CAN CHINA INNOVATE ?

CAN CHINA INNOVATE ?

     The immense weight of China dominates much economic prognostication these days. Will it overtake the USA and become the dominant power of this century ? What are its strengths and weaknesses ? In the November 18 edition of Time Magazine Michael Schuman looks at this question from the perspective of China's need to learn innovation. Not simply to produce. This is one area in which it is well behind the USA, to the great comfort of American apologists.

      China is facing a period of transition and needs to adjust.

     "China is a victim of its own success....The country can no longer rely on making lots of stuff; China has to invent things, design them, brand them and market them. Instead of following the leaders of global industry, China has to produce leaders of its own."

     China has taken steps to address the needs of its new stage of development, but it has a long way to go. Chinese labour is no longer the dollar-store market of the world. Chinese firms are beginning to outsource to other countries. The author looks at one instance, that of Speciality Medical Supplies who tried this year to shift production to India. Their Chinese workers revolted and held the American manager hostage in his office for six days. Tsk !

     Labour costs in Mumbai would have been 75% less than in Beijing. Wages in China are growing, courtesy of demographics and a shortage of skilled labour. Companies such as toymaker K'NEX are even beginning to "reshore" production back to the USA as other financial factors put pressure on the shrinking labour-cost advantage of China versus America.

     There is also the problem of China's slow adoption of cutting-edge technology. The failure of China's auto industry to make an impression in world markets is illustrative. Failure to adapt has resulted in a 49% rate of initial defects in Chinese-made cars. Ooops ! China has overtaken South Korea as the world's largest shipbuilder, but its vessels are built on older models while the Koreans have moved on to the lucrative markets of supermassive container ships and vessels for energy exploration.

     What innovation there is in China generally builds incrementally on existing technology rather than groundbreaking ideas. The Chinese educational system is good at skill-building but poor at instilling creativity. Chinese engineers tend to be conservative and every concerned about possible consequences of failure. Especially when new ideas are involved.

     China is also notably deficient in marketing. As the author says; "Chinese executives are too fixated on their production and not enough on their customers.". This may be a hangover from the Marxist mode of management, and new Chinese entrepreneurs are indeed trying better ways to sell their products to the world. Jazzed up with a veneer of the exoticism of Chinese culture.

     China lacks management skills, and those who have them can often command relatively huge salaries. Some firms have responded by making their businesses top heavy. What they lack in quality they try to make up for in quantity. Perhaps this managerial over-oversight is also a Marxist leftover.

     Yes, China has had almost miraculous economic growth, but there are many problems that still hold the country back. This article is a good overview of some of them. It's valuable even though it is replete with "evidence" that is only anecdotal.

CANADIAN LABOUR MANITOBA:

UNION BUSTING MANITOBA STYLE:

This one is probably a bit dated. The relevant events belong to last month, and it was duly reported in the local press, at least briefly. The story is an old and hoary one about how management fends off union organization by declaring portions of their employees as "managers" even if their supervisory actions rarely extend beyond seeing that their shoelaces are tied. Managers, of course, are out of the sphere of union bargaining, and they can be squeezed to the hilt if they are actually workers who have taken this legal loophole on the chin. The case, however, is hardly over as can be seen from below where , at least in my mind, there could be some doubt about the legality of what the real management has done in the face of a Labour Board ruling that authorized the MNU to represent the people involved. Still, you have to hand it to those "caring" social service bureaucrats for trying every possible avenue to avoid disgorging a few more shekels. Oh, they "care" so much. here's the story from the website of the Manitoba Nurses' Union.

CLCLCLCLCL
Nurses lose jobs after Union obtains certification
Nine nurses from the Kildonan Personal Care Centre have had their positions eliminated after seeking representation from the Manitoba Nurses Union for the purpose of collective bargaining. MNU is taking legal action against the employer. During an initial meeting in November 2009 with representatives of the MNU, the Centre’s Resident Care Coordinators, raised concerns about workload issues, salary, lack of shift and weekend premiums as well as proper overtime provision.

MNU agreed to represent the nurses and on January 8,2010 filed an application for certification pursuant to the provisions of the Labour Relations Act, in order to obtain an automatic certification to bargain a collective agreement for these nurses.

The employer claimed that the Resident Care Coordinators were in fact managers and were not appropriate to be unionized because they were performing “primarily management” functions.

The MNU disputed this allegation and description of the work actually being performed. Hearing dates were set by the Labour Board to determine whether the nurses were eligible to join the MNU for collective bargaining and representation rights, but shortly before the scheduled hearing the employer withdrew their objection to the application.

On May 17, 2010 the Labour Board issued a certification order enabling these nurses to be represented by the MNU. After a five month ordeal, the nurses had a victory – or so they thought.

Three days later, on May 20,2010, Revera Living, the corporation that runs Kildonan Personal Care Centre, eliminated the position of Resident Care Coordinator, thereby terminating all of the members of the newly certified bargaining unit, effective August 20,2010.

After terminating these nurses the employer posted Resident Care Manager positions which contain many shifts, duties, and responsibilities which appear similar to those of the eliminated positions.The terminated nurses have been offered the chance to apply for these positions, but there is no guarantee that these nurses will even be considered for the newly created positions.

The employer alleges the new “manager” jobs will meet the test to keep these positions excluded from being unionized in the future. The MNU shall continue to monitor and communicate with all nurses in the eight Revera Living workplaces and requests that all interested nurses continue to communicate with us in regard to representation.

CANADIAN ECONOMICS/CANADIAN POLITICS:

ANOTHER CORPORATE RIP-OFF:

The following, from the Progressive Economics Forum, certainly is grist to the mill of my long held contention that we no longer live in a society that could be styled "capitalist" (whatever the title of the article). I have termed our present society as "managerial rule" for decades, and I have yet to see convincing evidence that the traditional use of the c-word gives any greater insight. Usually it obscures very important phenomena. In my view We live in a society far removed from the "free market" that should be a defining aspect of "capitalism". Yes, I know that there has been over a century of leftist modification to the crude theory that Marx first presented in the 1800s, but as the years drag on this seems more and more to be like the addition of epicycles to try and correct the failings of the Ptolemaic model of the universe.

Understanding that most of the economy is now and has been for years outside of the simple supply/demand situation that would define pure capitalism is essential to understanding things like what is described below. No doubt our economy still retains some elements of capitalism. Even the most tyrannical Stalinist command economy had to have such elements, even if only as in the black market, simply to survive and function. Yet, both the theoretical owners of corporations ie the stockholders and the public in general are obviously defrauded by practices like those described below. If the "state" is an institution that operates "on behalf of the ruling class" then what the problem described below shows is that the managers of the corporations are the ruling class.

But enough of my theorizing. Here's the article.

CECECECECECECECE

Stock options, the buyback boondoggle and the crisis of capitalism
As if there weren’t already enough reasons to eliminate the egregious stock option tax loophole, a column by Eric Reguly in this month’s Report on Business magazine highlights yet another. This reason helps to explain why we had such a booming stock market up to 2008, but little growth in real investment and productivity. ( One of the chronic and perhaps growing problems of managerial society- Molly )

First of all, the stock option deduction, which allows those recipients of stock options to only pay half the statutory rate of income tax on their gains is:
#Expensive, costing Canada’s federal government an average of almost $1 billion a year in foregone tax revenues annually during the past five year, according to Finance Canada’s tax expenditure accounts.
#Unfair, with the benefits going overwhelming to those with the highest incomes, including CEOs, as Hugh Mackenzie has outlined in his annual CEO pay report for the CCPA. For example as I showed a few years ago, this tax loophole saved Robert Gratton, former CEO of Power Corp over $24 million in federal income taxes, just on one year’s income. This is a major reason why some of the highest paid people in our society pay tax at a lower rate than ordinary workers.
#Distortionary and destabilizing, creating the misaligned incentives and pay structures that reward short-term risk taking that Bank of Canada governor Mark Carney identified as one of the key reasons for turbulence in the financial markets in a speech he gave two years ago.

But there’s an even more devastating reason why the tax loophole for stock options should be eliminated: it has been very damaging for the economy.

Research by William Lazonick, director of the Centre for Industrial Competitiveness at the University of Massachusetts, shows that stock buybacks–using a company’s funds to buyback its own shares–has swallowed up an enormous amount of the income of major US companies. Canadian companies have also put increasing amounts of their income into stock buybacks and not into more productive investments, as I outlined a few years ago.

The stock buybacks have resulted in pretty blatant stock price manipulation, boosting stock price value for these companies, and paying off very handsomely for those who hold shares, which includes most CEOs and senior executives, especially since they only pay half the rate of tax on these gains. It’s been great for shareholders and other employees who also own shares, at least in the short-term. ( But they pay off most handsomely for those who can control and anticipate the movements ie management - Molly )

The problem is that in the long-term it has bled the economy of real investment in the economy. As Reguly writes:
Every dollar spent on buybacks means one less dollar spent elsewhere-on R&D, on training, on equipment, on creating employment, on innovation. Ultimately, competitiveness and economic growth suffer.

This issue is related to the broader discussion we’ve recently had on this blog about the ineffectiveness of corporate tax cuts.

Lazonick ties this to a broader crisis of US capitalism’s “New Economy business model”, says we should ban stock buybacks where they are used to manipulate prices, and writes that the:
The government also needs to enact legislation that drastically reins in top executive pay, which means placing restrictions on stock-based remuneration, especially stock options.

We will soon see in the federal Throne Speech and budget what Canada’s federal government has planned to revitalize Canada’s economy coming out of this recession.

But if it is just more faith in the same old simplistic laissez-faire Advantage Canada framework without fixing any of these problems, it will have very little success.

CANADIAN POLITICS:

CITY MANAGERS BEAT HOMELESS MAN IN TORONTO:

It seems that the managers in the city of Toronto are getting right mean these days. Tomorrow, as the following press release says, the Ontario Coalition Against Poverty (OCAP) will be holding a press conference about the recent beating of a homeless man in that city by managerial personnel staffing one of the 'shelters' down there. As the garbage piles up because of the civic workers' strike the boy scout thrill of actually having to work for a living wears a little thing after a few days. I'm sure the managers will be happy to get back to the hour long coffee breaks and the 2 1/2 hour long lunch. It seems that the jolly crew below were on the bottom of the ass kissing pyramid. Work for a change ? Yeah,as long as it doesn't last too long. But the boneyard shift ? This gets bad. Finally, they drew the flophouse (excuse me, am I supposed to say "shelter" in our politically correct society ?) detail. Considering that the city of Toronto is hiring outside contractors to deal with the vermin at the temporary dumps, this particular flophouse watch is probably the worst piece of bad luck a manager could pull. Or maybe not. What about sewers in TO ? Is that being contracted out as well ?

Who knows. One thing is for sure; the boys in the suits are getting right snake mean. One can only imagine what they'd do to their workers if they could get away with it. In any case, here's the story...

CPCPCPCPCPCPCP

Press Conference Thursday: City Management Assaults Homeless Man At Seaton House Shelter:‏
City management assaults homeless man at Seaton House shelter: Man severely beaten and dumped on sidewalk over dispute about a sandwich.

Press Conference

Date: Thursday, July 9

Time: 11:00 am

Location: Seaton House, 339 George Street(east of Jarvis Street, south of Gerrard Street)

Everyone is welcome. Please come out and support OCAP and condemn the assault of homeless man by City management at Seaton House.

Man severely beaten and dumped on sidewalk over dispute about a sandwich.

On June 24TH, 2009, Brian DuBourdieu went to The Seaton House men's shelter in downtown Toronto, to get something to eat and a night's sleep. Instead, he ended up spending the night in the emergency room of St.Mike's hospital.

The assault took place after Mr. DuBourdieu asked for something to eat from the city management who are staffing the shelter during the current strike. Despite his serious allergy to peanut butter, he was told by the managers that was all there was to eat, after which a sandwich was thrown at him. Upset and angry, Mr. DuBourdieu threw the sandwich back at the manager, kicked a steel door (causing no damage), turned and walked away.

“That is when the five city managers that were working, jumped me from behind, tackled me to the ground and three of them held me down while the other two kicked me repeatedly,” said DuBourdieu. The managers then picked Mr. DuBourdieu up. “They carried me down three flights of stairs and outside to the sidewalk where they dropped me on the ground and left me there”, says Mr. DuBourdieu. He was assisted to the hospital by a friend,where he was treated for his injuries, including torn cartilage and ligaments in his knee. There is a strong likelihood he will need surgery to repair the damage to his leg caused by the repeated kicks.

“The shelter system has been in crisis for a long time and sending in untrained managers to work in shelters does not help matters. Shelters are overcrowded, have insufficient food and are infested with mice and bedbugs” says Gaetan Heroux from the Ontario Coalition Against Poverty.

"The shelter system desperately needs more funding and more beds, especially now when we expect an increase in homelessness.” “We call on the City of Toronto to apologize to Mr. DuBourdieu, return his missing property, make restitution towards him, lift the ban against him at Seaton House, and ensure that nothing like this ever happens again. We also demand that the police lay charges against the managers involved in the assault", said Heroux.

Press Conference Speakers:

Brian DuBourdieu

Gaetan Heroux, OCAP

Mike Leitold, Lawyer

For more information call OCAP - 416-925-6939

Visit ocap.ca to read our statement of support of CUPE

**

Ontario Coalition Against Poverty

10 Britain St.

Toronto, ON M5A 1R6

416-925-6939

ocap@tao.ca

www.ocap.ca

**

ECONOMIC CRISIS:

BLAME THE MANAGERS:

Here's a choice one from the AFL-CIO Blog, one to remember the next time you read some screed that tries to blame "overpaid workers" for the decline of certain sectors of the economy. This, of course, is in reference to the problems of the US economy, but one of the points made-overpayment of managers- has reference to many other countries as well.

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Managers, Not Workers, Overpaid in Manufacturing Jobs:
by James Parks, Feb 17, 2009



Some pundits and lawmakers—Sen. Bob Corker (R-Tenn.) comes to mind—falsely claim that union workers are overpaid and are to blame for the decline of U.S. manufacturing. But a new report, released last week by the Economic Policy Institute (EPI), busts that myth and shows the convenient conventional wisdom to be wrong.

EPI economist Josh Bivens lays out the facts in Squandering the Blue-Collar Advantage, which show that U.S. manufacturing’s blue-collar workforce, far from destroying U.S. competitiveness, is actually one of the key elements making a positive contribution to competitiveness—a contribution being undermined by a variety of other factors. Click here to read the entire report.

Says Bivens:

If the story of U.S. manufacturing began and ended with its blue-collar
workers, the outcome would be far different from what we’re seeing today. In
hourly pay and productivity, U.S. manufacturing workers give their companies a
significant competitive edge—one that is being drained away by other negative
forces.

Bivens identifies three key factors undermining U.S. competitiveness:

*The overvalued U.S. dollar, which artificially drives up the price of U.S.
goods abroad and drives down the cost of foreign-produced goods here. Over the
past 10 years, this imbalance alone has created a 10 percent to 16 percent cost
disadvantage for U.S. goods, compared with the previous decade.
*The
high cost of U.S. health care is another significant factor. Reducing these
costs to the same level as our comparable trading partners could create a 4.6
percent cost advantage.
*U.S. managers—not workers—are overpaid. Bringing
white-collar wages in line with those in comparable countries could result in a
6.4 percent cost advantage for U.S. manufacturers.

Bivens adds:

If we want to restore the strength of U.S. manufacturing in our economy and in
the world, we have to address the real anti-competitive factors that are
dragging it down. In this effort, the wages and productivity of the unionized
blue-collar workforce are an important asset.

ECONOMIC CRISIS:

VALUE FOR YOUR MONEY ?:

The following article by Linda McQuaig is taken from the online progressive news site Straight Goods. It originally appeared in the Toronto Star. Think about the following the next time you hear about the "incentives" that management claims it needs.

..........................

About those bank CEO salaries...:
There is no evidence that phenomenal pay packages inspire higher performance levels.
by Linda McQuaig
It's probably a while still before we see bank CEOs on street corners selling the homeless news.

But reports last week of bank presidents cutting their own pay were somewhat eye-catching. (For a little perspective: Rick Waugh of Bank of Nova Scotia will take home $7.5 million this year — after his cut.)

Starting in the 1980s, a sea change swept away concerns about inequality and unleashed an era of greed and skyrocketing incomes at the top.

Still, the pay cuts suggest that even inside the most well-fortified Bay Street towers there are jitters that the people down below may start questioning how the economic pie is divided and why they are getting such a small — and shrinking — slice.

Certainly revelations of Wall Street hijinks have raised questions about the skewed nature of financial rewards and, more generally, about how far North American culture has drifted from what used to be known as the "work ethic".

We're waking up to the fact that, starting in the 1980s, a sea change swept away concerns about inequality and unleashed an era of greed and skyrocketing incomes at the top.

We're told that exorbitant pay is necessary to motivate great performance.

But that canard was surely put to rest last month by John Thain, former CEO of Merrill Lynch. Thain explained that it had been necessary to pay $4 billion in executive bonuses to keep the "best people", after those people had just steered the company to a net loss of $27 billion and helped trigger a global recession. (What might some less capable people have done? — started a nuclear war?)

Even when there is great performance, does the wild inflation in top incomes make sense?

Take baseball. In the early 1970s, Hank Aaron was the top-paid player at $200,000 a year. Last year, Alex Rodriguez, with similarly dazzling statistics, earned $27.7 million. Adjusting for inflation (but not for drugs), that makes Rodriguez's pay more than 25 times greater than Aaron's. Is Rodriguez's performance more than 25 times better?

There's no evidence that today's phenomenal pay packages — in sports, entertainment or business — are motivating today's players, performers or executives to any higher performance levels than more modest packages did a few decades ago.

Indeed, there's little logic to our approach to financial rewards. People want to be compensated for work — particularly when it involves drudgery or unpleasantness. But those at the top typically love their jobs, and are motivated by the desire to excel and win recognition. Money is one form of recognition, but there's no evidence that financial rewards have to be gigantic, or that much larger financial rewards produce any greater results.

Vincent van Gogh was motivated to produce hundreds of works of great art, even though he only managed to sell one of them, for a pittance, just before he died. Shakespeare produced the world's greatest dramas without even the prospect they'd become Hollywood blockbusters.

The pay for those at the top has gotten ridiculously out of whack in recent years. Among other things, this underlines the need for a more progressive tax system.

It's also been noted that if we cut the pay of those running our financial institutions, they might seek more useful employment as teachers or health-care workers. But a letter to The New York Times last week made a compelling case for maintaining Wall Street bonuses: "Without them, Wall Streeters will all look for other jobs. Do we really want these greedy, incompetent clowns building our houses, teaching our children or driving our cabs?"

Journalist and best-selling author Linda McQuaig has developed a reputation for challenging the establishment. As a reporter for The Globe and Mail, she won a National Newspaper Award in 1989 for writing a series of articles, which sparked a public inquiry into the activities of Ontario political lobbyist Patti Starr, and eventually led to Starr's imprisonment. In 1991, she was awarded an Atkinson Fellowship for Journalism in Public Policy to study the social welfare systems in Europe and North America.

She is author of seven books on politics and economics – all national bestsellers – including Shooting the Hippo (short-listed for the Governor General's Award for Non-Fiction), The Cult of Impotence, All You Can Eat and It's the Crude, Dude: War, Big Oil and the Fight for the Planet. Her most recent book is Holding the Bully's Coat: Canada and the US Empire.

Since 2002, McQuaig has written an op-ed column for the Toronto Star. This article, which appears here with permission, previously appeared in The Star.
Email: lmcquaig@sympatico.ca. Website: http://www.lindamcquaig.com.

AMERICAN POLITICS:

BEHIND BUSH'S BAILOUT:

What is presently being debated in the US Congress is unprecedented in many ways. It is, in fact, the largest "socialization" that has ever occurred in human history. The sheer scope of the "assets" (bad debts actually) the American administration is proposing take over beggars the paltry "socializations" carried out by regimes such as the Russian or Chinese revolutions produced. It is also a response to a "crisis" that has no previous exemplar in economic history. This is not the classical "crisis of overproduction" so beloved of Marxist ideologues. While housing prices are indeed falling in the USA this is not because an oversupply of housing was produced. The problem relates to the availability of credit, not to the supply of any real good such as housing. Neither is the present situation like the "crisis of confidence" in the banks that extended the Great Depression of the 1930s to almost a decade. It is not solvable by any of the remedies that present day "monetarists" (read neo-cons) read out from their analysis of the events of the 1930s.

Molly has her own ideas about what sort of society we live in, and she doesn't feel it can be labelled "capitalism". "Managerialism" is a much better term, but, like any economic system, this system cannot function without elements of other economic ways. The late "socialist" regimes proved this. They managed to endure as long as they did only because of a thriving black market in both goods and favours. The present day Cuban dictatorship endured for decades solely because of external subsidies from the USSR, and it exists today only because of a combination of similar subsidies from oil rich Venezuela, and an extensive black market that the state has somewhat "legalized" (in addition to collaboration with capitalist firms other than the USA). The so-called socialist regimes fell because too much of the economy was controlled by planners (sic) who had no rational way of replacing the signals of the market.

The so-called capitalist regimes of the West that thrived after the Second World War, with their social welfare policies (social compacts) and vast collusion between large corporations and the state were actually managerial as well. The difference was that they had achieved a better balance of economic systems than the "socialist" ones had. Yet, they had their troubles, and the neo-conservative "revolutions" of the 1980s were attempts to correct these problems by shifting this balance in favour of more "market oriented" policies.

What is happening today in the USA is the demonstrated failure of this balance. What is being debated in the halls of Congress will shift the balance back to a stricter managerialism, whether the outcome is favourable to the Bush administration and the managers it wishes to protect or to a more benign and rational policy that actually concedes certain things to ordinary people. Make no mistake about it. The traders who brought this mess about are the furthest thing from "capitalists" imaginable. They owned no means of production. Their schemes had nothing whatsoever to do with production period. In countries such as the USA stock ownership has been widely dispersed for many decades. Those who manipulated stock options, hedge funds, etc. did so in their capacity as managers not as purported owners.

Molly suspects that this crisis is part and parcel of an enduring tension within managerial society that has come to replace the classic "capitalist crisis of overproduction". The problem is that nobody fully understands what is happening today. The bromides of the left may be emotionally sound. Molly does as they do, pick sides. They don't, however, explain anything or point to any future course of action beyond reacting to such crises by trying to prevent the worst possible outcome (a worthy goal in itself I guess).

The following article from the Centre for Research on Globalization website contributes a lot towards such understanding. It puts the forces behind what happened in perspective. It may lack for prescriptive solutions, but it is excellent in description. So...if you want a further understanding of how we got to this point read on.

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Financial Bailout: America's Own Kleptocracy:
The largest transformation of America's Financial System since the Great Depression
by Michael Hudson

Nobody expected industrial capitalism to end up like this. Nobody even saw it evolving in this direction. I'm afraid this failing is not unusual among futurists: The natural tendency is to think about how economies can best grow and evolve, not how it can be untracked. But an unforeseen road always seems to appear, and there goes society goes off on a tangent.

What a two weeks!

On Sunday, September 7, the Treasury took on the $5.3 trillion mortgage exposure of Fannie Mae and Freddie Mac, whose heads already had been removed for accounting fraud.

On Monday, September 15, Lehman Brothers went bankrupt, when prospective Wall Street buyers couldn't gain any sense of reality from its financial books. On Wednesday the Federal Reserve agreed to make good for at least $85 billion in the just-pretend "insured" winnings owed to financial gamblers who bet on computer-driven trades in junk mortgages and bought counter-party coverage from the A.I.G. (the American International Group, whose head Maurice Greenberg already had been removed a few years back for accounting fraud).

But it is Friday, September 19, that will go down as a turning point in American history. The White House committed at least half a trillion dollars more to re-inflate real estate prices in an attempt to support the market value junk mortgages - mortgages issued far beyond the ability of debtors to pay and far above the going market price of the collateral being pledged.

These billions of dollars were devoted to keeping a dream alive - the accounting fictions written down by companies that had entered an unreal world based on false accounting that nearly everyone in the financial sector knew to be fake. But they played along with buying and selling packaged mortgage junk because that was where the money was. As Charles Prince of Citibank put it, "As long as they're playing music, you have to get up and dance." Even after markets collapsed, fund managers who steered clear were blamed for not playing the game while it was going. I have friends on Wall Street who were fired for not matching the returns that their compatriots were making. And the biggest returns were to be made in trading in the economy's largest financial asset - mortgage debt. The mortgages packaged, owned or guaranteed by Fannie and Freddie alone exceeded the entire U.S. national debt - the cumulative deficits run up by the American Government since the nation won the Revolutionary War!

This gives an idea of just how large the bailout has been - and where the government's (or at least the Republicans') priorities lie! Instead of waking up the economy to reality, the government has thrown all its resources to promote the unreal dream that debts can be paid - if not by the debtors themselves, then by the government - "taxpayers," as the euphemism goes.

Overnight, the U.S. Treasury and Federal Reserve have radically changed the character of American capitalism. It is nothing less than a coup d'Etat for the class that FDR called "banksters." What has happened in the past two weeks threatens to change the coming century - irreversibly, if they can get away with it. This is the largest and most inequitable transfer of wealth since the land giveaways to the railroad barons during the Civil War era.

Even so, there seems little sign that it even may end the free-market patter talk by financial insiders who have managed to avert public oversight by appointing non-regulators to the major regulatory agencies - and thus created the mess that Treasury Secretary Henry Paulson now says threatens the bank deposits and jobs of all Americans. What he really means, of course, are simply the largest Republican campaign contributors (and to be fair, also the largest contributors to Democratic candidates on key financial committees).

A kleptocratic class has taken over the economy to replace industrial capitalism. Franklin Roosevelt's term "banksters" says it all in a nutshell. The economy has been captured - by an alien power, but not the usual suspects. Not socialism, workers or "big government," nor by industrial monopolists or even by the great banking families. Certainly not by Freemasons and Illuminati. (It would be wonderful if there were indeed some group operating with centuries of wisdom behind them, so at least someone at least had a plan.) Rather, the banksters have made a compact with an alien power -not Communists, Russians, Asians or Arabs. Not humans at all. The group's cadre is a new breed of machine. It may sound like the Terminator movies, but computerized Machines have indeed taken over the world - at least, the White House's world.

Here is how they did it. A.I.G. wrote insurance policies of all sorts of that people and businesses need: home and property insurance, livestock insurance, even aircraft leasing. These highly profitable businesses were not the problem. (They therefore will probably be sold off to pay the company's bad gambles.) A.I.G.'s downfall came from the $450 billion - almost half a trillion - dollars it was on the hook for as a result of guaranteeing hedge-fund counterpart insurance. In other words, if two parties played the zero-sum game of betting against each other as to whether the dollar would rise or fall against sterling or the euro, or if they insured a mortgage portfolio of junk mortgages to make sure that they would get paid, they would pay a teeny tiny commission to A.I.G. for a policy promising to pay if, say, the $11 trillion U.S. mortgage market should "stumble" or if losers placing trillions of dollars in bets on foreign exchange derivatives, stock or bond derivatives should somehow find themselves in a position that so many Las Vegas patrons are in, and be unable to come up with the cash to cover their losses.

A.I.G. collected billions of dollars on such policies. And thanks to the fact that insurance companies are a Milton Friedman paradise - not regulated by the Federal Reserve or any other nation-wide agency, and hence able to get the proverbial free lunch without government oversight - writing such policies was done by computer printouts, and the company collected massive fees and commissions without putting in much capital of its own. This is what is called "self-regulation." It is how the Invisible Hand is supposed to work.

It turned out, inevitably, that some of the financial institutions that made billion-dollar gambles - usually in the form of a thousand million-dollar gambles in the course of a few minutes or so, to be precise - couldn't pay up. These gambles all occur in microseconds, at strokes of a keyboard almost without human interference. In that sense it is not unlike alien pod people taking over. But in this case they are robot-like machines, hence the analogy I drew above with the Terminators.

Their sudden rise to dominance is as unforeseen as an invasion from Mars. The nearest analogy is the invasion of the Harvard Boys, World Bank and U.S.A.I.D. to Russia and other post-Soviet economies after the Soviet Union was dissolved, pressing free-market giveaways to create national kleptocracies. It should be a worrying sign to Americans that these kleptocrats have become the Founding Fortunes of their respective countries. We should bear in mind Aristotle's observation that democracy is the political stage immediately preceding oligarchy.

The financial machines that placed the trades that bankrupted A.I.G. were programmed by financial managers to act with the speed of light in conducting electronic trades often lasting only a few seconds each, millions of times a day. Only a machine could calculate mathematical probabilities factored in regarding the squiggles up and down of interest rates, exchange rates and stock and bonds prices - and prices for packaged mortgages. And the latter packages increasingly took the form of junk mortgages, pretending to be payable debts but in reality empty flak.

The machines employed by hedge funds in particular have given a new meaning to Casino Capitalism. That was long applied to speculators playing the stock market. It meant making cross bets, lose some and win some - and getting the government to bail out the non-payers. The twist in the past two weeks' turmoil is that the winners cannot collect on their bets unless the government pays the debts that the losers are unable to cover with their own money.

One would have thought that this requires some degree of control over the government. The activity probably never should have been licensed. In fact, it never was licensed, and hence nor regulated. But there seemed to be a good reason: Investors in hedge funds had to sign a paper saying that they were rich enough to afford to lose their money on this financial gambling. Your average mom and pop investors were not permitted to participate. Despite the high rewards that millions of tiny trades generated, they were deemed too risky for the uninitiated lacking trust funds to play with.

A hedge fund does not make money by producing goods and services. It does not advance funds to buy real assets or even lend money. It borrows huge sums to leverage its bet with nearly free credit. Its managers are not industrial engineers but mathematicians who program computers to make cross-bets or "straddles" on which way interest rates, currency exchange rates, stock or bond prices may move - or the prices for packaged bank mortgages. The packaged loans may be sound or they may be junk. It doesn't matter. All that matters is making money in a marketplace where most trades last only a few seconds. What creates the gains is the price fibrillation - volatility.

This kind of transaction may make fortunes, but it is not "wealth creation" in the form that most people recognize. Before the Black-Scholes mathematical formula for calculating the value of hedge bets, this kind of put and call option was too costly to provide much profit to anyone except the brokerage houses. But the combination of powerful computers and the "innovation" of almost free credit and free access to the financial gambling tables has made possible a frenetic back-and-forth maneuvering.

So why has the Treasury found it necessary to enter this picture at all? Why should these gamblers be bailed out, if they had enough to lose without having to become public wards by going on welfare? Hedge fund trading was limited to the very rich, for investment banks and other institutional investors. But it became one of the easiest ways to make money, loaning funds at interest for people to pay out of their computer-driven cross-trades. And almost as fast as it was made, this revenue was paid out in commissions, salaries and annual bonuses reminiscent of America's Gilded Age in the years prior to World War I - years before the income tax was introduced in 1913. The remarkable thing about all this money was that its recipients didn't even have to pay normal income tax on it. The government let them call it "capital gains," which meant that the money was taxed at only a fraction of the rate that incomes were taxed.

The pretense, of course, is that all this frenetic trading creates real "capital." It certainly does not do so in the classical 19th-century concept of capital. The term has been decoupled from producing goods and services, hiring wage labor or from financing innovation. It is as much "capital" as the right to conduct a lottery and collect the winnings from the hopes of the losers. But then, casinos from Las Vegas to riverboats have become a major "growth industry," muddying the language of capital, growth and wealth itself.

For the gaming tables to be closed and the money paid out, the losers must be bailed out - Fannie Mae, Freddie Mac, A.I.G. and who knows what to come? This is the only way to solve the problem of how companies that already have paid out their revenue to their managers and stockholders instead of putting it in reserves are to collect their winnings from insolvent debtors and insurance companies. These losers also have paid out their income to their financial managers and insiders (along with the usual patriotic contributions to the political candidates on the key committees in charge of deciding the nation's financial structuring).

This has to be orchestrated well in advance. It is necessary to buy politicians and give them a plausible cover story (or at least a well-crafted set of poll-tested euphemisms) to explain to voters just why it was in the public interest to bail out gamblers. Good rhetoric is needed to explain why the government should let them go into a casino and let them keep all their winnings while using public funds to make good on the losses of their counterparts.

What happened on September 18-19 took years of preparation, capped by a faux ideology crafted by public-relations think tanks to be broadcast under emergency conditions to panic Congress - and voters - right before the presidential election. This seems to be our September election surprise. Under staged crisis conditions, Pres. Bush and Treasury Secretary Paulson are now calling for the country to come together in a War on Defaulting Homeowners. This is said to be the only hope to "save the system." (What system is this? Not industrial capitalism, or even banking as we know it.) The largest transformation of America's financial system since the Great Depression has been compressed into just two weeks, starting with the doubling of America's national debt on September 7 with the nationalization of Fannie Mae and Freddie Mac. (My computer's spellchecker will not permit me to use the euphemism "conservatorship" that Mr. Paulson applied to bailing out the Fannie Mae and Freddie Mac fraudsters.)

Economic theory used to explain that profits and interest were a return for calculated risk. But today, the name of the game is capital gains and computerized gambling on the direction of interest rates, foreign currencies and stock prices - and when bad bets are made, bailouts are the calculated economic return for campaign contributions. But this is not supposed to be the time to talk of such things. "We must act now to protect our nation's economic health from serious risk," intoned Pres. Bush on September 19. What he meant was that the White House must make the Republican Party's largest group of campaign contributors whole - Wall Street, that is - by bailing out their bad gambles. "There will be ample opportunity to debate the origins of this problem. Now is the time to solve it." In other words, don't make this an election issue. "In our nation's history there have been moments that require us to come together across party lines to address major challenges. This is such a moment." Right before the presidential election! The same guff was heard earlier on Friday morning from Sec. Paulson: "Our economic health requires that we work together for prompt, bipartisan action." The broadcasters said that half a trillion dollars was discussed for this day's maneuverings.

Much of the blame should go to the Clinton Administration for leading the call to repeal Glass-Steagall in 1999, letting the banks merge with casinos. Or rather, the casinos have absorbed the banks. That is what has put the savings of Americans at risk.

But does this really mean that the only solution is to re-inflate the real estate market? The Paulson-Bernanke plan is to enable the banks to sell off the homes of five million home mortgage debtors faced with default or foreclosure this year! Homeowners with "exploding adjustable-rate mortgages" will lose their homes, but the Fed will pump enough credit into the mortgage-lending agencies to enable new buyers to go deeply enough into debt to take the junk mortgages off the hands of the gamblers who presently own them. Time for another financial and real estate bubble to bail out the junk mortgage lenders and packagers.

America has entered into a new war - a War to Save Computerized Derivative Traders. Like the Iraq war, it is based largely on fictions and entered into under seeming emergency conditions - to which the solution has little relation to the underlying cause of the problems. On financial security grounds the government is to make good on the collateralized debt obligations packaged (CDOs) that Warren Buffett has called "weapons of mass financial destruction."

Hardly by surprise, this giveaway of public money is being handled by the same group that warned the country so piously about weapons of mass destruction in Iraq. Pres. Bush and Treasury Secretary Paulson have piously announced that this is no time for partisan disagreements over this shift of public policy to favor creditors rather than debtors. There is no time to make the biggest bailout in election history an election issue. Not an appropriate time to debate whether it is a good thing to re-inflate housing prices to a level that will continue to oblige new home buyers to go so deeply into debt that they must pay some 40 percent of their take-home pay on housing.

Remember when President Bush and Alan Greenspan informed the American people that there was no money left to pay Social Security (not to mention Medicare) because at some future date (a decade from now? 20 years? 40 years?) the system might run a deficit of what now seems to be merely a trivial trillion dollars spread over many, many years. The moral was that if we can't figure out how to pay, let's plow the program under right now.

Mr. Bush and Greenspan did have a helpful solution, of course. The Treasury could turn Social Security and medical insurance money over to Bear Stearns, Lehman Brothers and their brethren to invest at the "magic of compound interest."

What would have happened to U.S. Social Security had this been done? Perhaps we should view the past two weeks' events as having assigned to Wall Street gamblers all the money that has been set aside since the Greenspan Commission in 1983 shifted the tax burden onto FICA wage withholding. It is not retirees who are being rescued, but the Wall Street investors who signed papers saying that they could afford to lose their money. The Republican slogan this November should be "Gambling insurance, not health insurance."

This is not how the much-vaunted Road to Serfdom was mapped out to be. Frederick Hayek and his Chicago Boys insisted that serfdom would come from government planning and regulation. This view turned upside down the classical and Progressive Era reformers who depicted government as acting as society's brain, its steering mechanism to shape markets - and free them from income without playing a necessary role in production.

The theory of democracy rested on the assumption that voters would act in their self-interest. Market reformers made a kindred happy assumption that consumers, savers and investors would promote economic growth by acting with full knowledge and understanding of the dynamics at work. But the Invisible Hand turned out to be accounting fraud, junk mortgage lending, insider dealing and a failure to relate the soaring debt overhead to the ability of debtors to pay - all of this mess seemingly legitimized by computerized trading models, and now blessed by the Treasury.

Michael Hudon is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Super-Imperialism: The Economic Strategy of American Empire (1972 and 2003) and of The Myth of Aid (1971).

Michael Hudson is a frequent contributor to Global Research. Global Research Articles by Michael Hudson

POLAND:

A VICTORY FOR THE MANAGERS:

The following item has been reproduced from the Polish Centrum Informacji Anarchistycznej website. the CIA is a Polish equivalent of an Indymedia without all the horseshit that usually goes with an Indymedia. It reports news from an exclusively anarchist viewpoint. A few notes on the following are in order.

1)The "Sejm" is the Polish parliament.

2)While not definitely proving Molly's long standing conviction that we no longer live under "capitalism" but rather live under a "managerial society" this is a clear example of how the state responds to certain class interests ie those of the managers. Others who think that the "capitalists" rule should pay attention to numerous examples such as this where the class of managers definitely rule in that they can make/influence the state pass legislation favourable to them.

But anyways, here's the item. It has been slightly edited to convey the irony implicit in the original title.

................................

STOP THE DISCRIMINATION AGAINST MANAGERS- BEGIN DISCRIMINATION IN FAVOUR OF THEM:

The Sejm voted for an amendment to the act on privatization yesterday. One of the amendments concerned salary caps for managers in state-owned companies, or companies where the State Treasury have a majority share. Previously, managers of state-owned companies could only earn four times as much as the average salary in the company whereas managers of companies where the State Treasury have a majority stake can earn six times as much as the average salary. Now there will be no limit on their salaries.

The pro-business organizations had been lobbying for the change. In their view, the current regulations constituted "discrimination against managers".

In the meanwhile, statistics show than 13% of managers in Poland already earn over 100,000 zloties a month - about 30,000 euro.

VENEZUELA:

CHAVEZISMO VERSUS THE WORKERS ONCE MORE:

The following essay is reprinted from the News section of the Libcom site. It was translated from the Spanish language Internacionismo, affiliated with the 'International Communist Current'. Molly has blogged briefly on the subject of "left-communism" before, and there is little doubt that I do not consider them as realistic in their tactics or accurate in their theory. If I wanted to sum them up I would say that they are the last real Marxists on Earth. Well over a century after all of Marx's theories were disproven (or , more often,contradicted by those who wished to call themselves "Marxists) they hold to the theories of Das Kapital in all their baroque and antique "glory". Yet, such fundamentalism has its virtues as well as its vices. These people put themselves into a position where they can have zero chance of ever affecting the world, but, just because they are in such a position they are thoroughly immune to the ill-disguised power worship of too much of the left. They may not recognize that the economic system mis-named as "socialism" is the tool whereby a new managerial ruling class claws its way to power, but they have the unfailing instinct to reject this lie, even if they give it the wrong name. Their instincts are true in that they recognize immediately that such leftist demagogues as Chavez are representatives of a ruling class rather than "liberators".But anyways, here is the article.

.................................................

Steel workers' strike in Venezuela attacked by Chavez' state
tags:

Steel workers in Venezuela have been attacked by the Chavez government following a series of strikes.
The following is a translation from Internacionalismo.
The Chávez government - with the support of the opposition and unions - has unleashed repression against the workers of the Steel Zone of Venezuela who are struggling for their most basic necessities. Here we see the real Senor Chávez and his "socialism of the 21st century".

After more than 13 months of discussion of their collective contract, the steel workers at Ternium-SIDOR have had enough. Indignant about the starvation wages they receive (near to the minimum salary, in one of the regions of Venezuela with the highest cost of living) and the deplorable working conditions that have lead to the deaths of 18 workers and left dozens ill from industrial illness over less than a decade, they have carried out several strikes against the firm's refusal to meet their demands about wages and working conditions.

Various parts of the media have echoed the firm's campaign of victimisation, claiming that their demands amount to more than the firm's annual sales. These lies form part of a "black out" of information, both from the opposition media and the official media, about the true causes of the metal workers' struggles. Since the 1990's these workers have been subjected to a policy of cuts in pay and working conditions, introduced through the programme of restructuring, that has led to their benefits being lower than other workers in the region. The metalworkers' struggle is about a decent level of living. They know that if they accept the company's terms and conditions [1] they will suffer more than two years of miserable increases in their wages and benefits, whilst the price of food and the cost of living increases by more than 30% annually, according to the none too reliable figures of the Central Bank of Venezuela. Another important demand of the movement is to make the contracted workers (who make up 75% of the workforce of 1,600) permanent, since this will give them better benefits. Thus, the struggle of the SIDOR workers is expressing the discontent and uncertainty that dominates the workers in the region and the whole country, faced with the endless increase in the price of food and cost of living generally, along with precarious working conditions.

Likewise, the metalworkers have had enough of the bickering between representatives of the company, government and unions. The latter in particular have progressively undermined the initial demands of the movement (the unions are now "demanding" 50 Bolivars a day, whereas at the beginning of negotiations it was 80). Having fulfilled all of the requirements for going on strike, they took part in the high level commission formed by the nefarious triumvirate. Whilst these gentlemen discussed behind the workers' backs, the workers themselves assembled at the steel work's doors and decided to carry out several stoppages, the most important of these being that of the 12th March for 80 hours which expressed the radicalisation of the movement. They did not have to wait long for the firm and the state to respond: on the 14th March the National Guard and police unleashed a furious repression, leaving more than 15 workers injured and 53 arrested. With this repressive action the Chávez government has unmasked itself in front of the workers: it cast aside its "workers" uniform and put on its true uniform, that of the defence of the interests of the national capital. It is not the first time that the "workers and socialist" state has attacked workers' struggle for their own demands: we only need to mention for example, the terrible repression meted out to oil workers last year who were struggling to improve their working conditions.

The SUTISS union is also part of the repression of the workers (despite union leaders suffering repression), since its role is to act as a fireman in the movement. It tries to put itself at the head of the movement whilst negotiating a reduction in the wage demand.
Referendum and nationalisation: new traps for the movement

Faced with the workers' intransigence, they have pulled another trick from up their sleeve: the holding of a referendum in order to consult each worker about their agreement or not with the firm's proposals. Promoted by the Chavist minister of Labour (a Trotskyist or ex-Trotskyist), the proposal has already received the agreement of the SUTISS, though with certain "conditions". Class instinct has led several workers to reject this trap, which is aimed at undermining the sovereign assemblies (where the real strength of the working class is expressed) by turning each worker into a "citizen", who will have to define himself for or against the firm and state in isolation by means of the ballot box!! Faced with this the workers need to affirm themselves through their sovereign assemblies.

Another trap used against the movement is the proposition by the unions and various "revolutionary" sectors of Chavism to renationalise SIDOR, which is mainly owned by Argentine capital (the Venezuelan state owns 20% of the shares). This campaign could be a disaster for the struggle, since the workers have no choice but to confront the capitalists, be they Argentine or Venezuelan state bureaucrats. Nationalisation does not mean the disappearance of exploitation; the state-boss, even with a "worker's" face, has no other option than to permanently try to attack workers' wages and working conditions. The left of capital presents the concentration of companies in the hands of the state as a quick way to "socialism", hiding one of the fundamental lessons of Marxism: the state is the representative of the interests of each national bourgeoisie, and therefore the enemy of the proletariat. The Chavist bourgeoisie today is the head of the state which is seeking to increase the amount of surplus value it can gain, and in the name of "Bolivarian socialism" massively increases the level of precariousness of work through the missions and jointly managed companies (as happened with the workers of Invepal or Inveval).

These "Bolivarian revolutionaries" try to make the workers forget that for many years SIDOR was a state firm, and that they have had to struggle at various ties against the high rank bureaucrats of the state who administered it and their forces of repression, struggling for their own demands but also against the unions (the allies of capital in the factories). At the beginning of the 70's during the first Caldera government, this included burning down part of the installations of the CTV in Caracas in response to its anti-worker actions.

The state has been in the hands of the Chavists since 1999, but has not magically lost its capitalist character. All that has changed are its clothes, which now have a "socialist" colouring; but it is still a fundamental organ in the defence of the interests of capital against those of labour. The fact that Chávez presents himself as a "Sidorist" or a "worker" when it suits him should not confuse us about the class character of the Chavist government, which capital put in place in order to defend its system of exploitation as it sinks deeper and deeper into crisis. The workers are not so stupid as to believe these "revolutionaries" who put forwards the panacea of "re-nationalisation", but who live like bourgeois, earning salaries 30 times or more than the official minimum wage.
The only way to win: real workers' solidarity and solidarity with the population

The only way that this movement can succeed is through looking for solidarity. Initially with the contract workers, where the demand to make them permanent is one of the principle expressions of solidarity; but it is no less important to win the solidarity of workers in other branches of industry, at the regional or national level, since whether we work in the state sector or the private sector, we are all being hit by the blows of the economic crisis. It is also necessary to express solidarity with the population of Guayana, where the unemployed are affected by the high cost of living, and by the problems that the state cannot resolve, such as delinquency, housing, etc. However, this solidarity cannot be carried out through the unions, since they are the main organs for controlling the struggle, creating divisions between different industries and sectors, and in the last instance, complementing state repression; neither can solidarity with the local population be left in the hands of the social organisations created by the state, such as the communal councils. Solidarity must be "generated" by the workers themselves, through assemblies open to other workers.

The struggle of the metalworkers is our struggle, because they are fighting for a decent life, for the benefit of the whole of the proletariat. But the best benefit, apart for the momentary increase in the level of wages, resides in the development of consciousness of the strength that the proletariat has in its own hands, outside of the unions and the other institutions invented by the state in order to control social discontent.

The national bourgeoisie know that the situation in Guyana is intensely dangerous to its interests. The concentration of workers in this region and their experience of past struggles makes it very explosive, since at the same time there is a wider accumulation of labour and social discontent which has existed for some time due to the attacks on employment and workers' living conditions. In this sense, the so-called Metal Zone has a potential for transforming itself into a focal point for the workers' struggle in the country, as happened in the 60's and 70's.

The SIDOR workers have taken the only road possible for confronting the attacks of capital, that of the struggle. Spreading the fight to other branches of regional and national production, whilst looking for solidarity from the population as a whole: this is the road that will enable the Venezuelan proletariat to become part of an international movement for the overthrow capital and the creation of a real socialist society.
Note

[1] An increase of 44 Bolivars divided up as follows: 20 initially, 10 more in 2009 and another 10 in 2010, with another 1.5% based on performance.

FROM THE PAGES OF STRAIGHT GOODS:

Two recent article have caught Molly's eye while she was surfing the internet to Straight Goods, an online news magazine based out of Ontario.

GIRLS AS GUINEA PIGS:

HPV VACCINE CAMPAIGN RAISES SERIOUS HEALTH CARE QUESTIONS:

The new human papilloma vaccine that is supposed to guard against the subsequent development of cervical cancer has raised many concerns, not the least because of the immense cost in both the USA and Canada (estimated Canadian cost about $2 billion) and the possible connections between the manufacturers of Gardasil and conservative governments who are advocating its use, despite their stinginess on other health care matters. There are numerous studies questioning both the efficacy and safety of the vaccine, as well as its cost effectiveness. Straight Goods has published a recent article of the above title on this matter. Molly quotes,

"A vaccine against cancer is a dream come true---which explains why Gardasil, the new vaccine against some strains of Human Papilloma Virus (HPV), which cause genital warts and (eventually) cervical cancer, was so well received. The federal government swiftly announced funding for vaccination of girls and women and several provinces quickly took up the offer. Most parents surveyed supported this move. Many who have been affected by cervical cancer are applauding.

Now some Canadian researchers are having second thoughts. They are raising questions calling the $ 2 billion program to vaccinate all girls aged 9 to 13 premature and suggesting the vaccination could have unintended negative consequences. Since there is no epidemic of cervical cancer to warrant urgent action (Molly note about 400 deaths per year in Canada) , they suggest governments not rush into a universal vaccination program.

A leading researcher from Dartmouth University who participated in the development of the vaccine, said that giving the drug to preteen girls "is a great big public health experiment". then the Journal of the American Medical Association took a stand against mandatory vaccination with Gardasil with the devastating comment that, "Private wealth should never trump public health"....

To READ MORE see the article at the Straight Goods site.

Then there's this little bit about "bullying". Now, Molly isn't about to sign up to the latest fad of the social managerial ruling class that claims they can eliminate bullying in schools by intensifying the bullying that school authorities exercise towards their inmates-excuse me "pupils". As elsewhere the greatest amount of "bullying" is done there by the authorities and not by the pupils themselves. Now here's a study by the Workplace Bullying Institute and Zogby International about bullying in the workplace. A little birdie tells Molly that this sort of behavior, something that people have known about for centuries(millenia ?) won't become a major public campaign for the New Class amongst our rulers, if for no other reason than it would pit them against other members of their class. better to pick on children after all. Anyways...

BULLYING AFFECTS HALF OF US WORKERS:

IN 72 PERCENT OF CASES, THE BULLY WAS THE BOSS:

"Half of working Americans (49 percent) have suffered or witnessed workplace bullying---including verbal abuse, job sabotage, abuse of authority or destruction of workplace relationships, according to a new Workplace Bullying Institute/Zogby Interactive survey.

Prevalence: The WBI survey found that 37 percent of the US workforce, an estimated 54 million employees, have been bullied now or sometime during their worklife. despite this epidemic-level prevalence, 45 percent of respondents said they have never seen or experienced bullying at work.

"It's clearly a silent epidemic" claims Dr. Gary Manie, director of the Workplace Bullying Institute in Bellingham, Washington. Stress from prolonged exposure to bullying (33 percent suffer for more than one year) adversely affects psychological or physical health of 45 % of targets.".....

To READ MORE go to the article on Straight Goods.

All that Molly can add to this is that such things cannot be eliminated by any campaigns by do-good social reformers disguising their own power and financial motives. They can only be significantly reduced by eliminated the social class that perpetrates such things- the bosses and that includes the 'soft bosses' of the social managers.

A BALANCED ANARCHISM:

Sometimes someone writes a comment on this blog that provokes further thought and comment. One reply to a joke that I posted here on August 2nd is such an item. I reproduce the comment from "Buddhagem" below. Molly's comments follow. The original joke will probably have disappeared into the Archives for August 2007 with this post. Anyways, Buddhagem writes...

"I know I'm going to get hit for being "too serious" here. And I do understand that this is humour. With that said, however, it's jokes like these that fuel anti-politics. It obscures the fact that government growth has come mostly at the behest of the business/capitalist community. And it gives rise to the popular notion that government grows because bureaucracies are given to self-aggrandizement and want to affirm and enlarge their "power and prestige".

The real defect in the government is that it is potentially democratic. Corporations, on the other hand, are pure tyrannies. So if we destroy the former without checking the power of the latter we're going to be in a world of trouble.

OK, and the joke is funny. I just fear that these kinds of jokes do more harm that good. "

MOLLY REPLIES:

Well, as to "fueling anti-politics", Molly has to admit that she sincerely hopes that all her efforts add at least a drop or two of fuel to this little fire. I'm realistic about just how small an influence I or any other individual can have on society in general, but adding a drop of fuel to this attitude would bring a big Cheshire Cat smile to Molly's feline face like nothing else would.

OK, that's the quick reply. Here's the meat of the substance. To begin with, the classic modern studies of bureaucracy often take their subject matter not from government but from the private sector- the corporations (appropriate hisses from the audience at the appearance of the villain). Look at Peter Drucker's work for instance or that of the economists Berle and Means. The bureaucratic method of dealing with things is present in any and all institutions once they achieve a certain size. I will hazard to say that this little "technical problem" would be an ever present danger to any libertarian way of organizing an economy once it passed a certain threshold of complexity. This is one of the reasons why I am sceptical of the Parecon "solution" to the perennial question that anarchists wrestle with ie how to run a democratic economy. Parecon assumes the existence of organizations made up of "planners", and I see an ever present danger of that caste becoming a ruling class. I am certainly not convinced by anything that I have read of Parecon that their checks and balances are sufficient to prevent such an outcome.

But speaking of Parecon its founders and most of its advocates have one sterling virtue. They recognize that class structure in the modern world is considerably more complex than that contained in the doxology of classical leftism. They speak of a "three class" system, not just of the almost cartoon-like picture of noble "woikers" and evil top-hatted capitalists that is the holy writ of leftism. They call the third class the "coordinator class". Molly prefers to call them "the managers". She also sees society as being made up of many more classes than these three, as one simply cannot either predict or understand what happens in the world by simplifying the matter down to a Trinity, let alone the Manichean world view of traditional leftism. Molly also is a little put-off by Parecon's standing avoidance of mentioning the historical pedigree of this idea. The whole way of viewing the economic world as being more complex that a simple struggle between two sides dates as far back as Bakunin who expressed the problem in his typically crude way. More flesh was put on the bare bones by people such as the Polish radical Machajski and his disciple Max Nomad. James Burnham and his "The Managerial Revolution' extended the idea. There are numerous other sources from regular academic economics and sociology.

Molly would go further than the Parecon people want to not just in extending the complexity of the number of classes that can be found in society. She would also assert that modern society has not been "capitalist" for a long, long time. All societies are mixed economies. That is what makes them work. Pure ideas put into practice rapidly crash under their own weight. Command economies such as those in the late unlamented "Communist" states could only exist because of the presence of a black market ie a real market economy. These states also partook of a large measure of "slave economics" via their prison camps or "emulation campaigns". I understand that the use of such slave labour "emulation campaigns" on a large scale is still an ongoing matter every year in Cuba when the sugarcane harvest comes due.

Molly asserts that the type of society that most of us live under is better described as "managerial" rather than capitalist. Some of this can be seen by simple "counting on one's fingers". When the majority of the GDP of a country is generated via the state, as it is in some social democracies, then that country is "managerial" not capitalist. For those countries where this is not true, most outstandingly the USA, one has to go to the other hand for more fingers. Total up not just the proportion of the economy mediated via the state but also add in that produced by the sector of the economy that is in the hands of joint stock corporations where ownership is dispersed. These outfits are also "managerial" rather than capitalist. The real capitalists, the owners-often the ordinary "woikers" via such things as pension plans or other retirement savings- have very little control over such bureaucracies. Those who control such corporations, the "managers" have to respect the limits of profitability to the shareholders, but within the limits of a "market" where most other corporations are behaving in a way that maximizes the return to the managers at the expense of that to the shareholders they have very wide margins to operate in.

All of that is very well and good, and moving away from the simplicity of classical leftism can help you to understand many things that are otherwise either incomprehendsible or simply ignored. Why are many social democratic parties such as Canada's NDP best described, to paraphrase a 19th century state socialist, as "the social workers in committee" ? Why has the traditional base of such parties been moving away from them as this change takes hold ? Moving away without flocking to any group of would-be "revolutionary saviors". It may help a person to understand that the vast, vast majority of ordinary people who avoid their saviors are not victims of some sort of "false consciousness" but actually making very realistic choices. Perhaps the would be directors of some "revolution" actually are aspirants to be a new ruling class, without the talent of the old one.

So on and so forth. This theme could be discussed forever. I can hardly give a full rundown of all that this view implies in anything short of a book. It is actually little comfort to anarchists such as myself because admitting the complexity of modern class society means admitting the existence of large numbers of people in social classes whose economic existence is dependent upon the state, and who are unlikely to embrace a full blown anarchism no matter what the efforts of the anarchists are. Not a tiny coterie of mythical beasts in top hats, but large classes of people. It's an invitation to think harder about prospects for anarchism and the old hoary "what is to be done".

It also says a lot to the need to ignore neither one nor another opponent, or how ever many of them there may be (more than I have fingers for sure). Buddhagem is right, very right, in saying that "destroying" the state while leaving the corporations intact (as if our tiny numbers could do such a thing in the foreseeable future) would lead to "a world of trouble". But...if you are open to the idea that the rulers in the corporations just might be exactly the same social class as those in the state then you might have just a little more hesitation about recommending a narrow focus on the "evil corps". In the century that is now past us it was actually state socialist managers who created the most bloody and repressive dictatorships that human history has ever seen. That not so little fact should never be forgotten as the death camps of those regimes fade into the past.

As an aside it is indeed true that much (not all) of the expansion of the state in modern times has been due to the demands/requests of private industry for subsidy. That is one of the reasons why sensible anarchists propose not just opposition to the growth of statism (whether it disguises itself as "democracy" or not), but a gradual rollback of the present omnipresence of the state- beginning with the most flagrant examples of such corporate welfare. But I must most emphatically disagree with the notion that bureaucratic imperatives for expansion play no part in the growth of statism. Bureaucracies DO expand, in both the public and private sectors, for reasons quite separate from profit maximization. The ability of firms to maximize their profits by doing the exact opposite of expansion ie "downsize" is obvious proof that such expansion 1)does happen and 2)is for reasons other than the expansion of profits.

Now the question of "democracy". I'm almost tempted to blame the notion of the "potentially democratic nature of the state" on Chomsky, but he merely put words to a much larger notion current amongst the American left, a notion born of the naivety of a left that has never had any real experience with social democracy, let alone so-called "communism". Those who have spent time in such parties and thereby have had their eyes opened are under no illusions about the "democratic" nature of their internal processes, let alone the "democratic" nature of their proposals for a larger society. What a social democratic party proposes to do, not do, or undo may be better, worse or about the same as that proposed by any other party, but to tie the utility of their proposals to some ideology of "democracy" stretches the definition of democracy to snapping. Think about it for a minute. Everybody is democratic. Every party claims to "speak for the people" and believes that their program (if they have one- a lot of Parties don't) is the (cough) "democratic voice of the people". Socialist parties have no more justification for claiming this turf than any other party, especially because, like all the others, their policies will be formulated and put into action by very tiny minorities.

The degree of "democracy" that a body politic can have is first of all determined by its size. The smaller the governed population the more likely it is that democratic decisions can be made, either by actual democratic processes or by indirect means such as influence. Once you reach the size of most nation states in today's world actual "democracy" is a pipe dream. Other technical questions (proportional representation, referenda, recall legislation, term limits, etc., etc.) also have an effect on how democratic an entity is rather than on whether it is "democratic or not". Even the most democratic nation on Earth, Switzerland, can hardly be styled as a pure democracy.

Can government be democratic? All of the above talks merely about democracy within the legislative branch. The State is not just the legislature. The legislature is merely the tiny pea size brain that has illusions that it controls the gigantic saurian bureaucracy that it sits on top of. Once more, experience with social democracy in the real world, has shown just how corruptible the good intentions of the socialists are. This happens no matter what the intentions of the activists that bring the party to power. The higher you get in this political game the more likely it is that you are a careerist opportunist, to use some good old commie words that still hold true. But the vast amount of the damage done to the good intentions is done not by financial corruption but by agreeing to "work within reality" and do things as they usually are done in government. "Citizens' committees" become little fiefdoms dominated by the "facilitators".How "facile" to set up such things with the activists drafted into the bureaucracy by the party in power. They become empty shells.

In the end government cannot bring about the sort of democracy that is fully worthy of the name. I suspect that Buddhagem is arguing more against something that exists in his country but hardly makes a bleep in the rest of the world- the anarcho-capitalists of the Libertarian Party. To most of us who live elsewhere it would go without saying that anarchism presumes the dismantling of corporate power hand in hand with that of the state. If we are clear headed enough about it we don't commit "Chomskyisms" by saying that we can work towards such a thing by strengthening state power. Somebody said this a lot more clearly long before Chomsky abandoned his sympathy for anarchism in favour of a social democracy that merely lacks the correct label. Good old Uncle Joe Stalin with his pearl of wisdom, "Prepare for the withering away of the State by strengthening the State".

There are those in the USA who recognize another thing that most anti-capitalists keep conveniently at the back of their mind, if they think about it all. The "market" is actually a much more "democratic" institution- yeah "potentially" as well- than any government could ever be. Voting takes place in the market 24/7 365 days a year. This doesn't mean that it is "fair" or "right" or any other expression of approval. It merely is . Molly doesn't want to defend the point of view of the "market anarchists". Yes the term is correct. They are not the "anarcho-capitalists". They style themselves as anti-capitalists and believe that corporate power merely derives from state power. I don't agree with them in all their points, but they have much to say, and becoming acquainted with them may help many people shake off the dusty assumptions that are contained in leftist baggage. If the reader is interested a good place to start is Kevin Carson's Mutualist Blogspot. You can go on from there. Molly's own view of a "desirable economic system", by the way is very much a mixed economy. Quite frankly I can find good and bad points in all the systems. The "left libertarians" are also very much an American phenomenon.

So...yes I think that Buddhagem is very right in saying that simply dissolving state power is not sufficient. Most anarchists believe that attacks on various systems of power have to go on simultaneously. BUT,BUT, BUT one cannot argue that such power very much derives from corporate influence over the State while not at the same time recognizing that such a view brings to light an obvious way of limiting corporate power- turn down the tap on the government teat they feed on. Don't imagine that you can starve them by getting a higher production milk cow. Many decades of experience with so-called "progressive" governments shows that this is a false hope.