The Path to Corporate Globalism

If you don't know what the TPP and the TTIP are, you can be forgiven. The governments and corporations involved don't want you to know because these international agreements they are negotiating are that good for them and that bad for you. If you liked NAFTA, you'll love the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership(TTIP). The TPP is to the Far East what the TTIP is to Europe. These are the latest in a history of trade agreements that began in the 1930s and became institutionalized in the GATT in the postwar period. This time is different. The agreements are now being expanded to cover domestic policy as well as trade goods. They are regional rather than global like the GATT and WTO and they are set up to be controlled by and for the corporations of the world. It works like this. A foreign corporation wants to sell a product or service in the United States but US laws tax, control or otherwise impede the sale or nature of that product for safety, health, environmental or other reasons. If a foreign entity does not agree on the impact or need for such laws, that corporation can sue the US or state government for the profits it would have made had that regulation not existed. The case is adjudicated before a three-lawyer tribunal set up by the corporations. Over $3 billion of your taxes have already been paid and $14 billion in claims are pending under NAFTA and CAFTA. What that does is truly stunning. A foreign corporation has more legal rights to sue the government than you do. Tribunals made up of corporate representatives can determine how our environmental, safety, health and other regulations will be enforced. The pharmaceutical, energy and food industries will be able to influence the impact of patents, pollution and labeling. Wall Street will be able to diminish the effect of reregulation and Dodd-Frank reforms. Corporate lobbyist/advisors, 600 of them, have access to the evolving texts of these agreements. The Congress, journalists and the general public do not. There is nothing "free trade" about these agreements. They are intended to restrict trade to ensure the profits of corporations, maintain the income of doctors and other professionals and protect crony capitalists against a regulatory structure. These protectionist agreements are meant to free the corporations from the domestic political process and start a race to the bottom for standards and safeguards across the economy. But these agreements are even more than that. They are building blocks of the global power structure of the next generation. China has not been invited to join the TPP nor have the emerging economies of Brazil, Russia and India. And for good reason. The United States government is pushing a corporate capitalism that is very different from the state capitalism of most of the world. These agreements are meant to solidify the political power of the American corporation around the world as well as in the United States. The Obama administration, like the Bush administration before it, is completely committed to these corporate goals. They expect to use the "fast-track" congressional approval procedure where the Congress can only vote yes or no and has do so in a limited time frame. These money-oriented agreements are part of the war on the middle-class. They are supported by the Wall Street internationalists and opposed by practically everyone else, from the tea party on the right to the unions and occupy Wall Street on the left. Here's a chance for working Americans to come together and take their country back from the banks and corporations.

The Path to Corporate Globalism

If you don't know what the TPP and the TTIP are, you can be forgiven. The governments and corporations involved don't want you to know because these international agreements they are negotiating are that good for them and that bad for you. If you liked NAFTA, you'll love the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). The TPP is to the Far East what the TTIP is to Europe. These are the latest in a history of trade agreements that began in the 1930s and became institutionalized in the GATT in the postwar period. This time is different. The agreements are now being expanded to cover domestic policy as well as trade goods. They are regional rather than global like the GATT and WTO and they are set up to be controlled by and for the corporations of the world. It works like this. A foreign corporation wants to sell a product or service in the United States but US laws tax, control or otherwise impede the sale or nature of that product for safety, health, environmental or other reasons. If a foreign entity does not agree on the impact or need for such laws, that corporation can sue the US or state government for the profits it would have made had that regulation not existed. The case is then adjudicated before a three-lawyer tribunal set up by the corporations. Over $3 billion of your taxes have already been paid and $14 billion in claims are pending under NAFTA and CAFTA. What that does is truly stunning. A foreign corporation has more legal rights to sue the government than you do. Tribunals made up of corporate representatives can determine how our environmental, safety, health and other regulations will be enforced. The pharmaceutical, energy and food industries will be able to influence the impact of patents, pollution and labeling. Wall Street will be able to diminish the effect of reregulation and Dodd-Frank reforms. Corporate lobbyist/advisors, 600 of them, have access to the evolving texts of these agreements. The Congress, journalists and the general public do not. There is nothing "free trade" about these agreements. They are intended to restrict trade to ensure the profits of corporations, maintain the income of doctors and other professionals and protect crony capitalists against a regulatory structure. These protectionist agreements are meant to free the corporations from the domestic political process and start a race to the bottom for standards and safeguards across the economy. But these agreements are much more than that. They are building blocks of the global power structure of the next generation. China has not been invited to join the TPP nor have the emerging economies of Brazil, Russia and India. And for good reason. The United States government is pushing a corporate capitalism that is very different from the state capitalism of much of the world. These agreements are meant to solidify the imperial power of the American corporation around the world as well as in the United States. The Obama administration, like the Bush administration before it, is completely committed to these corporate goals. They expect to use the "fast-track" congressional approval procedure where the Congress can only vote yes or no and has do so in a limited time frame. These money-oriented agreements are part of the war on the middle-class. They are supported by the Wall Street internationalists and opposed by practically everyone else, from the tea party on the right to the unions and occupy Wall Street on the left. Here's a chance for working Americans to come together and take their country back from the banks and corporations.

The Shutdown: What Does It Mean?

What was that all about in Washington these past three weeks? Actually, not very much. On the surface the Tea Party forced the Republicans to impose a partial government shutdown in a losing confrontation with Pres. Obama. This was supposedly an attempt to defund the Affordable Care Act or defund the government in general. Of course, the shutdown had nothing to do with either of those issues. Something more primal was going on. And that is worth examining. In the simplest terms, this confrontation is merely the latest reflection of the very old division within the coalition that is the Republican Party. The Tea Party faction is made up of the dedicated conservatives who want small government in order to protect personal freedom. The opposing faction, the traditional Republicans, is the American business community which shares the desire for small government to profit from less regulation and lower taxes. This division is a well-known part of Republican history. It is Taft versus Dewey, Goldwater versus Rockefeller, Reagan versus Ford and, most recently, Rand versus Romney. It is the business community versus the supply-side theorists, the country club conservatives versus the social conservatives. In this latest dust up it was Sen. Ted Cruz versus Speaker John Boehner – the ideologue versus the pragmatist. This division is permanent. It will show up again in the presidential election of 2016. The Cruz-Tea Party wing of the Republicans are quite ready to be extreme and disruptive. After all, it was Goldwater who said: "Extremism in the defense of liberty is no vice. And moderation in the pursuit of justice is no virtue." And another member of that faction, Gov. Perry of Texas, once said "Maybe it's time to have some provocative language in this country," after he called Social Security a "Ponzi" scheme and "monstrous lie." So if we sometimes hear extreme language or have to put up with extreme behavior, we should expect it. It's in their DNA. In a second explanation, the Tea Party really does believe that Obamacare is a giant step toward socialism and the end of American democratic capitalism. The attempt to defund Obamacare is just one more step in their ongoing program to reverse government regulation, the power of unions, and the whole the New Deal. The Tea Party sees Obamacare as an obvious attempt to buy votes with programs that support minorities and people of color, not the poor. The Tea Party is ideological, that is, value-driven. They do what they have to do and if that costs them elections, safe seats or perceptions of stupidity, so be it. On the other hand, the Democrats and Pres. Obama are seen as the big winners in this shutdown crisis. Well, not as much as you would think. The entire encounter was framed in terms of Tea Party or Republican goals. Pres. Obama was never negotiating for gains but merely to hold on to what he had. The president purports to have an agenda: a farm bill, immigration and a budget deal but none of these ever came up. The rescinding of the sequestration cuts in federal spending were never on the table either. The budget discussion is again part of the Republican move to starve the federal government. It is their agenda. The sequestration includes automatic spending cuts of $1.1 trillion over approximately 8 years. To anyone with any respect for economic theory, this is idiotic. It is the European austerity program that has been such a complete failure there and that promises to maintain a slow economy here. The CBO estimates that the sequestration cuts will reduce US economic growth from 2.0% to 1.4% and cost 750,000 jobs. And this is the "important work" for which Obama wants "willing partners!" Finally, we should look at the whole political picture, particularly as it is playing out in the state governments. At that level, the Republicans are very strong. Traditionally, advocates of programs that lost in Washington, turn to the states. That is what both parties are now doing in the face of Washington gridlock . The Democrats have been successful at the state level on gay marriage, green chemicals, legalization of marijuana, climate change and genetically modified food. But Republicans who control many more state governments are winning in the states what they can't get in Washington. These include issues that serve both the Tea Party and business factions: attacks on voter rights, on universal healthcare, on union rights, on education, on women's right to choose and immigration. Reports of the death of the Republican Party are greatly exaggerated. The Republican Party has an established institutionalized base in the states. It can afford to lose big battles in Washington if it can maintain that state level base. So don't write off the Republicans. They came out of this shutdown better than anyone is willing to admit.

Political Bubbles

What a confused mess. We're not yet out of an economic crisis and already we're stumbling headlong into political crisis. Political and economic crises go hand-in-hand, with much the same causes, the same paths of destruction and similar cures. The cure for an economic crisis is the injection of money. The cure for a political crisis is the injection of faith and trust. We can create money; finding faith and trust among our politicians is going to be a little harder. Crises have their beginning when people systematically overvalue some bundle of assets. We call that a bubble. People think they are richer or more powerful than they actually are. Homeowners start using their houses as an ATM; politicians start working on their legacy. Then something like rising home foreclosures or an unexpected lost election exposes the underlying lack of value. The market reacts, the bubble bursts and we have a crisis. Markets freeze up because no one knows the value of goods and services, physical assets or financial instruments. Or, in a political crisis, the government shuts down. Bursting bubbles usually come as a surprise. President George Bush was going to spend the political capital he earned from winning the Iraq war and his reelection to privatize Social Security. His bubble was like your overvalued house in 2005. Pres. Barack Obama and the Democratic Party won big in 2008, taking both houses of Congress, the presidency and looking to appoint Supreme Court justices. President Obama obviously thought, much like President Bush, that he had a wealth of political capital to spend. In the battle for the Affordable Care Act and the next election, he learned that he did not. It was the political bankruptcy of the national Republican Party that allowed the election to the presidency of this young, untried African-American. Unfortunately, for recent presidents and for all of us, political capital has been evaporating out of our system for some time, maybe as far back as president Richard Nixon. The bubble nature of our politics has been growing over that length of time. The political debacle that was Speaker Newt Gingrich and the impeachment of Pres. Clinton exposed that overall political weakness. No one at the time saw that it was a systemic lack of faith and trust. The terrorist attacks of 9/11, Iraqi and Afghan wars and the economic crisis masked only for a while the political bankruptcy that engulfed the presidency and all of government under George Bush. Now, every time Pres. Obama tries to use his political capital, it isn't there. The pundits then proclaim he is presiding over a damaged, ineffective presidency. The problem is not his presidency, it's the lack of power in the system. The bubble is government-wide and Congress likewise is bankrupt. Just as stagnant wages, a sharp increase in personal and government debt, the housing bubble and Lehman Brothers bankruptcy preceded the full-blown financial crisis, so the present political chaos shows the same kind of buildup to crisis, political bankruptcy and government shutdown. At first the Congress could not pass a budget and now it can't pass any law. Attorney General Holder can't jail felonious bankers. The SEC can't prosecute blatant fraud. The Federal Trade Commission can't enforce the antitrust laws. No one can curtail the president's use of military force abroad in drone warfare and kidnappings. Nor can they control his extralegal surveillance systems at home. The lack of political capital is now obvious. Our present crises with the shutdown of the government, the perverse cut in spending called the sequester, the startup of the Affordable Care Act, the meaningless debt ceiling and possible dollar default are not real economic problems. Our economy is productive enough to handle any and all of them. They are political problems conjured up only because politicians do not have enough faith and trust in themselves or the electorate. In a political crises, the electorate needs an injection of faith and trust from someone they can believe in. We need a charismatic leader even when this is where demagogues and dictators can sneak in. And don't tell me it can't happen here. It can. Men like Sen. Ted Cruz or Gov. Rick Perry, to pick on mouthy Texans, both when they are patriots and when they are plotters, seldom accept that their power is limited. Nor can they identify with the common man. Sen. Schumer of New York, to add a Democrat, is the same stripe, all bought and paid for. Give me a quiet sincere man like Sen. Richard Durbin or a determined woman like Sen. Elizabeth Warren or Sen. Olympia Snowe. These are people neither supported by nor addicted to money, ideology or power. They become fewer and fewer. When we have no faith in our government, little political capital remains in the system. The convergence of the bubbles we worry about – the shutdown, debt and deficit, possible default – promise an ongoing crisis. They also show how little time is left before the people start looking for a "strong man."

The Rules Changed; The Middle Class Lost

Something is wrong with the American economy. For over five long years of recovery,  we have maintained an unemployment rate greater than 7%, or 15% to 20% if you count the part-timers and discouraged workers. This is not all that's wrong but all that is wrong is rigged to hurt the middle classes.

On the surface, the economic statistics describe a prosperous economy. GDP is growing at 2% per year. Inflation is under control at 1.5% per year. The stock market indexes and corporate profits, savings and investment are at record levels. CEO pay is as high as it has ever been and even the housing industry is recovering. In fact, the finance, insurance and real estate industry, which brought us to crisis in 2008, is again the dominant sector.

To understand what is wrong with our economy, you have to explain why the middle-class is in a state of near collapse, why employment has fallen when the economy is recovering and why wages went stagnant for 30 years when productivity was rising constantly. Then you must integrate that explanation with the housing bubble, Great Recession and financial crisis.

The commonly accused culprits – globalization, technology and demographics – simply cannot account for the salient facts. They do not explain adequately why wages delinked from productivity nor why the economy went through the boom, bubble and bust. Somehow, economists have to find a way to link falling employment and wages with a cycle of deregulation and financial takeover of the economy.

Surprisingly, that is not as difficult as it might seem. Mostly, people just don't want to hear about the exercise of economic and political power, the ability of one group to change the rules in its favor.

Our economy is a set of rules that we call capitalism. It is the body of laws that we have agreed to under our Constitution. There is no normal or natural set of rules. There is only what the people in each economy agree on. Each set of rules and each change in the rules, benefits someone and costs others. Think of things as basic as the protection of private property or as detailed as the US commercial code..

The 1960s and early 70s saw important exogenous changes in politics and technology. The rules had to be adapted to a new set of facts. So, beginning in the late 1970s, America began to rewrite its economic rules. We called it deregulation but it might better be called financialization. Finance took over our economy. Transportation and banking were first but then this re-regulation in favor of finance spread across the whole economy.

The changes we made in the micro and macro economic rules are still bothering us. They brought about a vast redistribution of income and assets beneficial to the finance, insurance and real estate industries at the expense of the working classes. Our present political gridlock arises from the fact that the losers have not yet accepted this new order.

And for good reason. Most of these rule changes were cost;y: removal of interest rate ceilings; the relationship between investment and commercial banks, the refusal to study much less regulate trade in derivatives; globalization of manufacturing; pressure on wages; privatization of risk as in medical care, pensions and education; trade agreements; the war on unions; the lack of antitrust enforcement; and the demand for lower taxes which led to the costly privatization of public services. The attack on Social Security and Medicare are the next step in this rule changing process.

The consequent drop in middle-class income explains the macro boom and bust. Workers maintained their standard of living, first, by putting women to paid work. Labor force participation by women increased from 46 percent in 1975 to 57 percent in 2012. Then began the great debt-fueled boom as workers maxed out their credit cards. Credit card debt rose from $204 billion in 1975 to $2.7 trillion in 2012. Finally, workers refinanced or second-mortgaged the bubble value of their home and used it as an ATM. This "payday loan" type society could not and did not last.

The debt burden finally became too much. When the middle class could no longer pay the interest to keep the economy afloat, this fraudulent and criminal system came crashing down. All those liar and ninja loans which were so profitable to the financial sector were paid off, not to make  the workers whole, but to bailout the banks.

The rules have been rigged. The so-called financial markets have become a riverboat casino kept afloat by the Federal Reserve's quantitative easing. They are the means by which the already very rich financial sector siphons off huge amounts of money without adding anything to the economy.

Where do we go from here? We have to change the rules to ensure that middle-class jobs and wages will enrich the real economy and will return the wealth to those who, with their work, created it.

"Jobs Component Lost from historic 1963 March

I was was there on the mall on Aug. 28, 1963, just 150 yards from where Martin Luther King Jr. delivered his "I Have a Dream" speech.
It was the high point of the 1963 Washington Civil Rights March and the public acceptance of the civil rights movement itself. The full name of the event was the "March on Washington for Jobs and Freedom." And therein lies a problem: the insertion of that word "jobs."
The march marked the high point of the civil rights movement. Dr. King knew he had officially won the segregation/discrimination battle because the Kennedy Administration was sponsoring civil rights legislation. The sit-ins in 1960, the freedom riders in 1961 and the Birmingham confrontations in 1963 crescendoed to the march and eventually legislation. Congress did pass the Civil Rights Act of 1964 and the Voting Rights Act of 1965 setting up the end of legal segregation. With the insertion of the word "jobs," Dr. King was pivoting from social and race issues to economic justice and Vietnam.
The planning for the march took place with suspicions and tensions very high - for all the wrong reasons. The people with money feared, with some justification, that the Civil Rights Movement would carry over its confrontation and civil disobedience to issues that actually involved money. The unions had, in fact, joined the march, and the militant, black nationalist Malcolm X was cooperating. But so was the Kennedy Administration and the major religions and civic organizations.

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The movement had become almost respectable. The mood at the march was excitement over shared purpose and accomplishment. It was a happy and excited crowd, much like the first Obama Inauguration. I was there, too. The security forces, 6,000 police officers and 20,000 military, mostly kept in the suburbs, were not the overpowering presence of fences, SWAT teams and armored vehicles that we see the police using today for even minor gatherings like Occupy Wall Street and Zuccotti Park.
The speech was originally titled "Normalcy, Never Again" and through the first half Dr. King stuck with that theme, demanding that America make good on the economic promissory note that is the Declaration of Independence and the U.S. Constitution. Dr. King was making the point that without the security of a job, freedom was meaningless.
Halfway through the speech, Mahalia Jackson cried out: "Tell them about the dream, Martin!" It is not unusual in black churches for the congregation to vocally lead the minister in the development of an evolving sermon. Dr. King picked up on the dream meme, something that he felt strongly about and had used frequently. The rest of the speech was extemporaneous and defiant: "I have a dream!" That call then became the iconic battle cry that marks the day, the speech and the man.
Unfortunately, economic justice was lost in the excitement of the moment when that was what the march was supposed to be all about. The march was hijacked by those who actually opposed economic justice and supported the Vietnam war. They could accept civil rights but not economic rights. They still can't. The march remains unfinished.
In 1963, the inclusion of the word jobs in the title of the march was very scary to those people who lend money and control investment. Their fear was made official by the FBI which wrote, commenting on the speech, that Dr. King was "the most dangerous Negro of the future in this nation from the standpoint of communism, the Negro and national security." Then began in anti-King program of surveillance, intimidation and smear by the FBI.
Now, 50 years later, the jobs problem remains with us, more pressing even than it was in 1963. Things have gotten worse not better. For 20 million people with no jobs or part-time jobs, freedom is a hollow promise. The black unemployment rate remains twice the national average, and the national average is twice what it was in 1963. A recent Pew Research study shows little if any closure of the black-white economic and political gap.
But the jobs problem is shrugged off. We have a second jobless recovery but no one seems worried. The Federal Reserve is considering going back to prioritizing inflation over unemployment.
The official 50-year commemoration at the Lincoln Memorial is titled "Let Freedom Ring Commemoration." The organizers of the "commemoration" are those people not interested in jobs or economic security. There is no call for jobs that I can find in any of the official statements. There is no condemnation of the widespread attack on voting rights. Scanning the schedule of events, I could find only two mentions of jobs and freedom. One at the Poverty Institute of the Southern Christian Leadership Conference and the other Al Sharpton's National Action Network.
The March on Washington for Jobs and Freedom built on years of bloodshed, suffering and guts. Every generation has to learn over again the hard lesson that power responds only to demands backed up by people willing to put themselves on the line. Those people are in short supply.

Economists Fighting

Economists have at last noticed that there is something wrong with their science and they are beginning to fight about it. A new group of economists has emerged to tell a story that counters the version of the financial crisis of 2007-8 that is typically presented by mainstream economists.

The problem within economics is not trivial but neither is it complicated. It comes down to faith in the power of markets. Orthodox neoclassical economists believe in the efficiency of markets and the inefficiency of government. Their opponents in this confrontation, Keynesians of one sort or another, claim that pervasive market failure can only be remedied through the regulatory power of government.

In the workaday world, the market economists have successfully marginalized anyone who opposes them. You bow before the God of markets or you do not get a job in academic economics.

The people who are presently challenging the entrenched market economists, principally Paul Krugman and Joseph Stiglitz, are themselves Nobel Laureate economists. They and the other leaders of this group have all of the honors, awards and credentials necessary to be taken seriously. They are supported and cheered on by a following of heterodox economists who occupy the fringe and range from the merely disgruntled to radical leftists.

The dispute around the 2007-8 crisis arose from the American choice of stimulus versus the IMF and European Union choice of austerity as their response to the present economic slowdown and crisis. For the mainstream economists, the appropriate policy in a recession is to put up with unemployment because it lowers wages and to pay off debts because it will keep the interest rate low and thereby avoid inflation. These choices are expected to generate confidence and job creating investment.

Keynesian economists, on the other hand, note that recessions by their nature reflect inadequate demand so that austerity, i.e.unemployment, lower wages, and paying off of debts, just makes the lack of aggregate demand even worse. A generous government social safety net and deficit spending is expected to restart the benevolent cycle that rebuilds the economy.

Mainstream austerity economists base their policy recommendations on a widely cited study by Ken Rogoff and Carmen Reinhart that found high debt associated with low growth, paired with a sharp drop in growth when the debt-to-GDP ratio went past 90 percent.

An independent group of heterodox economists reviewing the Rogoff study found statistical errors, confusion about the direction of causation and generally sloppy research in a non-reviewed journal. Rogoff and Reinhart vigorously defended the findings in their paper. They admitted the statistical errors but treated them as trivial and easily cleaned up. They fudged the causation discussion. Krugman and Stiglitz entered the fray to note how these flaws undermined the austerity theory. Rogoff accused them of uncivil behavior. Others, from both sides, jumped in and the battle was joined.

Rogoff and Stiglitz have a history of less than civil discourse on this topic. Insults are being carefully crafted and accusations are getting personal.

This is the first serious challenge to mainstream economics since Keynes. It came to notoriety based on the failures of the IMF and US austerity policies in dealing with recent financial crises. In 1995, the U.S. Treasury bailed out US banks in Mexico but not Mexican banks. Austerity devastated the Mexican economy. The IMF austerity program for Asia in 1997 undermined the finances of strong, well-managed economies. In the wake of these failures, the IMF is reconsidering its position.

This confrontation will hopefully change the nature of economics. Economics has pretended, since the 19th century, to eschew politics, claiming a mathematics-based neutrality. Paul Krugman has now changed all that, injecting a political model into the discussion. Krugman cited a Polish leftist, Michal Kalecki, on how the wealthy would use a demand for confidence to maintain their political agenda. In the 1930s, Kalecki predicted exactly what is happening now.

Economics, through this confrontation, are pointing out the failures oftheir science. In macro, mainstream economists have never explained why they failed to predict the biggest downturn since the Great Depression. Nor do they seem to think any explanation is necessary. The onset of the financial crisis had Treasury Secretary Paulson and Fed Chairman Bernanke picking a $700 billion stimulus number out of the air and improvising after that. Even today, Fed Chairman Ben Bernanke is making it up as he goes along with his quantitative easing.

Micro is just as bad. Maximization of profit is the bedrock of the theory of the firm but the corporate version, maximizing quarterly stockholder wealth, has been called the "dumbest idea ever." The attempt by America to impose its corporate structure on the world is being seriously challenged by the somewhat/maybe socialist/communist economic structure of China.

All of this boils down to that same question about the efficiency of markets. Let us hope that the economists go at it vigorously and and honestly. Eventually, economists might become as useful as dentists.