relatively small number of millionaires and billionaires could pay for Bush’s race for the 2016 Republican presidential nomination. The only problem is that the Bush scheme, as reported, would be illegal.” Reuters, 23 April 2015
The Hillary Clinton campaign is equally corrupt and equally beholden to a handful of very rich. Her family's “charities” have been forced to re-file tax returns for the last five years because they withheld vital information regarding contributions to the Clinton Foundation, an organization that has been criticized for its endemic corruption practices. While Hilary Clinton was in the State Department, the Clinton Foundation brought million of dollars from foreign governments as well as corporations paying to buy influence. Is this sloppy accounting or systemic corruption at the heart of the American political system? If this is the Democrat candidate presenting herself as the champion of the middle class and the enemy of the rich, it is understandable why voters become cynical and apathetic about politics. Much of this comes from Republican critics (Peter Schwitzer Clinton Cash: The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich)
The amazing thing is that the wealthy do not have to make any contributions to political campaigns because the system is already set up to serve their interests and no politician will survive if she/he tries to challenge the power and influence of big capital in society. Senator Bernie Sanders has been the remarkable exception, but always works within the system to survive. The rich give money to ensure influence for even more privileges of their specific interests, whether in the pharmaceutical industry, banking etc. This means that the average citizens are left out completely.
People have no illusions that the US is a country with elected officials that hardly represent the interests of the workers and middle class. Focused on the elites for whose benefit laws and policies are designed, the entire institutional structure exists to line up the masses into conformity. It is amazing that even in the latest budget deal that Obama sent to Congress for approval in December 2014, school lunch subsidies were slashed, while more tax breaks for Wall Street were included. No matter how much right wing radio and TV rhetoric is thrown at the American public, how is it possible that the vast majority do not appreciate that Congress consistently fails to serve the public interest because the financing of its campaigns and its ideological commitment is to the top ten percent of the country’s richest people?
The end result is that political polarization will become much worse during the next deep recession when there is further erosion of the middle class and further downward social mobility. People will become more cynical as both political parties try to convince the American people that the threats to American democracy are beyond the sovereign borders and that the solution is even more defense, intelligence, security and police spending, allegedly to contain foreign enemies when in fact democracy itself is the enemy of the existing political and socioeconomic elites.
Conclusions
An ancient Athenian invention, democracy evolved from the oligarchic system that existed from Solon the “Law Giver” who set on a course to harmonize society until Pericles who represented merchants and trade interests. A more representative system of government than any other in the ancient world, democracy was never inclusive, as it left all everyone who was not an adult male citizen in a city-state where the slaves and metics (non-Athenians) were the major engine of the economy. Similarly, in the modern times its challenge is the lack of inclusiveness and failure to deliver on social justice that people see as an integral part of this system. American democracy as the two political parties define it, as the mass media projects it, as all mainstream institutions want it to be is safe and sound for now because it helps to maintain a privileged elite with a fairly substantial middle class social layers living the “American Dream”. The rest of the population either aspires to the dream that never materializes, or they have given up and live on the fringes.
As the political economy continues to erode the middle layers that historically constitute the popular base of American “democracy”, and as the gap widens between the popular base and the power base of the system – concentrated wealth and political power – the system will begin to weaken and become increasingly authoritarian. If the challenge of American democracy in the 21st century is to survive and become stronger, it will not accomplish that goal if the system is in essence a form of oligarchy of the rich that both political parties represent as their role is achieve popular consensus to keep the oligarchy going under the guise of the label “democracy”.
In an article entitled “America’s Social Democratic Future”, Lane Kenworthy writing in Foreign Affairs (February 2014) agrees that the US has had many obstacles in its democratic progress. He concludes that American democracy is better off today than in was when Wilson took office in 1913, and it will be better off in the 21st century because its regime emulates the “Nordic” model. Those who have studied the “Nordic” models know the US has very little in common with them and even less with where it is headed based on its contemporary history and current trends.
The idea that the US is anything like Finland, Sweden, Norway, or any “Nordic” country is a combination of a mental construct and wishful thinking to placate the beleaguered masses crying out for a more just society. Appealing to the patriotic and nationalist mass sentiments, politicians and the corporate media will argue that “sacrifices” by the middle class and workers, not by the capitalists, are essential for America to remain “competitive” and enjoy the fruits of its labors in the future. The idea that the American financial elites will voluntarily compromise their privileges is as absurd as it was for the French nobility to surrender their privileges before the French Revolution of 1789. The only goal of the wealthiest Americans is amassing even more power so they remain hegemonic within society and globally. It is greed and power that motivates them, not rational ideas, not what is just and unjust, right or wrong.
The dogmatic ideological turn to the right after the election of Reagan in 1980, and the US-led global effort to undo all vestiges of Keynesianism and the social safety net while transferring capital to corporations and banks through the fiscal system and subsidies, created a political atmosphere hostile to any notion of democratic collectivism. Even Walter Lippmann who was the arch defender of liberal democracy agreed on the need of some measure of collectivism in a well function democratic society. He conceded that the state has the obligation for society’s economic life as a whole, even as it preserves liberty for individual transactions.
The business and political establishment expects the masses to enjoy the vicarious thrills of capitalist success and institutional privileges that the elites enjoy in society and be content with such an ethereal experience because they could be living in sub-Sahara Africa or Central America where living standards are the lowest in the world. After all, is it not enough that one enjoys personal identity with the super power of the world? Because of the added elements of nationalism and patriotism, the middle class and workers forgo their own realities and accept identity with the “larger” entity as success. In other words, if the US economy and military are strong and healthy, that ought to be enough for each individual, regardless if they have a well-paying job and can make the rent, or if their children have a prospect of upward social mobility.
Backed by the media, the corporate interests and political class will use everything from “terrorism” to foreign policy crises to forge some popular support for taking the country down the road to even more militaristic and police state methods than we have know in the last fifteen years. Not to belabor teleological mode of thinking, but the next decades will entail a deterioration of both democracy and social justice, while socioeconomic and political polarization are inevitable. Ideologically and politically the elites and media will steer the public more to the right, creating even more political apathy and cynicism, even greater polarization that will justify a course toward more authoritarian methods.
One reason that American society will evolve in this manner is that the contradictions between “Empire as a Way of Life”, to borrow from William Appleman Williams great work, is in direct contradiction with democratic development. It is entirely possible that a very deep and serious societal crisis even worse than the Great Depression of the 1930s could bring about a pause to these conditions at some point in this century. Such a crisis could also result in some form of a totalitarian state still calling itself democracy.
The challenges to American democracy in this century are not so different than they were during the Gilded Age, but the US survived and went on to become a superpower while creating a broader middle class. Having achieved the zenith of its power during the Truman and Eisenhower administrations when there were no economic rivals of any consequence, the US missed its opportunity to create a sound economic base that would keep it strong for another century. Instead, its policies of “Military Keynesianism” and welfare capitalism under a neoliberal regime weakened not only the economic base but also the political popular base on which American democracy stood. The very foundations of American society are now shaky, though not beyond repair. If current trends persist as I have described in this essay, those foundation will become even more so as the century unfolds.
How can people bring about change if they people are slaves to aspirations of supporting a system that inherently marginalizes them? Can there be greater democratization of society in the absence of a cultural revolution, and is it likely in the absence of a social revolution that will bring about political, economic and social change. Emerging from the Enlightenment rationalist tradition of the 18th century, American democracy aimed at the ideals of the French and English political philosophers but constantly grounded in the realities of a young nation endeavoring to emulate the success of the mother country. Applying abstract reason to solve societal problems was mainstream Enlightenment thinking among idealists who came out of a class society in which the nobility and the upper clergy held back the progress of society. In our time, the social progress of society is held back by a handful of very wealthy people who enjoy a hold on the state and institutions, including the media as a major tool of social control.
More so today than in the late 18th century, American democracy’s challenge is to serves the public interest not the interests of the 1% richest Americans to the detriment of the middle class and workers. It is interesting that the media, politicians, and even academics use the term “special interests” so that they avoid any class-based language and so that in the so-called “special interests” they can include trade unions and organizations such as the AARP, women’s and others. Defining corporate and finance capital as “special interests”, while defining the “public interest” as the sum total of citizens and the collective goods of the working class and middle class would be a good first step toward meeting some of democracy’s challenges in the 21st century. Engaging in deliberate illusion-making by trying to remain politically, ideologically and culturally acceptable to apologists of the existing system and refusing to recognize the class struggle at the core American democracy’s simply perpetuates more myths rather than trying to expose them. (John B. Judis, The Paradox of American Democracy: Elites, Special Interests, and the Betrayal of Public Trust.)

Agribusiness And The Four Horsemen Of The Apocalypse

Colin Todhunter

US citizens constitute 5 percent of the world’s population but consume 24 percent of global energy. On average, one person in the US consumes as much energy as two Japanese, six Mexicans, 13 Chinese, 31 Indians, 128 Bangladeshis, 307 Tanzanians and 370 Ethiopians.
The US is able to consume at such a level because the dollar serves as the world reserve currency. This means high demand for it is guaranteed as most international trade (especially oil) is carried out using the dollar. US dominance and wealth accumulation depends on maintaining the currency's leading role.
The international monetary system that emerged near the end of the Second World War was based on the US being the dominant economic power and the main creditor nation, with institutions like the World Bank and International Monetary Fund eventually being created to serve its interests. Since coming off the gold standard in the early seventies, Washington has been able to run up a huge balance of payments deficit by using the (oil-backed) paper dollar as security in itself (rather than outright ownership of gold) and engaging in petro-dollar recycling and treasury-bond super-imperialism.
Like all empires, Washington has developed a system to hitch a free ride courtesy of the rest of the world funding its generally high standard of living, militarism, financial bubbles, speculations and corporate takeovers.
With its control and manipulation of the World Bank, IMF and WTO, the US has been able to lever the trade and the financial system to its advantage by various means (for example, see this analysis of how Saudi Arabia’s oil profits enabled Wall Street to entrap African nations into debt). Based on the US neocons' holy scriptures for 21st century war and imperialism - the Project for a New American Century and the Wolfowitz doctrine - Washington will not allow its global hegemony and the role of the dollar to be challenged. Given Russia's reemergence on the global stage and China's rise, we are witnessing a sense of urgency to destabilise and undermine both countries, especially as they are now increasingly bypassing the dollar when doing business.
US strategic objectives and the role of agribusiness
The only real alternative to avoid ecological meltdown due to the massive consumption of the planet's finite resources and ultimately what appears to be a possible nuclear conflict with Russia (or China) is to move away from militarism and resource-gabbing conflicts by reorganising economies so that nations live within their environmental means. Key to this involves a major shift away from the petro-chemical industrial model of agriculture and food production, not only because it leads to bad foodpoor health and environmental degradation and is ultimately unsustainable (and creates food insecurity - see link further on) but also because this model has underpinned a US resource-grabbing foreign policy agenda for many decades.
Such a shift would however run counter to the aims of Monsanto and the agribusiness cartel it belongs to. US agribusiness benefits financially from the prevailing order, continues to colonise global agriculture and is in effect part of the US Establishment (for example see this and this). Agriculture and agribusiness remain integral to US strategic objectives.
For example, the ‘green revolution’ was exported courtesy of the oil-rich Rockefeller family, and poorer nations adopted agribusiness's petrochemical-dependent agriculture that required loans for inputs and infrastructure development. This was underpinned by the propaganda that these countries would earn dollars to prosper (and repay the loans) by adopting mono-crop, export-oriented policies. It entailed uprooting traditional agriculture and trapping nations into a globalised system of debt bondage, rigged trade relations and the hollowing out and destruction of national and local economies.
GMOs, the control of seeds and further corporate-controlled inputs represent the second coming of the green revolution.
Around the world from Mexico to India, we can see how traditional food production and retail sectors are being hijacked by mainly US corporate interests and can witness the subsequent impacts on health, food security, environments and livelihoods. NAFTA set the framework for plunder in Mexico, the Knowledge Initiative on Agriculture is playing a similar role in India and various bilateral trade agreements will do it elsewhere.
Thanks to the interests and demands of global agribusiness, farmers are leaving agriculture in India because it has been deliberately made financially non viable to continue. Regardless of the impact of GM cotton, this is the main reason why 300,000 have committed suicide in the last two decades. In attempting to dismiss or play down the link between Bt cotton and farmer suicides, prominent neoliberal apologists should consider the role of the elite interests they represent in causing hardship, hunger, poverty and devastation, instead of setting out to smear the likes of Vandana Shiva or spending their time trying to sideline the issue by trying to debunk any GM-suicide link.
Although the globalized hijack of food and agriculture by powerful corporations results in poverty, dependency and food insecurity, we are constantly and deceitfully informed that we must have more of the same if we are to feed an increasing global population and eradicate poverty. We are told that the solutions for feeding a projected world population of nine billion are more technical fixes: more petrochemical-dependent agriculture, more GMOs and more unnecessary shifting of food across the planet. Such a ‘solution’ is bogus: we already produce enough food to feed the world’s population and did so even at the peak of the world food crisis in 2008, and GM crops that are on the market today are not designed to address hunger. Four GM crops account for almost 100 percent of worldwide GM crop acreage, and all four have been developed for large-scale industrial farming systems and are used as cash crops for export, to produce fuel or for processed food and animal feed. Of course, throw in a heavy dose of ‘family planning’ (depopulation) for the ‘third world’ and we will be just fine.
There is no better example of this ideology than the current propaganda over GM golden rice. The idea is to parachute corporate-controlled GM rice into regions thereby disrupting delicately balanced local economies designed for specific markets and potentially destroying livelihoods - especially when fortified beta-carotene GM rice eventually contaminates local varieties and is manipulated to become the preeminent variety. This corporate grab is legitimised by public relations figures mouthing platitudes about feeding the hungry and giving sight to children whose vitamin A deficient diet causes blindness. The solution for blindness involves policies that would encourage a more diverse agriculture and in the short term vitamin supplements.
Statements about curing blindness, saving lives or feeding the world with GMOs are meant to tug at the heartstrings. And attacking critics with emotive outbursts are intended to do the same. Even if there were an element of logic in what these figures say, abuse and emotion are no substitute for intellectual rigor and reasoned debate. Yet what we have are public relations people like Patrick Moore going on ‘world tours’ claiming that those who oppose golden rice are effectively stealing children’s sight or are killing them. Such accusations are designed to divert attention from the underlying nature of poor nutrition/blindness and the real intention underlying the golden rice agenda - a wholesale corporate grab of global rice production.
The four horsemen of the apocalypse
There is a prevailing notion that we can just continue as we are, with an endless supply of oil, endless supplies of meat and the endless assault on soil, human and environmental well-being that intensive petrochemical agriculture entails. Given the figures quoted at the start of this article, this is unsustainable and unrealistic and is a recipe for continued resource-driven conflicts and devastation.
The genuine answer is to adopt more organic and ecological farming systems that are locally based and less reliant on petrochemicals. This would also mean a shift away from an emphasis on producing meat that places a massive burden on the environment and is highly land, water and energy-input intensive.
The current economic system and model of globalisation and development suits the interests of Western oil and financial oligarchs (including land and commodity speculators), global agribusiness and the major arms companies. These interlocking, self-serving interests constitute the four horsemen of the modern-day apocalypse and through their actions have managed to institute a globalized system of war, poverty and food insecurity and have acted to devastate economies.
People want solutions for hunger, poverty and conflict but are too often told there is no alternative to what exists. The solution ultimately lies in taking manipulated markets and rigged trade rules out of farming and investing in and supporting indigenous knowledge, agroecology, education and infrastructure, instead of inappropriately diverting funds to underperforming sectors. This involves rejecting big agritech’s current agenda and resisting the US strategy of using agriculture as a geopolitical tool. It involves challenging the corporate takeover of agriculture, supporting food sovereignty movements and embracing sustainable agriculture that is locally owned and rooted in the needs of communities.

Ukraine: Truth Has Been Murdered

Paul Craig Roberts

The Obama regime and its neocon monsters and European vassals have resurrected a Nazi government and located it in Ukraine. Read this statement by Elena Bondarenko, a member of the Ukrainian parliament:http://slavyangrad.org/2015/04/18/statement-by-elena-bondarenko-peoples-deputy-of-verkhovna-rada-of-ukraine/
The Western media has created a fictional account of events in Ukraine. The coup organized by the Obama regime that overthrew the elected democratic government in Ukraine is never mentioned. The militias decked out in Nazi symbols are ignored. These militias are the principle source of the violence that has been inflicted on the Russian populations, resulting in the formation of the break-away republics. Instead of reporting this fact, the corrupt Western media delivers Washington’s propaganda that Russia has invaded and is annexing eastern and southern Ukraine. British and European politicians parrot Washington’s lies.
The Western media is complicit in many war crimes covered up with lies, but the false story that the Western media has woven of Ukraine is the most audacious collection of lies yet. Truly, truth in the Western world has been murdered. There is no respect for truth in any Western capital.
The coup in Ukraine is Washington’s effort to thrust a dagger into Russia’s heart. The recklessness of such a criminal act has been covered up by constructing a false reality of a people’s revolution against a corrupt and oppressive government. The world should be stunned that “bringing democracy” has become Washington’s cover for resurrecting a Nazi state.

Ten Shocking Facts About Baltimore

Bill Quigley

Were you shocked at the disruption in Baltimore?  What is more shocking is daily life in Baltimore, a city of 622,000 which is 63 percent African American.  Here are ten numbers that tell some of the story.
1:  Blacks in Baltimore are more than 5.6 times more likely to be arrested for possession of marijuana than whites even though marijuana use among the races is similar.   In fact, Baltimore county has the fifth highest arrest rate for marijuana possessions in the USA.
2: Over $5.7 million has been paid out by Baltimore since 2011 in over 100 police brutality lawsuits.   Victims of severe police brutality were mostly people of color and included a pregnant woman, a 65 year old church deacon, children, and an 87 year old grandmother.
3: White babies born in Baltimore have six more years of life expectancy than African American babies in the city.
4: African Americans in Baltimore are eight times more likely to die from complications of HIV/AIDS than whites and twice as likely to die from diabetes related causes as whites.
5: Unemployment is 8.4 percent city wide.  Most estimates place the unemployment in the African American community at double that of the white community.  The national rate of unemployment for whites is 4.7 percent, for blacks it is 10.1.
6: African American babies in Baltimore are nine times more likely to die before age one than white infants in the city.
7: There is a twenty year difference in life expectancy between those who live in the most affluent neighborhood in Baltimore versus those who live six miles away in the most impoverished.
8: 148,000 people, or 23.8 percent of the people in Baltimore, live below the official poverty level.

The Failings of Capital Punishment

Binoy Kampmark


“Jokowi. Myuran Sukumaran. Kerobokan Prison. Bali. 23/01/2015. People can change.”
-Inscription by Myuran Sukumaran of a portrait of Joko Widodo, Indonesian President.
We have been reduced to morbid reflections, those moments when the smell of death, and the exiting life, is near. “The two boys died well,” explained Australian lawyer Peter Morrissey. “They made their preparations, they were dignified. They’re strong against the death penalty, they were supportive of their families.” Andrew Chan and Myuran Sukumaran died before the firing squad without being given the last rites. They were joined by six others: Okwuduli Oyatanze, Martin Anderson, Raheem Agbaje Salami, Silvester Obiekwe Nwolise, Rodrigo Gularte and Zainal Abidin.
The eight executions that took place at 12.35 in the morning local time on the prison island of Nusakambangan were not averted by the involvement of the UN Secretary General Ban Ki-moon. Or the EU. Neither did the pleas of France, Australia, Brazil, or Nigeria have much sway, though Philippines woman Mary Jane Veloso received a last minute reprieve from Manila that she be spared to act as a witness against a woman charged with trafficking her.
The entire saga has been one of state-sustained cruelty. One of the executed, Rodrigo Gularte, was a confirmed schizophrenic. The man executed as Raheem Agbaje Salami was actually Jamiu Owolabi Abashin, a Nigerian national whose fake identity was used by authorities from his conviction to his clemency pleas. He died, effectively, as a fake. Australians Chan and Sukumaran, leaders of the “Bali Nine” drug group, had been passing time in the throes of rehabilitation, with Sukumaran learning to paint and Chan finding God and a vocation in teaching English.
Even as those on death row were awaiting their last gasps of life, they were greeted by the vicious legal lottery that is capital punishment. Earlier this month, the “shock therapy” that Indonesia’s unrelenting president Joko Widodo described as necessary against drug traffickers was far from evident in the Bandung High Court. In commuting the death sentences of Iranians Mosavipour bin Sayed Abdollah and Moradalivand bin Moradali to life imprisonment, the court spoke of a need to educate rather than exact revenge.
Death here is taken in various guises. Drugs kill, though some are more permissible than others. Traffickers profit, suggesting that they, too, are the profiteers of the sick society. But visiting death upon such individuals in this bullet-ridden context is an irreversible, immutable process, striking rehabilitation efforts dumb. It suggests that the world is irreversibly dark, and the crimes of a few individuals will be met by the sanctioned crime of a vengeful state. Such punishment can never, by its own logic, be a deterrent because those who are best deterred will breathe no more. The victims, and the perpetrators, will continue to multiply.
The joint statement from France, Australia and the EU outlined some of the salient points. “We fully respect the sovereignty of Indonesia. But we are against the death penalty in our country and abroad. The execution will not have a deterrent effect on drug-trafficking or stop others from becoming victims of drug abuse. Executing these prisoners now will not achieve anything.”
The Bali Nine saga did not make for pretty reading and viewing. There was sentimentalising, not least of all attempts to transform moral chaff to patriotic wheat. Australian actor Brendan Cowell decided to get stroppy, urging the Australian prime minister in a video packed with celebrity wishes to “show some balls” in getting “over to Indonesia and bring[ing] these boys home.”
The inconsistency in the approach of certain countries to protecting their citizens was also exposed. Australia’s politicians were adamant in mucking in the emotional stakes for Chan and Sukamaran, but indifferent to citizens caught in the so called “war on terror” (David Hicks) or those who would meddle with the muscular presumptions of US foreign policy (Julian Assange). State policy is often merely a form of established hypocrisy.
There were also the parochial outbursts. Indonesians felt that drug dealing convicts were being romanticised as victims, while their legal system was being derided as fetid. Right to the point of the executions, there were suggestions on the part of Chan and Sukumaran that the judges hearing their case were compromised by corruption.
A judicial commission indicated that it had investigated claims that the judges had asked for $130,000 to reduce the sentences to less than 20 years in prison, only to refuse to release its findings. “I don’t think executions should take place if the investigations have not taken place,” suggested defence counsel Todung Mulya Lubis. “I don’t even know what is the outcome of the investigation.” The legal proceeding had become a parody of itself.
What matters in the spirit of rehabilitation is that there is no bridge too far – in some cases. Beating a retreat to the realm of measured sanity and stability are possible. Those efforts, if they are not at least rewarded, should not be ignored by populist, executive fiat. Those who perish before the capital punishment do so as political, rather than judicial sacrifices. Sovereignty kills.

Greek Debt Crisis

Jack Rasmus

This past week, April 24, European finance ministers met in Riga, Latvia. High on the agenda was the topic of Greek debt negotiations. Two months after the February 28 interim agreement between Greece and the EU ‘troika’—the IMF, European Commission, and European Central Bank—in which both sides agreed to continue negotiating—little has changed. In fact, led by its de facto spokesperson, hardline German finance minister, Walter Schaubel, the Troika’s position has continued to harden since February 28.
Schaubel and other northern Europe finance minister have continued to insist for the past two months that there will be no changes in pre-2014 terms and conditions of debt payments. The Troika and Schaubel have repeatedly demanded as well, that Greece provide more details to show how it will continue to pay its debt and how it will maintain previous austerity measures.
In reply, Greece and Syriza point to the various measures they have agreed to since February 28, as well as what they agree in principle to implement in the future: pension reforms that limit early retirement but don’t cut pensions ‘across the board’, selective privatizations that avoid cutting necessary social services but not general privatizations, tax reform that make the wealthy pay their fair share, and so on.
While Schaubel and the Troika demand Greece abide by the previous debt agreement, they themselves refuse to do the same. They refuse to release to Greece the US$8 billion in loans due to Greece under the old terms of the agreement. Or to release to Greece the US$2 billion in interest earned on Greek bonds earned since 2010. In other words, Greece must adhere to the letter of the debt agreement but the Troika does not have to.
Schaubel and other hardliners have become especially incensed with measures introduced since February 28 by the Syriza-led government, which include the moderating of some of the worst prior austerity measures. Those austerity-reversing measures include Syriza’s restoration of minimal pensions for the lowest wage earners, adjustments to the minimum wage for the working poor, rehiring of critical government workers to provide much needed social services, reversal of some of the previously planned privatization of public works, as well as the new Greek government’s reaffirming the rights of workers and unions in Greece to collectively bargain—i.e. all measures that the Greek people once had, that were taken away as part of the loans by northern bankers before 2014, and which Syriza has restored since February.
The Ghost of ‘Labor Market Reform’ at the Negotiating Table
These measures are particularly annoying to the northern Europe finance ministers and their bankers, since other European governments have introduced, or have plans to introduce, many of the very same ‘labor market reforms’ in their countries. Deepening labor market reforms everywhere throughout the Eurozone is a prime objective of business interests and their center-right politicians and governments. They see ‘labor market reforms’ as the key to lower costs of European exports and a main way to boost their stagnant economies. Thus to allow Greece to restore—what they themselves are trying to take away elsewhere from other European workers—provides a strong argument for unions and popular parties elsewhere in Europe to oppose their own ‘labor market reforms’. Greece and Syriza are in effect ‘sticking a thumb in the eye’ of key plans by European corporate interests by actually reversing labor market ‘reforms’ that were previously in place. More than Greece has always been at stake in the debt negotiations.
With Syriza’s selective reforms moderating some of the worst austerity measures, Schauble and other northern European finance ministers and the bankers became increasingly impatient in recent weeks, even more demanding, and have begun adopting an increasingly hardline and aggressive tone against Greece and its ministers.
At the April 25 Riga European finance ministers meeting, for example, according to the business press, the finance ministers were openly hostile to, and ‘ganged up’ on, Greek finance minister, Yanis Varoufakis, repeatedly berating him for not agreeing to their terms.
European Central Bank (ECB) chairman, Mario Draghi, also joined the attack last week, warning Greece that “time is running out”, and that he may take actions to put more pressure on Greek banks by limiting Greek banks’ access to ECB loans needed to ensure availability of Euros for everyday Greek economic use. Draghi was thus, in effect, threatening to ‘pull the plug’ on Greek banks and send Greece’s economy into a tailspin. Just the mention of such a threat by Draghi will no doubt accelerate capital flight from Greek banks, already a growing problem, thus putting even more pressure on the Syriza government to concede.
Not to be left behind, the other Troika member, the IMF, also turned up the heat on Greece last week. The chairman of the big Swiss bank, UBS, reported that the IMF meeting he attended last week discussed a Greek default. There is now a consensus in the IMF “that a Greek default would be systemically controllable”. There is apparently a ‘Plan B’ in the works to allow Greece to default. With the Eurozone having just introduced a massive US$60 billion a month ‘quantitative easing’ (QE) money injection by the ECB, the IMF view no doubt is that, in the event of a Greek default, the US$60 billion a month provided by the ECB would be sufficient to bail out the losses of northern European bankers—even if Greek banks and the Greek economy were allowed to crash. Schaubel and the finance minister hard-liners have also been suggesting that such a Plan B may be in the works.
Plan ‘B’ and Its Consequences
So what’s up? Is the Troika playing ‘chicken’ with Greece? Is Schaubel playing the ‘hard cop’ in negotiations, with Angela Merkle the ‘soft cop’, now reportedly meeting with Greek president, Tsipras, on the side? Or is the Troika seriously considering allowing Greece to default on its payments, thus cutting Greece off from future short term loans and funding? (And how about a ‘Plan C’? Would the Troika allow the even more serious alternative of Greece exiting the Euro?)
Playing ‘chicken’ in negotiations over the debt terms may represent a grand strategic error on the part of Eurozone finance ministers and technocrats. A default may end up far more messy than they think. The Eurozone may not be economically in a much stronger position to absorb a Greek default today than it was in 2010 or 2012, despite the argument to the contrary raised in various Euro-technocrat quarters recently that is designed to justify letting a default happen. Schaubel, Draghi and others may be overestimating Europe’s resources and ability to deal effectively with and contain a Greek default.
Others have been raising this warning as well, especially with regard to a Greek exit from the Euro. Sensing that Schaubel and company may be about to lose control of the situation concerning Greek debt negotiations, Jason Furman, chairman of the Obama Council of Economic Advisers, recently noted in a press interview while in Berlin that a Greek exit “would be taking a very large and unnecessary risk with the global economy”.
But even a Greek default might well prove far more destabilizing than assumed. Schaubel’s assessment, voiced at a meeting of the Council of Foreign Relations in New York in April, that ‘the markets’ have already priced in the possibility of default, and thus a Greek default could be contained, may be wishful thinking indeed. It has been estimated that more than US$250 billion in assets would be eventually affected by a default, and no one knows the connections linking these assets—i.e. what are the possible contagion effects. The memory of the Lehman Brothers default in 2008 is obviously stronger in the USA than it is today in Europe—hence the Furman public warning. Privately, US officials are even more concerned than Furman, according to the business press.
What then are the potential parallels between Lehman Brothers and a Greek default? Or, even more so, with a Greek exit? In both cases, default and exit, no one knows for sure with Greece. Any more than they knew with Lehman at the time. Neither the path nor the magnitude of the contagion effects is clear. The spider web of financial connections in today’s global financial system is still not well understood. Estimating the potential psychology of investor responses is almost impossible. And what would be the political consequences? If Greece left the Euro, would that be a sufficient signal and excuse for others to do so as well? What would be the economic impact of not just Greece but another one or two ‘exits’?
Is the Eurozone economy in so much ‘better shape’ today? In terms of stockholders perhaps. The various Euro stock markets are up by 20-30 percent or more in 2015 as a consequence of QE. But certainly not the rest of the non-financial, ‘real’ economy in the Eurozone. It is still largely stagnant at best. Unemployment remains at double digit levels. Business investment is poor. Bank lending flat. Nor is the Euro banking system less fragile today than before, contrary to the general view. Meanwhile, something like half of all government bonds in the Eurozone are now offering negative interest rates? No one knows how that ‘known unknown’ will respond to a Greek default; or what the consequence of still more widespread and even more negative government interest rates might be on the real Euro economy in the wake of a Greek default or exit? Or how about the effects of default or exit on the Euro currency, and in turn global currency instability, if Greece defaulted or exited?
The global economy is not growing robustly. China is clearly slowing. Japan’s QE experiment has failed, boosting stock values but not the real economy. Emerging markets everywhere are struggling with commodities and oil price collapse, with currency instability, capital outflow and the effects of eventual U.S. interest rate hikes. Meanwhile, the U.S. economy this week will likely show another quarterly GDP collapse to near 0-1% growth, the fourth GDP ‘collapse’ since 2009. This is not a global, or Eurozone, economic environment where a major shock like a Greek default or exit may have few contagion effects. In fact, quite the contrary.
Despite all this, arrogant German, Dutch, and other technocrats and bankers intent on retaining the old order of austerity and debt payments in Greece continue blindly to insist on more of the same, when it is clear that the Greek people and, hopefully its government, will refuse to continue with ‘business as usual’. The techno-banksters may just over-estimate their hard ball tactics and get swept up in the ‘Plan B’ themselves—even when they may not initially have planned for that. They pushed Greece and Syriza to the brink last February 28. Syriza had enough sense to not bring the crisis to a test at that time. They have bought time. They still have until the end of June, when the February 28agreement to extend runs out.
No doubt Schaubel and EC ministers, the ECB and the IMF, think they can push Greece to the wall again, and another concession will be made. But perhaps not. Tsipras has been meeting with Russia. Perhaps also with China. Perhaps Greece has its own ‘Plan B’. Time will tell. In the interim, the hardliners will become even more hardline, more obstinate, more demanding. They think they have marginalized and contained Greek finance minister, Varoufakis. However, they themselves may have been marginalized. The real negotiations on the Greek debt and the future of austerity has moved—from Schaubel and company to direct back door negotiations that have opened last week between Angela Merkle and Alex Tsipras.
Much will depend on the state of the Eurozone economy in late June, as well as on how well Greece can deal with the increasing economic pressure the Troika will continue to impose in the interim. The European Commission will continue to withhold funds. The ECB will continue to put pressure on the Greek banks. And the IMF will continue to leak details of ‘Plan B’. Greece should plan to raise the stakes in the interim as well perhaps. After all, there will be no concessions nor any agreement on anything until the end of June.