Buffet and Lemann: two peas in pod

Jorge Lemann: won't eat what he produces

by Richard Mellor GED

Afscme local 444, retired

In a previous piece I commented on New York City’s mayor, Michael Bloomberg, having a certain worldview.  He believes that the city’s services and no doubt the existence of the city itself, is made possible through the financial generosity and sacrifice of billionaires like him.  In response to the accusation that NYC has become two cities, one for the rich and one for the poor under his governance, Bloomberg denies it and says, “if to some extent it is, it's one group paying for services for the other."  This reflects two separate and distinct views of the world based on class.

People like Bloomberg, Warren Buffet and their colleagues, are ruthless thugs really.  You cannot accumulate $27 or $45 billion dollars without being so, excepting a lottery win. They believe they are where they are because they are special; because they are smarter than those who get up and work for a wage all of our lives.  How can they not be smarter, they’re rich and don’t work.

Every ruling class justifies its rule this way and each member of the ruling class accepts that they are where they are through their hard work and diligence.  For the rest of us, just get off your butts and be prepared to take the risks.

But like all ruling classes, they are where they are through their control of the forces of production in society, something that overwhelmingly comes to them through family ties. Functioning as owners of society’s productive forces and wealth is a set up that their state, or what most workers call government, keeps in place through violence, and coercion.  Just look at that photo of the heavily armed police at that peaceful WalMart protest.  What are the police there to protect?  They are not there to ensure that the workers demands are met, that they get a better deal than starvation wages from the owners of WalMart who do no work yet posses more wealth than 90 million Americans. The police are there to defend the Walton family’s wealth.

These people have nothing in common with workers.  They may be Americans in name like us, or British, Japanese or South African.  On days like today, remembering the victims of the attack on the World Trade Center in 2001, they call for national unity; we are all together they claim. But they have a different view of the world.  This difference is greater than any religious, racial or national differences workers have between each other. Despite all the weaknesses and horrific things workers can resort to as society degenerates or as non-owners, we are far more collective creatures by nature of our daily existence in capitalist society.

I was reading in Bloomberg’s magazine, Business Week, about one of the 1%’s heroes.  Not Gates or Buffet, one of their heroes from abroad, a Brazilian.  His name is Jorge, Paulo Lemann; he’s also Swiss. Lemann is a coupon clipper that runs an outfit called 3G Capital. Lemann and his partners have been on a bit of a buying spree and now own H.J Heinz , Burger King, and Anheuser-Busch.  Burger King was once owned by another bunch of coupon clippers in a club called Cerberus that had the imbecile Dan Quayle on its board; the connection to established political families is a plus in the business world.

Lemann’s 3G and Buffet’s Berkshire Hathaway have equal stakes in Heinz despite Buffet putting up three times as much cash according to BW.  So Buffet trusts this guy. Not only that, Buffet refers to him as, “classy” and admits that Heinz will be, “Lemann’s show” according to BW. Buffet recognizes ruthlessness when he sees it.

Lemann has already proved to Buffet how “classy”he is firing 600 of Heinz’s office

Buffet with one of his employees

staff in the US and Canada, about 350 of them in Pittsburgh PA. And when they bought Burger King from Goldman Sachs, Bain Capital of Mitt Romney fame and a couple other coupon clipping outfits Lemann was even classier, ridding the firm of 28,000 employees, or putting it in business lexicon, shoving “…28,000 employees off Burger King’s balance sheet.”

Lemann brought in a former railroad executive to run Burger King, the man knew nothing about fast food, but that doesn’t matter as the food is not the object of this exercise. Whatever form of production the owners of capital choose to engage in, it is not the finished product as an object of consumption or use that they’re after, it is the surplus value contained in the commodity and realized in its exchange that matters. “What’s important is not knowing hamburgers, it’s knowing how to lead a company” says a former colleague; “It’s the kind of intelligence that transcends any specific business segment”. It’s about profits. 

Could Marx have been any clearer when he wrote:
“A schoolmaster is a productive laborer when, in addition to belaboring the heads of his scholars, he works like a horse to enrich the school proprietor. That the latter has laid out his capital in a teaching factory, instead of in a sausage factory, does not alter the relation.”

Yep, Jorge is a real hero.  He surfs, (30 foot waves says BW) plays tennis even playing in a Wimbledon event.  In fact, Jorge admits that it wasn’t the things he learned at Harvard that gave him, “…a certain confidence when it came to taking risks.” It was that 30-foot wave he surfed in Copacabana. It all comes down to be prepared to take risks, take a chance.  If you’re bold enough to take a chance you can become rich and famous like Jorge and others like him.  The more than $30 million his dad left him wasn’t what got Trump started of course, and that Lemann’s Swiss father was a dairy entrepreneur didn’t give him a certain confidence, a willingness to take a risk someone without that sort of backing might pass on. When you fail, as George W. Bush did in most of his ventures, the moneyed interests, family or friends are there to rescue you.  Who won’t take risks with that backing? They’re not risks at all.

Lemann went to the American School of Rio de Janeiro.  This school is an institution designed to develop and strengthen Brazilian capitalism and its ties to US corporate interests.  Its creation was made possible by funding from the U.S. Department of State, the Ford Foundation, private individuals, corporations, and the American Chamber of Commerce. So Jorge is not just an ordinary guy who pulled himself up by his bootstraps.  He’s not a self made man, there’s no such thing. Everyone has help and people like Lemann have the most help, the most handouts, have all the connections in the right places.

Jorge Lemann places money above all things, not in the same way as workers do, to pay the rent or mortgage or feed the family or for that little extra cash for pleasure.  People like Lemann seek to accumulate capital, live through the profit of capital as opposed to productive labor.  He places the accumulation of money above social needs. This is why Warren Buffet and Sam Walton, the retail outlet’s founder, gave him an audience.  Lemann subscribes to hatchet man Jack Welch’s business philosophy, the 20-70-10 rule on how to deal with employees, “Promote 20 percent…maintain the middle 70, and fire the rest.”  A simple thing really.

Lemann may be a capitalist involved in the production of food and beverages, an important aspect of productive life for human society.  But he doesn’t eat the stuff he produces. He ate a Burger King hamburger once and wasn’t impressed.  “What he liked about Burger King was how it generated cash.”,  He admires the Goldman Sachs model as well, “Innovations that create value are useful” is one of the favorite maxims.  We must be clear that by “value” capitalists mean surplus value, the value created above that paid out for wages, value for which the capitalist gives nothing in return and that is the source of their profits: “People say that the customer comes first and all that”, says Vincent Falconi, a management consultant hired by Lemann when he owned the Brazilian beer company AmBev that provided the seed money for the purchase of AB InBev “but actually it’s cash”

And cash flowed in to InBev which sells one in every five beers in the world according to BW.  But most of it went in to Lemann and his partner’s bank accounts.  This no doubt helped replenish the $6.4 million Lemann and his partners were fined by the Brazilian regulators for crooked dealings at AmBev.

According to Business Week, Heinz is different as there is “less fat to trim”, so “How then, to wring more value from Heinz” is the question Business Week poses. As workers we know about how bosses “squeeze”more value from a company only too well; how they “trim the fat.” We experience it in the unemployment line, longer hours for those that don’t get laid off, less pay, increased pace of work as job cuts mean fewer hands doing more.

So far production, jobs at Heinz are still intact, but “workers are nervous” says one Union official, and so they should be.  This perpetual insecurity and fear is another cause of stress and the by-products of it, poor health, family break ups, drug and alcohol abuse and domestic violence. Waiting to be fired is not freedom. But that’s the market.  The Union official has no alternative to the waiting, or the unemployment that follows “fat trimming”. Fighting back, taking the production of society’s necessities out of the hands of the Jorge Lemann’s of this world is not something they consider.

Maybe I’m being a bit selfish here because writing about this is a sort of catharsis for me. It keeps me on my political toes, reminding me (and hopefully some who read it) of how the world really works and how absurd it is that the production of a social necessity like food is in the hands of private individuals and that production is set in to motion only if profit accrues to the owners of capital like Lemann, the moneylenders and other coupon clippers. It reminds me of who my enemies really are.

Lemann could have, as the quote from Marx stated above, invested his capital in condom production or a mining concern, it matters not to these people.  What matters is the end result, more money coming out of the process than went in.

A friend I talk to about these things worried that to take these important social functions out of the hands of private individuals would mean a bloodbath, that we will deny them life itself.  That is not necessarily so. It has not been workers that initiated violence in the historical struggle for some control over our lives at work and the respect and dignity that comes with it.  It has been the bosses and their government that resorted to violence, who hired gun thugs and entire armies to keep working people down.  The violence against strikers; the black folks who fought to eliminate Jim Crow and the apartheid south, and all Americans who fought for equality was always initiated by the state and its agents.

The Jorge Lemann’s , Warren Buffets and Donald Trumps of this word are all welcome as productive contributors in the society so many activists are fighting to build.  They just aren’t going to continue to live off the labor, poverty and misery of the vast majority of humanity.

Read More

Global capitalism: The global search for value

by Michael Roberts

In my view, we are now in a Long Depression, centred in the advanced capitalist economies but also affecting the emerging capitalist economies.  The latter do better because they still have ample supplies of cheap labour available to exploit (well, at least some larger emerging economies do).   So absolute surplus value can be increased without Marx’s law of profitability applying too strongly.  What do I mean by that?

Well, capitalists are permanently engaged in the search for value, or more specifically, surplus value.  They can get that globally by drawing more of the population into capitalist production. The big issue is how much longer capitalism can continue to appropriate value from human labour power when the workforce globally can no longer expand sufficiently.

Ironically, the UK’s right-wing City paper City Am put it from the perspective of capital: “People, not commodities, land or even capital, are the ultimate resource of an economy, as the US academic Julian Simon famously put it. Without talented, motivated, skilled and educated individuals, nothing is possible; capital itself is a product of labour.  Human ingenuity is able to overcome everything. Malthusians who dream of a shrinking population and who reflexively believe that every country is over-populated are wrong. This is always a lesson that nations suffering from shrinking populations relearn at great cost: all the productivity growth in the world is rarely enough to compensate for the psychological and actual effect of a declining population.”

More important, more people means more potential value to be appropriated by capital.  But getting more value and surplus value through extending the size of the workforce is increasingly difficult or even impossible in many advanced capitalist economies.

Instead, in these economies, capitalists must try and raise surplus value though the intensity of work and through more mechanisation and technology that saves labour i.e relative surplus value.  But that, as Marx explained, brings into operation the law of the tendency of the rate of profit to fall and the ultimate barrier to further accumulation and growth in value (see my post on http://thenextrecession.wordpress.com/2012/09/12/crisis-or-breakdown/).

Indeed the crisis in the south of the Eurozone is creating permanent damage to these economies: it is not just that their GDPs are shrinking, but there is an exodus of the workforce. The number of Greek and Spanish residents moving to other EU countries has doubled since 2007, reaching 39,000 and 72,000 respectively in 2011, according to new figures on immigration published by the OECD.  In contrast, Germany saw a 73% cent increase in Greek immigrants between 2011 and 2012, almost 50% for Spanish and Portuguese and 35% for Italians.

Japan is also suffering from the lack of expansion of its workforce.  In the short term GDP per capita growth in Japan looks better than its GDP growth so that US GDP per capita growth in recent years is little better than Japan.  Indeed on a per capita basis, the US has been stagnant since 2008 and Japan has risen slightly.

But longer term, this is bad news for Japan as its debt burden will mount and its working population to dependents will decline.  This is a growth and debt time bomb.  The move to crisis may be slow because Japan has huge reserves of FX reserves and foreign assets built up over decades so it has lots of funds to fall back on.  Japan’s net international investment position is 56% in the positive while the US is 19% in the negative.  Also its debt is mostly owned by its own citizens (only 7% by foreigners) while US government debt is 40% owned by foreigners.  However, the US dollar is still the world’s reserve currency, giving the US considerable leeway in funding its deficits and debt.  Japan’s banks and government are so intertwined that they will both go down together.  In the 1990s, the banks were bailed out by government; currently the banks are bailing out the government.  Next time, they both go down together.

George Magnus (Economic insights by George Magnus, 19 June, Demographics: from dividend to drag) recently pointed out that the support ratio in the US and Europe in the early 2000s was similar to that of Japan ten years earlier. It shows that from about  2016, the decline in China’s support ratio starts to speed up, so that by 2050, it will have fewer workers per older citizen than the US. It also includes India, by way of comparison, as the representative of the bulk of emerging markets and developing countries. India’s support ratio is predicted to grind lower but even by 2050, it will still be only the same as that in Western countries in the 1990s.  From the 1960s onwards – a little earlier in Japan – the total support ratio rose everywhere and more or less continuously, until about 1990 in Japan, and 2005-2010 in the US and Europe.  Japan’s support ratio is now approaching 1.5 workers per older citizen, and is predicted to carry on falling to parity in the middle of the century. The US and Europe are predicted to follow Japan, though support ratios are not expected to fall as far.

China and other emerging economies have not yet reached the point where the working population is no longer rising and the expansion of absolute surplus value is restricted – the so-called Lewis turning point (see my post, http://thenextrecession.wordpress.com/2012/11/16/chinas-transition-new-leaders-old-policies/).  But China is not far away.  In the meantime, China is pushing ahead with a sweeping plan to move 250 million rural residents into newly constructed towns and cities over the next dozen years — a massive of expansion of labour power into production.  The broad trend began decades ago. In the early 1980s, about 80% of Chinese lived in the countryside but only 47% today, plus an additional 17% that works in cities but is classified as rural.

And there are still huge reserves of labour as yet untapped, particularly in Africa.  The latest UN population projections for the world’s economies show that Africa is expected to dominate population growth over the next 90 years as populations in many of the world’s developed economies and China shrink.  Africa’s population is expected to more than quadruple over just 90 years,  while Asia will continue to grow, but peak about 50 years from now then start declining.  Europe will continue to shrink. South America’s population will rise until about 2050, at which point it will begin its own gradual population decline. North America will continue to grow at a slow, sustainable rate, surpassing South America’s overall population around 2070. 

China’s population is soon expected to go into decline , whereas India’s is expected to grow strongly for another 50 years, and the US’ and Indonesia’s populations are projected to grow steadily. Nigeria’s population is expected to explode eight-fold this century.

Read More

Defending the indefensible

Source: AlterNet

Note: US is ranked 27th in median wealth.  Graphic did not appear with original article.

by Michael Roberts

Greg Mankiw is professor and chairman of the prestigious economics department of Harvard University.  He is also author of the most widely used textbook on economics by university undergraduates.  So he could not be more ‘mainstream’.  Mankiw has a blog (http://gregmankiw.blogspot.co.uk/) and just published a new paper entitled,
Defending the 1% (http://scholar.harvard.edu/files/mankiw/files/defending_the_one_percent.pdf).

Mankiw is trying to be provocative and clever in this paper by arguing that there are perfectly good economic and even moral reasons for the top 1% of income earners in the US to have their huge share of total income.  In 2010, the top 1% had 17.4% of all income earned in the US, by any measure a very extreme level of income inequality.  As has been documented in many studies, that share of income going to the 1% has risen sharply from just (!) 7.7% in 1973.   Mankiw seeks to justify (defend) this more than doubling of the income of the 1% against the cries and protests of the Occupy movement.  He feigns to show sympathy with their ‘principles’ but his paper aims from beginning to end to refute all the arguments of ‘the left’ that this inequality is morally wrong or inefficient by using the principles of mainstream economics and a “healthy dose of political philosophy”.

His first defence is the one most used, namely that the reason the top 1% have had a rising share of income in the last 40 years has been the growing gap between the skills and education of workers.  ‘Skill-biased technical change’ has increased the demand for skilled labour and so incomes for the skilled have risen faster than the unskilled.  Mankiw quotes the usual study of his fellow Harvard economists, Claudia Goldin and Larry Katz  who have described this as a “race between education and technology.”   But there are plenty of other studies that argue something different has been going on.  In a working paper from the OECD, Kaja Bonesmo Frederiksen (Income inequality in the European Union, OECD Working paper 952, 16 April 2012), found that the reason that the top 10% did better was down to several factors: a decline in progressive taxation, rising capital gains from property and share ownership, so-called performance related pay, weaker trade unions and globalisation – indeed all the elements of the neo-liberal era – and not better technology skills (see my post, http://thenextrecession.wordpress.com/2012/12/12/apples-robots-and-robber-barons/).

The differences between the pay of the skilled and unskilled is not much different in the US compared to the UK or Europe.  And yet, as the OECD working paper shows, the ratio of the share of real disposable income growth going to top 10% over growth in income going to the bottom 10% averaged 2.6 times for the European Union, 9.1 times for the UK and a staggering 21.9 times for the US.  That means the top 10% of income earners in the US got 22 times more growth in income that the bottom 10% between the mid-1980s and 2008, while in France and Greece income growth for the bottom 10% was faster than for the top 10%!   So the most ‘neo-liberal’ capitalist economies saw the most unequal expansion in incomes.

Mankiw wants to dismiss the arguments of Joseph Stiglitz (The price of inequality, 2012) who argues that the top 1% have scooped the lion’s share of incomes because of ‘rent-seeking’, namely the ability to appropriate incomes produced through protectionism, cronyism and favourable regulations on tax and profits.  Mankiw says that ‘rent-seeking’ is no worse than 40 years ago, but this is an assertion without evidence in the same way that he criticises Stiglitz as making.

Mankiw insists that “the very wealthy get that way by making substantial economic contributions, not by gaming the system or taking advantage of some market failure or the political process”.  Yet it is difficult to imagine that the chief executives of top companies have done so well because they are so much more skilled than 40 years ago rather than just because they have been able to siphon off more corporate profits through their control of company boards.  Mankiw denies that is the case because non-quoted private companies pay their chief executives even more than the boards of quoted companies pay theirs.  What that proves I don’t know, except that family companies can pay the head of their tribe whatever they like without any reference to wider shareholders.  The UK’s High Pay Commission found that chief executives  of large companies are often paid 70, 80 or over 100 times the salary of their average worker, when three decades ago the ratio usually stood at 13 to 1.

According to the UK’s Financial Services Authority, 1800 bankers in the City still earn more than £1m a year after the banking collapse. So income rewards are not related to performance, but to the power of capital.   The UK’s Institute of Fiscal Studies found that bankers’ bonuses had played a large part in creating this divide. “If you look at who is racing away, then half the top 1% of high earners work in financial services,” said the IFS researcher.  Mark Stewart, a professor of economics at Warwick University, has shown that “almost all the increase in inequality has come from financial services” in the past 12 years.  But Mankiw tells us that these investment bankers are “most talented” and therefore should be “highly compensated”.   He sort of admits that the earnings of the top investment bankers might just be ‘rent-seeking’.  So what society needs is to “devise a legal and regulatory framework to ensure we get the right kind and amount of financial activity”.  But “that’s a difficult task”.  Indeed it is.

Mankiw goes on: “a well-functioning economy needs the correct allocation of talent.  The last thing we need is for the next Steve Jobs to forgo Silicon Valley in order to join the high-frequency traders in Wall Street.  So we should not be concerned about the next Steve Jobs striking it rich but we want to make sure he strikes it rich in a socially productive way”.   If Steve Jobs is so ‘socially productive’, how does Mankiw suggest that we ensure such people are paid for their value contribution rather than all the income going to ‘rent seekers’ in unproductive jobs like footballers or commodity traders?  He has no answer in this paper. But anyway, who is to say that the great ‘innovators of  technology’ must be rewarded more than those who do just as important jobs like nursing, refuse collecting, sewage etc.  And indeed, many of the great inventions, discoveries and technological advances have been the product of teamwork and cooperation and not down to some hugely talented individual.

Mankiw also seeks to defend the 1% by arguing that their skills and cleverness are inherited: “smart parents are more likely to have smart children”.   So the reason some have more income than others is that they inherit their cleverness from their parents and there is nothing we can do about it.  It is a genetic inequality.  What Mankiw mistakes here is genetic differences with inheritance.  Genes may be passed on, but there is no reason why incomes or wealth should be passed on from parent to child.  The top 1% of income earners can perpetuate their income status for their children, but not because of their genes but because of their influence.  Take the current scandal that internships in lucrative companies can be arranged by rich parents working in them or knowing the contacts, while equally clever poorer kids don’t get a look in. 

Okay, Mankiw says, let us assume that there are serious inequalities of income that are ‘unfair’.  What can be done about it?  Apparently little.  Mankiw correctly points out that the US  income tax system is already progressive.  In other words, the more income you ‘earn’, the more you pay as a percentage in income tax.  The poorest fifth pay just 1% of their income in federal taxes, the middle fifth pay 11%  and top 20% pay 23%, while the top 1% pay 29% of their income in tax.  So federal taxes are progressive.  So what’s the problem, says Mankiw.

But federal taxes are not the only taxes that people pay (see my post, http://thenextrecession.wordpress.com/2012/09/19/romney-and-the-47/).  People also pay sales taxes, VAT, insurance taxes, capital gains tax and payroll taxes.  And these are not progressive at all.   Then there are the subsidies, allowances and exemptions from tax usually paid to the better off.  There is every reason to conclude that the whole taxation system could be way more progressive and so bring about greater equality of incomes.

But Mankiw appears to reject the case for government applying any redistributive  policies at all.  After all, he says, if you are born with two kidneys and somebody else has two failing ones, government should not be able to enforce the removal of one of your kidneys to give it to the other person.  Mankiw equates the forcible removal of a person’s kidneys with the democratic decision of a government to make top earners pay more to help lower earners and spend of public goods!
Mankiw prefers what he calls a “just deserts” perspective – namely that a person should get an income congruent with his contribution to society.  On this perspective, there should not be higher taxation of those earning more because they are only receiving their ‘just deserts’, an income that matches their ‘marginal productivity’.  Mankiw thus presents us with the neoclassical concept of marginal productivity – a concept hugely discredited as bearing no resemblance to the reality of capitalism (see Fred Moseley’s critique of Mankiw and marginal productivity,http://www.paecon.net/PAEReview/issue61/Moseley61.pdf).

Mankiw discusses only the inequality of income in the US.  But global inequality is even greater (see my post, http://thenextrecession.wordpress.com/2010/01/10/20/) and clearly not the result of just technology and skill differences, but instead the product of trade and capital flows dominated and controlled by rich capitalist economies over weaker ones.

And Mankiw only talks of inequality of income.  But under capitalism, private (not common) ownership of financial assets, real estate and the means of global production is key.  So inequality in these ‘social’ assets is much more important and even greater than with incomes (see http://thenextrecession.wordpress.com/2012/02/28/free-markets-and-global-wealth).  The power of capital dominates and exploits labour and thus enables the 1%  to reap the benefits of the value created by the 99%.  Mankiw has nothing to say about this.

Marx never advocated ‘equality’, if we mean by that completely equal incomes or personal wealth for each person or household unit in a society.  But neither was the Marxist perspective one of ‘just deserts’.  Instead, it was “from each according to his/her abilities; to each according to his/her needs”.  People (Steve Jobs) may have different or ‘unequal’ abilities, but a commonwealth would provide for all according to their needs.

Read More

The world is rich. The problem is the rich control the world.

by Richard Mellor
Afscme 444, retired

We hear day in day out about the massive poverty and hunger that exists in the world. NGO’s and various non-profits have been around for decades appealing for assistance in feeding the world’s poor.  In the third world, water is as precious as gold.  Sewage and water sources run parallel in the streets due to the lack of modern infrastructure systems.

More often than not, the experts in the universities and think tanks of the 1% drag the age-old Malthusian explanation out of the closet.  There is simply an overpopulation problem. It is the poor that are to blame, if only they’d have fewer children.

But as I have pointed out in previous blogs, it is not too many people that are the problem.  It is not the lack of medical knowledge or technical expertise that leads to staggering infant and adult death rates in some parts of the world. It is the lack of social infrastructure and the capital needed to provide it.

The world produces enough food to feed everyone according to Hunger Notes.org 17% more calories today than it did 30 years ago.  But food is a commodity and its production does not take place if the end product cannot be bought and the value added during the production process realized.  The capitalist class would call this lack of demand. But in the world of the market, if you can’t pay you can’t play. No money for food, then you starve. This is the absurdity of capitalism that Marx wrote about, that we starve amid plenty. He wrote in 1848:

“It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce.”

Unicef estimates that between 2000 and 2010 92 million children died form hunger and diseases, “…many of the illnesses and conditions that children suffer are easily preventable, technically.”  says Global Issues, in other words, they are really what we might refer to as “man made” deaths.  They are in actuality, market induced deaths. Almost 2 million children a year die form diarrhea due to lack of safe drinking water, another market induced crisis with which even the UN seems to agree:

“We reject this [Malthusian perspective that global water problems are a problem of scarcity and population growth]. The availability of water is a concern for some countries. But the scarcity at the heart of the global water crisis is rooted in power, poverty and inequality, not in physical availability.” (2006 UN Human Development Report P. 2)

The cost of bringing people safe water is negligible when compared to the concentration of wealth.  “The world’s billionaires — just 497 people (approximately 0.000008% of the world’s population) — were worth $3.5 trillion (over 7% of world GDP).” says the World Bank.  The world’s richest, Business Week claims, have a collective net worth of $2.8 trillion.  Either way you measure it, there is plenty of money in the world. These characters spend half their time hiding this wealth to protect it, form ex-wives, estranged children and the rest of us. But how do they get it?

Russian billionaire Dmitry Rybolovlev, who is squabbling with his wife over a $9 billion nest egg

Dmitry Rybolovlev

and who has his cash stashed all over the world, made most of his money (including $500 million in art, $36 million in Jewelry and an $80 million yacht) “…from the sale of two potash fertilizer companies for a combined $8 billion…” Business Week adds.

But how did he come to own these huge operations; and in such a short period?  It’s quite simple really and one of the reasons Gorbachev was so popular with the B movie actor and US president Ronald Reagan and the global 1%. Gorbachev was a former leading Stalinist bureaucrat.  He was General Secretary of the Communist Party of the Soviet Union during the period when one of the most repressive totalitarian regimes in history began to draw its last breath and collapse under its own bureaucratic weight.

Gorbachev and his old buddies including many former KGB thugs like Putin who reached the ranks of Lieutenant Colonel, wasn’t about to go down with the sinking ship. What happened in a nutshell, and why we see so many prominent Russian millionaires and billionaires is that the old KGB and moribund party men appropriated the collective and collectivized  wealth of the Soviet and Russian people.  The US capitalist class welcomed the plunder and their former KGB credentials were a thing of the past as long as capitalism could flourish.  That’s where Rybolovlev and other Russians like him got their wealth.

No doubt readers are getting a bit bored with it but there is a need to hammer it home to counter the propaganda of the world’s bourgeois that there is not enough money to feed, clothe, house and provide humanity with a decent and productive life. I am talking about the claim by the Tax Justice Network that wealthy individuals, (we’re not talking corporations here) stashed as much as$32 trillion in offshore accounts in 2010 in order to avoid taxes.  This amounts to the combined GDP of the U S and Japan. “Fewer than 100,000 people own $9.8 trillion of offshore assets..”  BW claims.  This exists as more than 9 million people die worldwide each year because of hunger and malnutrition; 5 million of them are children.

This situation is not something that cannot change.  It is not an insoluble dilemma. It is not the fault of the victims, of  “human greed” in the abstract or of “natural disasters” or the by-product of supernatural squabbling between a benign god and his disgruntled fallen angel. It is a very simple; the Russian billionaires for example attained their rapid billionaire status simply through the transfer of the collective wealth of society to individuals including the means for generating that wealth.  We solve the problem by transferring collective wealth, and more importantly, the means by which it is created, the ownership of the means of production, distribution and exchange, from private individuals to the collective.

Through this process, we can emerge from the depths of depravity to the apex of civilization.  True freedom.

Read More

The 1% fleeing to tax havens with our money

The real welfare cheats

by Richard Mellor

Afscme Local 444, retired

Numerous reports have come out in the last few weeks about the massive accumulation of wealth by a small sector of the US population.  One of these characters is John Paulson. Paulson is a bit of a waster, a coupon clipper who profits from the misery of others.  He does no productive work.

He has a lot of money though.  He is famous for one of the bets he made.  “What bet was that?” the reader may ask.  “A bet on a horse, the lotto, a card game?” 

No, my friends, John Paulson is smarter than that.  He made $15 billion for his hedge fund betting that workers, people that worked hard all their lives to build this society we live in, would be bled so dry by moneylenders that they’d find it impossible to pay their mortgages and default on them.  He was right.  The subprime market fell to pieces and Johhny boy was $15 billion better off.

The subprime market was primarily poor people, senior citizens, and the disabled; people with weak credit histories which means they couldn’t pay the moneylender their blood money.  A major section of this market was African American and other people of color and poor whites. The effect on these communities was devastating.  ,“…something very nasty is going down.” wrote the Financial Times’ John Gapper at the time,  explaining that,  “Some 52 percent of loans made to black people in 2005 were subprime and 80 percent of these subprime loans were exploding Arms.”  (Adjustable Rate Mortgages) (1)

Martin Eakes, a credit union CEO estimated at the time that this catastrophe, could well be “the largest loss of African-American wealth in American history.” (2) That’s if we exclude 300 years of unpaid Labor of course.

I will never forget the words of one of the coupon clippers’ victims, a woman named Gertrude Johnson still working as a health aide at the age of 89.  That in itself is pretty bad, working till you drop. Gertrude’s mortgage had ballooned to more than $3000 a month and she simply couldn’t go on. "I just wanted to be able to eat and sleep in my house and have a roof over my head…", she told the Wall Street Journal,  "Every day at midnight when I go to sleep, I think maybe when I wake in the morning they'll tell me to get out." (3)

Indeed, the collapse of subprime was very good for John Paulson.

But poor John hasn’t always had it so good, he made a few bad bets since then but he still wants to protect that $9.5 billion of his own money (more accurately, money belonging to the above Ms. Johnson and others) he’s invested in his own hedge funds.  So he’s looking to move to Puerto Rico where a new law eliminating capital gains on his $9.5 billion is on the books.  (good thing there's no poverty in Puerto Rico). This would definitely help him keep more of the money he acquired from the misfortune of those wanting a roof over their heads.  With this new law he would not have to pay local or US federal taxes on his capital gains unlike in NYC where long term capital gains are taxed at 28%.

Paulson is looking at a nice neighborhood of San Juan where an 8,379 square foot house lists for $5 million according to Bloomberg Business Week.

So Paulson and other like him will have to live in Puerto Rico 183 days of a year to take advantage of residency and I’m sure they won’t have a problem with that.  If you can invest a sum of $9.5 billion you can sure bribe officials.

There are more and more coupon clippers moving to Puerto Rico much like some of the European super rich who are fleeing higher taxes, even changing their nationality to avoid them. People like Paulson are global citizens.  Their loyalty is not to any country or similar patriotic nonsense.  Another important aspect of this is that as long as we as workers accept in our own mind that Paulson and others like him have the right to own capital, much like industrial capitalists own factories, then we cannot change things for the better.  Capital is an integral part of the process of production allowing the exchange of commodities to take place; it is the lubricant of society as many economists have explained. 

But wealth in the form of capital is put back in to production and should also be invested in social infrastructure, housing, transportation, education, health care and other crucial needs of a modern society.  Wealth is a product of Labor; there is no other source. It is the product of human Labor power in use.  In our society this wealth, this surplus value created through the Labor process, is the property of capitalists, they are the rightful owners of it in such a society, a society in which those who work get nothing and those who don’t get all.

We have to challenge this right and challenge it first in our own consciousness because we are taught from day one that Paulson and others have a right to accumulate this wealth, this product of someone else’s Labor. But it is ours. It is our collective product and therefore it has to be taken in to our collective ownership and allocated in a way that benefits society as a whole, including John Paulson. He has a right to a secure and productive future free from want of basic necessities, something his activity denies everyone else.We should not deny John Paulson a roof over his head.

There is no shortage of money in society, the US or otherwise.  Poverty, disease, famine, hunger, wars, all the attacks on social services here in the US, these are all primarily a by- product of the economic system of production that Paulson and others govern and perpetuate.

Paulson thought nothing about making $15 billion off of millions of people who were struggling to pay the moneylenders for the right to have a roof over their head.  We should not worry about taking that money back from him.  It’s ours.

(1) FT 3-19-07

(2) ibid

(3) WSJ 3-12-07

Read More

War on Iran, War on Terror: No war on homelessness

By Richard Mellor

The Wall Street Journal reports today that for the first time, more than 50,000 people slept in New York City’s homeless shelters each night in January this year.  This is the size of a small town and it doesn’t include those that sleep on the streets; the sick, the disoriented and mentally damaged victims of capitalism and the free market.

The Huffington Post pointed out that there was19 million vacant homes in the US in 2011. This recent figure on NYC homelessness points out that it is families that are swelling the ranks.  Homelss families have risen 7.8% in Boston, 18% in Washington DC (the seat of government in the US) while the number of children sleeping in shelters in NYC has risen 22% in the last year. A staggering 21,000 children, a figure the Wall Street Journal calls “unprecedented”and equal to 1% of NYC’s young people slept in a shelter each night in January.  In this world city whose mayor, Michael Bloomberg has a net worth of $27 billion and is home to the United Nations, Wall Street, millionaire film stars and corporate law offices, homeless families have increased 73% since 2001 and  21,000 children have no permanent housing. This is nothing less than criminal.

This is occurring as Obama and Biden are assuring US corporations and the Israeli Lobby that war with Iran is not off the table and the absurd War on Terror shifts its focus to uranium and natural resource rich Mali and Saharan Africa. What is off the table is a war against speculators, coupon clippers and slumlords.  What is off the table is the war against poverty and homelessness, by-products of their precious market.

Trillions of dollars are spent on predatory wars fought by US workers on behalf of Wall Street and the corporations and 22 veterans a day commit suicide as a result of it. The bankers that wrecked the economy were bailed out by the taxpayer to the tune of trillions of dollars.  Rich individuals are known to have stashed more than $26 trillion, the equivalent of the combined GDP of the US and Japan in offshore accounts to avoid taxes and all this as public services are slashed, jobs eliminated and wages driven downward contributing to further homelessness; even the WSJ can’t ignore this reality but goes no further than that.

The voices of opposition are muted. The heads of organized Labor whose worldview mirrors the bankers, coupon clippers and other wasters whose actions decimate our social welfare and pollute the environment, plead with the bosses and their representatives in the Democratic Party to return to the good old days, “Please, please, just be a little nicer.”

At its peak, mighty US capitalism could not provide its own population with the basic necessities of life. In its decline it has become mired in debt, increases its plunder of the natural world and the former colonial countries and is forced to put its workers and middle classes on rations.  It is taking from the American workers all that we won through a century and half of struggle and is doing so with the help of the leaders of the Trade Union movement.  This will not continue unabated.

Nineteen million vacant homes amid mass homelessness. “As many as 3.5 million people experience homelessness in a given year,1% of the entire U.S. population or 10% of its poor), and about 842,000 people in any given week..) according to some data.  Yes, America the free.

Why can't they just go get a job?

The difference between the capitalist system and its predecessors is this: We starve amid plenty; we lack shelter as structures become dilapidated as they remain unoccupied; we are denied health care because we can’t pay for it. We become impoverished amid abundance.

US capitalism is more threatening in decline than in its ascendance.  It is armed to the teeth. It supplies more arms to humanity than the rest of the world combined. Its corporations dominate the world and own the rights to everything from corn seed to water. It is a truly dangerous animal in its demise.  As we used to say, even a match glows bright moments before it is extinguished and US capitalism will become more ruthless as its global influence wanes and its dominance threatened.

US workers are yet to see the worst, the likes of New York’s Mayor Bloomberg, Warren Buffet, Donald Trump, the gnomes of Wall Street and the owners of industry are not finished with us; they will defend their system and it will be done on our backs.

The US working class will not take this lightly forever, fill shelters, complain without action, withdraw form the struggle. This country will explode at some point and we will see what we have seen in Europe if not at a greater level; our history is a revolutionary one.

Workers will be forced to draw the conclusion that there is a far greater threat to our well being than al Qaeda, and its domestic. They will look forward for alternatives as they struggle to defend what we have. Capitalism will be challenged.

Read More

Wealth inequality in America

Read More

A US ambassador's tough life. Botswana? "No thanks."

US ambassador's UK home

by Richard Mellor

All this talk of "Government by the people for the people" sounds good, but "which" people are we talking about is important to understand.  "The people" are not all equal in a class society such as ours. I had some guy tell me the other day that he was a capitalist but there's no "capitalist class" so I guess the US Chamber of Commerce, the Business Round Table and the National Association of Manufacturers has a huge percentage of its membership that get a wage check every two weeks or so, you know; plumbers, retail clerks, teachers.  The IMF and World bank boards are full of working folk too no doubt.

Let's see, I wonder if I could become the US ambassador to the UK.  I'm originally from there and know a bunch of folks back there, some good dart players too.  I used to work in a glass factory once so know a bit about assembly work as well as sewer construction. It seems I'll have a bit of competition though.  The leading contender for that job is Anna Wintour the editor in chief of Vogue Magazine. According to Business Week Magazine, she raised $500,000 for Obama and "inspired the Runway to Win" fashion line, the Obama handbags and other important stuff that brought in $40 million more.

Wintour getting the plum job isn't guaranteed either. Obama's national finance chair, Matthew Barzun who married an heir to the Kentucky bourbon fortune and Marc Lasry, a coupon clipper (Hedge fund manager) who raised more than $200.000 for Obama are alos in the running.  I wonder as a retired backhoe operator if I might have a chance, especially as I didn't even vote for Obama.

Thirty one percent of US ambassadorships are political appointees according to The American Foreign Service Association (AFSA) with the rest being career diplomats.  The best, most lucrative, go to the political appointees.  The present ambassador to the UK is Louis Susman, an investment banker.  Having these rich folks as ambassadors in the wealthier countries is important as the budget allotted to these embassies does not cover all the parties and expenses so the wealthy cough up a million or so of their own money.  "Just filling the flower vases for the embassy in London is very expensive." Tex Harris, the former president of the AFSA says.   The current president, Susan Johnson defends the lavish parties and gatherings that are necessary to help spread peace and democracy throughout the world noting that spending taxpayer money on lavish parties has "always been a sore point for people who misunderstand that this is work, it's not play."

What heroes these representatives of ours are.  Spending their own hard-earned money expecting nothing in return but the welfare of millions of American workers as they help build a peaceful and stable global community.  The UK ambassador has lots of room to hold such events too, a 12-and a half acre estate in London.  Italy's not bad either coming with a villa and a 5000 bottle capacity wine cellar.

These diplomatic expenditures are necessary, "..in the hopes of encouraging conviviality and commerce between their countries" BW writes noting that through a US government "...art in embassies" program they can adorn the walls of their establsishmen with the finest art from US museums.

This is diplomacy in action, sacrificing all for the welfare of others.  Wikileaks founder Julian Assange is under what amounts to house arrest in the Ecuadorian embassy in London and Bradley Manning is fighting for his life after being tortured and imprisoned in the US  for releasing cables sent between embassies that revealed a dark, dishonest and seedy side of this phony diplomacy. In other words, for sharing with the rest of us what these folks are actually doing.

What we have is a government by the capitalist class for the capitalist class.  As these representatives of the coupon clippers maintain their ability to plunder the resources of the global community with catastrophic consequences for human life and the environment, one US politician explains that the competition among billionaires for a US ambassadorship is "like paying $25 million to go in to space......it's a fun thing to do."

The world is their playground as they say.

Read More

Ten Numbers the Rich Would Like Fudged

Reprinted from AlterNet

The numbers reveal the deadening effects of inequality in our country, and confirm that tax avoidance, rather than a lack of middle-class initiative, is the cause.

1. Only THREE PERCENT of the very rich are entrepreneurs. According to both Marketwatch and economist Edward Wolff, over 90 percent of the assets owned by millionaires are held in a combination of low-risk investments (bonds and cash), personal business accounts, the stock market, and real estate. Only 3.6 percent of taxpayers in the top .1% were classified as entrepreneurs based on 2004 tax returns. A 2009 Kauffman Foundation study found that the great majority of entrepreneurs come from middle-class backgrounds, with less than 1 percent of all entrepreneurs coming from very rich or very poor backgrounds.

2. Only FOUR OUT OF 150 countries have more wealth inequality than us.
In a world listing compiled by a reputable research team (which nevertheless prompted double-checking), the U.S. has greater wealth inequality than every measured country in the world except for Namibia, Zimbabwe, Denmark, and Switzerland.

3. An amount equal to ONE-HALF the GDP is held untaxed overseas by rich Americans.
The Tax Justice Network estimated that between $21 and $32 trillion is hidden offshore, untaxed. With Americans making up 40% of the world's Ultra High Net Worth Individuals, that's $8 to $12 trillion in U.S. money stashed in far-off hiding places.
Based on a historical stock market return of 6%, up to $750 billion of income is lost to the U.S. every year, resulting in a tax loss of about $260 billion.

4. Corporations stopped paying HALF OF THEIR TAXES after the recession.
After paying an average of 22.5% from 1987 to 2008, corporations have paid an annual rate of 10% since. This represents a sudden $250 billion annual loss in taxes.
U.S. corporations have shown a pattern of tax reluctance for more than 50 years, despite building their businesses with American research and infrastructure. They've passed the responsibility on to their workers. For every dollar of workers' payroll tax paid in the 1950s, corporations paid three dollars. Now it's 22 cents.

5. Just TEN Americans made a total of FIFTY BILLION DOLLARS in one year.
That's enough to pay the salaries of over a million nurses or teachers or emergency responders.
That's enough, according to 2008 estimates by the Food and Agriculture Organization and the UN's World Food Program, to feed the 870 million people in the world who are lacking sufficient food.
For the free-market advocates who say "they've earned it": Point #1 above makes it clear how the wealthy make their money.

6. Tax deductions for the rich could pay off 100 PERCENT of the deficit.
Another stat that required a double-check. Based on research by the Tax Policy Center, tax deferrals and deductions and other forms of tax expenditures (tax subsidies from special deductions, exemptions, exclusions, credits, capital gains, and loopholes), which largely benefit the rich, are worth about 7.4% of the GDP, or about $1.1 trillion.
Other sources have estimated that about two-thirds of the annual $850 billion in tax expenditures goes to the top quintile of taxpayers.

7. The average single black or Hispanic woman has about $100 IN NET WORTH.
The Insight Center for Community Economic Development reported that median wealth for black and Hispanic women is a little over $100. That's much less than one percent of the median wealth for single white women ($41,500).
Other studies confirm the racially-charged economic inequality in our country. For every dollar of NON-HOME wealth owned by white families, people of color have only one cent.

8. Elderly and disabled food stamp recipients get $4.30 A DAY FOR FOOD.
Temporary Assistance for Needy Families (TANF) has dropped significantly over the past 15 years, serving only about a quarter of the families in poverty, and paying less than $400 per month for a family of three for housing and other necessities. Ninety percent of the available benefits go to the elderly, the disabled, or working households.
Food stamp recipients get $4.30 a day.

9. Young adults have lost TWO-THIRDS OF THEIR NET WORTH since 1984.
21- to 35-year-olds: Your median net worth has dropped 68% since 1984. It's now less than $4,000.
That $4,000 has to pay for student loans that average $27,200. Or, if you're still in school, for $12,700 in credit card debt. With an unemployment rate for 16- to 24-year-olds of almost 50%, two out of every five recent college graduates are living with their parents. But your favorite company may be hiring. Apple, which makes a profit of $420,000 per employee, can pay you about $12 per hour.

10. The American public paid about FOUR TRILLION DOLLARS to bail out the banks.
That's about the same amount of money made by America's richest 10% in one year. But we all paid for the bailout. And because of it, we lost the opportunity for jobs, mortgage relief, and educational funding.
Bonus for the super-rich: A QUADRILLION DOLLARS in securities trading nets ZERO sales tax revenue for the U.S.
The world derivatives market is estimated to be worth over a quadrillion dollars (a thousand trillion). At least $200 trillion of that is in the United States. In 2011 the Chicago Mercantile Exchange reported a trading volume of over $1 quadrillion on 3.4 billion annual contracts.
A quadrillion dollars. A sales tax of ONE-TENTH OF A PENNY on a quadrillion dollars could pay off the deficit. But the total sales tax was ZERO.
It's not surprising that the very rich would like to fudge the numbers, as they have the nation.

Paul Buchheit is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at paul@UsAgainstGreed.org.

Read More