Ylli Përmeti
The Western world has shifted -almost parallel with the rise of the institutional framework of the New World Order (NWO) of neoliberal globalization (N/G)- from abandoning the social-democratic consensus to economic liberalism, namely, low taxes for transnational corporations (TNCs), the sale off of state enterprises, the lifting of protectionist policies, priority to private finance and not government and, philosophically, the individual above the state (of the Milton Freedman and Chicago School doctrine), which is an extremely organised eco-fascism. 'Eco' in the double sense: economic and ecological. As a result, countries which have been integrated into the NWO of N/G, are being concentrated more than ever, to monetary policies, leaving aside in the process the concentration of power, which have been baptised by orthodox economists "unconventional policies",[1] that is, "quantitative easing policies": they have recapitalised private banks in a broader scale; non-banks, such as security firms; and have purchased assets outright. Japan, US and UK are the main users of these monetary tools. But, in a world of free capital flows, Central Banks not only cannot be fully independent in their monetary policy, as a result, they are contagious,[2] but they have sadly failed and have created another "academic" illusion all over the world. No wonder, these policies have been introduced largely by the Federal Reserve of US and its governors.
In fact, Alan Greenspan, while once upon a time believed on classical economics and mathematical models, namely, models that he had created on his mind during the time when he was counsellor of Wall Street, before being chosen Governor of the Central Bank of America, in order to solve the economic and monetary problems of America, in his fatty pension, after studying a little bit more, admitted that he was wrong, because economic problems cannot be solved with "mathematical models" or "algorithmic" but by understanding human nature! And "there", according to him, "is something about human nature which is not rational", and that "those who are in the fatted offices, who profit more than any other from the actual system, never criticize each other"![3] Thus, while Greenspan kept high interests, Bernanke, his next,[4] in his first speech of the second term of his presidency, supported the responsibility of the fiscal policy and insisted in the application of the same practice, namely, of "QE", in order to confront the financial and budgetary crisis in America. In other words, The Fed begun to buy mortgage-backed securities, afterwards treasury securities and again, mortgage, in the aftermath of the explosion of the last financial crisis (2007) and lowered the interest of loans to almost '0' per cent. Once these measures did not bring about the expected results, two other monetary conception begun to be propagated, namely, "fiscal cliff" and "helicopter money".[5] But which social strata have gained from these policies so far? Is America better off or worse off today? And where is the difference between American's "QE" and Europe's? As Paul Krugman points out: 'incomes at the top have soared, with almost all the gains from 2009 to 2012 going to the top 1 percent, and almost a third going to the top 0.01 percent - that is, people with incomes over $10 million.[6] Meanwhile almost 40 per cent of American children live in poverty or almost poverty, as a result, a considerable number of neocons want to undermine from the public all the issues which concern the distribution of income![7]
Recently, according to some studies,[8] the upper 3 per cent of the income distribution in America received 30.5 per cent of total incomes in 2013. The next 7 per cent received just 16.8 per cent. This left barely over half of total incomes to the remaining 90 per cent. The upper 3 per cent was also the only group to have enjoyed a rising share in incomes since the early 1990s. Since 2010, median family incomes fell, while the mean rose...the bottom quintile of the income distribution received only 36 per cent of federal transfer payments in 2010, down from 54 per cent in 1979...In the late 1920s the bottom 90% held just 16% of America's wealth-considerably less than that held by the top 0.1%, which controlled a quarter of total wealth just before the crash of 1929. From the beginning of the Depression until well after the end of the second world war, the middle class's share of total wealth rose steadily, thanks to collapsing wealth among richer households, broader equity ownership, middle-class income growth and rising rates of home-ownership. From the early 1980s, however, these trends have reversed. The top 0.1% (consisting of 160,000 families worth $73m on average) hold 22% of America's wealth, just shy of the 1929 peak-and almost the same share as the bottom 90% of the population.[9]
As regards the revenues from taxes, based on current trends, America is 'heading toward a world in which only the middle class pay taxes: the federal government still gets a tenth of its revenue from corporate profits taxation. But it used to get a lot more - a third of revenue came from profits taxes in the early 1950s, a quarter or more well into the 1960s'.[10]
In more concrete terms, the "fiscal gap", according to three American orthodox economists,[11] was $210tr last year (2013), from $205tr a year before. In order to eliminate this fiscal gap the mentioned economists propose 'an immediate permanent 59 percent increase in federal tax revenue. An immediate, permanent 38 percent cut in federal spending would also suffice. The longer we wait, they conclude, the worse the pain. If, for example, we do nothing for 20 years, the requisite federal tax increase would be 70 percent, or the requisite spending cut, 43 percent'.
In these conditions, the shutting down of the American government on the first days of October, 2013, was simply unavoidable: because Obama wanted to improve the healthcare system through an 'Affordable Care Act (known as "Obamacare") which is modelled and introduced in 2006 in Massachusetts by the then governor Mitt Romney of the Republican party! This Act is characterized even by Martin Wolf as a criminal act and a form of serfdom.[12] Because most of the working people get insurance through their employers and it is an obstacle to labor market flexibility since it complicates decisions about leaving a job, particularly for people with chronic medical conditions. So, he required to increase the "debt ceiling", at a time when republicans do not vote it. The "Obamacare" program is being supported by Krugman for which he opposes the Republicans, calling them "the enemy of the poor",[13] on the ground that 'it improves their incentives, because the subsidies families receive for health care fade out gradually with higher income, instead of simply disappearing for anyone too affluent to receive Medicaid. But improving incentives this way means spending more, not less, on the safety net, and taxes on the affluent have to rise to pay for that spending'. Moreover, Krugman supports the idea that America has not a fiscal problem, since, unlike other countries, it borrows in its own currency and therefore it can't run out of cash, neither has it any debt crisis![14]
In order to strengthen his argument, Krugman, in another analysis,[15] points out that 'rising inequality has obvious economic costs: stagnant wages despite rising productivity, rising debt that makes us more vulnerable to financial crisis. It also has big social and human costs. There is, for example, strong evidence that high inequality leads to worse health and higher mortality...extreme inequality, it turns out, creates a class of people who are alarmingly detached from reality - and simultaneously gives these people great power...and there are a number of other plutocrats who manage to keep Hitler out of their remarks but who nonetheless hold, and loudly express, political and economic views that combine paranoia and megalomania in equal measure'.
However, The American Congress voted an agreement and the debt ceiling was increased for a very short time: until February 2014. But, as Chossudovsky shows, following the forecasts of the "Congressional Budget Office" and a lot of others systemic aspects, America will adopt deflationary policies or economic shock therapy.[16] The aim is, according to the same analysis, Wall Street to be able to control the monetary policies of the Federal Reserve in the interest of lobbies and private trusts, while more national wealth are being privatized (Medicare, Medicaid, social security etc.). And indeed, the "Institute of International Finance" (IIF),[17] where partake the greatest leaders of banking conglomerate in the world (JPMorgan Chase, Deutsche Bank and BNP Paribas) exercised pressure upon congressmen -through panic- so that if Congress do not raise the debt ceiling, the consequences will be catastrophic.[18] The strategy of this conglomerate, as Chossudovsky analyses, is to stay the information on their part, to create uncertainty through one-sided reports and to be used the information by stock exchange speculators in order to advice their clients for "safe investments" -a conglomerate, which, not only controls the world massmedia, but even international agencies such as Moody's, Standart and Poor. The four major institutions of Wall Street (J.P. Morgan Chase, City-Group, Bank of America and Goldman Sachs) account for more than 90 per cent of the exposed derivatives. And precisely, due to this exposure, they exercise organized influence upon the monetary policy, including debates inside the Congress and the debt ceiling.[19] Therefore, the pressure which is being exercised on Obama, and the promises he has given, is twofold: the one which is coming from the banking conglomerate and the other from republicans, who do not support the investments in the public sector.
In fact, the investments in the public sector have been reduced below the post-Second-World War level: from 5 per cent to 3.6 per cent of American GDP.[20] While the pressure upon the budget of the infrastructure is being increased since the Great Depression of 2008-09, public investments have been weak since the 1960s. Public investments have been high between 1950-60s, during the social-democratic consensus, but low, during the decade of 1970s-80s, the time when America, together with other countries of the West, particularly Britain, started to orient its economy towards the new sub-paradigm of modernity: of neoliberal globalization. But, public investments have fallen particularly after 2000s, when the New World Order was formalized by the Anglo-American foreign policy. And this, at the time when offshore investments, through TNCs, according to a study,[21] generally 'will hurt, rather than help, the US economy'. Because it shows that when the economic activity increases abroad, the increase inside home, is smaller than the half of the increase which is being created abroad. As a result, the expansion of TNC-s abroad will weaken job creation, investment, R&D, and exports at home, rather than strengthen or enhance domestic economic activity.
After all, through deflation public wealth may be purchased cheaper by oligarchs. On the other hand, Obama, could pass over unilaterally the debt ceiling, but he would have breached the law or he would have avoided the power of Congress and would have been under suspicions. The limit of debt was $16.699tr -which reached on may of 2013, because at the time when this analysis takes place, it has passed over the ceiling, namely, the debt is over $17tr, while the debt against GDP is 73% -twofold from the 2007 debt. But another independent evaluation puts America on the 9th world place, with a debt of $106.5% of GDP.[22] If we consider the axiom of the two orthodox economists Carmen Reinhart and Kenneth Rogoff which assumes that countries with a debt more than 90% decrease their economic growth by 1% each year, then, we may judge in which situation is America. And it is continuously falling generally at the economic level. For example, while in 2012 it controlled almost 25% of the world wealth, in 1948, it controlled almost 50%.[23]
America today, as Krugman points out, is back to its "patrimonial capitalism," in which the commanding heights of the economy are dominated not just by wealth, but also by inherited wealth, in which birth matters more than effort and talent...the dominance of income from capital, which can be inherited, over wages - the dominance of wealth over work - is what patrimonial capitalism is all about...In fact, not only don't most Americans own businesses, but business income, and income from capital in general, is increasingly concentrated in the hands of a few people. In 1979 the top 1 percent of households accounted for 17 percent of business income; by 2007 the same group was getting 43 percent of business income, and 75 percent of capital gains. Yet this small elite gets all of the G.O.P.'s love, and most of its policy attention...Great wealth buys great political influence - and not just through campaign contributions. Many conservatives live inside an intellectual bubble of think tanks and captive media that is ultimately financed by a handful of megadonors. Not surprisingly, those inside the bubble tend to assume, instinctively, that what is good for oligarchs is good for America.[24]
As regards the US's "revolution" in relation to the development of the shale gas, which is being followed blindly by other countries of western economic bloc (Britain etc.), as I showed elsewhere,[25] there doesn't exist any syllogistic and convincing argument that it will improve the American economy. As a recent study concludes: 'there is no evidence that the shale gas revolution will contribute to a 'reindustrialisation' in the US at the level of the manufacturing sector as a whole. Exports have increased in gas-intensive sectors, but only to a total of $23.6 billion in 2012 compared to a US manufacturing trade deficit of $779.4 billion. Coupled with other factors since 2007 which would tend to boost exports and reduce imports, including declines in the US real exchange rate during this time, and the effects of the recession on net imports, it is difficult to conclude that any evidence exists of a US manufacturing renaissance led by shale gas'.[26]
Finally, the labor force and the health of the American family on the other hand - is in misery. 'between 2007 and 2010 the median American family lost a generation of wealth, putting them on a par with where they were in 1992. Last week the census revealed that median household income is roughly the same as it was in 1988 and that the poverty rate had actually increased since 1973. Meanwhile, median male earnings in 2010 were on a par with 1964...And while wages have stagnated and wealth has dissipated, costs have shot up. A family's health insurance contributions have increased 90% over the past decade. Over the past five years tuition costs have leapt 27% at state universities and 13% at private institutions above inflation. A nation that has long prided itself on being forward-thinking is reconciling itself to going backwards'.[27] In short, Forbes magazine reports that 'the 400 wealthiest Americans are worth a record $2.02tn, up from $1.7tn in 2012, a collective fortune slightly bigger than Russia's economy'.[28] And with the recent regulation which was adopted by both parties in power, namely, the prohibition of compensation for the unemployed who pass six months, the number of whom surpasses 1.3 million Americans, who were compensated $400 a week, turns out, according to an assessment, in loss for the general American economy for more than one billion a week. And this, because it has been increased the scale of unemployment: from 5.6 per cent in 2008 to 7% in 2013.[29]
The conclusion of all these is that the American elite has created an illusion, not only inside the country but abroad too, that it still continuous to be a powerful economy -let alone the conception of democracy which has never been applied in America. But, as we saw above, in concrete numbers and evaluations, from serious sources, at least as regards the 'facts', for which the western academic world is serious since it has not been taught to contemplate about systemic causes, the situation is completely dismal. For the reviving of its economy America needs urgently a permanent deal, inclusive and a clear objective, either "from above" or "from bellow". Namely, it not only has to withdraw from its hegemony and expansion all over the world, with its TNCs, banks and military, and to reduce expenditures, if not completely ban, the armament and army, but, taxes ought to serve merely for a transition period to an inclusive democracy,[30] founded on rational principles, scientific production and solidarity (and not competition) and, based on domestic and continental resources. This implies that this deal must be extended particularly in Europe, since, as we shall see next, not only facts but also the systemic causes, including the theses of orthodox economists, western "communists" and "anarchists", and particularly the case of Greece, for which is being propagated another myth -the myth that European citizens are being burdened by "saving" the Greek People- it is in a deeper crisis than America.
Ylli Permeti