Monday, September 22, 2008
1. keep your goals small and feasible, not large and impossible;
2. make sure that you have a life outside of your activism;
3. understand that while your choices matter, being an activist is not the same as denying yourself some of the elementary pleasures that this short life has to offer.
Keep activism grounded in the real world, and one's own real world needs, is how to avoid burnout.
Sunday, September 21, 2008
regime change for global finance capital
The origins of the events last week have been well-rehearsed in previous entries on this weblog. The US financial crisis has multiple origins, but two dates stand out. Eight years ago Alan Greenspan, the former Chairman of the US Federal Reserve, argued that over-the-counter (OTC) derivatives, the contracts between banks, insurance companies and other non-bank financial firms, should not be subject to US government regulation. As a consequence, OTC derivatives have not been subject to oversight by the Commodities Futures Trading Commission. A year later, in 2001, the same Alan Greenspan started cutting US interest rates in the wake of the September 11 attacks. Greenspan's role in these two events, in that they laid the groundwork for the creation of a huge speculative financial bubble amongst global finance capital searching for profits and households searching for livelihood security, has meant that the man who was once the hero of global finance capital is now a man whose reputation stands, at long last, in tatters.
As US interest rates went lower, US mortgage providers started to look for new markets for their products: and the principal market turned out to be cheap mortgages that could be offered under the low-interest rate regime to people that, for various reasons, could never before in their life have thought about owning a home. The result: too many Americans started buying homes (and, through re-mortgaging, other big purchases like cars) with loans that they could not afford. These mortgage providers then 'bundled' these mortgages together, and sold them to investment banks, who started to repackage the mortgages into a set of increasingly arcane products that could be sold to investors such as non-bank financial institutions looking for 'safe' products with a better rate of return than that offered by 'conventional' investment products such as US government bonds.
In doing this, the investment banks started entering into a world in which they had little experience. Moreover, in order to continue doing this business, investment banks and other non-bank financial companies (like American Insurance Group [AIG]), who do not have deposits that they can tap into as an inexpensive source of money, depended upon continually securing short-term loans from other financial institutions, which they would secure by using the assets that they held--the 'bundled' mortgages. Investment banks and non-bank financial institutions were thus borrowing against assets that were ultimately held by less-creditworthy consumers. In essence, the investment banks and the non-bank financial companies that bought their products were counting on home prices continuing to rise, and thus that the holders of the mortgages being able to meet their debt obligations; the financial alchemy behind the crisis sees finance capital shuffling risk like a juggler keeping balls in the air, while all the while not really understanding the complex products--and obligations--that they were peddling. Indeed, as John Gapper writes in the Financial Times, it was as if finance capital had become addicted to complexity.
The house of cards started to collapse last year, when American mortgage holders who had been paying sub-prime interest rates suddenly found out that, as a consequence of the terms and conditions of their mortgage, their interest rates ratcheted up, and they were now paying far, far more in repayments than that for which they had budgeted. They couldn't afford it; and a wave of foreclosures followed. US house prices of course started to tumble; and the investment banks and non-bank financial companies were left holding bundled complex financialmort products predicated upon bundled mortgages that no one wanted to buy. These are the 'toxic assets' that people talk about now: bad loans rooted in the decision of US mortgage providers to provide home loans for consumers that were not adequately solvent, with such loans being then converted into bonds and other securities and being traded in a way that, in effect, spread their poison throughout the financial system. As a result, finance capital increasingly had trouble securing the short-term loans that they needed to stay afloat; and thus, for many companies, a crisis of liquidity opened up, as they became unable to borrow to meet their day-to-day needs. This was the background to last week's events, a process that had been unfolding slowly for more than a year.
One irony of recent events was that the American financial system's liquidity crisis took place in a world awash with money. The excess savings of China and other Asian countries, as well as that of the petro-economies, means that globally their is lots of money sloshing about (it is very fortunate for the US that China is not prepared to sell its holdings of US government Treasury bills and bonds; were such to happen, the crisis would be infinitely worse, becoming, no doubt, one of global capitalism). However, increasingly, US investment banks and non-bank financial institutions had a difficult time accessing that money as the awareness of their toxic assets grew. Growing legions of sovereign wealth funds, who at first seemed the most likely corporate partners to solve the crisis, balked when confronted with the true extent of what was going on; hence, the Korea Development Bank walked away from Lehmann Brothers, sealing its fate. In this way, overleveraged US finance generated the foundations of an economic panic amongst global finance capital.
Last week was one of high drama. After the rescue of Fannie Mae and Freddie Mac the previous week, the US government ended up guaranteeing almost half the mortgages in the US. However, the fun really started on Sunday, when Lehmann Brothers (founded 1850) collapsed and Merrill Lynch (founded 1915) was forced to welcome being bought out by Bank of America at a fraction of the stock market value that it had been worth just weeks before. AIG then required a stringent loan of US$85 billion (with the effect that the US government owns one of the largest insurers in the world). Financial markets started to panic. On Wednesday, the 'flight to safety' was so severe that the interest rate on one-month US Treasury bills turned negative, meaning that finance capital would rather lose money holding a safe asset than invest in financial markets awash with unforeseen toxic assets. The yield on three month Treasury bills that day was 0.02 %, the lowest rate since 1941, before the entry of the US into World War Two. Global finance capital was running for cover.
On Thursday and Friday, the US Treasury had no choice: with the financial system threatening to seize up, the world's central banks pumped US$180 billion into global money markets, the US government pledged US$50 billion to guarantee money-market mutual funds, US Treasury Secretary Hank Paulson unveiled a plan to mop up toxic assets with government money, and in both the US and London the short-selling of stocks is halted. In effect, the US government has socialized the US financial system, to deal with toxic assets whose worth has been estimated to be anywhere between US$500 billion and US$1 trillion. Of course, many of these assets will be sold at a fraction of the value; nonetheless, the cost of this socialization of US finance will run into the billions of dollars. The US government acted to save American finance capital.
Perhaps of all varieties of economists a Marxist economist would understand the causes of the crisis best. US finance capital has become increasingly divorced from the real economy where goods and services are produced. As such, it is increasingly having to slice and dice ever smaller amounts of the surplus value that is produced in the real economy and then redistributed from the productive economy into the financial sector. As it has to slice and dice, it was finding ever-more esoteric ways of trying to make money on top of an asset base that was not fundamentally changing. It was, in effect, a massive Ponzi scheme, and was bound to come crashing down.
Many things are going to change for global finance capital as a consequence of the past week. No doubt other financial institutions may fail. Investment banking is, as a business, finished, and global finance will start to shift back towards using assets based in the real economy as the basis of its activity. Thus, the market for credit derivatives is also finished, for now, and if it is revived, it will be very, very different. There is also little doubt that for the next little while the ability of consumers and firms to access credit will be heavily constrained; the US government has seen its public debt increase substantially with the socialization of US finance, which suggests that increases in US interest rates will be forthcoming, with implications for economic growth in the US economy, because it is so heavily reliant on debt, and for the rest of the world, because it is so heavily reliant on the US economy.
However, the most critical outcome of this past week is that the era of free market fundamentalism, in which is was believed that the system would work best if left to its own devices, has drawn inexorably to a close in the home of capitalism, the US. If the US government believes the only way to save finance capital is to nationalize assets on a scale greater than that witnessed in Russia under Vladimir Putin, then the era of free market capitalism is finished.
We should not be surprised. This past week has highlighted the fact that in deregulated financial markets market-based outcomes are not necessarily the best for society. If they were, there would have been no need for the socialization of US finance. Those who participate in markets are often motivated by private and professional greed, and will try and do what they can get away with, even if regulatory laws are in place. The financial bubble is a clear demonstration of this greed: financiers chased their astronomical bonus payments, and households jumped at the chance to buy something valuable--their homes--that they never thought they could afford because the mortgage providers told them they could afford it. As Adam Smith said, 'people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public'. Today, Smith might put it thus: markets cannot be trusted to work in the public interest, because they are a function of the legal and social environment within which they are created, and that environment may encourage actions that are detrimental to the public good in the pursuit of private profit. That has happened, recklessly, in the US over the past 5 years. The truth of Smith's insights have once again been revealed this past week.
Wednesday, September 10, 2008
elections (III): Canada
Fourth on the list, being of most concern to only 5% of those polled, was the Afghan war. This is, to my mind, very disappointing. My reasoning here is fairly straightforward: in an election a country can consider those issues that affect the citizens of the country, and make a judgment as to which political party is most likely to address their concerns. What directly affects Canadians? Healthcare, our environment, and the economy.
Alternatively, in an election a country can consider those issues through which the citizens of a country directly affect the citizens of another country, and make a judgement as to which political party is most likely to address their concerns. Where in the world is Canada most directly affecting the citizens of another country? Afghanistan.
Much of what Canada is doing in Afghanistan is entirely laudable: supporting the education system, supporting the healthcare system, supporting the economy--issues of which Canadians know the importance, because we face similar issues, although of a different magnitude. Where what we are doing is different, however, is obvious: the military mission.
Today the Prime Minister has said that Canada's mission in Afghanistan 'as we've known it' will end as agreed by Parliament in 2011. Presumably, that means reducing the military role and increasing even more the developmental role. To my mind, that date is too far away. It is not too far away because of the numbers of dead Canadians: 97 soldiers, 1 diplomat, and, of course, 2 aid workers. Terrible as that is, it is too far away because of that other matter which the media tends not to report: the number of dead innocent Afghan children, women and men. No one seems to accurately know how many civilians have been killed in the Afghan war. It is a statistic that, if known, is not released. Human Rights Watch, a respected New York-based non-governmental organization, has offered a number of figures for civilian deaths in recent years, most of which are inconsistent with previous reports. Thus, in its most recent 8 September 2008 report on civilian bombing casualties Human Rights Watch suggests that in 2006 116 Afghan civilians were killed in 13 bombings. In 2007 321 Afghan civilians were killed in 22 bombings, while hundreds more were injured, and more Afghan civilians were killed by airstrikes than by US and NATO ground fire. In the first seven months of 2008 at least 119 Afghan civilians died from airstrikes, according to Human Rights Watch.
While we do not know how many innocent have died, this is clearly too many. Moreover, one cannot hide from an inescapable fact: Canada is an active perpetrator in these civilian deaths. We do not know how many innocents Canadian soldiers have killed, but let us not forget that on 28 July 2008 cannon fire from a Canadian troop carrier killed a 2 year old boy and a 4 year old girl--children killed because their father's car came within 10 meters of the troop carrier. What makes this case unique is that most civilian deaths by Canadian troops go unreported (although not for lack of trying--I am sure The Globe and Mail's Graeme Smith would report it if he could obtain such information). These 2 deaths are not only 2 too many, but are also in all likelihood the tip of the iceberg, in terms of civilian deaths and injuries directly attributable to the activities of the Canadian Forces.
The response of the Department of Defence to those lamentable deaths is a keen indication of how this war is being fought, and its attitude to civilian deaths, most notably amongst the Department of Defence: the Department has hired Blackwater, the US company that supplies 'contractors' (for which read mercenaries) to train Canadian troops in better understanding Afghan culture and society. This is the company which in 2007 killed 17 Iraqis, of whom at least 14 were killed 'without cause'. Blackwater's training is to enhance force protection, not reduce the numbers of dead civilians.
Canadian soldiers are killing innocent non-Canadians in a land that is far away: our country is doing harm to families, to communities in a place that we do not know. Surely this should be what the election is about?
Sunday, September 7, 2008
elections (II): Angola
The secret to Angola's 'success'? Oil. With production of close to 2 million barrels a day, Angola will soon become the biggest oil producer in Sub-Saharan Africa, surpassing Nigeria. In 2007 the country exported US$30 billion worth of oil, and according to the Financial Times US$250 million flow into the government's bank accounts every day. This begs a question: why do two-thirds of the population of 17 million live on less than US$2 a day, why is 40 per cent of the workforce unemployed, and why does a bucket of water in Boa Vista, one of Luanda's worst slums, cost C$0.75? The answer is simple: corruption on a kleptocratic scale generating unimaginable inequality.
Senior MPLA ministers own the key companies with which the international oil companies do business in order to work in Angola. Dos Santos and a small group of advisors personally oversees the overall oil industry, according to the ever-reliable Stephanie Nolen of The Globe and Mail, while his daughter, Isabel dos Santos, is the majority shareholder in many important national companies. This allows the MPLA leadership to enrich itself with wealth that is, by first world standards, immense, showering themselves, while many cannot get access to clean water.
However, it is important to always remember that it is the foreign oil companies that do business in Angola. In other words, they are part of this deeply corrupt system that impoverishes the majority of Angolans. The misery facing Angolans, which Friday's election will have done nothing to help, is a function of oil (soon to be joined by diamonds), a corrupt political elite that is transforming itself into a rentier class, and transnational oil corporations that make sure that our cars get cheap oil. We too are implicated.
elections (I): President Asif Ali Zardari
On the face of it, the replacement of a military dictator-turned President by a civilian politician should be welcomed. However, such a proposition fails to account for the murky goings-on within Pakistan's ruling political and military classes; for my part, I am concerned.
Pakistan has witnessed varying degrees of political instability since the death of former military dictator Zia-ul-Haq in August 1988. Through the 1990s Pakistan had a series of civilian governments, led alternately by Benazir Bhutto and Nawaz Sharif. These governments were notorious for their corruption, for their implicit support for Islamist fundamentalism in Afghanistan, and for their failure to improve the living standards of ordinary Pakistani peasants and workers. Many middle-class Pakistanis, and leaders of the advanced capitalist countries, therefore welcomed Pervaiz Musharraf's coup in 1999 while Nawaz Sharif was out of the country. Following September 11, and a clear warning from US Vice-President Dick Cheney that if Pakistan did not sign up to the 'war on terror' it would be 'bombed back to the Stone Age', Musharraf eagerly signed up to the overthrow of the Taliban. Musharraf's legacy for Pakistan is really quite remarkable: he turned an unstable country into what The Economist described, in an editorial in January 2008, as 'the most dangerous country in the world'. With nuclear weapons, with increasingly wider swathes of the country under the effective control of armed Islamist militants, with a deepening inability to promote living standards amongst the often illiterate poor of urban and rural Pakistan, Musharraf, an apparently socially-liberal man, laid the groundwork for the resurrection of a deepening fundamentalism amongst segments of what is more generally a society that is religious but not fundamentalist.
It might appear that, in these circumstances, the return of civilian government would be welcomed, and indeed it would: but not the current alignment. Asif Ali Zardari assumes an office whose powers were expanded under the Musharraf regime; while traditionally the Pakistani President had been a figurehead, Musharraf gave the presidency the power to appoint provincial governors and service chiefs and to dissolve parliament independently. Zardari will thus be the most powerful civilian President in decades.
And what a President! He has no political experience in Pakistan, having only entered politics upon the assassination of Bhutto. Instead, during the prime ministership of Benazir Bhutto, Zardari was widely known as 'Mr 10 Per Cent': that was the cut that he was rumoured to demand from government-awarded contracts. Certainly, while Bhutto was alive, during the period of her marriage to Zardari the family fortune, which was already stupendous, grew; but while Zardari was imprisoned for corruption and murder by Nawaz Sharif and remained in prison under Musharraf, and while the Spanish and Swiss governments have investigated him for money-laundering and other crimes, he has never been convicted by an impartial court of anything. Nonetheless, corruption allegations will undoubtedly dog his presidency.
Moreover, as the Financial Times revealed last week, corruption charges laid in a British court were postponed when his lawyers presented to the court documents said to substantiate major psychological problems: dementia, depressive disorder and post-traumatic stress disorder. That such an individual will have some say in the deployment of nuclear weapons should give everyone pause for concern; I certainly believe that in the global sweepstakes for the role most unstable nuclear power, Pakistan has now reinforced its claim to the title. Iran, by way of contrast, the country that US presidential candidate John McCain has said that he is prepared to bom in order to prevent its acquisition of nuclear weapons, is, in my view, far less of a threat to world peace than a country run by a possibly corrupt, possibly pyschologically ill person.
Not that I would want Nawaz Sharif to have the power to appoint the President! Prior to becoming prime minister, Sharif amassed a fortune in Punjab through a variety of shady deals involving government pharmaceutical purchases, which in turn allowed him to diversify the family business portfolio to the point that the family became one of the richest in the province. Sharif's principal interest is, like that of Silvio Berlusconi in Italy and Thaksin Shinawatra in Thailand, protecting his family business interests.
Behind these political machinations lie the Pakistani 'deep state': the Directorate of Inter-Services Intelligence (ISI), a security service with a long history that was built up and 'Islamicized' by former President Zia, armed by the US CIA during the Soviet occupation of Afghanistan, and is now a formidable political power behind the scenes in Pakistani life. Beyond civilian control (despite a recent attempt to rein it in), the ISI is accountable only to the military. It was a major factor in the Taliban assuming control of Afghanistan, and its rumoured involvement in the bombing of India's embassy in Afghanistan in July 2008 is but the most recent of many rumoured involvements in terrorist activity.
The ISI is the real source of political power in Pakistan at present: and no one, to my knowledge, understands its true objectives and operations. Most importantly, the relationship of the ISI to the military is entirely unclear. It is, however, important to remember that the current military chief of staff, General Ashfaq Kiyani, who many see to be as a neutral bystander in Pakistan's political machinations cannot be so, for he is a former director of the ISI. President Zardari will not challenge the power of the intelligence-military 'deep state'; his concern is to remain out of jail. Nawaz Sharif will not challenge the power of the intelligence-military 'deep state': his concern is to keep the family business empire running. The only challenge to the ISI can come, not from the fossilized remains of the political parties that dominate Pakistani politics in order to promote the ambitions of a venal political class, but from the workers and peasants of Pakistan, who continue, as they have for the past 60 years, to bear the brunt of the development failure that is the legacy of Pakistani politics.
Wednesday, September 3, 2008
recent activities, summer 2008
I will be commencing my summer holidays in the next week, after a very busy early summer.
The proofs of my next book, again co-edited with C Kay, and entitled Peasants and Globalization: Political Economy, Rural Transformation and the Agrarian Question, have been completed, and the book is now in process. Ihope to see it late in August. It looks very, very good.
I have completed work on a review essay on the World Bank's World Development Report 2008: Agriculture for Development and have started work on my next book, Hungry for Change: Farmers, Agrarian Questions and the Global Food Crisis. I am extremely excited about this project: although I have not been able to work on it for a month, it was almost writing itself--the easiest writing experience I have had.
I attended the annual meetings of the Canadian Association for the Study of International Development, where I gave 3 papers, and also took part in the Inaugural North American Historical Materialism Conference, where I delivered a very well received paper on the agrarian question in the 21st century.
Finally, I have all but completed my course preparation for 2008: I need a rest.
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