le Lézard

Class struggles.

2012-01-27T07:24:00.000-08:00

The 19^th century saw the abolition of the slave trade and, progressively, of slavery and serfdom. It also saw the rapid development of machines and the rise of the industrial entrepreneur. These two processes changed the nature of class struggles. Previously labour had been in bondage, and the opposition had been between the land owning aristocracy and the burghal artisans and merchants. Quite suddenly labour was freed and mechanisation was replacing craftsmanship. The opposition was no longer between the rural raw materials and their urban transformations, it was between the coalition of property and the propertyless, between capital and labour. At the start, the struggle was one sided, but labour organised and slowly bettered its condition. Soon seen as a threat to property, these labour movements were repressed. Free labour fought back, and the violence escalated as the military backed the police. By the turn of the century the working class was classified as dangerous and was treated accordingly. So organisations went underground and armed themselves. Robbery and murder became political acts. Then a first war, followed by a second wider one, put everyone in uniform.

Society had become bipolar, property and its mercenaries were face to face with labour, without intermediaries. It was an accident of history, a consequence of the new forms of production. Armies, however, had kept the three-rank system. Officers were born gentlemen, but corporals and sergeants were promoted on merit. Armies still had a social ladder and a middle-rank between command and execution. They had avoided the direct confrontation of high and low, with the buffers of NCOs. The total wars that engulfed first Europe then most of the Northern hemisphere had a levelling effect. Valour and virtue took precedence over wealth and lineage. Total war concentrated power, both political and economic, in the hands of governments and of their officials. After 1945 the fighting and, to a lesser degree, the production of weapons dropped in intensity. Armies demobilised but a new middleclass had been created by the turmoil. Nurses, teachers, liberal professions, engineers, government employees, the armed and security forces had run the country in war and would continue in “peace”. For the next two decades middle became the dominant ideology.

During the 1960s the middle was attacked on both sides. Civil rights and national liberation fronts (women and gays) contested the white man’s rule, and voices were raised against leviathan governments. Slowly pressured by developing nations and state privatisations, the middle-class has lost its dominant role, and its model of social mobility no longer applies. The Dream has become a déclassé nightmare. Society is sliding back to where it was a hundred years ago. But this time the face off between property and propertyless is on a global scale. Another middleclass revival through mass conscription and a war of nations is unimaginable, because of technology and America’s preponderant military power. So what will the growing violence of class struggles lead to this time? Is there some other way to reconstruct the buffer zone between capital and labour, and get the trickle of social mobility going again, or is this the last showdown, the final struggle, the synthesis of a contradiction, with liberty, equality, fraternity, and the pursuit of happiness for all humanity?

Property is possession, control and power. It owns and decides the production of goods, services and ideas, and has military might to protect it. It can choose, like Septimius Severus, to enrich the army and ignore the rest. It can, like Constantine the Great, adopt a popular movement, empty it of its social content, and use it as a totalitarian ideology. (Both have been imitated countless times). In the past, property has been destroyed and has changed hands. But after wars, conquest and financial collapses it has always rebuilt its dominion. A century and a half ago, a few dreamers claimed that property was the inheritance of labour, arguing that labour made property productive and that this was the basis of value. It seems that their logic is shared by an ever growing world community, who have nothing to lose but their debts.

Cause and effect.

2012-01-04T01:11:00.000-08:00

What could have motivated the French and British governments to obtain a Security Council vote that allowed them to use air-power against Gaddafi’s armed forces? The humanitarian aspect was the strongest argument put forward, and there was the Kosovar precedent. But Kosovo was a breakaway region of Serbia with an ethnic identity. Whereas the division of Libya was never envisaged, though ethnicity and regional oppositions were preponderant in the conflict. The overthrow of a tyrant and regime change might have been justified morally, but both were strongly denied till the end, as they were not included in the Security Council resolution. Libyan oil and gas probably played a role, though the uncertain policies of future Libyan governments and the actual consensus on keeping production down and prices up should have argued against intervention, as an embargo would have sufficed. Attacking the Libyan army with an important deployment of air power gave Cameron and Sarkosy the political statures of Commanders in Chief. It was also the opportunity to show off the effectiveness of the Tornado, the Rafale and other high-tech killing machines, all of which are commercial disasters.

Now that Gaddafi is dead and the National Revolutionary Council has taken executive control of Libya, what is the balance of all these motives? Aircraft sales have not improved, and yesterday’s comrades in arms are at loggerheads over Europe. As intensive bombing, both aerial and terrestrial, have badly damaged Libyan infrastructures, Libya will not be influencing the oil and gas markets for a while. A new government is in place, but the divisions remain, between Tripoli and Benghazi, between Arabophones and Berberophones, between the coast and the vast interior. Can these different factions unite to form a nation, and why should they? Why should the arbitrary lines drawn on maps by European diplomats decide what nations are for all eternity? Why should colonial borders continue to divide up humanity as though there was no history, obliging existing cultures and languages to disappear or amalgamate inside imposed geographical limits? Whatever may be, the only uniting factor in Libya to-day is Sunni Islam, which is practiced by almost everyone. Given its borders, Libya’s existence as a nation has been enforced by the violence of an autocrat, but it might also be possible to reach a religious consensus. Libyans may follow the path taken by Tunisia and Egypt. If they do, their joint momentum will inevitably push East and West. So, whatever their intentions, Cameron and Sarkosy will have consolidated a movement that has the potential to spread from the Atlantic to the Pacific.

The Moslem world is beginning to experiment alternatives to absolute monarchy and autocracy, just as the Christian world did four centuries ago. Then as now, this quest has a strong element of religious fundamentalism. Confronting absolutism needs strong convictions, and faith builds convictions more easily than reason, so that the fundamentalist element may be unavoidable. But European precedents (the Dutch and the English, recently the Poles) show that religious fervour is quickly secularised by the realities of government. However, the Arab Spring could be the premise of something much bigger, such as East and West coming together to produce something new. The decline of Western imperialism opens alternative paths, and syncretism is one of them.

Démagogie.

2011-12-17T05:15:00.000-08:00

Sept mois après sa parution, je viens de lire la pièce en quatre actes de Frédéric Lordon, ‘’D’un retournement l’autre.’’ La forme vaut ce qu’elle vaut – je n’ai pas la culture qui rend sensible aux alexandrins – mais le fond manque quelques éléments essentiels. La pièce met en scène la finance et la politique comme si elles seules jouaient un rôle dans le drame. Comme si les copains du Fouquet’s n’existaient plus. Comme si le foncier et l’industrie se manifestaient dans une autre dimension. Pourtant, et Frédéric Lordon ne peut pas l’ignorer, le système qui nous régit s’est institué en quatre étapes qui sont devenues indissociables. Cela a commencé avec la constitution d’un État Central légitimé par la force des armes. Puis il y a eu la propriété privée du foncier, le domaine royal et les autres. Ensuite est venue la propriété privée de l’argent, celle de l’État monnayeur et, progressivement, celle des marchands-banquiers créditeurs. Enfin, surtout depuis la révolution industrielle, il y a la propriété privée des outils de production. L'État est devenu la chose privée d’une aristocratie, et le reste en a découlé. Le président et le banquier jouent dans un quatuor avec le propriétaire foncier/immobilier et l’entrepreneur, et tous ont bénéficié de l’argent-crédit distribué. Le banquier n’a fait qu’alimenter les circuits en liquidités, au profit de tous les propriétaires qui ont vu leurs patrimoines augmenter à un rythme rarement égalé. Tous ces emprunts toxiques ont payé des loyers, des intérêts, des dividendes et des impôts. Ils ont pourvu aux revenus du capital et de l’État. Dès que le crédit accordé a dépassé le cercle des débiteurs solvables, le processus était condamné. Mais, le crédit étant devenu le carburant de la croissance consommatrice, il était impossible d’interrompre son flot. La seule alternative était (et reste) de faire comme Clisthène à Athènes, une redistribution des revenus et (comment faire autrement?) de la propriété. Mais seul un démagogue soutenu par une large majorité populaire peut envisager quelque chose d’aussi radicale.

Fin d'empire.

2011-12-14T01:46:00.000-08:00

Voila un siècle et demi que le monde tremble à l’idée d’une invraisemblable dictature prolétarienne. Tout comme l’Antiquité à l’idée d’un soulèvement des esclaves. Et, de ce fait, la dictature bourgeoise a pu perdurer, et son idéologie tyrannique s’est propagée jusqu’aux régions les plus reculées de la planète. Il n’y a pas d’alternative. Cette dictature se présente comme libérale, humaniste, républicaine et, à petite dose, démocrate. Et, quand tout va bien, sa pratique s’approche de son discours. Tant que l’argent coule à flots et que les richesses abondent, il y a un ‘‘ruissellement’’ vers les plus pauvres et de l’ascension sociale pour les classes intermédiaires. Mais, lorsque la machine à fric s’emballe puis se bloque, ce qui lui arrive périodiquement et régulièrement compte tenu de ses mécanismes, tout cela s’arrête. Alors la dictature bourgeoise dévoile son autre visage. Celui d’une aristocratie qui se cramponne à sa propriété, ses privilèges et son pouvoir, et qui est prête à mettre la Terre à feu et à sang pour que rien ne change.

La guerre déclarée en 2001 est différente des précédentes, puisqu’une seule nation possède une puissance de feu supérieure à toutes les autres nations réunies. La guerre ne peut pas se faire entre nations, elle est donc idéologique. Il n’est plus question de bombarder des nations sans discrimination. Il s’agit d’en éradiquer les éléments qui s’opposent à la tyrannie bourgeoise, et d’assurer que son idéologie domine. Les guerres du nouveau millénaire sont impériales. Dans un système soumis à une seule idéologie (sans alternative), toute déviance est hérétique et criminelle, ou pathologique. Pourtant la rébellion était archaïque et rétrograde. Elle prônait un état antérieur lointain, le califat, et des règles sociales d’un autre temps. Cela semblait être un résidu du passé qui ne tarderait pas à disparaître, un anachronisme insignifiant, mais cette apparence était trompeuse. Le mouvement s’est propagé, a pris de l’ampleur et a attaqué artisanalement avec des cutters le cœur de l’empire. Et, malgré dix ans de guerre, il continu de s’étendre et de se diversifier. Pour essayer de comprendre ce phénomène il faut remonter un quart de siècle en arrière (puis presque deux mille ans).

En 1986, l’équilibre de la terreur qui établissait les règles de la guerre froide s’effritait du côté soviétique. La guerre des étoiles de l’administration Reagan (1980-1988) avait beaucoup dépensé et creusé l’écart entre les deux grandes puissances. Et vingt années de Brejnévisme avaient interdit les échanges et accentué les retards technologiques et sociaux. Lorsque le nouveau secrétaire général Gorbatchev a annoncé la restructuration (perestroïka) et la transparence (glasnost) au XXVIIème congrès (mars ’86), il était trop tard. Le régime soviétique chancelait, mais ses tentatives de rétablissement se sont répercutées dans toute sa zone d’influence. Partout, les partis uniques appuyés sur l’armée et la police, voyant le vent tourner, s’essayaient à l’ouverture politique vers le multipartisme et les élections libres, comme le grand frère de Moscou. Enfin presque partout, l’Irak, la Syrie, la Libye, le Tunisie, l’Egypte n’avaient pas réagi, et l’Algérie s’est rétractée après les élections qui ont plébiscité le Front Islamique du Salut en 1991, l’année de l’effondrement de l’URSS.

Pendant plus de quarante ans, deux systèmes de production s’étaient affrontés dans tous les domaines, sauf la guerre totale. D’une part, un control centralisé de toute l’économie et des plans quinquennaux, de l’autre, la libre entreprise, la privatisation des profits et la socialisation des pertes. Deux avenirs s’offraient à l’humanité, avec quelques nations ‘‘non-alignées’’ qui avaient choisi beaucoup de control et une dosette de liberté. Puis, dans un lapse de temps très court, l’un des deux modèles s’est écroulé sous le poids de ses contradictions. Le futur s’est soudainement réduit à une seule perspective. Les années ’90 ont été la décennie américaine, un pouvoir sans partage et que d’occasions ratées. Champagne, caviar, cocaïne et les gâteries de Monika ont occupé les dernières années du millénaire, et occasionné la gueule de bois de 2001. Mais la grande rigolade hédoniste n’était pas au gout de tout le monde, ni à la portée de toutes les bourses. Et la seule forme d’opposition qui subsistait était une morale religieuse archaïque. Le refus de l’omnipotence américaine avait comme seul support la foi en des croyances ancestrales. Pour rejeter un futur sans alternatives, il fallait se réfugier dans le passé, et il se trouve que la religion musulmane, de part sa répartition et son histoire, s’y prêtait le mieux.

En l’an 66, Rome est au sommet de son pouvoir. La puissance de ses armées dépasse celle des autres nations réunies. Néron joue et chante sur les scènes de théâtre, il veut être un artiste. Et, dans un recoin de l’empire, la Judée entre en rébellion. Situé sur le passage terrestre entre l’Afrique et l’Asie, ce petit lopin entre la Méditerranée et le Jourdain a tout subi au cours de son histoire. Et ceux qui y vivent ont une culture et des croyances particulières auxquelles ils sont très attachés. Cette fois-ci, entrainés par la faction la plus radicale, les zélotes, c’est contre le gouvernement du procurateur romain Gessius Florus qu’ils se soulèvent. Malgré ses problèmes de politique intérieure (69 en particulier), Rome aura le dernier mot et, après un long siège, Jérusalem sera rasée en 70. Cet événement provoque l’effroi parmi les communautés juives disséminées dans toutes les villes de l’empire. Mais il confirme les pronostiques de la secte chrétienne et va la sevrer de ses racines judéennes.

La radicalité des zélotes était alimentée par leur foi (Flavius Josephus décrit ceux de Jérusalem comme de la racaille assoiffée de sang, mais à Massada il est moins sûr). La foi absolue qu’il faut pour se sacrifier dans un combat désespéré. Cette foi était celle des martyres chrétiens. Elle est réapparue à Albi avec les cathares, à Münster avec les anabaptistes, et chez les protestants des Flandres et d’Allemagne face à l’Inquisition espagnole. Puis il y a eu un changement de paradigme. Dieu est mort de solitude et d’ennui, et son paradis est devenu terrestre. L’au-delà dimensionnel est devenu temporel, et le chœur céleste s’est transformé en lendemains qui chantent. Ceux qui se sacrifiaient le faisaient pour le bonheur des générations futures, et non plus pour leur propre salut.

Conspiracy/Conspiration.

2011-12-09T07:34:00.000-08:00

Shale oil is expensive to extract, and would be much more so if the environment was respected. And, to a lesser degree, the same goes for shale gas.

In Iran and Iraq, the gas comes up by itself and the oil just needs to be pumped. Both countries could export large quantities of both products at very low prices. How convenient it is for the shale extractors that war and embargo have stopped them from doing so! And for the whole industry, whose production costs are rising everywhere.

Le pétrole de schiste est cher à extraire, et le serait beaucoup plus si l’environnement était respecté. Et, à un moindre degré, il en va de même pour le gaz de schiste.

En Iran et en Irak, le gaz remonte de lui-même et il suffit de pomper le pétrole. Les deux pays pourraient exporter de grandes quantités des deux produits à très bas prix. Comme il est commode pour les extracteurs de schiste que la guerre et l’embargo les ont empêchés de le faire ! Ainsi que pour toute la filière, dont les couts de production sont en hausse partout.

Demos & res publica.

2011-11-19T06:11:00.000-08:00

Ever since they urbanised and developed, human societies have been subjected to tyranny, to the right of might, to weapons in the hands of a few. The alternative that occasionally manifests itself is the right of law, a set of rules that applies to all, rich and poor, weak and strong. For this to happen, oral traditions are not sufficient. The process needs writing and, more specifically, the wide-spread literacy that occurs when the spoken idiom is written using a phonetic alphabet. It took place in Babylon (Hammurabi’s code, 1700BC), in Jerusalem (Josiah’s Deuteronomy, 620BC), in Athens (Draco’s laws, 620BC) and in Rome (the decemviri’s Twelve Tables, 450BC), but not in Memphis. And it began again, after a long Dark Age, thanks to printing and the ample circulation of written idioms. Universal literacy and the rule of law seem to be closely connected. To insure their application, rights, duties and prohibitions need to be written down for all to see.

The passage from memory to written archives completely transforms a society. If writing is controlled by a few, its effect is conservative and will become totalitarian. If reading and writing can be practiced by all, something else happens. Top-down information is stale, forbids initiative and ends up congealed. Whereas the criss-cross of information that occurs when everyone participates nurtures creative thinking in every domain. Information technology can be used to oppress or to liberate. It leads to dogmatic rigidity or to imaginative cacophony. The freedom to read, think and write does not necessarily accompany the means that make them possible. It depends on access and on social equality.

In one of his dialogs, the Meno, Plato has Socrates discuss with a boy who is an illiterate slave. Socrates explains how to construct a square B that has twice the surface of square A. And Plato’s purpose seems to be the demonstration that logic transcends knowledge. Plato recognised the young slave’s humanity but, in a world where slaves were the motors of society, bred and programmed for certain tasks, he never envisaged the end of slavery. This fatalism dominated imaginations until mechanical devices powered by fossil energies began replacing muscle power. Then abolition became possible and even inevitable, as land enclosures throughout Europe provoked mass migrations of very cheap labour.

When the ancients wrote of liberty and equality, they excluded women, children, slaves and foreigners, human groups who might or might not have had rights to accompany their duties. Social inequality originated in a society that resulted from raids, wars and conquests, where the defeated were condemned to bondage or death. Slavery became unnecessary when machines replaced muscle power, and when there was nowhere to escape from “working for the man”. The bond of slavery was replaced by working class wages, and not having to buy the work force allowed for capital investments in machines. The end of bondage (slavery, serfdom) pulled up and pushed down. This was most obvious in the US, where whites, disliking the idea of competing for jobs with emancipated black slaves, installed segregation to keep the two communities apart. The new class divide, which began with the industrial revolution and seems associated to it, is between capital and labour, between proprietors and workers.

Previously, freedom, property and citizenship had been synonymous, but this excluded a large part of society. Then, freedom and citizenship were extended to include almost all of society, while property was set aside as though it no longer belonged to the social sphere. Civil rights and the possibility to influence legislature by speech and ballot were disconnected from the ownership of property, creating the illusion that politics and the distribution of wealth were separate, that government and market were different autonomous entities. Ancient Athenians widened their political base by granting land and citizenship to emancipated slaves and resident foreigners – they also bailed out bankrupt farmers and changed the rules of succession to break up big property ownership – but the barrier of slavery stopped further progress. Ancient Romans did not go that far, as the patricians kept a firm hold on their vast Latium estates right through republic and empire. The plebeian voters were mostly propertyless and their tribunes did not count for much in the city’s government. Political change was only achieved by open rebellion, which led to militarism and empire. The Roman republic had a two party system, a party of wealth and a people’s party that fluctuated between corrupt compromise and civil war. Athenians divided their territory into boroughs (demes) that were part urban, part rural and part maritime. A form of gerrymandering that assembled all social activities into a political unit whose representatives were chosen by lottery. Athenians invented the word demagogue to designate someone who could lead the people, show them the way, and convince the assembly with words, as did the poet Solon and Pericles with his “Olympian” voice. Romans were just as appreciative of eloquence but their orators seldom addressed the forum and, anyway, most conflicts were settled by armed force. The legionary’s loyalty to one of the two parties would finally tip the balance, which made the legions the determinant factor in Roman politics.

Athenians had a citizen’s army, an army of conscripts who would vote on their own conscription (they only hired mercenaries when the toll of war had halved the male population). Their “boroughcracy” included all social categories into each political unit, and their representation by lottery brought everyone into the decision making process. The districts of Rome did not encourage social mingling. Plebeians and patricians kept to their own quarters. Athens had two powerful neighbours, Corinth and Sparta. Governed by tyranny and gerontocracy, they were threatened at home by the Athenian regime of debate and vote, and abroad by enterprising Athenian merchants who controlled the Aegean and the Hellespont. This led to war with intervals of inconclusive peace, to the decline of the three cities and the rise of Macedonia. The Romans were to submit their neighbours in ever widening circles, the Etruscans, the Samnites, the Greeks of Taranto, then Syracuse, Carthage and the world. Athenians enjoyed the theatre, Romans preferred the circus.

When, thanks to the printing-press, the written idiom began circulating again, when spreading literacy and egalitarian aspirations strived towards legislations applicable to all, the Athenian and Roman experiences were the main sources of inspiration. (The Bible had some influence on Protestant nations, but the Deuteronomy is a very peculiar antiquated kind of legislation, and the Gospels’ precepts are not the material constitutions are made of.) With hind sight, the Enlightenment scrutinised both systems, the aristocratic republic with its militarism and the popular democracy with its demagogues. When this theorising was applied to the practicalities of constitutional government, it produced a form of syncretism, a sterile hybrid. The elected demagogues were subjected to the aristocratic rule of a military-industrial complex. The people’s representative was an emperor…with no cloths.

The 19^th and 20^th centuries saw the literate industrial nations fluctuate between centralised production and deregulated laissez-faire, between big and small government. The propertied classes (those who own land, money, tools, patents and copy rights) rely on governments for the security of their interests at home and abroad, and for the education and health of their work force. Security is a priority, as militarism is at the heart of the system. Education and health are more optional, as too much of both threatens the class divide. However, the experience of total war during WW2 modified the balance. Mobilising and uniting the nation for a war brings demagogues to the fore, and gives them unusual powers. Total war nurtures absolute power. To conscript the nation, the leader must convince the people that their divisions no longer exist, that they are as one in the face of adversity, and that he constitutes their unity. This discourse reached its optimal signification with the standardisation of Government Issues.

At the end of the Second World War an egalitarian spirit pervaded the victorious nations. It was the equality of campaigning armies where all ranks have similar living conditions, and of the shared austerity that war imposes on civilians. This sentiment was distracted from matters of representation and wealth distribution by the welfare state. The social hierarchy of power and income mirrored the military, but even the humblest conscript was fed, dressed, housed and kept healthy. His acceptance of discipline was linked to these provisions, and so it would be when he returned to civilian life, bread, circus games and conformity. During the 20^th century, successive hot and cold wars favoured the Roman model of a permanently mobilised nation, with governments redistributing incomes to the needy and leaving property in the hands of a few. A model built around a professional army and predestined to universal empire, eschatology, decline and fall.

Twice, history has preferred a commonwealth held by a few, and has disconnected property and citizenship to avoid any real representation of the many. Twice, the military-industrial complex has prevailed, whereas the Athenian experiment in the distribution of property and political influence has always been interrupted by bellicose neighbours who did not share these egalitarian aspirations. The wars that followed imposed militarization and, whatever the outcome, the Roman model was victorious. The sword is mightier than the pen, when property is concerned. The ideal of equality concerning incomes and decision making persists however, as a humanistic utopia and, occasionally and briefly, as an alternative to the ferocious competition of market economics, party politics and national warmongering. But, beyond an intimate circle, empathy and sharing are not spontaneous sentiments, least of all among the few who have the most. And the moment of generosity – usually a youthful middle-class movement – is short and inconsequential.

Athenian democracy used the redistribution of land to increase the number of its citizens, and to reduce the dominion of the Eupatrid aristocracy, a positive discrimination that laid the bases of meritocracy. The Roman republic did not follow the same course. The Plebeian class remained dependant on patronage and public hand-outs, so that the only social ladder was the army. This led inevitably to military dictatorship and empire. The class divide can be reduced by a redistribution of property, creating a level playing field where individual merit determines social status. When it is not reduced, social tensions lead to conflict, to civil and colonial wars, and to a vast security industry, which seems the dominant trend. The republic resolves conflict by force, democracy relies on the word’s power of conviction, Robocop vs. debate and argument. The urgency of perpetual war favours the first, an open network of communications favours the second. But the distribution of wealth is really what is at stake. Will demagogues take the power to redistribute property, or will emperors be the toys of the security complex?

Simple problem, impossible solution.

2011-09-09T07:32:00.000-07:00

Value is invested, labour is added, and the product ends up consumed. Not immediately of course. There is always a lapse of time between the first investment and the final consumption. And, sometimes, invested and added value will pile up year after year for a decade or so before consumption can begin e.g. the Eurotunnel 1986-1994. Another particularity of infrastructures, real estate and land property in general, is that they receive rent for a time span that is far longer than the time needed to restitute their original cost. The practice of rent is as old as property, and the notion then extended to money and, ultimately, to all forms of investment. Income that is not consumed is paid rent.

Rent (or interest, or dividends) is a part of the value consumed, whose payments last long after the investment and added values have been restored. If the rent is consumed, it is merely a transfer of consumption from the lease holder to the renter, from the borrower to the lender, or from the employee to the share holder. If the rent income is not consumed, it is paid rent. As a consequence of this, not only is there insufficient consumption but the unconsumed incomes get larger and larger, as do the unconsumed rents. The short term solution is to grant consumers credit and mortgages. This increases their consumption for a while, but they end up paying more and more rent, which is not consumed. And, at some point, the insufficient consumption can no longer be compensated, growth stops and the investment bubble is deflated. “And the harder they come the harder they fall, one and all”.

Getting a return on the income one does not spend seems traditionally moral but, inevitably, it results in boom and bust. A phenomenon that is repetitive, and seems to adopt a variety of time spans, and sometime they all deflate together. So, is the present situation, not to mention the dreary future of stagflation, a fatal part of the human condition, something mankind will have to drag itself through knowing that two or three generations hence it will be happening all over again? Can the Protestant ethic be transgressed? Undoubtedly, private property cannot be tampered with. The subject makes people fidgety, uncomfortable, aggressive and ultimately violent. Supposing, however, that unspent incomes cannot be invested and thereby increase unspent incomes. Supposing incomes must be either spent or redistributed as taxes and wages, or simply as less rent. Could this be morally defended, by giving the wealthy the opportunity to show empathy and citizenship, and a generous compassion for others, for their cities, their nations and the whole wide world? (1)

Visibly they don’t like the idea, and then they begin to laugh. Who will invest if they don’t? Where will growth come from, if they don’t invest their savings? Who will create jobs?

The monetary creation that must accompany a growth in exchanges is essentially credit. [And, when credit overreaches itself and has to contract, quantitative easing by central banks is a puny attempt at taking up the slack by circulating more cash. However, and this may have been the intention from the start, quantitative easing has allowed governments to increase their borrowing at affordable rates of interest. In effect, governments are “printing” money to pay their expenses. How long can that last?] Credit can mediate all exchanges, investments as well as consumption. In the past credit has favoured both, but its preference goes from one to the other. Business finances are a mix of shares, bonds and credit. Sometimes incomes invested in shares and bonds predominate, sometimes credit predominates. Credit mediates transactions as well as does money, but it is not money. It is a guarantee that real money is forthcoming. And this guarantee has a price that can be exorbitant, usurious. And the only organisations that can grant credit widely and regularly are banks. Banks where everyone has an account and where money moves virtually from one to the other. This existing virtuality can be extended to include the not-money of credit, while clearing houses keep an account of transactions between accounts held in different banks.

All money is virtual but credit is more so than income, which brings up the question of property. The property rights of credit only come into play when there is a default. An entrepreneur owns his company and can expand or sell it, as long as his credit is good. A chief executive runs his company for its owners, who may sell it as a whim, or when investments have been sacrificed for dividends that went elsewhere, and the company is obsolete. Credit has another advantage: as monetary creation it should be a social service, subject to public scrutiny and provided at cost price. Credit should be granted to new and expanding businesses, thereby increasing employment and consumer demand. However, credit’s evanescence means it is granted briefly and must be renewed frequently, and can be interrupted at short notice, which leads back to the nature of credit and its ownership. Can a bank own something it does not possess? (2) And why claim back monetary creation that is in circulation, if not to demand more remuneration. The new money is in the system fuelling growth. The investment is transferring its value to production and is getting it back, ready to be invested anew. Let the credit be owned by the company and become part of its capital. But then, who owns the company? Should it be the prime mover, that individual who got things started, who had the idea and put it into practice. No doubt that person should be privileged, but very few enterprises can be undertaken by a lone individual. From the outset other people will be concerned and active. Why is it that their share of ownership seems so preposterous? An ownership that cannot be sold, as there are no more unspent incomes. Its function would be to choose investment strategies and decide who earns what.

By now they are hilarious and tears are streaming down their joyful faces.
Demonstrably, Utopianism is an eminently laughable matter.

1. Probably in the “Grundisse” (the Penguin edition is an excellent read), Marx noted that wealthy citizens of imperial Rome had to spend their incomes on feasting, building, art works and public games, for lack of investment opportunities. That situation had been superseded by the unlimited investment opportunities of the Industrial Revolution.

2. Basel III will require banks to hold 4.5% of common equity (up from 2% in Basel II) and 6% of Tier I capital (up from 4% in Basel II) of risk-weighted assets (RWA). Basel III also introduces additional capital buffers, (i) a mandatory capital conservation buffer of 2.5% and (ii) a discretionary countercyclical buffer, which allows national regulators to require up to another 2.5% of capital during periods of high credit growth. In addition, Basel III introduces a minimum 3% leverage ratio and two required liquidity ratios. The Liquidity Coverage Ratio requires a bank to hold sufficient high-quality liquid assets to cover its total net cash flows over 30 days; the Net Stable Funding Ratio requires the available amount of stable funding to exceed the required amount of stable funding over a one-year period of extended stress. http://en.wikipedia.org/wiki/Basel_III

Twenty years after.

2011-07-22T06:55:00.000-07:00

Apart from the particularity of being symmetrical, 1991 was the year that saw the dissolution of the Warsaw pact (February 26) and the Comecom (June 28), the demise of the Soviet Communist Party (August 29) and the break up of the USSR (December 8). This put an end to the forty years Cold War and gave the US a victory by default. The sudden collapse of the Soviet empire left the world without an alternative. And the first victim of the new unanimity was Saddam Hussein, who had invaded Kuwait the previous year (August 2). Contrary to precedent, a UN resolution was voted and an armed coalition assembled. Desert Storm liberated Kuwait (February 26) and destroyed most of Iraq’s military capacity. The changed paradigm also introduced a new kind of warfare with cruise missiles and laser guided bombs, “surgical” strikes instead of carpet bombing.

The failure of centralised state economies and the fragmentation of the Eastern Block ended the Cold War and seemed to herald an age of peace, a pax americana and even an end of history. Then came the dotcom economy of internet start-ups and the closet hedonism of the Clinton presidency (I did not inhale, I did not have sex). Unfortunately it was all too good to be true. Throughout the empire oppression was rife. Autocrats were still in power, crushing all opposition and amassing huge wealth, abetted and armed by America and Europe. Absolutism had not disappeared with the Soviet Union, and its persistence became increasingly unbearable and unjustifiable. The newfound freedoms in the East were not replicated in the West.

The last proxy war opposing East and West was in Afghanistan. To a certain extent, it was the mirror image of the Vietnam War. Soviet troops were fighting an insurgency that was recruited and trained in neighbouring Pakistan, a Western ally. But, contrary to the unrestrained bombing of North Vietnam, Laos and Cambodia by the US, the Soviets did not attack the rear bases of the insurgency in the Tribal Areas and in Kashmir, where a large number of Afghans had taken refuge. Times and the balance of power had changed. None the less, Moscow finally recalled its troops and left the Afghans to their own devices, which led to a civil war won by Mullah Omar’s Pashtun Taliban and their Arab allies. The ten year occupation of Afghanistan by the Soviet Army (1979/89) had unwittingly created a coalition that humanity has learned to fear or admire, a coalition that has conveniently replaced the Communists as the world’s bogeymen.

As resistance to the Soviet invasion developed, the fighting intensified and the number of refugees grew. Many of these fled to safety in Pakistan (three to four million), most of them Pashtun. And, as they are Sunni Moslems, solidarity and aid came from Sunni Saudi Arabia. As part of this aid schools were built, providing a Saudi curriculum of strict Salafi precepts, the Koran and Hadith applied as Sharia Law. The graduates from these schools, the Taliban, joined the insurgency in Afghanistan, and were soon in command of the Pashtun front. Concomitant to the humanitarian aid for the refugees, Sunni Arabs of various nationalities were volunteering to fight the Soviets as an act of Jihad. One of these young men, Osama bin Laden, became the founder and funder of an International Brigade based in the mountains of the Hindu Kush, at the junction of the Pashtun and of the other resistance movements among the Tajik, Uzbek and Hazara minorities. This central position gave the small Arab contingent a strategic importance, such that they came to think of themselves as the Base. The Soviet retreat in 1989 and the fall of Kabul in 1992 were the signs of a Salafi success, and the international members of the Base began to imagine a similar process in their own countries. A new caliphate was at hand.

The operation Desert Storm to liberate Kuwait in 1991 assembled a considerable military force, a majority of Americans with British and French support, and the participation of thirty one other nations. For the main part, this army was quartered in neighbouring Saudi Arabia. Bases were built, arms and munitions were stockpiled and armoured units were deployed in an unprecedented invasion of the Salafi heartland by kafir soldiers. This could have been a temporary situation but, having thrashed the Iraqi army, the foreign troops did not leave. The continued threat of Saddam Hussein (those biological, chemical and nuclear weapons!) and the growing threat of Iran (ditto) were used to justify a continued presence. For the puritanical Salafi, this was sacrilegious. For the Base, it was a fantastic recruitment opportunity. The American military presence on Arabian soil could be construed as a counterpart of the Soviet occupation of Afghanistan that had led to the Taliban victory. Up to this point, America had relied on Sunni support in its conflicts with Shia Moslems in Iran, Iraq and Lebanon. Suddenly, radical Sunni were also threatening American lives, property and interests. However, the Soviet presence in Afghanistan and the American presence in Arabia were as different as are the respective geographies and populations of these two countries. The American forces were strictly confined to closed camps and no attempts were made to change the governments, the traditions or the laws. So there was no Arab insurgency (with the notable exception of Algeria), no uprisings, merely a succession of spectacular terrorist attacks culminating with the four hijacked planes on September the eleventh, which provoked the NATO occupation of Afghanistan in 2001 and, indirectly, the un-mandated occupation of Iraq in 2003. This demonstration of brute force convinced the Arab governments that a vigorous war on terror was to be waged.

The example given by America and its European allies in Afghanistan and Iraq was enthusiastically copied by despots throughout Islam. Arbitrary arrests, torture, extrajudicial executions, show-case trials, all the instruments of tyranny became the norm, morally justified by the ticking bomb hypothesis. It was even claimed that WMDs might fall into terrorist hands, and movie-makers promptly picked up the idea to give it a visual plausibility. The new terror that replaced the Soviet terror of the Cold War was labelled “Islamic”. It was a godsend for autocrats and for the world’s military industrial complex. During the Cold War, religion had opposed the atheist Soviet ideology and had been allowed to prosper. Religious eschatology, the people’s opium, alleviates suffering and is addictive. But it also carries an egalitarian message: confronted with God’s majesty and love all humans are equally insignificant and unique. Moreover, one of the pillars of Islam is alms giving. The demise of the Soviet Satan brought these ideas to the fore, subverting the status quo of feudal autocrats who owned and decided for the nation, backed by praetorian guards and secret police. Soon, Moslem clerics were preaching social equality (the way priests had preached a liberation theology in Latin America, also M.L.King and D.Tutu on civil rights), Moslem organisations were assisting the poor to obtain their basic needs and rights, and to educate their children, and mosques were becoming the places where discontent was voiced (as had churches in Poland, East Germany and South Africa during the 1980s, or in Alabama in the 1960s). The “Islamic” threat was the perfect pretext for the elimination of this rising opposition (notably in Algeria, where the first multi-party general elections in December 1991 had given a leading place to the Islamic Salvation Front. The army declared a state of emergency and made mass arrests. There ensued a very bloody counterinsurgency). The savage repression of Islamists destroyed the wider social movements and drove underground the surviving radical elements, most of whom have become affiliates of the Base, creating a residual instability that validates a police state in perpetual siege against the enemy within.

The Moslem world, from Morocco to Indonesia, has been ruled by despots with the consent and approval of America and its European allies. The presence in these countries of large oil and gas reserves is not incidental to the West’s ambiguity in proclaiming democracy and encouraging tyranny, or in its turn around from the Soviet menace to that of radical Islam. War has always ignored human rights, as the slightest protest can be accused of playing into the enemy’s hands. The iron fist was morally justified and, just a few months ago, the situation seemed static and destined to last indefinitely. But new and immaterial forces were undermining the whole construction. The absence of meeting places where opinions could be expressed – all venues were under close surveillance – was naturally compensated by the blogosphere and by social networking websites as soon as these became available. These virtual reunions were then materialised in Tahrir square and after Friday prayers. It seems that the process escaped the attention of the rulers (it didn’t in China) through ignorance or because of some psychological blind spot. But then the older generations never seem to know what the younger generation is up to, and this was most definitely a youth movement across societies where two thirds of the population is less than thirty years old.

Internet is progressively replacing the top down and centralised diffusion of ideas by mass media, education and government. Press magnates, Hollywood moguls, network pundits, university mandarins, security czars and administration spokespersons are all losing ground, especially among the young (according to a recent survey in France, the average TV viewer is 53 years old). The horizontal nature of the internet, where everyone is interconnected, contradicts the existing forms of ideological propagation, but it also comes at a time when the incompetence and corruption of those in positions of power have become starkly apparent. In a world where the economy is under public perfusion (how long can that last?) and where climatic upheavals are ever more frequent and costly, yesterday’s doctrines have lost their credibility.

When all human activity is money oriented, something must be going wrong. But it is only when systems fail one after the other that this mistaken orientation becomes apparent. Until then the continual scramble for money seems to be an integral of the human condition, like the constant bustle of ants around their hills. It is only when something brings this frenzied movement to a halt that its necessity can be questioned. Though the actual financial collapse is unprecedented in its scale and its global interconnections, it is the final stage of a cyclical process that Karl Marx tried to understand a hundred and fifty years ago. As investments increase in value, they claim more added value as rent, interest and dividends, which are in turn invested producing a snowball effect that can either fuel growth in the production of goods and services, or lead to speculation bubbles. Either way, this due paid to investments grows faster than the general growth in added value, and the respective shares of labour and state are proportionally reduced. To compensate this and to maintain growth in consumption, a part of the increasing investments is used to grant credit to labour and state. A possibility Marx seems to have ignored – monetary creation was more difficult in his day – that merely postpones the inevitable crunch. However, it does redirect attention from the claims of investments to the failure of bankers, who were simply trying to fulfil these claims. They failed predictably because they tried the impossible(1)

The possessors of money and power are disqualified by events. Their inconsequence is in the glaring light of reality. They have no idea of what they are doing. Their only belief is that the world is there for the taking. These ideological descendants of robber barons, conquistadors, land grabbers and carpet baggers have not noticed that the world has suddenly become very small. A global village where the beat of a butterfly’s wings can set off a storm and “a single spark can start a prairie fire”, an interconnected planet with horizontal communications, where interactions have no hierarchy, and where all life forms are interdependent. The ever closer scrutiny of the cosmos has demonstrated that the shifting pieces of the Earth’s crust, surrounded by water and enveloped by a nitrogen/oxygen atmosphere, are all there is. Beyond and beneath are non-organic realms. The very particular, not to say unique, conditions on planet Earth have allowed life to develop and thrive. And this kalpa of geological formations and genetic modifications is being squandered to satisfy the rapacity of a few or, more precisely, for the satisfaction of a rapacious ideology, “a little part of it in everyone”. A global conception based on the rules of war, with conquest and submission, master and servant, and dominion as the ultimate goal.

People are expressing their indignation ever more loudly, and rulers are mobilising all their forces to quell these vociferations, some with pacifying gifts and others with bullets, while those who are elected are desperately looking for scapegoats, one day the bankers and the next an ageing population, or tax evasion, moonlighting, immigration, social benefits, etc. It must be somebody’s fault. Everyone is accused of cheating, which is unavoidable because the dice are loaded. The game is set for a few to take from the many, and is incompatible with the growing social and environmental perception of human destiny. Immense wealth and absolute power are the consequences of social hierarchy, an ideological construction that appears at the end of the Stone Age. The reasons can only be conjectured, but it may have been the result of nomadic hunters and herdsmen coming into contact with sedentary agricultural societies, seeing their wealth and conquering them. Whatever may have been the historic examples of tribes and nations subjugating other tribes and nations relate a continuous tale of horror. For the past fifty centuries military might has been right. For most of that time the military were the ruling class, and the military structure based on rank and misogyny still weighs heavily on civil society.

At some point in the past, human societies established a state of perpetual war. The Aztecs and the Spartans are late Stone Age and early Iron Age examples. There is also David’s gruesome dowry, the practice of taking scalps or cutting ears that all proclaim an unquestioned right. For young men born out of bondage, killing “enemies” or making slaves/hostages/prisoners of them was a part of growing up. And the daily news is still full of similar exploits. However, the mental structures that condone the murdering of opponents concern a shrinking number of individuals. Conscript armies were considered ineffective when the skills needed to handle the weaponry and to insure that fighting units were operational became too complex to be acquired in a couple of months. Arguing efficiency, the military have become professionals with five year contracts and career plans. Learning and ordering to kill is a calling that appeals to a few and sets them aside, a situation that has threatened civil society in the past and still does to-day. Only the intricacies of industrial development seem able to thwart martial law. Though, in countries such as China, Iran and Egypt, the military are largely implicated in production, and not only in the manufacture of arms.

The soldier, the cleric and the merchant represent the ideological poles of human society since prehistoric times. The soldier thinks in terms of attack and defence, the cleric claims there is a here and a hereafter, and the merchant buys to sell. Meanwhile, the rest of humanity is busy producing and consuming, and trying to make some sense of the world. A world where the enemies are perceived to be malnutrition, polluted water, illiteracy, malaria, HIV, et cetera, along with seismic, climatic and industrial disasters against all of which an arm’s race is long overdue. A world where supernatural presences and voices are deemed to be creations of the mind rather than extraterrestrial entities, and where profit turns out to be institutionalised theft. The establishment pillars are still standing firmly but their functions are redundant. They no longer uphold anything and have become cumbersome nuisances. Getting rid of them will be a long painstaking task.

La propriété.

2011-04-20T01:05:00.000-07:00

L’histoire de l’humanité se confond avec celle de la production. Pendant quelques cinq mille ans une grande part des humains était attelée au travail, comme l’étaient les bêtes, pour que d’autres puissent faire la guerre et gouverner. Le monde ressemblait à une immense galère. Puis sont apparus les moteurs à vapeur, thermique et électrique. La force musculaire de l’homme et de l’animal est devenue insignifiante. La galère n’avait plus besoin de rameurs, mais comment transformer le servage, et en quoi ? Le travail restait essentiel à la conduite de la guerre et de l’Etat, mais il n’était plus enchaîné à son banc, à sa glèbe. Il devait s’y rendre tous les jours de son plein gré.

Le passage de l’esclavage au salariat, imposé par la mécanique capitaliste, ne s’est pas fait sans heurts. Pour imposer le salariat il fallait que le travail soit sans ressources, il fallait l’éloigner de la terre (nourricière ?) et le concentrer aux abords des usines urbaines. En Angleterre, où le capitalisme industriel s’est développé le plus rapidement, l’exode rural n’avait pas attendu la mécanisation des travaux agricoles. Il avait commencé bien plus tôt (XVIé siècle) avec la clôture des communs pour l’élevage de moutons à laine. Refoulé vers les villes, le travail doit se vendre pour vivre. Là où le serf travaillait trois jours pour lui et trois pour son seigneur, l’ouvrier vend sa semaine de travail au prix du marché. Pour le serf il est manifeste que le châtelain lui prend la moitié de son travail comme loyer de son lopin et de sa masure. Alors que pour l’ouvrier « il semble que le travail tout entier soit du travail payé. » (1) Le salarié vend son temps de travail, mais le prix qu’il en reçoit n’est qu’une partie de sa valeur.

Le salariat l’a emporté sur les rapports de productions précédents, jusqu’à devenir une pratique universelle. Et la valeur ajoutée par les salariés est partagée généreusement. Il y a la part des salaires, des retraites et des assurances. Il y a la part des impôts et des taxes diverses. Il y a la part des loyers fonciers et immobiliers. Il y a la part de l’intérêt sur les hypothèques, les dettes et le crédit. Il y a la part des marges, bénéfices et autres profits sur investissement. La première part permet le renouvellement de la force de travail, d’un jour à l’autre et sur le long terme. Mais cette continuité dans le temps de la valeur ajoutée concerne la nation toute entière, et donc l’Etat, qui intervient dans les domaines de la santé, de l’éducation, de la sécurité, de la justice et des infrastructures. Ce qui fait que les deux premières parts sont indissociables. L’Etat et le salariat forment un ensemble social de production de valeur, de biens et de services.

« …d’où vient ce singulier phénomène qui fait qu’on trouve sur le marché un groupe d’acheteurs en possession du sol, des machines, des matières premières et des moyens de subsistance, toutes choses qui, sauf la terre dans son état primitif, sont des produits du travail, et, de l’autre côté, un groupe de vendeurs n’ayant rien à vendre que leur force de travail, leurs bras et leurs cerveaux agissants ? […] L’étude de cette question nous conduirait à la recherche de ce que les économistes appellent l’accumulation antérieure ou primitive, mais qui devrait être appelée l’expropriation primitive. Nous trouverons que cette prétendue accumulation primitive ne signifie rien d’autre qu’une série de processus historiques aboutissant à une dissociation de l’unité primitive qui existait entre le travailleur et ses moyens de travail. » (2) Cela a commencé avec des invasions conquérantes et l’asservissement des populations autochtones. Le féodalisme qui en découle est un système où la classe guerrière se partage la possession du sol, et de ce qui se trouve dessus et dessous. Le conquérant doit aussi administrer ses conquêtes, alors la classe des clercs se voit attribuer une part du sol. Puis des échanges de marchandises remplacent le pillage de la conquête ; des villes marchandes acquièrent des privilèges et la richesse des marchands banquiers égale la splendeur des rois. Un petit groupe s’est accaparé la propriété du foncier. Un autre petit groupe a la maîtrise du commerce et de l’argent-crédit, qui est l’intermédiaire des échanges.

La Renaissance rappelle la Rome antique, la même opulence, la même puissance conquérante, la même confrontation entre le patricien et le novus homo. Mais l’histoire ne s’est pas répétée, et deux éléments venus de Chine y ont largement contribué. L’imprimerie et la poudre à canon ont bouleversé le cours des choses. La fabrication d’un grand nombre d’objets identiques et l’utilisation de l’énergie d’un gaz en expansion sont les fondements de la révolution industrielle. Les machines et la production de masse ont accompagné l’émergence d’un nouveau groupe, celui des entrepreneurs qui dominent et décident de ce qui est produit. Le travail a été dépossédé du sol, de l’argent et de l’outil, et doit consacrer une part de sa force au service des possédants. La valeur ajoutée doit rémunérer la propriété des moyens de production. Elle doit payer les loyers, les intérêts et les dividendes.

Le travail et l’Etat forment un ensemble social de production de valeur. La propriété privée du sol, de l’argent et des outils, s’oppose à cet ensemble dans le partage de la valeur ajoutée. Elle est un déni de l’égalité citoyenne et elle fausse le contrat de gouvernance entre État et travail. Elle détourne l’action de l’Etat à son avantage par la corruption et l’influence. Et il arrive très souvent (toujours ?) que la propriété privée contrôle le gouvernement et lui dicte sa conduite. L’Etat, dont le souci devrait être le plus grand bien du plus grand nombre, se trouve en position d’arbitre entre une minorité d’expropriateurs et une majorité d’expropriés. Et, puisque la propriété est un droit inaliénable, constitutionnel et humain, le parti pris de l’arbitre est inévitable (3). Que la propriété ait été du vol par le passé (prises de guerre, tricheries commerciales, accaparement des procédés industriels) rend plus nécessaire sa sacralisation. Ses origines crapuleuses (commerce triangulaire, colonisations) l’obligent à se faire passer pour un fondement de la société humaine. La propriété privée des moyens de production est devenue l’essentiel humanisant, tandis que l’usage de ces moyens se résume à un taux de plus value, à des loyers, de l’usure et du profit. Le travail s’est fait déposséder dans le passé et doit le payer d’une part de sa valeur ajoutée. Y a-t-il là un simple parasitage, ou est-ce plus pernicieux ?

La valeur ajoutée se partage entre travail, État et propriété. Comment se détermine cette valeur et à quoi vont servir ses différentes parts ? La valeur ajoutée du travail se concrétise sur le marché dans le prix obtenu par la marchandise (bien ou service), et différentes quantités de travail peuvent obtenir le même prix. La valeur ajoutée par le travail varie à l’intérieure d’une nation. Le travail d’un dentiste et le travail d’un mécanicien n’ajoutent pas la même valeur. A investissement comparable, le tarif horaire n’est pas le même. La dépose et pose d’une pièce mécanique et d’une prothèse dentaire n’ont pas le même prix. Les artisans et les professions libérales fournissent des services de valeurs différentes. Ce qui s’explique le mieux par une survivance des castes sociales, le clerc et le forgeron. En fait, la supposée répartition de la valeur n’est qu’un partage hiérarchisé de la valeur ajoutée de la nation. Puisque chaque production est connectée aux autres et qu’aucune ne peut fonctionner sans les autres, la répartition de leurs valeurs respectives est soit arbitraire soit un ancien privilège de classe, alors qu’elle pourrait être égalitaire.

Dans un premier partage, la hiérarchie sociale produit une échelle de la valeur ajoutée du travail. Puis la propriété privée des moyens de production prend ses loyers, son usure et ses dividendes. Et le haut du panier cumule un travail à forte valeur ajoutée avec la rente du propriétaire. Ainsi se répartissent les richesses d’une nation. Cet héritage criminel a colonisé la planète, et l’échelle de valeur ajoutée et la propriété privée des moyens de production ont créé une hiérarchie des nations. Au début du XXè siècle, une dizaine d’empires coloniaux se partageaient le monde. Une mainmise qui n’a épargné qu’une poignée de nations, et qui s’est accaparé les matières premières de l’ère industriel. Mais trois nations industrielles n’ont pas participé au découpage de la mappemonde. Le Japon, l’Allemagne et l’Italie n’ont eu que des miettes, et leur ressentiment n’a pas été sans conséquences pour le siècle. Quoi qu’il en soit, au lendemain de la seconde guerre mondiale, les empires coloniaux ont commencé leur long déclin. Bien que les rapports de domination économique, financière et culturelle se soient maintenus au-delà des indépendances.

Les nations industrielles dominent les nations « en développement » par leur richesse accumulée en infrastructures, par leurs connaissances accumulées en technologie et par leur passé impérial. Les colonies sont devenues des États clients, échangeant leurs ressources naturelles pour les produits de consommation des anciens colons. Les classes dirigeantes des nouvelles nations importent le mode de vie des nations industrielles et exportent les matières premières de leurs pays. Les régimes corrompus d’Afrique et d’Asie (l’Amérique latine subissait ce système depuis la doctrine Monroe de 1823, et le Moyen Orient depuis le dépeçage de l’empire ottoman en 1918) ont remplacé les anciennes administrations coloniales. Ils échangent leurs minerais et leurs monocultures de leurs pays contre des armes, des produits de luxe, des excédents agricoles, des vêtements et des véhicules, des médicaments, de l’électronique, etc. La production locale artisanale a disparu et l’agriculture vivrière ne progresse pas. Puisque tout se fabrique ailleurs, il ne reste plus que le commerce et les services administratifs comme emploi.

La vente des matières premières pour acheter des biens de consommation est la source de tous les maux, puisqu’elle détruit les emplois et encourage la corruption. Tandis que l’autre moitié de l’échange en tire de grands bénéfices. Dans un marché fermé, les produits de consommation doivent être consommés ou détruits. Ce qui suppose une répartition de la valeur ajoutée qui finance cette consommation de masse. Si le marché est multinational, les biens de consommation peuvent s’échanger contre des matières premières, et la consommation se fait ailleurs. Au lieu de rendre nécessaire une augmentation du pouvoir d’achat de l’Etat et des consommateurs, la production accrue de consommation se transforme en investissements par l’échange sur le marché mondial. Une très bonne affaire pour l’accumulation du capital et pour l’emploi, moins bonne pour le niveau de rémunération de la majorité. Cette pompe à investissements a profité à l’Angleterre et aux États-Unis, puis à l’Europe de l’Ouest, au Japon, etc. Depuis dix ans qu’elle a rejoint l’OMC, c’est principalement la Chine qui en bénéficie, au détriment de toute la planète. La Chine échange ses biens de consommation contre des matières premières comme les autres pays industrialisés, mais elle les échange aussi contre de la technologie. Et l’Occident (plus Japon) se trouve dans la situation de l’arroseur arrosé, puisqu’il exporte de l’investissement et importe de la consommation. Au lieu d’accroître ses investissements au détriment de sa consommation, il a accru sa consommation au détriment de ses investissements, qui se font ailleurs.

En délocalisant leur production en Chine et dans d’autres pays à bas coûts les multinationales ont réalisé d’énormes profits, mais elles ont laminé les structures industrielles de leurs pays d’origine. La production de biens y a baissé et celle des services s’est accrue. Pourtant le déséquilbre était manifeste. Les investissements exportés n’égalaient pas la consommation en retour, qui contenait un supplément de valeur ajoutée. Il s’en est suivi des déficits commerciaux et de la dette. Le manque de valeur produite s’est répercuté sur les échanges extérieurs et intérieurs. Une fois passé l’euphorie des premiers transferts massifs de technologie, où l’Occident s’attribuait le rôle de chercheur et de créateur fournissant du savoir aux petites mains de la planète, la réalité s’est imposée. L’Occident ne pouvait concurrencer les produits de consommation chinois, pas plus sur ses propres marchés intérieurs que dans l’échange avec les matières premières. Les nations d’Occident, à une ou deux exceptions près, importent plus de valeur qu’elles n’en exportent, notamment pour les produits de consommation. Il s’ensuit un endettement privé et public, et ces dettes, vendues à des investisseurs étrangers, servent à combler le déficit commercial. Mais les Etats, pas plus que les particuliers, ne peuvent indéfiniment dépenser plus qu’ils ne gagnent. Des dettes souveraines s’avèrent être sub-prime, elles aussi.

La propriété privée des moyens de production ne pense qu’à maximiser sa rente. Toutes ses actions vont dans ce sens, qui est sa moralité et sa raison d’être. Une cupidité universelle qui fait le bonheur d’escrocs petits et grands. La propriété doit rapporter gros. Une fin qui justifie tous les moyens, et ni la liberté d’expression ni les élections libres n’ont su renverser cette tyrannie. Son étau idéologique est trop puissant, puisque son contrôle des pensées est absolu et son fondement légal est inébranlable. Et, lorsque le château de cartes des crédits croisés (immobilier + obligations + actions) s’écroule sous son propre poids, la solidarité citoyenne est sollicitée comme s’il s’agissait d’une catastrophe naturelle. Il n’y a donc pas d’alternative à la socialisation des pertes et la privatisation des profits.

(1) Karl Marx. Salaire, prix et profit. p.48. Editions langues étrangères, Pékin 1970
(2) Ibid. p.42
(3) La propriété étant un droit inviolable et sacré, nul ne peut en être privé, si ce n’est lorsque la nécessité publique, légalement constatée, l’exige évidemment, et sous la condition d’une juste et préalable indemnité. (Déclaration des Droits de l’Homme et du Citoyen de 1789, article XVII)
Toute personne, aussi bien seule qu’en collectivité, a droit à la propriété. Nul ne peut être arbitrairement privé de sa propriété. (Déclaration Universelle des Droits de l'Homme de 1948, article 17)

Transparency and choice in a post-totalitarian world.

2011-03-24T07:45:00.000-07:00

The properties of different plants have probably been studied since the dawn of humanity. Many were found to be nourishing, other could heal, some were intoxicating and a few could kill. The transmission of all this empirical knowledge accumulated by hundreds of generations was oral and practical. It was part of a social and conceptual construction, of which a few scraps have survived in the most outlandish regions of the planet. Elsewhere, conquest, slavery and general mayhem interrupted the transmissions and the knowledge was lost. There followed a dark age of ignorance and superstition, a blank sheet for a new beginning. Biochemistry describes the molecular structures of living organisms. It can isolate and synthesise these molecules, and test their effects. So that the biosphere is made up of formulae and life is a continuous chemical reaction, a proliferation of molecules. A new world view has been created, by explaining all biological processes as chemistry. This began as a simplification. Vegetables needed nitrates, phosphates and light, while animals and humans could live off carbohydrates, proteins and vitamins. Active ingredients were extracted from plants and patented. The combination of chemistry and biology turned living matter into an industry based on profit. And legislation continually encouraged this ideology of omnipotent control. In agriculture and health, administrations decided what could and could not be consumed. This standardisation led to mass markets and to agro and pharmaceutical giants. Food and drugs became very big businesses. Drugs (and food) are an essential part of human existence. Health, well-being and life itself depend on them. For these reasons they are the focus of all social forces, and their legislation is influenced by powerful lobbies. Producing and selling drugs for general consumption can be very profitable. A profitability that increases considerably when a drug is patented, or when it is illegal. In both cases the provider is protected by law from a competing offer. Pharmaceutical companies and criminal organisations have monopolised the drugs trade at the expense of the consumer, who is obliged to pay an exorbitant price for his dose. And successive governments have been their accomplices in maintaining this hold. It seems reasonable that an administration should supervise the products that are being swallowed, inhaled and injected by the nation's citizens, to insure that these products are not adulterated. (Commercialised tobacco may contain as much as 15% of unnamed texture and conservation enhancers. This secrecy is allowed because, compared to tobacco, everything else is deemed harmless. Hence the bans on smoking, but not on exhaust fumes.) However, if controlling the composition of drugs seems amply justified, deciding which are legal and which are not is a far more complex enterprise. This is where scientific advice is confronted with public opinion and private corporations. Science, ideology and profit are in the balance, and science often loses out. Its professed objectiveness can so easily be corrupted by ideas and money. Two years ago, a virulent campaign was organised in France against hybrid varieties of hemp. Psychiatrists were claiming that the high tenures in THC of these plants were dangerous, that French youth was going crazy on skunk. This sudden uproar coincided with a sharp increase in home-grown weed, as more and more consumers rejected the low quality and often dubious products on offer. Last year, a drug called Mediator made by Servier laboratories was taken off the market, accused of having caused hundreds of deaths. This drug was supposed to have a beneficial effect on some diabetic patients, but had been very widely prescribed to people wishing to lose weight. It turned out that Mediator was simply a form of amphetamine and, as all should know, "speed kills"(1). Unfortunately, the patients did not realise they were speeding up, as there was no mention on the packet. Instead of criminalising gardeners and addicts, and encouraging pharmaceutical and mafia empires, administrations would do better to prevent fraud and adulteration, and let informed consumers choose for themselves. 1.Amphetamine Annie by Canned Heat.

Le centre de l'univers.

2011-02-28T05:01:00.000-08:00

L'hypothèse de l’expansion universelle suppose que l'espace intergalactique se dilate et que tout s'éloigne de tout en trois dimensions. Cette dilatation est supposée uniforme pour une période donnée mais, selon les versions, elle est soit en accélération, soit en ralentissement.
Imaginons trois galaxies alignées (ABC), séparées d'une même distance de quatre unités d'espace.

__________A._________B.________ C.

Un temps T plus tard, l'unité d'espace s'est dilatée d'un quart de sa longueur. Les galaxies A et B se sont écartées d'une unité, ainsi que B et C, alors que A et C se sont écartées de deux unités d'espace. L'ensemble AC mesure à présent dix unités d'espace.

_________A.__________B.__________C.

Mais comment s'est opéré cette élongation de l'espace? Puisque c'est l'espace intergalactique qui se dilate, A et B s'éloignent mutuellement, ainsi que B et C, ainsi que A et C.
A et C sont écartées par la dilatation de l'espace qui les sépare. Les deux galaxies s'éloignent, ce qui est aussi le cas de B et C. Mais, si la galaxie B s'éloigne de A, elle va vers C, et si elle s'éloigne de C, elle va vers A. La seule solution semble être que A et C s'éloignent de B, Qui devient le centre de l'univers. Alors que, justement, l'expansion universelle n'as pas de centre.

A Cold War Heritage.

2011-02-04T07:35:00.001-08:00

Tunisia, Egypt, where is the next domino? Nothing as surprising as this has happened since the end of the Warsaw Pact. This suggests that these events are the counterpart of the Velvet and Orange revolutions. The overthrow of tyrants belonging to the communist “block” was just the prelude. Now is the turn of those belonging to the “free” world. The Cold War was built on two pillars, the continental nations USA and USSR, pushing against each other with mutually destructive strength. When one of the pillars suddenly crumbled away, the other tried to maintain the power structure alone. A function it had not been built for. Now that the overload is beginning to bring down the second pillar, what can be learnt from the ruins of the first?

Breaking the Wall in Berlin was the start of political change for Eastern Europe and for most of the Soviet Republics. For some nations, the transformation has been extremely violent, but the majority toppled their tyrannies with hardly any bloodshed. However, as the USSR broke into pieces, the USA appeared to many as the mainstay of a future construction. As one pillar fell, everyone clambered on the one left standing. Rejecting the soviet model, they adopted the American dream. This can no loner apply, because the dream has turned out to be a Hollywood fantasy, and because Ben Ali, Mubarak and Co. have all been (France's) America’s faithful servants. Rejecting them means rejecting their successive masters in (Paris) Washington. The bipolar world is over, this is the era of developing nations. The Russian and American moulds have lost their significance. And the emerging nations are constituting a new distribution of material power and ideas. Tunisians and Egyptians will look to Turkey and Iran for potential models of a new society.

Though there are no celebrations in view, this is the twentieth anniversary of the end of the Cold War. 1991 was a hectic year, beginning with the dissolution of the Warsaw Pact (feb 26), and ending with the dissolution of the USSR (dec 08). The precipitated disappearance of something so formidable was probably due to the fact that the USSR could no longer compete with the wealth of the USA and its allies, coupled with an abysmal digital gap. Reaganomics and Apple were moving far too quickly. In the past twenty years Russia has mutated from superpower status to that of a developing nation rich in mineral resources. And the Russian government seems to depend on secret police and organized criminals to suppress opposition, very similar to the governments of Tunisia, Egypt, etc.

The Cold War was the pretext for tyranny and oppression. The War on Terror is the pretext for maintaining the existing despotisms. Especially for the Muslim nations, where opposition is defined as Islamist, and Islamist is equated with terrorist. “It’s me or chaos”, croaked Mubarak, sacrificing his well-being for the nation, claiming that democracy would bring to power the Muslim Brothers. But then, given the simple choice, one might well prefer the Salvation Army to the mafia, despite their fundamentalism. The Iranian revolution was immediately attacked and isolated, and radicalised. The Turks were constantly subjected to military coups. Hopefully, Tunisians, Egyptians et al. will be allowed to choose their future more peacefully and with less urgency.

Of barons and kings.

2011-01-25T04:46:00.000-08:00

Liberalism is the antithesis of absolutism. To the arbitrary power of the despot, it opposes the total freedom of each individual. Instead of rigid hereditary structures, it proposes the social mobility of meritocracy. But, where the anarchists consider that the past must be obliterated, along with state and property, liberals loudly encourage property, conveniently rewrite the past and focus their resentment on the state. By rejecting all forms of government control, liberalism brandishes the banner of liberty. And, in doing so, it creates the illusion that central government is the only form of oppression, and that property and state are not intimately linked.

The Magna Charta of 1215 imposed limits to the monarch's absolutism. Notably article 39: No freeman shall be arrested, or imprisoned, or dispossessed of his tenement, or outlawed, or exiled, or in anywise proceeded against, unless by the legal judgment of his Peers, or by the law of the land. But the Norman barons, who led the uprising that was resolved at Runnymede, did not contest the privileges and property they had acquired by right of royal conquest. And so it goes, down through the ages, with robber barons either vilifying central government as a limit to their own power, or using central government to grab vast expanses of land, to obtain tax exemptions, to have infrastructures built for them, and to be bailed out massively with the nation's hard-earned future incomes.

The alternatives seem to be a weak king faced with strong barons, and a strong king faced with weak barons, and the nation chooses one then the other. This back and forth movement could seem to be the best of both worlds, or the less bad, except that it perpetuates itself and excludes all other possibilities. The nation, the people, may choose between supporting the barons against the king, or the king against the barons. And the contest is so ancient and so repetitively mesmerising that the actual usefulness of barons and kings is never seriously discussed. Does a nation need to be led by a potentially dangerous megalomaniac, who claims he has a vision of future greatness? Should a nation accept that the wealth it produces be the property of so very few? Is the plutocratic monarchy humanity’s manifest destiny?

Qu'est-ce que le son?

2011-01-07T04:37:00.000-08:00

Le son ne se propage pas dans le vide. Il a besoin des molécules d'un milieu, gaz, liquide ou solide. Ce sont les molécules qui se transmettent le son. Le son passe de molécule à molécule et peut être réfléchi (écho, sonar). Mais un son n'est jamais qu'un coup donné au milieu, que ce soit par des cordes vocales ou par les pales d'une turbine. Les molécules se transmettent les coups reçus, mais elle ne se déplacent pas. Le son n'est pas un courant d'air. Ce qui suppose que la molécule transmet le coup reçu et rejoint (+/-) sa place d'origine. Elle opère un aller/retour dans l'espace qui la sépare de sa voisine.

Un petit mobile de salon consiste de trois (ou plus) billes d'acier suspendues en ligne à presque se toucher. En soulevant la bille de droite (ou de gauche) en arc sur son fil tendu, puis en la lâchant, un pendule se met en marche où les billes de gauche et de droite se balancent alternativement, alors que celle(s) du milieu ne bouge(nt) pas. Le "coup" sonore pourrait se transmettre ainsi par des molécules alignées. Un mot est dit et entendu mais, entre la bouche et l'oreille, rien ne semble bouger.

Le son se propage quatre fois plus vite dans l'eau (1435m/s) que dans l'air (340m/s), sans parler du fer (5600m/s). Le seul facteur qui semble pouvoir expliquer ces différences de vitesse, c'est la distance entre les molécules (ou atomes). Imaginons que les molécules sont comme des billes, et qu'elles ont un diamètre D. Imaginons 10 molécules alignées, avec 9 espaces de 4D qui les séparent. Le collier de molécules mesure 10D+(9x4D)=46D.. Si les espaces sont de 8D, alors 6 molécules et 5 espaces =46D. Espaces 2D, 16/15 =46D. Espaces D/2, 31/30 =46D. Espaces D/4, 37/36 =46D. Pour la même distance parcourue de 46D, les espaces intermoléculaires 8D donnent un parcours extra-moléculaire 5 x 8D =40D, et les espaces de D/4 donnent un parcours de 36 x D/4 =9D. En divisant l'espace intermoléculaire par 32, le parcours extra-moléculaire est divisé par 4. Cela modifie la vitesse de propagation du son à condition que le son se propage plus vite d'un bout de la molécule à l'autre qu'il ne se propage dans l'espace entre les molécules. Ce qui prend du temps c'est l'aller/retour entre molécules, c'est le mouvement qui transmet le "coup".

Un son a une fréquence et un volume sonore. Il est aigu ou grave, fort ou faible. Si la fréquence correspond au nombre de coups successifs qui frappent le milieu en un temps T, le volume sonore doit correspondre à la force des coups portés. Lorsqu'il se produit, le volume sonore est une mesure d'énergie, les watts d'un amplificateur. Une énergie qui peut varier. Mais les molécules ne changent pas de masse et se transmettent le son à la même vitesse, peu importe le volume sonore. L'énergie sonore ne convient donc pas à la formulation E = mv2/2. Elle ne se transmet pas par impact, ce n'est pas une énergie cinétique. Ce serait plutôt une énergie emmagasinée puis restituée, comme un ressort.

Le son peut être réfléchi, ce qui suppose un mouvement qui change de direction en frappant un obstacle, qui est un changement de milieu. Un son qui se propage dans l'air est réfléchi par l'eau. Et un son qui se propage dans l'eau est réfléchi par l'air. Le son passe difficilement d'un milieu à un autre, et a tendance à rebondir. Que se passe-t-il à l'interface des deux milieux? Le son est réfléchi par un changement de milieu, mais il peut aussi le contourner. Le son ne se transmet pas uniquement en lignes droites. Une part du volume se diffuse sur les côtés. Cet éparpillement du son explique sa capacité de contourner les obstacles. Les sons graves et aigus semblent se comporter de la même façon. La fréquence n'est pas modifiée par des changements de direction. Par contre le volume sonore peut être concentré ou éparpillé par un rebond. La concentration du son par des rebonds fait que des molécules énergisées rencontrent des molécules énergisées. Leur énergies peuvent s'accumuler. Un porte voix concentre le son et augmente son volume sonore. Au lieu de s'éparpiller, les molécules qui transmettent le son rebondissent vers le flux qui suit l'axe du cône du porte voix. Les molécules qui rebondissent transmettent leur son à des molécules qui en sont déjà porteuses. Certaines molécules sont frappées deux (ou plus) fois et transmettent cette double (ou plus) force, ce double (ou plus) volume sonore. Cette accumulation de "frappes" semble se produire lorsqu'un avion approche et passe le mur du son.

Lorsqu'un avion approche la vitesse du son (V), il est précédé d'un son de plus en plus aigu et suivi d'un son de plus en plus grave. Lorsqu'il atteint la vitesse du son, la fréquence qui le précède devient infini, alors que le fréquence qui le suit n'est que la moitié de ce qu'elle serait à l’arrêt. Mais une fréquence infini suppose un temps de transmission zéro, ce qui n'est pas le cas. Lorsque le percuteur (les pales de la turbine) avance à la vitesse de transmission du son, il frappe des molécules qui sont déjà porteuses de son. Le percuteur suit la transmission du son en ajoutant constamment du volume. Lorsque la fréquence ne peut plus augmenter, c'est le volume sonore qui prend le relais. C'est le bruit du passage du mur. Moment critique pour l'avion, qui a intérêt à dépasser rapidement la vitesse du son et le volume sonore qui s'accumule. Au delà de la vitesse du son, la transmission du son se fait derrière l'avion. Le percuteur ne frappe plus des molécules déjà porteuses de son. Ce qui se passe, c'est que le son qui se propage dans la même direction que l'avion, et qui le suit, rencontre le son qui se propage dans la direction opposée. Que se passe-t-il lorsqu'un son aigu rencontre un son grave qui se propage en sens opposé? Est-ce que leur volume sonore s'accumule. Quelle direction prend le son qui en résulte? Le fort volume sonore qui accompagne un avion volant à une vitesse supérieure à la vitesse du son semble montrer que les deux volumes s'accumulent et partent sur les côtés. Le phénomène de condensation qui se produit devant, puis au milieu de l'appareil lors du passage du mur du son, correspondent aux moments de très hautes fréquences. Est-ce que les ultra-ultrasons refroidissent l'air?

Question de son.

2010-12-24T03:39:00.000-08:00

1.
A _ _ _ _ A' _ _ _ _ O _ _ _ _ B _ _ B'
V/2

Un avion survole un observateur, O, à la moitié de la vitesse du son, V/2.
Le bruit émit par l'avion en A est entendu par l'observateur lorsque l'avion est en A' (AA'=A'O). Ce qui fait que le bruit du vol entre A et O est entendu par l'observateur lors du vol de A' à O. Le bruit émit dans un temps T est entendu dans un temps T/2.
Le bruit émit par l'avion en B est entendu par l'observateur lorsque l'avion est en B' (OB=2BB'). Ce qui fait que le bruit du vol entre O et B est entendu par l'observateur lors du vol de O à B'. Le bruit émit dans un temps T est entendu dans un temps 3T/2.
Dans le premier cas la fréquence est accélérée, donc plus aigüe. Dans le second elle est ralentie, donc plus grave. En modifient la fréquence, le vol de l'avion modifie la tonalité du son entendu par l'observateur.

2.
A _ _ _ A' _ _ _ _ _ _ S _ _ _ B _ _ _ B'
V/2

Un observateur passe prés d'une sirène, S, à la moitié de la vitesse du son, V/2.
Le bruit émit par S lorsque l'observateur est en A est entendu par lui lorsqu'il est en A' (A'S=2AA'). Le bruit émit lorsque l'observateur se déplace entre A et S est entendu entre A' et S. L'émission d'un temps T est entendu dans un temps 2T/3.
Le bruit émit par S lorsque l'observateur est en B est entendu par lui lorsqu'il est en B' (SB=BB'). Le bruit émit entre S et B est entendu entre S et B'. L'émission d'un temps T est entendu dans un temps 2T.

Ici aussi la fréquence est accélérée et ralentie mais, malgré une vitesse de déplacement égale, les proportions ne sont pas les mêmes. 2T/3 plus grand que T/2 ; 2T plus grand que 3T/2. C'est à dire que l'accélération est moindre et le ralentissement est plus fort lorsque l'observateur se déplace par rapport à un son fixe, plutôt qu'un son qui se déplace par rapport à un observateur fixe.

Ces différences correspondent à la formulation classique:

http://en.wikipedia.org/wiki/Doppler_effect

Mais une modification de la fréquence d'écoute par rapport à la fréquence d'émission, comme simple procédé temporel, permet d'éviter les complications d'une ondulation comprimée ou détendue. Et d'aller plus loin dans la compréhension du phénomène qu'est la transmission du son.

The binary production of wealth.

2010-08-25T01:07:00.000-07:00

The goods and services exchanged for money on the market are destined to one of two usages. In one case their value is transmitted or enhanced and will return to the market to be exchanged again, in which case they are investments. Alternatively their value is neither transmitted nor enhanced, and they are consumed in one go or piecemeal. During successive stages of the production process value is added to value, the value of machines and buildings, of energy, transport and additional labour, step by step until the final product is consumed. The raw materials (animal, vegetable, and mineral) extracted from nature become investments. They are the means of production used by labour to create value. Some investments transmit their value (e.g. machine-tools) and some will acquire more value (e.g. an iron ingot). And so value accumulates through the various stages of production, and all the added value is contained in the value to be consumed.

The production of goods and services is a progressive adding of value. The value of present labour joins the value of past labour contained in the means of production. The value to be consumed is the sum of past labour and present labour, of investments at their final stage and of the ultimate added value of labour. But, if present investments are a produce of the past, then future investments are a produce of the present. And the present value added for future investments coincides with the past added value of present investments that, along with the added value of present labour, will make up the value to be consumed.

Supposing production is broken down into three stages of equal duration, concerning respectively raw materials, intermediary products and consumer products. If each stage adds a value of 100, the value to be consumed during each time span is 300, and the value added by labour in one time span is also 300, because all three productions are going on at the same time.

The past labour of present investments equals the present labour of future investments, unless there is growth. The past labour of investments contained in the value to be consumed equals the present labour of future investments, unless investments are on the increase. So that growth, considered the be all and end all of political and corporate strategies, of budgets and markets, is in fact a disturbing process.

Growth necessarily begins with investments. The present labour that is producing future investments adds more value than did the past labour of present investments. So that the value added exceeds the value to be consumed.

The value to be consumed is 300, but the fist stage increases the value it adds to 110. Then the second stage increases its added value by 10, and finally the third stage follows suite. It is only then that the value to be consumed increases to 330.

When growth is continuous, the value added by labour is always in excess of the value to be consumed. The investments that are being produced have more value than those of the past whose value is being consumed.
Once the process has been primed, the added value that is in excess of the value to be consumed can be invested to maintain growth. However, if a rate of expansion (+10%) is expected instead of an incremental one (+10), then the excess added value is insufficient and must be supplemented (1). The other inconvenience is that, though labour increases in quantity and intensity, as does the value to be consumed, labour never gets to consume all the value it adds. There is a constant lag between the two. Labour adds more value than there is to consume and is dispossessed of this value, which increases the means of production and fuels growth. The excess added value increases the value of property and lays claim to more of the value to be consumed.

Growth increases the incomes of property and allows them to be saved and invested instead of being spent. This diversion of value supplements the excess added value that is invested, and maintains or increases the growth rate. But it also results in an insufficient demand for the value to be consumed. A problem that is resolved by foreign trade, when consumption is exported and investments are imported. Consumption is exchanged for investments on the world market, thereby perpetuating the production cycle. Value is added to value in an endless process, as the destruction of value by consumption takes place elsewhere. This process allows nations to industrialise and accumulate wealth, but it is devastating for their commercial partners who export investments and import consumption. Instead of adding more value than they consume and investing the difference, they must consume more value than they add and borrow the difference. Fair trade is not just value for value. It is also investment for investment and consumption for consumption. Taking a nation’s minerals in exchange for consumer goods puts that nation out of work, and plunges most of its population into poverty. Any nation that exports investments (outsourcing production is an export of investments) and imports consumption reduces the value added by its national labour. And, though individuals and corporations enrich themselves, the nation as a whole is impoverished.

Growth needs an investment of value over and above the excess added value, both as a primer to get started and as a supplement to sustain the growth rate. Growth also needs a constant increase in the means of payment, so as to exchange all that supplementary value. Monetary creation is a necessary part of economic growth. If it was used to increase investments, it would suffice as a primer and a supplement. In which case all incomes would have to be consumed, and those unable to consume all their income would have to give away the excess in a distributive potlatch. Unfortunately this simple solution leaves unsolved two major problems. Who creates the money and who owns the investments?

Minting and printing money is, and always has been, a governmental prerogative. And the proportion of material money, of currency, the stuff people try to counterfeit, is fairly constant in developed nations at less than 10% of the money supply (USA: 5-7%)(2). What has changed over the past fifty years is the usage of banknotes. Plastic cards have largely replaced them as means of payment. It might not be exaggerated to say that they are reduced to the role of banking reserves, and the payments of criminal, covert and moonlight activities, though some nations (e.g. the Germans) still prefer the wad to the glint of platinum and gold. Payments are essentially credit and debit, and credit is granted by banks. So that monetary creation is essentially controlled by the banking system. That is by private, profit making entities subjected to no political control other than a few rules and a ratio agreed on in Basle. Banks have the quasi monopoly of payments and they decide the usage of monetary creation. They decide where this supplement of value is used, as well as what is being paid for. However, banking privileges do not make them omnipotent. They are, after all, just the servants of property. They obey the orders of ownership.

The property of the means of production uses the excess added value to increase its domains and its incomes. Incomes are also used to increase investments, thereby upsetting the balance of consumer supply and demand, and excluding the investment of monetary creation. Being unable to invest their created money, banks are obliged to use it to restore balance on the consumer market. Instead of increasing the money supply by lending to corporations, banks do it by granting mortgages and consumer credit. Property increases its sway by investing the incomes it does not consume, while banks do their best to maintain a balanced market. But the process is doomed to failure.

By definition, invested value returns to the market and gets its value back, plus a share of incomes in the forms of dividends, interest, rent, or copy and patent rights. The returned value of investments allows their regular renewals. Invested goods and services are renewed frequently, infrastructures are more long lasting (unless they are built at the end of a technological cycle), and land just stays (though industrial and environmental desertification can make it valueless). So that, except for catastrophes such as bankruptcies and earthquakes, an investment starts off a process of perpetual renewal. Whereas consumed value is literally used up (consumere in Latin). It is destroyed and must be created again from scratch. Consumption does not return value, so that the value of its renewal is the added value of incomes.

If monetary creations are invested, the increased investment perpetuates itself and the new money stays in circulation. Or rather, banks being what they are, the value is returned with interest and is borrowed again. A growth in investments, once it is primed, maintains itself. Whereas if monetary creations are consumed, the increased consumption cannot maintain itself as its value is used up. No value is returned to be borrowed again, so that borrowing again only returns the value without maintaining the increased consumption.

Borrowing for consumption increases disposable incomes and paying back reduces them, so that renewed borrowing does neither, and incomes are back where they started. However, interest will reduce disposable incomes if it is not paid for with increased borrowing.

Supposing borrowing increases demand for consumption from 100 to 110.
If demand is to go on growing, the next round of borrowing will need 10 (neglecting interest) to pay back the previous debt, 10 to maintain previous growth, and 10 for new growth. Demand grows by 10 at every time span, but debt grows much faster.

Then supposing borrowing increases demand for investments from 100 to 110.
If demand is to go on growing, the next round of borrowing will need 10 to maintain previous growth and 10 for new growth. The previous debt (neglecting interest) is paid back when the invested value returns to the market.

Increasing demand for consumption with monetary creation and debt is a highly expansive process that quickly gets out of hand. And, as public spending both civil and military is essentially consumption, this also applies to budget deficits and government debts. Whereas if monetary creation increases demand for investment, and if banking costs replace interest, the growth curves of demand and debt run parallel. However, an obstacle remains, that of the private property of the means of production, that of excess added value and its supplement as private investments. Handing over property to the banks is not a solution. They are, after all, just providing a service by creating money and organising its circulation. No doubt this needs a highly skilled work force, but then so does the production and distribution of electricity. The state as sole proprietor is a confusion of functions that has always led to absolutism. The state funds its spending by raising taxes, and its incomes do not need to be justified by property. And accepting or refusing taxes has, throughout history, been the best prevention against the abuse of power. Anyway the state influences production sufficiently by legislation and procurement. Therefore, the only remaining candidates for the property of the means of production are those who actually use them. Labour’s ownership of the means of production seems the only alternative to periodic financial and economic chaos, and to social unrest and widespread misery.

(1) Growth rate of 10%, to the nearest whole number.

Over time, the supplement stabilises at around 7% of the excess added value.

(2) http://en.wikipedia.org/wiki/File:Components_of_the_United_States_money_supply2.svg

On the persistence of hierarchy.

2010-07-03T00:50:00.000-07:00

Labour and property have always confronted each other. However, until quite recently, the labourer was chattel, bonded to the earth as a serf, or to the master as a slave. History is full of peasant uprisings and slave revolts, but the modern form of confrontation only appeared as serfage and slavery were progressively repealed. Labour had to be free to stop working, at least in principle, without being condemned to maiming or hanging. In practice, labour’s dependence on wages and the precarious existence this implies make a lie of this freedom. So that labour’s second ongoing struggle was the right to organise. Except that freeing labour from bondage was as much an advantage for property as it was for labour, whereas organised labour threatened property. New techniques of agriculture had made serfs cumbersome and mass migrations had made slaves unnecessary, letting free labour organise was another matter.

Labour began to organise along the lines of the ancient trade guilds. These were secretive affaires – patents and copyrights had yet to be introduced – that wielded considerable power. But they were associations of masters defending the interests of property, those merchant bankers and master craftsmen who were to jostle monarchy and join the landowning aristocracy to form a republic, a commonwealth of property. From the start labour unions were fragmented and semi-clandestine. They helped their own when sick or unemployed, and were severely repressed whenever they went beyond such mutual aid. However, unions resisted and gained influence, and even appeared united. The International Workingmen’s Association was founded in 1864, the Trades Union Congress in 1868 and the Knights of Labour in 1869, a high tide for labour that culminated with the Paris Commune of 1871. But it was also the time when labour’s future divisions became apparent. On the one hand, those who wanted property to change hands, on the other, those who wanted to do away with property altogether.

At the Hague Congress of 1872, Bakunin and his party were excluded from the International. This was the consequence of an ideological rift between him and Marx, two opposed visions of history. Marx had developed the concept of class struggle. Just as the bourgeoisie has wrested power from the monarchy, so the proletariat would wrest power from the bourgeoisie to form a class dictatorship of their own. Then, in a classless society, communism would develop and blossom. Bakunin argued that the French aristocrats had been less unsettled by the guillotine than by the confiscation and sale of their domains, that tyrants and exploiters in general were the involuntary products of a certain social organisation, and that the vengeance taken on them was “as futile as the destructions caused by a storm”.

“But, to have the right to act humanly with humans without endangering the revolution, no pity must be shown for positions and things. All must be destroyed, first and foremost property and its inevitable corollary: the State.” (1)

Marx had grown up under Prussian rule and was living in London, at the heart of a global maritime empire. He had experienced the power of a military state and could measure the influence of property. These could not disappear overnight, but their hierarchy would change and give them a different direction. Bakunin had grown up in Russia and had moved to Paris, with only brief stays in Berlin and London. His models had weak governments and their populations were still mainly rural. The courts of Alexander II and Napoleon III could disappear overnight and be replaced by a federation of local popular governments. Property would be confiscated and become communal. The two men’s personal circumstances seem to have influenced their particular visions. Marx perceived the complex levels of authority and wealth, between the generals and the private soldiers, between the City and the slums. He was an intellectual who had studied history and saw it as a progressive movement. As labour produced wealth, its struggle through the ages and its ultimate goal were to control that production. That the basic contradiction between property and labour would be synthesised was unavoidable. Bakunin divided society into the people and the state, the labourer and the absentee landlord. He had begun a military career (a common practise among young men of independent means, see Tolstoy et al.), but he left the Russian army in his late twenties and went to Paris. During the half century that preceded his arrival in 1842, Paris had been the theatre of some ten regime changes, from mob rule to military coup, and more was to come. During this entire hullabaloo the people had gone on working and getting things done. Clearly the whole sad business of state and property could and should be done away with. Bakunin remained faithful to his mentor Proudhon, who was a federalist and had proclaimed “property is theft”. And Marx kept faith in Hegelian logic.

The opposition between Marx and Bakunin was played out during the 20^th century, without the destruction of property and state. The revolutions were remakes of those that had occurred previously in England and America. They were bourgeois led revolts against absolute monarchs and colonial rule. Nations were born and opposed one another. Ideological borders sprang up and led to ethnic cleansings and war. Property and state dominated everywhere. Bakunin’s ideas had inspired the Soviets, the CNT-FAI and the IWW, and insurgencies from China to Cuba, to no avail, which seems to show that bourgeois revolutions actually strengthen the powers of property and state. They rationalise them and make them law. They enshrine them and make ideological touchstones of them. Property is sacred, and the state is there to insure it is never violated.

Bakunin’s idea that a revolution could abolish property and state was a fallacy. History has disproved it time and again. But the freedom that accompanies this idea is so exhilarating that people will, and have abundantly, put their lives in the balance. It seems that the Hague Congress was justified. Labour cannot do away with property. They are in contradiction, thesis and antithesis, and are condemned to synthesise. There will be no victor, the two will amalgamate. Neither can annul the other, they can only merge as yin and yang. A process that goes on with ebbs and flows regardless of obstacles.

Labour and property are mutually dependent entities in a dialectical confrontation. But these opposed abstractions are made of real flesh and psyche human beings. There are those whose income is a wage for work done, and those whose income is rent derived from the property of shares, bonds, real estate, farmland, mining rights, patents and copyrights. This distinction is beginning to blur. Rentiers earn wages, and wage earners receive rent. Property and state have democratised. Almost everyone can vote, and almost every one can own property. But the bottom of the pile are generally excluded, and the top 1% own a third, a half or more of all property, and have total control of its essential parts. Labour and property are mingling, but the process has widened the base, strengthened the hierarchy and lifted it higher. Labour’s collaboration has strengthened property’s dominion. It has legitimised property, the way that voting legitimises the state. But neither give control of the hierarchy, which is an ideological construction, the dominant ideology of dominion, the rule of superlatives.

Labour, property and state share power and wealth. Their respective control can vary, but their hierarchical structures are identical. And so it is throughout society. Life is a competition, and everyone admires those who make it to the top. Sporting events epitomise this struggle, as a perpetual competition for the first place, faster, higher, farther. Whether the state controls property or property controls the state, or whether labour has a control of both, winners and losers confirm the competitive nature of society and of living beings in general. In all circumstances humans are divided between the one and the many, the speaker and the audience, the leader and the crowd, shepherds and sheep. Labour is taking control of the wealth it produces by eliminating the rentier, as dividends become a variable of wages and pay for retirement pensions. But this process accentuates the scramble up a higher ladder. It does not contest the ladder’s necessity.

Prehistoric societies, those that precede writing and city dwelling, do not have permanent leaders. They have recourse to a series of individuals, each best suited for a particular function. Some have the accumulated knowledge of old age and some have the supple strength of youth, or the stamina of middle age, while others have various skills, poets and artisans, healers and sorcerers, sculptors and painters, magic skills that set them apart. The one accepted leader is the war chief, but even he must show results to keep his position for the duration of hostilities. Supposing war becomes a permanent state, the full-time occupation of a whole society - as was the case for the Achaeans, always up to trouble, destroying Iliums, stealing golden fleeces and killing Minotaurs, or the Spartans with their secular counter-insurgency against the Messenians - then the war chief becomes a permanent fixture.

Since the dawn of history, humans have waged constant war on fellow humans, and have honoured the best killers as their leaders. Covering at least five thousand years, history relates the many different ways leaders have succeeded one another in almost perfect continuity. And, along with the perennial leaders, come the soldiers and the clerics, the executive, the administrative, the legislative and all the petty leaders, the barons and the sergeants. Property and state may change hands but the pyramid of power and wealth is perpetuated. Yet the pyramid is the most inefficient form of government, whether for decision taking or for wealth distribution. The all seeing, all knowing head of the executive contradicts all initiative. The law is the law, orders are orders, right turn, left turn. And the only alternative to absolutism seems to be an assembly of lifers, a senate or a council of cardinals, gerontocracies that are the most conservative of governments. The Vatican has (unsuccessfully) tried to stop history for centuries, and the high chambers of the major democracies are all allergic to change.

Labour has been absorbed into the structures of power and wealth, and has adopted its hierarchical code. The contradiction has been resolved but the pyramid remains, as firm as ever. The leader ideology is perpetuated with its cascade of supporting roles. And equity must rely on charity. The rule is the most extreme inequality, immeasurable wealth and abject poverty, and the reliance on empathy to bring some solace to the humblest members of a global society. Nations need to look up at models, at exemplary figures on the screen and the green, in government and corporations, in religious faith and on the killing fields of war. But this is the synthetic construction of a historic period. It accompanied the advent of cities and conquest, and writing.

McLuhan – arguably the most materialist of historians – studied what he called media, all those intermediaries between us and our environment, from clothing to words. Words in particular, as they fashion our world view by encompassing all the other media as well as the environment. Language is the master medium. Language is spoken and written. It can be heard and it can be read, and it is a uniquely human interaction. Language models our conceptions. There is the thing and the word for the thing, and words for things that are immaterial. For most of history, ephemeral speech was the only word, and word of mouth the only transmission. Then came writing, and words could be engraved for eternity, and slogans posted at crossroads. In their heyday, the pyramids of Giza were plastered white and used as billboards to glorify the sons of Ra. The phonetic alphabet was the next novelty, followed by the movable type printing press, the rotary press and electronic sound. McLuhan studied the cultural and social transformations and the traumas that immediately followed the introduction of these new media, and reached some interesting conclusions. But he seems to have neglected their accessibility. The medium is the message, but how does the mediation function?

Words and the ideas they provoke are transmitted by sound and writing. Sound needed a theatre and writing a surface. Theatres were subjected to government authorisations, and writing materials were expensive. The rulers had control of both. This centralised control of words was to change with paper and movable type. The Gutenberg revolution was devastating. Books and pamphlets were soon circulating without restraint and were being read in private. Printing broke the ideological monopoly of kings and cardinals. By the mid-18^th century, three hundred years after Gutenberg’s brilliant invention, the Earth was one of the planets moving around the Sun, which was a star among countless stars, and gravity governed them all. The material world had expanded infinitely and the ideology of dominance had trouble keeping up. Europe was in cultural effervescence and France was its geographical centre, awash with subversive clandestine literature coming from all sides. Geography and printing had made France the social laboratory of Europe, while neighbouring nations watched with awe and apprehension. Monarchy, republic, empire, monarchy, republic, empire followed in quick succession to quell this continual subversion. It was finally subdued by the rotary press and the mass media era.

Ideas are constructed with words that circulate. And the nature of the ideas depends on the mode of circulation. The words may be identical for all with a centralised diffusion, and they can be a multitude of different words from a variety of sources. Printing created a network of messages. Mass media restored monopolies. The cry of the newspaper vendor and the signature tunes of radio and TV are like the angelus bell and the muezzin’s call. They summon the faithful to communion in a common message. Totalitarian control of mass media led to impasses and precipices. The nations that maintained some diversity fared better. Thanks to offset printing, FM radio and cable TV a counterculture was kept alive, a polyphony provoking novel ideas. Diversity is survival in an ever changing world. Diversity can adapt to new circumstances. However the age old habit of control persists.

Gutenberg’s printing press resulted in a criss-crossing of words that revived old ideas and produced new ones, and broke up the medieval cultural monopoly. The web – let’s say Berners-Lee/Noyce/Jobs – is a similar network, with a global reach and instant connexions. The mesh of words is sparking off new ways of thinking about social cohesion and technology, an absolute urgency with pending climate change, biodiversity collapse, peaking resources, financial piracy, et cetera. And, anyway, historic cycles seem to get shorter and shorter. A few decades may (must?) suffice to repeat the stages of Renaissance, Reformation and Enlightenment. Internet has broken the ideological monopolies of mass media, and loosened the hold of central thought control. But the controlling forces are fighting back, countering reform as well as insurgency. Is this reaction the last skirmishing before defeat, or is it a prelude to the return of total mastery via the search engines? Will the criss-cross of words nurture protest and future solutions, or will a mono-message lead the world off a cliff?

Labour collaborated with property but did not appropriate it. Dazzled and stupefied by the glamour and celebrity fostered by the mass media, the middle class majority kept the wages of labour and the incomes of property as two distinct entities, instead of merging them. Instead of increasing wages and phasing out incomes, the middle class majority cumulated them, as working capitalists dreaming of wealth and fame. The pyramid of property and state was perpetuated, as were the social scrambles and the heady heights. And it worked for a time, long enough to become the universal model for a successful society. But pyramids can only grow if they have a wider base. And the accumulation of wages and incomes suggests that wealth is coming from elsewhere, from wages without incomes, from immigrant and overseas labour that does not receive the value it produces. The pyramid’s base goes beyond its national limits. It becomes multinational and strives to be global. Property and state supported by a middle class majority must be expansionist. When the expansion stops or regresses, so does the social climbing. Then the middle class majority is deprived of its incomes, and may even lose its wages. And the pyramid is shown to be built on sand, on oppression and exploitation. Expansion (growth!?) came to a standstill two years ago, and the future seems doomed to paying back debts and cleaning a messed up planet. The historic coincidence of a tottering pyramid and a free web of words is a very rare opportunity that must not be squandered.

(1) Programme et objet de l’organisation secrète révolutionnaire des Frères Internationaux, in Ni dieu, ni Maître, Anthologie de l’anarchisme (I, 222), Daniel Guérin, Maspero 1972.

Money for nothing.

2010-06-02T01:08:00.000-07:00

The financial market’s pressure on the euro seems to be linked to the practise of quantitative easing. The Bank of Japan introduced it at the turn of the century, and the Federal Reserve and the Bank of England instituted it last year, but the European Central Bank (ECB) was dragging its feet, condemning it as unorthodox. The ECB has now adopted the principle (pending parliamentary approval in the member states), which means that quantitative easing has become the guarantee of ballooning budget deficits in the major monetary spheres, dollar, sterling, yen and euro. The four central banks are buying Treasury bonds in their respective currencies so as to maintain the high prices of the bonds and their low interest rates, thereby allowing governments to borrow more and more. Central banks regularly intervene on the currency market to stabilise exchange rates, often to no avail. Their interventions on the bond market have another dimension.

The governments of the majority world are currently borrowing 7/8% of GDP. These are vast sums that need an equally vast supply of willing lenders. But the lenders have realised the doubtful nature of the debts. After all, the governments are not spending these loans, and even less are they investing them. The borrowing is being used to pay back past debts, those of the Treasuries and those of the banks that governments have bailed out. Now borrowing for consumption or investment produces growth, whereas borrowing to pay back debts and their interests is just a Ponzi scheme. The lenders’ suspicions are justified.

Faced with the probability of soaring interest rates, government have called their central banks to the rescue. Quantitative easing is seen as a solution to the problem. Central banks buy and sell currencies to stabilise exchange rates. They can just as well buy and sell Treasury bonds to stabilise interest rates. Except that, when a nation’s currency is attacked, the central bank can only intervene if it has a stock of foreign currency to buy back its own currency on the market. And when the stock runs out, the intervention ceases automatically. Whereas Treasury bonds are labelled in the central bank’s own currency, and it can produce that in unlimited quantities. The ECB quite rightly considers this unorthodox. And the Germans, who are opposed to quantitative easing, have learnt in the past that printing money to pay for government debts does not lead to a brave new world. The rest of the world seems convinced that there is no alternative. Hopefully, Germany’s past experience will not repeat itself.

Choosing change: roasted or fried.

2010-05-28T07:06:00.000-07:00

The state is an instrument in the hands of the ruling class, and can occasionally be the tool of tyranny, or of absolute monarchy. These brief periods of total power are revolutionary. They destroy the old dominant class by taking away their power to rule. And, as tyrants govern through henchmen and administrators, these will eventually succeed him as a new ruling class. The novus homo replaced the patrician, and the bourgeois assumed the role of the aristocrat.

The state controls the civilian and military armed forces. It holds sway over the judiciary and has the power to levy taxes. A ruling class must master these functions to maintain its privileges of property and wealth. The use of force and its legislative justification are essential for maintaining a hierarchy of riches, both at home and abroad. Force also insures taxation, and taxation guarantees state borrowing. The ruling class has the nation’s wealth and the nation’s debt at its disposal.

The ruling propertied class is far from being monolithic. It is as varied as are the forms of property. But this multiplicity seems to follow the two major trends that constitute alternative governments. Property as such is nothing. It only has value if it brings a return. For this it needs an input of labour. To be productive, property needs labour. But different kinds of property need different kinds of labour, and give rise to different relationships. A part of the labour force works hard just for food and a roof, while another part works at a career. Some pick tomatoes, some assemble cars, some are in offices and some trade on the stock exchange. It would seem that the main divide is between agriculture and industry, with services (bankers and barbers, functionaries et cetera) belonging to both sides.

Property needs labour, and the property less must work for property or starve. The propertied class used to own the work force as slaves and serfs. This ownership was finally replaced by the more advantageous system of hire and fire. It was the consequence of a plethoric work force. Human rivers were flowing from the countryside to the cities and from Europe to America. Starving masses who would do a slave’s work for a slave’s pittance, without the investment of ownership. Property no longer had to buy, house, feed, cloth and guard the work force. It merely had to pay the working hours at a minimum wage, barely enough to keep labour alive. And if it died, newcomers would replace it at no extra cost.

The modern paradigm began when landowners and land grabbers evicted all unnecessary inhabitants. Agriculture was changing its methods and practices, and rural communities were a hindrance. Marx tells of a Scottish landlord who emptied a highland valley of its inhabitants, so as to dispose of a game reserve for hunting and shooting. At about the same time factories were being built in the cities. The skilled farm labour became unskilled industrial labour, with dire living conditions and low life expectancies. As mechanisation progressed most agricultural skills disappeared, and farm labour was reduced to picking and carrying. Meanwhile, in the cities, industrial labour acquired skills and bargaining power. It organised and confronted property in an epic struggle. The countryside, that had been the crucible of popular revolt for millennia, sank into the lethargy of ignorance, while the urban proletariat took up the flame. Landed property increased its power over labour, and industrial property learned to divide and rule. Hence conservatives and liberals, with financial property trying to occupy the centre ground, preying on and fuelling both parties.

The propertied class controls the apparatus of state. But property is divided by ideological, historic and material fractures into agriculture, finance and industry. The three major forms of property are united against labour, but they are divided by the different relationships they entertain with labour. And they constantly fight over the repartition of profits between rent, interest and dividends. The three forms of property are reduced to two governing parties, because financial property must deal with both land and industry and has to stay sitting on the fence. So land and industry compete for executive power and rally their respective troops with conservative and liberal programs, and labour just gets more of the same. And there is no alternative, unless labour decides to expropriate the means of production and do away with the propertied class. A perspective that, for the time being, is mere wishful thinking.

Serial events.

2010-03-24T02:14:00.000-07:00

The cycles of history have often been written about. Be it the rise and fall of power or other more complex phenomena. One apparent series goes from monarchy to republic and on to empire, then an intermediary period of anarchy before starting again. Such a repetition seems to occur when the city states of Greece are compared to the nation states of Europe, in the first case leading to Rome and in the second to America. Has the cycle repeated itself because the new world was founded on the old, or is it because the concentration of power has only one course to follow? Whatever may be, the similitudes are there, and even Hadrian’s 2nd century enthusiasm for walls and limes resonates to-day.

Class struggle has been theorised in a linear form, where the bourgeoisie overthrows the aristocracy, and is in turn overthrown by the proletariat at the end of time. But it can also be seen as a perpetual fight between the middle class and the ruling class, with the working class tipping the balance according to circumstances, siding either with the proprietor or with the demagogue who wants the proprietor’s place. If class struggle is in fact a cyclical upheaval – in a three class society with no final confrontation – its repeated resurgences alongside the other historic stutters are a logical result.

Technology also appears cyclical. A new medium is developed and improved, it becomes universal then fades into oblivion when something more effective comes along. However, the time span of renewal is getting shorter and shorter. Old stone, new stone, bronze, iron, steam, internal combustion, battery – alternatively, speech, writing, printing, audio, video, digital – how much faster can change take place?

Finally, though not exclusively, there seems to be a variety of business cycles – those that have been studied have periods of 2/3 years (Kitchin), 9/10 years (Juglar), 17/20 years (Kuznets), 55/60 years (Kondratieff) – all going on at the same time.

The natural world’s cycles are generally accepted, and atomic half lives, tides, eclipses, comets, et cetera, can be predicted precisely. If the synthetic cycles of human society were better known, their future phases might also be foreseeable. And even if the timing lacked precision (How quickly is the technological time scale contracting? How long do empires last?) this knowledge would still give a sense of perspective to a species blindly groping forward into the unknown.

Taking a look at boom and bust.

2010-03-17T01:39:00.000-07:00

Societies used to be divided into slaves and masters, vassals and suzerains. Without completely obliterating the past, the Industrial Revolution introduced a new confrontation between capital and labour, between the private property of the means of production, and the hand and minds that put them to use. Other changes resulted from this transformed paradigm. Labourers were no longer the master’s property, they were free to be hired and fired. And government by cooptation replaced the hereditary transmission of power. The machine age also added a new element to the previous division of wealth between land-owning aristocracy and urban merchant bankers. The industrial entrepreneur was multiplying production and taking his share. And the ancient arch-enemies welcomed him with open arms, as their own wealth was also being multiplied. Growth was the new idol that brought riches to all. Even the poor might get a trickle.

The brave new mechanised world did have a few inconveniences, however, and air and water pollution were not the least. But the major problem was the funding of growth, and the periodic collapses of its financial structures. During the 19^th century the cycles of boom and bust were perceived to last ten years. These cycles were studied by Juglar, and Engels mentioned them in his introduction to Capital 3. He added that, at the time of writing (1894), the cycles seemed to have a longer, twenty year period. It turned out that there were several cycles going on at the same time, short ones (Kitchin), medium ones (Juglar, Kuznets) and long ones (Kondratieff). This means that most of the time the booming cycles compensate those going bust, that occasionally they all boom together, and that they sometimes all go bust together. As for the causes behind these phenomena, Schumpeter was convinced that technological innovation was the explanation – creative destruction (sic) - and that supply expanded and contracted in consequence. However, unprecedented supply cannot justify the apparent regularity of the various cycles, whereas demand seems well fitted to cause such periodic events.

Growth in supply needs a growing demand. And demand depends on being able to pay. So that growth in supply needs a growing amount of money. But money is nothing more than a promise to pay, a symbol of value mediating exchange. A promise to pay that is either the result of a past transaction, or the result of a transaction predicted to occur some time in the future. It can be either cash or credit. If to-day’s demand is to grow, yesterday’s incomes must be supplemented by those of to-morrow. And to-day’s growth increases to-morrow’s incomes, so that it all balances out. Except that something always seems to go wrong. Credit grows faster than incomes, bubbles inflate and suddenly burst, and recession looms. Is the premise at fault, or is it just greedy bankers who are to blame?

The purpose of demand is either investment or consumption. (Supply is less easily defined, as identical goods and services can be destined to both usages). The value of an investment is returned enhanced by dividends, interest, or rent, whereas consumption destroys value. For example, rent pays the upkeep of a property and taxes, plus something more, whereas home owners must pay for upkeep and taxes as part of their expenses. The fist case is an investment, the second is consumption. (Rising property prices may bring a profit in both cases, but that is just bubble economics).

If the credit to fuel growth in demand is invested, the promise to pay is guaranteed by the investment. The investment may be an industrial or a commercial enterprise, or a loan to the Treasury, or real estate. In all cases, when all goes well, the investment is returned with a margin that covers the interest on the credit. And the investor using the credit can make a profit of his own. Moreover, increased investments should increase the work force, or their productivity. This is a necessary result, as only labour can create the surplus value of dividends, interest and rent. (Government spending is mainly consumption, in the form of salaries, social services, real estate and military hardware. Government borrowing can be cash or credit. Either surplus incomes are consumed or consumer credit is granted, and in both cases interest is paid).

If growth in demand is fuelled by consumer credit, the picture is quite different. Consumption uses up value, there is no return, no dividend, interest or rent. So the promise to pay the credit and interest with future incomes is contingent. The borrower (public or private) must be able to create new value, the value of his credit plus interest. And, meanwhile, he needs to maintain his ordinary consumption, which means that his income must grow. Otherwise, paying back the credit will reduce his consumption. So that the increased demand of the granted credit results in a reduced demand when the credit is paid back. The solution is to renew the credit, plus a percentage to cover the interest. But this merely maintains past demand. To maintain the increased demand more credit must be granted. And, for demand to continue growing, even more credit must be granted.

Invested credit is returned, so that its renewal maintains the increased demand. Neglecting interest, this means that the amount of credit grows at the same rate as demand. Consumed credit is not returned, so that the amount of credit must grow faster than demand, to maintain past demand, to maintain previous growth, and to fuel new growth. If growth in demand is to be one unit of value per unit of time, and if credit is granted for one unit of time without interest, then invested credit follows the series 1, 2, 3, 4, 5, etc., whereas consumed credit follows the series 1, 3, 5, 7, 9, etc. It seems obvious that the explosive growth of consumer credit (private and public) cannot be sustained. At some stage the boom must go bust. So why not fuel growth in demand solely with invested credit? The answer lies in the private property of the means of production, and in the tribute levied by the proprietors.

From the very start, humans were able to produce more than they needed to sustain life. This left them plenty of time to sleep and dream, to tell stories, to sing and dance, and to wonder at the beautiful and awesome world in which they travelled. Agriculture put an end to this primal state. It tied people down to a particular place, for life and for generations. It concentrated them along fertile river valleys. And, by labouring from dawn to dusk, these new societies could produce a surplus for the upkeep of a privileged class and the building of monuments. Cities took form and armies conquered, and labour became ever more intensive. Then the steam engine and gas lighting allowed work to continue night and day all the year round. This possibility has been expanded and perfected to this day, on a sleepless planet where billions of humans have adopted the slogan, Work Brings Freedom.

For most of history, the surplus produced by labour was consumed by the ruling propertied class, for the upkeep of artists and courtiers, of armies and artisans. Wealth was land, and its property was only modified by war, murder, marriage or revolution. Even bankers had to limit their investments to commercial enterprises, usury and rented urban property. Marx explained the wasteful luxury of Roman games and feasts by the lack of investment opportunities, the rich had to spend their incomes. Weber linked the birth of modern capitalism to the Protestant ethic, and to its rejection of extravagance. But it was machines and motor-power that really opened the perspective of unlimited investments. The means of production had started with land, then money and trade had proved to be indispensable. Suddenly tools were even more essential, huge tools with gigantic buildings to house them. At last the rich had something to do with their incomes, other than spend them gratuitously. There was however a problematic aspect to the Industrial Age. Multiplying production means multiplying consumption. The mass of goods and services needs a mass market. And if labour earns enough to pay for all it produces, where is the surplus to come from?

The simplest and oldest solution to this dilemma is foreign trade. Consumption is exported and its value comes back as investments, as raw materials or machines. Unfortunately very few nations can play that game at the same time. And it is ruinous for their commercial partners, who must import consumption and export investment. One side gets more investments, and to a certain degree more employment, while the other side looses its investments, and to some extent its jobs. In the past this has often been a casus belli. The other solution is to grant consumer credit.

The surplus of labour can be invested to generate more productivity and employment, more wealth and more surpluses. Consequently, the surplus is no longer consumed, though it remains a part of the wealth produced that must ultimately be consumed. Investing surplus incomes reduces final demand, while increasing supply. The widening gap between the two can be filled by unfair trade and consumer credit, but neither is sustainable, which seems to show that past incomes should be consumed and distributed accordingly. And that growing investments should be financed with credit. The cash of past incomes is consumed, and the credit of future incomes is invested. But this still leaves two unanswered questions. Who owns the investments and who grants the credit? Should the credit, and hence the ownership, be granted to an individual or to a group, and on what grounds? And are private banks the appropriate entities to grant credit out of thin air and obtain interest for it? However, neither question is likely to be asked, much less answered, in the foreseeable future.

Ideological Drugs.

2010-03-05T07:38:00.000-08:00

I’ve seen the needle and the damage done.
Neil Young, Harvest.

Marx famously compared religion to opium, because opium has a double effect. It relieves pain and is habit forming. Marx probably had in mind those faiths that promise an end of time followed by a new beginning, a new Temple, another coming, a Mahdi, and a heavenly afterlife in an eschatological paradise. Such promises are a comfort for all those living miserably under oppression of some kind or another. Their agony can be made bearable by the belief that an extraterrestrial, all-seeing, almighty and just being will set things right in the hereafter. But, once the creed is assimilated, it becomes the centre of existence, a life-line, “milk-blood to keep from running out”.

Religion is a crutch and a monkey. But so are other ideologies, even the most materialist. Communism promised a brave new dawn, and hooked millions. Capitalism promised infinite eternal growth, and hooked billions. And once hooked, what is there left to do but to go on believing, paying the Man because there is no alternative. The downtrodden need hope of some kind to get them through the day, if for not now, for future generations. Otherwise what is the point, why not just go berserk?

Hope and habit keep noses to the grindstone. Backed up by varying degrees of violence, they help to contain the “dangerous classes”. The faith (credulity) they depend on holds back the most disadvantaged sections of society from running amok. Hope and habit are the cornerstones of oppression and inequality. But who can blame the users when there’s “a little part of it in everyone”?

Industrial dominion and trade.

2010-01-15T07:35:00.000-08:00

Henry Ford is said to have remarked that his employees should earn enough to afford the cars they made, which is sensible because mass production is for mass consumption, a mass that included Ford’s factory workers. Other employers did not all agree, however, as high wages necessarily reduce profits. They saw no reason why their workers should own cars, while hoping that Mr. Ford’s well paid workers would buy their products. This is the major problem faced by mass production. When the private property of the means of production demands profit/interest/rent, a maximum return on investments contradicts the wages that allow mass consumption. Low wages mean insufficient consumer demand, and high wages mean insufficient profit.

The simplest and oldest solution to mass production, and insufficient demand because of low wages, is foreign trade. Surplus consumer goods are exchanged abroad for luxury goods or, better still, for raw materials. The classic example is the industrial revolution in England and the cotton trade with India. Raw cotton from India was spun into thread by the new steam machines, and sent back to India. This put the Indian cotton spinners out of work, while the English spinners stayed in rags and the large profits built more and more cotton mills. Only a fraction of the thread was being consumed in England, so only a fraction of its value was paid in wages. However, the redundant Indian spinners were buying fewer clothes, which meant less thread and the closing of mills in England. Later came mechanical weaving, and the American market for raw cotton and consumers. But America had gained independence and soon industrialised itself, whereas India had to wait almost two centuries.

Importing investments and exporting consumption means the added value that is not consumed is invested. The value added by labour is consumed elsewhere and returns as investments. Henry Ford’s remark no longer applies, because workers need not earn enough to consume their products. This has been the model for all industrial nations. But its application cannot be universal and has obvious limits. The model has favoured a few nations with industrialisation and full employment, to the detriment of the many who produce only raw materials and cash crops, and have mass unemployment. Machines are concentrated in a few countries, and the majority world is out of work, as all their traditional craftsmanship has been swept aside by mass produced synthetic equivalents.

Exchanging consumption for investments on the world market means that investments can grow faster than consumption and profit/interest/rent can outstrip wages and taxes. However, as labour in the majority world was made redundant - as had been the Indian cotton spinners before – consumer demand was concentrated in a few hands, those of corrupt governments and their military supporters. Flagging growth was countered by arms sales and constant conflict, and by encouraging the majority world to consume now and pay later. These growing debts led to a crisis in the mid-1990s, when several nations saw their creditworthiness fall very low and were on the verge of bankruptcy (Mexico ’94, Thailand ’97, Russia ’98).

The early 1990s were a turning point, where the end of the Cold War allowed China to adopt the classic model for industrial expansion on a grand scale. (The process started in the 1970s under the Nixon administration. Its “most favoured nation status” was restored in 1980, but China only joined the World Trade Organisation in 2000). For the past three decades, China has been importing investments and exporting consumption, and has accumulated capital at a speed unequalled by any of its predecessors. But, being a late comer, the method of development has evolved. Being the first nation to industrialise, England did so mainly with home-grown technology. When other nations followed suit, they all developed along similar lines, and a new technology was quickly copied by all. By 1940, the major industrial nations – Britain, the USA, Germany, France, Italy, the USSR and Japan – had very similar industrial structures centred around armaments, though none could match America’s productive capacity. After the war, the victors continued the arms race, East against West, whereas the vanquished were banned from the competition. Both Germany and Japan had been severely damaged, their industry and infrastructure were in ruins, and they had no colonies to exploit. They slowly reconstructed themselves from the rubble up. The first phase was all investment and very little consumption. In this they were assisted by the US, where investors were feeling the aftermath of the war boom. When investments began producing consumption, Germany and Japan promptly exported it, to import more investments. But, lacking the neo-colonialists’ privileged access to the majority world, their only possible customers were the industrial nations, first America with whom they already shared financial interests, then Europe and the world. By the 1980s, Japan and Germany had conquered large shares of the global market for cars and cameras, machine-tools and motorcycles, sound and video, et cetera, and had become the second and third largest economies.

Japan and Germany showed the way and China is following in their foot-steps, American investments, then the American consumer market, Japan, Europe and the world. China is drawing in investments and pumping out consumption. And, as with the Indian cotton spinners, people are loosing their employment right across the industrialised world. This should have resulted in a fall in demand. Except that China is trading with the richest nations, where well paid industrial jobs are replaced by services and the difference in incomes is compensated by consumer credit. Or at least was, as this process may be a thing of the past. The credit crunch was the first collapse of the post-Cold War global market. And the huge volume of debts that has piled up and is still growing may take a decade or more to resolve. Meanwhile, other global events are shaping up, climate change, the end of cheap energy, dwindling mineral resources, population growth and urban concentration, food, water, deforestation, biodiversity… China may be developing a model of society that is approaching the end of its historical cycle, which brings the Roman Empire to mind. Then, the cheap source of energy came from slaves. But slaves were the booty of Roman conquest, so that the resource grew, peaked and contracted, as did the limits of Roman dominion. The decline of Rome began with the rising price of slaves. To-day’s Empire is based on the cheap energy that fuels all its machines. These fossil and hydroelectric resources grew, they will peak (may have already) and will inevitably decline.

The credit crunch brought growth in consumption to a standstill. Governments have tried to fill the gap by borrowing more than ever. But there is no reason why subsidising the banks and the car industry should help the millions who have borrowed the income of several years to buy a home, and are struggling to pay their monthly instalments, or those who have overdrafts and revolving credits that equal their monthly earnings. Mass consumption needs a plethora of well paid jobs, which does not seem a likely prospect for the near future, with redundancies everywhere. Shrinking employment in the industrial countries will reduce consumer demand world wide, and China must either close factories to produce less, or develop its own consumer demand, or both. If growth in investments is to continue at the same rate, there can be no redistribution of added value. This means that wage increases would be inflationary, and that consumer demand can only grow with consumer credit. However there is no certainty that the Chinese will take on debt as willingly as have Americans and Europeans.

The struggle of nations.

2010-01-06T01:33:00.000-08:00

The Cold war was the acme of insurgency. The two super powers, who were held apart by mutual nuclear destruction, conducted a war by proxy throughout the post-colonial world. The slightest disturbance in one sphere of influence was immediately supported by the other. However, as America’s allies were the colonial nations of Western Europe, decolonisation made them an easier target than the Soviet Bloc behind its iron curtain. Each new nation was wooed by Moscow. In the case of a refusal, the opposition would be courted. And, if the union was accepted, the opposition could rely on support from Washington. The Cold War was power play in ideological clothing. Liberalism and communism had to be incompatible because the adversaries had chosen those two banners, though neither was either. Proving this Manichean notion was a cover-up for world supremacy. It meant arming rival factions and encouraging violent conflicts all around the world. The imperial purpose turned the delicate process of nation building into an endless blood-bath.

The Cuban insurgency was possibly the most emblematic and mythic. It was also the most improbable. That, on America’s very door-step, a few bearded peasants could overthrow a dictator backed by an army and a police force, and financed by United Fruit and Cosa Nostra, was astounding. The main reason behind this success was probably an ageing second-term war-weary president in the White House, who called back a joint Anglo-Franco-Israeli attack on Egypt in 1956. Eisenhower had put an end to the Korean War and had not given much support to France’s war in Indochina. He would not send American troops into the Sierra Maestra. The success of the Cuban insurrection was also due to its two very charismatic leaders, Guevara the theorist and Castro the organiser. Their background was South American, and they seem to have been more influenced by Villa and Sandino, than by Lin Biao and Giap. But all had in common a national liberation front and a people’s army. And their common enemies were absentee landlords, foreign control of the economy and a corrupt puppet government. Land reform, self determination and national pride appeal to a wide band of the social spectrum, which leaves the compradors out on a limb. The Cuban insurgency took place during a lull in the global power struggle (Khrushchev was busy trying to get rid of Stalin’s heritage and quarrelling with China), and no one could disapprove when Batista and his gangster friends fled Havana . But things were about to change, with a new American administration, a blockade of Berlin and “Cuban” missiles. And, for the following quarter century, the Cold War would be very hot in the majority world of budding nations. Orwell imagined three super powers that changed alliances and colluded. Alliances did change between Eastasia, Eurasia and Oceania, but the contest for wealth and power was as real as the death counts. A costly protracted war was soon deemed better than a fallen domino.

The American involvement in Vietnam and the Russian involvement in Afghanistan mirrored each other. They were the moments of the Cold War when the two super powers engaged their combat troops in wars they could not win. Armies have always been trained to fight other armies in total war. They are not adapted to the policing of native civilians. The limits of the operations were also a handicap. America barely hesitated in bombing North Vietnam and neighbouring Laos and Cambodia, but could go no farther. And the Soviet Army could not even envisage bombing Pakistan. In both cases the insurgents disposed of a safe-haven protected by a line that could not be crossed, a base that provided equipment, training and comfort. With the end of the Cold War, the assistance given to insurgencies by the two protagonists stopped quite suddenly. Insurgents were left to their own devices, no more money and weapons, no Ho Chi Minh trails, no Stingers, no protective line.

Since the events of 1989/91 insurgents are no longer involved in a global conflict between two super powers, and have had to fend for themselves. Some went out of business and joined main stream politics, some retreated to the inaccessible regions of their ethnic roots, and some turned to the illicit trade in drugs, diamonds, gold et cetera. But, in the Muslim world, old-new concepts and solidarities were shaping up as an international movement. Its origins can be traced back to the Iranian revolution of 1979 and the founding of an Islamic republic. The Iranians were virulently anti-American. This made them potentially pro-Soviet, though there is little evidence of such an alliance. As they were also Shia and republicans, the Sunni kingdom Saudi-Arabia felt especially threatened. In response, and with America’s blessing, the Saudi launched a Wahhabi revival. A very strict Sunni fundamentalism that was propagated from Nigeria to the Philippines, by the funding of schools and mosques dedicated to this obedience. With almost unlimited means the manoeuvre was a huge success. Madrasahs and minarets sprang up everywhere, and a new fervour animated the Coranic faith. But the reformation that had begun as a cynical move in the geopolitical game was soon to live a life of its own. It came into contact with those Frantz Fanon called “the damned” and was radicalised, notably among the Afghan refugees living in Pakistan. And, for as long as the Soviet army occupied Kabul, the Jihadist enthusiasm of the Taliban was encouraged and supplied with weapons. However, when the Russians pulled out of Afghanistan, the American, Saudi and Pakistani Services seem to have been totally overwhelmed by their own creation. Mullah Omar and his Coranic students ruling over such a strategic cross-road pleased no one. Then an aerial attack on the US was planned there, which made matters much worse.

The Wahhabi reformation straddled Islam, linking Asia to Africa, and Trans-Caucasus to Sub-Sahara. When the interior struggle for faith and morality was exteriorised as a struggle for power, the result was as explosive as ever. Fundamentalism is a powerful force. It steeled the Protestants of Europe against the Inquisition and the counter-reformation. Having been dictated by God, the laws of Moses superseded the decrees of kings and princes. Submission to the edicts of a lonely deity was a rebellion against the petty tyrants of the material world. Literacy and the printed vernacular Bible broke up the European feudal society and replaced it with nations. And, having levelled society, the Scriptures became an ethnic bond. God spoke in many tongues, to each nation its own. Much of Islam is still in the grips of feudalism and illiteracy. Fundamentalism may be the necessary path to a literate nation united by a written vernacular. According to McLuhan’s hypothesis that the medium is the message, the Koran can be a nation builder as were the Old and New Testaments, and the Little Red Book.

The Pashtu insurgency against the US led coalition in Afghanistan has spread to Pakistan. This shows clearly that it is a national movement divided by a colonial frontier, the Durand Line, and does not bode well for its resolution. It also suggests that the Afghan ethnic patchwork may become a federation, but will never be a nation. The vernacular and the particular culture it transmits are the basis of a national identity, so that two (or more) linguistic groups cannot coexist within a nation without one dominating the other(s). The majority rule of wealth and numbers will always impose one language as representing the whole nation, to the exclusion of the other(s). But linguistic minorities can be very resistant over time. After seven centuries of English domination, the Welsh are still fighting for cultural equality. After the Treaty of Sèvres, which divided up the Ottoman Empire between the victorious allies in 1920, the Kurds had to be Turks, Iranians, Syrians or Iraqis. They are still fighting for a homeland of their own. There is no reason to believe that the Pashtu will show less resolve, which applies to all the other nations that live astride the colonial borders of Afghanistan, Tajik and Uzbek, Turkmen and Baloch, Kashmiri and Iranian.

Nations are cultural concepts that differentiate themselves by the media of culture, by speech and the written word. They are a step beyond the rule of might and feudal hierarchy to a social contract among equals. An equality that presupposes cultural homogeneity through a common language. Many European nations are still divided internally by linguistic, religious and historic differences. Whereas the US is an immigrant nation, and successive waves of newcomers from all over the world have had to adapt to the mould and abandon their ancestral heritage. (Though the states taken from Mexico may soon develop their Hispanic culture to the point of claiming cultural autonomy). Melting Pot America has an established dominant culture symbolised by Thanksgiving and the 4th of July. The unquestioned predominance of the English story is made possible by its structure. The American tale is not about ancestry, filiations and roots. It is about arrival, construction, expansion and conquest, which means that newcomers are as much a part of this dynamic process as those who came before them. America is a nation of immigrants who move around the continent with a sense of possession, but no sense of belonging. “This land is our land”, from ocean to ocean. Such an abstract concept of nationality does not apply to most human groups, least of all to the Pashtu who have seen Greeks, Huns and Turks, Arabs and Mongols, English and Russians, come and go in the valleys beneath their mountain strongholds.
The Pashtu insurgency against the coalition’s presence in Afghanistan has spread to the Tribal Areas and the North West Province of Pakistan. It is not unlikely that this will enflame neighbouring Baluchistan, and Kashmir. What began as a retaliatory strike against Osama bin Laden and his brain-child Al Qaeda is turning into a situation where the occupying forces face a nation in arms. Crushing the international brigades and destroying their Tora Bora stronghold was a straightforward military operation in a free-fire zone. Helping the Northern Alliance to take Kabul back from the Taliban was essentially a matter of fire power. Submitting a mountainous region that stretches from China to Iran can only be envisaged at a great cost in human lives. In fact history seems to show that only the total annihilation of a nation can insure its submission. Short of that, resentment will reach boiling point and bust into violence, again and again. A nation can be annihilated physically, as in Antiquity when the price of rebellion was death or slavery. And many nations have disappeared over the course of history. But extermination, except for the inhabitants of the fast receding tropical forests, is no longer acceptable. The modern alternative is to chase people off their ancestral land and concentrate them in camps, where they can be safely guarded. Refugee camps on the periphery of a war zone are more easily controlled than “strategic hamlets” inside the zone. The American surge in Afghanistan next spring will push refugees across the Durand Line, where they will join other refugees fleeing Pakistan’s military offensives in Swat and Waziristan. They will move East, South and North, spreading anger and resentment. So far there are just a few camps in Pakistan, many refugees lodge with the inhabitants of their place of refuge. But, if their numbers increase significantly, this may no longer be feasible, nor desirable for the authorities who will want to avoid the dissemination of subversion. The programmed escalation of violence in Afghanistan will provoke a humanitarian tragedy and will wake a nation from its medieval slumber. Just another blood offering to the sacrosanct frontiers drawn in the chancelleries of Europe, as they divided up the world they were conquering. Or it may be that nations need more than literacy, that they must then construct themselves by a desperate struggle for existence.

Le temps.

2009-11-25T01:08:00.000-08:00

Et si le temps n’existait pas. Si c’était le mouvement qui crée l’illusion du temps. L’univers bouge et la position respective des éléments qui le composent varie constamment. C’est cette variation qui serait le temps qui passe. Par ailleurs, certains mouvements semblent se répéter, et cet éternel retour donne l’impression d’une régularité du temps et d’une continuité entre le passé et le futur, d’un écoulement qui peut se découper en segments identique. Mais, puisque tout bouge, chaque position est unique et ne pourra jamais se reproduire. La notion d’un continuum temporel serait fausse. Il n’y a que des situations différentes qui se succèdent.

Le sable coule et les isotopes se décomposent. Leurs mouvements sont réguliers et paraissent exister en fonction du temps. On mesure le temps passé, tant de sable s’est écoulé, tant d’isotopes ont perdu des neutrons, mais le temps présent nous échappe. L’ici et maintenant n’est pas perceptible, puisque nos sens ne transmettent que des événements passés. Il faudrait une perception instantanée qui ne passe pas par les capteurs, le système nerveux et le cerveau. Seul un sens qui serait en dehors du temps nous donnerait le sentiment de ce qui est. Nos sens ordinaires captent des informations extérieures et les transmettent au cerveau. Pour supprime ce retard, pour percevoir le monde tel qu’il est (en devenir) plutôt que le monde figé du passé, il faudrait supprimer le passage du message, dépasser la distinction entre le monde et sa conceptualisation, lâcher son moi pour se perdre dans le grand tout.

Nos actions sur le monde sont projetées dans le temps futur. L’acte est prémédité, il faut le concevoir et activer les muscles appropriés. L’action a lieu et déjà nous sommes à nouveau dans le passé, dans le domaine cérébral du souvenir et des sens. L’action (le mouvement) est dans le présent, mais la perception qu’on en a vient du passé. L’action prolongée réduit le brouillage du passé, mais elle accentue celui du futur. L’intention exclue le souvenir. Le prochain pas, celui à faire, se superpose sur le précédent. Le mouvement rapproche du présent par son action sur le monde, mais il dépend d’une intention future. C’est peut être la méditation (mandalas, mantras et respiration) qui donne un aperçu du temps présent. Une non-action active et une intention sans objet. Une action qui écarte sans solliciter le futur. L’intention qui projette dans le futur est contrée par les techniques visuelles, sonores et respiratoires. Le passé est exclu par l’action, et le futur disparait avec la dilution du moi volontaire. Alors le présent devient perceptible, le prodige d’un monde en train de devenir.

The egalitarian ideal.

2009-11-06T07:42:00.000-08:00

Twenty years ago the Iron Curtain was breached in Germany, signalling the beginning of the end of the Cold War. That this should happen where it did is not surprising, as that was where the confrontation between East and West was at its most acute. Elsewhere the Curtain followed national boundaries, only in Germany did it split a nation in two. Only there did each side see a distorted mirror image if itself. There was no national difference, only a systemic one. Though East and West Germans shared a seat at the United Nations, they were opposed by the global conflict. The contradiction was extreme.

From the outset, the Soviet regime had professed an egalitarian ideal. No more national and religious distinctions, the Soviet citizen had identical rights and duties from the Bering Straits to the Baltic Sea. This was not an easy task, as many nations in the old Tsarist Empire did not consider themselves Russian, let alone Soviet. The egalitarian ideal had too root out all differences, so populations were moved around, places of worship closed, and opponents from everywhere were herded into the Arctic gulag. The West did not have to deal with egalitarianism. The colonial powers had never accepted their subject peoples as equals. Granting them independence merely replaced the colonial administration with a native government. And these governments remained wholly dependant, both financially and militarily, on the neo-colonial metropolis. This meant that the three continents could be plundered at will, their populations could live in abject poverty, and their rulers could act as absolute tyrants, while Western Europeans and North Americans enriched themselves without the slightest qualm, in the benevolent framework of their liberal societies.

For forty years Germans lived astride the global ideological divide. At the start, the Easterners were looted by their Soviet occupiers and obliged to pay war damages. Then, after the uprisings of 1953 (and the death of Stalin), they were gradually blended into the Soviet norm. The Westerners were more fortunate. They were the main beneficiaries of the Marshall plan and, untroubled by the colonial problems of their neighbours, were soon the most prosperous nation in Europe. Wealth instead of drudgery, shiny colours instead of dismal grey, BMWs instead of Trabants, who could resist such attractions? The good life was in the West, where even immigrants seemed to fare better than Easterners. So that by the late 1980s a vast majority of East Germans were striving to go west. And, at the first signs of weakness shown by a wavering authority, they crossed the line en masse and brought down the wall.

The egalitarian ideal has proved to be unfeasible. It cannot compete with the ostentation of inequality. It cannot produce the lavish spectacle of mega-wealth. The luxury celebrities who fuel the popular day-dreams are far too potent to be countered by a communal ethic. And life as a lottery is a much simpler and more appealing fantasy than the prosaic struggle for a common good. However, the unequal distribution of income is not just a glamour show. It tends to favour investment rather than consumption, and thereby the accumulation of public and private debts, a financial house of cards that periodically collapses. These times of crisis are when demagogues call for a level society, when a disgruntled middle class burns its idols and follows the first determined leader to present himself. The world has often been in crisis before, but the usual outlet of war and the levelling effects it induces are no longer a serious option. So the sharing of dwindling resources in a changing climate could turn out to be a necessity rather than an ideal.

Answering five questions.

2009-10-16T08:28:00.000-07:00

1. If Robert Zoellick himself warned, days ago, that the dollar is set to be eclipsed, so why Gulf countries, such as Qatar or Saudi Arabia or UAE, insist on using American dollars in their oil trading, denying what the prominent Robert Fisk wrote in the independent, yesterday, about replacing the dollar with a basket of currencies, in trading oil?
2. In your opinion what is the perfect shape, for a new international economic order, that may include china and India, and others?
3. What it takes to rebalance the global economy?
4. How effect can the IMF be as rebalancing referee?
5. Will there be a change in global dealings with some currencies?
Khalil Harb

Money is a measure of value that facilitates exchange. Minting coins and, later, printing paper money has always been a prerogative closely supervised by the state (Scotland seems to be the only exception, where private banks issue notes). Bearing the monarch’s effigy, or the republic’s emblems, money symbolises the power of state. A power that stops at the border, beyond which another power and another currency take over. A legal tender exists within the frontiers of a nation. But goods, services, commodities, merchants, entrepreneurs and labour cross these frontiers continually, and at each crossing value has to be reassessed. Exchange rates vary constantly according to supply, demand and speculation, as well as for political and diplomatic reasons. Not knowing to-morrow’s value is a great inconvenience.

The US dollar’s supremacy dates back to the end of the Second World War In 1945, America was the only major industrial nation not to have suffered war damages. A year earlier, the gold standard established at Bretton Woods had been a face saving operation for Great Britain and France. It was of little consequence as, for the following fifteen or so years, the US was the only nation able to produce industrial goods for the world market. And the US dollar became the world’s currency as a consequence of this monopoly.

By the mid-1960s, Japan and Europe had rebuilt their capacities, had settled their colonial pasts (neo-colonialism) and were back in the competition for all the new markets. But their currencies were still weak and dollar dependent. The US trade balance remained largely positive, and America was still the world’s creditor. However, when crude oil prices were multiplied in the 1970s, the balance was upset and America became the world’s debtor. According to Michael Hudson (http://www.counterpunch.org/shaefer04232003.html) this was when the US government decided to pay its commercial deficits with Treasury bonds. A practise it has maintained ever since.

Saudi Arabia, Japan, Germany and more recently China, have accepted large quantities of US Treasury paper to balance the growing US trade deficit. Hudson says that Saudi Arabia did it under pressure. And this could be true for all of America’s creditors. Whatever may be, once a nation accepts another nation’s money (T-bonds are a promise to pay), it must continue doing so. If at some point it demands another form of payment, the money form will be devalued to its own disadvantage, as it is in possession of a lot of paper labelled in that other nation’s currency. If Japan stops buying US Treasury bonds and China stops accumulating US dollar reserves, the dollar will plummet and both creditors will lose out on the Dollars they are holding.

A global market needs a global currency. The US dollar has filled this function for over sixty years. During the first half of this period, America had a trade surplus and was the world’s creditor. During the second half, America had a trade deficit and was the world’s debtor. Concomitant to the trade deficit, the US was running a budget deficit and was selling it abroad. And the two deficits conveniently balanced out. On both the interior and the exterior markets, the US was thriving on ever increasing quantities of credit. The problem facing America to-day is that it is importing les and thereby reducing its trade deficit, while its budget deficit has been hugely multiplied. The flow of credit has stalled, the dollar is at the cliff’s edge and the world is holding its breath, waiting to see the result of quantitative easing. That is, the central bank buys old Treasury bonds from private banks, who in turn buy the new bonds being issued. This is in fact “printing” money to pay for government deficits, and is usually considered the symptom of a failed state.

The US dollar has far outreached its function as a global currency. This can be blamed on the Cold War and the superpower politics of imperialism. However, empires cannot be reformed, they can only decline or fall, which seems to be the future of America’s financial tool, the mighty dollar. Can it be saved from collapse by bolstering it up with a mixed bag of other currencies? Could the IMF or OPEC offer an alternative currency? Can the euro…? None of this seems likely, as the quantities of money concerned are too vast. The dollar stands alone, and alone it will fall or decline. And a new world currency will replace it. The dollar imposed its primacy because of America’s trade surplus. And, except that there will be several players, this will probably be the criterion again. So that following the adage, he who pays the piper calls the tune.

The gardener's spirit.

2009-10-16T08:21:00.000-07:00

Humanity seems bent on disrupting the planet’s stability, to the point of threatening the existence of many living species. This possibility, which may already be beyond recall, is a consequence of science, technology and the original human notion that nature can be modified. For most life forms on Earth, the only preoccupations are food and reproduction. Though birds, some insects and a variety of mammals build and burrow, very early on human kind went a step farther with tools and clothes, and the cooking fire. Artefacts are unnatural, an offence to creation and a challenge to the gods. So Prometheus was severely punished, and the serpent of Paradise must forever slither. But the power to create, to imagine and to make, had become a human faculty. The world could be transformed and visions could become reality.

Adam and Eve acquired knowledge and were expelled from the animal Eden. They learned to cloth themselves and to cultivate the earth. Cain and Able specialised, a farmer and a herdsman. They fought and, notwithstanding the Bible’s constant preference for meat offerings, agriculture was victorious. This led to the building of towns. Later, the sons of Lamech learned herding but not husbandry, music and metallurgy. In the more complex Greek cosmology, this was when Prometheus intervened. The fire he stole was not that of the hearth, nor even that of the potter’s oven, it was the heat of Hephaestus’ furnace. The Olympian black-smith had been cheated and avenged himself by forging unbreakable chains for the thief.

Bronze and steel transformed the production process and the rules of war. But their discovery supposed a certain perception of the material world. Natural gold and, more rarely, copper are found as nuggets in river beds. However, most copper, tin to make hard bronze and iron must be extracted from an ore. Heat transforms matter. It makes food more digestible, it hardens and glazes pottery, it turns stone into steel. Heat and fire were seen as a cosmic force on a footing with earth, sea and wind, while in hot climates the omnipresent sun dominated all. And, though other metals were extracted from their ores (as late as the 17^th century, alchemists were still hoping to find gold ore), so things remained for a few thousand years.

Knowledge is good and bad. It produces and destroys, saves and kills, makes things possible and impossible. Hunter-gatherers are nomadic because they follow the game and the seasonal plants. Having no reserves, they must find fresh food all the year round. Living this way supposes a precise knowledge of considerable trackless expanses, of meteorological and topographical particularities, of animals and plants, of magic ritual and the interpretation of dreams. Primitive societies master their environment and are subjected to it. Their world is awesome and beautiful, generous and demanding. It exists of itself. About ten thousand years ago humanity split in two. Some learnt to domesticate a variety of animals for food and portage. Others learnt to grow selected plants. At the start, this was probably an either/or situation, following the herd or staying with the gardens. The herdsmen are well documented, and their remnants still roam around East Africa, Arabia, Lapland, Siberia and Mongolia. The gardeners left only fragments that are difficult to put together, and Malinowski’s Trobrianders gave just a glimpse of what may have been.

In hunter-gatherer societies, men usually do the hunting and women the gathering. With the domestication of animals and plants, the herdsmen adopted a patrilineal succession, and the gardeners may have had a matrilineal transmission. Herds have alpha males, whereas most plants are both male and female. There is no duelling for sex in the vegetable kingdom. So the herdsmen roamed the steppes in search of fresh pastures, and the gardeners built, planted and reaped in the fertile river plains. Two separate worlds, two incompatible cultures and, when they met, the alpha males must have been irresistible.

Knowledge of the world had divided and joined again. But the reunion did not restore the balance. It installed a series of dominations. Adults dominate the young, man dominates woman, men dominate one another, and all humans dominate nature. The gardener’s acquired knowhow was subjected to the herdsman’s animal certainty. And knowledge became the tool of power. In the animal world, power is limited to the food chain and to reproduction. Human power expresses itself as wealth. The herdsman’s wealth was his herd, his wives, children and servants, and the personal belongings that could be carried. In the bountiful garden plains, wealth was multiplied by abundant manpower to build palaces and temples, and to cover with gold the ultimate source of power, be he king or god, or king-god.

History is the tale of power using knowledge for its own magnification. The pen’s might is the sword’s servant. With the advent of writing, the transmission of knowledge was split into public and esoteric, the official version and the word of mouth. The ancient oral traditions did not survive the onslaught, so the world was according to Plato and Aristotle, Livy and Virgil. The Iliad, the Odyssey, and the Pentateuch were “written” at about the same time, 6^th/5^th century BC. Pisistratos commissioned the edition of Homer’s poems, and Ezra organised the publication of the five books of Moses. These were two powerful men who knew the importance of hearts and minds. And for one tale transcribed, how many fell into oblivion? However the oral tradition lingered on in domains where apprenticeship was linked to a particular practise, such as herbal medicine.

In Antiquity, books were scrolls made of papyrus. The fall of Rome and the rise of Islam put and end to that. (McLuhan considers that the extensive harvesting of papyrus in Egypt had overstretched the resources, and that the ensuing scarcity of writing material was instrumental in Rome’s decline.) And for close to a thousand years, books were made of leather pages bound together in a cover. (Parchment was invented, or at least developed in Pergamum as a response to an interruption of papyrus exports from Egypt). Publishing became a long and arduous process, books were rare and the destruction of libraries by Gothic and Norman invaders made them rarer still. Books had replaced the oral form of transmission, and books had been burnt. In Western Europe, the Dark Ages were a time of abysmal ignorance, where the rule of might was absolute. And it was a slow climb to enlightenment. In the East, Greek libraries had survived. And their books began to trickle westwards when crusaders entered Antioch or Seville. But the real novelties, algebra, alchemy, paper and the printing press, came from Asia via Bagdad. (Movable type was a western application facilitated by the Greek and Latin alphabets).

Gutenberg’s invention was of inestimable importance. It not only made possible the diffusion of the written word on an unprecedented scale, but it was also the premise, almost the prototype, of mass production. Printing circulated ideas at an ever increasing speed. Old writings were confronted with medieval society, and soon new ideas were being expressed in the vernacular instead of Greek and Latin. And the Old and New Testaments were confronted with the medieval Church. Reformation and Renaissance were the first outcome. Then came the scientific and technological revolutions of Enlightenment. Humanity climbed out of Plato’s camera obscura to scrutinise the real world. And it was found to be very big and very small, and very material. Cosmic and telluric forces, or meteorological events, were not the work of whimsical gods. Dreams and visions were not the demonstrations of an ethereal soul. Newton’s gravity was not deified, though it pervades and governs the universe, and is still not fully understood.

Science and technology are mutually dependant. Theory needs practise to test itself, and practise needs theory to develop itself. Optics, chemistry, thermodynamics, electricity, et cetera, once it was started the process took up speed and raced away. By the late 19^th century, steel machines burning coal were everywhere, and Nietzsche could announce that the gods were dead, that humans were condemned to decide their destinies without celestial guidance. This left a gaping hole. If going to church to worship the gods was not the specie’s raison d’être, then what was? Under oriental influence, Nietzsche’s quest was a personal affair, awakening was an individual task. Others extolled human destiny in terms of class, nation and race. For many, wealth and parenthood made sense of an empty existence. And heaven and hell were lived on earth, not in some increasingly unlikely after-life.

The 20^th century was a paroxysm of power. Atoms were split, fused and combined at will. Living matter was modified at molecular level. Rivers were dammed, land was covered in concrete and mountains were raised to the ground. The seas were emptied of fish and tropical forests were cut down. By mid-century the specious questions concerning human destiny had been settled. Wealth became the only point of life, wealth at any price, wealth and the power it buys. Humanity embarked on a wild race for more, and the world’s diverse materiality was reduced to money. When the gods die of disbelief, the realm of matter is epitomised as gold.

The ancient gardeners knew that increasing their patch meant encroaching on their neighbour’s, because the fertile river valley was a limited space, whereas the early herdsmen moved in a boundless emptiness. For ages humans have lived like herdsmen, taking and moving on to pastures new. In the past there has always been more to take, more raw materials to exploit. This no longer seems to be the case, and the planet appears as no more than a garden with precise boundaries. Unfortunately the gardener’s spirit is shrouded in the far distant past, and may be impossible to revive.

Is this the end?

2009-09-25T07:14:00.000-07:00

Capitalism needs free labour, a work force that can be hired and fired at will. As Marx pointed out in his writings on the American Civil War, the North opposed slavery for utilitarian reasons not moral ones. Wages are paid after the work is accomplished, and when the work stops the worker must fend for himself. The investment in upbringing, education and upkeep does not concern the employer. This being so, there is a lot of wastage, and capitalism must have a plethora of labour if it is to succeed. It needs the constant renewal of young adults that results from mass migrations, either from the countryside to the towns or from one nation to another. Capitalism prospers on freedom and resists all forms of constraint. But its own liberty presents a double contradiction, as one freedom stops where another begins.

Capitalism uses labour to produce wealth. Its own freedom to use as it wishes confronts labour’s freedom to refuse that usage. This conflictive situation is arbitrated by the rule of law and the power of state, by the executive and the legislative, and by the minority decisions of universal suffrage. The freedom of capitalism opposes the freedom of labour, but cannot do without it. However, capitalism controls the means of production, and these include the mass media. That is, the top down diffusion of ideology, as opposed to the criss-crossing web. (Can a search engine be ideologically orientated? Or does its globality preclude all bias?) Capitalism and labour are fighting an asymmetric war.

Capitalism has a light side represented by industry and the production of wealth, and it has a dark side represented by finance and the production of money. The light side confronts labour. The dark side confronts other moneys. One conflict is open to a lopsided debate of ideas. The other is covert and imperialistic. Mass production depends on exchange, which in turn needs a measure of value as legal tender. But this currency only holds sway within national borders, a limit that hinders foreign trade. Frontiers interrupt financial continuity because of different currencies and their exchange rates that fluctuate constantly. A dominant trade partner, one who monopolises certain productions, will impose his currency as the standard. For centuries China held the monopoly on silk, tea and porcelain, and demanded payment in silver, its own legal tender. The English countered with an unlicensed opium trade that led to the Opium Wars, et cetera. After WW2, The US was the only major industrial nation not to have suffered severe war damages. For the following ten years or so, it was the only exporter of industrial goods. This monopoly imposed the US dollar as the universal currency used for pricing most commodities. Did this contribute to the illicit drugs trade and the various “wars” that have ensued?

Capitalism proclaims freedom at home, and practices imperial oppression abroad. In fact, the freedom of capitalism is its own, to the exclusion of all others, its freedom to use (exploit) the resources of planet Earth, including the renewable human resource, its freedom to accumulate and concentrate wealth by all imaginable means. Capitalism is a process, but it is not a faceless entity. Based on the private property of the means of production, its existence depends on a propertied class, an aristocracy with its sycophants and hangers-on who sustain and promote the status quo, a few millionaires and billionaires who are, by birth, marriage or acquisition, the slaves of mammon. Capital and labour are free, while property is bondage, the total submission of body and mind to the dictates of capitalist accumulation, always more.

Capitalism has its high priests, its beadles and its flocks of worshipers. And its church is universal. As there is no alternative faith, capitalism can only be reformed. So the modern day Luthers want to moralise the market, to abolish bonuses, to restore banking to its original Glass-Steagall purity. And, like the 95 theses posted in Wittenberg , this could be the prelude to a gigantic upheaval.

Compulsive investments.

2009-08-19T00:47:00.000-07:00

Common wealth and private wealth are in contradiction. Riches are accumulated by individuals at the expense of the community. This is quite obvious in the case of conquest and colonial land grabs, when societies are subjected to the rule of might. The contradiction is blurred in the case of usury and commercial profit. Bankers and merchants have social functions. They insure the circulation of money and commodities. However, their intermediary position allows them to prey on depositors and creditors, on producers and consumers. They decide the price of borrowing and lending, of buying and selling. This considerable power opposed them historically to the ruling landowning aristocracy. Another blurred contradiction is the private property of the tools of production. Before the advent of steam engines, tools were essentially hand tools and of little consequence. The exceptions were mills powered by water and wind. Tools of production benefit their owners, but they are also the source of work and wage. The industrial entrepreneur gives work and takes a profit. The combination of capital and labour produces the wealth they share between them. However, capital is not only renewed, it claims a part of the value added by labour as a dividend. The means of production are privately owned so that land receives rent, money obtains interest, trade makes a profit and machines bring a dividend. The rest of the added value pays the work force, while taxes take a slice of the whole cake.

The state owns the nation. It can expropriate and make war, but its main function is to guard property with law and order. The state is the watch dog of property. It defends (and may expand) the nation’s borders, and guarantees the limits of private property within those borders. In most modern states it is a constitutional duty to protect property, thereby reducing the pursuit of happiness to the accumulation of personal wealth. That wealth and happiness are synonymous is epitomised by celebrity culture. A social model where the happy few fill the day-dreams of humanity, as did the imperial and royal splendours of the past. What has changed is that working class footballers and stock exchange wizards have replaced hereditary earls and merchant princes. Anyone can become a celebrity, but very few will succeed. The pyramid is maintained and renews itself in a most effective way. The pyramid is unquestioned, and its perpetuation seems a part of social evolution, a constant adaptation to changing circumstances. Arthur Koestler argued that hierarchy is inherent to all living matter, from the simplest forms to the most complex (Janus, 1978). But he described a hierarchy of communication, not one of power and wealth. And, ten years later, he might have written of webs and hubs. Whatever may be, the pyramid lives on growing ever higher and wider. And the higher it gets, the greater the pressure on the base.

As millions became millionaires, a few dozens were promoted to billionaire status. How does one spend a billionaire’s income? Building extravagant palaces and running private armies are things of the past. So the wealthy must resign themselves to investing the income they do not spend. This increased investment brings in even more income that must in turn be invested, and so on, and so it goes all the way down to the levels where income is never in excess. Always more for those who have too much, the Draconian law of capitalism where wealth is private and its usage must bring a return. And so wealth accumulates without restraint, with the state its obedient servant.

Karl Marx had imagined that mechanisation would reduce labour to the point where surplus value was no longer sufficient to pay a return on investments. Well mechanisation has not brought down the edifice, but the sheer quantity of investments does shake it severely at regular intervals. The finality of production is consumption, and all value produced must ultimately be consumed. But the division of labour and the complexity of production have increased to such an extent that most activity concerns the primary and intermediary stages. Machines to get the raw materials, and machines that make machines to make machines, chemicals to make chemicals, et cetera. Then there is transport, insurance and banking. So that only a fraction of all production is directly linked to feeding, clothing, housing, educating, healing and entertaining the population, and moving them around. And yet that is where all the value ends up, along with the upkeep of the state apparatus. All value produced must ultimately be consumed, but this is in contradiction with accumulated wealth as the path to happiness. Incomes are invested and, as a consequence, consumer supply is always in excess of demand. This inconvenience can be overcome in two ways. Unfortunately, both are dead ends.

Excess consumer supply can be traded abroad for raw materials, or for intermediary products. Consumption becomes investment through exchange. Weapons, consumer goods par excellence, can be transformed into Arabian light, the ideal investment. A perfect swap that has its limits of course, but the arms trade is a great exporter of consumption. This unbalanced trade means that one nation can invest without consuming, while the other must consume without investing. No investment means no work and no demand, so the imported consumer supply goes to state employees and supporters, often the military. The dividing of society into a privileged few and a mass of unemployed leads to social unrest, insurgency and terror. And the trading partner is faced with a moral dilemma. It must justify the support of its client regime even when it is illegitimate, which helps to explain why the terrorist threat replaced the communist menace at such short notice.

Trade alone cannot cope with the fast expansion of invested incomes, especially with growing competition on the world market. So the second transformation of consumption into investment is also necessary. Incomes can be lent to the state, an ancient practise, and to the less well off. Here there is no exchange of goods. Income simply passes from one to the other at interest. To a greater or lesser degree, states have always borrowed to supplement insufficient taxes, but consumer credit on a massive scale is a recent occurrence. Granting consumer credit with no guarantees could only lead to millions of micro Ponzi schemes, with new borrowing paying off past debts and their interest. As for 100% plus mortgages fuelling a real estate bubble, they just had to burst. And that is where things are right now.

Lenders & borrowers.

2009-07-10T05:51:00.000-07:00

Banks have been saved from their lending folly, while borrowers remain in the quagmire. But banks are merely the intermediaries by which the wealthy lend their excess incomes to the less well off. To maintain growth in consumer demand, the 5% who cannot spend all their revenue (and the 60% who save for their retirement) must circulate the surplus. They do this by depositing it in banks and demanding high returns. The banks then use the deposits to grant credit. This concentrates wealth even more, because the interest on deposited incomes increases the surpluses, the deposits and the interest, in an ever expanding spiral.

Bankers have been accused of rapacity, but in fact they are the victims of their greedy depositors. Until quite recently, money was deposited on non-remunerated checking accounts.
(The change started in the 1960s, as shown by the growth of M3 to the detriment of M1: http://en.wikipedia.org/wiki/File:Components_of_the_United_States_money_supply2.svg).
This liquidity was used by bankers to grant commercial credit, mortgages and occasional, begrudged and very safe overdrafts. Then came the investment funds, paying high returns thanks to profitable market speculations based on instinct and mathematical equations. This was a drain on checking accounts, on the life blood of banks. They countered by offering equivalent remunerations on deposits. And their lending strategies became far more aggressive to compensate the cost of the money they were using. Money they had previously used for free.

Progressively, borrowing became the norm. A minority was lending more and more, a majority was lending less and less, and an ever increasing fraction was living on future incomes, with all the uncertainty that implies. As credit expanded into the subprime zone the uncertainty grew. But credit had to spread to keep the ball rolling, so the obvious was ignored. And more credit was granted to pay more interest on swelling deposits. This created a huge suction pipe for wealth that was completely disconnected from any form of production.

Saving the banks with treasury money is saving their depositors at the expense of the wider community. The ruling class is digging deep into the public purse to bolster up an exhausted system. Does anyone really believe it can be revived, or is this just a little extra mileage and the liquidity to move out?

Back to the frying -pan.

2009-06-17T01:00:00.000-07:00

Growth concerns both supply and demand. And growth in demand needs more buying power, which ultimately means more money in people’s pockets. Or should it be “meant”, when payments with bills and coins are getting ever rarer? However, until quite recently, money had a material form whose quantity was obliged to increase to allow more spending. When money was gold and silver, multiplying demand depended on new sources of precious metals. The introduction of paper money resolved the problem of quantity, but there remained the question of how the extra money was circulated, of who was the first user. Minting and spending new coins had always been a state prerogative. Printed money followed the same path, with frequent and even notable abuses.

Meanwhile, another kind of payment was circulating in ever larger quantities. Merchants have always traded for profit, it is their livelihood. Selling to buy focuses on commodities, the sold and the bought. Buying to sell focuses on money, less for more. So that, very early on, merchants realised that money was also a commodity to be bought and sold at a profit, and a virtual one at that. Transactions could be made without any actual money changing hands. Credit could be granted and returned in the form of scriptural money, by simply writing it up in a ledger. With time – first in the Ancient World and again in the Renaissance – banking specialised and took financial control of the merchant sphere by allowing or refusing credit.

To pay for budget deficits often caused by dynastic wars, states minted more coins when they could obtain the bullion or were obliged to debase existing coins when they could not, while banks circulated and accumulated wealth by granting commercial credit at interest. Then the more secure banks, those backed by city-states such as Venice and Florence, began to finance various European monarchies. Even with galleons bringing gold and silver from the Americas, Charles V of Spain was heavily indebted to Venetian bankers. Progressively, credit was shown to be a way to increase spending that was far more dependable than the circulating of ever more coins and notes, and their current account equivalents. (US monetary growth over the past 50 years demonstrates this preference. The newcomer M3 has completely cannibalised M1. http://en.wikipedia.org/wiki/Money_supply#Money_supplies_around_the_world")

Spending depends on the quantity of money in circulation. But the speed at which money circulates is just as important. A sum of money can change hands twice in a day, or only once. It can allow the exchange of twice its value, or of only once. A faster circulation of money has the same effect as an increase in the quantity of money. However, the speed of spending is not really controllable. Daily and weekly wages circulate faster than monthly and yearly salaries, and electronic payments outstrip paper checks sent by land mail, and inflation accelerates spending while deflation slows it down. But the way people are paid cannot change easily, and technology happens when it does. As for provoking inflation to get people spending, who would dare plead for that? So quantity remains the only lever of control over demand. And even that lever has its limits, to the dismay of Bernanke, Trichet, Shirakawa, et al.

Growth is driven by demand, and demand is fuelled by credit. But demand has two distinct forms. One applies to investment, and the other to consumption, and this distinction affects the credit they depend on. Invested credit goes into the production process, and comes out again with value added by human labour. The credit is returned with added value to pay for interest. So that a renewed credit renews the investment, and production continues. Consumed credit is used up and does not return, nor does the interest. So that a renewed credit merely pays itself back. It neither pays the interest, nor does it renew consumption and maintain demand. The difference between investment and consumption means that the credit needed to increase their respective demands must follow separate growth curves. In the first case, increasing credit increases investment in a direct proportion. (Questions such as how the interest is paid, where does it come from, and the effect it has on the general balance, are not considered here). In the second case, renewed credit does not renew consumption, so that increasing credit must first insure this renewal, and only then will it allow growth in consumption. Credit for investment grows as a constant percentage of GDP, whereas credit for consumption must necessarily follow a much steeper growth curve.

Households have spent their incomes in advance, and the same goes for local and national governments. Once consumer credit was institutionalised -- public spending is also consumption -- to become the fuel for growth in demand, it could only lead to excess. The multiplication at each turnover was completely out of step with the growth of domestic product, and the outcome was unavoidable. What needs explaining, therefore, is not the proliferation of consumer credit, it is the reason for its existence in the first place. Why did growth in consumer incomes (wages and taxes) lag behind so consistently that it had to be supplemented and progressively supplanted by growth in consumer credit?

Increased investments are supposed to increase incomes, so that consumer demand keeps up with supply. If this was the case, invested credit would fuel growth in demand for both investment and consumption. This ideal balance is in fact upset by inherent problems, namely interest, inflation and private property.

Invested credit comes back increased by the added value of human labour. If some added value goes to interest, human labour gets less than its share, and consumer demand is insufficient. Unless the interest is the value of banking labour, and is consumed. But, as banking costs are added to interest, this is never the case. Interest goes to financing more credit, which results in more interest in an ever increasing spiral.

Not all increased investments lead directly to increased consumption. Many investments, such as R&D, far precede the equivalent consumption. More generally, growth in production begins at the primary and secondary stages before reaching the consumer stage. This is most obvious when a nation rebuilds the destructions of war. There is plenty of work, but not much to eat, nothing to wear and nowhere to live. If, during the first stages of growth, increased investments go to increasing incomes, then consumer demand will precede consumer supply, with inflationary consequences. More money chasing the same quantity of goods and services induces a rise in prices. And, when the consumer supply does increase, the higher prices cannot be met by demand. However, if the growth in investments continues, as it did in post-WW2 Europe and Japan, the continuing growth in incomes this generates will at some point be in step with increasing consumer supply. Later, if investment growth slows down while consumer supply is still growing fast, demand must be stimulated with credit. All the more so when investments begin to be outsourced, taking incomes with them.

Invested credit takes interest away from incomes. But there is also the question of who owns the investment. Is it the banker who grants the virtual value of credit, or is it the entrepreneur who puts it into a production process to create real value? Moreover, incomes never seem to correspond to consumer supply, too much or too little. The litigious property of the means of production, and the constantly unbalanced state of consumer supply and demand, logically led to the notion that incomes should be invested, thereby clarifying the ownership of investments, and that consumption should be credited according to supply. So most incomes stagnated while a few got bigger and bigger as they accumulated interest, rent and profit. And consumer credit, mortgages and government debts had to multiply extravagantly just to stay ahead. A jump from the frying-pan of banks/central bank/government control over investments and of endemic inflation, into the fire of an abysmal incomes gap and a catastrophic credit collapse. And, as things are shaping up, humanity is about to scramble back into the frying-pan.

Having walked on the Moon and landed on Mars, having invented perfume and wine, having cloned and genetically modified living matter, split and fused atoms and run a hundred metres in less than ten seconds, must humankind resign itself to these two dismal alternatives?

A pragmatic tool.

2009-04-29T00:53:00.000-07:00

On September the 2^nd 1792, a Parisian mob began a killing rampage that lasted four days. Investing the city’s prisons one after the other, they executed all the prisoners (a total of over 1000), mostly aristocrats, suspected of plotting for the return of monarchy, and refractory priests, who had refused to swear allegiance to the constitution. This massacre took place at a moment of high tension – accused of treason Louis XVI had been deposed in August, food was scarce, Prussian armies were advancing on French territory to the East, and troops were being levied and armed, while the popular press called for dire measures against “the enemies of the people” – and was to be known as the First Terror. Danton and Robespierre were to apply it as a mode of government, culminating in the Great Terror. They and their supporters were self proclaimed terrorists, who proceeded to execute all opposition. After the fall of Robespierre in July 1794, a White Terror occurred in the South of France from Lyons to Marseilles, as a reaction to the revolutionary excesses. And a Second White Terror, also in the South, set in after Waterloo with the extrajudicial execution of many of Napoleon’s soldiers and officers, and of a few surviving republicans.

Terror and counterterror also took their toll during the Russian revolution. The Soviet Red army was as ruthless as had been the “Blue” army of the first French Republic. And the “Whites” – Denikine and Wrangle in Crimea, Koltchak in Siberia – supported by foreign powers (France, GB, US, Japan) were as reckless as had been the Vendean and the Chouan uprisings of 1793. The German revolution of the Weimar republic did not escape the rule of terror either. All these examples (and one could include the English revolution of 1642, and the Iranian revolution of 1979) of mass and often indiscriminate murder took place in the context of class war. The new dominant bourgeois class must destroy all the ancient allegiances, and replace them with new ones. (This necessary destruction may explain why all these events ended with the rule by terror of dictators). Be they serfs or Grand Dukes, the royal subjects must become citizens, free to work and equal with regards to the law. Multilayered societies rooted in feudalism have to be restructured into two tiered systems of a propertied class and a wage-dependant proletariat. History shows that this is never a gala supper.

Revolution and civil war seem to promote terrorism. Colonial rule favours insurgency. The first modern nations to break away from empire were the Swiss and the Dutch. But the classic example was the American War of Independence. It set down the basic premises for success, foreign aid and a united front. The function of colonies is to supply the Metropolis with raw materials in exchange for consumer goods. This means that industry in the colonies is underdeveloped, and cannot sustain an armed rebellion that needs a constant supply of weapons. These can only come from another colonial power, so that “my enemy’s enemy is my friend”. For the American insurgents the friend was the then still kingdom of France – always ready to fight the hereditary English foe – who provided the guns and troops that determined the outcome. This could have led to a simple change of masters. But events in Paris and the ensuing British blockade of Europe turned attention away from the new American nation, and gave them time to build up their own industries.

National liberation is usually a protracted struggle. The colonial master does not relinquish his hold easily. And so the civil administration becomes a military occupation where the dividing line is easily drawn, the soldiers and their collaborators forming one party, and the civilian population making up the other. The soldiers are identifiable and can be targeted. The insurgents are indiscernible. Soldiers are ambushed and see their comrades fall. They then vent their anger on whoever they find, and a cycle sets in of terror and counterterror. This widens the gap between the two parties and makes them irreconcilable. By this time the budding nation is finding its unity in the form of patriotism, a nationalist mysticism that inspires great sacrifices. The same succession of events was to occur when Napoleon occupied Spain, as depicted by the French firing squad in Goya’s Tres de Mayo. The 21^st of August 1941 on a subway platform in Paris, a twenty-two years old member of the French Communist Party, Pierre Georges later known as Colonel Fabien, shot down a German officer. In retaliation the Germans executed several hostages. This tit for tat included collaborationists, and went crescendo until the liberation of France in 1944. After the war, national liberation movements blossomed in one colonised nation after the other. A few were helped by the US, ever wary of European empires. But most of them could only count on support from the USSR, or China. This automatically involved them in the Cold War between communism and the “free world”. And terror was followed by counterterror on a global scale.

Terror can be the act of an unruly mob against its class enemies, and it can be the tool of totalitarian rule. The hit and run tactics of insurgents are judged contrary to the rules of war, and are treated as terrorism. And counterinsurgency is always involved in counterterror. However, the ultimate form of terror must be the bombing of urban concentrations. Siege weapons had traditionally been aimed at a town’s defences. The early canons were used to batter down walls. But the invention of explosive and incendiary shells changed that principle, and Londonderry was the first city to endure this novelty during the siege of 1689. As bombing took to the air, so did terror. In this case, Guernica was the experimental victim. Then came carpet bombing and the two gigantic mushroom clouds over Japan. Terror can be used against a whole nation as an act of war, to shock and awe.

Terrorists murder people with bullets and bombs. Some victims are in uniform, the others may be men, women or children. Terrorist organisations justify their acts as the necessary path to fulfilling an ideological agenda. They usually have subordinates to do the dirty work, brainwashed teenaged soldiers trained to kill and to lay down their lives for the cause. Terrorists have no moral values and no respect for human life. They believe the end justifies the means. Terror can be a tool of rebellion, and of national and imperial oppression. In his Memoirs, George Grivas wrote,
The British – who arm their commandos with knives and instruct them to kill…from the rear – protested vigorously when such tactics were applied to themselves. It may be argued that these things are only permissible in war. This is nonsense. I was fighting a war in Cyprus against the British, and if they did not recognise the fact from the start they were forced to at the end. The truth is that our form of war, in which a few hundred fell in four years, was more selective than most, and I speak as one who has seen battlefields covered with dead. We did not strike, like the bomber, at random. We shot only British servicemen who would have killed us if they could have fired first, and civilians who were traitors or intelligence agents. To shoot down your enemies in the street may be unprecedented, but I was looking for results, not precedents. How did Napoleon win his victories? He took his opponents in the flank or the rear; and what is right on a grand scale is not wrong when the scale is reduced and the odds against you are a hundred to one.”
Quoted by Robert Taber in The War of the Flea, Paladin 1970)

A topsy-turvy world.

2009-04-29T00:41:00.000-07:00

Capitalism has a history and an ideology. Its story begins with conquest and land grabbing. The personal property of the Earth’s surface was first acquired by the right of might. For the price of their lives, the planet’s inhabitants had to submit. For the price of their survival, they had to work for the landlords. After the force of arms came the traders with their own particular weapon. Money commands both the pen and the sword. Then, much later, came machines and wage labour, opening the path for a huge expansion of capitalist accumulation. From land to money, and on to the tools of production, private property has triumphed over all other forms of ownership. And yet, once again, public bailouts of the private sector are in complete contradiction with this continuing dominance. Why does private capitalism flounder at regular intervals, and why do all agree to put it on track again? Are the glamorous rich so essential to human existence that they must be saved at any cost?

The value produced contains the value invested and the added value. But the invested value is in turn made up of investment and added value, and so on into the past. This means that the value produced is in fact the sum of added values, present and past. More value is added to existing value until the product has reached its final stage. At which point it can still transmit its value to other products as part of the investment. However, the ultimate phase of production supplies goods and services that can neither acquire more value, nor transmit their value. This terminal accumulation of value must therefore be consumed. And the sum of added values represents the value of that consumption. There are no clear-cut boundaries between production departments. Most “consumer” goods and services, from cars to soap and from counselling to security, can transmit their value as production costs. Only usage finally determines the categories of investment and consumption.

Supposing the extreme complexity of production is represented by just three stages, raw materials, intermediary products, and consumer goods and services. The third and last stage contains the value of the two preceding ones plus its own added value. If each stage takes a year, the value consumed in a year has been accumulated over three years. But this accumulation is the same as the value produced by all three stages in one year.

If there is growth, however, the third stage is the last to grow. Until it does, the yearly sum of added values must be greater than the value to be consumed, during the same period, which seems to invalidate their equality. This happens at the beginning of a growth cycle. It is a temporary phase, during which growing incomes can be invested to increase added value, without upsetting the balance of supply and demand for consumption. Paid with profits, the work force increases, so that there is more value added for a still unchanged supply and demand. When consumer supply does begin to grow, the demand is lacking.

The sharing of added value varies with changing modes of production and class struggle. But the three beneficiaries are always the same. The state takes its share by levying taxes. Labour gets the wages it can. And the rest is a return on investments, in the forms of rent, interest and dividends. Governments consume their taxes on wages for the armed and security services, and for functionaries, on military hardware, on the upkeep of public buildings and infrastructure, et cetera. Wages are to a large extent spent on consumption. The higher brackets invest a part of their salaries, while the lower ones have recourse to credit to supplement their meagre incomes. What the rich do not spend, they can lend to the poor (and the state) at interest. There remains the part of added value that is a return on investments. Rent, interest and dividends can be someone’s retirement pension, in which case they will probably be spent on consumption, though their value was in the past saved from consumption and invested. But they can just as well be an addition to an already comfortable salary, or be simply too big to spend, or go to an investment fund, or whatever, in which case they will probably be invested.

The sum of added values is the value that needs to be consumed. But, because a part of added value is invested in real estate, bonds and shares, consumer demand is insufficient. This problem can be resolved in two ways. Consumer goods can be traded for investments on the world market. In which case, the commercial partners must exchange investments for consumption, meaning less value added, less work, and less investments on their territories. Alternatively, demand for consumption can be sustained by credit, which is a form of monetary creation. In which case debts accumulate, and that leads to the present situation where subprime loans go toxic and banks go bust, or have to be saved by massive injections of tax-payers’ money. Neither solution is satisfactory, so it remains to be seen how growth can be financed, other than by investing added value instead of consuming it.

If all added value goes to demand for consumption, as it ultimately should, how can the value of investments increase and, thereby, the amount of added value and the supply of consumer goods and services? For a start, many investments are non-productive and do not increase added value. Buying existing shares merely modifies the ownership of a company. And, though it may increase the value of each share and of the company, it does not increase the company’s productive capacity. It can, at best, increase the company’s borrowing capacity. The same goes for housing and commercial buildings. If they exist already, buying them does not increase their quantity, though it may increase the price of real estate in general. In fact, increasing the value added and the wealth distributed means an increase in the production of goods and services. The increased wealth created by bubbles in real estate, shares or bonds, is nothing but an illusion.

The productivity of labour remained unchanged for most of history. After the invention of the wheel and the discovery of iron, things stayed very much the same for a few thousand years. Medieval Europeans used the same tools and worked at the same rhythm as had the Celts. First conceived at the end of the Roman Empire, the windmill was the only “machine” that distinguished them. But a new approach to the study of physics and chemistry – a revolution that seems to have started with the discovery of the optical lens, and its different vision of the world that minds struggled to explain – was to transform humanity’s attitude to the surrounding elements. Notably in the production process, where both power and speed made a sudden quantitative leap with the introduction of the steam engine. Then came gas-lighting, and daylight no longer counted.

A gain in productivity occurs when the amount of labour needed to produce a given quantity of goods and services is reduced. (Outsourcing for longer working hours, lower wages and less regulation has nothing to do with productivity. Though it does bring down prices and put up profits, by reducing the cost of a working hour, instead of reducing the necessary amount of work.) A quantity of work is measured by the number of workers and the time they are employed to do the job. Machines reduce the numbers and the time. But machines must be built and fuelled, transported and maintained, and that employs considerable numbers. So that the numbers lost and gained may well cancel out, thus leaving the time factor as the principal motor of productivity.

Over the past two centuries, production has continuously accelerated. But, in all domains, land, sea and air, speed has limits that can only be passed at a considerable expense, counteracting the gains. While the physical limits of the human body, or the speed of light, cannot be exceeded at whatever cost. The accelerating effect of steam power peaked less than a century ago. The accelerating effect of combustion power peaked in the 1970’s. The accelerating effect of electricity has not peaked yet, but its limits are not far off. So that humanity is fast approaching the maximum speeds of the physical world in the production process. Being largely dependant on speed, productivity will taper off, and then regress as fossil fuel resources dwindle. Nuclear fusion as a source of energy for generating electricity may seem a promising prospect for the future, but electricity will not fuel commercial planes, ships and bulldozers. Hydrogen by electrolysis and bio fuels will not suffice either. Even battery-run cars will remain expensive toys. Two hundred years of acceleration have boosted productivity and the production of wealth. Slowing down will have the reverse effect, with predictably dire consequences for most of the world’s inhabitants.

Growth in the production of wealth is the result of increased investments. More value is added when more hands and minds are put to work. And that means more machines and buildings, more input and wages. All this must be financed before production reaches the market. The increased added value, past and present, must be paid in advance. This can be either cash or credit. The value paid can come from consumer demand, as supply is unchanged for the time being. It is only when increased production reaches the consumer stage that this diversion presents a problem, when increased supply needs an increased demand. The value paid can also be credit, a monetary creation that increases consumer demand ahead of the increased supply. In the first case, increased consumer demand is lacking when needed. In the second case, consumer demand increases too early, raises prices and is ineffective when more supply is on offer. However, if growth is constant and investing credit continues, after an initial bout of inflation increased demand and supply will balance out.

Invested value goes into the production process, and is returned when the produce is exchanged for money on the market. Consumed value is…consumed. Invested value persists. Consumed value must be created again. This fundamental difference also applies to credit. Invested credit pays for added values, past and present, before they have combined into their final value. Consumed credit pays for added values, past and present, after they have combined into their final value. Invested credit produces value, and consumed credit destroys it. As the value of invested credit is returned, a renewed credit renews the investment. As the value of consumed credit is not returned, a renewed credit merely pays itself back. It does not renew the consumption.

If consumption increases with a $100 credit, it must then be reduced below its original level to pay back the debt. Or the credit can be renewed, and consumption will continue as usual (interest and other charges are not taken into account). Growth, of course, increases incomes. But that growth must cover interest, so that credit must still be renewed to maintain the previous level of consumption. To maintain the increased level of consumption (plus $100), the credit granted must be doubled ($100 to pay back and $100 to spend), which doubles the interest, without extra growth. At some point, the growth in incomes falls below the total interest, and we are beginning to see what happens then.

Fuelling growth with invested credit seems far less problematic than increasing consumer demand with credit, and yet it is the worst choice that prevails. Why are incomes invested and credit consumed, rather than the other way round? This preference can only be explained in terms of property and the distribution of wealth. A section of the population does not, or cannot, spend all their income. Apart from misers, this means their incomes exceed their consumer needs. This excess wealth will be invested rather than distributed. Investing incomes also insures the property of the investment, whereas the property of invested credit is dual. The debtor owns the investment, and the creditor owns the debt. So that an entrepreneur will always chose to invest his profits rather than distribute them as wages, and go cap-in-hand to his banker for a loan. And there remains the question of interest. The older, less radical Proudhon suggested that credit should be free of interest. But Marx cuttingly replied – they were no longer friends by then – that those who had money to lend would simply hoard it, if there was no gain in lending it. As for the risk taken by the lender, that is a matter of insurance, not of usury. So nationalise credit and change the rules. Instead of bailing out private banks and corporations, create money for investment, and transfer its ownership to the work force collectively. Like air, water, land, minerals, infrastructure, tools, education, health, war and peace, money is a part of the commonwealth, and must one day be wrenched from the grasp of private greed.

John Maynard's martingale.

2009-04-15T00:34:00.000-07:00

As usual in times of economic crises, Keynesian solutions are bandied about, and their supposed influence on Roosevelt's New Deal is magnified. This fuels the old debate as to whether investment or consumption is best suited for public aid in climbing out of recession. It seems that Keynes has lost once again. The flood-gates of funds have opened for corporations instead of workers. So that the effective result of the alternative will remain a mystery. But, as inflation is the only solution to massive debt, why not get it over with right from the start? Why let things drag on endlessly while redundancies soar?

However, if Keynes became rich, famous and honoured (a peerage), it was less the consequence of his General Theory than of his stock exchange martingale. Having read Marx, and grasped the idea of an average return on capital investments, he realised that it applied to shares and bonds, and made a fortune through a strange twist of history. Marx had explained that capital moves around and that, in the case of farm land, more productive acres are worth more than less productive ones, and the return on investment tends to balance out. Keynes looked at the varying prices of shares and bonds, and realised that... In fact no one knows how he went about it. But when the price of shares rises, the price of bonds tends to fall, an vice versa. This is due to their two forms of remuneration, dividends and interest. Dividends vary according to profits, and the interest paid is fixed.

$100 shares pay $5 in dividends (5%), and $100 bonds at 5% pay $5. If the dividends double to $10, the price of the shares also has to double ($200) to re-establish a 5% return, while the bonds have to lose half their price ($50) to bring a return of 10%. What would actually happen in such a simple case is that share prices would rise a bit ($133), and bond prices would fall a bit ($67), and the return on both would average out at 7.5%. Alternatively, if the dividends were to drop to $3, share prices would fall to $75, and bond prices would rise to $125, for an average return of 4%.

Of course, the real market was infinitely more complex than that, even when Keynes was piling up his stash. But the trends existed and still do to-day. So, what happens when profits are in free-fall? The price of bonds goes up. But the scale of government borrowing and the way it is financed may turn out to be inflationary. And inflation affects bonds the same as bank notes. So shares may be preferable after all. The world's stock markets are hesitant and nervous. Prices rise and fall, suddenly and unexplainably. And many, dreaming perhaps of a return to metalism, still believe that gold can save them from the looming debacle. Which just goes to show how little influence Keynesian ideas have had on the general consciousness.

Where has all the consumption Gone?

2009-03-18T01:50:00.000-07:00

The depth of financial crisis and of the resulting recession is the direct consequence of an increasingly disproportionate distribution of wealth, whereas the timing is due to the periodic coincidence of various debt cycles. The wealth produced by a nation is split three ways. Governments tax a share, employees get what they can, and the rest is a return on investments, in the forms of rent, interest and profit. Over the past couple of decades, the respective parts of each group have been completely modified. The end of the Cold War and of the soviet model made Big Government and redistribution redundant, so that taxes on high incomes have been reduced progressively ever since. Over the same period, wages and social benefits stagnated, while the return on investments reached unprecedented heights as, carried by the numeric revolution, the amount of wealth produced increased prodigiously for the sole benefit of dividends. The problem was that all wealth produced must ultimately be consumed, that mass production needs mass consumption, and that supply had increased while wages stayed the same and taxes were reduced. Some of the return on investment was being consumed, of course, mainly by the middle classes. But their share was laminated by the dotcom bubble. Most of the return on investments was being reinvested, thereby increasing the concentration of investments and the returns they received into fewer and fewer hands. The only way out, other than redistribution, was to grant credit to everyone and give them a spending spree. So there was credit to buy houses and cars, credit for travel, clothes and home videos, and credit to make war on terror.

Investing wealth instead of consuming it increases the future production of wealth without distributing the wherewithal for its consumption, except in the form of credit. But credit merely brings forward future incomes to be spent in the present. And, being spent, those incomes will be lacking when future demand is needed. Unless the credit is renewed, which it was. Debts piled up, and up, the daily and weekly ones, and the decadal, and all the in between ones. When several renewal points coincided in time, as they regularly must, things started to go terribly wrong. This massive roll over of credit overstretched the banking system and exposed the shoddiness of its reserves. To be able to grant ever more credit, banks must increase their funds. But, instead of secure reserves, such as Treasury bonds that pay a miserable interest or none at all, banks bought complex derivatives with high returns. Most of which have turned out to be either subprime, downright toxic or Ponzi swindles.

The unlimited investment of wealth, was made possible by the mechanisation of production, and was the foundation of capitalism. The insufficient demand that is the result of this process can be resolved however, if the excess consumer supply is traded for investments on the world market. This transformation of consumption into investment by foreign trade had benefited the developed nations since the Industrial Revolution. They drew in all the raw materials of the planet, and shipped out their beads and guns in exchange. Contradicting Henry Ford’s idea, workers need not earn enough to consume all they produce as consumption traded directly for investments. This is obviously not a game that can be played by all. It was the monopoly of the most industrialised nations. And, even so, they regularly made war on each other. While their various satellite dominions just had to submit. However, over the past ten years or so, new major players have joined the field. China in particular has been flooding the planet with consumer goods, and investing at an unprecedented rate. This reversal of the flow of consumption first affected Japan, then the US, and finally Europe. The Japanese seem to dislike credit, so Japan was the first to go into recession. Americans had no such misgivings, and took on debts recklessly. This resulted in a consumer boom, to which Europeans participated belatedly, some more than others. An ever greater part of the wealth produced was invested, while consumer demand expanded proportionately on credit. And when the renewals coincided, the overloaded structure collapsed.

Bail out the megabanks, they are too big to fail. Bail out the major insurers and the car manufacturers. And who will be next, Boeing, IBM? And what happens to those small enough to fail? Is de facto state ownership of most of the economy the only solution? And, if so, how can the guarantees that governments are offering be transformed into actual cash? The Bank of England is experimenting something called “quantitative easing”. The British central bank is offering the commercial banks cash for the Treasury bonds they are holding. The idea seems to be that this will put some liquidity into the system, while maintaining the high prices of Treasury bonds and their subsequent low interest rates. A crucial point when budget deficits are increasing at such an unusual rate. The trouble with this is that banks do not need cash to grant credit. They need securities, such as Treasury bonds, to back the credit they are granting. So that the Bank of England will buy all their old Treasury bonds, at a price so high it can only drop, and the commercial banks will get bundles [£75 ($100) billion is on offer and could be doubled] of fresh cash to buy the new massive issues, at a far more interesting rate. The British central bank is about to “print” money to finance the expanding public debt. But, as it is not allowed to make such a transaction directly, it must use this slight of hand, and pass through the intermediary of commercial banks at a predictable loss. The British government has decided to finance its budget deficit by printing money. To hide this inflationary move a commission will be paid to the commercial banks. The exact size of this commission (the loss of value of the old bonds as they catch up with rising interest rates) will only be known at the end of the year. By which time the whole banking system may have been nationalised anyway, with the government printing larger and larger denomination notes to keep up with rising prices.

Inflation is the only way to cancel the vast accumulation of debts, and start a new cycle of growth. Everyone must realise this evidence, but nobody dares admit it because of the lenders. All that Treasury paper is about to lose a lot of value, provoking considerable collateral damage. But no government can afford to admit that inflation is the way forward. Public debt is held domestically and internationally, so there will be anger all round, with recriminations and nasty finger pointing, social unrest and diplomatic tensions. The total impact of the process that is just beginning is difficult to estimate. Its dimension is global, and this universal involvement increases the scale of the crisis. But it may also help the solution. The whole of humanity is concerned, which might avoid war between nations and put the focus on class struggle. That really would be unprecedented.

A biblical heritage.

2009-01-23T07:17:00.000-08:00

Down to the Plymouth Rock, that had been to their feet as a doorstep Into a world unknown – the corner-stone of a nation! The American story begins around Chesapeake Bay and at Cape Cod. But the Virginian foundation, with its tobacco plantations, its English riff-raff and its African slaves, was wiped off the slate by the Civil War. So that the good ship Mayflower and turkey at Thanksgiving became the primary myths. A depiction of the aboriginal Americans arriving from England with very definitive ideas on right and wrong.

The Pilgrim Fathers were Puritans whose world view was based on the Bible. (Cranmer’s Bible rather than the King James Authorised Version, as they were fleeing persecution by that monarch.) And the biblical influence pervaded the New England colony. They had wandered in the wilderness and reached the Promised Land. They had escaped from bondage to build a New Jerusalem. And, with the Almighty on their side, they would fight the heathens and so reduce them that they would disappear from history.

The Native Americans were treated as Canaanites and Philistines. They could be killed indiscriminately as they counted for nothing in God’s project for his chosen people. And because illness took the greatest toll (small pox, measles, tuberculosis, etc.), as with the plagues of Egypt the Lord of Hosts bore the brunt of the extermination. The two and a half centuries separating the Rock at Plymouth from Wounded Knee were a continual land grab. The native populations were pushed ever westward to fight among themselves. And, when they had nowhere left to go, the survivors were camped like refugees in desolate places that nobody wanted. Just the way the Good Book sad it should be. Though captain Smith fared better than Samson, and general Custer lacked David’s military genius.

America has constructed itself on the premise that worshiping the Bible God gave special rights and obligations. Superiority over other beliefs, other gods and traditions, and the duty to proselytise by force and destroy recalcitrants. This was partly due to the brutal religious wars in Europe where massacring one’s opponents was habitual, and partly to Puritan hubris. To paraphrase Max Weber, success is a sign of God’s benevolence. If His eye is on the sparrow, the end justifies the means.
The Christian Bible contains the Old and the New Testaments. And the Gospels are clearly influenced by Greek humanism. The tribal/national God, Yahweh/Eloim, becomes a universal and transcendental concept, and the Galilean Jesus is a peripatetic. The God who speaks and writes, who inhabits prophets, judges and kings, is silenced and removed to some heavenly outer sphere. This break with the past was consumed when Paul preached to the Gentiles. When circumcision, Abraham’s original covenant, was superseded by baptism.

Faced with the contradiction between old and new interpretations of faith, the Byzantine and Roman Churches proscribed the old and replaced it by saintly “biographies”. But the fall of Byzantium, the Renaissance, Gutenberg’s revolution and the Reformation brought the Old Testament back into the spot-light. And the Reformed Churches have had to deal with that duality ever since. Retribution or love, an eye for an eye or turn the other cheek, it is a schizophrenic situation of Jekyll and Hyde proportions. A form of double-think and double-talk that characterises most western societies.

For historical reasons, Zionism is not encumbered by the Gospel testimony. The Zionist God is exclusively pre-Christian. He commands angel armies, rains down brimstone and stops the Sun, and enjoys nothing more than the perfume of fresh blood and burning flesh. He is a violent God from violent times. But here again a duality appeared. The Babylonian exile had developed writing, scholarship and commentary. This led to the adaptation of the Torah to a wider perception of the world. Confronted with the might of empires, the desert God of war became an urban God of law. For every conceivable situation, a ruling decided what was right. Rules that were deduced from the Pentateuch to give the Mishna, the Gemara and finally the Talmud.

Joshua, Samson and David are the central figures of the biblical saga, on a par with the heroes of the Iliad. But Joshua is preceded by Moses the law-maker, and Jesus is vaguely related to David through his stepfather Joseph (Matthew 1). Conquest is always a lawless and destructive process. And all accounts are of bloodshed and mayhem. So Moses, who killed a man in his youth but would never shed blood again having God to do the work, could not enter the land of Canaan where men would be doing the killing. Once he had led the tribes out of Egypt, Moses became wholly preoccupied by the Covenant. The perpetual agreement between man and his creator founded on a set of written rules. The idea that life in general and community life in particular are governed by certain laws that cannot be broken without dire consequences. Something comparable to the Gaia concept and Human Rights.

There are no stories of Jesus writing. The stepson of a carpenter having sojourned in the desert (with the Essenes?), he may not have mastered the difficult art of calligraphy. But then he had no need to set down laws that existed already. His task was to revive them and replace them in a new context. The personage described in the Gospels opens the way for a Hellenisation of the Torah. He integrates the Dionysian and Osirian elements of a loving bountiful God who lays down his life to save humanity. Gods who die and come back to life are agrarian. They are quite the contrary of Abraham’s pastoral God, and would have been anathema for the tribes fleeing Egypt. But, in a world dominated by Greek culture, and where Roman emperors were made living gods, the New Testament was a perfect adaptation to the times.

The Bible is a mix of covenant, conquest and redemption. And the two nations whose ideologies have been the most influenced by the Scriptures are Israel and the United States of America. The first is stuck in the dilemma between the rule of law and the rules of war. The second is unable to pass from the rules of war to the promise of universal peace. Both nations are congealed in between, and their destinies seem inextricably linked.

Divide and rule.

2009-01-23T07:06:00.000-08:00

The three pillars of government are force, money and consent. Government also needs precise geographical borders to separate it from other armies, currencies and ideas. Inside the national limits the military, the police and the intelligence agencies work together, the nation’s currency is legal tender, and one language is taught, one story told, one ideology propagated. Uniformity makes government possible, and a single model encourages conformity and submission. However, an immutable status quo invariably leads to nihilism and sclerosis of the power structure. This can be avoided by installing a meritocracy. Government renews itself by co-optation, while partisan discussions give the illusion of opposed opinions and possible change.

Aristotle reasoned that government should strive for the common good. The Augustinian view was that rulers should serve God and the Church. Machiavelli, a contemporary of Luther and Calvin, counselled the prince on how to grasp power and maintain his dominion. The enlightenment closed the circle and, returning to the Athenian ideals, Lock and Rousseau conceived social contracts. But, in the intervening two thousand years, the city-states of Antiquity had been replaced by nations.

In his preface to the French edition (Argone 2003) of The Twentieth Century, Howard Zinn wrote, “Nations are not communities and never have been. Any country’s history, presented as a family story, hides bitter conflicts of interest (that are sometimes made public but are mostly repressed) between the conquerors and the conquered, the masters and the slaves, the capitalists and the workers, the dominant and the dominated, be it for reasons of race or gender.” And, “…this book is radically sceptical with regards to governments and their attempts, using culture and politics, to snare ordinary people in the great web of a “national community”, supposed to bring about the satisfaction of common interests.”

Nations are artificial constructions. Conglomerates held together by the cultural cement of languages and by the particular world view each of them transmits. A multitude of points of view that place each nation at the centre of the universe, and bolster national pride with tales of heroism. A partial view concocted by the rulers for their subjects. A top down message diffused by school curricula and mass media. And, when the movement encounters a counter flow of popular culture that refuses denial, the flow is assimilated as part of the main stream. Nevertheless, the language is changed and the past is rewritten, so that the point of view is displaced without losing is central position. Political revolutions are carried and preceded by cultural movements. As both rely on language for their existence, the new modes of expression are necessary for social change. And the impact of a cultural movement is largely dependent on diffusion, on the technology and the media of the historical period.

A cultural counter flow can modify the point of view of a nation. To do this the flow needs a medium. And one may ask, as did McLuhan, “Is the medium the message?” Or is each new medium such a surprise that it briefly opens unforeseen doors through which pass new messages? It is hard to accept that the content has no significance. However, the categories of hot and cold do seem to relate to experience. The sound of a voice is more emotional than are the printed words. And so is a picture, and even more so when sound and image combine. Controlled mass circulation of print accompanied the stiff, tight-laced 19th century. Then radio and cinema exploded the corsets that had bound society. A cultural tsunami, a huge upsurge from the depths, unfettered noise and glaring lights that were only quelled by war.

A cultural medium may be hot or cold, but the content is the message, and the control of the content determines the cultural point of view. New media take society by surprise and open up the gates of culture to an up swell from below. New sounds and images take the place of their predecessors, giving another point of view. But each time the process is stopped before it can run its course. Each time the new mode of expression is restrained by the language barriers around nations, and by media control.

Nations are a fairly recent development. They first appeared as replacements for kingdoms, where monarchs ruled through (and sometimes against) the land owning aristocracy. This monopoly of wealth and power was overthrown when the classes of trade and industry controlled a majority of the kingdom’s riches. The old feudal bonds were broken and a new entity had to be invented to maintain the cohesion of property. The kingdom had belonged to the king and his nobles. The nation was shared out among the propertied classes, old and new.

The end of hereditary power, and of rule as a family affair, brought back ancient forms of government. Notwithstanding that history had shown time and again that municipal government was un-adapted to larger endeavours. Monarchy allows disparity, as all are equally subjected to the monarch, to a minority of one. Democracy creates a situation where a minority is subjected to a majority or, in most cases, where a majority is subjected to a minority. If a society is perfectly uniform, if the citizens are culturally homogenous and egalitarian in the distribution of wealth, then the government of the city by the majority votes of elected representatives is likely to be determined by reason and conviction, with respect to the common good. This may have been the case with the Athenian demos and the Roman gens, the original clans who shared a common fortress and place of worship, on their acropolis or Capitol. But both cities were soon beset by social conflicts between rich and poor. So that cultural cohesion became the only support of government. A “them and us” situation facilitated by perpetual war, and by a cultural identity propagated by writing and literacy.

Representative government and majority decisions can regulate the politics of a homogenous urban population. The geographic space of a nation does not have homogeneity. The inhabitants do not share a common habitat, and their cultural habits will vary accordingly, from their food and clothing to their language and beliefs. Majority rule widens the cultural gap. To the social divide of the city is added the ethnic divide inside the national boundaries.

Western Europe constructed itself on the ruins of Rome, with the obsession of autocracy and empire (Eastern Europe was Byzantine). Along with territorial expansion by conquest, they were the cultural heritage of Latin. When printing began to diffuse the spoken idioms, the Latin monopoly of the written word (by monks in monasteries) was broken. But the imperial ideal was kept alive by the powerful monarchs who imposed their particular idioms, Spanish, French, English, and German (Russian). Over the past hundred years, the slow progression of elected representation and majority rule has split these entities into ever smaller more homogenous units. Government is increasingly localised and culturally uniform. (However, empires do not let their subject peoples go easily, and Europe has been at the heart of two hot world wars and a third cold one, followed by fighting in Yugoslavia, Kosovo, Tchetchenia, Georgia, etc.) These smaller units have led to a greater interdependence, a dense mesh of cultural and economic links that makes future conflict almost impossible. But the cultural uniformity of local government brings to the fore the social divide. When ethnicity no longer divides society, the distribution of wealth becomes a class struggle. So far, only the capitalist classes have formed a supranational alliance. The European working classes have lagged behind. Constrained by language barriers, trade unions have proved incapable of uniting beyond their contracting national boundaries. Will the accumulated crises that seem about to unfold together (finance, industry, commodities, climate) change that disparity? Majority rule tends towards consensus with cultural and social homogeneity. Capital rules by the division of labour. And there are no signs that the coming upheaval will advance the solution to this fundamental contradiction between capitalism and democracy.

Inflating out of recession.

2008-12-19T07:32:00.000-08:00

The house of cards that was built with credit is collapsing by tiers. The global Ponzi scheme, where new credit was paying the interest on past credit, has reached its fatal conclusion. The lenders would like their fiat money back, but they have already had it back in dividends (first come, best served) so there is nothing left.

Credit cards and mortgages were the first to flounder. Then came the bankers and the insurers who had backed them. Faced with massive deleveraging (?) and gaping holes in their accounts, they were saved in extremis by Treasuries and Central Banks rushing to the rescue. The various rescue plans, however, have merely guaranteed past credit. Considering the level of debt it is far too early for a new credit boom, so governments can only shore up the financial institutions and cover the credit they have granted. And when credit is only renewed, the interest paid reduces demand. Falling demand begins with the spending that can be postponed. And so house builders and car makers began to suffer and cried for help. (Kitchen appliances and electronics are made overseas, so the cries are too faint to be heard). Bailing out Wall Street was simply a guarantee of existing loans, a form of insurance for defaults. It represents a huge guarantee but very little actual cash. Whereas bailing out Maine Street needs credit or cash. Notwithstanding Central Banks reducing their discount rates to 0%, the first solution is frozen up for a while, and that leaves the second.

Falling demand leads to business closures and rising unemployment. No one can expect spending to increase in those circumstances. The few who still have income over and above their basic needs will be setting it aside, fearing for their health insurance, their children’s schooling and their pension funds, and worrying that they may be out of work in the near future. When money is short, the reaction is to save, thus making the shortage even greater. Tax rebates are pointless, as they just move existing income from one place to another and back again. Governments are obliged to reduce their expenses (or must borrow to compensate), and the rebates are hoarded as surplus income and lent back to the Treasury. Vast public works would compensate some job losses, but changing from building houses to building bridges is not an overnight event. By the time the projects get going, everything could be at a standstill, as shrinking demand reduces supply and jobs, and less employment reduces demand, and so on.

In fact, other than sprees with a credit card, there are at least two ways to get people to spend. One is to increase their wages and their social benefits. The other is inflation, and the two usually go together. Putting up wages means that more money is circulating in the real economy, but it raises production costs and is passed on to prices. There is more money to spend, and rising prices are an incentive to spend today rather than tomorrow. This is stagflation, considered only marginally better than complete collapse. But the inflation part of the formula has a secondary effect of great importance. Inflation devalues money and, thereby, all the debt that is measured in money is devalued as well.

Inflation accompanies rising wages and cancels debts, allowing a new debt cycle to get under way. The difficulty will be obtaining the higher wages, when they have been static for so long and when unemployment is rising fast. The corporations are not likely to do it, increasing wages goes against the grain. The trade-unions are not about to fight for it, after years of bargaining over wage cuts they have forgotten how. Governments, however, could start with the public sector, thereby obliging the private sector to follow suite. Governments could also legislate on increasing the minimum wage.

It seems that stopping a deflationary recession with inflationary stagnation must be a political choice, an administrative decision for a lesser evil. So far no one has dared. Either those who govern us believe there is an alternative and are waiting for Xmas to bring us the good tidings, or the consequences of inflation frighten them politically. After all, when inflation melts debts like sunshine melts snow, the debtors gain but the creditors lose. Government budgets would be greatly relieved but someone would be paying the bill. The spendthrift gets off and the miser loses his hoard. A difficult point to put across, especially when the problem goes beyond the nation’s savings into the domain of diplomacy and bilateral relations.

Public debt is the accumulation of consecutive budget deficits. The amount of public debt increases regularly with exceptional decreases, and the various debts must be renewed when they reach their pay-back date (the Bush administration has mentioned emitting 3-year bonds, surely that pitfall is too obvious to be allowed). Treasury bonds are held by individuals and institutions, at home and abroad. So that inflation has a domestic and an international effect. Several developed nations, notably the US as Michael Hudson has so well explained, have paid their trade deficits with Treasury bonds. While other developed nations, notably Japan and Germany, as well as the Developing Giants have bought those Treasury bonds with their trade surpluses. National debts have become an integral part of global accounting. Provoking inflation unilaterally might settle things on the home market at a reasonable political price, but the consequences on the world market could be disastrous. Wildly fluctuating currencies can bring trading back to primitive bartering, commodity for commodity. Should this happen to the US dollar, the world’s major currency, most trading would have to stop.

National salvation by inflation was never an easy task. The intermeshing of public debts around the world and the necessity of a concerted global decision make it almost impossible. Nevertheless, the first domino to fall will bring the others down one after the other. At which point, the recession will have taken its toll and the stagnation point will be all the more miserable. Stagflation being an unavoidable phase of the credit cycle, as it cancels debts and allows borrowing to expand again, it would seem more reasonable to stagnate on the crest of the wave rather than in the trough. But then, if logic ruled, the precise workings of credit would be known and its various phases would be predictable, and the whole troublesome cycle might turn out to be unnecessary. Meanwhile, greed and pride are the senseless powers that preside over our destinies.

The factories to the workers!

2008-11-21T07:10:00.000-08:00

As is usual when the financial order exposes its weakness and seems to be tottering before a fall, the possibility of an end to capitalism comes to the fore. The trouble with such speculations is that they often confuse the basis of capitalism and its various extensions. Those subsidiary parts that can be destroyed and rebuilt without threatening the essential principles of capitalism. Real estate, banks and commerce, land and money, these profit from capitalism, but they preceded it and could therefore outlive it. They are not the substantive matter of capitalism.

As Marx pointed out, capitalism breaks with the past by replacing servile labour by free labour. Workers are paid wages when they are employed. As opposed to slaves who have been bought and need to be fed and kept fit, whether employed or not. The slave owner buys the person and must obtain enough work to make a profit. The capitalist leaves the person free, buying only the work time. Fuelled by waves of migrants from the countryside, then from Ireland and Central Europe, the early capitalism described in Capital 1 was quite horrendous, with a human waste that defies belief. A miserable situation that was the logical result of extracting the most labour for the least wage. (One should perhaps put this perception in perspective, as Marx was writing during the American Civil War, 50 years after the Napoleonic Wars and 50 years before WW1. Human life had seldom been so apparently worthless).

Capitalism needs a free work force that it can employ at will. But, to make a profit, capitalism also needs free markets to sell its produce at a price that is higher than the cost of production. This can be the case on foreign markets where production depends on more primitive tools and less knowhow. The home market, however, is subject to fierce competition and to price fixing by cartels. And this is where capitalism made its other break with the past. When wages and working hours are fixed at their utmost and the market price is the same for all, the competitive edge can only come from gains in productivity obtained by technological innovations. So capitalism introduced the notions and the rules concerning patents, copyrights and their offshoots.

Capitalism widened the scope of property. Land and money had from the start been based on private property. Capitalism expanded the rule to include the means of production, the work and the tools. Work could be bought piecemeal without owning the worker, and an idea could belong exclusively to someone. If Citigroup and General Motors go under, will that bring down capitalism, change the way work is bought, and prohibit the private ownership of ideas? Certainly not. Capitalism will rise from the rubble with renewed youth, vigour and attraction. Has anyone heard the president elect talk of giving the property of the above mentioned corporations to their employees? Even though the supposed value of their pension funds probably outweighs the stock market value of the said companies. Could co-operatives bloom, and executives turn to beards, bioethics and bicycles? Can flower-power turn back the guns and can sitting in or dropping out stop the cog-wheels, when everyone is just trying to catch up with yesterdays spending? When capitalism is making its final break with the past by using the constraints of debt instead of force, in a world where the loss of one’s “capital” resembles a death sentence.

Le socialisme bourgeois.

2008-11-19T00:16:00.000-08:00

Aussi loin que l’on remonte dans le temps, les mouvements sociaux sont le résultat d’une alliance entre la masse laborieuse et une partie de son encadrement. Une fraction de la hiérarchie s’en détache et, s’appuyant sur un soutient populaire, tente de la renverser pour prendre sa place. Lorsque l’oppression s’accentue et que le peuple gronde, les insatisfaits et les déclassées du système se présentent comme une alternative de gouvernement. Ils se mettent à la tête et se font les porte-parole du mouvement. Cette prise en main de la révolte par un groupe de transfuges est peut être inévitable. Puisque la pratique des armes et des concepts est réservée aux cadres du système, que le conflit ait une forme militaire ou idéologique le mouvement populaire se trouve dépourvu de direction. Avec du temps il pourrait sans doute développer ses propres idées et une autre pratique, mais la révolte d’en bas se fait toujours dans l’urgence. N’ayant pas de capital, l’ouvrier ne peut interrompre sa force de travail qu’un court instant, le temps que durent ses maigres réserves. Au-delà, lui et ses dépendants sont confrontés à la faim et l’expulsion. S’il ne l’emporte pas tout de suite, il est perdu. Pris par le temps, il ne peut que suivre ceux qui semblent savoir, cette partie marginale du pouvoir, la lumpenbourgeoisie.

La sociale bourgeoisie a les mêmes vieilles origines que les mouvements sociaux. On la trouve déjà à l’œuvre à Athènes et à Rome. Et dés lors on voit les deux tendances qui la scindent, les opportunistes et les moralistes. Les premiers contestent leur position dans l’ordre social, mais l’ordre lui-même n’est pas remis en cause. Le sommet de la pyramide doit être renversé pour être immédiatement remplacé par un novus homo et ses fidèles. Les seconds contestent l’immoralité de l’ordre social. L’ordre lui-même n’est pas en cause et le sommet n’est pas à changer. Ce sont des niveaux subalternes qui pourrissent l’édifice et qui doivent retrouver un comportement éthique. L’opportuniste voit la force des masses laborieuses, la puissance du nombre, et cherche à sen servir. Le moraliste voit la faiblesse des masses laborieuses, le dénuement matériel et moral, et cherche à y remédier.

Le révolutionnaire et le réformiste divisent depuis toujours le socialisme bourgeois. Qui ne sait s’il doit pencher à gauche ou au centre (sic). Cette indécision est une constante, et seules les lames de fond populaires peuvent interrompre son habituelle collaboration à l’ordre social. La sociale bourgeoisie française hésite à nouveau devant son éternel obstacle. Son choix est d’autant plus cruciale que la crise financière se propage à tous les niveaux, présageant de fortes turbulences. Il n’est pas sûr que le PS puisse se positionner en accord avec cette perspective. Sa trop grande implication dans l’ordre existant et les rigidités inévitables que cela implique vont lui interdire un virage à bâbord. Mais, d’un autre côté, il n’est pas certain qu’en ce début de millénaire la sociale bourgeoisie reste une nécessité, que les masses laborieuses en ayant encore besoin pour mener leurs luttes.

A présent le fossé du savoir est en partie comblé et la révolution informatique en est largement responsable. Les réseaux du savoir, des connaissances et de l’information sont en train de laminer le système de transmission scolaire, où le programme ne laisse pas de place à la curiosité, puisque lui-seul décide des critères sélectifs, le choix des sujets et le temps qui leur est accordé, et la docilité que cela impose. Le réseau ouvre un monde, comme le faisait la rue avant le voiture, ou la campagne avant les pesticides et la voiture, mais la nouvelle ouverture ainsi engendrée est planétaire et tous azimuts. La curiosité trouve un vaste champ libre et rend caduc le programme scolaire et sa sélection catégorielle, qui l’ouvrier, qui le cadre, qui le haut dirigeant.
Les révolutions culturelles sont nécessairement générationelles et ne se préoccupent pas immédiatement des hiérarchies du pouvoir. Des nouveaux concepts, un nouveau langage et des rapports différents qui en découlent, seul un groupe d’âge restreint est capable de les assimiler immédiatement. Les autres sont trop vieux ou trop jeunes. Il leur faudra du temps pour s’y faire. Lorsque tout le monde aura vieilli et que la nouveauté se sera émoussée. La génération qui est à la jonction des mondes anciens et nouveaux s’identifie à un idéal, que se soit le refoulement romantique, le nivellement sociale, ou faire l’amour au lieu de la guerre. Et puisqu’elle a l’âge qu’elle a, de quinze à vingt-cinq ans, la génération qui est aux avants postes est la plus turbulente et la moins formatée de tout le corps social.

La révolution informatique est culturelle autant que technologique. Comme avec l’imprimerie à ses débuts, l’état d’esprit est transformé par le nouveau média. Cela se reporte sur le rapport aux autres et au monde. Si la manière de communiquer les idées et les sentiments change, tout doit changer en conséquence. C’est alors que l’ordre établi est rejeté. Et combiné à une crise capitalistique sans précédents, puisque réellement mondiale, la révolution culturelle surf sur la toile et se propage à la vitesse ultime de la lumière. Lorsque l’effondrement du système monétaire mondiale se résoudra par de l’inflation galopante, des taux d’intérêt à deux chiffres, une production ralentie et des pertes d’emplois, avec un État surendetté plus préoccupé par les entreprises que par les salariés, s’employant à faire de la finance au lieu du social, c’est alors que les réseaux montreront leurs vraies possibilités. Et il est difficile d’imaginer que les quinquas et les quadras du PS puissent jouer un rôle quelconque face au grand chamboulement qui se prépare. Les réseaux sociaux se sont affranchis de l’électoralisme et des querelles de chefs. Ils favorisent le représentant révocable et le mandataire, au détriment de l’élu. Ils produisent des connections horizontales plutôt que verticales, permettent l’interaction du plus grand nombre et leur irrésistible inventivité. A-t-on vu à Reims les derniers soubresauts d’une sociale bourgeoisie moribonde, devenue enfin inutile?

Crises cycliques.

2008-11-07T07:10:00.000-08:00

La croissance de la demande est alimentée par le crédit. Ce crédit est en partie investi et en partie consommé. Mais, historiquement et nécessairement, le crédit accroît d’abord l’investissement avant d’accroître la consommation. Ce qui fait qu’un cycle de croissance se partage en deux moments différents. Et, puisque le crédit rapporte de l’intérêt et ne peut donc croître infiniment, chacun des moments va jusqu'à sa limite et s’effondre. Et, puisque le remboursement/renouvellement du crédit obéit à des périodicités précises, ces effondrements répétitifs ont la régularité des événements cosmiques, et la même prévisibilité. (Voir J.A.Schumpeter, daté du 07/02/07)
Les banques ont pour fonction principale d’accorder du crédit à leurs clients. Cela rend plus fluide les échanges de biens et de services, et cela présente une façon d’accroître ces échanges qui est bien plus efficace que le recours à la planche à billets. Le crédit est accordé en fonction de l’offre. Il permet même une production a flux tendu, puisqu’il régule la demande de manière très précise. Tandis qu’une quantité accrue de billets se distribue difficilement, souvent en règlement des dépenses de l’Etat avec des conséquences inflationnistes. D’ailleurs, les billets de banque représentent une fraction décroissante de la masse monétaire et paraissent anachroniques en cette époque de paiements électroniques.
Le crédit permet d’accroître raisonnablement la demande et d’éviter des stocks excessifs. Mais cette croissance a des limites qui sont celles du crédit lui-même. Le crédit se renouvelle, mais l’intérêt ponctionne les revenus. Une croissance du crédit, et donc de l’intérêt versé, réduit d’autant les revenus. Plus d’un côté et moins de l’autre et, lorsque les deux quantités se rejoignent, la croissance s’arrête. Lorsque le crédit supplémentaire mis en circulation ne dépasse plus l’intérêt payé sur la masse de crédit existant, la demande stagne.
Le premier moment d’un cycle concerne l’investissement. L’Etat et les entreprises privées empruntent pour investir plus, qui dans l’infrastructure, l’énergie et les transports, qui dans les moyens de production. Mais un investissement est, au bout du compte, de la valeur ajoutée, du travail et des salaires. Avec l’investissement croissant la masse salariale augmente, alors que l’offre accrue de consommation n’est pas encore au rendez-vous. Il s’ensuit de l’inflation et une hausse des taux d’intérêt. L’Etat voit sa dette réduite par l’inflation et accrue par l’intérêt en hausse. Mais ses revenus sont eux aussi réduits par l’inflation et ses dépenses stagnent. De leur côté les salariés réclament des hausses de salaires et en obtiennent un peu. Ce qui se répercute sur les prix, en plus de la hausse des taux d’intérêt. Les prix flambent, tandis que la demande et la production stagnent.
Le premier temps de la croissance conduit à la stagflation. C’est alors que le deuxième temps se met en marche avec du crédit à la consommation. L’Etat et les consommateurs empruntent pour consommer plus, qui pour les services sociaux et les aides sociales, pour le patrimoine et les armes, qui pour des logements et des biens durables, voir pour des dépenses quotidiennes. En consommant de plus en plus à crédit, l’Etat et les consommateurs ne réclament ni des hausses d’impôts, ni des hausses de salaires. Et la croissance de la valeur ajoutée qui s’ensuit profite aux seuls actionnaires. Jusqu'à ce que le crédit atteint ses limites. Jusqu'à ce que le nouveau crédit n’arrive plus à dépasser l’intérêt payé. C’est alors que les prêts sont de plus en plus douteux et que le château de dettes finit par s’écrouler. Il ne reste plus à l’Etat que de tenter une relance par une création monétaire alimentée par la dette publique, ce qui résulte en autant d’inflation. Il s’ensuit de la stagflation, puis un nouveau cycle commence avec de l’investissement.
Les cycles du crédit se répètent inlassablement. Les cycles courts, les moyens et les longs, qui parfois s’annulent et parfois s’additionnent, ce qui conditionne leurs effets. Le crédit et la dette, comme la monnaie, sont en principe des prérogatives nationales. (La zone euro est une exception qui posera des problèmes particuliers). Ce qui fait que chacune des grandes puissances et sa zone d’influence avaient leur propre calendrier. Ce n’est plus le cas. A présent, la planète entière suit le même rythme, à quelques battements près. Ce qui fait que nous vivons la conjonction de plusieurs fins de cycles, dans le cadre inédit d’une synchronisation mondiale. Et, bien que le processus soit connu et que son occurrence était prévisible, ses conséquences seront d’une ampleur sans précèdent et ses effets collatéraux seront sans commune mesure avec les exemples du passé.

Going beyond confrontation.

2008-10-29T02:06:00.000-07:00

Eight years ago, the dawning millennium looked quite promising. The bug scare was over and the dotcom economy was still bubbling. As November 4th 2000 approached, the election result seemed a foregone conclusion. But then the NASDAC crashed and some jiggery-pokery in Florida gave the White House tenancy to George W. Bush. The world and most of America were aghast, realising that this bemused born-again with a dissolute past and his gangster entourage were to rule the empire. The new president stumbled and strutted through the first months of his occupancy. Then, by luck or laissez-faire, came the successful terrorist attack on the Twin Towers and the Pentagon. These tragic September events, aptly compared to the Reichstag fire of 1933, provided a golden opportunity for obtaining special powers. The War on Terror was declared, and when at war it is legitimate to restrict civil rights and liberties. The US PATRIOT Act was passed and police powers were extended. While overseas diplomatic wrangling made way for cluster bombs and depleted uranium, for murder and mayhem.
Both Brecht (Arturo Ui, 1941) and Pasolini (Salo, 1974) have in their distinct ways described how absolute power is acquired. Taking advantage of greedy capitalists and corrupt politicians, Bretch’s gangsters use violence and intimidation to take control of Chicago and the fictional town of Cicero. Bretch describes tyranny as the rule of terror, but he wrote his play at the very start of WW2 when the Nazi drama had yet to reach its final conclusion. With hindsight and with a contemporary reading of Sade’s 120 Days, Pasolini paints a much darker picture covering the last days of the Fascist republic of Salo, in Northern Italy. His film argues that tyranny needs the consent of its victims. That absolute power builds up progressively from the basic premise of them and us. A mirror image where the laws that are applied to them must then apply to us, creating a spiral of increasing savagery. If Bush is Arturo Ui, who is to replace him for the outcome after next month’s elections? In the midst of financial, industrial, climatic and social disorders, will a new administration be able to interrupt the spiralling horror set off by 9/11?
History repeats itself (according to Schumpeter’s 57 year time scale, the short term reference should be 1951, not 1929) because the same causes produce the same effects. There is never a tabula rasa. New worlds are always built on old world foundations. And so the same misery is passed on through generations and millennia. Rome is said to have owed much to Greek civilisation, but the two worlds remained quite distinct. An ideological divide renewed by the Christian schism between Orthodoxy and Catholicism, finalised in 1054. And again by the East-West divide of the Cold War. Two worlds that rise and fall and rise again, always opposed. An opposition that is fundamental to the overall structure. Because they lean on each other for support and construct themselves as mutual buttresses, and when the East collapses the West is left alone on the edge. And its first reaction to this sudden emptiness is conquest. Pompey seized the Seleucid empire and, twelve and a half centuries later, Baudouin took Constantinople. The break up of the Soviet Union produced a similar vacuum that drew in the West financially and militarily. And, as usual, the victor overstretched his capacities. The West’s material victories brought world dominion, but they never conquered hearts and minds. And the backlash was civil war and the end of the Roman republic, or Reformation versus counter-reformation and the end of feudalism. The events to come will be just as momentous, but they are not just located around the Mediterranean, or on the European continent. This time the whole planet is concerned. An awesome prospect, and a comforting one as well. As, once the dust has settled, there can be no bigger confrontation to construct (unless war with another solar system is considered imaginable). Our species has reached the ultimate stage of confrontation and future centuries will have to invent something new to build on. They will be obliged to put aside the idea of otherness and accept the inescapable reality of planet Earth’s common humanity.

The blame game.

2008-10-01T00:53:00.000-07:00

So far, the only proposed solution to the financial crisis is a return to regulation, public bail-outs and state control. Bail out Wall Street to save Maine Street, the habitual deception since the Yazoo land-fraud of 1795(1). Deregulation has brought down the barriers between the different financial institutions and led to excessive derivations. Doubtful debts have been bundled up into complex derivatives and spread around the planet, and nobody knows where the rotten apples are (they could be everywhere). Regulation, say its promoters, will put a stop to subprime lending. But putting the blame on bad loans supposes that good loans can increase forever, without going bad at some level or other. Good loans are those that can be and are paid back. Good loans turn bad when there is over-borrowing. So that debt and credit have their limits, as does the growth in the production of wealth that they generate. Were regulations to dictate, “This far and no more”, the credit crunch would be permanent, albeit for different reasons. Nevertheless, state regulation will be much talked about as future administrations and existing governments choose the easy path. Assuring those they rule that these excesses do not condemn the system. However, as the crisis gains momentum, even existing limits to borrowing will not stand up to growing social unrest, and governments will be the first to ignore them. Thereby provoking the inflation that cancels debt, and preparing the ground for a new cycle.

Continuous growth leads inevitably to overborrowing and its consequences. But this fatality is systematic. It is inherent to the private property of the means of production, and to private property in general considered as theft of common property, where the minor thieves are accessories to the major ones. And, as private property is the corner stone of the world’s dominant ideology, there is no chance of it being found at fault. So that cause and effect are denied, are not even considered possible. This is not a conspiracy, it is the mental bind of a dogma proclaiming that private property, the mainstay of democracy, saved humanity from a collectivised totalitarian gulag. This of course is a fairy tale. “Communist” regimes never abolished private property. Like their bourgeois revolutionary predecessors of the 18^th and 19^th centuries, and like the pigs in George Orwell’s Animal Farm, they simply changed the landlords. So private property is an undebatable subject and, somewhere between the mangy British bulldog of fallen empire and France’s actual pocket pinscher president, a majority of its American adherents would like to see a sleek pitbull couple in the White House. As ever, the response of the threatened proprietor is the guard dog. In times of financial crisis, the middle classes rise up against the super-rich. They burn yesterday’s idols and turn to demagogues who reassure them with the soothing words that bolster their deflated egos and the promise a national revival. Blame the banks and the stock market, the cosmopolitan traders and the off-shore investors, the “fat cats”, blame those who have done what everyone said was the right thing, by increasing private wealth and public poverty world wide.

Establishing common property is surely an impossible task, as the armed force that first installed and still maintains private property would have to be “communised” as well. And naked force seems naturally hierarchical, like an unfortunate heritage of the food chain pyramid. Or, perhaps, the use of violence against our fellow human beings is so unnatural that we need to be goaded on by some illuminated or half-crazed leader to even envisage such an act. Whatever may be, we might as well resign ourselves to a continuation of immense wealth balancing immense poverty, to plethoric guard dogs and to recurrent crises that turn The Dream into a nightmare. Notwithstanding this stoic pessimism, there is no harm in trying to understand why private property is the principal obstacle, not only to equality but to regular steady growth all round.

Private property is the individual ownership of just about everything. This individualisation of property was confronted from the outset with the tricky problem of its transmission. Was the property to remain concentrated by some form of primogeniture, or should it be diluted by being shared among all the descendants, in what proportions and what of gender? And what happens when there is no proper heir? With the transmission of private property came new forms of criminal activity at all levels of society, from extortion and murder to all out war and genocide. Meanwhile women were in a state of permanent tutelage. And the blame for these dire consequences fell on human nature, or on Satan, or on some psychotic (genetic?) defect. So humanity learned to live with private property and constant bloodshed, accepting them as normal. Kings always tried to conquer their neighbours, fathers and sons always fought, women never grew up and siblings disappeared or died mysteriously. But owners big and small could proudly proclaim, “This is mine”.

Until recent times, private property was essentially land ownership. Commerce waxed and waned according to the safety of land and sea routes. Wars, invasions, or piracy can put a sudden end to trade, whereas land remains, albeit under a different tenure. The two forms of income are also distinct. Land ownership is paid rent. Commercial enterprise brings in a profit. Land rent as such may be low, but it continues down the ages and can rise sharply due to a mineral discovery, to urbanisation or to some other infrastuctural change. Commercial profit can seem excessive, but trading is never without risk. A gamble that must be repeated again and again, endlessly. Sometimes you win, sometimes you lose. Land rent was usually paid in kind and this obliged the landlord to do business with the trader who seemed to own and control all the money. And, though minting money was a royal prerogative, to a large extent he did. The conflict opposing the owners of land to the owners of money is a long tale of woe, culminating in the 18^th century with the opposed arguments of physiocrats and mercantilists. Finally, in the 19^th century, they were forced to close ranks when the industrial entrepreneur showed he could accumulate capital in seemingly limitless quantities. Land possession had obvious boundaries. Circulating money could not increase without inflation. But capital growth offered infinite opportunities for both. In the heat and noise of steam and steel, landlords and bankers were coerced into a three-sided agreement on the sharing of this vast new wealth.

Maintaining private property is the main function of states. Tyrants respect it, and constitutions proclaim its unalienable rights in their opening phrases. But then armed force and private property have always gone hand in hand. From the beginning land owners were conquering soldiers, freemen and nobles alike. In the past, this had greatly disadvantaged the bankers, forever seeking a safe haven. The new alliance offered relative security to all three parties. But government and control of the budget still divides them to this day. Where should the tax money go, to industry, to real estate, or to the banks? And when all three fail together, their divisions lead to some quite violent infighting.

Private property owns the state and the nation’s wealth, but is unable to sustain stable growth, and is constantly booming and busting. Is this also due to human nature, to Satan and psychology (genes?). Do the 7 Deadly Sins get in the way? Greed and avarice, hubris and gambling, speed, alcohol and sex in the city? If these innocuous pastimes can bring down the capitalist cathedral, the edifice must be built on sand. Or is it a basic structural defect (not enough cement or buttresses?) that blows out the walls when the steeple reaches its pinnacle?

Private property, backed by the power of state, takes the nation’s wealth and divides it up between the owners of land, the owners of money and the owners of the means of production. Land concerns a lot of people, and the means of production concern just about everyone, each in its distinct material way. Money, however, is but the accountant intermediary of exchange. A virtuality that explains why bankers lack troops to support them, in a political clash with the two other parties of the property coalition. They will be the first to lose out in the coming turmoil. They will take the blame and be the expiatory offering to the populace. Nationalisation is in the air and on many lips, and inflation is just around the corner. And the cycle will follow its course, increasing its destructiveness each time around.

Wealth results from the combination of labour and the means of production. But that combination can only take place if land and credit are forthcoming. When an element is absent, no wealth is produced. The production of wealth needs the three parties of property, and the rest of society. It is a social enterprise. Increasing wealth means exchanging more value on the market. And if the value exchanged is to increase, the monetary intermediary must grow proportionally. In all logic, and that is how growth cycles start, increased credit goes to the increasing of investments. The means of production must precede production, as investments must precede consumption. This, however, poses several problems. Firstly, as the banker grants credit to the entrepreneur, the property of the enterprise and the profit it implies must be shared. Neither has outright control. Secondly, at the start of a growth cycle, private and public investments grow along with employment and consumer demand. As investment growth and the demand it generates are ahead of consumer supply, they are inflationary. This could be tided over. If investments continue to grow, the consumer demand they create stops being inflationary as soon as increased supply starts to come off the ultimate production chains. But the owners of money cannot accept its loss of value, so banks react by increasing interest rates. Companies stop borrowing and stop increasing investments, so that consumer demand levels off just as supply is increasing. The ensuing recession leads to mass unemployment. The state intervenes with hand-outs provoking more inflation. Prolonged mass unemployment weakens labour unions numerically and financially, and strengthens employers. So that wages stagnate nominally while their buying power is reduced by inflation. This is the first stage of the cycle, fuelled by invested credit. The second stage is fuelled by consumer credit (2).

Wages have been pushed down by unemployment and inflation. The labour movement has lost all initiative and bargaining power. Whereas the owners of the means of production have concentrated their holdings and paid off their debts. Production is way below full capacity, but productivity has increased considerably. When credit begins to fuel the growth of consumer demand on a massive scale, the increased supply is on hand with very few extra jobs, little or no extra long term investments, stable wages and prices, and consequently ballooning profits. And, contrary to printing paper money, consumer credit creates demand according to an existing supply of goods and services, it can be planned and programmed to reduce stocks to a minimum, and it is not inflationary. So banks are back in business lending “leveraged” money. Companies are expanding world wide with multiple take-overs, joint ventures and acquisitions of privatised public utilities. Even the real estate business is finding its place.

The price of land is variable to the extreme, from nothing to no limit. This reality allows the propagation of the idea that real estate need not be rented to be an investment. That its constant increase in value generates revenue. Now a commercial enterprise does consider land and buildings as a part of its investments. But, along with their constant upkeep and renewal, the cost is passed on to the customers. A company’s dividends, interest payments and rent are generated by its work force, not by its investments. Yet the myth lives on as self-made billionaire promoters join the “beautiful people”. And, if a house is an investment, it can be treated as such by the financial system. And, ipso facto, it becomes an investment that is traded on the market along with bonds, shares and commodities. Like commercial real estate, houses are in fact an expense. But they resemble investments for as long as house prices are rising. And that situation depends on demand remaining greater than supply. Meaning that existing houses must be continuously sold above their previous value, and new ones must be ever more expensive. So the number of newcomers on the property ladder must grow regularly to bring the necessary extra cash needed for a fast expanding market. Leading quite naturally to a borrowing bubble that must finally burst. But meanwhile, the inflated price of houses has passed on to steel and cement, wood and glass, tiles, copper and PVC, etc. And when the market can no longer expand, when the necessary number of first time buyers cannot be reached (even with subprime loans), credit breaks down on the housing market, on the commodities market, on the consumer market and on the investment market. A once in a life time Minsky moment (3), and “All the king’s horses and all the king’s men, couldn’t put Humpty together again”. Though they will surely build another bigger one.

When climbers are roped-up on the brink, the first to fall gets the blame when they all come hurtling down. But the responsibility should be shared by all, because the urge to climb is the original cause that makes the drop possible. Imagine a world whiteout climbers, where there is no particular incentive to look down on one’s fellow human beings, where property is not accumulated in the hands of a few, where communities finance investments and own them, where the wealth of nations belongs to all, and where pigs have wings.

(1) http://www.globalresearch.ca/index.php?context=viewArticle&code=HUD20080923&articleId=10316

(2) As growth cycles are caused by or, at least, intimately linked to debt cycles, the length of the debt determines the length of the cycle. So a whole range of cycles with different periodicities are going on at the same time. Most of the time their movements are cacophonous, but they are in harmony at regular intervals both up and down.

(3) http://alamedalearning.com/reality/2007/07/29/minsky-has-his-moment/

Ethical usury.

2008-07-17T00:58:00.000-07:00

“The land is free,” said the young King, “and thou art no man’s slave.”

“In war,” answered the weaver, “the strong make slaves of the weak, and in peace the rich make slaves of the poor.”

Oscar Wilde, The Young King.

Lending and borrowing are basic human activities. A tool, a pound of flour, a sum of money, these go back and forth between individuals and are part of ordinary social intercourse, of friendship and neighborliness. This social credit also applies to those commercial enterprises that are funded by parents and friends. Lending is a social function. Usury is a business. And the informal practice of lending is perverted to make a profit. The borrower must pay interest, a form of rent. And, as is the case for social lending, professional lending concerns two categories of borrowers. There are those who borrow for their own personal use and those who borrow as entrepreneurs. So that credit may be granted for consumption and for investment.

Individuals can only lend what they have. Banks can grant credit in quantities that multiply what they have (x12 seems the commonly accepted limit). This is possible because most of the credit granted by a bank merely moves around the different accounts in the bank. The loans never leave the bank that grants them, and need not be materialised in the form of cash or equity. But this immateriality does not hinder the paying power of bank credit, nor its capacity to increase demand. Banks lend imaginary money and are paid back with “real” money, the central bank stuff. By granting credit, banks transform their accountant money into currency that can be used as a reserve for increasing credit (x12). But this siphoning off must result in a situation where only accountant money remains in the bank’s accounts. This is still not a problem for all transactions between customers of the same bank. But transactions between banks are regarded with growing suspicion.

Bankers make a business of lending for profit. They lend to investors and to consumers, depending on demand. An entrepreneur wishing to expand his business (or to start a new one) may borrow the funds he needs. But he may just as well raise funds by selling shares in his business. And, when possible, he will prefer the second option. And, as entrepreneurship concerns the power of control as much as it does wealth, borrowing funds is in fact the least appealing of three alternatives. The best choice is to expand by reinvesting profits, as this does not entail any loss of control or wealth. The second choice is to sell shares while keeping a controlling majority. Wealth is shared in the form of dividends, but power is maintained. Finally, borrowing funds means paying back with interest. The funds acquired must be returned, and then borrowed again when the used investment needs to be renewed. While the fixed rate of interest takes no account of the actual rate of profit. Borrowing to invest leaves control of a worn out investment and can reduce wealth, if the profit rate falls below the interest rate.

Given the choice, an entrepreneur will not borrow funds for his new investments. Wishing to consume more, a person can only borrow. (For most of history and for most of humanity even to-day, consumer borrowing was and is solicited to survive in lean times, not to consume more than usual. Growth fueled by consumer credit needs an affluent society. The concept is recent - post-WW1? - and had not yet been tried on such a scale. This latest experiment seems to have reached its conclusion.) Consuming now and paying later means paying more than the price, as the bill will include interest. This surcharge reduces the borrower’s overall spending.

Banks exist to lend money at interest, but neither of their potential customers really benefits from this service. However, any increase in the value exchanged on the market depends on growing amounts of liquidity. So that monetary creation is an essential part of economic growth. If the supply of wealth is to increase and find a solvent demand, the supply of money must increase proportionally. And the age old problem is how to circulate this continual supply of additional liquidity. As the state had the prerogative of minting coins, it traditionally assumed the right to circulate all new monetary emissions in payment of its budget deficits. But, when paper money replaced gold and silver coin, this system led to many abuses and the first use of new money by the state was abandoned.

Circulating extra liquidity in the form of credit and debt reduces the state to being a borrower among others, while remaining the trustee of national currency. The power of state is behind the central bank whose function is to guarantee the value of the legal tender. That means robust law enforcement against counterfeiters and, theoretically, a firm hold on inflation. The state and its banking appendix back the value of currency, and the confidence they inspire depends on both financial and political stability, whereas the creation and circulation of additional liquidity is left to the private sector.

Granting credit is as old as trading, and probably preceded the earliest introductions of money. Credit plays an essential part in the process of exchanging goods and services. The more so when coin is scarce, or not yet invented (I’ll give you X to-day, and you’ll give me Y next full moon). But, at some point in time, granting credit came to mean getting more value back than the value given, so that paying back or paying later meant paying more.

Usury is justified by risk and ethics. The lender must cover the possibility of a default on the part of the borrower. But this is in fact insurance not interest, and is often added on as a surcharge (e.g. life insurance). The moral approach is that the econo-miser is superior to the spendthrift. Waste not, want not. And the morality of saving merits the reward of interest. More prosaically, interest is considered as rent paid to the proprietor. But, whatever may be the justification of usury, no difference is made between unspent incomes and the multiple virtuality of banking credit. Lending hard earned savings is considered the same as lending them on twelve times. The saver gets 5% and the banker gets 60%. And the first is used to justify the second, who neither saved nor actually owns, nor even has what he is lending.

Money is the necessary intermediary of exchanges on the market. Money is the demand that should balance with supply, if prices are to be stable. Supply is the result of producing goods and services. And, as production is the result of investment in the means of production and in wages, the market price of supply should cover the price of the investment, plus taxes, land rent, interest and profit. Demand is both the renewal of the means of production and the consumption of wages, while taxes, land rent, interest and profit may join one demand or the other. Taxes are seldom invested, though government funds such as the Trust for Social Security are a part of the budget. Land rent, interest and profit are frequently invested (wages may also be saved from consumption), thereby disrupting the balance of supply and demand.

The components of value (means of production, wages, taxes, land rent, interest and profit) accumulate in the final consumer stage of production. In this way the means of production are renewed and the rest, the added value, is consumed. When a part of the added value is invested instead of being consumed, this brings demand for consumption below supply and, by increasing investment, will ultimately increase consumer supply. (When investments grow with credit, additional money is circulated. This can result in consumer demand exceeding supply, as all investments are not immediately consumable). However, all additional investments do not necessarily increase production and, ultimately, consumer supply. Corporate bonds and shares, or treasury bonds, or real estate, can accumulate increasing speculative value without the slightest effect on supply. But all additional investments, productive or not, that come from added value must necessarily reduce consumer demand.

If additional investments are funded with bank credit, consumer demand is strong. If additional investments are funded with added value, consumer demand is weak. Unless, in the second case, bank credit can turn around from funding investment to funding consumption. But, whereas an investment is supposed to and often does return its value with a profit, consumption returns no value at all. Additional investment funded by bank credit is returned and profit pays for interest. Additional consumption funded by bank credit is not returned and interest raises the price paid, thereby reducing the borrower’s future consumption by more than his present consumption has increased. An invested debt can turn over because profit pays for interest. A consumed debt must turn over with an increase, to cover the interest. Invested debt grows at the same rate as investment. Consumed debt must grow faster than consumption to compensate interest. Invested credit receives interest that is a part of profit. Consumed credit receives interest that is a part of future consumption. So consumer credit can compensate invested added value, and can even increase consumer demand to balance the increased supply from those additional investments. But maintaining this demand means constantly re-lending paid back credit as well as interest.

Additional money with a nominal value of 100 is circulated as consumer credit every year. These 100 are paid back 125 over five years in equal yearly payments of 25. Borrowing means more spending and increased demand. Paying back means less spending and reduced demand. So, if demand increases by 100 the first year, its growth is only 75 the second year, because 25 of the first year’s credit is paid back and taken out of circulation. Then follow growths of 50, 25, 0, -25, -25, -25, etc. For growth in demand to remain at 100, lending must grow in consequence. From 100 the first year to 125 the second, then 156, 195, 244, 305, 356, 414, etc. When an increase in demand of 100 needs the lending out of four times that amount (414), subprime loans cannot be far off.

Increasing or even maintaining consumer demand with credit just runs away and is not sustainable. But, as investors would rather invest their incomes than borrow at interest, with the result that consumer demand is insufficient, there seems no simple alternative solution. Either we resign ourselves to periodic financial upheavals on an ever increasing scale, with all the human suffering that implies, or we take a very hard look at who owns what, where it comes from and how it is used. This could lead to different forms of property and credit, where the commonwealth would have priority over private greed. But it won’t be a gala dinner party.

The pas de deux of state and money.

2008-06-25T01:28:00.000-07:00

The Irish constitutional referendum has again exposed the contradiction between direct democracy and representative democracy. By rejecting the Lisbon Treaty, the people voted against their elected representatives. In a repeat of the Dutch and French campaigns three years ago, the Irish government and most of the opposition, as well as the media commentators and the press editors, were all supporting the treaty and calling for a “yes” vote. But, as the result showed, the nation’s representatives and opinion makers did not convince the voters, who either abstained from voting or, to a majority, voted “no”. This result should not be swept aside disdainfully. It was much more than a victory for the sovereigntists, the Catholic Church and the ultra-conservatives. As was the case in 2005, the Irish “no” vote carries a double message. It questions the European Union and the electoral process.

From the outset the European community has been about trade, big business and banking. Beginning with the European Coal and Steel Community of 1951, and followed in 1957 by the customs union of the European Economic Community and the nuclear energy program of Euratom. Then came the Common Agricultural Policy, aeronautics and space, and on to the single currency. During the past half century corporations, bankers and farmers have had the benefit of a cosy nest, protected from the world by tariff barriers and subsidised exports. And, as the market expanded with new adherents, so their power grew. Capital has grown at an exponential rate but, notwithstanding a trickle down of wealth, organised labour has not progressed at all. Social rights are still negotiated at a national level and trade unions have been incapable of going transnational. As a result, outsourcing to lesser paid regions of Europe and inverse immigrant flows have levelled down salaries rather than pull them up. The European Community has been a huge success for employers and a catastrophe for workers. This may not have been the intention of successive Commissions nor, more recently, of the Lisbon Treaty, where some social questions were timidly considered. But all Europeans know that the corporations get their way by lobbying and that labour organisations have neither the funds nor the capacity to do the same. And that neither the Commission in Brussels, nor the Central Bank in Frankfurt, nor the parliament in Strasbourg, is going to change that disadvantage. Being reduced to the national arena by their trade unions and their means of action, European workers see nothing to gain and much to lose from an expanded communal superstructure.

In a speech to the Commons after his electoral defeat of 1945, Winston Churchill is reported to have remarked, “It has been said that democracy is the worst form of government... except all the others that have been tried.” These words expressed his disappointment with, perhaps, a touch of scorn for fickle voters. But, considering the context, they also implied that there is no known democratic alternative to representative government. Suggesting that people are too busy, lazy or ignorant to govern themselves, and rely on professionals to rule in their stead. And this is largely true concerning the civil service. The functions of state need dedication and specialised knowledge, as do the military, the health service, law and order, transport, etc. But the craft of politics belongs to a different domain. It concerns ideology and its consequences. The idea people have of society and the world at large, and the acts that are a result of this point of view. So that a nation’s meandering path is determined by swaying opinions.

A democratic government is legitimised by elections. At regular preordained intervals the people are called to the ballot-boxes to make a choice. But the choice is between two or more candidates and has no effect on policy. There is no binding mandate, only promises that may or may not be kept. The only choice offered to the electorate is between granting another term to the incumbent and replacing him by his opponent. On a national scale this produces a bipartisan representation with alternating majorities, with government and opposition playing their respective roles, knowing they will change and change again. An ongoing comedy, with the parts transmitted from generation to generation by co-optation. This is a highly selective reproductive process that leaves no room for eccentricity. And so the voters are given a choice of candidates that seem ever more interchangeable, being equally primed for the same part. And parliament resembles a college of cardinals whose essential task is to perpetuate itself. (The Roman Church’s longevity shows how effective co-optation can be.)

As the facade of democracy crackles, the wheels of government become more apparent. Behind the power of state is the power of money. The state and its functionaries are nothing without the wherewithal produced by the rest of society. Alternatively, the power of money is nothing without the power of state behind it. Accumulated wealth needs to be backed by the strong arm of the law. Each leans on the other but, as neither is monolithic, their collusion is more like a clumsy pas de deux than a total symbiosis. Though state ideology is basically greed, always wanting more, it is tainted by moral values and a vague sense of justice. While the accumulation of wealth opposes rent, interest and profit, the historic divisions of surplus value between land owners, merchant bankers and entrepreneurs. These are the faults that produce seismic political upheavals. When morality and justice are ignored, and when the three elements of capitalism are at each other’s throats, there is usually a break in continuity. The old moulds are shattered and new ones replace them. And, as the shape of things inevitably becomes loose and comfortable with time, its replacement will feel tight and constricting.

A ripe time for inflation.

2008-06-06T07:36:00.000-07:00

If people expect an increase in inflation to be temporary and do not build it into their longer-term plans for setting wages and prices, then the inflation created by a shock to oil prices will tend to fade relatively quickly. Ben Bernanke at Harvard, June 4th 2008.

The term inflation only applies to rises in the consumer price index. When the price of shares (or houses) inflates, it is called a bubble. This is because the consumer price is the final price, no more added value, no selling on at a profit. And because the price of shares (and houses) goes up and down on a regular basis, whereas the consumer price index rises constantly (1). But the double terminology also suggests that bubbles resemble each other and have nothing to do with inflation.

On the stock market, prices vary according to supply and demand, as they should. A general rise in the price of shares across the board means that demand exceeds supply. This can happen because demand increases, when more and more punters put their savings on the gaming-table. But it can just as well happen because supply is reduced, when shares are hoarded. However, only increasing demand can result in a stock market bubble, as was the case some years ago, when everyone wanted a piece of the dot-com gamble. A stock market bubble draws in cash when it inflates, and destroys that cash when it bursts. By attracting money and reducing demand elsewhere, inflation on the stock market and its final destruction of liquidity tends to be deflationary, in the sense that it reduces demand on the consumer market.

Prices on the housing market also vary according to supply and demand. But these two variables have little in common with the supply of and demand for company shares. New-comers to the property market usually need more than their savings to buy a house or an apartment, and so increasing demand depends largely on borrowing. Reducing supply by hoarding urban real estate does happen in a few large cities around the world, but it is marginal and its effect on prices is local (2). A housing bubble is inflated with debt and does not destroy that debt when it bursts. The price of houses falls but the debts remain. Based on debt, inflation on the housing market does not reduce demand elsewhere. Instead, as long as the amounts lent out exceed the amounts paid back, the increasing demand for houses inflates the price of building materials and generously circulates liquidity. It is only when the bubble bursts and the flow of credit dries up, when more is paid back than is lent out, that consumer demand is reduced to essentials.

Stock market bubbles have a deflationary effect. They draw in cash and seemingly destroy it when the bubble bursts. Though, in fact, it has fed huge profits and fat wages that may have affected the price of luxury goods, “art” and up-town apartments, but not the consumer price index. Housing bubbles have an inflationary effect on building materials. As house prices rise, building accelerates and demand for materials increases faster than supply. But this does not directly affect the consumer price index either. When the tide of credit recedes, for lack of credit worthy customers or because the limits of over borrowing are reached, demand drops and house prices fall. All the more so that the building sector is in full expansion and a large number of new houses are being built. However, the value destroyed by falling house prices was paid with credit, not in cash. Not with unspent incomes from the past, but with as yet unearned future incomes. And, as the value of the mortgage becomes greater than that of the devalued house, each dollar paid back is devalued in proportion to the devaluation of the property. Future incomes will be paying the house more than its market value, so each dollar will pay back less than a dollar’s worth of house. This contradiction is resolved by inflation, when the house regains its nominal price in a devalued dollar.

A housing market has borrowers. It must also have lenders. As the bubble begins to deflate, some of these lenders are faced with multiple foreclosures and have trouble surviving. But the larger institutions write off their losses and carry on their business as usual. Except that lending is almost at a standstill, while most borrowers are still paying back their debts. Vast sums are being repaid that cannot be lent out again. So where can all this money go to make a profit? As long term interest rates are rising, bonds are not a good buy (3). Share prices on the stock market are like a roller-coaster, brief ups and scary downs. Real estate is out of the question. So all that remains are futures on the commodity market.

Prices on the commodity market vary according to supply and demand. Demand resembles that of the stock market, cash and short term credit. Whereas supply has its own particularities. Commodities are produced to be transformed by the production process, and have a relatively short life span. They can be hoarded but, as they occupy space and mostly need special storage conditions, this is at a cost. In fact, most storage is either “strategic” or imposed by seasonal crops. But it is the nature of commodities that makes their supply different from the supply on other speculative markets. The supply of public debt increases and occasionally decreases. The number of companies that have shares on the stock market goes up and occasionally down. Houses are being built all the time and some are occasionally blown down or swept away. But the supply on these markets concerns not only the increase but, potentially, the whole of the stock. Old and new are bought and sold without distinction. Whereas commodities must be constantly produced anew to supply the market, before being transformed by the production process. As the supply of commodities is a flux rather than an increasing stock, it can be interrupted. Natural disasters, war, peaking non-renewables, climate change, all threaten tomorrow’s expanding production of commodities. This being so, any rational analysis must conclude that the actual flow of commodities is more likely to slow down than to accelerate, at a time when demand is expanding as never before. An ideal situation for speculative investments.

Commodities are the produce of the planet. The production of minerals, fossilised organic matter, plants and animals depends primarily on that amazing and improbable system we call Earth, and only secondarily on human activity (4). A technological adaptation of ancient eschatological fantasies, had led to the dream of travelling through space to other worlds. But it is increasingly obvious - was there ever a reasonable doubt? - that living anywhere else but here is beyond our scope. One planet, one world, and its generous abundance has limits. As does its capacity to absorb our waste emissions. By digging and pumping things out of the ground and diffusing them into the air and water, we are modifying the composition of these two primeval elements. Lakes and rivers are poisonous and the sea merely dilutes these toxic waters, as ocean currents spread the poison all around the globe. At the same time the atmosphere’s complex mixture of gases is being changed. Not so long ago, CFCs gave a clear sign of what was possible. To-day, the increasing proportion of CO2 and the decreasing proportion of oxygen in the air seem to be having an effect on atmospheric conditions. Though this is still under debate, we can be fairly sure that the carbon trapped underground as coal, oil and methane was taken out of the atmosphere by very large plants and very small animals, long before Australopithecus roamed the Rift valley. By burning fossil fuels, we are replacing oxygen molecules by molecules of carbon dioxide. This is recreating conditions that pre-date human presence on Earth, and could make parts of the world uninhabitable for a variety of species, including our own. It has already increased the frequency and force of tornadoes and tropical storms.

The consumption of mineral resources is close to its Gauss curve peak (5), and powerful storms are wrecking the plains and swamping the deltas. The world’s supplies of minerals, fuel and food will stop growing as a result, and may drop because of interactions between the two. Producing food needs fuel and minerals, and producing fuel and minerals needs food. But demand has no reason to stop growing, as long as it is solvent, as long as it can pay. What remains to be seen is who can continue paying ever rising prices. America prints the stuff, the wherewithal, while China, Japan, Germany and a few others are holding vast quantities of it in cash and bonds. On the world commodity market, the dollar reigns supreme, with the euro and the yen playing a very minor role. So rising prices simply need more dollars. The US Treasury has been working hard at it for years and seems set to accelerate the new supply. In a world awash with the green stuff, there is nowhere better for it to go than on the commodity market.

Inflation is often described as too much money chasing too few goods, and this description does seem to apply to the stock, housing and commodity markets, but not to the only accepted measure of inflation, the consumer price index. As yet there is no sign of excess money in the consumer’s pocket. In fact, most consumers are already finding it difficult to face up to the rising prices that are manifestly the result of a top down effect. So the description above may apply to speculative and credit bubbles, but it does not describe inflation as such, measured by the consumer price index.

Rising consumer prices and rising wages are usually associated, and this has become a dogma with the onus placed on wages. And, because wages are a part of the selling price, rising wages do automatically push up prices all along the chain and on to the consumer. This observation has led to the application of a lowest possible minimum wage linked a posteriori to inflation. Meaning that inflation happens and then, hopefully, wages follow. So that neither the low level, but chronic, inflation of the past twenty-odd years, nor the build up of hyper inflation over the past months, can be blamed on wages. Wages rise when wage earners can no longer manage on their earnings and, even then, strike action or some more general social upheaval is usually necessary. A problem that can be countered for a while by easy credit and tax rebates. But this is a move that leads unerringly to over-borrowing by both the government and individuals.

Wage rises are a reaction to consumer price inflation, not its original cause. But rising wages do in turn push up consumer prices. This is because wages are competing for a share of added value with the other two main beneficiaries, taxes and profits. If wage rises are compensated by falling profits or taxes, prices are unchanged. Whereas low wages and low taxes leave room for large profits. And, as profit is the driving force of capitalism, all is done to keep wages and taxes as low as possible and to compensate the lack of spending power with credit. For the past twenty years or so and at in increasing amounts, profits have been invested abroad and credit granted at home, so that a growing proportion of home demand is based on future incomes. Overdrafts, credit cards, mortgages and T-bonds - not to mention the subprime stuff - have insured growing consumer demand at home, while profits were out-sourced as investments and came back as consumer products. Growing profits invested overseas have built up an equivalent debt at home, to compensate the low level of wages and taxes. This process seems to have reached its limits, and returning investments are as forlorn as paid back housing debts. And the commodity market beckons them all. That much more money chasing too few goods.

The inflation chart (1) shows three periods of high inflation, 1916-1921, 1941-1948, 1973-1982. All three are linked to war and fossil fuels. The first period starts during the war in Europe, where the possession of coal reserves played a major part. The second period starts when the Germans tried to take control of the Caspian oil fields and the Japanese, after bombing Pearl Harbour, briefly took over the Indonesian ones. The third period starts after the Yom Kippur war, when oil sales were interrupted and prices soared. In 2008, we have government borrowing for war and soaring oil prices. And if that were not enough, food prices are reacting to foreseeable supply shortages, house prices are plunging and climate change seems upon us. Finally, if inflation is simply a phenomena resulting from the long borrowing cycle - every thirty years - then the time is ripe.

1. Deflation seems to be a thing of the past, possibly due to the demise of the gold standard.
Inflation in the US, 1914-2006 :-
http://www.gocurrency.com/articles/stories-inflation.htm
2. Bubbles stimulate and increase supply on both markets. But when the bubbles burst, the star-ups disappear whereas the building sites remain. The effect on employment is also quite different.
3. When the rate of interest increases, existing bonds automatically lose value. For example:
$5 = 5% of $100 = 10% of $50. I-bonds have variable interest rates that increase with inflation. This theoretically prevents them from losing value.
4. However, it is human activity that creates the exchange value of commodities. The rent, royalties and concessionary rights that are added are the privileges of private and state property.
5. The precise position in time of the different production peaks for non-renewables can only be known after the event. But there are signs (other than price inflation) that suggest we have reached the peak for several products, including oil.

Tax against tyranny.

2008-05-21T00:34:00.000-07:00

The governments of the world can be seen as belonging to either of two categories. There are those that depend on taxes for their spending and there are those that do not. And the extent of its dependence on taxes will largely determine the form of a particular government.
The collection of taxes has never been popular. And introducing new taxes has more than once brought down a government, or led to revolt and even revolution. Taxing the nation means taking a part of the wealth produced. But the part appropriated should not be excessive, as overtaxing inhibits investments and growth. So that a short term gain from an increase in the tax rate contradicts the long term gain due to increased wealth being taxed at the same rate. The necessary “fine tuning” of the tax rate and the consensual disapproval of taxes in general often result in governments having to pay their budget deficits with borrowed money. This inveterate borrowing in turn allows governments, in a bid to restore lost popularity, to cut taxes for certain strategic sectors of society. However, borrowing relies on the lender’s confidence in the borrower’s future capacity to pay. This also applies to government borrowing but, as the limits of debt are poorly defined (1), the lender’s reaction often comes too late, after the limits are passed.
Deciding who bears the burden of financing the state is a fundamental function of parliamentary representation. The question of who is taxed, how and how much is (or should be) a subject of great importance in electoral debates. On a par with law and order, education and welfare, war and peace, that is with all the different ways of spending what is reaped. Fair taxation is essential to the notion of res publica, the idea of a commonwealth shared by all citizens. And so, refusing taxation has proved to be the most effective, perhaps the only way of opposing tyranny. Unless, of course, the tyrant ensures that refusal is impossible.
Communist regimes managed to eliminate taxation by a total control of production, exchange and finance, with government expenditures as an integral part of the process. The highly centralised planning put in place by the communists was inherent to the mechanical age. Coal and steel are best produced in a planed and centralised manner. For this reason, the totalitarian economies were fairly successful for a while, but they were totally unable to adapt to the electronic age. The decentralised nature of electronic software production, the garage start-ups and the high school entrepreneurs quietly pushed state control of production into the landfills of history. Initiative and inventiveness can neither be planed nor extorted.
The top down control of bureaucratic tyranny could not survive in a changed environment. But military tyranny is as thriving as ever, because warlords only need guns and ammunition to maintain their dominion. The rest can be procured by force. And, in the same way, tyrants are able to rule by might, when they do not depend on civil society for their incomes. An army can buy the arms it needs to impose its will thanks to “blood” diamonds, coltan, copper, oil, etc. If the Burmese generals stopped receiving royalties for gas, oil and timber, they would fade away almost over night. But, as no one wants to give up their consumption of gas, oil and tropical timber, it just won’t happen (2). And, to make tyranny even easier, Burma is ethnically divided. So the army just looks after its own and can oppress or neglect the other inhabitants. In the same way, dozens of corrupt cliques are in power all around the world, funded by the royalties they receive.
Beginning with the Magna Carta, English history is a tale of rulers submitting to the will of the people in exchange for badly needed cash. And, to a large extent, it was George III’s need of money and Lord North’s intransigence that led to the Declaration of Independence and the birth of the United States of America. And, in France, Louis XVI’s empty coffers obliged him to assemble the Three Estates that deposed and then beheaded him. These nations are justly proud of their rebellious past and of their forefathers’ brave stands against tyranny. But what of to-day? What pressure can be brought to bear by the taxpayers on a government that grants rebates and borrows all it needs on the world’s currency markets? Powerless at home and hooked to minerals and fossil fuels abroad, what remains of our heritage?

1. The capacity to repay depends on excess income, the part that is over and above the cost of the necessities of life. When incomes are stable, increased borrowing means reduced spending on necessities. But it is always difficult to assess how far the reduction can go.
2. During the Cold War, dictators were funded to put down the reds or the imperialist puppets, depending on which side was paying. Nowadays, funding is essentially commercial, with a few exceptions due to the War on Terror. And events in Iraq have demonstrated once again that it is easier and cheaper to payroll a tyrant than to subdue a nation.

China’s paper feet.

2008-05-07T01:21:00.000-07:00

Over the past twenty years, China has applied the ideal model for the accumulation of capital. A model inaugurated in modern times by England during the industrial revolution, when the cotton-mills put out of work the millions of Indians who were spinning by hand, as had their ancestors since prehistoric times (cotton was originally cultivated in the Indus valley). A model that can counterbalance for a time the inherent contradiction of capitalism, by exporting consumption and importing investments. Instead of distributing value as wages to the workers, so that they may consume the produce of their labour, the produce is exported and consumed by others, and its value returns in the form of investments. China exports consumer goods and, in exchange, imports raw materials and technology. This means that other nations export raw materials and technology and, in exchange, import consumer goods. The Chinese do not consume goods they have produced, whereas other nations consume goods they have not produced. This is the perfect situation and China has benefited from it on an unprecedented scale. But, now that the consumer nations are in trouble, how will China manage a slump.
Raw materials and technology are investments that need the transforming power of labour and the value added by work to be consumable. Entering the production process, they acquire or transmit value until the final consumer stage. For example, machines and plastic pellets are exported by the US to China, and toys are imported back. But the toys contain the value of the machines, the pellets and the work applied in making them (for simplicity’s sake this work includes the buildings, the energy supply, etc.). So that the value of the toys produced is always superior to that of the machines and pellets. Value for value some of the toys stay in China. And, for the same investment in machines and pellets, the US gets fewer toys, albeit at a lower price than those produced at home. And, being cheaper, the imported toys take over the home market.
When the toys were made in the US, a certain investment in machines and pellets resulted in a certain amount of toys. Now that the investments are exported, less toys are imported value for value, as they contain the value added by work. To maintain the amount of toys supplied, the exported investment musts increase constantly to compensate the difference in value. The making of toys is outsourced to China and those employed to make them in the US lose their jobs. But the production of machines and pellets must increase, and so the workers change jobs, from making toys they pass to making machines and pellets. Except that these productions are less labour intensive, so that only a few keep an industrial job and the rest can only provide services.
The entrepreneur (this one represents a whole sector) does not see things this way. He exports machines and pellets and imports cheap toys of the same value, and he puts the local production out of business with low prices they cannot match. As long as his business is expanding, he exports a growing quantity of machines and pellets and imports all the toys produced. The growth in exports compensates the difference in value explained above. This continues until he controls all the market. At which point growth in the production of machines and pellets for export stops. But, as soon as the exported investments stop growing, the value of the toys exceeds the value of the investment and a part of the toys stay in China. But the Chinese, who have no use for them and no demand, sell these extra toys on the world market in competition with the entrepreneur at the origin of the process. Hence the obligation to control the whole production, and hence the continual succession of lawsuits over copyrights. And, as the value of the machines and pellets he exports is insufficient, he pays the difference in currency.
Outsourcing the production of toys leads to a trade deficit, because the value of the toys produced exceed that of the machines and pellets. But the deficit also applies to supply and demand for toys on the US market. As more value is coming in than is going out, more value is being consumed than is being produced. The importer pays the difference with currency. The consumer pays the difference with credit and debt. So the consumer borrows to buy toys, and the entrepreneur passes on this debt to the Chinese in the form of currency (a promise to pay). And the currency is used to buy US Treasury bonds, thereby filling the budget deficit. So the consumer’s borrowing pays the government’s overspending, and the Chinese are holding the paper. But, now that consumer borrowing is waning and governments are overspending more than ever, the Chinese may become wary of bonds and prefer stocks. And that leaves no one to refund the treasury deficit. However, not even the Chinese would consider leaving the US Treasury out on a limb. Though interest rates will have to rise considerably to make the T-bonds attractive enough in an inflationary situation.
China’s sovereign funds will be obliged pick up the US Treasury’s debt, but this will not be enough to regenerate consumer demand. So that China will export less consumer goods. Will the Chinese close factories, or can they turn production around and open up the Chinese market to mass consumption? Will they try to deal with mass unemployment, or can they distribute wealth by increasing wages and allowing the work force to consume the produce of its labour? Can the Chinese consumer take the place of the failing consumers of the world? An improbable solution, as the two options are not equally practicable. The unwritten laws that regulate the accumulation of capital only allow the first choice. Capitalism has a time for expansion and a time for concentration. And the function of recessions is to condense the dispersed wealth of growth, gathering it into a few hands.
As China reduces exports for lack of demand, imports will diminish accordingly. Fewer toys need fewer machines and pellets. And so it will be the world over. We are about to witness the first slump of the post-Cold War era. The first depression to have a really global dimension. And the world’s financial system is so overstretched, with debts piled on debts like a house of cards that it could collapse quite suddenly. Ever since the start of the subprime crisis last summer and the subsequent credit crunch, the official discourse has repeated endlessly that the “fundamentals are sound”. It assures us that there is no reason for alarm because the upheaval concerns exclusively certain banks or, at the very worse, the banking system. Those who govern our destinies may believe their own spin, or it may be wishful thinking or, more likely, a voluntary misrepresentation. But it is gradually becoming apparent that those assurances are false, and that over borrowing is universal. Governments as well as house-owners, consumers and investors, all have borrowed far more than they should and their spending spree has left a wide paper-trail all around the planet. Far too much paper for it to keep its value. Can this gigantic structure built on consumer debt weather a category 5 financial storm? Or will stagnation and inflation bring down the Chinese colossus, with fatal consequences for the declining euro and dollar empires? Will its paper foundations turn out to be quite worthless?

Righting human rights.

2008-04-18T07:16:00.000-07:00

Demand is outstripping supply and prices are multiplying. Fuel and food, the fundamentals of life, are proving to be insufficient for an extension of the Euro-American social model to the entire human race. Though it had long been obvious that meat eating gas-guzzlers could only be a privileged minority, while the rest of humanity (notwithstanding Tata Motors) should be content with millet and muscle power, the dream persisted, backed by intense mass media diffusion. All the more so that ideology was the basic ingredient of the Cold War. “Be like us, not like them.” Or rather, “If you want to be like us, join our side.” Human rights and free enterprise were the gateposts to universal prosperity. And, as it is the wealthiest nations that win wars (cf. Paul Kennedy), so the West won. And the Western model was consecrated as the planetary standard. However, now that this model has passed the limits of planet Earth’s capacity to produce our needs and absorb our wastes, it is becoming daily more apparent that the model is flawed and has brought us to the brink.
Human rights and free enterprise, and the second of the two always gets the blame. Unleashed capitalism, the world market, tax havens, and so on, these are the villains of the play. Whereas human rights, as declared in 1948(1), are a beacon lighting up the darkness of economic rapacity. And yet, the two are intertwined and form an inextricable whole. And if one is at fault, the other is acquiescent.

All human beings are born free and equal in dignity and rights. Etc. (Article 1)
Everyone is entitled to all the rights and freedoms set forth in the Declaration, etc. (Article 2)

So we are equally entitled by birth to freedoms and rights. The freedoms are straightforward enough. They include the freedom of movement and residence (Art. 13), the freedom of opinion and expression (Art.19), the freedom of “peaceful” assembly and association (Art. 20). We may exercise these freedoms if we wish to. The rights as such are more ambiguous.

Everyone has the right to life, liberty and security of person. (Art. 3)

This simply confirms our birthrights. Being born, we may go on living. Born free, we remain so, secured by laws that are equal for all (Art. 7). We have these rights at birth and keep them for life. But, as we grow up, things get more subtle.

Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be compulsory. Technical and professional education shall be made generally available and higher education shall be equally accessible to all on the basis of merit. Etc. (Art. 26)

Here the right becomes compulsive. A child must ingurgitate the state curriculum and his future depends on his capacity to do so, on his “merit”.

Everyone has the right to work, etc. (Art. 23)
Everyone has the right to a standard of living adequate for [the] health and well being etc. (Art. 25)
Everyone has the right to rest and leisure, etc. (Art. 24)

Here the rights are considered a free choice, subjected neither to compulsion by law nor to measure by merit. But, though very few of us are born with work and almost all of us are obliged to work for a living, the material necessity of work and the psychological necessity of leisure are ignored. So the right to work, adequate living and leisure remains formal and is, at best, a right to social benefits.

Everyone has a right to take part in the government of his country, etc. (Art. 21)

This cannot be the same right as the right to work and leisure as there is no personal life and death necessity to partake in politics. Moreover, government should concern society as a whole, whereas work concerns individuals, the employer and the employee. However, politics have become so personalised that the process is little more than a mediated face to face between individuals, the elector and the elected.

Everyone has the right to a nationality. No one shall be arbitrarily deprived of his nationality nor denied the right to change his nationality. (Art.15)

Nationality is a birthright linked to the place of birth or, in some cases, to the nationality of the parents. We are born members of a nation and changing this fatality is wholly dependent on acceptance by other nations. And, though left unmentioned, the right to nationality is in fact compulsory, as no one may be (arbitrarily?) nation less.

Everyone has the right to own property alone as well as in association with others. No one shall be arbitrarily deprived of his property. (Art. 17)

Though stated in almost identical terms, this right to own property is clearly different from the right to a nationality. Property is not a birthright that is shared equally and identically by all. Unlike nationality and the access it grants to the commonwealth, property is a private matter, a matter of private inheritance. Nor is property compulsory, be it by law or necessity (most own little or nothing), though the psychological and ideological pressure to climb the ladder is obsessively applied to all. The right to property protects those who own from those who do not. The right to own property protects the state, the church and the rich, and offers nothing but a day-dream to those “born with a plastic spoon”.
So human rights were built to measure for free enterprise, with compulsory education and nationalism for the foundations and private property for the corner-stones. But then, how could it have been otherwise, considering when and by whom they were drawn up. On the eve of the Cold War, human rights were a crusading banner for the “free” world, thirty verses full promises and the subtleties of language. A declaration of rights that carefully avoids the definition of what a right really is. And even blurs the concept by putting on a same standing education and nationality, work and marriage (Art. 16), property and government, life and liberty, public and private, society and individuals. However, in 1948, the Declaration was a sign of hope for budding nations in Africa and Asia, in the Pacific and the Americas. Now, sixty years on, the non-definition of the rights of human beings has run its course. More precision is a pressing necessity. Unfortunately, the brief window of opportunity offered by peace, between the end of the Cold War (1991) and the start of the War on Terror (2001), has been missed and the Clinton imperium will for ever be associated with Monica Lewinsky’s deep throat. Such a small step for humanity!

1. http://en.wikipedia.org/wiki/Universal_Declaration_of_Human_Rights

Deflation or inflation?

2008-03-21T08:29:00.000-07:00

The harder they come, the harder they fall one and all.
Jimmy Cliff.

There are currently two contradictory forecasts for the times to come, deflation and inflation. Are rising commodity prices mere speculation, a bubble amongst bubbles that will burst as bubbles do? Will the credit crunch lead to a liquidity crisis that must push prices down? Or is legal tender losing its face-value? Is OPEC to blame for the rising price of crude oil, or should the major central banks be held responsible for flooding the market with “money for nothing”?

Trading in commodities is always a speculative business, as it demands a continual anticipation of future prices. But this also applies to stocks and real estate. And these, as shown by recent events, can inflate without inflating currency. However, the price of stocks and real estate only affects the price of stocks and real estate, whereas the price of commodities affects the price of just about everything else. It is also true that company shares and land are practically eternal, whereas commodities are destined to enter the production/consumption process. A barrel of oil is not continuously coming back on the market to be bought and sold. At some stage its value is determined once and for all (without, of course, prejudicing the price of future barrels of oil). Commodities and their value are destined to be consumed and must be produced again. Company shares (as long as the company exists) and land (a part of the Earth’s surface) cannot be consumed. Their market value may fluctuate but their material existence persists unchanged. The persistence of stocks and real estate allows the formation of speculative bubbles that drain money from other employment, but do not otherwise affect the prices on the market. Whereas inflated commodity prices inflate all other prices.

The direct effect of a liquidity crisis is that banks hesitate in lending to each other and to the world at large. This means that the biggest banks will take control of the smaller fry, probably after substantial government bail-outs (vis. Bear Stearns). The next to suffer are the market operators on the stock exchange and in real estate, who need regular injections of extra credit to keep their buoyancy. Then come home-buyers, car-buyers, buyers of sofas and TVs, right down to the ordinary overdraft. Less liquidity means less buying power all round. Will this bring prices down generally, or will it reduce spending to the essentials of life, at whatever price? A shrinking demand for non-essential goods and services will push the weak to the wall, and the big companies will swallow the small.

Like the Roman god Janus, money is two-faced. It can be the intermediary of exchange and it can be the finality of exchange. As K. Marx explained long ago, the perpetual chain of exchanges, commodity - money - commodity - money - C - M - C - M - etc., is made up of two separate series of events. One is C - M - C, and the other is M - C - M. The first series concerns the exchange of goods and services, with money as their intermediary. The second series concerns the exchange of money, with goods and services as its intermediary. Selling the produce of labour to buy the produce of different labour is a consequence of the division of labour. Buying the produce of labour to sell it again at a profit is a consequence of the monetary system. Through the intermediary of money, goods and services are exchanged for consumption (productive or not). Use and exchange value changes hands, and the intervening money is a simple formality. Whereas buying to sell at a profit means that the object of the exchange between money and more money is of secondary importance and that, ultimately, everything is bought and sold.

Buying to sell instead of selling to buy means available credit instead of available goods and services, capital instead of labour. It is no longer the product of labour that is sold to buy the product of other labours. It is labour that is bought, and its product is sold at a profit. And the question arises of the nature of profit. Is labour bought at less than its value, or is the product of labour sold at more than its value? This is a moot-point. But the value of a product is the sum of the values that go into its production, and its market price must cover this plus profit. Profit is the difference between the market price and the production costs. This means that profit depends on a market price that is superior to the value of the product. And profit increases as the gap between price and value widens. If the market price of a product is unchanged (if supply matches demand), and its value is reduced by productivity gains (new technology), or by reducing the price of labour (outsourcing), then profit will increase accordingly. But the exchanges on the market are exchanges of value that do not take into account the difference between an excessive and an insufficient price of labour. The value of labour is the price paid for it. Profit means that the market price is in excess of value, and that the currency measuring the price is devalued. And the larger the profit margin, the more currency is devalued.

In 1973, the Arab members of OPEC decided to reduce their production of oil. This was a reaction to the Kippur War and the occupation of the Sinai. Faisal, the then king of Saudi Arabia who was to be murdered and replaced by his nephew two years later, even declared an embargo on all deliveries to the US. In a matter of weeks, the price of oil was multiplied by four. Arabian light, priced at $2.32 in October 1973, had risen to $9 by January 1974. This led to inflation rates of 10% and more. By 1979 the price of oil had stabilised but, as a consequence of the Iranian revolution followed closely by the Iran/Iraq war, supply was again reduced and prices almost trebled. Inflation rates soared again past the 10% mark. These two “petroleum shocks” were sudden and unexpected, being linked to probable but unpredictable political and military conflicts. Their consequences for oil importing countries were high inflation, recession and unemployment. The present situation seems very similar and the same outcome is likely. This time, however, there are no obvious causes, either political or military, to explain the actual multiplication of the price of oil. The novelty, this time, is that OPEC no longer needs to reduce supply to raise the market price of oil. Not increasing production fast enough is sufficient. And insurgent Iraq seems unable to produce more than it does. Iran is ostracised by several potential customers who refuse to trade. Chavez is doing fine as it is. And other nations (Kuwai,Saudi Arabia, and Nigeria) may have reached their production peaks.

The price of non-renewable commodities is entering a new phase. So far, abundance has been the rule, and this may still be true (1). But the growth curve of supply has been crossed by the growth curve of demand, which is much steeper. Market prices are but a reflection of this new relation, where the planet’s resources are pushed to the limit. However, demand must be solvent, and increasing demand depends on increasing amounts of liquidity. And that seems to be in contradiction with the present situation. Unless liquidity is being drained onto the commodity market, thereby accentuating the lack of liquidity elsewhere. Either demand for commodities slackens and the world economy stagnates or recedes, or this demand is sustained by credit and banks will fall like dominoes. Or, and this is the case so far, central banks change their status of ultimate lenders to that of primary lenders. Instead of backing short term discounting and inter-bank lending, central banks are doing the lending themselves at a bargain rate. This is not quite the same as printing larger and larger denomination bank-notes, because credit returns to the creditor, whereas bank-notes stay in circulation. But the principle is the same. The loans granted by central banks will have to be renewed and increased. Renewed to keep the banks afloat, and increased to compensate the liquidity drawn on to the commodities market. And also to compensate the liquidity that is withdrawn to be consumed. As rising commodity prices are passed on to the consumer, the credit squeeze forces him to fall back on his savings. He too needs cash and must sell his stocks and bonds, maybe even his life insurance or his home. This also must be compensated by central bank loans.

It seems that 2008 will be an up and down year, as central banks regularly intervene on a weekly, monthly and quarterly basis with increasing amounts of credit. The real test will come when governments try to fill their abysmal budget deficits by borrowing on the money market. With banks on the verge of asphyxiation and savings being spent on consumption, this will be difficult and costly and will depend on more central bank lending. Handing out swaths of money at close to zero interest, backed by little or no collateral, may be different from printing bank-notes but the result will be just as inflationary. So inflation wipes out debts and borrowing can increase again, drawing growth along with it. Inflation will greatly alleviate government, corporate and all fixed interest debts. But the holders of these debts will loose out. So will wage earners and fixed incomes in general. And the consequence of these recurrent inflationary peaks is always proportionate to the size of the debt. With inflation, the amount of value destroyed is necessarily a percentage of the total sum of all values.

1. The state of petroleum reserves in the ground is a well kept secret. And may, in fact, be difficult to ascertain. Most sites have been pumping water into the fields for years, to push up the oil. And there is probably no precise way to know how much of an underground reservoir is full of water, and how much is still full of oil. For example, does the Ghawar field in Saudi Arabia still contain more, as much, or less than the 60 billion barrels it has produced so far? http://en.wikipedia.org/wiki/Ghawar

Jumping debts and cyclical borrowing.

2008-03-07T07:12:00.000-08:00

Cycles govern most aspects of our environment. The returning seasons, the quarters of the moon and the succession of days and nights are decisive for life on planet Earth. History is subjected to similar periodic phenomena, as empires rise and fall. And business and trade have their own times of growth and slump. And, though the cosmic cycles have given up their secrets and the movements of empire show the historic limits of accumulated power, the cycles of production and consumption, those very human affairs, are still clouded in mystery. What has been studied so far (Kitchin, Juglar, Kuznets, and Kondratieff) is growth in production. This led Schumpeter to conclude that technological innovation was the driving force of growth. And that may be so, but why the cycles? Innovation is an accelerating historical force that can’t be chopped up conveniently into regular slices of time. The cyclical time factor must come from somewhere else.

More supply needs more demand and, hence, more money in circulation. This is done by granting credit, either by lending unspent incomes, or by creating virtual banking money. Credit is granted for investments and for consumption, but only the second case will be considered, that of consumption, of public state spending and private personal spending.

Credit for consumption increases spending to-day and reduces spending to-morrow (when the credit is repaid), unless the credit is constantly renewed. In which case, only the interest is deducted from to-morrow’s spending. An increase in spending due to credit is followed by a reduction in spending, unless the credit and the interest are borrowed again. So past credit and interest are added to the new credit that is maintaining growth in demand. All the credit paid back must be lent out again. And growth cycles in demand are in fact credit cycles.

Credit cycles result directly from successive emissions of treasury bonds. These pay yearly interest, but the value of the bond is only returned at term, in one sum.

A government decides to spend 100 units more per year. To do so, the treasury emits 5-year bonds that pay 5% interest.

The first year = 100

The second year 100 plus 5% interest on the previous year’s borrowing = 105

(Neglecting compound interest)

The third year 100 plus two years interest = 110

The fourth year = 115

The fifth year = 120

But on the sixth year, 125 plus 100, as the first year’s bonds have come to term and must be borrowed again = 225

The “jump” (from 120 to 225) is the turning point in the cycle. It must necessarily cause a slow down in credit growth, as extra funding for an already expanding debt gets more difficult to find. For the usual 10-year and 30-year T-bonds the “jump” is less pronounced, as the sum of interest (x9, x29, instead of x4) accumulated before the “jump” is greater. But the slow down occurs for the same reasons. Government debt, borrowed in the name of the governed, grows and stabilises and grows again, following different time spans. Periodically, the growth and the stabilisation phases of two or more cycles coincide. And the accumulated growth mirrors the magnitude of the ensuing slump.

Public borrowing by states (cities, counties, etc.) depends on unspent incomes. Government debt circulates money that would not do so otherwise, it makes use the nation’s (the world’s?) savings. Private borrowing by individuals is not able to raise funds with bonds, and must depend on banking credit. Individual debt circulates promises of future payments. It creates more money and increases demand. But, as the rules of private borrowing are different, there are no particular turning points.

Consumer credit and mortgages are usually paid back piecemeal. This means that the amount of renewed credit increases faster, but that there is no “jump” at the term of the debt. For example, a 5-year mortgage at 5%, paid back in five instalments, for a growth in spending of 100 per year, gives a progression of credit something like this:

100, 125, 155, 190, 235, 285, 330, 380, etc.

The amounts paid back (that must be lent out again) increase rapidly. And the necessary lending out of ever larger amounts seems to explain the actual debacle of sub-prime loans. Private borrowing also has a variety of time scales, and these regularly coincide. So mortgages and consumer credit just pile up as high as they can. Whereas bonds are cyclical, as the value emitted must “jump” at each term. The two interact however, as both increase demand for consumption and, thereby, sustain investments and employment. And, at regular intervals, a privately cumulated borrowing bubble coincides with a publicly cumulated borrowing “jump”. That seems to be happening at present, as it did 57-odd years ago at the start of the Cold War. And each time around, the dimensions of the event are multiplied.

Another cumulative factor is the gradual synchronisation of the world’s markets in the emission of treasury bonds. Different nations used to have their “jumps” at different points in time. Though the imperial nations had synchronised their dominions and had already magnified growth and slump. Then, the USA being the only solvent nation after WW2, the international monetary institutions were all backed by the US dollar and this synchronised borrowing in the Western sphere of influence. The Soviet and Chinese markets and their satellites tried (with decreasing success) to manage on their own until the early 90s. Since then, all is one and one is all.

It is difficult to grasp the sheer dimension of what is happening. There is no precedent or equivalent to this one-world system of finance and trade. That we all inhabit the same space ship is becoming ever more obvious, as the effects of climate change become apparent. At present, financial synchronisation has also become global but, as with emissions of carbon dioxide, government borrowing is still considered a national prerogative. And, just like greenhouse gases, borrowing is really an integral part of the technological and ideological system that rules all existence on this planet.