Democracy and State Capitalism Exposed

This article was first published in The Irish Times and re-published by ZMagazine.

Anti-democratic nature of US capitalism is being exposed
By Noam Chomsky

THE SIMULTANEOUS unfolding of the US presidential campaign and unraveling of the financial markets presents one of those occasions where the political and economic systems starkly reveal their nature.

Passion about the campaign may not be universally shared but almost everybody can feel the anxiety from the foreclosure of a million homes, and concerns about jobs, savings and healthcare at risk.

The initial Bush proposals to deal with the crisis so reeked of totalitarianism that they were quickly modified. Under intense lobbyist pressure, they were reshaped as "a clear win for the largest institutions in the system . . . a way of dumping assets without having to fail or close", as described by James Rickards, who negotiated the federal bailout for the hedge fund Long Term Capital Management in 1998, reminding us that we are treading familiar turf.

The immediate origins of the current meltdown lie in the collapse of the housing bubble supervised by Federal Reserve chairman Alan Greenspan, which sustained the struggling economy through the Bush years by debt-based consumer spending along with borrowing from abroad. But the roots are deeper. In part they lie in the triumph of financial liberalisation in the past 30 years - that is, freeing the markets as much as possible from government regulation.

These steps predictably increased the frequency and depth of severe reversals, which now threaten to bring about the worst crisis since the Great Depression.

Also predictably, the narrow sectors that reaped enormous profits from liberalisation are calling for massive state intervention to rescue collapsing financial institutions.

Such interventionism is a regular feature of state capitalism, though the scale today is unusual. A study by international economists Winfried Ruigrok and Rob van Tulder 15 years ago found that at least 20 companies in the Fortune 100 would not have survived if they had not been saved by their respective governments, and that many of the rest gained substantially by demanding that governments "socialise their losses," as in today's taxpayer-financed bailout. Such government intervention "has been the rule rather than the exception over the past two centuries", they conclude.

In a functioning democratic society, a political campaign would address such fundamental issues, looking into root causes and cures, and proposing the means by which people suffering the consequences can take effective control.

The financial market "underprices risk" and is "systematically inefficient", as economists John Eatwell and Lance Taylor wrote a decade ago, warning of the extreme dangers of financial liberalisation and reviewing the substantial costs already incurred - and proposing solutions, which have been ignored. One factor is failure to calculate the costs to those who do not participate in transactions. These "externalities" can be huge. Ignoring systemic risk leads to more risk-taking than would take place in an efficient economy, even by the narrowest measures.

The task of financial institutions is to take risks and, if well-managed, to ensure that potential losses to themselves will be covered. The emphasis is on "to themselves". Under state capitalist rules, it is not their business to consider the cost to others - the "externalities" of decent survival - if their practices lead to financial crisis, as they regularly do.

Financial liberalization has effects well beyond the economy. It has long been understood that it is a powerful weapon against democracy. Free capital movement creates what some have called a "virtual parliament" of investors and lenders, who closely monitor government programs and "vote" against them if they are considered irrational: for the benefit of people, rather than concentrated private power.

Investors and lenders can "vote" by capital flight, attacks on currencies and other devices offered by financial liberalization. That is one reason why the Bretton Woods system established by the United States and Britain after the second World War instituted capital controls and regulated currencies.*

The Great Depression and the war had aroused powerful radical democratic currents, ranging from the anti-fascist resistance to working class organization. These pressures made it necessary to permit social democratic policies. The Bretton Woods system was designed in part to create a space for government action responding to public will - for some measure of democracy.

John Maynard Keynes, the British negotiator, considered the most important achievement of Bretton Woods to be the establishment of the right of governments to restrict capital movement.

In dramatic contrast, in the neoliberal phase after the breakdown of the Bretton Woods system in the 1970s, the US treasury now regards free capital mobility as a "fundamental right", unlike such alleged "rights" as those guaranteed by the Universal Declaration of Human Rights: health, education, decent employment, security and other rights that the Reagan and Bush administrations have dismissed as "letters to Santa Claus", "preposterous", mere "myths".

In earlier years, the public had not been much of a problem. The reasons are reviewed by Barry Eichengreen in his standard scholarly history of the international monetary system. He explains that in the 19th century, governments had not yet been "politicized by universal male suffrage and the rise of trade unionism and parliamentary labor parties". Therefore, the severe costs imposed by the virtual parliament could be transferred to the general population.

But with the radicalization of the general public during the Great Depression and the anti-fascist war, that luxury was no longer available to private power and wealth. Hence in the Bretton Woods system, "limits on capital mobility substituted for limits on democracy as a source of insulation from market pressures".

The obvious corollary is that after the dismantling of the postwar system, democracy is restricted. It has therefore become necessary to control and marginalize the public in some fashion, processes particularly evident in the more business-run societies like the United States. The management of electoral extravaganzas by the public relations industry is one illustration.

"Politics is the shadow cast on society by big business," concluded America's leading 20th century social philosopher John Dewey, and will remain so as long as power resides in "business for private profit through private control of banking, land, industry, reinforced by command of the press, press agents and other means of publicity and propaganda".

The United States effectively has a one-party system, the business party, with two factions, Republicans and Democrats. There are differences between them. In his study Unequal Democracy: The Political Economy of the New Gilded Age, Larry Bartels shows that during the past six decades "real incomes of middle-class families have grown twice as fast under Democrats as they have under Republicans, while the real incomes of working-poor families have grown six times as fast under Democrats as they have under Republicans".

Differences can be detected in the current election as well. Voters should consider them, but without illusions about the political parties, and with the recognition that consistently over the centuries, progressive legislation and social welfare have been won by popular struggles, not gifts from above.

Those struggles follow a cycle of success and setback. They must be waged every day, not just once every four years, always with the goal of creating a genuinely responsive democratic society, from the voting booth to the workplace.

* The Bretton Woods system of global financial management was created by 730 delegates from all 44 Allied Second World War nations who attended a UN-hosted Monetary and Financial Conference at the Mount Washington Hotel in Bretton Woods in New Hampshire in 1944.

Bretton Woods, which collapsed in 1971, was the system of rules, institutions, and procedures that regulated the international monetary system, under which were set up the International Bank for Reconstruction and Development (IBRD) (now one of five institutions in the World Bank Group) and the International Monetary Fund (IMF), which came into effect in 1945.

The chief feature of Bretton Woods was an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value.

The system collapsed when the US suspended convertibility from dollars to gold. This created the unique situation whereby the US dollar became the "reserve currency" for the other countries within Bretton Woods.

Christmas & The Economy

Washington Post Headline, October 9, 2008
Make-or-Break Holiday Season Looms Large
Each day of financial tumult is bringing more pressure to bear on the nation's retailers -- and time is growing short.

Perhaps, Gov. Sarah Palin might wish to address how she feels about end-of-year retail profits being determined by how much people spend on gifts to celebrate the birth of Jesus that she, and others, are so greatfully born-in-again in their desire for life hereafter.

Bail-Out Mortgage Holders?

This following article is from a contributor to Portside - http://www.portside.org/. To Blakley's suggestions, I add that Congress should also consider giving a tax break for those who rent. This would enable them to save for a down-payment to purchase in future.

From Sandra Blakely

Re: Wall Street Bailout

If anyone was watching The View the other day, Whoopi Goldberg made an interesting suggestion. As I heard it, she said that Wall Street may or may not need to be bailed out, but if they are, than every American with a mortgage should have their mortgage cut in half. The audience was ecstatic, and so was I. I wouldn't be
trying to sell my house if I received a government bailout. As a single women, this economy is killing me, and single women homeowners are being adversely hit
in this vile market.

Whistleblower Tried to Prevent Iraq War

The Whistleblowers of the world need our support. And, for any of you contemplating blowing the whistle on government or corporate fraud, malfeasance and illegal activities, before doing so please contact Government Accountability Project: http://www.whistleblower.org/. The following article was originally posted on http://www.truthout.org/

Story of the Whistleblower Who Tried to Prevent the Iraq War
Thursday 25 September 2008

by: Norman Solomon, t r u t h o u t Perspective


Katharine Gun worked at the British intelligence agency when she discovered an NSA memo that she used in an attempt to stop the invasion of Iraq.

Of course, Katharine Gun was free to have a conscience, as long as it didn't interfere with her work at a British intelligence agency. To the authorities, practically speaking, a conscience was apt to be less tangible than a pixel on a computer screen. But suddenly - one routine morning, while she was scrolling through email at her desk - conscience struck. It changed Katharine Gun's life, and it changed history.

Despite the nationality of this young Englishwoman, her story is profoundly American - all the more so because it has remained largely hidden from the public in the United States. When Katharine Gun chose, at great personal risk, to reveal an illicit spying operation at the United Nations in which the US government was the senior partner, she brought out of the transatlantic shadows a special relationship that could not stand the light of day.

By then, in early 2003, the president of the United States - with dogged assists from the British prime minister following close behind - had long since become transparently determined to launch an invasion of Iraq. Gun's moral concerns were not unusual; she shared, with countless other Brits and Americans, strong opposition to the impending launch of war. Yet, thanks to a simple and intricate twist of fate, she abruptly found herself in a rare position to throw a roadblock in the way of the political march to war from Washington and London. Far more extraordinary, though, was her decision to put herself in serious jeopardy on behalf of revealing salient truths to the world.

We might envy such an opportunity, and admire such courage on behalf of principle. But there are good, or at least understandable, reasons so few whistleblowers emerge from institutions that need conformity and silence to lay flagstones on the path to war. Those reasons have to do with matters of personal safety, financial security, legal jeopardy, social cohesion and default positions of obedience. They help to explain why and how people go along to get along with the warfare state even when it flagrantly rests on foundations of falsehoods.

The emailed memorandum from the US National Security Agency (NSA) that jarred Katharine Gun that fateful morning was dated less than two months before the invasion of Iraq that was to result in thousands of deaths among the occupying troops and hundreds of thousands more among Iraqi people. We're told that this is a cynical era, but there was nothing cynical about Katharine Gun's response to the memo that appeared without warning on her desktop. Reasons to shrug it off were plentiful, in keeping with bottomless rationales for prudent inaction. The basis for moral engagement and commensurate action was singular.

The import of the NSA memo was such that it shook the government of Tony Blair and caused uproars on several continents. But for the media in the United States, it was a minor story. For The New York Times, it was no story at all.

At last, a new book tells this story. "The Spy Who Tried to Stop a War" packs a powerful wallop. To understand in personal, political and historic terms - what Katharine Gun did, how the British and American governments responded, and what the US news media did and did not report - is to gain a clear-eyed picture of a military-industrial-media complex that plunged ahead with the invasion of Iraq shortly after her brave action of conscience. That complex continues to promote what Martin Luther King Jr. called "the madness of militarism."

In a time when political players and widely esteemed journalists are pleased to posture with affects of great sophistication, Katharine Gun's response was disarmingly simple. She activated her conscience when clear evidence came into her hands that war - not diplomacy seeking to prevent it - headed the priorities list of top leaders at both 1600 Pennsylvania Avenue and 10 Downing Street. "At the time," she recalled, "all I could think about was that I knew they were trying really hard to legitimize an invasion, and they were willing to use this new intelligence to twist arms, perhaps blackmail delegates, so they could tell the world they had achieved a consensus for war."

She and her colleagues at the Government Communications Headquarters were, as she later put it, "being asked to participate in an illegal process with the ultimate aim of achieving an invasion in violation of international law."

The authors of "The Spy Who Tried to Stop a War," Marcia and Thomas Mitchell, describe the scenario this way: "Twisting the arms of the recalcitrant [UN Security Council] representatives in order to win approval for a new resolution could supply the universally acceptable rationale." After Katharine Gun discovered what was afoot, "she attempted to stop a war by destroying its potential trigger mechanism, the required second resolution that would make war legal."

Instead of mere accusation, the NSA memo provided substantiation. That fact explains why US intelligence agencies firmly stonewalled in response to media inquiries - and it may also help to explain why the US news media gave the story notably short shrift. To a significant degree, the scoop did not reverberate inside the American media echo chamber because it was too sharply telling to blend into the dominant orchestrated themes.

While supplying the ostensible first draft of history, US media filtered out vital information that could refute the claims of Washington's exalted war planners. "Journalists, too many of them - some quite explicitly - have said that they see their mission as helping the war effort," an American media critic warned during the lead-up to the invasion of Iraq. "And if you define your mission that way, you'll end up suppressing news that might be important, accurate, but maybe isn't helpful to the war effort."

Jeff Cohen (a friend and colleague of mine) spoke those words before the story uncorked by Katharine Gun's leak splashed across British front pages and then scarcely dribbled into American media. He uttered them on the MSNBC television program hosted by Phil Donahue, where he worked as a producer and occasional on-air analyst. Donahue's prime time show was canceled by NBC management three weeks before the invasion - as it happened, on almost the same day that the revelation of the NSA memo became such a big media story in the United Kingdom and such a carefully bypassed one in the United States.

Soon, a leaked NBC memo confirmed suspicions that the network had pulled the plug on Donahue's show in order to obstruct views and information that would go against the rush to war. The network memo said that the Donahue program would present a "difficult public face for NBC in a time of war." And: "He seems to delight in presenting guests who are antiwar, anti-Bush and skeptical of the administration's motives." Cancellation of the show averted the danger that it could become "a home for the liberal antiwar agenda at the same time that our competitors are waving the flag at every opportunity."

Overall, to the editors of American mass media, the actions and revelations of Katharine Gun merited little or no reporting - especially when they mattered most. My search of the comprehensive LexisNexis database found that for nearly three months after her name was first reported in the British media, US news stories mentioning her scarcely existed.

When the prosecution of Katharine Gun finally concluded its journey through the British court system, the authors note, a surge of American news reports on the closing case "had people wondering why they hadn't heard about the NSA spy operation at the beginning." This book includes an account of journalistic evasion that is a grim counterpoint to the story of conscience and courage that just might inspire us to activate more of our own.

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This article was adapted from Norman Solomon's foreword to the new book by Marcia and Thomas Mitchell, "The Spy Who Tried to Stop a War: Katharine Gun and the Secret Plot to Sanction the Iraq Invasion

Open Letter to Hon. Sarah Palin

The following letter was posted by registered airmail and sent via E-mail on 20 September 2008.


Dear Governor Palin:


I strongly support your right to not use birth control, to oppose sex education for your children, to carry a Down Syndrome embryo to term, and to have a career while raising a family. I do this as a founding mother of the current feminist movement, a mother of two, grandmother of four, great-grandmother of one.

In support of our U.S. Constitution and Bill of Rights, which grant citizens the legal means to debate and resolve fundamental disagreement within the Rule of Law, I defend your legitimate right to seek repeal or amendment of current laws and to enact new ones that would change the status quo—a status quo that once:

• Denied women the right to vote;
• Denied women access to education;
• Prohibited both men and women from access to birth control measures that would prevent unwanted pregnancies;
• Gave women no choice over whether to carry an embryo to term, even in cases of incest or rape;
• Failed to hold men accountable for children they fathered;
• Destroyed or tainted the reputation of a woman who had sex outside of marriage, but not the reputation of her male partner;
• Prohibited legal sanction of marriage between people of different races;
• Banned teaching of Darwinian evolution in elementary schools;
• Blocked civil service employment and most civil rights to homosexuals and lesbians; and
• Banned from public libraries books disapproved of by pressure groups.

Governor Palin, it is my understanding that YOU seek, or have sought, to:

• Prohibit sex education being taught in schools;
• Repeal laws that allow women the right to use birth control, including the “morning-after” pill, even in cases of incest or rape;
• Ban from public libraries books that do not conform to your religious and/or political beliefs;
• Seek to have Creationism taught alongside Darwinism in public schools.

If I have misunderstood your positions on the above, please correct me. Also, please inform me of your position regarding:

• Enforcement of equal pay to women for equal work?
• Provision of social and economic support for unwed or single mothers?
• Establishment of affordable and freely accessible child care?
• Enactment of legislation to ensure maximum Social Security retirement benefits for women who are stay-at-home mothers?
• Rigorous enforcement of a man’s responsibility to provide monetary support for any and all children he fathers?
• Provision of universal health care, including maternity care, for all U.S. citizens?
• Strengthening and expansion of public education?
• Free or low-cost tuition for higher education?
• Re-institution of inheritance taxes (currently mislabeled as “death taxes”)?
• Provision to renters of the same State and Federal tax write-offs now given to home-buyers, thus enabling renters to save down payments for homes?
• Banning excessive profiteering by manufacturers of military weapons?
• Banning arms sales by U.S. citizens to currently proclaimed terrorist organizations?
• Blocking the sale of guns without strong background checks on potential buyers?
• Rescission of the 1999 Gramm-Leach-Bliley Financial Services Modernization Act that abolished firewall regulations which formerly governed transactions between commercial banks, insurance companies, securities firms and investment institutions?
• Citing and fining commercial and agricultural businesses that hire illegal immigrants?
• Abolition of trade agreements that permit U.S. businesses to close facilities here and re-establish them in countries where workers’ rights and wages undercut those guaranteed in the United States?
• Sanction the right of trade unions to organize workers?
• Granting overseas professionals work permits that will greatly reduce or abolish jobs for similarly qualified U.S. citizens?

I am a U.S. citizen currently residing in the Republic of Ireland. I will be voting in the November 2008 election via absentee ballot. Therefore, Governor Palin, I respectfully await your response prior to Wednesday, October 24, 2008 to enable sufficient time to return my absentee ballot.

Sincerely,
Margie Bernard