Why Greece Is in Trouble

I just finished a terrific article from the latest (July 2011) issue of the journal Socialism & Democracy. It’s called “Bloodless Coup D’Etat: The European Union’s Response to the Eurozone Crisis,” by Steve McGiffen. If you have access to an academic library, you may be able to get it free online; if not, it’s here, but behind a ridiculously high paywall (you can but a subscription, at the “member rate” – open to anyone – for the price they charge for one article). So I’ll save you money by summing up the main points, but it’s well worth reading if you get a chance.

McGiffen’s basic point is that the crisis is caused by the conditions for joining the Eurozone, and is being used by finance capital to force all the member states to adopt neoliberal policies: reduced social security, an end to stable jobs, fewer government services, and everything we have come to know and love as “austerity.”

The euro has caused the Greek crisis (as well as the Spanish, Portuguese, Irish, Italian, and other crises) in two ways:

1. Immediately, by denying Greece the normal tool countries use to resolve balance-of-payments problems: devaluation of their currency. If Greece was still using the drachma, they could devalue it and pay off their debts. But they can’t devalue the euro.

2. More essentially, Greece was brought into the eurozone at a drachma-to-euro conversion rate that overvalued the drachma. The result was that exports from Greece to other countries in the zone became more expensive, and imports to Greece from Germany (in particular) became cheaper. So naturally Greeks began to use a lot of German imports, and stopped buying locally.

The whole history of the European Union is that countries sign treaties and sell them to their people on the basis of a feeling that Europe is a good thing, and that it will be convenient to travel without having to change money all the time. But the treaties always turn out to have economic restrictions built into them. Most basically, they take more and more policy decisions out of the hands of elected national governments and put them into the hands of the bankers – specifically, the European Central Bank, backed up by the non-elected European commission.

The “democratic deficit” in the EU is well-known; the European Parliament, the only elected part of the governing structure, has little power. But even the other parts of the governing structure have their hands tied by the treaties and the rules of the eurozone.

Yesterday the Greek finance minister made one of the points I make above – you can’t have a currency union without an economic union. Unfortunately, his solution was to turn over control of his country’s economy, as well as his currency, to the European Central Bank. That would mean the bank would be free to impose austerity everywhere – just what the neoliberals (and, more importantly, finance capital) want. Less for the workers, more for the capitalists – it’s that simple.

There is another solution — Greece could leave the eurozone and default on its external debt. That would be a good thing for the people of Greece; but then, that’s not really whom the Greek government seeks to serve. Instead, the EU will continue the losing struggle to bail out Greece in order to bail out the bankers, and they will continue to drag the world economy down.

The US Should Support Democracy in Bahrain, Not Only in Syria and Libya

This past week saw two ominous delements in the small Arab monarchy of Bahrain, home base of the US fifth fleet.

On Saturday, September 24, the regime held a by-election for 18 seats in the lower house of its parliament. These 18 seats (out of 40) head been held by the main opposition party, al-Wefaq. The al-Wefaq members had resigned en bloc when massive pro-democracy protests broke out in February of this year.

The opposition argued, with justice, that their seats were meaningless for two reasons. First, the parliament had been gerrymandered so that they won only a minority of the seats, even though they received a majority of the total vote. And second, the seats would have been meaningless anyway, because parliament had no power. The prime minister was appointed by the king, and the appointed upper house of the legislature had the only power to limit executive actions. In practice, both prime minister and upper house were simply tools of the royal family (which the prime minister belongs to).

The massive, militant, nonviolent popular protests have continued until today, although the occupation of the Pearl Roundabout – a central location in the capital city, Manama – was dispersed by troops sent in from the neighboring, larger absolutist monarchy, Saudi Arabia. I wrote about these protests in an earlier post, so I won’t repeat the details here.

A complicating factor is that the majority of the population are Shi’a, while the royal family and most of their supporters are Sunni. The king uses this to claim that the protesters are really Iranian agents; however, there are many Sunni in the democracy movement, and a recurrent slogan in the protests was “No Sunni, No Shi’a, only Bahraini.” Protesters have consistently denounced Iranian efforts to influence them.

Ever since the Saudi suppression of the protests, the Bahrain monarchy has tried to maintain that things are back to normal. They had an ersatz “national dialogue” this summer, which made weak recommendations now being “considered” by the king; and they attempted, unsuccessfully, to bring back both Formual 1 racing and professional golf. No one has been convinced; there is a tacit internationa boycott of Bahraini sporting events.

The elections yesterday were part of this pretense. The parliament remains toothless, it is still gerrymandered against the opposition, al-Wefaq boycotted the election, and all independent observers have described voter turnout as “light.” The government, however, declares that the turnout was “massive” and that the opposition was repudiated. Presumably they will now have a parliament that supports the king’s dictates unanimously.

Meanwhile, ominously, the US Department of Defence proposed earlier this week to sell $53 million worth of weapons to the monarchist government. These weapons would include wire-guided missiles, high-tech armored cars, and a lot of other weapons designed for the repression of urban insurgency. Arms sales to Bahrain had been suspended, at least de facto, while President Obama declared that he supported democray and human rights in Bahrain. However, he never acted on that position, and now seems poised to resume arming the tyrant, rather than supporting the democratic forces.

The US, and President Obama, should get on the right side of history. Democracy is more important than oil (especially since oil is destroying the earth’s climate!); if the US doesn’t align itself with democracy, it will become increasingly isolated in the world. This is just the opposite of what so many hoped that an Obama presidency would bring. What is shows, more than anything else, is that in America today oil companies are more important than people.

Why Universities Should Not Be Training Military Officers

On April 9, 1969, a group of us marched into University Hall, the main administration building at Harvard, demanding that Harvard abolish its ROTC program and stop evicting working class people as it expanded. An additional demand, to create a Black Studies program, was added later.

We took over the building, evicting the deans and their staff, and mobilized thousands of other students to either join us inside or to rally on the steps outside. We remained in possession until about 3 AM; by that time Harvard had mobilized 10,000 police officers from around the region who massed outside,stormed the building (we had voted to resist nonviolently, by locking arms),and hauled 180 of us out to jail (we were booked for trespassing and released 6 or 7 hours later). The arrests, in turn, triggered a student strike which went on for a few weeks.

One result of these events was that I was convicted of assault and battery on the Dean of the College (testimony showed that I had held his elbow as we escorted him out of the building) and sentence to 9 months in prison. Other results were more positive: Harvard did establish a Black Studies program, it became at least a little more sensitive to its working class neighbors in Allston, Cambridge, and Roxbury. And it abolished ROTC.

So you can see why I might take it personally that Harvard ROTC is now coming back. Congress passed a law some years back requiring colleges to allow ROTC in order to qualify for federal funds. Harvard had resisted on the ground that ROTC discriminated against lesbian and gay people; but with the repeal of Don’t Ask-Don’t Tell, effective today, Harvard has decided to welcome the program back.

1969 was a long time ago – my daughter emailed me this morning, “Well, I guess 40 years is pretty good” – and I don’t want to become obsessed, particularly since I am not at Harvard anymore. But I do want to say that all the reasons we were against ROTC then, at Harvard or at any other campus, are still valid.

What were those reasons?

  1. All over the world, the US military is used to repress people’s struggles for democracy and control of their own economies. They sometimes pretend the opposite – that’s what they are pretending now in Libya; but in the long run, it never turns out that way. When the US military intervenes, democracy does not ensue. What does follow is that repressive governments are propped up and popular movements are repressed violently. This used to be excused as ‘fighting communism;’ now it’s more likely to be ‘fighting terrorism,’ or ‘fighting drugs.’ But it comes down to the same thing. Universities should not cooperate with the military; for that matter, neither should anyone else.
  2. More and more, the military is populated through what is known as the “economic draft.” That is, while no one is drafted any more, the people who end up in the military choose it because they cannot find another way to make a living. ROTC is part of that economic draft – people become cadets because they can’t finance their education any other way. Instead of forcing them to fight, the government should spend the money on lowering the cost of college for everyone. One of our demands at Harvard was that the university should take over the scholarships ROTC cadets were receiving. Let’s scale that up to the national level.
  3. ROTC distorts the purposes of liberal arts education. We are supposed to be teaching students to think critically; ROTC teaches them to follow (and then later to give) orders. This is fundamentally out of place in a university.
  4. Abolishing ROTC is not just a symbolic gesture – the military really needs it to get enough officers. So abolishing ROTC on campuses will impede their ability to start even more wars.

OK – I know Harvard University is not listening to me, and I really don’t want it to become an obsession. I just had to get that off my chest.

Class War – Good or Bad?

Today Representative Paul Ryan (R-WI) – the guy who wants to end Medicare – attacked President Obama’s proposal that people with incomes over $1 million a year should pay taxes at at least as high a rate as middle income people do. Obama cited the investor Warren Buffet’s statement that it is unfair that he pays 17% tax on his income, while his secretary pays 20% on hers, and called his proposal the “Buffett rule.”

Ryan, in response, told Fox News that Obama was taking the “class warfare path,” adding Class warfare … may make for really good politics, but it makes for rotten economics.”  Ryan offered the following explanation for his claim that it was ‘rotten economics:’

 If you tax something more, you get less of it. If you tax job creators more, you get less job creation. If you tax their investment more, you get less investment.

Not for the first time, Ryan displays his economic idiocy here. He is ignorant of the most basic economic categories. Specifically, taxing income is not the same as taxing the thing that produces the income. For example, imagine that I take advantage of owning a bike to get a job as a bike courier. When the income I earn is taxed, that is not a tax on my bike (I am not going to decide to give up my bike, because then I would have no income at all). It is just a tax on my income. (And the tax won’t make me want to stop earning income, either – if I earn $100 and have to pay $20 in taxes, I am still $80 ahead of where I would be if I hadn’t earned it). Similarly, a tax on the income earned from investment is not a tax on investment; and it is certainly not a tax on “job creation,” since most investment does not create any jobs.

(This is an aside – but if I invest money in the stock market, I am not creating any jobs – I am just buying someone else’s right to share in the profits of a company.)

Right now, there are two basic causes of unemployment: lack of consumer demand, and a shortage of government revenues.

  • Consumers are not buying at normal levels. This does not make investors stop investing (they have to invest – otherwise their money loses its value), but it does make them invest in something other than producing jobs – speculating, buying other companies, and the like.
  • Nevertheless, private sector employment has gone up over the last year. However, public sector employment has gone down. Teachers, police officers, firefighters, librarians, and others who perform necessary public services are being laid off and not replaced. Why? Not because their services are not needed – they are – but because governments (especially state and local governments) do not have enough revenue to pay them.

Government needs more revenues, and more government revenues will create more jobs, not decrease them. And government spending will put money in consumers pockets (and in their bank accounts), increase consumption, and create more private sector jobs as well.

So Ryan is making a idiotic argument – about on a par with his claim that he wanted to destroy Medicare in order to save it. But why?

That’s where class warfare comes in. I’ll write more about this later this week. But to start with, think about what a “class” is. It’s a group of people who get their income in (broadly speaking) the same way.

  • The working class is paid for the work it does. That work can vary a lot, but what makes the working class a class is that its income comes from selling its labor.
  • The capitalist class gets its income from investing its capital – that is, by using its money to hire other people (namely, the working class) to work for it, then selling the products of the labor it hires for a profit.

You can see from the above that the less the working class gets for working, the more the capitalists get from investing. Guess what? They want to get as much as possible; so they are trying to destroy unions, lower wages, and also lower the “social wage” – the benefits that government provides so that workers don’t have to pay for them directly, such as health care, education, and social security.

What Ryan is doing, then, is engaging in pure class warfare himself: trying to defend the outrageously high incomes of the rich by undermining not only social services but the jobs of working people. So we need a little class warfare on the other side. We need to understand that anyone who makes over $1 million a year has not earned all that money, and should be made to use more of it to support society.


Assassination as a Foreign Policy

The Boston Globe today (September 16, 2011) has this story about a debate within the Obama administration. The debate topic is when it’s OK for the US to assassinate people in other countries, primarily through attacks by remote-controlled aircraft, the so-called “drones.”

The claim that any such strikes are justified by international law is nonsense. Remember all those old Western movies where the Native Americans, fleeing a bunch of soldiers bent on killing them, fled over the border to Canada – and the soldiers halted in their tracks? That’s because military incursion into another country is illegal – unless you have that country’s permission. The US has such permission from Afghanistan. In Pakistan, the government ordered us to stop all drone attacks, and we announced that we would ignore them. And we have no permission in Yemen (although there is tacit cooperation from the government there), and least of all in Somalia.

That doesn’t mean that the US has to sit idle while terrorists prepare to attack us; but there are established legal ways to respond. We can demand that the government of the state where the terrorists are located take action. We can offer aid to that government. And, if we don’t get results, we can declare war on them and, if we win, occupy the country and act on our own. (That’s what we did in Afghanistan, except that the declaration of war was missing.) But there is no legal right to simply kill people in another country because they are “likely” members of al-Qaeda.

Why is this important? Because international law provides a way for disputes to be settled peaceably most of the time, and to limit the conflict when they can’t be settled peaceably. Right now, the rulers of the US – not only Obama, but Bush and Clinton before him – believe that the US is so powerful that we can simply ignore the law. Unfortunately, that path leads to a chaotic world, one more dangerous than one where the norms of law prevail.

One side maintains that the US has the legal right to try to kill known leaders of al-Qaeda in other countries (specifically, Pakistan, Yemen, and Somalia, though the claim is more general). Those guys are the liberal side of the argument – the ‘doves,’ I guess.

The other side says that it’s OK to kill a bunch of people even if their identity is unknown, as long as they are in some place that suggests they may be associated with al-Qaeda. As the Globe phrases it, this involves attacks “aimed at killing clusters of people whose identities are not known but who are deemed likely members of a militant group based on patterns like training in terrorist camps.” Note the word “likely.” And note that the example used here, terrorist training, is chosen to make the killing look good. Other examples have included attacks on weddings, attacks on houses inhabited by large extended families, and even attacks on people standing around in the street. Large numbers of civilians with no connection to al-Qaeda or other terrorist organizations have been killed by these strikes.

Are Corporations People?

Last month Mitt Romney aroused a lot of controversy by asserting that “corporations are people,” and added “Of course they are! Everything corporations earn ultimately goes to people. Where do you think it goes?” (quoted in the Washington Post, August 11, 2011).

Progressives had a good time making fun of Romney for these remarks, but much of the criticism missed the point — it was basically about how corporations are rich and powerful entitites, while most people are not. That’s true, but it’s simply part of the general problem of growing economic inequality – lots of individuals are also rich and powerful, and get privileges the rest of us don’t.

The real problem is that corporations are not people, but organizations of people, operating under a particular set of rules. Because of those rules, people organized as corporations do things and make decisions that are different from what they would do and decide if they were organized some other way.

We may think of a corporations as made up of employees. Legally, however, the people who make up a corporation are its stockholders. But the people who control the corporation are its officers and board. Those officers and board members have what is called a “fiduciary duty” – that is, a duty to be faithful servants – to the stockholders. This duty could be many things, but in essence it is financial: the corporation is legally required to act to maximize the value of the stockholders shares and/or dividends.

From time to time, something goes wrong in a business operation, sometimes horribly wrong, with deaths and injuries as a result. In such cases, a common first reaction from the leaders of the corporation involved is to want to take responsibility, to apologize if appropriate, and to do what they can to help mitigage the damage.

Then the legal department steps in. It is explained to them that their duty is to avoid making any damaging admissions that might lead to a liability finding against the company, and that any other course of action would violate their duty to the stockholders. So they end up stonewalling and digging in their heels instead of doing what is right and just.

Most people (not all) would be different. Suppose you are driving down a street late at night and sideswipe a parked car. Most people would leave a note on the windshield with a phone number, offering to pay for the repair. Few corporations would do that.

Unfortunately, it is not just Mitt Romney. More and more, the law is treating corporations as having the same rights as people – including the right of free expression (a ridiculous concept, since corporations don’t have opinions or ideas to express – only the people in them do), which is used to justify anti-union campaigns, for example. For a corporation to tell its employees they should not join a labor union used to be an unfair labor practice; now it is a legal right.

Corporate personhood – giving individual human rights to corporations – has seriously distorted American democracy. For more details, see the excellent website of POCLAD, the Program on Corporations, Law, and Democracy.

The Constitution, the Tea Party, and Health Care

The more I listen to the Tea Party, the more I realize that when they refer to the Constitution and the intent of the framers, they are really thinking of the Antifederalists – that is, those who opposed the Constitution because they thought it would lead to a tyrannical federal government.  When Tea Party people argue that health care, or environmental protection, or social security should be left to the states, they are basically arguing against federal authority over interstate commerce.

The point they are ignoring is that, by and large, the Antifederalists lost. Their arguments were rejected, and the Constitution was ratified.

However, their loss was not complete. One of their major objections to the Constitution was that it did not have a bill of rights; enough people agreed with that objection that the Bill of Rights was added to the Constitution. This was a victory for the Antifederalists; but it did not change the federal governments power to regulate interstate commerce.

The Tea Party points particularly to the Tenth Amendment, which says that any powers not given to the federal government are reserved to the people, or to the states. However, this really does not speak to the issues involved in the health care debate. The Obama administration is not claiming that there is a new federal power, the power to provide health care. It is claiming, instead, that the existence of a universal health care plan is vital to the maintenance of a free market in interstate commerce. Any debate about this issue was settled with the passage of Medicare and Medicaid in 1965 – and, in fact, had mostly been settled with the passage of the Social Security Act back in the 1930s.

There is much to admire in the Antifederalists’ vision of a small-scale, decentralized society. The world might be better off if the Constitution had not been ratified. However, it was – and its ratification led to the development of a centralized econcomy dominated by giant corporations.

Those corporations are the big threat to liberty today; we need a strong government to protect us from them. Fortunately, the Constitution allows such a strong government to develop.

Ten Years After

I just heard that members of the Fire Department of New York are spending the day (probably more than that) in Binghamton, helping rescue people from the Susquehanna River flood. It’s hard to think of any more fitting memorial to their lost comrades. And it shows one of the two very contradictory things that came out of the 9/11 tragedy: the great spirit that we are all in this together, that we need to help each other out, and that one way we help each other out is by supporting dedicated public servants prepared to deal with emergencies.

The other thing to come out of those events is very different – a legacy of stupid wars justified by government lying, torture, and willingness to kill hundreds of civilians for each terrorist leader through fairly indiscriminate drone strikes.

Today is not the day for political argument. But as we remember, we need to remember both sides.

As is often true, “Candorville” says it much better than I.

New Attacks on Social Security

Social Security is threatened – NOT because it is going to “run out of money,” but because many of its defenders are losing sight of the principle it’s based on.

Real briefly, here’s how it works. Almost everyone who is employed pays a social security tax, which is a percentage of their paycheck up to an income cap. This money goes into the social security trust fund, where it is used to pay benefits to those currently receiving them. (Some state government employees do not pay the tax and do not qualify for the benefits.)

So far, the payments have always covered the benefits. However, as the baby boom generation begins to collect, the ratio of those paying taxes to those collecting gets lower. People are living somewhat longer, as well. As a result, the trust fund will run out of money in, perhaps, 30 years. (Maybe more – they used to predict 2030, now they’re saying 2043.)

This is a problem that has to be fixed, but the fixes are simple. We can eliminate the income cap (it’s about $100,000 a year), so that people pay the social security tax on all their earned income. Or we can cut benefits a little (most likely by adjusting the cost-of-living adjustment), or we can raise the tax rate. I favor the first, as it is fairer, but any of them will work financially. 

However, we now have a new problem: progressives are calling for reducing the social security tax. In fact, it was cut by 1/3 as part of the budget deal between President Obama and the House Republicans in the lame-duck session of Congress last December (2010); last night, Obama called for extending the cut (he calls it the “payroll tax holiday,” presumably because he does not want to highlight the link between the tax and social security benefits), and making it apply to employers as well as employees.

This morning, writing on the progressive website Demos.Org, Robert Frank calls for eliminating the social security tax altogether, and funding social security benefits with other revenues.

This is a terrible idea. Right now, social security has widespread support, for two reasons:

  1. Everybody gets it.
  2. Everybody pays for it, so basically you are getting benefits because you paid for them.

If your benefits are not linked to your payments, social security will come to be seen as a charity, rather than a pension. It will come under even more attack, and it will be more difficult to resist those attacks because it will be just one more government handout.

Social Security has nothing to do with the deficit, because the benefits are paid from the trust fund, not from general revenue. There is no reason at all to link it to any deficit reduction deal. We should not change that in pursuit of the chimera of a more equitable tax system.

Health Care and the Spirit of the Constitution

Yesterday I posted a schematic version of the argument that the Obama health law is constitutional. I want to fill that out today by seeing how it fits in with the original spirit of the Constitution.

A big part of the framers’ motivation for writing a Constitution was to prevent destructive competition among the states. Congress was given the exclusive power to regulate interstate and foreign commerce so that states could not try to gain advantage by taxing imports from other states, or by imposing what today we would call non-tariff barriers: e.g., regulations that only goods from your own state will meet.

In the course of time, Congress decided that the regulation of interstate commerce should extend to such things as child labor, the health of workers, wages and hours generally, and later to protecting the environment. The argument for each was the same: if these matters were left solely to individual states, the latter would have an incentive to compete for business through a race to the bottom.

Consider child labor, for example. Young children were employed in factories (and for long days, 12-14 hours) because they were cheaper than adults. Individual states always had the power to regulate child labor – but doing so would make goods from that state more expensive than competing goods from other states where child labor was permitted. So Congress adopted a national child labor law, and the Supreme Court ultimately accepted it as constitutional.

Today, that is the situation with health care. The cost of health care is a major obstacle to doing business; and states cannot really afford to take it on. Massachusetts is trying – but it’s questionable if it would succeed in the long run if the federal government did not step in in 2014. So providing a national health care plan is a legitimate exercis of the commerce power.

Conservatives who are railing against the health care plan – and other federal regulation – are really not basing themselves on the Constitution. They are using the arguments made against the Constitution by the Antifederalists. That battle was lost in 1787.