Troubles ahead for world economy

Troubles ahead for world economy the 7.30 Report. Transcript of interview with Joseph Stiglitz.

Joseph Stiglitz is a Nobel laureate, a former chief economist of the World Bank and he chaired Bill Clinton’s presidential council of economic advisors.  His latest book, ‘Freefall’, is a worrying critique of the root causes of the Global Financial Crisis, and despite President Obama’s recent banking reforms, he says it could happen again. He’s also predicting another US economic slowdown. The veteran economist is on a lecture tour in Australia and I spoke with him in Brisbane today.

Joseph Stiglitz, if we can start with an up-to-date appraisal of the US economy: what is the state of the economy right now?

JOSEPH STIGLITZ, GLOBAL ECONOMIST: In a single word, weak, ah, and probably going to get weaker.

Hedge funds accused of gambling with lives

Fermented cocoa beans being dried. Cocoa prices have risen 150% in 18 months – but farmers have not necessarily benefited. Photograph: AlamyHedge funds accused of gambling with lives of the poorest as food prices soar refers to a report on how trading in food commodity derivatives inflates and destabilises food prices with devastating consequences for the poorest communities globally.

Deborah Doane, WDM director, said: “Investment banks, like Goldman Sachs, are making huge profits by gambling on the price of everyday foods. But this is leaving people in the UK out of pocket, and risks the poorest people in the world starving. “Nobody benefits from this kind of reckless gambling except a few City wheeler-dealers. British consumers suffer because it pushes up inflation, because of unpredictable oil and raw material prices, and the world’s poorest people suffer because basic foods become unaffordable.” The group used figures in Goldman Sachs’ annual report to estimate that the bank made a profit of $1bn (£650m) through speculating on food last year.

This report follows the issue blogged on here on July 2nd – How Goldman Sachs gambled on starving the world’s poor – and won.

David Harvey calculates that the global capitalist economy has to aim, for a variety of structural and systemic reasons, for about 3% growth per annum. As a result capital is always looking for forms of investment to achieve this. As one set of opportunities collapses or becomes exhausted – for instance the boom and bust 1995 to 2000 – capital looked elsewhere. When the bubble burst capital moved into property eventually leading to the toxic debts underlying the current economic crisis. More recently it has moved into commodity futures, destabilising markets such as energy and food. Regulations to control speculation on food prices were dismantled about 5 years ago spawning the food derivatives industry. Perhaps the latest money spinner for the speculators and casino capitalist will be carbon cap and trade. The full story has a number of components that need investigation – commodification, marketisation and financialisation, deregulation and the development of speculative derivatives markets. All of this is connected with privatisation, the loss of accountability and the erosion of democratic controls.

For a brief history of bubbles and burst see  The Great American Bubble Machine.

The depersonalisation of capitalism

I have been in email correspondence with my colleague Richard Kilminster following on from some very interesting and constructive comments on a draft article I am writing on critical pedagogy. The discussion concerns various issues around the marxist underpinnings and the normative basis of critical pedagogy as developed from the Frankfurt School Critical Theory and its successors, Habermas for instance. Richard’s main issue is that it all still depends to some extent on Kantian transcendental categories and a prioris that act as founding assumptions rather than empirically substantiated concepts. To this extent sociology generally is still in the thrall of philosophical forms of thinking, to its detriment. Richard strives for a post-philosophical sociology and to this end is developing the work of Norbert Elias who recognised the problem and made significant progress towards this goal.

Richard pointed me towards an article by Godried Van Benthem Van Den Bergh where he demonstrates how in practice  sociological analyses and diagnoses often look for the causes of the state of affairs of interest  in order to produce an explanation and, perhaps, help develop a plan of action or set of policies to alter that state of affairs. Often, in practice, these diagnoses and explanations take the from of  finding something to blame for the condition. This can then lead to a ‘personalisation’ of the causes in a manner not dissimilar to other sorts of pre and non-scientific orientations to the world. From a scientific point of view this is an obstacle to knowledge as this form of attribution of cause and explanation  “implies that one has to isolate the action(s) of one identifiable entity, whether individual, group or reified (and at the same time often personalised) ’cause’, from a complex sequence of events”. He gives examples of ‘capitalism’ and ‘modernisation’ being used in this way. This form of thinking, or at the very least this style of writing, is still prevalent in contemporary sociology. In a forthcoming article Richard gives a number of examples of this quoting from well known and influential current sociologists, for example  –  “modernity ‘is coming of age’ and is now ‘consciously abandoning what it was unconsciously doing”; “Post-modernity may be conceived of as modernity conscious of its true nature – modernity for itself”; ” What happens when modernization, understanding its own excesses and vicious spiral of destructive subjugation begins to take itself as object of reflection”? – and others.

With respect to ‘capitalism’ Richard points out that  ‘capitalistic’ social relations cannot exist without being embedded in “a whole socio-genetic complex of interdependencies that makes them possible. The specifically ‘capitalistic’ aspects may not in fact be the most instrumental in producing what are perceived as the undesirable consequences of contemporary global developments”.

This implies that ‘capitalism’ cannot be a singular foundational unit of analysis based on the notion that ‘it’ is the primary cause of what appear to be, or are assumed to be, ‘its’ effects and consequences. If this is a mistaken orientation than solutions may be misdirected and may exacerbate conditions rather than improve them, amounting to, perhaps at best, an amelioration of the condition rather than changing the system – like an aspirin ‘cures’ a headache without having any transformational effect on the underlying causes. In fact it can make things worse by developing new forms of subjugation, dependence and the reproduction of the very system we are seeking to change.

What is the broader sociological context that must be factored into an analysis of globalising capitalism for activists who want to do something about inequality, exploitation and the destruction of the environment? It will be interesting to see how Norbert Elias’s sociology conceptualises and constructs ‘capitalism’, its apparent contradictions and contemporary neoliberal ideology. If the analysis is too general and too synthetic it may be difficult to draw political and policy conclusions from it. In which case, pragmatically, where do we go?

Godried Van Benthem Van Den Bergh (1986) The Improvement of Human Means of Orientation: Towards Syntheses in the Social Sciences in Development Studies: Critique and Renewal Eds R Apthorpe and A Krahl

Most, but not all, of this article is available on Google Books

Austerity drive will hand billions to private sector

Austerity drive will hand billions to private sector, Friday 16 July 2010 21.50 BST

This report seems to confirm that the outcome of the ConDem’s budget and economic policy, intentionally or otherwise,  will be the front door, back door and side entrance privatisation of everything the corporations can lay their hands on that will turn a buck for their directors and shareholders. This surely compromises even more the fragile political democracy we still have with more and more services being managed from the unaccountable private sector. This has already taken a hit with the proposed integration of (unelected) business leaders directly into a business friendly and private profit orientated government. Why the former BP boss’s new government job is beyond parody Independent Friday, 2 July 2010.

Austerity: Why and for Whom? by Rick Wolff

Austerity: Why and for Whom? by Rick Wolff. On-line article at Links austerity programmes across Europe to conditions set by banks lending to governments due to fears of defaults on government debts. For instance the high rates of interest imposed on Greece in return for bail out loans by European banks. If governments default on loans then their credit rating may prevent them borrowing more, the banks will collapse and the Governments will not be able to borrow form banks to bail them out! Is this right? The banks have lent money to governments to bail themselves, the banks, out. Presumabley these are not the same banks – it is the banks not crippled by bad investment (the ‘national’ banks’?) that are lending to governments who then use the money to bail out the failing banks. The public funding cuts are to ensure governments can service these debts to the bank, maintain their credit ratings so that, if necessary, the governments can bail out the banks in the future. If the national banks lent the money to governments to bail out the failing banks, why couldn’t the banks have lent directly to other banks? I assume they want governments, their tax streams and assets, to guarantee the loans. It is generally recognised that European national banks will make significant profits out of lending to Greece as the interest rate is significantly higher than the banks can borrow money themselves.

All this leaves open the question – why do the austerity measures punish the poor and, despite everything, wealth still grows and concentrates? That’s because for the wealthy, every problem is an opportunity. And for the political right, ironically, via neoliberal policies, it is an opportunity to enact barely masked ideologically informed policies. Given the high profits banks will make out of loans to Greece, for instance, this looks like a direct transfer of money from the poor to the financial institutions that got us into the mess in the first place.

Reading 15-7-01

Considering the importance of liberalism in the current government’s economic and social policies, the restructuring and deficit reductions being undertaken throughout Europe voluntarily it seems and being forced upon less developed countries by the IMF etc. my reading over the last month, and still ongoing, has been an attempt to understand liberalism and how it is being ‘oerationalised’ across the globe in pursuit of state goals in general and the USA’s hegemonic project in particular. Apart from fairly abstract and theoretical readings I have been looking at concrete examples of neoliberal policies in accord with the principle “through their actions shall you know them”. This also looks at ways countries, areas and indigenous peoples have with varying degrees tried to resist the external neoliberal globalising forces. I will post here short reviews and comparisons of these readings in due course.

Currently reading:

Ray Bush (2007) Poverty and Neoliberalism: Persistence and Reproduction in the Global South Pluto Press
G Collier and E Quaratiello (1999) Basta! Land and the Zapatista Rebellion in Chiapas Food First Books
David Harvey (2005) A Brief History of Liberalism OUP
David Harvey (2010) The Enigma of Capital and the Crises of Capitalism Profile Books
John Holloway (2010) Crack Capitalism Plot Press
J Johnston & G Laxer ( 2003) Solidarity in the age of globalization: Lessons from the anti-MAI and Zapatista struggles in Theory and Society 32: 39-91
Mihalis Mentinis (2006) Zapatistas: The Chiapas Revolt and What it Means for Radical Politics Pluto Press

The Johnston and Laxer article is particularly interesting as it focusses on the central role of the Internet for linking national and global communication and resistance and the way that national governments have been unable to control the flow of information as they have in the past.

I will be looking at John Holloway’s other writing when I can get hold of the books. He has written specifically  about the Zapatistas and is referenced in Mentinis’ book.

Suggestions are welcome.

Caving in to the corporations?

“Health” Secretary Andrew Lansley seems to be in process of abandoning every health initiative taken by the previous Labour government, often based on a pretty near consensus of health professionals and social commentators and vigorously opposed by the food industry. Under the ConDems the corporations have won by the look of it, providing more evidence that pro business and private sector policies is all too often anti people and society policies. Mr Lansley, junk food and idiocy.

Perhaps a clue to why pro business is so often anti-people and society can be found in Pavan Sukhdev, head of the UN’s investigation into how to stop the destruction of the natural world, recent claim that modern businesses are “soulless corporations” that are in danger of becoming a “cancer” on society. He claims companies usually take a short-term view of the importance of the environment, and this short-term thinking is seen in their lobbying against new policies that could slow environmental devastation, he said.

This short-termism and unrelenting profit and growth orientation applies underpins a relentless and powerful resistance to all forms of regulation that create obstacles to ‘share holder value’. Things seem to have moved on very little since Friedman’s statement in the 1970s that in a “free-enterprise system” business’s only concern is with profit and has no responsibility for achieving desirable social ends (The Social Responsibility of Business is to Increase its Profits).

Lansley has killed off traffic-light labelling, which exposes hidden salt, fat and sugar against the advice of the British Medical Association, the British Dietetic Association, the British Heart Foundation and dozens of other health and consumer groups. He has rejected a plan by National Institute for Health and Clinical Excellence to prevent 40,000 deaths from heart disease, calling for a ban on trans fats, no TV junk-food advertising before 9pm and restrictions on takeaways close to schools. He plans to close the Food Standards Agency (although there is evidence this was already heavily influenced by the food industry and agribusiness).

His answer to all of this is that the food producers are in the best position to educate the public about healthy eating and diet. This is about as useful as saying casino financial interests are in the best positon to advise people on savings  and pension schemes.

Privatisation of everything?

In a previous post – A neoliberal budget for business and marketisation? – I began to document the claim that the emergency budget was informed by the supposedly discredited neoliberal economic doctrine. The recent changes to the education system and the NHS proposed by the ConDem government both seem to offer opportunities for ‘back door’ privatisation and the general neoliberal objective of commodifying and marketising as much of public sector provision and services as possible. In the case of the NHS the plan is too pass a large part of the budget to GPs who will provide or purchase services on behalf of their patients.  The private sector is already circling to pick up the spoils.

NHS faces radical pro-market shakeup
“The plans could represent the biggest shakeup of the NHS in a generation, with a whole tier of the NHS decapitated: 10 strategic health authorities would be abolished by 2012 and the 150 primary care trusts scrapped by 2013; up to 30,000 managers face being cut or redeployed. […] By 2014 every hospital will be a foundation trust and all will be allowed to leave public ownership while still providing public services”.

NHS shakeup: Private companies see potential to expand their role
“Private companies believe the shake-up of the NHS will lead to a big expansion of their currently small role, as many GPs will need their help to carry out their new role as commissioners of healthcare. Firms which already have small-scale involvement with family doctors are preparing to exploit the chance to gain an unprecedented foothold in the NHS once GPs start spending £80bn of NHS funds”.

How Goldman Sachs gambled on starving the world’s poor – and won

Posted by Johann Hari

By now, you probably think your opinion of Goldman Sachs and its swarm of Wall Street allies has rock-bottomed at raw loathing. You’re wrong. There’s more. It turns out the most destructive of all their recent acts has barely been discussed at all. Here’s the rest. This is the story of how some of the richest people in the world – Goldman, Deutsche Bank, the traders at Merrill Lynch, and more – have caused the starvation of some of the poorest people in the world, just so they could make a fatter profit.