By Caleb T. Maupin
The media in the United States is private property. FOX news is owned by Australian Billionaire Rupert Murdoch. MSNBC is owned by General Electric, a huge corporation that makes billions annually in military contracts and has brutally suppressed unions. The capitalist media largely reinforces and preaches ideas that serve the interests of those who own it, the wealthy capitalist class.
My writing is generally centered around economic and military Imperialism and it's excesses. So, understandably, given the misunderstandings and ignorance abound about anti-Imperialism and criticism of the United States, you may be surprised to know that I consider the struggle against Imperialism waged in the Third-world a woman's struggle just as much as it is an anti-Imperialist one. That, to divorce the struggle against Imperialism as capitalism's current manifestation in this era from the women's question, is to negate the ABC's of Leftist thoughtform.
Something that always astounds me is the blind devotion military service members have for their country. I think this is best exemplified by the willingness to sacrifice for a group of people who hate you and abuse you. Service members are of course convinced by their superiors, indoctrination and media propaganda that their sacrifices are for the American people themselves. I don’t know how anyone can still be buying the official line at this point.
Take this for example, Bank of America has now been ordered to pay $36.8 million to military service members who had their homes unlawfully closed upon (oops, sorry I mean “improperly foreclosed on”) while they were overseas in active duty. It’s actually illegal to do so. Foreclosing on a service member who is on active duty overseas violates the Servicemembers act. Currently the Justice Department is still reviewing foreclosures from all five banks involved.
According to the Reuters article:
Each of 316 service members will receive at least $116,785, plus compensation and with interest, for any home equity lost.
These members of the military, I believe, were blatantly ripped off by mortgage companies. I could not think of a more lowlife thing to do to someone overseas. (In my opinion) literally stealing someone’s home while they are away. Upwards of 5,000 members had their homes confiscated according to regulators in 2011.
The truly ironic part is that the home was stolen by the very people the soldier was off fighting for. Members of the military need to keep this incident in mind when they decide whether or not to sign up for another tour of duty. There have been countless incidents of soldiers being refused body armour, dying from faulty electrical work in showers, to ignoring their incredibly high suicide rate, to outright cutting their benefits for having made sacrifices.
The ruling class cares nothing for those they send to their deaths. They care nothing for you as a member of the military. The only solution is to outright refuse enlisting and refuse a possible draft. The Russians too faced the same choice. Become mutilated or dead for the benefit of the Czar, or refuse service and join the Bolsheviks.
There is a reason way the following lines are in the Internationale:
“The soldiers too will take strike action, they’ll break ranks and fight no more…”
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Sources:
Military members to get $39 mln in home foreclosure settlement
http://www.reuters.com/article/2013/04/04/foreclosure-military-idUSL2N0CR25E20130404
Soldiers in Iraq still buying their own body armor
http://usatoday30.usatoday.com/news/world/iraq/2004-03-26-body-armor_x.htm
Pentagon: 16 soldiers died from electric shock
http://usatoday30.usatoday.com/news/world/iraq/2008-07-25-iraq-contractors_N.htm
Suicide Rate Among Vets and Active Duty Military Jumps – Now 22 A Day
http://www.forbes.com/sites/melaniehaiken/2013/02/05/22-the-number-of-veterans-who-now-commit-suicide-every-day/
Bush cuts to veterans services
http://www.awolbush.com/
What is Happening In Cyprus subscriber asked for a quick rundown of what is happening in Cyprus right now. So here is a blog post I found showing the events that have unfolded.
THE EUROZONE’S finance ministers are to hold a make-or-break summit in Brussels this evening where they will decide whether Cyprus gets a €10 billion bailout – or whether the country is shoved out of the Euro.
It’s been a long-building saga in Cyprus, which has been in line for an EU bailout for a long time now – but has still struggled to finalise a bailout that would allow its banks to be recapitalised and continue in operation….
In the wake of the death of Hugo Chavez many predicted a sharp return to capitalist policies. Much to their dismay (and my delight) this is not the case. The government of Nicolas Maduro is solidly keeping the victories of Venezuela in sight as he and the Bolivarians begin a new monetary policy. The goal of socialism/communism is to undermine and destroy capitalism and its effects. The most obvious and damaging forms of this appear in two primary ways. First the generation of profit from owning the means of production and rent. Second, the generation of money for simply owning money.
It’s this second one that is being tackled with the new policy. The government of Maduro is aiming to “overcome the parallel market”. The policy is to control what foreign money is purchased in the country. It’s called the Complimentary System of Foreign Currency Acquirement (Sicad). This new system will operate alongside the Foreign Exchange Administration Commission (Cadivi) system which obtains dollars at the official exchange rate.
Finance Minister Jorge Giodorani said the Sicad will operate like a ‘”bidding” system for private companies who need to import. A Superior Organ for the Optimisation of the Exchange System will decide which companies are authorized to buy dollars and announce how much money is available.’ Working in conjunction with the Central Bank all companies will submit receipts showing the cost of machinery and materials they wish to purchase. They will make the request through regular private financial institutions and then it gets filed off to the Central Bank.
The Central Bank would then provide the funds to the overseas providers directly meaning the companies who have been authorized to receive foreign dollars will never actually hold them.
So what is the purpose of this? It prevents corporations from buying foreign dollars with the purpose of betting against the economy, that it will destabilize. it also forces companies to only be able to obtain the dollars for production, eliminating the possibility of buying dollars for non-productive purposes. This prevents the bourgeois from making money simply by owning money. To obtain these dollars you have to be entering into production that generates value.
No longer can the rich simply use owning money as a means of generating profits. They have to actually contribute something to the economy in order to get it. Of course there are other ways of doing the same thing. This is just one less avenue they have to achieve it.
If there is one thing I have noticed in studying the history of bourgeois economics, it is that capitalists never seem to learn certain lessons. The capitalist’s ability to critique their own system is limited in a way that doesn’t allow them to actually question the very heart of the system itself. No matter what has happened, they never seem to be able to truly criticize the profit motive. We shouldn’t be surprised at all by this, it’s the very foundation of the capitalist system.
Many times in the past a new economist has come along and questioned whether or not the profit motive was the best way to deal with a particular issue that was facing a difficulty. This kind of semi-criticism has taken the form of regulation, just making sure the situation doesn’t get too bad. The underlying problem of the profit motive remains to do the damage that it does. At no point is the profit motive actually challenged. Often some have advised taking an entire industry right out of the hands of the bourgeois in order to halt disastrous consequences that have harmed millions of people. For example the production of drinking water is a state function in the First World. Places where this is not the case there is a great deal water borne diseases. These conditions kill untold numbers of people around the world. The state must either take it out of the hands of private business, or merely take control because it is simply not being done.
When it comes to the topic of recession it appears they make the same mistake. They don’t learn from the mistakes of the past to predict or solve the problems. Marx has clearly laid out the reasons for recession, yet they have gone ignored. If all these decades later it is still being asked why the Great Depression happened, don’t you think it’s time to start looking outside mainstream bourgeois economic thought? I would think that if all the orthodox methods failed, it would be time to look outside the orthodox methods.
Yet here we are right now facing a second dip in the recession not all that different from what caused the first one. The recovery from 2008 has not taken place anywhere near what should have happened by this time. We still see stagnated wages, weak (if at all) job recovery, new investment is desperately lacking. Meanwhile the capitalist class is reporting greater and greater profits. The stock market and other such institutions are doing even greater than they were before the recession. There has been a return to profitability but to primarily non-reproducible investment. Secondary financial market transactions make up a good amount of the increased profits. They’re just the reselling of assets that have already been produced. No new production is being undertaken.
What is happening here is that the typical Keynesian recovery process is not actually taking place. New investment in production that requires hiring workers and selling goods in not happening. The end of previous recessions was signalled by a return to production and accumulation of new profits. This is what the Keynesian model tells us must be done to save the economy. While it has worked in the past it is not working now. In this situation we see that banks are not loaning out the money they could be. Large corporate firms are flushed with cash that their shareholders are begging them to invest. The reason why it’s not being carried out is because they don’t see it as being profitable.
This is a flaw in the thinking and theory of Keynesian economics: Keynes said that the state should create new money and have the state spend it on infrastructure projects putting people to work, putting money into their pockets thus stimulating demand. Despite the intention this doesn’t guarantee that it will make investment by capitalists in production profitable. They don’t go into business just because they have money they want to invest. The do it because they see profitability. If they don’t see the possibility of receiving profits from investment, they are not going to bother investing.
A disturbing trend has been developing since the end of last year. Mergers and acquisitions have dramatically increased, which should be a cause of concern for anyone interested in the economy. It is a continuation of the problem of the capitalist class refusing to begin new production. Instead of investing in new production, capitalists have begun buying out their competitors instead. Profits have been raised by cutting costs, not increasing sales. As the demand has dropped/stagnated across the board companies find themselves in a desperate situation to stay in solvency. Now they can’t sell, because the profitability is not there. All businesses are suffering, some worse than others. When two of them see the end as close, they may chose to merge into one saving as much of both companies as possible. They reduce the size of the two companies to one company making two failing enterprises into a single surviving one. In doing so they have concentrated their resources and obtained a larger share of the market through reduced competition. This can also happen when one company purchases another that is failing, producing the same result. Neither of these tactics will repair the economic situation we have.
To demonstrate the extent of the M&As (mergers and acquisitions) here is just a sample of what has taken place recently from the fiscal times.
“Anheuser-Busch InBev (NYSE: BUD), in hopes of getting those regulators to sign off on its own marriage to Grupo Modelo of Mexico, announced plans to sell to Constellation Brands (NYSE: STZ) the rights to Corona beer and other brands in the United States: a $4.75 billion transaction that may (the parties hope) make it possible to pull off the larger $20.1 billion deal.
Cardinal Health (NYSE: CAH) plans to acquire AssuraMed for $2.07 billion in hopes of making bigger inroads into the home care market expected to grow because of the country’s demographic changes.
Then there was the elephant: Warren Buffett’s announcement that his Berkshire Hathaway (NYSE: BRK.A) holding company (along with buyout firm 3G Holdings) will pay $23 billion to purchase H.J. Heinz (NYSE: HNZ) – yup, the ketchup guys.
That $40 billion-plus worth of deals took place on just a single day on Wall Street. Add in the recent $24.4 billion buyout offer for Dell (NASDAQ: DELL) by founder Michael Dell and private equity firm Silver Lake (and leaving out the total value of the AB InBev/Grupo Modelo deal), and you’re looking at more than $65 billion of merger and acquisition activity in only a month. Plus, Liberty Global (NASDAQ: LBTYA) plans to snap up Virgin Media, the British cable business, for $16 billion. Comcast (NASDAQ: CMCSA) will spend $18.1 billion to buy General Electric’s (NYSE: GE)share of broadcaster NBCUniversal. Throw in the December announcement of a merger between NYSE Euronext (NYSE: NYX) and Intercontinental Exchange (NYSE: ICE), a deal valued at $8 billion. And those are just the transactions that grab headlines.”
Source
These are not small M&As, these are major financial transactions that are taking place. It is not a few isolated incidents. The article goes on to describe how around $1 trillion worth of these M&As took place in the 4th quarter of 2012, which went relatively unnoticed by the financial community and media. This is obviously a major trend that is taking place.
Since this is very real and such a big deal we have to ask why this is happening. Companies are profiting from these M&As as a substitute for increased profits from sales. The profits are coming from cost cutting in operation. Companies are choosing to eliminate certain aspects of their operations. Some have downsized entire departments in favour of a more efficient process; or simply because of reduced demand for products. Others have closed stores that are struggling to meet the monthly bills or are just not as profitable as the company would like them to be. Some are going for cheaper packaging or demanding various cuts to the manufacturing process. Often times there are outright reductions in pay for workers, even layoffs. This of course leads to further antagonism between the workers and capitalist.
The bottom line is that this is not a recovery strategy for the economy. There is no new production beginning stimulating employment and worker spending. Profits are increasing by means that which go against the recovery process. The true irony is that this literally makes things worse. With these cuts in large companies there are even more unemployed workers that leads to an even greater reduction in demand for products and services, which in turn causes more unemployment. We’re looking at a self-perpetuating worsening economy. (Interestingly we can see a contradiction as well. What is saving the capitalist is also killing the economy and thus in turn killing himself.)
There is going on here than just this contradiction. The government is trying to stimulate spending through quantitative easing but it is clearly not working. Traditionally this Keynesianism has been quite successful. Getting cash out there for people to make purchases and for businesses to get off the ground or finance a new round of production. What is going wrong this time, which is unique from past recessions, is two phenomenon: First, the banks are not lending the money out for various reasons, including fear and greed. Second, many large firms don’t actually need to borrow the money. Mega corporations are flushed with cash right now and have no need to borrow.
Revenue growth by S&P 500 companies (as well as global economic growth) is still hard to come by. Earnings are growing at a faster pace than revenue. The cash they are flushed with is their earnings. This money is just sitting there on their balance sheets not being put to any use or being paid out in dividends. The average dividend yield hasn’t changed, it’s remaining at a solid 2.05%. Of course shareholders are asking questions, there is all this potential just lying around not being put to use. In fact the amount is now greater than it was just before the recession. Back in 2007 it was $564.8b now it’s an overwhelming $920b. This is a drastic increase from before 2008 when the times were much more profitable.
This cash is just laying around in company bank accounts because the capitalists see no profitable investment at this time. As I said previously they’re not going to enter into production if they see no chance for a profitable return. So what we have here is a perfect storm for M&A. Companies are downsizing, cutting costs to maintain profitability because sales have not increased. Meanwhile others are flushed with cash from doing the same and also see no new profitable investment. The money has to go somewhere in order to keep the flow of money going. So why not just buy up your competitor and absorb his operations?
It has definite benefits: your cash can start flowing into a new area gaining new means of production and particular skilled employees. It also reduces competition by reducing the number of competitors in the market leaving the customer with less choice and more likely going to your store. When (at least some of) these customers go to your store you increase your profits through increased sales.
When conditions like these develop it makes M&As pretty much inevitable. There is no possibility for new sales so they resort to instead getting a larger share of the market when possible. It’s one of those incidences of the concentration of capital that bourgeois economists like to pretend don’t happen.
So what is so bad about this you might ask? Well for one thing this creates no new value. Marx said that the only production that creates value is physical commodity production. Things like financial transactions and asset purchasing can generate profits, but they cannot create value. No new production is taking place, increased sales is from obtaining a larger share of the market. Profits have increased only from a decrease in competition. The company absorbing the other now has more sales, but not because there are more sales in the economy (just on its balance sheet). Which all means there is no new physical commodity production taking place.
This brings us to the question as to why not creating new value is a bad thing. To answer this question I’m going to use the Marxian circuit of capital.
M – C …P… C’ – M’
This is the circuit through which money must travel in order to avoid crisis in an economy. It first begins with money (M) being invested into a commodity (C) which is usually a raw material, for our example we’ll use steel. P represents the application of labour to the commodity (the steel). When the worker’s job is finished, the end result is a commodity of a greater value than the lump of steel, represented as (C’). This finished commodity is then sold for a greater sum of money than the raw material was purchased for, represented by (M’).
In Marxist economic theory anytime there is a break down in the circuit of capital the economy goes into a recession, if the break is bad enough. To give an example I’ll use the housing crisis of the Global Collapse of Capitalism. A great deal of mortgages were given out to the public because credit was so cheap at the time and other reasons. (Proponents of subprime lending maintain that the practice extends credit to people who would otherwise not have access to the credit market.) Many people who could never get one before were now faced with the prospect of owning a home through a sub-prime mortgage. Thus as a result all these people went out looking for homes to buy.
A sharp increase in demand took place stimulation new home construction and drove up the costs of existing homes. Housing prices increased exponentially; The total mortgage debt and home prices grew at almost exactly the same rates between 2000 and the end of 2005, 100% and 102% respectively. (As measured by the Case-Shiller Home Price Index.) This caused the prices of homes and the size of mortgages to go well beyond the earnings of workers which did not increase along with them. Meaning workers never actually had enough income to pay the mortgages, leaving many defaults that crash the housing market.
This is where the circuit of capital broke driving the recession. Obviously there was more to the recession than this, but this was the catalyst that set it off. The break down in the circuit of capital went like this:
M – Money spent
C – Raw materials collected
P – Homes physically built
C’ – Value of home greater than raw material
— Break —
The homes were indeed constructed according to the demand for them. The problem was that people couldn’t afford the loans that got taken out in order to purchase them. The M’ was never realized, meaning the profit from the production of homes was never realized. In addition, the banks lost their M’ by not having those loans paid back. The circuit was broken kicking off the recession.
This is just an example of the break down in the circuit. We are facing a break down right now with this massive occurrence of M&As as opposed to renewed production. At the end of the circuit, the M’ is not being reinvested in new commodity creation. Instead its being used to purchase already existing assets, other businesses and whatever it is they hold. No new value is being created.
It is the renewed investment in commodity production that hires people into the factories that gives them wages that can be spent on other goods and services. This tactic of buying up competitors does not accomplish what is necessary to begin the recovery. This process actually makes it worse because it often puts more people out of work through layoffs causing more damage to the circuit.
With less people working there is less money being spent on goods and services. This decreases the demand for them leading to a less profitable environment for reinvestment. If this trend continues long enough we’re going to face a second dip in the recession. One that could potentially be worse than the first.
Did Paul Krugman Admit Exploitation?
•2013 04 15 • Leave a CommentFirst notice how Krugman acknowledges class within the firm itself. Many will outright deny this and claim that there are just different positions of differing functions and importance. Second, I believe that Krugman is acknowledging that there are groups of positions within a firm that are given preferential treatment and an inequitable remuneration for the functions performed. He’s stating that the productive value of the CEOs and corporate this-and-that is questionable in comparison to how much they receive in compensation.
Am I seeing what I think I am seeing? I think I’m seeing Krugman (in a way) admit there is exploitation in capitalism. It seems to me he’s pointing out how the most venerated of positions within a company are given more in compensation than they are actually contributing to the production process. It almost seems as though he’s admitting that the workers in the company, be they physical or mental labour, are being exploited!
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Quote Source:
Paul Krugman. 2013, 2012. End This Recession Now! W.W.Norton, New York. 78-79 (emphasis mine)
Paul Krugman On Twitter
https://twitter.com/NYTimeskrugman
Posted in Commentary
Tags: economics, end this recession now, exploitation, paul krugman