It’s the economy, stupid

In this round-up, why we need economics, why China is a growing power for reaction in the world, the corruption of the UK banking industry, the obscene wealth of the tax-evading fatcats, and the bizarre fashionable anti-capitalist backlash on Wall Street. First, some satire from the Daily Mash.

Trader may have been acting in own self-interest

THERE is a chance the scary trader on the BBC News may have been acting selfishly, it has emerged.

Alessio Rastani said stockmarkets were ‘toast’, the Eurozone rescue package would fail and that in 12 months your savings would be wiped out, in a move that experts said was clearly about making a colossal amount of money by lunchtime.

The trader, who does not get invited to a huge number of parties, also left millions of viewers traumatised with the revelation that financial markets do not care about them.

Julian Cook, chief economist at Donnelly-McPartlin, said: “Rastani has obviously built up significant positions in panic, paranoia and Mad Max futures, but the emerging Eurozone deal could have knocked at least 12% off their value.

“Therefore he had no choice but to go on television and tell you that you were going to die. I’m only surprised he didn’t put an unloaded pistol to his head and pull the trigger.”

Martin Bishop, fear analyst at Madeley Finnegan, said: “Rastani has already driven fear prices up 6%. “And this is top quality, long-term fear because it comes from an expert who everyone knows is a total shark but also has no idea whether or not to believe him and so will inevitably just do exactly what he says.”

Meanwhile Rastani also claimed that ‘Goldman Sachs, not governments, rule the world’ leading to an explosion in online I-told-you-sos from amateur experts who have been saying this sort of thing in pubs for years.

But Roy Hobbs, professor of simplification at Roehampton University, said: “With all due respect to Goldman Sachs, it’s actually run by a complex network of bastards.

“Or do Goldman Sachs pay me to say that? You’ll never know.”

Irish Left Review · Has the Left given up on Economics?

irishleftreview.org – Though provoking post here from Nick Srnicek of Disorder of Things: The leftist response to the economic crisis has instead been mostly been to focus on piecemeal reactions against government policies. The student movement arose as a response to tuition fee and EMA changes; the right to protest movement arose as a response to heavy-handed police treatment; and leftist parties have suggested a mere moderation of existing government policies. The project to bring about a fully different economic system has been shirked in favour of smaller-scale protests. There is widespread critique, but little construction.[…]

 

Russia, China veto UN resolution on Syria crackdown

google.com – Russia, China veto UN resolution on Syria crackdown By Tim Witcher (AFP) – 3 hours ago UNITED NATIONS — A senior aide to Syria’s embattled President Bashar al-Assad on Wednesday hailed as “historic” Russian and Chinese vetoes of a UN resolution against his regime’s deadly crackdown on protests. But Syria’s newly united opposition said that by voting against the European-proposed resolution at the UN Security Council, Russia and China risked provoking opponents of Assad’s regime to resort to violence. […]

Osborne admits UK banks ran ‘ponzi schemes’

liberalconspiracy.org – by Sunny Hundal     October 5, 2011 at 10:20 amI missed this key passage from George Osborne’s speech to Tory conference: The banks and those regulating them believed that the bubble would never stop growing, that markets were always self- correcting, that greed was always good, thattheir Ponzi schemes would never collapse, and that none of the debts would ever turn bad.[…]

Billionaire Bet: Warren Buffett Challenges Rupert Murdoch To Release His Tax Returns

thinkprogress.org – NEWS FLASH Billionaire Bet: Last week, News Corp’s Wall Street Journal editorial board told the billionaire behind the president’s “Buffett Rule” that, instead of calling for America’s wealthy to pay their fair share in taxes, Warren Buffett should “educate the public” by allowing “everyone else in on his secrets of tax avoidance by releasing his tax returns.” Today at Fortune’s Most Powerful Women Summit, Buffett wholeheartedly agreed to release his tax returns to the public. He just has one condition: “I think it might be a terrific idea if [the Wall Street Journal] would just ask their boss, Rupert Murdoch, and he and I will meet at Fortune, and we’ll both give you our tax returns and you can publish them.” Buffett noted, “I’m ready tomorrow morning.” Murdoch has yet to respond.

How to Think About: Jewish Bankers

MICHAEL KINSLEY – Goldman Sachs, the huge and hugely profitable investment bank, has become a symbol of the financial excesses that helped to bring on the current recession. Because Goldman is thought of as a “Jewish” firm, and because it dominates the financial industry, criticism of Goldman, or of bankers generally, is often accused of being anti-Semitic. Commentators including Rush Limbaugh and Maureen Dowd have been so accused. When, if ever, are such accusations fair? […]

Isca Stieglitz – Insider trading? It’s not Alessio Rastani or Goldman-Sachs I’m worried about!

GREENS ENGAGE – Funny isn’t it? Greens – we’re predominantly ‘anti’ capitalist, are deeply suspicious of anything remotely ‘businessy’ (unless it passes ‘green’ muster), and certainly question the motives of those involved in it…or at least until ‘someone’ says exactly what we want to hear. How quickly the leap is made, how quickly the scrutiny stops and how quickly we latch onto people who wouldn’t ordinarily get our time of day. However, with a whiff of ‘conspiracy’, a sniff of ‘rule the world’ and a large helping of ‘we told you so’, (when all that’s been stated is the bleedin’ obvious), and we’re there posting and hosting like we’ve just discovered something ground breaking – no checking, no research, no search for provenance – the complete suspension of scrutiny and the hanging on the every word of bloke no one knows. Ah, but he’s a ‘trader’ so he must know stuff and now he’s gone on telly and shared seemingly (not!) big secrets, well, we can obviously trust him. I’m not saying I trust Rastani or not, I don’t know enough at this stage to make that decision and that’s the point, neither does anyone else. I wonder about the mind of someone who jumps so quickly. […]

Who are the 99 percent?

washingtonpost.com – (Ramin Talaie – BLOOMBERG) “I did everything I was supposed to and I have nothing to show for it.” t’s not the arrests that convinced me that “Occupy Wall Street” was worth covering seriously. Nor was it their press strategy, which largely consisted of tweeting journalists to cover a small protest that couldn’t say what, exactly, it hoped to achieve. It was a Tumblr called, “We Are The 99 Percent,” and all it’s doing is posting grainy pictures of people holding handwritten signs telling their stories, one after the other.[…]

Joined Protest on the Brooklyn Bridge, Got Trapped, But Didn’t Get Arrested / And some thoughts about all this

NEVER GOT USED TO IT – I’ve been a pretty active activist the past few days, though I’ve been going on my own, with a downbeat attitude that repeatedly gets turned around. I went on a protest to the NYPD yesterday. Well, that was not so great, except for a few minutes, when the bulk of the protest first arrived at the police headquarters. That was fun. Also, I like a chant that developed briefly that went, “Students, labor, shut the city down.” At least I think that’s what they were saying – and if it is, I am all for that! I go along with “Banks got bailed out, we got sold out,” even if it isn’t that inspiring politically, because it is very true and lots of people can relate to that. I’m not that crazy about “We are the 99%,” because the implicit class analysis is a bit limited. “This is what democracy looks like” is getting kind of tired, too (remember, I heard that dozens of times a dozen years ago, while running around in clouds of tear gas). […]

Jodi Dean on phases of struggle

One benefit of the model in use at occupy wall street is the possible formation of a group, collectivity, out of folks who have a hard time thinking and acting as a group. So, if we think of the occupiers as primarily people who don’t union membership as an option and don’t see any existing parties as persuasive, then they are trying to build a different kind of group. An interesting problem they face is how to describe it–it’s not an ‘identity category’ or an ‘interest group’ or even an issue-based group. Given that absence, the non-expression of core ideas makes sense–there aren’t any so, armed by some pretty influential theory (anarchists, Hardt and Negri, Tikkun) and a read of recent politics influenced by that theory, the activists are turning (or trying to turn) a weakness into a strength. What I hope will happen is that this will be a stage (the inchoate stage wherein previously dissipated rages begin to consolidate) and that we will see another stage of more organization and specificity emerge. Graeber suggests as much when he mentions the thirty working groups. The thing is, folks committed to anarchist ‘horizontal’ organizing might be really good at one phase of struggle and a barrier at another. Graeber’s description makes it seem like unions are the ones who make it difficult for the ‘movement’ folks, but it makes more sense, I think, to recognize that their commitments can become a detriment at another point. I heard last week (maybe this has changed) that some law folks were very interested in helping with the larger first amendment issues around the protests (masks, tents) but that they weren’t getting very far because there was no ‘there’ (no substantial entity) to represent.

Ideological notes

 Henwood on October 3, 2011 –

I know this will prompt more rebukes for trying to impose an anachronistic old left on the spontaneously new, but someone’s got to do it.

I read this quote in the New York Times the other day. I know that that may not be the go-to medium for reports on Occupy Wall Street, but it’s not unrepresentative of some of the things I’ve seen and heard first hand from that quarter:

“This is not about left versus right,” said the photographer, Christopher Walsh, 25, from Bushwick, Brooklyn. “It’s about hierarchy versus autonomy.”

Autonomy in this context sounds like a hipster version of bourgeois individualism. I’ve also seen a bit of Ron Paul-ish “end the Fed” stuff around OWS, which is a topic in itself, something I’ll take up in the near future. But I don’t want to get that wonky just now. I just want to make a simple point. Occupy Wall Street is hardly about autonomy. It’s about living out solidarity and about attracting people to a movement. They’re living a collectivity, even if they’re not articulating it that way.

I suspect the problem is that three decades of neoliberalism have destroyed any available vocabulary for solidarity. My guess is that most of the people in Zuccotti Park were born after Thatcher and Reagan took office. There’s no such thing as society, as the Lady said. But there is, and we need more of it.

Maybe 99% is a bit much, but…

Doug Henwood on October 1, 2011 –

The last day or two I’ve been seeing some complaints that the chant of the Occupy Wall Street protesters that “We are the 99%” casts the net too widely, effacing all kinds of class, race, and gender distinctions. Well, yes, probably so. But I still find it cheering.

It is a fact that over the last couple of decades, much of the growth in total income in the U.S. has gone to the upper reaches of society. For example, based on Census data, between 1982 and 2010, the richest fifth of society have claimed a little over half of the increase in total personal income; the top 5%, nearly a quarter the gain. The bottom 60% of society, though, has gotten less than a quarter. And, for a number of reasons, the Census figures seriously underestimate the action at the very top. (For more, see the forthcoming LBO, now in prep.) Using data compiled by the economistsEmmanuel Saez and Thomas Piketty from IRS records, we can estimate that the top 1% took in a quarter of the income gain between 1982 and 2008. The bottom 90%, though, only took in 40% of the gain. (1982, by the way, is when the great bull market in stocks took off, corporate profitability began a long upsurge, and the Roaring Eighties really began.) And the further you go down the ladder within the bottom 90%, the smaller the gains.

Looked at another way, here are two graphs of average incomes, adjusted for inflation, the first from the Census data:

 

[…]

The teenage moralism of the Occupy Wall Street hipsters almost makes me ashamed to be Left-wing

Brendan O’Neill – Occupy Wall Street, the gathering of angry actors, graphic designers and various other hipsters in the financial districts of New York City, might just be the most degenerate Left-wing movement of recent times. Its weird demands, plastered across tongue-in-cheek placards and on super-cool, self-pressed t- shirts, capture the descent of the modern Left into the cesspool of victimology, conspiracy-mongering and disdain for mass society and its allegedly dumb inhabitants. Far from representing anything that I, a Leftie, would recognise as progressive and humane, this gaggle of rich kids spouts little more than snobbery and fear, seemingly incapable of deciding whom they loathe the most: greedy fat bankers or the dumb fat public. […]

Three Babies, Four Dogs, Two Breasts, and No Radiohead: A Dispatch From Occupy Wall Street 

Manhattan—The class war began at the corner of Broadway and Cedar St., as Wall Street’s bankers waited for a bus and Wall Street’s occupiers, for a revolution. What had begun two weeks ago as an unfocused rabble of ragtag discontents had become a still-unfocused rabble of ragtag discontents—but way bigger. The culprit: Radiohead. Rumors of a surprise solidarity concert had brought the huddled masses streaming in from Williamsburg, Greenpoint, and Bushwick. The crowd in Zuccotti Park, occupation-central, bulged outwards, spilling into the bus stop, tivas scuffing shined loafers and graphic tees dueling paisley ties. […]

With some thanks to Engage

The last superpower

In Europe, the economy continues to implode. In the UK, analysis by the FT shows, unsurprisingly, that it is the lowest paid who, as ever, will bear the brunt of the economic downturn – while companies like Ernst and Young, which aided and abetted Lehman Brothers in its misdemeanours, go on and on.

Although the big business lobby likes to blame public sector profligacy for the so-called PIGS crisis (and therefore prescribe public sector austerity as the cure), the private sector bears the main responsibility – most clearly in Spain, where the national debt stock stands at about 53 per cent of GDP – among the lowest in the eurozone – while private sector debt stands at a staggering 178 per cent.

Meanwhile, in the USA, as the oil spreads through the Gulf, so do conspiracy theories. The finance sector, however, continues on, despite wave after wave of shameful incidents, the latest culprit being Litton Loans, the sub-prime arm of Goldman Sachs, “America’s foreclosure king”, specialising in loans to (and repossessions from) the US’s poorest home-owners. And America’s global power is declining; it has already lost its hegemony in the Middle East.

The disaster in the Gulf and the crisis in Europe are good indicators of a totally transforming geography of power in the world today. The centre of gravity is no longer the old Atlantic.

As Stephen Walt writes,

Asia’s share of world GDP already exceeds that of the United States or Europe, and arecent IMF study suggests it will be greater than the United States and Europe combined by 2030. Europe has already become a rather hollow military power, and the current economic crisis is going to force European states-and especially the United Kingdom — to cut those capabilities even more. Needless to say, hopes that the euro might one day supplant the dollar look rather hollow today. Politics within many European countries is likely to get nasty as austerity kicks in, and there will inevitably be less money and less support for Europe’s various philanthropic projects in Africa, Central Asia, or the Middle East. Such activities won’t disappear entirely, but it’s hard to see how they can continue at anywhere near their current levels.

China in particular continues to rise. This article analyses China’s strategic interests in Latin America, in the US’s back yard. This article describes its strategy in Africa. China is also on the move in crisis-torn Europe, with the Vice Premier Zhang in Greece this week to grease the rusting wheels of Greek capitalism.

To be sure, China is a new form of global superpower, but that does not mean it is fundamentally different from the old imperialist powers.

While China’s public pronouncements may at times appear mercurial, they are more likely part of a well-conceived strategy. On one hand, China seeks to leverage benefits consistent with being a developing country, plays upon the west’s historical guilt over colonialism, and exploits the west’s continued belief that economic development will inexorably lead to pluralism. On the other hand, it does not hesitate to attempt to parlay its growing power into influence whenever and wherever it can. This Janus-like strategy gives China leeway and flexibility in crafting its international political and economic policy.

And despite occasional posturing from American liberals and conservatives, China and the US remain tied together in an intimate web of shared interests.

However, in China itself, the workforce is getting restive. In a highly unusual move, the prime minister has acknowledged worker grievances.Following the Honda strikes in Guangdong, a Toyota parts manufacturer in Tianjin is now out.  This excellent article shows how the wildcat strike at Honda sheds new light on the suicides at Foxconn, suggesting Chinese labor is reaching a tipping point.

And, along with the China, the new global geometry of power continues to tip towards the oil producing states, especially in the Persian Gulf region, as the BP disaster seems to be doing little to encourage us to break our dependency on petroleum. Global spare capacity is around 6 million barrels per day, nearly all of which is in OPEC countries (around 4.2 million barrels per day of this is in Saudi Arabia) – and these countries are reaping the benefits of a weak Euro caused by the PIGS crisis. Jadwa, one of Dubai’s biggest companies, has just bought one of the largest new office complexes on the Southern edge of London’s financial district, at a serious bargain price.

In turn, the Arab oil states and China are increasingly drawing together:

As Washington’s influence in the world and the Middle East wanes, Gulf countries are weaning themselves from their traditional orientation toward and dependence on the United States. America’s post-war political and economic supremacy in the region is now threatened as a result of its own foreign policy, but equally so by the rise in importance of the emerging powers. No country has capitalized on the shifting landscape more thanChina, which has, consistent with its actions globally, moved assertively to strengthen its ties with the Gulf region generally and in particular with its most important economic and political power, Saudi Arabia.

However, critical voices are in denial about the new geometry of power, and continue to act as if America and its close allies, including insignificant Israel, remain the geopolitical driving forces. Time to wake up.

Related Articles

• The future with a frugal and broke Superpower (nextbigfuture.com)
• Op-Ed Columnist: Superbroke, Superfrugal, Superpower? (nytimes.com)
• Stealth Superpower: How Turkey Is Chasing China in Bid to Become the Next Big Thing (alternet.org)
• US is not a superpower: Exorbitant Privilege- … (projectworldawareness.com)
• Chomsky’s Lectern: China and the New World Order (littlealexinwonderland.wordpress.com)
• China and Russia drive mineral-rich Mongolia to join the mining elite (telegraph.co.uk)
• Why The US-China Trade Imbalance Will Keep Getting Worse (businessinsider.com)

NEWS/ANALYSIS: Goldman Sachs

NEWS

Goldman Sachs’s golden boys to testify [Telegraph]

The two Goldman Sachs traders who delivered a $4bn (£2.6bn) profit for the bank from betting against sub-prime mortgage bonds are to be grilled as a key Senate committee turns its focus on the bank’s trading pratices. Michael Swenson and Josh Birnbaum will testify on Tuesday as part of a Senate hearing where current and former Goldman employees will be questioned about their role in the mortgage-backed securities market and how it triggered the financial crisis. [READ THE REST]

Below the fold: the bank industry’s revolving door culture with the UK and US governments, Fabrice Tourre’s half a million bonus, Goldman Sachs’ fees bonanza from UK privatisations, insider trading allegations at Lloyds, the Raj Rajarathnam tip-off, and the continuing confidence of Warren Buffet and BayernLB.

ANALYSIS: Bankocracy [John Lanchester/Mazen Labban]

Image by CanadaGood via Flickr

After a meeting with Nicolas Sarkozy in the autumn, Angela Merkel stated her conviction that ‘no bank should be allowed to become so big that it can blackmail governments.’ She’s right – but unfortunately, that’s the system we have, and will continue to have for the foreseeable future. It is a monstrous hybrid in which bank profits are privately owned, but are made possible thanks to an unlimited guarantee against losses, provided by the taxpayer. Goldman Sachs, the biggest of the investment banks, was rescued from insolvency by a taxpayer injection of $10 billion last October; then it collected another $12.9 billion in credit default swap insurance, also provided by the taxpayer, thanks to the bail-out of AIG; then it announced that it was paying itself $16.7 billion in pay and bonuses for the first three quarters of this year. The lack of competition (from imploded rivals) and that taxpayer guarantee against failure made this possible. This is the world that the collapse of Lehman made.

[READ THE REST]

A response:

It is curious that John Lanchester should propose ‘bankocracy’ as the ‘name for the new economic system, which certainly isn’t capitalism’ (LRB, 5 November 2009). In a passage in chapter 31 of the first volume of Capital, Marx describes the emergence of ‘modern bankocracy’ (along with the international credit system, the modern system of taxation and ‘stock-exchange gambling’) from the creation of national debt. The national debt endowed ‘barren money with the power of breeding’, giving rise to agiotage and creating the ‘class of lazy annuitants’ – ‘this brood of bankocrats, financiers, rentiers, brokers, stock-jobbers etc’. Capitalism has always been one form or another of a modern bankocracy, at least since the founding of the Bank of England in 1694.

Mazen Labban
University of Miami, Florida

Also read:

Blog posts by John Lanchester:

Kaboom! The SEC v. Goldman Sachs
Chess on Ice Wall Street’s Favourite Sport

Articles and reviews by John Lanchester:

The Great British Economy Disaster: A Very Good Election to Lose · 11 March 2010
Short Cuts: Kraft eats Cadbury · 7 January 2010
Bankocracy: Lehman Brothers · 5 November 2009
Short Cuts: Caster Semenya · 8 October 2009
It’s Finished: The Banks · 28 May 2009
Short Cuts: Google Street View · 9 April 2009
Short Cuts: the demise of Woolworths · 29 January 2009
Cityphobia: The Crash · 23 October 2008
Cityphilia: the credit crunch · 3 January 2008

Related Articles

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• Goldman Sachs hit by lurid allegations of sex discrimination (guardian.co.uk)
• Johann Hari: How Goldman gambled on starvation (independent.co.uk)
• Here’s Why the Cookie Crumbled (dealbook.blogs.nytimes.com)
• The Lehman Brothers Hangover (thedailybeast.com)
• The bankers’ victory dance | John Lanchester (guardian.co.uk)