Wednesday, March 25, 2009

The Crisis Is Not an Abnormality of Capitalism


"I believe the crisis can reach very serious dimensions, but I do not think that, on its own, it represents the end of the capitalist system or its definitive destruction. One of the things that Marx argued with great lucidity was that capitalism does not collapse through an economic crisis. Capitalism has to be brought down, through political actions."

Editorial Comment

An interview worth reading. A serious re examination is taking place of the pros and cons of Capitalism. The excessive focus on profits and its disregard for a social purpose have come to to haunt a system that got carried away by its own hubris.

The question not asked was whether Capitalism breeds its own culture of materialism which then helps to perpetuate the system like a disease. Materialsim become a cancer which could become difficult to eradicate even with surgery. This is where I differ with Marx. Political action will not bring down Capitalism in America or reform it. America is likely to implode under the weight of its top heavy political system.

There is a race going on between the grass roots and the entrenched establishment. The grass roots have been dealt a blow by the apparent defection of Obama to the other side. They are in denial about it and want to give him the benefit of the doubt. Will they get there before the implosion happens? This is the Trillion dollar question.


http://mrzine. monthlyreview. org/martinez2303 09p.htmlOsvaldo Martínez: "The Crisis Is Not an Abnormality of Capitalism"

Interview by Luisa Maria Gonzalez Garcia 2009 started off badly. The international economic crisis is the top priority of governments, companies, international organizations, and individuals preoccupied with having a roof to sleep under and food on the table.The situation has surprised almost everybody, albeit Cuba to a lesser degree. Almost a decade ago, Comandante Fidel Castro warned that the conditions were being created for the outbreak of a crisis of enormous dimensions. Osvaldo Martínez, director of the Research Centre for World Economy and chair of the Cuban National Assembly's Economic Affairs Commission, had also alluded to the subject on several occasions. Looking back, the Economics PhD says: "They criticized us heavily, they called us catastrophists, but finally the crisis is here.

"Mass lay-offs all around the world, rising unemployment and poverty, closures of companies and insolvency of banks are some of the most obvious effects of the crisis. What stage of the crisis are we in?
The crisis is just beginning, and no one can predict with certainty its duration or intensity. We are facing something more than a mere financial crisis: it is a global economic crisis that affects not only international finances but also the real economy. Because of the high degree of development of speculation and financial capital in recent years, the extent of the breakdown in the financial sector, and the high degree of globalization of the world economy, we can confidently conclude that the present crisis will be the worst since the Great Depression that occurred in the 30s.What has been happening since August 2008 is the burst of the speculative financial bubble caused essentially by neoliberal policies. At this point the crisis is beginning to affect the real economy, that is, the economy that produces real goods and services, development of technology, and use values that can be used to satisfy needs.

How much more will it affect the real economy?

It is hard to say. There are many opinions on this subject. Some suggest that the crisis may last between two and five years. If we use historical references, we see that the crisis of the 30s started in October 1929, developed at full speed until 1933, and the economies had not fully recovered their previous levels of activity when the Second World War started in 1939.What finally solved that crisis -- and I put "solve" between quotation marks because I'm referring to how capitalism solves a crisis -- was precisely the Second World War; it was the destruction of productive forces as a result of the war that allowed post-1945 capitalism to initiate a new growth stage based on the reconstruction of everything that had been destroyed by the war. Every crisis, whether or not linked to a war, is above all a process of destruction of the productive forces.Turning to the current situation, I would not presume to make a precise forecast on the duration of the crisis, but I will say that it is far from having hit bottom.

Which are the sectors that have been most affected?

The burst of the financial bubble has caused the collapse of stock markets and the bankruptcy of large corporate speculators (the so-called investment banks, which in fact are not productive investors but speculative investors). Large banks have become bankrupt and credit at a global level has become scarce and expensive. The prices of raw materials and oil have plunged. Sectors of the real economy, such as the automobile industry in the USA, are beginning to be affected by the crisis: the three largest companies, General Motors, Ford, and Chrysler, are receiving support from the government to avoid bankruptcy. Several airlines have closed down, and flights have been reduced. Unemployment is on the rise, tourism is also affected. It is a cascading process, which can lead to a much deeper crisis in 2009.

To some specialists, this is one more cyclical crisis of the capitalist system, one of those described by Marx in the 19th century. But it has also been said that it is not just "one more" but, given the huge dimensions it has reached, it is the expression of the internal destruction of late capitalism. What is your opinion?

I think that the current crisis is, without doubt, another cyclical crisis of capitalism. It is one more in the sense that the system that has been in place since 1825, the date of the first crisis identified by Marx, has suffered hundreds of similar crises. A crisis is not an abnormality of capitalism; rather, it is a regular feature and is even necessary to the system. Capitalism follows a particular logic, since it needs to destroy productive forces in order to pave the way for another stage of economic growth. However, the current crisis is undoubtedly the mark of a very profound deterioration within the capitalist system. I believe the crisis can reach very serious dimensions, but I do not think that, on its own, it represents the end of the capitalist system or its definitive destruction. One of the things that Marx argued with great lucidity was that capitalism does not collapse through an economic crisis. Capitalism has to be brought down, through political actions.

So do you agree with what Marx said, and Vladimir Lenin and Rosa Luxemburg later demonstrated, that, despite the self-destructive nature of capitalism, there has to be a revolution to bring it down?

Of course I do. To think that capitalism will collapse on its own, due to a spontaneous force like an economic crisis, is to believe in utopia. The crisis may create conditions that promote large anti-capitalist political movements. A capable leadership of the masses that is adept at the art of politics can take advantage of the favorable conditions created by the greater poverty, unemployment, large-scale bankruptcy, and desperation of the masses generated by the crisis. Throughout history, major economic crises have been linked to revolutionary movements. For example, during the First World War there was a profound capitalist crisis, and the success of the first socialist revolution in Russia was linked to this. The crisis of the 1930s, however, was linked to the rise of fascism because in Germany and Italy the right successfully capitalized on the desperation of the masses as a result of the crisis and led them toward far-right, fascist, chauvinist, and ultranationalist positions.What I want to stress is that nothing is set in stone in history. It all depends on the skill and expertise of the contending political forces. In the present situation, I think that it is possible to think about change: we are in a situation that in my view is quite likely to result in a radicalization of anti-capitalist movements.

It is yet another cyclical crisis, but it is different; what makes it unique?
I think the differences lie especially in the context. The present crisis is particularly complicated because the global economy is much more complicated than it was in 1929. In the first place, the level of economic globalization is vastly greater. The degree of interconnectedness of national economies back in 1929 was still incipient, corresponding to the technologies available at the time, especially in transportation and communications. In 1929 there was no internet, no email, no jet planes; they depended on telegraph communications, telephones were still quite underdeveloped, and planes were just starting to take to the skies. Today the situation is very different. Globalization ensures that whatever happens in a powerful economy has an impact, within minutes, on the rest of the world. Markets are greatly interconnected, especially global financial markets, and that means that the world economy is like a spider web in which we are all trapped. A movement in any part of the spider web is felt everywhere else. Therefore, the crisis's capacity to spread is infinitely greater today than in 1929. That is the first difference.Secondly, the level of financialization of the global economy is also vastly greater. Speculative capital and its operations play a much greater role than in 1929. Back then there were stock markets, but their functioning was much more simple. Today, financial speculation has achieved immense sophistication, and this sophistication is at the same time one of its weak points. That is, the speculative operations are so sophisticated, risky, unreal, and fraudulent that they have been at the basis of the global financial explosion.

Up until now no steps have been taken that are sufficiently radical to curb the crisis. However, little by little, we are seeing how states, above all the United States, have been intervening to avoid the bankruptcy of companies . . . with a "protagonist" approach reminiscent of the Keynesian methods used by Franklin D. Roosevelt to overcome the 1930s crisis.

Today many claim that "neo-Keynesianism" will be the alternative.
In essence that is what they are trying to do: to apply neo-Keynesian methods in a very diffused manner. We can see this in what Barack Obama has announced in connection with a major public works program including the reconstruction of the highway system (roads, bridges, etc). That is a typical Keynesian method of generating employment and income and stimulating demand. But at the same time, measures like this are being combined with others that are contradictory, such as rescuing bankrupt speculators and allocating huge amounts of money to reconstitute the speculative structure which has failed and collapsed.This is in contradiction to classic Keynesianism, and a clear expression that the neoliberals continue to hold some key positions of power; in fact, they have not been removed. We are witnessing a battle between a neo-liberalism that is unwilling to die and a neo-Keynesianism that is supposedly being established.I very much doubt that neo-Keynesianism, even if it is strictly applied, can be the solution to this crisis, because the current crisis has new components. The crisis combines elements of over- and under-production simultaneously; it is also a crisis that coincides with an attack on the environment so massive that it is not only an economic but also environmental crisis, jeopardizing the survival of human beings and the conditions for human life on this planet.

Do you mean that, in the form it has taken, Keynesianism will only be a temporary solution that will paper over the problems without getting at the roots?

Of course. It is inconceivable that Keynesianism and neo-Keynesianism can be an infallible recipe to resolve the economic problems of capitalism. Capitalism has suffered major crises with both neoliberal and Keynesian policies. Between 1973 and 1975 there was a severe capitalist crisis that occurred under Keynesian policies, and that was precisely a factor that brought about the substitution of neoliberal policy for Keynesian policy.We should put no credence in the false dichotomy according to which neoliberalism provokes the crisis and Keynesianism resolves it. Simply put, the system is contradictory and has a tendency to develop periodic economic crises. Whether they are neoliberal or Keynesian, economic policies can facilitate, postpone, or stimulate, but are not able to eliminate, capitalist crises.

Then there is one solution left: socialism. . . .

Without a doubt. I am more convinced of this than ever before and I believe that we are very clearly faced today with the dilemma posed by Rosa Luxemburg: "Socialism or barbarism." I do not believe that humanity will regress to barbarism, if only because our survival instinct is the strongest of all.I believe the rational position will prevail, and the rational position implies a sense of social justice. I think we will overcome capitalism, and we will come to implement a creative socialism, socialism as a permanent search, which is not to deny that the system has certain common general basic principles that apply to all socialisms. However, based on these principles, there are immense possibilities for experimentation, controversy, and creativity.

And that would be the socialism of the 21st century?

I think so.

President Rafael Correa, in a lecture he gave in the main assembly hall at the University of Havana in January this year, explained that one of the problems of socialism is that it has adhered to a development model similar to that of capitalism: that is, a different and fairer way to achieve the same thing -- GDP, industrialization, and accumulation. What do you think?

Correa raised a good point. The socialism practiced by the countries of the Socialist Camp replicated the development model of capitalism, in the sense that socialism was conceived as a quantitative result of growth in productive forces. It thus established a purely quantitative competition with capitalism, and development consisted in achieving this without taking into account that the capitalist model of development means the structuring of a consumer society that is inconceivable for humanity as a whole.The planet would not survive. It is impossible to replicate the model of one car for each family -- the model of the idyllic North American society, Hollywood, etc. -- that's absolutely impossible. It is also impossible for this to continue to be the reality for the 250 million inhabitants of the United States, with a huge rearguard of poverty in the rest of the world. It is therefore necessary to come up with another model of development that is compatible with the environment and has a much more collective way of functioning.Although I heard Correa say many correct things, there was one that seems incorrect to me. In his TV interview, when he was talking about this socialism of the 21st century, with which I am in full agreement, he referred to things that would be obsolete and would have to be done away with. Amongst them, he mentioned the class struggle, but I think that what he was explaining in his lecture in the main assembly hall about the political struggles that confront him in Ecuador, what he was describing, is nothing more than an episode of the class struggle in which the project he represents is immersed.Who opposes this agenda? It is undoubtedly the oligarchy, the bourgeoisie. Who can he rely on to support him against those enemies? The workers, the peasants, the indigenous peoples. What I have in mind is not a narrow classic definition of "class," but the unquestionable existence of social classes, broadly speaking, and the struggle of those classes is undeniable and evident. If we renounce the class struggle, what would we be left with? Class collaboration? I do not think Ecuador can proceed to 21st century socialism with the cooperation of people like Gustavo Novoa or that sector of the Catholic church and all those who are now trying to overthrow Correa.

Many expectations have developed worldwide in relation to the presidency of Barack Obama. What role can his government play with regard to solving the crisis?
I do not have high hopes of change. I believe that Obama's government may represent a certain change in US politics that is more cosmetic than substantive. In my opinion, he represents the position of a certain political sector in the United States which understood that it was impossible to continue with a regime that was as unpopular, worn out, and disagreeable as that of George Bush. However, there is a factor we must take into account, giving him at least the benefit of the doubt: Obama's ideas are one thing, and where the deepening economic crisis may take him is another thing. And once again I have to use the thirties as an example.In 1932, when the crisis was full-blown, Franklin D. Roosevelt was elected president. His ideas were nothing extraordinary, there was nothing in his election platform that would suggest what would happen next: his policy of active state intervention in the economy, of basing himself on the trade unions, or regulating the private US economy along the lines of a national economy.All those measures were taken more as the result of what the crisis forced him to do than as a result of a pre-existing political philosophy. Something similar could happen with Obama; we must give him the benefit of the doubt to see where the crisis might take him.

In the past few weeks there has been a lot of talk about the role of Latin American integration in confronting the crisis. Although this process is only in its initial stages, there have been changes at the structural level that point towards integration. How can integration help us face the crisis as a region and as a country?
I think that the integration of Latin America and the Caribbean will be a key strategic factor in the future of the region, of course, and I do not mean integration as an appendage of the United States. For decades, the priority of Latin American integration has been all rhetoric and no practice. But now we are seeing the beginning of a new period, characterized in particular by the Summit of Salvador de Bahía, held last December, when Cuba joined the Rio Group. We also have the ALBA (Bolivarian Alternative for the Americas), a new model of integration based on solidarity and cooperation, not on the market.This situation coincides with the big crisis that is forcing Latin America to rethink her position in the global economy. This also coincides with the profound crisis in the neoliberal policy that dominated the region during the last 30 years. It is a great moment, and I think that there is a real possibility that true Latin American and Caribbean integration is beginning to take firm steps.Some commentators are arguing that in the wake of the current crisis the world economy will be structured in large regional blocs: one in Asia, another that will continue to exist in North America, and a new one taking shape in Latin America. This is a very interesting possibility.

1 Former president of Ecuador (2000-2003), now living in exile in the Dominican Republic. -- RF.
Luisa Maria Gonzalez García, the interviewer, is a journalism student at the University of Havana. This is a revised version of Richard Fidler's English translation for Socialist Voice, which was in turn based on an earlier translation by Damaris Garzón of CubaDebate, where this interview was first published in English. The original interview "Osvaldo Martínez: 'La crisis no es una anormalidad en el capitalismo' " was published by CubaDebate on 10 March 2009.

Sunday, March 15, 2009

Our skewed world view won't let us see the real Pakistan

"We face a related problem in Afghanistan where we are still hoping to build the
state we want the Afghans to want, rather than the state that they actually
want. Ask many Afghans which state they hope their own will resemble in a few
decades and the answer is "Iran". "

Editorial Comment

The author wants us to re examine the whole notion of Pakistan being a failed state. He characterizes it as a state who has learnt the art of damsel in distress. This is a kinder version of my view which is that of a Pakistan as a whore or a kept woman who constantly raises the spectre of being chased by the Mullah and then secretly meets with the Mullah in the darkness of night. Pakistan's future seems to lie between being raped by the Mullah or the West.

Is there a real possibility that Pakistan could become the Sunni version of Iran? Definitely.For Iran the only way to avoid the predicament of Pakistan was to shut off it's borders to the West but this could not be done except by first getting rid of the Shah and other colonised Iranians. This is the scenario that keeps Western planners sleepless. With Pakistan will go Afghanistan, Bangladesh and a potentially destablised India.

What the West knows is that except for a minority of the elite who are nurtured by them the general population in the Muslim world whether Shia or Sunni regard them as the real enemy. This does not mean that these people are Taliban sympathisers( evidenced by the way they vote) but given the choice between being raped by the West or the Taliban, they would choose the Taliban ( their own people).

Events are moving with the speed of light and battle lines are being drawn for the coming blood shed. Thirty five thousand US troops will not be enough in Afghanistan and neither will attacking Iran be an option. Withdrawal of US troops from Iraq will not be an option. The legacy of Bush will consume the Middle East in flames and Obama will be too busy dousing fires at home to come out with a sensible Foreign policy. People like Chas Freeman who could have made a difference have been sidelined by people who do not understand what havoc they have already wrought.

There is no shortage of people in the US who understand the scenario that I have outlined better than me and who could offer a solution out of this which will work but their voices are constantly silenced and their participation in decision making sabotaged. The reckoning to the US of this madness has already happened in a loss of its standing and prestige in the world. Can this loss of credibility get any worse? Read this essay again in six months ( yes 6 months) and you will see the speed of the deterioration.


--- On Sun, 3/15/09, sshusain@aol. com wrote:

To see this story with its related links on the uk site, go to free/2009/ mar/15/jason- burke-pakistan

Our skewed world view won't let us see the real Pakistan

The west can no longer afford to impose its values and notions of democracy on

countries that neither want nor need them

Jason Burke

Sunday March 15 2009

The Observer

First for the good news: Pakistan is not about to explode. The Islamic militants

are not going to take power tomorrow; the nuclear weapons are not about to be

trafficked to al-Qaida; the army is not about to send the Afghan Taliban to

invade India; a civil war is unlikely.

The bad news is that Pakistan poses us questions that are much more profound

than those we would face if this nation of 170m, the world's second biggest

Muslim state, were simply a failed state. If Pakistan collapsed, we would be

faced by a serious security challenge. But the resilience of Pakistan and the

nation's continuing collective refusal to do what the west would like it to

together pose questions with implications far beyond simple security concerns.

They are about our ability to influence events in far-off places, our capacity

to analyse and understand the behaviour and perceived interests of other nations

and cultures, about our ability to deal with difference, about how we see the


Pakistan has very grave problems. In the last two years, I have reported on

bloody ethnic and political riots, on violent demonstrations, from the front

line of a vicious war against radical Islamic insurgents. I spent a day with

Benazir Bhutto a week before she was assassinated and covered the series of

murderous attacks committed at home and abroad by militant groups based in

Pakistan with shadowy connections to its security services. There is an economic

crisis and social problems - illiteracy, domestic violence, drug addiction - of

grotesque proportions. Osama bin Laden is probably on Pakistani soil.

For many developing nations, all this would signal the state's total

disintegration. This partly explains why Pakistan's collapse is so often

predicted. The nation's meltdown was forecast when its eastern half seceded to

become Bangladesh in 1971, during the violence that preceded General Zia

ul-Haq's coup in 1977, when the Soviets invaded Afghanistan, when Zia was killed

in 1988, during the horrific sectarian violence of the early Nineties, through

sundry ethnic insurgencies, after 9/11, after the 2007 death of Bhutto and now

after yet another political crisis. These predictions have been consistently

proved wrong. The most recent will be too. Yesterday, tempers were already


Some of the perpetual international hysteria is stoked by the Pakistanis

themselves. Successive governments have perfected the art of negotiating by

pointing a gun to their own heads. They know that their nation's strategic

importance guarantees the financial life support they need from the

international community. More broadly, our understanding of Pakistan is skewed.

This is in part due to centuries of historical baggage. Though few would quote

Emile Zola on contemporary France, Winston Churchill, who as a young man fought

on the North-West Frontier, is regularly cited to explain today's insurgency.

This legacy also includes stereotypes of "Mad Mullahs" running amok, an image

fuelled by television footage that highlights ranting demonstrators from

Pakistan's Islamist parties though they have never won more than 14% in an


For many Britons, Pakistan represents "the other" - chaotic, distant, exotic,

dirty, hot, fanatical and threatening. Yet at the same time, Pakistan seems very

familiar. There is the English language, cricket, kebabs and curries and figures

such as Imran Khan. There are a million-odd Britons of Pakistani-descent who

over four decades have largely integrated far better in the UK than often


It is the tension between these two largely imaginary Pakistans that leads to

such strong reactions in Britain. We see the country as plunged in a struggle

between the frighteningly foreign and the familiar, between fanaticism and

western democracy, values, our vision of the world and how it should be ordered.

Yet while we are fretting about Pakistan's imminent disintegration, we are blind

to the really important change.

Recent years have seen the consolidation of a new Pakistani identity between

these two extremes. It is nationalist, conservative in religious and social

terms and much more aggressive in asserting what are seen, rightly or wrongly,

as local "Pakistani" interests. It is a mix of patriotic chauvinism and moderate

Islamism that is currently heavily informed by a distorted view of the world

sadly all too familiar across the entire Muslim world. This means that for many

Pakistanis, the west is rapacious and hostile. Admiration for the British and

desire for holidays in London have been replaced by a view of the UK as

"America's poodle" and dreams of Dubai or Malaysia. The 9/11 attacks are seen,

even by senior army officers, as a put-up job by Mossad, the CIA or both. The

Indians, the old enemy, are seen as running riot in Afghanistan where the

Taliban are "freedom fighters". AQ Khan, the nuclear scientist seen as a

bomb-selling criminal by the West, is a hero. Democracy is seen as the best

system, but only if democracy results in governments that take decisions that

reflect the sentiments of most Pakistanis, not just those of the Anglophone,

westernised elite among whom western policy-makers, politicians and journalists

tend to chose their interlocutors.

This view of the world is most common among the new, urban middle classes in

Pakistan, much larger after a decade of fast and uneven economic growth. It is

this class that provides the bulk of the country's military officers and

bureaucrats. This in part explains the Pakistani security establishment' s dogged

support for elements within the Taliban. The infamous ISI spy agency is largely

staffed by soldiers and the army is a reflection of society. For the ISI, as for

many Pakistanis, supporting certain insurgent factions in Afghanistan is seen as

the rational choice. If this trend continues, it poses us problems rather

different from those posed by a failed state. Instead, you have a nuclear armed

nation with a large population that is increasingly vocal and which sees the

world very differently from us.

We face a related problem in Afghanistan where we are still hoping to build the

state we want the Afghans to want, rather than the state that they actually

want. Ask many Afghans which state they hope their own will resemble in a few

decades and the answer is "Iran". Dozens of interviews with senior western

generals, diplomats and officials in Kabul last week have shown me how deeply

the years of conflict and "nation-building" have dented confidence in our

ability to transplant western values. Our interest in Afghanistan has been

reduced to preventing it from becoming a platform for threats to the west. In

Afghanistan, as in Iraq, the west has glimpsed the limits to its power and to

the supposedly universal attraction of its values.

The west's dreams of a comfortable post-Cold War era have been rudely shaken. We

have been forced reluctantly to accept the independence and influence of China

and Russia. These are countries that we recognise as difficult international

actors pursuing agendas popular with substantial proportions of their citizens.

Other countries, particularly those less troubled than Pakistan or Afghanistan,

are likely soon to join that list.

This poses a critical challenge in foreign policy. Worrying about the imminent

collapse of Pakistan is not going to help us find answers to the really

difficult questions that Pakistan poses.

Copyright Guardian Newspapers Limited 2009

Thursday, March 12, 2009

The Global Collapse- A non orthodox view

The problem with Capitalism is when it takes over Democracy and then bends it to it's will.Built into Capitalism is the ability to rule the Capitalist. It is an addictive process from which there is no escape. Money becomes the alter on which the Capitalist worships.Value means monetary value, the ultimate measure of success and human values become degraded and considered valueless
Editoria1 Comment

1. The problem with ......redistributing income to the rich, you were gutting the incomes of the poor and middle classes, thus restricting demand,
2. By the end of the 1990s, with excess capacity in almost every industry, the gap between productive capacity and sales was the largest since the Great Depression.
3. The radical rise of prices of an asset far beyond real values is what is called the formation of a bubble.

The above is a summary of a fine article below. It misses out on an aspect which almost every single analyses misses out on as if they would commit blasphemy by mentioning it. This is the role of the US Financial Institutions and the role of Capitalism as practised in the US in bringing about the present economic catastrophe.
The first time that a surplus was created in the world in recent times was through the rise in oil prices.All the surplus came into the US Economy and US Banks. Subsequently South America and Asia were flooded with this money in the form of loans. This was predatory lending at it's worst and it only created bad loans, wrecked economies and huge commissions for US bankers. The next time the surplus came in the form of increased reserves of emerging markets such as China and Brazil. This also landed in the US and was lent out to finance US Mortgages again resulting in the collapse of the housing market, massive foreclosures, securitizes bad debts exported world wide and huge commissions for US Bankers.
In both cases the commissions and false profits were shared with, Rating Agencies and Legislators. Regulators looked the other way because they did not have a clue as to what was going on and deemed it their patriotic duty not to interfere in the business of wealth creation.No Analyst, Economist, Politician wants to tackle this hit and run which has happened twice in recent History and will likely happen again if people still trust America with their money.
There is a culture of greed, fraud and graft built into the American system which thank God has been exposed so that other countries ( except Europe and America) will learn from it. Here are the people who will continue to spread illusion and fantasy, The Wall Street Journal, Barrons Magazine, Fortune Magazine, Time, MSNBC, The Economist. John Stewart of the daily show recently exposed MSNBC in 10 minutes in an act of brilliant journalism. He showed how people on MSNBC were recommending the purchase of Bear Stern shares two weeks before Bear collapsed. This was not an act of deliberate deceit. It was the blind, leading the blind.
If you think, I am getting carried away, think of the people world wide who have lost 30 trillion dollars of wealth in the last 12 months and think of the people primarily in the US who were paid huge ( unimaginable) bonuses for creating these losses. The Fundamental law of Economics that has been broken is the creation of phantom value. This was and is the privilege of watch makers, who sell a watch for millions of dollars, whose intrinsic value might be a few thousand dollars. It is deemed OK if it relieves the rich of their ill gotten gains but when everything is deemed to have a value way beyond it's worth then there will be hell to pay.
It is when people forget that the best things in life are free that there is opportunity for creating value in valueless objects. Then it is happy hunting for the Madoffs of this world. Madoff should not be put in Jail, he should be teaching at Harvard. He was amongst the few who recognised how easily people could be made fools of. Not ordinary people, but captains of Industry and Society. Smart, educated, successful people. People who are the pillars of our decadent culture.


The Global Collapse: a Non-orthodox View

February 22, 2009 By Walden Bello Source: MR Zine

This is the longer version of an essay by the author released by the
British Broadcasting Corporation (BBC) on 6 February 2009.

Week after week, we see the global economy contracting at a pace worse
than predicted by the gloomiest analysts. We are now, it is clear, in
no ordinary recession but are headed for a global depression that could
last for many years.

The Fundamental Crisis: Overaccumulation

Orthodox economics has long ceased to be of any help in understanding
the crisis. Non-orthodox economics, on the other hand, provides
extraordinarily powerful insights into the causes and dynamics of the
current crisis. From the progressive perspective, what we are seeing is
the intensification of one of the central crises or "contradictions" of
global capitalism: the crisis of overproduction, also known as
overaccumulation or overcapacity. This is the tendency for capitalism
to build up, in the context of heightened inter-capitalist competition,
tremendous productive capacity that outruns the population's capacity to
consume owing to income inequalities that limit popular purchasing
power. The result is an erosion of profitability, leading to an
economic downspin.

To understand the current collapse, we must go back in time to the
so-called Golden Age of Contemporary Capitalism, the period from 1945 to
1975. This was a period of rapid growth both in the center economies
and in the underdeveloped economies -- one that was partly triggered by
the massive reconstruction of Europe and East Asia after the devastation
of the Second World War, and partly by the new socioeconomic
arrangements and instruments based on a historic class compromise
between Capital and Labor that were institutionalized under the new
Keynesian state.

But this period of high growth came to an end in the mid-1970s, when the
center economies were seized by stagflation, meaning the coexistence of
low growth with high inflation, which was not supposed to happen under
neoclassical economics.

Stagflation, however, was but a symptom of a deeper cause: the
reconstruction of Germany and Japan and the rapid growth of
industrializing economies like Brazil, Taiwan, and South Korea added
tremendous new productive capacity and increased global competition,
while income inequality within countries and between countries limited
the growth of purchasing power and demand, thus eroding profitability.
This was aggravated by the massive oil price rises of the seventies.

The most painful expression of the crisis of overproduction was global
recession of the early 1980s, which was the most serious to overtake the
international economy since the Great Depression, that is, before the
current crisis.

Capitalism tried three escape routes from the conundrum of
overproduction: neoliberal restructuring, globalization, and

Escape Route # 1: Neoliberal Restructuring

Neoliberal restructuring took the form of Reaganism and Thatcherism in
the North and Structural Adjustment in the South. The aim was to
invigorate capital accumulation, and this was to be done by 1) removing
state constraints on the growth, use, and flow of capital and wealth;
and 2) redistributing income from the poor and middle classes to the
rich on the theory that the rich would then be motivated to invest and
reignite economic growth.

The problem with this formula was that in redistributing income to the
rich, you were gutting the incomes of the poor and middle classes, thus
restricting demand, while not necessarily inducing the rich to invest
more in production. In fact, it could be more profitable to invest in

In fact, neoliberal restructuring, which was generalized in the North
and south during the eighties and nineties, had a poor record in terms
of growth: Global growth averaged 1.1 percent in the 1990s and 1.4
percent in the '80s, compared with 3.5 percent in the 1960s and 2.4
percent in the '70s, when state interventionist policies were dominant.
Neoliberal restructuring could not shake off stagnation.

Escape Route # 2: Globalization

The second escape route global capital took to counter stagnation was
"extensive accumulation" or globalization, or the rapid integration of
semi-capitalist, non-capitalist, or pre-capitalist areas into the global
market economy. Rosa Luxemburg, the famous German radical economist,
saw this long ago in her classic "The Accumulation of Capital" as
necessary to shore up the rate of profit in the metropolitan economies.

How? By gaining access to cheap labor, by gaining new, albeit limited,
markets, by gaining new sources of cheap agricultural and raw material
products, and by bringing into being new areas for investment in
infrastructure. Integration is accomplished via trade liberalization,
removing barriers to the mobility of global capital, and abolishing
barriers to foreign investment.

China is, of course, the most prominent case of a non-capitalist area to
be integrated into the global capitalist economy over the last 25 years.

By the middle of the first decade of the 21st century, roughly 40-50
percent of the profits of US corporations came from their operations and
sales abroad, especially in China.

The problem with this escape route from stagnation is that it
exacerbates the problem of overproduction because it adds to productive
capacity. A tremendous amount of manufacturing capacity has been added
in China over the last 25 years, and this has had a depressing effect on
prices and profits. Not surprisingly, by around 1997, the profits of US
corporations stopped growing. According to one calculation, the profit
rate of the Fortune 500 went from 7.15 in 1960-69 to 5.30 in 1980-90 to
2.29 in 1990-99 to 1.32 in 2000-2002. By the end of the 1990s, with
excess capacity in almost every industry, the gap between productive
capacity and sales was the largest since the Great Depression.

Escape Route # 3: Financialization

Given the limited gains in countering the depressive impact of
overproduction via neoliberal restructuring and globalization, the third
escape route -- financialization -- became very critical for maintaining
and raising profitability.

With investment in industry and agriculture yielding low profits owing
to overcapacity, large amounts of surplus funds have been circulating in
or invested and reinvested in the financial sector -- that is, the
financial sector is turning on itself.

The result is an increased bifurcation between a hyperactive financial
economy and a stagnant real economy. As one financial executive noted
in the pages of the Financial Times, "there has been an increasing
disconnection between the real and financial economies in the last few
years. The real economy has grown . . . but nothing like that of the
financial economy -- until it imploded." What this observer does not
tell us is that the disconnect between the real and the financial
economy is not accidental -- that the financial economy exploded
precisely to make up for the stagnation owing to overproduction of the
real economy.

One indicator of the super-profitability of the financial sector is that
while profits in the US manufacturing sector came to one percent of US
gross domestic product (GDP), profits in the financial sector came to
two percent. Another is the fact that 40 percent of the total profits
of US financial and non-financial corporations is accounted for by the
financial sector although it is responsible for only five percent of US
gross domestic product (and even that is likely to be an overestimate) .

The problem with investing in financial sector operations is that it is
tantamount to squeezing value out of already created value. It may
create profit, yes, but it does not create new value -- only industry,
agricultural, trade, and services create new value. Because profit is
not based on value that is created, investment operations become very
volatile and prices of stocks, bonds, and other forms of investment can
depart very radically from their real value -- for instance, the stock
of Internet startups may keep rising to heights unknown, driven mainly
by upwardly spiraling financial valuations.

Profits then depend on taking advantage of upward price departures from
the value of commodities, then selling before reality enforces a
"correction, " that is a crash back to real values. The radical rise of
prices of an asset far beyond real values is what is called the
formation of a bubble.

Profitability being dependent on speculative coups, it is not surprising
that the finance sector lurches from one bubble to another, or from one
speculative mania to another. Because it is driven by speculative
mania, finance-driven capitalism has experienced about 100 financial
crises since capital markets were deregulated and liberalized in the
1980s, the most serious before the current crisis being the Asian
Financial Crisis of 1997.

Dynamics of the Subprime Implosion

The current Wall Street collapse has its roots in the Technology Bubble
of the late 1990s, when the price of the stocks of Internet startups
skyrocketed, then collapsed, resulting in the loss of $7 trillion worth
of assets and the recession of 2001-2002.

The loose money policies of the Fed under Alan Greenspan had encouraged
the Technology Bubble, and when it collapsed into a recession,
Greenspan, trying to counter a long recession, cut the prime rate to a
45-year low of 1.0 percent in June 2003 and kept it there for over a
year. This had the effect of encouraging another bubble -- the real
estate bubble.

As early as 2002, progressive economists were warning about the real
estate bubble. However, as late as 2005, then Council of Economic
Advisers Chairman and now Federal Reserve Board Chairman Ben Bernanke
attributed the rise in US housing prices to "strong economic
fundamentals" instead of speculative activity. Is it any wonder that he
was caught completely off guard when the Subprime Crisis broke in the
summer of 2007?

The subprime mortgage crisis was not a case of supply outrunning real
demand. The "demand" was largely fabricated by speculative mania on the
part of developers and financiers that wanted to make great profits from
their access to foreign money -- most of it Asian and Chinese in origin
-- that flooded the US in the last decade. Big ticket mortgages were
aggressively sold to millions who could not normally afford them by
offering low "teaser" interest rates that would later be readjusted to
jack up payments from the new homeowners.

Thursday, March 5, 2009

Aftermath of the attack in Lahore

Editorial Comment

What is not mentioned in this analyses is the impact on India. The biggest threat to India's future is a Talibanised Pakistan. The use of force by India to forestall this will mean that the Pakistan Army will step in on the side of the Taliban and India will become a front line State. Any Military solution including the one being tried by the US, plays into the hands of the Taliban. Like Osama, they are relying on continued bombing by US drones in order to recruit people to their cause.
An Indian incursion will fast forward the demise of Pakistan and the rise of extremists from Afghanistan, all the way to Bangladesh. India cannot afford to open the Pandora's box that is it's 200 million destitute Muslims, who are the blacks of India.
May be now people can see why I have been forecasting the coming blood shed. There is a predictability about events knowing the hawkish stance of all the players. Both Musharraf and Zardari have presented, over the severe objections of the US, an alternate approach but have not been able to show tangible results to the impatient Americans.While The US is quick to blame the lack of results from the approaches made to the Taliban, they do not point to the failure of there own policies.
A fast deteriorating Pakistan is a direct result of US policies and not anything Zardari is doing or Musharraf was doing. Labeling people as enemies and then going after them in hot pursuit is a uniquely American activity. The Bush doctrine of, If you are not with us then you must be against us, is the reverse of , live and let live and creates an unneccesarliy hostile and dangerous world. How blind America is to having made this a more dangerous world is seen by the fact that even Obama cannot see this.
We are all helpless in a world dominated by a mad power, which clings on to a power that it has long ago sold to it's own version of us verses them. No country today stands as an example of foolishly handing over its soul and body to America for more than 60 years as does Pakistan. For years case studies will be written quoting Pakistan as the worst case of Imperialist abuse. It is a tale of lust in which no one has been more depraved then the Pakistanis.


The Guardian, Thursday 5 March 2009

Whole provinces beyond the writ of the state, Islamist insurgents uniting for a broader fight, terror attacks conceived, plotted and exported: Pakistan was in serious danger of implosion before the attack on the Sri Lankan cricket team on Tuesday brought the parlous security situation in the country to a wider international audience.But security is not the only problem of a country which the United States now considers a greater threat than neighbouring Afghanistan. With the economy teetering, political tumult building and social conditions ripe for extremists, nuclear-armed Pakistan faces six critical threats to the rule of law and governance of the state.
The current violence started in summer 2007, when security forces routed armed militants at the Red Mosque in Islamabad. That event turned militant groups which were focused on India or Afghanistan inwards, to Pakistan itself. A campaign of suicide bombings started, in which Taliban-style extremists in the north-west, near the Afghan border, joined forces with jihadist groups based in Punjab, Pakistan's heartland. The fatal attack on Benazir Bhutto in December 2007 and the strike against Islamabad's Marriott hotel demonstrated that insurgents were aiming high and frequently being successful.Large parts of Pakistan have been snatched from government control. Most of the tribal area, the semi-autonomous sliver of land that runs along the Afghan border, is now firmly in the control of the Pakistani Taliban, who play host to al-Qaida commanders. Osama bin Laden and his deputy, Ayman al-Zawahiri, may be hiding in the tribal territory. This week, the Guardian learned that three rival Pakistani Taliban groups had formed a united front to wage war in Afghanistan, promising further instability there. Much of the North-West Frontier province is menaced by marauding extremists, with citizens having to form village militias to defend themselves. The vast Swat valley has been taken over by a band of Taliban guerrillas. In an attempt to bring some peace to Swat, the government agreed last month to impose Islamic law in the area. In Baluchistan, Pakistan's largest but most sparsely populated province, the threat from Afghan Taliban elements is compounded by a long-running Baluch nationalist rebellion. Punjab, by far the most populous and richest province, is also threatened by extremists in its midst. There are many jihadist groups, including Lashkar-e-Taiba, the outfit blamed for the Mumbai attack in November.
Intelligence services
The aims of Pakistan's premier spy agency, Inter-Services Intelligence (ISI), are the big question: does it still support at least some of the extremist groups?The ISI, once heavily backed by Washington, masterminded the mujahideen resistance in Afghanistan to the Soviet invasion in the 1980s, training and financing the insurgents. The ISI then decided to use the same tactics against India, founding a series of militant groups that started a violent resistance to Indian rule in the disputed region of Kashmir. The agency also nurtured a number of sectarian outfits, such as Sipah-e-Sahaba.Then, in the mid-1990s, the ISI helped create a new Islamic movement in Afghanistan, the Taliban, which rapidly managed to take over the country. It also spawned a copycat Pakistani Taliban movement.The problem is that many of these militant groups, which were used to further Pakistan's foreign policy and domestic aims, have slipped out of the ISI's control. The groups have turned on the state itself, under the influence of al-Qaida.
The economy
The rule of President Pervez Musharraf, from 1999 to 2008, was characterised by an economic boom. But, just as elections were held in February 2008, that boom was turning to bust.Inflation is now running at some 25%, while the currency and the stockmarket have been pummelled over the last year. Much of Pakistan's textile industry, which had accounted for about half of its exports, is closed as a result of chronic power shortages and lack of competitiveness.Late last year, Pakistan was forced to go on its knees to the IMF for an emergency $7.6bn bail-out, as it was threatened by imminent bankruptcy. The economic crisis means that unemployment and poverty are on the increase, the very conditions that breed extremism. The economy and poor governance have meant a failure to provide the country with an education and health system that serves most of the population. As a result, many poor people send their children to free madrasa schools, where the education is almost exclusively religious, sometimes preaching a radical version of Islam. Millions of children have few workplace skills and knowledge only of Islam.
Pakistan's politics has always been tumultuous, with the country under military rule for most of its 61 years of existence. The last period of army rule ended in 2008, but the new democratic dispensation has floundered. In particular, the two main political parties, the Pakistan Peoples party, which runs the federal government, and the party of former prime minister Nawaz Sharif, are in a state of war. Last week, Islamabad dismissed the provincial government in the all-important Punjab province, which had been run by Sharif's party. Sharif and a pressure group of lawyers calling for judicial independence are now going to take their opposition on to the streets. With poor governance in Islamabad and a lack of fundamental political consensus on how the country should be run, there are already rumours that the army is about to step back in.
The military
Army chief Ashfaq Kayani has repeatedly indicated that he does not want to see the army step back into the political fray, but with a government struggling to cope with the security situation, many predict that he will eventually intervene. The army is pervasive in Pakistan, dominating the economy: there are dozens of military businesses, it is prominent in land ownership, and, of course, it is the most important political institution. When foreign leaders want to deal seriously with Pakistan, they talk to the army chief.The army is in charge of Pakistan's nuclear arsenal, making the unity and integrity of the military an international concern. The ISI also comes under the army. Politicians and ordinary Pakistanis live in fear of the military.
International allies
Since 9/11, Pakistan has been courted by the west, which suddenly realised that the country held the key to international security. Relations with India steadied somewhat after a critical stand-off in 2002. But the Mumbai attacks have drawn the two neighbours back into confrontation.China too watches with concern at the apparent disintegration of its neighbour and close ally.Pakistan's western backers are impatient with its failure to deal with the militant safe havens along the Afghan border. Britain is concerned at Pakistani involvement in its own terror problems: Gordon Brown said recently that three-quarters of known British terror plots had links to Pakistan. American efforts to take matters into its own hand with attacks on Pakistani territory have frayed relations further. But the west cannot turn on a country whose co-operation is needed for security. The fear is that isolation could push Pakistan into collapse