Capitalism and Its Mexican Genocide

Economic War
Updated 5.18.14

map-of-mexican-drug-cartels_full_6001

By Mateo Pimentel 

Capitalism accumulates wealth and profits the capitalists, whether under the aegis of a formal, or informal economy. But when greed is pitted against greed, as is common today, the people seldom benefit. Currently, we are witnessing a bloody clash between both realms of economy, a clash embodied by Mexico’s drug wars. Moreover, this warring south of the US borderland is no longer a simple byproduct of the capitalist clash in question. Simply put, the Mexican drug war amounts to genocide.

The ensuing genocidal tear in Mexico’s social fabric yet functions to profit those who grow richer from upped production and sales in both market places. Additionally, there is little-to-no comparable spillage over to the US side of the border. The reason for this is self-evident:  HYPERLINK “http://www.nytimes.com/2009/03/26/world/americas/26mexico.html?_r=0” American consumption drives both economies!

The misfortunate collateral in the war between formal economic fascists and the informal economy’s drug oligopoly includes the wanton destruction of Mexico, the terrorizing of its people, and the unnecessary loss of life. Deaths total some  HYPERLINK “http://ncronline.org/news/global/counting-mexicos-drug-victims-murky-business” 125,000 after Calderon’s reign ended in 2012, coupled with nearly  HYPERLINK “http://www.washingtonpost.com/world/the_americas/mexicos-crime-wave-has-left-up-to-25000-missing-government-documents-show/2012/11/29/7ca4ee44-3a6a-11e2-9258-ac7c78d5c680_story.html” 30,000 disappearances in 2013 alone.

No more should die in this bloody tug-of-war for profits. We need to pursue the condemnation of this mounting genocide. Revealing it for what it is can be the first step in that direction. Furthermore, connecting the death toll and the murderous proclivities of capitalist forces with the elements of genocide is  absolutely essential: It is responsible for all genocidal acts.

Consider the literature espoused by the Office of the UN Special Adviser on the Prevention of Genocide (OSAPG). Article 2 of the Convention on the Prevention and Punishment of the Crime of Genocide (1948) defines genocide as,

http://www.bbc.com/news/magazine-24772724” beheading and murdering seeks to destroy them “in part,” if not “in whole.” But whereas some may say, or claim, that the hundreds of thousands of victims do not belong to any particular “national” group, how could it be more obvious that they do? Their unification rests in their innocence. So, how many more must die to have the rest of the world turn from shaking its head to actually working against the true genocidal warlords and their handiwork in Mexico?

The “Analysis Framework,” set forth by the OSAPG provides eight categorical factors to determine whether or not a risk of genocide exists in a given situation. A look into this framework further uncovers the genocide that is happening in Mexico today. The categories are unranked, and any absence of information regarding one or more categories does not presuppose an absence of genocide, or of the risk of genocide. The aggregate effect of these factors is what ultimately matters. It is through looking at these categories and assessing their cumulative effect that the genocide in Mexico becomes unbelievably more apparent.

The first factor is “Inter–group relations, including record of discrimination and/or other human rights violations committed against a group.” Just a few of the issues that need be addressed under this first category bespeak the real horror of the homicides, the homicidal violence, and the ‘disappearances’ in Mexico that are wrought by warring over accumulation. To start, there are serious tensions, including power and economic tensions, between victims of the drug war and their aggressors. There is an existing conflict regarding “land, power, security and expressions of identity.” There is a (homicidal)  HYPERLINK “http://www.washingtonpost.com/world/the_americas/calderon-finishes-his-six-year-drug-war-at-stalemate/2012/11/26/82c90a94-31eb-11e2-92f0-496af208bf23_story_1.html” discrimination against the victims of the informal economy’s illicit drug trade, including the stalwarts of the formal economy and their military client terrorists sicced on all opponents in Mexico. In addition, there are discriminatory practices at many levels of political life, systematic exclusions of the victims from positions of power, and massive  HYPERLINK “http://www.hrw.org/news/2013/11/12/mexico-build-accurate-database-disappeared” human rights violations.

The second factor is considering “Circumstances that affect the capacity to prevent genocide.” Arguably, there is little, if any, operative legislative protection, effectual national  HYPERLINK “http://www.amnesty.org/en/news/un-mexico-must-address-dire-human-rights-situation-concrete-actions-not-rhetoric-2014-03-19” human rights institutions, or an applicable presence of international actors (like the UN) present in Mexico. Even assuming the presence of such elements, none are clearly capable of protecting the vulnerable group of victims. At least, they have not been. Mexico, in fact, just legalized  HYPERLINK “http://www.latinpost.com/articles/12278/20140511/mexico-legalizes-vigilante-groups-fuerzas-autodefensas-formed-because-of-governments-inability-to-stop-attacks.htm” vigilante groups to help combat the problem, despite joint ventures with the DEA and whatever other funding it receives from the US.

Number three is the “Presence of illegal arms and armed elements.” Upwards of  HYPERLINK “http://www.foxnews.com/us/2012/04/26/mexico-seized-68000-guns-from-us-since-2006/” 70,000 guns were found by Mexican authorities between the years 2006 and 2012. An alarming number of these weapons came from US border states. Furthermore, the OSAPG’s third category suggests such weapons as indicative of genocide when “there exists a capacity to perpetrate genocide,” including but not limited to killing. Unfortunately, conditions in Mexico vis-à-vis arms and the capacity for genocide point toward genocide rather than away from it.

Number four on the list of OSAPG’s categories is “Motivation leading actors in the State/region; acts which serve to encourage divisions between national, racial, ethnic, and religious groups.” The key element worth consideration here is any relevant role, active or passive, of actors outside the country such as foreign governments, and their political or economic incentives for acting.  HYPERLINK “http://www.cfr.org/mexico/mexicos-drug-war/p13689” The US has poured untold amounts of money into Mexico for the sole purposes of eradicating illicit drug trade and its illicit drug oligopoly. The price has been paid in full in innocent Mexican blood. Genocide, given this fourth category, is also apparent.

Five: “Circumstances that facilitate perpetration of genocide (dynamic factors).” To be sure, there are events that “suggest a trajectory towards the perpetration of genocidal violence” in Mexico. There is a  HYPERLINK “http://www.nytimes.com/2011/08/07/world/07drugs.html?pagewanted=all” strengthening of military and security apparatuses; there is the imposition of extraordinary security measures that deteriorate Mexicans’ civil rights/liberties. All of the above only increases with time.

For category six, “Genocidal acts,” certain elements are painfully apparent. There are killings, abductions/disappearances, torture, rape, etc. – acts defined as obvious elements of genocide under Article 6 of the Rome Statute of the International Criminal Court. Less obvious notes hum in the background of the whole affair: displacement, death threats, disfigurement/injury,  HYPERLINK “http://www.washingtonpost.com/world/americas/torture-surges-in-mexicos-drug-war-rights-group-says/2011/11/09/gIQAphSI6M_story.html” torture, etc.

Category seven refers back to the original, working definition of genocide set forth by the OSAPG and the “intent to destroy in whole or in part…” In Mexico today, there is a large-scale armed conflict, invariable beheadings and other signature torture methods, dismemberment of “those already killed,” revealing “a level of dehumanization of the group or euphoria at having total control over another human being…” There are also targeted eliminations of leaders, whether local Mexican officials or  HYPERLINK “http://www.newsweek.com/2014/05/02/murder-juarez-247089.html” US Consulate workers.

Finally, category eight addresses “Triggering factors.” Currently, there has been military deployment to act against civilians assumed to be part of the illicit drug trade and its oligopoly. There have been armed hostilities for years, with hundreds of thousands of innocent Mexicans caught in the middle of it all. Unfortunately, the drug wars taking place in Mexico match many elements of the eight categories set forth by the OSAPG, all of which are necessary for analyzing genocide, or the possibility thereof. The UN’s “Analysis Framework” also mentions that genocidal intent can develop gradually. It does the skeptic well to consider that there is nothing gradual about tens of thousands of deaths within the span of six years, accompanied by the untold thousands of abductions and disappearances. The time to act against this genocide wrought by economic warring is now. No more people should die in a genocide over profit in Mexico. Despite the usual discontents of capitalism, this warring and the economic depredations borne by the Mexican people do not stop when the press or popular rhetoric arrives at words like “victim,” or “casualty.” This only discolors the truth. What is happening now is nothing  short of genocide; it can have no other name.

Mateo Pimentel lives on the Mexican-US border, writing for many alternative political newsletters and publications. Much of his work can be found on CounterPunch.com 

 



The Origins of Inequity

‘Bout time: Economists Discover Inequality
capitalism-systemError

by JACK RASMUS, Counterpunch

Much has been written over the past year about the growing income inequality in America, and how the wealthiest 1% households have accrued 95% of all the national income gains in the US economy since the June 2009 so-called economic ‘recovery’ officially began.

Liberal economists like Paul Krugman, Robert Reich, James Galbraith and others have writing numerous books and countless newspaper columns on the subject over the past year. They have finally discovered in recent years the sad fact of accelerating income inequality in America, a developing trend that has been in progress for decades, at least since the early 1980s. Actually, theirs has been less a ‘discovery’ than a re-reporting of work on the subject done by others.

While liberal economists have been reporting on income inequality, they have yet to explain why and how the growing concentration of income, and consequently wealth, in the hands of the 1% has been occurring and, indeed, why that inequality has been accelerating now after more than three decades. As the data conclusively show, the 95% of all income growth accruing to the wealthiest 1% households since 2009,noted above, represents an acceleration, from 65% of all income gains accruing to the 1% during the Bush years, 2001-08, and 45% during the Clinton years, 1993-2000.

While no doubt of value in itself, it is one thing to cite data that shows the irrefutable trend of income and wealth concentration; it is another to explain how and why that concentration has occurred and who is responsible for it—a responsibility that lies not with mystical categories like ‘the market’ or ‘globalization’ but with real individuals and policymakers in both business and government for the past 30 years.

The Emmanuel Saez Connection

The discovery of inequality was initially given its major boost more than a decade ago in the then pioneering work of Emmanual Saez, a French economist transplanted more than a decade ago to the University of California, Berkeley. Saez back in 2002 was the first to begin reporting the facts about growing income inequality in the U.S. since the early 1980s, based on previously unavailable data from the Internal Revenue Service. Prior to Saez’s work, other official sources of government data from the Bureau of Labor Statistics, Commerce Dept., Federal Reserve and Congressional Budget Office were, and still remain, notoriously limited and incomplete with regard to accurately estimating capital incomes. Of course, with regard to Krugman and others, better late than never to have ‘discovered’ inequality. But Saez is the real economist hero—not Krugman, Reich & company—having revealed for more than a decade now the more accurate (although in some ways still limited) facts about growing income inequality in America.

While having made a major contribution by more accurately describing the true dimensions of income inequality, Saez’s work has been weaker on identifying the fundamental causes of that growing income and wealth inequality. A professor of Public Finance (i.e. government spending and fiscal policy in general), Saez has focused his explanation of the causes mostly on the growing inequities of the tax system in the USA and other capitalist economies. To a lesser extent, he has also focused on the trend of senior executive pay in business, pointing out that in the last decade alone CEOs and senior corporate management have roughly doubled their share of total corporate profits—a not insignificant shift of income when ‘senior’ management is defined typically as the top half dozen to a dozen managers in a typical corporation.

But Executive Pay trends represent more an internal transfer of potential capital income’s rising share from stockholders and bondholders of a corporation to active CEO and senior management. What’s of more interest is how the overall share of incomes from Capital in general is rising at the expense of workers’ earned incomes, i.e. wages and salary incomes—and especially the sub-category of hourly wages and weekly earnings for the roughly 110 million production and non-supervisory workers in the U.S.

By addressing the role of the restructuring of the tax system that has been occurring for three decades in the US, shifting in favor of corporations and their wealthy 1% stock & bond holders in turn, Saez addresses an important element in the general explanation of growing income inequality. But in so doing, he omits the even more fundamental origins of income and wealthy inequality. The tax system changes are but one of a ‘three legged stool’ of income inequality forces at work. The tax system changes ensure that income generated at its source flows through the corporation to the owners of capital without being seriously diverted, or siphoned off, by the State and the tax system for other purposes. The ‘tax connection’ is thus strategic for understanding the income inequality trend, but it is not the whole story. It is more an enabling force than a fundamental causative force of income inequality.

Changing the tax system may therefore slow the process of income concentration, but does not address the origins of the problem at its source. The tax system is but one of three important elements of the income trend issue. For Saez to focus on it almost exclusively, providing an important contribution to understanding the trend, is not yet to provide a more complete explanation and understanding of the problem.

Thomas Picketty’s New Book

Working with Saez at the beginning of his work a decade ago on income and wealth concentration in the 20th century, Saez’s economics partner has been his collaborator, another French economist, Thomas Picketty, who recently published a major book called, Capital in the 21st Century. The book is getting a lot of traction and promotion from other liberal economists, like Krugman, from the liberal news media, as well as from the US business press, the latter of which is more interested in trying to debunk Picketty’s data.

The title of the book is somewhat misleading. The Picketty book is less about the changing nature and processes of global Capitalist Reproduction in its various forms in the 21st century—a work that is long overdue but not yet written. The book is more about the consequences of those changes; specifically the accelerating of capital incomes and the concentration of wealth accruing to capital owners. PIcketty’s book is best understood as a deeper and more historical representation of Saez’s work on in come inequality that proceeded it. We are still talking about the appearances of inequality; not its essentially origins.

In the book Picketty reveals that the wealthiest households, composed of those whose incomes are earned almost exclusively consisting of returns from capital, have in recent decades been increasing their wealth steadily at 5%-8% on average over the long term every year. And that’s been the case, whether in good economic times or bad. Moreover, the half dozen or so recessions in the US since 1980, including the recent ‘great’ one that began in 2007, seem to have had little long run impact on the accelerating concentration of income and wealth to the top 1% households. In stark contrast, Picketty’s book argues working families—recipients of what is called ‘earned incomes’ from wages and salaries—have barely maintained their incomes and standard of living during the best of times, while experience a reduction in income during recessions and not so good times.

What the income inequality trends revealed by both Saez and Picketty suggest, therefore, is not just that the wealthiest are accruing ever more percentage of the national income and wealth for themselves, but that the remaining bottom 80% working class households are stagnating at best, or actually declining in terms of real wages, real earnings, and real disposable income. The income inequality in America now means not only that the rich are getting richer; but that the middle and below are simultaneously getting poorer over the longer term.

What the Saez-Picketty work together suggests is that Income inequality is a two-headed monster. It occurs when the rich get richer in absolute (capital income) terms, as well as when middle class and below households experience a decline in their (earned wage & salary) incomes; or when both occur simultaneously which of course has been the case in the past three decades at least. However, while identifying wage stagnation or decline, neither Picketty or Saez offer much explanation as to why or how this decline has been occurring. It is one thing to identify wage stagnation and decline; it is another to explain why and how it is occurring—and accelerating of late.

So how are the wealthiest 1% households becoming not merely ‘very rich’ but ‘super-rich’ and ‘mega-rich’? What are the fundamental causes behind the trend? How is their income being generated at the source—thereafter ensuring it is ‘passed through’ by an ever-generous treatment of corporate and personal capital incomes by a restructuring tax system?

The Dual Origins of Rising Capital Incomes

Their accelerating income and wealth is generated, in increasing part, from the manipulation of global financial assets and speculative financial trading, on the one hand. That is, from returns on capital from global stock & bond trading, foreign exchange speculation, interest, real estate, commodity futures, structured finance and derivatives in myriad proliferating forms, rents, and so forth—to mention just a short list. This is just ‘money making money’ and doesn’t involve shifting income from workers by reducing their real wages, cutting their health care and retirement benefits, stealing all their productivity gains, and the many other ways their corporations shift income from the working class to themselves.

This second of the twofold process, i.e. reducing of labor costs across the board, are therefore a second major way in which income has been growing for the wealthiest 1%. Income and wealth is not only generated from financial speculation, but from the transfer of income from workers through the conduit of their corporations to them in the form of capital gains, dividends, interest and rent. One of the hallmarks of the past decade globally is that Corporate ‘profit margins’ (i.e. profits from reducing operating costs) are at consistent, record annual levels. Corporate income taxes are then in turn reduced by governments to increase the ‘pass through’ of these growing corporate net income gains to their major stockholders, the wealthy 1% households who are almost exclusively ‘investor’ households and not earners of wages & salaries. Governments then further reduce their personal income taxes as well, in order to ensure they can keep an ever growing percentage of the profits that their corporations pass through to them.

As both Saez and Picketty have understood, Capitalist tax systems are central to both of the more basic processes of income creation noted above. Tax cuts on corporate and personal investor income taxes both result in more income accruing to the wealthiest 1%. But the underlying processes are different. One involves the increase in transfer of share of national income from workers to owners of capital; the other involves owners of capital manipulating the financial system and financial asset prices for gain. One involves increasing the exploitation of labor, and the other involves the manipulation of asset prices and exchange.

Both Saez and Picketty focus on the tax system as central to the growing concentration of income in favor of the wealthiest 1%. However, neither examine the more fundamental processes at play—i.e. the growing relative weight of financial speculation in global Capitalism or the simultaneous growing intensification of labor exploitation and income transfer between classes that is occurring in the U.S. and globally as well.

Saez and Picketty’s lesser economist colleagues—the Krugmans, Reichs, et. al.—provide little explanation of the strategically central fundamental processes (financial speculation income generation & earned income transfer from workers to owners of capital), focusing only empirically and sporadically on ‘this or that’ surface manifestation of the problem: noting a problem of real minimum wage decline here, a particular corporate tax cut there, rising cost (and shift) of health services today, coming crisis in retirement incomes tomorrow, and so on. That is, an eclectic empiricism with no theoretical foundation, and therefore no real analysis and therefore no possibility of effective solutions for ending the growing concentration of incomes in the end.

Explaining—Not Reporting—Income Inequality

What is necessary to explain fully the growing income-wealth inequality trends is a threefold task:

First, it is necessary to explain the processes by which the rate of increase in workers’ compensation (wages & benefits) is being reducedon a class-wide basis—that is, for both the employed, unemployed, and underemployed—and especially for the ‘core’ 110 million non-supervisory & production workers in the US.

The unemployed experience a total wage cut. That needs to be factored into the overall average for wage reduction for the working class as a whole. Unfortunately, current government statistics report wages and compensation only for those still employed, which underestimates the total wage reduction since the unemployed total loss of wage income is not included. Moreover, that official data reports wages only for those who are full time employed. It thus underestimates the overall wage reduction for the class as a whole for those millions of workers in recent years that have been forced from full time into part time and temp jobs. The growth in underemployed part time and temp jobs represents a further reduction in the overall working class wage and benefit estimation, since on average these ‘contingent’ jobs pay 50%-55% of the average full time job.

It is important also to consider the roughly 110 million non-supervisory workers’ wages and compensation. Government data reporting on ‘wages and compensation’ in general include salaries and benefits for CEOs and senior managers, whose ‘wage’ and salary increases may be significant and thus ‘bias upward’ the total average for wages and benefits in general. The trend in income inequality in favor of the top 1% is consequently worse than reported, when the trend compares the 1% to the roughly ‘bottom 80%’ of households in the US where the ‘non-supervisory’ 110 million reside.

The preceding adjustments that more accurately estimate wages and compensation on a class-wide basis that includes the unemployed, underemployed, and excludes CEOs and senior management, are only the beginning of the necessary task, however.

To obtain a more accurate summary of wage and income reduction for workers today, still further estimation adjustments are necessary. It is necessary to adjust not only for current nominal wage cuts and reductions that may have occurred, but also for deferred wagespreviously paid in the form of workers’ pensions and healthcare contributions that are reclaimed and taken back. When defined benefit pensions are converted to 401ks personal pensions by a company, or when a company declares bankruptcy and turns over its pension to the government’s Pension Benefit Guaranty Corp, to restructure, pension benefits are reduced. Pension payments are reduced. In effect, the company takes back in part the worker contributions that were previously paid into the pension fund. The same occurs when prior worker contributions to a health insurance fund are offset when a company increases the share of monthly premiums workers’ must pay for employer provided health insurance coverage, or when the coverage provided by that insurance is reduced. The result is an increase in payment by the worker for both cases. But estimating reductions in nominal and deferred wages is still not the entire story.

There is the reduction of future wages yet to be paid. Future wages are reduced by means of issuance of credit and debt to workers. The interest paid on that debt currently and over the life of the loan represents a reduction in future wages not yet paid.

There is also a fourth category of wage that must be calculated in order to accurately estimate the overall reduction in workers’ income and inequality. That is the ‘social wage’. That is the contribution to social security and medicare paid by workers in the payroll tax. It too is a form of wage that is deferred. Workers pay into the social security fund in expectation of a claim on that payment when retired. A reduction in social security monthly benefits and/or a rise in co-pays by retirees for Physician or Prescription drug coverage represents a reclaiming of part of the social wage previous paid.

All the above forms of wages are further reduced by inflation, so that adjustments for the real wage paid to workers are necessary as well. This leads to what inflation index is used to adjust wages and benefits in their nominal form to their real, purchasing power form. US government inflation indices have been ‘smoothed out’ over recent decades by introducing statistical estimation techniques that reduce the volatility of price inflation. The different techniques are too numerous (and boringly arcane) to recount here. But they add up to the effect of underestimating the true inflation in the typical goods and services bought by the ‘bottom 80%’ households and the 110 million nonsupervisory core working class. That means that true inflation is higher, and therefore real wages are actually lower than reported by the government.

What all the above in effect means is that working class incomes in the US have actually slowed, and fallen in many cases, even more than has been reported. Were that more accurate wage and compensation reduction been used to track the growing income inequality in the US, that inequality would be significantly greater than even reported today—whether by the government or by the Saez-Picketty studies as well.

Explaining inequality—not just reporting it—requires an analysis of how these various ‘forms of wages’ have been reduced in recent decades and especially since 2009. That deeper analysis leads to explanations of trends of destruction of unions and thus the higher union wage, the growing trend of outright ‘wage theft’ by businesses, the avoidance of paying overtime pay by reclassifying millions of workers as ‘exempt’ instead of hourly paid, the atrophying of the real minimum wage, the wage reduction effects of free trade, the shift to contingent labor, and all the reasons why the total unemployed (in and out of the labor force) are rising steadily and are chronically longer term jobless. Add to this the analyses of the many government policies introduced in recent years and decades that reduce the deferred, social, and future wage and underestimate the real wage.

The Three-Legged Stool

But explaining true scope and magnitude of wage reduction is still just one of the three legs of the income inequality stool—in this case the declining income side of the coin of inequality. The other two legs are how more income is generated and claimed by the wealthiest households, especially the 1%, and how changes in the tax system are enabling an ever-greater pass through of income from the corporations of the wealthiest households to their personal bank accounts. To explain the ‘other (non-wage) side of inequality therefore requires a second set of explanations and analyses: i.e. how and why corporate profits have consistently risen in recent decades, accelerating especially in the past decade, and how that historic rise has been ‘passed through’ at increasing rates, from the corporation to its major owners and investors—i.e. the wealthiest 1% households.

Explaining the accelerating rise in corporate profits in turn requires two directions of analysis.

First, it requires an analysis of profits that are being generated increasingly by means of manipulation of financial asset prices by investors, by creating new forms of money and credit, and recycling money capital to create still more money capital where nothing is actually being produced except for money capital. This is the realm of finance capital, growing in relative weight and role in the 21st century. This is the realm of the now $71 trillion in investible assets held byglobal shadow banks—hedge funds, private equity firms, investment banks, asset management funds, etc. It is the realm of the growing numbers of ‘ultra- and very-high net worth’ individual investors who invest tens of millions each annually in highly liquid global markets through these institutions–in the proliferating forms of financial instruments in which they speculate and trade.

But profits are created not only by financial speculation, although the trend is toward a more rapid growth of profits from financial speculation relative to total profits growth. The other, more traditional source of profits generation is, of course, profits from making goods and providing non-financial services. Here profits grow by either selling more goods, raising prices of the goods sold, or reducing costs of producing those goods—especially labor costs. Since the June 2009 recession, the data show profits from production quickly escalated to record levels in the US, exceeding the historic high pre-recession 2007 levels. But this profits escalation has not primarily resulted from selling more output or at higher prices. Today’s record pre-tax corporate profits are primarily the outcome of the growth of ‘profit margins’; that is, profits generated from reduction of operating costs, in particular labor costs and therefore by raising productivity and/or reducing wages and compensation. The record profits growth for goods and services producing corporations is therefore not the consequence of raising prices or selling significantly more product. It is the result of cost-reduction—which means largely wage and benefits cost containment or reduction. Explaining the income inequality trend must therefore focus the rise in profit margins for companies that produce goods and services, as well as profits from financial speculation. Moreover, the multiple connections between profits from finance capital and profits from real production by non-finance capital requires analysis and explanation.

But profits represent income accruing to the institution of the corporation. Income inequality is typically a measurement of relative income shares between upper and mid-lower households. How the income of corporations gets transferred to the former, wealthiest households, is consequently a critical element in the overall explanation and analysis of income inequality as a trend. That is where and analysis of the third leg of the ‘three legged stool’ of inequality is required—i.e. the restructured tax system of recent decades.

How corporate income, generated from the first and second fundamental processes above, gets ‘passed through’ the corporation at increasing rates and volumes to the individual owners of capital is therefore the third level of explanation. This work has been the focus of Saez, Picketty and others. The tax system is a critical, strategic enabling factor in the growing income inequality trend in the US and globally. But it does not explain the origins of the inequality. Enabling and originating is not the same thing, although the former may be essential for the latter.

Here too, a dual analysis and explanation is required. How the tax system has been restructured in favor of capital incomes—i.e. capital gains, dividends, interest, rent and other payments to the wealthy and investors is a necessary focus of analysis, as is how corporate taxes have been reduced as well. Reducing corporate taxes allows corporations to keep more income to potentially ‘pass through’ to their investors. Reducing taxation on capital incomes after having been distributed by the corporation results in still more income gains by the wealthiest households in turn. Conversely, how the restructured tax system has in recent years raised the total tax burden and share (federal, state, and local) on the working class is a second essential focus of the general effect of the tax system on income inequality.

Saez, Picketty and a few others have contributed significantly to the analysis of the role of the tax system changes in recent years and decades to the growing income inequality trends in the US. Their work should be commended. Krugman and other notable liberal economists have publicized their work, especially of late. But none of them have focused in any significant detail on the fundamental origins of income inequality—i.e. in the process of production, in the growth of credit, debt, and speculative finance, or how the working class is not only no longer sharing in the income generation but is increasingly having to give back income it previously earned to the forces of Capital as well.



Indonesians Need Revolution!

The Archipelago of Fear
by ROSSIE INDIRA & ANDRE VLTCHEK, Counterpunch

Nyoman Ramin. In the background is the site of the mass grave in Petulu's cemetery. Photo by: Stefan Simanowitz

Nyoman Ramin. In the background is the site of the mass grave in Petulu’s cemetery. Photo by: Stefan Simanowitz

In Indonesia, something unusual and hopeful is taking place. After a long intellectual winter, new green shoots are breaking through the snow (if one could be allowed to use this metaphor in a tropical country).

A new Indonesian progressive publishing house – Badak Merah (“Red Rhino”) – is launching its first title, Andre Vltchek’s “Indonesia – The Archipelago of Fear”, translated from English to ‘Indonesia: Untaian Ketakutan di Nusantara’. It is a powerful criticism of post-1965 Indonesia, which both Andre Vltchek and Naomi Klein believe was nothing less than a Western experiment on human beings, duplicated later in many other parts of the world.

The Indonesian writer and publisher, Rossie Indira, interviewed Vltchek for CouterPunch:

RI: What can you say about the present situation in Indonesia? How would you compare the situation now and during the time when you were producing and directing your documentary film ‘Terlena – Breaking of a Nation’?

AV: Now, the situation is much worse than 10 years ago. It is because then, there was still some hope. The progressive Muslim leader Abdurrahman Wahid, (known as Gus Dur) was alive and so was Pramoedya Ananta Toer. Mr Wahid, a former President of Indonesia, was a closet Socialist. He was deposed by a judicial coup constructed by the Indonesian elites and military, but many Indonesians still believed that he would manage to make a comeback.

Then, there were were several activist groups, still pure and ‘unsold’, working for a new Indonesia. People, at least many of them, were obsessed with finding new ways to change their country.PointofNoReturn300

Now the dictatorship or call it the ‘Indonesian regime’, fully consolidated its power… You see, the West told Indonesians, indirectly of course, that ‘democracy’ is when you have several or many political parties, and people vote at least once in a while. But it is total nonsense. Democracy is when you vote and your vote can actually totally change the course of your nation: like in Venezuela. Real ‘power of the people’… To have many political parties and sticking those pieces of paper into a box, guarantees nothing! In Indonesia, there are many parties, but they are all pro-business and for the elites, and all their candidates, including Jokowi, are pre-selected, and pre-approved, by the regime. So no matter how people vote here, it changes nothing.

Actually, voting in countries like Indonesia is unpatriotic, as it only legitimizes the regime, which serves foreign political and economic interests, as well as those totally prostituted ‘elites’.

Bloody henchman for US imperialism Suharto, adorning TIME's cover.

Bloody henchman for US imperialism Suharto, adorning TIME’s cover. One of the most corrupt (illegitimate) leaders of the 20th century, courtesy of  clueless US taxpayers. 

Indonesia is now undeniably a ruined country. It has sunk to the level of sub-Saharan African nations (I work in Africa, and can easily compare). It has malls and luxury hotels in several cities, but in between them it is an absolute nightmare, with all the basic services either missing, or on a totally inadequate level.

Even Rwanda has much better roads than Indonesia. Even Zimbabwe has much better public schools. Even Kenya has more reliable mobile and Internet networks. Even Botswana has better public hospitals.

The regime is lying about everything, including the number of people who live here, and about the number of poor (in reality the great majority of the population). Education is almost non-existent. The so-called education system is here only to brainwash, and to maintain the status quo. And it shows: the country of over 300 million (real number) has not one great scientist or thinker, in stark contrast to places like Nigeria, which has many.

And there is no real opposition.

Of course such a failed state is fully supported by Western academia and the mass media, because it does what it is told to do: it became a huge, brainwashed country, which is now plundering and exporting its riches, while not even having a clue that many parts of the world are now fighting for true independence from Western tyranny, and for socialism.

RI: In your book “Archipelago of Fear”, which was published by Pluto in London, and which will be available in two weeks in Bahasa Indonesia: why did you describe Indonesia as an ‘archipelago of fear’? Many people here asked me this and it seems that they are not aware or not willing to admit that it is as you defined?

AV: Indonesian people are living in constant fear, in horror. Often they do not realize it, because this state of mind, this ‘living in fear’, is considered ‘biasa’ (normal). This fear, also explains why almost nobody rebels, or is willing to start a rebellion against the regime. People are paralyzed by an abstract fear, which actually has its roots in ignorance and insecurity.

Only those who rob and are corrupt are actually protected and respected here. The rest are clear victims. They are scared, frustrated and uninformed victims. Workers are scared because they are unprotected: farmers are scared, maids (pembantus) are scared (and fleeing for jobs even to the Middle East, hardly a haven for women), and even corporate employees are scared too. Children are scared because they are like the property of their parents and mostly treated as such. Women are scared because they are humiliated on a daily basis and treated like meat, like sexual objects, like slaves. And many women here are even suffering from genital mutilation (some even say that most of them are), from sexual harassment, rape (even those perpetrated within families), and while the rate of sexual abuse here is one of the highest in the world, the great majority of cases goes unreported, exactly because of fear.

In Indonesia, rape is a common occurrence and it has accompanied several genocides this country has witnessed: 1965/66, that in East Timor and now in Papua. Women, who are detained in police custody, are commonly raped.
Many women are so scared of the society and of their families, that if they get pregnant out of wedlock, they would rather abandon their children (throw them into the gutter) than to confront society. Indonesia has one of the highest child-abandonment rates in the world, but again, most of it goes unreported.

People are scared of being assaulted, insulted, robbed or raped. Again, it is because they are unprotected. Police and even the legal system are corrupt or/and on the side of the rich. Victims see no justice. How could you not be scared in almost total lawlessness?

If people look ‘different’, they are afraid. Racist insults fly if someone does not look like part of the majority. Indonesia is one of the most racist countries on earth, and it has proven it during several of the genocides that have taken place here. But there is no perception, no clue, and no understanding of what racism actually is. And there is zero self-criticism.

People are scared of falling sick, because Indonesia has one of the most compassionless medical systems in the world, totally abandoned to market forces. Medical care here is just ‘business’, as everything else here has become ‘business’. It is quite terrifying and grotesque.

The victims of the 1965 massacres are scared! Instead of demanding justice and throwing those responsible for genocide into prison, they are actually scared! It is because they are defenseless. You saw it in the film, “Act of Killing”! But while the entire world is horrified, watching how respected and admired the local mass murderers are, many Indonesian people see it again all as normal – as biasa.

Fear is felt when one sees the entire archipelago – ruined, logged out, robbed, polluted. Sumatra is gone, Kalimantan is gone, Papua… Java… Bangka… Bali has become a kitschy, overcrowded and polluted ‘duty-free island’.

Maybe people are not able to define their fears. But they have them, and it shows from their behavior. There is so much frustration and anger.

Some people say they are content, but in fact most of them are miserable. People say they are not poor, even if they take water from the gutter and live in a carton shack. They say they are not afraid, because even the horror they are experiencing every day, is not allowed here to be defined as fear. If it is, the families, the officials, and mass media, mock it.

And of course, Indonesian people are above all scared of being ‘different’. Being different here is punished brutally. Different people get mocked, ostracized, raped, tortured, and murdered. They are banned. To be a Communist is banned. To be gay is banned. To be an atheist is banned. To be a Taoist is banned. Being one of a thousand things is banned.

That is why this is one of the most uncreative, monolithic places on earth. Many hide behind their religions, some of which have already gone totally gaga. They are also hiding inside their family clans. In the multitudes, in the masses, the lack of knowledge and inability to think do not stand out as idiocy, and are in fact considered as strength.

Indonesia is one of the most scary and scared places on earth.

RI: We just had our Legislative elections here, on April 9th 2014. What is worrying is that, as you mentioned earlier, we were brainwashed to think that as we have elections with many parties, we are a democracy. Our representatives in the House forget all about their promises after being elected or re-elected, and it is clear to anyone that they are there only for their own self-interest. It is similar to the Presidential elections: once elected, the President ‘forgets’ all about his promises, and duties to protect the people. So what would be the best system for a country like Indonesia? Would our fourth pillar of Pancasila (the official philosophical foundation of the Indonesian state) – “Democracy guided by the inner wisdom in the unanimity arising out of deliberations amongst representatives” – be the right one?

AV: I believe that Indonesia has to first be ruled by some form of a socialist system, before we can even start talking about ‘democracy’.

Because first of all, Indonesian people have to be educated and to know what they want and what their country is all about. The interests of the people have to be put first! The entire society has to work day and night in order to improve the lives of the majority. Basically, we need the opposite of what is Indonesia right now, which is: the majority-serving business interests of the local gangsters and their foreign handlers.

There has to be a strong drive to educate the people. As it is now, after the US-sponsored 1965 military coup and consequent bloodbath, Indonesian culture has been destroyed and replaced by local and mainly US pop. Thinking has been strongly discouraged. Decent education is strictly for the elites, and those who are educated are using their knowledge to extract even more from the country, and not to improve it as a whole.

Therefore, Indonesian people have no idea whom they are actually voting for, or of what their political system consists of. It is so easy to fool them.

People’s Representatives: fine… of course! But these have to be extremely dedicated, honest, brave men and women. They have to be ready to live or die for their nation: put their personal interests, even the interests of their families, far behind the interests of the archipelago!

To create such people, such People’s Representatives, would take decades, and they can only grow up in a fundamentally different political system, and in a totally new culture. What is now governing Indonesia is morally defunct, it is corrupt. What is ruling the country now is not even a culture or a political system: it is a disease.

As it is now, decades after 1965, the people of Indonesia have no clue about any other system except their own, or about true democracy.

If the US and the West had not raped the country in 1965, a natural form of government would have been that as created by the father of the nation, a nationalist (and internationalist) Sukarno who had been very closely allied with the Communist Party of Indonesia (PKI), then the third largest Communist Party in the world, after those of China and the Soviet Union. To follow that, part – nationalism, internationalism and “democratic Communism” – would be the most natural and normal development for Indonesia, for its culture and mentality. And only Western terror and the corrupt Indonesian elites, as well as zealous religious cadres (of all religions, not just Islam), derailed that process by murdering, raping and imprisoning millions of people, by locking this country in perpetual fear, in horror, in moral surrender.

All this has to be explained to the Indonesian public: what their country was before the coup, and what that horrible coup really consisted of. The coup did not ‘save Indonesia from Communism’. It merely converted a nationalist and progressive country back into a colony of the West. ‘Colonialism’ and ‘democracy’ are two contradictory terms. In order to be ‘democratic’ a country has to be free. Right now, Indonesian people are slaves: of the West and of their local elites.

Right now, it is not ‘the rule of the people’ (democracy). It is the rule of greedy local butlers and their foreign owners.

RI: You also mentioned the education system. What kind of education should we implement? We understand that a thriving democracy would not be achieved if the people were still uneducated, and that, to educate them, the country has to pay a very high price; any price, indeed. But according to the Indonesian Constitutional Court, the ‘fair public participation in the financing of education’ is not against the constitution. The Court says that for his or her own development, each citizen must also take responsibility to educate him or herself to the level that he or she wants to achieve. This means that the State has the primary responsibility but the citizen has to spend his or her funds. This is part of neo-liberalism, if I read it correctly?

AV: Correct. There can be no democracy in a country where people are uneducated and do not understand their own position in the society and the world. People ‘rule’ only if they can make ‘educated decisions’. Democracy means ‘rule of the people’, but are people really ruling if all they can do is to count how much money they get for sticking paper into a box, or if they vote for candidates who will make sure that the status quo prevails? And all the candidates in Indonesia are pre-selected and approved by the regime, especially those who appear to be a ‘little bit different’, like Jokowi.

Of course each citizen should try to educate him or herself, but only after receiving some essential, basic blocks of knowledge. Formal education should always be free; from kindergarten to PhD. It is free in many European countries, and in several Latin American ones (including Cuba, Mexico and Argentina). China is returning to free education, as it is returning to universal health care. In countries like Chile, people are on the streets right now fighting for free education, and they are winning!

Culture has to be constantly on the vanguard, too. It should be educating people, as it does in Latin America: thousands of great theatres, art cinemas, millions of free books distributed by the governments, public poetry readings, free public lectures, and all sorts of bookstores are open until early mornings, exhibitions reacting to the needs and sorrows of society, concerts of engaged music.

Please just look at those Indonesian cities: Jakarta, Surabaya, Medan… are there any other cities on earth, of that size, with such an absolute chronic lack of culture, and institutions that are supposed to make people think? Like theatres, archives, grand libraries, concert halls, art cinemas, progressive bookstores… There is nothing here…

How could you educate yourself in Indonesia? Could you, just by consuming that obligatory crap – pop, and the junk television channels, or from mingling with that ‘functionally illiterate majority’, which is hiding its idiocy in the ocean of similarly minded citizens?

RI: Since you are recommending that some form of socialist system should rule Indonesia, do you have any suggestions on how can we go in that direction? Many countries in this world struggled for this, and now for example, we see most of the Latin American countries winning and turning socialist. But it seems that Indonesians, most of them, do not participate in this wave. Most of them even appear to be indifferent. How do we teach the people of Indonesia that a fundamentally different political, economic and cultural system is what is needed for them to get out of this desperate situation?

AV: It can only be done by education and by openness. Everybody who can, should be participating in this ‘project’. Not only professional educators and teachers (these people are themselves often indoctrinated and brainwashed), but especially artists, creative people, thinkers. There should be many more initiatives, particularly more from the independent press! What happened to progressive independent publications in Indonesia? Nothing – they never took off! It is a shame.

A publishing house like yours – Badak Merah – should be the mainstay of the opposition.

The outraged citizens of Indonesia – lawyers, doctors, engineers, scientists – should be speaking up; they should be shouting. And of course, the voices of farmers and workers, their terrible stories, should be read and heard from the pages of independent magazines and blogs, from YouTube and independent films.

Enough of pop! Pop is low, egocentric entertainment for the brain-dead, indoctrinated masses. The West has distributed it, via the Empire, so that people in their new colonies stop thinking altogether, and while they are being raped, they imagine that they are actually being made love to! It is a reactionary, rightwing way of expressing pseudo-reality. And rest assured: it is extremely un-cool, and conservative.

The people of Indonesia have to learn, realize, that fighting for a better country is great and inspiring. Like those men, women, and even children in Latin America understood many decades ago! Young people especially, should know: Rebellion is good. Revolution is good. Thinking is good. Progress is good. To be a revolutionary, a rebel, is cool – very cool. Much cooler than driving a red or yellow Ferrari bought with the money your daddy has stolen from the poor!

Learning, traveling and comparing the world, writing outraged poetry, producing revolutionary art, demonstrating, holding the older generation (including their own parents and grandparents) responsible for destroying this country, and finally aiming at building a just, kind and beautiful nation called ‘Indonesia’. This is much better and glorious than sitting in Starbucks, staring like idiots at uniformed smart phones, and basically killing ones life… and the lives of others… for nothing.

People have to be engaged. Enough of nihilism! Enough of emptiness and defeatism! Fighting for a better world is not only the decent thing to do, it is also fun; it is meaningful and fulfilling.

RI: Do you think Indonesia has to go through a revolution to get free universal medical care and free education? Should it go through a revolution so it could build a much better society?

AV: For medical care, they have some sort of plan, but it is not going to work, as it is a ‘dog-cat’. It is not a determined plan to provide the citizens of Indonesia with free and universal medical care (at least similar to what already exists in Thailand), but some sort of patch up over a horrible situation, over an open wound. Again we have to remember that the quality of medical care in Indonesia is on par with Kenya or Tanzania, not with Malaysia or Thailand, and that the system is totally corrupt, financially and morally, and would never allow anything ‘public’, or ‘free’.

As for free education, universal medical care and other basic rights: Yes, people have to fight! Of course they have to. Free and good education is their right, no matter what advisors and ‘experts’ coming from the United States say.

The country has already been governed for too long by sclerotic uncles who have sold their nation off to foreign companies and governments. These people have no morals and no compassion. If you negotiate with them, they will only do what they have been doing for decades: they will cheat and lie, trying to buy time. They don’t give a damn about Indonesia and its people! They want those Porsches and diplomas for their kids, and luxury condominiums in Australia, the United States, Singapore and Hong Kong.

The only way is to unseat them, to kick their backsides off the throne. Indonesian people have to regain power, regain control over their own country. And that will never come without a struggle.

But it can be done; it has to be done. In the name of the majority of the Indonesian people, who are living in terrible misery! In the name of the nation, which has already lost almost everything. In the name of the lives of the hundreds of millions of men, women and children, damn it!

Andre Vltchek is a novelist, filmmaker and investigative journalist. He has covered wars and conflicts in dozens of countries. His discussion with Noam Chomsky On Western Terrorism is now going to print. His critically acclaimed political novel Point of No Return is now re-edited and available. Oceania is his book on Western imperialism in the South Pacific. His provocative book about post-Suharto Indonesia and the market-fundamentalist model is called “Indonesia – The Archipelago of Fear”. He has just completed the feature documentary, “Rwanda Gambit” about Rwandan history and the plunder of DR Congo. After living for many years in Latin America and Oceania, Vltchek presently resides and works in East Asia and Africa. He can be reached through his website or his Twitter.

Rossie Indira is an Indonesian writer, architect and publisher. She is co-founder of Badak Merah Publishing House. She is co-author of ‘Exile –Pramoedya Ananta Toer in conversation with Andre Vltchek and Rossie Indira’. Her latest book ‘Surat Dari Bude Ocie’ is about her travel to Latin American countries. She was the Production Manager and Translator of ‘Terlena—Breaking of a Nation’, a 90-minute documentary film on the impact of the 1965 coup on Indonesia society. She writes for publications inside and outside Indonesia and she writes in English and Indonesian languages. She can be reached through herwebsite and her twitter.



USA RIP?

Less Tax for the Rich Versus Infrastructure for the Rest
The largest corporation in the United States, General Electric, made U.S. profits of $5.1 billion in 2010, yet paid no taxes. In fact, they claimed a tax benefit of $3.2 billion.

GE CEO Jeffrey Immelt: In and out of government, too.

GE CEO Jeffrey Immelt: In and out of government, too.

by JOHN K. WHITE

American pharmaceutical giant Pfizer wants to become British, joining the ranks of other major corporations opening “headquarters” in low-tax-rate countries. At 21.0 percent in the U.K. versus 32.8 percent in the U.S., it’s a no-brainer. At the same time, roads, bridges, and airports – infrastructure that helped make the U.S. great more than a half century ago – is falling apart. Is there a connection?

Pfizer’s move is an old-fashioned takeover, hoping to acquire AstraZeneca for more than $100 billion, creating the world’s largest pharmaceutical group in the process. The modern part is the right to pay almost 40% less tax than legislated in the U.S. One calculation put the savings at $3.8 billion.

Another American pharmaceutical company investing in “inversion” or relocating their tax base away from the U.S. has set up in Ireland, where the corporate tax rate is a measly 12.5%. Endo has hoisted its shingle in a basement office in Dublin, where a skeleton staff is claiming “headquarters” status for its 4,100 Pennsylvania-based employees. The move is expected to save $75 million in taxes.

According to the Financial Times (April 30), Endo’s most recent major purchase was a Nespresso machine and the basement door of their new global “headquarters” doesn’t even have a brass name plate. As they would say in any of a hundred Dublin pubs located only blocks from Endo and the nearby Irish parliament, “Are you taking the piss?” Indeed, as the Financial Times further noted, the effective tax rate for U.S. pharmaceutical companies over the past decade is, in fact, “less than 6 per cent on over $100 billion of Irish profits,” less than half the official measly rate. No wonder corporations want to be tax resident in Ireland or Britain. No need to be Swiss or Cayman any more.

Inversion is all the rage for corporations looking to improve shareholder value. By listing profits in low-tax-rate jurisdictions overseas, American corporations save billions. Of course, some established companies don’t bother to move, using their own home-grown loopholes to escape the tax man. The largest corporation in the United States, General Electric, made U.S. profits of $5.1 billion in 2010, yet paid no taxes. In fact, they claimed a tax benefit of $3.2 billion. But to park almost $60 billion in “trapped” foreign profits, they want in on the international game too, hoping to acquire French power giant Alstom for tax purposes, a company Industry minister Arnaud Montebourg referred to as a “national jewel.”

Anything to keep their money from the American government. At the same time, American infrastructure is falling apart, with little will to maintain roads, bridges, or airports, not to mention a failing education system.

Government seems loath to get involved in public works, despite the past success of major nation-building projects. The FDR-inspired New Deal helped to build the Hoover Dam, a national interstate highway system, and the Tennessee Valley Authority (TVA), the nation’s largest public utility that provides almost 200 billion kWh and more than 40,000 jobs.

Depending on which side of the fence one stands, the TVA represents all that is wrong with government – top-down planning and restricted competition – or all that is right with government – organized effort and economic development. The New Deal heralded a proud new America still reeling after a decade of economic misery. In short, infrastructure helped rebuild America.

The top-down planning of NASA’s Apollo program and subsequent space missions helped bring about necessary component miniaturization needed in space, paving the way for the modern microchip revolution. Where would high-tech giants such as Intel, Microsoft, HP, or Apple be, never mind the recent Internet behemoths Google, Amazon, eBay, or Facebook, without government investment in the space program?

In a slimmed-down crisis-filled world, however, the U.S. space agency can’t even get to the International Space Station now without hitching a Russian ride (made all the more difficult with the current European border crises). In 2007, the I-35W bridge in Minneapolis collapsed over the Mississippi River, what Minnesota Governor Tim Pawlenty called “a catastrophe of historic proportions,” before acknowledging the lack of government funding in highway infrastructure. Joe Biden even recently likened passing through La Guardia airport to being in a third-world country. From New Orleans to Detroit, basic federal infrastructure is decaying piece by rotting piece.

Unfortunately, the U.S. is becoming a user-pay society, with different rules for the wealthy, elaborate gated communities, and multi-tiered levels of health care. If you can provide your own high-priced lawyers, security forces, and medical staffs, you don’t need government infrastructure. You don’t need government.

But infrastructure is a part of any national identity, as governments and people decide what’s important and strategic. In Germany, the state bars intercity bus travel to protect state-run train travel. In Canada, a multi-billion-dollar potash company takeover was deemed not to be of “net benefit” to Canada and blocked. In China, government subsidies spur on green technology to combat rising pollution. Integrated travel, mineral resources, and clean energy matter. In the United States, it seems keeping shareholders happy matters.

Pfizer has even cheekily threatened the U.K. government not to block their takeover of AstraZeneca, the 7,000-strong, London-based company they hope to outmuscle for preferred U.K. tax status, and a place to park their $85-billion overseas war chest. Known for popular performers such as Viagra, Pfizer’s own hard-on now is for reduced taxes. Forget outside innovation or the so-called R&D pipeline, the real jewel is increased share value via reduced taxes.

One wonders what Pfizer would do if the government sent them the bill for educating its workforce, providing on-demand electricity and water, or policing streets to protect their assets, important infrastructure and utilities falling short now because of vast reductions in the government tax take. By the way, AstraZeneca makes cancer-therapy drugs, not that that matters to the bottom line or shareholder profits.

When finance replaces industry as a national goal, decline follows. At the peak of the British Empire, business received preferential government treatment through an expanded circle of merchant bankers, who were no longer subject to any one government. Giovanni Arrighi noted in The Long Twentieth Century: Money, Power, and the Origins of our Times that “the massive relocation of surplus capital from industry to finance resulted in unprecedented prosperity for the bourgeoisie, partly at the expense of the working class.” In Empire, Niall Ferguson noted that of the more than threefold increase in per capita British GDP during almost 200 years of Indian rule, most of the profits “went to British managing agencies, banks or shareholders.” Over the same time, the Indian GDP per capita grew by only 14%. Basically, money any way you can get it.

To be sure, economic competition is a hazard when everyone wants the same limited resources or, in modern economic-speak, the same low tax rates. Regulation disappears, junk becomes gold, and the citizen consumer ends up with the bill. Barack Obama has gone on record saying he will tackle tax evasion, including a proposal in his most recent budget to outlaw inversion. But in fact, Obama and Co are really thinking about how to implement their own low corporate tax rate to keep pace with global competition.

The reality is that to fight low-rate tax regimes elsewhere countries are becoming low-rate tax regimes at home. It’s a fight that hurts everyone, and curbs much-needed infrastructure. Indeed, borderless corporations are defining the modern state. In the new user-pay USA, one can now expect either low corporate tax rates or a steady increase in corporate “inversions.”

Forget about new roads, modern electricity grids, and innovative changes to education. Forget about potholes on your street. Welcome to more pay for corporate shareholders. Welcome to third-world status. Sadly, the U.S. is being eclipsed by its own worst self. RIP USA (1776-2014?).

JOHN K. WHITE, an adjunct lecturer in the School of Physics, University College Dublin, and author of Do The Math!: On Growth, Greed, and Strategic Thinking (Sage, 2013). Do The Math! is also available in a Kindle edition. He can be reached at: john.white@ucd.ie.



Gangster State America

Where is America’s Democracy?

corporations_flag

by PAUL CRAIG ROBERTS

Anyone who looks carefully behind the veil of words cannot find democracy in America. For years I have been writing that the US government is no longer accountable to law or to the people (see, for example, my book, How America Was Lost).  The Constitution has been set aside, and the executive branch is degenerating into Caesarism.

Government is used to impose agendas that result from the symbiotic relationship between the neoconservative ideology of US world hegemony and the economic interests of powerful private interest groups, such as Wall Street, the military/security complex, the Israel Lobby, agribusiness, and extractive industries (energy, mining, and timber). Dollar imperialism, threats, bribes, and wars are means by which US hegemony is extended.  These agendas are pursued without the knowledge or approval of the American people and in spite of their opposition.

Professor Martin Gilens at Princeton University and Professor Benjamin Page of Northwestern University have examined American governance and have concluded that the US is an oligarchy ruled by powerful rich private interest groups and that the US government has only a superficial resemblance to a democracy.  Their analysis is forthcoming in publication in the journal, Perspectives on Politics.

Their conclusions are striking:

“The central point that emerges from our research is that economic elites and organized groups representing business interests have substantial independent impacts on US government policy, while mass-based interest groups and average citizens have little or no independent influence.”

“When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose.”

“In the United States, our findings indicate that the majority does not rule–at least not in the causal sense of actually determining policy outcomes.”

“The preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact  upon public policy.”

A number of factors have contributed to the demise of democracy and accountable government in the US. One factor is the concentration of the US media in a few hands. During the last years of the Clinton regime, a formerly diverse media with significant independence was concentrated in five mega-corporations. The value of these corporations consists largely of their federal broadcast licenses.  To insure the renewal of these licenses, the media avoids challenging the government on significant issues.

Another factor is the offshoring of US industrial and manufacturing jobs. This development destroyed the manufacturing and industrial unions, which were the backbone of the Democratic Party’s financial support.  Now the Democrats have to appeal to the same interest groups as the Republicans–Wall Street, the military/security complex, and the polluting industries that despoil the environment.  As both political parties are now financed by the same private interests, both political parties serve the same masters. There is no longer any countervailing power.  The Obama regime is simply a continuation of the George W. Bush regime.

Two recent rulings by the Republican majority on the US Supreme Court are another decisive factor. The court ruled that it is merely an exercise of free speech for oligarchs to purchase the US government (Citizens United v. Federal Election Commission and McCutcheon v. Federal Election Commission). A corrupt Supreme Court has invented a “constitutional right” for corporations and oligarchs to use their vast financial resources to form a government of their choosing.

Private interest groups in the US are so powerful that they can purchase immunity from law. On March 27 a retiring Securities and Exchange Commission prosecutor, James Kidney, said that his prosecutions of financial criminals at Goldman Sachs and other giant US banks were blocked by SEC political appointees who “were focused on getting high-paying jobs after their government service.”

In a recent test to ascertain the responsiveness of members of Congress to monied interests in comparison to voters, two letters were sent to congressional offices. One letter asked for the representative to meet with community groups in his district.  The other letter asked for the representative to meet with a group of active donors.  The latter letter received by far the most responses from members of Congress.

In the US and Europe there is constant propaganda about “gangster state Russia.”  According to this propaganda, President Putin is a tool of oligarchs who use Putin to rule Russia and loot the people.  In my opinion, this propaganda originates in the Washington-funded NGOs that constitute a US fifth column inside Russia. The purpose of the propaganda is to destroy Putin’s legitimacy and that of his government in hopes of bringing to power a Washington-compliant government in Moscow.

My impression is that the Russian government has curtailed activities of some of the oligarchs who used the privatization era to seize control of resources, but that the government’s actions are consistent with the rule of law.  In contrast, in the US oligarchs control the law and use it to acquire immunity from law.

The real gangster state is the US. Every institution is corrupt. Regulators sell protection from law for well-paying jobs in the industries that they are supposed to regulate. The Supreme Court not only permits money to purchase the government but also sells out the Constitution to the police state. The Supreme Court has just refused to hear the case against indefinite detention of US citizens in the absence of due process.  This is an unambiguous unconstitutional law, yet the Supreme Court refuses to even hear the case, thus granting unchecked police power to the gangster state.  

Another defining characteristic of a gangster state is the criminalization of dissent and truth tellers. Washington has done everything in its power to criminalize Julian Assange and Edward Snowden for revealing the US government’s illegal, unconstitutional, and criminal actions.  Washington reeks of hypocrisy.  On April 26 the State Department announced its third annual Free The Press campaign, a propaganda exercise directed at foreign countries that are not Washington’s puppets.  The very same day the Justice Department told the Supreme Court to reject the protection US journalists have under the Constitution against being forced to reveal their confidential sources so that James Risen can be imprisoned for reporting a government misdeed.

In the 21st century Washington has squandered trillions of dollars on wars that have destroyed countries and killed, maimed, and displaced millions of people in seven or eight countries.  Declaring its war crimes to be a “war on terror,” Washington has used the state of war that it created to destroy US civil liberty.

In the 21st century it is difficult to find a significant statement made by Washington that is not a lie. Obamacare is a lie. Saddam Hussein’s weapons of mass destruction is a lie.  Assad’s use of chemical weapons is a lie. Iranian nukes are a lie. Russia’s invasion and annexation of Crimea is a lie. No fly zones are a lie. Russian aggression against Georgia is a lie. 9/11, the basis for Washington’s destruction of civil liberty and illegal military attacks, is itself a lie.  The fantastic story that a few Saudi Arabians without government or intelligence agency backing outwitted the entire national security apparatus of the Western world is unbelievable. It is simply not credible that every institution of the national security state simultaneously failed.  That Washington would tell such a fantastic lie shows that Washington has no respect for the intelligence of the American people and no respect for the integrity of the American media.  It shows also that Washington has no respect for the intelligence and integrity of its European and Asian allies.

Washington won’t even tell the truth about little things in comparison–jobs, unemployment, inflation, GDP growth, economic recovery.  Washington rigs the markets in order to cover up its sacrifice of the economy for the benefit of a few special interests.

In the name of “privatization,” Washington hands over public assets and government responsibilities to rapacious private interests.

The conclusion is inescapable that the US is a gangster state.  Indeed, the US is worse than a mere gangster state. The US is a shameless exploitative tyranny.

Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal. Roberts’ How the Economy Was Lost is now available from CounterPunch in electronic format. His latest book is How America Was Lost.